<PAGE> 1
As filed with the Securities and Exchange Commission on September 15, 1998
Registration No. 333-__________
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-4
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933
SOUTHTRUST CORPORATION
(Exact name of registrant as specified in its charter)
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<CAPTION>
DELAWARE 6711 63-0574085
<S> <C> <C>
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
</TABLE>
420 NORTH 20TH STREET
BIRMINGHAM, ALABAMA 35203
(205) 254-5000
(Address, including zip code, and telephone number,
including area code, of registrant's
principal executive offices)
AUBREY D. BARNARD
SOUTHTRUST CORPORATION
420 NORTH 20TH STREET
BIRMINGHAM, ALABAMA 35203
(205) 254-5000
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
With copies to:
C. LARIMORE WHITAKER WALTER G. MOELING
BRADLEY ARANT ROSE & WHITE LLP POWELL, GOLDSTEIN, FRAZER & MURPHY LLP
2001 PARK PLACE 191 PEACHTREE STREET, N.E.,
SUITE 1400 SIXTEENTH FLOOR
BIRMINGHAM, ALABAMA 35203 ATLANTA, GEORGIA 30303
(205) 521-8000 (404) 572-6600
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. / /______
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
<TABLE>
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Proposed maximum Proposed maximum
Title of each class of Amount to be offering price aggregate offering Amount of
securities to be registered registered per unit price registration fee
--------------------------- ---------- ---------------- ------------------ ----------------
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Common Stock, par value
$2.50 per share....................... 792,918 Shares(1) * $10,017,198(3) $2,955.08
Rights to Purchase Series A Junior
Participating Preferred Stock.......... 234,939 Rights(2)
</TABLE>
* Not Applicable
(1) This Registration Statement covers (i) the maximum number of shares of the
common stock of the Registrant which is expected to be issued in connection
with the merger of Georgia National Bancorp, Inc. with and into a
subsidiary of SouthTrust Corporation, and (ii) the maximum number of shares
of common stock reserved for issuance under various option plans of Georgia
National Bancorp, Inc., the obligations under which will be assumed by the
Registrant upon consummation of the merger, but which may be issued prior
to the consummation of the merger to the extent such options are then
currently exercisable.
(2) Represents eight twenty-sevenths of a Right issued in respect of each share
of Common Stock issued.
(3) Estimated solely for purposes of determining the amount of the registration
fee, in accordance with Rule 457(f)(2) under the Securities Act of 1933.
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.
<PAGE> 2
[LETTERHEAD OF GEORGIA NATIONAL BANCORP, INC.]
September ___, 1998
TO THE SHAREHOLDERS OF
GEORGIA NATIONAL BANCORP, INC.:
You are cordially invited to attend a Special Meeting of the
Shareholders (the "Special Meeting") of Georgia National Bancorp, Inc. ("Georgia
National") to be held on ___________, 1998, at 8:00 a.m., local time, at Georgia
National's main office, 202 College Avenue, Athens, Georgia, notice of which is
enclosed.
At the Special Meeting, you will be asked to consider and vote on a
proposal to approve an Agreement and Plan of Merger (the "Merger Agreement")
which provides for the merger (the "Merger") of Georgia National with and into a
subsidiary of SouthTrust Corporation ("SouthTrust"). Upon consummation of the
Merger, each share of Georgia National common stock issued and outstanding
(except for (i) certain shares held by Georgia National or SouthTrust, or their
respective subsidiaries, in each case other than shares held in a fiduciary
capacity or in satisfaction of debts previously contracted), and (ii) shares
dissenting from approval of the Merger Agreement will be converted
into the right to receive 0.60 shares of SouthTrust common stock, with cash
being paid in lieu of issuing fractional shares.
Enclosed are the (i) Notice of Special Meeting, (ii) Proxy
Statement/Prospectus, and (iii) Proxy for the Special Meeting. The Proxy
Statement/Prospectus describes in more detail the Merger Agreement and the
proposed Merger, including a description of the conditions to consummation of
the Merger and the effects of the Merger on the rights of Georgia National
shareholders. Please read these materials carefully and consider thoughtfully
the information set forth in them.
THE BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED THE MERGER AGREEMENT
AND CONSUMMATION OF THE MERGER CONTEMPLATED THEREBY, AND UNANIMOUSLY RECOMMENDS
THAT YOU VOTE FOR APPROVAL OF THE MERGER AGREEMENT.
Approval of the Merger Agreement will require the affirmative vote of a
majority of the votes entitled to be cast at the Special Meeting by the holders
of the issued and outstanding shares of Georgia National common stock, each
share of Georgia National common stock being entitled to one vote. Accordingly,
whether or not you plan to attend the Special Meeting, you are urged to
complete, sign, and return promptly the enclosed proxy card. If you attend the
Special Meeting, you may vote in person if you wish, even if you previously have
returned your proxy card. The proposed Merger is a significant step for Georgia
National and your vote on this matter is of great importance.
ON BEHALF OF THE BOARD OF DIRECTORS, I URGE YOU TO VOTE FOR APPROVAL OF
THE MERGER AGREEMENT BY MARKING THE ENCLOSED PROXY CARD "FOR" ITEM ONE.
We look forward to seeing you at the Special Meeting.
Sincerely,
Claude Williams, Jr.
Chairman of the Board
<PAGE> 3
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
Notice is hereby given that a Special Meeting of shareholders of
Georgia National Bancorp, Inc., a Georgia corporation ("Georgia National"), will
be held on __________, 1998, at 8:00 a.m., local time, at Georgia National's
main office, 202 College Avenue, Athens, Georgia, for the following purposes
(the "Special Meeting"):
1. To consider and vote upon the Agreement and Plan of Merger,
dated as of July 1, 1998 (the "Merger Agreement"), a copy of which is
annexed as Exhibit A to the accompanying Proxy Statement/Prospectus, by
and between SouthTrust of Alabama, Inc., an Alabama corporation
("ST-Sub"), and Georgia National, and joined in by SouthTrust
Corporation, a Delaware corporation ("SouthTrust"), and whereby Georgia
National will be merged with and into ST-Sub and each issued and
outstanding share of Georgia National common stock will be converted
into the right to receive 0.60 shares of SouthTrust common stock
(subject to possible adjustment in the event of certain occurrences),
with cash being paid in lieu of issuing fractional shares, all pursuant
to and in accordance with the terms and conditions of the Merger
Agreement, all as more fully described in the accompanying Proxy
Statement/Prospectus; and
2. To consider and act upon such other matters as may properly
come before the Special Meeting or any adjournment or adjournments
thereof.
Only those persons who were holders of record of shares of common stock
and preferred stock of Georgia National at the close of business on
_______________, 1998 are entitled to notice of and to vote at the Special
Meeting and any adjournment thereof. If the transactions contemplated by the
Merger Agreement are consummated, the shareholders of Georgia National
dissenting from approval of the Merger Agreement may be entitled, if they comply
with the provisions of the Georgia Business Corporation Code regarding the
rights of dissenting shareholders, to be paid the fair value of their shares.
The meeting may be adjourned or postponed from time to time without
notice other than announcement at the meeting, or at any adjournment or
postponement thereof, and any business for which notice is hereby given may be
transacted at any such adjournment or postponement.
A Proxy Card and a Proxy Statement/Prospectus for the Special Meeting
are enclosed.
By Order of the Board of Directors
Michael R. Carson
Secretary
Athens, Georgia
September { }, 1998
WHETHER YOU PLAN TO ATTEND THE SPECIAL MEETING OR NOT, PLEASE SIGN AND
RETURN THE ENCLOSED PROXY SO THAT GEORGIA NATIONAL MAY BE ASSURED OF THE
PRESENCE OF A QUORUM AT THE SPECIAL MEETING. A SELF-ADDRESSED ENVELOPE IS
ENCLOSED FOR YOUR CONVENIENCE. NO POSTAGE IS REQUIRED IF MAILED IN THE UNITED
STATES.
<PAGE> 4
PROXY STATEMENT/PROSPECTUS
PROXY STATEMENT OF
GEORGIA NATIONAL BANCORP, INC.
FOR A SPECIAL MEETING OF THE SHAREHOLDERS OF GEORGIA NATIONAL BANCORP, INC.
TO BE HELD OCTOBER { }, 1998
THIS PROXY STATEMENT INCLUDES THE PROSPECTUS OF
SOUTHTRUST CORPORATION
RELATING TO UP TO 792,918 SHARES OF COMMON STOCK
(PAR VALUE $2.50 PER SHARE)
TO BE ISSUED IN CONNECTION WITH A PROPOSED MERGER OF
GEORGIA NATIONAL BANCORP, INC. WITH AND INTO SOUTHTRUST OF
ALABAMA, INC., A WHOLLY OWNED SUBSIDIARY OF
SOUTHTRUST CORPORATION
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION NOT CONTAINED OR INCORPORATED BY REFERENCE IN THIS PROXY
STATEMENT/PROSPECTUS IN CONNECTION WITH THE OFFER MADE HEREBY. IF GIVEN OR MADE,
SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY SOUTHTRUST CORPORATION ("SOUTHTRUST") OR GEORGIA NATIONAL BANCORP,
INC. ("GEORGIA NATIONAL"). THIS PROXY STATEMENT/PROSPECTUS DOES NOT CONSTITUTE
AN OFFER OF ANY SECURITIES OTHER THAN THE SHARES TO WHICH IT RELATES OR AN OFFER
OF ANY KIND TO ANY PERSON IN ANY JURISDICTION WHERE SUCH AN OFFER WOULD BE
UNLAWFUL. NEITHER DELIVERY OF THIS PROXY STATEMENT/PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL UNDER ANY CIRCUMSTANCES CREATE AN IMPLICATION THAT INFORMATION
CONTAINED OR INCORPORATED BY REFERENCE HEREIN IS CORRECT AS OF ANY TIME
SUBSEQUENT TO THE DATE HEREOF.
ALL INFORMATION CONTAINED HEREIN WITH RESPECT TO GEORGIA NATIONAL AND
ITS SUBSIDIARIES HAS BEEN PROVIDED BY GEORGIA NATIONAL AND ITS SUBSIDIARIES, AND
SOUTHTRUST AND ITS SUBSIDIARIES ARE RELYING ON THE ACCURACY OF THAT INFORMATION.
ALL INFORMATION CONTAINED OR INCORPORATED BY REFERENCE HEREIN WITH RESPECT TO
SOUTHTRUST AND ITS SUBSIDIARIES HAS BEEN PROVIDED BY SOUTHTRUST AND ITS
SUBSIDIARIES, AND GEORGIA NATIONAL AND ITS SUBSIDIARIES ARE RELYING ON THE
ACCURACY OF THAT INFORMATION.
THIS PROXY STATEMENT/PROSPECTUS AND THE ACCOMPANYING FORM OF PROXY ARE
FIRST BEING MAILED TO SHAREHOLDERS OF GEORGIA NATIONAL ON OR ABOUT SEPTEMBER
{ }, 1998.
THE SECURITIES OF SOUTHTRUST OFFERED IN CONNECTION WITH THE
MERGER DESCRIBED IN THIS PROXY STATEMENT/PROSPECTUS HAVE NOT BEEN
APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION
OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROXY
STATEMENT/PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
THE SECURITIES OFFERED HEREBY ARE NOT SAVINGS ACCOUNTS OR BANK DEPOSITS,
ARE NOT OBLIGATIONS OF A BANK OR SAVINGS ASSOCIATION, AND ARE NOT
INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION
OR ANY OTHER GOVERNMENTAL AGENCY.
The date of this Proxy Statement/Prospectus is September { }, 1998.
<PAGE> 5
TABLE OF CONTENTS
<TABLE>
<S> <C>
AVAILABLE INFORMATION............................................................................................ 4
CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING INFORMATION...................................................... 4
INTRODUCTION..................................................................................................... 5
General ............................................................................................... 5
Voting at the Special Meeting........................................................................... 6
SUMMARY ........................................................................................................ 8
Parties to the Merger................................................................................... 8
Special Meeting......................................................................................... 9
The Merger.............................................................................................. 9
Certain Federal Income Tax Consequences................................................................. 14
Rights of Dissent and Appraisal......................................................................... 14
Stock Prices of SouthTrust and Georgia National......................................................... 14
Resale of SouthTrust Common Stock Received in the Merger................................................ 15
Differences in Rights of Georgia National Shareholders.................................................. 15
Accounting Treatment.................................................................................... 15
Equivalent Share Data................................................................................... 16
Selected Financial Data................................................................................. 17
Selected Pro-Forma Information.......................................................................... 18
THE MERGER....................................................................................................... 19
General ............................................................................................... 19
Background of and Reasons for the Merger................................................................ 20
Opinion of Financial Advisor............................................................................ 21
Interests of Certain Named Persons in the Merger........................................................ 23
Effect of the Merger on Georgia National Common Stock................................................... 25
Possible Conversion Ratio Adjustment.................................................................... 26
Effect of the Merger on Georgia National Stock Options.................................................. 28
Effective Time of the Merger............................................................................ 28
Exchange of Stock Certificates.......................................................................... 29
Resale of SouthTrust Common Stock Received in the Merger................................................ 29
Accounting Treatment.................................................................................... 30
Regulatory Approvals and Certain Other Conditions to the Merger; Waiver and Amendment................... 30
Termination............................................................................................. 32
Certain Expenses........................................................................................ 33
Rights of Dissent and Appraisal......................................................................... 34
Conduct of Business by Georgia National Pending the Merger.............................................. 35
Business and Management of Georgia National Following the Merger; Plans for Business of
Georgia National....................................................................................... 36
Stock Option Agreement.................................................................................. 37
No Solicitation......................................................................................... 40
CERTAIN FEDERAL INCOME TAX CONSEQUENCES.......................................................................... 40
DESCRIPTION OF SOUTHTRUST CAPITAL STOCK.......................................................................... 42
General ............................................................................................... 42
SouthTrust Common Stock................................................................................. 42
SouthTrust Preferred Stock.............................................................................. 45
MARKET PRICE AND DIVIDEND INFORMATION RESPECTING THE SOUTHTRUST COMMON STOCK
AND THE GEORGIA NATIONAL COMMON STOCK................................................................... 46
Market Price............................................................................................ 46
Dividends............................................................................................... 46
</TABLE>
2
<PAGE> 6
<TABLE>
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COMPARISON OF THE SOUTHTRUST COMMON STOCK
AND THE GEORGIA NATIONAL COMMON STOCK................................................................... 48
Dividends............................................................................................... 48
Voting Rights and Other Matters......................................................................... 49
Dissent and Appraisal Rights............................................................................ 52
Rights on Liquidation................................................................................... 52
Preemptive Rights....................................................................................... 52
Reports to Stockholders and Shareholders................................................................ 52
Stockholders' Rights Plan............................................................................... 53
SUPERVISION AND REGULATION....................................................................................... 53
SouthTrust.............................................................................................. 53
Georgia National........................................................................................ 55
CERTAIN INFORMATION CONCERNING THE BUSINESS OF
GEORGIA NATIONAL AND THE BANK........................................................................... 55
General................................................................................................. 55
Employees............................................................................................... 57
Description of Property................................................................................. 57
Legal Proceedings....................................................................................... 58
Regulation and Legislation.............................................................................. 58
Certain Relationships and Related-Party Transactions.................................................... 58
Beneficial Ownership of Georgia National Common Stock................................................... 59
Risk of Remaining Independent as Opposed to Merging with SouthTrust..................................... 60
GEORGIA NATIONAL MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS........................................................ 60
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE.................................................................. 78
LEGAL MATTERS.................................................................................................... 79
EXPERTS ........................................................................................................ 79
ADDITIONAL INFORMATION........................................................................................... 79
Other Business.......................................................................................... 79
CONSOLIDATED FINANCIAL STATEMENTS OF GEORGIA NATIONAL........................................................... F-1
EXHIBIT A - AGREEMENT AND PLAN OF MERGER........................................................................ A-1
EXHIBIT B - STOCK OPTION AGREEMENT.............................................................................. B-1
EXHIBIT C - OPINION OF THE JERNIGAN GROUP, LLC.................................................................. C-1
EXHIBIT D - GEORGIA BUSINESS CORPORATION CODE DISSENTERS RIGHTS PROVISION....................................... D-1
</TABLE>
3
<PAGE> 7
AVAILABLE INFORMATION
SouthTrust is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith files, reports, proxy and information statements and other
information with the Securities and Exchange Commission (the "Commission"). Such
reports, proxy and information statements and other information can be inspected
and copied at the public reference facilities maintained by the Commission at
Judiciary Plaza, Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549, and
at the Commission's regional offices at Seven World Trade Center, Suite 1300,
New York, New York 10048 and Citicorp Center, Suite 1400, 500 West Madison
Street, Chicago, Illinois 60661-2511. Copies of such material can be obtained
from the Public Reference Section of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549, at prescribed rates. The Commission also maintains a
site on the worldwide web (http:\\www.sec.gov) that contains reports, proxy and
information statements and other information regarding reporting companies,
including SouthTrust. In addition, reports, proxy and information statements and
other information concerning SouthTrust may be inspected at the offices of the
National Association of Securities Dealers, Inc., 1735 K Street, N.W.,
Washington, D.C. 20096.
SouthTrust has filed a Registration Statement on Form S-4 (herein,
together with all amendments thereto, called the "Registration Statement") with
the Commission under the Securities Act of 1933, as amended (the "Securities
Act"), with respect to the shares of Common Stock of SouthTrust offered hereby.
This Proxy Statement/Prospectus does not contain all of the information and
undertakings set forth in the Registration Statement and the exhibits and
schedules thereto. For further information with respect to SouthTrust and the
shares of Common Stock of SouthTrust, reference is made to the Registration
Statement and the exhibits and schedules thereto. Statements contained in this
Proxy Statement/Prospectus as to the contents of any contract or other document
referred to are not necessarily complete, and in each instance reference is made
to a copy of such contract or other document filed as an exhibit to the
Registration Statement, each such statement being qualified in all respects by
such reference. The Registration Statement and the exhibits and schedules
thereto may be inspected at the Commission's office at 450 Fifth Street, N.W.,
Washington, D.C. 20549, and copies thereof may be obtained from the Public
Reference Section of the Commission at such address at prescribed rates or from
the Commission's website.
THIS PROXY STATEMENT/PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE
WHICH ARE NOT PRESENTED HEREIN OR DELIVERED HEREWITH. THE DOCUMENTS RELATING TO
SOUTHTRUST (OTHER THAN EXHIBITS TO SUCH DOCUMENTS WHICH ARE NOT SPECIFICALLY
INCORPORATED BY REFERENCE IN SUCH DOCUMENTS) ARE AVAILABLE ON REQUEST WITHOUT
CHARGE FROM AUBREY D. BARNARD, SOUTHTRUST CORPORATION, 420 NORTH 20TH STREET,
BIRMINGHAM, ALABAMA 35203, TELEPHONE NUMBER (205) 254-5000. IN ORDER TO ENSURE
TIMELY DELIVERY OF THE DOCUMENTS, ANY REQUEST SHOULD BE MADE BY ____________,
1998. SEE "INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE."
All information contained in this Proxy Statement/Prospectus relating
to SouthTrust and its subsidiaries has been supplied by SouthTrust and all
information relating to Georgia National and its subsidiaries has been supplied
by Georgia National.
CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING INFORMATION
This Proxy Statement/Prospectus (including information included or
incorporated by reference herein) contains certain forward-looking statements
with respect to the financial condition, results of operations, plans,
objectives, future performance and business of each of SouthTrust and Georgia
National, including statements preceded by, followed by or that include the
words "believes," "expects," "anticipates," "estimates," or similar expressions
(see "SUMMARY -- The Merger," "SUMMARY -- Stock Prices of SouthTrust," "THE
MERGER -- Background of and Reasons for the Merger," "THE MERGER -- Opinion of
Financial Advisor," "THE MERGER -- Effective Time of the Merger," "THE MERGER --
Business and Management of Georgia National Following the Merger; Plans for
Business of Georgia National," "MARKET PRICE AND DIVIDEND INFORMATION RESPECTING
THE SOUTHTRUST COMMON STOCK AND THE GEORGIA NATIONAL COMMON STOCK" and "GEORGIA
NATIONAL MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS"). These forward-looking statements involve certain risks and
uncertainties. Factors that may cause actual results to differ materially from
those contemplated by such forward-looking statements include, among others, the
following possibilities: (a) expected cost savings from the Merger may not be
fully realized or realized within the expected time frame; (b) revenues
following the Merger may be lower than expected, or deposit attrition, operating
costs or customer loss and business disruption following the Merger may be
greater than expected; (c) competitive pressures among depository and other
financial institutions may increase significantly; (d) costs or difficulties
related to the integration of the business of SouthTrust and Georgia National
may be greater than expected; (e) changes in the interest rate environment may
reduce margins; (f) general economic or business conditions, either nationally
or in the states in which
4
<PAGE> 8
SouthTrust is doing business, may be less favorable than expected, resulting in,
among other things, a deterioration in credit quality or a reduced demand for
credit; (g) legislative or regulatory changes may adversely affect the business
in which SouthTrust is engaged; and (h) changes may occur in the securities
markets.
INTRODUCTION
GENERAL
This Proxy Statement/Prospectus is being furnished to the holders of
the common stock, par value $0.005 per share ("Georgia National Common Stock"),
of Georgia National Bancorp, Inc., a Georgia corporation ("Georgia National"),
in connection with the solicitation of proxies by the Board of Directors of
Georgia National for use at a special meeting of shareholders of Georgia
National to be held on ______________, 1998, at 8:00 a.m., local time, at
Georgia National's main office, 202 College Avenue, Athens, Georgia, and at any
adjournment or postponement thereof (the "Special Meeting").
The purpose of the Special Meeting is to consider and vote upon that
certain Agreement and Plan of Merger dated as of July 1, 1998 (the "Merger
Agreement") by and between SouthTrust of Alabama, Inc., an Alabama corporation
("ST-Sub") and Georgia National, and joined in by SouthTrust Corporation, a
Delaware corporation ("SouthTrust"), providing for the merger of Georgia
National with and into ST-Sub (the "Merger") and the exchange in the Merger of
each outstanding share of Georgia National Common Stock for 0.60 shares of
common stock, par value $2.50 per share, of SouthTrust ("SouthTrust Common
Stock"), as the same may be adjusted pursuant to the Merger Agreement (the
"Conversion Ratio"). See "THE MERGER - Effect of the Merger on Georgia National
Common Stock."
The 0.60 shares of SouthTrust Common Stock for which each share of
Georgia National Common Stock may be exchanged in the Merger had an aggregate
market value, based upon the last sales price of SouthTrust Common Stock on
___________, 1998, of $_____. See "DESCRIPTION OF SOUTHTRUST CAPITAL STOCK -
SouthTrust Common Stock" and "MARKET AND DIVIDEND INFORMATION RESPECTING THE
COMMON STOCK OF SOUTHTRUST." Because the number of shares of SouthTrust Common
Stock to be received for each share of Georgia National Common Stock in the
Merger is fixed, a change in the market price of SouthTrust Common Stock before
the Merger would affect the value of the SouthTrust Common Stock to be received
in the Merger in exchange for each share of Georgia National Common Stock. The
Merger Agreement, however, provides that (i) if the average of the last sales
prices (the "Average Closing Price") of SouthTrust Common Stock as reported on
the Nasdaq National Market ("Nasdaq") for the twenty consecutive trading days
ending at the close of trading on the fifth business day prior to the date on
which the last required consent of any regulatory authority having authority
over the Merger is received (the "Determination Date") is less than $38.14375,
and if the quotient obtained by dividing the Average Closing Price on such date
by $44.875 (the "Parent Ratio") shall be less than the quotient obtained by
dividing the weighted average of the closing prices of certain bank holding
companies as listed in Section 10.1 of the Merger Agreement (the "Index Group")
on the Determination Date by the weighted average closing prices of the Index
Group on July 1, 1998 and subtracting 0.15 from this quotient (the "Index
Ratio"), or (ii) if the Average Closing Price on the Determination Date is less
than $33.65625, then Georgia National will have the right to terminate the
Merger Agreement unless SouthTrust elects to adjust the Conversion Ratio in the
manner described under "THE MERGER-Possible Conversion Ratio Adjustment." No
fractional shares of SouthTrust Common Stock will be issued in the Merger, and,
in lieu thereof, each holder of shares of Georgia National Common Stock that
otherwise would have been entitled to receive a fractional share of SouthTrust
Common Stock will be entitled to receive a cash payment in an amount equal to
the product of (i) the fractional interest of a share of SouthTrust Common Stock
to which such holder otherwise would have been entitled and (ii) the last sale
price of one share of SouthTrust Common Stock as reported by Nasdaq on the last
trading day preceding the Effective Time of the Merger (as defined below).
The Merger Agreement also contemplates that, at the Effective Time of
the Merger, all rights with respect to shares of Georgia National Common Stock
issuable pursuant to the exercise of stock options ("Georgia National Stock
Options") granted by Georgia National under the stock option plans of Georgia
National (the "Georgia National Stock Option Plans") which are outstanding at
the Effective Time of the Merger, whether or not exercisable, will be assumed by
SouthTrust in accordance with the terms of the particular Georgia National Stock
Option Plan under which
5
<PAGE> 9
such Georgia National Stock Options were issued, and will become rights with
respect to SouthTrust Common Stock on a basis adjusted to reflect the Conversion
Ratio. See "THE MERGER - Effect of Merger on Georgia National Stock Options."
Subject to the approval of the Merger Agreement by the shareholders of
Georgia National and the satisfaction or waiver of all conditions contained in
the Merger Agreement, the Merger will become effective on the date and at the
time on which Articles of Merger have been duly filed with the Secretaries of
State of Alabama and Georgia (the "Effective Time of the Merger").
A copy of the Merger Agreement is attached hereto as Exhibit A, and the
description thereof contained in this Proxy Statement/Prospectus is qualified in
its entirety by reference to such Exhibit A. See "THE MERGER."
VOTING AT THE SPECIAL MEETING
The Board of Directors of Georgia National has fixed the close of
business on September ___, 1998 as the record date (the "Record Date") for the
determination of holders of shares of Georgia National Common Stock entitled to
notice of and to vote at the Special Meeting. On the Record Date, Georgia
National had outstanding [1,316,530] shares of Georgia National Common Stock,
which constituted the only outstanding class of capital stock of Georgia
National entitled to notice of and to vote at the Special Meeting. The presence,
in person or by proxy, of the holders of a majority of the outstanding shares of
Georgia National Common Stock entitled to vote is necessary to constitute a
quorum at the Special Meeting. All properly executed proxies will be treated as
present at the Special Meeting for purposes of determining the presence or
absence of a quorum without regard to whether the proxy is marked as casting a
vote for or against or abstaining with respect to a particular matter. In
addition, shares of Georgia National Common Stock represented by "broker
non-votes" will be treated as present for purposes of determining a quorum. The
affirmative vote of the holders of a majority of the outstanding shares of
Georgia National Common Stock entitled to vote thereon (each share of Georgia
National Common Stock being entitled to one vote) is required to approve the
Merger Agreement. Abstentions and broker non-votes will be included for purposes
of determining whether the requisite number of affirmative votes have been cast
with respect to the approval of the Merger Agreement; and accordingly, will have
the same effect as a negative vote. Each holder of record of shares of Georgia
National Common Stock on the Record Date is entitled to one vote for each share
of such Georgia National Common Stock held of record.
As of the Record Date, Georgia National directors and their affiliates
beneficially owned a total of 660,253 shares of Georgia National Common Stock,
representing approximately 49.96% of the shares of Georgia National Common Stock
entitled to vote at the Special Meeting. All such directors and their affiliates
have informed Georgia National that, as of the date of the Proxy
Statement/Prospectus, they intend to vote for approval of the Merger Agreement.
The Jernigan Group, LLC ("Jernigan") has rendered its opinion to the
Board of Directors of Georgia National dated August 14, 1998, stating that the
Conversion Ratio is fair from a financial point of view to the shareholders of
Georgia National. See "SUMMARY - The Merger - Opinion of Financial Advisor" and
"THE MERGER - Opinion of Financial Advisor."
THE BOARD OF DIRECTORS OF GEORGIA NATIONAL RECOMMENDS THAT SHAREHOLDERS
VOTE FOR APPROVAL OF THE MERGER AGREEMENT. SEE "THE MERGER - BACKGROUND AND
REASONS FOR THE MERGER."
A proxy in the form enclosed, properly completed and returned in time
for the voting thereof at the Special Meeting, with instructions specified
thereon, will be voted in accordance with such instructions. If no specification
is made, a signed proxy will be voted FOR approval of the Merger Agreement. A
proxy may be revoked at any time prior to its exercise (i) by filing with the
Secretary of Georgia National either an instrument revoking the proxy or a duly
executed proxy bearing a later date or (ii) by attending the Special Meeting and
voting in person. Attendance at the Special Meeting will not by itself revoke a
proxy.
In addition to the use of the mail, proxies may be solicited by
telephone, telegraph or personally by the directors, officers and employees of
Georgia National, who will receive no extra compensation for their services.
Georgia National will reimburse banks, brokerage firms and other custodians,
nominees and fiduciaries for reasonable expenses incurred by them in sending
proxy soliciting materials to the beneficial owners of shares of Georgia
National Common Stock.
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SHAREHOLDERS ARE REQUESTED TO COMPLETE, SIGN AND DATE THE ACCOMPANYING
PROXY AND RETURN IT PROMPTLY IN THE ENCLOSED, POSTAGE-PAID ENVELOPE.
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<PAGE> 11
SUMMARY
The following is a brief summary of certain information contained in or
incorporated by reference into this Proxy Statement/Prospectus with respect to
Georgia National, SouthTrust and certain of their respective subsidiaries and
the terms of the Merger. The following summary is not intended to be complete
and is qualified in all respects by the information appearing elsewhere herein
or incorporated by reference into this Proxy Statement/Prospectus, the Exhibits
hereto and the documents referred to herein.
PARTIES TO THE MERGER
SouthTrust
SouthTrust is a regional bank holding company headquartered in
Birmingham, Alabama, and is engaged in a full range of banking services from
more than 540 banking locations in Alabama, Florida, Georgia, Mississippi, North
Carolina, South Carolina and Tennessee. SouthTrust also offers a range of other
services, including mortgage banking services, fiduciary and trust services and
securities brokerage services. As of June 30, 1998, SouthTrust had consolidated
total assets of approximately $34.7 billion.
Effective June 2, 1997, SouthTrust, pursuant to the Riegle-Neal
Interstate Banking and Branching Efficiency Act of 1994 (the "Interstate Banking
Act"), consolidated all of its banking subsidiaries, located in the states of
Alabama, Florida, Georgia, Mississippi, North Carolina, South Carolina and
Tennessee, into its largest banking subsidiary, SouthTrust Bank of Alabama,
National Association and changed this subsidiary's name to SouthTrust Bank,
National Association ("ST-Bank"). The bank consolidation was undertaken by
SouthTrust in order to obtain the benefits of the Interstate Banking Act, which,
subject to certain limitations, permits qualifying bank holding companies to
engage in interstate mergers and allows banks to maintain and operate branches
in states other than the states where they maintain their principal place of
business.
SouthTrust has pursued a strategy of acquiring banks and financial
institutions in or near major metropolitan or growth markets in Alabama,
Florida, Georgia, Mississippi, North Carolina, South Carolina and Tennessee. The
purpose of this strategy is to give SouthTrust business development
opportunities in metropolitan markets with favorable prospects for population
and per capita income growth.
Through the first two quarters of 1998, SouthTrust effected
acquisitions of three financial institutions, and assumed deposits and acquired
certain assets of a third, with aggregate total assets of $4.8 billion. The
following table presents certain information as of July 31, 1998 with respect to
transactions that are currently pending as of the date of this Proxy
Statement/Prospectus, including the Merger:
<TABLE>
<CAPTION>
Institution Location Total Assets Total Deposits Total Loans*
- ----------- -------- ------------ -------------- ------------
(in millions)
<S> <C> <C> <C> <C>
Georgia National Bancorp Athens, Ga. $ 92.1 $ 80.8 $ 63.9
First American Bank Vero Beach, Fl. 46.4 41.3 30.0
Security Bank Texas Arlington, Tx. 89.4 80.9 37.7
</TABLE>
- --------------
*Net of unearned income
SouthTrust anticipates that each of the above transactions will be
accounted for as a pooling of interests. Consummation of the pending
transactions is subject to, in each case, among other things, approval by
applicable regulatory authorities.
As a routine part of its business, SouthTrust evaluates opportunities
to acquire bank holding companies, banks and other financial institutions. Thus,
at any particular point in time, including the date of this Proxy
Statement/Prospectus, discussions and, in some cases, negotiations and due
diligence activities looking toward or culminating in the execution of
preliminary or definitive documents respecting potential acquisitions may occur
or be in progress. These transactions may involve SouthTrust acquiring such
financial institutions in exchange for cash or capital stock, and depending upon
the terms of these transactions, they may have a dilutive effect upon the
SouthTrust Common Stock to be issued to holders of Georgia National Common Stock
in the Merger.
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<PAGE> 12
The principal executive offices of SouthTrust are located at 420 North
20th Street, Birmingham, Alabama 35203, and their telephone number is (205)
254-5000.
Georgia National and the Bank
Georgia National is a bank holding company headquartered in Athens,
Georgia. Georgia National Bank (the "Bank"), a national bank and wholly owned
subsidiary of Georgia National, is the sole subsidiary of Georgia National. At
June 30, 1998, Georgia National had assets of $89.8 million, deposits of $79.2
million and stockholders' equity of $9.9 million.
The Bank was originally chartered in 1987, and Georgia National was
formed in 1991. The Bank has grown from $5 million in assets in 1987 to $89.8
million in assets at June 30, 1998. Currently, the Bank operates four
full-service branch offices, three of which are located in Athens, Clarke
County, Georgia and one in Winder, Barrow County, Georgia. From February 1,
1997, until June 30, 1998, the Bank also provided mortgage loan origination
services in the metropolitan Atlanta area under the name "U.S. Lending." The
Bank offers ATM service at each branch. As of June 30, 1998, Georgia National
employed 41 full-time equivalent employees.
Georgia National and the Bank maintain their principal executive
offices at 202 College Avenue, Athens, Georgia, and the telephone number at such
office is (706) 369-3030.
SouthTrust of Alabama, Inc.
ST-Sub, an Alabama corporation, is a wholly owned subsidiary of
SouthTrust. It owns ST-Bank. The main office of ST-Sub is located in Birmingham,
Alabama.
SPECIAL MEETING
The Special Meeting will be held at 8:00 a.m., local time, on ________,
______ __, 1998, at Georgia National's main office, 202 College Avenue, Athens,
Georgia, to consider and vote upon the approval of the Merger Agreement. Only
holders of record of shares of Georgia National Common Stock as of the close of
business on ___________, 1998 will be entitled to notice of and to vote at the
Special Meeting, including any adjournment or postponement thereof.
THE MERGER
Terms of the Merger
Subject to approval of the Merger Agreement by the shareholders of
Georgia National at the Special Meeting, the receipt of required regulatory
approvals, and satisfaction of other conditions, Georgia National will be merged
with and into ST-Sub pursuant to the Merger Agreement. At the Effective Time of
the Merger, each share (excluding (i) shares held by any of Georgia National's
subsidiaries or by SouthTrust or any of its subsidiaries, in each case other
than in a fiduciary capacity or as a result of debts previously contracted, and
(ii) shares dissenting from approval of the Merger Agreement) of Georgia
National Common Stock will be converted into the right to receive 0.60 shares of
SouthTrust Common Stock, as the same may be adjusted pursuant to the terms of
the Merger Agreement. See "THE MERGER - Effect of the Merger on Georgia National
Common Stock."
If (i) the Average Closing Price of SouthTrust Common Stock on the
Determination Date is less than $38.14375, and if the quotient obtained by
dividing the Average Closing Price on such date by 44.875 shall be less than the
quotient obtained by dividing the weighted average of the closing prices of the
Index Group on the Determination Date by the weighted average of the closing
prices of the Index Group on July 1, 1998, and subtracting 0.15 from this
quotient, or if (ii) the Average Closing Price on the Determination Date is less
than $33.65625, then Georgia National will have the right to terminate the
Merger Agreement unless SouthTrust elects to adjust the Conversion Ratio in the
manner described under "THE MERGER - Possible Conversion Ratio Adjustment."
As the Conversion Ratio may be increased at the option of SouthTrust as
discussed in the preceding paragraph, the Conversion Ratio may not be
definitively determined until just prior to the Effective Time of the Merger.
Based upon the last sales price of SouthTrust Common Stock on September , 1998
(the last trading day immediately prior to the date of this Proxy
Statement/Prospectus), which last sales price was $ , the Conversion Ratio
would remain 0.60. In the event SouthTrust has the right to adjust the
Conversion Ratio but chooses not to exercise such right, then Georgia National
is entitled, at its option, to terminate the Merger Agreement.
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<PAGE> 13
The Conversion Ratio, including the number of shares of SouthTrust
Common Stock issuable in the Merger, is subject to appropriate adjustment in the
event of certain stock splits, stock dividends, reclassifications or similar
distributions effected by SouthTrust. No fractional shares of SouthTrust Common
Stock will be issued in the Merger, and, in lieu thereof, each holder of shares
of Georgia National Common Stock that otherwise would have been entitled to
receive a fractional share of SouthTrust Common Stock will be entitled to
receive a cash payment in an amount equal to the product of (i) the fractional
interest of a share of SouthTrust Common Stock to which such holder otherwise
would have been entitled and (ii) the last sale price of SouthTrust Common Stock
as reported by Nasdaq on the last trading day preceding the Effective Time of
the Merger.
All rights with respect to Georgia National Common Stock issuable
pursuant to the exercise of Georgia National Stock Options granted pursuant to
Georgia National Stock Option Plans, and held by each participant thereunder,
shall be assumed by SouthTrust and converted into, as of the Effective Time of
the Merger, the right of the holders thereof to receive shares of SouthTrust
Common Stock on a basis adjusted to reflect the Conversion Ratio.
As promptly as practicable after the Effective Time of the Merger,
SouthTrust or its agents will send or cause to be sent to each former holder of
record of Georgia National Common Stock a letter of transmittal for use in
exchanging their stock certificates formerly representing such Georgia National
Common Stock for the right to receive certificates representing the appropriate
number of shares of SouthTrust Common Stock plus a cash payment for any
fractional shares. GEORGIA NATIONAL SHAREHOLDERS SHOULD NOT SURRENDER THEIR
CERTIFICATES FOR EXCHANGE UNTIL THEY RECEIVE SUCH LETTER OF TRANSMITTAL AND
INSTRUCTIONS. See "THE MERGER - Exchange of Stock Certificates."
Vote Required
The affirmative vote of the holders of a majority of the outstanding
shares of Georgia National Common Stock (each share of Georgia National Common
Stock being entitled to one vote) is required to approve the Merger Agreement.
Directors and executive officers of Georgia National, and their affiliates,
beneficially owned, as of the Record Date, directly or indirectly, 660,253
shares of Georgia National Common Stock, constituting approximately 49.96% of
the shares of Georgia National Common Stock outstanding on the Record Date for
the Special Meeting. It is anticipated that all of such shares will be voted for
approval of the Merger Agreement.
Background of and Reasons for the Merger; Recommendations of the Board of
Directors of Georgia National
The Board of Directors of Georgia National believes that the Merger
Agreement and the Merger are in the best interests of Georgia National and its
shareholders. THE GEORGIA NATIONAL DIRECTORS UNANIMOUSLY RECOMMEND THAT GEORGIA
NATIONAL SHAREHOLDERS VOTE FOR APPROVAL OF THE MERGER AGREEMENT. In unanimously
approving the Merger Agreement, Georgia National's directors considered, among
other things, the value of the consideration to be received by Georgia
National's shareholders relative to the book value and earnings per share of
Georgia National Common Stock, certain information concerning the financial
condition, results of operations and business prospects of SouthTrust, the
marketability of SouthTrust Common Stock and the tax consequences of the Merger.
SouthTrust is engaging in the transactions pursuant to the Merger
Agreement because the Merger is consistent with its expansion strategy within
the Southern United States and because the acquisition of Georgia National and
the Bank will augment SouthTrust's existing market share in Georgia and enhance
its competitive position in such market.
See "THE MERGER - Background of and Reasons for the Merger."
Opinion of Financial Advisor
Jernigan has rendered an opinion to Georgia National that, based on and
subject to the procedures, matters, and limitations described in its opinions
and such other matters as it considered relevant, as of the date of its
opinions, the Conversion Ratio is fair, from a financial point of view, to the
shareholders of Georgia National. The opinion of Jernigan dated as of August 14,
1998 is attached as Exhibit C to this Proxy Statement/Prospectus. Georgia
National shareholders are urged to read the opinion in its entirety for a
description of the procedures followed, matters considered, and limitations on
the reviews undertaken in connection therewith. See "THE MERGER - Opinion of
Financial Advisor."
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<PAGE> 14
Interests of Certain Named Persons in the Merger
Certain members of Georgia National's management and Board of Directors
may be deemed to have interests in the Merger in addition to their interests, if
any, as shareholders of Georgia National generally. Among those interests are
certain employment and change in control agreements that provide for severance
pay and other benefits upon the occurrence of a merger or other change in
control and agreements by SouthTrust that it will, for six (6) years after the
Effective Time of the Merger, indemnify, defend and hold harmless each person
entitled to indemnification from Georgia National, the Bank or any of their
respective subsidiaries, against all liabilities arising out of actions or
omissions occurring at or prior to the Effective Time of the Merger (including,
without limitation, the transactions contemplated by the Merger Agreement) to
the same extent and subject to the conditions set forth in the Certificates or
Articles of Incorporation or Association of Georgia National, the Bank or any of
their respective subsidiaries, as may be applicable, and Bylaws, in each case as
in effect on the date of the Merger Agreement. SouthTrust has also generally
agreed to use its reasonable efforts to maintain the existing directors' and
officers' liability insurance policy or policies of Georgia National, the Bank
and their respective subsidiaries for three years after the Effective Time of
the Merger, subject to certain limitations. In connection with the Merger
Agreement, all of the Georgia National directors have entered into affiliate
agreements with SouthTrust restricting them from selling the Georgia National
Common Stock they own, except as contemplated by the Merger Agreement, and
restricting them from selling, transferring or otherwise disposing of the
SouthTrust Common Stock received in the Merger until such time as financial
results covering at least 30 days of combined operations of Georgia National and
SouthTrust have been published within the meaning of Section 201.01 of the
Commission's Codification of Financial Reporting Policies. Furthermore, certain
executive officers of Georgia National have agreed to enter into Retention Bonus
Agreements with SouthTrust and have amended their existing employment agreements
in connection with the Merger. See "THE MERGER - Interests of Certain Named
Persons in the Merger" and "THE MERGER - Business and Management of Georgia
National Following the Merger; Plans for Business of Georgia National."
Effective Time of the Merger
Subject to the conditions to the obligations of the parties to effect
the Merger, the Effective Time of the Merger will be the later of the date and
time at which the following actions are completed: (i) the Articles of Merger
are filed and become effective with the Secretary of State of the State of
Georgia and (ii) the Articles of Merger are filed and become effective with the
Secretary of State of the State of Alabama, unless in each case a later date is
specified in such Articles. Unless otherwise agreed upon by Georgia National and
SouthTrust, and subject to the conditions to the obligations of the parties to
effect the Merger, the parties to the Merger Agreement shall cause the Effective
Time of the Merger to occur on the first business day following the last to
occur of (i) the effective date (including the expiration of any applicable
waiting period) of the last consent of any regulatory authority required for the
Merger, and (ii) the date on which the shareholders of Georgia National approve
the matters relating to the Merger Agreement required to be approved by such
shareholders by applicable law. See "THE MERGER - Effective Time of the Merger"
and "THE MERGER - Regulatory Approvals and Certain Other Conditions to
Consummation of the Merger; Waiver and Amendment."
NO ASSURANCE CAN BE PROVIDED THAT THE NECESSARY SHAREHOLDER AND
REGULATORY APPROVALS WILL BE OBTAINED OR THAT THE OTHER CONDITIONS PRECEDENT TO
THE MERGER CAN OR WILL BE SATISFIED. GEORGIA NATIONAL AND SOUTHTRUST ANTICIPATE
THAT ALL CONDITIONS TO THE CONSUMMATION OF THE MERGER WILL BE SATISFIED SO THAT
THE MERGER CAN BE CONSUMMATED ON OR BEFORE OCTOBER 23, 1998. HOWEVER, DELAYS IN
THE CONSUMMATION OF THE MERGER COULD OCCUR.
Regulatory Approvals and Certain Other Conditions to the Merger; Waiver and
Amendment
The respective obligations of SouthTrust and Georgia National to
consummate the Merger are subject to the satisfaction of certain conditions,
including, among others, (i) the receipt of all required regulatory approvals
with respect to the Merger (and the satisfaction of all notice and waiting
periods and conditions required by such approvals), (ii) the approval of the
Merger Agreement by the requisite vote of Georgia National shareholders and by
the sole shareholder of SouthTrust Bank, and (iii) certain other conditions
customary in transactions in this kind, including conditions regarding
securities registration and legal proceedings.
Consummation of the Merger is subject to receipt of certain regulatory
approvals, including, ordinarily, the prior approval by the Board of Governors
of the Federal Reserve System (the "Federal Reserve Board") under the Bank
Holding Company Act of 1956, as amended (the "Bank Holding Company Act").
Pursuant, however, to the Federal Reserve Board's Regulation Y, where (i) the
merger of a company (i.e., Georgia National) controlling a bank (i.e., the
Bank) with a bank holding company (i.e., ST-Sub) is part of a merger of such
Bank with an operating subsidiary bank of the acquiring
11
<PAGE> 15
bank holding company (i.e., ST-Bank), (ii) the bank merger and bank holding
company merger occur simultaneously, (iii) the transaction requires the prior
approval of a federal supervisory agency, (iv) the transaction does not involve
the acquisition of any non-bank company that would require prior approval
pursuant to Section 4 of the Bank Holding Company Act and (v) the acquiring bank
holding company meets the Federal Reserve Board's capital adequacy guidelines,
no Federal Reserve Board approval is required if ten day's prior notice of the
transaction is given to the applicable Federal Reserve Bank, and within such
ten-day period such Federal Reserve Bank has not informed the acquiring bank
holding company that an application under Regulation Y is required.
In connection with the Merger, it is contemplated that,
contemporaneously with or following the Effective Time of the Merger, the Bank
will be merged into ST-Bank, whereupon the Bank will cease to be a separate
entity (the "Subsidiary Merger"). Because ST-Bank, the surviving bank in that
transaction, is a national bank, the merger of the banking subsidiaries will be
subject to the approval of the Office of the Comptroller of the Currency (the
"Comptroller") under the Bank Merger Act, which prohibits the merger or
consolidation of any insured institution with any other depository institution
without the approval of the insured institution's primary federal supervisory
regulatory agency. SouthTrust has given the required notice of the Subsidiary
Merger to the Federal Reserve Bank of Atlanta. The Deputy Secretary of the
Federal Reserve Board, acting under delegated authority, informed SouthTrust on
August 21, 1998 that, based on review of the notice given to the Federal Reserve
Bank of Atlanta, the Federal Reserve Board does not object to the Merger and
that no Federal Reserve Board approval will be required for the Merger if the
Subsidiary Merger is approved by the Comptroller. On August 5, 1998, ST-Bank
submitted to the Comptroller an application seeking approval of the Subsidiary
Merger.
The approval standards to be applied by the Comptroller under the Bank
Merger Act and by the Federal Reserve Board under Section 3 of the Bank Holding
Company Act are the same. In essence, the Comptroller will deny approval to the
Subsidiary Merger (i) if such transaction would result in a monopoly or be in
furtherance of any combination or conspiracy to monopolize or to attempt to
monopolize the business of banking in any part of the United States, or (ii) if
the effect of such transaction in any section of the country may be
substantially to lessen competition or to tend to create a monopoly, or if it
would in any other manner be a restraint of trade, unless the relevant
regulatory agency finds that the anti-competitive effects of such merger are
clearly outweighed by the public interest and by the probable effect of the
transaction in meeting the convenience and needs of the communities to be
served. Under the Bank Merger Act, the Comptroller also considers whether the
proposed transaction can reasonably be expected to produce benefits to the
public, such as greater convenience, increased competition, or gains in
efficiency, that outweigh possible adverse effects, such as undue concentration
of resources, decreased or unfair competition, conflicts of interests, or
unsound banking practices. The Comptroller has the authority to deny an
application if it concludes that the combined organization would have an
inadequate capital position or if the acquiring organization does not meet the
requirements of the Community Reinvestment Act of 1977. In addition, the
Subsidiary Merger may not be consummated until the 30th day following the date
of the approval of the Comptroller, during which period the United States
Department of Justice may comment adversely on the transaction or challenge the
Subsidiary Merger on antitrust grounds. However, the Subsidiary Merger may be
consummated on or after the 15th day following the date of the Comptroller
approval if the Comptroller does not receive any adverse comments from the
United States Attorney General and the United States Attorney General consents
to the shorter period. The commencement of an antitrust action would stay the
effectiveness of such an approval unless a court specifically orders otherwise.
THE MERGER CANNOT PROCEED IN THE ABSENCE OF THE REQUISITE REGULATORY
APPROVALS. THERE CAN BE NO ASSURANCE THAT SUCH REGULATORY APPROVALS WILL BE
OBTAINED OR AS TO THE TIMING OF ANY SUCH APPROVALS. THERE ALSO CAN BE NO
ASSURANCE THAT ANY SUCH APPROVALS WILL NOT IMPOSE CONDITIONS THAT ARE DEEMED BY
GEORGIA NATIONAL OR SOUTHTRUST TO MATERIALLY ADVERSELY IMPACT THE ECONOMIC OR
BUSINESS ASSUMPTIONS OF THE TRANSACTIONS CONTEMPLATED BY THE MERGER AGREEMENT.
THERE ALSO CAN BE NO ASSURANCE THAT THE UNITED STATES DEPARTMENT OF JUSTICE OR A
STATE ATTORNEY GENERAL WILL NOT CHALLENGE THE MERGER OR, IF SUCH A CHALLENGE IS
MADE, AS TO THE RESULT THEREOF.
At any time before the Merger becomes effective, any party to the
Merger Agreement may waive conditions contained therein to its own obligations,
to the extent that such obligations, agreements and conditions are intended for
its own benefit. In addition, the Merger Agreement may be amended by written
instrument signed on behalf of each of the parties thereto.
See "THE MERGER - Regulatory Approvals and Certain Other Conditions to
the Merger; Waiver and Amendment."
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<PAGE> 16
Termination
The Merger Agreement may be terminated and the Merger abandoned at any
time prior to the Effective Time of the Merger in any of the following ways:
(i) by the mutual consent in writing of the Board of Directors
of SouthTrust, ST-Sub and Georgia National; or
(ii) by the Board of Directors of SouthTrust, ST-Sub or
Georgia National if the Merger shall not have occurred on or prior to
January 31, 1999, provided that the failure to consummate the Merger on
or before such date is not accompanied by any breach of any of the
representations, warranties, covenants or other agreements contained
within the Merger Agreement by the party electing to terminate; or
(iii) by the Board of Directors of SouthTrust, ST-Sub or
Georgia National (provided that the terminating party is not then in
breach of any representation or warranty contained in the Merger
Agreement) in the event of an inaccuracy of any representation or
warranty of the other party contained in the Merger Agreement which
cannot be or has not been cured within thirty (30) days after the
giving of written notice to the breaching party of such inaccuracy; or
(iv) by the Board of Directors of SouthTrust, ST-Sub or
Georgia National (provided that the terminating party is not then in
breach of any representation or warranty contained in the Merger
Agreement) in the event of a material breach by the other party of any
covenant or agreement contained in the Agreement which cannot be or has
not been cured within thirty (30) days after the giving of written
notice to the breaching party of such breach; or
(v) by the Board of Directors of SouthTrust, ST-Sub or Georgia
National in the event that (i) any consent of any regulatory authority
required for consummation of the Merger and the other transactions
contemplated thereby shall have been denied by final nonappealable
action of such authority or if any action taken by such authority is
not appealed within the time limit for appeal, or (ii) the shareholders
of Georgia National fail to vote their approval of the Merger Agreement
and the Merger and the transactions contemplated thereby as required by
applicable law; or
(vi) by the Board of Directors of SouthTrust, ST-Sub or
Georgia National (provided that the terminating party is not then in
breach of any representation or warranty contained in the Merger
Agreement) in the event that any of the conditions precedent to the
obligations of such party to consummate the Merger (other than as
contemplated by (v) above) cannot be satisfied or fulfilled by January
31, 1999; or
(vii) by Georgia National if certain conditions with respect
to the price of SouthTrust Common Stock are not met and certain
adjustments to the Conversion Ratio are not made by SouthTrust. See
"THE MERGER - Possible Conversion Ratio Adjustment."
In the event of the termination and abandonment of the Merger Agreement
pursuant to the above, the Agreement shall terminate and have no effect, except
that certain representations and warranties regarding confidentiality
obligations and provisions regarding indemnification and construction of the
Merger Agreement shall survive any such termination and abandonment. See "THE
MERGER - Termination."
Stock Option Agreement
In connection with the execution of the Merger Agreement, Georgia
National granted SouthTrust an option (the "Stock Option") to purchase, under
certain circumstances, up to 325,090 shares (the "Option Shares") of Georgia
National Common Stock at a price of $24.71 per share pursuant to the terms of a
Stock Option Agreement, dated as of July 1, 1998, between SouthTrust and Georgia
National (the "Stock Option Agreement"). The Stock Option is exercisable only
upon the occurrence of Purchase Event (as hereinafter defined), which has not
occurred as of the date hereof. Georgia National granted the Stock Option as a
condition of and in consideration for the entry by SouthTrust into the Merger
Agreement. A copy of the Stock Option Agreement is attached hereto as Exhibit B,
and any description thereof contained in this Proxy Statement/Prospectus is
qualified in its entirety by reference to such Exhibit B. See "THE MERGER -
Stock Option Agreement."
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<PAGE> 17
No Solicitation
Georgia National has agreed that neither Georgia National nor any of
its affiliates will directly or indirectly solicit any acquisition proposal by
any person. Except to the extent necessary to comply with fiduciary duties of
Georgia National's Board of Directors, as advised by counsel, neither Georgia
National nor any of its affiliates may furnish any non-public information to, or
have discussions with, any person, other than SouthTrust, relating to any
acquisition proposal. Georgia National must promptly notify SouthTrust in the
event that it receives any inquiry or proposal relating to any such transaction.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The consummation of the merger is conditioned upon the receipt by
Georgia National of an opinion of Bradley Arant Rose & White LLP to the effect
that, for federal income tax purposes, (i) the Merger will constitute a tax-free
reorganization under Section 368 of the Internal Revenue Code of 1986, as
amended (the "Code"), and (ii) no gain or loss will be recognized by holders of
shares of Georgia National Common Stock who receive shares of SouthTrust Common
Stock in the Merger, except that gain or loss will be recognized with respect to
cash received in lieu of fractional interests in shares of SouthTrust Common
Stock. See "CERTAIN FEDERAL INCOME TAX CONSEQUENCES."
THE FEDERAL, STATE AND LOCAL TAX CONSEQUENCES MAY VARY DEPENDING UPON
THE PARTICULAR CIRCUMSTANCES OF EACH HOLDER OF SHARES OF GEORGIA NATIONAL COMMON
STOCK. ALL HOLDERS OF SHARES OF GEORGIA NATIONAL COMMON STOCK ARE URGED TO
CONSULT THEIR OWN TAX ADVISORS CONCERNING THE FEDERAL, STATE, LOCAL, FOREIGN AND
OTHER TAX CONSEQUENCES OF THE MERGER IN THEIR PARTICULAR CIRCUMSTANCES.
RIGHTS OF DISSENT AND APPRAISAL
Holders of Georgia National Common Stock are entitled to dissent from
the Merger and demand the fair value of the shares held by such shareholders in
cash under Sections 14-2-1301 to 14-2-1332 of the Georgia Business Corporation
Code, which sections are reprinted in their entirety in Exhibit D to this Proxy
Statement/Prospectus. A person having a beneficial interest in shares of Georgia
National Common Stock that is held of record in the name of another person, such
as a broker or nominee, must act promptly to cause the record holder to follow
the steps summarized elsewhere in this Proxy Statement/Prospectus properly and
in a timely manner to perfect whatever dissenters' rights the beneficial owner
may have. See "THE MERGER - Rights of Dissent and Appraisal."
STOCK PRICES OF SOUTHTRUST AND GEORGIA NATIONAL
The SouthTrust Common Stock is quoted on Nasdaq under the symbol SOTR.
As of August 30, 1998, there were approximately 15,000 holders of record of
SouthTrust Common Stock. Georgia National Common Stock is not traded on any
exchange, and there is no established public trading market for such stock. As
of _______, 1998, there were approximately ____ holders of record of Georgia
National Common Stock. There are no bid or asked prices available for Georgia
National Common Stock. The last trade in Georgia National Common Stock of which
Georgia National is aware occurred on April 13, 1998, at a per share price of
$11.25. No assurance can be given that this trade was effected on an
arm's-length basis. Transactions in Georgia National Common Stock are infrequent
and are negotiated privately between persons involved in those transactions. The
following table sets forth applicable last sales prices, and pro forma
equivalents based upon such last sales prices, for SouthTrust Common Stock as of
selected dates:
<TABLE>
<CAPTION>
SouthTrust Georgia National
Common Stock Common Stock
Last Sales Price Equivalent(1)
---------------- ---------------
<S> <C> <C>
April 21, 1998(2) $42.625 $25.575
September , 1998(3) $
</TABLE>
- ----------
(1) Pro forma equivalents calculated using the last sales price for SouthTrust
Common Stock as of the selected date multiplied by the Conversion Ratio of
0.60.
(2) Last trading day preceding public announcement of the proposed transaction.
(3) Most recent date practicable preceding the date of this Proxy
Statement/Prospectus.
14
<PAGE> 18
Dividends paid by SouthTrust on the SouthTrust Common Stock are at the
discretion of the Board of Directors of SouthTrust and are affected by certain
legal restrictions on the payment of dividends as described below, SouthTrust's
earnings and financial condition and other relevant factors. SouthTrust has
increased the dividend paid on the SouthTrust Common Stock for 28 consecutive
years. The current policy of SouthTrust is to pay dividends on a quarterly
basis. Subject to an evaluation of its earnings and financial condition and
other factors, including the legal restrictions on the payment of dividends as
described below, SouthTrust anticipates that it will continue to pay regular
quarterly dividends with respect to the SouthTrust Common Stock.
There are certain limitations on the payment of dividends to ST-Sub by
its bank subsidiary, which in turn affects the payment of dividends to
SouthTrust by ST-Sub. As a national banking association, the amount of dividends
that ST-Bank may declare in one year without approval of the Office of the
Comptroller of the Currency (the "Comptroller") is the sum of the Bank's net
profits for that year and its retained net profits for the preceding two years.
Under rules promulgated by the Comptroller, the calculation of net profits is
more restrictive under certain circumstances. Under the foregoing laws and
regulations, at June 30, 1998, approximately $400.0 million was available for
payment of dividends to SouthTrust by its subsidiaries, primarily its bank
subsidiary.
See "MARKET PRICE AND DIVIDEND INFORMATION RESPECTING THE SOUTHTRUST
COMMON STOCK AND THE GEORGIA NATIONAL COMMON STOCK."
RESALE OF SOUTHTRUST COMMON STOCK RECEIVED IN THE MERGER
The shares of SouthTrust Common Stock to be issued pursuant to the
Merger Agreement have been registered under the Securities Act, thereby allowing
such shares to be sold without restriction by shareholders of Georgia National
who are not deemed to be "affiliates" (as that term is defined under the
Securities Act) of Georgia National and who do not become affiliates of
SouthTrust. The shares of SouthTrust Common Stock to be issued to affiliates of
Georgia National may be resold only pursuant to an effective registration
statement, pursuant to Rule 145 under the Securities Act, or in transactions
otherwise exempt from registration under the Securities Act. SouthTrust will not
be obligated and does not intend to register its shares under the Securities Act
for resale by shareholders who are affiliates. Since the aggregate number of
shares of SouthTrust Common Stock to be issued in the Merger is less than any
applicable volume limitation under Rule 145, an affiliate of Georgia National
who otherwise complies with Rule 145, subject to the undertaking described
below, will be free to resell, during any given three-month period, all of the
shares of SouthTrust Common Stock received by such affiliate in the Merger.
Georgia National has caused each person identified by Georgia National
as an affiliate to execute and deliver to SouthTrust a written agreement in the
form provided for in the Merger Agreement providing that such affiliate will not
sell, transfer or otherwise dispose of such shares of SouthTrust Common Stock to
be received by such affiliate upon consummation of the Merger, except (i) in
compliance with the Securities Act or the rules and regulations thereunder, and
(ii) until such time as financial results covering at least thirty (30) days of
combined operations of Georgia National and SouthTrust have been published
within the meaning of Section 201.01 of the Commission's Codification of
Financial Reporting Policies.
See "THE MERGER - Resale of SouthTrust Common Stock Received in the
Merger."
DIFFERENCES IN RIGHTS OF GEORGIA NATIONAL SHAREHOLDERS
Upon consummation of the Merger, Georgia National shareholders will
become SouthTrust stockholders. As a result, their rights as shareholders, which
now are governed by Georgia corporate law and Georgia National's Articles of
Incorporation and Bylaws, will be governed by Delaware corporate law and
SouthTrust's Restated Certificate of Incorporation and Restated Bylaws. Because
of certain differences between the provisions of Georgia corporate law and
Delaware corporate law and of Georgia National's Articles of Incorporation and
Bylaws and SouthTrust's Restated Certificate of Incorporation and Restated
Bylaws, the current rights of Georgia National shareholders will change after
the Merger. Some of these differences include anti-takeover provisions. See
"COMPARISON OF THE SOUTHTRUST COMMON STOCK AND THE GEORGIA NATIONAL COMMON
STOCK."
ACCOUNTING TREATMENT
The Merger will be accounted for by SouthTrust as a pooling of
interests. See "THE MERGER - Accounting Treatment."
15
<PAGE> 19
EQUIVALENT SHARE DATA
The following summary presents comparative historical unaudited per
share data for both SouthTrust and Georgia National. The pro forma amounts
assume the Merger had been effective during the periods presented and had been
accounted for as a pooling of interests. SouthTrust's pro forma amounts
represent the combined pro forma results, and Georgia National pro forma
equivalent amounts are computed by multiplying the combined pro forma amounts by
a factor of 0.60, to reflect the Conversion Ratio in the Merger. The data
presented should be read in conjunction with the historical financial statements
and the related notes thereto included elsewhere herein or incorporated by
reference herein.
<TABLE>
<CAPTION>
Six Months Ended Years Ended
June 30, December 31,
--------------------- ---------------------------------
1998 1997 1997 1996 1995
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Net income per diluted common share:
SouthTrust ............................ $ 1.09 $ 0.98 $ 2.03 $ 1.79 $ 1.57
Georgia National ...................... 0.41 0.42 0.97 0.91 0.79
SouthTrust pro forma combined ......... 1.09 0.98 2.03 1.79 1.57
Georgia National pro forma equivalent . 0.65 0.59 1.22 1.07 0.94
Cash dividends per common share:
SouthTrust ............................ $ 0.38 $ 0.33 $ 0.67 $ 0.59 $ 0.53
Georgia National ...................... 0.17 0.10 0.21 0.05 0.00
SouthTrust pro forma combined(1) ...... 0.38 0.33 0.67 0.59 0.53
Georgia National pro forma equivalent . 0.23 0.20 0.40 0.35 0.32
Book value per common share (period end):
SouthTrust ............................ $ 15.65 $ 13.05 $ 14.28 $ 12.03 $ 10.85
Georgia National ...................... 7.55 6.86 7.35 6.55 6.74
SouthTrust pro forma combined ......... 15.63 13.04 14.27 12.02 10.85
Georgia National pro forma equivalent . 9.38 7.82 8.56 7.21 6.51
</TABLE>
- ----------
(1) SouthTrust pro forma combined dividends represent historical cash dividends
of SouthTrust.
16
<PAGE> 20
SELECTED FINANCIAL DATA
The following tables set forth certain selected historical consolidated
financial information for Georgia National and SouthTrust. The historical income
statement data included in the selected financial data for the five most recent
fiscal years are derived from audited consolidated financial statements of
SouthTrust. The financial data for the interim periods ended June 30, 1998 and,
all 1997 are derived from the unaudited historical financial statements of
SouthTrust and Georgia National, respectively, and reflect, in the respective
opinions of management of SouthTrust and Georgia National, all adjustments
(consisting only of recurring adjustments) necessary for a fair presentation of
such data. This information should be read in conjunction with the consolidated
financial statements of SouthTrust, and the related notes thereto, incorporated
herein by reference, and the consolidated financial statements of Georgia
National, and the related notes thereto, set forth at pages F-1 through F-39
herein. See "INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE."
SOUTHTRUST CORPORATION AND SUBSIDIARIES
<TABLE>
<CAPTION>
Six Months Ended
June 30, Years Ended December 31,
--------------------- --------------------------------------------------------------------
1998 1997 1997 1996 1995 1994 1993
----------- -------- ----------- ----------- ------------ ------------ -----------
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA
(in thousands, except per
share data):
Interest income ............. $ 1,233,406 $ 1,068,836 $ 2,232,252 $ 1,804,220 $ 1,484,623 $ 1,108,612 $ 927,551
Interest expense ............ 666,986 562,255 1,186,079 938,194 791,423 501,067 397,743
---------- ---------- ----------- ----------- ----------- ----------- -----------
Net interest income ....... 563,420 506,581 1,046,173 866,026 693,200 607,545 529,808
Provision for loan losses ... 43,336 48,877 90,613 90,027 61,286 44,984 45,032
---------- ---------- ----------- ----------- ----------- ----------- -----------
Net interest income after
provision for loan losses . 520,084 457,704 955,560 775,999 631,914 562,561 484,776
Non-interest income ......... 181,263 126,024 270,507 254,809 208,664 184,778 174,702
Non-interest expense ........ 435,419 356,199 748,216 643,298 536,534 485,999 434,951
---------- ----------- ----------- ----------- ----------- ----------- -----------
Income before income taxes .. 265,928 227,529 477,851 387,510 304,044 261,340 224,527
Income taxes ................ 89,984 81,262 171,143 132,807 105,039 88,338 73,992
---------- ----------- ----------- ----------- ----------- ----------- -----------
Net income ................ $ 175,944 $ 146,267 $ 306,708 $ 254,703 $ 199,005 $ 173,002 $ 150,535
========== =========== =========== =========== =========== =========== ===========
Net income per diluted
common share .............. $ 1.09 $ 0.98 $ 2.03 $ 1.79 $ 1.57 $ 1.43 $ 1.29
Cash dividends declared
per common share .......... 0.38 0.33 0.67 0.59 0.53 0.45 0.40
Average diluted common shares
outstanding (in thousands) 161,363 149,267 151,008 142,154 126,687 121,157 117,027
BALANCE SHEET DATA
(at period end) (in thousands):
Total assets ................ $34,667,937 $29,192,946 $30,906,445 $26,223,193 $20,787,024 $17,632,059 $14,707,964
Total loans, net ............ 24,300,039 20,808,177 22,159,314 19,061,269 14,448,524 11,950,215 9,313,086
Total deposits .............. 21,150,845 18,679,409 19,586,584 17,305,493 14,575,077 12,801,239 11,515,311
Total stockholders' equity .. 2,576,790 1,951,759 2,194,641 1,734,892 1,430,870 1,135,268 1,051,766
</TABLE>
17
<PAGE> 21
GEORGIA NATIONAL BANCORP, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
Six Months Ended
June 30, Years Ended December 31,
--------------------- --------------------------------------------------------------------
1998 1997 1997 1996 1995 1994 1993
--------- ------- -------- ---------- ---------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA
(in thousands, except
per share data):
Interest income ................ $ 3,736 $ 3,552 $ 7,320 $ 6,286 $ 5,694 $ 4,449 $ 4,024
Interest expense ............... 1,516 1,443 2,977 2,548 2,367 1,898 1,920
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net interest income .......... 2,220 2,109 4,343 3,738 3,327 2,551 2,104
Provision for loan losses ...... 90 45 135 35 0 40 135
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net interest income after
provision for loan losses .... 2,130 2,064 4,208 3,703 3,327 2,511 1,969
Non-interest income ............ 691 420 1,456 749 631 757 601
Non-interest expense ........... 1,999 1,668 3,763 2,846 2,453 2,261 2,167
---------- ---------- --------- --------- ---------- ---------- ----------
Income before income taxes ..... 822 816 1,901 1,606 1,505 1,007 403
Income taxes ................... 293 284 671 556 508 357 138
---------- ---------- --------- --------- ---------- ---------- ----------
Net income ..................... $ 529 $ 532 $ 1,230 $ 1,050 $ 997 $ 650 $ 265
========== ========== ========= ========= ========== ========== ==========
Net income per diluted
common share .................. 0.41 0.42 0.97 0.91 0.79 0.48 0.21
Cash dividends declared
per common share ............. 0.17 0.10 0.21 0.05 0 0 0
Average diluted common shares ..
outstanding .................. 1,298,622 1,204,112 1,272,286 1,155,734 1,266,703 1,354,576 1,262,252
BALANCE SHEET DATA (at period end)
(in thousands):
Total assets ................... $ 89,811 88,950 91,813 80,741 72,971 66,432 58,517
Total loans, net ............... 62,745 61,140 61,980 55,372 44,739 42,368 39,310
Total deposits ................. 79,198 79,652 81,108 71,370 63,686 59,113 51,572
Total stockholders' equity ..... 9,888 8,618 9,395 8,232 7,465 6,139 5,768
</TABLE>
SELECTED PRO-FORMA INFORMATION
The following table sets forth certain unaudited pro forma combined
financial information for SouthTrust and Georgia National giving effect to the
Merger. The unaudited pro forma combined condensed financial presentation is
presented for information purposes only and is not necessarily indicative of the
combined financial position or results of operations which would actually have
occurred if the transactions had been consummated in the past or which may be
obtained in the future. This information should be read in conjunction with the
consolidated financial statements of SouthTrust, and the related notes thereto
incorporated herein by reference, and the consolidated financial statements of
Georgia National, and the related notes thereto, set forth at pages F-1 through
F-39 herein. See "INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE."
PRO FORMA COMBINED INFORMATION
SOUTHTRUST CORPORATION AND GEORGIA NATIONAL BANCORP, INC.
<TABLE>
<CAPTION>
Six Months Ended Years Ended December 31,
--------------------------- ------------------------------------------
June 30, June 30,
1998 1997 1997 1996 1995
---------- ----------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA
(in thousands, except per
share data)
Interest income ................... $1,237,142 $1,072,388 $2,239,572 $1,810,506 $1,490,317
Interest expense .................. 671,502 563,698 1,189,056 940,742 793,790
---------- ---------- ---------- ---------- ----------
Net interest income ............. 565,640 508,690 1,050,516 869,764 696,527
Provision for loan losses ......... 43,426 48,922 90,748 90,062 61,286
---------- ---------- ---------- ---------- ----------
Net interest income after provision
for loan losses ................. 522,214 459,768 959,768 779,702 635,241
Non-interest income ............... 181,954 126,444 271,963 255,558 209,295
Non-interest expense .............. 437,418 357,867 751,979 646,145 538,987
---------- ---------- ---------- ---------- ----------
Income before income taxes ........ 266,750 228,345 479,752 389,115 305,549
Provision for income taxes ........ 90,277 81,546 171,814 133,363 105,547
---------- ---------- ---------- ---------- ----------
Net income ...................... $ 176,473 $ 146,799 $ 307,938 $ 255,752 $ 200,002
========== ========== ========== ========== ==========
Net income per diluted common share $ 1.09 $ 0.98 $ 2.03 $ 1.79 $ 1.57
Average diluted common shares
outstanding ..................... 162,142 149,912 151,771 142,848 127,447
BALANCE SHEET DATA
(in millions)
Total assets ...................... $ 34,758 $ 29,282 $ 30,998 $ 26,304 $ 20,860
Total loans, net .................. 24,363 20,869 22,221 19,116 14,494
Total deposits .................... 21,230 18,759 19,668 17,376 14,639
Total stockholders' equity ........ 2,587 1,961 2,204 1,743 1,438
</TABLE>
18
<PAGE> 22
THE MERGER
The terms of the Merger are set forth in the Merger Agreement. The description
of the Merger which follows summarizes the principal provisions of the Merger
Agreement, is not complete and is qualified in all respects by reference to the
Merger Agreement, a copy of which is attached hereto as Exhibit A.
GENERAL
The Merger Agreement has been approved by the Boards of Directors of
Georgia National, SouthTrust and ST-Sub, and by SouthTrust as the sole
shareholder of ST-Sub. No approval of the Merger by the stockholders of
SouthTrust is required.
Subject to approval of the Merger Agreement by the shareholders of
Georgia National at the Special Meeting, the receipt of required regulatory
approvals, and satisfaction of other conditions, Georgia National will be merged
with and into ST-Sub pursuant to the Merger Agreement and the Georgia Business
Corporation Code and the Alabama Business Corporation Act, and ST-Sub will be
the Surviving Corporation. At the Effective Time of the Merger, each share
(excluding (i) shares held by any of Georgia National's subsidiaries or by
SouthTrust or any of its subsidiaries, in each case other than in a fiduciary
capacity or as a result of debts previously contracted, and (ii) shares
dissenting from approval of the Merger Agreement) of Georgia National Common
Stock will be converted into the right to receive 0.60 shares of SouthTrust
Common Stock, as the same may be adjusted pursuant to the terms of the Merger
Agreement. This Conversion Ratio, including the number of shares of SouthTrust
Common Stock issuable in the Merger, is subject to appropriate adjustment in the
event of certain stock splits, stock dividends, reclassifications or similar
distributions effected by SouthTrust. See "THE MERGER - Effect of the Merger on
Georgia National Common Stock."
If the Average Closing Price on the Determination Date is less than
$38.14375 and if the Parent Ratio shall be less than the Index Ratio, or if the
Average Closing Price on the Determination Date is less than $33.65625, then
Georgia National will have the right to terminate the Merger Agreement unless
SouthTrust elects to adjust the Conversion Ratio in the manner described under
"-Possible Conversion Ratio Adjustment."
No fractional shares of SouthTrust Common Stock will be issued in the
Merger, and, in lieu thereof, each holder of shares of Georgia National Common
Stock that otherwise would have been entitled to receive a fractional share of
SouthTrust Common Stock will be entitled to receive a cash payment in an amount
equal to the product of (i) the fractional interest of a share of SouthTrust
Common Stock to which such holder otherwise would have been entitled and (ii)
the last sale price of SouthTrust Common Stock as reported by Nasdaq on the last
trading day preceding the Effective Time of the Merger.
All rights with respect to shares of Georgia National Common Stock
issuable pursuant to the exercise of stock options granted by Georgia National
under stock option plans of Georgia National, and held by each participant
thereunder, shall be converted into, as of the Effective Time of the Merger, the
right of the holders thereof to receive shares of SouthTrust Common Stock. See
"-Effect of Merger on Georgia National Stock Options."
