<PAGE> 1
As filed with the Securities and Exchange Commission on May 6, 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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<S> <C> <C>
DELAWARE 6711 63-0574085
(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:
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C. LARIMORE WHITAKER ALLEN I. ISAACSON LUTHER F. SADLER, JR.
BRADLEY ARANT ROSE & WHITE LLP FRIED, FRANK, HARRIS, SHRIVER & FOLEY & LARDNER
2001 PARK PLACE JACOBSON THE GREENLEAF BUILDING
SUITE 1400 ONE NEW YORK PLAZA 200 LAURA STREET
BIRMINGHAM, ALABAMA 35203 NEW YORK, NEW YORK 10004 JACKSONVILLE, FLORIDA 32202
(205) 521-8000 (212) 859-8000 (904) 359-2000
</TABLE>
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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. [ ]
-----------------------------------------------------
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
===================================================================================================================================
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
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, par value
$2.50 per share.............................. 3,930,282 Shares(1) * $40,754,000(3) $12,022.43
Rights to Purchase Series A Junior
Participating Preferred Stock.................. 1,164,528 Rights(2)
===================================================================================================================================
</TABLE>
* Not Applicable
(1) This Registration Statement covers the maximum number of shares of the
common stock of the Registrant which is expected to be issued in
connection with the merger of American Banks of Florida, Inc. with and
into a subsidiary of SouthTrust Corporation.
(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 AMERICAN BANKS OF FLORIDA, INC.]
_______________, 1998
TO THE SHAREHOLDERS OF
AMERICAN BANKS OF FLORIDA, INC.:
You are cordially invited to attend a Special Meeting of the
Shareholders (the "Special Meeting") of American Banks of Florida, Inc.
("American") to be held on ___________, 1998, at 9:00 a.m., local time, at
_______________ at _____________, 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 American with and into a
subsidiary of SouthTrust Corporation ("SouthTrust"). Upon consummation of the
Merger, each share of American common stock issued and outstanding (except for
certain shares held by American or SouthTrust, or their respective subsidiaries,
in each case other than shares held in a fiduciary capacity or in satisfaction
of debts previously contracted) will be exchanged for 3.23574794 shares of
SouthTrust common stock, with cash being paid in lieu of issuing fractional
shares, and each share of American preferred stock issued and outstanding
(except for certain shares held by American or its subsidiaries) will be
exchanged for the number of shares of SouthTrust common stock for which the
number of shares of American common stock into which such share of American
preferred stock is convertible would have been exchanged.
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 American 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 American common stock and
American preferred stock, voting together, each share of American common stock
or American preferred stock being entitled to one vote, and the affirmative
votes of the holders of two-thirds of the outstanding shares of each series of
American preferred stock. 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 American 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 AGREEMENT BY MARKING THE ENCLOSED PROXY CARD "FOR" ITEM ONE.
We look forward to seeing you at the Special Meeting.
Sincerely,
RAYMOND K. MASON, JR.
Chairman of the Board,
President and Chief Executive Officer
<PAGE> 3
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
Notice is hereby given that a Special Meeting of Shareholders of
American Banks of Florida, Inc., a Florida corporation ("American"), will be
held on __________, 1998, at 9:00 a.m., local time, at _____________ at
_______________, for the following purposes (the "Special Meeting"):
1. To consider and vote upon the Agreement and Plan of
Merger, dated as of February 18, 1998 (the "Merger Agreement"), a
copy of which is annexed as Exhibit A to the accompanying Proxy
Statement/Prospectus, by and among American, SouthTrust Corporation,
a Delaware corporation ("SouthTrust"), and SouthTrust of Alabama,
Inc., an Alabama corporation and wholly owned subsidiary of
SouthTrust ("ST-Sub"), whereby American will be merged with and into
ST-Sub and holders of American common stock will receive 3.23574794
shares of SouthTrust common stock, with cash being paid in lieu of
issuing fractional shares, for each share of American common stock,
and holders of American preferred stock will receive the number of
shares of SouthTrust common stock that they would have received if
they had held the number of shares of American common stock into
which their American preferred stock would have been converted, 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 American 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 American dissenting from
approval of the Merger Agreement may be entitled, if they comply with the
provisions of the Florida Business Corporation Act regarding the rights of
dissenting shareholders, to be paid the fair value of their shares.
The meeting may be adjourned from time to time without notice other
than announcement at the meeting, or at any adjournment thereof, and any
business for which notice is hereby given may be transacted at any such
adjournment.
A Proxy Card and a Proxy Statement/Prospectus for the Special Meeting
are enclosed.
By Order of the Board of Directors
T. KEITH PERRY
Secretary
- -------------------
, 1998
- --------------
WHETHER YOU PLAN TO ATTEND THE SPECIAL MEETING OR NOT, PLEASE SIGN
AND RETURN THE ENCLOSED PROXY SO THAT AMERICAN 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
AMERICAN BANKS OF FLORIDA, INC.
FOR A SPECIAL MEETING OF ITS SHAREHOLDERS
TO BE HELD _________, 1998
THIS PROXY STATEMENT INCLUDES THE PROSPECTUS OF
SOUTHTRUST CORPORATION
RELATING TO UP TO 3,930,282 SHARES OF COMMON STOCK
(PAR VALUE $2.50 PER SHARE)
TO BE ISSUED IN CONNECTION WITH A PROPOSED MERGER OF
AMERICAN BANKS OF FLORIDA, INC. 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 AMERICAN BANKS OF
FLORIDA, INC. ("AMERICAN"). 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 AMERICAN AND ITS
SUBSIDIARIES HAS BEEN PROVIDED BY AMERICAN 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 HAS BEEN PROVIDED BY SOUTHTRUST AND ITS SUBSIDIARIES, AND AMERICAN
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 AMERICAN ON OR ABOUT _____________,
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 _____________, 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.................................................................... 5
SUMMARY..................................................................................................... 7
Parties to the Merger............................................................................ 7
Special Meeting.................................................................................. 8
The Merger....................................................................................... 8
Certain Federal Income Tax Consequences..........................................................13
Rights of Dissent and Appraisal..................................................................13
Stock Prices of SouthTrust.......................................................................13
Stock Prices of American.........................................................................14
Resale of SouthTrust Common Stock Received in the Merger.........................................15
Differences in Rights of American 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.....................................................................22
Interests of Certain Named Persons in the Merger.................................................25
Effect of the Merger on American Stock...........................................................27
Effect of the Merger on the American Stock Bonus Agreements......................................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..................................................................33
Conduct of Business by American Pending the Merger...............................................35
Conduct of Business by SouthTrust Pending the Merger.............................................37
Business and Management of American Following the Merger; Plans for Business of American.........37
Stock Option Agreement...........................................................................38
No Solicitation..................................................................................40
CERTAIN FEDERAL INCOME TAX CONSEQUENCES.....................................................................40
General..........................................................................................40
Federal Income Tax Consequences of the Escrow Agreement..........................................41
DESCRIPTION OF SOUTHTRUST CAPITAL STOCK.....................................................................41
General..........................................................................................41
SouthTrust Common Stock..........................................................................42
SouthTrust Preferred Stock.......................................................................44
MARKET PRICE AND DIVIDEND INFORMATION RESPECTING THE
SOUTHTRUST COMMON STOCK AND THE AMERICAN STOCK...................................................45
</TABLE>
2
<PAGE> 6
<TABLE>
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COMPARISON OF THE SOUTHTRUST COMMON STOCK AND THE AMERICAN STOCK............................................47
Dividends .......................................................................................47
Voting Rights and Other Matters..................................................................48
Dissent and Appraisal Rights.....................................................................50
Rights on Liquidation............................................................................51
Preemptive Rights................................................................................51
Reports to Stockholders and Shareholders.........................................................51
Stockholders' Rights Plan........................................................................51
SUPERVISION AND REGULATION..................................................................................52
SouthTrust.......................................................................................52
American.........................................................................................54
CERTAIN INFORMATION CONCERNING THE BUSINESS OF AMERICAN AND THE BANK........................................54
Description of Business..........................................................................54
Strategy.........................................................................................54
Markets and Customers............................................................................54
Competition......................................................................................54
Legal Matters....................................................................................55
Risk of Remaining Independent as Opposed to Merging with SouthTrust..............................55
AMERICAN MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS........................................................................55
Overview.........................................................................................55
Financial Overview...............................................................................56
Income Statement Review..........................................................................58
Balance Sheet Review.............................................................................63
Asset Quality....................................................................................69
Market Risk Management...........................................................................72
Comparison of 1996 with 1995.....................................................................73
Fourth Quarter Management Discussion.............................................................75
BENEFICIAL OWNERSHIP OF AMERICAN CAPITAL STOCK..............................................................75
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE.............................................................78
LEGAL MATTERS...............................................................................................78
EXPERTS .................................................................................................78
ADDITIONAL INFORMATION......................................................................................78
Other Business...................................................................................79
Shareholder Proposals............................................................................79
CONSOLIDATED FINANCIAL STATEMENTS OF AMERICAN..............................................................F-1
EXHIBIT A - AGREEMENT AND PLAN OF MERGER...................................................................A-1
EXHIBIT B - STOCK OPTION AGREEMENT.........................................................................B-1
EXHIBIT C - OPINION OF WHEAT FIRST SECURITIES, INC.........................................................C-1
EXHIBIT D - FLORIDA BUSINESS CORPORATION ACT DISSENTERS RIGHTS PROVISION...................................D-1
EXHIBIT E - FORM OF ESCROW AGREEMENT TO BE EXECUTED BY AMERICAN BANKS
OF FLORIDA, INC., RAYMOND K. MASON, SR., RAYMOND K. MASON, JR.,
CHARLES J. FRANSON, T. KEITH PERRY AND THE ESCROW AGENT .....................................E-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.
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."
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 American,
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 American Following the Merger; Plans for Business of
American," "MARKET PRICE AND DIVIDEND INFORMATION RESPECTING THE SOUTHTRUST
COMMON STOCK AND THE AMERICAN STOCK" and "AMERICAN 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 American 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
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.
4
<PAGE> 8
INTRODUCTION
GENERAL
This Proxy Statement/Prospectus is being furnished to the holders of
common stock, par value $1.00 per share ("American Common Stock") and the
holders of Series B Cumulative Convertible Preferred Stock, par value $1.00 per
share (the "American Series B Preferred Stock"), Series C Cumulative Convertible
Preferred Stock, par value $1.00 per share (the "American Series C Preferred
Stock"), and Series D Cumulative Convertible Preferred Stock, par value $1.00
per share (the "American Series D Preferred Stock" and together with the
American Series B Preferred Stock and the American Series C Preferred Stock, the
"American Preferred Stock," and all together with the American Common Stock, the
"American Stock"), of American Banks of Florida, Inc., a Florida corporation
("American"), in connection with the solicitation of proxies by the Board of
Directors of American for use in a special meeting of shareholders of American
to be held on ______________, 1998, at ____ a.m., local time, at
_____________________ at _________________________, and at any adjournment
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 February 18, 1998 (the "Merger
Agreement") among American, SouthTrust Corporation, a Delaware corporation
("SouthTrust"), and SouthTrust of Alabama, Inc., an Alabama corporation and a
wholly owned subsidiary of SouthTrust ("ST-Sub"), providing for the merger of
American into ST-Sub (the "Merger") and the exchange in the Merger of each
outstanding share of American Common Stock for 3.23574794 shares of common
stock, par value $2.50 per share, of SouthTrust ("SouthTrust Common Stock") (the
"Exchange Ratio") and each outstanding share of American Preferred Stock for a
number of shares of SouthTrust Common Stock equal to the product of the Exchange
Ratio and the number of shares of American Common Stock into which such share of
American Preferred Stock is convertible. The Exchange Ratio gives effect to the
three-for-two split of the SouthTrust Common Stock on February 26, 1998 (the
"SouthTrust Stock Split"). See "THE MERGER - Effect of the Merger on American
Stock" and "- Effect of the Merger on the American Stock Bonus Agreements."
The 3.23574794 shares of SouthTrust Common Stock for which each share
of American 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." No fractional shares of SouthTrust Common Stock
will be issued in the Merger, and, in lieu thereof, each holder of shares of
American 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 average of the last sales prices of one share of SouthTrust Common
Stock for the five Nasdaq trading days immediately preceding the Effective Time
of the Merger (as defined below), as reported in The Wall Street Journal.
Subject to the approval of the Merger Agreement by the shareholders
of American and the satisfaction or waiver of all conditions contained in the
Merger Agreement, the Merger will become effective upon the later of the filing
of appropriate Articles of Merger with the Department of State of the State of
Florida and the filing of Articles of Merger with the Secretary of State of the
State of Alabama (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 American has fixed the close of business on
___________, 1998 as the record date (the "Record Date") for the determination
of holders of shares of American Stock entitled to notice of and to vote at the
Special Meeting. On the Record Date, American had outstanding 1,183,751 shares
of American Common Stock and 9,770.534, 10,225.266 and 10,897.256 shares,
respectively, of American Series B Preferred Stock, American Series C Preferred
Stock and American Series D Preferred Stock, which constituted the only
outstanding classes of capital stock of American 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 American Common Stock and American
Preferred Stock entitled to vote is necessary to constitute a quorum at the
Special Meeting, and the affirmative vote of the holders of a majority of the
outstanding shares of American Stock entitled to vote thereon (each share of
American Common Stock or American Preferred Stock being entitled to one vote)
and the affirmative votes of the holders of two-thirds of the outstanding shares
of each of the American Series B Preferred Stock, the American Series C
Preferred Stock and the American Series D Preferred Stock are required to
approve the Merger Agreement. Each holder of record of shares of American
5
<PAGE> 9
Stock on the Record Date is entitled to one vote for each share of such American
Stock held of record. Shares of American Stock (the "ESOP Shares") held by the
American Banks of Florida, Inc. Employee Stock Ownership Plan and Trust (the
"American ESOP") will be voted by American National Bank of Florida, the trustee
of the American ESOP (the "Trustee"), upon instructions given by the beneficial
owners of ESOP Shares. All of the American Preferred Stock is held by the
American ESOP.
As of the Record Date, American directors and their affiliates (a
total of 8 persons) beneficially owned a total of 804,463 shares of American
Common Stock (including 90,000 shares of American Common Stock which are subject
to the dispute described herein under the caption "THE MERGER - Effect of the
Merger on the American Stock Bonus Agreements"), representing approximately
67.96% of the shares of American Common Stock entitled to vote at the Special
Meeting, and, through the American ESOP, a total of 994.955, 975.529 and 946.869
shares, respectively, of American Series B Preferred Stock, American Series C
Preferred Stock and American Series D Preferred Stock, representing
approximately 10.18%, 9.54% and 8.69%, respectively, of the shares of American
Series B Preferred Stock, American Series C Preferred Stock and American Series
D Preferred Stock entitled to vote at the Special Meeting. All such directors
and their affiliates have informed American that, as of the date of the Proxy
Statement/Prospectus, they intend to vote for approval of the Merger Agreement.
All of the American directors have entered into affiliate agreements with
SouthTrust pursuant to which each agreed to vote for approval of the Merger at
the Special Meeting.
Wheat First Securities, Inc. ("Wheat First") has rendered its opinion
to the Board of Directors of American dated ______________, 1998, stating that,
in its opinion, the Exchange Ratio is fair from a financial point of view to the
shareholders of American. See "SUMMARY - The Merger - Opinion of Financial
Advisor" and "THE MERGER - Opinion of Financial Advisor."
THE BOARD OF DIRECTORS OF AMERICAN 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 American 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
American, who will receive no extra compensation for their services. American
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 American Stock.
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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SUMMARY
The following is a brief summary of certain information contained in
or incorporated by reference into this Proxy Statement/Prospectus
with respect to American, SouthTrust 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 State ment/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 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 December 31, 1997, SouthTrust had
consolidated total assets of approximately $30.9 billion, which ranked it as the
largest bank holding company headquartered in Alabama.
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 its 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, after June 1, 1997, 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.
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 American Stock in the Merger.
The principal executive offices of SouthTrust are located at 420
North 20th Street, Birmingham, Alabama 35203, and their telephone number is
(205) 254-5000.
American and the Bank
American is a bank holding company headquartered in Jacksonville,
Florida. American National Bank of Florida, a national bank and wholly owned
subsidiary of American (the "Bank"), is the sole banking subsidiary of American.
At December 31, 1997, American had assets of $543 million, deposits of $450
million and stockholders' equity of $41 million.
The Bank was originally chartered in 1941, and American was formed in
1973. Since its inception in 1973, American has grown from one
nationally-chartered and three state-chartered banks into a multi-branch
financial institution serving the most rapidly developing areas of metropolitan
Jacksonville. The Bank has grown from $133 million in assets in 1978 to $541
million in assets at December 31, 1997. Currently, the Bank operates twelve
full-service branch offices, eleven of which are located in Duval County, and
one in Clay County. The Bank also operates a limited service facility in a
retirement community known as Wesley Woods located in St. John's County. The
Bank offers ATM service at each branch as well as at a remote drive-up facility
and two stand-alone walk-up ATM facilities. During late April 1998, the Bank
established an ATM on the premises of a large employer in downtown Jacksonville.
As of December 31, 1997, American employed 243 full-time equivalent employees.
American and the Bank maintain their principal executive offices at
2031 Hendricks Avenue, Jacksonville, Florida, and the telephone number at such
office is (904) 396-8111.
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SouthTrust of Alabama, Inc.
ST-Sub, an Alabama corporation, is a wholly owned subsidiary of
SouthTrust. It owns ST-Bank.
SPECIAL MEETING
The Special Meeting will be held at 9:00 a.m., local time, on
________, ______ __, 1998, at ___________ at _______________, to consider and
vote upon the approval of the Merger Agreement. Only holders of record of shares
of American 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 thereof.