Because the Conversion Ratio may be increased at the option of
SouthTrust as discussed above, the Conversion Ratio may not be definitively
determined until just prior to the Effective Time of the Merger. Based upon the
last sales price of SouthTrust Common Stock on September ___, 1998 of $________
(the last trading day immediately prior to the date of this Proxy
Statement/Prospectus) the Conversion Ratio would remain 0.60. In the event that
SouthTrust has the right to adjust the Conversion Ratio but chooses not to
exercise such right, then Georgia National is entitled, at its option upon
approval by a majority of the Board of Directors, to terminate the Merger
Agreement. See "--Possible Conversion Ratio Adjustment."
Subject to the conditions to the obligations of the parties to effect
the Merger, the Effective Time of the Merger will be the later of the date and
time at which the following actions are completed: (i) the Articles of Merger
are filed and become effective with the Secretary of State of the State of
Georgia and (ii) the Articles of Merger are filed and become effective with the
Secretary of State of the State of Alabama, unless in each case a later date is
specified in such
19
<PAGE> 23
Articles. Unless otherwise agreed upon by Georgia National and SouthTrust, and
subject to the conditions to the obligations of the parties to effect the
Merger, the parties to the Merger will cause the Effective Time of the Merger to
occur on the first business day following the last to occur of (i) the effective
date (including the expiration of any applicable waiting period) of the last
consent of any regulatory authority required for the Merger, and (ii) the date
on which the shareholders of Georgia National approve the matters relating to
the Merger Agreement required to be approved by such shareholders by applicable
law. See "- Effective Time of the Merger."
BACKGROUND OF AND REASONS FOR THE MERGER
Background of the Merger
At a meeting of the Board of Directors of Georgia National on October
20, 1997, Ralph W. Jernigan, Jr. of The Jernigan Group, LLC ("Jernigan") led a
discussion of the Board of Directors with respect to the environment at that
time regarding the purchase and sale of financial institutions. The Board had
devoted several meetings during 1997 to focusing on strategic plans and
operations. Following the discussion at the October 20 meeting of the Board of
Directors, Mr. Jernigan was asked to explore further this environment and to
continue to keep the Board advised.
During November 1997, a member of the Board of Directors received a
written expression of interest in acquiring Georgia National if Georgia National
were for sale from a senior executive officer of a regional financial
institution. This expression of interest was discussed at length at the December
1997 meeting of the Board of Directors, but the Board deferred taking
affirmative action with respect to the expression of interest at that time based
upon the Board's then-existing strategy of remaining an independent bank and the
vague and indefinite terms of the expression of interest.
At its meeting on January 20, 1998, the Board again discussed strategic
alternatives. Following a full discussion of the issue, the Board adopted a
resolution retaining Jernigan and special legal counsel to assist Georgia
National in exploring and assessing its strategic alternatives, including the
expression of interest.
On February 26, 1998, Mr. Jernigan met with representatives of the
Board of Directors of Georgia National and received authority to initiate
discussions with SouthTrust and with the other regional bank that had previously
expressed an interest in Georgia National. During the month of March 1998,
meetings and discussions of a preliminary nature were held with SouthTrust and
the other regional bank, and serious negotiations began early in April. On April
15 and 16, 1998, proposals were received from each institution and were
presented to the Board of Directors for consideration at its meeting on April
20, 1998. Following an extensive discussion at that time, the SouthTrust
proposal was accepted.
Georgia National's Reasons for the Merger
Georgia National's Board of Directors, with the assistance of
Jernigan and outside legal advisors, evaluated the financial, legal and market
considerations bearing on the decision to recommend the Merger to the
shareholders of Georgia National. In reaching its conclusion that the Merger
Agreement is in the best interest of Georgia National and its shareholders, the
Georgia National Board of Directors carefully considered the following material
factors:
(a) The alternatives to the Merger, including remaining an
independent institution in light of the current economic
condition of the market and the competitive disadvantages as
compared to the larger financial institutions operating in the
market;
(b) The value of the consideration to be received by Georgia
National's shareholders relative to the book value and
earnings per share of Georgia National Common Stock;
(c) Certain information concerning the financial condition,
results of operations and business prospects of SouthTrust;
20
<PAGE> 24
(d) The financial terms of recent business combinations in the
financial services industry and a comparison of the multiples
of selected combinations with the terms of the proposed
transaction with SouthTrust;
(e) The marketability of the Georgia National Common Stock
compared to the SouthTrust Common Stock;
(f) The competitive and regulatory environment for financial
institutions generally;
(g) The fact that the Merger will enable Georgia National
shareholders to exchange their shares of Georgia National
Common Stock, in a tax-free transaction, for shares of common
stock of a regional company, the stock of which is widely held
and actively traded; and
(h) SouthTrust's ability to provide comprehensive financial
services through Georgia National to its market.
While each member of the Georgia National Board of Directors considered
the foregoing and other factors, the Georgia National Board of Directors did not
collectively assign any specific value or relative weights to the factors
considered and did not make any determination with respect to any individual
factor. The Georgia National Board of Directors collectively made its
determination with respect to the Merger based upon the unanimous conclusion
reached by its members, in light of the factors that each of them considered as
appropriate, that the Merger is in the best interest of the Georgia National
shareholders.
The terms of the Merger, including the Conversion Ratio, were the
results of arm's-length negotiations between representatives of Georgia National
and representatives of SouthTrust. Based upon its consideration of the foregoing
factors, the Board of Directors of Georgia National approved the Merger
Agreement and the Merger as being in the best interests of Georgia National and
its shareholders.
FOR THE REASONS DESCRIBED ABOVE, GEORGIA NATIONAL'S BOARD OF DIRECTORS
UNANIMOUSLY APPROVED THE MERGER AGREEMENT AND BELIEVES THE MERGER IS FAIR TO,
AND IN THE BEST INTERESTS OF, ITS SHAREHOLDERS. ACCORDINGLY, GEORGIA NATIONAL'S
BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT GEORGIA NATIONAL SHAREHOLDERS
VOTE "FOR" APPROVAL OF THE MERGER AGREEMENT.
SouthTrust's Reasons for the Merger
SouthTrust is engaging in the transactions pursuant to the Merger
Agreement because the Merger is consistent with its expansion strategy within
the southern United States and because the acquisition of Georgia National and
the Bank will augment SouthTrust's existing market share in Georgia and enhance
its competitive position in such market.
OPINION OF FINANCIAL ADVISOR
As noted above, Georgia National retained Jernigan to act as its
financial advisor as it explored its strategic options including the potential
sale of Georgia National.
On August 14, 1998, Jernigan delivered its written opinion to the Board
of Directors of Georgia National that based upon and subject to certain matters
stated in such opinion, the Per Share Purchase Price and Terms (as defined in
such opinion) are fair, from a financial point of view, to Georgia National
shareholders. Jernigan was not requested to recommend the amount of
consideration to be received by the shareholders of Georgia National, which
amount was determined by negotiation between SouthTrust and Georgia National.
THE FULL TEXT OF JERNIGAN'S WRITTEN OPINION IS ATTACHED AS EXHIBIT C TO
THIS PROXY STATEMENT/PROSPECTUS AND IS INCORPORATED HEREIN BY REFERENCE. THE
DESCRIPTION OF THE OPINION SET FORTH HEREIN IS QUALIFIED IN ITS ENTIRETY
21
<PAGE> 25
BY REFERENCE TO EXHIBIT C. GEORGIA NATIONAL SHAREHOLDERS ARE URGED TO READ THE
OPINION IN ITS ENTIRETY FOR A DESCRIPTION OF THE PROCEDURES FOLLOWED,
ASSUMPTIONS MADE, MATTERS CONSIDERED, AND QUALIFICATIONS AND LIMITATIONS ON THE
REVIEW UNDERTAKEN BY JERNIGAN IN CONNECTION THEREWITH.
Jernigan's opinion is directed to the Georgia National Board only and
is directed only to the Per Share Purchase Price and Terms and does not
constitute a recommendation to any Georgia National shareholder regarding how
such shareholder should vote at the special meeting.
In arriving at the written opinion, Jernigan, among other things: (i)
analyzed certain audited and unaudited financial statements and other
information of Georgia National and SouthTrust; (ii) reviewed and discussed with
appropriate management personnel of Georgia National and SouthTrust the current
business activities and financial results and the financial outlook of Georgia
National and SouthTrust; (iii) reviewed the historical price and trading
activity of the common stock of Georgia National and SouthTrust; (iv) compared
certain financial and stock market data relating to SouthTrust with similar data
of other publicly held banking institutions considered to be potential
alternative merger candidates to SouthTrust for Georgia National; (v) performed
an analysis comparing the pro forma consequences of the Merger on earnings per
share, book values per share and dividends per share to Georgia National; (vi)
reviewed the prices paid in certain comparable acquisition transactions of
community banking institutions and the multiples of earnings and book value and
percent of assets received by the selling institutions; (vii) reviewed the
Merger Agreement and certain related documents; and (viii) considered the
financial implications of certain other strategic alternatives available to
Georgia National.
In conducting its analysis and arriving at its opinion, Jernigan
assumed and relied upon, without independent verification, the accuracy and
completeness of the information reviewed for the purposes of the opinion.
Jernigan also relied upon the management of Georgia National with respect to the
reasonableness and achievability of the financial forecast (and the assumptions
and bases underlying such forecast) provided to Jernigan. Jernigan also assumed
that the aggregate allowances for loan losses for each of Georgia National and
SouthTrust are adequate to cover such losses. Jernigan did not make, nor was
Jernigan furnished with, independent valuations of appraisals of the assets or
liabilities of either Georgia National or SouthTrust or any of their
subsidiaries. Jernigan assumed that the Merger will be recorded utilizing
pooling of interests accounting under generally accepted accounting principles
("GAAP").
Summary Transaction Analysis: Jernigan reviewed the terms of the
proposed transaction including the Conversion Ratio and the aggregate
transaction value. Based on a recent per share price of SouthTrust common stock
of $37.50, the Conversion Ratio of 0.60 shares of SouthTrust Common Stock per
share of Georgia National Common Stock would provide Georgia National
shareholders a per share value of $22.35. Based on outstanding shares and
options as of June 30, 1998, this indicates an aggregate transaction value of
$29.5 million. This aggregate transaction represents 24 times Georgia National's
earnings for the trailing twelve months ending June 30, 1998, 3.0 times Georgia
National's stated book value at June 30, 1998 and 32.1% and 36.5%, respectively,
of Georgia National's assets and deposits as of June 30, 1998.
Per Share Merger Analysis: Based upon a Conversion Ratio of 0.60
shares of SouthTrust Common Stock for each share of Georgia National Common
Stock and using earnings estimates provided by Georgia National and estimates
for SouthTrust provided by independent securities analysts, Jernigan compared
the estimated 1998 estimated earnings per share of Georgia National Common Stock
on a stand alone basis to the equivalent performance earnings per share of
SouthTrust Common Stock which would be received in the Merger. This resulted in
an earnings increase of 26% in 1998 for Georgia National shareholders in the
combined company.
Jernigan also evaluated the effect of the Merger on book value per
share. Assuming a consummation in the fourth quarter and using the above
described earning estimates, the Merger would result in an increase of 19.8% in
book value for Georgia National shareholders.
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Jernigan compared the amount of dividends expected to be paid on
Georgia National Common Stock prior to the signing of the Agreement to the
expected dividend to be paid on a performance basis post Merger and determined
that the Merger would result in an increase in dividends of 90% for Georgia
National shareholders.
Analysis of Selected Comparable Mergers and Acquisitions: Jernigan
reviewed recent mergers involving southeastern banks and bank holding companies.
No transaction was considered identical to the Merger; therefore, the means and
medians of the overall transactions multiples are more relevant than the
multiples for any specific transaction. Jernigan calculated a mean market value
multiple of latest twelve-month net income of 24.2 times, latest reported book
value median of 2.9 times, latest reported median of total assets of 23.5% and
latest reported median percent of total deposits of 27.9%. As noted above,
Georgia National's transaction multiples are 24 times latest twelve month
earnings for the period ended June 30, 1998, 3.0 times stated book value as of
June 30, 1998, 32.1% of total assets and 36.5% of total deposits as of June 30,
1998.
Discounted Cash Flow Analysis: Jernigan performed a discounted cash
flow analysis of the present value of projected cash flow from dividends and the
present value of the estimated terminal value for Georgia National Bank assuming
it was sold at year end 2003. In performing this analysis, discount rates of 12%
to 14% and terminal multiples of 10.0 times to 12.0 times were used. This
analysis resulted in a range of per share values of $13.36 to $16.74.
In performing these analyses, Jernigan made numerous assumptions with
respect to industry performance, general business and economic conditions and
other matters, many of which are beyond the control of Georgia National or
SouthTrust. The analyses performed by Jernigan are not necessarily indicative of
actual values or actual future results, which may be significantly more or less
favorable than suggested by such analyses. Such analyses were prepared solely as
part of Jernigan's analysis of the fairness, from a financial point of view, of
the consideration to be paid by SouthTrust. The analyses do not purport to be
appraisals or to reflect the prices at which a company might actually be sold or
the prices at which any securities may trade at the present time or at any time
in the future.
As noted above, Georgia National originally retained Jernigan in
October of 1997 to provide financial advisory services. As the Georgia National
Board of Directors began to consider the possibilities of merging Georgia
National with another institution in more detail, Georgia National entered into
a subsequent letter agreement with Jernigan, dated January 21, 1998. Pursuant to
this agreement, Georgia National agreed to pay Jernigan a fee equivalent to
one-half of one percent of the fair market value of the aggregate consideration
realized by the shareholders of Georgia National. Georgia National has also
agreed to reimburse Jernigan for approved expenses associated with the
transaction, and to indemnify Jernigan against certain liabilities arising out
of Jernigan's engagement.
Georgia National retained Jernigan based upon Jernigan's experience and
expertise. Jernigan has experience in assisting clients, including banks and
bank holding companies, in investigating their strategic options. Jernigan also
has experience in the valuation of businesses and securities in connection with
mergers and acquisitions.
INTERESTS OF CERTAIN NAMED PERSONS IN THE MERGER
General
Certain members of Georgia National management and of Georgia
National's Board of Directors have interests in the Merger that are in addition
to any interests they may have as shareholders of Georgia National generally.
These interests include, among others, provisions in the Merger Agreement
relating to indemnification of Georgia National's directors and officers,
directors' and officers' liability insurance, and certain severance and other
employee benefits, as described below.
SouthTrust has agreed in the Merger Agreement that it will, for six (6)
years after the Effective Time of the Merger, indemnify, defend and hold
harmless each person entitled to indemnification from Georgia National, the Bank
or any of their respective subsidiaries, against all liabilities arising out of
actions or omissions occurring at or prior to the Effective Time of the Merger
(including, without limitation, the transactions contemplated by the Merger
Agreement)
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to the same extent and subject to the conditions set forth in the Certificates
or Articles of Incorporation or Association of Georgia National, the Bank or any
of their respective subsidiaries, as may be applicable, and Bylaws, in each case
as in effect on the date of the Merger Agreement. SouthTrust has also generally
agreed to use its reasonable efforts to maintain the existing directors' and
officers' liability insurance policy or policies of Georgia National, the Bank
and their respective subsidiaries for three years after the Effective Time of
the Merger, subject to certain limitations.
Following the Effective Time of the Merger and subject to certain
conditions described below, SouthTrust has agreed that the officers and
employees of Georgia National or the Bank who SouthTrust or any of its
affiliates employs will be eligible to participate in the employee benefits
plans of SouthTrust, including welfare and fringe benefit plans, on the same
basis and subject to the same conditions as are applicable to any newly-hired
employee of SouthTrust, except that (i) with respect to SouthTrust's group
health plan, SouthTrust will credit each such employee for eligible expenses
incurred by such employee and his or her dependents (if applicable) under
Georgia National's group medical insurance plan during the current calendar year
for purposes of satisfying the deductible provisions under SouthTrust's group
medical benefits plan for such current year, and SouthTrust will not apply any
waiting period (including, but not limited to, waiting periods for pre-existing
conditions) of a duration greater than the duration of the corresponding waiting
period, if any, under Georgia National's group health plan in effect prior to
the Effective Time of the Merger; and (ii) credit for each such employee's past
service with Georgia National or the Bank prior to the Effective Time of the
Merger will be given by SouthTrust to employees for purposes of: (1) determining
vacation and sick leave benefits and accruals in accordance with the established
policies of SouthTrust; (2) establishing eligibility for participation in, and
vesting under, SouthTrust's employee benefits plans and for purposes of
determining the scheduling of vacations and other determinations which are made
based on length of service (except that such credit for past service will not be
given to any such employee for purposes of establishing eligibility for
participation in the 1990 Discounted Stock Plan of SouthTrust); and (3)
determining satisfaction of applicable waiting periods under said plans for
pre-existing conditions.
The Merger Agreement further provides that the Georgia National
Bancorp, Inc. 401(k) Profit Sharing Plan (the "Georgia National Profit Sharing
Plan") will either be merged into the SouthTrust Corporation Employees' Profit
Sharing Plan (the "ST Profit Sharing Plan") as of January 1 of the year
following the Effective Time of the Merger or, if so elected by SouthTrust,
terminated as of a date prior to the Effective Time of the Merger. From and
after the January 1 following the Effective Time of the Merger, for purposes of
determining eligibility to participate in, and vesting in accrued benefits
under, both the SouthTrust Corporation Revised Retirement Income Plan (the "ST
Retirement Plan") and the ST Profit Sharing Plan, employment by Georgia National
and Georgia National's subsidiaries will be credited as if it were employment by
SouthTrust, but such service will not be credited for purposes of determining
benefit accrual under the ST Retirement Plan.
Employment Agreements for Certain Executive Officers
Georgia National has previously entered into employment agreements with
each of William S. Huggins, President and CEO of Georgia National and the Bank,
Thomas Z. Lanier, Executive Vice President and Senior Loan Officer of the Bank,
and Michael R. Carson, Senior Vice President and Cashier of the Bank and
Secretary of Georgia National (Messrs. Huggins, Lanier and Carson are sometimes
referred to collectively as the "Executives"). These employment agreements were
amended in connection with the execution of the Merger Agreement, to take effect
as of the Effective Time of the Merger. In the event the Merger is not
consummated by the parties, the amendments will be void and of no effect.
Mr. Huggins' employment agreement, as amended, provides that in the
event of a change in control of Georgia National, Mr. Huggins will be entitled,
for a period beginning twenty days prior to, and ending three months after, the
closing date of the transaction effecting the change in control to terminate his
employment agreement and receive an amount equal to his then current monthly
salary multiplied by the greater of (i) the number of months remaining in the
term of his agreement or (ii) 12 months. He will also be entitled to continue to
receive benefits. In the amendment to his employment agreement, Mr. Huggins has
agreed that any termination, as described above, will not be effective until 110
days following the date that notice of such termination is delivered to his
employer. Mr. Huggins' employment agreement further provides that a cash bonus
in the amount of $32,000 will be paid to Mr. Huggins at the time bonus payments
are made to similarly situated executives of SouthTrust and its affiliates, but
in no event later than March 31,
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1999, in the event Mr. Huggins remains employed under his employment agreement
through December 31, 1998 (the "Year End Bonus"). In the event Mr. Huggins
continues in the employment of ST-Bank after December 31, 1998, he will be
entitled to participate in such bonus plans and programs as are available to
similarly situated executive employees of SouthTrust and its affiliates on the
same terms as such similarly situated executive employees. Mr. Huggins'
employment agreement, as amended, also provides that Mr. Huggins may be
terminated for "cause" (as defined in the employment agreement) without notice
and without further obligation by SouthTrust or ST-Bank other than for monies
already paid. In the event ST-Bank terminates Mr. Huggins without cause,
however, Mr. Huggins will be entitled to be paid for the duration of his
employment agreement, which is scheduled to terminate on December 31, 1999,
with all other benefits as are then being provided to Mr. Huggins.
Mr. Lanier's and Mr. Carson's employment agreements, as amended,
provide for similar benefits as Mr. Huggins' employment agreement in the event
of a change in control, although each of them will be entitled to receive such
salary and benefits equal to 12 months worth of salary and benefits, regardless
of the remaining term of their respective employment agreements. Mr. Lanier's
employment agreement further provides for a Year End Bonus of $21,445 in the
event he remains employed under his employment agreement through December 31,
1998, and Mr. Carson's employment agreement provides that he will receive a Year
End Bonus of $14,045 in the event he remains employed under his employment
agreement through December 31, 1998.
In addition, each of the Executives has entered into an agreement
(collectively, "Retention Bonus Agreements") with ST-Bank that provides that
each Executive will receive a lump sum payment in the event he continues in the
employment of ST-Bank through the expiration of the sixth full calendar month
following the Merger. These lump sum payments are $259,600, $141,900 and
$107,700 for Messrs. Huggins, Lanier and Carson, respectively. These payments
are each subject to the further condition that in the event that such payments
or any payments under the Executives' respective employment agreements, as
amended, would not be deductible (in whole or in part) as a result of Section
280G of the Internal Revenue Code of 1986, as amended (the "Code"), the payments
or benefits under the Retention Bonus Agreement will be reduced until no portion
of such payment or benefit is not deductible as a result of Section 280G of the
Code, except that such a reduction may not exceed the payments that would
otherwise be made under the applicable Retention Bonus Agreement. The
determination as to whether any payment or benefit under a Retention Bonus
Agreement will be nondeductible by reason of the provisions of Section 280G of
the Code will be made by tax counsel selected by SouthTrust's independent
auditors and acceptable to the Executive.
EFFECT OF THE MERGER ON GEORGIA NATIONAL COMMON STOCK
Subject to approval of the Merger Agreement by the shareholders of
Georgia National at the Special Meeting, the receipt of required regulatory
approvals, and satisfaction of other conditions, Georgia National will be merged
with and into ST-Sub pursuant to the Merger Agreement. At the Effective Time of
the Merger, each share (excluding (i) shares held by any of Georgia National's
subsidiaries or by SouthTrust or any of its subsidiaries, in each case other
than in a fiduciary capacity or as a result of debts previously contracted, and
(ii) shares dissenting from approval of the Merger Agreement) of Georgia
National Common Stock will be converted into the right to receive 0.60 shares of
SouthTrust Common Stock, subject to possible adjustment as described under
"-Possible Conversion Ratio Adjustment."
The Conversion Ratio, including the number of shares of SouthTrust
Common Stock issuable in the Merger, is subject to appropriate adjustment in the
event of certain stock splits, stock dividends, reclassifications or similar
distributions effected by SouthTrust. No fractional shares of SouthTrust Common
Stock will be issued in the Merger, and, in lieu thereof, each holder of shares
of Georgia National Common Stock that otherwise would have been entitled to
receive a fractional share of SouthTrust Common Stock will be entitled to
receive a cash payment in an amount equal to the product of (i) the fractional
interest of a share of SouthTrust Common Stock to which such holder otherwise
would have been entitled and (ii) the last sale price of SouthTrust Common Stock
as reported by Nasdaq on the last trading day preceding the Effective Time of
the Merger.
Because, except as described below, the Conversion Ratio of shares of
SouthTrust Common Stock for Georgia National Common Stock is fixed, it will not
compensate Georgia National shareholders for decreases in the market price of
SouthTrust Common Stock which could occur before the Effective Time of the
Merger. Further, in the event the
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market price of SouthTrust Common Stock decreases after ________, 1998, the date
of the Special Meeting, the value of the SouthTrust Common Stock to be received
in the Merger in exchange for the Georgia National Common Stock would decrease
below the value prevailing at the time the shareholders of Georgia National
consider and act upon the proposal to approve and adopt the Merger Agreement.
However, in the event the market price of SouthTrust Common Stock increases, the
value of the SouthTrust Common Stock to be received in the Merger in exchange
for Georgia National Common Stock would increase. Georgia National's
shareholders are advised to obtain current market quotations for SouthTrust
Common Stock. No assurance can be given as to the market prices of SouthTrust
Common Stock on the date the Merger becomes effective or as to the market price
of SouthTrust Common Stock thereafter.
POSSIBLE CONVERSION RATIO ADJUSTMENT
The Merger Agreement provides that it may be terminated by the Georgia
National Board, at its sole option, if either:
(i) both (a) the Average Closing Price on the Determination
Date (i.e., the average last sale price of SouthTrust Common Stock for
the 20 consecutive trading days ending on the fifth business day prior
to the date on which the last required consent of any regulatory
authority having authority over the Merger is received) is less than
$38.14375 and (b) the number obtained by dividing the Average Closing
Price on the Determination Date by $44.875 (the "Parent Ratio") is less
than the number obtained by dividing the weighted average closing price
per share of the common stocks of the Index Group on the Determination
Date by the weighted average closing price per share of the common
stocks of the Index Group on July 1, 1998, and subtracting 0.15 from
this quotient (the "Index Ratio"); or
(ii) the Average Closing Price on the Determination Date is
less than $33.65625;
provided, however, that the Merger Agreement would not be so terminated if
SouthTrust elects, in its sole option, to increase the Conversion Ratio as set
forth in the Merger Agreement and as illustrated below. There can be no
assurance that the Georgia National Board would exercise its rights to terminate
the Merger Agreement if a Termination Event (i.e., the condition in clauses (i)
or (ii) above) exists and, if the Georgia National Board does elect to so
terminate the Merger Agreement, there can be no assurance that SouthTrust would
elect to increase the Conversion Ratio as provided in the Merger Agreement and
as illustrated below.
Certain possible effects of the above provisions on the Conversion
Ratio may be illustrated by the following four scenarios:
(1) If the Average Closing Price on the Determination Date is
not less than $38.14375, there would be no Termination Event and no
adjustment to the Conversion Ratio.
(2) If the Average Closing Price on the Determination Date is
less than $38.14375 and greater than $33.65625, but the Parent Ratio is
equal to or greater than the Index Ratio, there would be no Termination
Event and no increase in the Conversion Ratio.
(3) If the Average Closing Price on the Determination Date is
less than $38.14375 and the Parent Ratio is less than the Index Ratio,
there would be a Termination Event and the Georgia National Board
could, at its sole option, elect to terminate the Agreement; provided
that SouthTrust could, at its sole option, override such termination by
electing to increase the Conversion Ratio to equal the lesser of (i)
the result of dividing the product of $38.14375 and the Conversion
Ratio (as then in effect) by the Average Closing Price on the
Determination Date, and (ii) the result of dividing the product of the
Index Ratio and the Conversion Ratio (as then in effect) by the Parent
Ratio.
(4) If the Average Closing Price on the Determination Date is
less than $33.65625, there would be a Termination Event and the Georgia
National Board could, at its sole option, elect to terminate the
Agreement;
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provided that SouthTrust could, at its sole option, override such
termination by electing to increase the Conversion Ratio to equal the
quotient obtained by dividing the product of $33.65625 and the
Conversion Ratio (as then in effect) by the Average Closing Price on
the Determination Date.
If there were to be a Termination Event described in both paragraphs
(3) and (4) above, the Georgia National Board could elect which Termination
Event to assert. The above scenarios are for illustrative purposes only and are
not intended to, and do not, reflect the value of the SouthTrust Common Stock
that may actually be received by holders of Georgia National Common Stock in the
Merger, nor do they reflect all possible termination/increase scenarios.
Georgia National shareholders should be aware that the Average Closing
Price on the Determination Date on which the occurrence of a Termination Event
and the subsequent increase, if any, in the Conversion Ratio may be determined,
will be based on the average of the last reported sale prices of SouthTrust
Common Stock during a 20 consecutive trading day period ending at the close of
trading on the Determination Date. Accordingly, because the market price of
SouthTrust Common Stock between the Determination Date and the Effective Time of
the Merger, as well as on the date certificates representing shares of
SouthTrust Common Stock are delivered in exchange for shares of Georgia National
Common Stock following consummation of the Merger, will fluctuate, the value of
the SouthTrust Common Stock actually received by holders of Georgia National
Common Stock may be more or less than (i) the Average Closing Price on the
Determination Date, or (ii) the value of the SouthTrust Common Stock at the
Effective Time resulting from the Conversion Ratio or any possible adjustment to
the Conversion Ratio as illustrated above.
The Index Group consists of 17 bank holding companies selected by
SouthTrust and Georgia National as being directly relevant for purposes of
distinguishing changes in SouthTrust's stock prices that are unique from those
reflective of general changes in comparable companies. The 17 bank holding
companies are AmSouth Bancorporation, BB&T Corporation, Compass Bancshares,
Inc., Fifth Third Bancorp, First American Corporation, First Security
Corporation, First Tennessee National Corporation, First Virginia Banks, Inc.,
Hibernia Corporation, Huntington Banchares, Inc., Mercantile Bancorporation,
Inc., Regions Financial Corporation, Star Banc Corporation, Summit Bancorp,
SunTrust Banks, Inc., Union Planters Corporation, and Wachovia Corporation. If
SouthTrust or any company belonging to the Index Group declares or effects a
stock dividend, reclassification, recapitalization, split-up, combination,
exchange of shares or similar transaction between July 1, 1998 and the
Determination Date, the prices of SouthTrust Common Stock or such other common
stocks shall be appropriately adjusted for all purposes, including determining
whether there is a Termination Event or determining any possible increase in the
Conversion Ratio as illustrated above (and, in the case of any such transaction
by SouthTrust, the Conversion Ratio also shall be appropriately adjusted). In
the event there shall have been, between July 1, 1998 and the Determination
Date, any public announcement of a proposal for such company to be acquired or
for such company to acquire another company or companies in transactions with a
value exceeding 25% of the acquiror's market capitalization as of July 1, 1998,
or if the common stock of one of the listed companies ceases to be publicly
traded, such company will be removed from the Index Group and the weights will
be redistributed proportionately for purposes of computing the Index Price
(which, as described above, is used to determine the Index Ratio which in turn
is used in determining whether there has been a Termination Event and, in the
case of a Termination Event described in (3) above, is used to determine the
increase in the Conversion Ratio, if any).
It is not possible to know whether a Termination Event will occur until
after the Determination Date. The Georgia National Board has made no decision as
to whether to exercise its termination right in such situation. The Georgia
National Board would, consistent with its fiduciary duties, take into account
all relevant facts and circumstances that exist at such time and would consult
with its financial advisors and legal counsel. Approval of the Merger Agreement
by the shareholders of Georgia National at the Special Meeting will confer on
the Georgia National Board the power, consistent with its fiduciary duties, to
elect to consummate the Merger in the event of a Termination Event whether or
not there is any increase in the Conversion Ratio and without any further action
by, or resolicitation of, the shareholders of Georgia National. If the Georgia
National Board elects to exercise its termination right, Georgia National must
give SouthTrust prompt notice of that decision during a ten-day period following
the Determination Date, but the Georgia National Board may withdraw such notice,
at its sole option, at any time during such ten-day period. During the five-day
period commencing with receipt of such notice, SouthTrust has the option, in its
sole discretion, to increase the Conversion Ratio in the manner set forth in the
Merger Agreement and as illustrated above and thereby avoid such termination of
the Agreement. SouthTrust is under no obligation to increase the Conversion
Ratio, and there can be no assurance that
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SouthTrust would elect to increase the Conversion Ratio if the Georgia National
Board were to exercise its right to terminate the Merger Agreement as set forth
above. Any such decision would be made by SouthTrust in light of the
circumstances existing at the time SouthTrust has the opportunity to make such
an election. If SouthTrust elects to increase the Conversion Ratio as set forth
in the Merger Agreement and as illustrated above, it must give Georgia National
prompt notice of that election and such increased Conversion Ratio, in which
case no termination of the Agreement would occur as a result of a Termination
Event.
The foregoing discussion is qualified in its entirety by reference to
the applicable provisions in the Merger Agreement (a copy of which is set forth
as Exhibit A to this Proxy Statement/Prospectus) relating to possible increase
in the Conversion Ratio as the result of a Termination Event.
EFFECT OF THE MERGER ON GEORGIA NATIONAL STOCK OPTIONS
At the Effective Time of the Merger, all rights with respect to shares
of Georgia National Common Stock issuable pursuant to the exercise of stock
options ("Georgia National Stock Options") granted by Georgia National under the
stock option plans of Georgia National ("Georgia National Stock Option Plans"),
which are outstanding at the Effective Time of the Merger, whether or not
exercisable, will be assumed by SouthTrust in accordance with the terms of the
particular Georgia National Stock Option Plan under which such Georgia National
Stock Options were issued, and will become rights with respect to SouthTrust
Common Stock on a basis adjusted to reflect the Conversion Ratio. From and after
the Effective Time of the Merger, (i) each Georgia National Stock Option assumed
by SouthTrust may be exercised solely for shares of SouthTrust Common Stock,
(ii) the number of shares of SouthTrust Common Stock subject to such Georgia
National Stock Option shall be equal to the number of shares of Georgia National
Common Stock subject to such Georgia National Stock Option immediately prior to
the Effective Time of the Merger multiplied by the Conversion Ratio, and (iii)
the per share exercise price under each such Georgia National Stock Option shall
be adjusted by dividing the per share exercise price under each such Georgia
National Stock Option by the Conversion Ratio and rounding up to the nearest
cent.
As soon as practicable after the Effective Time of the Merger,
SouthTrust has agreed in the Merger Agreement to file a registration statement
on Form S-3 or Form S-8, as the case may be, with respect to the shares of
SouthTrust Common Stock subject to the Georgia National Stock Options and
to use its reasonable efforts to maintain the effectiveness of such registration
statement or registration statements (and maintain the current status of the
prospectus or prospectuses contained therein) for so long as any of the Georgia
National Stock Options remain outstanding.
It is intended that such assumption of Georgia National Stock Options
shall be undertaken in a manner that will not constitute a "modification" as
defined in Section 424 of the Internal Revenue Code of 1986, as amended (the
"Code") as to any stock option which is an incentive stock option as defined in
Section 422 of the Code. All restrictions or limitations on transfer with
respect to shares of Georgia National Common Stock awarded under a Georgia
National Stock Option Plans ("Restricted Stock"), to the extent that such
restrictions or limitations shall not have already lapsed, shall remain in full
force and effect with respect to the shares of SouthTrust Common Stock into
which such Restricted Stock is converted unless such restrictions arise under
the Securities Act of 1933 and are eliminated by virtue of the Registration
Statement filed by SouthTrust of which this Proxy Statement/Prospectus is a
part.
EFFECTIVE TIME OF THE MERGER
Subject to the conditions to the obligations of the parties to effect
the Merger, the Effective Time of the Merger will be the later of the date and
time at which the following actions are completed: (i) the Articles of Merger
are filed and become effective with the Secretary of State of the State of
Georgia and (ii) the Articles of Merger are filed and become effective with the
Secretary of State of the State of Alabama, unless in each case a later date is
specified in such Articles. Unless otherwise agreed upon by Georgia National and
SouthTrust, and subject to the conditions to the obligations of the parties to
effect the Merger, the parties to the Merger will cause the Effective Time of
the Merger to occur on the first business day following the last to occur of (i)
the effective date (including the expiration of any applicable waiting period)
of the last consent of any regulatory authority required for the Merger, and
(ii) the date on which the shareholders of Georgia National approve the matters
relating to the Merger Agreement required to be approved by such shareholders by
applicable law.
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NO ASSURANCE CAN BE PROVIDED THAT THE NECESSARY SHAREHOLDER AND
REGULATORY APPROVALS WILL BE OBTAINED OR THAT OTHER CONDITIONS PRECEDENT TO THE
MERGER CAN OR WILL BE SATISFIED. GEORGIA NATIONAL AND SOUTHTRUST ANTICIPATE THAT
ALL CONDITIONS TO CONSUMMATION OF THE MERGER WILL BE SATISFIED SO THAT THE
MERGER CAN BE CONSUMMATED ON OCTOBER 23, 1998. HOWEVER, DELAYS IN THE
CONSUMMATION OF THE MERGER COULD OCCUR.
The Board of Directors of either Georgia National or SouthTrust
generally may terminate the Agreement if the Merger is not consummated by
January 31, 1999, unless the failure to consummate by that date is the result of
a breach of any of the representations, warranties, covenants or other
agreements contained in the Merger Agreement by the party electing to terminate.
See "- Regulatory Approvals and Certain Other Conditions to Consummation of the
Merger; Waiver and Amendment" and "- Termination."
EXCHANGE OF STOCK CERTIFICATES
Promptly after the Effective Time of the Merger, SouthTrust and Georgia
National will cause the exchange agent selected by SouthTrust (the "Exchange
Agent") to mail to each former holder of record of shares of Georgia National
Common Stock appropriate transmittal materials for use in exchanging their
certificates formerly representing shares of Georgia National Common Stock for
exchange and conversion in accordance with the procedures provided for herein
and in the Merger Agreement. The letter of transmittal will specify that
delivery shall be effected, and risk of loss and title to the certificates shall
pass, only upon proper delivery of such certificates to the Exchange Agent.
GEORGIA NATIONAL SHAREHOLDERS SHOULD NOT SURRENDER THEIR CERTIFICATES FOR
EXCHANGE UNTIL THEY RECEIVE SUCH LETTER OF TRANSMITTAL AND INSTRUCTIONS. After
the Effective Time of the Merger, each holder of shares of Georgia National
Common Stock shall surrender the certificates representing such shares to the
Exchange Agent and shall promptly receive in exchange therefor the SouthTrust
Common Stock, together with all undelivered dividends or distributions in
respect of such shares (without interest thereon), and cash in lieu of any
fractional shares of SouthTrust Common Stock to which such shareholder may
otherwise be entitled. Until the stock certificates evidencing the shares of
Georgia National Common Stock are surrendered pursuant to the Merger Agreement,
no SouthTrust Common Stock will be delivered or remitted to such holders. In
addition, holders of shares of Georgia National Common Stock will not be
entitled to receive any interest respecting any dividends or distributions
payable in respect of shares of SouthTrust Common Stock, or on any cash in lieu
of fractional shares. Neither SouthTrust nor the Exchange Agent shall be liable
to a holder of Georgia National Common Stock for any amounts paid or property
delivered in good faith to a public official pursuant to any applicable
abandoned property law.
Whenever a dividend or other distribution is declared by SouthTrust on
SouthTrust Common Stock, the record date of which is at or after the Effective
Time of the Merger, the declaration will include dividends or other
distributions on all shares issuable pursuant to the Merger Agreement, but,
after the Effective Time of the Merger, no dividend or other distribution
payable after the Effective Time of the Merger with respect to SouthTrust Common
Stock will be paid to the holder of any certificate representing shares of
Georgia National Common Stock issued and outstanding at the Effective Time of
the Merger until the holder duly surrenders such certificate. Upon surrender of
such Georgia National Common Stock certificate, however, both the SouthTrust
Common Stock certificate, together with all undelivered dividends or other
distributions (without interest thereon), and any undelivered cash payments to
be paid in lieu of fractional shares (without interest thereon) will be
delivered and paid with respect to each share represented by such certificate.
After the Effective Time of the Merger, there will be no transfers of
shares of Georgia National Common Stock on Georgia National's stock transfer
books. If certificates formerly representing shares of Georgia National Common
Stock are presented for transfer after the Effective Time of the Merger, they
will be canceled and exchanged for shares of SouthTrust Common Stock and a check
for the amount due in lieu of fractional shares, if any, deliverable in respect
thereof.
RESALE OF SOUTHTRUST COMMON STOCK RECEIVED IN THE MERGER
The shares of SouthTrust Common Stock to be issued pursuant to the
Merger Agreement have been registered under the Securities Act, thereby allowing
such shares to be sold without restriction by shareholders of Georgia National
who are not deemed to be "affiliates" (as that term is defined in the rules
under the Securities Act) of Georgia National and who do not become affiliates
of SouthTrust. The shares of SouthTrust Common Stock to be issued to affiliates
of Georgia National may be resold only pursuant to an effective registration
statement, pursuant to Rule 145 under the Securities Act,
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or in transactions otherwise exempt from registration under the Securities Act.
SouthTrust will not be obligated and does not intend to register its shares
under the Securities Act for resale by shareholders who are affiliates. Since
the aggregate number of shares of SouthTrust Common Stock to be issued in the
Merger is less than any applicable volume limitation under Rule 145, an
affiliate of Georgia National who otherwise complies with Rule 145, subject to
the undertaking described below, will be free to resell, during any given
three-month period, all of the shares of SouthTrust Common Stock received by
such affiliate in the Merger.
This Proxy Statement/Prospectus does not cover any resales of
SouthTrust Common Stock received by persons who may be deemed to be affiliates
of Georgia National or SouthTrust.
Georgia National has caused each person identified by Georgia National
as an affiliate to execute a written agreement in the form provided for in the
Merger Agreement providing that such affiliate will not sell, transfer or
otherwise dispose of such shares of SouthTrust Common Stock to be received by
such affiliate upon consummation of the Merger, except (i) in compliance with
the Securities Act or the rules and regulations thereunder, and (ii) until such
time as financial results covering at least 30 days of combined operations of
Georgia National and SouthTrust have been published within the meaning of
Section 201.01 of the Commission's Codification of Financial Reporting Policies.
ACCOUNTING TREATMENT
The Merger will be accounted for by SouthTrust as a pooling of
interests. Under the pooling of interests method of accounting, the recorded
amounts of the assets and liabilities of Georgia National and SouthTrust will be
carried forward at their previously recorded amounts. The Merger Agreement
provides, as a condition of both SouthTrust's and Georgia National's obligations
to consummate the Merger, that none of SouthTrust, Georgia National or the Bank
will have taken any action that would materially impede the ability of
SouthTrust to account for the Merger as a pooling of interests. The Merger
Agreement also provides that, as a condition of SouthTrust's obligations to
consummate the Merger, that SouthTrust, in the exercise of its reasonable
discretion, shall not have determined that the transactions contemplated by the
Merger Agreement would fail to qualify for pooling of interests accounting
treatment. For information concerning certain restrictions to be imposed on the
transferability of the shares of SouthTrust Common Stock received by the
affiliates of Georgia National in the Merger in order, among other things, to
assure the availability of pooling of interests accounting treatment, see "-
Resale of SouthTrust Common Stock Received in the Merger."
REGULATORY APPROVALS AND CERTAIN OTHER CONDITIONS TO THE MERGER; WAIVER AND
AMENDMENT
The respective obligations of SouthTrust and Georgia National to
consummate the Merger are subject to the satisfaction of certain conditions,
including, among others, (i) the receipt of all required regulatory approvals
with respect to the Merger, (ii) the approval of the Merger Agreement by the
requisite vote of Georgia National shareholders, and (iii) certain other
conditions as described in more detail below.
Applications for the approvals described below have been submitted to
the appropriate regulatory agencies. THERE CAN BE NO ASSURANCE THAT SUCH
REGULATORY APPROVALS WILL BE OBTAINED OR AS TO THE TIMING OF ANY SUCH APPROVALS.
There also can be no assurance that any such approvals will not impose
conditions or be restricted in a manner (including requirements relating to the
raising of additional capital or the disposition of assets) which in the
reasonable judgment of the Board of Directors of either SouthTrust or Georgia
National would so materially adversely impact the economic or business benefits
of the transactions contemplated by the Merger Agreement that, had such
condition or requirement been known, such party would not, in its reasonable
judgment, have entered into the Merger Agreement.
Georgia National and SouthTrust are not aware of any material
governmental approvals or actions that are required for consummation of the
Merger, except as described below. Should any other approval or action be
required, it currently is contemplated that such approval or action would be
sought.
Consummation of the Merger is subject to receipt of certain regulatory
approvals, including, ordinarily, the prior approval by the Federal Reserve
Board under the Bank Holding Company Act. Pursuant, however, to the Federal
Reserve Board's Regulation Y, where (i) the merger of a company
(i.e., Georgia National) controlling a bank (i.e., Bank) with a bank holding
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company (i.e., ST-Sub) is part of a merger of such bank with an operating
subsidiary bank of the acquiring bank holding company (i.e., ST-Bank), (ii) the
bank merger and bank holding company merger occur simultaneously, (iii) the
transaction requires the prior approval of a federal supervisory agency, (iv)
the transaction does not involve the acquisition of any non-bank company that
would require prior approval pursuant to Section 4 of the Bank Holding Company
Act, and (v) the acquiring bank holding company meets the Federal Reserve
Board's capital adequacy guidelines, no Federal Reserve Board approval is
required if ten day's prior notice of the transaction is given to the applicable
Federal Reserve Bank, and within such ten-day period such Federal Reserve Bank
has not informed the acquiring bank holding company that an application under
Regulation Y is required.
In connection with the Merger, it is contemplated that,
contemporaneously with or following the Effective Time of the Merger , the Bank
will be merged into ST-Bank whereupon the Bank will cease to be a separate
entity. Because ST-Bank, the surviving bank in that transaction, is a national
bank, the merger of the banking subsidiaries will be subject to the approval of
the Comptroller under the Bank Merger Act, which prohibits the merger or
consolidation of any insured institution with any other depository institution
without the approval of the insured institution's primary federal supervisory
regulatory agency. SouthTrust has given the required notice of the Subsidiary
Merger to the Federal Reserve Bank of Atlanta. The Deputy Secretary of the
Federal Reserve Board, acting under delegated authority, informed SouthTrust on
August 21, 1998 that, based on review of the notice given to the Federal Reserve
Bank of Atlanta, the Federal Reserve Board does not object to the Merger and
that no Federal Reserve Board approval will be required for the Merger if the
Subsidiary Merger is approved by the Comptroller. On August 5, 1998, ST-Bank
submitted to the Comptroller an application seeking approval of the Subsidiary
Merger.
The approval standards to be applied by the Comptroller under the Bank
Merger Act and by the Federal Reserve Board under Section 3 of the Bank Holding
Company Act are the same. The Bank Merger Act requires that the Comptroller take
into consideration, among other factors, the financial and managerial resources
and future prospects of the institutions and the convenience and needs of the
communities to be served. In essence, the Comptroller will deny approval of the
Subsidiary Merger (i) if such transaction would result in a monopoly or be in
furtherance of any combination or conspiracy to monopolize or to attempt to
monopolize the business of banking in any part of the United States, or (ii) if
the effect of such transaction in any section of the country may be
substantially to lessen competition or to tend to create a monopoly, or if it
would in any other manner be a restraint of trade, unless the relevant
regulatory agency finds that the anti-competitive effects of such merger are
clearly outweighed by the public interest and by the probable effect of the
transaction in meeting the convenience and needs of the communities to be
served. Under the Bank Merger Act, the Comptroller also considers whether the
proposed transaction can reasonably be expected to produce benefits to the
public, such as greater convenience, increased competition, or gains in
efficiency, that outweigh possible adverse effects, such as undue concentration
of resources, decreased or unfair competition, conflicts of interests, or
unsound banking practices. The Comptroller has the authority to deny an
application if it concludes that the combined organization would have an
inadequate capital position or if the acquiring organization does not meet the
requirements of the Community Reinvestment Act of 1977. In addition, the
Subsidiary Merger may not be consummated until the 30th day following the date
of the approval of the Comptroller, during which period the United States
Department of Justice may comment adversely on the transaction or challenge the
Subsidiary Merger on antitrust grounds. However, the Subsidiary Merger may be
consummated on or after the 15th day following the date of the approval of the
Comptroller if the Comptroller does not receive any adverse comments from the
United States Attorney General and the United States Attorney General consents
to the shorter period. The commencement of an antitrust action would stay the
effectiveness of such an approval unless a court specifically orders otherwise.
The Merger cannot proceed in the absence of the requisite regulatory
approvals. There can be no assurance that such regulatory approvals will be
obtained, and, if the Merger is approved, there can be no assurance as to the
date of any such approval. There also can be no assurance that the United States
Department of Justice or a State Attorney General will not challenge the Merger
or, if such a challenge is made, as to the result thereof.
Approval by the Comptroller of the Subsidiary Merger is not a condition
to the obligation of SouthTrust to consummate the Merger. Accordingly, it is
possible that, if all conditions to the respective obligations of SouthTrust and
Georgia National to consummate the Merger are satisfied, but the regulatory
approvals with respect to the Subsidiary Merger have not been obtained, the
Merger could be consummated even though consent to the Subsidiary Merger were to
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be delayed. In such case, however, prior approval by the Federal Reserve Board
under the Bank Holding Company Act would have to be obtained for the Merger
itself.
In addition to receipt of all necessary regulatory approvals and the
expiration of all required notice and waiting periods following the granting of
such approvals, and the approval of the Merger Agreement by the requisite vote
of the shareholders of Georgia National, consummation of the Merger is subject
to the satisfaction of certain other conditions on or before the Effective Time
of the Merger. Such additional conditions include, among others, the following:
(i) The Registration Statement will be effective under the
Securities Act, no stop orders suspending the effectiveness of the
Registration Statement will have been issued and no proceeding by the
Commission or any other regulatory authority to suspend the
effectiveness thereof will have been initiated or threatened;
(ii) The representations and warranties of SouthTrust, ST-Sub
and Georgia National, respectively, made in the Merger Agreement and
assessed as of the time of the Merger Agreement and the Effective Time
of the Merger will be accurate to the extent provided for in the Merger
Agreement, except for inaccuracies which, in the aggregate, are not
reasonably likely to have a Material Adverse Effect (as defined in the
Merger Agreement) on the party making the representations and
warranties;
(iii) SouthTrust, ST-Sub and Georgia National, respectively,
will have performed, and complied with, in all material respects all of
their respective agreements and covenants pursuant to the Merger
Agreement;
(iv) Georgia National will have received opinions of Bradley
Arant Rose & White LLP, counsel to SouthTrust and ST-Sub, as to certain
matters including certain tax matters (see "CERTAIN FEDERAL INCOME TAX
CONSEQUENCES");
(v) No court or governmental or regulatory authority of
competent jurisdiction will have enacted, issued, promulgated, enforced
or entered any law, statute, regulation or order or taken any other
action which prohibits or makes illegal the consummation of the
transactions contemplated by the Merger Agreement;
(vi) The shares of SouthTrust Common Stock issuable pursuant
to the Merger will have been approved for listing on Nasdaq;
(vii) SouthTrust, in the exercise of its reasonable
discretion, will not have determined that the transactions contemplated
by the Merger Agreement fail to qualify for pooling of interests
accounting treatment; and
(viii) In the case of SouthTrust's obligations, the holders of
not more than 5% of the outstanding shares of Georgia National Common
Stock will have taken appropriate steps to dissent from the Merger.
At any time before the Effective Time of the Merger, any party to the
Merger Agreement may waive in writing any provision of the Merger Agreement. In
addition, any provision of the Merger Agreement may be amended by written
instruments signed on behalf of each of the parties thereto.
TERMINATION
The Merger Agreement may be terminated and the Merger abandoned at any
time prior to the Effective Time of the Merger in any of the following ways:
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(i) by the mutual consent in writing of the Board of Directors
of SouthTrust, ST-Sub and Georgia National; or
(ii) by the Board of Directors of SouthTrust, ST-Sub or
Georgia National if the Merger shall not have occurred on or prior to
January 31, 1999, provided that the failure to consummate the Merger on
or before such date is not accompanied by any breach of any of the
representations, warranties, covenants or other agreements contained
within the Merger Agreement by the party electing to terminate; or
(iii) by the Board of Directors of SouthTrust, ST-Sub or
Georgia National (provided that the terminating party is not then in
breach of any representation or warranty contained in the Merger
Agreement) in the event of an inaccuracy of any representation or
warranty of the other party contained in the Merger Agreement which
cannot be or has not been cured within thirty (30) days after the
giving of written notice to the breaching party of such inaccuracy; or
(iv) by the Board of Directors of SouthTrust, ST-Sub or
Georgia National (provided that the terminating party is not then in
breach of any representation or warranty contained in the Merger
Agreement) in the event of a material breach by the other party of any
covenant or agreement contained in the Agreement which cannot be or has
not been cured within thirty (30) days after the giving of written
notice to the breaching party of such breach; or
(v) by the Board of Directors of SouthTrust, ST-Sub or Georgia
National in the event that (i) any consent of any regulatory authority
required for consummation of the Merger and the other transactions
contemplated thereby shall have been denied by final nonappealable
action of such authority or if any action taken by such authority is
not appealed within the time limit for appeal, or (ii) the shareholders
of Georgia National fail to vote their approval of the Merger Agreement
and the Merger and the transactions contemplated thereby as required by
applicable law; or
(vi) by the Board of Directors of SouthTrust, ST-Sub or
Georgia National (provided that the terminating party is not then in
breach of any representation or warranty contained in the Merger
Agreement) in the event that any of the conditions precedent to the
obligations of such party to consummate the Merger (other than as
contemplated by (v) above) cannot be satisfied or fulfilled by January
31, 1999; or
(vii) by Georgia National if certain conditions with respect
to the price of SouthTrust Common Stock are not met and certain
adjustments to the Conversion Ratio are not made by SouthTrust. See
"-Possible Conversion Ratio Adjustment."
In the event of the termination and abandonment of the Merger Agreement
pursuant to the above, the Agreement shall terminate and have no effect, except
that certain representations and warranties regarding confidentiality
obligations and provisions regarding indemnification and construction of the
Merger Agreement shall survive any such termination and abandonment.
The Stock Option Agreement is governed by its own terms as to
termination. See "THE MERGER - Stock Option Agreement" and "THE MERGER -
Termination."
CERTAIN EXPENSES
The Merger Agreement provides that SouthTrust and Georgia National will
solely and entirely bear their own expenses incurred in connection with or
related to the authorization, preparation and execution of the Merger Agreement,
the solicitation of shareholder approval and all other matters related to the
closing of the transactions contemplated thereby, including all fees and
expenses of agents, representatives, counsel and accountants employed by either
party or its affiliates.
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RIGHTS OF DISSENT AND APPRAISAL
Holders of Georgia National Common Stock are entitled to dissent from
the Merger and receive in cash the fair value, as of immediately before the
Effective Time of the Merger, of the shares of Georgia National Common Stock
held by such shareholders pursuant to Sections 14-2-1301 to 14-2-1332 of the
Georgia Business Corporation Code (the "Georgia Dissent Provisions"), which
sections are reprinted in their entirety in Exhibit D to this Proxy
Statement/Prospectus. Such fair value is exclusive of any appreciation or
depreciation in anticipation of the Merger. The appraisal value of the Georgia
National Common Stock may differ from the consideration that a shareholder of
Georgia National is entitled to receive in the Merger. All references in
Sections 14-2-1301 to 14-2-1332 and in this summary to a "shareholder" are to
the record holders of Georgia National Common Stock as to which dissenters'
rights are asserted. A person having a beneficial interest in shares of Georgia
National Common Stock that are held of record in the name of another person,
such as a broker or nominee, must act promptly to cause the record holder to
follow the steps summarized below properly and in a timely manner to perfect
whatever dissenters' rights the beneficial owner may have.
The following is a summary of the Georgia Dissent Provisions. This
summary is qualified in all respects by reference to the Georgia Dissent
Provisions themselves, the full text of which is annexed hereto as Exhibit D.
Under the Georgia Dissent Provisions, a shareholder of Georgia National
who wishes to assert dissenters' rights (i) must file with Georgia National,
prior to the Special Meeting, or at the Special Meeting but before the vote is
taken, written notice of the shareholder's intent to demand payment for his or
her shares; and (ii) must refrain from voting in favor of the Merger. Within ten
(10) days after the date of the Special Meeting, Georgia National must give the
dissenting shareholder written notice of authorization of the Merger by the
shareholders setting forth (A) where the payment demand must be sent, (B) the
date by which the payment demand must be received, which date may not be fewer
than thirty (30) nor more than sixty (60) days after the notice is sent, and (C)
a copy of the Georgia Dissent Provisions. The dissenting shareholder must file
with Georgia National a demand for payment of the fair value of his or her
shares in accordance with the terms of the notice. Any dissenting shareholder
filing a payment demand must deposit his or her certificates with Georgia
National simultaneously with the filing of the demand for payment. A record
shareholder may dissent as to less than all of the shares of Georgia National
Common Stock held by him or her, only if such shareholder dissents with respect
to all shares beneficially owned by any one beneficial shareholder and notifies
Georgia National in writing of the name and address of each person on whose
behalf such shareholder asserts dissenters' rights. In the event of such partial
dissent, the shareholder is treated as two separate shareholders.
Within ten (10) days after the later of the expiration of the period in
which the dissenting shareholder may file a notice of election to dissent, or
the Effective Time of the Merger, the Surviving Corporation is required to make
a written offer to each dissenting shareholder to purchase the shares of Georgia
National Common Stock at a price deemed by the Surviving Corporation to be the
fair value of such shares plus accrued interest. The offer of payment must be
accompanied by the corporation's financial statements as of a fiscal year ending
not more than 16 months before the date of payment, the latest available interim
financial statements, if any, and an explanation of how the interest was
calculated. If, within thirty (30) days after the making of such offer, any
shareholder accepts the same, payment therefor shall be made within sixty (60)
days after the later of the date such offer was made or the consummation of the
Merger. If the dissenting shareholder fails to respond to the offer within said
thirty (30) day period, the dissenting shareholder will have been deemed to have
accepted such offer, and the Surviving Corporation must make payment within said
sixty (60) day period. However, if the Surviving Corporation and the dissenting
shareholder are unable to agree with respect to a price, then the Surviving
Corporation, within sixty (60) days after receipt of written demand from such
dissenting shareholder, shall file an action in a court of competent
jurisdiction in the county in which Georgia National maintained its registered
office requesting that the fair value of the shares of Georgia National Common
Stock be found and determined. If the Surviving Corporation shall fail to
institute such proceedings, it shall pay each dissenting shareholder whose
demand remains unsettled the amount demanded by such shareholder. All dissenting
shareholders are deemed to be parties to the proceeding as an action against
their shares. 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 cost and expenses of any such dissent proceeding shall be
determined by the court and shall be assessed against the Surviving Corporation,
but all or any part of such costs and expenses may be apportioned and assessed
against
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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 or
vexatious and not in good faith. The expenses awarded by the court may include
compensation for reasonable fees and expenses of any appraiser, counsel or
experts employed by any party to the proceedings. Upon payment by the Surviving
Corporation of the fair value of the shares, as determined by the court, the
dissenting shareholder will cease to have any interest in the shares of Georgia
National Common Stock.
The foregoing is only a summary of the Georgia Dissent Provisions. Each
Georgia National shareholder is urged to read the Georgia Dissent Provisions
attached as Exhibit D carefully and to seek competent legal advice regarding
such dissent and appraisal rights.
CONDUCT OF BUSINESS BY GEORGIA NATIONAL PENDING THE MERGER
The Merger Agreement provides that, until the Effective Time of the
Merger, Georgia National will and will cause its subsidiaries to (i) operate its
business only in the usual, regular and ordinary course, consistent with past
practice and prudent banking and business principles, (ii) use its best efforts
to maintain and preserve intact its business organization and employees,
goodwill with customers and advantageous business relationships and retain the
services of its officers and key employees, and (iii) except as required by law
or regulation, take no action which would adversely affect or delay the ability
of Georgia National or SouthTrust to obtain any regulatory approval or other
approvals required for the consummation of the transactions contemplated by the
Merger Agreement or to perform its covenants and agreements under the Merger
Agreement. The Merger Agreement further provides that, until the Effective Time
of the Merger, Georgia National will not do or agree or commit to do, or permit
any of its subsidiaries to do or agree or commit to do, any of the following
without the prior written consent of SouthTrust:
(1) amend its Articles of Incorporation or Bylaws or the Articles
of Association or Bylaws of the Bank;
(2) except for the issuance of shares pursuant to the terms of
outstanding options to purchase Georgia National Common Stock,
change the number of shares of Georgia National Common Stock
authorized, issued or outstanding, including any issuance,
purchase, redemption, split, combination or reclassification
thereof, or issue or grant any option, warrant, call,
commitment, subscription, right or agreement to purchase
relating to the authorized or issued capital stock of Georgia
National, declare, set aside or pay any dividend or other
distribution with respect to the outstanding capital stock of
Georgia National; provided, however, that Georgia National may
(to the extent it is legally able to do so by applicable law),
but shall not be obligated to, declare and pay a dividend with
respect to the outstanding capital stock of Georgia National
in an amount per share that does not exceed the product of the
per share amount of any dividend declared by SouthTrust with
respect to each SouthTrust Share during the period from the
date of the Merger Agreement to the Effective Time of the
Merger multiplied by the Conversion Ratio; and, provided,
always, that any such dividend declared by Georgia National
must be declared in accordance with the dividend policy of
Georgia National existing at the date of the Merger Agreement
and with past practice;
(3) incur any material liabilities or material obligations (other
than deposit liabilities and short-term borrowings in the
ordinary course of business), whether directly or by way of
guaranty, including any obligation for borrowed money, or
whether evidenced by any note, bond, debenture, or similar
instrument, except in the ordinary course of business
consistent with past practice;
(4) make any capital expenditures individually in excess of
$25,000, or in the aggregate in excess of $50,000 other than
pursuant to binding commitments existing on December 31, 1997,
and disclosed pursuant to the Merger Agreement and other than
expenditures necessary to maintain existing assets in good
repair;
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(5) sell, transfer, convey or otherwise dispose of any real
property (including "other real estate owned") or interest
therein or any tangible or intangible personal property having
a book value in excess of or in exchange for consideration in
excess of $25,000 for each such parcel or interest other than
in the ordinary course of business for reasonable and adequate
consideration;
(6) pay any bonuses to any executive officer or director except
pursuant to the terms of an enforceable agreement as disclosed
in the Merger Agreement; enter into any new, or amend in any
respect any existing employment, consulting, non-competition
or independent contractor agreement with any person, except as
may be required by law; alter the terms of any existing
incentive bonus or commission plan; adopt any new or amend in
any material respect any existing employee benefit plan,
except as may be required by law or to maintain the tax
qualified status of any such plan; grant any general increase
in compensation to its employees as a class or to its officers
except for non-executive officers in the ordinary course of
business and consistent with past practices and policies or
except in accordance with the terms of an enforceable written
agreement; grant any material increases in fees or other
increases in compensation or in other benefits to any of its
directors; or effect any change in any material respect in
retirement benefits to any class of employees or officers,
except as required by law;
(7) enter into or extend any agreement, lease or license relating
to real property, tangible or intangible personal property or
any service or other function (including, without limitation),
data processing or bankcard functions relating to Georgia
National, the Bank or any of their respective subsidiaries
that involves an aggregate of $25,000;
(8) increase or decrease the rate of interest paid on time
deposits or on certificates of deposit, except in a manner and
pursuant to policies consistent with Georgia National and the
Bank's past practices;
(9) purchase or otherwise acquire any investment securities for
its own account having an average remaining life to maturity
greater than five years, or any asset-backed security, other
than those issued or guaranteed by the Government National
Mortgage Association, the Federal National Mortgage
Association or Home Loan Mortgage Corporation, or any
Derivative Contract (as defined in the Merger Agreement);
(10) acquire twenty percent (20%) or more of the assets or equity
securities of any person or acquire direct or indirect control
of any person, other than in connection with (A) any internal
reorganization or consolidation involving existing
subsidiaries of Georgia National or the Bank which has been
approved in advance in writing by SouthTrust, (B) foreclosures
in the ordinary course of business, (C) acquisitions of
control by a banking subsidiary in a fiduciary capacity or (D)
the creation of new subsidiaries organized to conduct and
continue activities otherwise permitted by the Merger
Agreement; or
(11) commence any cause of action or proceeding other than in
accordance with past practice or settle any action, claim,
arbitration, complaint, criminal prosecution, demand letter,
governmental or other examination or investigation, hearing,
inquiry or other proceeding against Georgia National, the Bank
or any of their respective subsidiaries for material money
damages or restrictions upon any of their operations.
BUSINESS AND MANAGEMENT OF GEORGIA NATIONAL FOLLOWING THE MERGER; PLANS FOR
BUSINESS OF GEORGIA NATIONAL
Upon consummation of the Merger, Georgia National will be merged with
and into ST-Sub, with ST-Sub being the surviving corporation in the Merger (the
surviving corporation being sometimes referred to herein as the "Surviving
Corporation"). As of the Effective Time of the Merger, it is anticipated that
the Board of Directors of the Surviving Corporation will consist of those
persons who are serving as directors of ST-Sub as of the Effective Time of the
Merger,
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and such other persons as may be designated in writing by SouthTrust at or prior
to the Effective Time of the Merger. It is further anticipated that the officers
of the Surviving Corporation will be those persons serving as officers of ST-Sub
as of the Effective Time of the Merger, and such other persons as may be
designated in writing by SouthTrust at or prior to the Effective Time of the
Merger.
Simultaneously with, or following, the Merger, the Bank will be merged
with and into ST-Bank in the Subsidiary Merger, provided that required
regulatory approvals are obtained. Upon consummation of the Subsidiary Merger,
it is anticipated that the Board of Directors of ST-Bank, as the surviving
entity in the Subsidiary Merger, will consist of those persons who are serving
as directors of ST-Bank as of the effective time of the Subsidiary Merger, and
such other persons as may be designated in writing by SouthTrust at or prior to
such time. It is further anticipated that the officers of ST-Bank, as the
surviving entity in the Subsidiary Merger, will be those persons serving as
officers of ST-Bank at the effective time of the Subsidiary Merger and such
other persons as may be designated in writing by SouthTrust at or prior to the
effective time of such merger.
After the Effective Time of the Merger, the Surviving Corporation will
operate as a subsidiary corporation of SouthTrust, acting as a holding company
for its banking operations. After the effectiveness of the Subsidiary Merger,
the operations of the Bank will be integrated into the operations of ST-Bank,
with efforts directed toward preserving the existing customer and banking
relationships of the Bank as part of ST-Bank.
Following the Effective Time of the Merger and subject to certain
conditions described below, SouthTrust has agreed that the officers and
employees of Georgia National or the Bank who SouthTrust or any of its
affiliates employs will be eligible to participate in the employee benefits
plans of SouthTrust, including welfare and fringe benefit plans, on the same
basis and subject to the same conditions as are applicable to any newly-hired
employee of SouthTrust, except that (i) with respect to SouthTrust's group
health plan, SouthTrust will credit each such employee for eligible expenses
incurred by such employee and his or her dependents (if applicable) under
Georgia National's group medical insurance plan during the current calendar year
for purposes of satisfying the deductible provisions under SouthTrust's group
medical benefits plan for such current year, and SouthTrust will not apply any
waiting period (including, but not limited to, waiting periods for pre-existing
conditions) of a duration greater than the duration of the corresponding waiting
period, if any, under Georgia National's group health plan in effect prior to
the Effective Time of the Merger; and (ii) credit for each such employee's past
service with Georgia National or the Bank prior to the Effective Time of the
Merger will be given by SouthTrust to employees for purposes of: (1) determining
vacation and sick leave benefits and accruals in accordance with the established
policies of SouthTrust; (2) establishing eligibility for participation in, and
vesting under, SouthTrust's employee benefits plans and for purposes of
determining the scheduling of vacations and other determinations which are made
based on length of service (except that such credit for past service will not be
given to any such employee for purposes of establishing eligibility for
participation in the 1990 Discounted Stock Plan of SouthTrust); and (3)
determining satisfaction of applicable waiting periods under said plans for
pre-existing conditions.
The Merger Agreement further provides that the Georgia National
Bancorp, Inc. 401(k) Profit Sharing Plan (the "Georgia National Profit Sharing
Plan") will either be merged into the SouthTrust Corporation Employees' Profit
Sharing Plan (the "ST Profit Sharing Plan") as of January 1 of the year
following the Effective Time of the Merger or, if so elected by SouthTrust,
terminated as of a date prior to the Effective Time of the Merger. From and
after the January 1 following the Effective Time of the Merger, for purposes of
determining eligibility to participate in, and vesting in accrued benefits
under, both the SouthTrust Corporation Revised Retirement Income Plan (the "ST
Retirement Plan") and the ST Profit Sharing Plan, employment by Georgia National
and Georgia National's subsidiaries will be credited as if it were employment by
SouthTrust, but such service will not be credited for purposes of determining
benefit accrual under the ST Retirement Plan.
STOCK OPTION AGREEMENT
As an inducement and a condition to SouthTrust to enter into the Merger
Agreement, SouthTrust and Georgia National entered into the Stock Option
Agreement, whereby Georgia National granted SouthTrust an option entitling
SouthTrust to purchase up to 325,090 shares (which will in no event exceed 19.9%
of the issued and outstanding shares of Georgia National Common Stock) of
Georgia National Common Stock, at a purchase price of $24.71 per share, under
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the circumstances described below. The following description of the Stock Option
Agreement and the Stock Option does not purport to be complete and is qualified
in its entirety by reference to the Stock Option Agreement, which is
incorporated herein by reference and attached hereto as Exhibit B.
The Stock Option is exercisable only if a Purchase Event (as
hereinafter defined) occurs after the date of the Stock Option Agreement and
prior to the Effective Time of the Merger.
The term "Preliminary Purchase Event" means any of the following events
or transactions:
1) any person (other than SouthTrust or any subsidiary of
SouthTrust) shall have commenced (as such term is defined in Rule 14d-2
promulgated under the Exchange Act), or shall have filed a registration
statement under the Securities Act with respect to, a tender offer or
exchange offer to purchase any shares of Georgia National Common Stock
such that, upon consummation of such offer, such person would own or
control 20% or more of the then-outstanding shares of Georgia National
Common Stock (such an offer being referred to herein as a "Tender
Offer" or an "Exchange Offer," respectively); or
2) the holders of Georgia National Common Stock shall not have
approved the Merger Agreement at the meeting of such shareholders held
for the purpose of voting on the Merger Agreement, such meeting shall
not have been held or shall have been canceled prior to termination of
the Merger Agreement, or Georgia National's Board of Directors shall
have withdrawn or modified in a manner adverse to SouthTrust the
recommendation of Georgia National's Board of Directors with respect to
the Merger Agreement, in each case after it shall have been publicly
announced that any person (other than SouthTrust or any subsidiary of
SouthTrust) shall have (A) made, or disclosed an intention to make, a
proposal to engage in an Acquisition Transaction (as hereinafter
defined), (B) commenced a Tender Offer or filed a registration
statement under the Securities Act with respect to an Exchange Offer,
or (C) filed an application (or given a notice), whether in draft or
final form, under Georgia banking or corporate law or any other
applicable law seeking approval to engage in an Acquisition
Transaction.
The term "Purchase Event" means any of the following events subsequent
to the date of the Stock Option Agreement:
(i) without SouthTrust's prior written consent, Georgia
National shall have authorized, recommended, publicly proposed, or
entered into an agreement with any person (other than SouthTrust or any
subsidiary of SouthTrust) to effect an Acquisition Transaction. As used
in the Stock Option Agreement, the term "Acquisition Transaction" means
(A) a merger, consolidation, or similar transaction involving Georgia
National or any of its subsidiaries (other than transactions solely
between Georgia National's subsidiaries), (B) the disposition, by sale,
lease, exchange, or otherwise, of assets of Georgia National or any of
its subsidiaries representing in either case 20% or more of the
consolidated assets of Georgia National and its subsidiaries, or (C)
the issuance, sale, or other disposition of (including by way of
merger, consolidation, share exchange, or any similar transaction)
securities representing 20% or more of the voting power of Georgia
National or any of its subsidiaries; or
(ii) any person (other than SouthTrust or any subsidiary of
SouthTrust) shall have acquired beneficial ownership (as such term is
defined in Rule 13d-3 promulgated under the Exchange Act) of, or the
right to acquire beneficial ownership of, or any "group" (as such term
is defined in Rule 13d-5 promulgated under the Exchange Act), shall
have been formed which beneficially owns, has the right to acquire
beneficial ownership of, 20% or more (or, if such person or group is
the beneficial owner of 20% or more on the date the Stock Option
Agreement was executed, such person or group acquires an additional 5%
or more) of the voting power of Georgia National or any of its
significant subsidiaries.
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Georgia National shall notify SouthTrust promptly in writing of the
occurrence of any Preliminary Purchase Event or Purchase Event, it being
understood that the giving of such notice by Georgia National will not be a
condition to the right of SouthTrust to exercise the Stock Option. Any purchase
of Stock Option shares, upon exercise of the Option, will be subject to
compliance with all applicable laws and any required regulatory approval.
The Stock Option will terminate and be of no further force and effect
upon the earliest to occur of: (i) the Effective Time of the Merger; (ii)
termination of the Merger Agreement in accordance with the terms thereof, other
than termination by SouthTrust for an uncured material breach or inaccuracy by
Georgia National (a "Default Termination"), prior to the occurrence of a
Purchase Event or a Preliminary Purchase Event; (iii) the close of business on
the 365th day after a Default Termination; and (iv) the close of business on the
365th day after termination of the Merger Agreement (other than a Default
Termination) following the occurrence of a Purchase Event or a Preliminary
Purchase Event (each such event referred to herein as an "Exercise Termination
Event").
In the event of any change in Georgia National Common Stock by reason
of a stock dividend, stock split, split-up, recapitalization, combination,
exchange of shares, or similar transaction, the type and number of shares
subject to the Stock Option, and the purchase price thereof, will be adjusted
appropriately.
Upon the occurrence of a Repurchase Event (as defined below) that
occurs prior to an Exercise Termination Event, at the request of SouthTrust,
delivered prior to an Exercise Termination Event, Georgia National will, subject
to regulatory restrictions, be obligated to repurchase the Stock Option and any
shares of Georgia National Common Stock theretofore purchased pursuant to the
Stock Option, at a specified price. As defined in the Stock Option Agreement, a
"Repurchase Event" shall occur if (i) any person (other than SouthTrust or a
SouthTrust subsidiary) shall have acquired beneficial ownership (as such term is
defined in Rule 13d-3 promulgated under the Exchange Act), or the right to
acquire beneficial ownership, 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 50% or more of the then-outstanding shares of
Georgia National Common Stock, or (ii) any of the following transactions are
consummated: (x) Georgia National consolidates with or merges into any person,
other than SouthTrust or a subsidiary of SouthTrust, and shall not be the
continuing or surviving corporation of such consolidation or merger, (y) Georgia
National permits any person, other than SouthTrust or a SouthTrust subsidiary,
to merge into Georgia National and Georgia National shall be the continuing or
surviving corporation, but, in connection with such merger, the then outstanding
shares of Georgia National Common Stock shall be changed into or exchanged for
stock or other securities of Georgia National or any other person or cash or any
other property or the outstanding shares of Georgia National Common Stock
immediately prior to such Merger shall after such merger represent less than 50%
of the outstanding shares and share equivalents of the merged company, or (z)
Georgia National sells or otherwise transfers all or substantially all of its
assets to any person, other than SouthTrust or a subsidiary of SouthTrust.
In the event that prior to the exercise or termination of the Stock
Option, Georgia National enters into an agreement to engage in any of the
transactions described in clause (ii) of the definition of Repurchase Event
above, SouthTrust will receive for each option share with respect to which the
Stock Option has not been exercised a Substitute Option which will be issued by
such entity as SouthTrust shall elect (pursuant to the Stock Option Agreement)
and will have the same or substantially the same terms as the Stock Option.
The Stock Option Agreement (and the Stock Option granted thereby)
are exchangeable, without expense, at the option of SouthTrust for options of
different denominations entitling the holder thereof to purchase in the
aggregate the same number of shares purchasable under the Stock Option
Agreement.