THE MERGER
Terms of the Merger
Subject to approval of the Merger Agreement by the shareholders of
American at the Special Meeting, the receipt of required regulatory approvals,
and satisfaction of other conditions, American will be merged into ST-Sub
pursuant to the Merger Agreement. At the Effective Time of the Merger, pursuant
to the Merger Agreement, SouthTrust is to issue a total of 3,930,282 shares of
SouthTrust Common Stock for all of the issued and outstanding American Stock. As
of the date of the Merger Agreement and assuming the conversion of all of the
American Preferred Stock into American Common Stock, a total of 1,214,644.056
shares of American Common Stock would be issued and outstanding, which total
includes 90,000 Bonus Shares issued to certain officers and directors of
American and over which the dispute more fully described below exists. Unless
the dispute regarding the Bonus Shares is resolved prior to the Effective Time
of the Merger in a manner consistent with Sections 7.10 and 7.11 of the Merger
Agreement, immediately prior to the Effective Time of the Merger, the Bonus
Shares will be delivered to the Escrow Agent (as hereinafter defined) in
accordance with Section 7.11 of the Merger Agreement and will be held and
disposed of in accordance with Section 7.11 of the Merger Agreement and with the
provisions of the Escrow Agreement. If the dispute regarding the Bonus Shares is
resolved prior to the Effective Time of the Merger in accordance with Sections
7.10 and 7.11 of the Merger Agreement, the consideration which is or would have
been applicable to the Bonus Shares will be distributed in accordance with such
resolution; if such resolution is that all or some of the Bonus Shares will be
canceled and treated as not issued, then such consideration will be allocated,
on a pro rata basis, to increase the amount of SouthTrust Common Stock to be
received by the American shareholders.
Accordingly, subject to Sections 3.01, 7.10 and 7.11 of the Merger
Agreement, at the Effective Time of the Merger, each share (excluding (i) shares
held by any of American'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 American Common Stock, including the Bonus Shares, will
become and be converted into the right to receive 3.23574794 shares of
SouthTrust Common Stock, and each share of American Preferred Stock issued and
outstanding (except for shares held by American's subsidiaries other than in a
fiduciary capacity or as a result of debts previously contracted) will become
and be converted into the right to receive the number of shares of SouthTrust
Common Stock equal to the product of 3.23574794 multiplied by the number of
shares of American Common Stock into which such share of American Preferred
Stock is convertible. Each share of American Preferred Stock is convertible into
one share of American Common Stock. See "THE MERGER - Effect of the Merger on
American Stock."
The Exchange Ratio, including the number of shares of SouthTrust
Common Stock issuable in the Merger, gives effect to the SouthTrust Stock Split
and is subject to appropriate adjustment in the event of certain other 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 American 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 average of
the last sales prices of SouthTrust Common Stock for the five Nasdaq trading
days immediately preceding the Effective Time of the Merger, as reported in The
Wall Street Journal.
A dispute has arisen between, on the one hand, Raymond K. Mason, Sr.,
Chairman Emeritus and member of the Board of Directors of American ("Mr.
Mason"), and, on the other hand, Raymond K. Mason, Jr., Charles J. Franson and
T. Keith Perry (the "Bonus Shareholders"), who are also members of the Board of
Directors of American. (Mr. Raymond K. Mason, Jr. is also Chairman, President
and Chief Executive Officer thereof, and Mr. Perry is also Executive Vice
President, Secretary and Treasurer thereof.) This dispute concerns the
enforceability of the stock bonus agreements, dated May 26, 1995, between each
of the Bonus Shareholders and American (the "Stock Bonus Agreements"), under
which the Bonus Shareholders each were awarded 30,000 shares of American Common
Stock,
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<PAGE> 12
for an aggregate of 90,000 shares of American Common Stock (the "Bonus Shares").
Mr. Mason disputes whether these Stock Bonus Agreements were duly authorized by
the Board of Directors of American and whether American met certain performance
benchmarks set forth in the Stock Bonus Agreements before such 90,000 shares
were issued.
In connection with the Merger Agreement, American has agreed that,
immediately prior to the Effective Time of the Merger, and provided that the
issues related to the Bonus Shares have not been resolved earlier in a manner
that would not conflict with the Merger Agreement, including any action not
contemplated by the Merger Agreement that would prevent the Merger from being
accounted for as a pooling of interests, it will enter into an escrow agreement
in substantially the form set forth in Exhibit E hereto (the "Escrow Agreement")
with Mr. Mason, the Bonus Shareholders and an escrow agent to be agreed upon
(the "Escrow Agent"). The Escrow Agreement provides that resolution of the
dispute between Mr. Mason and the Bonus Shareholders be determined by award of
an arbitrator or a final, non-appealable decision of a court of proper
jurisdiction, as determined and selected by the mutual agreement of Mr. Mason
and the Bonus Shareholders. In order to accomplish this result, the Escrow
Agreement provides that the Bonus Shareholders must deliver to and deposit with
the Escrow Agent the certificate or certificates representing the Bonus Shares.
At the Effective Time of the Merger, the Escrow Agent will exchange the
certificates representing the Bonus Shares for shares of SouthTrust Common Stock
pursuant to the terms of the Merger Agreement. These shares of SouthTrust Common
Stock are referred to in the Escrow Agreement as the "Escrow Fund."
In the event it is determined that the issuance of all the Bonus
Shares to the Bonus Shareholders was valid, the Escrow Agent will release the
Escrow Fund to the Bonus Shareholders in the proportion to which the Bonus
Shareholders are entitled to the Bonus Shares. In the event it is determined
that the Bonus Shareholders are entitled to some number of the Bonus Shares less
than 90,000, the Escrow Agent will release a portion of the Escrow Fund to the
Bonus Shareholders, and the remaining Escrow Fund will be released, on a pro
rata basis, to the shareholders of American at the Effective Time of the Merger.
In the event it is determined that the Bonus Shareholders are entitled to none
of the Bonus Shares, then the Escrow Agent will release all of the Escrow Fund,
on a pro rata basis, to the shareholders of American at the Effective Time of
the Merger. See "THE MERGER -- Effect of the Merger on the American Stock Bonus
Agreements."
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 American Stock a letter of transmittal for use in exchanging their
stock certificates formerly representing such American 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. AMERICAN
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 American Stock (each share of American Common Stock or American
Preferred Stock being entitled to one vote) and the affirmative votes of the
holders of two-thirds of the outstanding shares of each of the American Series B
Preferred Stock, the American Series C Preferred Stock and the American Series D
Preferred Stock, are required to approve the Merger Agreement. The ESOP Shares
held by the American ESOP will be voted by the Trustee upon instructions given
by the beneficial owners of ESOP Shares. All of the American Preferred Stock is
held by the American ESOP. Directors of American, and their affiliates,
beneficially owned, as of the Record Date, directly or indirectly, 804,463
shares of American Common Stock (including 90,000 shares of American Common
Stock which are subject to the dispute described herein under the caption "THE
MERGER - Effect of the Merger on the American Stock Bonus Agreements"),
constituting approximately 67.96% of the shares of American Common Stock
outstanding on the Record Date for the Special Meeting and, through the American
ESOP, a total of 994.955, 975.529 and 946.869 shares, respectively, of American
Series B Preferred Stock, American Series C Preferred Stock and American Series
D Preferred Stock, constituting approximately 10.18%, 9.54% and 8.69%,
respectively, of the shares of American Series B Preferred Stock, American
Series C Preferred Stock and American Series D Preferred 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. All of the American
directors have entered into affiliate agreements with SouthTrust pursuant to
which each agreed to vote for approval of the Merger at the Special Meeting.
The American ESOP provides that, upon the occurrence of certain
events, including a merger of American, the beneficial owners of ESOP Shares are
entitled to exercise the voting rights attached to the ESOP Shares. The Trustee
will forward to the beneficial owners of ESOP Shares all required materials to
allow them to fully exercise their rights. In order to vote, the beneficial
owners of ESOP Shares must return to the Trustee the appropriate proxy card
included in such materials, and the Trustee will vote the ESOP Shares as
instructed by the beneficial owners thereof at the Special Meeting. At the
Effective Time of the Merger, the ESOP Shares will be converted into shares of
SouthTrust Common Stock, as previously described, and the American ESOP will
hold the shares of SouthTrust Common Stock pursuant to the terms of the American
ESOP.
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Background of and Reasons for the Merger; Recommendations of the Board of
Directors of American
The Board of Directors of American believes that the Merger Agreement
and the Merger are in the best interests of American and its shareholders. THE
AMERICAN DIRECTORS UNANIMOUSLY RECOMMEND THAT AMERICAN SHAREHOLDERS VOTE FOR
APPROVAL OF THE MERGER AGREEMENT. In unanimously approving the Merger Agreement,
American's directors considered, among other things, American's and SouthTrust's
financial conditions, the financial terms and the income tax consequences of the
Merger, the likelihood of the Merger being approved by regulatory authorities
without undue conditions or delay, legal advice concerning the proposed Merger,
the views of Wheat First as to the fairness of the Exchange Ratio, from a
financial point of view, to the shareholders of American, and in general the
fairness of the terms of the Merger to American shareholders.
SouthTrust is engaging in the transactions pursuant to the Merger
Agreement because the Merger is consistent with its expansion strategy within
the southeastern United States and because the acquisition of American and the
Bank will augment SouthTrust's existing market share in Jacksonville, Florida
and enhance its competitive position in such market.
See "THE MERGER - Background of and Reasons for the Merger."
Opinion of Financial Advisor
Wheat First has rendered opinions to American 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 Exchange Ratio is fair, from a financial point of view, to the
shareholders of American. The opinion of Wheat First dated as of the date of
this Proxy Statement/Prospectus is attached as Exhibit C to this Proxy
Statement/Prospectus. American 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."
Interests of Certain Named Persons in the Merger
Certain members of American'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 American 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 to indemnify directors, officers, employees and agents
of American and its subsidiaries from and after the Merger against certain
liabilities arising prior to the Merger to the full extent permitted under
Florida law and American's Articles of Incorporation and Bylaws. SouthTrust has
also generally agreed to use its reasonable efforts to maintain American's
existing directors' and officers' liability insurance policy for six years after
the Merger, subject to certain limitations. In connection with the Merger
Agreement, all of the American directors have entered into affiliate agreements
with SouthTrust restricting them from selling the American Common Stock they own
from the date that is 30 days prior to the Effective Time of the Merger 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 American and
SouthTrust have been published within the meaning of Section 201.01 of the
Commission's Codification of Financial Reporting Policies. Such affiliate
agreements also require each director to vote for the Merger and not exercise
any rights of appraisal or rights to dissent from the Merger that each director
may have.
See "THE MERGER - Interests of Certain Named Persons in the Merger"
and "THE MERGER - Business and Management of American Following the Merger;
Plans for Business of American."
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 occur upon 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 Department of State of the State
of Florida and (ii) the Articles of Merger are filed and become effective with
the Secretary of State of the State of Alabama. Unless otherwise agreed upon by
American and SouthTrust, and subject to the conditions to the obligations of the
parties to effect the Merger, the parties have agreed to use their reasonable
efforts to cause the Effective Time of the Merger to occur on the third 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, (ii) the date on which the
shareholders of American approve the matters relating to the Merger Agreement
required to be approved by such shareholders by applicable law, (iii) the last
required consent or approval of all persons other than regulatory authorities
required for consummation of the Merger, unless the failure to obtain any such
consent or approval is not reasonably likely to have, individually or in the
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<PAGE> 14
aggregate, a material adverse effect on SouthTrust or American, and (iv) the
listing on Nasdaq of the shares of SouthTrust Common Stock issuable under the
Merger Agreement, or (v) such other date to which SouthTrust and American agree
in writing. 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. AMERICAN 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 JUNE ___, 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 American 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 American shareholders, and (iii) certain other conditions customary in
transactions of this kind.
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 controlling a bank (i.e., American) with a bank holding
company (i.e., ST-Sub) is part of a merger of the 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 (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
April 30, 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 April 10, 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.
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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
AMERICAN OR SOUTHTRUST TO MATERIALLY ADVERSELY IMPACT THE ECONOMIC OR BUSINESS
ASSUMPTIONS OF THE TRANSACTIONS CONTEMPLATED BY THE MERGER AGREEMENT. THERE CAN
ALSO 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."
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 mutual consent of SouthTrust and American, if the
Boards of Directors of each so determine by majority vote of the
entire membership of each such board; or
(ii) By either SouthTrust or American, in the event of an
inaccuracy of any representation or warranty of the other party
contained in the Merger Agreement which cannot be or is not cured
within 30 days after the giving of written notice to the breaching
party of such inaccuracy and which inaccuracy would have a Material
Adverse Effect (as defined in the Merger Agreement); or
(iii) By either SouthTrust or American, in the event of a
material breach by the other party of any covenant or agreement
contained in the Merger Agreement which cannot be or is not cured
within 30 days after the giving of written notice to the breaching
party of such breach; or
(iv) By either SouthTrust or American, in the event the
approval of the Federal Reserve Board required for consummation of
the Merger and the other transactions contemplated thereby is denied
by final nonappealable action of such authority;
(v) By either SouthTrust or American, in the event that
the approval of the Merger by American shareholders is not obtained;
or
(vi) By either SouthTrust or American, in the event that
the Merger is not consummated by December 31, 1998, if the failure to
consummate the transactions contemplated hereby on or before such
date is not caused by any breach of the Merger Agreement by the party
electing to terminate.
In the event of the termination and abandonment of the Merger
Agreement pursuant to the above, no party to the Merger Agreement will have any
liability or further obligations to any other party under the Merger Agreement,
except with respect to certain circumstances involving an uncured willful breach
of a representation, warranty, covenant, or agreement giving rise to such
termination and with respect to the survival of confidentiality obligations and
provisions regarding construction of the Merger Agreement. The Stock Option
Agreement is governed by its own terms as to termination. See "THE MERGER -
Stock Option Agreement" and "THE MERGER - Termination."
Stock Option Agreement
In connection with the execution of the Merger Agreement, American
granted SouthTrust an option (the "Stock Option") to purchase, under certain
circumstances, 236,853 shares (the "Option Shares") of American Common Stock at
a price of $131.99 per share pursuant to the terms of a Stock Option Agreement,
dated February 18, 1998, between SouthTrust and American (the "Stock Option
Agreement"). The Stock Option is exercisable only upon the occurrence of either
a Preliminary Purchase Event (as hereinafter defined) or a Purchase Event (as
hereinafter defined ), neither of which has occurred as of the date hereof.
American 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."
12
<PAGE> 16
No Solicitation
American has agreed that neither American 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 American's Board of
Directors, as advised by counsel, neither American nor its subsidiaries may
furnish any non-public information to, or have discussions with, any person,
other than SouthTrust, relating to any acquisition proposal. American must
promptly notify SouthTrust in the event that it receives any inquiry or proposal
relating to any such transaction.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
General
The consummation of the merger is conditioned upon the receipt by
American and SouthTrust of an opinion of Bradley Arant Rose & White LLP to the
effect that, for federal income tax purposes, (i) the Merger will qualify as a
reorganization under Section 368(a) 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 American 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 -- General."
THE FEDERAL, STATE AND LOCAL TAX CONSEQUENCES MAY VARY DEPENDING UPON
THE PARTICULAR CIRCUMSTANCES OF EACH HOLDER OF SHARES OF AMERICAN STOCK. ALL
HOLDERS OF SHARES OF AMERICAN 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.
Federal Income Tax Consequences of the Escrow Agreement
There may be certain federal income tax consequences to the
shareholders of American in connection with the Escrow Agreement to be executed
in connection with the dispute over the Bonus Shares. These consequences are
more fully described below. See "CERTAIN FEDERAL INCOME TAX CONSEQUENCES --
Federal Income Tax Consequences of Escrow Agreement."
RIGHTS OF DISSENT AND APPRAISAL
Holders of American Stock are entitled to dissenters' rights under
Sections 607.1301, 607.1302 and 607.1320 of the Florida Business Corporation
Act, which sections are reprinted in their entirety in Exhibit D to this Proxy
Statement/Prospectus. A person having a beneficial interest in shares of
American 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 below 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
The SouthTrust Common Stock is quoted on Nasdaq under the symbol
SOTR. As of _______, 1998, SouthTrust had approximately _____ holders of record
of SouthTrust Common Stock. The following table sets forth the high and low
closing price per share of the SouthTrust Common Stock as reported by Nasdaq and
the per share dividends declared by SouthTrust for the quarters indicated. On
______, 1998, the last reported sale price of the SouthTrust Common Stock as
reported by Nasdaq was ______.
<TABLE>
<CAPTION>
Price* Per Share
-------------------------------- Dividends
High Low Declared
---- --- ----------
1996:
<S> <C> <C> <C>
First Quarter................................. $19.1667 $16.8333 $0.1467
Second Quarter................................ 19.0000 17.7500 0.1467
Third Quarter................................. 21.2500 17.6667 0.1467
Fourth Quarter................................ 24.0833 20.3333 0.1467
1997:
First Quarter................................. 28.5000 22.7500 0.1667
Second Quarter................................ 28.2500 23.5833 0.1667
Third Quarter................................. 34.4583 25.7500 0.1667
Fourth Quarter................................ 42.8333 30.6667 0.1667
1998:
First Quarter................................. 45.1250 35.7500 0.1900
Second Quarter (through _______, 1998)
</TABLE>
- ---------------------
* The information listed above was obtained from the National
Association of Securities Dealers, Inc. ("NASD"), and reflects
interdealer prices, without retail markup, markdown or commissions,
and may not represent actual transactions.
13
<PAGE> 17
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
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 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 December 31, 1997, approximately
$472.5 million was available for payment of dividends to SouthTrust by its
subsidiaries, primarily its bank subsidiary.
On February 18, 1998 and February 20, 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 the NASD, were $41.359
and $42.422, respectively; and on _________, 1998, the last sale price of
SouthTrust Common Stock as obtained from the NASD was $____.
See "MARKET PRICE AND DIVIDEND INFORMATION RESPECTING THE SOUTHTRUST
COMMON STOCK AND THE AMERICAN STOCK."