Georgia National has agreed to comply with all reporting requirements
and to do all such other things as may be necessary to permit the expeditious
sale, at any time, of the Stock Option shares by the holder thereof. If a
Registration Statement is required by the terms of the Stock Option Agreement,
Georgia National shall use all reasonable efforts to make such registration
statement become and remain effective and to obtain all consents or waivers
required therefor. Georgia National has also agreed to indemnify the holder of
the Stock Option shares with respect to certain expenses, losses, claims,
damages and liabilities in connection which any such registration.
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Each party to the Stock Option Agreement will pay all costs and
expenses incurred by it or on its behalf in connection with the transactions
contemplated thereby.
The purpose of the Stock Option Agreement and the Stock Option is to
increase the likelihood that the Merger will occur, by making it more difficult
for another party to acquire Georgia National. The ability of SouthTrust to
exercise the Stock Option and to cause up to an additional 325,090 shares of
Georgia National Common Stock to be issued may be considered a deterrent to
other potential acquisitions of control of Georgia National, as it is likely to
increase the cost of an acquisition of all the shares of Georgia National Common
Stock which would then be outstanding and would prevent any successful bidder
from accounting for the acquisition of Georgia National as a pooling of
interests.
NO SOLICITATION
Georgia National has agreed that neither Georgia National nor its
subsidiaries will directly or indirectly solicit any acquisition proposal by any
person. Except to the extent necessary to comply with fiduciary duties of
Georgia National's Board of Directors, as advised by counsel, neither Georgia
National nor its subsidiaries may furnish any non-public information to, or have
discussions with, any person, other than SouthTrust, relating to any acquisition
proposal. Georgia National must promptly notify SouthTrust in the event that it
receives any inquiry or proposal relating to any such transaction.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following discussion is a summary of the material federal income
tax consequences of the Merger to holders of Georgia National Common Stock. The
discussion is included for general information purposes only, applies only to a
holder of Georgia National Common Stock who holds such stock as a capital asset,
and may not apply to special situations, such as holders of Georgia National
Common Stock, if any, who received their Georgia National Common Stock upon the
exercise of employee stock options or otherwise as compensation and holders that
are insurance companies, securities dealers, financial institutions or foreign
persons.
EACH HOLDER OF GEORGIA NATIONAL COMMON STOCK IS URGED TO CONSULT HIS OR
HER OWN TAX ADVISOR AS TO THE FEDERAL INCOME TAX CONSEQUENCES IN HIS OR HER OWN
PARTICULAR FACTS AND CIRCUMSTANCES, AND ALSO AS TO ANY STATE, LOCAL, FOREIGN OR
OTHER TAX CONSEQUENCES ARISING OUT OF THE MERGER.
Neither SouthTrust, ST-Sub nor Georgia National has requested or will
receive an advance ruling from the Internal Revenue Service ("IRS") as to any of
the federal income tax consequences of the Merger to holders of Georgia National
Common Stock or of any of the federal income tax consequences of the Merger to
SouthTrust, ST-Sub or Georgia National. The consummation of the Merger is
conditioned upon the receipt by Georgia National of an opinion of Bradley Arant
Rose & White LLP as to certain of the federal income tax consequences of the
Merger to the holders of Georgia National Common Stock. The opinion of Bradley
Arant Rose & White LLP is based entirely upon the Code, regulations now in
effect thereunder, current administrative rulings and practice, and judicial
authority, all of which are subject to change, possibly with retroactive effect.
Management of SouthTrust has represented to Bradley Arant Rose & White LLP that
it has no plan or intention to cause SouthTrust to redeem or otherwise reacquire
the shares of SouthTrust Common Stock issued in the Merger.
Unlike a ruling from the IRS, an opinion is not binding on the IRS and
there can be no assurance, and none is hereby given, that the IRS will not take
a position contrary to one or more positions reflected herein or that the
positions stated in the opinion will be upheld by the courts if challenged by
the IRS.
In the opinion of Bradley Arant Rose & White LLP, the following federal
income tax consequences to the holders of Georgia National Common Stock will
result from the Merger:
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(i) The Merger will qualify as a reorganization within the
meaning of Section 368(a) of the Code. Georgia National, SouthTrust and
ST-Sub each will be a party to the reorganization within the meaning of
Section 368(b) of the Code.
(ii) Georgia National shareholders will recognize no gain or
loss upon their exchange of Georgia National Common Stock solely for
SouthTrust Common Stock.
(iii) The basis of the shares of SouthTrust Common Stock
received by the Georgia National shareholders (including any fractional
share interests to which they may be entitled) will be the same as the
basis of the shares of Georgia National Common Stock surrendered in
exchange therefor.
(iv) The holding period of the shares of SouthTrust Common
Stock received by the shareholders of Georgia National (including any
fractional share interest to which they may be entitled) will include
the period during which the shares of Georgia National Common Stock
surrendered in exchange therefor were held by the Georgia National
shareholders, provided that the shares of Georgia National Common Stock
surrendered were held as a capital asset within the meaning of Section
1221 of the Code by the Georgia National shareholders as of the
Effective Time of the Merger.
(v) The receipt by a holder of Georgia National Common Stock
of cash in lieu of a fractional share of SouthTrust Common Stock will
be treated as though such fractional share actually was issued in the
Merger and thereafter redeemed by SouthTrust for cash. The receipt of
such cash in lieu of a fractional share by a holder of Georgia National
Common Stock will be treated as a distribution by SouthTrust in full
payment in exchange for the fractional share as provided in Section
302(a) of the Code.
(vi) Georgia National shareholders who exercise dissenters'
rights, and as a result receive only cash, will be treated as having
received such cash as a distribution in redemption of their shares of
Georgia National Common Stock, subject to the provisions and
limitations of Section 302 of the Code. Those holders of Georgia
National Common Stock who receive only cash, and who hold no SouthTrust
Common Stock, directly or indirectly through the application of Section
318(a) of the Code, following the Merger will be treated as having a
complete termination of interest within the meaning of Section
302(b)(3) of the Code, and the cash received will be treated as a
distribution in full payment in exchange for such holder's Georgia
National Common Stock as provided in Section 302(a) of the Code. As
provided in Section 1001 of the Code, gain will be realized and
recognized by such Georgia National shareholders measured by the
difference between the redemption price and the adjusted tax basis of
the shares of Georgia National Common Stock surrendered. Provided that
Section 341 of the Code (relating to collapsible corporations) is
inapplicable and the Georgia National Common Stock is a capital asset
in the hands of such holders, the gain, if any, will constitute capital
gain. Such gain will constitute long-term capital gain if the
surrendered shares of Georgia National Common Stock were held by the
shareholder for a period greater than one year prior to the Merger; if
the surrendered shares of Georgia National Common Stock were held by
such shareholder for a period of one year or less, the gain will
constitute short-term capital gain.
No opinion is expressed as to the federal tax treatment of the
transaction under any other provisions of the Code and regulations, or about the
tax treatment of any conditions existing at the time of, or effects resulting
from, the transaction that are not specifically covered by the opinion.
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DESCRIPTION OF SOUTHTRUST CAPITAL STOCK
GENERAL
The authorized capital stock of SouthTrust consists of 500,000,000
shares of common stock, par value $2.50 per share (referred to throughout this
Proxy Statement/Prospectus as "SouthTrust Common Stock"), and 5,000,000 shares
of preferred stock, par value $1.00 per share ("SouthTrust Preferred Stock"). As
of June 30, 1998, there were 164,675,600 shares of SouthTrust Common Stock
issued and outstanding, exclusive of shares held as treasury stock, and no
shares of SouthTrust Preferred Stock were outstanding. As of June 30, 1998,
there were 7,987,500 shares of SouthTrust Common Stock reserved for issuance
pursuant to employee benefit plans. In addition, 500,000 shares of SouthTrust
Preferred Stock designated as Series A Junior Participating Preferred Stock were
reserved for issuance upon the exercise of certain rights described below under
"- SouthTrust Common Stock-Stockholder Rights Plan."
Since SouthTrust is a holding company, the right of SouthTrust, and
hence the right of creditors and stockholders of SouthTrust, to participate in
any distribution of assets of any subsidiary (including ST-Bank) upon its
liquidation or reorganization or otherwise is necessarily subject to the prior
claims of creditors of the subsidiary, except to the extent that claims of
SouthTrust itself as a creditor of the subsidiary may be recognized.
The following summary does not purport to be complete and is subject in
all respects to the applicable provisions of the General Corporation Law of the
State of Delaware and SouthTrust's Restated Certificate of Incorporation, as
amended ("Restated Certificate"), including the Certificate of Designations
describing the Series A Junior Participating Preferred Stock, and SouthTrust's
Restated Bylaws.
SOUTHTRUST COMMON STOCK
Dividend Rights
Subject to any prior rights of any SouthTrust Preferred Stock
outstanding, holders of SouthTrust Common Stock are entitled to dividends when,
as and if declared by SouthTrust's Board of Directors out of funds legally
available therefor. Under Delaware law, SouthTrust may pay dividends out of
surplus (whether capital surplus or earned surplus) or net profits for the
fiscal year in which declared or for the preceding fiscal year, even if its
surplus accounts are in a deficit position. The sources of funds for payment of
dividends by SouthTrust are its subsidiaries. Because its primary subsidiary is
a bank, payments made by such subsidiary to SouthTrust are limited by law and
regulations of the bank regulatory authorities. See "MARKET PRICE AND DIVIDEND
INFORMATION RESPECTING THE SOUTHTRUST COMMON STOCK AND THE GEORGIA NATIONAL
COMMON STOCK."
Voting Rights and Other Matters
The holders of SouthTrust Common Stock are entitled to one vote per
share on all matters brought before the stockholders. The holders of SouthTrust
Common Stock do not have the right to cumulate their shares of SouthTrust Common
Stock in the election of directors. SouthTrust's Restated Certificate provides
that in the event of a transaction or a series of transactions with an
"Interested Stockholder" (generally defined, as a holder of more than 10% of the
voting stock of SouthTrust or an affiliate of such a holder) pursuant to which
SouthTrust would be merged into or with another corporation or securities of
SouthTrust would be issued in a transaction which would permit control of
SouthTrust to pass to another entity, or similar transactions having the same
effect, approval of such transactions requires the vote of the holders of 70% of
the voting power of the outstanding voting securities of SouthTrust, except in
cases in which either certain price criteria and procedural requirements are
satisfied or the transaction is recommended to the stockholders by a majority of
the members of SouthTrust's Board of Directors who are unaffiliated with the
Interested Stockholder and who were directors before the Interested Stockholder
became an Interested Stockholder.
The SouthTrust Common Stock does not have any conversion rights, nor
are there any redemption or sinking fund provisions applicable thereto. Holders
of SouthTrust Common Stock are not entitled to any preemptive rights to
subscribe for any additional securities which may be issued.
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Liquidation Rights
In the event of liquidation, holders of SouthTrust Common Stock will be
entitled to receive pro rata any assets distributable to stockholders with
respect to the shares held by them, after payment of indebtedness and such
preferential amounts as may be required to be paid to the holders of any
SouthTrust Preferred Stock hereafter issued by SouthTrust.
Provisions with Respect to Board of Directors
SouthTrust's Restated Certificate provides that the members of
SouthTrust's Board of Directors are divided into three classes as nearly equal
in number as possible. Each class is elected for a three-year term. At each
annual meeting of stockholders of SouthTrust, roughly one-third of the members
of SouthTrust's Board of Directors will be elected for a three-year term, and
the other directors will remain in office until their three-year terms expire.
Therefore, control of SouthTrust's Board of Directors cannot be changed in one
year, and at least two annual meetings must be held before a majority of the
members of SouthTrust's Board of Directors can be changed.
Special Vote Requirements for Certain Amendments to Restated Certificate of
Incorporation, as Amended
The General Corporation Law of the State of Delaware provides that, in
the case of a corporation, such as SouthTrust, that has a classified board,
directors may be removed for cause unless the certificate of incorporation
otherwise provides. The Restated Certificate and Restated Bylaws of SouthTrust
provide that a director, or SouthTrust's entire Board of Directors, may be
removed by the stockholders only for cause. The Restated Certificate of
SouthTrust also provides that the affirmative vote of the holders of at least
70% of the voting power of the outstanding capital stock entitled to vote for
the election of directors is required to remove a director or the entire Board
of Directors from office. Certain portions of the Restated Certificate of
SouthTrust described in certain of the preceding paragraphs, including those
related to business combinations and the classified Board of Directors, may be
amended only by the affirmative vote of the holders of 70% of the voting power
of the outstanding voting stock of SouthTrust.
Possible Effects of Special Provisions
Certain of the provisions contained in the Restated Certificate and
Restated Bylaws of SouthTrust described above have the effect of making it more
difficult to change SouthTrust's Board of Directors, and may make SouthTrust's
Board of Directors less responsive to stockholder control. These provisions also
may tend to discourage attempts by third parties to acquire SouthTrust because
of the additional time and expense involved and a greater possibility of
failure, and, as a result, may adversely affect the price that a potential
purchaser would be willing to pay for the capital stock of SouthTrust, thereby
reducing the amount a stockholder might realize in, for example, a tender offer
for the capital stock of SouthTrust.
Stockholder Rights Plan
On February 22, 1989, the Board of Directors of SouthTrust declared a
dividend to holders of SouthTrust Common Stock of record on March 6, 1989 (the
"Record Date") of one right (a "Right" and collectively, the "Rights") for, and
to be attached to, each share of SouthTrust Common Stock outstanding on the
Record Date. Each Right entitles the holder thereof to purchase from SouthTrust
one one-hundredth of a share of SouthTrust Preferred Stock designated as the
Series A Junior Participating Preferred Stock ("Series A Preferred Stock") at a
purchase price of $75.00 (the "Purchase Price"). Such resolutions also provide
that as long as the Rights are attached to shares of SouthTrust Common Stock as
provided in that certain Rights Agreement, dated as of February 22, 1998 (the
"Rights Agreement"), between SouthTrust and Mellon Bank, N.A., as Rights Agent,
the appropriate number of Rights will be issued with each share of SouthTrust
Common Stock issued after the Record Date. The number of Rights attached to or
to be issued with each share of SouthTrust Common Stock as well as the
redemption price for each such Right, were appropriately decreased as a result
of a three-for-two stock split effected by SouthTrust on January 24, 1992, a
three-for-two stock split effected by SouthTrust on May 19, 1993, and a
three-for-two stock split effected by SouthTrust on February 26, 1998.
Accordingly, at the present time eight twenty-sevenths of a Right is attached to
each share of SouthTrust Common Stock and eight twenty-sevenths of a Right will
be issued with each share of SouthTrust Common Stock exchanged in the Merger for
Georgia National Common Stock.
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The Rights will expire on February 22, 1999 unless redeemed earlier and
will not be exercisable or transferable separately from the shares of SouthTrust
Common Stock until the close of business on the "Distribution Date," which will
occur on the earlier of (i) the tenth day following a public announcement that a
person (an "Acquiring Person") or any associate or affiliate of an Acquiring
Person has acquired, or obtained the right to acquire, beneficial ownership of
20% or more of the outstanding SouthTrust Common Stock (the "Stock Acquisition
Date"); or (ii) the tenth business day following commencement of a tender or
exchange offer which would result in the ownership of 20% or more of the
outstanding SouthTrust Common Stock; or (iii) the tenth day after SouthTrust's
Board of Directors declares, upon a determination by at least a majority of
SouthTrust's Disinterested Directors (as defined in the Rights Agreement), that
a person, alone or with affiliates and associates (an "Adverse Person"), has
become the beneficial owner of a substantial amount (not to be less than 10%) of
outstanding SouthTrust Common Stock and that such person's ownership either is
intended to cause SouthTrust to take action adverse to its long-term interests
or may cause a material adverse impact on SouthTrust to the detriment of
SouthTrust's stockholders.
The Rights Agreement provides that, following the occurrence of any of
the following events, each holder of a Right will have the right to receive,
upon payment of the Purchase Price, in lieu of Series A Preferred Stock, a
number of shares of SouthTrust Common Stock (or, in certain circumstances, cash
or other property) having a value equal to twice the Purchase Price: (i)
SouthTrust is the surviving corporation in a merger with an Acquiring Person and
SouthTrust's Common Stock remains outstanding and unchanged and is not exchanged
for securities of the Acquiring Person or other property; (ii) any Acquiring
Person shall transfer any assets to SouthTrust in exchange for shares of equity
securities of SouthTrust; (iii) any Acquiring Person shall sell assets to, or
acquire assets from, SouthTrust on terms and conditions less favorable to
SouthTrust than SouthTrust would otherwise be able to obtain in an arm's length
transaction (other than pursuant to certain consolidations, mergers or transfers
or transfers of assets of SouthTrust following the Distribution Date); (iv) any
Acquiring Person shall sell assets to, or purchase assets from, SouthTrust
(other than in the ordinary course of business) having an aggregate fair market
value of more than $5 million (other than pursuant to certain consolidations,
mergers or transfers or transfers of assets of SouthTrust following the
Distribution Date); (v) any Acquiring Person shall receive any compensation from
SouthTrust other than compensation for full-time employment as a regular
employee at rates in accordance with SouthTrust's past practices; (vi) any
Acquiring Person shall receive the benefit of any loans, advances or other
financial assistance provided by SouthTrust; (vii) a person becomes the
beneficial owner of 30% or more of the outstanding SouthTrust Common Stock
(other than pursuant to certain consolidations, mergers or transfers of assets
of SouthTrust following the Distribution Date or except pursuant to a "Fair
Offer" as determined by the Disinterested Directors); (viii) while there is an
Acquiring Person, an event involving SouthTrust or any of its subsidiaries
occurs which results in the Acquiring Person's proportionate ownership interest
being increased by more than 1%; or (ix) SouthTrust's Board of Directors shall
declare any person to be an Adverse Person upon a determination by at least a
majority of the Board who are not officers of SouthTrust that the Adverse Person
is attempting to obtain a short-term financial gain from SouthTrust that is not
in the best long-term interests of SouthTrust or that the ownership by the
Adverse Person of SouthTrust Common Stock may have a material adverse impact on
SouthTrust. Rights are not exercisable following the occurrence of any of the
events set forth in this paragraph until the expiration of the period during
which the Rights may be redeemed by SouthTrust as described below.
Notwithstanding the foregoing, after the occurrence of any of the events set
forth in this paragraph, Rights that are (or, under certain circumstances,
Rights that were) beneficially owned by an Acquiring Person or an Adverse Person
will be null and void.
Unless the Rights are redeemed earlier, if, after the Distribution
Date, SouthTrust is acquired in a merger or other business combination in which
SouthTrust is not the surviving corporation or in which SouthTrust Common Stock
is changed into or exchanged for securities of any other person or other
property (other than a merger which follows a Fair Offer) or 50% or more of the
assets or earning power of SouthTrust and its subsidiaries (taken as a whole)
are sold or transferred, the Rights Agreement provides that each holder of
record of a Right will from and after that time have the right to receive, upon
payment of the Purchase Price, that number of shares of common stock of the
acquiring company which has value equal to twice the Purchase Price.
At any time until ten days following the Stock Acquisition Date
(subject to certain provisions requiring action by a majority of the
Disinterested Directors), SouthTrust may redeem the Rights in whole, but not in
part, at a price of $0.01 per Right. Prior to the Distribution Date, SouthTrust
may, except with respect to the Purchase Price, redemption price or
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date of expiration of the Rights, amend the Rights in any manner. At any time
after the Distribution Date, SouthTrust may amend the Rights in any manner that
does not adversely affect the interest of holders of the Rights as such.
The Rights have certain anti-takeover effects and may adversely affect
a third party's attempt to acquire SouthTrust. The Rights will cause substantial
dilution to a person or group that attempts to acquire SouthTrust. The Rights
should not interfere with any merger or other business combination approved by
SouthTrust's Board of Directors since, among other things, the Board of
Directors may, at its option, under certain circumstances, redeem all but not
less than all of the then outstanding Rights at the redemption price, as
discussed above.
The foregoing description of the Rights and the Series A Preferred
Stock does not purport to be complete and is qualified in its entirety by
reference to the Rights Agreement between SouthTrust and Mellon Bank, N.A. (now
known as ChaseMellon Shareholder Services LLC), as Rights Agent, and the
Certificate of Designation, Preferences and Rights of Series A Preferred Stock,
copies of each of which are exhibits to the Registration Statement of which this
Proxy Statement/Prospectus forms a part.
Transfer Agent
The transfer agent for SouthTrust Common Stock is ChaseMellon
Shareholder Services LLC.
SOUTHTRUST PREFERRED STOCK
General
Under SouthTrust's Restated Certificate SouthTrust's Board of Directors
is authorized without further stockholder action to provide for the issuance of
up to 5,000,000 shares of SouthTrust Preferred Stock, in one or more series, by
adoption of a resolution or resolutions providing for the issuance of such
series and determining the relative rights and preferences of the shares of any
such series with respect to the rate of dividend, call provisions, payments on
liquidation, sinking fund provisions, conversion privileges and voting rights
and whether the shares shall be cumulative, non-cumulative or partially
cumulative. The holders of SouthTrust Preferred Stock would not have any
preemptive right to subscribe for any shares issued by SouthTrust. It is not
possible to state the actual effect of the authorization and issuance of
SouthTrust Preferred Stock upon the rights of holders of SouthTrust Common Stock
unless and until SouthTrust's Board of Directors determines the price and
specific rights of the holders of a series of SouthTrust Preferred Stock. Such
effects might include, however, (i) restrictions on dividends on SouthTrust
Common Stock if dividends on SouthTrust Preferred Stock have not been paid; (ii)
dilution of the voting power of SouthTrust Common Stock to the extent that
SouthTrust Preferred Stock has voting rights, or that any SouthTrust Preferred
Stock series is convertible into SouthTrust Common Stock; (iii) dilution of the
equity interest of SouthTrust Common Stock unless the SouthTrust Preferred Stock
is redeemed by SouthTrust; and (iv) SouthTrust Common Stock not being entitled
to share in SouthTrust's assets upon liquidation until satisfaction of any
liquidation preference granted SouthTrust Preferred Stock. While the ability of
SouthTrust to issue SouthTrust Preferred Stock is, in the judgment of
SouthTrust's Board of Directors, desirable in order to provide flexibility in
connection with possible acquisitions and other corporate purposes, its issuance
could impede an attempt by a third party to acquire a majority of the
outstanding voting stock of SouthTrust.
Series A Junior Participating Preferred Stock
In connection with the adoption of the Stockholder Rights Plan
described above, SouthTrust's Board of Directors designated 500,000 shares of
SouthTrust's authorized but unissued SouthTrust Preferred Stock as Series A
Junior Participating Preferred Stock (which has been previously referred to as
the "Series A Preferred Stock"). The terms of the Series A Preferred Stock are
such that one share of Series A Preferred Stock will be approximately equivalent
in terms of dividend and voting rights, before adjustment for the three-for-two
stock split effected on January 24, 1992, the three-for-two stock split effected
on May 19, 1993, and the three-for-two stock split effected on February 26,
1998, to 100 shares of SouthTrust Common Stock. No shares of Series A Preferred
Stock have been issued as of the date of this Proxy Statement/Prospectus.
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<PAGE> 49
MARKET PRICE AND DIVIDEND INFORMATION RESPECTING THE
SOUTHTRUST COMMON STOCK AND THE GEORGIA NATIONAL COMMON STOCK
MARKET PRICE
The SouthTrust Common Stock is quoted on Nasdaq under the symbol SOTR.
The following table sets forth, for the periods indicated, the high and low
closing prices per share of the SouthTrust Common Stock as reported by Nasdaq
for the quarters indicated, as adjusted for a three-for-two stock split effected
by SouthTrust on February 26, 1998. On ______, 1998, the last reported sale
price of the SouthTrust Common Stock as reported by Nasdaq was ______.
<TABLE>
<CAPTION>
Price*
------
High Low
---- ---
<S> <C> <C>
1996:
First Quarter..................................... $ 19.1667 $ 16.8333
Second Quarter.................................... 19.0000 17.7500
Third Quarter..................................... 21.2500 17.6667
Fourth Quarter.................................... 24.0833 20.3333
1997:
First Quarter..................................... 28.0833 22.7500
Second Quarter.................................... 28.2500 23.5833
Third Quarter..................................... 34.4583 25.7500
Fourth Quarter.................................... 42.8333 30.6667
1998:
First Quarter..................................... 45.1250 35.7500
Second Quarter.................................... 45.0000 39.2500
Third Quarter (through _______, 1998).............
</TABLE>
- ---------------------
* The information listed above was obtained from the National Association
of Securities Dealers, Inc., and reflects interdealer prices, without
retail markup, markdown or commissions, and may not represent actual
transactions.
On April 21, 1998 and April 23, 1998 (the trading days immediately
before and after the public announcement of the Merger), the last sale prices of
SouthTrust Common Stock, as obtained from Nasdaq, were $42.6250 and $43.4375,
respectively; and on ______, 1998, the last sale price of SouthTrust Common
Stock as obtained from Nasdaq was $____.
Georgia National Common Stock is not traded on any exchange, and there
is no established public trading market for such stock. As of _______, 1998,
there were approximately ____ holders of record of Georgia National Common
Stock. Transactions in Georgia National Common Stock are infrequent and are
negotiated privately between persons involved in those transactions. There are
no bid or asked prices available for Georgia National Common Stock. The last
trade in Georgia National Common Stock of which Georgia National is aware
occurred on April 13, 1998, at a per share price of $11.25. No assurance can be
given that this trade was effected on an arm's length basis.
DIVIDENDS
Dividends paid by SouthTrust on the SouthTrust Common Stock are at the
discretion of SouthTrust's Board of Directors and are affected by certain legal
restrictions on the payment of dividends as described below, SouthTrust's
earnings and financial condition and other relevant factors. SouthTrust has
increased the dividend paid on the SouthTrust Common Stock for 28 consecutive
years. The current policy of SouthTrust is to pay dividends on a quarterly
basis. Subject
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<PAGE> 50
to an evaluation of its earnings and financial condition and other factors,
including the legal restrictions on the payment of dividends as described below,
SouthTrust anticipates that it will continue to pay regular quarterly dividends
with respect to the SouthTrust Common Stock.
There are certain limitations on the payment of dividends to SouthTrust
by its bank subsidiary. As a national banking association, the amount of
dividends that SouthTrust's subsidiary bank may declare in one year, without
approval of the Comptroller, is the sum of the Bank's net profits for that year
and its retained net profits for the preceding two years. Under rules
promulgated by the Comptroller, the calculation of net profits is more
restrictive under certain circumstances. Under the foregoing laws and
regulations, at June 30, 1998, approximately $400.0 million was available
for payment of dividends to SouthTrust by its bank subsidiary.
Dividends paid by Georgia National on the Georgia National Common Stock
are at the discretion of Georgia National's Board of Directors and are affected
by certain legal restrictions on the payment of dividends as described below,
Georgia National's earnings and financial condition and other relevant factors.
Georgia National's policy is to pay dividends to its shareholders from time to
time, but only to the extent that (1) Georgia National's net income available to
shareholders over the past fiscal year has been sufficient to fully fund the
proposed dividends, (2) the proposed dividend is consistent with the maintenance
of adequate capital levels within Georgia National, (3) the proposed dividend
does not violate any externally placed limitations on the payment of dividends
to shareholders, (4) the proposed dividends fall within all applicable
regulatory maximums for the payment of dividends, and (5) the proposed dividends
are consistent with Georgia National's goals of superior asset quality and
overall financial condition.
There are certain limitations on the payment of dividends to Georgia
National by the Bank. As a national bank, the amount of dividends that the Bank
may declare in one year, without approval of the Comptroller, is the sum of the
Bank's net profits for that year and its retained net profits for the preceding
two years. Under rules promulgated by the Comptroller, the calculation of net
profits is more restrictive under certain circumstances. Under the foregoing
laws and regulations, at June 30, 1998, approximately $2.5 million was available
for payment of dividends to Georgia National by the Bank.
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<PAGE> 51
The following table sets forth, for the periods indicated, the
dividends declared by SouthTrust per share of SouthTrust Common Stock and by
Georgia National per share of Georgia National Common Stock, as well as the
pro-forma dividend per share (based on the number of shares of SouthTrust Common
Stock to be issued per share of Georgia National Common Stock) after the Merger.
Georgia National's ability to declare and pay dividends after July 1, 1998 is
subject to the Merger Agreement. See "THE MERGER - Conduct of Business by
Georgia National Pending the Merger."
<TABLE>
<CAPTION>
Pro-Forma
SouthTrust Georgia National Dividend Per
Common Stock Common Stock Share of
Dividend Per Dividend Per Georgia National
Share Share Common Stock(1)
----- ----- ---------------
<S> <C> <C> <C>
1996:
First Quarter $ 0.1467 $ 0.00 $ 0.08802
Second Quarter 0.1467 0.00 0.08802
Third Quarter 0.1467 0.00 0.08802
Fourth Quarter 0.1467 0.05 0.08802
1997:
First Quarter 0.1667 0.05 0.10002
Second Quarter 0.1667 0.05 0.10002
Third Quarter 0.1667 0.05 0.10002
Fourth Quarter 0.1667 0.06 0.10002
1998:
First Quarter 0.1900 0.06 0.11400
Second Quarter 0.1900 0.114 0.11400
</TABLE>
(1) The pro-forma dividend per share of Georgia National Common Stock is
equal to the SouthTrust Common Stock dividend per share multiplied by
the Conversion Ratio and represents the dividend that would have been
distributed on the number of shares of SouthTrust Common Stock to be
received for each share of Georgia National Common Stock. See
"COMPARISON OF THE SOUTHTRUST COMMON STOCK AND THE GEORGIA NATIONAL
COMMON STOCK."
COMPARISON OF THE SOUTHTRUST COMMON STOCK
AND THE GEORGIA NATIONAL COMMON STOCK
The rights of Georgia National shareholders are governed by the
Articles of Incorporation of Georgia National, the Bylaws of Georgia National
and the laws of the State of Georgia. The rights of SouthTrust stockholders are
governed by the Restated Certificate of SouthTrust, the Restated Bylaws of
SouthTrust and the laws of the State of Delaware. After the Merger becomes
effective, the rights of Georgia National shareholders who become SouthTrust
stockholders will be governed by the laws of the State of Delaware and by
SouthTrust's Restated Certificate and Restated Bylaws. The following summary of
the rights of the holders of SouthTrust Common Stock and the holders of Georgia
National Common Stock is qualified in its entirety by reference to the Restated
Certificate and Restated Bylaws of SouthTrust, the Articles of Incorporation and
Bylaws of Georgia National, the General Corporation Law of the State of
Delaware, and the Georgia Business Corporation Code.
DIVIDENDS
The sources of funds for payments of dividends by SouthTrust and
Georgia National are their subsidiaries. Because the primary subsidiaries of
SouthTrust and Georgia National are financial institutions, payments made by
such
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<PAGE> 52
subsidiaries of SouthTrust and Georgia National to their shareholders are
limited by law and regulations of the bank regulatory authorities. See
"DESCRIPTION OF SOUTHTRUST CAPITAL STOCK - SouthTrust Common Stock-Dividend
Rights" and "MARKET PRICE AND DIVIDEND INFORMATION RESPECTING THE SOUTHTRUST
COMMON STOCK AND THE GEORGIA NATIONAL COMMON STOCK" for information concerning
the effect of such limitations on SouthTrust's and Georgia National's ability to
pay dividends. Delaware General Corporation Law provides that, subject to any
restrictions in the corporation's certificate of incorporation, dividends may be
declared from the corporation's surplus or, if there is no surplus, from its net
profits for the fiscal year in which the dividend is declared and the preceding
fiscal year. Dividends may not be declared, however, if the corporation's
capital has been diminished to an amount less than the aggregate amount of all
capital represented by the issued and outstanding stock of all classes having a
preference upon the distribution of assets. The Georgia Business Corporation
Code provides that a corporation may not make distributions to its shareholders
if, after giving effect to the distribution, (i) the corporation would not be
able to pay its debts as they became due in the usual course of business, or
(ii) the corporation's total assets would be less than the sum of its total
liabilities plus the amount that would be needed, if the corporation were to be
dissolved at the time of the distribution, to satisfy the preferential rights
upon dissolution of shareholders whose preferential rights are superior to those
receiving the distribution.
VOTING RIGHTS AND OTHER MATTERS
Subject to the rights, if any, of any series of SouthTrust's classes of
preferred stock, all voting rights of SouthTrust and Georgia National are vested
in the holders of shares of SouthTrust Common Stock and Georgia National Common
Stock, respectively, with the holder of each of such share being entitled to one
vote. The holders of SouthTrust Common Stock and Georgia National Common Stock
do not have the right to cumulate their votes in the election of directors.
As described above under the caption "DESCRIPTION OF SOUTHTRUST CAPITAL
STOCK - SouthTrust Common Stock - Voting Rights and Other Matters," the Restated
Certificate of SouthTrust provides that in the event of a transaction or a
series of transactions with an Interested Stockholder (generally defined as a
holder of more than 10% of the voting stock of SouthTrust or an affiliate of
such holder) pursuant to which SouthTrust would be merged into or with another
corporation or securities of SouthTrust would be issued in a transaction which
would permit control of SouthTrust to pass to another entity, or similar
transactions having the same effect, approval of such transaction requires the
vote of the holders of 70% of the outstanding voting securities of SouthTrust,
except in cases in which either certain price criteria and procedural
requirements are satisfied or the transaction is recommended to the stockholders
by a majority of the members of the Board of Directors of SouthTrust who are
unaffiliated with the Interested Stockholder and who were directors before the
Interested Stockholder became an Interested Stockholder. The Articles of
Incorporation and Bylaws of Georgia National do not contain any prohibitions of
or limitations on transactions between Georgia National and a related party or
shareholder.
SouthTrust is subject to Section 203 of the Delaware General
Corporation Law. That section generally provides that a corporation may not
engage in a business combination, except with extraordinary corporate approval,
with any person deemed to be an "interested stockholder" for a period of three
years following the date that the stockholder became an interested stockholder.
An "interested stockholder" is defined as any person who directly or indirectly
owns 15% or more of the outstanding voting stock of the corporation within the
three-year period beginning immediately prior to the date on which such
determination is made. The extraordinary corporate approval must consist of
board approval prior to the time the person became an interested stockholder or
approval of the transaction by the board of directors and at least two-thirds of
the outstanding voting stock which is not owned by the interested stockholder;
in the absence of such approval, the interested stockholder must own at least
85% of the voting stock of the corporation.
Georgia National is subject to Section 14-2-1132 of the Georgia
Business Corporation Code. It provides that a corporation may not engage in any
business combination with any "interested shareholder" for a period of five
years following the time that the shareholder became an interested shareholder,
unless the board of directors approves either the transaction which resulted in
the shareholder becoming an interested shareholder or the business combination
or the interested shareholder beneficially owns at least 90 percent of the
outstanding voting stock of the corporation. In addition, Section 14-2-1133 of
the Georgia Business Corporation Code provides that Section 14-3-1132 shall not
apply unless the bylaws of the corporation specifically provide for its
applicability. The Bylaws of Georgia National do not provide for such
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<PAGE> 53
applicability. Accordingly, the provisions of Section 14-2-1132 are not
applicable to the Merger or the transactions contemplated by the Stock Option
Agreement.
Georgia National is also subject to Section 14-2-1111 of the Georgia
Business Corporation Code which provides, in addition to any vote otherwise
required by law or the articles of incorporation, a business combination shall
be (i) unanimously approved by the board of directors, or (ii) recommended by at
least two-thirds of the directors and approved by a majority of the votes
entitled to be cast by holders of voting shares other than shares beneficially
held by an interested stockholder who is, or whose affiliate is, a party to the
business combination. Section 14-2-1113 of the Georgia Business Corporation Code
provides that Section 14-2-1111 shall not apply unless the bylaws of the
corporation specifically provide for its applicability. The Bylaws of Georgia
National do not provide for such applicability. Accordingly, the vote
requirement of Section 14-2-1111 does not apply to the Merger.
The Delaware General Corporation Law enumerates several situations in
which class voting is required with respect to amendments to a corporation's
certificate of incorporation, whether or not the holders of such shares are
entitled to vote thereon by the provisions of the certificate of incorporation,
if such amendments: (i) increase or decrease the aggregate number of authorized
shares, (ii) increase or decrease the par value of the shares of such class, or
(iii) alter or change the powers, preferences or special rights of the shares of
such class as to affect them adversely; provided, that only the shares of the
series so affected by the amendment will be considered a separate class for the
purpose of the class voting requirements; and provided, further, that the
authorized shares of any class of stock may be increased or decreased by the
affirmative vote of a majority of the stockholders, irrespective of the class
voting requirement set forth above, if so provided in the original certificate
of incorporation, in any amendments thereto which created such class of stock,
or in any amendment thereto which was authorized by a resolution adopted by the
affirmative vote of the holders of a majority of shares of such class.
Under the Georgia Business Corporation Code, the holders of the
outstanding shares of a class are entitled to vote as a separate voting group on
a proposed amendment to the corporation's Articles of Incorporation, unless
shareholder voting is not required because an amendment may be made solely by
the board of directors, if the amendment would: (i) increase or decrease the
aggregate number of authorized shares of the class; provided, however, that if
the Articles of Incorporation specifically authorize the shares of any class to
be increased or decreased without a shareholder vote, under such circumstances,
the authorized number, terms, conditions, designations, preferences,
limitations, and relative rights of those shares may be fixed as provided in the
Articles of Incorporation; (ii) effect an exchange or reclassification of all or
part of the shares of the class into shares of another class; (iii) effect an
exchange or reclassification, or create the right of exchange, of all or part of
the shares of another class into shares of the class; (iv) change the
designation, rights, preferences, or limitations of all or part of the shares of
the class; (v) change the shares of all or part of the class into a different
number of shares of the same class; (vi) create a new class of shares having
rights or preferences with respect to distributions or to dissolution that are
prior, superior, or substantially equal to the shares of the class; (vii)
increase the rights, preferences, or number of authorized shares of any class
that, after giving effect to the amendment, have rights or preferences with
respect to distributions or to dissolution that are prior, superior, or
substantially equal to the shares of the class; (viii) limit or deny an existing
preemptive right of all or part of the shares of the class; (ix) cancel or
otherwise affect rights to distributions of dividends that have accumulated but
not yet been declared on all or part of the shares of the class; or (x) cancel,
redeem, or repurchase all or part of the shares of the class.
The Bylaws of SouthTrust provide that the members of SouthTrust's Board
of Directors are to be divided into three (3) classes as nearly equal as
possible. Each such class is elected for a three-year term. At each annual
meeting of stockholders, roughly one-third of the members of SouthTrust's Board
of Directors will be elected for a three-year term, and the other directors will
remain in office. Therefore, control of SouthTrust's Board of Directors cannot
be changed in one (1) year, and at least two (2) annual meetings must be held
before a majority of the members of SouthTrust's Board of Directors can be
changed. But for this provision in the Restated Bylaws of SouthTrust, all
directors would stand for election at each annual meeting. The Bylaws of Georgia
National provide that the entire Board of Directors of Georgia National is to be
elected by a plurality vote of the shareholders entitled to vote and present at
an annual meeting or other special meeting of shareholders at which such
election is to occur. At all meetings of shareholders, a quorum of those
entitled to vote on a matter must exist before action on that matter may be
taken. The presence (in person or by proxy) of
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<PAGE> 54
shares representing a majority of votes entitled to be cast on a matter
constitutes a quorum. Directors so elected serve for a term of one (1) year and
until their successors shall be elected and shall qualify.
Both the Delaware General Corporation Law and Georgia Business
Corporation Code provide (unless otherwise provided in a corporation's charter
or bylaws), that a director, or the entire board of directors, may be removed by
the shareholders with or without cause by vote of the holders of a majority of
the shares of capital stock of the corporation then entitled to vote on the
election of directors. The Restated Certificate and Restated Bylaws of
SouthTrust, however, provide that the affirmative vote of the holders of at
least 70% of the voting power of the outstanding capital stock entitled to vote
for the election of directors is required to remove a director or SouthTrust's
entire Board of Directors from office and such removal may be effected only for
cause. The vacancy created by any such removal will then be filled by majority
vote of the directors then in office and the successor director so elected will
fill the unexpired term of the director removed from office. The Bylaws of
Georgia National provide that directors may be removed with or without cause by
a plurality vote of the shares entitled to be cast in the election of the
directors, provided that a quorum exists (as defined above).
The Restated Bylaws of SouthTrust also provide that vacancies on
SouthTrust's Board of Directors, caused by the death or resignation of a
director or the creation of a new directorship, may be filled by the remaining
directors. A person selected by the remaining directors to fill a vacancy will
serve until the annual meeting of stockholders at which the term of the class of
directors to which such director has been appointed expires. Therefore, if a
director who was recently elected to a three-year term resigns, the remaining
directors will be able to select a person to serve the remainder of that
three-year term, and such person will not be required to stand for election
until the third annual meeting of stockholders after such director's
appointment. The Bylaws of Georgia National provide that vacancies on Georgia
National's Board of Directors may be filled until the next annual meeting of the
shareholders by a majority vote of the remaining directors entitled to fill the
vacancy, unless and until the shareholders have elected a successor.
Under the Delaware General Corporation Law (unless otherwise provided
in a corporation's charter), any action required or permitted to be taken by the
stockholders of a corporation may be taken without a meeting and without a
stockholder vote if a written consent is signed by the holders of the shares of
outstanding stock having the requisite number of votes that would be necessary
to authorize such action at a meeting of stockholders at which all shares
entitled to vote thereon were present and voted. Under the Restated Certificate
of SouthTrust, action by written consent of the stockholders is prohibited.
Further, under the Restated Certificate and Restated Bylaws of SouthTrust, the
stockholders are not permitted to call a special meeting of stockholders or to
require that SouthTrust's Board of Directors call such a meeting. Under the
Georgia Business Corporation Code, any action required or permitted to be taken
by the shareholders of a corporation may be taken without a meeting and without
a shareholder vote if a written consent is signed by (i) all of the holders of
the outstanding capital stock of the corporation, or (ii) if permitted by the
Articles of Incorporation, the requisite number of votes that would be necessary
to authorize such action at a meeting of shareholders at which all shares
entitled to vote thereon were present and voted. Under the Bylaws of Georgia
National, any action required or permitted to be taken by Georgia National's
Board of Directors or shareholders at a meeting may be taken without a meeting
if written consent, setting forth the action taken, shall be signed by all the
directors or all of the shareholders entitled to vote on the action and included
in the minutes of the proceedings of the Board or filed with the corporate
records. Such consent will have the same effect as though the action had been
taken at a regular meeting.
Certain portions of the Restated Certificate of SouthTrust described in
certain of the proceeding paragraphs, including those related to business
combinations and SouthTrust's classified Board of Directors, may be amended only
by the affirmative vote of the holders of 70% of the outstanding voting stock of
SouthTrust. Georgia National's Articles of Incorporation generally may be
amended as prescribed by law. The Bylaws of Georgia National may be amended by
the affirmative vote of (i) a majority of all the directors then holding office
at any meeting of Georgia National's Board of Directors for which any required
notice was given; and (ii) a plurality of the shareholders entitled to vote with
regard to the amendment at any meeting, so long as a quorum exists (as defined
above). The shareholders of Georgia National may prescribe that any bylaw
adopted by them shall not be altered, amended or repealed by Georgia National's
Board of Directors.
The provisions contained in the Restated Certificate of SouthTrust
described above have the effect of making it more difficult to change
SouthTrust's Board of Directors, and may make SouthTrust's Board of Directors
less responsive
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<PAGE> 55
to stockholder control. Those provisions also may tend to discourage attempts by
third parties to acquire SouthTrust because of the additional time and expense
involved and a greater possibility of failure. This also can affect the price
that a potential purchaser would be willing to pay for the stock of SouthTrust,
thereby reducing the amount a stockholder might realize in, for example, a
tender offer for the stock of SouthTrust.
DISSENT AND APPRAISAL RIGHTS
A shareholder of Georgia National has dissent and appraisal rights
pursuant to Section 14-2-1301 et seq. of the Georgia Business Corporation Code
(the "Georgia Dissent Provisions") in the event of any of the following
corporate actions: (i) consummation of a plan of merger to which the corporation
is a party if shareholder approval is required or if the corporation is a
subsidiary that is merged with its parent pursuant to the Georgia Business
Corporation Code; (ii) consummation of a plan of share exchange to which the
corporation is a party as the corporation whose shares will be acquired, if the
shareholder is entitled to vote on the plan; (iii) consummation of a sale or
exchange of all or substantially all of the property of the corporation if
shareholder vote is required; (iv) an amendment of the articles of incorporation
if such amendment would materially and adversely affect the rights in respect of
a dissenter's shares; and (v) any corporate action taken pursuant to a
shareholder vote to the extent that the voting or nonvoting shareholders of the
corporation, if any, are entitled to dissent pursuant to the articles of
incorporation, bylaws or resolutions of the board of directors of the
corporation. See "THE MERGER - Rights of Dissent and Appraisal." A stockholder
of SouthTrust has similar dissent and appraisal rights pursuant to Section 262
of the Delaware General Corporation Law (the "Delaware Dissent Provisions"), but
only in the event of a merger or consolidation. Both the Georgia Dissent
Provisions and the Delaware Dissent Provisions provide that there is no right to
dissent if, at the record date, the shares of the corporation were listed on a
national securities exchange, designated as a national market system security on
Nasdaq or held by more than 2,000 shareholders. Since the shares of SouthTrust
Common Stock are listed on Nasdaq and held by more than 2,000 stockholders of
record, and the shares of Georgia National are not listed on a national
securities exchange or on Nasdaq, the shareholders of Georgia National who
become stockholders of SouthTrust will no longer have the right to dissent.
RIGHTS ON LIQUIDATION
In the event of liquidation, the holders of SouthTrust Common Stock and
the holders of Georgia National Common Stock will be entitled to receive pro
rata any assets distributable to stockholders with respect to the shares held by
them, after payment of indebtedness and such preferential amounts as may be
required to be paid to the holders of any preferred stock presently outstanding
or hereafter issued by SouthTrust.
PREEMPTIVE RIGHTS
The holders of SouthTrust Common Stock and Georgia National Common
Stock do not have any preemptive rights to purchase additional shares of any
class of securities, including common stock, of SouthTrust or Georgia National,
respectively, which may hereafter be issued.
REPORTS TO STOCKHOLDERS AND SHAREHOLDERS
The SouthTrust Common Stock is registered under the Exchange Act, and,
therefore, SouthTrust is required to provide annual reports containing audited
financial statements to stockholders and to file other reports with the
Commission and solicit proxies in accordance with the rules of the Commission.
SouthTrust also provides reports to its stockholders on an interim basis
containing unaudited financial information.
Although Georgia National is not registered under the Exchange Act, the
Georgia Business Corporation Code requires that Georgia National prepare annual
financial statements that include a balance sheet as of the end of the fiscal
year and an income statement for that year. Upon written request, the
corporation is required to mail to any shareholder copies of these statements.
If prepared for other purposes, the corporation shall also furnish to any
shareholder of record a copy of the statements of cash flows and stockholders'
equity for that year. If the financial statements are prepared for the
corporation on the basis of generally accepted accounting principles, the annual
financial statements also must be prepared on that basis. If the financial
statements are prepared on some other basis, that basis must be disclosed and
must
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<PAGE> 56
be the same basis as other statements prepared by the corporation for the use of
others. If the annual financial statements are reported upon by a public
accountant, the report of such public accountant must accompany the financial
statements. If not, a statement by the president or other responsible party as
to the basis of preparation must accompany the financial statements. In addition
to requiring financial statements, the Georgia Business Corporation Code
requires that, if a corporation indemnifies or advances expenses to a director
in connection with a proceeding by or in the right of the corporation, the
corporation must report the indemnification or advance in writing to the
shareholders with or before the notice of the shareholders' next meeting.
STOCKHOLDERS' RIGHTS PLAN
As described above under the caption "DESCRIPTION OF SOUTHTRUST CAPITAL
STOCK - SouthTrust Common Stock - Stockholder Rights Plan," presently attached
to each share of SouthTrust Common Stock is eight twenty-sevenths of a Right
issued pursuant to the Rights Agreement described under that caption. Each Right
entitles the holder thereof to purchase from SouthTrust one one-hundredth of a
share of Series A Preferred Stock at the Purchase Price.
Georgia National has not adopted any similar plan.
SUPERVISION AND REGULATION
SOUTHTRUST
General
SouthTrust is a bank holding company within the meaning of the Bank
Holding Company Act and is registered with the Federal Reserve Board. ST-Bank,
SouthTrust's banking subsidiary, is subject to restrictions under federal law
which limit the transfer of funds by ST-Bank to SouthTrust and its nonbanking
subsidiaries, whether in the form of loans, extensions of credit, investments or
asset purchases. Such transfers by ST-Bank to SouthTrust or any nonbanking
subsidiary are limited in amount to 10% of ST-Bank's capital and surplus and,
with respect to SouthTrust and all such nonbanking subsidiaries, to an aggregate
of 20% of ST-Bank's capital and surplus. Furthermore, such loans and extensions
of credit are required to be secured in specified amounts. The Bank Holding
Company Act also prohibits, subject to certain exceptions, a bank holding
company from engaging in or acquiring direct or indirect control of more than 5%
of the voting stock of any company engaged in nonbanking activities. An
exception to this prohibition is for activities expressly found by the Federal
Reserve Board to be so closely related to banking or managing or controlling
banks as to be a proper incident thereto.
As a bank holding company, SouthTrust is required to file with the
Federal Reserve Board periodic reports and such additional information as the
Federal Reserve Board may require. The Federal Reserve Board may also make
examinations of SouthTrust and each of its subsidiaries.
The approval of the Comptroller is required for any dividend proposed
to be paid by ST-Bank to SouthTrust if the total of all dividends declared by
ST-Bank in any calendar year would exceed the total of its net profits, as
defined by the Comptroller, for that year, combined with its retained net
profits for the preceding two years, less any required transfers to surplus or a
fund for the retirement of any preferred stock. Under the foregoing laws and
regulations, at June 30,1998, approximately $400.0 million was available
for payment of dividends to SouthTrust by its subsidiaries, primarily ST-Bank.
The payment of dividends by ST-Bank may also be affected by other factors, such
as the maintenance of adequate capital for ST-Bank. In addition to the foregoing
restrictions, the Federal Reserve Board has the power to prohibit the payment of
dividends by bank holding companies if their actions constitute unsafe or
unsound practices. The Federal Reserve Board has issued a policy statement on
the payment of cash dividends by bank holding companies, which expresses the
Federal Reserve Board's view that a bank holding company experiencing earnings
weaknesses should not pay cash dividends that exceed its net income or that
could only be funded in ways that weaken the bank holding company's financial
health, such as by borrowing. Furthermore, the Comptroller has the authority to
prohibit the payment of dividends by a national bank when it determines such
payment to be an unsafe and unsound banking practice.
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Capital Adequacy
Under the Federal Reserve Board's risk-based capital guidelines
applicable to SouthTrust, the minimum ratio of capital to risk-weighted assets
(including certain off-balance sheet items, such as standby letters of credit)
is 8%. To be considered a "well capitalized" bank under the guidelines, a bank
must have a total risk-based capital ratio in excess of 10%. At December 31,
1997, all of SouthTrust's then existing subsidiary banks, which, effective June
2, 1997, were consolidated into ST-Bank, were considered "well capitalized."
Under these guidelines, at least half of the total capital is to be comprised of
common equity, retained earnings and a limited amount of perpetual preferred
stock, after subtracting certain intangibles, and certain other adjustments
("Tier 1 capital"). The remainder may consist of perpetual debt, mandatory
convertible debt securities, a limited amount of subordinated debt, other
preferred stock not qualifying for Tier 1 capital and a limited amount of loan
loss reserves. ST-Bank is subject to similar capital requirements adopted by the
Comptroller. In addition, the Federal Reserve Board, the Comptroller and the
Federal Deposit Insurance Corporation (the "FDIC") have adopted a minimum
leverage ratio (Tier 1 capital to adjusted quarterly average assets) of 3%.
Generally, banking organizations are expected to operate well above the minimum
required capital level of 3% unless they meet certain specified criteria,
including that they have the highest regulatory ratings. Most banking
organizations are required to maintain a leverage ratio of 3% plus an additional
cushion of at least 1% to 2%. The guidelines also provide that banking
organizations experiencing internal growth or making acquisitions will be
expected to maintain strong capital positions substantially above the minimum
supervisory levels without significant reliance upon intangible assets. On
December 31, 1997, ST-Bank had a Tier 1 capital ratio of 7.76%, a total
risk-based capital ratio of 10.87% and a leverage ratio of 6.66%.
Failure to meet capital guidelines could subject a banking institution
to a variety of enforcement remedies available to federal regulatory
authorities, including the termination of deposit insurance by the FDIC,
issuance of a capital directive, a prohibition on the taking of brokered
deposits and certain other restrictions on its business.
The Federal Deposit Insurance Corporation Improvement Act of 1991
("FDICIA") substantially revised the depositary institution regulatory and
funding provisions of the Federal Deposit Insurance Act as well as several other
federal banking statutes. Among other things, FDICIA requires the federal
banking regulators to take prompt corrective action in respect of depositary
institutions that do not meet minimum capital requirements. FDICIA establishes
five capital tiers: "well capitalized," "adequately capitalized,"
"undercapitalized," "significantly undercapitalized" and "critically
undercapitalized." A depository institution is well capitalized if it
significantly exceeds the minimum level required by regulation for each relevant
capital measure, is adequately capitalized if it meets each such measure, is
undercapitalized if it fails to meet any such measure, is significantly
undercapitalized if it is significantly below such measure and is critically
undercapitalized if it fails to meet any critical capital level set forth in
applicable regulations. The critically undercapitalized level occurs where
tangible equity is less than 2% of total tangible assets or less than 65% of the
minimum leverage ratio to be prescribed by regulation (except to the extent that
2% would be higher than such 65% level). A depository institution may be deemed
to be in a capitalization category that is lower than is indicated by its actual
capital position if it receives an unsatisfactory examination rating.
FDICIA generally prohibits a depository institution from making any
capital distribution (including payment of a dividend) or paying any management
fee to its holding company if the depository institution would thereafter be
undercapitalized. Undercapitalized depository institutions became subject to
restrictions on borrowing from the Federal Reserve System, effective as of
December 19, 1993. In addition, undercapitalized depository institutions are
subject to growth limitations and are required to submit capital restoration
plans. A depository institution's holding company must guarantee the capital
plan, up to an amount equal to the lesser of 5% of the depository institution's
assets at the time it becomes undercapitalized or the amount of the capital
deficiency when the institution fails to comply with the plan. The federal
banking agencies may not accept a capital plan without determining, among other
things, that the plan is based on realistic assumptions and is likely to succeed
in restoring the depository institution's capital. If a depository institution
fails to submit an acceptable plan, it is treated as if it is significantly
undercapitalized.
Significantly undercapitalized depository institutions may be subject
to a number of requirements and restrictions, including orders to sell
sufficient voting stock to become adequately capitalized, requirements to reduce
total assets and cessation of receipt of deposits from correspondent banks.
Critically undercapitalized depository institutions are subject to appointment
of a receiver or conservator.
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Source of Strength
According to Federal Reserve Board policy, bank holding companies are
expected to act as a source of financial strength to each subsidiary bank and to
commit resources to support each such subsidiary. This support may be required
at times when a bank holding company may not be able to provide such support.
The Riegle-Neal Interstate Banking and Branching Efficiency Act
In September 1994, the Interstate Banking Act became law. The
Interstate Banking Act provides that as of September 29, 1995, adequately
capitalized and managed bank holding companies are permitted to acquire banks in
any state. State laws prohibiting interstate banking or discriminating against
out-of-state banks were preempted as of the effective date, although states were
permitted to require that target banks located within the state be in existence
for a period of up to five years before such bank may be subject to the
Interstate Banking Act. The Interstate Banking Act establishes deposit caps
which prohibit acquisitions that would result in the acquiror controlling 30% or
more of the deposits of insured banks and thrifts held in the state in which the
acquisition or merger is occurring or in any state in which the target maintains
a branch or 10% or more of the deposits nationwide. State-level deposit caps are
not preempted as long as they do not discriminate against out-of-state
acquirors, and the federal deposit caps apply only to initial entry
acquisitions.
In addition, the Interstate Banking Act provides that as of June 1,
1997, adequately capitalized and managed banks may engage in interstate
branching by merging banks in different states and allowing banks to maintain
branches in states other than the states where they maintain their principal
place of business. Acting pursuant to this authorization, SouthTrust, effective
June 2, 1997, consolidated all of its then existing banking subsidiaries into
its largest banking subsidiary and changed the subsidiary's name to SouthTrust
Bank, National Association.
Proposals to change the laws and regulations governing the banking
industry are frequently introduced in Congress, in the state legislatures and
before the various bank regulatory agency. The likelihood and timing of any such
changes and the impact such changes might have on SouthTrust and its
subsidiaries, however, cannot be determined at this time.
GEORGIA NATIONAL
Because Georgia National is a bank holding company within the meaning
of the Bank Holding Company Act and is registered with the Federal Reserve Board
and because the Bank, Georgia National's sole banking subsidiary, is a national
banking association, Georgia National and the Bank are subject to regulations
substantially the same as those to which SouthTrust and ST-Bank are subject. On
December 31, 1997, the Bank had a Tier 1 capital ratio of 13.82%, a total
risk-based capital ratio of 15.07% and a leverage ratio of 10.17%.
CERTAIN INFORMATION CONCERNING THE BUSINESS OF
GEORGIA NATIONAL AND THE BANK
GENERAL
The Bank was organized in 1987 as a banking corporation under the laws
of the State of Georgia with the primary purpose of serving the banking needs of
Athens-Clarke County, Georgia and surrounding areas. The Bank began operating as
a nationally chartered banking association on January 4, 1988. In July, 1991,
Georgia National was organized as a bank holding company under the laws of the
state of Georgia for the purpose of acquiring all of the outstanding common
stock of the Bank. Simultaneously with the formation of Georgia National and its
acquisition of the Bank, the Bank acquired the Clarke County, Georgia branches
and approximately $38.4 million in deposits from the failed Fulton Federal
Savings and Loan Association.
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Since its organization in 1987, the Bank has provided most traditional
commercial banking services, including, but not limited to, interest and
non-interest bearing checking and savings accounts, money market deposit
accounts, certificates of deposit, individual retirement accounts, and
commercial, real estate mortgage, and consumer loans.
The Bank provides commercial banking services primarily to residents of
Clarke County, Georgia through three banking offices located at 202 College
Avenue, Athens, Ga 30601, 290 Alps Rd., Athens, Ga 30606, and 1059 Gaines School
Rd., Athens, Ga 30605. The Bank also provides banking services to residents of
Winder, Georgia in Barrow County through its banking office located at 25 E. May
Street, Winder, Ga 30680.
The Bank acts as a depository for treasury, tax and loan payments. The
Bank also acts as an issuing agent for U.S. Savings Bonds and travelers checks.
The Bank offers full teller services, wire transfer services, ACH receipt and
origination services, ATM machines at all locations, safe deposit boxes, a 24
hour voice response system, drive-in banking, and night depository services at
all locations.
The Bank's full product line of deposits is tailored to its principal
market area. The Bank offers interest rates on deposit accounts which are
competitive with those offered in the Bank's primary service area. On June 30,
1998, Georgia National had total assets of $89.8 million, total deposits of
$79.2 million, and stockholders' equity of $9.9 million.
The business of the Bank consists primarily of attracting retail
deposits from the general public in the areas served by its banking offices and
using the funds generated to make secured and unsecured commercial loans, loans
for the purchase, construction, financing and refinancing of commercial and
residential real estate in its primary market areas of Clarke County, Georgia,
Barrow County, Georgia, and areas surrounding these counties. The Bank also
makes consumer purpose loans.
The principal sources of funds for the Bank's lending and investment
activities are deposits, repayments of loans and proceeds from the sale of
investment securities. The Bank's revenues are derived primarily from interest
on loans and investments, and fees received in connection with its lending and
deposit activities. The Bank's principal expenses are the interest paid on
deposits, and general operating expenses such as salaries and benefits and
occupancy expenses.
The Bank offers a wide range of short to medium-term commercial and
consumer loans. Commercial loans include, but are not limited to, both secured
and unsecured loans for working capital (including inventory and receivables),
business expansion loans (including acquisition of real estate and
improvements), purchase of equipment and machinery, construction of investment
properties such as residences, apartment complexes and office buildings, and
Small Business Administration ("SBA") loans. Consumer purpose loans include
secured and unsecured loans for financing automobiles, home improvements, and
other personal expenditures. The Bank also originates a variety of residential
real estate loans, including mortgage loans collateralized by first mortgages
for purchase, refinance or home improvements, as well as home equity lines of
credit secured by second mortgages.
The Bank provides a variety of banking services to individuals,
businesses and other institutions located in its primary market areas. Deposit
services include non-interest and interest checking accounts, money market
deposit accounts, savings accounts, certificates of deposit, and individual
retirement accounts. All interest-bearing deposit products carry rates of
interest competitive to other rates offered in the market areas served. All
deposit account service charges are also competitive with other fee schedules
offered in the market areas served. All deposit accounts are insured by the FDIC
to the maximum extent provided by law.
The Bank offers ATM cards with access to local, state, national and
international networks, ATM machines at all retail locations, safe deposit
boxes, wire transfers, direct deposit services, 24 hour voice response services,
and ACH origination services. The Bank also offers both corporate and personal
VISA and Mastercard credit cards issued through a correspondent bank which
assumes the risk of repayment of the credit extended under the cards issued.
The Bank encounters intense competition both in making loans and
attracting deposits. The deregulation of the banking industry and the evolution
of interstate banking has created a highly competitive environment for
commercial banking in the Bank's market areas. The Bank competes with other
local, regional, and national commercial banks, as well
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as credit unions, finance companies, securities brokerage and investment
management firms, mutual funds, insurance companies, and other financial
intermediaries operating in its market areas. Many of these competitors have
substantially greater resources and higher lending limits than the Bank, and
they may offer certain services, such as fiduciary services, that the Bank does
not provide.
Clarke County, Georgia is served by approximately six other commercial
banks, with 28 branch offices, four credit unions with four offices, and
approximately seven securities brokerage firms. Barrow County, Georgia is served
by approximately seven other commercial banks, with eight branch offices.
Competition among financial institutions is largely based upon interest
rates offered on deposit accounts and loans, service charges on deposits, the
quality of services rendered, the convenience of banking facilities, and, in the
case of commercial borrowers, relative lending limits.
As is the case with all financial institutions generally, the Bank's
operations and profitability are significantly influenced by general economic
conditions and by the related monetary and fiscal policies of the Federal
Reserve System. Deposit flows and interest rates on competing investments and
general market rates of interest influence the Bank's cost of funds. Lending
activities are affected by the demand for financing of real estate and other
types of loans, which in turn are affected by the interest rates at which such
financing may be offered and other factors affecting local demand and
availability of funds.
EMPLOYEES
At June 30, 1998, the Bank had 39 full-time and 4 part-time employees,
none of whom is represented by a collective bargaining agreement. Management
believes that employee relations are good.
DESCRIPTION OF PROPERTY
The main office of Georgia National is located at 202 College Avenue,
Athens, Georgia. The following table sets forth information relating to each of
the Bank's offices. All of the Bank's offices are owned by the Bank, with the
exception of the two offices on College Avenue, both of which are subject to
leases. The lease on the main office is in dispute and has not been renewed,
although the Bank anticipates renewing this lease prior to the Effective Time of
the Merger. It is a condition to the Merger that Georgia National either renew
this lease or enter into a new lease for this property.
Location Square Footage
202 College Avenue 4,442
Athens, Georgia 30601 (Plus 1,962 unfinished)
220 College Avenue 2,600
Athens, Georgia 30601
290 Alps Road 2,300
Athens, Georgia 30606
1059 Gaines School Road 2,200
Athens, Georgia 30605
25 E. May Street 2,200
Winder, Georgia 30680
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LEGAL PROCEEDINGS
The Bank is, from time to time, a party to litigation which arises in
the normal course of its business. The Bank does not have pending any litigation
that, separately or in the aggregate, is currently expected to have a material
adverse effect on the operating results or financial conditions of the Bank.
REGULATION AND LEGISLATION
As a nationally chartered bank, the Bank is subject to extensive
examination by the office of the Comptroller of the Currency (the "OCC"). As a
bank holding company registered under the Bank Holding Company Act of 1956, as
amended, Georgia National is subject to regulation by the Federal Reserve Board
and the Georgia Department of Banking and Finance. Georgia National and the Bank
file reports with the above regulatory bodies concerning their financial
condition, in addition to obtaining regulatory approvals prior to entering into
certain transactions such as mergers with or acquisitions of other financial
institutions. Periodic examinations are performed by the OCC and the OCC
monitors the Bank's compliance with all applicable regulations and laws on a
continuous basis.
CERTAIN RELATIONSHIPS AND RELATED-PARTY TRANSACTIONS
The Bank's officers and directors and certain business organizations
and individuals associated with them have been customers of and have had banking
transactions with the Bank and are expected to continue such transactions in the
future. In connection with such transactions, the Bank's directors have borrowed
funds from time to time for various business and personal reasons. The
extensions of credit made by the Bank to its directors and officers (i) were
made in the ordinary course of business, (ii) were made on substantially the
same terms, including interest rates and collateral, as those prevailing at the
time for comparable transactions with other persons and (iii) did not involve
more than a normal risk of collectability or present other unfavorable features.
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BENEFICIAL OWNERSHIP OF GEORGIA NATIONAL COMMON STOCK
The following table sets forth, as of August 28, 1998 (a) the name of
the persons known by Georgia National to be beneficial owners of more than 5% of
the shares of Georgia National Common Stock and the name of each of Georgia
National's directors and executive officers; (b) the number and percent of the
shares of Georgia National Common Stock owned by each such person and by all of
the directors and executives officers of Georgia National as a group; and (c)
the estimated number of shares of SouthTrust Common Stock each such person or
group is expected to receive as a result of the Merger (assuming that such
persons do not exercise their dissenters' rights), calculated by multiplying the
number of shares of Georgia National Common Stock beneficially owned by such
person or group by the Conversion Ratio.
<TABLE>
<CAPTION>
Estimated
Number of Number of
Shares Shares of SouthTrust
Beneficially Percentage of Common Stock to be
Beneficial Owner Owned (1) Total Shares (2) Owned Following Merger
- ---------------- ----- --- ---------------- ----------------------
<S> <C> <C> <C>
Conway C. Broun (3) 164,392(4) 12.49% 98,635
E. Clay Bryant 36,116 2.75% 2,169
Michael R. Carson 8,000 * 4,800
James Don Edwards (5) 110,652 8.40% 66,391
Harry N. Gordon 26,046 1.98% 15,627
Martha Henderson 2,000 * 1,200
William S. Huggins 36,770(6) 2.78% 22,062
Carl O. Jones 135 * 81
Thomas Z. Lanier 22,800 1.73% 13,680
M. Louise McBee 17,464 1.33% 10,478
Ted R. Ridlehuber 42,512 3.23% 25,507
Tommy E. Warner 23,606 1.79% 14,163
Claude Williams, Jr. (7) 143,502 10.90% 86,101
William B. Winter 26,258 1.99% 15,754
------- -----
All Executive Officers
& Directors as a Group 660,253 49.96%
======= ======
</TABLE>
* Represents beneficial ownership of less than 1% of the outstanding shares
of Georgia National Common Stock.
(1) Under applicable regulations of the Securities and Exchange Commission,
shares are considered to be beneficially owned by a person if such person
either (a) directly or indirectly has or shares the power to vote or
dispose of the shares, whether or not such person has any economic interest
in the shares, or (b) has the right to acquire such shares within 60 days
of the date of this Proxy Statement/Prospectus. Unless otherwise indicated,
the named beneficial owner has the sole voting and investment power with
respect to the shares reported.
(2) For purposes of computing beneficial ownership and the percentages of
outstanding shares held by each person or group of persons on a given date,
shares which such person or group has the right to acquire within 60 days
after such date are shares for which such person has beneficial ownership
and are deemed to be outstanding for purposes of computing the percentage
for such person, but are not deemed to be outstanding for the purpose of
computing the percentage of any other person. Except as otherwise indicated
in these notes to the foregoing table, the beneficial owners named in the
table have sole voting and investment power with respect to the shares of
Georgia National Common Stock reflected.
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(3) The address of Mr. Broun is P.O. Box 807, Athens, Georgia 30603.
(4) This amount includes 164,292 shares which are held in the name of Broun
Family, LLP. Mr. Broun is the managing partner of this partnership.
(5) The address of Dr. Edwards is 325 St. George Drive, Athens, Georgia 30606.
(6) This amount includes 4,000 shares held as options. Mr. Huggins will not be
fully vested in these options until January 1, 1999 or in the event the
Merger is consummated.
(7) The address of Mr. Williams is 570 Springdale Street, Athens, Georgia
30606.
RISK OF REMAINING INDEPENDENT AS OPPOSED TO MERGING WITH SOUTHTRUST
Georgia National's Board of Directors considered numerous factors prior to
approving the Merger with SouthTrust, including the relative risks to its
shareholders of remaining independent as opposed to merging with SouthTrust.
These risks include (i) the potential difficulty Georgia National, as an
independent enterprise, will have in producing sufficient earnings to result in
a value to Georgia National shareholders comparable to the value to be received
in the Merger, (ii) the competitive environment requiring continued investments
in technology, including investments necessary to address year 2000 issues,
human resources, new product development and marketing, and (iii) the recent
focus of Georgia National's competitors on Georgia National's niche of existing
customers, particularly small businesses.
GEORGIA NATIONAL MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
This analysis has been prepared to provide insight into the
consolidated financial condition of Georgia National and addresses the factors
which have affected Georgia National's results of operations for the six months
ended June 30, 1998 and 1997, and for the fiscal years ended December 31, 1997,
1996, and 1995. Unless otherwise noted, the financial and other information
presented with respect to Georgia National in the discussion includes the
accounts of the Bank. Georgia National's consolidated financial statements and
accompanying notes which follow are an integral part of this review and should
be read in conjunction with it.
Georgia National conducts a general commercial banking business in
Clarke County and Barrow County, Georgia, and in the surrounding areas. The
business consists primarily of attracting deposits from the general public and
applying those funds to the origination of loans for commercial, consumer, and
residential purposes. Georgia National's profitability depends primarily on net
interest income, which is the difference between interest income generated from
interest-earning assets (i.e., loans and investments) less interest expense
incurred on interest-bearing liabilities (i.e., customer and borrowed funds).
Net interest income is affected by the relative amounts of interest-earning
assets and interest-bearing liabilities and the interest rates paid on these
balances.
Net interest income is dependent on Georgia National's interest rate
spread, which is the difference between the average yield earned on its
interest-earning assets and the average rate paid on interest-bearing
liabilities. When interest-earning assets exceed interest-bearing liabilities,
net interest income is generated. Accordingly, net interest income is impacted
by levels of deposits which do not bear interest costs. During 1997, Georgia
National's yield on net average earning assets was 5.37%, and for the six months
ended June 30, 1998, Georgia National's yield on net average earning assets was
5.31%. During 1996 and 1995, Georgia National's yield on net average earning
assets was 5.44% and 5.45%, respectively. The net yield is impacted by interest
rates, deposit flows, and loan demand.
In addition, Georgia National's profitability is affected by such
factors as the level of non-interest income and expenses, the provision for loan
losses and the effective tax rate. Non-interest income consists primarily of
service charges
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and other deposit fees, and fees from mortgage origination activities.
Non-interest expenses consists primarily of compensation and benefits, occupancy
related expenses, and other operating expenses.
Since the commencement of banking operations in January, 1988, Georgia
National's total assets have grown to $89.8 million as of June 30, 1998. To
augment its normal growth and to achieve greater market share, Georgia National
acquired the Clarke County, Georgia deposits and branches of the failed Fulton
Federal Savings and Loan Association in 1991. This acquisition added $38.4
million in deposits to Georgia National's balance sheet. Georgia National has
continued to sustain its growth while maintaining a strong capital position
through internally generated profits.
RESULTS OF OPERATIONS
Comparison of the Six Months Ended June 30, 1998 and 1997.
For the six months ended June 30, 1998, Georgia National reported net
income of approximately $529,000, or $0.41 per fully diluted share, as compared
to net income of $532,000, or $0.42 per fully diluted share for the six month
period ending June 30, 1997, a decrease of approximately $3,000. Net income for
the six months ended June 30, 1998, was slightly below that of the six months
ended June 30, 1997, primarily due to the losses incurred at Georgia National's
mortgage origination division in Atlanta, which is discussed in more detail
below. Total assets at June 30, 1998, were approximately $89.8 million, an
increase of $1.0 million, or 2%, from June 30, 1997. Net earning assets
increased to approximately $82.7 million at June 30, 1998, an increase of
approximately $1.4 million, or 1.8% over June 30, 1997.
The increase in net earning assets resulted in net interest income
before provision for loan losses of $2,219,966 for the six months ended June 30,
1998, an increase of $111,407 or 5.28% over the six months ended June 30, 1997.
The increase in net interest income before provision for loan losses was
mitigated by an increase of $45,000 in the loan loss provision for the six
months ended June 30, 1998, over the same period in 1997.
In 1997 Georgia National started a mortgage origination division with
an office in Atlanta, Georgia. The focus of this operation was to solicit and
underwrite first and second mortgages which were either pre-sold or were
subsequently sold for the purpose of generating fee income to the Bank. This
mortgage division utilized targeted mass mailings as its primary marketing
strategy. This mortgage operation failed to produce projected revenue levels and
for the six months ended June 30, 1998, the division contributed losses to the
Bank totaling $105,874. The mortgage operation contributed losses totaling
$115,874 for the six months ended June 30, 1997. This operation was closed
effective July 31, 1998.
Total non-interest income for the six months ended June 30, 1998, was
approximately $691,000, as compared to total non-interest income of
approximately $420,000 for the six months ended June 30, 1997, an increase of
$272,000 or 64.5%. However, total operating expenses were $1,999,494 for the six
months ended June 30, 1998, as compared to $1,667,970 for the six months ended
June 30, 1997, an increase of $331,524 or 19.9%. Operating expenses associated
with the Atlanta mortgage origination operation were $408,537 for the six months
ended June 30, 1998, and $260,790 for the six months ended June 30, 1997.
Georgia National's loans totaled approximately $63.6 million at June
30, 1998, an increase of $1.7 million or 2.75% over June 30, 1997. The allowance
for loan losses was $903,910, or 1.42% of total loans at June 30, 1998, up from
$791,247, or 1.28% of total loans at June 30, 1997.
Georgia National's yield on net average earning assets during the six
months ended June 30, 1998 was 5.31%. This compares to a yield on net average
earning assets of 5.35% during the same period in 1997.
Comparison of the Fiscal Years Ended December 31, 1997 and 1996.
For the year ended December 31, 1997, Georgia National reported net
income of $1,229,923, or $0.97 per fully diluted share, as compared to net
income of $1,049,412, or $0.91 per fully diluted share for the year ended
December 31, 1996. The 1997 net income was an increase of $180,511, or 17.20%
over 1996. Georgia National's 1997 net income
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increased from 1996 notwithstanding that the mortgage origination operation
contributed tax adjusted losses totaling $64,691 during 1997.