STOCK PRICES OF AMERICAN
American Stock is not traded on any exchange, and there is no
established public trading market for such stock. There are no bid or asked
prices available for American Stock. Management of American is aware of certain
transactions in American Common Stock that occurred in 1997 and 1996. Although
the prices of all transactions are not known, for purposes of the American ESOP,
the appraisal value of one share of American Common Stock as of December 31,
1996 and 1997 was $35.4781 and $67.1044, respectively, it being understood that
the appraisal value as of December 31, 1997 was determined taking into account
the potential sale of American. No assurance can be given that these trades were
effected on an arm's-length basis. Transactions in American Common Stock are
infrequent and are negotiated privately between persons involved in those
transactions. The American Preferred Stock, upon distribution by the American
ESOP to a terminating participant, is converted into American Common Stock.
14
<PAGE> 18
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 American who are
not deemed to be "affiliates" (as that term is defined under the Securities Act)
of American and who do not become affiliates of SouthTrust. The shares of
SouthTrust Common Stock to be issued to affiliates of American 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. Under the volume limitations of Rule 145, and based upon the
outstanding shares of SouthTrust Common Stock as of ______________, 1998
(exclusive of shares of SouthTrust Common Stock to be issued in the Merger), an
affiliate of American who otherwise complies with Rule 145, subject to the
undertaking described below, will be free to resell, during any given
three-month period, up to approximately _______ shares of SouthTrust Common
Stock.
American has caused each person identified by American 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 American and SouthTrust have been published within the
meaning of Section 201.01 of the Commission's Codification of Financial
Reporting Policies, which is expected to occur on _______________ 1998.
See "THE MERGER - Resale of SouthTrust Common Stock Received in the
Merger."
DIFFERENCES IN RIGHTS OF AMERICAN SHAREHOLDERS
Upon consummation of the Merger, American shareholders will become
SouthTrust stockholders. As a result, their rights as shareholders, which now
are governed by Florida corporate law and American's Articles of Incorporation
and Bylaws, will be governed by Delaware corporate law and SouthTrust's Restated
Certificate of Incorporation and Bylaws. Because of certain differences between
the provisions of Florida corporate law and Delaware corporate law and of
American's Articles of Incorporation and Bylaws and SouthTrust's Restated
Certificate of Incorporation and Bylaws, the current rights of American
shareholders will change after the Merger. Some of these differences include
anti-takeover provisions. See "COMPARISON OF THE SOUTHTRUST COMMON STOCK AND THE
AMERICAN 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 American. 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 American pro forma equivalent amounts are
computed by multiplying the combined pro forma amounts by a factor of
3.23574794, to reflect the Exchange 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>
Years Ended
December 31,
---------------------------------------------
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Net income per diluted common share:
SouthTrust................................... $ 2.03 $ 1.79 $ 1.57
American..................................... 0.74 2.27 2.25
SouthTrust pro forma combined................ 1.99 1.77 1.55
American pro forma equivalent................ 6.44 5.72 5.01
Cash dividends per common share:
SouthTrust................................... $ 0.67 $ 0.59 $ 0.53
American..................................... 2.04 1.72 1.05
SouthTrust pro forma combined(1)............. 0.67 0.59 0.53
American pro forma equivalent................ 2.17 1.91 1.70
Book value per common share (period end):
SouthTrust................................... $ 14.28 $ 12.03 $ 10.85
American..................................... 33.65 34.02 36.11
SouthTrust pro forma combined................ 14.19 12.00 10.87
American pro forma equivalent................ 45.91 38.82 35.17
</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 American 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 American and SouthTrust. This information should be read in conjunction with
the consolidated financial statements of American and SouthTrust, and the
related notes thereto, incorporated herein by reference. See "INCORPORATION OF
CERTAIN DOCUMENTS BY REFERENCE."
SOUTHTRUST CORPORATION AND SUBSIDIARIES
<TABLE>
<CAPTION>
Years Ended December 31,
---------------------------------------------------------------------
1997 1996 1995 1994 1993
----------- ----------- ------------ ------------ -----------
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA (in thousands, except per
share data):
Interest income................................... $ 2,232,252 $ 1,804,220 $ 1,484,623 $ 1,108,612 $ 927,551
----------- ----------- ----------- ----------- -----------
Interest expense.................................. 1,186,079 938,194 791,423 501,067 397,743
----------- ----------- ----------- ----------- -----------
Net interest income............................. 1,046,173 866,026 693,200 607,545 529,808
Provision for loan losses......................... 90,613 90,027 61,286 44,984 45,032
----------- ----------- ----------- ----------- -----------
Net interest income after
provision for loan losses....................... 955,560 775,999 631,914 562,561 484,776
Non-interest income............................... 270,507 254,809 208,664 184,778 174,702
Non-interest expense.............................. 748,216 643,298 536,534 485,999 434,951
----------- ----------- ----------- ----------- -----------
Income before income taxes........................ 477,851 387,510 304,044 261,340 224,527
Income taxes...................................... 171,143 132,807 105,039 88,338 73,992
----------- ----------- ----------- ----------- -----------
Net income...................................... $ 306,708 $ 254,703 $ 199,005 $ 173,002 $ 150,535
=========== =========== =========== =========== ===========
Net income per diluted common share............... $ 2.03 $ 1.79 $ 1.57 $ 1.43 $ 1.29
Cash dividends declared
per common share................................ 0.67 0.59 0.53 0.45 0.40
Average diluted common shares outstanding
(in thousands).................................. 151,008 142,154 126,687 121,157 117,027
BALANCE SHEET DATA (at period end) (in thousands):
Total assets...................................... $30,906,445 $26,223,193 $20,787,024 $17,632,059 $14,707,964
Total loans, net.................................. 22,159,314 19,061,269 14,448,524 11,950,215 9,313,086
Total deposits.................................... 19,586,584 17,305,493 14,575,077 12,801,239 11,515,311
Total stockholders' equity........................ 2,194,641 1,734,892 1,430,870 1,135,268 1,051,766
</TABLE>
AMERICAN BANKS OF FLORIDA, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
Years Ended December 31,
-----------------------------------------------------------------------
1997 1996 1995 1994 1993
------------ ---------- ---------- ----------- ------------
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA (in thousands, except
per share data):
Interest income...................................... $ 41,401 $ 40,528 $ 40,419 $ 39,083 $ 36,617
------------ ---------- ---------- ----------- ------------
Interest expense..................................... 18,350 19,089 19,048 14,358 13,555
------------ ---------- ---------- ----------- ------------
Net interest income................................ 23,051 21,439 21,371 24,725 23,062
Provision (credit) for loan losses................... 1,625 1,750 (275) 790 1,136
------------ ---------- ---------- ----------- ------------
Net interest income after
provision for loan losses.......................... 21,426 19,689 21,646 23,935 21,926
Non-interest income.................................. 5,615 6,533 6,347 13,359 8,131
Non-interest expense................................. 24,901 22,352 24,346 27,274 27,159
------------ ---------- ---------- ----------- ------------
Income before income taxes........................... 2,140 3,870 3,647 10,020 2,898
Income taxes......................................... 1,238 1,296 1,084 3,063 709
------------ ---------- ---------- ----------- ------------
Income before cumulative effect of
accounting change.................................. 902 2,574 2,563 6,957 2,189
Cumulative effect of change in accounting
principle, net of taxes............................ -- -- -- -- 823
------------ ---------- ---------- ----------- ------------
Net income .......................................... $ 902 $ 2,574 $ 2,563 $ 6,957 $ 3,012
============ ========== ========== =========== ============
Net income per diluted common share.................. $ 0.74 $ 2.27 $ 2.25 $ 5.44 $ 2.23
Cash dividends declared
per common share................................... 2.04 1.72 1.05 2.05 1.10
Average diluted common shares
outstanding (in thousands)......................... 1,091 1,077 1,078 1,279 1,284
BALANCE SHEET DATA (at period end) (in thousands):
Total assets......................................... $ 543,289 $ 565,868 $ 552,478 $ 575,139 $ 580,549
Total loans, net..................................... 338,044 324,718 289,970 311,317 277,792
Total deposits....................................... 450,374 466,911 460,803 449,252 497,520
Total stockholders' equity........................... 40,754 41,179 40,307 34,010 36,725
</TABLE>
17
<PAGE> 21
SELECTED PRO-FORMA INFORMATION
The following table sets forth certain unaudited pro forma combined
financial information for SouthTrust and American 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 American and SouthTrust and the related notes thereto
incorporated herein by reference. See "INCORPORATION OF CERTAIN DOCUMENTS BY
REFERENCE."
PRO FORMA COMBINED INFORMATION
SOUTHTRUST CORPORATION AND AMERICAN BANKS OF FLORIDA, INC.
<TABLE>
<CAPTION>
Years Ended December 31,
----------------------------------------
1997 1996 1995
---------- ---------- ----------
<S> <C> <C> <C>
INCOME STATEMENT DATA
(in thousands, except per share data):
Interest income ............................ $2,273,653 $1,844,748 $1,525,042
Interest expense ........................... 1,204,429 957,283 810,471
---------- ---------- ----------
Net interest income .................... 1,069,224 887,465 714,571
Provision for loan losses .................. 92,238 91,777 61,011
---------- ---------- ----------
Net interest income after provision for
loan losses ............................ 976,986 795,688 653,560
Non-interest income ........................ 276,122 261,342 215,011
Non-interest expense ....................... 773,117 665,650 560,880
---------- ---------- ----------
Income before income taxes ................. 479,991 391,380 307,691
Income taxes ............................... 172,381 134,103 106,123
---------- ---------- ----------
Net income ............................. $ 307,610 $ 257,277 $ 201,568
========== ========== ==========
Net income per diluted common share ........ $ 1.99 $ 1.77 $ 1.55
Average diluted common shares outstanding
(in thousands) ......................... 154,538 145,639 130,175
BALANCE SHEET DATA
(in millions)
Total assets ............................... $ 31,449 $ 26,789 $ 21,339
Total loans, net ........................... 22,497 19,386 14,739
Total deposits ............................. 20,037 17,772 15,036
Total stockholders' equity ................. 2,236 1,776 1,471
</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
American, 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.
Pursuant to the Merger Agreement, American will be merged with and
into ST-Sub pursuant to the Florida Business Corporation Act and the Alabama
Business Corporation Act, and ST-Sub will be the Surviving Corporation. Subject
to approval of the Merger Agreement by the shareholders of American at the
Special Meeting, the receipt of required regulatory approvals, and satisfaction
of other conditions, American will be merged into ST-Sub pursuant to the Merger
Agreement. At the Effective Time of the Merger, pursuant to the Merger
Agreement, SouthTrust is to issue a total of 3,930,282 shares of SouthTrust
Common Stock for all of the issued and outstanding shares of American Stock. As
of the date of the Merger Agreement and assuming the conversion of all of the
American Preferred Stock into American Common Stock, a total of 1,214,644.056
shares of American Common Stock would be issued and outstanding, which total
includes 90,000 Bonus Shares issued to certain officers and directors of
American and over which the dispute more fully described below exists. Unless
the dispute regarding the Bonus Shares is resolved prior to the Effective Time
of the Merger in a manner consistent with Sections 7.10 and 7.11 of the Merger
Agreement, immediately prior to the Effective Time of the Merger, the Bonus
Shares will be delivered to the Escrow Agent in accordance with Section 7.11 of
the Merger Agreement and will be held and disposed of in accordance with Section
7.11 of the Merger Agreement and with the provisions of the Escrow Agreement. If
the dispute regarding the Bonus Shares is resolved prior to the Effective Time
of the Merger in accordance with Sections 7.10 and 7.11 of the Merger Agreement,
the consideration which is or would have been applicable to the Bonus Shares
will be distributed in accordance with such resolution; if such resolution is
that some or all of the Bonus Shares will be canceled and treated as not issued,
then such consideration will be allocated, on a pro rata basis, to increase the
amount of SouthTrust Common Stock to be received by the American shareholders.
Accordingly, subject to Sections 3.01, 7.10 and 7.11 of the Merger
Agreement, at the Effective Time of the Merger, each share (excluding (i) shares
held by any of American'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 American Common Stock, including the Bonus Shares, will
become and be converted into the right to receive 3.23574794 shares of
SouthTrust Common Stock and each share of American Preferred Stock issued and
outstanding (except for shares held by American's subsidiaries other than in a
fiduciary capacity or as a result of debts previously contracted) will become
and be converted into the right to receive the number of shares of SouthTrust
Common Stock equal to the product of 3.23574794 multiplied by the number of
shares of American Common Stock into which such share of American Preferred
Stock is convertible. Each share of American Preferred Stock is convertible into
one share of American Common Stock. See "THE MERGER - Effect of the Merger on
American Stock.
The Exchange Ratio, including the number of shares of SouthTrust
Common Stock issuable in the Merger, gives effect to the SouthTrust Stock Split
and is subject to appropriate adjustment in the event of certain other stock
splits, stock dividends, reclassifications or similar distributions effected by
SouthTrust.
A dispute has arisen between, on the one hand, Mr. Mason, Chairman
Emeritus and member of the Board of Directors of American, and, on the other
hand, the Bonus Shareholders, who are also members of the Board of Directors of
American. (Mr. Raymond K. Mason, Jr. is also Chairman, President and Chief
Executive Officer thereof, and Mr. Perry is also Executive Vice President,
Secretary and Treasurer thereof.) This dispute concerns the enforceability of
the Stock Bonus Agreements, dated May 26, 1995, between each of the Bonus
Shareholders and American, under which the Bonus Shareholders each were awarded
30,000 shares of American Common Stock, for an aggregate of 90,000 shares of
American Common Stock. Mr. Mason disputes whether the Stock Bonus Agreements
were duly authorized by the Board of Directors of American and whether American
met certain performance benchmarks set forth in the Stock Bonus Agreements
before the Bonus Shares were issued.
19
<PAGE> 23
In connection with the Merger Agreement, American has agreed that,
immediately prior to the Effective Time of the Merger, and provided that the
issues related to the Bonus Shares have not been resolved earlier in a manner
that would not conflict with the Merger Agreement, including any action not
contemplated by the Merger Agreement that would prevent the Merger from being
accounted for as a pooling of interests, it will enter into the Escrow Agreement
with Mr. Mason, the Bonus Shareholders and the Escrow Agent. The Escrow
Agreement provides that resolution of the dispute between Mr. Mason and the
Bonus Shareholders will be determined by award of an arbitrator or a final,
non-appealable decision of a court of proper jurisdiction, as determined and
selected by the mutual agreement of Mr. Mason and the Bonus Shareholders. In
order to accomplish this result, the Escrow Agreement provides that the Bonus
Shareholders must deliver to and deposit with the Escrow Agent the certificate
or certificates representing the Bonus Shares. At the Effective Time of the
Merger, the Escrow Agent will exchange the certificates representing the Bonus
Shares for shares of SouthTrust Common Stock pursuant to the terms of the Merger
Agreement. These shares of SouthTrust Common Stock are referred to in the Escrow
Agreement as the "Escrow Fund."
In the event it is determined that the issuance of all the Bonus
Shares to the Bonus Shareholders was valid, the Escrow Agent will release the
Escrow Fund to the Bonus Shareholders in the proportion to which the Bonus
Shareholders are entitled to the Bonus Shares. In the event it is determined
that the Bonus Shareholders are entitled to some number of the Bonus Shares less
than 90,000, the Escrow Agent will release a portion of the Escrow Fund to the
Bonus Shareholders, and the remaining Escrow Fund will be released, on a pro
rata basis, to the shareholders of American at the Effective Time of the Merger.
In the event it is determined that the Bonus Shareholders are entitled to none
of the Bonus Shares, then the Escrow Agent will release all of the Escrow Fund,
on a pro rata basis, to the shareholders of American at the Effective Time of
the Merger. See "- Effect of the Merger on the American Stock Bonus Agreements."
No fractional shares of SouthTrust Common Stock will be issued in the
Merger, and, in lieu thereof, each holder of shares of American 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 average of
the last sales prices of SouthTrust Common Stock for the five Nasdaq trading
days immediately preceding the Effective Time of the Merger, as reported in The
Wall Street Journal.
The Merger will become effective on the date of filing of appropriate
Articles of Merger with the Department of State of the State of Florida and
Articles of Merger with the Secretary of State of the State of Alabama. The
Merger Agreement provides that, unless otherwise mutually agreed upon in
writing, the parties thereto will use their reasonable efforts to cause such
effective time to occur on the third business day following the last to occur of
(i) the effective date (including expiration of any applicable waiting period)
of the last required consent of any regulatory authority having authority over
and approving or exempting the Merger, (ii) the date on which the shareholders
of American approve the Merger Agreement to the extent such approval is required
by applicable law, (iii) the last required consent or approval of all persons
other than regulatory authorities required for consummation of the Merger,
unless the failure to obtain any such consent or approval is not reasonably
likely to have, individually or in the aggregate, a material adverse effect on
SouthTrust or American, and (iv) the listing on Nasdaq of the shares of
SouthTrust Common Stock issuable under the Merger Agreement. See "- Effective
Time of the Merger."
BACKGROUND OF AND REASONS FOR THE MERGER
Background of the Merger
Prior to April 22, 1997, the date of the 1996 annual meeting of
American, various disagreements had arisen between Mr. Mason and the other
members of the Board of Directors of American over the board's strategy and
future plans for American. Such disagreements continued after the annual
meeting, until the Board of Directors unanimously determined, in the best
interests of all American shareholders, to explore a sale or merger of American,
and, among other things, to retain a financial advisor for American. On July 29,
1997, the Board of Directors of American unanimously voted to engage Wheat First
to serve as its financial advisor on financial and strategic matters relating to
the possible sale of American.
During September 1997, Wheat First contacted a number of parties
regarding a potential transaction with American. After execution of
confidentiality agreements and subsequent reviews of financial and other
materials concerning American provided to such parties by Wheat First, certain
of those parties, including SouthTrust, expressed initial interest in acquiring
American. As a result of these initial indications of interest, Wheat First
conducted further negotiations and provided further information on American to
SouthTrust and the other potential acquirors.
20
<PAGE> 24
SouthTrust and certain of the other interested parties were invited
to conduct on-site due diligence of American. Thereafter, both SouthTrust and
the other parties were asked to submit definitive proposals to acquire American.
American pursued negotiations with a number of bidders and met with
Wheat First to discuss the merits and value of the offers received from all
bidders before focusing on SouthTrust's offer. After further negotiations in
February 1998, during which SouthTrust performed further due diligence in order
to update the information previously provided by American, the Board of
Directors of American considered SouthTrust's last offer, which was conditioned
on the signing by American of the Stock Option Agreement.
Upon review of such offer, the Board of Directors of American
instructed its management, legal counsel and financial advisors to negotiate a
final definitive purchase agreement with SouthTrust.
Subsequent discussions and negotiations between SouthTrust, American
and Wheat First, acting on behalf of American, resulted in the preparation of
the Merger Agreement.
On February 18, 1998, at a meeting of American's Board of Directors
that included the participation of Wheat First, American's Board of Directors
reviewed the terms of the proposed Merger, Merger Agreement and Stock Option
Agreement, unanimously approved the offer from SouthTrust and authorized the
execution and delivery of the Merger Agreement and the Stock Option Agreement.
American's Reasons for the Merger
In reaching its conclusion to approve the Merger Agreement,
American's Board of Directors consulted with American's senior management, as
well as its financial and legal advisors, and considered various factors,
including the following:
(i) The effect on shareholder value if American remained
independent compared to the value of combining with SouthTrust. This included an
analysis of the merger environment, American's ability to grow its business
internally and by acquisitions, the prices being paid for institutions such as
American and the negative effect of the potential failure to resolve amicably
the various disagreements which had arisen between Mr. Mason and the other
members of the Board of Directors of American over the board's strategy and
future plans for American.
(ii) Certain financial information about American and SouthTrust.
Such information included, but was not limited to, information with regard to
recent and historical stock performance, valuation analyses, pro forma analyses,
comparative financial and operating performance data, acquisition capacity
analyses, and comparable precedent merger and acquisition transactions presented
by Wheat First. The Board of Directors of American also considered the results
of due diligence on SouthTrust, particularly regarding the views of Wheat First
about SouthTrust Common Stock.
(iii) Advice of financial advisor and fairness opinion. The opinion
of Wheat First (including the assumptions and financial information and
projections relied on by Wheat First in arriving at such opinion) that, as of
February 17, 1998, the Exchange Ratio was fair to the shareholders of American
from a financial point of view. See "- Opinion of Financial Advisor."
(iv) Certain nonfinancial information and terms of agreements.
Fried, Frank, Harris, Shriver & Jacobson and Foley & Lardner, counsel to
American, had, prior to the meeting, distributed copies of the Merger Agreement
and Stock Option Agreement to the Board of Directors of American and generally
summarized their material provisions. The Board of Directors of American was
also advised that SouthTrust had made the Stock Option Agreement a condition to
the transaction, and the Board of Directors considered that the existence of
such an agreement might generally discourage third parties from bidding but
under the circumstances of American's extensive auction process such effect was
unlikely to be detrimental to American's shareholders. See "--Stock Option
Agreement."
(v) Regulatory approvals. The likelihood of obtaining the
regulatory approvals that would be required with respect to the Merger. See " -
Regulatory Approvals and Certain Other Conditions to the Merger; Waiver and
Amendment."
(vi) Impact on American constituencies. The general impact of the
Merger on various constituencies served by American, including its customers,
employees, and communities.
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The foregoing discussion of the information and factors considered by
American's Board of Directors is not intended to be exhaustive but is believed
to include all material factors considered by American's Board of Directors. In
reaching its determination to approve the Merger, American's Board of Directors
did not assign any relative or specific weights to the foregoing factors, and
individual directors may have given differing weights to different factors.
After deliberating with respect to the Merger and the other transactions
contemplated thereby, and considering, among other things, the matters discussed
above and the opinion of Wheat First referred to above, American's Board of
Directors unanimously approved the Merger Agreement and the transactions
contemplated thereby, including the Stock Option Agreement, as being in the best
interests of American and its shareholders.
For the reasons described above, American'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, American's Board of
Directors unanimously recommends that American 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 southeastern United States and because the acquisition of American and the
Bank will augment SouthTrust's existing market share in Jacksonville, Florida
and enhance its competitive position in such market.
OPINION OF FINANCIAL ADVISOR
General
American retained Wheat First to act as its financial advisor in
connection with the Merger and to render an opinion to American's Board of
Directors as to the fairness, from a financial point of view, to the holders of
American Stock of the Exchange Ratio. Wheat First is a nationally recognized
investment banking firm regularly engaged in the valuation of businesses and
their securities in connection with mergers and acquisitions, negotiated
underwritings, competitive biddings, secondary distributions of listed and
unlisted securities, private placements and valuations for estate, corporate and
other purposes. Wheat First regularly publishes research reports regarding the
financial services industry and the businesses and securities of publicly owned
companies in that industry. American's Board of Directors selected Wheat First
to serve as its financial advisor in connection with the Merger on the basis of
such firm's expertise.
Representatives of Wheat First participated in the meeting of
American's Board of Directors on February 18, 1998, at which the Merger
Agreement was considered and approved. At the meeting, Wheat First issued its
oral opinion that, as of such date, the Exchange Ratio was fair, from a
financial point of view, to the holders of American Stock. A written opinion
dated as of the date of this Proxy Statement/Prospectus has been delivered to
American's Board of Directors to the effect that, as of such date, the Exchange
Ratio is fair, from a financial point of view, to the holders of American Stock.
The full text of the opinion delivered by Wheat First (the "Wheat
First Opinion"), dated as of the date of this Proxy Statement/Prospectus, which
sets forth certain assumptions made, matters considered and limitations on
review undertaken, is attached as Exhibit C to this Proxy Statement/Prospectus,
is incorporated herein by reference, and should be read in its entirety in
connection with this Proxy Statement/Prospectus. The summary of the opinion of
Wheat First set forth in this Proxy Statement/Prospectus is qualified in its
entirety by reference to the opinion. Wheat First's opinion is directed only to
the fairness, from a financial point of view, of the Exchange Ratio to the
holders of American Stock and does not constitute a recommendation to any
shareholder of American as to how such shareholder should vote on the Merger.
In arriving at its oral opinion of February 18, 1998, Wheat First
reviewed certain publicly available business and financial information relating
to American and SouthTrust and certain other information provided to it,
including, among other things the following: (i) American's Annual Reports to
Shareholders and related financial information for the three fiscal years ended
December 31, 1996, and certain financial data provided by management of American
for the fiscal year ended December 31, 1997; (ii) certain financial data
provided by management of American for the periods ended March 31, 1997, June
30, 1997 and September 30, 1997; (iii) SouthTrust's Annual Reports to
Stockholders, Annual Reports on Form 10-K and related financial information for
the three fiscal years ended December 31, 1996; (iv) SouthTrust's Quarterly
Reports on Form 10-Q and related financial information for the periods ended
March 31, 1997, June 30, 1997 and September 30, 1997, and certain financial data
provided by management of SouthTrust for the period ended December 31, 1997; (v)
certain publicly available information with respect to historical market prices
and trading activities for American Stock and SouthTrust Common Stock and for
certain publicly traded
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<PAGE> 26
financial institutions which Wheat First deemed relevant; (vi) certain publicly
available information with respect to banking companies and the financial terms
of certain other mergers and acquisitions which Wheat First deemed relevant;
(vii) the Merger Agreement; (viii) certain estimates of the cost savings,
revenue enhancements and divestitures projected by American and SouthTrust for
the combined company; (ix) other financial information concerning the businesses
and operations of American and SouthTrust, including certain audited and
unaudited financial information and certain internal financial analyses and
forecasts for American and SouthTrust prepared by the senior managements of
these companies; and (x) such financial studies, analyses, inquiries and other
matters as Wheat First deemed necessary. In addition, Wheat First met with
members of the senior managements of American and SouthTrust to discuss the
business and prospects of each company.
In connection with its review, Wheat First relied upon and assumed
the accuracy and completeness of all of the foregoing information provided to it
or publicly available, including representations and warranties of American and
SouthTrust included in the Merger Agreement, and Wheat First has not assumed any
responsibility for independent verification of such information. Wheat First
relied upon the managements of American and SouthTrust as to the reasonableness
and achievability of their financial and operational forecasts and projections,
and the assumptions and bases therefor, provided to Wheat First, and assumed
that such forecasts and projections reflected the best currently available
estimates and judgments of such managements and that such forecasts and
projections will be realized in the amounts and in the time periods currently
estimated by such managements. Wheat First also assumed, without independent
verification, that the aggregate allowances for loan losses and other
contingencies for American and SouthTrust are adequate to cover such losses.
Wheat First did not review any individual credit files of American or
SouthTrust, nor did it make an independent evaluation or appraisal of the assets
or liabilities of American or SouthTrust.
In connection with rendering its opinion dated as of the date of this
Proxy Statement/Prospectus, Wheat First performed a variety of financial
analyses. The preparation of a fairness opinion involves various determinations
as to the most appropriate and relevant methods of financial analysis and the
application of those methods to the particular circumstances and, therefore,
such an opinion is not readily susceptible to partial analysis or summary
description. Moreover, the evaluation of the fairness, from a financial point of
view, of the Exchange Ratio to holders of American Stock (other than SouthTrust
and its affiliates) was to some extent a subjective one based on the experience
and judgment of Wheat First and not merely the result of mathematical analysis
of financial data. Accordingly, notwithstanding the separate factors summarized
below, Wheat First believes that its analyses must be considered as a whole and
that selecting portions of its analyses and of the factors considered by it,
without considering all analyses and factors, could create an incomplete view of
the evaluation process underlying its opinion. The ranges of valuations
resulting from any particular analysis described below should not be taken to be
Wheat First's view of the actual value of American or SouthTrust.
In performing its analyses, Wheat First made numerous assumptions
with respect to industry performance, business and economic conditions and other
matters, many of which are beyond the control of American or SouthTrust. The
analyses performed by Wheat First are not necessarily indicative of actual
values or future results, which may be significantly more or less favorable than
suggested by such analyses. Additionally, analyses relating to the values of
businesses do not purport to be appraisals or to reflect the prices at which
businesses actually may be sold. In rendering its opinion, Wheat First assumed
that, in the course of obtaining the necessary regulatory approvals for the
Merger, no conditions will be imposed that will have a material adverse effect
on the contemplated benefits of the Merger, on a pro forma basis, to SouthTrust.
Wheat First's opinion is just one of the many factors taken into
consideration by American's Board of Directors in determining to approve the
Merger Agreement. Wheat First's opinion does not address the relative merits of
the Merger as compared to any alternative business strategies that might exist
for American, nor does it address the effect of any other business combination
in which American might engage.
The following is a summary of the analyses performed by Wheat First
in connection with its oral opinion delivered to American's Board of Directors
on February 18, 1998:
Comparison of Selected Companies
Wheat First compared the financial performance and market trading
information of SouthTrust to that of a group of regional bank holding companies
(the "Group"). This Group included: AmSouth Bancorp, BB&T Corp., Compass
Bancshares Inc., Crestar Financial Corp., First American Corp., First Tennessee
National Corp., First Union Corp., NationsBank Corp., Regions Financial Corp.,
SunTrust Banks, Inc., Union Bankshares Corp., and Wachovia Corp.
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<PAGE> 27
Based on balance sheet financial data as of December 31, 1997, or
September 30, 1997, as adjusted pro forma for its other major pending
acquisitions, SouthTrust had ratios which included: (i) equity to assets of
6.80% compared to an average of 8.00%, a minimum of 6.63% and a maximum of 9.65%
for the Group; (ii) loans to deposits of 97.10% compared to an average of
97.80%, a minimum of 90.02% and a maximum of 105.38% for the Group; (iii)
nonperforming assets to total assets of 0.53% compared to an average of 0.39%, a
minimum of 0.14% and a maximum of 0.79% for the Group; (iv) reserves for loan
losses to nonperforming assets of 175.1% compared to an average of 307.1%, a
minimum of 157.1% and a maximum of 613.4% for the Group. Based on income
statement data for the three month period ended December 31, 1997, SouthTrust
had (i) a return on average assets before nonrecurring charges and extraordinary
items of 1.09% compared to an average of 1.38%, a minimum of 1.22% and a maximum
of 1.67% for the Group; and (ii) a return on average equity before nonrecurring
charges and extraordinary items of 15.21% compared to an average of 17.49%, a
minimum of 13.76% and a maximum of 25.31% for the Group.
Based on market values as of February 18, 1998, and balance sheet
financial data as of December 31, 1997 or September 30, 1997, as estimated pro
forma for its other major pending acquisitions, SouthTrust had: (i) a stock
price to book value multiple of 274.0% compared to an average of 309.8%, a
minimum of 266.7% and a maximum of 423.4% for the Group; (ii) a stock price to
"First Call" (as hereinafter defined) 1998 estimated earnings per share multiple
of 18.2x compared to an average of 17.3x, a minimum of 13.3x and a maximum of
20.9x for the Group; (iii) a stock price to First Call 1999 estimated earnings
per share multiple of 16.4x compared to an average of 15.4x, a minimum of 11.6x
and a maximum of 18.8x for the Group; and (iv) an indicated dividend yield of
1.84% compared to an average of 2.21%, a minimum of 1.39% and a maximum of 3.17%
for the Group. "First Call" is a data service that monitors and publishes a
compilation of earnings estimates produced by selected research analysts
regarding companies of interest to institutional investors.
Analysis of Selected Transactions
Wheat First performed an analysis of premiums paid in thirteen
selected pending or recently completed mid-sized Florida bank acquisitions
announced since January 1997 where the announced deal value was between $25
million and $400 million (the "Selected Transactions"). Multiples of book value,
trailing twelve months earnings and estimated current year earnings paid in the
Selected Transactions were compared to the multiples and premiums implied by the
consideration offered by SouthTrust in the Merger. The Selected Transactions
included the following pending transactions: F.N.B. Corp./Seminole Bank;
Wachovia Corp./Ameribank Bancshares; Regions Financial Corp./Key Florida Bancorp
and Colonial BancGroup/South Florida Banking Corp. The Selected Transactions
included the following completed transactions: Colonial BancGroup/United
American Bank; Union Planters Corp./Capital Bancorp; Republic Security/County
Financial; Wachovia Corp./First United Bancorp; Compass Bancshares/GSB
Investments; Colonial BancGroup/Dadeland Bancshares; Provident Bancorp/Florida
Gulfcoast; Seacoast Bancorp/Port St. Lucie; and Republic Security/Family Bank.
Based on the market value of SouthTrust Common Stock on February 17,
1998, and financial data as of December 31, 1997, the analysis yielded ratios of
the implied consideration to be paid by SouthTrust to American: (i) to book
value of 391.7% compared to an average of 284.5%, a minimum of 222.9% and a
maximum of 363.8% for the Selected Transactions; (ii) to trailing twelve months
earnings per share of 42.0x compared to an average of 21.7x, a minimum of 13.9x
and a maximum of 26.4x for the Selected Transactions; and (iii) to annualized
latest quarter earnings per share of 35.3x compared to an average of 19.9x, a
minimum of 13.9x and a maximum of 24.3x for the Selected Transactions.
The following comparisons were based on financial data as of the
period ended December 31, 1997 for American and the twelve months reporting
period prior to the announcement of each transaction for each acquiree in the
Selected Transactions; American had: (i) equity to assets of 7.60% compared to
an average of 8.58%, a minimum of 6.18% and a maximum of 10.96% for the Selected
Transaction acquirees; (ii) nonperforming assets to total assets of 0.49%
compared to an average of 0.73%, a minimum of 0.00% and a maximum of 2.57% for
the Selected Transaction acquirees; (iii) a return on average assets of 0.69%
compared to an average of 1.18%, a minimum of 0.34% and a maximum of 1.96% for
the Selected Transaction acquirees; and (iv) a return on average equity before
extraordinary items of 10.01% compared to an average of 13.93%, a minimum of
3.58% and a maximum of 23.13% for the Selected Transaction acquirees.
Contribution Analysis
Wheat First analyzed the relative contribution to the pro forma
combined company of American and SouthTrust based on certain balance sheet and
income statement items, including assets, deposits, shareholders' equity and
estimated
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earnings. This analysis included balance sheet data as of December 31, 1997
(estimated pro forma for SouthTrust's pending acquisitions as of that date),
market values as of February 17, 1998, First Call consensus earnings estimates
for SouthTrust and management earnings projections for American. Wheat First
then compared the relative contribution of such balance sheet and income
statement items with the fully diluted ownership percentage of the combined
company of approximately 2.38% for American shareholders based on the Exchange
Ratio (approximately 3.24 following the SouthTrust Stock Split) offered by
SouthTrust to the American shareholders. The contribution analysis showed that
under the SouthTrust proposal, American would contribute approximately 1.51% of
the combined assets, 1.69% of the combined shareholder's equity (before
Merger-related expenses) and 1.05% of the 1998 estimated earnings of the two
companies (before cost savings).
Discounted Dividends Analysis
Using discounted dividends analysis, Wheat First estimated the
present value of the future stream of dividends that American could produce over
the next five years, under various circumstances, assuming the company performed
in accordance with the earnings forecasts of management and an assumed level of
expense savings was achieved. Wheat First then estimated the terminal values for
American Stock at the end of the period by applying multiples ranging from 16x
to 18x projected earnings in year five. The dividend streams and terminal values
were then discounted to present values using different discount rates (ranging
from 14% to 16%) chosen to reflect different assumptions regarding the required
rates of return to holders or prospective buyers of American Stock. This
discounted dividend analysis indicated reference ranges of between $129.1 and
$152.8 million for American. These values compare to the consideration offered
by SouthTrust to American in the Merger of $161.9 million based on the market
value of SouthTrust Common Stock on February 17, 1998.
In connection with its written opinion as of the date hereof, Wheat
First confirmed the appropriateness of its reliance on the analyses used to
render its February 18, 1998 opinion by performing procedures to update certain
of such analyses and by reviewing the assumptions on which such analyses were
based and the factors considered in connection therewith.
No company or transaction used as a comparison in the above analysis
is identical to American, SouthTrust or the Merger. Accordingly, an analysis of
the results of the foregoing necessarily involves complex considerations and
judgments concerning differences in financial and operating characteristics of
the companies and other factors that could affect the public trading value of
the companies used for comparison in the above analysis.