Net interest income before provision for loan losses for the year ended
December 31, 1997, was approximately $4,342,000, or approximately 5.37% of
average net earning assets, as compared to $3,738,000, or 5.44% of average net
earning assets for the year ended December 31, 1996. The increase in net
interest income from 1996 to 1997 was due primarily to an increase in net
earning assets.
Georgia National's total assets were approximately $91.8 million and
$80.7 million at December 31, 1997 and 1996, respectively. Total assets
increased approximately $11.1 million, or 13.75% from December 31, 1996 to
December 31, 1997. Georgia National's earning assets were approximately $84.5
million at December 31, 1997, an increase of $ 11.2 million, or 15.4%, from
December 31, 1996.
Georgia National's loans totaled approximately $62.8 million at
December 31, 1997, an increase of $6.7 million or 11.9% from December 31, 1996.
The allowance for loan losses was $835,849, or 1.33% of total loans at December
31, 1997. This compares to an allowance for loan losses of $739,634, or 1.32% of
total loans at December 31, 1996. Georgia National took provisions for loan
losses totaling $135,000 and $35,000 for the years ended December 31, 1997 and
1996, respectively. Management believes that the current level in the allowance
for loan losses is adequate to absorb potential losses in the loan portfolio.
Comparison of the Fiscal Years Ended December 31, 1996 and 1995
For the year ended December 31, 1996, Georgia National reported net
income of $1,049,412, or $0.91 (adjusted for 2 for 1 split effective July 31,
1997) per fully diluted share, as compared to net income of $996,979, or $0.79
(adjusted for 2 for 1 split effective July 31, 1997) per fully diluted share for
the year ended December 31, 1995. The 1996 net income was an increase of
$52,433, or 5.26%, over 1995.
Net interest income before provision for loan losses for the year ended
December 31, 1996, was approximately $3,738,000, or 5.44% of average net earning
assets, as compared to $3,327,000, or 5.45% of average net earning assets for
the year ended December 31, 1995. The increase in net interest income from 1995
to 1996 was due primarily to an increase in net earning assets. Georgia
National's total assets were approximately $80.7 million and $72.9 million at
December 31, 1996 and 1995, respectively. Total assets increased approximately
$7.8 million, or 10.7% from December 31, 1995 to December 31, 1996. Georgia
National's earning assets were approximately $73.3 million at December 31, 1996,
an increase of $7.2 million, or 10.89%, from December 31, 1995.
Georgia National's loans totaled approximately $56.1 million at
December 31, 1996, an increase of $10.7 million or 23.6% from December 31, 1995.
The allowance for loan losses was $739,634, or 1.32% of total loans at December
31, 1996. This compares to an allowance for loan losses of $688,510 or 1.52% of
total loans at December 31, 1995. Georgia National took provisions for loan
losses of $35,000 for the year ended December 31, 1996. There was no provision
for loan losses recorded during the year ended December 31, 1995. Management
believes that the Bank's current level of allowance for loan losses is adequate
to absorb potential losses in the portfolio.
NET INTEREST INCOME
Net interest income, which constitutes the principal source of income
for Georgia National, represents the difference between interest income on
interest-earning assets and interest expense on interest-bearing liabilities.
The primary interest-earning assets are loans made to businesses and
individuals. Interest-bearing liabilities primarily consist of time deposits,
interest-bearing checking accounts ("NOW accounts"), savings deposits and money
market deposits. Funds generated by these sources are invested in
interest-earning assets. Accordingly, net interest income depends on the volume
of average interest-earning assets and average interest-bearing liabilities and
the interest rates earned and paid on interest-earning assets and
interest-bearing liabilities.
62
<PAGE> 66
Net interest income for the six months ended June 30, 1998, and 1997,
was approximately $2,220,000 and $2,109,000, respectively, and the yield on net
average interest-earning assets was 5.31% and 5.35%, respectively.
Net interest income for the fiscal years ended December 31, 1997, 1996
and 1995 totaled approximately $4,342,000, $3,738,000 and $3,327,000,
respectively, and the yield on net average interest-earning assets was 5.37%,
5.44% and 5.45% respectively. Total interest expense for the years ended
December 31, 1997, 1996 and 1995 was approximately $2,977,000, $2,548,000 and
$2,367,000, respectively, and the average cost of interest-bearing liabilities
for each period was 4.45%, 4.42% and 4.53% respectively.
The following Table (1) presents for each category of interest-earning
assets and interest-bearing liabilities the average balances outstanding, the
interest earned or paid, and the average rate earned or paid for the six months
ended June 30, 1998, and 1997, and for the fiscal years ended December 31, 1997,
1996 and 1995. The table also shows the average rate earned on all
interest-earning assets, the average rate paid on all interest-bearing
liabilities and the yield on net average interest-earning assets for the same
periods.
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<PAGE> 67
TABLE (1)
COMPARATIVE AVERAGE BALANCES, INTEREST, AND AVERAGE YIELDS
(IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30,
1998 1997
Interest Interest
Average Income/ Yield/ Average Income/ Yield/
Balance Expense Rate Balance Expense Rate
<S> <C> <C> <C> <C> <C> <C>
Interest earning assets:
Loans receivable, net $ 63,766 $ 3,149 9.93% $ 58,270 $ 2,931 10.09%
Investment Securities $ 12,533 $ 379 6.06% $ 13,768 $ 441 6.41%
Federal funds sold $ 6,894 $ 191 5.50% $ 6,116 $ 167 5.44%
Interest-earning deposits w/other banks $ 133 $ 3 6.75% $ 0 $ 0 0.00%
Federal Reserves & FHLB Stock $ 428 $ 14 6.85% $ 404 $ 13 6.85%
--------- ------- ---- -------- -------- -----
Total interest earning assets $ 83,754 $ 3,736 8.96% $ 78,558 $ 3,552 9.06%
Non-interest earning assets:
Cash and due from banks $ 3,465 $ 3,310
Other assets $ 2,987 $ 3,086
--------- --------
Total non-interest earning assets $ 6,452 $ 6,396
--------- --------
Total assets $ 90,206 $ 84,954
========= ========
Interest bearing liabilities:
Deposits
Interest bearing demand and NOW deposits $ 24,337 $ 460 3.81% $ 18,599 $ 316 3.43%
Savings deposits $ 18,183 $ 408 4.53% $ 19,274 $ 423 4.43%
Money market deposits $ 2,123 $ 31 2.90% $ 2,508 $ 36 2.93%
Time deposits $ 19,501 $ 524 5.40% $ 21,434 $ 568 5.36%
IRA time deposits $ 3,315 $ 88 5.35% $ 3,599 $ 95 5.30%
T,T&L deposits $ 199 $ 5 7.11% $ 191 $ 5 4.64%
--------- ------- ---- -------- -------- -----
Total interest bearing liabilities $ 67,658 $ 1,516 4.52% $ 65,605 $ 1,443 4.44%
Non-interest bearing liabilities:
Non-interest bearing deposits $ 11,757 $ 10,406
Other liabilities $ 1,054 $ 367
--------- --------
Total non-interest bearing liabilities $ 12,811 $ 10,773
--------- --------
Total liabilities $ 80,469 $ 76,378
========= ========
Stockholders' equity $ 9,737 $ 8,576
--------- --------
Total liabilities and Stockholders' equity $ 90,206 $ 84,954
========= ========
Net interest income $ 2,220 $ 2,109
======= ========
Net yield on average earning assets 5.31% 5.35%
==== =====
</TABLE>
[TABLE (1) IS CONTINUED ON THE NEXT PAGE.]
64
<PAGE> 68
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
1997 1996 1995
---- ---- ----
Interest Interest Interest
Average Income/ Yield Average Income/ Yield Average Income/ Yield
Balance Expense Rate Balance Expense Rate Balance Expense Rate
------- ------- ---- ------- ------- ---- ------- ------- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Interest earning assets:
Loans receivable, net $ 60,563 $ 6,079 10.04% $ 48,302 $ 5,032 10.40% $ 44,126 $ 4,581 10.39%
Investment Securities $ 13,926 $ 876 6.40% $ 16,503 $ 1,070 6.32% $ 13,469 $ 894 6.65%
Federal funds sold $ 6,401 $ 338 5.46% $ 2,965 $ 158 5.20% $ 3,347 $ 204 6.01%
Interest-earning deposits
w/other banks $ 0 $ 0 0.00% $ 0 $ 0 0.00% $ 0 $ 0 0.00%
Federal Reserves & FHLB Stock $ 407 $ 27 6.85% $ 393 $ 26 6.75% $ 206 $ 15 6.50%
-------- -------- ----- -------- -------- ----- -------- -------- -----
Total interest earning assets $ 80,937 $ 7,320 9.06% $ 68,163 $ 6,286 9.14% $ 61,148 $ 5,694 9.31%
Non- interest earning assets:
Cash and due from banks $ 3,253 $ 2,977 $ 3,069
Other assets $ 2,962 $ 3,156 $ 2,730
-------- -------- --------
Total non-interest
earning assets $ 6,215 $ 6,133 $ 5,799
-------- -------- --------
Total assets $ 87,152 $ 74,296 $ 66,947
======== ======== ========
Interest bearing liabilities:
Deposits
Interest bearing demand
and NOW deposits $ 20,226 $ 719 3.54% $ 10,090 $ 231 2.28% $ 7,744 194 3.43%
Savings deposits $ 19,408 $ 867 4.47% $ 17,672 $ 769 4.34% $ 15,335 708 4.43%
Money market deposits $ 2,480 $ 72 2.90% $ 3,457 $ 102 2.93% $ 3,924 117 2.93%
Time deposits $ 20,947 $ 1,122 5.35% $ 22,323 $ 1,230 5.50% $ 21,084 1,131 5.36%
IRA time deposits $ 3,579 $ 189 5.29% $ 3,713 $ 209 5.61% $ 3,763 212 5.30%
T,T&L deposits $ 233 $ 8 5.58% $ 228 $ 7 3.10% $ 215 5 2.50%
-------- -------- ----- -------- -------- ----- -------- -------- -----
Total interest bearing liabilities $ 66,873 $ 2,977 4.45% $ 57,483 $ 2,548 4.42% $ 52,085 2,367 4.53%
Non-interest bearing liabilities:
Non-interest bearing deposits $ 10,878 $ 8,539 $ 7,405
Other liabilities $ 532 $ 398 $ 647
-------- -------- --------
Total non-interest
bearing liabilities $ 11,410 $ 8,937 $ 8,052
-------- -------- --------
Total liabilities $ 78,283 $ 66,420 $ 60,117
-------- -------- --------
Stockholders' equity $ 8,869 $ 7,876 $ 6,830
-------- -------- --------
Total liabilities and
Stockholders' equity $ 87,152 $ 74,296 $ 66,947
======== ======== ========
Net interest income $ 4,343 $ 3,738 $ 3,327
======== ======== ========
Net yield on average earning assets 5.37% 5.44% 5.45%
===== ===== =====
</TABLE>
65
<PAGE> 69
The effect on interest income, interest expense, and net interest
income for the periods indicated, of changes in average balances and rate, is
shown in the following Table (2). The effect of a change in average balance has
been determined by applying the average rate at the year-end for the earlier
period to the change in average balances at the year-end for the later period.
Changes resulting from average balance/rate variances are included in changes
resulting from volume.
TABLE (2)
RATE/VOLUME ANALYSIS OF NET INTEREST INCOME
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
Six Months Ended Year Ended Year Ended
June 30, December 31, December 31
1998 Compared to 1997 1997 Compared to 1996 1996 Compared to 1995
--------------------- --------------------- ---------------------
Increase (Decrease) Due to Increase (Decrease) Due to Increase (Decrease) Due to
-------------------------- -------------------------- --------------------------
Average Average Total Average Average Total Average Average Total
Volume Rate Change Volume Rate Change Volume Rate Change
------ ---- ------ ------ ---- ------ ------ ---- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Interest earned on:
Loans receivable, net $ 256 $ (37) $ 219 $1,284 $ (239) $1,045 $ 490 $ (40) $ 450
Investment securities $ (35) $ (23) $ (58) $ (211) $ 20 $ (191) $ 248 $ (60) $ 188
Federal funds sold $ 21 $ 2 $ 23 $ 165 $ 15 $ 180 $ (22) $ (24) $ (46)
------- ------ ------ ------ ------ ------ ------- ------ ------
Total interest income $ 242 $ (58) $ 184 $1,238 $ (204) $1,034 $ 716 $ (124) $ 592
Interest paid on:
Interest-bearing demand $ 98 $ 46 $ 144 $ 232 $ 255 $ 487 $ 59 $ (22) $ 37
and NOW deposits
Savings deposits $ (24) $ 9 $ (15) $ 75 $ 23 $ 96 $ 104 $ (47) $ 57
Money Market deposits $ (5) $ 0 $ (5) $ (29) $ (1) $ (30) $ (14) $ (1) $ (15)
Time deposits $ (51) $ 7 $ (44) $ (76) $ (33) $ (109) $ 67 $ 37 $ 104
IRA time deposits $ 8 $ 1 $ (7) $ (8) $ 12 $ (20) $ (3) $ 0 $ (3)
T,T&L deposits $ 1 $ (1) $ 0 $ 5 $ (2) $ 3 $ 0 $ 1 $ 1
------- ------ ------ ------ ------ ------ ------- ------ ------
Total interest expense $ 11 $ 62 $ 73 $ 199 $ 230 $ 429 $ 213 $ (32) $ 181
------- ------ ------ ------ ------ ------ ------- ------ ------
Change in net
interest income $ 231 $ (120) $ 111 $1,039 $ (434) $ 605 $ 503 $ (92) $ 411
======= ====== ====== ====== ====== ====== ======= ====== ======
</TABLE>
PROVISION FOR LOAN LOSSES
Georgia National recorded a provision for loan losses of $90,000 during
the six months ended June 30, 1998, as compared to $45,000 for the six months
ended June 30, 1997. For the fiscal year ended December 31, 1997, Georgia
National recorded a provision for loan losses of $135,000, as compared to
$35,000 for the fiscal year ended December 31, 1996. Georgia National did not
record a provision for loan losses during the year ended December 31, 1995.
The total allowance for loan losses was $903,910, or 1.42% of total
loans at June 30, 1998, as compared to $791,247, or 1.28% of total loans at June
30, 1997. The total allowance for loan losses was $835,850, or 1.33% of total
loans at December 31, 1997, as compared to $739,634, or 1.32% of total loans at
December 31, 1996. The total allowance for loan losses was $688,510 or 1.52% of
total loans at December 31, 1995.
66
<PAGE> 70
Georgia National's policy is to record a provision for loan losses
consistent with the current levels of net charge-offs, loan growth, aggregate
credit quality trends (including an assessment of existing levels of classified
and criticized assets) and current economic conditions.
Georgia National's allowance for loan losses represents an amount
which, in the judgment of management and the Bank's board of directors, will be
adequate to absorb losses on existing loans that may become uncollectible. The
adequacy of the allowance for loan losses is evaluated monthly based on a
regular review of the Bank's loan portfolio, with particular emphasis on
internally rated credits, non-accruing loans, past due loans, and other loans
that management and the loan committee believe require special attention.
NON-INTEREST INCOME
Georgia National's non-interest income includes service charges and
other fees on deposit accounts, fees from mortgage origination activities, and
other miscellaneous fee income. For the six months ended June 30, 1998 and 1997,
non-interest income was approximately $691,000 and $420,000, respectively.
Non-interest income totaled approximately $1,456,000, $749,000 and
$631,000 for the years ended December 31, 1997, 1996 and 1995, respectively. Of
the $707,000 increase in non-interest income from 1996 to 1997, approximately
$696,000 was attributable to the mortgage origination operation started in
Atlanta during 1997. Table (3) below compares various categories of non-interest
income for the periods indicated.
TABLE (3)
NON-INTEREST INCOME CATEGORIES
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30, YEARS ENDED DECEMBER 31,
------------------------- ------------------------
1998 1997 1997 1996 1995
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Service Charges $ 212 $ 225 $ 442 $ 436 $ 387
Mortgage Origination Fees 407 156 901 168 113
Other Income 72 39 113 145 131
--------- -------- --------- --------- --------
Total non-interest income $ 691 $ 420 $ 1,456 $ 749 $ 631
========= ======== ========= ========= ========
</TABLE>
NON-INTEREST EXPENSE
Non-interest expenses for the six months ended June 30, 1998 and 1997,
totaled approximately $1,999,000 and $1,668,000, respectively.
Non-interest expenses for the fiscal years ended December 31, 1997,
1996 and 1995 totaled approximately $3,762,000, $2,846,000 and $2,453,000,
respectively. The increase in non-interest expenses of $916,000 from 1996 to
1997 was due primarily to increases in personnel costs and the operating
expenses associated with the Atlanta mortgage origination operation started in
1997. The increase in non-interest expenses from 1995 to 1996 of $393,000 was
due primarily to increases in personnel costs and the operating expenses
associated with a branch location which was opened in September, 1996. Table (4)
below summarizes the various categories of non-interest expense for the periods
indicated.
67
<PAGE> 71
TABLE (4)
NON-INTEREST EXPENSES
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
Six Months Ended, June 30, Years Ended December 31,
-------------------------- ------------------------
1998 1997 1997 1996 1995
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Salaries and Employee Benefits $ 907 $ 715 $ 1,674 $ 1,118 $ 992
Occupancy & F,F & E Expenses 313 300 632 564 508
Advertising Expenses 19 29 72 73 67
FDIC Premiums 12 13 29 186 97
Legal and Professional Expenses 64 44 116 76 43
Stationary & Supplies Expenses 147 96 227 79 56
Postage Expenses 132 89 243 51 49
Directors Fees 39 37 78 67 55
Intangible Assets-Amortization 97 97 193 193 193
Other Expenses 269 248 498 369 393
--------- -------- --------- ---------- ---------
Total Non-interest expenses $ 1,999 $ 1,668 $ 3,762 $ 2,846 $ 2,453
</TABLE>
INCOME TAXES
For the six months ended June 30, 1998 and 1997, Georgia National's
provision for income taxes was approximately $293,000 and $284,000,
respectively. For the years ended December 31, 1997, 1996 and 1995, Georgia
National's provision for income taxes was approximately $671,000, $557,000 and
$508,000. The increases from 1996 to 1997 and from 1995 to 1996 were due to
increased earnings before taxes.
ASSET/LIABILITY MANAGEMENT
Georgia National seeks to maximize net interest income through growth
in net earning assets and by immunizing the Bank's net interest margin from
changing interest rate environments, while assuming acceptable degrees of risk
and ensuring adequate liquidity for loan growth and deposit flows. Georgia
National accomplishes this by structuring the balance sheet so that repricing
opportunities exist for both assets and liabilities in proportionately matched
amounts at approximately the same time intervals in the future. Georgia
National's management and board of directors recognize that a perfectly matched
interest rate sensitive balance sheet is not possible and that imbalances in
repricing opportunities at any point in time constitute the Bank's interest
sensitivity position.
Georgia National's management attempts to manage these imbalances to
provide for a consistently growing positive net interest rate margin under all
interest rate environments. To this end, the Bank's management and the
Investment and Asset and Liability Committees monitor the structure of the
Bank's rate sensitive assets and liabilities so that annualized net interest
income at risk (the projected change in net interest income over a given time
frame assuming downward and upward interest rate moves) does not exceed $200,000
given a 2% adverse move in interest rates. As a secondary measure, the Bank's
Asset and Liability Committee's policy is to limit the Bank's net rate sensitive
assets (rate sensitive assets minus rate sensitive liabilities) to plus or minus
10% of total assets at a one year forward looking time horizon.
A traditional indicator of the interest rate sensitivity position of a
financial institution's balance sheet is the difference between rate sensitive
assets and rate sensitive liabilities at given forward looking time horizons,
which is referred to as the Bank's "GAP" measurement. While GAP analysis is a
traditional indicator used for monitoring interest rate risk, it does not
adequately address such factors as basis (magnitude) change risk and the effect
of imbedded options risk. In addition, because of newer product lines such as
deposit accounts tied to a percentage of the current prime rate, management has
recognized that the effect of changes in net interest income cannot be
accurately indicated by the traditional static GAP report. Consequently, Georgia
National relies more heavily on simulation models to more accurately project the
effects of changing interest rates on the Bank's net interest income. Based upon
its simulation models, management believes that Georgia National is not subject
to any excessive or material interest rate risk at June 30, 1998.
68
<PAGE> 72
Tables (5) and (6) below set forth the interest rate-sensitive assets
and liabilities of Georgia National at June 30, 1998, and December 31, 1997,
which are expected to mature or are subject to repricing in each of the time
periods indicated. As discussed above, these tables are limited to the extent
that they do not disclose changes to the Bank's net interest income under
alternate interest rate environments and are not indicative of Georgia
National's rate sensitivity position at future points in time. The balances have
been derived based on the financial characteristics of each asset and liability
in the Bank's portfolio. Adjustable and floating rate assets are included in the
period in which interest rates are next scheduled to adjust rather than at their
stated maturity dates. Fixed rate loans have been amortized based on loan terms
and the principal cash flows are placed in the appropriate time horizons.
Repricing of time deposits is based on their scheduled maturities. Deposits
without a stated maturity are repriced based on known characteristics and
historical patterns of the deposit product.
TABLE (5)
INTEREST RATE SENSITIVITY ANALYSIS AS OF JUNE 30, 1998
(DOLLARS IN THOUSANDS)
TERMS TO REPRICING
<TABLE>
<CAPTION>
90 Days 91 Days More Than
Or Less To 1 Year 1 Year Total
------- --------- ------ -----
<S> <C> <C> <C> <C>
Interest-earning assets:
Federal funds sold $ 4,540 $ 0 $ 0 $ 4,540
Investment securities $ 4,428 $ 2,974 $ 7,137 $ 14,539
Loans, net $ 19,477 $ 19,635 $ 24,387 $ 63,649
------------ ------------- ------------- --------------
Total interest-earning assets $ 28,445 $ 22,809 $ 31,474 $ 82,728
============ ============= ============= ==============
Interest-bearing liabilities:
NOW & savings accounts $ 25,260 $ 18,039 $ 250 $ 43,549
Money market deposits $ 1,880 $ 0 $ 0 $ 1,880
Time & IRA time deposits $ 4,886 $ 12,991 $ 4,587 $ 22,474
T,T&L demand notes $ 211 $ 0 $ 0 $ 211
------------ ------------- ------------- --------------
Total interest-bearing liabilities $ 32,237 $ 31,030 $ 4,847 $ 68,114
============ ============= ============= ==============
Interest sensitivity gap $ (3,792) $ (8,221) $ 26,627 $ 14,614
============ ============= ============= ==============
Cumulative gap $ (3,792) $ (12,013) $ 14,614
============ ============= =============
Cumulative ratio of interest-earning
assets to interest-bearing liabilities 88.23% 81.01% 121.46%
Cumulative gap to total assets -4.17% -13.22% 16.08%
</TABLE>
69
<PAGE> 73
TABLE (6)
INTEREST RATE SENSITIVITY ANALYSIS AS OF DECEMBER 31, 1997
(DOLLARS IN THOUSANDS)
TERMS TO REPRICING
<TABLE>
<CAPTION>
90 Days 91 Days More Than
Or Less To 1 Year 1 Year Total
------- --------- ------ -----
<S> <C> <C> <C> <C>
Interest-earning assets:
Federal funds sold $ 6,620 $ 0 $ 0 $ 6,620
Investment securities $ 341 $ 6,270 $ 8,491 $ 15,102
Loans, net $ 24,818 $ 17,865 $ 20,133 $ 62,816
------------ ------------- ------------ ------------
Total interest-earning assets $ 31,779 $ 24,135 $ 28,624 $ 84,538
============ ============= ============ ============
Interest-bearing liabilities:
NOW & savings accounts $ 25,796 $ 15,326 $ 0 $ 41,122
Money market deposits $ 2,351 $ 0 $ 0 $ 2,351
Time & IRA time deposits $ 3,704 $ 12,639 $ 7,406 $ 23,749
T,T&L demand notes $ 681 $ 0 $ 0 $ 681
------------ ------------- ------------ ------------
Total interest-bearing liabilities $ 32,532 $ 27,965 $ 7,406 $ 67,903
============ ============= ============ ============
Interest sensitivity gap $ (753) $ (3,830) $ 21,218 $ 16,635
============ ============= ============ ============
Cumulative gap $ (753) $ (4,583) $ 16,635
============ ============= ============
Cumulative ratio of interest-earning assets
to interest-bearing liabilities 97.69% 92.42% 124.50%
Cumulative gap to total assets -0.92% -5.60% 20.33%
</TABLE>
FINANCIAL CONDITION
LENDING ACTIVITIES
The primary source of income for Georgia National is the interest
earned on loans. Loans are the single largest component of the Bank's earning
assets, as well as the highest yielding component. Due to the importance of
loans to the Bank's profitability, most other assets and liabilities are managed
to accommodate the funding of loans.
At June 30, 1998, Georgia National's total assets were approximately
$89.8 million, as compared to $88.9 million at June 30, 1997. At December 31,
1997, total assets were approximately $91.8 million, as compared to $80.7
million at December 31, 1996. At June 30, 1998, total loans were approximately
$63.6 million, or 70.0% of total assets, as compared to total loans of $61.9
million, or 69.7% of total assets at June 30, 1997. At December 31, 1997, total
loans were $62.8 million, or 68.4% of total assets, as compared to total loans
of $56.1 million, or 69.5% of total assets, at December 31, 1996 and $45.4
million, or 62.3% of total assets, at December 31, 1995. Management believes
that the increase in loans from 1995 to 1997 is primarily attributable to a
continued strong local and regional economy and a relatively stable interest
rate environment, as well as the Bank's good reputation among small businesses
and professionals in its primary market areas.
70
<PAGE> 74
Table (7) below summarizes the composition of Georgia National's loan
portfolio by type of loan on the dates indicated.
TABLE (7)
LOAN PORTFOLIO COMPOSITION
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEARS ENDED DECEMBER 31,
---------------- ------------------------
JUNE 30, 1998 1997 1996 1995
------------- ---- ---- ----
Amount % Amount % Amount % Amount %
------ ------- ------ ------- ------ ------ ------ -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Type of loan:
Commercial and industrial loans $12,187 19.14% $ 13,101 20.95% $ 11,458 20.71% $10,156 22.36%
Real estate construction $ 6,457 10.15% $ 5,392 8.57% $ 5,697 10.15% $ 1,494 3.29%
Other real estate loans $41,747 65.59% $ 41,022 65.23% $ 36,051 64.25% $31,422 69.17%
Consumer loans $ 2,876 4.52% $ 2,906 4.62% $ 3,905 4.89% $ 2,103 4.63%
Other loans $ 382 0.60% $ 395 0.63% $ 0 0.00% $ 253 0.55%
------- ----- --------- ----- -------- ------ ------- ------
Total loans $63,649 100.00% $ 62,816 100.00% $ 56,111 100.00% $45,428 100.00%
======= ====== ========= ====== ======== ====== ======= ======
Less: Allowance for loan losses $ 904 $ 836 $ 739 $ 689
------- --------- -------- -------
Total loans, net $62,745 $ 61,980 $ 55,372 $44,739
======= ========= ======== =======
</TABLE>
Table (8) below sets forth as of June 30, 1998, and December 31, 1997,
the dollar amounts of all loans and their maturity periods.
TABLE (8)
LOAN PORTFOLIO MATURITY/REPRICING SCHEDULE
EXCLUDING NON-ACCRUAL LOANS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
June 30, 1998 December 31, 1997
------------- -----------------
<S> <C> <C>
Maturity or repricing period:
Three months or less $ 6,577 $ 8,174
Over three months through 12 months $ 13,690 $ 12,202
Over one year through three years $ 26,488 $ 25,506
Over three years through five years $ 5,557 $ 4,965
Over five years through 15 years $ 8,961 $ 10,075
over 15 years $ 2,376 $ 1,894
------------- ------------
Total $ 63,649 $ 62,816
============= ============
</TABLE>
ASSET QUALITY
Management has sought to maintain a high quality of assets through
sound underwriting and lending practices. An analysis of the loan portfolio
reveals a significant concentration of real estate related credits. As of June
30, 1998, approximately 76% of total loans were secured by real estate, and as
of December 31, 1997, approximately 74% of total loans were secured by real
estate. At December 31, 1996 and 1995, respectively, approximately 74.35% and
72.34% of total loans were secured by real estate.
At December 31, 1997, commercial mortgages totaled approximately $19.6
million, or approximately 31.3% of total loans. At December 31, 1996 and 1995,
this group totaled $15.5 million, or approximately 27.7% of total loans and
71
<PAGE> 75
$11.6 million, or approximately 25.5% of total loans, respectively. This group
of loans is comprised of loans secured by office buildings, manufacturing
sites, retail businesses, and other commercial properties. The Bank has not
incurred any losses on commercial real estate loans since the Bank's inception
in January 1988, and the Bank's loan loss analysis does not lead management to
believe that this group of loans poses a significant threat of material losses
in the future.
Residential mortgages totaled approximately $27.8 million, or 44.4% of
total loans outstanding at December 31, 1997. At December 31, 1996 and 1995 this
segment of the loan portfolio totaled $29.5 million or 52.8% of total loans
outstanding and $23.9 million or 52.5% of total loans outstanding, respectively.
This group of loans includes residential lots, and first and second mortgages on
owner-occupied and non-owner occupied dwellings. These loans also have a very
good performance history with low past-due percentages. Georgia National
suffered losses totaling $2,929 in this category of loans during 1997. These
losses were ultimately fully recovered. Georgia National suffered no residential
real estate losses during 1996 or 1995. Two foreclosures occurred during 1997
with both properties being sold at no loss to the Bank. Georgia National had no
"Other real estate owned" at December 31, 1997.
Georgia National's consistently favorable trends in loans past due has
continued during 1998, with the Bank reporting no loans past due over 90 days at
June 30, 1998. Georgia National reported approximately $153,000, or 0.02% of
total loans past due between 30 and 89 days at June 30, 1998, as compared to
approximately $127,000, or 0.02% of total loans past due at June 30, 1997.
Georgia National reported approximately $102,000, or 0.016% of total loans past
due between 30 and 89 days, approximately $273,000, or 0.05% of total loans past
due between 30 and 89 days, and approximately $342,000, or 0.75% of total loans
past due between 30 and 89 days, at December 31, 1997, 1996 and 1995,
respectively.
As a result of management's ongoing review of the loan portfolio, loans
are classified as non-accrual when it is not reasonable to expect collection of
interest under the original terms of the loan due to a deterioration in the
financial condition of the borrower, or when principal and interest has been in
default for a period of 90 days or more. At December 31, 1997, Georgia National
had one loan of approximately $21,000 which was in non-accrual status. The loan
was guaranteed by the U.S. Small Business Administration and has since been
disposed of at a loss to the Bank totaling approximately $2,900. At June 30,
1998, Georgia National had non-accrual loans totaling $169,000 to one
construction company which is no longer operating. The expected loss on this
relationship totals $130,000.
Loan concentrations are defined as amounts loaned to a number of
borrowers engaged in similar activities which would cause them to be similarly
impacted by economic or other conditions. Georgia National constantly evaluates
these concentrations for the purpose of projecting needed adjustments to its
lending activities due to changes in the economy, loan to deposit ratios, and
different industry trends. In addition, Georgia National has set a target mix of
40% commercial loans, 40% real estate loans and 20% consumer loans to further
reduce concentration risk.
Georgia National's board of directors and management place great
emphasis on strong underwriting procedures on all loans. Georgia National has
established a review process with the objective of quickly identifying,
evaluating, and initiating necessary corrective action for marginal or troubled
loans. In this regard, Georgia National's loan committee reviews initially and
annually all lending relationships with commitments and outstandings of $100,000
and over. Also, the loan committee reviews monthly all credits internally
classified as "Other assets especially mentioned" or worse. Combined, these
components are integral elements of Georgia National's loan program which has
resulted in the strong portfolio performance to date.
CLASSIFICATION OF ASSETS
Generally, interest on loans is accrued and credited to income based
upon the principal balance outstanding. It is management's policy to discontinue
the accrual of interest income and classify a loan as non-accrual when principal
or interest is 90 days past due, the financial condition of the borrower
deteriorates or when principal or interest is not likely to be paid in
accordance with the terms of the obligation. Loans are not returned to accrual
status until principal and interest payments are brought current and future
payments appear certain. Interest accrued and unpaid at the time a loan is
placed
72
<PAGE> 76
on non-accrual status is charged against income immediately. Subsequent payments
received are applied to the outstanding principal until the loan is taken out of
non-accrual status.
Real estate acquired by Georgia National as a result of foreclosure is
classified as "Other real estate owned". These properties are recorded on the
date acquired at the lower of fair value less estimated selling costs or the
recorded investment in the related loan. If the fair value after deducting the
estimated selling costs of the acquired property is less than the recorded
investment in the related loan, the estimated loss is charged to the allowance
for loan losses at that time. The resulting carrying value established at the
date of the foreclosure becomes the new cost basis for subsequent accounting.
After foreclosure, if the fair value less estimated selling costs of the
property becomes less than its cost, the deficiency is charged to the provision
for loan losses. Any costs related to the developmental improvement of the
property are capitalized, whereas those costs relating to holding the property
for sale are charged as an expense.
As of December 31, 1997, 1996 and 1995, Georgia National had $0.00,
$168,683 and $0.00, respectively, in other real estate owned. As of June 30,
1998 and June 30, 1997, the Bank had $91,000 and $0.00, respectively, in other
real estate owned. The parcel carried as other real estate owned at December 31,
1996 was disposed of in 1997 with no loss to the Bank. The parcel carried as
other real estate owned at June 30, 1998, was recorded at 80% of estimated fair
market value. Approximately $22,000 was charged to the loan loss reserve at that
time. The property is currently listed for sale at $128,000 and it is expected
that the sale will bring a full recovery of all charges to the reserve plus any
expenses involved in the disposition of the property.
ALLOWANCE FOR LOAN LOSSES
In originating loans, Georgia National recognizes that credit losses
will be experienced and that the risk of loss will depend largely on the type of
loan made, the credit worthiness of the borrower over the term of the loan and,
in case of a collateralized loan, the quality of the collateral for the loan as
well as general economic conditions. It is management's policy to maintain an
adequate allowance for loan losses based on, among other things, Georgia
National's historical loss experience, evaluation of economic conditions and
regular reviews of delinquencies and loan portfolio quality.
The allowance for loan losses has been established through charges to
earnings in the form of a provision for loan losses. Increases and decreases in
the allowance due to changes in the measurement of impaired loans are included
in the provision for loan losses. Loans continue to be classified as impaired
unless they are brought fully current and the collection of scheduled interest
and principal is considered probable. When a loan or portion of a loan is
determined to be uncollectible, the portion deemed uncollectible is charged
against the allowance.
It is management's policy to discontinue the accrual of interest income
and classify a loan as non-accrual when principal or interest is 90 days past
due, the financial condition of the borrower deteriorates or when principal or
interest is not likely to be paid in accordance with the terms of the
obligation.
Management continues to actively monitor Georgia National's asset
quality and to charge-off loans against the allowance for loan losses when
appropriate or to provide specific loss allowances when necessary. Although
management believes it uses the best information available to make
determinations with respect to the allowance for loan losses, future adjustments
may be necessary if economic conditions differ from the economic conditions used
as assumptions in making the initial determinations.
Georgia National's allowance for loan losses was $903,910 at June 30,
1998 (1.42% of total loans), and $835,850 at December 31, 1997 (1.33% of total
loans). Georgia National experienced charge-offs totaling $43,000 during the six
month period ended June 30, 1998. Georgia National had recoveries of previously
charged-off loans totaling $20,000 during the six month period ended June 30,
1998. Georgia National experienced charge-offs totaling $58,000, $14,000 and
$27,000 during the fiscal years ended December 31, 1997, 1996 and 1995,
respectively. During those same years, Georgia National had recoveries of
previously charged-off loans totaling $19,000, $30,000 and $23,000,
respectively.
73
<PAGE> 77
Table (9) below sets forth an analysis of Georgia National's allowance
for loan losses for the periods indicated.
TABLE (9)
SUMMARY LOAN LOSS
EXPERIENCE
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEARS ENDED
JUNE 30, DECEMBER 31,
---------------- ------------
1998 1997 1997 1996 1995
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Allowance for loan losses, beginning of period $ 836 $ 740 $ 740 $ 689 $ 692
Provision for loan losses $ 90 $ 45 $ 135 $ 35 $ 0
Loans charged off $ (43) $ (10) $ (58) $ (14) $ (27)
Recoveries of previously charged off loans $ 20 $ 16 $ 19 $ 30 $ 24
Allowance for loan loss, end of period $ 903 $ 791 $ 836 $ 740 $ 689
</TABLE>
At June 30, 1998, Georgia National's allowance for loan losses was
comprised of a general loan portfolio allocation totaling $776,613 and a
specific allocation for one outstanding relationship totaling $127,297. Georgia
National's board has determined that the allowance for loan losses is adequate
to cushion against the reasonable expectation of future losses within the
portfolio.
INVESTMENT ACTIVITIES
Management and the board of directors of Georgia National have made it
a policy to classify all investment securities purchased as "available for
sale." Securities in this category are to be held for indefinite periods of time
and not intended to be held until maturity. Assets included in this category are
those assets that management intends to use as a part of its overall
asset/liability strategy and that may be sold in response to changes in interest
rates, corresponding prepayment risk changes, liquidity needs, and other factors
related to management's asset/liability strategy.
Securities in this category are recorded at fair market value. Both
unrealized gains and losses on securities available for sale, net of taxes, are
included as separate components of stockholders' equity in the consolidated
balance sheets until these gains or losses are realized.
The cost of investment securities sold is determined by the specific
identification method. If a security has a decline in fair value that is other
than temporary, then the security will be written down to its fair value by
recording a loss in the statement of operations.
Management currently has no securities classified as "held to maturity"
or "trading" securities.
At June 30, 1998, Georgia National had an unrealized loss, net of
taxes, of approximately $11,000. At June 30, 1998, Georgia National's investment
portfolio totaled approximately $13,039,000, compared to $15,102,000 at December
31, 1997. At June 30, 1998, the Bank's investment portfolio consisted of U.S.
governmental agency securities, GNMA, FHLMC, and FNMA mortgage-backed securities
and collateralized mortgage obligations, and Federal Home Loan Bank and Federal
Reserve Bank stock.
74
<PAGE> 78
Table (10) below summarizes the carrying value of Georgia National's
investment portfolio at the dates indicated.
TABLE (10)
INVESTMENT SECURITIES
PORTFOLIO
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
At June 30, At December 31,
----------- ---------------
1998 1997 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Investment securities, available for sale:
U.S. Government and agency $ 8,310 $ 12,095 $ 11,769 $ 12,153
Mortgage-backed securities $ 4,279 $ 2,571 $ 1,888 $ 5,220
Other securities $ 450 $ 436 $ 440 $ 1,172
--------- --------- --------- ----------
Total, available for sale $ 13,039 $ 15,102 $ 14,091 $ 18,545
Investment securities, held to maturity:
U.S. Government and agency $ 0 $ 0 $ 0 $ 0
Mortgage-backed securities $ 0 $ 0 $ 0 $ 0
Other securities $ 0 $ 0 $ 0 $ 0
--------- --------- --------- ----------
Total, held to maturity $ 0 $ 0 $ 0 $ 0
--------- --------- --------- ----------
Total, all investment securities $ 13,039 $ 15,102 $ 14,091 $ 18,545
========= ========= ========= ==========
</TABLE>
DEPOSIT ACTIVITIES
Deposits are the primary source of funds for Georgia National's lending
and other investment activities. In addition to deposits, Georgia National
derives funds from interest payments, loan principal payments, and funds
provided from operations. Scheduled loan repayments are a relatively stable
source of funds, while deposit inflows and outflows are significantly influenced
by competitive and general market interest rates, and overall economic growth
and activity in the Bank's market. Georgia National is a member of the Federal
Home Loan Bank through which it has access to short and long term borrowings
should they be needed. The Bank also has federal funds purchase lines available
from several correspondent banks for short term borrowing needs. Georgia
National has never used its borrowing capabilities with the FHLB Bank and has on
only a few occasions used overnight fed funds.
Georgia National attracts deposits exclusively from within its
principal market areas through the offering of a full line of products. Deposit
products include checking accounts, money market accounts, savings accounts,
regular time deposits, and retirement savings plans.
Georgia National has introduced two new products which have proven very
successful over the last two years. In 1996 Georgia National introduced "Prime"
savings, which carries a floating interest rate equal to 55% of the current
prime rate. As of June 30, 1998, the Bank had Prime savings accounts totaling
approximately $17 million. During 1997 Georgia National introduced "Investment"
checking in an attempt to compete with the brokerage firm cash management
accounts. This account pays a high rate of interest which is tiered based on the
balance in the account. At June 30, 1998, Georgia National had approximately
$15.2 million in Investment checking balances. Both of these deposit products
fit well with Georgia National's overall asset/liability management strategy and
both product types have proven to be a stable source of funds. Georgia National
has reserved the right to change the rate and the relevant tiers for the payment
of rates on both of these deposit products.
Georgia National does not generally accept deposits from areas outside
of its local geographic markets and has never aggressively pursued large
denomination, high interest-bearing certificates of deposit. As of June 30,
1998, Georgia National had only $1,815,000 in time deposits with balances of
$100,000 or more. At December 31, 1997, 1996 and 1995,
75
<PAGE> 79
Georgia National had time deposit balances in excess of $100,000 totaling
$3,611,000, $3,334,000, and $3,069,000, respectively.
Georgia National establishes maturity terms, service fees and
withdrawal penalties on a periodic basis. The determination of interest rates
and terms is dependent on funds acquisition and liquidity needs, interest rates
paid by competitors, growth goals, loan demand, and federal regulations.
Regulations promulgated by the FDIC pursuant to FDICIA place
limitations on the ability of insured depository institutions to accept, renew
or roll-over deposits by offering rates of interest which are significantly
higher than the prevailing rates of interest on deposits offered by other
depository institutions having the same type of charter in such depository
institution's normal market area. Under these regulations, "well capitalized"
depository institutions may accept, renew or roll such deposits over without
restriction, "adequately capitalized" depository institutions may accept, renew
or roll such deposits over with a waiver from the FDIC (subject to certain
restrictions on payment of rates), and "under capitalized" depository
institutions may not accept, renew or roll such deposits over. The regulations
contemplate that the definitions of "well capitalized", "adequately capitalized"
and "under capitalized" will be the same as the definitions adopted by the
agencies to implement the corrective action provisions of FDICIA. As of June 30,
1998, Georgia National met the definition of a "well capitalized" depository
institution.
Table (11) below sets forth the average balances and average weighted
rates for Georgia National's categories of deposits for the periods indicated.
TABLE (11)
DEPOSITS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30, FISCAL YEAR ENDED DECEMBER 31,
1998 1997 1996
---- ---- ----
% OF % OF % OF
AVERAGE AVERAGE TOTAL AVERAGE AVERAGE TOTAL AVERAGE AVERAGE TOTAL
BALANCE RATE DEPOSITS BALANCE RATE DEPOSITS BALANCE RATE DEPOSITS
------- ---- -------- ------- ---- -------- ------- ---- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Non-interest bearing
demand deposits $ 11,757 0.00% 14.84% $10,878 0.00% 14.03% $ 8,539 0.00% 12.98%
Interest bearing demand
and NOW deposits $ 24,337 3.81% 30.72% $20,226 3.54% 26.09% $ 10,090 2.28% 15.34%
Savings account deposits $ 18,182 4.53% 22.95% $19,408 4.47% 25.04% $ 17,671 4.34% 26.86%
Money market accounts $ 2,123 2.90% 2.68% $ 2,480 2.90% 3.20% $ 3,456 2.93% 5.25%
Time Deposits $ 19,500 5.42% 24.62% $20,947 5.38% 27.02% $ 22,323 5.50% 33.93%
IRA deposits $ 3,315 5.35% 4.18% $ 3,579 5.29% 4.62% $ 3,713 5.61% 5.64%
-------- ----- ------- ----- -------- -----
Total $ 79,214 100.00% $77,518 100.00% $ 65,792 100.00%
======== ====== ======= ====== ======== ======
Weighted average rate
total deposits 3.85% 3.83% 3.85%
==== ==== ====
</TABLE>
<TABLE>
<CAPTION>
FISCAL YEAR ENDED DECEMBER 31,
1995
----
% OF
AVERAGE AVERAGE TOTAL
BALANCE RATE DEPOSITS
------- ---- --------
<S> <C> <C> <C>
Non-interest bearing
demand deposits $10,406 0.00% 13.69%
Interest bearing demand
and NOW deposits $18,790 3.43% 24.72%
Savings account deposits $19,274 4.43% 25.36%
Money market accounts $ 2,508 2.93% 3.30%
Time Deposits $21,434 5.36% 28.20%
IRA deposits $ 3,590 5.30% 4.73%
------- -----
Total $76,011 100.00%
======= ======
Weighted average rate
total deposits 3.83%
====
</TABLE>
76
<PAGE> 80
RETURN ON EQUITY AND ASSETS
Table (12) below sets forth Georgia National's performance for the periods
indicated.
TABLE (12)
RETURN ON EQUITY AND ASSETS
<TABLE>
<CAPTION>
AT DECEMBER 31,
---------------
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Return on average assets 1.41 1.41 1.49
Return on average equity 13.88 13.42 14.77
Dividend payout ratio 21.53 6.00 0.00
Year-end equity to year-end total assets 10.12 10.14 10.20
Year-end risk weighted tier one
capital to assets 12.34 12.96 13.83
Allowance for loan losses to total loans 1.33 1.32 1.51
Net charge-offs to average loans 0.06 (0.03) 0.01
</TABLE>
LIQUIDITY AND CAPITAL RESOURCES
Georgia National's principal sources of funds are deposits, principal
and interest payments on loans, interest on investments, and sales of
investments. During 1997 Georgia National experienced deposit growth of
approximately $9.7 million, or 13.6%. Management is unaware of any trends in
the sources or uses of funds by Georgia National that are expected to have a
material adverse impact on the Bank's liquidity position. Georgia National
maintains and periodically tests significant sources of secondary liquidity in
case events occur that would cause a material change in the liquidity position
of the Bank. Georgia National maintains several overnight funds lines with
correspondent banks and Georgia National is a member of the FHLB bank at which
it has approximately $8.0 million in borrowing capacity.
At June 30, 1998, shareholder's equity was approximately $9,887,825, or
11.0% of total assets, compared to $9,395,084 or 10.23% of total assets at
December 31, 1997. At June 30, 1998 and December 31, 1997, respectively, Georgia
National's Tier I risk based capital ratios were approximately 12.96% and
13.82%. All of Georgia National's capital ratios are in excess of regulatory
guidelines for a "well capitalized" bank.
IMPACT OF INFLATION AND CHANGING PRICES
Georgia National's financial statements have been prepared in
accordance with generally accepted accounting principles, which require the
measurement of financial position and operating results in terms of historical
dollars without considering changes in the relative purchasing power of money
over time due to inflation. The primary impact of inflation on the operations of
Georgia National is reflected in increased operating costs. Unlike most
industrial companies, virtually all of the assets and liabilities of a financial
institution are monetary in nature. As a result, changes in interest rates have
a more significant impact on the performance of a financial institution than do
the effects of change in the general rate of inflation and changes in prices.
Interest rates do not necessarily move in the same direction or in the same
magnitude as the prices of goods and services in general.
FEDERAL AND STATE TAXATION
Although a bank's income tax liability is determined under provisions
of the Internal Revenue Code of 1986, as amended (the "Code"), which is
applicable to all taxpayers or corporations, Sections 581 through 597 of the
Code apply specifically to financial institutions.
The two primary areas in which the treatment of financial institutions
differs from the treatment of other corporations under the Code are in the areas
of bond gains and losses and bad debt deductions. Bond gains and losses
77
<PAGE> 81
generated from the sale or exchange of portfolio instruments are generally
treated for financial institutions as ordinary gains and losses as opposed to
capital gains and losses for other corporations, as the Code considers bond
portfolios held by banks to be inventory in a trade or business rather than
capital assets. Banks are allowed a statutory method for calculating a tax
deductible reserve for bad debt deductions.
Georgia National files state income tax returns in the state of
Georgia. Georgia taxes banks under primarily the same provisions as other
corporations.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by SouthTrust with the Commission are
incorporated by reference herein:
(i) SouthTrust's Annual Report on Form 10-K for the year ended
December 31, 1997 (including therein SouthTrust's Proxy Statement for
its Annual Meeting of Stockholders held April 15, 1998) (Commission
File No. 0-3613);
(ii) SouthTrust's Quarterly Reports on Form 10-Q, dated March
31, 1998 and June 30, 1998 (Commission file No. 0-3613); and
(iii) SouthTrust's Current Report on Form 8-K, dated January
12, 1998 (Commission File No. 0-3613).
(iv) The description of SouthTrust Common Stock contained in
SouthTrust's Registration Statement on Form 8-A (File No. 1-3613).
(v) The description of the Preferred Stock Purchase Rights
contained in SouthTrust's Registration Statement on Form 8-A (File No.
1-3613).
All documents filed by SouthTrust pursuant to Sections 13(a), 13(c), 14
or 15(d) of the Exchange Act after the date of this Proxy Statement/Prospectus
and prior to final adjournment of the Special Meeting, shall be deemed to be
incorporated by reference into this Proxy Statement/Prospectus from the date of
the filing of such documents.
Any statement contained herein or in a document incorporated or deemed
to be incorporated by reference herein shall be deemed to be modified or
superseded for purposes of this Proxy Statement/Prospectus to the extent that a
statement contained herein or in any other subsequently filed document which
also is or is deemed to be incorporated by reference herein modifies or
supersedes such statement. Any statement so modified or superseded shall not be
deemed, except as so modified or superseded, to constitute a part of this Proxy
Statement/Prospectus.
The audited financial statements of SouthTrust incorporated herein by
reference should only be read in conjunction with the discussion of consummated
and pending acquisitions set forth under the caption "SUMMARY - Parties to the
Merger - SouthTrust."
Copies of all documents with respect to SouthTrust incorporated by
reference (not including exhibits to the documents incorporated by reference
unless such exhibits are specifically incorporated into the documents
incorporated by reference) will be provided without charge to each person to
whom a copy of this Proxy Statement/Prospectus is delivered upon written or oral
request. Requests for such copies should be directed to: Mr. Aubrey D. Barnard,
Secretary, Treasurer and Controller, SouthTrust Corporation, 420 North 20th
Street, 34th Floor, Birmingham, Alabama, 35203, telephone number (205) 254-5000.
78
<PAGE> 82
LEGAL MATTERS
Certain legal matters in connection with the SouthTrust Common Stock
being offered hereby will be passed upon by Bradley Arant Rose & White LLP
Birmingham, Alabama, counsel for SouthTrust. As of June 30, 1998, the partners
and associates of the firm of Bradley Arant Rose & White LLP beneficially owned
approximately 3,053,000 shares of SouthTrust Common Stock.
EXPERTS
The consolidated financial statements of SouthTrust Corporation and
subsidiaries incorporated by reference in this Proxy Statement/Prospectus and
elsewhere in the Registration Statement, to the extent and for the periods
indicated in their reports, have been audited by Arthur Andersen LLP,
independent public accountants, as indicated in their reports with respect
thereto and to the extent and for the periods indicated in their reports with
respect thereto and are incorporated herein by reference in reliance upon the
authority of said firm as experts in giving said reports.
The consolidated financial statements of Georgia National Bancorp, Inc.
and subsidiaries included in this Proxy Statement/Prospectus have been audited
by Mauldin & Jenkins, LLC, independent certified public accountants, for the
periods indicated in their report thereon and are included herein in reliance
upon the authority of said firm as experts in giving said reports.
ADDITIONAL INFORMATION
OTHER BUSINESS
The Board of Directors of Georgia National does not know of any matter
to be brought before the Special Meeting other than as described in the Notice
of Special Meeting accompanying this Proxy Statement/Prospectus. If any other
matter comes before the Special Meeting, it is the intention of the persons
named in the accompanying proxy to vote the proxy in accordance with their best
judgment with respect to such other matters.
79
<PAGE> 83
GEORGIA NATIONAL BANCORP, INC.
AND SUBSIDIARY
CONSOLIDATED FINANCIAL REPORT
DECEMBER 31, 1997
F-1
<PAGE> 84
GEORGIA NATIONAL BANCORP, INC.
AND SUBSIDIARY
CONSOLIDATED FINANCIAL REPORT
DECEMBER 31, 1997
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
----
<S> <C>
INDEPENDENT AUDITOR'S REPORT .................................................................F-3
FINANCIAL STATEMENTS
Consolidated balance sheets ..............................................................F-4
Consolidated statements of income ........................................................F-5
Consolidated statements of stockholders' equity ..........................................F-6
Consolidated statements of cash flows ............................................F-7 and F-8
Notes to consolidated financial statements ..................................F-9 through F-39
</TABLE>
F-2
<PAGE> 85
INDEPENDENT AUDITOR'S REPORT
TO THE BOARD OF DIRECTORS
GEORGIA NATIONAL BANCORP, INC. AND SUBSIDIARY
ATHENS, GEORGIA
We have audited the accompanying consolidated balance sheets of
GEORGIA NATIONAL BANCORP, INC. AND SUBSIDIARY as of December 31, 1997 and 1996,
and the related consolidated statements of income, stockholders' equity and cash
flows for each of the three years in the period ended December 31, 1997. 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 generally accepted
auditing standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Georgia National
Bancorp, Inc. and subsidiary as of December 31, 1997 and 1996, and the results
of their operations and their cash flows for each of the three years in the
period ended December 31, 1997, in conformity with generally accepted accounting
principles.
Atlanta, Georgia
February 5, 1998
F-3
<PAGE> 86
GEORGIA NATIONAL BANCORP, INC.
AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
--------------
ASSETS 1997 1996
------ ---- ----
<S> <C> <C>
Cash and due from banks $ 4,833,940 $ 4,540,953
Federal funds sold 6,620,000 3,140,000
Securities available-for-sale 14,692,982 13,693,463
Loans 62,815,608 56,111,188
Less allowance for loan losses 835,849 739,634
----------- -----------
Loans, net 61,979,759 55,371,554
Government corporation stock 408,951 398,251
Premises and equipment 1,774,387 1,841,864
Intangible asset 288,704 481,905
Other assets 1,214,373 1,272,888
----------- -----------
Total assets $91,813,096 $80,740,878
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits
Noninterest-bearing demand $13,886,142 $ 9,945,106
Interest-bearing demand 25,124,934 17,629,650
Savings 18,347,806 18,090,569
Time, $100,000 and over 3,611,079 3,334,320
Other time 20,137,811 22,370,136
----------- -----------
Total deposits 81,107,772 71,369,781
Other borrowings 680,942 378,015
Other liabilities 629,298 761,568
----------- -----------
Total liabilities 82,418,012 72,509,364
=========== ===========
Commitments and contingent liabilities
Stockholders' equity
Common stock, par value $.005 and $.01, respectively,
5,000,000 shares authorized, 1,278,132 and 627,949
shares issued and outstanding, respectively 6,391 6,279
Capital surplus 5,651,996 5,534,157
Retained earnings 3,751,165 2,786,456
Unrealized losses on securities available-for-sale,
net of tax (14,468) (95,378)
----------- -----------
Total stockholders' equity 9,395,084 8,231,514
----------- -----------
Total liabilities and stockholders' equity $91,813,096 $80,740,878
=========== ===========
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
F-4
<PAGE> 87
GEORGIA NATIONAL BANCORP, INC.
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
YEARS ENDED DECEMBER 31, 1997, 1996, AND 1995
<TABLE>
<CAPTION>
-------------------------------
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
INTEREST INCOME
Loans $6,078,868 $5,032,118 $4,580,562
Taxable securities 875,111 1,069,539 884,296
Other investments 27,224 26,429 25,972
Federal funds sold 338,399 158,271 203,023
---------- ---------- ----------
Total interest income 7,319,602 6,286,357 5,693,853
---------- ---------- ----------
INTEREST EXPENSE
Deposits 2,965,596 2,540,395 2,356,445
Other borrowings 11,690 7,694 10,806
---------- ---------- ----------
Total interest expense 2,977,286 2,548,089 2,367,251
---------- ---------- ----------
Net interest income 4,342,316 3,738,268 3,326,602
Provision for loan losses 135,000 35,000 -
---------- ---------- ----------
Net interest income after provision for
loan losses 4,207,316 3,703,268 3,326,602
---------- ---------- ----------
OTHER INCOME
Service charges on deposit accounts 441,941 436,451 387,431
Mortgage origination fees 900,658 167,618 112,529
Net realized gains on sales of securities 7,382 61,564 16,183
Other operating income 106,291 83,327 115,308
---------- ---------- ----------
Total other income 1,456,272 748,960 631,451
---------- ---------- ----------
OTHER EXPENSES
Salaries and employee benefits 1,674,192 1,187,480 1,100,901
Equipment expenses 310,685 285,747 251,083
Occupancy expenses 321,588 275,547 257,285
Other operating expenses 1,456,554 1,097,610 843,863
---------- ---------- ----------
Total other expenses 3,763,019 2,846,384 2,453,132
---------- ---------- ----------
Income before income taxes 1,900,569 1,605,844 1,504,921
INCOME TAX EXPENSE 670,646 556,432 507,942
---------- ---------- ----------
Net income $1,229,923 $1,049,412 $ 996,979
========== ========== ==========
BASIC EARNINGS PER COMMON SHARE $ 0.98 $ 0.91 $ 0.90
========== ========== ==========
DILUTED EARNINGS PER COMMON SHARE $ 0.97 $ 0.91 $ 0.79
========== ========== ==========
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
F-5
<PAGE> 88
GEORGIA NATIONAL BANCORP, INC.
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
UNREALIZED
GAINS
(LOSSES) ON
SECURITIES
COMMON STOCK AVAILABLE- TOTAL
------------ CAPITAL RETAINED FOR-SALE, STOCKHOLDERS'
SHARES PAR VALUE SURPLUS EARNINGS NET OF TAX EQUITY
------ --------- ------- -------- ---------- ------
<S> <C> <C> <C> <C> <C> <C>
BALANCE, DECEMBER 31, 1994 553,762 $5,538 $ 5,526,507 $ 802,860 $(196,076) $ 6,138,829
Net income -- -- -- 996,979 -- 996,979
Common stock issued for cash 187 1 1,951 -- -- 1,952
Net change in unrealized
gains (losses) on
securities available-for
sale, net of tax -- -- -- -- 327,311 327,311
---------- ------ ----------- ----------- --------- -----------
BALANCE, DECEMBER 31, 1995 553,949 $5,539 $ 5,528,458 $ 1,799,839 $ 131,235 $ 7,465,071
Net income -- -- -- 1,049,412 -- 1,049,412
Common stock issued for cash 470 5 6,434 -- -- 6,439
Warrant conversion 73,530 735 (735) -- --
Cash dividends declared,
$.05 per share -- -- -- (62,795) -- (62,795)
Net change in unrealized
gains (losses) on
securities available-for
sale, net of tax -- -- -- -- (226,613) (226,613)
---------- ------ ----------- ----------- --------- -----------
BALANCE, DECEMBER 31, 1996 627,949 6,279 5,534,157 2,786,456 (95,378) 8,231,514
Net income -- -- -- 1,229,923 -- 1,229,923
Common stock issued for cash 2,848 17 23,433 -- -- 23,450
Exercise of warrants 18,900 95 94,406 -- -- 94,501
Cash dividends declared,
$.21 per share -- -- -- (265,214) -- (265,214)
Stock split 628,435 -- -- -- -- --
Net change in unrealized
gains (losses) on
securities available-for
sale, net of tax -- -- -- -- 80,910 80,910
---------- ------ ----------- ----------- --------- -----------
BALANCE, DECEMBER 31, 1997 $1,278,132 $6,391 $ 5,651,996 $ 3,751,165 $ (14,468) $ 9,395,084
========== ====== =========== =========== ========= ===========
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
F-6
<PAGE> 89
GEORGIA NATIONAL BANCORP, INC.
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1997, 1996, AND 1995
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
1997 1996 1995
-------------------------------------------------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income $ 1,229,923 $ 1,049,412 $ 996,979
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 212,148 229,494 220,174
Amortization of intangible 193,200 193,200 193,200
Provision for loan losses 135,000 35,000
Deferred income taxes (105,571) (40,401) (82,741)
Net realized gains on sales of securities (7,382) (61,564) (16,183)
Gain on sale of loans -- (25,454) (39,091)
(Increase) decrease in interest receivable 29,620 (26,177) (31,115)
Increase (decrease) in interest payable 7,405 21,222 41,357
Increase (decrease) in taxes payable 22,345 30,709 (131,415)
Other operating activities (6,402) (118,453) 117,558
------------ ------------ -----------
Net cash provided by operating activities 1,710,286 1,286,988 1,268,723
------------ ------------ -----------
INVESTING ACTIVITIES
Net increase in interest-bearing deposits in banks -- -- (3,952)
Purchases of securities available-for-sale (11,174,771) (11,705,626) (8,955,511)
Proceeds from sales of securities available-for-sale 10,102,629 15,271,566 8,556,339
Proceeds from maturities of securities available
for-sale 204,344 625,209 79,999
Purchases of securities held-to-maturity -- -- (8,957,736)
Proceeds from maturities of securities held-to-maturity -- -- 2,901,563
Net (increase) decrease in Federal funds sold (3,480,000) (1,040,000) 4,580,000
Net increase in loans (6,821,678) (10,473,043) (2,332,555)
Purchase of Government Corporation stock (10,700) (21,600) (16,400)
Purchase of premises and equipment (144,671) (517,735) (146,033)
------------ ------------ -----------
Net cash used in investing activities (11,324,847) (7,861,229) (4,294,286)
------------ ------------ -----------
</TABLE>
F-7
<PAGE> 90
GEORGIA NATIONAL BANCORP, INC.
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1997, 1996, AND 1995
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
1997 1996 1995
-----------------------------------------------
<S> <C> <C> <C>
FINANCING ACTIVITIES
Net increase in deposits $ 9,737,991 $ 7,683,711 $ 4,573,059
Net increase (decrease) in other borrowings 302,927 (934,201) 897,580
Repayment of obligation under capital lease -- (46,771) (67,504)
Proceeds from issuance of common stock 117,951 6,439 1,952
Dividends paid (251,321) -- --
------------ ------------ -----------
Net cash provided by financing activities 9,907,548 6,709,178 5,405,087
------------ ------------ -----------
Net increase in cash and due from banks 292,987 134,937 2,379,524
Cash and due from banks at beginning of year 4,540,953 4,406,016 2,026,492
------------ ------------ -----------
Cash and due from banks at end of year $ 4,833,940 $ 4,540,953 $ 4,406,016
============ ============ ===========
SUPPLEMENTAL DISCLOSURES
Cash paid for:
Interest $ 2,969,881 $ 2,526,867 $ 2,325,894
Income taxes $ 753,872 $ 566,124 $ 722,098
NONCASH TRANSACTION
Unrealized (gains) losses on securities available-for-sale $ (124,339) $ 345,578 $ (495,919)
Transfer of securities held-to-maturity to securities
available-for-sale $ -- $ -- $ 8,134,909
Principal balances of loans transferred to other real estate $ 78,473 $ 168,684 $ --
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
F-8
<PAGE> 91
GEORGIA NATIONAL BANCORP, INC.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF BUSINESS
Georgia National Bancorp, Inc. (the Company) is a bank holding company whose
business is conducted by its wholly-owned subsidiary, The Georgia National Bank
(the Bank). The Bank is a commercial bank located in Athens, Clarke County,
Georgia with three branches located in Athens and one branch in Winder, Georgia.
The Bank provides a full range of banking services in its primary market area of
Clarke County and the surrounding counties. The Bank also provides mortgage loan
origination services in the metropolitan Atlanta area.
BASIS OF PRESENTATION
The consolidated financial statements include the accounts of the Company and
its subsidiary. Significant intercompany transactions and accounts are
eliminated in consolidation.
The accounting and reporting policies of the Company conform to generally
accepted accounting principles and general practices within the financial
services industry. In preparing the financial statements, management is required
to make estimates and assumptions that affect the reported amounts and
disclosures of assets and liabilities as of the date of the balance sheet and
revenues and expenses for the period. Actual results could differ from those
estimates.
CASH AND DUE FROM BANKS
Cash on hand, cash items in process of collection, and amounts due from banks
are included in cash and due from banks.
The Company maintains amounts due from banks which, at times, may exceed
Federally insured limits. The Company has not experienced any losses in such
accounts.
F-9
<PAGE> 92
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
SECURITIES
Securities are classified based on management's intention on the date of
purchase. All debt securities are classified as available-for-sale and carried
at fair value with net unrealized gains and losses included in stockholders'
equity, net of tax. Other securities and Government corporation stock without a
readily determinable fair value are carried at cost.
Interest and dividends on securities, including amortization of premiums and
accretion of discounts, are included in interest income. Realized gains and
losses from the sales of securities are determined using the specific
identification method.
LOANS HELD FOR SALE
The Company originates and sells participations in certain loans. The amount of
gain recognized on the sale of a specific loan is equal to the percentage
resulting from determining the fair value of the portion of the loan sold
relative to the fair value of the entire loan. Any gain that is materially in
excess of or less than the net premium received is deferred and amortized into
income over the term of the portion of the loan not sold.
LOANS
Loans are carried at their principal amounts outstanding less unearned income
and the allowance for loan losses. Interest income on loans is credited to
income based on the principal amount outstanding.
Fees charged in excess of related costs on real estate loans are deferred and
recognized as income over the life of the loan. Fees charged and costs incurred
on other loans are recognized when the loan is made, the results of which are
not materially different from generally accepted accounting principles.
F-10
<PAGE> 93
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
LOANS (CONTINUED)
The allowance for loan losses is maintained at a level that management believes
to be adequate to absorb potential losses in the loan portfolio. Management's
determination of the adequacy of the allowance is based on an evaluation of the
portfolio, past loan loss experience, current economic conditions, volume,
growth, composition of the loan portfolio, and other risks inherent in the
portfolio. In addition, regulatory agencies, as an integral part of their
examination process, periodically review the Company's allowance for loan
losses, and may require the Company to record additions to the allowance based
on their judgment about information available to them at the time of their
examinations.
The accrual of interest on impaired loans is discontinued when, in management's
opinion, the borrower may be unable to meet payments as they become due. When
accrual of interest is discontinued, all unpaid accrued interest is reversed.
Interest income is subsequently recognized only to the extent cash payments are
received.
A loan is impaired when it is probable the Company will be unable to collect all
principal and interest payments due in accordance with the terms of the loan
agreement. Individually identified impaired loans are measured based on the
present value of payments expected to be received, using the contractual loan
rate as the discount rate. Alternatively, measurement may be based on observable
market prices or, for loans that are solely dependent on the collateral for
repayment, measurement may be based on the fair value of the collateral. If the
recorded investment in the impaired loan exceeds the measure of fair value, a
valuation allowance is established as a component of the allowance for loan
losses. Changes to the valuation allowance are recorded as a component of the
provision for loan losses.
MORTGAGE ORIGINATION FEES
Mortgage origination fees are recognized when the mortgage loans are closed. The
Bank does not fund or hold the mortgage loans, nor does it retain any servicing
rights.
PREMISES AND EQUIPMENT
Premises and equipment are stated at cost less accumulated depreciation.
Depreciation is computed principally by the straight-line method over the
estimated useful lives of the assets.
F-11
<PAGE> 94
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
OTHER REAL ESTATE OWNED
Other real estate owned represents properties acquired through foreclosure.
Other real estate owned is held for sale and is carried at the lower of the
recorded amount of the loan or fair value of the properties less estimated
selling costs. Any write-down to fair value at the time of transfer to other
real estate owned is charged to the allowance for loan losses. Subsequent gains
or losses on sale and any subsequent adjustment to the value are recorded as
other expenses.
INCOME TAXES
Income tax expense consists of current and deferred taxes. Current income tax
provisions approximate taxes to be paid or refunded for the applicable year.
Deferred tax assets and liabilities are recognized on the temporary differences
between the bases of assets and liabilities as measured by tax laws and their
bases as reported in the financial statements. Deferred tax expense or benefit
is then recognized for the change in deferred tax assets or liabilities between
periods.
Recognition of deferred tax balance sheet amounts is based on management's
belief that it is more likely than not that the tax benefit associated with
certain temporary differences, tax operating loss carryforwards and tax credits
will be realized. A valuation allowance would be recorded for those deferred tax
items for which it is more likely than not that realization would not occur.
The Company and the Bank file a consolidated income tax return. Each entity
provides for income taxes based on its contribution to income taxes (benefits)
of the consolidated group.
EARNINGS PER COMMON SHARE
Basic earnings per common share are computed by dividing net income by the
weighted average number of shares of common stock outstanding. Diluted earnings
per share are computed by dividing net income by the sum of the weighted-average
number of shares of common stock outstanding and potential common shares.
Potential common shares consist of stock options. In 1997, the Company declared
a two-for-one common stock split. All per share data and share information has
been adjusted to reflect this common stock split.
F-12
<PAGE> 95
NOTES TO FINANCIAL STATEMENTS
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
RECENT ACCOUNTING PRONOUNCEMENTS
The Financial Accounting Standards Board (FASB) has issued, and the Company has
adopted, Statement of Financial Accounting Standards (SFAS) No. 125, "Accounting
for Transfers and Servicing of Financial Assets and Extinguishments of
Liabilities". SFAS No. 125 was amended by SFAS No. 127, which defers the
effective date of certain provisions of SFAS No. 125 until January 1, 1998. This
statement provides accounting and reporting standards for transfers and
servicing of financial assets and extinguishments of liabilities based on
consistent application of a financial-components approach that focuses on
control. It distinguishes transfers of financial assets that are sales from
transfers that are secured borrowings. The adoption of this statement did not
have a material effect on the Company's financial statements.
The FASB has issued, and the Company has adopted, SFAS No. 128, "Earnings Per
Share". SFAS No. 128 supersedes Accounting Principles Board Opinion No. 15
"Earnings Per Share" and specifies the computation, presentation, and disclosure
requirements for earnings per share (EPS) for entities with publicly held common
stock or potential issuable common stock. SFAS No. 128 replaces the presentation
of primary EPS with a presentation of basic EPS and fully diluted EPS with
diluted EPS. It also requires dual presentation of basic and diluted EPS on the
face of the income statement for all entities with complex capital structures
and requires a reconciliation of the numerator and denominator for the basic EPS
computation to the numerator and denominator of the diluted EPS computation.
SFAS No. 128 is effective for financial statements for both interim and annual
periods ending after December 15, 1997. The adoption of this statement did not
have a material effect on the Company's financial statements.
The FASB has issued SFAS No. 130, "Reporting Comprehensive Income". This
statement establishes standards for reporting and display of comprehensive
income and its components in the financial statements. SFAS No. 130 requires all
items that are required to be recognized under accounting standards as
components of comprehensive income to be reported in a financial statement that
is displayed in equal prominence with the other financial statements. The term
"comprehensive income" is used in the SFAS to describe the total of all
components of comprehensive income including net income. "Other comprehensive
income" refers to revenues, expenses, gains and losses that are included in
comprehensive income but excluded from earnings under current accounting
standards. Currently, "other comprehensive income" for the Company consists of
items previously recorded directly in equity under SFAS No. 115, "Accounting for
Certain Investments in Debt and Equity Securities". SFAS No. 130 is effective
for periods beginning after December 15, 1997.
F-13
<PAGE> 96
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2. SECURITIES
The amortized cost and fair value of securities are summarized as follows:
<TABLE>
<CAPTION>
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
------------ ---------- ---------- -----------
<S> <C> <C> <C> <C>
Securities Available-for-Sale
December 31,1997:
U. S. Government and agency
securities $12,111,650 $ 1,541 $ (18,441) $12,094,750
Mortgage-backed securities 2,577,115 1,647 (7,143) 2,571,619
Other securities 26,613 -- -- 26,613
----------- --------- ------------ -----------
$14,715,378 $ 3,188 $ (25,584) $14,692,982
=========== ========= ============ ===========
December 31,1996:
U. S. Government and agency
securities $11,900,841 $ 35,291 $ (173,065) $11,763,067
Mortgage-backed securities 1,897,030 949 (9,910) 1,888,069
Other securities 42,327 -- -- 42,327
----------- --------- ------------ -----------
$13,840,198 $ 36,240 $ (182,975) $13,693,463
=========== ========= ============ ===========
</TABLE>
The amortized cost and fair value of securities as of December 31, 1997 by
contractual maturity are shown below. Maturities may differ from contractual
maturities in mortgage-backed securities because the mortgages underlying the
securities may be called or prepaid with or without penalty. Therefore, these
securities are not included in the maturity categories in the following summary.
<TABLE>
<CAPTION>
Securities Available-for-Sale
------------------------------
Amortized Fair
Cost Value
---- -----
<S> <C> <C>
Due in one year or less $ 26,613 $ 26,613
Due from one year to five years 1,736,131 1,732,693
Due from five to ten years 10,375,519 10,362,057
Mortgage-backed securities 2,577,115 2,571,619
----------- -----------
$14,715,378 $14,692,982
=========== ===========
</TABLE>
Securities with a carrying value of $4,111,921 and $2,666,390 as of December 31,
1997 and 1996, respectively, were pledged to secure public deposits and for
other purposes.
F-14
<PAGE> 97
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2. SECURITIES (CONTINUED)
Gains and losses on sales of securities available-for-sale consist of the
following:
<TABLE>
<CAPTION>
December 31,
------------
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Gross gains $ 9,484 $ 84,314 $ 71,310
Gross losses (2,102) (22,750) (55,127)
------- -------- --------
Net realized gains $ 7,382 $ 61,564 $ 16,183
======= ======== ========
</TABLE>
NOTE 3. LOANS AND ALLOWANCE FOR LOAN LOSSES
The composition of loans is summarized as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
------------
1997 1996
---- ----
<S> <C> <C>
Commercial and financial $ 13,573,000 $ 11,458,000
Real estate - construction 5,392,000 5,697,000
Real estate - mortgage 41,022,000 36,051,000
Consumer installment 2,782,000 2,658,000
Other 124,739 291,407
------------ ------------
62,893,739 56,155,407
Unearned income (78,131) (44,219)
Allowance for loan losses (835,849) (739,634)
------------ ------------
Loans, net $ 61,979,759 $ 55,371,554
============ ============
</TABLE>
F-15
<PAGE> 98
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 3. LOANS AND ALLOWANCE FOR LOAN LOSSES (CONTINUED)
Changes in the allowance for loan losses are as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------------------
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Balance, beginning of year $ 739,634 $ 688,510 $ 691,887
Provision for loan losses 135,000 35,000 --
Loans charged off (58,015) (13,933) (27,349)
Recoveries of loans
previously charged off 19,230 30,057 23,972
--------- --------- ---------
Balance, end of year $ 835,849 $ 739,634 $ 688,510
========= ========= =========
</TABLE>
Management has identified no material amounts of loans considered to be impaired
as defined by Statement of Financial Accounting Standard No. 114, "Accounting by
Creditors for Impairment of a Loan" as of December 31, 1997 and 1996. Interest
income on impaired loans of $ - -, $ - -, and $67,075 was recognized for cash
payments received for the years December 31, 1997, 1996, and 1995, respectively.