The Wheat First Opinion is dated as of the date of this Proxy
Statement/Prospectus and is based solely upon the information available to Wheat
First and the economic, market and other circumstances as they existed as of
such date. Events occurring after that date could materially affect the
assumptions and conclusions contained in the opinion of Wheat First. Wheat First
has not undertaken to reaffirm or revise its opinion or otherwise comment on any
events occurring after the date hereof.
Compensation of Wheat First
As compensation for Wheat First's services, American has agreed to
pay Wheat First advisory fees of $50,000 payable upon the execution of a letter
of intent or definitive agreement for the sale of American, a $50,000 closing
fee payable upon the closing of a transaction for the sale of American, and a
contingency fee of 2.5% of the amount by which the consideration received in the
transaction for the sale of American exceeds $126,849,000 payable at the closing
of such transaction. Based on the price of SouthTrust Common Stock on _________,
1998, such contingency fee would have been $____________. American has agreed
also to reimburse Wheat First for its reasonable out-of-pocket expenses incurred
in connection with the activities contemplated by its engagement, regardless of
whether the Merger is consummated, up to $25,000. American has further agreed to
indemnify Wheat First against certain liabilities, including certain liabilities
under federal securities laws. The payment of the above fees is not contingent
upon Wheat First rendering a favorable opinion with respect to the Merger.
INTERESTS OF CERTAIN NAMED PERSONS IN THE MERGER
Certain members of American management and of American's Board of
Directors have interests in the Merger that are in addition to any interests
they may have as shareholders of American generally. These interests include,
among others, provisions in the Merger Agreement relating to indemnification of
American's directors and officers, directors' and officers' liability insurance,
and certain severance and other employee benefits, as described below.
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<PAGE> 29
SouthTrust has agreed in the Merger Agreement that it will indemnify,
defend and hold harmless the present and former directors, officers, employees
and agents of American or American's subsidiaries against all liabilities
arising out of actions or omissions occurring at or prior to the Effective Time
of the Merger (including the transactions contemplated by the Merger Agreement)
to the full extent permitted under Florida law and by American's Articles of
Incorporation and Bylaws as in effect on the date of the Merger Agreement,
including provisions relating to advances of expenses incurred in the defense of
any claim, suit, proceeding or investigation. SouthTrust has also agreed to use
its reasonable efforts to maintain in effect American's existing directors' and
officers' liability insurance policy for six years after the Effective Time of
the Merger, subject to certain limitations, including the right to substitute
policies and to limit the premium costs of such coverage.
Following the Effective Time of the Merger and subject to certain
conditions described below, SouthTrust has agreed that the officers and
employees of American 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 as 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 medical insurance
plan, SouthTrust will credit each such employee for eligible expenses incurred
by such employee and his or her dependents (if applicable) under American'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 waive all waiting periods under
said plans for pre-existing conditions or exclusions; and (ii) credit for each
such employee's past service with American 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; and (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).
The Merger Agreement further provides that the American Banks of
Florida, Inc. 401(k) Profit Sharing Plan (the "American Profit Sharing Plan")
will be terminated as of a date prior to the Effective Time of the Merger. From
and after 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 SouthTrust Corporation Employees' Profit Sharing Plan
(the "ST Profit Sharing Plan"), employment by American and American'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.
American has enacted a severance protection plan (the "Severance
Plan") for certain employees who are not otherwise covered by a collective
bargaining agreement or a severance agreement. The Severance Plan provides,
among other things, that if, within one year following a "Change-in-Control" (as
defined in the Severance Plan), the participant's employment is terminated by
the participant for "Good Reason" or by American other than for "Cause" (as such
terms are defined in the Severance Plan), such participant will be entitled to
receive as severance benefits the following: (i) all base salary,
reimbursements, vacation pay, and bonuses and incentive compensation earned as
of such participant's termination date; (ii) if a participant is an officer, an
amount in cash equal to two weeks base salary for each year of service with
American as of the date the participant is terminated, provided that such amount
is subject to a minimum of eight weeks of base salary and a maximum of 52 weeks
of base salary; and (iii) if a participant is not an officer, an amount in cash
equal to the sum of (x) one week of base salary for each week of service in
excess of two years with American as of the date the participant is terminated
and (y) four weeks base salary, provided that such sum is subject to a maximum
of 52 weeks of base salary.
In lieu of receiving severance benefits under the Severance Plan, the
following employees have entered into certain retention and severance agreements
(the "Severance Agreements") with American: Richard C. Martin, A. Curtis Cunkle,
Veria V. Cox, Stephen J. Veniard, Mike E. McCorvey, Louie C. Casey, Frederick E.
Bacon, and Scott C. Renwick. Generally, the Severance Agreements provide, among
other things that if, within two years after a "Change- in-Control" (as defined
in the Severance Agreements), the employee's employment is terminated by the
employee for "Good Reason" or by American other than for "Cause" (as such terms
are defined in the Severance Agreements), the employee will be entitled to
receive a one-time lump sum cash payment equal to the sum of the employee's
annual base salary and bonus. The Severance Agreements also provide that the
employee is entitled to receive a retention bonus (the "Retention Bonus") in the
amount of $100,000 ($500,000 in the case of Mr. Martin), provided that (i) the
employee is entitled to receive one-half of the Retention Bonus only if the
employee is still employed by American (or its successor) as of the Effective
Time of the Merger; and (ii) the employee is entitled to receive the remaining
one-half
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of the Retention Bonus only if (x) the employee is still employed by American
(or its successor) on the ninetieth (90th) day following the Effective Time of
the Merger or (y) the employee's employment with American (or its successor)
terminates prior to the ninetieth (90th) day following the Effective Time of the
Merger for any reason other than a termination initiated by the employee without
Good Reason.
Raymond K. Mason, Sr., Raymond K. Mason, Jr., and T. Keith Perry are
not entitled to severance and retention payments under either the Severance Plan
or under any Severance Agreements.
EFFECT OF THE MERGER ON AMERICAN STOCK
Pursuant to the Merger Agreement, American will be merged with and
into ST-Sub pursuant to the Florida Business Corporation Act and the Alabama
Business Corporation Act, and ST-Sub will be the Surviving Corporation. At the
Effective Time of the Merger, and subject to approval of the Merger Agreement by
the shareholders of American at the Special Meeting, the receipt of required
regulatory approvals, and satisfaction of other conditions, pursuant to the
Merger Agreement, SouthTrust is to issue a total of 3,930,282 shares of
SouthTrust Common Stock for all of the issued and outstanding American Stock. As
of the date of the Merger Agreement and assuming the conversion of all of the
American Preferred Stock into American Common Stock, a total of 1,214,644.056
shares of American Common Stock would be issued and outstanding, which total
includes the Bonus Shares over which the dispute more fully described above
exists. Unless the dispute regarding the Bonus Shares is resolved prior to the
Effective Time of the Merger in a manner consistent with Sections 7.10 and 7.11
of the Merger Agreement, immediately prior to the Effective Time of the Merger,
the Bonus Shares will be delivered to the Escrow Agent in accordance with
Section 7.11 of the Merger Agreement and will be held and disposed of in
accordance with Section 7.11 of the Merger Agreement and with the provisions of
the Escrow Agreement. If the dispute regarding the Bonus Shares is resolved
prior to the Effective Time of the Merger in accordance with Sections 7.10 and
7.11 of the Merger Agreement, the consideration which is or would have been
applicable to the Bonus Shares will be distributed in accordance with such
resolution; if such resolution is that all or some of the Bonus Shares will be
canceled and treated as not issued, then such consideration will be allocated,
on a pro rata basis, to increase the amount of SouthTrust Common Stock to be
received by the American shareholders.
Accordingly, subject to Sections 3.01, 7.10 and 7.11 of the Merger
Agreement, at the Effective Time of the Merger, each share (excluding (i) shares
held by any of American'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 American Common Stock, including the Bonus Shares, will
become and be converted into the right to receive 3.23574794 shares of
SouthTrust Common Stock and each share of American Preferred Stock issued and
outstanding (except for shares held by American's subsidiaries other than in a
fiduciary capacity or as a result of debts previously contracted) will become
and be converted into the right to receive the number of shares of SouthTrust
Common Stock equal to the product of 3.23574794 multiplied by the number of
shares of American Common Stock into which such share of American Preferred
Stock is convertible. Each share of American Preferred Stock is convertible into
one share of American Common Stock. The conversion premium which applies under
certain circumstances upon redemption or conversion of the American Preferred
Stock is not applicable in connection with the conversion contemplated by the
Merger Agreement.
The Exchange Ratio, including the number of shares of SouthTrust
Common Stock issuable in the Merger, gives effect to the SouthTrust Stock Split
and 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 a share of American Stock that
otherwise would have been entitled to receive a fractional share of SouthTrust
Common Stock will be entitled to receive a cash payment (without interest) 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 average of the last sales prices of SouthTrust Common Stock for the
five Nasdaq trading days immediately preceding the Effective Time of the Merger,
as reported in The Wall Street Journal.
Because, except as described above, the Exchange Ratio of shares of
SouthTrust Common Stock for American Stock is fixed, it will not compensate
American 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 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 American Stock would decrease
below the value prevailing at the time the shareholders of American consider and
act upon the proposal to approve and adopt the Merger Agreement.
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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 American Stock would increase. American'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.
EFFECT OF THE MERGER ON THE AMERICAN STOCK BONUS AGREEMENTS
A dispute exists between, on the one hand, Mr. Mason, Chairman
Emeritus and member of the Board of Directors of American, and, on the other
hand, the Bonus Shareholders, who are also members of the Board of Directors of
American. (Mr. Raymond K. Mason, Jr. is also Chairman, President and Chief
Executive Officer thereof, and Mr. Perry is also Executive Vice President,
Secretary and Treasurer thereof.) This dispute concerns the enforceability of
the Stock Bonus Agreements, dated May 26, 1995, between each of the Bonus
Shareholders and American, under which the Bonus Shareholders each were awarded
30,000 shares of American Common Stock, for an aggregate of 90,000 shares of
American Common Stock. Mr. Mason disputes whether the Stock Bonus Agreements
were duly authorized by the Board of Directors of American and whether American
met certain performance benchmarks set forth in the Stock Bonus Agreements
before the Bonus Shares were issued.
In connection with the Merger Agreement, American has agreed that,
immediately prior to the Effective Time of the Merger, and provided that the
issues related to the Bonus Shares have not been resolved earlier in a manner
that would not conflict with the Merger Agreement, including any action not
contemplated by the Merger Agreement that would prevent the Merger from being
accounted for as a pooling of interests, it will enter into the Escrow Agreement
with Mr. Mason, the Bonus Shareholders and the Escrow Agent. The Escrow
Agreement provides that resolution of the dispute between Mr. Mason and the
Bonus Shareholders will be determined by award of an arbitrator or a final,
non-appealable decision of a court of proper jurisdiction, as determined and
selected by the mutual agreement of Mr. Mason and the Bonus Shareholders. The
Escrow Agreement provides that the Bonus Shareholders must deliver to and
deposit with the Escrow Agent the certificate or certificates representing the
Bonus Shares. At the Effective Time of the Merger, the Escrow Agent will
exchange the certificates representing the Bonus Shares for shares of SouthTrust
Common Stock pursuant to the terms of the Merger Agreement. These shares of
SouthTrust Common Stock are referred to in the Escrow Agreement as the "Escrow
Fund."
In the event it is determined that the issuance of all the Bonus
Shares to the Bonus Shareholders was valid, the Escrow Agent will release the
Escrow Fund to the Bonus Shareholders in the proportion to which the Bonus
Shareholders are entitled to the Bonus Shares. In the event it is determined
that the Bonus Shareholders are entitled to some number of the Bonus Shares less
than 90,000, the Escrow Agent will release a portion of the Escrow Fund to the
Bonus Shareholders, and the remaining Escrow Fund will be released, on a pro
rata basis, to the shareholders of American at the Effective Time of the Merger.
In the event it is determined that the Bonus Shareholders are entitled to none
of the Bonus Shares, then the Escrow Agent will release all of the Escrow Fund,
on a pro rata basis, to the shareholders of American at the Effective Time of
the Merger.
EFFECTIVE TIME OF THE MERGER
The Merger will become effective on the date of filing of appropriate
Articles of Merger with the Department of State of the State of Florida and
Articles of Merger with the Secretary of State of the State of Alabama. The
Merger Agreement provides that, unless otherwise mutually agreed upon in
writing, the parties thereto will use their reasonable efforts to cause such
effective time to occur on the third business day following the last to occur of
(i) the effective date (including expiration of any applicable waiting period)
of the last required consent of any regulatory authority having authority over
and approving or exempting the Merger, (ii) the date on which the shareholders
of American approve the Merger Agreement, (iii) the last required consent or
approval of all persons other than regulatory authorities required for
consummation of the Merger, unless the failure to obtain any such consent or
approval is not reasonably likely to have, individually or in the aggregate, a
material adverse effect on SouthTrust or American, and (iv) the listing on
Nasdaq of the shares of SouthTrust Common Stock issuable under the Merger
Agreement. The Merger cannot become effective until American shareholders have
approved the Merger Agreement and all required regulatory approvals and actions
have been obtained and taken.
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. American and SouthTrust anticipate that all
conditions
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to consummation of the Merger will be satisfied so that the Merger can be
consummated on June ___, 1998. However, delays in the consummation of the Merger
could occur.
The Board of Directors of either American or SouthTrust generally may
terminate the Agreement if the Merger is not consummated by December 31, 1998,
unless the failure to consummate by that date is the result of a knowing action
or inaction of the party seeking termination. 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
American will cause the exchange agent selected by SouthTrust (the "Exchange
Agent") to mail to each former holder of record of shares of American Stock
appropriate transmittal materials for use in exchanging their certificates
formerly representing shares of American 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. AMERICAN 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 American 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 American 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 American 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
American 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
American Stock issued and outstanding at the Effective Time of the Merger until
the holder duly surrenders such certificate. Upon surrender of such American
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 American Stock on American's stock transfer books. If certificates
formerly representing shares of American 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 American who are
not deemed to be "affiliates" (as that term is defined in the rules under the
Securities Act) of American and who do not become affiliates of SouthTrust. The
shares of SouthTrust Common Stock to be issued to affiliates of American 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. Under the volume limitations of Rule 145, and
based upon the outstanding shares of SouthTrust Common Stock as of
_____________, 1998 (exclusive of shares of SouthTrust Common Stock to be issued
in the Merger), each affiliate of American will be free to resell, during any
given three-month period, up to approximately __________ shares of SouthTrust
Common Stock, provided that such affiliate otherwise complies with the
provisions of Rule 145.
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This Proxy Statement/Prospectus does not cover any resales of
SouthTrust Common Stock received by persons who may be deemed to be affiliates
of American or SouthTrust.
American has caused each person identified by American 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
American and SouthTrust have been published within the meaning of Section 201.01
of the Commission's Codification of Financial Reporting Policies, which is
expected to occur on _______________.
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 American and SouthTrust will be carried
forward at their previously recorded amounts. The Merger Agreement provides, as
a condition of both SouthTrust's and American's obligations to consummate the
Merger, that American will not have taken any actions not contemplated by the
terms of the Merger Agreement that would prevent the Merger from qualifying for
pooling-of-interests accounting treatment under Accounting Principles Board
Opinion No. 16 if closed and consummated in accordance with, and as contemplated
by, the terms of the Merger Agreement. For information concerning certain
restrictions to be imposed on the transferability of the shares of SouthTrust
Common Stock received by the affiliates of American 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 American 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 American 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 American
would so materially adversely impact the economic or business benefits of the
transactions contemplated by the Agreement that, had such condition or
requirement been known, such party would not, in its reasonable judgment, have
entered into the Merger Agreement.
American 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
controlling a bank (i.e., American) with a bank holding company (i.e., ST-Sub)
is part of a merger of the 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
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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 April 30, 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 April 10,
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 American 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 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 American, 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;
(ii) The representations and warranties of SouthTrust and
American, 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
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reasonably likely to have a Material Adverse Effect (as defined in
the Merger Agreement) on the party making the representations and
warranties;
(iii) SouthTrust and American, respectively, will have
performed, and complied with, in all material respects all of their
respective agreements and covenants pursuant to the Merger Agreement;
(iv) The receipt of the opinion of Bradley Arant Rose &
White LLP 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) American will not have taken any actions not
contemplated by the terms of the Merger Agreement that would prevent
the Merger from qualifying for pooling-of-interests accounting
treatment under Accounting Principles Board Opinion No. 16 if closed
and consummated in accordance with, and as contemplated by, the terms
of the Merger Agreement;
(viii) In the case of SouthTrust's obligations, immediately
prior to the Effective Time of the Merger, the Escrow Agreement will
have been executed among American, Mr. Mason, the Bonus Shareholders
and the Escrow Agent, and the shares of American Common Stock subject
to the Stock Bonus Agreements will have been transferred to the
Escrow Agent; and
(ix) In the case of SouthTrust's obligations, the holders
of not more than 5% of American Common Stock, assuming the conversion
of American Preferred Stock into American 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; provided, however,
that, after approval by the holders of American Stock, no amendment may be made
that reduces or modifies the consideration to be received by the holders of
American Stock.
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 mutual consent of SouthTrust and American, if the
Boards of Directors of each so determine by majority vote of the
entire membership of each such board; or
(ii) By either SouthTrust or American, in the event of an
inaccuracy of any representation or warranty of the other party
contained in the Merger Agreement which cannot be or is not cured
within 30 days after the giving of written notice to the breaching
party of such inaccuracy and which inaccuracy would have a Material
Adverse Effect (as defined in the Merger Agreement); or
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(iii) By either SouthTrust or American, in the event of a
material breach by the other party of any covenant or agreement
contained in the Merger Agreement which cannot be or is not cured
within 30 days after the giving of written notice to the breaching
party of such breach; or
(iv) By either SouthTrust or American, in the event the
approval of the Federal Reserve Board required for consummation of
the Merger and the other transactions contemplated thereby is denied
by final nonappealable action of such authority; or
(v) By either SouthTrust or American, in the event that
the approval of the Merger by American shareholders is not obtained;
or
(vi) By either SouthTrust or American, in the event that
the Merger is not consummated by December 31, 1998, if the failure to
consummate the transactions contemplated hereby on or before such
date is not caused by any breach of the Merger Agreement by the party
electing to terminate.
In the event of the termination and abandonment of the Merger
Agreement pursuant to the foregoing, no party to the Merger Agreement will have
any liability or further obligations to any other party under the Merger
Agreement, except with respect to certain circumstances involving an uncured
willful breach of a representation, warranty, covenant, or agreement giving rise
to such termination and with respect to the survival of confidentiality
obligations and provisions regarding construction of the Merger Agreement. The
Stock Option Agreement is governed by its own terms as to termination. See
"--Stock Option Agreement."
CERTAIN EXPENSES
The Merger Agreement provides that the parties thereto will bear
their own expenses incurred in connection with consummating the transactions
contemplated thereby except that SouthTrust will bear all the filing fees
payable in connection with the Registration Statement and the Proxy
Statement/Prospectus and printing costs incurred in connection with the printing
of the Registration Statement and the Proxy Statement/Prospectus.
RIGHTS OF DISSENT AND APPRAISAL
Holders of American Stock are entitled to dissenters' rights under
Sections 607.1301, 607.1302 and 607.1320 of the Florida Business Corporation
Act, which sections are reprinted in their entirety in Exhibit D to this Proxy
Statement/Prospectus. All references in Sections 607.1301, 607.1302 and 607.1320
and in this summary to a "shareholder" are to the record holders of American
Stock as to which dissenters' rights are asserted. A person having a beneficial
interest in shares of American 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.
Holders of American Stock who follow the procedure set forth in
Section 607.1320 of the Florida Business Corporation Act ("Section 607.1320")
will be entitled to receive payment of the "fair value" of such shares of
American Stock. The Florida Business Corporation Act defines "fair value" to be
the value of the shares of American Stock as of the close of business on the
date prior to the date of shareholder approval of the Merger, excluding any
appreciation or depreciation in anticipation of the Merger, unless exclusion
would be inequitable.
Under Section 607.1320, where a merger is to be submitted for
approval at a meeting of shareholders, the corporation, not less than ten nor
more than sixty days prior to the meeting, must notify each of its shareholders
of the proposed shareholders' meeting. The notice must also state that the
purpose, or one of the purposes, of the meeting is to consider the plan of
merger and contain or be accompanied by a copy or summary of the merger
agreement. Furthermore, the notice must contain a clear and concise statement
that if the plan of merger is effected, the shareholders dissenting therefrom
may be entitled, if they comply with the provisions of the Florida Business
Corporation Act regarding the rights of dissenting shareholders, to be paid the
fair value of their shares, and must be accompanied by a copy of Sections
607.1301, 607.1302 and 607.1320 of the Florida Business Corporation Act. This
Proxy Statement/Prospectus will constitute such notice to the shareholders of
American and the Merger Agreement and the applicable statutory provisions of the
Florida Business Corporation Act are attached to this Proxy Statement/Prospectus
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as Exhibit A and Exhibit D, respectively. The following discussion is not a
complete statement of the law pertaining to dissenters' rights under the Florida
Business Corporation Act and is qualified in its entirety by the full text of
Sections 607.1301, 607.1302 and 607.1320 of the Florida Business Corporation Act
attached to the Proxy Statement/Prospectus. Any shareholder who wishes to
exercise such dissenters' rights or who wishes to preserve his right to do so
should review the following discussion and Exhibit D carefully because failure
to timely and properly comply with the procedures specified will result in the
loss of dissenters' rights under the Florida Business Corporation Act.
Each shareholder who wishes to assert dissenters' rights must (i)
deliver to American, before the taking of the vote on the Merger, a written
notice of his intent to demand payment for his shares of American Stock if the
proposed Merger is effectuated, and (ii) not vote his shares in favor of the
proposed Merger. Because an executed proxy which does not contain voting
instructions will, unless revoked, be voted for adoption of the Merger
Agreement, a shareholder who votes by proxy and who wishes to exercise his
dissenters' rights must (i) vote against adoption of the Merger Agreement, or
(ii) abstain from voting on adoption of the Merger Agreement. A vote against
adoption of the Merger Agreement, in person or by proxy, will not in and of
itself constitute a written notice of intent to demand payment for shares of
American Stock satisfying the requirements of Section 607.1320.
Only a holder of record of shares of American Stock is entitled to
assert dissenters' rights for the shares registered in that holder's name. A
notice of intent to demand payment for shares must be exercised by or on behalf
of the holder of record, fully and correctly, as his name appears on his stock
certificates. If the shares are owned of record in a fiduciary capacity, such as
by a trustee, guardian or custodian, execution of the notice should be made in
that capacity, and if the shares are owned of record by more than one person, as
in a joint tenancy or tenancy in common, the notice should be executed by or on
behalf of all joint owners. An authorized agent, including one or two or more
joint owners, may execute a notice on behalf of a holder of record; however, the
agent must identify the record owner or owners and expressly disclose the fact
that, in executing the notice, the agent is acting as agent for such owner or
owners. A record holder, such as a broker, who holds shares as nominee for
several beneficial owners may exercise dissenters' rights with respect to the
shares held for one or more beneficial owners while not exercising such rights
with respect to the shares held for other beneficial owners. In such case, the
notice should set forth the number of shares as to which dissenters' rights are
sought. Where no number of shares is expressly mentioned, the demand will be
presumed to cover all shares held in the name of the record owner. Shareholders
who hold their shares in brokerage accounts or other nominee forms and who wish
to exercise dissenters' rights are urged to consult with their brokers to
determine the appropriate procedures for doing so. Beneficial owners of ESOP
Shares who wish to exercise their dissenters' rights must send a notice of
intent to demand payment for shares to the Trustee of the American ESOP and must
either (i) return a proxy showing a vote against adoption of the Merger or (ii)
abstain from voting on the Merger.
Within ten days after the date of shareholder approval of the Merger,
American must give written notice of adoption of the Merger Agreement to each
shareholder who filed a notice of intent to demand payment for his shares of
American Stock. Within twenty days after the giving of such notice to him by
American any shareholder who elects to dissent must file with American a notice
of such election, stating his name and address, the number of shares as to which
he dissents, and a demand for payment of the fair value of his shares. Any
shareholder filing an election to dissent must deposit his stock certificates
with American simultaneously with the filing of the election to dissent.
Beneficial owners of ESOP Shares must forward such notice of election to the
Trustee of the American ESOP.
Within ten days after the expiration of the period in which
shareholders may file their notices of election to dissent, or within ten days
after the Merger is effected, whichever is later (but in no case later than
ninety days from the date of shareholder approval of the Merger Agreement),
American will make a written offer to each dissenting shareholder who has made a
demand as provided in Section 607.1320 to pay an amount American estimates to be
the fair value for such shares of American Stock. Such notice and offer will be
accompanied by (i) a balance sheet of American as of the latest available date,
and (ii) a profit and loss statement of American for the 12-month period ended
on the date of such balance sheet.
Any shareholder who has duly filed a notice of election to dissent in
compliance with Section 607.1320 will thereafter be entitled only to payment of
the fair value of his shares of American Stock and will not be entitled to vote
or to exercise any other rights of a shareholder. A notice of election may be
withdrawn in writing by the shareholder at any time before an offer is made by
American to pay for his shares. After such offer, no such notice of election may
be withdrawn unless American consents thereto.
If within thirty days after the making of such offer by American, any
shareholder accepts the same, payment for his shares of American Stock will be
made within ninety days after the making of such offer or the consummation
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of the Merger, whichever is later. Upon payment of the agreed value, the
dissenting shareholder will cease to have any interest in such shares.
If American fails to make an offer for the fair value of the shares
of American Stock within the period specified above, or if it makes the offer
and any dissenting shareholder or shareholders fail to accept the same within
the period of thirty days thereafter, then American, within thirty days after
receipt of written demand from any dissenting shareholder given within sixty
days after the date on which the Merger was effected, must, or at its election
at any time within such period of sixty days may, file an action in any court of
competent jurisdiction in Duval County, Florida requesting that the fair value
of such shares be determined. The court will also determine whether each
dissenting shareholder, as to whom American requests the court to make such
determination, is entitled to receive payment for his shares. If American fails
to institute such a proceeding, any dissenting shareholder may do so in the name
of American. All dissenting shareholders (whether or not residents of the State
of Florida), other than shareholders who have agreed with American as to the
value of their shares, will be made parties to the proceeding. American must pay
to each dissenting shareholder the amount found to be due him within ten days
after final determination of the proceedings. Upon payment of the judgment, the
dissenting shareholders will cease to have any interest in such shares.
Shareholders considering seeking dissenters' rights should be aware
that the fair value of their shares as determined under Section 607.1320 could
be more than, the same as, or less than the consideration they would receive
pursuant to the Merger Agreement if they did not seek to demand payment of their
shares. Any judicial determination of the "fair value" of the shares can be
based on numerous considerations, including, but not limited to, the market
value of the shares prior to the Merger and the net asset value and earnings
value of American. The costs and expenses of any judicial proceeding will be
determined by the court and will be assessed against American, but all or any
part of such costs and expenses may be apportioned and assessed as the court
deems equitable against any or all of the dissenting shareholders who are
parties to the proceeding, to whom American has made an offer to pay for the
shares, if the court finds that the action of such shareholders in failing to
accept such offer was arbitrary, vexatious, or not in good faith.
If any shareholder who demands payment for his shares of American
Stock under Section 607.1320 fails to perfect, or effectively withdraws, or
loses, his right to dissent, the shares of such holder will be converted into
the right to receive the consideration in accordance with the Merger Agreement.
Failure to follow the steps required by Section 607.1320 for
perfecting dissenters' rights may result in the loss of such rights, in which
event a shareholder will be entitled to receive the consideration provided for
in the Merger Agreement.
CONDUCT OF BUSINESS BY AMERICAN PENDING THE MERGER
The Merger Agreement provides that, until the Effective Time of the
Merger, and except with the prior approval of SouthTrust, American will and will
cause its subsidiaries to operate its business only in the usual, regular and
ordinary course, preserve intact its business organization and assets and
maintain its rights and franchises, and American will take no action which would
adversely affect its ability to obtain required regulatory approvals or to
perform any of its material obligations under the Merger Agreement. The Merger
Agreement further provides that, until the Effective Time of the Merger,
American 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, which consent will not be unreasonably withheld:
(i) amend its Articles of Incorporation or Bylaws; or
(ii) make, declare, pay or set aside for payment any
dividend (other than (A) monthly cash dividends on American Common
Stock in an amount not to exceed the greater of (i) $0.17 per share
and (ii) the product of the Exchange Ratio multiplied by SouthTrust's
then-effective quarterly dividend multiplied by one third, (B)
dividends payable on American Preferred Stock at a rate not exceeding
the rate provided for in the terms thereof, and (C) dividends from
the Bank (provided such dividends in amount or frequency are not in
contravention of any applicable Comptroller or other regulations) to
American on or in respect of, or declare or make any distribution on
any shares of its capital stock, or directly or indirectly adjust,
split, combine, redeem, reclassify, purchase or otherwise acquire,
any shares of its capital stock, other than (1) as previously
disclosed in the disclosure schedule to the Merger Agreement, (2)
pursuant
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to the terms of the American Preferred Stock, or (3) in the ordinary
course pursuant to employee benefit plans; or
(iii) (other than by way of foreclosures or acquisitions of
control in a bona fide fiduciary capacity or in satisfaction of debts
previously contracted in good faith, in each case in the ordinary and
usual course of business consistent with past practice) dispose of or
discontinue any portion of its assets, business or properties, which
is material to it and its subsidiaries taken as a whole, or acquire
all or any portion of, the business or property of any other entity,
or sell, transfer or otherwise dispose of the 150,000 shares of
International Speedway Corp. Class B Stock which it owns; or
(iv) enter into or amend any written employment, severance
or similar agreements or arrangements with any of its directors,
officers or employees, or grant any salary or wage increase or
increase any employee benefit (including incentive or bonus
payments), except for (i) normal individual increases in compensation
to employees in the ordinary course of business consistent with past
practice, (ii) extensions of employee bonus incentive programs or
special incentive programs as set forth in the disclosure schedule to
the Merger Agreement or (iii) other changes as are provided for in
the Merger Agreement or as may be required by law or to satisfy
existing contractual obligations or additional grants of awards to
newly hired employees consistent with past practice or such changes
that, either individually or in the aggregate, would not reasonably
be expected to result in a material liability to American or its
subsidiaries; or
(v) with certain exceptions, adopt any new employee
benefit plan of American or its subsidiaries or make any material
change in or to any existing employee benefit plans of American or
its subsidiaries other than any such change that is required by law
to satisfy contractual obligations of American; or
(vi) implement or adopt any change in its accounting
principles, practices or methods, other than as may be required by
generally accepted accounting principles; or
(vii) take any action that would, or is reasonably likely
to, prevent or impede the Merger from qualifying as a reorganization
within the meaning of Section 368(a) of the Code or knowingly take
any action that is intended or is reasonably likely to result in (x)
any of its representations and warranties set forth in the Merger
Agreement being or becoming untrue in any material respect at any
time prior to the Effective Time of the Merger, (y) any of the
conditions to the Merger set forth in the Merger Agreement not being
satisfied or (z) a material violation of any provision of the Merger
Agreement except, in each case, as may be required by applicable law.
American and SouthTrust have further agreed in the Merger Agreement
that they will consult with respect to (i) their loan, accrual, reserve,
litigation and real estate evaluation policies and practices (including loan
classifications and levels of reserves) and (ii) the character, amount and
timing of any restructuring charges to be taken by each of SouthTrust and
American (and their respective subsidiaries) in connection with such matters or
otherwise in connection with the transactions contemplated by the Merger
Agreement, including (a) any charge in respect to the write off or write down of
any asset, (b) any reserve or other charge relating to the fees and expenses of
advisors and other third parties in connection with the transactions
contemplated by the Merger Agreement, (c) any reserve or other charge relating
to severance, termination, and retirement payments in connection with the
transactions contemplated by the Merger Agreement, (d) any reserve or other
charge relating to taxes, or any contractual or other liability of American and
its subsidiaries, including any liability incurred by American and its
subsidiaries in a fiduciary capacity, and any other appropriate accounting
adjustment. In accordance with the foregoing, during early 1998, management
reassessed the loss exposure of certain non-performing and potential problem
loans which existed at year-end 1997 and increased the balance of the allowance
for loan losses by $.90 million through a fourth quarter 1997 charge to
earnings. This reassessment and resulting provision for loan losses was reviewed
and concurred with by SouthTrust.
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CONDUCT OF BUSINESS BY SOUTHTRUST PENDING THE MERGER
The Merger Agreement provides that, until the Effective Time of the
Merger, and except with the prior approval of American, SouthTrust will take no
action which would adversely affect its ability to obtain required regulatory
approvals or to perform any of its material obligations under the Merger
Agreement. The Merger Agreement further provides that, until the Effective Time
of the Merger, SouthTrust 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 American, which consent will not be unreasonably
withheld:
(i) make, declare, pay or set aside for payment any
dividend, other than regular cash dividends on SouthTrust Common
Stock in accordance with its usual custom and practice, and cash
dividends on any other outstanding issues of preferred stock in
accordance with the terms thereof and dividends from subsidiaries to
SouthTrust; or
(ii) make any acquisition or take any other action which
would materially adversely affect its ability to consummate the
transactions contemplated by the Merger Agreement; or
(iii) take any action that would, or is reasonably likely
to, prevent or impede the Merger from qualifying as a reorganization
within the meaning of Section 368(a) of the Code or knowingly take
any action that is intended or is reasonably likely to result in (x)
any of its representations and warranties set forth in the Merger
Agreement being or becoming untrue in any material respect at any
time prior to the Effective Time of the Merger, (y) any of the
conditions to the Merger set forth in the Merger Agreement not being
satisfied or (z) a material violation of any provision of the Merger
Agreement except, in each case, as may be required by applicable law.
BUSINESS AND MANAGEMENT OF AMERICAN FOLLOWING THE MERGER; PLANS FOR BUSINESS
OF AMERICAN
Upon consummation of the Merger, American will be merged 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, 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 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, SouthTrust has agreed to
cover the officers and employees of American or the Bank who are employed by
ST-Sub or ST-Bank under the employee benefit plans of SouthTrust other than the
ST Retirement Plan and the ST Profit Sharing Plan; to grant such employees
coverage and benefits under such employee benefit plans comparable to those
granted SouthTrust employees of comparable position and seniority; and, subject
to the provisions discussed in the following paragraph, to credit service with
American or the Bank prior to the
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Effective Time of the Merger for purposes of determining eligibility of such
employees to participate in such employee benefit plans.
The Merger Agreement further provides that the American Profit
Sharing Plan will be terminated as of a date prior to the Effective Time of the
Merger. From and after 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 ST Retirement Plan and the ST Profit Sharing Plan,
employment by American 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 American entered into the Stock Option
Agreement, whereby American granted SouthTrust the Stock Option entitling
SouthTrust to purchase up to 236,853 shares (which will in no event exceed 19.9%
of the issued and outstanding shares of American Common Stock) of American
Common Stock, at a purchase price of $131.99 per share, under 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 either a Preliminary Purchase
Event (as hereinafter defined) or 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:
(i) 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 American
Common Stock such that, upon consummation of such offer, such person
would own or control 20% or more of the then-outstanding shares of
American Common Stock (such an offer being referred to herein as a
"Tender Offer" or an "Exchange Offer," respectively); or
(ii) the holders of American 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 American's Board of Directors
shall have withdrawn or modified in a manner adverse to SouthTrust
the recommendation of American'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 Florida 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, American
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 American or any of its subsidiaries (other than
transactions solely between American's
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subsidiaries), (B) the disposition, by sale, lease, exchange, or
otherwise, of assets of American or any of its subsidiaries
representing in either case 15% or more of the consolidated assets of
American 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 American 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 American or its
subsidiaries.