The Company has granted loans to certain directors, executive officers, and
their related entities. The interest rates on these loans were substantially the
same as rates prevailing at the time of the transaction and repayment terms are
customary for the type of loan involved. Changes in related party loans for the
year ended December 31, 1997 are as follows:
<TABLE>
<S> <C>
Balance, beginning of year $ 4,093,329
Advances 2,312,262
Repayments (1,222,431)
-----------
Balance, end of year $ 5,183,160
===========
</TABLE>
F-16
<PAGE> 99
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 4. PREMISES AND EQUIPMENT
Premises and equipment are summarized as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------------
1997 1996
---- ----
<S> <C> <C>
Land $ 515,319 $ 515,319
Buildings and improvements 1,366,768 1,366,768
Equipment 1,135,750 991,078
Equipment under capital lease -- 304,835
----------- -----------
3,017,837 3,178,000
Accumulated depreciation, including amounts
applicable to assets acquired under capital leases (1,243,450) (1,336,136)
----------- -----------
$ 1,774,387 $ 1,841,864
=========== ===========
</TABLE>
NOTE 5. INTANGIBLE ASSET
On July 26, 1991, the Company acquired certain deposits and assets of Fulton
Federal totaling $38,516,335 and $93,336, respectively. The excess of the net
liabilities assumed over the total cash received has been capitalized as a
deposit purchase premium. The deposit premium is carried at cost, less
accumulated amortization computed on the straight-line basis over eight years.
NOTE 6. OTHER BORROWINGS
Other borrowings of $680,942 and $378,015 at December 31, 1997 and 1996,
respectively, consist of short-term treasury tax and loan notes which bear
interest at 1/4% below the Federal funds rate. These borrowings are due on
demand.
F-17
<PAGE> 100
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 7. EMPLOYEE STOCK PURCHASE PLAN
The Company has an employee stock purchase plan whereby an employee may purchase
common stock through payroll deductions. No more than 10% of an employee's
gross pay may be deducted for the purpose of purchasing common stock. The
purchase price of the common stock is based upon the market value of the latest
known trade from the prior month. During the years ended December 31, 1997 and
1996, 3,344 and 940 shares, respectively, of common stock were issued under the
employee stock purchase plan at purchase prices ranging from $6.59 to $7.27 per
share.
NOTE 8. STOCK OPTION PLAN AND WARRANTS
The Company has an Incentive Stock Option Plan (the "Plan") under which stock
options are granted to eligible employees. The Company has reserved 150,000
shares of its common stock for issuance under the Plan. The Company's
compensation committee administers the Plan and grants the options. The Plan
provides that the option price will be the fair market value of the shares on
the date of the grant but in no case less than the par value of such shares. The
options under the Plan expire ten years after the date of the grant. The options
granted can be exercised for five years beginning five years after the date of
grant. At December 31, 1997, 79,775 options were available to grant under the
Plan. Other pertinent information related to the options follows:
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
WEIGHTED- WEIGHTED- WEIGHTED-
AVERAGE AVERAGE AVERAGE
EXERCISE EXERCISE EXERCISE
NUMBER PRICE NUMBER PRICE NUMBER PRICE
------ -------- ------ --------- ------ ---------
<S> <C> <C> <C> <C> <C> <C>
Under option and exercisable,
beginning of year 30,100 $ 5.97 26,100 $ 5.87 22,100 $ 5.90
Granted 4,000 6.59 4,000 6.62 4,000 5.72
------ ------ ------ ----- ------ ------
Under option and exercisable,
end of year 34,100 6.93 30,100 5.97 26,100 5.87
====== ====== ====== ====== ====== ======
</TABLE>
F-18
<PAGE> 101
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 8. STOCK OPTION PLAN AND WARRANTS (CONTINUED)
<TABLE>
<CAPTION>
Weighted -
Weighted- Average
Average Remaining
Range of Exercise Contractual
Number Prices Price Life (Years)
------ ------ ----- ------------
<S> <C> <C> <C> <C>
Under option and exercisable,
end of year 34,100 $ 5.00-7.31 $ 6.04 2.76
</TABLE>
As permitted by SPAS No. 123 ("Accounting for Stock-Based Compensation"), the
Company recognizes compensation cost for stock-based employee compensation
awards in accordance with APB Opinion No. 25 ("Accounting for Stock Issued to
Employees"). The Company recognized no compensation cost for stock-based
employee compensation awards for the years ended December 31, 1997, 1996, and
1995. The effect on net income and earnings per share had the Company accounted
for compensation cost in accordance with SFAS No. 123 is as follows:
<TABLE>
<CAPTION>
DECEMBER 31, 1997
-----------------
BASIC DILUTED
EARNINGS EARNINGS
NET INCOME PER SHARE PER SHARE
---------- --------- ---------
<S> <C> <C> <C>
As reported $ 1,229,923 $ 0.98 $ 0.97
Stock-based compensation,
net of related tax effect (4,604) (0.01) (0.01)
----------- -------- --------
As adjusted $ 1,225,319 $ 0.97 $ 0.96
=========== ======== ========
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, 1996
-----------------
BASIC DILUTED
EARNINGS EARNINGS
NET INCOME PER SHARE PER SHARE
---------- --------- ---------
<S> <C> <C> <C>
As reported $ 1,049,412 $ 0.91 $ 0.91
Stock-based compensation,
net of related tax effect (2,380)
As adjusted $ 1,047,032 $ 0.91 $ 0.91
=========== ======== ========
</TABLE>
F-19
<PAGE> 102
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 8. STOCK OPTION PLAN AND WARRANTS (CONTINUED)
<TABLE>
<CAPTION>
DECEMBER 31, 1995
-----------------
BASIC DILUTED
EARNINGS EARNINGS
NET INCOME PER SHARE PER SHARE
---------- --------- ---------
<S> <C> <C> <C>
As reported $ 996,979 $ 0.90 $ 0.79
Stock-based compensation,
net of related tax effect (1,348) -- --
----------- -------- --------
As adjusted $ 995,631 $ 0.90 $ 0.79
=========== ======== ========
</TABLE>
The fair value of the options granted during the year was based upon the
discounted value of future cash flows of the options using the following
assumptions:
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Risk-free interest rate 5.97% 6.50% 6.50%
Expected life of the options 7 years 7 years 7 years
Expected dividends (as a percent of the
fair value of the stock) 2.40% 2.00% 2.00%
</TABLE>
In connection with the initial offering of common stock, 344,500 warrants were
issued to purchase the same number of shares of common stock. The exercise price
was $10 per share exercisable for ten years beginning December 31, 1987. During
1996, 284,300 of the warrants were redeemed for 73,530 shares of common stock.
During 1997, the remaining 9,450 warrants, after being adjusted for the
two-for-one stock split declared during 1997, were exercised.
NOTE 9. INCOME TAXES
Income tax expense consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
------------
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Current $ 776,217 $ 596,833 $ 590,683
Deferred (105,571) (40,401) (82,741)
----------
Income tax expense $ 670,646 $ 556,432 $ 507,942
========== ========= =========
</TABLE>
F-20
<PAGE> 103
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 9. INCOME TAXES (CONTINUED)
The Company's income tax expense differs from the amounts computed by applying
the Federal income tax statutory rates to income before income taxes. A
reconciliation of the differences is as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
------------
1997 1996 1995
---- ---- ----
AMOUNT PERCENT AMOUNT PERCENT AMOUNT PERCENT
------ ------- ------ ------- ------ -------
<S> <C> <C> <C> <C> <C> <C>
Income taxes at statutory rate $ 646,192 34% $ 545,987 34% $ 511,666 34 %
Tax-exempt interest -- -- (11,098) (1) (3,577) --
State income tax 37,499 2 27,979 2 21,002 1
Other items, net (13,045) (1) (6,436) -- (21,149) (1)
---------- ------ --------- ------ --------- --------
Income tax expense $ 670,646 35% $ 556,432 35% $ 507,942 34%
========== ====== ========= ====== ========= ========
</TABLE>
The components of deferred income taxes are as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
------------
1997 1996
---- ----
<S> <C> <C>
Deferred tax assets:
Loan loss reserves $ 260,204 $ 217,807
Deferred loan fees 29,487 15,556
Deferred director fees 27,965 19,172
Depreciation and amortization 55,242 46,894
Deposit premium amortization 68,911 51,007
Securities available-for-sale 7,928 51,358
--------- ---------
449,737 401,794
--------- ---------
Deferred tax liabilities, other 42,277 56,476
--------- ---------
Net deferred tax assets $ 407,460 $ 345,318
========= =========
</TABLE>
F-21
<PAGE> 104
NOTES TO FINANCIAL STATEMENTS
NOTE 10. EARNINGS PER COMMON SHARE
The following is a reconciliation of net income (the numerator) and
weighted-average shares outstanding (the denominator) used in determining basic
and diluted earnings per common share (EPS):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1997
----------------------------
NET WEIGHTED-AVERAGE
INCOME SHARES PER SHARE
(NUMERATOR) (DENOMINATOR) AMOUNT
----------- ------------- ------
<S> <C> <C> <C>
Basic EPS $ 1,229,923 1,256,959 $ 0.98
------
Effect of Dilutive Securities
Stock options -- 15,327
----------- ----------
Diluted EPS $ 1,229,923 1,272,286 $ 0.97
=========== ========== ======
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1996
----------------------------
NET WEIGHTED-AVERAGE
INCOME SHARES PER SHARE
(NUMERATOR) (DENOMINATOR) AMOUNT
----------- ------------- ------
<S> <C> <C> <C>
Basic EPS $ 1,049,412 1,148,004 $ 0.91
------
Effect of Dilutive Securities
Stock options -- 7,730
----------- ----------
Diluted EPS $ 1,049,412 1,155,734 $ 0.91
=========== ========== ======
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1995
----------------------------
NET WEIGHTED-AVERAGE
INCOME SHARES PER SHARE
(NUMERATOR) (DENOMINATOR) AMOUNT
----------- ------------- ------
<S> <C> <C> <C>
Basic EPS $ 996,979 1,107,626 $ 0.90
------
Effect of Dilutive Securities
Stock options -- 159,077
--------- ----------
Diluted EPS $ 996,979 1,266,703 $ 0.79
========= ========== ======
</TABLE>
F-22
<PAGE> 105
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 11. COMMITMENTS AND CONTINGENT LIABILITIES
In the normal course of business, the Company has entered into off-balance sheet
financial instruments which are not reflected in the financial statements. These
financial instruments include commitments to extend credit and standby letters
of credit. Such financial instruments are included in the financial statements
when funds are disbursed or the instruments become payable. These instruments
involve, to varying degrees, elements of credit risk in excess of the amount
recognized in the balance sheet.
The Company's exposure to credit loss in the event of nonperformance 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. A summary of the Company's commitments is as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
------------
1997 1996
---- ----
<S> <C> <C>
Commitments to extend credit $ 7,667,000 $ 6,651,000
Standby letters of credit 824,069 576,419
----------- -----------
$ 8,491,069 $ 7,227,419
=========== ===========
</TABLE>
Commitments to extend credit generally have fixed expiration dates or other
termination clauses and may require payment of a fee. Since many of the
commitments are expected to expire without being drawn upon, the total
commitment amounts do not necessarily represent future cash requirements. The
credit risk involved in issuing these financial instruments is essentially the
same as that involved in extending loans to customers. The Company evaluates
each customer's creditworthiness 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 customer. Collateral
held varies but may include real estate and improvements, marketable securities,
accounts receivable, inventory, equipment, and personal property.
F-23
<PAGE> 106
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 11. COMMITMENTS AND CONTINGENT LIABILITIES (CONTINUED)
Standby letters of credit are conditional commitments issued by the Company to
guarantee the performance of a customer to a third party. Those guarantees are
primarily issued to support public and private borrowing arrangements. The
credit risk involved in issuing letters of credit is essentially the same as
that involved in extending loans to customers. Collateral held varies as
specified above and is required in instances which the Company deems necessary.
The nature of the business of the Company and the Bank is such that it
ordinarily results in a certain amount of litigation. In the opinion of
management of the Company, any liability resulting from such proceedings would
not have a material effect on the Company's financial statements.
LEASE COMMITMENT
The Company leases its operation center and mortgage origination facility under
two operating leases. The minimum lease payments in the aggregate and by year as
of December 31, 1997 are as follows:
<TABLE>
<S> <C>
1998 $ 52,692
1999 39,979
2000 27,485
---------
$ 120,156
=========
</TABLE>
Rental expense during 1997, 1996, and 1995 was $158,547, $126,782, and $126,782,
respectively.
The Company leases its main office facilities on a per month basis at $7,993 per
month. There is no contractual lease for this arrangement at this time.
NOTE 12. CONCENTRATIONS OF CREDIT
The Company makes commercial, residential and consumer loans to customers
primarily in Athens, Clarke County and surrounding counties. The ability of the
majority of the Company's customers to honor their loan obligations is
dependent on the business economy in Athens and surrounding areas. The Athens
economy is strongly dependent on the University of Georgia.
F-24
<PAGE> 107
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
12. CONCENTRATIONS OF CREDIT (CONTINUED)
Seventy-four percent of the Company's loan portfolio is secured by real estate,
of which a substantial portion is secured by real estate in the Company's
primary market area. In addition, a substantial portion of the other real estate
owned is located in those same markets. Accordingly, the ultimate collectibility
of the loan portfolio and the recovery of the carrying amount of other real
estate owned are susceptible to changes in market conditions in the Company's
primary market area. The other significant concentrations of credit by type of
loan are set forth in Note 3.
The concentrations of credit by type of loan are set forth in Note 3. The
Company, as a matter of policy, does not generally extend credit to any single
borrower or group of related borrowers in excess of 15% of the Bank's total
capital base, as defined by the OCC, which amounted to $1,488,000 at December
31, 1997.
NOTE 13. REGULATORY MATTERS
The Bank is subject to certain restrictions on the amount of dividends that may
be declared without prior regulatory approval. At December 31, 1997,
approximately $3,031,000 of retained earnings were available for dividend
declaration without regulatory approval.
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 financial statements. Under capital adequacy guidelines
and the regulatory framework for prompt corrective action, the Company and Bank
must meet specific capital guidelines that involve quantitative measures of the
assets, liabilities, and certain off-balance sheet items as calculated under
regulatory accounting practices. The Company and Bank 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 to risk-weighted assets and of Tier I capital to average
assets. Management believes, as of December 31, 1997, the Company and the Bank
meet all capital adequacy requirements to which they are subject.
F-25
<PAGE> 108
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 13. REGULATORY MATTERS (CONTINUED)
As of December 31, 1997, the most recent notification from the FDIC 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 l leverage ratios as set
forth in the following table. There are no conditions or events since that
notification that management believes have changed the Bank's category.
The Company and Bank's actual capital amounts and ratios are presented in the
following table.
<TABLE>
<CAPTION>
TO BE WELL
FOR CAPITAL CAPITALIZED UNDER
ADEQUACY PROMPT CORRECTIVE
ACTUAL PURPOSES ACTION PROVISIONS
------ -------- -----------------
AMOUNT RATIO AMOUNT RATIO AMOUNT RATIO
------ ----- ------ ----- ------ -----
(DOLLARS IN THOUSANDS)
-------------------------------
<S> <C> <C> <C> <C> <C> <C>
As of December 31, 1997
Total Capital
(to Risk Weighted)
Consolidated $9,956 13.47% $5,913 8% $7,392 10%
Bank $9,925 13.43% $5,913 8% $7,392 10%
Tier I Capital
(to Risk Weighted)
Consolidated $9,120 12.34% $2,957 4% $4,435 6%
Bank $9,089 12.30% $2,957 4% $4,435 6%
Tier I Capital
(to Average Assets):
Consolidated $9,120 10.20% $3,577 4% $4,471 5%
Bank $9,089 10.17% $3,577 4% $4,471 5%
</TABLE>
F-26
<PAGE> 109
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 13. REGULATORY MATTERS (CONTINUED)
<TABLE>
<CAPTION>
TO BE WELL
FOR CAPITAL CAPITALIZED UNDER
ADEQUACY PROMPT CORRECTIVE
ACTUAL PURPOSES ACTION PROVISIONS
------ -------- -----------------
AMOUNT RATIO AMOUNT RATIO AMOUNT RATIO
------ ----- ------ ----- ------ -----
(DOLLARS IN THOUSANDS)
-------------------------------
<S> <C> <C> <C> <C> <C> <C>
As of December 31,1996
Total Capital
(to Risk Weighted)
Consolidated $ 8,585 14.18% $ 4,844 8% $ 6,005 10%
Bank $ 8,575 14.16% $ 4,844 8% $ 6,005 10%
Tier I Capital
(to Risk Weighted)
Consolidated $ 7,845 12.96% $ 2,422 4% $ 3,633 6%
Bank $ 7,835 12.94% $ 2,422 4% $ 3,633 6%
Tier I Capital
(to Average Assets):
Consolidated $ 7,845 10.05% $ 3,124 4% $ 3,904 5%
Bank $ 7,835 10.03% $ 3,124 4% $ 3,904 5%
</TABLE>
F-27
<PAGE> 110
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 14. FAIR VALUE OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used by the Company in estimating its
fair value disclosures for financial instruments. In cases where quoted market
prices are not available, fair values are based on estimates using discounted
cash flow methods. Those methods are significantly affected by the assumptions
used, including the discount rates and estimates of future cash flows. In that
regard, the derived fair value estimates cannot be substantiated by comparison
to independent markets and, in many cases, could not be realized in immediate
settlement of the instrument. The use of different methodologies may have a
material effect on the estimated fair value amounts. Also, the fair value
estimates presented herein are based on pertinent information available to
management as of December 31, 1997 and 1996. Such amounts have not been revalued
for purposes of these financial statements since those dates and, therefore,
current estimates of fair value may differ significantly from the amounts
presented herein.
The following methods and assumptions were used by the Company in estimating
fair values of financial instruments as disclosed herein:
CASH AND DUE FROM BANKS AND FEDERAL FUNDS SOLD:
The carrying amounts of cash and due from banks and Federal funds sold
approximate their fair value.
AVAILABLE-FOR-SALE SECURITIES:
Fair values for securities are based on quoted market prices. The carrying
values of equity securities with no readily determinable fair value approximate
fair values.
LOANS:
For variable-rate loans that reprice frequently and have no significant change
in credit risk, fair values are based on carrying values. For other loans, the
fair values are estimated using discounted cash flow methods, using interest
rates currently being offered for loans with similar terms to borrowers of
similar credit quality. Fair values for impaired loans are estimated using
discounted cash flow methods or underlying collateral values.
F-28
<PAGE> 111
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 14. FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)
DEPOSITS:
The carrying amounts of demand deposits, savings deposits, and variable-rate
certificates of deposit approximate their fair values. Fair values for
fixed-rate certificates of deposit are estimated using discounted cash flow
methods, using interest rates currently being offered on certificates.
OTHER BORROWINGS:
The carrying amounts of the Company's other borrowings approximate their fair
values. The borrowings are short-term borrowings due on demand.
ACCRUED INTEREST:
The carrying amounts of accrued interest approximate their fair values.
OFF-BALANCE SHEET INSTRUMENTS:
Fair values of the Company's off-balance sheet financial instruments are based
on fees charged to enter into similar agreements. However, commitments to extend
credit and standby letters of credit do not represent a significant value to the
Company until such commitments are funded. The Company has determined that these
instruments do not have a distinguishable fair value and no fair value has been
assigned.
F-29
<PAGE> 112
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 14. FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)
OFF-BALANCE SHEET INSTRUMENTS (CONTINUED):
The estimated fair value of the Company's financial instruments were as
follows:
<TABLE>
<CAPTION>
DECEMBER 31, 1997 DECEMBER 31, 1996
----------------- -----------------
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
------ ----- ------ -----
<S> <C> <C> <C> <C>
Financial assets:
Cash and due from banks,
and Federal funds sold $ 11,453,940 $ 11,453,940 $ 7,680,953 $ 7,680,953
Securities available for-sale 14,692,982 14,692,982 13,693,463 13,693,463
Government corporation
stock 408,951 408,951 398,251 398,251
Loans 61,979,759 63,182,192 55,371,554 56,438,646
Accrued interest receivable 473,374 473,374 502,994 502,994
Financial liabilities:
Deposits 81,107,772 81,204,302 71,369,781 71,474,260
Other borrowings 680,942 680,942 378,015 378,015
Accrued interest payable 216,458 216,458 209,053 209,053
</TABLE>
NOTE 15. SUPPLEMENTAL FINANCIAL DATA
Components of other operating expenses in excess of 1% of total revenue are as
follows:
<TABLE>
<CAPTION>
DECEMBER 31,
------------
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Deposit insurance assessments $ 28,782 $ 186,115 $ 97,328
Premium amortization expense 193,200 193,200 193,200
Stationery and office supplies 74,841 73,483 51,076
Printing 123,133 -- --
Postage 261,486 51,356 48,519
Miscellaneous operating expenses 103,501 88,090 110,970
</TABLE>
F-30
<PAGE> 113
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 16. PARENT COMPANY FINANCIAL INFORMATION
The following information presents the condensed balance sheets of Georgia
National Bancorp, Inc. as of December 31, 1997 and 1996 and the related
statements of income and cash flows for each of the three years in the period
ended December 31, 1997:
CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Assets
Cash $ 32,188 $ 9,359
Investment in subsidiary 9,362,902 8,221,771
Other assets 77,115 63,223
---------- ----------
Total assets $9,472,205 $8,294,353
========== ==========
Liabilities $ 77,121 $ 62,839
Stockholders' equity 9,395,084 8,231,514
---------- ----------
Total liabilities and stockholders' equity $9,472,205 $8,294,353
========== ==========
</TABLE>
CONDENSED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
INCOME, dividend from subsidiary $ 265,214 $ 62,795 $ --
EXPENSE, other 1,012 1,259 995
------------ ------------ -----------
Income (loss) before income tax benefits and equity
in undistributed income of subsidiary 264,202 61,536 (995)
INCOME TAX BENEFITS -- (428) --
------------ ------------ -----------
Income (loss) before equity in undistributed income
of subsidiary 264,202 61,964 (995)
EQUITY IN UNDISTRIBUTED INCOME OF SUBSIDIARY 965,721 987,448 997,974
------------ ------------ -----------
NET INCOME $ 1,229,923 $ 1,049,412 $ 996,979
============ ============ ===========
</TABLE>
F-31
<PAGE> 114
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 16. PARENT COMPANY FINANCIAL INFORMATION (CONTINUED)
CONDENSED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income $ 1,229,923 $ 1,049,412 $ 996,979
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Undistributed income of subsidiary (965,721) (987,448) (997,974)
Other operating activities (13,503) (63,179) --
------------ ------------ -----------
Net cash provided by (used in) operating activities 250,699 (1,215) (995)
------------
INVESTING ACTIVITIES
Investment in subsidiary (94,500) -- --
------------ ------------ -----------
Net cash used in investing activities (94,500) -- --
------------ ------------ -----------
FINANCING ACTIVITIES
Dividends paid (251,321) -- --
Proceeds from issuance of common stock 117,951 6,439 1,952
------------ ------------ -----------
Net cash provided by (used in) financing activities (133,370) 6,439 1,952
------------ ------------ -----------
Net increase in cash 22,829 5,224 957
Cash at beginning of year 9,359 4,135 3,178
------------ ------------ -----------
Cash at end of year $ 32,188 $ 9,359 $ 4,135
============ ============ ===========
</TABLE>
F-32
<PAGE> 115
GEORGIA NATIONAL BANCORP, INC.
AND SUBSIDIARY
CONSOLIDATED FINANCIAL REPORT
JUNE 30, 1998
(UNAUDITED)
F-33
<PAGE> 116
GEORGIA NATIONAL BANCORP, INC.
AND SUBSIDIARY
CONSOLIDATED FINANCIAL REPORT
JUNE 30, 1998
(UNAUDITED)
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
PAGE
FINANCIAL STATEMENTS
<S> <C>
Consolidated balance sheets.......................................................1
Consolidated statements of income and comprehensive income........................2
Consolidated statements of cash flows.............................................3
Notes to consolidated financial statements........................................5
</TABLE>
F-34
<PAGE> 117
GEORGIA NATIONAL BANCORP, INC.
AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
JUNE 30, 1998 AND 1997
<TABLE>
<CAPTION>
ASSETS 1998 1997
------------ ------------
<S> <C> <C>
Cash and due from banks $ 4,861,558 $ 4,964,633
Interest-bearing deposits in banks 1,500,000 --
Federal funds sold 4,540,000 5,300,000
Securities available-for-sale 12,589,895 13,754,593
Loans 63,648,816 61,931,109
Less allowance for loan losses 903,910 791,247
------------ ------------
Loans, net 62,744,906 61,139,862
------------ ------------
Government corporation stock 449,450 408,951
Premises and equipment 1,714,735 1,854,720
Intangible assets 192,105 385,305
Other assets 1,218,107 1,141,864
------------ ------------
Total assets $ 89,810,756 $ 88,949,928
============ ============
Liabilities and Stockholders' Equity
Deposits
Noninterest-bearing demand $ 11,295,120 $ 11,490,536
Interest-bearing demand 26,744,950 24,352,226
Savings 18,683,974 19,227,030
Time, $ 100,000 and over 1,814,560 2,149,779
Other time 20,659,033 22,432,001
------------ ------------
Total deposits 79,197,637 79,651,572
Other borrowings 210,645 136,141
Other liabilities 514,649 543,805
------------ ------------
Total liabilities 79,922,931 80,331,518
------------ ------------
Commitments and contingent liabilities
Stockholders' equity
Common stock, par value $.005 and $.01, respectively,
5,000,000 shares authorized, 1,308,530 and 628,272
shares issued and outstanding, respectively 6,543 6,282
Capital surplus 5,839,036 5,538,898
Retained earnings 4,053,483 3,192,717
Unrealized losses on securities available-for-sale,
net of tax (11,237) (119,487)
------------ ------------
Total stockholders' equity 9,887,825 8,618,410
------------ ------------
Total liabilities and stockholders' equity $ 89,810,756 $ 88,949,928
============ ============
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
F-35
<PAGE> 118
GEORGIA NATIONAL BANCORP, INC.
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
SIX MONTHS ENDED JUNE 30, 1998 AND 1997
<TABLE>
<CAPTION>
1998 1997
------------ ------------
<S> <C> <C>
Interest income
Loans $ 3,149,031 $ 2,930,328
Taxable securities 378,761 440,868
Other investments 13,821 13,410
Federal funds sold 190,856 167,302
Deposits in banks 3,310 --
------------ ------------
Total interest income 3,735,779 3,551,908
------------ ------------
Interest expense
Deposits 1,510,969 1,438,783
Other borrowings 4,844 4,566
------------ ------------
Total interest expense 1,515,813 1,443,349
------------ ------------
Net interest income 2,219,966 2,108,559
Provision for loan losses 90,000 45,000
------------ ------------
Net interest income after provision 2,129,966 2,063,559
for loan losses ------------ ------------
Other income
Service charges on deposit accounts 211,500 224,850
Mortgage origination fees 406,063 155,803
Net realized gains (losses) on sales of securities (507) 10,611
Other operating income 74,366 28,563
------------ ------------
Total other income 691,422 419,827
------------ ------------
Other expenses
Salaries and employee benefits 963,807 779,887
Equipment expenses 149,115 146,688
Occupancy expenses 163,407 153,818
Other operating expenses 723,165 587,577
------------ ------------
Total other expenses 1,999,494 1,667,970
------------ ------------
Income before income taxes 821,894 815,416
Income tax expense 292,690 283,521
------------ ------------
Net income 529,204 531,895
------------ ------------
Other comprehensive income (loss), net of tax:
Unrealized gains (losses) on securities
available-for-sale arising during period 2,907 (17,318)
Less: reclassification adjustment for
(gains) losses included in net income 324 (6,791)
------------ ------------
Total other comprehensive income (loss) 3,231 (24,109)
------------ ------------
Comprehensive income $ 532,435 $ 507,786
============ ============
Basic earnings per common share $ 0.41 $ 0.42
============ ============
Diluted earnings per common share $ 0.41 $ 0.42
============ ============
</TABLE>
See Notes to Consolidated Financial Statements.
F-36
<PAGE> 119
GEORGIA NATIONAL BANCORP, INC.
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED JUNE 30, 1998 AND 1997
(UNAUDITED)
<TABLE>
<CAPTION>
1998 1997
-------------- --------------
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 529,204 $ 531,895
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 97,666 98,551
Amortization of intangible 96,600 96,600
Provision for loan losses 90,000 45,000
Net realized (gains) losses on sales of securities 507 (10,611)
Increase in interest receivable (178,121) (61,247)
Increase in interest payable 4,940 63,769
Decrease in taxes payable (118,405) (64,851)
Other operating activities 113,260 (72,449)
------------ ------------
Net cash provided by operating activities $ 635,651 $ 626,657
------------ ------------
INVESTING ACTIVITIES
Net increase in interest-bearing deposits in banks (1,500,000) --
Purchases of securities available-for-sale (8,557,571) (1,707,357)
Proceeds from sales of securities available-for-sale 10,620,593 1,497,500
Proceeds from maturities of securities
available-for-sale 44,559 120,441
Net (increase) decrease in Federal funds sold 2,080,000 (2,160,000)
Net increase in loans (946,147) (5,813,308)
Purchase of Government Corporation stock (40,499) (10,700)
Purchase of premises and equipment (38,014) (111,407)
------------ ------------
Net cash provided by (used in) in 1,662,921 (8,184,831)
investing activities ------------ ------------
</TABLE>
F-37
<PAGE> 120
GEORGIA NATIONAL BANCORP, INC.
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED JUNE 30, 1998 AND 1997
(UNAUDITED)
<TABLE>
<CAPTION>
1998 1997
------------- -------------
<S> <C> <C>
FINANCING ACTIVITIES
Net increase (decrease) in deposits $ (1,910,135) $ 8,281,791
Net decrease in other borrowings (470,297) (241,874)
Proceeds from issuance of common stock 187,192 4,744
Dividends paid (77,714) (62,807)
------------ ------------
Net cash provided by (used in) $ (2,270,954) $ 7,981,854
financing activities ------------ ------------
Net increase in cash and due from banks $ 27,618 $ 423,680
Cash and due from banks at beginning of period 4,833,940 4,540,953
------------ ------------
Cash and due from banks at end of period $ 4,861,558 $ 4,964,633
============ ============
SUPPLEMENTAL DISCLOSURES
Cash paid for:
Interest $ 1,510,873 $ 1,379,580
Income taxes $ 411,095 $ 324,771
NONCASH TRANSACTION
Unrealized (gains) losses on securities
available-for-sale $ (5,001) $ 38,897
Principal balances of loans
transferred to other real estate $ 91,000 $ --
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
F-38
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GEORGIA NATIONAL BANCORP, INC.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1. BASIS OF PRESENTATION
The consolidated financial statements included herein
are unaudited; however, such information reflects all
adjustments (consisting solely of normal recurring
adjustments) which are, in the opinion of management,
necessary for the fair statement of results for the
interim period.
The results of operations for the six month period
ended June 30, 1998 are not necessarily indicative of
the results to be expected for the full year.
NOTE 2. CURRENT ACCOUNTING DEVELOPMENTS
The adoption of the provisions of SFAS No. 125,
"Accounting for Transfers and Servicing of Financial
Assets and Extinguishments of Liabilities" that became
effective on January 1, 1998 did not have a material
effect on the Company's financial statements.
The adoption of SFAS No. 128, "Earnings Per Share",
that became effective as of December 31, 1997 had no
effect on the calculation of losses per common share
for the six months ended June 30, 1997.
The adoption of SFAS No. 130, "Reporting Comprehensive
Income", that became effective on January 1, 1998
required the Company to report comprehensive income in
the Company's Statements of Income and Comprehensive
Income.
There are no other recent accounting pronouncements
that have had, or are expected to have, a material
effect on the Company's financial statements.
F-39
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EXHIBIT A
AGREEMENT AND PLAN OF MERGER
OF
SOUTHTRUST OF ALABAMA, INC.
AND
GEORGIA NATIONAL BANCORP, INC.
JOINED IN BY
SOUTHTRUST CORPORATION
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<PAGE> 123
ARTICLE I
<TABLE>
<CAPTION>
THE MERGER
<S> <C> <C>
Section 1.1 Constituent Corporations; Consummation of Merger; Closing Date 2
Section 1.2 Effect of Merger...............................................2
Section 1.3 Further Assurances.............................................3
Section 1.4 Directors and Officers.........................................3
Section 1.5 Stock Option Agreement.........................................3
ARTICLE II
CONVERSION OF CONSTITUENTS' CAPITAL SHARES
Section 2.1 Manner of Conversion of Company Shares.........................3
Section 2.2 Company Stock Options and Related Matters......................4
Section 2.3 Fractional Shares..............................................5
Section 2.4 Effectuating Conversion ......................................6
Section 2.5 Laws of Escheat................................................8
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Section 3.1 Corporate Organization.........................................8
Section 3.2 Capitalization.................................................9
Section 3.3 Financial Statements; Filings.................................10
Section 3.4 Loan Portfolio; Reserves......................................11
Section 3.5 Certain Loans and Related Matters.............................12
Section 3.6 Authority; No Violation.......................................12
Section 3.7 Consents and Approvals........................................13
Section 3.8 Broker's Fees.................................................13
Section 3.9 Absence of Certain Changes or Events..........................13
Section 3.10 Legal Proceedings; Etc........................................13
Section 3.11 Taxes and Tax Returns.........................................14
Section 3.12 Employee Benefit Plans........................................15
Section 3.13 Title and Related Matters.....................................16
Section 3.14 Real Estate...................................................17
Section 3.15 Environmental Matters.........................................17
Section 3.16 Commitments and Contracts.....................................18
Section 3.17 Regulatory, Accounting and Tax Matters........................19
Section 3.18 Registration Obligations......................................19
</TABLE>
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<TABLE>
<S> <C> <C>
Section 3.19 State Takeover Laws...........................................19
Section 3.20 Insurance.....................................................19
Section 3.21 Labor.........................................................20
Section 3.22 Compliance with Laws..........................................20
Section 3.23 Transactions with Management..................................21
Section 3.27 Proxy Materials...............................................21
Section 3.28 Deposit Insurance.............................................22
Section 3.29 Year 2000.....................................................22
Section 3.30 Untrue Statements and Omissions...............................22
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF
SOUTHTRUST AND ST-SUB
Section 4.1 Organization and Related Matters of SouthTrust................22
Section 4.2 Organization and Related Matters of ST-Sub....................23
Section 4.3 Capitalization................................................23
Section 4.4 Authorization.................................................23
Section 4.5 Financial Statements..........................................24
Section 4.6 Absence of Certain Changes or Events..........................25
Section 4.7 Legal Proceedings, Etc........................................25
Section 4.8 Insurance.....................................................25
Section 4.9 Consents and Approvals........................................25
Section 4.10 Accounting, Tax, Regulatory Matters...........................25
Section 4.11 Proxy Materials...............................................25
Section 4.12 No Broker's or Finder's Fees..................................26
Section 4.13 Untrue Statements and Omissions...............................26
Section 4.14 SEC Filings...................................................26
Section 4.15 Compliance with Laws..........................................26
Section 4.16 Year 2000.....................................................27
ARTICLE V
COVENANTS AND AGREEMENTS
Section 5.1 Conduct of the Business of Company............................27
Section 5.2 Current Information...........................................29
Section 5.3 Access to Properties; Personnel and Records...................30
Section 5.4 Approval of Shareholders......................................31
Section 5.5 No Other Bids.................................................31
Section 5.6 Notice of Deadlines...........................................32
Section 5.7 Affiliates....................................................32
</TABLE>
A-3
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<TABLE>
<S> <C> <C>
Section 5.8 Maintenance of Properties.....................................32
Section 5.9 Environmental Audits..........................................32
Section 5.10 Title Insurance...............................................33
Section 5.11 Surveys.......................................................33
Section 5.12 Consents to Assign and Use Leased Premises....................33
Section 5.13 Exemption Under Anti-Takeover Statutes........................33
Section 5.14 Conforming Accounting and Reserve Policies....................33
Section 5.15 Publicity.....................................................33
Section 5.16 Compliance Matters............................................34
Section 5.17 Subsidiary Merger Agreement...................................34
Section 5.18 Employee Issues...............................................34
Section 5.19 Coordination of Dividends.....................................34
ARTICLE VI
ADDITIONAL COVENANTS AND AGREEMENTS
Section 6.1 Best Efforts; Cooperation.....................................34
Section 6.2 Regulatory Matters............................................35
Section 6.3 Other Matters.................................................35
Section 6.4 Indemnification; Insurance....................................36
Section 6.5 Current Information...........................................37
Section 6.6 Registration Statement........................................37
Section 6.7 Reservation of Shares.........................................38
Section 6.8 Consideration.................................................38
ARTICLE VII
MUTUAL CONDITIONS TO CLOSING
Section 7.1 Shareholder Approval..........................................38
Section 7.2 Regulatory Approvals..........................................38
Section 7.3 Legal Proceedings.............................................38
Section 7.4 Registration Statement and Listing............................38
ARTICLE VIII
CONDITIONS TO THE OBLIGATIONS OF SOUTHTRUST AND ST-SUB
Section 8.1 Representations and Warranties................................39
Section 8.2 Performance of Obligations....................................39
Section 8.3 Certificate Representing Satisfaction of Conditions...........39
Section 8.4 Absence of Adverse Facts......................................39
</TABLE>
A-4
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<TABLE>
<S> <C> <C>
Section 8.5 Opinion of Counsel............................................40
Section 8.6 Consents Under Agreements.....................................40
Section 8.7 Consents Relating to Leased Real Property.....................40
Section 8.8 Material Condition............................................40
Section 8.9 Employment Issues.............................................40
Section 8.10 Outstanding Shares of the Company.............................40
Section 8.11 Dissenters....................................................41
Section 8.12 Pooling.......................................................41
Section 8.13 Certification of Claims.......................................41
Section 8.14 Litigation....................................................41
Section 8.16 New Lease.....................................................41
ARTICLE IX
CONDITIONS TO OBLIGATIONS OF THE COMPANY
Section 9.1 Representations and Warranties................................41
Section 9.2 Performance of Obligations....................................42
Section 9.3 Certificate Representing Satisfaction of Conditions...........42
Section 9.4 Absence of Adverse Facts......................................42
Section 9.5 Consents Under Agreements.....................................42
Section 9.6 Opinion of Counsel............................................42
Section 9.7 SouthTrust Shares.............................................43
Section 9.8 Tax Opinion...................................................43
ARTICLE X
TERMINATION, WAIVER AND AMENDMENT
Section 10.1 Termination...................................................43
Section 10.2 Effect of Termination.........................................46
Section 10.3 Amendments....................................................46
Section 10.4 Waivers.......................................................46
Section 10.5 Non-Survival of Representations and Warranties................47
ARTICLE XI
MISCELLANEOUS
Section 11.1 Entire Agreement..............................................47
Section 11.2 Definitions...................................................47
Section 11.3 Notices.......................................................48
Section 11.4 Severability..................................................49
</TABLE>
A-5
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<TABLE>
<S> <C> <C>
Section 11.5 Costs and Expenses............................................49
Section 11.6 Captions......................................................49
Section 11.7 Counterparts..................................................50
Section 11.8 Governing Law.................................................50
Section 11.9 Persons Bound; No Assignment..................................50
Section 11.10 Exhibits and Schedules........................................50
Section 11.11 Waiver........................................................50
Section 11.12 Construction of Terms.........................................50
</TABLE>
A-6
<PAGE> 128
AGREEMENT AND PLAN OF MERGER OF
SOUTHTRUST OF ALABAMA, INC.
WITH
GEORGIA NATIONAL BANCORP, INC.
--------------------------
LIST OF SCHEDULES
--------------------------
Disclosure Schedule 3.1(d)
Disclosure Schedule 3.3(f)
Disclosure Schedule 3.4
Disclosure Schedule 3.5
Disclosure Schedule 3.7
Disclosure Schedule 3.9
Disclosure Schedule 3.10
Disclosure Schedule 3.11
Disclosure Schedule 3.12(a)
Disclosure Schedule 3.12(g)
Disclosure Schedule 3.13(a)
Disclosure Schedule3.14(a)
Disclosure Schedule 3.14(b)
Disclosure Schedule 3.16(a)
Disclosure Schedule 3.16(b)
A-7
<PAGE> 129
Disclosure Schedule 3.20
Disclosure Schedule 3.22
Disclosure Schedule 3.23
Disclosure Schedule 3.24
Disclosure Schedule 3.25
Disclosure Schedule 4.4
Disclosure Schedule 4.7
Disclosure Schedule 4.9
Disclosure Schedule 4.15
Disclosure Schedule 4.16
Disclosure Schedule 5.1(b)(iv)
Disclosure Schedule5.1(b)(vi)
Disclosure Schedule 5.6
A-8
<PAGE> 130
AGREEMENT AND PLAN OF MERGER OF
SOUTHTRUST OF ALABAMA, INC.
WITH
GEORGIA NATIONAL BANCORP, INC.
--------------------------
LIST OF EXHIBITS
--------------------------
Exhibit 1.5: Stock Option Agreement
Exhibit 5.7: Form of Affiliate Letter
Exhibit 5.17: Subsidiary Merger Agreement
Exhibit 5.18(a): Form of Amendment to Mr. Huggins' Employment Contract
Exhibit 5.18(b): Form of Amendment to Mr. Carson's Employment Contract
Exhibit 5.18(c): Form of Amendment to Mr. Lanier's Employment Contract
Exhibit 8.5: Matters as to which Powell, Goldstein, Frazer & Murphy LLP,
Counsel to the Company, will opine
Exhibit 8.9: Form of Agreement with respect to the payment of Retention
Bonuses
Exhibit 9.6: Matters as to which Bradley Arant Rose & White LLP, Counsel to
SouthTrust and ST-Sub, will opine
A-9
<PAGE> 131
AGREEMENT AND PLAN OF MERGER
OF
SOUTHTRUST OF ALABAMA, INC.
AND
GEORGIA NATIONAL BANCORP, INC.
JOINED IN BY
SOUTHTRUST CORPORATION
This AGREEMENT AND PLAN OF MERGER, dated as of the 1st day of July,
1998 (this "Agreement"), by and between SouthTrust of Alabama, Inc., an Alabama
corporation ("ST- Sub") and Georgia National Bancorp, Inc., a Georgia
corporation (the "Company"), and joined in by SouthTrust Corporation, a Delaware
corporation ("SouthTrust").
WITNESSETH THAT:
WHEREAS, the respective Boards of Directors of ST-Sub and the Company
deem it in the best interests of ST-Sub and of the Company, respectively, and of
their respective shareholders, that ST-Sub and the Company merge pursuant to
this Agreement in a transaction that qualifies as a reorganization pursuant to
Section 368(a)(1) of the Internal Revenue Code of 1986 (the "Code") (the
"Merger");
WHEREAS, the Boards of Directors of ST-Sub and the Company have
approved this Agreement and have directed that this Agreement be submitted to
their respective shareholders for approval and adoption in accordance with
applicable law;
WHEREAS, SouthTrust, the sole shareholder of ST-Sub, will deliver, or
cause to be delivered, to the shareholders of the Company the consideration to
be paid pursuant to the Merger in accordance with the terms of this Agreement;
and
WHEREAS, the Company owns all of the issued and outstanding capital
stock of Georgia National Bank, a national banking association (the "Bank"), and
ST-Sub owns all of the issued and outstanding capital stock of SouthTrust Bank,
National Association, a national banking association ("ST-Bank"), and it is
contemplated that, in connection with the consummation of this Agreement and
pursuant to the terms of that certain Subsidiary Merger Agreement (the
"Subsidiary Merger Agreement"), the Bank will be merged with and into ST-Bank;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants, representations, warranties and agreements herein contained, the
parties agree that the Company will be merged with and into ST-Sub and that the
terms and conditions of the Merger, the mode of carrying the Merger into effect,
including the manner of converting the shares of common stock of the Company,
par value $0.005 per share, into shares of common stock of SouthTrust, par value
of $2.50 per share, shall be as hereinafter set forth.
A-10
<PAGE> 132
ARTICLE I
THE MERGER
Section 1.1 Constituent Corporations; Consummation of Merger; Closing
Date.
(a) Subject to the provisions hereof, the Company shall be
merged with and into ST-Sub (which has heretofore and shall hereinafter be
referred to as the "Merger") pursuant to the laws of the States of Alabama and
Georgia and ST-Sub shall be the surviving corporation (sometimes hereinafter
referred to as "Surviving Corporation" when reference is made to it after the
Effective Time of the Merger (as defined below)). The Merger shall become
effective on the date and at the time on which a Certificate or Articles of
Merger have been duly filed with the Secretary of State of Alabama and Georgia,
unless a later date is specified in such Certificate or Articles of Merger (such
time is hereinafter referred to as the "Effective Time of the Merger"). Subject
to the terms and conditions hereof, unless otherwise agreed upon by SouthTrust
and the Company, the Effective Time of the Merger shall occur on the first
business day following the later to occur of (i) the effective date (including
expiration of any applicable waiting period) of the last required Consent (as
defined below) of any Regulatory Authority (as defined below) having authority
over the transactions contemplated under this Agreement and (ii) the date on
which the shareholders of the Company, to the extent that their approval is
required by applicable law, approve the transactions contemplated by this
Agreement, or such other time as the parties may agree.
(b) The closing of the Merger (the "Closing") shall take place
at the principal offices of the Company at 10:00 a.m. local time on the day that
the Effective Time of the Merger occurs, or such other date and time and place
as the parties hereto may agree (the "Closing Date"). Subject to the provisions
of this Agreement, at the Closing there shall be delivered to each of the
parties hereto the opinions, certificates and other documents and instruments
required to be so delivered pursuant to this Agreement.
Section 1.2 Effect of Merger. (a) At the Effective Time of the
Merger, the Company shall be merged with and into ST-Sub and the separate
existence of the Company shall cease. The Articles of Incorporation and Bylaws
of ST-Sub, as in effect on the date hereof and as otherwise amended prior to the
Effective Time of the Merger, shall be the Articles of Incorporation and the
Bylaws of the Surviving Corporation until further amended as provided therein
and in accordance with applicable law. The Surviving Corporation shall have all
the rights, privileges, immunities and powers and shall be subject to all of the
duties and liabilities of a corporation organized under the laws of the State of
Alabama shall thereupon and thereafter possess all other privileges, immunities
and franchises of a private, as well as of a public nature, of each of the
constituent corporations. All property (real, personal and mixed) and all debts
on whatever account, including subscriptions to shares, and all choses in
action, all and every other interest, of or belonging to or due to each of the
constituent corporations so merged shall be taken and deemed to be transferred
to and vested in the Surviving Corporation without further act or deed. The
title to any real estate, or any interest therein, vested in any of the
constituent corporations shall not
A-11
<PAGE> 133
revert or be in any way impaired by reason of the Merger. The Surviving
Corporation shall thenceforth be responsible and liable for all the liabilities
and obligations of each of the constituent corporations so merged and any claim
existing or action or proceeding pending by or against either of the constituent
corporations may be prosecuted as if the Merger had not taken place or the
Surviving Corporation may be substituted in its place. Neither the rights of
creditors nor any liens upon the property of any constituent corporation shall
be impaired by the Merger.
Section 1.3 Further Assurances. From and after the Effective Time of
the Merger, as and when requested by the Surviving Corporation, the officers and
directors of the Company last in office shall execute and deliver or cause to be
executed and delivered in the name of the Company such deeds and other
instruments and take or cause to be taken such further or other actions as shall
be necessary in order to vest or perfect in or confirm of record or otherwise to
the Surviving Corporation title to and possession of all of the property,
interests, assets, rights, privileges, immunities, powers, franchises and
authority of the Company.
Section 1.4 Directors and Officers. From and after the Effective
Time of the Merger, the directors of the Surviving Corporation and the officers
of the Surviving Corporation shall be those persons serving as directors and
officers of ST-Sub immediately prior to the Effective Time of the Merger, and
such additional persons, in each case, as SouthTrust, at or prior to the
Effective Time of the Merger, shall designate in writing.
Section 1.5 Stock Option Agreement. As a condition to the execution
of this Agreement, the Company is executing and delivering to SouthTrust the
Stock Option Agreement in the form as annexed hereto as EXHIBIT 1.5.
ARTICLE II
CONVERSION OF CONSTITUENTS' CAPITAL SHARES
Section 2.1 Manner of Conversion of Company Shares. Subject to the
provisions hereof, as of the Effective Time of the Merger and by virtue of the
Merger and without any further action on the part of SouthTrust, ST-Sub, the
Company or the holder of any shares thereof, the shares of the constituent
corporations shall be converted as follows:
(a) Each share of capital stock of ST-Sub outstanding
immediately prior to the Effective Time of the Merger shall, after the Effective
Time of the Merger, remain outstanding and unchanged and thereafter shall
constitute all of the issued and outstanding shares of capital stock of the
Surviving Corporation.
(b) Each share of common stock of the Company (the "Company
Shares") held by the Company or by SouthTrust (or any of their subsidiaries),
other than in a fiduciary capacity or as a result of debts previously
contracted, shall be canceled and retired and no consideration shall be paid or
delivered in exchange therefor.
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<PAGE> 134
(c) Except with regard to Dissenting Company Shares (as
hereinafter defined) and the Company Shares excluded in (b) above, each Company
Share outstanding immediately prior to the Effective Time of the Merger shall be
converted into the right to receive 0.60 shares of common stock of SouthTrust
(and the rights associated therewith issued pursuant to a Rights Agreement dated
February 22, 1989 between SouthTrust and Mellon Bank, N.A.) (together, the
"SouthTrust Shares")(such number, as may be adjusted as provided in Section
10.1(g) of this Agreement, being hereinafter referred to as the "Conversion
Ratio"). The Conversion Ratio, including the number of SouthTrust Shares
issuable in the Merger, shall be subject to an appropriate adjustment in the
event of any stock split, reverse stock split, dividend payable in SouthTrust
Shares, reclassification or similar distribution whereby SouthTrust issues
SouthTrust Shares or any securities convertible into or exchangeable for
SouthTrust Shares without receiving any consideration in exchange therefor,
provided that the record date of such transaction is a date after the date of
the Agreement and prior to the Effective Time of the Merger.
(d) Each outstanding Company Share, the holder of which has
perfected his demand for payment of the fair value of such share in accordance
with Sections 14-2-1301 to 14-2- 1332 of the Georgia Business Corporation Act
(the "Dissent Provisions"), and has not effectively withdrawn or lost his right
to such appraisal (the "Dissenting Company Shares"), shall not be converted into
or represent a right to receive the SouthTrust Shares issuable in the Merger but
the holder thereof shall be entitled only to such rights as are granted by the
Dissent Provisions. The Company shall give SouthTrust prompt notice upon receipt
by the Company of any written demands for payment of the fair value of the
Company Shares, and of withdrawals of such demands, and any other instruments
provided to the Company pursuant to the Dissent Provisions (any shareholder duly
making such demand being hereinafter called a "Dissenting Shareholder"). Each
Dissenting Shareholder who becomes entitled, pursuant to the Dissent Provisions,
to payment of fair value for any Company Shares held by such Dissenting
Shareholder shall receive payment therefor from the Surviving Corporation in
accordance with the Dissent Provisions and all of such Dissenting Shareholder's
Company Shares shall be canceled. Neither the Company nor the Surviving
Corporation shall, except with the prior written consent of SouthTrust,
voluntarily make any payment with respect to, or settle or offer to settle, any
demand for payment by any Dissenting Shareholder. If any Dissenting Shareholder
shall have failed to perfect or shall have effectively withdrawn or lost such
right to demand payment of fair value, the Company Shares held by such
Dissenting Shareholder shall thereupon be deemed to have been converted into the
right to receive the consideration to be issued in the Merger as provided by
this Agreement.
Section 2.2 Company Stock Options and Related Matters. (a) As of the
Effective Time of the Merger, all rights with respect to Company Shares issuable
pursuant to the exercise of stock options (the "Company Options") granted by the
Company under stock option plans of the Company (the "Company Stock Option
Plans"), which are outstanding at the Effective Time of the Merger, whether or
not such Company Options are then exercisable, shall, subject to this section,
be assumed by SouthTrust in accordance with the terms of the particular Company
Stock Option Plan under which such Company Options were issued and the stock
option agreement by which such Company Options are evidenced. From and after the
Effective Time of the Merger, (i) each
A-13
<PAGE> 135
Company Option assumed by SouthTrust hereunder may be exercised solely for
SouthTrust Shares, (ii) the number of SouthTrust Shares subject to such Company
Option shall be equal to the number of Company Shares subject to such Company
Option immediately prior to the Effective Time of the Merger multiplied by the
Conversion Ratio and (iii) the per share exercise price under each such Company
Option shall be adjusted by dividing the per share exercise price under each
such Company Option by the Conversion Ratio and rounding down to the nearest
cent.
(b) At all times after the Effective Time of the Merger,
SouthTrust shall reserve for issuance such number of SouthTrust Shares as shall
be necessary to permit the exercise of the Company Options assumed by SouthTrust
in the manner contemplated by this Agreement. At or (at the election of
SouthTrust) within a reasonable time after the Effective Time of the Merger,
SouthTrust shall file a Registration Statement on Form S-3 or Form S-8, as the
case may be (or any successor or other appropriate form), with respect to the
SouthTrust Shares subject to the Company Options assumed by SouthTrust and shall
use its best efforts to maintain the effectiveness of such registration
statement or registration statements (and maintain the current status of the
prospectus or prospectuses contained therein) for so long as any such Company
Options assumed by SouthTrust remain outstanding. SouthTrust shall make any
filings required under any applicable state securities laws to qualify the
SouthTrust Shares subject to such Company Options assumed by SouthTrust for
resale thereunder.
(c) The number of SouthTrust Shares subject to Company
Options to be assumed by SouthTrust hereunder and the exercise price thereof
shall, from and after the Effective Time of the Merger, be subject to
appropriate adjustment in the event of the occurrence of any transaction
described in Section 2.1(c) hereof if the record date with respect to such
transaction is on or after the Effective Time of the Merger.
(d) It is intended that the foregoing assumption of Company
Options shall be undertaken in a manner that will not constitute a
"modification" as defined in Section 424 of the Code as to any Company Option
which is an incentive stock option as defined in Section 422 of the Code. All
restrictions or limitations on transfer with respect to Company Shares awarded
under a Company Stock Option Plan ("Restricted Stock"), to the extent that such
restrictions or limitations shall not have already lapsed, and except as
otherwise provided by such Company Stock Option Plan, shall remain in full force
and effect with respect to the SouthTrust Shares into which such Restricted
Stock is converted pursuant to this Agreement, unless such restrictions arise
under the Securities Act of 1933 and are eliminated by virtue of the
Registration Statements described in this Agreement. Except as otherwise
provided herein, (i) no additional options to purchase shares of capital stock
of the Company will be granted pursuant to Company Stock Option Plans following
the Effective Time of the Merger and (ii) the Company shall take all reasonable
steps to ensure that following the Effective Time of the Merger no holder of
Company Options shall have any right thereunder to acquire any equity securities
of the Company.
(e) The Company acknowledges that the holders of Company
Options who may become or be deemed to be executive officers or directors of
SouthTrust after the Effective
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<PAGE> 136
Time of the Merger may be subject to the short-swing sale restrictions of the
Securities Exchange Act of 1934 and regulations promulgated thereunder.
(f) At the election of SouthTrust, the Company shall procure
from each holder of Company Options, and shall deliver to SouthTrust at the
Closing, an executed acknowledgment of the treatment and disposition of such
holder's Company Options, as provided for under this Section 2.2 of this
Agreement.
Section 2.3 Fractional Shares. Notwithstanding any other provision
of this Agreement, each holder of Company Shares converted pursuant to the
Merger, who would otherwise have been entitled to receive a fraction of a
SouthTrust Share (after taking into account all certificates delivered by such
holder), shall receive, in lieu thereof, cash (without interest) in an amount
equal to such fractional part of such SouthTrust Share, multiplied by the market
value of one SouthTrust Share at the Effective Time of the Merger. The market
value of one SouthTrust Share at the Effective Time of the Merger shall be the
last sale price of such SouthTrust Share, as reported by the Nasdaq National
Market ("NASDAQ") on the last trading day preceding the Effective Time of the
Merger or, if the SouthTrust Shares hereafter become listed for trading on any
national securities exchange registered under the Securities Exchange Act of
1934, the last sale price of such SouthTrust Shares on the applicable date as
reported on the principal securities exchange on which the SouthTrust Shares are
then listed for trading. No such holder will be entitled to dividends, voting
rights or any other rights as a shareholder in respect of any fractional share.
Section 2.4 Effectuating Conversion (a) SouthTrust shall designate
such institution as it may select, including SouthTrust or one of its
affiliates, to serve as the exchange agent (the "Exchange Agent") pursuant to
this Agreement. The Exchange Agent may employ sub- agents in connection with
performing its duties. As of the Effective Time of the Merger, SouthTrust will
deliver or cause to be delivered to the Exchange Agent the consideration to be
paid by SouthTrust for the Company Shares, along with an appropriate cash
payment in lieu of fractional interests in SouthTrust Shares. As promptly as
practicable after the Effective Time of the Merger, the Exchange Agent shall
send or cause to be sent to each former holder of record of Company Shares
transmittal materials (the "Letter of Transmittal") for use in exchanging their
certificates formerly representing Company Shares for the consideration provided
for in this Agreement. The Letter of Transmittal will contain instructions with
respect to the surrender of certificates representing the Company Shares and the
receipt of the consideration contemplated by this Agreement and will require
each holder of the Company Shares to transfer good and marketable title to such
Company Shares to SouthTrust, free and clear of all liens, claims and
encumbrances. Amounts that would have been payable to Dissenting Shareholders
for Company Shares but for the fact of their dissent in accordance with the
provisions of Section 2.1(d) hereof shall be returned by the Exchange Agent to
SouthTrust as promptly as practicable.
(b) At the Effective Time of the Merger, the stock transfer
books of the Company shall be closed as to holders of Company Shares immediately
prior to the Effective Time
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of the Merger and no transfer of Company Shares by any such holder shall
thereafter be made or recognized and each outstanding certificate formerly
representing Company Shares shall, without any action on the part of any holder
thereof, no longer represent Company Shares. If, after the Effective Time of the
Merger, certificates are properly presented to the Exchange Agent, such
certificates shall be promptly exchanged for the consideration contemplated by
this Agreement into which the Company Shares represented thereby were converted
in the Merger.
(c) In the event that any holder of record as of the
Effective Time of the Merger of Company Shares is unable to deliver the
certificate which represents such holder's Company Shares, ST-Sub, in the
absence of actual notice that any Company Shares theretofore represented by any
such certificate have been acquired by a bona fide purchaser, may, in its
discretion, deliver to such holder the consideration contemplated by this
Agreement and the amount of cash representing fractional SouthTrust Shares to
which such holder is entitled in accordance with the provisions of this
Agreement upon the presentation of all of the following:
(i) An affidavit or other evidence to the reasonable
satisfaction of SouthTrust that any such certificate
has been lost, wrongfully taken or destroyed;
(ii) Such security and indemnity as may be reasonably
requested by SouthTrust to indemnify and hold
SouthTrust harmless in respect of such stock
certificate(s); and
(iii) Evidence to the satisfaction of SouthTrust that such
holder is the owner of the Company Shares theretofore
represented by each certificate claimed by such holder
to be lost, wrongfully taken or destroyed and that
such holder is the person who would be entitled to
present each such certificate for exchange pursuant to
this Agreement.
(d) In the event that the delivery of the consideration
contemplated by this Agreement and the amount of cash representing fractional
SouthTrust Shares are to be made to a person other than the person in whose name
any certificate representing Company Shares surrendered is registered, such
certificate so surrendered shall be properly endorsed (or accompanied by an
appropriate instrument of transfer), with the signature(s) appropriately
guaranteed, and otherwise in proper form for transfer, and the person requesting
such delivery shall pay any transfer or other taxes required by reason of the
delivery to a person other than the registered holder of such certificate
surrendered or establish to the satisfaction of SouthTrust that such tax has
been paid or is not applicable.
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(e) No holder of Company Shares shall be entitled to receive
any dividends or distributions declared or made with respect to the SouthTrust
Shares with a record date before the Effective Time of the Merger. After the
Effective Time of the Merger, and until properly surrendered and exchanged
pursuant to this Agreement, each outstanding certificate representing Company
Shares, subject to this Section 2.4(e), shall be deemed to represent and
evidence for all corporate purposes only the right to receive the consideration
into which such Company Shares were converted as of the Effective Time of the
Merger. Accordingly, among other matters, neither the consideration contemplated
by this Agreement, any amount of cash representing fractional SouthTrust Shares
nor any dividend or other distribution with respect to SouthTrust Shares where
the record date thereof is on or after the Effective Time of the Merger shall be
paid, and SouthTrust shall not be obligated to pay, to the holder of any
unsurrendered certificate or certificates representing Company Shares until such
holder shall surrender the certificate or certificates representing the Company
Shares as provided for by this Agreement, and until such holder becomes the
record holder of the SouthTrust Shares issuable in the Merger, such holder shall
not be entitled to vote such SouthTrust Shares in respect of any matter coming
before the stockholders of SouthTrust. Subject to applicable laws, following
surrender of any such certificate or certificates, there shall be paid to the
holder of the certificate or certificates then representing SouthTrust Shares
issued in the Merger, without interest at the time of such surrender, the
consideration contemplated by this Agreement, the amount of any cash
representing fractional SouthTrust Shares and the amount of any accrued
dividends or other distributions with respect to SouthTrust Shares to which such
holder is entitled as a holder of SouthTrust Shares in accordance with the
foregoing.
Section 2.5 Laws of Escheat. If any of the consideration due or
other payments to be paid or delivered to the holders of Company Shares is not
paid or delivered within the time period specified by any applicable laws
concerning abandoned property, escheat or similar laws, and if such failure to
pay or deliver such consideration occurs or arises out of the fact that such
property is not claimed by the proper owner thereof, SouthTrust or the Exchange
Agent shall be entitled to dispose of any such consideration or other payments
in accordance with applicable laws concerning abandoned property, escheat or
similar laws. Any other provision of this Agreement notwithstanding, none of the
Company, SouthTrust, ST-Sub, the Exchange Agent nor any other person acting on
their behalf shall be liable to a holder of Company Shares for any amount paid
or property delivered in good faith to a public official pursuant to and in
accordance with any applicable abandoned property, escheat or similar law.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to ST-Sub and SouthTrust
as follows as of the date hereof and as of all times up to and including the
Effective Time of the Merger (except as otherwise provided):
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Section 3.1 Corporate Organization. (a) The Company is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Georgia. The Company has the corporate power and authority to own or
lease all of its properties and assets and to carry on its business as such
business is now being conducted, and the Company is duly licensed or qualified
to do business in each state or other jurisdiction where the nature of the
business conducted by it or the character or location of the properties and
assets owned or leased by it make such qualification necessary, except where the
failure to be so licensed or qualified (or steps necessary to cure such failure)
would not have a Material Adverse Effect (as defined in Section 11.2 of this
Agreement) on the Company. The Company is duly registered as a bank holding
company under the Bank Holding Company Act of 1956, as amended. True and correct
copies of the Articles of Incorporation of the Company and the Bylaws of the
Company, each as amended to the date hereof, have been delivered to SouthTrust.
(b) The Bank is a national banking association duly
organized, validly existing and in good standing under the laws of the United
States, the Bank has the corporate power and authority to own or lease all of
its properties and assets and to carry on its business as such business is now
being conducted, and the Bank is duly licensed or qualified to do business in
Georgia and elsewhere where the nature of the business conducted by it or the
character or location of the properties and assets owned or leased by it makes
such licensing or qualification necessary, except where the failure to be so
licensed or qualified (or steps necessary to cure such failure) would not have a
Material Adverse Effect on the Bank. True and correct copies of the Articles of
Association of the Bank and the Bylaws of the Bank, each as amended to the date
hereof, have been delivered to SouthTrust.
(c) Each of the Company, the Bank, and their respective
subsidiaries has in effect all federal, state, local and foreign governmental,
regulatory and other authorizations, permits and licenses necessary to own or
lease its properties and assets and to carry on its business as now conducted,
the absence of which, either individually or in the aggregate, would have a
Material Adverse Effect on the Company.
(d) Neither the Company nor the Bank owns any capital stock
of any subsidiary, or has any interest in any partnership or joint venture,
except as set forth in Disclosure Schedule 3.1(d); for purposes of this
Agreement, a "subsidiary" means any corporation or other entity of which the
party referred to beneficially owns, controls, or has the power to vote,
directly or indirectly, more than 5% of the outstanding equity securities.
(e) The minute books of the Company, the Bank and their
respective subsidiaries contain complete and accurate records in all material
respects of all meetings and other corporate actions held or taken by its
shareholders and Board of Directors (including all committees thereof).
Section 3.2 Capitalization. (a) The authorized capital stock of the
Company consists of 5,000,000 shares of common stock, par value $0.005
(hereinbefore and hereinafter referred to as "Company Shares"), 1,308,530 shares
of which as of the date hereof are issued and outstanding (none of which are
held in the treasury of the Company). All of the issued and outstanding
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Company Shares have been duly authorized and validly issued and all such shares
are fully paid and nonassessable. Except as set forth on Disclosure Schedule
3.2(a), as of the date hereof, there are no outstanding options, warrants,
commitments or other rights or instruments to purchase or acquire any shares of
the capital stock of the Company, or any securities or rights convertible into
or exchangeable for shares of capital stock of the Company.
(b) The authorized capital stock of the Bank consists of
5,000,000 shares of common stock, par value of $5.00, 503,004 shares of which as
of the date hereof are issued and outstanding (none of which are held in the
treasury of the Bank) (the "Bank Shares"). All of the issued and outstanding
Bank Shares have been duly authorized and validly issued and all such shares are
fully paid and nonassessable. As of the date hereof, there are no outstanding
options, warrants, commitments or other rights or instruments to purchase or
acquire any shares of capital stock of the Bank, or any securities or rights
convertible into or exchangeable for shares of capital stock of the Bank.
(c) All of the issued and outstanding shares of capital
stock of the Bank:
(i) are owned by the Company, except as may be limited
or required by laws of general application relating to the
Bank; and
(ii) are so owned free and clear of all liens and
encumbrances and adverse claims thereto.
Section 3.3 Financial Statements; Filings. (a) The Company has
previously delivered to SouthTrust copies of the consolidated financial
statements of the Company as of and for each of the three (3) fiscal years ended
immediately prior to this Agreement and the interim unaudited consolidated
financial statements of the Company as of and for each of the fiscal periods of
the Company ended after the close of the most recently completed fiscal year of
the Company and prior to the date of this Agreement, and the Company shall
deliver to SouthTrust, as soon as practicable following the preparation of
additional consolidated financial statements for each subsequent fiscal quarter
(or other reporting period) or year of the Company, the consolidated financial
statements of the Company as of and for such subsequent fiscal quarter (or other
reporting period) or year (such financial statements, unless otherwise
indicated, being hereinafter referred to collectively as the "Financial
Statements of the Company").
(b) The Bank has previously delivered to SouthTrust copies
of the financial statements of the Bank as of and for each of the three (3)
fiscal years of the Bank ended immediately prior to the date of this Agreement
and the interim financial statements of the Bank as of and for each of the
fiscal periods of the Bank ended after the close of the most recently completed
fiscal year of the Bank and prior to the date of this Agreement, and the Bank
shall deliver to SouthTrust, as soon as practicable following the preparation of
additional financial statements for each subsequent fiscal quarter (or other
reporting period) or year of the Bank, the financial statements of the Bank as
of and for such subsequent fiscal quarter (or other reporting period) or year
(such financial statements, unless otherwise indicated, being hereinafter
referred to collectively as the "Financial Statements of the Bank").
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(c) The Bank has previously delivered to SouthTrust copies
of the Call Reports of the Bank as of and for each of the three (3) fiscal years
ended immediately prior to this Agreement and the Call Reports of the Bank as of
and for the periods after the end of the most recent fiscal year and prior to
the date of this Agreement, and the Bank shall deliver to SouthTrust, as soon as
practicable following the preparation of additional Call Reports for each
subsequent fiscal quarter (or other reporting period) or year of the Bank, the
Call Reports of the Bank as of and for each such subsequent fiscal quarter (or
other reporting period) or year (such Call Reports, unless otherwise indicated,
being hereinafter referred to collectively as the "Call Reports of the Bank").
(d) Each of the Financial Statements of the Company, the
Financial Statements of the Bank and each of the Call Reports of the Bank
(including the related notes, where applicable) have been or will be prepared in
all material respects in accordance with generally accepted accounting
principles or regulatory accounting principles, whichever is applicable, which
principles have been or will be consistently applied during the periods
involved, except as otherwise noted therein, and the books and records of the
Company and the Bank, and their subsidiaries have been, are being, and will be
maintained in all material respects in accordance with applicable legal and
accounting requirements and reflect only actual transactions. Each of the
Financial Statements of the Company, the Financial Statements of the Bank and
each of the Call Reports of the Bank (including the related notes, where
applicable) fairly present or will fairly present the financial position of the
Company and the financial condition of the Bank on a consolidated basis as of
the respective dates thereof and fairly present or will fairly present the
results of operation of the Company and the results of operation of the Bank on
a consolidated basis for the respective periods therein set forth.
(e) To the extent not prohibited by law, the Company has
heretofore delivered or made available, or caused to be delivered or made
available, to SouthTrust all reports and filings made or required to be made by
the Company, the Bank or any of their subsidiaries, with the Regulatory
Authorities, and will from time to time hereafter furnish to SouthTrust, upon
filing or furnishing the same to the Regulatory Authorities, all such reports
and filings made after the date hereof with the Regulatory Authorities. As of
the respective dates of such reports and filings, all such reports and filings
did not and shall not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading.
(f) Except as reflected on Disclosure Schedule 3.3(f)
hereto, since December 31, 1997, neither the Company, the Bank nor any of their
subsidiaries has incurred any obligation or liability (contingent or otherwise)
that has or might reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect on the Company except obligations and
liabilities (i) which are accrued or reserved against in the Financial
Statements of the Company, the Financial Statements of the Bank or the Call
Reports of the Bank, or reflected in the notes thereto, and (ii) which were
incurred after December 31, 1997, in the ordinary course of business consistent
with past practices. Since December 31, 1997, neither the Company, the Bank nor
any of their
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subsidiaries have incurred or paid any obligations or liability which would have
a Material Adverse Effect on the Company, except as may have been incurred or
paid in the ordinary course of business, consistent with past practices.
Section 3.4 Loan Portfolio; Reserves. Except as set forth in
Disclosure Schedule 3.4, (i) all evidences of indebtedness in original principal
amount in excess of $10,000 reflected as assets in the Financial Statements of
the Company, the Financial Statements of the Bank and the Call Reports of the
Bank as of and for the year ended December 31, 1997 were as of such dates in all
respects the binding obligations of the respective obligors named therein in
accordance with their respective terms, and were not subject to any defenses,
setoffs, or counterclaims, except as may be provided by bankruptcy, insolvency
or similar laws or by general principles of equity; (ii) the allowances for
possible loan losses shown on the Financial Statements of the Company, the
Financial Statements of the Bank and the Call Reports of the Bank as of and for
the year ended December 31, 1997 were, and the allowance for possible loan
losses to be shown on the Financial Statements of the Company, the Financial
Statements of the Bank and the Call Reports of the Bank as of any date
subsequent to the execution of this Agreement will be, as of such dates,
adequate to provide for possible losses, net of recoveries relating to loans
previously charged off, in respect of loans outstanding (including accrued
interest receivable) of the Company and the Bank and other extensions of credit
(including letters of credit or commitments to make loans or extend credit);
(iii) the reserve for losses with respect to other real estate owned ("OREO
Reserve") shown on the Financial Statements of the Company, the Financial
Statements of the Bank and the Call Reports of the Bank as of and for the year
ended December 31, 1997 were, and the OREO Reserve to be shown on the Financial
Statements of the Company, the Financial Statements of the Bank and the Call
Reports of the Bank as of any date subsequent to the execution of this Agreement
will be, as of such dates, adequate to provide for losses relating to the other
real estate owned portfolio of the Company and the Bank as of the dates thereof;
(iv) the reserve for losses in respect of litigation ("Litigation Reserve")
shown on the Financial Statements of the Company, the Financial Statements of
the Bank and the Call Reports of the Bank as of and for the year ended December
31, 1997 were, and the Litigation Reserve to be shown on the Financial
Statements of the Company, the Financial Statements of the Bank, and the Call
Reports of the Bank as of any date subsequent to the execution of this Agreement
will be, as of such dates, adequate to provide for losses relating to or arising
out of all pending or threatened litigation applicable to the Company, the Bank
and their subsidiaries as of the dates thereof, and (v) each such allowance or
reserve described above has been established in accordance with the accounting
principles described in Section 3.3(d) and applicable regulatory requirements
and guidelines.
Section 3.5 Certain Loans and Related Matters. Except as set forth
in Disclosure Schedule 3.5, neither the Company, the Bank nor any of their
subsidiaries is a party as of the date of this Agreement to any written or oral:
(i) loan agreement, note or borrowing arrangement, other than credit card loans
and other loans the unpaid balance of which does not exceed $10,000 per loan,
under the terms of which the obligor is sixty (60) days delinquent in payment of
principal or interest or is in default of any other provision as of the date
hereof; (ii) loan agreement, note or borrowing arrangement which has been
classified or, in the exercise of reasonable diligence by the Company, the Bank
or any Regulatory Authority, should have been classified as "substandard",
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"doubtful", "loss," "other loans especially mentioned," "other assets especially
mentioned" or any other comparable classification; or (iii) loan agreement, note
or borrowing arrangement, including any loan guaranty, with any director or
executive officer of the Company, the Bank or any of their subsidiaries or any
ten percent (10%) shareholder of the Company, the Bank or any of their
subsidiaries, or any person, corporation or enterprise controlling, controlled
by or under common control with any of the foregoing.
Section 3.6 Authority; No Violation. (a) The Company has full
corporate power and authority to execute and deliver this Agreement and, subject
to the approval of the shareholders of the Company and to the receipt of the
Consents of the Regulatory Authorities and the other Consents referred to in
Section 3.7 hereof, to consummate the transactions contemplated hereby. The
Board of Directors of the Company has duly and validly approved this Agreement
and the transactions contemplated hereby, has authorized the execution and
delivery of this Agreement, has directed that this Agreement and the
transactions contemplated hereby be submitted and recommended to the Company's
shareholders for approval at a meeting of such shareholders and, except for the
adoption of such Agreement by its shareholders, no other corporate proceedings
on the part of the Company are necessary to consummate the Merger and the other
transactions contemplated hereby. This Agreement, when duly and validly executed
by the Company and delivered by the Company, will constitute a valid and binding
obligation of the Company, and will be enforceable against the Company in
accordance with its terms, except as such enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting the enforcement of creditors rights generally and except that the
availability of the equitable remedy of specific performance or injunctive
relief is subject to the discretion of the court before which any proceeding may
be brought.
(b) Neither the execution and delivery of this Agreement by
the Company nor the consummation by the Company of the transactions contemplated
hereby, nor compliance by the Company with any of the terms or provisions
hereof, will (i) violate any provision of the Articles of Incorporation or
Bylaws of the Company (ii) to the Company's knowledge and assuming that any
necessary Consents, including, but not limited to, those of the Regulatory
Authorities, referred to herein are duly obtained, (A) violate any statute,
code, ordinance, rule, regulation, judgment, order, writ, decree or injunction
applicable to the Company, the Bank or any of their subsidiaries or any of their
respective properties or assets, or (B) violate, conflict with, result in a
breach of any provisions of, constitute a default (or an event which, with
notice or lapse of time, or both, would constitute a default) under, result in
the termination of, accelerate the performance required by or result in the
creation of any lien, security interest, charge or other encumbrance upon any of
the respective properties or assets of the Company, the Bank or any of their
subsidiaries under, any of the terms, conditions or provisions of any material
note, bond, mortgage, indenture, deed of trust, license, permit, lease,
agreement or other instrument or obligation to which the Company, the Bank or
any of their subsidiaries is a party, or by which the Company, the Bank or any
of their subsidiaries or any of its properties or assets may be bound or
affected.
Section 3.7 Consents and Approvals. Except for (i) the approval of
the shareholders of the Company pursuant to the proxy statement of the Company
relating to the meeting of the
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shareholders of the Company at which the Merger is to be considered (the "Proxy
Statement"); (ii) the Consents of the Regulatory Authorities; (iii) the approval
of this Agreement by the shareholder of ST-Sub; (iv) the filing of a Certificate
or Articles of Merger with the States of Alabama and Georgia; and (v) as set
forth in Disclosure Schedule 3.7, no Consents of any person are necessary in
connection with the execution and delivery by the Company of this Agreement, and
the consummation by the Company of the Merger and the other transactions
contemplated hereby.
Section 3.8 Broker's Fees. None of the Company, the Bank or any of
their subsidiaries nor any of their respective officers or directors, has
employed any broker or finder or incurred any liability for any broker's fees,
commissions or finder's fees in connection with any of the transactions
contemplated by this Agreement, other than pursuant to that certain letter
agreement, dated January 21, 1998, between the Company and The Jernigan Group, a
copy of which has been provided to ST-Sub.
Section 3.9 Absence of Certain Changes or Events. Except as
disclosed on Disclosure Schedule 3.9 and as otherwise provided in Section 5.1(b)
of this Agreement, since December 31, 1997, there has not been (i) any
declaration, payment or setting aside of any dividend or distribution (whether
in cash, stock or property) in respect of the Company Shares or (ii) there has
not been any Material Adverse Effect on the Company, the Bank or any of their
respective subsidiaries and to the knowledge of the Company, the Bank or any of
their respective subsidiaries, no fact or condition exists as of the date hereof
which might reasonably be expected to cause any such event or change in the
future.
Section 3.10 Legal Proceedings; Etc. Except as set forth in
Disclosure Schedule 3.10, neither the Company, the Bank nor any of their
respective subsidiaries is a party to any, and there are no pending or, to the
knowledge of the Company, the Bank or any of their respective subsidiaries,
threatened, judicial, administrative, arbitral or other proceedings, claims,
actions, causes of action or governmental investigations against the Company,
the Bank or any of their respective subsidiaries challenging the validity of the
transactions contemplated by this Agreement and, to the knowledge of the
Company, the Bank and their respective subsidiaries as of the date hereof, there
is no proceeding, claim, action or governmental investigation against the
Company, the Bank or any of their respective subsidiaries, and no judgment,
decree, injunction, rule or order of any court, governmental department,
commission, agency, instrumentality or arbitrator is outstanding against the
Company, the Bank or any of their respective subsidiaries which has or might
reasonably be expected to have a Material Adverse Effect on the Company. None of
the Company, the Bank or their respective subsidiaries is a party to any
agreement, order or memorandum in writing by or with any Regulatory Authority
restricting the operations of the Company, the Bank or any of their respective
subsidiaries and neither the Company, the Bank nor any of their respective
subsidiaries has been advised by any Regulatory Authority that any such
Regulatory Authority is contemplating issuing or requesting the issuance of any
such order or memorandum in the future.
Section 3.11 Taxes and Tax Returns. (a) The Company has previously
delivered or made available to SouthTrust copies of the federal, state and local
income tax returns of the
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Company and, if consolidated returns do not exist for all periods, of the Bank
and each of their respective subsidiaries, for the years 1994, 1995, and 1996
and all schedules and exhibits thereto, and, will provide SouthTrust with a copy
of all federal, state and local income tax returns for the year 1997, with all
schedules and exhibits thereto, when such returns are filed, and, such returns
have not been subjected to an audit by the Internal Revenue Service or any other
taxing authority. Except as reflected in Disclosure Schedule 3.11, the Company,
the Bank and their respective subsidiaries have duly filed in correct form all
federal, state and local information returns and tax returns required to be
filed on or prior to the date hereof, and the Company, the Bank and any of their
respective subsidiaries have duly paid or made adequate provisions for the
payment of all taxes and other governmental charges which are owed by the
Company, the Bank or any of their respective subsidiaries to any federal, state
or local taxing authorities, whether or not reflected in such returns
(including, without limitation, those owed in respect of the properties, income,
business, capital stock, deposits, franchises, licenses, sales and payrolls of
the Company, the Bank and any of their respective subsidiaries), other than
taxes and other charges which (i) are not yet delinquent or are being contested
in good faith or (ii) have not been finally determined. The amounts set forth as
liabilities for taxes on the Financial Statements of the Company, the Financial
Statements of the Bank and the Call Reports of the Bank are sufficient, in the
aggregate, for the payment of all unpaid federal, state and local taxes
(including any interest or penalties thereon), whether or not disputed, accrued
or applicable, for the periods then ended, and have been computed in accordance
with generally accepted accounting principles consistent with past practices.
Neither the Company, the Bank nor any of their respective subsidiaries is
responsible for the taxes of any other person other than the Company, the Bank
and any of their respective subsidiaries, under Treasury Regulation 1.1502-6 or
any similar provision of federal, state or foreign law.
(b) Except as disclosed in Disclosure Schedule 3.11, neither
the Company, the Bank nor any of their respective subsidiaries has executed an
extension or waiver of any statute of limitations on the assessment or
collection of any federal, state or local taxes due that is currently in effect,
and deferred taxes of the Company, the Bank or any of their respective
subsidiaries, have been adequately provided for in the Financial Statements of
the Company, or the Financial Statements of the Bank, as the case may be.
(c) Except as disclosed in Disclosure Schedule 3.11, neither
the Company, the Bank nor any of their respective subsidiaries has made any
payment, is obligated to make any payment or is a party to any contract,
agreement or other arrangement that could obligate it to make any payment that
would be disallowed as a deduction under Section 280(G) or 162(m) of the Code.
(d) There has not been an ownership change, as defined in
Section 382(G) or the Code, of the Company, the Bank or any of their respective
subsidiaries that occurred during or after any taxable period in which the
Company, the Bank or any of their respective subsidiaries incurred an operating
loss that carries over to any taxable period ending after the fiscal year of the
Company immediately preceding the date of this Agreement.
(e) (i) Proper and accurate amounts have been withheld by
the Company, the Bank and their respective subsidiaries from their employees and
others for all prior periods in
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compliance in all material respects with the tax withholding provisions of all
applicable federal, state and local laws and regulations, and proper due
diligence steps have been taken in connection with back-up withholding, (ii)
federal, state and local returns have been filed by the Company, the Bank and
their respective subsidiaries for all periods for which returns were due with
respect to withholding, Social Security and unemployment taxes or charges due to
any federal, state or local taxing authority and (iii) the amounts shown on such
returns to be due and payable have been paid in full or adequate provision
therefor has been included by either the Company or the Bank in the Financial
Statements of the Company or the Financial Statements of the Bank.
Section 3.12 Employee Benefit Plans. (a) None of the Company, the
Bank or any of their respective subsidiaries has or maintains any "employee
benefit plan," as defined in Section 3(3) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), except as described in Disclosure
Schedule 3.12(a).
(b) None of the Company, the Bank or any of their respective
subsidiaries (or any pension plan maintained by either of them) has incurred any
liability to the Pension Benefit Guaranty Corporation ("PBGC") or the Internal
Revenue Service with respect to any pension plan qualified under Section 401 of
the Code, except liabilities to the PBGC pursuant to Section 4007 of ERISA, all
which have been fully paid. No reportable event under Section 4043(b) of ERISA
(including events waived by PBGC regulation) has occurred with respect to any
such pension plan.
(c) None of the Company, the Bank or any of their
subsidiaries has incurred any material liability under Section 4201 of ERISA for
a complete or partial withdrawal from, or agreed to participate in, any
multi-employer plan as such term is defined in Section 3(37) of ERISA.
(d) All "employee benefit plans," as defined in Section 3(3)
of ERISA, that are maintained by the Company, the Bank and their respective
subsidiaries comply in both form and operation, in all material respects, with
ERISA and the Code that are applicable, or intended to be applicable, to such
"employee benefit plans." None of the Company, the Bank nor any of their
respective subsidiaries have any material liability under any such plan.
(e) No prohibited transaction (which shall mean any
transaction prohibited by Section 406 of ERISA and not exempt under Section 408
of ERISA) has occurred with respect to any employee benefit plan maintained by
the Company, the Bank or any of their respective subsidiaries (i) which would
result in the imposition, directly or indirectly, of a material excise tax under
Section 4975 of the Code or a material civil penalty under Section 502(i) of
ERISA, or (ii) the correction of which would have a material adverse effect on
the Condition of the Company, the Bank or any of their respective subsidiaries;
and no actions have occurred which could result in the imposition of a penalty
under any section or provision of ERISA.
(f) No employee benefit plan which is a defined benefit
pension plan has any "unfunded current liability," as that term is defined in
Section 302(d)(8)(A) of ERISA, and the present fair market value of the assets
of any such plan exceeds the plan's "benefit liabilities," as
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that term is defined in Section 4001(a)(16) of ERISA, when determined under
those actuarial factors normally applied by such plan's actuaries.
(g) Except as set forth in Disclosure Schedule 3.12(g),
neither the execution and delivery of this Agreement nor the consummation of the
transactions contemplated hereby will (i) result in any material payment
(including, without limitation, severance, unemployment compensation, golden
parachute or otherwise) becoming due to any director or any officer or employee
of the Company, the Bank or any of their respective subsidiaries under any
benefit plan or otherwise, (ii) materially increase any benefits otherwise
payable under any benefit plan or (iii) result in any acceleration of the time
of payment or vesting of any such benefits to any material extent.
Section 3.13 Title and Related Matters. (a) Except as set forth in
Disclosure Schedule 3.13(a), the Company, the Bank and their respective
subsidiaries have good title, and as to owned real property, have good and
marketable title in fee simple absolute, to all assets and properties, real or
personal, tangible or intangible, reflected as owned by it or carried under its
name on the Financial Statements of the Company, the Financial Statements of the
Bank, or the Call Reports of the Bank or acquired subsequent thereto (except to
the extent that such assets and properties have been disposed of for fair value
in the ordinary course of business since December 31, 1997), free and clear of
all liens, encumbrances, mortgages, security interests, restrictions, pledges or
claims, except for (i) those liens, encumbrances, mortgages, security interests,
restrictions, pledges or claims reflected in the Financial Statements of the
Company, the Financial Statements of the Bank and the Call Reports of the Bank
or incurred in the ordinary course of business after December 31, 1997, (ii)
statutory liens for amounts not yet delinquent or which are being contested in
good faith, and (iii) liens, encumbrances, mortgages, security interests,
pledges, claims and title imperfections that do not in the aggregate have a
Material Adverse Effect on the Company.
(b) All agreements pursuant to which the Company, the Bank
or any of their respective subsidiaries leases, subleases or licenses material
real or material personal properties from others are valid, binding and
enforceable in accordance with their respective terms (except as enforceability
may be limited by applicable bankruptcy, insolvency, reorganization, moratorium
or other laws affecting the enforcement of creditors' rights generally and
except that the availability of the equitable remedies of specific performance
or injunctive relief is subject to the discretion of the court before which any
proceedings may be brought). Except as set forth in Disclosure Schedule 3.13(b),
the Company, the Bank and their respective subsidiaries have all right, title
and interest as a lessee under the terms of each lease or sublease, free and
clear of all liens, claims or encumbrances (other than the rights of the
lessor), as of the Effective Time of the Merger, and shall have the right to
transfer each lease or sublease pursuant to this Agreement.
(c) Other than real estate owned, acquired by foreclosure or
voluntary deed in lieu of foreclosure (i) all of the buildings, structures and
fixtures owned, leased or subleased by the Company, the Bank and any of their
respective subsidiaries, are in good operating condition and repair, subject
only to ordinary wear and tear and/or minor defects which do not interfere with
the continued use thereof in the conduct of normal operations, and (ii) all of
the material personal
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properties owned, leased or subleased by the Company, the Bank and any of their
respective subsidiaries, are in good operating condition and repair, subject
only to ordinary wear and tear and/ or minor defects which do not interfere with
the continued use thereof in the conduct of normal operations.
Section 3.14 Real Estate. (a) Disclosure Schedule 3.14(a) identifies
and sets forth a complete legal description for each parcel of real estate or
interest therein owned, leased or subleased by the Company, the Bank or any of
their respective subsidiaries or in which the Company, the Bank or any of their
respective subsidiaries have any ownership or leasehold interest.
(b) Disclosure Schedule 3.14(b) lists or otherwise describes
and sets forth each and every written or oral lease or sublease, together with
the current name, address and telephone number of the landlord or sublandlord
and the landlord's property manager (if any), under which the Company, the Bank
or any of their respective subsidiaries is the lessee or sublessee of any real
property and which relates in any manner to the operation of the businesses of
the Company, the Bank or any of their respective subsidiaries.
(c) Disclosure Schedule 3.14(c) lists or otherwise
describes, with respect to each parcel of leased real property listed on
Disclosure Schedule 3.14(b), each and every Consent required to facilitate the
full and complete assignment of all right, title and interest of the lessee in
such lease or sublease to ST-Sub and thence to ST-Bank and the use and operation
of such real property by ST-Sub or ST-Bank.
(d) As to each parcel of real property owned or used by the
Company, the Bank or any of their respective subsidiaries, none of the Company,
the Bank or any of their respective subsidiaries have received notice of any
pending or, to the knowledge of the Company, the Bank or any of their respective
subsidiaries, threatened condemnation proceedings, litigation proceedings or
mechanics or materialmen's liens.
Section 3.15 Environmental Matters.
(a) Each of the Company, the Bank, their respective
subsidiaries, the Participation Facilities (as defined below), and the Loan
Properties (as defined below) are, and have been, in compliance with all
applicable laws, rules, regulations, standards and requirements of the United
States Environmental Protection Agency and all state and local agencies with
jurisdiction over pollution or protection of the environment, except for
violations which, individually or in the aggregate, will not have a Material
Adverse Effect on the Company.
(b) There is no litigation pending or, to the knowledge of
the Company, the Bank or any of their respective subsidiaries, threatened before
any court, governmental agency or board or other forum in which the Company, the
Bank, their respective subsidiaries, or any Participation Facility has been or,
with respect to threatened litigation may be, named as defendant (i) for alleged
noncompliance (including by any predecessor), with any Environmental Law (as
defined below) or (ii) relating to the release into the environment of any
Hazardous Material (as defined below) or oil, whether or not occurring at or on
a site owned or leased or operated by the Company, the Bank, any of their
respective subsidiaries, or any Participation Facility, except for
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such litigation pending or threatened that will not, individually or in the
aggregate, have a Material Adverse Effect on the Company.
(c) There is no litigation pending or, to the knowledge of
the Company, the Bank and their respective subsidiaries, threatened before any
court, governmental agency or board or other forum in which any Loan Property
(or the Company, the Bank or any of their respective subsidiaries in respect of
such Loan Property) has been or, with respect to threatened litigation, may be,
named as a defendant or potentially responsible party (i) for alleged
noncompliance (including by any predecessor) with any Environmental Law (as
defined below) or (ii) relating to the release into the environment of any
Hazardous Material (as defined below) or oil, whether or not occurring at, on or
involving a Loan Property, except for such litigation pending or threatened that
will not individually or in the aggregate, have a Material Adverse Effect on the
Company.
(d) To the knowledge of the Company, the Bank and any of
their respective subsidiaries, there is no reasonable basis for any litigation
of a type described in 3.15(b) of this Agreement, except as will not have,
individually or in the aggregate, a Material Adverse Effect on the Company.
(e) During the period of (i) ownership or operation by the
Company, the Bank or any of their respective subsidiaries of any of their
respective current properties, or (ii) participation by the Company, the Bank or
any of their respective subsidiaries in the management of any Participation
Facility, or (iii) holding by the Company, the Bank or any of their respective
subsidiaries of a security interest in a Loan Property, there have been no
releases of Hazardous Material or oil in, on, under or affecting such
properties, except where such releases have not and will not, individually or in
the aggregate, have a Material Adverse Effect on the Company.
(f) Prior to the period of (i) ownership or operation by the
Company, the Bank or any of their respective subsidiaries of any of their
respective current properties, (ii) participation by the Company, the Bank or
any of their respective subsidiaries in the management of any Participation
Facility, or (iii) holding by the Company, the Bank or any of their respective
subsidiaries of a security interest in any Loan Property, to the knowledge of
the Company, the Bank and their respective subsidiaries, there were no releases
of Hazardous Material or oil in, on, under or affecting any such property,
Participation Facility or Loan Property, except where such releases have not and
will not, individually or in the aggregate, have a Material Adverse Effect on
the Company.
Section 3.16 Commitments and Contracts. (a) Except as set forth in
Disclosure Schedule 3.16(a), none of the Company, the Bank or any of their
respective subsidiaries is a party or subject to any of the following (whether
written or oral, express or implied):
(i) Any employment contract or understanding (including
any agreement or plan with respect to severance or termination pay liabilities
or fringe benefits) with any present or former officer, director, employee,
including in any such person's capacity as a consultant (other than those which
either are terminable at will without any further amount being payable
thereunder or as a result of such termination by the Company, the Bank or any of
their respective subsidiaries);
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(ii) Any labor contract or agreement with any labor
union;
(iii) Any contract covenants which limit the ability of
the Company, the Bank or any of their respective subsidiaries to compete in any
line of business or which involve any restriction of the geographical area in
which the Company, the Bank or any of their respective subsidiaries may carry on
its business (other than as may be required by law or applicable regulatory
authorities);
(iv) Any lease (other than real estate leases
described on Disclosure Schedule 3.14(b)) or other agreements or contracts with
annual payments aggregating $5,000 or more; or
(v) Any other contract or agreement which would be
required to be disclosed in reports filed by the Company, the Bank or any of
their respective subsidiaries with the SEC, the FRB, or the FDIC and which has
not been so disclosed.
(b) Except as set forth in Disclosure Schedule 3.16(b),
there is not, under any agreement, lease or contract to which the Company, the
Bank or any of their respective subsidiaries is a party, any existing default or
event of default, or any event which with notice or lapse of time, or both,
would constitute a default or force majeure, or provide the basis for any other
claim of excusable delay or non-performance.
Section 3.17 Regulatory, Accounting and Tax Matters. None of the
Company, the Bank or any of their respective subsidiaries has taken or agreed to
take any action, has any knowledge of any fact nor has agreed to any
circumstance that would (i) materially impede or delay receipt of any Consents
of any Regulatory Authorities referred to in this Agreement, (ii) prevent the
transactions contemplated by this Agreement from qualifying as a reorganization
within the meaning of Section 368(a) of the Code, or (iii) materially impede the
ability of SouthTrust to account for the transactions contemplated by this
Agreement as a pooling of interests.
Section 3.18 Registration Obligations. None of the Company, the Bank
or any of their respective subsidiaries is under any obligation, contingent or
otherwise, which will survive the Merger, to register any of its securities
under the Securities Act of 1933 or any state securities laws.
Section 3.19 State Takeover Laws. This Agreement and the
transactions contemplated hereby are not restricted by any applicable state
anti-takeover statute.
Section 3.20 Insurance. Each of the Company, the Bank and their
respective subsidiaries is presently insured, and during each of the past three
(3) calendar years has been insured, for reasonable amounts against such risks
as companies or institutions engaged in a similar business would, in accordance
with good business practice, customarily be insured. To the knowledge of the
Company, the Bank and their respective subsidiaries, the policies of fire,
theft, liability and other insurance maintained with respect to the assets or
businesses of the Company, the Bank and their respective subsidiaries provide
adequate coverage against loss, and the fidelity
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bonds in effect as to which the Company, the Bank or any of their respective
subsidiaries is named an insured are sufficient for their purpose. Such policies
of insurance are listed and described in Disclosure Schedule 3.20.
Section 3.21 Labor. No work stoppage involving the Company, the Bank
or any of their respective subsidiaries is pending as of the date hereof or, to
the knowledge of the Company, the Bank and their respective subsidiaries,
threatened. None of the Company, the Bank or any of their respective
subsidiaries is involved in, or, to the knowledge of the Company, the Bank and
their respective subsidiaries, threatened with or affected by, any proceeding
asserting that the Company, the Bank or any of their respective subsidiaries has
committed an unfair labor practice or any labor dispute, arbitration, lawsuit or
administrative proceeding which might reasonably be expected to have a Material
Adverse Effect on the Company. No union represents or claims to represent any
employees of the Company, the Bank or their respective subsidiaries, and, to the
knowledge of the Company, the Bank and their respective subsidiaries, no labor
union is attempting to organize employees of the Company, the Bank or their
respective subsidiaries.
Section 3.22 Compliance with Laws. Each of the Company, the Bank and
their respective subsidiaries has conducted its business and owned its assets in
accordance with all applicable federal, foreign, state and local laws,
regulations and orders, and is in compliance with such laws, regulations and
orders, except for such violations or non-compliance, which when taken together
as a whole, will not have a Material Adverse Effect on the Company. Except as
disclosed in Disclosure Schedule 3.22, none of the Company, the Bank or any of
their respective subsidiaries:
(a) is in violation of any laws, regulations, rules, orders
or permits applicable to its business or the employees
or agents or representatives conducting its business,
except for violations which individually or in the
aggregate do not have and will not have a Material
Adverse Effect on the Company; and
(b) has received a notification or communication from any
agency or department of federal, state or local
government or the Regulatory Authorities or the staff
thereof (i) asserting that the Company, the Bank or any
of their respective subsidiaries is not in compliance
with any laws or orders which such governmental
authority or Regulatory Authority enforces, where such
noncompliance is reasonably likely to have a Material
Adverse Effect on the Company, (ii) threatening to
revoke any permit, the revocation of which is
reasonably likely to have a Material Adverse Effect on
the Company, (iii) requiring the Company, the Bank or
any of their respective subsidiaries to enter into any
cease and desist order, formal agreement, commitment or
memorandum of understanding, or to adopt any
resolutions or similar undertakings, or (iv) directing,
restricting or limiting, or purporting to direct,
restrict or limit in any manner, the operations of the
Company, the Bank or any of their
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respective subsidiaries, including, without limitation,
any restrictions on the payment of dividends.
Section 3.23 Transactions with Management. Except for (a) deposits,
all of which are on terms and conditions comparable to those made available to
other customers of the Bank at the time such deposits were entered into, (b) the
loans listed on Disclosure Schedule 3.5, (c) the agreements listed on Disclosure
Schedule 3.16, (d) obligations under employee benefit plans of the Company, the
Bank and their respective subsidiaries as set forth on Disclosure Schedule 3.12,
and (e) the items described on Disclosure Schedule 3.23, there are no contracts
with or commitments to present or former stockholders, directors, officers or
employees involving the expenditure of more than $1,000 as to any one
individual, including, any business directly or indirectly controlled by any
such person, or $5,000 for all such contracts or commitments in the aggregate
for all such individuals.
Section 3.24 Derivative Contracts. Neither the Company nor the Bank
is a party to or has agreed to enter into an exchange-traded or over-the-counter
swap, forward, future, option, cap, floor or collar financial contract or
agreement, or any other contract or agreement not included in Financial
Statements of the Company and the Financial Statements of the Bank which is a
financial derivative contract (including various combinations thereof)
("Derivative Contracts"), except for those Derivative Contracts set forth in
Disclosure Schedule 3.24.
Section 3.25 Deposits. To the best of the Company's and the Bank's
knowledge, none of the deposits of the Bank is a "brokered" deposit or is
subject to any encumbrance, legal restraint or other legal process (other than
garnishments, pledges, set off rights, escrow limitations and similar actions
taken in the ordinary course of business), and no portion of such deposits
represents a deposit of any affiliate of the Company's except as set forth in
Disclosure Schedule 3.25.
Section 3.26 Accounting Controls. Each of the Company, the Bank and
their respective subsidiaries has devised and maintained systems of internal
accounting control sufficient to provide reasonable assurances that: (i) all
material transactions are executed in accordance with general or specific
authorization of the Board of Directors and the duly authorized executive
officers of the Company, the Bank and their respective subsidiaries; (ii) all
material transactions are recorded as necessary to permit the preparation of
financial statements in conformity with generally accepted accounting principles
consistently applied with respect to institutions such as the Company, the Bank
and their respective subsidiaries or any other criteria applicable to such
financial statements, and to maintain proper accountability for items therein;
(iii) access to the material properties and assets of the Company, the Bank and
their respective subsidiaries is permitted only in accordance with general or
specific authorization of the Board of Directors and the duly authorized
executive officers of the Company, the Bank and their respective subsidiaries;
and (iv) the recorded accountability for items is compared with the actual
levels at reasonable intervals and appropriate actions taken with respect to any
differences.
Section 3.27 Proxy Materials. None of the information relating to
the Company, the Bank or any of their respective subsidiaries to be included in
the Proxy Statement which is to be mailed to the shareholders of the Company in
connection with the solicitation of their approval of
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this Agreement will, at the time such Proxy Statement is mailed or at the time
of the meeting of shareholders to which such Proxy Statement relates, be false
or misleading with respect to any material fact, or omit to state any material
fact, necessary in order to make a statement therein not false or misleading.
The legal responsibility for the contents of such Proxy Statement relating to
the Company, the Bank or any of their respective subsidiaries shall be and
remain with the Company, the Bank and their respective subsidiaries.
Section 3.28 Deposit Insurance. The deposit accounts of the Bank are
insured by the Bank Insurance Fund ("BIF") in accordance with the provisions of
the Federal Deposit Insurance Act (the "Act"); the Bank has paid all regular
premiums and special assessments and filed all reports required under the Act.
Section 3.29 Year 2000. Except as specifically set forth in
Disclosure Schedule 3.29, to the Company's knowledge, all computer software
necessary for the conduct of the business of the Company, the Bank and their
respective subsidiaries (the "Software") is designed to be used prior to, during
and after the calendar year 2000 A.D., and the Software will operate during each
such time period without error relating to the year 2000, specifically including
any error relating to, or the product of, date data which represents or
references different centuries or more than one century. The Software accepts,
calculates, sorts, extracts, and otherwise processes date inputs and date
values, and returns and displays date values, in a consistent manner regardless
of the dates used, whether before, on, or after January 1, 2000.
Section 3.30 Untrue Statements and Omissions. No representation or
warranty contained in Article III of this Agreement or in the Disclosure
Schedules of the Company contains any untrue statement of a material fact or
omits to state a material fact necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF
SOUTHTRUST AND ST-SUB
SouthTrust and ST-Sub hereby jointly and severally represent and
warrant to Company as follows as of the date hereof and as of all times up to
and including the Effective Time of the Merger (except as otherwise provided):
Section 4.1 Organization and Related Matters of SouthTrust. (a)
SouthTrust is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware. SouthTrust has the corporate
power and authority to own or lease all of its properties and assets and to
carry on its business as now conducted, or as proposed to be conducted pursuant
to this Agreement, and SouthTrust is licensed or qualified to do business in
each jurisdiction in which the nature of the business conducted by SouthTrust,
or the character or location of the properties and assets owned or leased by
SouthTrust makes such licensing or qualification necessary, except where the
failure to be so licensed or qualified (or steps necessary to cure such
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failure) would not have a Material Adverse Effect on SouthTrust. SouthTrust is
duly registered as a bank holding company under the Bank Holding Company Act of
1956, as amended. True and correct copies of the Restated Certificate of
Incorporation of SouthTrust and the Bylaws of SouthTrust, each as amended to the
date hereof, have been delivered to Company.
(b) SouthTrust has in effect all federal, state, local and
foreign governmental, regulatory and other authorizations, permits and licenses
necessary for it to own or lease its properties and assets and to carry on its
business as now conducted, the absence of which, either individually or in the
aggregate, would have a Material Adverse Effect on SouthTrust.
Section 4.2 Organization and Related Matters of ST-Sub. (a) ST-Sub
is a corporation duly organized, validly existing and in good standing under the
laws of the State of Alabama. ST- Sub has, or as of the Effective Time of the
Merger, will have, the corporate power and authority to own or lease all of its
properties and assets and to carry on its business as now conducted, or as
proposed to be conducted pursuant to this Agreement, and ST-Sub is licensed or
qualified to do business in each jurisdiction in which the nature of the
business conducted by ST-Sub, or the character or location of the properties and
assets owned or leased by ST-Sub makes such licensing or qualification
necessary, except where the failure to be so licensed or qualified (or steps
necessary to cure such failure) would not have a Material Adverse Effect on
SouthTrust. True and correct copies of the Articles of Incorporation of ST-Sub
and the Bylaws of ST-Sub, each as amended to the date hereof have been delivered
to the Company.
(b) ST-Sub has in effect all federal, state, local and
foreign governmental, regulatory and other authorizations, permits and licenses
necessary for it to own or lease its properties and assets and to carry on its
business as now conducted, the absence of which, either individually or in the
aggregate, would have a Material Adverse Effect on SouthTrust.
Section 4.3 Capitalization. As of March 31, 1998, the authorized
capital stock of SouthTrust consisted of 300,000,000 shares of common stock, par
value $2.50 per share, 160,437,557 shares (which includes the rights associated
with such shares pursuant to that certain Rights Agreement dated as of February
22, 1989 between SouthTrust and Mellon Bank, N.A.) of which were issued and
outstanding (exclusive of any such shares held in the treasury of SouthTrust as
of such date), and 5,000,000 shares of preferred stock, par value $1.00 per
share, none of which is issued and outstanding as of the date hereof. All issued
and outstanding SouthTrust Shares have been duly authorized and validly issued,
and all such shares are fully paid and nonassessable.
Section 4.4 Authorization. The execution, delivery, and performance
of this Agreement, and the consummation of the transactions contemplated hereby
and in any related agreements, have been or, as of the Effective Time of the
Merger, will have been duly authorized by the Boards of Directors of SouthTrust
and ST-Sub, and by the shareholder of ST-Sub, and no other corporate or
shareholder proceedings on the part of SouthTrust or ST-Sub are or will be
necessary to authorize this Agreement and the consummation of the transactions
contemplated hereby. This Agreement, when duly authorized, will be the valid and
binding obligation of SouthTrust and ST-Sub enforceable against each in
accordance with its terms, except as such enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium
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or similar laws affecting the enforcement of creditors rights generally and
except that the availability of the equitable remedy of specific performance or
injunctive relief is subject to the discretion of the court before which any
proceeding may be brought. Neither the execution, delivery or performance of
this Agreement nor the consummation of the transactions contemplated hereby will
(i) violate any provision of the Restated Certificate of Incorporation or Bylaws
of SouthTrust or the Articles of Incorporation or Bylaws of ST-Sub or, (ii) to
SouthTrust's knowledge and assuming that any necessary Consents, including, but
not limited to those of the Regulatory Authorities, referred to herein are duly
obtained, (A) violate, conflict with, result in a breach of any provisions of,
constitute a default (or an event which, with notice or lapse of time, or both,
would constitute a default) under, result in the termination of, accelerate the
performance required by or result in the creation of any lien, security
interest, charge or other encumbrance upon any of the properties or assets of
SouthTrust or ST-Sub under any of the terms, conditions or provisions of any
material note, bond, mortgage, indenture, deed of trust, license, permit, lease,
agreement or other instrument or obligation to which SouthTrust or ST-Sub is a
party, or by which SouthTrust or ST-Sub or any of their respective properties or
assets may be bound or affected, (B) violate any statute, code, ordinance, rule,
regulation, judgment, order, writ, decree or injunction applicable to SouthTrust
or ST-Sub or any of their respective material properties or assets, except for
(X) such conflicts, breaches or defaults as are set forth in Disclosure Schedule
4.4; and (Y) with respect to (B) above, such as individually or in the aggregate
will not have a Material Adverse Effect on SouthTrust.
Section 4.5 Financial Statements. (a) SouthTrust has made available
to Company copies of the consolidated financial statements of SouthTrust as of
and for the two (2) fiscal years ended immediately prior to the date of this
Agreement, and as of and for the period ended after the most recent fiscal year
and prior to the date of this Agreement. SouthTrust will make available to the
Company, as soon as practicable following the preparation of additional
consolidated financial statements for each subsequent fiscal period or year of
SouthTrust, the consolidated financial statements of SouthTrust as of and for
such subsequent fiscal period or year (such consolidated financial statements,
unless otherwise indicated, being hereinafter referred to collectively as the
"Financial Statements of SouthTrust").
(b) Each of the Financial Statements of SouthTrust
(including the related notes) have been or will be prepared in all material
respects in accordance with generally accepted accounting principles, which
principles have been or will be consistently applied during the periods
involved, except as otherwise noted therein, and the books and records of
SouthTrust have been, are being, and will be maintained in all material respects
in accordance with applicable legal and accounting requirements and reflect only
the actual transactions. Each of the Financial Statements of SouthTrust
(including the related notes) fairly presents or will fairly present the
consolidated financial position of SouthTrust as of the respective dates thereof
and fairly presents or will fairly present the results of operations of
SouthTrust for the respective periods therein set forth.
(c) Since December 31, 1997, SouthTrust has not incurred any
obligation or liability (contingent or otherwise) that has or might reasonably
be expected to have, individually or in the aggregate, a Material Adverse Effect
on SouthTrust, except obligations and liabilities (i)
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which are accrued or reserved against in the Financial Statements of SouthTrust
or reflected in the notes thereto, and (ii) which were incurred after December
31, 1997 in the ordinary course of business consistent with past practices.
Since December 31, 1997, and except for the matters described in (i) and (ii)
above, SouthTrust has not incurred or paid any obligation or liability which
would be material to the Condition of SouthTrust on a consolidated basis.
Section 4.6 Absence of Certain Changes or Events. Since December 31,
1997, there has not been any Material Adverse Effect on SouthTrust, and to the
knowledge of SouthTrust, no fact or condition exists which might reasonably be
expected to cause such a Material Adverse Effect on SouthTrust in the future.
Section 4.7 Legal Proceedings, Etc. Except as set forth on
Disclosure Schedule 4.7 hereto, or as disclosed in any registration statement
filed by SouthTrust with the SEC and made available to the Company hereunder,
neither SouthTrust nor any of its affiliates is a party to any, and there are no
pending, or, to the knowledge of SouthTrust, threatened, legal, administrative,
arbitral or other proceedings, claims, actions, causes of action or governmental
investigations of any nature against SouthTrust challenging the validity or
propriety of the transactions contemplated by this Agreement or which would be
required to be reported by SouthTrust pursuant to Item 103 of Regulation S-K
promulgated by the SEC.
Section 4.8 Insurance. SouthTrust has in effect insurance coverage
with insurers which, in respect of amounts, premiums, types and risks insured,
constitutes reasonably adequate coverage against all risks customarily insured
against by institutions comparable in size and operation to SouthTrust.
Section 4.9 Consents and Approvals. Except for (i) the Consents of
the Regulatory Authorities; (ii) approval of this Agreement by the respective
shareholders of ST-Sub and the Company; (iii) issuance of a Certificate of
Merger by the OCC; (iv) the filing of a Certificate or Articles of Merger with
the States of Alabama and Georgia; or (v) as disclosed in Disclosure Schedule
4.9, no Consents of any person are necessary in connection with the execution
and delivery by SouthTrust and ST-Bank or, to the knowledge of SouthTrust, by
the Company of this Agreement, and the consummation of the Merger and the other
transactions contemplated hereby.
Section 4.10 Accounting, Tax, Regulatory Matters. SouthTrust has not
agreed to take any action, has no knowledge of any fact and has not agreed to
any circumstance that would (i) prevent the transactions contemplated hereby,
including the Merger, from qualifying as a reorganization within the meaning of
Section 368 of the Code, (ii) materially impede or delay receipt of any Consent
from any Regulatory Authority referred to in this Agreement, or (iii) materially
impede the ability of SouthTrust to account for the transactions contemplated by
this Agreement as a pooling of interests.
Section 4.11 Proxy Materials. None of the information relating to
SouthTrust or any of its subsidiaries to be included or incorporated by
reference in the Proxy Statement which is to be mailed to the shareholders of
the Company in connection with the solicitation of their approval of this
Agreement will, at the time such Proxy Statement is mailed or at the time of the
meeting of
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shareholders of the Company to which such Proxy Statement relates, be false or
misleading with respect to any material fact, or omit to state any material fact
necessary in order to make a statement therein not false or misleading. The
legal responsibility for the contents of the information supplied by SouthTrust
and relating to SouthTrust which is either included or incorporated by reference
in the Proxy Statement shall be and remain with SouthTrust.
Section 4.12 No Broker's or Finder's Fees. Neither SouthTrust nor
ST-Sub or any of their subsidiaries, affiliates or employers has employed any
broker or finder or incurred any liability for any broker's fees, commissions or
finder's fees in connection with this Agreement or the consummation of any of
the transactions contemplated herein.
Section 4.13 Untrue Statements and Omissions. No representation or
warranty contained in Article IV of this Agreement or in the Disclosure
Schedules of SouthTrust or ST-Sub contains any untrue statement of a material
fact or omits to state a material fact necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading.
Section 4.14 SEC Filings. SouthTrust has filed all forms, reports
and documents required to be filed by SouthTrust with the SEC since December 31,
1994, other than registration statements on Form S-4 and S-8 (collectively, the
"SouthTrust SEC Reports"). The SouthTrust SEC Reports (i) at the time they were
filed, complied in all material respects with the applicable requirements of the
Securities Act of 1933, as amended, and the Securities Exchange Act of 1934, as
amended, as the case may be, (ii) did not at the time they were filed (or if
amended or superseded by a filing prior to the date of this Agreement, then on
the date of such filing) contain any untrue statement of a material fact or omit
to state a material fact required to be stated in such SouthTrust SEC Reports or
necessary in order to make the statements in such SouthTrust SEC Reports, in
light of the circumstances under which they were made, not misleading.
Section 4.15 Compliance with Laws. Each of SouthTrust or ST-Sub has
conducted its business and owned its assets in accordance with all applicable
federal, foreign, state and local laws, regulations and orders, and is in
compliance with such laws, regulations and orders, except for such violations or
non-compliance, which when taken together as a whole, will not have a Material
Adverse Effect on SouthTrust. Except as disclosed in Disclosure Schedule 4.15,
none of SouthTrust or ST-Sub:
(a) is in violation of any laws, regulations, rules, orders
or permits applicable to its business or the employees
or agents or representatives conducting its business,
except for violations which individually or in the
aggregate do not have and will not have a Material
Adverse Effect on SouthTrust; and
(b) has received a notification or communication from any
agency or department of federal, state or local
government or the Regulatory Authorities or the staff
thereof (i) asserting that SouthTrust or ST-Sub is not
in compliance with any laws or orders which such
governmental authority or Regulatory Authority
enforces, where such noncompliance
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is reasonably likely to have a Material Adverse Effect
on SouthTrust, (ii) threatening to revoke any permit,
the revocation of which is reasonably likely to have a
Material Adverse Effect on SouthTrust, (iii) requiring
SouthTrust or ST-Sub to enter into any cease and desist
order, formal agreement, commitment or memorandum of
understanding, or to adopt any resolutions or similar
undertakings, or (iv) directing, restricting or
limiting, or purporting to direct, restrict or limit in
any manner, the operations of SouthTrust or ST-Sub,
including, without limitation, any restrictions on the
payment of dividends.
Section 4.16 Year 2000. Except as specifically set forth in
Disclosure Schedule 4.16, to SouthTrust's knowledge, all computer software
necessary for the conduct of the business of SouthTrust, ST-Sub and their
respective subsidiaries (the "SouthTrust Software") is designed to be used prior
to, during and after the calendar year 2000 A.D., and the SouthTrust Software
will operate during each such time period without error relating to the year
2000, specifically including any error relating to, or the product of, date data
which represents or references different centuries or more than one century. The
SouthTrust Software accepts, calculates, sorts, extracts, and otherwise
processes date inputs and date values, and returns and displays date values, in
a consistent manner regardless of the dates used, whether before, on, or after
January 1, 2000.
ARTICLE V
COVENANTS AND AGREEMENTS
Section 5.1 Conduct of the Business of Company. (a) During the
period from the date of this Agreement to the Effective Time of the Merger, the
Company shall and shall cause the Bank and each subsidiary of the Company and
the Bank to, (i) conduct its business in the usual, regular and ordinary course
consistent with past practice and prudent banking and business principles, (ii)
use its best efforts to maintain and preserve intact its business organization,
employees, goodwill with customers and advantageous business relationships and
retain the services of its officers and key employees, and (iii) except as
required by law or regulation, take no action which would adversely affect or
delay the ability of Company or SouthTrust to obtain any Consent from any
Regulatory Authorities or other approvals required for the consummation of the
transactions contemplated hereby or to perform its covenants and agreements
under this Agreement.
(b) During the period from the date of this Agreement to the
Effective Time of the Merger, except as required by law or regulation, the
Company shall not, and it shall not permit the Bank or any of their respective
subsidiaries, without the prior written consent of SouthTrust, to:
(i) change, delete or add any provision of or to the Articles of
Incorporation or Bylaws of the Company, the Articles of
Association of the Bank or the Articles or Certificates of
Incorporation or Bylaws of any of their respective
subsidiaries;
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(ii) except for the issuance of the Company Shares pursuant to
the terms of the Company Options, change the number of
shares of the authorized, issued or outstanding capital
stock of the Company, including any issuance, purchase,
redemption, split, combination or reclassification thereof,
or issue or grant any option, warrant, call, commitment,
subscription, right or agreement to purchase relating to
the authorized or issued capital stock of the Company,
declare, set aside or pay any dividend or other
distribution with respect to the outstanding capital stock
of the Company; provided, however, that the Company may (to
the extent it is legally able to do so by applicable law),
but shall not be obligated to, declare and pay a dividend
with respect to the outstanding capital stock of the
Company in an amount per share that does not exceed the
product of the per share amount of any dividend declared by
SouthTrust with respect to each SouthTrust Share during the
period from the date of this Agreement to the Effective
Time of the Merger multiplied by the Conversion Ratio; and,
provided, always, that any such dividend declared by the
Company must be declared in accordance with the dividend
policy of the Company existing at the date of this
Agreement and with past practice;
(iii) incur any material liabilities or material obligations
(other than deposit liabilities and short-term borrowings
in the ordinary course of business), whether directly or by
way of guaranty, including any obligation for borrowed
money, or whether evidenced by any note, bond, debenture,
or similar instrument, except in the ordinary course of
business consistent with past practice;
(iv) make any capital expenditures individually in excess of
$25,000, or in the aggregate in excess of $50,000 other
than pursuant to binding commitments existing on December
31, 1997 and disclosed in a Disclosure Schedule delivered
pursuant to Article III of this Agreement or in the annexed
Disclosure Schedule 5.1(b)(iv) and other than expenditures
necessary to maintain existing assets in good repair;
(v) sell, transfer, convey or otherwise dispose of any real
property (including "other real estate owned") or interest
therein or any tangible or intangible personal property
having a book value in excess of or in exchange for
consideration in excess of $25,000 for each such parcel or
interest other than in the ordinary course of business for
reasonable and adequate consideration;
(vi) pay any bonuses to any executive officer or director except
pursuant to the terms of an enforceable agreement as
reflected in annexed
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Disclosure Schedule 5.1(b)(vi); enter into any new, or
amend in any respect any existing employment, consulting,
non-competition or independent contractor agreement with
any person, except as may be required by law; alter the
terms of any existing incentive bonus or commission plan;
adopt any new or amend in any material respect any existing
employee benefit plan, except as may be required by law or
to maintain the tax qualified status of any such plan;
grant any general increase in compensation to its employees
as a class or to its officers except for non-executive
officers in the ordinary course of business and consistent
with past practices and policies or except in accordance
with the terms of an enforceable written agreement; grant
any material increases in fees or other increases in
compensation or in other benefits to any of its directors;
or effect any change in any material respect in retirement
benefits to any class of employees or officers, except as
required by law;
(vii) enter into or extend any agreement, lease or license
relating to real property, tangible or intangible personal
property or any service or other function (including,
without limitation), data processing or bankcard functions
relating to the Company, the Bank or any of their
respective subsidiaries that involves an aggregate of
$25,000;
(viii) increase or decrease the rate of interest paid on time
deposits or on certificates of deposit, except in a manner
and pursuant to policies consistent with the Company and
the Bank's past practices;
(ix) purchase or otherwise acquire any investment securities for
its own account having an average remaining life to
maturity greater than five years, or any asset-backed
security, other than those issued or guaranteed by the
Government National Mortgage Association, the Federal
National Mortgage Association or Home Loan Mortgage
Corporation, or any Derivative Contract;
(x) acquire twenty percent (20%) or more of the assets or
equity securities of any person or acquire direct or
indirect control of any person, other than in connection
with (A) any internal reorganization or consolidation
involving existing subsidiaries of the Company or the Bank
which has been approved in advance in writing by
SouthTrust, (B) foreclosures in the ordinary course of
business, (C) acquisitions of control by a banking
subsidiary in a fiduciary capacity or (D) the creation of
new subsidiaries organized to conduct and continue
activities otherwise permitted by this Agreement; or
(xi) commence any cause of action or proceeding other than in
accordance with past practice or settle any action, claim,
arbitration,
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complaint, criminal prosecution, demand letter,
governmental or other examination or investigation,
hearing, inquiry or other proceeding against the Company,
the Bank or any of their respective subsidiaries for
material money damages or restrictions upon any of their
operations.
Section 5.2 Current Information. During the period from the date of
this Agreement to the Effective Time of the Merger or the time of termination or
abandonment of this Agreement, the Company will cause one or more of its
designated representatives to confer on a regular and frequent basis with
representatives of SouthTrust and to report the general status of the ongoing
operations of the Company, the Bank and their respective subsidiaries. The
Company will promptly notify SouthTrust of any material change in the normal
course of business or the operations or the properties of the Company, the Bank
or any of their respective subsidiaries, any governmental complaints,
investigations or hearings (or communications indicating that the same may be
contemplated) affecting the Company, the Bank or any of their respective
subsidiaries, the institution or the threat of material litigation, claims,
threats or causes of action involving the Company, the Bank or any of their
respective subsidiaries, and will keep SouthTrust fully informed of such events.
The Company will furnish to SouthTrust, promptly after the preparation and/or
receipt by the Company thereof, copies of its unaudited periodic financial
statements, and shall furnish or cause the Bank or such other applicable
subsidiary of the Company or the Bank to furnish to SouthTrust promptly after
the preparation and/or receipt by the Company, the Bank or such subsidiary,
copies of all periodic financial statements of the Bank and such subsidiaries,
if available, and all call reports with respect to the Bank for the applicable
periods then ended, and such financial statements and call reports shall, upon
delivery to SouthTrust, be treated, for purposes of Section 3.3 hereof, as among
the Financial Statements of the Company, the Financial Statements of the Bank
and the Call Reports of the Bank.
Section 5.3 Access to Properties; Personnel and Records. (a) So long
as this Agreement shall remain in effect, the Company, the Bank and their
respective subsidiaries shall permit SouthTrust or its agents full access,
during normal business hours, to the properties of the Company, the Bank and
their respective subsidiaries, and shall disclose and make available (together
with the right to copy) to SouthTrust and to its internal auditors, loan review
officers, attorneys, accountants and other representatives, all books, papers
and records relating to the assets, stock, properties, operations, obligations
and liabilities of the Company, the Bank or any of their respective
subsidiaries, including all books of account (including the general ledger), tax
records, minute books of directors' and shareholders' meetings, organizational
documents, bylaws, contracts and agreements, filings with any regulatory agency,
examination reports, correspondence with regulatory or taxing authorities,
documents relating to assets, titles, abstracts, appraisals, consultant's
reports, plans affecting employees, securities transfer records and stockholder
lists, and any other assets, business activities or prospects in which
SouthTrust may have a reasonable interest, and the Company, the Bank and their
respective subsidiaries shall use their reasonable best efforts to provide
SouthTrust and its representatives access to the work papers of the Company's
accountants. The Company, the Bank and their respective subsidiaries shall not
be required to
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provide access to or to disclose information where such access or disclosure
would violate or prejudice the rights of any customer, would contravene any law,
rule, regulation, order or judgment or would violate any confidentiality
agreement; provided that the Company, the Bank and their respective subsidiaries
shall cooperate, to the extent it does not incur undue cost, with SouthTrust in
seeking to obtain Consents from appropriate parties under whose rights or
authority access is otherwise restricted. The foregoing rights granted to
SouthTrust shall not, whether or not and regardless of the extent to which the
same are exercised, affect the representations and warranties made in this
Agreement by the Company and its subsidiaries.
(b) All information furnished by the parties hereto pursuant
to this Agreement shall be treated as the sole property of the party providing
such information until the consummation of the Merger contemplated hereby and,
if such transaction shall not occur, the party receiving the information shall
return to the party which furnished such information, all documents or other
materials containing, reflecting or referring to such information, shall use its
best efforts to keep confidential all such information, and shall not directly
or indirectly use such information for any competitive or other commercial
purposes. The obligation to keep such information confidential shall continue
for two (2) years from the date the proposed transactions are abandoned but
shall not apply to (i) any information which (A) the party receiving the
information was already in possession of prior to disclosure thereof by the
party furnishing the information, (B) was then available to the public, or (C)
became available to the public through no fault of the party receiving the
information; or (ii) disclosures pursuant to a legal requirement or in
accordance with an order of a court of competent jurisdiction or regulatory
agency; provided that the party which is the subject of any such legal
requirement or order shall use its best efforts to give the other party at least
ten (10) business days prior notice of any such required disclosure. Each party
hereto acknowledges and agrees that a breach of any of their respective
obligations under this Section 5.3 would cause the other irreparable harm for
which there is no adequate remedy at law, and that, accordingly, each is
entitled to injunctive and other equitable relief for the enforcement thereof in
addition to damages or any other relief available at law.
Section 5.4 Approval of Shareholders. The Company will take all
steps necessary under applicable laws to call, give notice of, convene and hold
a meeting of its shareholders at such time as may be mutually agreed to by the
parties for the purpose of approving this Agreement and the transactions
contemplated hereby and for such other purposes consistent with the complete
performance of this Agreement as may be necessary or desirable. The Board of
Directors of the Company will recommend to its shareholders the approval of this
Agreement and the transactions contemplated hereby and the Company will use its
best efforts to obtain the necessary approvals by its shareholders of this
Agreement and the transactions contemplated hereby.
Section 5.5 No Other Bids. Except with respect to this Agreement and
the transactions contemplated hereby, neither the Company nor any "affiliate"
(as defined below) thereof, nor any investment banker, attorney, accountant or
other representative (collectively, "representative") retained by the Company,
the Bank or any of their respective subsidiaries shall directly or indirectly
solicit any "takeover proposal" (as defined below) by any other party. Except to
the extent necessary to comply with the fiduciary duties of the Company's Board
of Directors
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as advised in writing by counsel to such Board of Directors, neither the Company
nor any affiliate or representative thereof shall furnish any non-public
information that it is not legally obligated to furnish or negotiate or enter
into any agreement or contract with respect to any takeover proposal, and shall
direct and use its reasonable efforts to cause its affiliates or representatives
not to engage in any of the foregoing, but the Company may communicate
information about such a takeover proposal to its shareholders if and to the
extent it is required to do so in order to comply with its legal obligations as
advised in writing by counsel. The Company shall promptly notify SouthTrust
orally and in writing in the event that it receives any inquiry or proposal
relating to any such transaction. The Company shall immediately cease and cause
to be terminated as of the date of this Agreement any existing activities,
discussions or negotiations with any other parties conducted heretofore with
respect to any of the foregoing. As used in this Section 5.5, an "affiliate" of
a party means (i) any other party directly or indirectly controlling, controlled
by or under common control with such party, (ii) any executive officer,
director, partner, employer or direct or indirect beneficial owner of a 10% or
greater equity or voting interest in such party, or (iii) any other party for
which a party described in clause (ii) acts in any such capacity. As used in
this Section 5.5, "takeover proposal" shall mean any proposal for a merger or
other business combination involving the Company, the Bank or any of their
respective subsidiaries or for the acquisition of a significant equity interest
in the Company, the Bank or any of their respective subsidiaries or for the
acquisition of a significant portion of the assets or liabilities of the
Company, the Bank or any of their respective subsidiaries.
Section 5.6 Notice of Deadlines. Disclosure Schedule 5.6 lists the
deadlines for extensions or terminations of any material leases, agreements or
licenses (including specifically real property leases and data processing
agreements) to which the Company, the Bank or any of their respective
subsidiaries is a party.
Section 5.7 Affiliates. Concurrently with the execution of this
Agreement, the Company shall deliver to SouthTrust a letter identifying all
persons who are anticipated to be, at the time this Agreement is submitted for
approval to the shareholders of the Company, "affiliates" of the Company for
purposes of Rule 145 under the Securities Act of 1933. In addition, the Company
shall use its reasonable efforts to cause each person who is an "affiliate" in
the letter referred to above to deliver to SouthTrust not later than ten (10)
days following execution of this Agreement, a written agreement, substantially
in the form of EXHIBIT 5.7, providing that such person will not sell, pledge,
transfer, or otherwise dispose of the Company Shares held by such person, except
as contemplated by such agreement or by this Agreement, and will not sell,
pledge, transfer, or otherwise dispose of the SouthTrust Shares to be received
by such person upon consummation of the Merger except in compliance with
applicable provisions of the Securities Act of 1933, and the rules and
regulations promulgated thereunder until such time as the financial results
covering at least thirty (30) days of combined operations of SouthTrust and the
Company and its subsidiaries have been published within the meaning of Section
201.01 of the SEC's Codification of Financial Reporting Policies. If the Merger
will qualify for pooling-of-interests accounting treatment, the SouthTrust
Shares issued to such affiliates of the Company in exchange for the Company
Shares shall not be transferable until such time as the financial results
covering at least thirty (30) days of combined operations of SouthTrust and the
Company and its subsidiaries
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have been published within the meaning of Section 201.01 of the SEC's
Codification of Financial Reporting Policies regardless of whether each such
person has provided the written agreement referred to in this Section 5.7.
SouthTrust shall not be required to maintain the effectiveness of the
Registration Statement under the Securities Act of 1933 for the purposes of
resale of SouthTrust Shares by such persons.
Section 5.8 Maintenance of Properties. The Company, the Bank and
their respective subsidiaries will maintain their respective properties and
assets in satisfactory condition and repair for the purposes for which they are
intended in all material respects, ordinary wear and tear excepted.
Section 5.9 Environmental Audits. At the reasonable election of
SouthTrust, the Company will, at its own expense, with respect to each parcel of
real property that the Company, the Bank or any of their respective subsidiaries
owns, leases or subleases, procure and deliver to SouthTrust, at least thirty
(30) days prior to the Effective Time of the Merger, an environmental audit,
which audit shall be reasonably acceptable to and shall be conducted by a firm
reasonably acceptable to SouthTrust.
Section 5.10 Title Insurance. At the reasonable election of
SouthTrust, the Company will, at its own expense, with respect to each parcel of
real property that the Company, the Bank or any of their respective subsidiaries
owns, leases or subleases, procure and deliver to SouthTrust, at least thirty
(30) days prior to the Effective Time of the Merger, owner's title insurance
issued in such amounts and by such insurance company reasonably acceptable to
SouthTrust, which policy shall be free of all material exceptions to
SouthTrust's reasonable satisfaction.
Section 5.11 Surveys. At the reasonable election of SouthTrust, with
respect to each parcel of real property as to which a title insurance policy is
to be procured pursuant to Section 5.10, the Company, at its own expense, will
procure and deliver to SouthTrust at least thirty (30) days prior to the
Effective Time of the Merger, a survey of such real property, which survey shall
be reasonably acceptable to and shall be prepared by a licensed surveyor
reasonably acceptable to SouthTrust, disclosing the locations of all
improvements, easements, sidewalks, roadways, utility lines and other matters
customarily shown on such surveys and showing access affirmatively to public
streets and roads and providing the legal description of the property in a form
suitable for recording and insuring the title thereof (the "Survey"). The Survey
shall not disclose any survey defect or encroachment from or onto such real
property that has not been cured or insured over prior to the Effective Time of
the Merger.
Section 5.12 Consents to Assign and Use Leased Premises. With
respect to the leases disclosed in Disclosure Schedule 3.14(b), the Company
will, or shall cause the Bank and each applicable subsidiary of the Company and
the Bank to, obtain all Consents necessary or appropriate to transfer and assign
all right, title and interest of the Company, the Bank and their respective
subsidiaries to ST-Bank and to permit the use and operation of the leased
premises by ST-Bank.
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Section 5.13 Exemption Under Anti-Takeover Statutes. Prior to the
Effective Time of the Merger, the Company will use its best efforts to take all
steps required to exempt the transactions contemplated by this Agreement from
any applicable state anti-takeover law.
Section 5.14 Conforming Accounting and Reserve Policies. At the
request of SouthTrust, the Company shall immediately prior to Closing establish
and take such reserves and accruals as SouthTrust reasonably shall request to
conform the Bank's loan, accrual, reserve and other accounting policies to the
policies of ST-Bank, provided however, such requested conforming adjustment
shall not be taken into account as having a Material Adverse Effect on the
Company.
Section 5.15 Publicity. Except as otherwise required by law or the
rules of NASDAQ, so long as this Agreement is in effect, neither ST-Sub nor the
Company shall, or shall permit any of their respective subsidiaries or
Affiliates to, issue or cause the publication of any press release or other
public announcement with respect to, or otherwise make any public statement
concerning, the transactions contemplated by this Agreement without the consent
of the other party, which consent shall not be unreasonably withheld. In the
event such press release, public statement or public announcement is required by
law, the announcing party will give the other party advance notice of such and
provide a copy of the proposed release, statement or announcement to the other
party.
Section 5.16 Compliance Matters. Prior to the Effective Time of the
Merger, the Company shall take, or cause to be taken, all steps reasonably
requested by SouthTrust to cure any deficiencies in regulatory compliance by the
Company, the Bank or any of their respective subsidiaries, including compliance
with Regulations Z and CC of the FRB); provided that neither SouthTrust nor
ST-Sub shall be responsible for discovering or have any obligation to disclose
the existence of such defects to the Company nor shall SouthTrust or ST-Sub have
any liability resulting from such deficiencies or attempts to cure them.
Section 5.17 Subsidiary Merger Agreement. Prior to the effective
time of the Merger, ST-Bank and the Bank shall have executed and delivered the
Subsidiary Merger Agreement substantially in the form annexed hereto as EXHIBIT
5.17 and the Company shall have voted by action by written consent or as
otherwise required the shares of capital stock of the Bank held by the Company
in favor of such Subsidiary Merger Agreement and the transactions contemplated
thereby.
Section 5.18 Employee Issues. (a) SouthTrust agrees, and agrees that
it shall cause ST- Sub to ensure, that the existing employment agreements
between the Company and William S. Huggins, Michael S. Carson and Thomas Z.
Lanier, respectively, will continue in full force and effect after the Closing,
as amended by certain amending agreements, to be executed by Messrs. Huggins,
Carson and Lanier, in substantially the form attached as EXHIBIT 5.18(a), (b)
and (c), respectively.
(b) SouthTrust agrees, and agrees that it shall cause ST-Sub
to ensure that, pursuant to their respective employment agreements, as amended,
Messrs. Huggins, Lanier and Carson shall be paid a performance bonus for fiscal
year 1998 in an amount equal to the performance bonus paid to each of them,
respectively, by the Company with respect to fiscal year 1997. Such amounts will
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be payable to Messrs. Huggins, Lanier and Carson within thirty (30) days of the
end of fiscal year 1998. The Company agrees that prior to the Closing it shall,
with respect to the annual incentive bonuses for fiscal year 1998, accrue not
more than $100,000, being the aggregate amount of performance bonuses paid to
Messrs. Huggins, Lanier and Carson in fiscal year 1997 plus the estimated
aggregate amount of performance that may be paid to other key officers of the
Bank.
Section 5.19 Coordination of Dividends. After the date of this
Agreement the Company shall coordinate with SouthTrust the declaration of any
dividends in respect of the Company Shares and the record dates and payments
dates relating thereto, it being the intention of the parties that the holders
of Company Shares shall not receive more than one dividend, or fail to receive
one dividend, for any calendar quarter with respect to their Company Shares and
any SouthTrust Shares any holder of Company Shares receives in exchange therefor
in the Merger.
ARTICLE VI
ADDITIONAL COVENANTS AND AGREEMENTS
Section 6.1 Best Efforts; Cooperation. Subject to the terms and
conditions herein provided, each of the parties hereto agrees to use its best
efforts promptly to take, or cause to be taken, all actions and to do, or cause
to be done, all things necessary, proper or advisable under applicable laws and
regulations, or otherwise, including attempting to obtain all necessary
Consents, to consummate and make effective, as soon as practicable, the
transactions contemplated by this Agreement.
Section 6.2 Regulatory Matters. (a) Promptly following the execution
and delivery of this Agreement, SouthTrust and the Company shall cause to be
prepared and filed all required applications and filings with the Regulatory
Authorities which are necessary or contemplated for the obtaining of the
Consents of the Regulatory Authorities or consummation of the Merger. Such
applications and filings shall be in such form as may be prescribed by the
respective government agencies and shall contain such information as they may
require. The parties hereto will cooperate with each other and use their best
efforts to prepare and execute all necessary documentation, to effect all
necessary or contemplated filings and to obtain all necessary or contemplated
permits, consents, approvals, rulings and authorizations of government agencies
and third parties which are necessary or contemplated to consummate the
transactions contemplated by this Agreement, including, without limitation,
those required or contemplated from the Regulatory Authorities, and the
shareholders of the Company. Each of the parties shall have the right to review
and approve in advance, which approval shall not be unreasonably withheld, any
filing made with, or written material submitted to, any government agency in
connection with the transactions contemplated by this Agreement.
(b) Each party hereto will furnish the other party with all
information concerning itself, its subsidiaries, directors, trustees, officers,
shareholders and depositors, as applicable, and such other matters as may be
necessary or advisable in connection with any statement or application made by
or on behalf of any such party to any governmental body in
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connection with the transactions, applications or filings contemplated by this
Agreement. Neither party shall be required to provide access to or to disclose
information where such access or disclosure would violate or prejudice the
rights of any customer, would contravene any law, rule, regulation, order or
judgment or would violate any confidentiality agreement; provided, however, that
the parties shall cooperate, to the extent they do not incur undue costs, in
seeking to obtain consents from appropriate parties under whose rights or
authority access is otherwise restricted. Upon request, the parties hereto will
promptly furnish each other with copies of written communications received by
them or their respective Subsidiaries from, or delivered by any of the foregoing
to, any governmental body in respect of the transactions contemplated hereby.
Section 6.3 Other Matters. (a) The parties acknowledge that nothing
in this Agreement shall be construed as constituting an employment agreement
between SouthTrust or any of its affiliates and any officer or employee of the
Company, the Bank or any of their respective subsidiaries or obligation on the
part of SouthTrust or any of its affiliates to employ any such officers or
employees.
(b) Except as provided in Section 6.3(c) below, the parties
agree that appropriate steps shall be taken to terminate all employee benefit
plans of the Company, the Bank and their respective subsidiaries as of the
Effective Time of the Merger or as promptly as practicable thereafter. Following
the termination of all such plans, and except as otherwise provided in Section
6.3(c) below, SouthTrust agrees that the officers and employees of the Company,
the Bank and their respective subsidiaries who the Surviving Corporation employs
shall be eligible to participate in SouthTrust's employee benefit plans,
including welfare and fringe benefit plans on the same basis and subject to the
same conditions as are applicable to any newly- hired employee health plan
(within the meaning of Section 5000(b)(1) of the Code) of SouthTrust; provided,
however, that:
(i) with respect to each SouthTrust group health plan
(within the meaning of Section 5000(b)(1) of the Code),
SouthTrust shall credit each such employee for eligible
expenses incurred by such employee and his or her dependents
(if applicable) under the corresponding Company's group
medical insurance plan during the current calendar year for
purposes of satisfying the health plan deductible provisions
under SouthTrust's plan for such current year and shall not
apply any waiting period (including, but not limited to,
waiting periods for pre-existing conditions) of a duration
greater than the duration of the corresponding waiting
period, if any, under the Company group health plan as in
effect immediately prior to the Effective Time; and
(ii) credit for each such employee's past service with
the Company, the Bank or any of their respective
subsidiaries prior to the Effective Time of the Merger
("Past Service Credit") shall be given by SouthTrust to
employees for purposes of:
(1) determining vacation and sick leave benefits
and accruals, in accordance with the established
policies of SouthTrust;
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(2) establishing eligibility for participation in
and vesting under SouthTrust's employee benefit plans
(including welfare and fringe benefit plans), and for
purposes of determining the scheduling of vacations and
other determinations which are made based on length of
service, provided, however, notwithstanding anything
contained in this Agreement to the contrary, Past
Service Credit shall not be given to any such employee
for purposes of establishing eligibility for
participation in the 1990 Discounted Stock Plan of
SouthTrust;
(3) determining satisfaction of applicable waiting
periods under said plans for pre-existing conditions.
(c) The parties further agree that any existing 401(k) plans
of the Company, the Bank and any of their respective subsidiaries will either be
merged into the SouthTrust Corporation Employee's Profit Sharing Plan (the "STPS
Plan") effective as of January 1 of the year following the Effective Term of the
Merger or, if so elected by SouthTrust, terminated as of a date prior to the
Effective Time of the Merger. The determination as to whether such 401(k) plans
shall be terminated or merged into the STPS Plan shall be made by SouthTrust.
From and after the January 1 following the Effective Time of the Merger, for
purposes of determining eligibility to participate in, and vesting in accrued
benefits under, the STPS Plan and the SouthTrust Corporation Revised Retirement
Income Plan (the "ST Retirement Plan") employment by the Company, the Bank or
any of their respective subsidiaries shall be credited as if it were employment
by SouthTrust, but such service shall not be credited for purposes of
determining benefit accrual under the ST Retirement Plan.
Section 6.4 Indemnification; Insurance. (a) For a period of six (6)
years after the Effective Time of the Merger, SouthTrust shall, and shall cause
ST-Bank, to indemnify, defend and hold harmless each person entitled to
indemnification from the Company, the Bank or any of their respective
subsidiaries (each, an "Indemnified Party") against all liabilities arising out
of actions or omissions occurring at or prior to the Effective Time of the
Merger (including, without limitation, the transactions contemplated by this
Agreement) to the same extent and subject to the conditions set forth in the
Certificates or Articles of Incorporation or Association of the Company, the
Bank or any of their respective subsidiaries, as may be applicable, and Bylaws,
in each case as in effect on the date hereof.
(b) SouthTrust shall use its reasonable efforts (and the
Company, the Bank and their respective subsidiaries shall cooperate prior to the
Effective Time of the Merger in these efforts) to maintain in effect for a
period of three years after the Effective Time of the Merger the existing
directors' and officers' liability insurance policy or policies of the Company,
the Bank and their respective subsidiaries (provided that SouthTrust may
substitute therefor (i) policies of at least the same coverage and amounts
containing terms and conditions which are substantially no less advantageous or
(ii) with the consent of the Company (given prior to the Effective Time of the
Merger) any other policy with respect to claims arising from facts or events
which occurred prior to the Effective Time of the Merger and covering persons
who are currently covered by such
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insurance; provided, that SouthTrust shall not be obligated to make premium
payments for such three-year period in respect of such policy (or coverage
replacing such policy) which exceed, for the portion related to the directors
and officers, 200% of the annual premium payments on the current policy or
policies of the Company, the Bank and their respective subsidiaries, as in
effect as of the date of this Agreement (the "Maximum Amount"). If the amount of
premium that is necessary to maintain or procure such insurance coverage exceeds
the Maximum Amount, SouthTrust shall use its reasonable efforts to maintain the
most advantageous policies of directors' and officers' liability insurance
obtainable for a premium equal to the Maximum Amount.
(c) If SouthTrust or any of its successors or assigns shall
consolidate with or merge into any other person and shall not be the continuing
and surviving person of such consolidation or merger, or shall transfer all or
substantially all of its assets to any person, then, and in each case, proper
provisions shall be made so that the successors and assigns of SouthTrust shall
assume the obligations set forth in this Section 6.4.
Section 6.5 Current Information. During the period from the date of
this Agreement to the Effective Time of the Merger or the time of termination or
abandonment hereunder, SouthTrust will cause one or more of its designated
representatives to confer on a regular and frequent basis with the Company and
to report with respect to the general status and the ongoing operations of
SouthTrust.
Section 6.6 Registration Statement. As soon as practicable after the
execution of this Agreement, SouthTrust shall file a Registration Statement on
Form S-4 relating to the SouthTrust Shares issuable in the Merger with the SEC
and any required state securities authority. SouthTrust shall take all
appropriate steps and will use its best efforts to cause such Registration
Statement to become effective with the SEC and any such state securities
authority prior to the Effective Time of the Merger, which Registration
Statement shall permit all the shareholders of the Company who receive
SouthTrust Shares in the Merger to receive unlegended, freely transferable
securities; provided, however, that certain of such shares shall be subject to
restrictions on their transfer by certain former shareholders of the Company as
set forth in Section 5.7 hereof. The Company will furnish to SouthTrust the
information required to be included in the Registration Statement with respect
to the business and affairs of the Company, the Bank and their respective
subsidiaries before such Registration Statement is filed with the SEC and again
before any amendments are filed. SouthTrust shall take all actions required to
qualify or obtain exemptions from such qualifications for the SouthTrust Shares
to be issued in connection with the transactions contemplated by this Agreement
under applicable federal securities laws and state blue sky securities laws, as
appropriate.
Section 6.7 Reservation of Shares. SouthTrust, on behalf of ST-Sub,
shall reserve for issuance such number of SouthTrust Shares as shall be
necessary to pay the consideration contemplated in this Agreement. If at any
time the aggregate number of SouthTrust Shares remaining unissued (or in
treasury) shall not be sufficient to meet such obligation, SouthTrust shall take
all appropriate actions to increase the amount of its authorized common stock.
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Section 6.8 Consideration. SouthTrust shall issue the SouthTrust
Shares and shall pay or cause to be paid all cash payments as and when the same
shall be required to be issued and paid pursuant to this Agreement.
ARTICLE VII
MUTUAL CONDITIONS TO CLOSING
The obligations of SouthTrust and ST-Sub on the one hand, and the
Company, on the other hand, to consummate the transactions provided for herein
shall be subject to the satisfaction of the following conditions, unless waived
as hereinafter provided for:
Section 7.1 Shareholder Approval. The Merger shall have been
approved by the requisite vote of the shareholders of the Company and the sole
shareholder of ST-Bank.
Section 7.2 Regulatory Approvals. All necessary Consents of the
Regulatory Authorities shall have been obtained and all notice and waiting
periods required by law to pass after receipt of such Consents shall have
passed, and all conditions to consummation of the Merger set forth in such
Consents shall have been satisfied.
Section 7.3 Legal Proceedings. No court or governmental or
regulatory authority of any competent jurisdiction shall have enacted, issued,
promulgated, enforced or entered any law, order or similar restriction (whether
temporary, preliminary or permanent) or taken any other action which prohibits
or makes illegal the consummation of the transactions contemplated by this
Agreement.
Section 7.4 Registration Statement and Listing. The Registration
Statement shall have become effective and no stop order suspending the
effectiveness of the Registration Statement shall have been issued and no
action, suit, proceeding or investigation by the SEC to suspend the
effectiveness of the Registration Statement shall have been initiated or
threatened by the SEC or any other regulatory authority. SouthTrust shall have
received all federal and state securities laws, or "Blue Sky" permits or other
authorizations or confirmations as to the availability of exemptions from
registration requirements, as may be necessary to issue the SouthTrust Shares
pursuant to the terms of this Agreement. The SouthTrust Shares issuable pursuant
to the Merger shall have been approved for listing on NASDAQ subject only to
official notice of issuance.
ARTICLE VIII
CONDITIONS TO THE OBLIGATIONS OF SOUTHTRUST AND ST-SUB
The obligations of SouthTrust and ST-Sub to consummate the Merger
are subject to the fulfillment of each of the following conditions, unless
waived as hereinafter provided for:
Section 8.1 Representations and Warranties. The representations and
warranties of the Company set forth in this Agreement and in any certificate or
document delivered pursuant hereto shall be true and correct as of the date of
this Agreement and as of all times up to and
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including the Effective Time of the Merger (as though made on and as of the
Effective Time of the Merger except to the extent such representations and
warranties are by their express provisions made as of a specified date and
except for changes therein contemplated by this Agreement). The representations
and warranties of the Company set forth in Section 3.2 of this Agreement shall
be true and correct (except for inaccuracies which are de minimis in amount).
There shall not exist inaccuracies in the representations and warranties of the
Company set forth in the Agreement such that the aggregate effect of such
inaccuracies has, or is reasonably likely to have, a Material Adverse Effect on
the Company; provided that, for purposes of this sentence only, those
representations and warranties that are qualified by references to "material" or
"Material Adverse Effect" shall be deemed not to include such qualifications.
Section 8.2 Performance of Obligations. The Company, the Bank and
their respective subsidiaries shall have performed all covenants, obligations
and agreements required to be performed by them under this Agreement prior to
the Effective Time of the Merger.
Section 8.3 Certificate Representing Satisfaction of Conditions. The
Company shall have delivered to SouthTrust and ST-Sub a certificate of the Chief
Executive Officer of the Company dated as of the Closing Date as to the
satisfaction of the matters described in Sections 8.1 and 8.2 hereof, and such
certificate shall be deemed to constitute additional representations,
warranties, covenants, and agreements of the Company under Article III of this
Agreement; and (b) certified copies of resolutions duly adopted by the Company's
board of directors and shareholders evidencing the taking of all corporate
action necessary to authorize the execution, delivery and performance of this
Agreement, and the consummation of the transactions contemplated hereby, in each
case, in such reasonable detail as SouthTrust's counsel shall request.