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 prior
to the occurrence of a Purchase Event or a Preliminary Purchase Event; (iii) 12
months after a Default Termination; and (iv) 12 months 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 American 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 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 Holder (as
defined in the Stock Option Agreement), delivered prior to an Exercise
Termination Event, American will, subject to regulatory restrictions, be
obligated to repurchase the Stock Option and any shares of American 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 in Rule 13d-5 promulgated 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 American
Common Stock, or (ii) any of the following transactions are consummated: (x)
American 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) American permits any person,
other than SouthTrust or a SouthTrust subsidiary, to merge into American and
American shall be the continuing or surviving corporation, but, in connection
with such merger, the then outstanding shares of American Common Stock shall be
changed into or exchanged for stock or other securities of American or any other
person or cash or any other property or the outstanding shares of American
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) American 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, American 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 an amount of consideration in the form and equal to the per
share amount of consideration that would be received by the holder of one share
of American Common Stock less the purchase price of the Stock Option (and, in
the event of an election or similar arrangement with respect to the type of
consideration to be received by holders of American Common Stock, proper
provision shall be made so that SouthTrust would have the same election or
similar rights as would the holder of the number of shares of American Common
Stock for which the Stock Option is then exercisable).
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 American. The ability of SouthTrust to exercise the
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Stock Option and to cause up to an additional 236,853 shares of American Common
Stock to be issued may be considered a deterrent to other potential acquisitions
of control of American, as it is likely to increase the cost of an acquisition
of all the shares of American Stock which would then be outstanding and would
prevent any successful bidder from accounting for the acquisition of American as
a pooling of interests.
NO SOLICITATION
American has agreed that neither American 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 American's Board of
Directors, as advised by counsel, neither American nor its subsidiaries may
furnish any non-public information to, or have discussions with, any person,
other than SouthTrust, relating to any acquisition proposal. American must
promptly notify SouthTrust in the event that it receives any inquiry or proposal
relating to any such transaction.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
GENERAL
The following discussion is a summary of the material federal income
tax consequences of the Merger to holders of American Stock. The discussion is
included for general information purposes only, applies only to a holder of
American Stock who holds such stock as a capital asset, and may not apply to
special situations, such as holders of American Stock, if any, who received
their American 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 AMERICAN 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 American 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 American Stock or of
any of the federal income tax consequences of the Merger to SouthTrust, ST-Sub
or American. The consummation of the Merger is conditioned upon the receipt by
American and SouthTrust 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
American 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. No opinion of Bradley Arant Rose & White LLP
is being expressed on any federal income tax consequences to any party of the
transfer by the Bonus Shareholders of the Bonus Shares into the Escrow Fund or
the release of shares of SouthTrust Common Stock (or cash in lieu of fractional
shares) from the Escrow Fund.
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 American Stock will result
from the Merger:
(i) The Merger will qualify as a reorganization within the
meaning of Section 368(a) of the Code.
(ii) No gain or loss will be recognized by the shareholders
of American upon the receipt of SouthTrust Common Stock (including
the Rights associated therewith) solely in exchange for their shares
of American Stock. In addition,
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no gain or loss will be recognized by American stockholders upon the
receipt of the Rights attached to the SouthTrust Common Stock.
(iii) The basis of the SouthTrust Common Stock to be
received by the American shareholders will be the same as the basis
of American Stock surrendered in exchange therefor, except for
the basis allocated to any fractional shares and shares treated as
interest.
(iv) The holding period of the shares of SouthTrust Common
Stock to be received by the shareholders of American will include the
period during which American Stock surrendered in exchange therefor
was held.
(v) The payment of cash to an American shareholder in
lieu of issuing a fractional share interest in SouthTrust Common
Stock will be treated as if the fractional share actually was issued
as part of the Merger and then was redeemed by SouthTrust. This cash
payment will be treated as having been received as a distribution in
full payment in exchange for the stock redeemed. Generally, any gain
or loss recognized upon such exchange will be a capital gain or loss.
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.
Specifically, no opinion is expressed with respect to the federal income tax
consequences of the Escrow Agreement, other than that the consummation of the
transactions contemplated by the Escrow Agreement will not cause the Merger to
fail to qualify as a reorganization pursuant to Section 368(a) of the Code.
FEDERAL INCOME TAX CONSEQUENCES OF THE ESCROW AGREEMENT
Cash in lieu of fractional shares, if any, received by shareholders
of American from the Escrow Fund will be treated, for federal income tax
purposes, in substantially the same way as cash in lieu of fractional shares
received in the Merger described above. For federal income tax purposes, it is
unclear whether shares of SouthTrust Common Stock, if any, received by
shareholders of American from the Escrow Fund should be treated entirely as
additional consideration in a reorganization or recharacterized, in part, as
interest. If the latter treatment were to apply, an amount equal to the excess
of (i) the value of such shares on the date received over (ii) the same amount
discounted back to the Effective Time of the Merger, using a discount rate equal
to the Applicable Federal Rate for short-term debt instruments in effect for the
month which includes the Effective Time of the Merger, would be treated as
interest income. In addition, the tax basis of the SouthTrust Common Stock
released from the Escrow Fund would be increased by the amount, if any, treated
as interest income and a corresponding portion of such shares would have a
holding period that begins with the date after the date the shares are released
from the Escrow Fund. Each holder of American Stock should consult his or her
own tax advisor as to the tax consequences of the receipt of shares of
SouthTrust Common Stock from the Escrow Fund.
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 ______________, there were __________ 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 _________________,
there were ________ 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
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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,
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 AMERICAN 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 of
Incorporation 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.
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 of Incorporation 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
The General Corporation Law of the State of Delaware and the Restated
Certificate of Incorporation and Bylaws of SouthTrust provide that a director,
or SouthTrust's entire Board of Directors, may be removed by the
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<PAGE> 46
stockholders only for cause. The Restated Certificate of Incorporation and
Bylaws of SouthTrust also 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 the entire
Board of Directors from office. Certain portions of the Restated Certificate of
Incorporation 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 of
Incorporation and 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 the Rights Agreement referred to below, 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 American Stock.
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 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, 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.
In the event that (i) SouthTrust's Board of Directors determines that
a person is an Adverse Person; (ii) 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; (iii) an Acquiring Person receives a financial benefit
or advantage, through certain self-dealing transactions involving SouthTrust,
greater than that received by other stockholders of SouthTrust or that which
would have resulted from arms-length negotiations; (iv) a person becomes the
beneficial owner of 30% or more of the outstanding SouthTrust Common Stock
(except pursuant to a "Fair Offer" as determined by the Disinterested
Directors); or (v) 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%, 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. Rights are
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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, as defined in the Rights Agreement), 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 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 for the 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 of Incorporation,
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
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<PAGE> 48
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.
MARKET PRICE AND DIVIDEND INFORMATION RESPECTING THE
SOUTHTRUST COMMON STOCK AND THE AMERICAN STOCK
The SouthTrust Common Stock is quoted on Nasdaq under the symbol
SOTR. As of _______, 1998, SouthTrust had approximately _____ holders of record
of the SouthTrust Common Stock. 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 and the per share dividends declared by SouthTrust
for the quarters indicated. On ______, 1998, the last reported sale price of the
SouthTrust Common Stock as reported by Nasdaq was ______.
<TABLE>
<CAPTION>
Price* Per Share
------------------------------------ Dividends
High Low Declared
---- --- ---------
<S> <C> <C> <C>
1996:
First Quarter..................................... $ 19.1667 $ 16.8333 $ 0.1467
Second Quarter.................................... 19.0000 17.7500 0.1467
Third Quarter..................................... 21.2500 17.6667 0.1467
Fourth Quarter.................................... 24.0833 20.3333 0.1467
1997:
First Quarter..................................... 28.5000 22.7500 0.1667
Second Quarter.................................... 28.2500 23.5833 0.1667
Third Quarter..................................... 34.4583 25.7500 0.1667
Fourth Quarter.................................... 42.8333 30.6667 0.1667
1998:
First Quarter..................................... 45.1250 35.7500 0.1900
Second 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.
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 to an evaluation of its earnings and financial condition and
other factors, including the legal restrictions
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<PAGE> 49
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 December 31, 1997, approximately _____ million was available for
payment of dividends to SouthTrust by its bank subsidiary.
On February 18, 1998 and February 20, 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 $41.359
and $42.422, respectively; and on _________, 1998, the last sale price of
SouthTrust Common Stock as obtained from Nasdaq was $____.
American Stock is not traded on any exchange, and there is no
established public trading market for such stock. There are no bid or asked
prices available for American Stock. Management of American is aware of certain
transactions in American Common Stock that occurred in 1997 and 1996. Although
the prices of all transactions are not known, for purposes of the American ESOP,
the appraisal value of one share of American Common Stock as of December 31,
1996 and 1997 was $35.4781 and $67.1044, respectively, it being understood that
the appraisal value as of December 31, 1997 was determined taking into account
the potential sale of American. No assurance can be given that these trades were
effected on an arm's-length basis. Transactions in American Common Stock are
infrequent and are negotiated privately between persons involved in those
transactions. The American Preferred Stock, upon distribution by the American
ESOP to a terminating participant, is converted into American Common Stock.
The following table sets forth, for the periods indicated, the
dividends declared by American per share of American Common Stock and per share
of American Preferred 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
American Common Stock) after the Merger. American's ability to declare and pay
dividends after February 18, 1998 is subject to the Merger Agreement. See "THE
MERGER - Conduct of Business by American Pending the Merger."
<TABLE>
<CAPTION>
American Series Pro-Forma
--------------- ---------
American B and Series D American Series Dividend Per
-------- -------------- --------------- ------------
Common Stock Preferred Stock C Preferred Share of
------------ --------------- ----------- --------
Dividend Per Dividend Per Stock Dividend American
------------ ------------ -------------- --------
Share Share Per Share Stock(1)
----- ----- --------- --------
<S> <C> <C> <C> <C>
1996:
First Quarter $ 0.375 $ 0.675 $ 0.750 $ 0.475
Second Quarter 0.405 0.675 0.750 0.475
Third Quarter 0.445 0.675 0.750 0.475
Fourth Quarter 0.495 0.675 0.750 0.475
1997:
First Quarter 0.510 0.675 0.750 0.539
Second Quarter 0.340 0.675 0.750 0.539
Third Quarter 0.680 0.675 0.750 0.539
Fourth Quarter 0.510 0.675 0.750 0.539
1998:
First Quarter 0.510 0.675 0.750 0.615
Second Quarter
(through May , 1998) 0.170 [0.675] [0.750] [0.615]
----
</TABLE>
- ---------------
(1) The pro-forma dividend per share of American Stock is equal to the
SouthTrust Common Stock dividend per share multiplied by the Exchange
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 American Common Stock. See "COMPARISON OF THE
SOUTHTRUST COMMON STOCK AND THE AMERICAN STOCK."
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<PAGE> 50
Dividends paid by American on the American Common Stock are at the
discretion of American's Board of Directors and are affected by certain legal
restrictions on the payment of dividends as described below, American's earnings
and financial condition and other relevant factors. The current policy of
American is to pay dividends on a monthly basis. Dividends on the American
Preferred Stock are paid on a quarterly basis, in cash at the annual rate of
$2.70, $3.00 and $2.70 per share of American Series B Preferred Stock, American
Series C Preferred Stock and American Series D Preferred Stock, respectively,
and pursuant to the terms of the certificate of designation, preferences, rights
and limitations of each series of American Preferred Stock.
There are certain limitations on the payment of dividends to American
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 December 31, 1997, approximately $1.411 million was
available for payment of dividends to American by the Bank.
COMPARISON OF THE
SOUTHTRUST COMMON STOCK
AND THE AMERICAN STOCK
The rights of American shareholders are governed by the Articles of
Incorporation of American, the Bylaws of American and the laws of the State of
Florida. The rights of SouthTrust stockholders are governed by the Restated
Certificate of Incorporation of SouthTrust, the Bylaws of SouthTrust and the
laws of the State of Delaware. After the Merger becomes effective, the rights of
American shareholders who become SouthTrust stockholders will be governed by the
laws of the State of Delaware and by SouthTrust's Restated Certificate of
Incorporation and Bylaws. The following summary of the rights of the holders of
SouthTrust Common Stock and the holders of American Common Stock is qualified in
its entirety by reference to the Restated Certificate of Incorporation and
Bylaws of SouthTrust, the Articles of Incorporation and Bylaws of American, the
General Corporation Law of the State of Delaware, and the Florida Business
Corporation Act.
DIVIDENDS
The sources of funds for payments of dividends by SouthTrust and
American are their subsidiaries. Because the primary subsidiaries of SouthTrust
and American are financial institutions, payments made by such subsidiaries of
SouthTrust and American 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 AMERICAN STOCK" for
information concerning the effect of such limitations on SouthTrust's and
American'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 Florida Business Corporation Act 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 (unless the
articles of incorporation permit otherwise) 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.
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<PAGE> 51
VOTING RIGHTS AND OTHER MATTERS
Subject to the rights, if any, of any series of their respective
classes of preferred stock, all voting rights of SouthTrust and American are
vested in the holders of shares of SouthTrust Common Stock and American Common
Stock, respectively, with the holder of each of such share being entitled to one
vote. The holders of SouthTrust Common Stock and American 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 Incorporation 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 American do not contain any
prohibitions of or limitations on transactions between American 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.
American is subject to Section 607.0901 of the Florida Business
Corporation Act. That section generally provides that a business combination
with any person deemed to be an "interested shareholder" must be approved by the
affirmative vote of the holders of two-thirds of the voting shares other than
the shares beneficially owned by the interested shareholder unless any of the
following conditions apply to the transaction: (i) the transaction has been
approved by a majority of the disinterested directors; (ii) the corporation has
not had more than 300 shareholders of record at any time during the three years
proceeding the announcement of such transaction; (iii) the interested
shareholder has been a beneficial owner of at least 80% of the corporation's
outstanding voting shares for at least five years proceeding the announcement of
such transaction; (iv) the interested shareholder is the beneficial owner of at
least 90% of the outstanding voting shares of the corporation, exclusive of
shares acquired directly from the corporation in a transaction not approved by a
majority of disinterested directors; (v) the corporation is an investment
company registered under the Investment Company Act of 1940; or (vi)
consideration will be paid to holders of each class or series of voting shares
of the corporation and certain conditions concerning the consideration received
are met. An "interested shareholder" is defined as any person who directly or
indirectly owns more than 10% of the outstanding voting shares of a corporation.
American is also subject to Section 607.0902 of the Florida Business Corporation
Act. That section generally provides that, in the event a person acquires shares
in a corporation giving that person certain levels of voting control of the
corporation, such person's shares will have the same voting rights as other
shareholders' shares only to the extent granted by resolution approved by the
shareholders of the corporation.
The effect of the business combination and affiliated transactions
provisions, respectively, is to make more difficult the acquisition of a
majority control of a corporation or the use of its assets to finance such
acquisition.
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
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<PAGE> 52
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 amendments thereto which was authorized by
a resolution adopted by the affirmative vote of the holders of a majority of
shares of such class.
The Florida Business Corporation Act enumerates several situations
in which class voting is required with respect to amendments of a corporation's
articles of incorporation, whether or not the holders of such shares are
entitled to vote thereon by the provisions of the articles of incorporation, if
such amendments: (i) increase or decrease the aggregate number of authorized
shares of the class; (ii) effect an exchange reclassification of all or part of
the shares of the class into shares of another class; (iii) effect an exchange
reclassification, or create a right of exchange, of all or part of the shares of
another class into the 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 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 existing preemptive rights on
all or part of the shares of the class; or (ix) cancel or otherwise affect
rights to distributions or dividends that have accumulated but not yet been
declared on all or part of the shares of the class. Additionally, if a proposed
amendment to a corporation's articles of incorporation entitling two or more
series of shares to vote as separate classes would effect those two or more
series in the same or substantially similar way, shares of all the series so
effected must vote together as a single class on the proposed amendment. Voting
by class or series as a separate voting group is required on a plan of merger if
the plan contains a provision which, if contained in a proposed amendment to the
articles of incorporation, would entitle the class or series to vote as a
separate voting group on the proposed amendment. Pursuant to the certificates of
designation, preferences, rights and limitations of the American Series B
Preferred Stock, American Series C Preferred Stock and American Series D
Preferred Stock, American cannot effect a merger which would affect adversely
the preferences, special rights or powers of the holders of shares of American
Preferred Stock without the affirmative vote by class, given in person or by
proxy, by the holders of at least 66 2/3% of the shares of each series of
American Preferred Stock then outstanding.
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 Bylaws of SouthTrust, all directors would
stand for election at each annual meeting. The Bylaws of American provide that
the entire Board of Directors of American is to be elected by majority vote of
the shares entitled to vote at an annual meeting of shareholders at which such
election is to occur. 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 Florida Business
Corporation Act 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 of Incorporation and 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
American provide that directors may be removed with or without cause by a
majority vote of the votes entitled to be cast in the election of directors.
The 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
American provide that vacancies on American's Board of Directors
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may be filled until the next annual meeting of the shareholders by a vote of not
less than 50% of the directors remaining in office.
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 Incorporation of SouthTrust, action by written consent of the
stockholders is prohibited. Further, under the Restated Certificate of
Incorporation and 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 Florida Business Corporation Act, 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 all of the holders of the outstanding capital stock of the
corporation. Under the Bylaws of American, any action required to be taken by
American's Board of Directors or a committee of the Board 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 committee members and filed with the
minutes of the proceedings of the Board or committee. 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 Incorporation 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. American's Articles of Incorporation
generally may be amended as prescribed by law. The Bylaws of American may be
amended by the affirmative vote of a majority of all the directors then holding
office at any meeting of American's Board of Directors if notice of the proposed
amendment is contained in the notice of the meeting. However, the shareholders
of American may prescribe that any bylaw adopted by them shall not be altered,
amended or repealed by American's Board of Directors.