Section 8.4 Absence of Adverse Facts. There shall have been no
determination by SouthTrust that any fact, event or condition exists or has
occurred that, in the judgment of SouthTrust, (a) would have a Material Adverse
Effect on, or which may be foreseen to have a Material Adverse Effect on, the
Company or the consummation of the transactions contemplated by this Agreement,
(b) would be of such significance with respect to the business or economic
benefits expected to be obtained by SouthTrust pursuant to this Agreement as to
render inadvisable the consummation of the transactions pursuant to this
Agreement or (c) would render the Merger or the other transactions contemplated
by this Agreement impractical because of any state of war, national emergency,
banking moratorium or general suspension of trading on NASDAQ, the New York
Stock Exchange, Inc. or other national securities exchange.
Section 8.5 Opinion of Counsel. SouthTrust shall have received an
opinion of counsel from Powell, Goldstein, Frazer & Murphy LLP or other counsel
to the Company acceptable to SouthTrust in substantially the form set forth in
EXHIBIT 8.5 hereof.
Section 8.6 Consents Under Agreements. The Company shall have
obtained the consent or approval of each person (other than the Consents of the
Regulatory Authorities) whose consent or approval shall be required in order to
permit the succession by the Surviving Corporation to any obligation, right or
interest of the Company, the Bank and any of their respective subsidiaries under
any loan or credit agreement, note, mortgage, indenture, lease (other
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than any lease or sublease described in and set forth on Disclosure Schedule
3.14(b)), license, or other agreement or instrument, except those for which
failure to obtain such consents and approvals would not in the opinion of
SouthTrust, individually or in the aggregate, have a Material Adverse Effect on
the Surviving Corporation or upon the consummation of the transactions
contemplated by this Agreement.
Section 8.7 Consents Relating to Leased Real Property. The Company
shall have delivered evidence that each Consent described in Section 3.14(c)
shall have been obtained by the Company, the Bank and any of their respective
subsidiaries, as appropriate.
Section 8.8 Material Condition. There shall not be any action taken,
or any statute, rule, regulation or order enacted, entered, enforced or deemed
applicable to the Merger by any Regulatory Authority which, in connection with
the grant of any Consent by any Regulatory Authority, imposes, in the reasonable
judgment of SouthTrust, any material adverse requirement upon SouthTrust or its
subsidiaries, including, without limitation, any requirement that SouthTrust
sell or dispose of any significant amount of the assets of the Company or the
Bank or any other banking or other Subsidiary of SouthTrust, provided that,
except for any such requirement relating to the above-described sale or
disposition of any significant assets of the Company or the Bank or any banking
or other subsidiary of SouthTrust, no such term or condition imposed by any
Regulatory Authority in connection with the grant of any Consent by any
Regulatory Authority shall be deemed to be a material adverse requirement unless
it materially differs from terms and conditions customarily imposed by any such
entity in connection with the acquisition of banks under similar circumstances.
Section 8.9 Employment Issues. Messrs. Huggins, Carson and Lanier
shall have executed and delivered to SouthTrust (i) amendments to their existing
employment agreements with the Company in substantially the form attached to
this Agreement as EXHIBIT 5.18 (A), (B) AND (C), respectively, and (ii) an
agreement with SouthTrust with respect to the eligibility and payment of
Retention Bonuses payable after the Effective Time of the Merger, in
substantially the form attached to this Agreement as EXHIBIT 8.9.
Section 8.10 Outstanding Shares of the Company. The total number of
the Company Shares outstanding as of the Effective Time of the Merger and the
total number of the Company Shares covered by any option, warrant, commitment,
or other right or instrument to purchase or acquire any Company Shares that are
outstanding and fully exercisable as of the Effective Time of the Merger,
including any securities or rights convertible into or exchangeable for Company
Shares, shall not exceed 1,321,530 shares in the aggregate.
Section 8.11 Dissenters. The holders of not more than five percent
(5%) of the outstanding Company Shares shall have elected to exercise their
right to dissent from the Merger and demand payment in cash for the fair or
appraised value of their shares.
Section 8.12 Pooling. SouthTrust, in the exercise of its reasonable
discretion, and after taking into account the holders of the outstanding Company
Shares who shall have elected to
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exercise their right to dissent from the Merger and demand payment in cash for
the fair or appraised value of their shares, shall not have determined that the
transactions contemplated by this Agreement fail to qualify for pooling of
interests accounting treatment.
Section 8.13 Certification of Claims. The Company shall have
delivered a certificate to SouthTrust that the Company is not aware of any
pending or threatened claim under the directors and officers insurance policy or
the fidelity bond coverage of the Company, the Bank or any of their respective
subsidiaries.
Section 8.14 Litigation. There shall be no actual or threatened
causes of action, investigations or proceedings (i) challenging the validity or
legality of this Agreement or the consummation of the transactions contemplated
by this Agreement, or (ii) seeking damages in connection with the transactions
contemplated by this Agreement, or (iii) seeking to restrain or invalidate the
transactions contemplated by this Agreement, which, in the case of (i) through
(iii), and in the reasonable judgment of SouthTrust, based upon advice of
counsel, would have a Material Adverse Effect with respect to the interests of
SouthTrust.
Section 8.15 Increase in Borrowing. As of the date of any Financial
Statement of the Company, any Financial Statement of the Bank or any Call Report
of the Bank subsequent to the execution of this Agreement, including the date of
the Financial Statements of the Company, the Financial Statements of the Bank
and the Call Report of the Bank that immediately precede the Effective Time of
the Merger, there shall not have been any material increase in the loan
agreements, notes or borrowing arrangements described in (i) through (iii) of
Section 3.5 and in Disclosure Schedule 3.5.
Section 8.16 New Lease. The Company shall have executed a lease
agreement with respect to the parcel of real property used by the Company
located at 202 College Avenue, Athens, Georgia 30601 with the landlord of such
parcel of real property, upon terms and subject to conditions satisfactory to
SouthTrust.
ARTICLE IX
CONDITIONS TO OBLIGATIONS OF THE COMPANY
The obligation of the Company to consummate the Merger as
contemplated herein is subject to each of the following conditions, unless
waived as hereinafter provided for:
Section 9.1 Representations and Warranties. The representations and
warranties of SouthTrust and ST-Sub contained in this Agreement or in any
certificate or document delivered pursuant to the provisions hereof shall be
true and correct as of the date of this Agreement and as of the Effective Time
of the Merger (as though made on and as of the Effective Time of the Merger and
(except to the extent such representations and warranties are by their express
provisions made as of a specified date and except for changes therein
contemplated by this Agreement). The
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representations and warranties of SouthTrust set forth in Section 4.3 shall be
true and correct (except for inaccuracies which are de minimis in amount). There
shall not exist inaccuracies in the representations and warranties of SouthTrust
set forth in this Agreement such that the aggregate effect of such inaccuracies
has, or is reasonably likely to have, a Material Adverse Effect on SouthTrust;
provided that, for purposes of this sentence only, those representations and
warranties that are qualified by references to "material" or "Material Adverse
Effect" shall be deemed not to include such qualifications.
Section 9.2 Performance of Obligations. SouthTrust and ST-Sub shall
have performed all covenants, obligations and agreements required to be
performed by them and under this Agreement prior to the Effective Time of the
Merger.
Section 9.3 Certificate Representing Satisfaction of Conditions.
SouthTrust and ST- Sub shall have delivered to the Company a certificate dated
as of the Effective Time of the Merger as to the satisfaction of the matters
described in Sections 9.1 and 9.2 hereof, and such certificate shall be deemed
to constitute additional representations, warranties, covenants, and agreements
of SouthTrust and ST-Sub under Article IV of this Agreement, and (b) certified
copies of resolutions duly adopted by the board of directors of SouthTrust and
ST-Sub and by the shareholders of ST- Sub, evidencing the taking of all
corporate action necessary to authorize the execution, delivery and performance
of this Agreement, and the consummation of the transactions contemplated hereby,
in each case in such reasonable detail as the Company's counsel shall request.
Section 9.4 Absence of Adverse Facts. There shall have been no
determination by the Company that any fact, event or condition exists or has
occurred that, in the reasonable judgment of the Company, (a) would have a
Material Adverse Effect on, or which may be reasonably foreseen to have a
Material Adverse Effect on SouthTrust on a consolidated basis or the
consummation of the transactions contemplated by this Agreement, or (b) would
render the Merger or the other transactions contemplated by this Agreement
impractical because of any state of war, national emergency, banking moratorium,
or a general suspension of trading on NASDAQ, the New York Stock Exchange, Inc.
or other national securities exchange.
Section 9.5 Consents Under Agreements. SouthTrust and ST-Sub shall
have obtained the consent or approval of each person (other than the Consents of
Regulatory Authorities) whose consent or approval shall be required in
connection with the transactions contemplated hereby under any loan or credit
agreement, note, mortgage, indenture, lease, license or other agreement or
instrument, except those for which failure to obtain such consents and approvals
would not, in the judgment of the Company, individually or in the aggregate,
have a Material Adverse Effect upon the consummation of the transactions
contemplated hereby.
Section 9.6 Opinion of Counsel. The Company shall have received the
opinion of Bradley Arant Rose & White LLP counsel to SouthTrust, dated the
Effective Time of the Merger in substantially the form set forth in EXHIBIT 9.6
hereof.
Section 9.7 SouthTrust Shares. The SouthTrust Shares to be issued in
connection herewith shall be duly authorized and validly issued and, fully paid
and nonassessable, issued free
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of preemptive rights and free and clear of all liens and encumbrances created by
or through SouthTrust.
Section 9.8 Tax Opinion. The Company shall have received an opinion
of Bradley Arant Rose & White LLP on or before the date on which the Proxy
Statement of Company is to be mailed to holders of the Company Shares, to the
effect, among others, that the Merger will constitute a tax-free reorganization
within the meaning of Section 368 of the Code and that no gain or loss will be
recognized by the shareholders of Company to the extent that they receive
SouthTrust Shares in exchange for their Company Shares in the Merger.
ARTICLE X
TERMINATION, WAIVER AND AMENDMENT
Section 10.1 Termination. This Agreement may be terminated and the
Merger abandoned at any time prior to the Effective Time of the Merger:
(a) by the mutual consent in writing of the Board of
Directors of SouthTrust, ST-Sub and the Company; or
(b) by the Board of Directors of SouthTrust, ST-Sub, or the
Company if the Merger shall not have occurred on or prior to January 31, 1999,
provided that the failure to consummate the Merger on or before such date is not
accompanied by any breach of any of the representations, warranties, covenants
or other agreements contained herein by the party electing to terminate pursuant
to this Section 10.1(b);
(c) by the Board of Directors of SouthTrust, ST-Sub or the
Company (provided that the terminating party is not then in breach of any
representation or warranty contained in this Agreement under the applicable
standard set forth in Section 8.1 of this Agreement in the case of the Company
and Section 9.1 in the case of SouthTrust or in breach of any covenant or
agreement contained in this Agreement) in the event of an inaccuracy of any
representation or warranty of the other party contained in this Agreement which
cannot be or has not been cured within thirty (30) days after the giving of
written notice to the breaching party of such inaccuracy and which inaccuracy
would provide the terminating party the ability to refuse to consummate the
Merger under the applicable standard set forth in Section 8.1 of this Agreement
in the case of the Company and Section 9.1 of this Agreement in the case of
SouthTrust; or
(d) by the Board of Directors of SouthTrust, ST-Sub or the
Company (provided that the terminating party is not then in breach of any
representation or warranty contained in this Agreement under the applicable
standard set forth in Section 8.1 of this Agreement in the case of the Company
and Section 9.1 in the case of SouthTrust or in breach of any covenant or other
agreement contained in this Agreement) in the event of a material breach by the
other party
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of any covenant or agreement contained in this Agreement which cannot be or has
not been cured within thirty (30) days after the giving of written notice to the
breaching party of such breach; or
(e) by the Board of Directors of SouthTrust, ST-Sub or the
Company in the event (i) any Consent of any Regulatory Authority required for
consummation of the Merger and the other transactions contemplated hereby shall
have been denied by final nonappealable action of such authority or if any
action taken by such authority is not appealed within the time limit for appeal,
or (ii) the shareholders of the Company fail to vote their approval of this
Agreement and the Merger and the transactions contemplated hereby as required by
applicable law at the Company's shareholders' meeting where the transactions
were presented to such shareholders for approval and voted upon; or
(f) by the Board of Directors of SouthTrust, ST-Sub or the
Company (provided that the terminating party is not then in breach of any
representation or warranty contained in this Agreement under the applicable
standard set forth in Section 8.1 of this Agreement in this case of the Company
and Section 9.1 in the case of SouthTrust or in breach of any covenant or
agreement contained in this Agreement) in the event that any of the conditions
precedent to the obligations of such party to consummate the Merger (other than
as contemplated by Section 10.1(e) of this Agreement) cannot be satisfied or
fulfilled by the date specified in Section 10.1(b) of this Agreement as the date
after which such party may terminate this Agreement.
(g) by the Company at any time during the ten-day period
following the Determination Date (as defined below), if either (x) both of the
following conditions are satisfied:
(i) the Average Closing Price (as defined below) shall be
less than the product of 0.85 and the Starting Price (as
defined below); and
(ii)(i) the number obtained by dividing the Average Closing
Price by the Starting Price (such number being referred
to herein as the "Parent Ratio") shall be less than (ii)
the number obtained by dividing the Index Price on the
Determination Date by the Index Price on the Starting
Date and subtracting 0.15 from such quotient (such
number being referred to herein as the "Index Ratio");
or (y) the Average Closing Price shall be less than the product of 0.75 and the
Starting Price; subject to the following four sentences. If the Company elects
to exercise its termination right pursuant to the immediately preceding
sentence, it shall give written notice to SouthTrust which notice shall specify
which of clauses (x) or (y) is applicable (or if both would be applicable, which
clause is being invoked); provided that such notice of election to terminate may
be withdrawn at any time within the aforementioned ten-day period. During the
five-day period commencing with its receipt of such notice, SouthTrust shall
have the option in the case of a termination invoked under clause (x), of
adjusting the Conversion Ratio to equal the lesser of (i) a number equal to a
quotient (rounded to the nearest one-ten-
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thousandth), the numerator of which is the Index Ratio multiplied by the
Conversion Ratio (as then in effect) and the denominator of which is the Parent
Ratio. During such five-day period, SouthTrust shall have the option, in the
case of a termination invoked under clause (y), to elect to increase the
Conversion Ratio to equal a number equal to a quotient (rounded to the nearest
one-ten-thousandth), the numerator of which is the product of 0.75, the Starting
Price and the Conversion Ratio (as then in effect) and the denominator of which
is the Average Closing Price. If SouthTrust makes an election contemplated by
either of the two preceding sentences, within such five-day period, it shall
give written notice to the Company of such election and the revised Conversion
Ratio, whereupon no termination shall have occurred pursuant to this Section
10.1(g) and this Agreement shall remain in effect in accordance with its terms
(except as the Conversion Ratio shall have been so modified), and any references
in this Agreement to "Conversion Ratio" shall thereafter be deemed to refer to
the Conversion Ratio as adjusted pursuant to this Section 10.1(g). For purposes
of this Section 10.1(g), the following terms shall have the meanings indicated:
"Average Closing Price" means the average of the last reported sale
prices per share of SouthTrust Shares as reported on NASDAQ (as reported in The
Wall Street Journal or, if not reported therein, in another mutually agreed upon
authoritative source) for the 20 consecutive trading days on NASDAQ ending at
the close of trading on the Determination Date.
"Determination Date" means the fifth business day prior to the date
on which the last required Consent of any Regulatory Authority having authority
over the transactions contemplated by this Agreement required for consummation
of the Merger shall be received, without regard to any requisite waiting periods
in respect thereof.
"Index Group," means the group of each of the 17 bank holding
companies listed below, the common stock of all of which shall be publicly
traded and as to which there shall not have been, since the Starting Date and
before the Determination Date, an announcement of a proposal for such company to
be acquired or for such company to acquire another company or companies in
transactions with a value exceeding 25% of the acquiror's market capitalization
as of the Starting Date. In the event that the common stock of any such company
ceases to be publicly traded or any such announcement is made with respect to
any such company, such company will be removed from the Index Group, and the
weights (which have been determined based on the number of outstanding shares of
common stock) redistributed proportionately for purposes of determining the
Index Price. The 17 bank holding companies and the weights attributed to them
are as follows:
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<TABLE>
<CAPTION>
BANK HOLDING COMPANIES WEIGHTING
---------------------- ---------
<S> <C>
AmSouth Bancorporation.............................................................. 4.07%
BB&T Corporation.................................................................... 6.78
Compass Bancshares, Inc............................................................. 3.34
Fifth Third Bancorp................................................................. 7.84
First American Corporation.......................................................... 2.96
First Security Corporation.......................................................... 5.86
First Tennessee National Corporation................................................ 3.25
First Virginia Banks, Inc........................................................... 2.62
Hibernia Corporation................................................................ 6.62
Huntington Bancshares, Inc.......................................................... 9.68
Mercantile Bancorporation, Inc...................................................... 6.60
Regions Financial Corporation....................................................... 5.05
Star Banc Corporation............................................................... 4.32
Summit Bancorp...................................................................... 8.91
SunTrust Banks, Inc................................................................. 10.67
Union Planters Corporation.......................................................... 3.45
Wachovia Corporation................................................................ 7.99
------
Total................................................................... 100.00%
======
</TABLE>
"Index Price" on a given date means the weighted average (weighted
in accordance with the factors listed above) of the closing prices of the
companies comprising the Index Group.
"Starting Date" shall mean the date of this Agreement.
"Starting Price" shall mean the last reported sale price per share
of SouthTrust Shares on the Starting Date, as reported by NASDAQ (as reported in
The Wall Street Journal or, if not reported therein, in another mutually agreed
upon authoritative source).
If any company belonging to the Index Group or SouthTrust declares
or effects a stock dividend, reclassification, recapitalization, split-up,
combination, exchange of shares or similar transaction between the Starting Date
and the Determination Date, the prices for the common stock of such company or
SouthTrust shall be appropriately adjusted for the purposes of applying this
Section 10.1(g).
Section 10.2 Effect of Termination. In the event of the termination
and abandonment of this Agreement pursuant to Section 10.1 of this Agreement,
the Agreement shall terminate and have no effect, except that the provisions of
this Section 10.2, Section 10.5 and Article 11 of this Agreement shall survive
any such termination and abandonment.
Section 10.3 Amendments. To the extent permitted by law, this
Agreement may be amended by a subsequent writing signed by each of SouthTrust,
ST-Sub, and the Company.
Section 10.4 Waivers. Subject to Section 11.11 hereof, prior to or
at the Effective Time of the Merger, SouthTrust and ST-Sub, on the one hand, and
the Company, on the other hand, shall have the right to waive any default in the
performance of any term of this Agreement by the other, to waive or extend the
time for the compliance or fulfillment by the other of any and all of the
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other's obligations under this Agreement and to waive any or all of the
conditions to its obligations under this Agreement, except any condition, which,
if not satisfied, would result in the violation of any law or any applicable
governmental regulation.
Section 10.5 Non-Survival of Representations and Warranties. No
representations, warranties, covenants or agreements in this Agreement or in any
instrument delivered by SouthTrust or ST-Sub, or the Company shall survive the
Merger; provided, however, that (a) Sections 5.3(b), 6.3(b), 6.4 and 6.6 of this
Agreement shall survive the Merger, and (b) any representation or warranty in
any agreement, contract, report, opinion, undertaking or other document or
instrument delivered hereunder in whole or in part by any person other than
SouthTrust, ST-Sub, the Company (or directors and officers thereof in their
capacities as such) shall not so terminate and shall not be so extinguished; and
provided further, that no representation or warranty of SouthTrust, ST-Sub or
the Company contained herein shall be deemed to be terminated or extinguished so
as to deprive SouthTrust or ST-Sub, on the one hand, and the Company, on the
other hand, of any defense at law or in equity which any of them otherwise would
have to any claim against them by any person, including, without limitation, any
shareholder or former shareholder of either party. No representation or warranty
in this Agreement shall be affected or deemed waived by reason of the fact that
SouthTrust, ST-Sub or the Company and/or its representatives knew or should have
known that any such representation or warranty was, is, might be or might have
been inaccurate in any respect.
ARTICLE XI
MISCELLANEOUS
Section 11.1 Entire Agreement. This Agreement and the documents
referred to herein contain the entire agreement among SouthTrust, ST-Sub and the
Company with respect to the transactions contemplated hereunder and this
Agreement supersedes all prior arrangements or understandings with respect
thereto, whether written or oral. Nothing in this Agreement, expressed or
implied, is intended to confer upon any person, firm, corporation or entity,
other than the parties hereto and their respective successors, any rights,
remedies, obligations or liabilities under or by reason of this Agreement.
Section 11.2 Definitions. Except as otherwise provided herein, the
capitalized terms set forth below (in their singular and plural forms as
applicable) shall have the following meanings:
"Affiliate" of a person shall mean (i) any other person directly or
indirectly through one or more intermediaries controlling, controlled by or
under common control of such person, (ii) any officer, director, partner,
employer or direct or indirect beneficial owner of any 10% or greater equity of
voting interest of such person or (iii) any other persons for which a person
described in clause (ii) acts in any such capacity.
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"Consent" shall mean a consent, approval or authorization, waiver,
clearance, exemption or similar affirmation by any person pursuant to any lease,
contract, permit, law, regulation or order.
"Environmental Law" means any applicable federal, state or local
law, statute, ordinance, rule, regulation, code, license, permit, authorization,
approval, consent, order, judgment, decree or injunction relating to (i) the
protection, preservation or restoration of the environment (including, without
limitation, air, water vapor, surface water, groundwater, drinking water supply,
surface soil, subsurface soil, plant and animal life or any other natural
resource), and/or (ii) the use, storage, recycling, treatment, generation,
transportation, processing, handling, labeling, production, release or disposal
of any substance presently listed, defined, designated or classified as
hazardous, toxic, radioactive or dangerous, or otherwise regulated, whether by
type or by substance as a component; "Loan Property" means any property owned by
the Company, the Bank or any of their subsidiaries, or in which the Company, the
Bank or any of their subsidiaries holds a security interest, and, where required
by the context, includes the owner or operator of such property, but only with
respect to such property; "Hazardous Material" means any pollutant, contaminant,
or hazardous substance within the meaning of the Comprehensive Environmental
Response, Compensation, and Liability Act, 42 U.S.C. ss. 9601 et seq., or any
similar federal, state or local law; and "Participation Facility" means any
facility in which the Company, the Bank or any of their subsidiaries has engaged
in Participation in the Management of such facility, and, where required by the
context, includes the owner or operator of such facility, but only with respect
to such facility; "Participation in the Management" of a facility has the
meaning set forth in 40 C.F.R. ss. 300.1100(c).
"Material Adverse Effect," with respect to any party, shall mean any
event, change or occurrence which, together with any other event, change or
occurrence, has a material adverse impact on (i) the business, assets,
operations, financial condition or results of operation of such party and their
respective subsidiaries, taken as a whole, or (ii) the ability of such party to
perform its obligations under this Agreement or to consummate the Merger and the
other transactions contemplated by this Agreement.
"Regulatory Authorities" shall mean, collectively, the Federal Trade
Commission (the "FTC"), the United States Department of Justice (the "Justice
Department"), the Board of Governors of the Federal Reserve System (the "FRB"),
the Office of the Comptroller of the Currency (the "OCC"), the Federal Deposit
Insurance Corporation (the "FDIC"), and all state regulatory agencies having
jurisdiction over the parties, the National Association of Securities Dealers,
Inc., all national securities exchanges and the Securities and Exchange
Commission (the "SEC").
Section 11.3 Notices. All notices or other communications which are
required or permitted hereunder shall be in writing and sufficient if delivered
personally or sent by first class or registered or certified mail, postage
prepaid, telegram or telex or other facsimile transmission addressed as follows:
If to Georgia National Bancorp, Inc.:
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202 College Avenue
Athens, Georgia 30601
Attention: William S. Huggins
Fax: (706) 369-3007
with a copy to:
Powell, Goldstein, Frazer & Murphy LLP
191 Peachtree Street, N.E., Sixteenth Floor
Atlanta, Georgia 30303
Attention: Walter G. Moeling, Esq.
Fax: (404) 572-6999
If to ST-Sub or SouthTrust, then to:
SouthTrust Corporation
420 North 20th Street
Birmingham, Alabama 35203
Attention: Alton E. Yother
Fax (205) 254-5022
with a copy to:
Bradley Arant Rose & White LLP
2001 Park Place, Suite 1400
Birmingham, Alabama 35203
Attention: C. Larimore Whitaker, Esq.
Fax (205) 521-8800
All such notices or other communications shall be deemed to have
been delivered (i) upon receipt when delivery is made by hand, (ii) on the third
(3rd) business day after deposit in the United States mail when delivery is made
by first class, registered or certified mail, and (iii) upon transmission when
made by telegram, telex or other facsimile transmission if evidenced by a sender
transmission completed confirmation.
Section 11.4 Severability. If any term, provision, covenant or
restriction contained in this Agreement is held by a court of competent
jurisdiction or other competent authority to be invalid, void or unenforceable
or against public or regulatory policy, the remainder of the terms, provisions,
covenants and restrictions contained in this Agreement shall remain in full
force and effect and in no way shall be affected, impaired or invalidated, if,
but only if, pursuant to such remaining terms, provisions, covenants and
restrictions the Merger may be consummated in substantially the same manner as
set forth in this Agreement as of the later of the date this Agreement was
executed or last amended.
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Section 11.5 Costs and Expenses. Expenses incurred by the Company on
the one hand and SouthTrust on the other hand, in connection with or related to
the authorization, preparation and execution of this Agreement, the solicitation
of shareholder approval and all other matters related to the closing of the
transactions contemplated hereby, including all fees and expenses of agents,
representatives, counsel and accountants employed by either such party or its
affiliates, shall be borne solely and entirely by the party which has incurred
same.
Section 11.6 Captions. The captions as to contents of particular
articles, sections or paragraphs contained in this Agreement and the table of
contents hereto are inserted only for convenience and are in no way to be
construed as part of this Agreement or as a limitation on the scope of the
particular articles, sections or paragraphs to which they refer.
Section 11.7 Counterparts. This Agreement may be executed in any
number of counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same document with the same force
and effect as though all parties had executed the same document.
Section 11.8 Governing Law. This Agreement is made and shall be
governed by and construed in accordance with the laws of the State of Georgia
without respect to its conflicts of laws principles.
Section 11.9 Persons Bound; No Assignment. This Agreement shall be
binding upon and shall inure to the benefit of the parties hereto and their
respective successors, distributees, and assigns, but notwithstanding the
foregoing, this Agreement may not be assigned by any party hereto unless the
prior written consent of the other parties is first obtained (other than by
ST-Bank to another affiliate of SouthTrust).
Section 11.10 Exhibits and Schedules. Each of the exhibits and
schedules attached hereto is an integral part of this Agreement and shall be
applicable as if set forth in full at the point in the Agreement where reference
to it is made. Any matter disclosed in any of the Schedules to the Agreement
shall be deemed incorporated by reference into each other Schedule thereto and
disclosed in each such Schedule.
Section 11.11 Waiver. The waiver by any party of the performance of
any agreement, covenant, condition or warranty contained herein shall not
invalidate this Agreement, nor shall it be considered a waiver of any other
agreement, covenant, condition or warranty contained in this Agreement. A waiver
by any party of the time for performing any act shall not be deemed a waiver of
the time for performing any other act or an act required to be performed at a
later time. The exercise of any remedy provided by law, equity or otherwise and
the provisions in this Agreement for any remedy shall not exclude any other
remedy unless it is expressly excluded. The waiver of any provision of this
Agreement must be signed by the party or parties against whom enforcement of the
waiver is sought. This Agreement and any exhibit, memorandum or schedule hereto
or delivered in connection herewith may be amended only by a writing signed on
behalf of each party hereto.
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Section 11.12 Construction of Terms. Whenever used in this
Agreement, the singular number shall include the plural and the plural the
singular. Pronouns of one gender shall include all genders. Accounting terms
used and not otherwise defined in this Agreement have the meanings determined
by, and all calculations with respect to accounting or financial matters unless
otherwise provided for herein, shall be computed in accordance with generally
accepted accounting principles, consistently applied. References herein to
articles, sections, paragraphs, subparagraphs or the like shall refer to the
corresponding articles, sections, paragraphs, subparagraphs or the like of this
Agreement. The words "hereof", "herein", and terms of similar import shall refer
to this entire Agreement. Unless the context clearly requires otherwise, the use
of the terms "including", "included", "such as", or terms of similar meaning,
shall not be construed to imply the exclusion of any other particular elements.
Unless expressly provided otherwise in this Agreement, references to a party's
"judgment" mean that party's reasonable judgment, and references to the
"approval" or "consent" of a party mean that party's approval or consent which
shall not be unreasonably withheld.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed and delivered, and their respective seals hereunto affixed, by their
officers thereunto duly authorized, and have caused this Agreement to be dated
as of the date and year first above written.
GEORGIA NATIONAL BANCORP, INC.
By: /s/ WILLIAM S. HUGGINS
----------------------------------
William S. Huggins
Chief Executive Officer
ATTEST:
By: /s/ MICHAEL R. CARSON
----------------------------
Michael R. Carson
Secretary
[CORPORATE SEAL]
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SOUTHTRUST OF ALABAMA, INC.
By: /s/ ALTON E. YOTHER
---------------------------
Alton E. Yother
Vice President
ATTEST:
By: /s/ WILLIAM L. PRATER
----------------------------
William L. Prater
Secretary
[CORPORATE SEAL]
SOUTHTRUST CORPORATION
By: /s/ ALTON E. YOTHER
---------------------------
Alton E. Yother
Senior Vice President
ATTEST:
By: /s/ WILLIAM L. PRATER
---------------------------
William L. Prater
Secretary
[CORPORATE SEAL]
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EXHIBIT 1.5
STOCK OPTION AGREEMENT
(Exhibit 1.5 is included as Exhibit B of this Proxy Statement/Prospectus)
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EXHIBIT 5.7
FORM OF
AFFILIATE LETTER
__________ ___, 1998
SouthTrust Corporation
420 North 20th Street
Birmingham, Alabama 35203
Ladies and Gentlemen:
I have been advised that as of the date hereof I may be an
"affiliate" of Georgia National Bancorp, Inc., a Georgia corporation (the
"Company"), as that term is defined for purposes of paragraphs (c) and (d) of
Rule 145 of the Rules and Regulations ("Rules and Regulations") of the
Securities and Exchange Commission (the "Commission") under the Securities Act
of 1933, as amended (the "Act").
Pursuant to the terms of that certain Agreement and Plan of Merger
dated as of the ___ day of __________, 1998 (the "Agreement"), by and between
SouthTrust of Alabama, Inc., an Alabama corporation ("ST-Sub"), and the Company,
and joined in by SouthTrust Corporation, a Delaware corporation ("SouthTrust"),
the Company will be merged with and into ST-Sub (the "Merger"). As a result of
the Merger, I may receive shares of common stock, par value $2.50 per share, of
SouthTrust (the "SouthTrust Common Stock") in exchange for the shares of common
stock, par value $0.005 per share, of the Company (the "Company Common Stock"),
owned by me at the Effective Time of the Merger as determined pursuant to the
Agreement.
I represent and warrant to SouthTrust that in such event:
A. I shall not make any sale, transfer or other disposition of the
SouthTrust Common Stock in violation of the Act or the Rules and Regulations nor
shall I make any sale, transfer or other disposition of SouthTrust Common Stock
received by me in the Merger or any other shares of SouthTrust Common Stock
until such time as financial results covering at least thirty (30) days of
combined operations of the Company and SouthTrust have been published within the
meaning of Section 201.01 of the Commission's Codification of Financial
Reporting Policies.
B. I have carefully read this letter and the Agreement and discussed
its requirements and other applicable limitations upon my ability to sell,
transfer or otherwise dispose of the SouthTrust Common Stock, to the extent that
I have felt necessary, with my counsel or counsel for the Company.
C. I have been advised that the issuance of the SouthTrust Common
Stock to me pursuant to the Merger will be registered with the Commission under
the Act on a Registration Statement on Form S-4. However, I have also been
advised that, since at the time the Merger is
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to be submitted for a vote of the shareholders of the Company, I may be an
affiliate of the Company and the distribution by me of the SouthTrust Common
Stock has not been registered under the Act, the SouthTrust Common Stock held by
me must be held indefinitely unless and until (i) such distribution of
SouthTrust Common Stock has been registered under the Act as a secondary
offering on my behalf (which registration is not contemplated by SouthTrust),
(ii) a sale of the SouthTrust Common Stock is made in conformity with the volume
and other limitations of Rule 145 promulgated by the Commission under the Act,
or (iii) in the opinion of counsel reasonably acceptable to SouthTrust, some
other exemption from registration is available with respect to any such proposed
sale, transfer or other disposition of the SouthTrust Common Stock.
I understand that the volume limitations referred to above limit me
from reselling, within any given three month period, the greater of (i) 1% of
the class of outstanding shares of SouthTrust Common Stock as shown by the most
recent report or statement published by SouthTrust, (ii) the average weekly
reported volume of trading in such securities as reported through the automated
quotations system of a registered securities association during the four
calendar weeks preceding receipt of the order to execute the transaction, or
(iii) the average weekly volume of trading in such securities as reported
through the consolidated transaction reporting system during such four calendar
weeks. I understand that as of March 31, 1998, the outstanding SouthTrust Common
Stock consisted of {____________} shares. I also understand that securities are
sold in "brokers' transactions" within the meaning of Section 4(4) of the Act
if, among other things, a broker does no more than execute the order as an
agent, receives no more than the usual and customary broker's commission and
neither solicits nor arranges for the solicitation of orders to buy the
securities in anticipation of or in connection with the transaction. Further,
because the number of shares representing 1% of the outstanding shares of
SouthTrust Common Stock exceeds the total number of shares of SouthTrust Common
Stock issued to me in connection with the Merger, I understand that all
transactions involving such shares will be within the volume limitations of Rule
145(d).
D. I understand that SouthTrust is under no obligation to register
the sale, transfer or other disposition of SouthTrust Common Stock by me or on
my behalf or to take any other action necessary in order to make compliance with
an exemption from registration available.
E. I understand that stop transfer instructions will be given to
SouthTrust's transfer agents with respect to the SouthTrust Common Stock and
that there may be placed on the certificates for the SouthTrust Common Stock, or
any substitutions therefor, a legend stating in substance:
The shares represented by this certificate were issued in a
transaction to which Rule 145 promulgated under the Securities
Act of 1933 applies. The shares represented by this certificate
may only be transferred in accordance with the terms of the
letter agreement, dated ____________ ___, 1998, between the
registered holder hereof and SouthTrust Corporation, a copy of
which agreement is on file at the principal offices of SouthTrust
Corporation.
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It is understood and agreed that the legend provided for above shall
be removed by delivery of substitute certificates without such legend if the
undersigned shall have delivered to SouthTrust a copy of a letter form the staff
of the Commission, or an opinion of counsel in form and substance satisfactory
to SouthTrust, to the effect that such legend is not required for the purposes
of the Act.
I further represent to and covenant with SouthTrust that I will not,
during the 30 days prior to the Effective Time of the Merger (as defined in the
Agreement), sell, transfer or otherwise dispose of any shares of the Company
Common Stock or SouthTrust Common Stock that I may hold and, furthermore, that I
will not sell, transfer or otherwise dispose of any shares of SouthTrust Common
Stock received by me in the Merger or any other shares of SouthTrust Common
Stock until such time as financial results covering at least 30 days of combined
operations of the Company and SouthTrust have been published within the meaning
of Section 201.01 of the Commission's Codification of Financial Reporting
Policies.
Very truly yours,
--------------------------------------
Print Name:
--------------------------------------
Print Name:
(If shares are held jointly, each owner should sign.)
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EXHIBIT 5.17
SUBSIDIARY AGREEMENT AND
PLAN OF MERGER
This SUBSIDIARY AGREEMENT AND PLAN OF MERGER (this "Agreement")
dated as of this ___ day of _________, 1998 by and between GEORGIA NATIONAL
BANK, a national banking association (the "Bank") and a wholly-owned subsidiary
of Georgia National Bancorp, Inc., a Georgia corporation (the "Company") and
SOUTHTRUST BANK, NATIONAL ASSOCIATION, a national banking association
("ST-Bank") and a wholly-owned subsidiary of SouthTrust of Alabama, Inc.
("ST-Sub"), which in turn is a wholly-owned subsidiary of SouthTrust Corporation
("SouthTrust").
W I T N E S S E T H:
WHEREAS, the Boards of Directors of ST-Sub, SouthTrust and the
Company have approved, and deem it advisable and in the best interests of their
respective shareholders to consummate, the transactions set forth in that
certain Agreement and Plan of Merger dated as of July 1, 1998 by and between
ST-Sub and the Company, joined in by SouthTrust (the "Merger Agreement")
pursuant to which the Company will be merged with and into ST-Sub in a merger
(the "Merger");
WHEREAS, the Boards of Directors of the Bank and ST-Bank have
approved, and deem it advisable to consummate, the transactions provided for
herein pursuant to which the Bank will merge with and into ST-Bank, subject to
and as soon as practicable following the consummation of the Merger; and
WHEREAS, the parties to this Agreement contemplate that the
transactions set forth herein shall qualify pursuant to Section 368 of the
Internal Revenue Code of 1986, as amended (the "Code"), and that this Agreement
constitutes a plan of reorganization pursuant to Section 368 of the Code.
NOW, THEREFORE, in consideration of the foregoing and the respective
covenants and agreements set forth herein and in the Merger Agreement, the
parties hereto agree as follows:
ARTICLE XII
THE MERGER
12.1 Bank Merger. (a) Subject to the provisions hereof, the Bank
shall be merged with and into ST-Bank (the "Bank Merger") under the charter of
ST-Bank, and ST-Bank shall be the surviving association (sometimes hereinafter
referred to as the "Association" when reference is made to it after the
Effective Time of the Bank Merger (as defined below)). The name of the surviving
association shall be "SouthTrust Bank, National Association," and the business
of the Association shall be that of a national banking association. This
business shall be conducted by the
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Association at its main office, which shall be located in Birmingham, Alabama
and at its legally established branches.
(b) The Bank Merger shall occur immediately following the
consummation of the Merger (the "Effective Time of the Bank Merger"), or at such
other date and time as ST-Bank and Bank may mutually designate, provided,
however, that the Bank Merger shall not occur and shall not be effective unless
and until approved by the Office of the Comptroller of the Currency and the
Board of Governors of the Federal Reserve System.
12.2 Effect of Bank Merger. At the Effective Time of the Bank
Merger, Bank shall be merged with and into ST-Bank and the separate existence of
Bank shall cease. All of the shares of capital stock of the Bank issued and
outstanding as of the Effective Time of the Bank Merger, and all rights in
respect thereof, shall be canceled. The shares of capital stock of ST-Bank
outstanding immediately prior to consummation of the Bank Merger shall
constitute the only outstanding shares of capital stock of the Association
following consummation of the Bank Merger.
12.3 Conveyance. All assets of Bank and ST-Bank as they exist at the
Effective Time of the Bank Merger shall pass to and vest in the Association
without any conveyance or other transfer. The Association shall be responsible
for all the liabilities of every kind and description of each of ST-Bank and
Bank existing as of the Effective Time of the Bank Merger.
12.4 Board of Directors; Articles of Association; Bylaws. The
present Board of Directors of ST-Bank shall continue to serve as the Board of
Directors of the Association until the next annual meeting or until such time as
their successors have been elected and have qualified. At the Effective Time of
the Bank Merger, the Articles of Association and the Bylaws of the Association
shall be the Articles of Association and Bylaws of ST-Bank as in effect
immediately prior to the Bank Merger.
12.5 Savings Accounts. From and after the Effective Time of the Bank
Merger, savings accounts of the Association shall be issued in a manner
consistent with the issuance of savings accounts by ST-Bank prior to the
Effective Time of the Bank Merger.
ARTICLE XIII
CAPITALIZATION
13.1 Capitalization of Bank and ST-Bank. As of March 31, 1998, the
Bank had a total capital of $ 2,515,020. There were 503,004 shares of Common
Stock, each of $5.00 par value. As of March 31, 1998, ST-Bank had total capital
of $9,060,600. There were 1,020,000 shares of Common Stock, each of $8.83 par
value.
13.2 Capitalization of Association. The amount of capital stock of
the Association shall be $ 9,006,600 divided into 1,020,000 shares of Common
Stock, each of $8.83 par value.
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ARTICLE XIV
COVENANTS
14.1 Covenants of Bank and ST-Bank. During the period from the date
of this Agreement and continuing until the Effective Time, each of the parties
hereto agrees to observe and perform all agreements and covenants in the Merger
Agreement that pertain or are applicable to Bank and ST-Bank, respectively. Each
of the parties hereto agrees to use all reasonable efforts to take, or cause to
be taken, all action and to do, or cause to be done, all things necessary,
proper or advisable under applicable laws and regulations to consummate and make
effective the transactions contemplated by this Agreement, subject to and in
accordance with the applicable provisions of the Merger Agreement.
ARTICLE XV
CONDITIONS PRECEDENT
15.1 Conditions to Each Party's Obligation to Effect the Bank
Merger. The respective obligations of each party to effect the Bank Merger shall
be subject to the satisfaction prior to the Effective Time of the Bank Merger of
the following conditions:
(a) Effective Time of the Merger. The Effective Time (as
defined in the Merger Agreement) of the Merger shall have occurred.
(b) No Injunctions or Restraints; Illegality. No temporary
restraining order, preliminary or permanent injunction or other order issued by
any court of competent jurisdiction or other legal restraint or prohibition
preventing the consummation of the Bank Merger shall be in effect. There shall
not be any action taken, or any statute, rule, regulation or order enacted,
enforced or deemed applicable to the Bank Merger, which makes the consummation
of the Bank Merger illegal as of the Effective Time of the Bank Merger.
(c) Shareholder Approval. The sole shareholder of ST-Bank and
the sole shareholder of the Bank each shall have voted affirmatively to approve
the Bank Merger by not less than a majority of the outstanding voting stock of
ST-Bank and the Bank, respectively.
(d) Other Approvals. All requisite regulatory approvals
relating to the Bank Merger shall have been obtained and continue to be in full
force and effect, and all waiting and notice periods under applicable law shall
have expired.
ARTICLE XVI
TERMINATION AND AMENDMENT
16.1 Termination. This Agreement shall be terminated immediately and
without any action on the part of the Bank or ST-Bank upon any termination of
the Merger Agreement.
16.2 Effect of Termination. In the event of termination of this
Agreement as provided in Section 5.1 hereof, this Agreement shall forthwith
become void and there shall be no liability or obligation on the part of the
Bank or ST-Bank or their respective officers or directors.
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16.3 Amendment. This Agreement may be amended by the parties hereto,
by action taken or authorized by their respective Boards of Directors. This
Agreement may not be amended except by an instrument in writing signed on behalf
of each of the parties hereto.
ARTICLE XVII
GENERAL PROVISIONS
17.1 Nonsurvival of Agreements. None of the agreements in this
Agreement or in any instrument delivered pursuant to this Agreement shall
survive the Effective Time of the Bank Merger.
17.2 Notices. All notices and other communications hereunder shall
be in writing and shall be deemed given if delivered personally, telecopied
(with confirmation) or mailed by registered or certified mail (return receipt
requested) to the Bank or ST-Bank, respectively, at the addresses for notices to
the Company or SouthTrust, respectively, as set forth in the Merger Agreement,
with copies to the persons referred to therein.
17.3 Interpretation. When a reference is made in this Agreement to
Sections, such reference shall be to a Section of this Agreement unless
otherwise indicated. The headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation 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."
17.4 Counterparts. This Agreement may be executed in two
counterparts, both of which shall be considered one and the same agreement and
shall become effective when both counterparts have been signed by each of the
parties and delivered to the other party, it being understood that both parties
need not sign the same counterpart.
17.5 Entire Agreement. Except as otherwise set forth in the Merger
Agreement, this Agreement (including the documents and the instruments referred
to herein) constitutes the entire agreement and supersedes all prior agreements
and understandings, both written and oral, among the parties with respect to the
subject matter hereof. This Agreement shall be subject to the terms and
conditions of the Merger Agreement.
17.6 Assignment. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by any of the parties
hereto (whether by operation of law or otherwise) without the prior written
consent of the other party.
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IN WITNESS WHEREOF, the signatures and seals of the Bank and ST-Bank
this ___ day of __________, 1998, each set by its president or a vice president
and attested to by its cashier or secretary, pursuant to a resolution of its
board of directors, acting by a majority.
GEORGIA NATIONAL BANK
By:
-----------------------------------
Its:
-----------------------------------
Attest:
By:
-----------------------------------
Its:
----------------------------------
[Seal of Bank]
SOUTHTRUST BANK,
NATIONAL ASSOCIATION
By:
-----------------------------------
Its:
-----------------------------------
Attest:
By:
-----------------------------------
Its:
-----------------------------------
[Seal of Bank]
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<PAGE> 194
STATE OF ALABAMA )
) SS:
COUNTY OF JEFFERSON )
On this ________ day of _______________, 1998, before me, a notary
public for this state and county, personally came __________________________, as
____________________________________________, and ____________________________,
as ________________________________, of SouthTrust Bank, National Association,
and each in his/her said capacity acknowledged this instrument to be the act and
deed of the association and the seal affixed to it to be its seal.
WITNESS my official seal and signature this day and year.
---------------------------------------
[Seal of Notary] Notary Public, Jefferson County.
My commission expires
------------------
STATE OF GEORGIA )
) SS:
COUNTY OF ____________ )
On this ______ day of _______________, 1998, before me, a notary
public for this state and county, personally came _____________________________,
as ________________________________________, and _________________________, as
___________________________________, of Georgia National Bank, and each in
his/her said capacity acknowledged this instrument to be the act and deed of the
association and the seal.
WITNESS my official seal and signature this day and year.
---------------------------------------
[Seal of Notary] Notary Public, County
----------------------
My commission expires
------------------
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EXHIBIT 5.7
FORM OF
AFFILIATE LETTER
__________ ___, 1998
SouthTrust Corporation
420 North 20th Street
Birmingham, Alabama 35203
Ladies and Gentlemen:
I have been advised that as of the date hereof I may be an
"affiliate" of Georgia National Bancorp, Inc., a Georgia corporation (the
"Company"), as that term is defined for purposes of paragraphs (c) and (d) of
Rule 145 of the Rules and Regulations ("Rules and Regulations") of the
Securities and Exchange Commission (the "Commission") under the Securities Act
of 1933, as amended (the "Act").
Pursuant to the terms of that certain Agreement and Plan of Merger
dated as of the ___ day of __________, 1998 (the "Agreement"), by and between
SouthTrust of Alabama, Inc., an Alabama corporation ("ST-Sub"), and the Company,
and joined in by SouthTrust Corporation, a Delaware corporation ("SouthTrust"),
the Company will be merged with and into ST-Sub (the "Merger"). As a result of
the Merger, I may receive shares of common stock, par value $2.50 per share, of
SouthTrust (the "SouthTrust Common Stock") in exchange for the shares of common
stock, par value $0.005 per share, of the Company (the "Company Common Stock"),
owned by me at the Effective Time of the Merger as determined pursuant to the
Agreement.
I represent and warrant to SouthTrust that in such event:
A. I shall not make any sale, transfer or other disposition of the
SouthTrust Common Stock in violation of the Act or the Rules and Regulations nor
shall I make any sale, transfer or other disposition of SouthTrust Common Stock
received by me in the Merger or any other shares of SouthTrust Common Stock
until such time as financial results covering at least thirty (30) days of
combined operations of the Company and SouthTrust have been published within the
meaning of Section 201.01 of the Commission's Codification of Financial
Reporting Policies.
B. I have carefully read this letter and the Agreement and discussed
its requirements and other applicable limitations upon my ability to sell,
transfer or otherwise dispose of the SouthTrust Common Stock, to the extent that
I have felt necessary, with my counsel or counsel for the Company.
C. I have been advised that the issuance of the SouthTrust Common
Stock to me pursuant to the Merger will be registered with the Commission under
the Act on a Registration Statement on Form S-4. However, I have also been
advised that, since at the time the Merger is to
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be submitted for a vote of the shareholders of the Company, I may be an
affiliate of the Company and the distribution by me of the SouthTrust Common
Stock has not been registered under the Act, the SouthTrust Common Stock held by
me must be held indefinitely unless and until (i) such distribution of
SouthTrust Common Stock has been registered under the Act as a secondary
offering on my behalf (which registration is not contemplated by SouthTrust),
(ii) a sale of the SouthTrust Common Stock is made in conformity with the volume
and other limitations of Rule 145 promulgated by the Commission under the Act,
or (iii) in the opinion of counsel reasonably acceptable to SouthTrust, some
other exemption from registration is available with respect to any such proposed
sale, transfer or other disposition of the SouthTrust Common Stock.
I understand that the volume limitations referred to above limit me
from reselling, within any given three month period, the greater of (i) 1% of
the class of outstanding shares of SouthTrust Common Stock as shown by the most
recent report or statement published by SouthTrust, (ii) the average weekly
reported volume of trading in such securities as reported through the automated
quotations system of a registered securities association during the four
calendar weeks preceding receipt of the order to execute the transaction, or
(iii) the average weekly volume of trading in such securities as reported
through the consolidated transaction reporting system during such four calendar
weeks. I understand that as of March 31, 1998, the outstanding SouthTrust Common
Stock consisted of {____________} shares. I also understand that securities are
sold in "brokers' transactions" within the meaning of Section 4(4) of the Act
if, among other things, a broker does no more than execute the order as an
agent, receives no more than the usual and customary broker's commission and
neither solicits nor arranges for the solicitation of orders to buy the
securities in anticipation of or in connection with the transaction. Further,
because the number of shares representing 1% of the outstanding shares of
SouthTrust Common Stock exceeds the total number of shares of SouthTrust Common
Stock issued to me in connection with the Merger, I understand that all
transactions involving such shares will be within the volume limitations of Rule
145(d).
D. I understand that SouthTrust is under no obligation to register
the sale, transfer or other disposition of SouthTrust Common Stock by me or on
my behalf or to take any other action necessary in order to make compliance with
an exemption from registration available.
E. I understand that stop transfer instructions will be given to
SouthTrust's transfer agents with respect to the SouthTrust Common Stock and
that there may be placed on the certificates for the SouthTrust Common Stock, or
any substitutions therefor, a legend stating in substance:
The shares represented by this certificate were issued in a
transaction to which Rule 145 promulgated under the Securities Act
of 1933 applies. The shares represented by this certificate may only
be transferred in accordance with the terms of the letter agreement,
dated ____________ ___, 1998, between the registered holder hereof
and SouthTrust Corporation, a copy of which agreement is on file at
the principal offices of SouthTrust Corporation.
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It is understood and agreed that the legend provided for above shall
be removed by delivery of substitute certificates without such legend if the
undersigned shall have delivered to SouthTrust a copy of a letter form the staff
of the Commission, or an opinion of counsel in form and substance satisfactory
to SouthTrust, to the effect that such legend is not required for the purposes
of the Act.
I further represent to and covenant with SouthTrust that I will not,
during the 30 days prior to the Effective Time of the Merger (as defined in the
Agreement), sell, transfer or otherwise dispose of any shares of the Company
Common Stock or SouthTrust Common Stock that I may hold and, furthermore, that I
will not sell, transfer or otherwise dispose of any shares of SouthTrust Common
Stock received by me in the Merger or any other shares of SouthTrust Common
Stock until such time as financial results covering at least 30 days of combined
operations of the Company and SouthTrust have been published within the meaning
of Section 201.01 of the Commission's Codification of Financial Reporting
Policies.
Very truly yours,
----------------------------------------------
Print Name:-----------------------------------
----------------------------------------------
Print Name:-----------------------------------
(If shares are held jointly, each owner should sign.)
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<PAGE> 198
EXHIBIT 5.17
SUBSIDIARY AGREEMENT AND
PLAN OF MERGER
This SUBSIDIARY AGREEMENT AND PLAN OF MERGER (this "Agreement")
dated as of this ___ day of _________, 1998 by and between GEORGIA NATIONAL
BANK, a national banking association (the "Bank") and a wholly-owned subsidiary
of Georgia National Bancorp, Inc., a Georgia corporation (the "Company") and
SOUTHTRUST BANK, NATIONAL ASSOCIATION, a national banking association
("ST-Bank") and a wholly-owned subsidiary of SouthTrust of Alabama, Inc.
("ST-Sub"), which in turn is a wholly-owned subsidiary of SouthTrust Corporation
("SouthTrust").
W I T N E S S E T H:
WHEREAS, the Boards of Directors of ST-Sub, SouthTrust and the
Company have approved, and deem it advisable and in the best interests of their
respective shareholders to consummate, the transactions set forth in that
certain Agreement and Plan of Merger dated as of July 1, 1998 by and between
ST-Sub and the Company, joined in by SouthTrust (the "Merger Agreement")
pursuant to which the Company will be merged with and into ST-Sub in a merger
(the "Merger");
WHEREAS, the Boards of Directors of the Bank and ST-Bank have
approved, and deem it advisable to consummate, the transactions provided for
herein pursuant to which the Bank will merge with and into ST-Bank, subject to
and as soon as practicable following the consummation of the Merger; and
WHEREAS, the parties to this Agreement contemplate that the
transactions set forth herein shall qualify pursuant to Section 368 of the
Internal Revenue Code of 1986, as amended (the "Code"), and that this Agreement
constitutes a plan of reorganization pursuant to Section 368 of the Code.
NOW, THEREFORE, in consideration of the foregoing and the respective
covenants and agreements set forth herein and in the Merger Agreement, the
parties hereto agree as follows:
ARTICLE XVIII
THE MERGER
18.1 Bank Merger. (a) Subject to the provisions hereof, the Bank
shall be merged with and into ST-Bank (the "Bank Merger") under the charter of
ST-Bank, and ST-Bank shall be the surviving association (sometimes hereinafter
referred to as the "Association" when reference is made to it after the
Effective Time of the Bank Merger (as defined below)). The name of the surviving
association shall be "SouthTrust Bank, National Association," and the business
of the Association shall be that of a national banking association. This
business shall be conducted by the Association at its main office, which shall
be located in Birmingham, Alabama and at its legally established branches.
(b) The Bank Merger shall occur immediately following the
consummation of the Merger (the "Effective Time of the Bank Merger"), or at such
other date and time as ST-Bank and Bank may mutually designate, provided,
however, that the Bank Merger shall not occur and shall
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not be effective unless and until approved by the Office of the Comptroller of
the Currency and the Board of Governors of the Federal Reserve System.
18.2 Effect of Bank Merger. At the Effective Time of the Bank
Merger, Bank shall be merged with and into ST-Bank and the separate existence of
Bank shall cease. All of the shares of capital stock of the Bank issued and
outstanding as of the Effective Time of the Bank Merger, and all rights in
respect thereof, shall be canceled. The shares of capital stock of ST-Bank
outstanding immediately prior to consummation of the Bank Merger shall
constitute the only outstanding shares of capital stock of the Association
following consummation of the Bank Merger.
18.3 Conveyance. All assets of Bank and ST-Bank as they exist at the
Effective Time of the Bank Merger shall pass to and vest in the Association
without any conveyance or other transfer. The Association shall be responsible
for all the liabilities of every kind and description of each of ST-Bank and
Bank existing as of the Effective Time of the Bank Merger.
18.4 Board of Directors; Articles of Association; Bylaws. The
present Board of Directors of ST-Bank shall continue to serve as the Board of
Directors of the Association until the next annual meeting or until such time as
their successors have been elected and have qualified. At the Effective Time of
the Bank Merger, the Articles of Association and the Bylaws of the Association
shall be the Articles of Association and Bylaws of ST-Bank as in effect
immediately prior to the Bank Merger.
18.5 Savings Accounts. From and after the Effective Time of the Bank
Merger, savings accounts of the Association shall be issued in a manner
consistent with the issuance of savings accounts by ST-Bank prior to the
Effective Time of the Bank Merger.
ARTICLE XIX
CAPITALIZATION
19.1 Capitalization of Bank and ST-Bank. As of March 31, 1998, the
Bank had a total capital of $ 2,515,020. There were 503,004 shares of Common
Stock, each of $5.00 par value. As of March 31, 1998, ST-Bank had total capital
of $9,060,600. There were 1,020,000 shares of Common Stock, each of $8.83 par
value.
19.2 Capitalization of Association. The amount of capital stock of
the Association shall be $ 9,006,600 divided into 1,020,000 shares of Common
Stock, each of $8.83 par value.
ARTICLE XX
COVENANTS
20.1 Covenants of Bank and ST-Bank. During the period from the date
of this Agreement and continuing until the Effective Time, each of the parties
hereto agrees to observe and perform all agreements and covenants in the Merger
Agreement that pertain or are applicable to Bank and ST-Bank, respectively. Each
of the parties hereto agrees to use all reasonable efforts to take, or cause to
be taken, all action and to do, or cause to be done, all things necessary,
proper or advisable under applicable laws and regulations to consummate and make
effective the transactions contemplated by this Agreement, subject to and in
accordance with the applicable provisions of the Merger Agreement.
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ARTICLE XXI
CONDITIONS PRECEDENT
21.1 Conditions to Each Party's Obligation to Effect the Bank
Merger. The respective obligations of each party to effect the Bank Merger shall
be subject to the satisfaction prior to the Effective Time of the Bank Merger of
the following conditions:
(a) Effective Time of the Merger. The Effective Time (as
defined in the Merger Agreement) of the Merger shall have occurred.
(b) No Injunctions or Restraints; Illegality. No temporary
restraining order, preliminary or permanent injunction or other order issued by
any court of competent jurisdiction or other legal restraint or prohibition
preventing the consummation of the Bank Merger shall be in effect. There shall
not be any action taken, or any statute, rule, regulation or order enacted,
enforced or deemed applicable to the Bank Merger, which makes the consummation
of the Bank Merger illegal as of the Effective Time of the Bank Merger.
(c) Shareholder Approval. The sole shareholder of ST-Bank and
the sole shareholder of the Bank each shall have voted affirmatively to approve
the Bank Merger by not less than a majority of the outstanding voting stock of
ST-Bank and the Bank, respectively.
(d) Other Approvals. All requisite regulatory approvals
relating to the Bank Merger shall have been obtained and continue to be in full
force and effect, and all waiting and notice periods under applicable law shall
have expired.
ARTICLE XXII
TERMINATION AND AMENDMENT
22.1 Termination. This Agreement shall be terminated immediately and
without any action on the part of the Bank or ST-Bank upon any termination of
the Merger Agreement.
22.2 Effect of Termination. In the event of termination of this
Agreement as provided in Section 5.1 hereof, this Agreement shall forthwith
become void and there shall be no liability or obligation on the part of the
Bank or ST-Bank or their respective officers or directors.
22.3 Amendment. This Agreement may be amended by the parties hereto,
by action taken or authorized by their respective Boards of Directors. This
Agreement may not be amended except by an instrument in writing signed on behalf
of each of the parties hereto.
ARTICLE XXIII
GENERAL PROVISIONS
23.1 Nonsurvival of Agreements. None of the agreements in this
Agreement or in any instrument delivered pursuant to this Agreement shall
survive the Effective Time of the Bank Merger.
23.2 Notices. All notices and other communications hereunder shall
be in writing and shall be deemed given if delivered personally, telecopied
(with confirmation) or mailed by registered or certified mail (return receipt
requested) to the Bank or ST-Bank, respectively, at the
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addresses for notices to the Company or SouthTrust, respectively, as set forth
in the Merger Agreement, with copies to the persons referred to therein.
23.3 Interpretation. When a reference is made in this Agreement to
Sections, such reference shall be to a Section of this Agreement unless
otherwise indicated. The headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation 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."
23.4 Counterparts. This Agreement may be executed in two
counterparts, both of which shall be considered one and the same agreement and
shall become effective when both counterparts have been signed by each of the
parties and delivered to the other party, it being understood that both parties
need not sign the same counterpart.
23.5 Entire Agreement. Except as otherwise set forth in the Merger
Agreement, this Agreement (including the documents and the instruments referred
to herein) constitutes the entire agreement and supersedes all prior agreements
and understandings, both written and oral, among the parties with respect to the
subject matter hereof. This Agreement shall be subject to the terms and
conditions of the Merger Agreement.
23.6 Assignment. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by any of the parties
hereto (whether by operation of law or otherwise) without the prior written
consent of the other party.
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IN WITNESS WHEREOF, the signatures and seals of the Bank and ST-Bank
this ___ day of __________, 1998, each set by its president or a vice president
and attested to by its cashier or secretary, pursuant to a resolution of its
board of directors, acting by a majority.
GEORGIA NATIONAL BANK
By:
-----------------------------
Its:
----------------------------
Attest:
By:
-----------------------------
Its:
----------------------------
[Seal of Bank]
SOUTHTRUST BANK,
NATIONAL ASSOCIATION
By:
-----------------------------
Its:
----------------------------
Attest:
By:
-----------------------------
Its:
----------------------------
[Seal of Bank]
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<PAGE> 203
STATE OF ALABAMA )
) SS:
COUNTY OF JEFFERSON )
On this ________ day of _______________, 1998, before me, a notary
public for this state and county, personally came __________________________, as
____________________________________________, and ____________________________,
as ________________________________, of SouthTrust Bank, National Association,
and each in his/her said capacity acknowledged this instrument to be the act and
deed of the association and the seal affixed to it to be its seal.
WITNESS my official seal and signature this day and year.
-------------------------------------------
[Seal of Notary] Notary Public, Jefferson County
My commission expires
----------------------
STATE OF GEORGIA )
) SS:
COUNTY OF _______________ )
On this ______ day of _______________, 1998, before me, a notary
public for this state and county, personally came _____________________________,
as ________________________________________, and _________________________, as
___________________________________, of Georgia National Bank, and each in
his/her said capacity acknowledged this instrument to be the act and deed of the
association and the seal.
WITNESS my official seal and signature this day and year.
-------------------------------------------
[Seal of Notary] Notary Public, County
--------------------
My commission expires
----------------------
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EXHIBIT B
STOCK OPTION AGREEMENT
This STOCK OPTION AGREEMENT, dated as of July 1, 1998 (the
"Agreement"), is by and between Georgia National Bancorp, Inc., a Georgia
corporation ("Issuer"), and SouthTrust Corporation, a Delaware corporation
("Grantee").
WHEREAS, Issuer and SouthTrust of Alabama, Inc., an Alabama
corporation and a wholly-owned subsidiary of Grantee ("ST-Sub"), have entered
into an Agreement and Plan of Merger dated as of July 1, 1998 and joined in by
Grantee (the "Merger Agreement"), providing for, among other things, the merger
of Issuer with and into ST-Sub, with ST-Sub as the surviving corporation; and
WHEREAS, as a condition and inducement to Grantee's execution of the
Merger Agreement, Grantee has required that Issuer agree, and Issuer has agreed,
to grant Grantee the Option (as defined below);
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth herein and in
the Merger Agreement, and intending to be legally bound hereby, Issuer and
Grantee agree as follows:
1. Defined Terms. Capitalized terms which are used but not defined
herein shall have the meanings ascribed to such terms in the Merger Agreement.
2. Grant of Option. Subject to the terms and conditions set forth
herein, Issuer hereby grants to Grantee an irrevocable option (the "Option") to
purchase up to 325,090 shares (the "Option Shares") of Common Stock of Issuer,
par value $0.005 per share ("Issuer Common Stock"), at a purchase price per
Option Share (the "Purchase Price") equal to $24.71; provided, however, that in
no event shall the number of shares of Issuer Common Stock for which this Option
is exercisable exceed 19.9% of the Issuer's issued and outstanding shares of
Common Stock. The number of shares of Issuer Common Stock that may be received
upon the exercise of the Option and the Purchase Price are subject to adjustment
as herein set forth.
3. Exercise of Option.
(a) Provided that (i) Grantee shall not be in material breach of the
agreements or covenants contained in this Agreement or the Merger Agreement, and
(ii) no preliminary or permanent injunction or other order against the delivery
of the Option Shares issued by any court of competent jurisdiction in the United
States shall be in effect, Grantee may exercise the Option, in whole or in part,
at any time and from time to time, but only following the occurrence of a
Purchase Event (as defined below); provided that the Option shall terminate and
be of no further force or effect upon the earlier to occur of (A) the Effective
Time of the Merger, (B) the termination of the Merger Agreement in accordance
with the terms thereof before the occurrence of a Purchase Event or a
Preliminary Purchase Event (other than a termination of the Merger Agreement by
Grantee pursuant to Section 10.1(c) or (d) of the Merger Agreement (an "Issuer
Default Termination")); (C) the close of business on the 365th day after the
occurrence of an Issuer Default Termination; and (D) the close of business on
the 365th day after termination of the Merger
B-1
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Agreement (other than an Issuer Default Termination) following the occurrence of
a Purchase Event or a Preliminary Purchase Event (hereinafter sometimes referred
to as the "Termination Date"); provided that any purchase of Option Shares upon
the exercise of the Option shall be subject to compliance with applicable law,
including, without limitation, the Bank Holding Company Act of 1956 (the
"BHCA"), and any required Consent of any Regulatory Authority. The rights set
forth in Section 8 of this Agreement shall terminate when the right to exercise
the Option terminates (other than as a result of a complete exercise of the
Option) as set forth herein.
(b) As used herein, a "Purchase Event" means any of the following
events:
(i) without Grantee's prior written consent, Issuer shall have
authorized, recommended, publicly proposed or publicly announced an
intention to authorize, recommend or propose, or entered into a
agreement with any person (other than Grantee or any subsidiary of
Grantee) to effect an Acquisition Transaction (as defined below). As
used herein, the term "Acquisition Transaction" shall mean (A) a
merger, consolidation or similar transaction involving Issuer or any
of its subsidiaries (other than transactions solely between Issuer's
subsidiaries), (B) the disposition, by sale, lease, exchange or
otherwise, of assets of Issuer or any of its subsidiaries
representing in either case 20% or more of the consolidated assets
of Issuer and its subsidiaries or (C) the issuance, sale or other
disposition of (including by way of merger, consolidation, share
exchange or any similar transaction) securities representing 20% or
more of the voting power of Issuer or any of its significant
subsidiaries; or
(ii) any person (other than Grantee or any subsidiary of
Grantee) shall have acquired beneficial ownership (as such term is
defined in Rule 13d-3 promulgated under the Securities Exchange Act
of 1934, as amended (the "Exchange Act")) of, 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, 20% or more (or, if such person or group is the beneficial owner
of 20% or more on the date hereof, such person or group acquires an
additional 5% or more) of the voting power of Issuer or any of its
significant subsidiaries.
(c) As used herein, a "Preliminary Purchase Event" means any of the
following events:
(i) any person (other than Grantee or any subsidiary of
Grantee) shall have commenced (as such term is defined in Rule 14d-2
under the 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 Issuer Common Stock such that, upon consummation of such
offer, such person would own or control 20% or more of the then
outstanding shares of Issuer Common Stock (such an offer being
referred to herein as a "Tender Offer" or an "Exchange Offer",
respectively); or
(ii) the holders of Issuer Common Stock shall not have approved
the Merger Agreement at the meeting of such shareholders held for
the purpose of voting on the Merger Agreement, such meeting shall
not have been held or shall have been canceled prior to termination
of the Merger Agreement or Issuer's Board of Directors shall have
withdrawn or modified in a manner adverse to Grantee the
recommendation of Issuer's Board of Directors with respect to the
Merger Agreement, in each case, after it shall have been
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<PAGE> 206
publicly announced that any person (other than Grantee or any
subsidiary of Grantee) shall have (A) made, or disclosed an
intention to make, a proposal to engage in an Acquisition
Transaction, (B) commenced a Tender Offer or filed a registration
statement under the Securities Act with respect to an Exchange Offer
or (C) filed an application (or given a notice), whether in draft or
final form, under Georgia banking or corporate law or any other
applicable law seeking, including, without limitation, the BHCA,
approval to engage in an Acquisition Transaction.
As used in this Agreement, "person" shall have the meaning specified in Sections
3(a)(9) and 13(d)(3) of the Exchange Act.
(d) Issuer shall notify Grantee promptly in writing of the
occurrence of any Preliminary Purchase Event or Purchase Event, it being
understood that the giving of such notice by Issuer shall not be a condition to
the right of Grantee to exercise the Option.
(e) In the event Grantee wishes to exercise the Option, it shall
send to Issuer a written notice (the date of which being herein referred to as
the "Notice Date") specifying (i) the total number of Option Shares it intends
to purchase pursuant to such exercise and (ii) subject to the next sentence, a
place and date not earlier than three (3) business days nor later than fifteen
(15) business days after the Notice Date for the closing (the "Closing") of such
purchase (the "Closing Date"). If prior notification to or consent of any
regulatory authority is required in connection with such purchase, then,
notwithstanding the prior occurrence of the Termination Date, the Closing Date
shall be extended for such period as shall be necessary to enable such prior
notification or consent to occur or to be obtained (and the expiration of any
mandatory waiting period). Issuer shall cooperate with Grantee in the filing of
any applications or documents necessary to obtain any required consent or in
connection with any required prior notification and the Closing shall occur
immediately following receipt of such consent (or the filing of any such prior
notification and the expiration of any mandatory waiting periods).
4. Payment and Delivery of Certificates.
(a) On each Closing Date, Grantee shall (i) pay to Issuer, in
immediately available funds by wire transfer to a bank account designated by
Issuer, an amount equal to the Purchase Price multiplied by the number of Option
Shares to be purchased on such Closing Date, and (ii) present and surrender this
Agreement to the Issuer at the address of the Issuer specified herein.
(b) At each Closing, simultaneously with the delivery of immediately
available funds and surrender of this Agreement as provided in Section 4(a)
above, (i) Issuer shall deliver to Grantee (A) a certificate or certificates
representing the Option Shares to be purchased at such Closing, which Option
Shares shall be free and clear of all liens, claims, charges and encumbrances of
any kind whatsoever and subject to no pre-emptive rights, and (B) if the Option
is exercised in part only, a new Stock Option Agreement, executed by Issuer,
with the same terms as this Agreement evidencing the right to purchase the
balance of the shares of Issuer Common Stock purchasable hereunder, and (ii)
Grantee shall deliver to Issuer a letter agreeing that Grantee shall not offer
to sell or otherwise dispose of such Option Shares in violation of applicable
federal and state law or of the provisions of this Agreement.
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(c) In addition to any other legend that is required by applicable
law, certificates for the Option Shares delivered at each Closing shall be
endorsed with a restrictive legend which shall read substantially as follows:
THE TRANSFER OF THE STOCK REPRESENTED BY THIS CERTIFICATE IS SUBJECT TO
RESTRICTIONS ARISING UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND PURSUANT
TO THE TERMS OF A STOCK OPTION AGREEMENT DATED AS OF JUNE__, 1998. A COPY OF
SUCH AGREEMENT WILL BE PROVIDED TO THE HOLDER HEREOF WITHOUT CHARGE UPON RECEIPT
BY THE ISSUER OF A WRITTEN REQUEST THEREFOR.
It is understood and agreed that the above legend shall be removed by delivery
of substitute certificate(s) without such legend if Grantee shall have delivered
to Issuer an opinion of counsel in form and substance reasonably satisfactory to
Issuer and its counsel, to the effect that such legend is not required for
purposes of the Securities Act.
(d) Upon the giving by Grantee to Issuer of the written notice of
exercise of the Option provided for under Section 3(e) of this Agreement, the
tender of the applicable Purchase Price in immediately available funds and the
tender of this Agreement to Issuer, Grantee shall be deemed to be the holder of
record of the shares of Issuer Common Stock issuable upon such exercise,
notwithstanding that the stock transfer books of Issuer shall then be closed or
that certificates representing such shares of Issuer Common Stock shall not then
be actually delivered to Grantee. Issuer shall pay all expenses, and any and all
United States federal, state, and local taxes and other charges that may be
payable in connection with the preparation, issuance and delivery of stock
certificates under this Section in the name of Grantee or its assignee,
transferee, or designee.
(e) Issuer agrees (i) that it shall at all times maintain, free from
pre-emptive rights, sufficient authorized but unissued or treasury shares of
Issuer Common Stock so that the Option may be exercised without additional
authorization of Issuer Common Stock after giving effect to all other options,
warrants, convertible securities and other rights to purchase Issuer Common
Stock, (ii) that it will not, by amendment to its Articles of Incorporation or
Bylaws or through reorganization, consolidation, merger, dissolution or sale of
assets, or by any other voluntary act, avoid or seek to avoid the observance or
performance of any of the covenants, stipulations or conditions to be observed
or performed hereunder by Issuer, (iii) promptly to take all action as may from
time to time be required (including (A) complying (if applicable) with all
premerger notification, reporting and waiting period requirements specified in
15 U.S.C. ss. 18a and regulations promulgated thereunder and (B) in the event,
under any federal or state law, prior notice to Consent of any Regulatory
Authority is necessary before the Option may be exercised, co-operating fully
with Grantee in preparing any required application or notice and providing such
information to such Regulatory Authority as such Regulatory Authority may
require) in order to permit Grantee to exercise the Option and Issuer duly and
effectively to issue shares of Issuer Common Stock pursuant hereto, and (iv)
promptly to take all action provided herein to protect the rights of Grantee
against dilution.
5. Representations and Warranties of Issuer. Issuer hereby
represents and warrants to Grantee as follows:
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(a) Due Authorization. Issuer has all requisite corporate power and
authority to enter into this Agreement and, subject to any approvals referred to
herein, to consummate the transactions contemplated hereby. The execution and
delivery of this Agreement and the consummation of the transactions contemplated
hereby have been duly authorized by all necessary corporate action on the part
of Issuer. This Agreement has been duly executed and delivered by Issuer.
(b) Authorized Stock. Issuer has taken all necessary corporate and
other action to authorize and reserve and to permit it to issue, and, at all
times from the date hereof until the obligation to deliver Issuer Common Stock
upon the exercise of the Option terminates, will have reserved for issuance,
upon exercise of the Option, the number of shares of Issuer Common Stock
necessary for Grantee to exercise the Option, and Issuer will take all necessary
corporate action to authorize and reserve for issuance all additional shares of
Issuer Common Stock or other securities which may be issued pursuant to Section
7 of this Agreement upon exercise of the Option. The shares of Issuer Common
Stock to be issued upon due exercise of the Option, including all additional
shares of Issuer Common Stock or other securities which may be issuable pursuant
to Section 7 of this Agreement, upon issuance pursuant hereto, shall be duly and
validly issued, fully paid and nonassessable, and shall be delivered free and
clear of all liens, claims, charges and encumbrances of any kind or nature
whatsoever, including any pre-emptive right of any shareholder of Issuer, but
subject to the voting restrictions contained in the Articles of Incorporation of
Issuer.
(c) No Violation. Except as disclosed pursuant to the Merger
Agreement, the execution and delivery of this Agreement does not, and the
consummation of the transactions contemplated hereby will not, conflict with, or
result in any violation pursuant to any provisions of the Certificate or
Articles of Incorporation or By-laws of Issuer or any subsidiary of Issuer or,
subject to obtaining any approvals or consents contemplated hereby, result in
any violation of any loan or credit agreement, note, mortgage, indenture, lease,
plan or other agreement, obligation, instrument, permit, concession, franchise,
license, judgment, order, decree, statute, law, ordinance, rule or regulation
applicable to Issuer or any subsidiary of Issuer or their respective properties
or assets which violation would have a material adverse effect on the Condition
of Issuer on a consolidated basis.
6. Representations and Warrants of Grantee. Grantee hereby
represents and warrants to Issuer that:
(a) Due Authorization. Grantee has all requisite corporate power and
authority to enter to this Agreement and, subject to any approvals or consents
referred to herein, to consummate the transactions contemplated hereby. The
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of Grantee. This Agreement has been duly executed
and delivered by Grantee.
(b) Purchase Not for Distribution. This Option is not being, and any
Option Shares or other securities acquired by Grantee upon exercise of the
Option will not be, acquired with a view to the public distribution thereof and
will not be transferred or otherwise disposed of except in a transaction
registered or exempt from registration under the Securities Act.
7. Adjustment upon Changes in Capitalization, etc.
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(a) In the event of any change in Issuer Common Stock by reason of a
stock dividend stock split, split-up, recapitalization, combination, exchange of
shares or similar transaction, the type and number of shares or securities
subject to the Option, and the Purchase Price therefor, shall be adjusted
appropriately, and proper provision shall be made in the agreements governing
such transaction so that Grantee shall receive, upon exercise of the Option, the
number and class of shares or other securities or property that Grantee would
have received in respect of Issuer Common Stock if the Option had been exercised
immediately prior to such event, or the record date therefor, as applicable. If
any additional shares of Issuer Common Stock are issued after the date of this
Agreement (other than pursuant to an event described in the first sentence of
this Section 7(a)), the number of shares of Issuer Common Stock subject to the
Option shall be adjusted so that, after such issuance, the Option, together with
any shares of Issuer Common Stock previously issued pursuant hereto, equals
19.9% of the number of shares of Issuer Common Stock then issued and
outstanding, without giving effect to any shares subject to or issued pursuant
to the Option.
(b) In the event that, prior to the Termination Date, Issuer shall
enter into an agreement: (i) to consolidate with or merge into any person, other
than Grantee or one of its subsidiaries, and shall not be the continuing or
surviving corporation of such consolidation or merger, (ii) to permit any
person, other than Grantee or one of its subsidiaries, to merge into Issuer
where Issuer shall be the continuing or surviving corporation, but, in
connection with such merger, the then outstanding shares of Issuer Common Stock
shall be changed into or exchanged for stock or other securities of Issuer or
any other person or cash or any other property or the outstanding shares of
Issuer Common Stock immediately prior to such merger shall after such merger
represent less than 50% of the outstanding shares and share equivalents of the
merged company, or (iii) to sell or otherwise transfer all or substantially all
of its assets to any person, other than Grantee or one of its subsidiaries,
then, and in each such case, the agreement governing such transaction shall make
proper provisions so that, upon the consummation of any such transaction and
upon the terms and conditions set forth herein, the Option, notwithstanding the
fact that as of the date of consummation of such transaction the Termination
Date shall have occurred, shall be converted into, or exchanged for, an option
(the "Substitute Option"), at the election of Grantee, of either (x) the
Acquiring Corporation (as defined below), (y) any person that controls the
Acquiring Corporation, or (z) in the case of a merger described in clause (ii),
the Issuer (in each case, such entity being referred to as the "Substitute
Option Issuer").
(c) The Substitute Option shall have the same terms as the Option,
provided that, if the terms of the Substitute Option cannot, because of the
applicability of any law or regulation, have the exact terms as the Option, such
terms shall be as similar as possible and in no event less advantageous to
Grantee. The Substitute Option Issuer shall also enter into an agreement with
the then-holder or holders of the Substitute Option in substantially the same
form as this Agreement, which shall be applicable to the Substitute Option.
(d) The Substitute Option shall be exercisable for such number of
shares of the Substitute Common Stock (as hereinafter defined) as is equal to
the Assigned Value (as hereinafter defined) multiplied by the number of shares
of the Issuer Common Stock for which the Option was theretofore exercisable,
divided by the Average Price (as hereinafter defined). The exercise price of
each share of Substitute Common Stock subject to the Substitute Option (the
"Substitute Purchase Price") shall be equal to the Purchase Price multiplied by
a fraction in which the numerator is the
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number of shares of the Issuer Common Stock for which the Option was theretofore
exercisable and the denominator is the number of shares for which the Substitute
Option is exercisable.
(e) The following terms have the meanings indicated:
(i) "Acquiring Corporation" shall mean (x) the
continuing or surviving corporation of a consolidation or merger
with respect to which Issuer is one of the parties (if other than
Issuer), (y) the Issuer in a consolidation or merger or in which the
Issuer is the continuing or surviving corporation, and (z) the
transferee of all or any substantial part of the Issuer's assets (or
the assets of its subsidiaries).
(ii) "Assigned Value" shall mean the highest of (x) the
price per share of the Issuer Common Stock at which a Tender Offer
or Exchange Offer therefor has been made by any person (other than
Grantee), (y) the price per share of the Issuer Common Stock to be
paid by any person (other than the Grantee) pursuant to an agreement
with Issuer, and (z) the highest last sales price per share of
Issuer Common Stock quoted on any national securities exchange
(including the NASDAQ - National Market System) (or if Issuer Common
Stock is not quoted on any such national securities exchange, the
highest bid price per share on any day as quoted on the principal
trading market or securities exchange on which such shares are
traded as reported by a recognized source chosen by Grantee) within
the six-month period immediately preceding the agreement described
in Section 7(b) above; provided, however, that in the event of a
sale of less than all of Issuer's assets, the Assigned Value shall
be the sum of the price paid in such sale for such assets and the
current market value of the remaining assets of Issuer as determined
by a nationally recognized investment banking firm selected by
Grantee, divided by the number of shares of the Issuer Common Stock
outstanding at the time of such sale. In the event a Tender Offer or
Exchange Offer is made for the Issuer Common Stock or an agreement
is entered into for a merger or consolidation involving
consideration other than cash, the value of the securities or other
property issuable or deliverable in exchange for the Issuer Common
Stock shall be determined by a nationally recognized investment
banking firm mutually selected by Grantee and Issuer (or if
applicable, Acquiring Corporation), provided that if a mutual
selection cannot be made as to such investment banking firm, it
shall be selected by Grantee.
(iii) "Average Price" shall mean the average last sales
price of a share of the Substitute Common Stock for the one year
immediately preceding the consolidation, merger or sale in question,
as quoted on any national securities exchange (including the NASDAQ
National Market System), and if the Substitute Common Stock is not
quoted on any such national securities exchange, the average of the
bid price for the one year period described above, as quoted on the
principal trading market or securities exchange on which such
Substitute Common Stock is traded, as reported by a recognized
source, as chosen by Grantee, but in no event higher than the last
sales price or closing price or the bid price of the shares of the
Substitute Common Stock on the day preceding such consolidation,
merger, or sale; provided that if Issuer is the issuer of the
Substitute Option, the Average Price shall be computed with respect
to a share of common stock issued by Issuer, the person merging into
Issuer or by any company which controls or is controlled by such
person, as Grantee may elect.
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(iv) "Substitute Common Stock" shall mean the common stock
issued by the Substitute Option Issuer upon the exercise of the
Substitute Option.
(f) In no event pursuant to any of the foregoing paragraphs shall
the Substitute Option be exercisable for more than 19.9% of the aggregate of the
shares of the Substitute Common Stock outstanding prior to exercise of the
Substitute Option. In the event that the Substitute Option would be exercisable
for more than 19.9% of the aggregate of the shares of the Substitute Common
Stock but for this clause (f), the Substitute Option Issuer shall make a cash
payment to Grantee equal to the amount of (i) the value of the Substitute Option
without giving effect to the limitation in this clause (f) in excess of (ii) the
value of the Substitute Option after giving effect to the limitation in this
clause (f). This difference in value shall be determined by a nationally
recognized investment banking firm selected by Grantee.
(g) Issuer shall not enter into any transaction described in
subsection (b) of this Section 7 unless the Acquiring Corporation and any person
that controls the Acquiring Corporation assumes in writing all of the
obligations of Issuer hereunder and takes all other actions that may be
necessary so that the provisions of this Section 7 are given full force and
effect (including, without limitation, any action that may be necessary so that
the shares of Substitute Common Stock are in no way distinguished from or have
lesser economic value (other than any diminution resulting from the fact that
the Substitute Common Stock is "restricted securities" within the meaning of
Rule 144 under the Securities Act) than other shares of common stock issued by
the Substitute Option Issuer).
(h) The provisions of Sections 8, 9 and 10 shall apply, with
appropriate adjustments, to any securities for which the Option becomes
exercisable pursuant to this Section 7 and, as applicable, references in such
sections to "Issuer," "Option," "Purchase Price," and "Issuer Common Stock"
shall be deemed to be references to "Substitute Option Issuer," "Substitute
Option," "Substitute Purchase Price," and "Substitute Common Stock,"
respectively.
8. Repurchase at the Option of Grantee.
(a) Subject to the last sentence of Section 3(a) of this Agreement,
at the request of Grantee at any time commencing upon the first occurrence of a
Repurchase Event (as defined in Section 8(d)) and ending at the close of
business 365 days thereafter, Issuer shall repurchase from Grantee the Option
and all shares of Issuer Common Stock purchased by Grantee pursuant hereto with
respect to which Grantee then has beneficial ownership. The date on which
Grantee exercises its rights under this Section 8 is referred to as the "Request
Date". Such repurchase shall be at an aggregate price (the "Section 8 Repurchase
Consideration") equal to the sum of:
(i) the aggregate Purchase Price paid by Grantee for any shares
of Issuer Common Stock acquired pursuant to complete or partial
exercise of the Option with respect to which Grantee then has
beneficial ownership;
(ii) the excess, if any, of (x) the Applicable Price (as
defined below) for each share of Issuer Common Stock over (y) the
Purchase Price (subject to adjustment pursuant to Section 7),
multiplied by the number of shares of Issuer Common Stock with
respect to which the Option has not been exercised; and
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(iii) the excess, if any, of the Applicable Price over the
Purchase Price (subject to adjustment pursuant to Section 7) paid
(or, in the case of Option Shares with respect to which the Option
has been exercised but the Closing Date has not occurred, payable)
by Grantee for each share of Issuer Common Stock with respect to
which the Option has been exercised and with respect to which
Grantee then has beneficial ownership, multiplied by the number of
such shares.
(b) If Grantee exercises its rights under this Section 8, Issuer
shall, within ten (10) business days after the Request Date, pay the Section 8
Repurchase Consideration to Grantee in immediately available funds, and
contemporaneously with such payment Grantee shall surrender to Issuer the Option
and the certificates evidencing the shares of Issuer Common Stock purchased
thereunder with respect to which Grantee then has beneficial ownership, and
Grantee shall warrant that it has sole record and beneficial ownership of such
shares and that the same are then free and clear of all liens, claims, charges
and encumbrances of any kind whatsoever. Notwithstanding the foregoing, to the
extent that prior notification to or Consent of any Regulatory Authority is
required in connection with the payment of all or any portion of the Section 8
Repurchase Consideration, or Issuer is prohibited under applicable law or
regulation, or as a consequence of administrative policy, from repurchasing the
Option and/or the Option Shares in full, Issuer shall immediately so notify
Grantee and thereafter deliver from time to time, and as permitted by applicable
law or regulation, that portion of the Section 8 Repurchase Consideration that
it is not then so prohibited from paying within five business days after the
date on which Issuer is no longer prohibited; provided, however, that if Issuer
at any time is prohibited under applicable law or regulation, or as a
consequence of administrative policy, from delivering to the Grantee the Section
8 Repurchase Consideration, in full (and Issuer hereby undertakes to use its
best efforts to obtain all required consents of regulatory authorities and to
file any required notices as promptly as practicable in order to accomplish such
repurchase), the Grantee may, at its option, revoke its request that Issuer
repurchase the Option or the Option Shares either in whole or to the extent of
the prohibition, whereupon, in the latter case, Issuer shall promptly (i)
deliver to the Grantee that portion of the Section 8 Repurchase Consideration
that Issuer is not prohibited from delivering; and (ii) deliver, to the Grantee
either (A) a new Stock Option Agreement evidencing the right of Issuer to
purchase that number of shares of Common Stock obtained by multiplying the
number of shares of Common Stock for which the surrendered Stock Option
Agreement was exercisable at the time of delivery of the notice of repurchase by
a fraction, the numerator of which is the Section 8 Repurchase Consideration
less the portion thereof theretofore delivered to the Grantee and the
denominator of which is the Section 8 Repurchase Consideration, or (B) a
certificate for the Option Shares it is then prohibited from repurchasing.
Notwithstanding anything herein to the contrary, all of Grantee's
rights under this Section 8 shall terminate on the Termination Date of this
Option pursuant to Section 3(a) of this Agreement.
(c) For purposes of this Agreement, the "Applicable Price" means the
highest of: (i) the highest price per share of Issuer Common Stock paid for any
such share by the person or groups described in Section 8(d)(i) below; (ii) the
price per share of Issuer Common Stock received by holders of Issuer Common
Stock in connection with any merger or other business combination transaction
described in Section 7(b)(i), 7(b)(ii) or 7(b)(iii) above; or (iii) the highest
last sales price per share of Issuer Common Stock quoted on any national
securities exchange (including the
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NASDAQ - National Market System) (or if Issuer Common Stock is not quoted on any
such national securities exchange, the highest bid price per share as quoted on
the principal trading market or securities exchange on which such shares are
traded as reported by a recognized source chosen by Grantee) during the sixty
(60) business days preceding the Request Date; provided, however, that in the
event of a sale of less than all of Issuer's assets, the Applicable Price shall
be the sum of the price paid in such sale for such assets and the current market
value of the remaining assets of Issuer as determined by a nationally recognized
investment banking firm selected by Grantee, divided by the number of shares of
the Issuer Common Stock outstanding at the time of such sale. If the
consideration to be offered, paid or received pursuant to either of the
foregoing clauses (i) or (ii) shall be other than in cash, the value of such
consideration shall be determined in good faith by an independent nationally
recognized investment banking firm selected by Grantee and reasonably acceptable
to Issuer, which determination shall be conclusive for all purposes of this
Agreement.
(d) As used herein, a "Repurchase Event" shall occur if (i) any
person (other than Grantee or any subsidiary of Grantee) shall have acquired
beneficial ownership of (as such term is defined in Rule 13d-3 promulgated under
the 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, 50%
or more of the then outstanding shares of Issuer Common Stock, or (ii) any of
the transactions described in Section 7(b)(i), 7(b)(ii) or 7(b)(iii) of this
Agreement shall be consummated.
9. Registration Rights.
(a) Demand Registration Rights. Issuer shall, subject to the
conditions of subparagraph (c) below, if requested by Grantee, as expeditiously
as possible prepare and file a registration statement under the Securities Act
(or similar document under analogous bank securities regulations) if such
registration is necessary in order to permit the sale or other disposition of
any or all shares of Issuer Common Stock or other securities that have been
acquired by or are issuable to Grantee upon exercise of the Option in accordance
with the intended method of sale or other disposition stated by Grantee in such
request, including without limitation a "shelf" registration statement under
Rule 415 under the Securities Act or any successor provision, and Issuer shall
use its best efforts to qualify such shares or other securities for sale under
any applicable state securities laws.
(b) Additional Registration Rights. If Issuer at any time after the
exercise of the Option proposes to register any shares of Issuer Common Stock
under the Securities Act in connection with an underwritten public offering of
such Issuer Common Stock, Issuer will promptly give written notice to Grantee
(and any permitted transferee) of its intention to do so and, upon the written
request of Grantee (or any such permitted transferee of Grantee) given within 30
days after receipt of any such notice (which request shall specify the number of
shares of Issuer Common Stock intended to be included in such underwritten
public offering by Grantee (or such permitted transferee)), Issuer will cause
all such shares, the holders of which shall have requested participation in such
registration, to be so registered and included in such underwritten public
offering; provided, that the Issuer may elect not to cause all of the shares for
which the Grantee has requested participation in such registration to be
registered and included in such underwritten public offering if the
underwriters, for good business reasons and in good faith, object to such
inclusion.
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(c) Conditions to Required Registration. Issuer shall use all
reasonable efforts to cause each registration statement referred to in
subparagraph (a) above to become effective and to obtain all consents or waivers
of other parties which are required therefor and to keep such registration
statement effective, provided, however, Issuer shall not be required to register
Option Shares under the Securities Act pursuant to subparagraph (a) above:
(i) prior to the earliest of (a) termination of the Merger
Agreement, and (b) a Purchase Event or a Preliminary Purchase Event;
(ii) on more than two occasions;
(iii) more than once during any calendar year; and
(iv) within 90 days after the effective date of a registration
referred to in subparagraph (b) above pursuant to which the holder
or holders of the Option Shares concerned were afforded the
opportunity to register such shares under the Securities Act and
such shares were registered as requested.
In addition to the foregoing, Issuer shall not be required to
maintain the effectiveness of any registration statement after the expiration of
180 days from the effective date of such registration statement. Issuer shall
use all reasonable efforts to make any filings, and take all steps, under all
applicable state securities laws to the extent necessary to permit the sale or
other disposition of the Option Shares so registered in accordance with the
intended method of distribution for such shares.
(d) Expenses. Except where applicable state law prohibits such
payments, Issuer will pay all of its expenses (including, without limitation,
registration fees, qualification fees, blue sky fees and expenses, legal
expenses, printing expenses and the costs of special audits or "cold comfort"
letters, expenses of underwriters, excluding discounts and commissions but
including liability insurance if Issuer so desires or the underwriters so
require, and the reasonable fees and expenses of any necessary special experts)
in connection with each registration pursuant to subparagraph (a) or (b) above
(including the related offerings and sales by holders of Option Shares) and all
other qualifications, notifications or exemptions pursuant to subparagraph (a)
or (b) above; provided, however, that fees and expenses of counsel to the
Grantee and any other expenses incurred by the Grantee in connection with such
registration shall be borne by the Grantee.
(e) Indemnification. In connection with any registration under
subparagraph (a) or (b) above Issuer hereby indemnifies the holder of the Option
Shares, and each underwriter thereof, including each person, if any, who
controls such holder or underwriter within the meaning of Section 15 of the
Securities Act, against all expenses, losses, claims, damages and liabilities
caused by any untrue, or alleged untrue, statement of a material fact contained
in any registration statement or prospectus or notification or offering circular
(including any amendments or supplements thereto) or any preliminary prospectus,
or caused by any omission, or alleged omission, to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, except insofar as such expenses, losses, claims, damages or
liabilities of such indemnified party are caused by any untrue statement or
alleged untrue statement that was included by Issuer in any such registration
statement or prospectus or notification or offering circular (including any
amendments or supplements thereto) in reliance upon and in conformity with,
information furnished in writing to Issuer by such indemnified party expressly
for use therein, and
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Issuer and each officer, director and controlling person of Issuer shall be
indemnified by such holder of the Option Shares, or by such underwriter, as the
case may be, for all such expenses, losses, claims, damages and liabilities
caused by any untrue, or alleged untrue, statement, that was included by Issuer
in any such registration statement or prospectus or notification or offering
circular (including any amendments or supplements thereto) in reliance upon, and
in conformity with, information furnished in writing to Issuer by such holder or
such underwriter, as the case may be, expressly for such use.
Promptly upon receipt by a party indemnified under this subparagraph
(e) of notice of the commencement of any action against such indemnified party
in respect of which indemnity or reimbursement may be sought against any
indemnifying party under this subparagraph (e), such indemnified party shall
notify the indemnifying party in writing of the commencement of such action, but
the failure so to notify the indemnifying party shall not relieve it of any
liability which it may otherwise have to any indemnified party under this
subparagraph (e). In case notice of commencement of any such action shall be
given to the indemnifying party as above provided, the indemnifying party shall
be entitled to participate in and, to the extent it may wish, jointly with any
other indemnifying party similarly notified, to assume the defense of such
action at its own expense, with counsel chosen by it and satisfactory to such
indemnified party. The indemnified party shall have the right to employ separate
counsel in any such action and participate in the defense thereof, but the fees
and expenses of such counsel (other than reasonable costs of investigation)
shall be paid by the indemnified party unless (i) the indemnifying party either
agrees to pay the same, (ii) the indemnifying party fails to assume the defense
of such action with counsel satisfactory to the indemnified party, or (iii) the
indemnified party has been advised by counsel that one or more legal defenses
may be available to the indemnifying party that may be contrary to the interest
of the indemnified party, in which case the indemnifying party shall be entitled
to assume the defense of such action notwithstanding its obligation to bear fees
and expenses of such counsel. No indemnifying party shall be liable for any
settlement entered into without its consent, which consent may not be
unreasonably withheld.
If the indemnification provided for in this subparagraph (e) is
unavailable to a party otherwise entitled to be indemnified in respect of any
expenses, losses, claims, damages or liabilities referred to herein, then the
indemnifying party, in lieu of indemnifying such party otherwise entitled to be
indemnified, shall contribute to the amount paid or payable by such party to be
indemnified as a result of such expenses, losses, claims, damages or liabilities
in such proportion as is appropriate to reflect the relative benefits received
by Issuer, the selling shareholders and the underwriters from the offering of
the securities and also the relative fault of Issuer, the selling shareholders
and the underwriters in connection with the statements or omissions which
resulted in such expenses, losses, claims, damages or liabilities, as well as
any other relevant equitable considerations. The amount paid or payable by a
party as a result of the expenses, losses, claims, damages and liabilities
referred to above shall be deemed to include any legal or other fees or expenses
reasonably incurred by such party in connection with investigating or defending
any action or claim; provided, however, that in no case shall the holders of the
Option Shares be responsible, in the aggregate, for any amount in excess of the
net offering proceeds attributable to its Option Shares included in the
offering. No person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Securities Act) shall be entitled to contribution from
any person
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who was not guilty of such fraudulent misrepresentation. Any obligation by any
holder to indemnify shall be several and not joint with other holders.
In connection with any registration pursuant to subparagraph (a) or
(b) above, Issuer and each holder of any Option Shares (other than Grantee)
shall enter into an agreement containing the indemnification provisions of this
subparagraph (e).
(f) Miscellaneous Reporting. Issuer shall comply with all reporting
requirements and will do all such other things as may be necessary to permit the
expeditious sale at any time of any Option Shares by the holder thereof in
accordance with and to the extent permitted by any rule or regulation
promulgated by the SEC from time to time. Issuer shall at its expense provide
the holder of any Option Shares with any information necessary in connection
with the completion and filing of any reports or forms required to be filed by
them under the Securities Act or the Exchange Act, or required pursuant to any
state securities laws or the rules of any stock exchange.
(g) Issue Taxes. Issuer will pay all stamp taxes in connection with
the issuance and the sale of the Option Shares and in connection with the
exercise of the Option, and will save Grantee harmless, without limitation as to
time, against any and all liabilities, with respect to all such taxes.
10. Quotation; Listing. If Issuer Common Stock or any other
securities to be acquired upon exercise of the Option are then authorized for
quotation or trading or listing on any national securities exchange (including
the NASDAQ - National Market System) or any securities exchange, Issuer, upon
the request of Grantee, will promptly file an application, if required, to
authorize for quotation or trading or listing the shares of Issuer Common Stock
or other securities to be acquired upon exercise of the Option on any such
national securities exchange and will use its best efforts to obtain approval,
if required, of such quotation or listing as soon as practicable.
11. Division of Option. This Agreement (and the Option granted
hereby) are exchangeable, without expense, at the option of Grantee, upon
presentation and surrender of this Agreement at the principal office of Issuer
for other Agreements providing for Options of different denominations entitling
the holder thereof to purchase in the aggregate the same number of shares of
Issuer Common Stock purchasable hereunder. The terms "Agreement" and "Option" as
used herein include any other Agreements and related Options for which this
Agreement (and the Option granted hereby) may be exchanged. Upon receipt by
Issuer of evidence reasonably satisfactory to it of the loss, theft, destruction
or mutilation of this Agreement, and (in the case of loss, theft or destruction)
of reasonably satisfactory indemnification, and upon surrender and cancellation
of this Agreement, if mutilated, Issuer will execute and deliver a new Agreement
of like tenor and date. Any such new Agreement executed and delivered shall
constitute an additional contractual obligation on the part of Issuer, whether
or not the Agreement so lost, stolen, destroyed or mutilated shall at any time
be enforceable by anyone.
12. Miscellaneous.
(a) Expenses. Except as otherwise provided in Section 9 of this
Agreement, each of the parties hereto shall bear and pay all costs and expenses
incurred by it or on its behalf in connection with the transactions contemplated
hereunder, including fees and expenses of its own financial consultants,
investment bankers, accountants and counsel.
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(b) Waiver and Amendment. Any provision of this Agreement may be
waived at any time by the party that is entitled to the benefits of such
provision if such waiver is in writing. This Agreement may not be modified,
amended, altered or supplemented except upon the execution and delivery of a
written agreement executed by the parties hereto.
(c) Entire Agreement; No Third-Party Beneficiary; Severability. This
Agreement, together with the Merger Agreement and the other documents and
instruments referred to herein and therein, between Grantee and Issuer (a)
constitutes the entire agreement and supersedes all prior agreements and
understandings, both written and oral, between the parties with respect to the
subject matter hereof and (b) is not intended to confer upon any person other
than the parties hereto (other than any transferees of the Option Shares or any
permitted transferee of this Agreement pursuant to Section 12(h)) any rights or
remedies hereunder. If any term, provision, covenant or restriction of this
Agreement is held by a court of competent jurisdiction or a federal or state
regulatory agency to be invalid, void or unenforceable, the remainder of the
terms, provisions, covenants and restrictions of this Agreement shall remain in
full force and effect and shall in no way be affected, impaired or invalidated.
If for any reason such court or regulatory agency determines that the Option
does not permit Grantee to acquire, or does not require Issuer to repurchase,
the full number of shares of Issuer Common Stock as provided in Sections 3 and 8
(as adjusted pursuant to Section 7), it is the express intention of Issuer to
allow Grantee to acquire or to require Issuer to repurchase such lesser number
of shares as may be permissible without any amendment or modification hereof.
(d) Governing Law. This Agreement shall be governed and construed in
accordance with the laws of the State of Georgia without regard to any
applicable conflicts of law rules.
(e) Descriptive Heading. The descriptive headings contained herein
are for convenience of reference only and shall not affect in any way the
meaning or interpretation of this Agreement.
(f) Notices. All notices and other communications hereunder shall be
in writing and shall be deemed given if delivered personally, telecopied (with
confirmation) or mailed by registered or certified mail (return receipt
requested) to the parties at the following addresses (or a such other address
for a party as shall be specified by like notice):
If to Issuer to: Georgia National Bancorp, Inc.
202 College Avenue
Athens, Georgia 30601
Telecopy Number: (706)369-3007
Attention: Mr. William S. Huggins
with a copy to: Powell, Goldstein, Frazer & Murphy LLP
191 Peachtree Street, N.E., Sixteenth Floor
Atlanta, Georgia 30303
Telecopy Number: (404)572-6999
Attention: Walter G. Moeling, Esq.
If to Grantee to: SouthTrust Corporation
420 North 20th Street
Birmingham, Alabama 35203
Telecopy Number: (205) 254-6695
Attention: Alton E. Yother
Senior Vice President
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with a copy to: Bradley Arant Rose & White LLP
2001 Park Place, Suite 1400
Birmingham, Alabama 35203
Telecopy Number: (205) 251-8800
Attention: C. Larimore Whitaker, Esq.
(g) Counterparts. This Agreement and any amendments hereto may be
executed in two counterparts, each of which shall be considered one and the same
agreement and shall become effective when both counterparts have been signed, it
being understood that both parties need not sign the same counterpart.
(h) Assignment. Neither this Agreement nor any of the rights,
interests or obligations hereunder or under the Option shall be assigned by any
of the parties hereto (whether by operation of law or otherwise) without the
prior written consent of the other party, except that Grantee may assign this
Agreement to a wholly owned subsidiary of Grantee and Grantee may assign its
rights hereunder in whole or in part after the occurrence of a Purchase Event.
Subject to the preceding sentence, this Agreement shall be binding upon, inure
to the benefit of and be enforceable by the parties and their respective
successors and assigns.
(i) Further Assurances. In the event of any exercise of the Option
by Grantee, Issuer and Grantee shall execute and deliver all other documents and
instruments and take all other action that may be reasonably necessary in order
to consummate the transactions provided for by such exercise.
(j) Specific Performance. The parties hereto agree that this
Agreement may be enforced by either party through specific performance,
injunctive relief and other equitable relief. Both parties further agree to
waive any requirement for the securing or posting of any bond in connection with
the obtaining of any such equitable relief and that this provision is without
prejudice to any other rights that the parties hereto may have for any failure
to perform this Agreement.
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IN WITNESS WHEREOF, Issuer and Grantee have caused this Agreement to
be signed by their respective officers thereunto duly authorized, all as of the
day and year first written above.
GEORGIA NATIONAL BANCORP, INC.
By: /s/ WILLIAM S. HUGGINS
--------------------------------------
William S. Huggins
President and Chief Executive Officer
ATTEST:
By: /s/ MICHAEL R. CARSON
--------------------------------
Michael R. Carson
Secretary
[CORPORATE SEAL]
SOUTHTRUST CORPORATION
By: /s/ ALTON E. YOTHER
--------------------------------------
Alton E. Yother
Senior Vice President
ATTEST:
By: /s/ WILLIAM L. PRATER
--------------------------------
William L. Prater
Assistant Secretary
[CORPORATE SEAL]
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EXHIBIT C
RALPH W. JERNIGAN JR.
THE JERNIGAN GROUP, LLC
ATLANTA, GEORGIA
August 14, 1998
Board of Directors
Georgia National Bancorp, Inc.
Dear Members of the Board:
You have requested my opinion as to the fairness to the shareholders
of Georgia National Bancorp, Inc. (the "Company"), from a financial point of
view, of the per share purchase price and terms (the "Per Share Purchase Price
and Terms") provided for in the Agreement and Plan of Merger (the "Merger
Agreement") between the Company and Southtrust Corporation ("Southtrust"). The
Merger Agreement provides for a merger (the "Merger") of the Company and
Southtrust pursuant to which the common shareholders of the Company will receive
.60 common shares of Southtrust for every common share of the Company.
In arriving at my opinion, I have reviewed certain publicly
available business and financial information relating to Southtrust and the
Company. I have also reviewed certain other information, including financial
forecasts and budgets, provided to us by Southtrust and the Company, and have
discussed with the Company's management the business and prospects of the
Company.
I have also considered certain financial and stock market data of
Southtrust and the Company and I have compared that data with similar data for
our other publicly held bank holding companies and I have considered the
financial terms of certain other comparable transactions which have recently
been effected. I also considered such other information, financial studies,
analyses and investigations and financial, economic and market criteria which
were relevant. In connection with my review, I have not independently verified
any of the foregoing information and have relied on its being complete and
accurate in all material respects. With respect to the financial forecasts and
budgets, I have assumed that they have been reasonably prepared reflecting the
best currently available estimates and judgments of Southtrust's and the
Company's managements. In addition, I have not made an independent evaluation or
appraisal of the assets of Southtrust or the Company. I solicited third party
indications of interest in acquiring the company and have considered the results
of that solicitation in arriving at my opinion.
It should be noted that this opinion is based on market conditions
and other circumstances existing on the date hereof and this opinion does not
represent my views as to what the value of Southtrust common stock necessarily
will be when the Southtrust common stock is issued to the stockholders of the
Company upon consummation of the Merger.
I have acted as consultant and financial advisor to the Company in
connection with the Merger and will receive a fee for my services, a significant
portion of which is contingent upon the consummation of the Merger.
It is understood that this opinion may be included in its entirety
in any communication by the Company of the Board of Directors to the
shareholders of the Company. The opinion may not, however, be summarized,
excerpted from or otherwise publicly referred to without my prior written
consent.
Based upon and subject to the foregoing, and based on such other
matters I consider relevant, it is my opinion that as of the date hereof, the
Per Share Purchase Price and Terms of the Merger are fair to the common
shareholders of the Company from a financial point of view.
Very truly yours,
/s/ RALPH W. JERNIGAN, JR.
The Jernigan Group
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EXHIBIT D
GEORGIA BUSINESS CORPORATION CODE
ARTICLE 13. DISSENTERS' RIGHTS
PART 1. RIGHT TO DISSENT AND OBTAIN PAYMENT FOR SHARES
14-2-1301 DEFINITIONS. As used in this article, the term:
(1) "Beneficial shareholder" means the person who is a beneficial owner of
shares held in a voting trust or by a nominee as the record shareholder.
(2) "Corporate action" means the transaction or other action by the corporation
that creates dissenters' rights under Code Section 14-2-1302.
(3) "Corporation" means the issuer of shares held by a dissenter before the
corporate action, or the surviving or acquiring corporation by merger or share
exchange of that issuer.
(4) "Dissenter" means a shareholder who is entitled to dissent from corporate
action under Code Section 14-2-1302 and who exercises that right when and in the
manner required by Code Sections 14-2- 1320 through 140-2-1327.
(5) "Fair value," with respect to a dissenter's shares, means the value of the
shares immediately before the effectuation of the corporate action to which the
dissenter objects, excluding any appreciation or depreciation in anticipation of
the corporate action.
(6) "Interest" means interest from the effective date of the corporate action
until the date of payment, at a rate that is fair and equitable under all the
circumstances.
(7) "Record shareholder" means the person in whose name shares are registered in
the records of a corporation or the beneficial owner of shares to the extent of
the rights granted by a nominee certificate on file with a corporation.
(8) "Shareholder" means the record shareholder or the beneficial shareholder.
14-2-1302 RIGHT TO DISSENT. (a) A record shareholder of the corporation is
entitled to dissent from, and obtain payment of the fair value of his shares in
the event of, any of the following corporate actions:
(1) Consummation of a plan of merger to which the corporation is a party:
(A) If approval of the shareholders of the corporation is required
for the merger by Code Section 14-2-1103 or the articles of incorporation and
the shareholder is entitled to vote on the merger; or
(B) If the corporation is a subsidiary that is merged with its
parent under Code Section 14-2- 1104;
(2) Consummation of a plan or share exchange to which the corporation is a party
as the corporation whose shares will be acquired, if the shareholder is entitled
to vote on the plan;
(3) Consummation of a sale or exchange of all or substantially all of the
property of the corporation if a shareholder vote is required on the sale or
exchange pursuant to Code Section 14-2-1202, 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 one year after the date of sale;
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(4) An amendment of the articles of incorporation that materially and adversely
affects rights in respect of a dissenter's shares because it:
(A) Alters or abolishes a preferential right of the shares;
(B) Creates, alters, or abolishes a right in respect of redemption,
including a provision respecting a sinking fund for the redemption or
repurchase, of the shares;
(C) Alters or abolishes a preemptive right of the holder of the
shares to acquire shares or other securities;
(D) Excludes or limits the right of the shares to vote on any
matter, or to cumulate votes, other than a limitation by dilution through
issuance of shares or other securities with similar voting rights;
(E) Reduces the number of shares owned by the shareholder to a
fraction of a share if the fractional share so created is to be acquired for
cash under Code Section 14-2-604; or
(F) Cancels, redeems, or repurchases all or part of the shares of the class;
or
(5) Any corporate action taken pursuant to a shareholder vote to the extent that
Article 9 of this chapter, the articles of incorporation, bylaws, or a
resolution of the board of directors provides that voting or nonvoting
shareholders are entitled to dissent and obtain payment for their shares.
(b) A shareholder entitled to dissent and obtain payment for his shares under
this article may not challenge the corporate action creating his entitlement
unless the corporate action fails to comply with procedural requirements of this
chapter or the articles of incorporation or bylaws of the corporation or the
vote required to obtain approval of the corporate action was obtained by
fraudulent and deceptive means, regardless of whether the shareholder has
exercised dissenter's rights.
(c) Notwithstanding any other provision of this article, there shall be no right
of dissent in favor of the holder of shares of any class or series which, at the
record date fixed to determine the shareholders entitled to receive notice of
and to vote at a meeting at which a plan of merger or share exchange or a sale
or exchange of property or an amendment of the articles of incorporation is to
be acted on, were either listed on a national securities exchange or held of
record by more than 2,000 shareholders, unless:
(1) In the case of a plan of merger or share exchange, the holders of shares of
the class or series are required under the plan of merger or share exchange to
accept for their shares anything except shares of the surviving corporation or
another publicly held corporation which at the effective date of the merger or
share exchange are either listed on a national securities exchange or held of
record by more than 2,000 shareholders, except for scrip or cash payments in
lieu of fractional shares; or
(2) The articles of incorporation or a resolution of the board of directors
approving the transaction provides otherwise.
14-2-1303 DISSENT BY NOMINEES AND BENEFICIAL OWNERS. A record shareholder may
assert dissenters' rights as to fewer than all the shares registered in his name
only if he dissents with respect to all shares beneficially owned by any one
beneficial shareholder and notifies the corporation in writing of the name and
address of each person on whose behalf he asserts dissenters' rights. The rights
of a partial dissenter under this Code section are determined as if the shares
as to which he dissents and his other shares were registered in the names of
different shareholders.
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PART 2. PROCEDURE FOR EXERCISE OF DISSENTERS' RIGHTS
14-2-1320 NOTICE OF DISSENTERS' RIGHTS. (a) If proposed corporate action
creating dissenters' rights under Code Section 14-2-1302 is submitted to a vote
at a shareholders' meeting, the meeting notice must state that shareholders are
or may be entitled to assert dissenters' rights under this article and be
accompanied by a copy of this article.
(b) If corporate action creating dissenters' rights under Code Section 14-2-1302
is taken without a vote of shareholders, the corporation shall notify in writing
all shareholders entitled to assert dissenters' rights that the action was taken
and send them the dissenters' notice described in Code Section 14-2-1322 no
later than ten days after the corporate action was taken.
14-2-1321 NOTICE OF INTENT TO DEMAND PAYMENT. (a) If proposed corporate
action creating dissenters' rights under Code Section 14-2-1302 is submitted to
a vote at a shareholders' meeting, a record shareholder who wishes to assert
dissenters' rights:
(1) Must deliver to the corporation before the vote is taken written notice of
his intent to demand payment for his shares if the proposed action is
effectuated; and
(2) Must not vote his shares in favor of the proposed action.
(b) A record shareholder who does not satisfy the requirements of subsection (a)
of this Code section is not entitled to payment for his shares under this
article.
14-2-1322 DISSENTERS' NOTICE. (a) If proposed corporate action creating
dissenters' rights under Code Section 14-2-1302 is authorized at a shareholders'
meeting, the corporation shall deliver a written dissenters' notice to all
shareholders who satisfied the requirements of Code Section 14-2-1321.
(b) The dissenters' notice must be sent no later than ten days after the
corporate action was taken and must:
(1) State where the payment demand must be sent and where and when certificates
for certificated shares must be deposited;
(2) Inform holders of uncertificated shares to what extent transfer of the
shares will be restricted after the payment demand is received;
(3) Set a date by which the corporation must receive the payment demand, which
date may not be fewer than 30 nor more than 60 days after the date the notice
required in subsection (a) of this Code section is delivered; and
(4) Be accompanied by a copy of this article.
14-2-1323 DUTY TO DEMAND PAYMENT. (a) A record shareholder sent a dissenters'
notice described in Code Section 14-2-1322 must demand payment and deposit his
certificates in accordance with the terms of the notice.
(b) A record shareholder who demands payment and deposits his shares under
subsection (a) of this Code section retains all other rights of a shareholder
until these rights are canceled or modified by the taking of the proposed
corporate action.
(c) A record shareholder who does not demand payment or deposit his share
certificates where required, each by the date set in the dissenters' notice, is
not entitled to payment for his shares under this article.
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14-2-1324 SHARE RESTRICTIONS. (a) The corporation may restrict the transfer
of uncertificated shares from the date the demand for their payment is received
until the proposed corporate action is taken or the restrictions released under
Code Section 14-2-1326.
(b) The person for whom dissenters' rights are asserted as to uncertificated
shares retains all other rights of a shareholder until these rights are canceled
or modified by the taking of the proposed corporation action.
14-2-1325 OFFER OF PAYMENT. (a) Except as provided in Code Section 14-2-1327,
within ten days of the later of the date the proposed corporation action is
taken or receipt of a payment demand, the corporation shall by notice to each
dissenter who complied with Code Section 14-2-1323 offer to pay to such
dissenter the amount the corporation estimates to be the fair value of his or
her shares, plus accrued interest.
(b) The offer of payment must be accompanied by:
(1) The corporation's balance sheet as of the end of a fiscal year ending not
more than 16 months before the date of payment, an income statement for that
year, a statement of changes in shareholders' equity for that year, and the
latest available interim financial statements, if any;
(2) A statement of the corporation's estimate of the fair value of the shares;
(3) An explanation of how the interest was calculated;
(4) A statement of the dissenter's right to demand payment under Code Section
14-2-1327; and
(5) A copy of this article.
(c) If the shareholder accepts the corporation's offer by written notice to the
corporation within 30 days after the corporation's offer or is deemed to have
accepted such offer by failure to respond within said 30 days, payment for his
or her shares shall be made within 60 days after the making of the offer or the
taking of the proposed corporate action, whichever is later.
14-2-1326 FAILURE TO TAKE ACTION. (a) If the corporation does not take the
proposed action within 60 days after the date set for demanding payment and
depositing share certificates, the corporation shall return the deposited
certificates and release the transfer restrictions imposed on uncertificated
shares.
(b) If, after returning deposited certificates and releasing transfer
restrictions, the corporation takes the proposed action, it must send a new
dissenters' notice under Code Section 14-2-1322 and repeat the payment demand
procedure.
14-2-1327 PROCEDURE IF SHAREHOLDER DISSATISFIED WITH PAYMENT OR OFFER. (a) A
dissenter may notify the corporation in writing of his own estimate of the fair
value of his shares and amount of interest due, and demand payment of his
estimate of the fair value of his shares and interest due, if:
(1) The dissenter believes that the amount offered under Code Section 14-2-1325
is less than the fair value of his shares or that the interest due is
incorrectly calculated; or
(2) The corporation, having failed to take the proposed action, does not return
the deposited certificates or release the transfer restrictions imposed on
uncertificated shares within 60 days after the date set for demanding payment.
(b) A dissenter waives his or her right to demand payment under this Code
section and is deemed to have accepted the corporation's offer unless he or she
notifies the corporation of his or her demand in writing under subsection (a) of
this Code section within 30 days after the corporation offered payment for his
or her shares, as provided in Code Section 14-2-1325.
(c) If the corporation does not offer payment within the time set forth in
subsection (a) of Code Section 14-2-1325:
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(1) The shareholder may demand the information required under subsection (b) of
Code Section 14-2- 1325, and the corporation shall provide the information to
the shareholder within ten days after receipt of a written demand for the
information; and
(2) The shareholder may at any time, subject to the limitations period of Code
Section 14-2-1332, notify the corporation of his own estimate of the fair value
of his shares and the amount of interest due and demand payment of his estimate
of the fair value of his shares and interest due.
PART 3. JUDICIAL APPRAISAL OF SHARES
14-2-1330 COURT ACTION. (a) If a demand for payment under Code Section
14-2-1327 remains unsettled, the corporation shall commence a proceeding within
60 days after receiving the payment demand and petition the court to determine
the fair value of the shares and accrued interest. If the corporation does not
commence the proceeding within the 60 day period, it shall pay each dissenter
whose demand remains unsettled the amount demanded.
(b) The corporation shall commence the proceeding, which shall be a nonjury
equitable valuation proceeding, in the superior court of the county where a
corporation's registered office is located. If the surviving corporation is a
foreign corporation without a registered office in this state, it shall commence
the proceeding in the county in this state where the registered office of the
domestic corporation merged with or whose shares are acquired by the foreign
corporation was located.
(c) The corporation shall make all dissenters, whether or not residents of this
state, whose demands remain unsettled parties to the proceeding, which shall
have the effect of an action quasi in rem against their shares. The corporation
shall serve a copy of the petition in the 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 compliant, and upon each nonresident dissenting
shareholder either by registered or certified mail or by publication, or in any
other manner permitted by law.
(d) The jurisdiction of the court in which the proceeding is commenced under
subsection (b) of this Code section is plenary and exclusive. The court may
appoint one or more persons as appraisers to receive evidence and recommend
decision on the question of fair value. The appraisers have the powers described
in the order appointing them or in any amendment to it. Except as otherwise
provided in this chapter, Chapter 11 of Title 9, known as the "Georgia Civil
Practice Act," applies to any proceeding with respect to dissenters' rights
under this chapter.
(e) Each dissenter made a party to the proceeding is entitled to judgment for
the amount which the court finds to be the fair value of his shares, plus
interest to the date of judgment.
14-2-1331 COURT COSTS AND COUNSEL FEES. (a) The court in an appraisal
proceeding commenced under Code Section 14-2-1330 shall determine all costs of
the proceeding, including the reasonable compensation and expenses of appraisers
appointed by the court, but not including fees and expenses of attorneys and
experts for the respective parties. The court shall assess the costs against the
corporation, except that the court may assess the costs against all or some of
the dissenters, in amounts the court finds equitable, to the extent the court
finds the dissenters acted arbitrarily, vexatiously, or not in good faith in
demanding payment under Code Section 14-2-1327.
(b) The court may also assess the fees and expenses of attorneys and experts for
the respective parties, in amounts the court finds equitable:
(1) Against the corporation and in favor of any or all dissenters if the court
finds the corporation did not substantially comply with the requirements of Code
Sections 14-2-1320 through 14-2-1327; or
(2) Against either the corporation or a dissenter, in favor of any other party,
if the court finds that the party against whom the fees and expenses are
assessed acted arbitrarily, vexatiously, or not in good faith with respect to
the rights provided by this article.
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(c) If the court finds that the services of attorneys for any dissenter were of
substantial benefit to other dissenters similarly situated, and that the fees
for those services should not be assessed against the corporation, the court may
award to these attorneys reasonable fees to be paid out of the amounts awarded
the dissenters who were benefited.
14-2-1332 LIMITATION OF ACTIONS. No action by any dissenter to enforce
dissenters' rights shall be brought more than three years after the corporate
action was taken, regardless of whether notice of the corporate action and of
the right to dissent was given by the corporation in compliance with the
provisions of Code Section 14-2-1320 and Code Section 14-2-1322.
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PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Restated Certificate of Incorporation, as amended, and the Bylaws
of Registrant provide that Registrant shall indemnify its officers, directors,
employees and agents to the extent permitted by the General Corporation Law of
the State of Delaware, which permits a corporation to indemnify any person who
was or is a party or is threatened to be made a party to any threatened, pending
or completed action, suit or proceeding by reason of the fact that he is or was
a director, officer, employee or agent of the corporation, against expenses
(including attorneys' fees), judgments, fines and settlements incurred by him in
connection with any such suit or proceeding, if he acted in good faith and in a
manner reasonably believed to be in or not opposed to the best interests of the
corporation, and, (i) with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful or (ii) in the case of a
derivative action on behalf of the corporation, if he were not adjudged to be
liable to the corporation unless and only to the extent that the court in which
such action or suit was brought determines that, despite the adjudication of
liability, such person is entitled to indemnity for such expenses as such court
shall deem proper. SouthTrust also maintains insurance coverage relating to
certain liabilities of directors and officers.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
The following exhibits are filed as part of this Registration
Statement:
2 Agreement and Plan of Merger, dated as of July 1, 1998, by and
between SouthTrust of Alabama, Inc., an Alabama corporation,
and Georgia National Bancorp, Inc., a Georgia corporation, and
joined in by SouthTrust Corporation, a Delaware corporation
(included as Exhibit A to the Proxy Statement/Prospectus filed
as part of this Registration Statement).
* 4(a) Articles FOURTH, SIXTH, SEVENTH, and ELEVENTH of the Composite
Restated Certificate of Incorporation of SouthTrust
Corporation, which was filed as Exhibit 3 to SouthTrust
Corporation's Registration Statement on Form S-3 (Registration
No. 333-34947).
* 4(b) Certificate of Adoption of Resolutions designating Series A
Junior Participating Preferred Stock, adopted February 22,
1989, which was filed as Exhibit 1 to SouthTrust Corporation's
Registration Statement on Form 8-A (File No. 1-3613).
* 4(c) Stockholders' Rights Agreement, dated as of February 22, 1989,
between SouthTrust Corporation and Mellon Bank, N.A., Rights
Agent, which was filed as Exhibit 1 to SouthTrust
Corporation's Registration Statement on Form 8-A (File No.
1-3613).
* 4(d) Indenture, dated as of May 1, 1989, between SouthTrust
Corporation and National Westminster Bank USA, which was filed
as Exhibit 4(a) to SouthTrust Corporation's Registration
Statement on Form S-3 (Registration No. 33-13637).
* 4(e) Subordinated Indenture, dated as of May 1, 1992, between
SouthTrust Corporation and Chemical Bank, which was filed as
Exhibit 4(b)(ii) to the Registration Statement on Form S-3 of
SouthTrust Corporation (Registration No. 33-52717).
* 4(f) Composite Restated Bylaws of SouthTrust Corporation, which was
filed as Exhibit 4(e) to the Registration Statement on Form
S-4 of SouthTrust Corporation (Registration No. 33-61557).
* 4(g)(i) Form of Senior Indenture which was filed as Exhibit 4(b)(i) to
the Registration Statement on Form S-3 of SouthTrust
Corporation (Registration No. 33-44857).
* 4(g)(ii) Form of Subordinated Indenture which was filed as Exhibit
4(b)(ii) to the Registration Statement on Form S-3 of
SouthTrust Corporation (Registration No. 33-52717).
5 Opinion of Bradley Arant Rose & White LLP as to the legality
of the securities being registered.
8(a) Form of Opinion of Bradley Arant Rose & White LLP regarding
certain tax matters.
23(a) Consent of Arthur Andersen LLP (with respect to SouthTrust
Corporation).
23(b) Consent of Mauldin & Jenkins, LLC (with respect to Georgia
National Bancorp, Inc.)
23(c) Consent of Bradley Arant Rose & White LLP (included in Exhibit
5).
23(d) Consent of The Jernigan Group, LLC
24 Powers of Attorney.
99 Form of Proxy Card.
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* Incorporated by reference.
<PAGE> 229
ITEM 22. UNDERTAKINGS.
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales
are being made, a post-effective amendment to this
registration statement.
(i) To include any prospectus required by
Section 10(a)(3) of the Securities Act of
1933;
(ii) To reflect in the prospectus any facts or
events arising after the effective date of
the Registration Statement (or the most
recent post-effective amendment thereof)
which, individually or in the aggregate,
represent a fundamental change in the
information set forth in the Registration
Statement. 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 percent
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) The undersigned registrant hereby undertakes that, for
purposes of determining any liability under the Securities Act
of 1933, each filing of the registrant's annual report
pursuant to Section 13(a) or 15(d) of the Securities Exchange
Act of 1934 (and, where applicable, each filing of an employee
benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by
reference in the registration statement shall be deemed to be
a new registration statement relating to the securities
offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering
thereof.
(c) (1) The undersigned registrant hereby undertakes as
follows: that prior to any public reoffering of the
securities registered hereunder through use of a
prospectus which is a part of this Registration
Statement, by any person or party who is deemed to be
an underwriter within the meaning of Rule 145(c), the
issuer undertakes that such reoffering prospectus
will contain the information called for by the
applicable registration form with respect to
reofferings by persons who may be deemed
underwriters, in addition to the information called
for by the other items of the applicable form.
(2) The registrant undertakes that every prospectus: (i)
that is filed pursuant to paragraph (1) immediately
preceding, or (ii) that purports to meet the
requirements of Section 10(a)(3) of
<PAGE> 230
the Act and is used in connection with an offering of
securities subject to Rule 415, will be filed as a
part of an amendment to the Registration Statement
and will not be used until such amendment is
effective, and that, for purposes of determining any
liability under the Securities Act of 1933, each such
post-effective amendment shall be deemed to be a new
Registration Statement relating to the securities
offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona
fide offering thereof.
(d) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers
and controlling persons of the registrant pursuant to the
foregoing provisions, or otherwise, the registrant has been
advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such
liabilities (other than the payment by the registrant of
expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense
of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the
securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it
is against public policy as expressed in the Act and will be
governed by the final adjudication of such issue.
(e) The undersigned registrant hereby undertakes to respond to
requests for information that is incorporated by reference
into the prospectus pursuant to Item 4, 10(b), 11, or 13 of
this Form, within one business day of receipt of such request,
and to send the incorporated documents by first class mail or
other equally prompt means. This includes information
contained in documents filed subsequent to the effective date
of the registration statement through the date of responding
to the request.
(f) The undersigned registrant hereby undertakes to supply by
means of a post-effective amendment all information concerning
a transaction, and the company being acquired involved
therein, that was not the subject of and included in the
registration statement when it became effective.
<PAGE> 231
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant has duly caused this registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Birmingham,
State of Alabama, on September 15, 1998.
SOUTHTRUST CORPORATION
By: /s/ WALLACE D. MALONE, JR.
-------------------------------------------------
Its Chairman of the Board of
Directors, President and Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed below by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ WALLACE D. MALONE, JR. Chairman, President, Chief Executive September 15, 1998
-------------------------- Officer, Director
Wallace D. Malone, Jr. (Principal Executive Officer)
/s/ AUBREY D. BARNARD Secretary, Treasurer and September 15, 1998
------------------------- Controller (Principal
Aubrey D. Barnard Accounting and
Financial Officer)
/s/ JULIAN W. BANTON Director September 15, 1998
------------------------- (Chairman and Chief Executive
Julian W. Banton Officer, SouthTrust Bank, N.A.)
* Director September 15, 1998
-------------------------
Allen J. Keesler, Jr.
* Director September 15, 1998
-------------------------
Van L. Richey
Director
-------------------------
Carl F. Bailey
* Director September 15, 1998
-------------------------
Rex J. Lysinger
</TABLE>
<PAGE> 232
<TABLE>
<S> <C> <C>
* Director September 15, 1998
-------------------------
William C. Hulsey
* Director September 15, 1998
-------------------------
John M. Bradford
* Director September 15, 1998
-------------------------
Wm. Kendrick Upchurch, Jr.
* Director September 15, 1998
-------------------------
H. Allen Franklin
Director
-------------------------
F. Crowder Falls
*By /s/ WILLIAM L. PRATER September 15, 1998
----------------------
William L. Prater
Attorney-in-fact
</TABLE>
<PAGE> 233
INDEX TO EXHIBITS
EXHIBIT
NO. DESCRIPTION
--- -----------
2 Agreement and Plan of Merger, dated as of July 1, 1998, by and
between SouthTrust of Alabama, Inc., an Alabama corporation,
and Georgia National Bancorp, Inc., a Georgia corporation, and
joined in by SouthTrust Corporation, a Delaware corporation
(included as Exhibit A to the Proxy Statement/Prospectus filed
as part of this Registration Statement).
* 4(a) Articles FOURTH, SIXTH, SEVENTH, and ELEVENTH of the Composite
Restated Certificate of Incorporation of SouthTrust
Corporation, which was filed as Exhibit 3 to SouthTrust
Corporation's Registration Statement on Form S-3 (Registration
No. 333-34947).
* 4(b) Certificate of Adoption of Resolutions designating Series A
Junior Participating Preferred Stock, adopted February 22,
1989, which was filed as Exhibit 1 to SouthTrust Corporation's
Registration Statement on Form 8-A (File No. 1-3613).
* 4(c) Stockholders' Rights Agreement, dated as of February 22, 1989,
between SouthTrust Corporation and Mellon Bank, N.A., Rights
Agent, which was filed as Exhibit 1 to SouthTrust
Corporation's Registration Statement on Form 8-A (File No.
1-3613).
* 4(d) Indenture, dated as of May 1, 1989, between SouthTrust
Corporation and National Westminster Bank USA, which was filed
as Exhibit 4(a) to SouthTrust Corporation's Registration
Statement on Form S-3 (Registration No. 33-13637).
* 4(e) Subordinated Indenture, dated as of May 1, 1992, between
SouthTrust Corporation and Chemical Bank, which was filed as
Exhibit 4(b)(ii) to the Registration Statement on Form S-3 of
SouthTrust Corporation (Registration No. 33-52717).
* 4(f) Composite Restated Bylaws of SouthTrust Corporation, which was
filed as Exhibit 4(e) to the Registration Statement on Form
S-4 of SouthTrust Corporation (Registration No. 33-61557).
* 4(g)(i) Form of Senior Indenture which was filed as Exhibit 4(b)(i) to
the Registration Statement on Form S-3 of SouthTrust
Corporation (Registration No. 33-44857).
* 4(g)(ii) Form of Subordinated Indenture which was filed as Exhibit
4(b)(ii) to the Registration Statement on Form S-3 of
SouthTrust Corporation (Registration No. 33-52717).
5 Opinion of Bradley Arant Rose & White LLP as to the legality
of the securities being registered.
8(a) Form of Opinion of Bradley Arant Rose & White LLP regarding
certain tax matters.
23(a) Consent of Arthur Andersen LLP (with respect to SouthTrust
Corporation).
23(b) Consent of Mauldin & Jenkins, LLC (with respect to Georgia
National Bancorp, Inc.)
23(c) Consent of Bradley Arant Rose & White LLP (included in Exhibit
5).
23(d) Consent of The Jernigan Group, LLC
24 Powers of Attorney.
99 Form of Proxy Card.
- ----------
* Incorporated by reference.
<PAGE> 1
EXHIBIT 5
September 15, 1998
SouthTrust Corporation
420 North 20th Street
Birmingham, Alabama 35203
Ladies and Gentlemen:
In our capacity as counsel for SouthTrust Corporation, a
Delaware corporation ("SouthTrust"), we have examined the Registration Statement
on Form S-4 (the "Registration Statement"), in form as proposed to be filed by
SouthTrust with the Securities and Exchange Commission under the provisions of
the Securities Act of 1933, relating to the proposed merger (the "Merger") of
Georgia National Bancorp, Inc., a Georgia corporation ("Georgia National"), with
and into SouthTrust of Alabama, Inc., an Alabama corporation, and the issuance
of up to 792,918 shares of common stock, par value $2.50 per share, of
SouthTrust (the "Shares") and up to 234,939 rights to purchase 1/100th of one
share of Series A Junior Participating Preferred Stock (the "Rights") in
connection with the Merger. Pursuant to the Merger, each holder of shares of
common stock of Georgia National will receive shares of SouthTrust common stock.
In this connection, we have examined such records, documents and proceedings as
we have deemed relevant and necessary as a basis for the opinions expressed
herein.
Upon the basis of the foregoing, we are of the opinion that
the Shares and Rights to be registered under the Registration Statement, to the
extent actually issued pursuant to the Merger, will be legally issued, fully
paid and nonassessable.
We hereby consent to the filing of this opinion with the
Securities and Exchange Commission as an exhibit to the Registration Statement.
In addition, we hereby consent to the inclusion of the statements made in
reference to our firm under the caption Legal Matters in the Proxy
Statement/Prospectus which is a part of the Registration Statement.
Very truly yours,
/s/ BRADLEY ARANT ROSE & WHITE LLP
<PAGE> 1
EXHIBIT 8(a)
September , 1998
----
Georgia National Bancorp, Inc.
202 College Avenue
P.O. Box 1684
Athens, GA 30603
Re: Agreement and Plan of Merger by and between SouthTrust of Alabama,
Inc. and Georgia National Bancorp, Inc., joined in by SouthTrust Corporation
Ladies and Gentlemen:
You have requested the opinion of Bradley Arant Rose & White LLP, as
counsel to SouthTrust Corporation, a Delaware corporation and a bank holding
company registered pursuant to the Bank Holding Company Act (12 USC ss. 1841,
et seq.) and Regulation Y promulgated thereunder ("SouthTrust"), regarding the
transactions contemplated by that certain Agreement and Plan of Merger, dated
July 1, 1998 (the "Merger Agreement"), by and between SouthTrust of Alabama,
Inc., an Alabama corporation ("ST-Sub") and Georgia National Bancorp, Inc., a
Georgia corporation ("Georgia National"), and joined in by SouthTrust
Corporation, a Delaware corporation ("SouthTrust"). Specifically, you have
requested us to opine that the merger of Georgia National with and into ST-Sub
(the "Merger") pursuant to the Merger Agreement will constitute a tax-free
reorganization under Section 368(a) of the Internal Revenue Code of 1986, as
amended (the "Code"), and that no gain or loss will be recognized by the
stockholders of Georgia National upon the receipt solely of SouthTrust voting
common stock in exchange for their Georgia National common stock upon
consummation of the Merger.
This opinion is being rendered pursuant to Section 9.8 of the Merger
Agreement. Capitalized terms used herein and not otherwise defined herein have
the meanings given to them in the Merger Agreement.
In rendering the opinion set forth below, we have examined and relied
upon originals or copies of the Merger Agreement and such other documents and
materials as we have deemed necessary as a basis for such opinion. In
connection with such examination, we have assumed the genuineness of all
signatures, the authenticity of all documents, agreements and instruments
submitted to us as originals, the conformity to original documents, agreements
and instruments of all documents, agreements and instruments submitted to us as
copies or specimens and the authenticity of the originals of such documents,
agreements and instruments submitted to us as copies or specimens, and, as to
factual matters, the veracity of written statements made by officers and other
representatives of Georgia National and SouthTrust included in the Merger
Agreement.
The opinion stated below is based upon the relevant provisions of the
Code, regulations promulgated pursuant thereto by the Department of the
Treasury and the Internal Revenue Service (the "IRS"), current administrative
rulings and applicable judicial decisions, all of which are subject to change.
Neither SouthTrust, ST-Sub nor Georgia National has requested or will receive
an advance ruling from the IRS as to any of the federal income tax effects to
holders of Georgia National common stock of the Merger, or of any of the
federal income tax effects to SouthTrust, ST-Sub or Georgia National of the
Merger. Our opinion set forth below is not binding upon the IRS, and there can
be no assurance, and none hereby is given, that the IRS will not take a
position contrary to one or more of the positions reflected herein, or that our
opinion will be upheld by the courts if challenged by the IRS.
<PAGE> 2
FACTS
SouthTrust is a registered bank holding company and is the common parent
of an affiliated group of corporations, including ST-Sub, that file
consolidated federal income tax returns on the calendar year basis. SouthTrust
Common Stock is publicly held and publicly traded through the Automated
Quotation System of the Nasdaq Stock Market.
In accordance with resolutions of SouthTrust's Board of Directors
adopted on February 22, 1989, and that certain Rights Agreement, dated as of
February 22, 1989 (the "Rights Agreement"), between SouthTrust and Mellon Bank,
N.A. (now known as ChaseMellon Shareholder Services LLC), as Rights Agent, each
share of SouthTrust Common Stock issued and outstanding carries with it eight
twenty-sevenths of a right to purchase from SouthTrust one one-hundredth of a
share of SouthTrust Preferred Stock designated as the Series A Junior
Participating Preferred Stock at a purchase price of $75.00 (a "Right"). These
Rights will expire on February 22, 1999 unless redeemed earlier and are not
exercisable or transferable separately from the shares of SouthTrust Common
Stock until the occurrence of certain events associated with an acquisition of
a substantial amount of SouthTrust Common Stock. The provisions of the Rights
are more fully described in the Rights Agreement and the Certificate of
Designation, Preferences and Rights of Series A Junior Participating Preferred
Stock. A copy of the Rights Agreement is incorporated by reference as an
exhibit to the Registration Statement.
Immediately prior to the Merger, SouthTrust will own 100% of the common
stock of ST-Sub, and ST-Sub will own 100% of the common stock of SouthTrust
Bank, National Association, a national banking association ("ST-Bank"). Both of
ST-Sub and ST-Bank are included in the consolidated federal income tax return
of SouthTrust.
Georgia National is a corporation organized pursuant to the laws of the
State of Georgia and is a registered bank holding company. As of July 1, 1998,
the authorized common stock of Georgia National consisted of 5,000,000 shares
of common stock, par value $0.005 per share, of which 1,308,530 shares were
issued and out standing (the "Georgia National Common Stock"); Georgia National
owns 100% of the issued and outstanding common stock of Georgia National Bank,
a national bank and the sole banking subsidiary of Georgia National (the
"Bank"). Georgia National is an accrual method taxpayer using a calendar year
accounting period.
THE PROPOSED TRANSACTIONS
Pursuant to the Merger Agreement the following transactions will take
place:
1. Georgia National will merge with and into ST-Sub in accordance with
the applicable corporation laws of the States of Georgia and Alabama (the
"Corporate Laws"), after which ST-Sub will be the surviving corporation. ST-Sub
will acquire all of the assets and assume all of the liabilities of Georgia
National. ST-Sub will be the surviving corporation and the separate corporate
existence of Georgia National will terminate.
2. Each share of Georgia National Common Stock will become and be
converted into the right to receive 0.60 shares of SouthTrust Common Stock, and
eight twenty-sevenths of a Right will be associated with each share of
SouthTrust Common Stock exchanged in the Merger for Georgia National Common
Stock.
3. No fractional shares of SouthTrust Common Stock will be issued in the
Merger; each holder of Georgia National Common Stock who would otherwise be
entitled to receive a fractional share interest, if any, will receive cash in
lieu of a fractional share.
4. Any holder of Georgia National Common Stock who dissents from the
Merger will be entitled to receive from the surviving corporation the fair
value of his or her shares in cash.
<PAGE> 3
REPRESENTATIONS
Officers of Georgia National and SouthTrust each have made certain
written representations to us on behalf of their respective institutions by
letters dated each of even date herewith (the "Representation Letters"), and
with your consent, we have relied upon the accuracy and validity of these
representations provided in the Representation Letters in offering the opinions
expressed below.
OPINION
Upon the basis of the foregoing facts and representations, and solely
for purposes of the Code, we are of the opinion that:
(i) The Merger will qualify as a reorganization within the meaning of
Section 368(a) of the Code. Georgia National, SouthTrust and ST-Sub each will
be a party to the reorganization within the meaning of Section 368(b) of the
Code.
(ii) Georgia National shareholders will recognize no gain or loss
upon their exchange of Georgia National Common Stock solely for SouthTrust
Common Stock.
(iii) The basis of the shares of SouthTrust Common Stock received by
the Georgia National shareholders (including any fractional share interests to
which they may be entitled) will be the same as the basis of the shares of
Georgia National Common Stock surrendered in exchange therefor.
(iv) The holding period of the shares of SouthTrust Common Stock
received by the shareholders of Georgia National (including any fractional
share interest to which they may be entitled) will include the period during
which the shares of Georgia National Common Stock surrendered in exchange
therefor were held by the Georgia National shareholders, provided that the
shares of Georgia National Common Stock surrendered were held as a capital
asset within the meaning of Section 1221 of the Code by the Georgia National
shareholders as of the Effective Time of the Merger.
(v) The receipt by a holder of Georgia National Common Stock
of cash in lieu of a fractional share of SouthTrust Common Stock will be
treated as though such fractional share actually was issued in the Merger and
thereafter redeemed by SouthTrust for cash. The receipt of such cash in lieu of
a fractional share by a holder of Georgia National Common Stock will be treated
as a distribution by SouthTrust in full payment in exchange for the fractional
share as provided in Section 302(a) of the Code.
(vi) Georgia National shareholders who exercise dissenters' rights,
and as a result receive only cash, will be treated as having received such cash
as a distribution in redemption of their shares of Georgia National Common
Stock, subject to the provisions and limitations of Section 302 of the Code.
Those holders of Georgia National Common Stock who receive only cash, and who
hold no SouthTrust Common Stock, directly or indirectly through the application
of Section 318(a) of the Code, following the Merger will be treated as having a
complete termination of interest within the meaning of Section 302(b)(3) of the
Code, and the cash received will be treated as a distribution in full payment
in exchange for such holder's Georgia National Common Stock as provided in
Section 302(a) of the Code. As provided in Section 1001 of the Code, gain will
be realized and recognized by such Georgia National shareholders measured by
the difference between the redemption price and the adjusted tax basis of the
shares of Georgia National Common Stock surrendered. Provided that Section 341
of the Code (relating to collapsible corporations) is inapplicable and the
Georgia National Common Stock is a capital asset in the hands of such holders,
the gain, if any, will constitute capital gain. Such gain will constitute
long-term capital gain if the surrendered shares of Georgia National Common
Stock were held by the shareholder for a period greater than one year prior to
the Merger; if the surrendered shares of Georgia National Common Stock were
held by such shareholder for a period of one year or less, the gain will
constitute short-term capital gain.
<PAGE> 4
No opinion is expressed as to the federal tax treatment of the
transaction under any other provisions of the Code and regulations, or as to
the tax treatment of any conditions existing at the time of, or effects
resulting from, the transaction that are not specifically covered by the
opinion.
This opinion is rendered solely with respect to certain federal income
tax consequences of the Merger under the Code, and does not extend to the
income or other tax consequences of the Merger under the laws of any state or
any political subdivision of any state; nor does it extend to any tax effects
or consequences of the Merger to SouthTrust or ST-Sub other than those
expressly stated in the above opinion.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement. We also consent to the references to this firm under
the heading "Certain Federal Income Tax Consequences" in the prospectus which
is included as part of the Registration Statement. In giving such consent, we
do not thereby admit that we are in the category of persons whose consent is
required under Section 7 of the Securities Act of 1933, as amended.
Yours very truly,
<PAGE> 1
EXHIBIT 23(a)
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference in this Registration Statement of our report dated February 13, 1998
included in SouthTrust Corporation's Form 10-K for the year ended December 31,
1997 and to all references to our Firm included in this Registration Statement.
/s/ ARTHUR ANDERSEN LLP
Birmingham, Alabama
September 10, 1998
<PAGE> 1
EXHIBIT 23(b)
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
We consent to the use of our report included in the Proxy Statement/Prospectus
contained in this Registration Statement and to all references to our Firm
included in this Registration Statement.
/s/ MAULDIN & JENKINS, LLC
Atlanta, Georgia
September 8, 1998
<PAGE> 1
EXHIBIT 23(d)
CONSENT OF THE JERNIGAN GROUP, LLC
We hereby consent to the inclusion in the Proxy Statement/Prospectus forming
part of this Registration Statement on Form S-4 of SouthTrust Corporation of our
opinion as Exhibit C thereto and to the reference to such opinion and to our
firm therein. We also confirm the accuracy in all material respects of the
description and summary of our analyses, observations, beliefs and conclusions
relating thereto set forth under the heading "THE MERGER - Opinion of Financial
Advisor" therein. In giving such consent, we do not admit that we come within
the category of persons whose consent is required under Section 7 of the
Securities Act of 1933 and the rules and regulations of the Securities and
Exchange Commission issued thereunder.
Very truly yours,
/s/ RALPH W. JERNIGAN, JR.
THE JERNIGAN GROUP, LLC
Atlanta, Georgia
September 14, 1998
<PAGE> 1
EXHIBIT 24
STATE OF ALABAMA )
COUNTY OF JEFFERSON )
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director
whose signature appears below hereby constitutes and appoints Aubrey D. Barnard
and William L. Prater, and each of them, his true and lawful attorneys-in-fact
and agents, with full power of substitution and resubstitution, for him and in
his name, place and stead, in any and all capacities, to sign a registration
statement of SouthTrust Corporation (the "Company") on Form S-4 relating to
shares of the Company proposed to be issued in connection with the Company's
proposed acquisition of Georgia National Bancorp, Inc., including all additional
amendments to such registration statement, and to file the same, with all
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission and with any state securities commission,
granting unto said attorneys-in-fact and agents, full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
and about the premises, as fully to all intents and purposes as he might or
could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents, or any of them, or their substitute or
substitutes, may lawfully do or cause to be done by virtue thereof.
Dated as of this 15th day of September, 1998.
/s/ ALLEN J. KEESLER, JR.
_________________________________
Allen J. Keesler, Jr.
/s/ VAN L. RICHEY
_________________________________
Van L. Richey
_________________________________
Carl F. Bailey
/s/ REX J. LYSINGER
_________________________________
Rex J. Lysinger
/s/ WILLIAM C. HULSEY
_________________________________
William C. Hulsey
<PAGE> 2
/s/ JOHN M. BRADFORD
_________________________________
John M. Bradford
/s/ WM. KENDRICK UPCHURCH, JR.
_________________________________
Wm. Kendrick Upchurch, Jr.
/s/ H. ALLEN FRANKLIN
_________________________________
H. Allen Franklin
_________________________________
F. Crowder Falls
/s/ JULIAN W. BANTON
_________________________________
Julian W. Banton
<PAGE> 1
EXHIBIT 99
GEORGIA NATIONAL BANCORP, INC.
SPECIAL MEETING OF SHAREHOLDERS, ___________, 1998
THIS PROXY IS BEING SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF THE
COMPANY
The undersigned shareholder of Georgia National Bancorp, Inc., a
Georgia corporation (the "Company"), hereby appoints Claude Williams, Jr. and
William S. Huggins, and each of them, proxies and attorneys-in-fact of the
undersigned, each with full power of substitution, to attend and act for the
undersigned at the Special Meeting of Shareholders to be held on ______ __, 1998
at 8:00 a.m., Athens, Georgia time, at 202 College Avenue, Athens, Georgia, and
at any adjournments or postponements thereof, and in connection therewith to
vote and represent all of the shares of the issued and outstanding shares of the
common stock, par value $0.005 per share of the Company which the undersigned
would be entitled to vote. Capitalized terms not otherwise defined herein shall
have the meanings given thereto in the Proxy Statement/Prospectus.
Said proxies and attorneys, and each of them, shall have all the
powers which the undersigned would have if voting in person. The undersigned
hereby revokes any other proxies to vote at such meeting and hereby ratifies,
and confirms all that said proxies and attorneys, and each of them, may
lawfully do by virtue hereof. Said proxies and attorneys, without hereby
limiting their general authority, are specifically authorized to vote in
accordance with their best judgment with respect to all matters incident to the
conduct of the Special Meeting.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE APPROVAL OF THE MERGER.
PROPOSAL. APPROVAL OF THE MERGER BETWEEN THE COMPANY
AND A SUBSIDIARY OF SOUTHTRUST CORPORATION.
____FOR ____AGAINST ____ABSTAIN
Each of the above-named proxies and attorneys present at the Special
Meeting, either in person or by substitute, shall have and exercise all the
powers of said proxies and attorneys hereunder. This proxy when properly
executed will be voted in the manner directed herein by the undersigned
shareholder. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED "FOR" THE MERGER
AND IN THE DISCRETION OF THE PROXY HOLDER AS TO ANY OTHER MATTER THAT MAY COME
BEFORE THE SPECIAL MEETING OF SHAREHOLDERS OR ANY ADJOURNMENTS OR POSTPONEMENTS
THEREOF, EXCEPT WITH RESPECT TO BROKER NON-VOTES.
Please sign exactly as name appears below. When shares are held by
joint tenants, both should sign. When signing as attorney, executor,
administrator, trustee or guardian, please give full title as such. If a
corporation, please sign in full corporate name by President or other
authorized officer. If a partnership or other entity, please sign in
partnership or entity name by authorized person.
The undersigned acknowledges receipt of the
copy of the Notice of Special Meeting and
Proxy Statement (with all enclosures and
attachments) dated September ___, 1998,
relating to the meeting.
Dated: , 1998
Signature
Signature (If applicable)
PLEASE VOTE, SIGN, DATE AND PROMPTLY RETURN THIS CARD.