The provisions contained in the Restated Certificate of
Incorporation 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 shareholder 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 American has dissent and appraisal rights pursuant
to Section 607.1301 et seq. of the Florida Business Corporation Act (the
"Florida 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; (ii) consummation of a plan of share
exchange to which the corporation is a party if shareholder approval is
required; (iii) consummation of a sale or exchange of all or substantially all
of the property of the corporation if shareholder vote is required; (iv) any
amendment of the articles of incorporation if the shareholder is entitled to
vote on the amendment and if such amendment would adversely affect such
shareholder by: (1) altering or abolishing any preemptive rights attached to any
of his shares; (2) altering or abolishing the voting rights pertaining to any of
his shares, except as such rights may be affected by the voting rights of new
shares then being authorized of any existing or new class or series of shares;
(3) effecting an exchange, cancellation, or reclassification of any of his
shares, when such exchange, cancellation, or reclassification would alter or
abolish his voting rights or alter his percentage of equity in the corporation,
or effecting a reduction or cancellation of accrued dividends or other
arrearages in respect to such shares; (4) reducing the stated redemption price
of any of his redeemable shares, altering or abolishing any provision relating
to any sinking fund for the redemption or purchase of any of his shares, or
making any of his shares subject to redemption when they are not otherwise
redeemable; (5) making noncumulative, in whole or in part, dividends of any of
his preferred shares which had theretofore been cumulative; (6) reducing the
stated dividend preference of any of his preferred shares; or (7) reducing any
stated preferential amount payable on any of his preferred shares upon voluntary
or involuntary liquidation; 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 and (vi) approval of a control-share acquisition as provided in
Section 607.0902 of the Florida Business Corporation Act. 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
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event of a merger or consolidation. Both the Florida 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 American are not listed on a national securities exchange or on
Nasdaq, the shareholders of American would no longer have the right to dissent
pursuant to the Florida Dissent Provisions.
RIGHTS ON LIQUIDATION
In the event of liquidation, the holders of SouthTrust Common Stock
and the holders of American 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 either corporation.
PREEMPTIVE RIGHTS
The holders of SouthTrust Common Stock and American Stock do not
have any preemptive rights to purchase additional shares of any class of
securities, including common stock, of SouthTrust or American, 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 American is not registered under the Exchange Act, the
Florida Business Corporation Act requires that American provide the shareholders
of American annual financial statements that include a balance sheet as of the
end of the fiscal year, an income statement for that year, and a statement of
cash flows 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 annual
financial statements are reported upon by a public accountant, the report of
such public accountant must accompany the financial statements. In addition to
requiring financial statements, the Florida Business Corporation Act requires
that, if a corporation indemnifies or advances expenses to a director, officer,
employee, or agent, otherwise than by court order or action by the shareholders
or by an insurance carrier pursuant to insurance maintained by 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, and,
if a corporation issues or authorizes the issuance of shares for promises to
render services in the future, the corporation must report in writing to the
shareholders the number of shares authorized or issued, and the consideration
received by the corporation, with or before the notice of the next shareholders'
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 such 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. American has not
adopted any similar plan.
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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 December 31, 1997, approximately $472.5 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.
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 7.72%, a total
risk-based capital ratio of 12.07% and a leverage ratio of 6.61%.
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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.
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.
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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.
AMERICAN
Because American 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, American's sole banking subsidiary, is a national banking
association, American and 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 10.92%, a total risk-based capital ratio of
12.16% and a leverage ratio of 7.45%.
CERTAIN INFORMATION CONCERNING THE BUSINESS OF AMERICAN AND THE BANK
DESCRIPTION OF BUSINESS
American is a bank holding company, organized in 1973, with
headquarters in Jacksonville, Florida. The Bank is the sole banking subsidiary
of American and was chartered in 1941. Since its inception, American has grown
from one nationally-chartered and three state-chartered banks into a
multi-branch financial institution serving the most rapidly developing areas of
metropolitan Jacksonville. The Bank has grown from $133 million in assets in
1978 to $541 million in assets at December 31, 1997. At December 31, 1997,
American had assets of $543 million, deposits of $450 million and stockholders'
equity of $41 million.
STRATEGY
The Bank has positioned itself as the largest local community bank
among larger, primarily out-of-state, competitors, in order to provide superior
quality service and attention to customer needs. To support this business
strategy, during 1995, American underwent an extensive technology assessment and
re-engineering effort resulting in the replacement of the functional department
organization by business processes. In an effort to foster quality service,
recent technological improvements were carried out, including the creation of a
bank-wide network, automated platform delivery, teller support and loan
documentation and support systems that enhance sales and customer service while
improving the speed and accuracy of customer transactions.
MARKETS AND CUSTOMERS
American serves the metropolitan Jacksonville, Florida market. The
standard metropolitan statistical area is comprised of four contiguous counties
- - Duval, Nassau, Clay and St. John's - which contain a population in excess of
one million people. American has focused its marketing efforts on the Duval
County market area. Currently, the Bank operates twelve full-service branch
offices, eleven of which are located in Duval County, and one in Clay County as
well as a limited service facility in a local retirement community. ATM service
is available at each office and at a remote drive-up facility and two stand
alone walk-up ATM facilities. During late April 1998, the Bank established an
ATM on the premises of a large employer in downtown Jacksonville.
American strives to differentiate itself from other area banks by
serving the interests of small to medium sized businesses with revenues ranging
from less than $3 million to $20 million. American also serves high net worth
individuals through its trust and professional lending departments. Virtually
all of American's lending occurs within the Jacksonville market.
COMPETITION
The Bank experiences competition in attracting deposits and lending
funds. Primary competitors of the Bank are other commercial banks and credit
unions located in the Bank's market area. To a lesser extent, finance companies,
insurance companies, savings and loan associations, credit card organizations
and other financial institutions which make loans to customers and obtain
deposits of customers also compete with American. The Jacksonville banking
market is currently concentrated, and is dominated by several super-regional
banks as well as several strong credit
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unions. The competition is generally based on the level of interest rates
charged on loans or paid on deposits. In recent years important federal and
state legislation has increased the competitive environment in which financial
institutions must conduct their business, and the potential for competition
among financial institutions of all types has increased significantly. As a
result, the Bank faces increasing competition from larger financial
institutions, many of which have recently entered the competitive markets of the
Bank as a result of increased legal flexibility with respect to interstate
banking acquisitions.
LEGAL MATTERS
American's federal income tax returns for the years ended December
31, 1992 through 1995 are currently being examined by the IRS. No adjustments
have been proposed at this time; however, the IRS has provided American with
certain "Explanations of Items," which represent the IRS's preliminary position
and which may ultimately represent proposed adjustments to be included in the
Revenue Agent's Report. These items, if asserted in their entirety, include
amounts which could increase American's taxable income during the tax years
under audit by approximately $7.7 million, which would result in a deficiency
(including penalties and after-tax interest) of $4.1 million. Management of
American disagrees with the informal position taken by the IRS and intends to
vigorously defend against it.
On May 14, 1997, the Bank entered into an agreement with a
third-party vendor to provide data processing services. On July 1, 1997, the
Bank advised the vendor of the potential sale of American and instructed it to
suspend data processing conversion activities immediately. The vendor claims
that payments aggregating approximately $1.7 million are due pursuant to the
agreement. Management of American disputes this claim and the parties have
commenced a dispute resolution process as outlined in the agreement.
Although the ultimate outcome of these matters is unknown at the
present time, management of American believes that American's exposure will not
result in a significant adverse impact on the consolidated financial position,
liquidity, or results of operations of American.
RISK OF REMAINING INDEPENDENT AS OPPOSED TO MERGING WITH SOUTHTRUST
American'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 American, as an independent
enterprise, will have in producing sufficient earnings to result in a value to
American 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 the year 2000 issues, human
resources, new product development and marketing, and (iii) the recent focus of
American's competitors on American's niche of existing customers, particularly
small businesses.
AMERICAN MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
This discussion contains certain forward-looking statements within
the meaning of Section 27A of the Securities Act with respect to the financial
condition, results of operations, plans, objectives, future performance and
business of American and the Bank, including, without limitation, (i) statements
regarding trends in the banking industry, (ii) statements regarding the risks of
remaining independent as opposed to merging with SouthTrust and (iii) statements
preceded by, followed by or that include the words "believes," "expects,"
"anticipates" or similar expressions. Some risk factors could cause actual
results and developments to be materially different from those expressed in or
implied by such statements.
OVERVIEW
The business of commercial banking is affected by many factors,
virtually all of which are beyond the ability of American's management to
influence. Some of the more significant factors are the competitive environment,
economic influences and applicable political and legislative agendas.
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American holds a unique position within the Jacksonville
marketplace; the Bank is Jacksonville's largest community bank. The majority of
the banks within American's market are geographic operations of larger regional
competitors. Moreover, the majority of American's former community bank peers
have already been acquired, and the next largest community bank has less than
one-half American's assets. As a result, American's size and relative market
share, on the one hand, make it an attractive acquisition target, and, on the
other hand, as an independent company, offer it opportunities to capture market
share from less nimble and focused competitors.
American's business is greatly influenced by the rapidly changing
competitive landscape, and certain trends within the banking industry that
impact American's current and prospective customers pose particular challenges
to and opportunities for its management. American's traditional market niche has
been lending to small businesses with revenues between three and twenty million
dollars. This market represents a significant source of incremental loans and
lower cost deposits. Recently, however, larger regional banks with operations in
Jacksonville, nationally recognized out-of-state banking competitors, and
others, have all identified this market segment and aggressively targeted this
customer base. As a result, loan-pricing margins have declined and costs of
deposits have increased. American's management anticipates that this trend will
continue.
A related trend is the rise of niche-oriented competitors. These
entities have been created, or their focus altered, to compete in specific
segments of the market which were formerly the domain of commercial banks. A
good example is the Money Store, which is a dominant competitor in home equity
lending in the Jacksonville area.
Economic trends also significantly influence the commercial banking
industry. The favorable economic climate which has seen the equity markets rise
to unprecedented levels has led customers to compare the returns from equity
investments to the returns from traditional bank deposits and, in many cases,
conclude that the incremental risks involved with equities are acceptable.
American's management believes that the growth of traditional bank deposits, or
the lack thereof, will be greatly influenced by these economic factors into the
foreseeable future.
The role of politics also influences the landscape of commercial
banking. Legislative consideration of the merits of the Glass-Steagall Act and
the recent legal battles with credit unions are two good examples. Repeal of
Glass-Steagall restrictions may have little impact on community banks; however,
credit unions have become fierce competitors of the banking industry and the
Jacksonville marketplace contains several large credit unions. The fact that
these entities pay no federal income tax gives them the ability to offer rates
on loans and deposits with which commercial banks, including American, find it
difficult to compete.
On a final note, one of the greatest challenges confronting the
industry is the role of technology. Recent advances in the computer industry,
such as the speed of micro-processors and the pervasive influence of the
Internet, are causing management teams throughout the industry to review the
role of technology in the industry generally and in their banks in particular.
These difficult technology assessments are further complicated by the Year 2000
issue that confronts not just commercial banks, but their customers and
counterparties as well. More specifically, the question is how, or whether, the
programming of computer-based systems and activities will continue to function
after December 31, 1999. American's management had begun to address this issue
through an outsourcing arrangement. However, in light of the sale announcement,
management has deferred dealing definitively with this issue, anticipating that
it will be dealt with as part of American's sale, which it believes will be
concluded prior to the time that critical actions addressing this issue would
have to be taken by American if it were to remain independent. However, no
assurances can be given that, in the event the sale of American is not concluded
on a timely basis, it will be able to successfully meet this technological
challenge.
FINANCIAL OVERVIEW
For the year ended December 31, 1997, American reported net income
of $.90 million and basic earnings per share of $.75 compared to net income of
$2.57 million and basic earnings per share of $2.30 in 1996 (see Note 14.
Earnings Per Share). For 1995, net income was $2.56 million and basic earnings
per share were $2.31. Table 1, Selected Financial Data, contains summarized
financial information for the most recent five-year period.
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TABLE 1: SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
(Dollars in thousands except for per share data) 1997 1996 1995 1994 1993
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
FOR THE YEAR
Net interest income $ 23,051 $ 21,439 $ 21,371 $ 24,725 $ 23,062
Provision (credit) for loan losses 1,625 1,750 (275) 790 1,136
Other income 5,615 6,533 6,347 13,359 8,131
Other expenses 24,901 22,352 24,346 27,274 27,159
Net income 902 2,574 2,563 6,957 3,012
- ------------------------------------------------------------------------------------------------------------------------------
PER COMMON SHARE
Net income:
Basic $ 0.75 $ 2.30 $ 2.31 $ 5.76 $ 2.33(1)
Diluted 0.74 2.27 2.25 5.44 2.23(1)
Dividends declared 2.04 1.72 1.05 2.05 1.10
- ------------------------------------------------------------------------------------------------------------------------------
RATIO ANALYSIS
Return on assets 0.16% 0.46% 0.46% 1.18% 0.54%
Return on equity 2.24 6.45 6.78 19.21 8.36
Average equity to assets 7.25 7.13 6.73 6.15 6.42
Dividend payout ratio 272.00 74.78 45.45 35.59 47.21(1)
- ------------------------------------------------------------------------------------------------------------------------------
AVERAGE BALANCES
Loans, net of unearned income $339,675 $304,207 $301,150 $307,587 $257,241
Earning assets 508,288 511,958 512,448 536,949 509,475
Assets 554,105 559,927 561,761 588,693 561,162
Deposits 451,932 459,827 456,828 503,101 474,583
Notes payable 5,105 5,384 16,335 15,166 21,550
Stockholders' equity 40,200 39,925 37,818 36,221 36,034
- ------------------------------------------------------------------------------------------------------------------------------
YEAR-END BALANCES
Loans, net of unearned income $342,634 $328,171 $293,104 $314,620 $281,455
Assets 543,289 565,868 552,478 575,139 580,549
Deposits 450,374 466,911 460,803 449,252 497,520
Notes payable 5,067 5,228 5,783 29,092 17,685
Stockholders' equity 40,754 41,179 40,307 34,010 36,725
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) After cumulative effect of FAS 109, basic and diluted earnings per share
before cumulative effect was $1.66 and $1.59, respectively and dividend
payout ratio before cumulative effect of FAS 109 was 66.27%.
All three years in the comparative analysis period reported earnings
which included material, non-recurring amounts. Prior to the 1996 annual meeting
of American in April 1997, various disagreements had arisen among the members of
the Board of Directors of American over the Board's strategy and future plans
for American. Such disagreements continued after the annual meeting until the
Board of Directors unanimously determined that it was in the best interests of
all American shareholders to explore a sale or merger of American. In connection
with the foregoing, approximately $.96 million of expenses comprised primarily
of legal and professional fees were incurred (including $.68 million which were
attributable to sale/merger expenses and thus not deductible for federal income
tax purposes). Also as a result of the sale, American rescinded its decision
made during 1996 to outsource its data processing functions and reversed $.36
million of an accrual established that year related to severance obligations and
technology write-offs. In addition, American established a reserve in the amount
of $2.25 million related to the potential liability associated with the possible
adverse outcomes of both a current Internal Revenue Service examination and a
contractual dispute with a third party vendor of data processing services (see
Note 17. Commitments and Contingencies). For 1995, reported earnings included
$.74 million of non-recurring expenses related to severance payments from staff
reductions.
Although the amount of reported earnings declined significantly
during 1997, the adjusted earnings performance of American reflected
improvement. American defines adjusted earnings as net income adjusted for the
after-tax effect (at a 35.27% rate) of securities transactions and material,
non-recurring amounts. Management believes this earnings measurement more
accurately reflects trends in the fundamental earnings generation ability of
American than does the traditional reported earnings measure since it excludes
items that are subject to volatility, such as gains and losses from securities
transactions, and adjusts for non-recurring amounts of income and expense. On
this measurement basis, adjusted earnings, as defined, for 1997 were $3.34
million or $.84 million and 34% greater than the $2.50 million for 1996 and 9%
higher than the $3.07 million for 1995.
57
<PAGE> 61
Net interest income increased $1.61 million or 8% to $23.1 million
during 1997. For both 1996 and 1995, net interest income was $21.4 million. The
improved net interest income level during 1997 resulted from increased interest
income and lower interest expense. During 1997, interest income increased $.87
million or 2% to $41.4 million compared with interest income of $40.5 million
and $40.4 million during 1996 and 1995, respectively. The higher level of
interest income for 1997 was largely volume-driven as the average balance of
loans increased $35.5 million or 12% during 1997. The result of this loan growth
was a more favorable mix of earning assets and a 23 basis point improvement in
the earning asset yield. During 1997, total interest expense declined $.74
million to $18.35 million. For 1996, total interest expense was $19.09 million
which was stable relative to 1995. Approximately 69% of the reduced funding
costs for 1997 were the result of favorable rate variances as the average rate
on interest-bearing liabilities declined 10 basis points between 1997 and 1996.
During 1997, this rate variance primarily reflected the maturity of two-year
Flex certificates of deposit and the effect of a reduction in the rate on NOW
accounts. See Balance Sheet Review - Deposits for a general discussion of the
Flex certificate of deposit product. The balance of the decreased interest
expense was the result of a nominal volume decline in average interest-bearing
liabilities.
For 1997, total other income, net of securities transactions, of
$5.65 million decreased $.39 million or 6% from its 1996 level of $6.04 million.
For 1995, total other income, net of securities transactions, was $6.38 million.
The decreased level of non-interest income in 1997 reflected a continuing trend
of reduced service charges on deposits, which declined 6% or $.28 million to
$4.05 million during 1997. Service charges on deposits were $4.32 million and
$4.63 million, respectively, during 1996 and 1995. The diminished levels of
service charges over the three-year comparative period primarily reflect volume
declines in the number of accounts and transactions subject to service charges.
The volume declines are the result of a modification of customer behavior and
the intense level of competition both within and outside the banking industry.
For 1997, trust fees remained stable at $.58 million compared to $.57 million
reported in 1996 and $.60 million for 1995. Other operating income of $1.02
million reflected a 10% decline from the $ 1.14 million reported in 1996, while
for 1995 other operating income was $1.15 million.
Total 1997 non-interest expenses, net of non-recurring amounts, were
stable at $22.05 million in comparison with the $21.97 million in 1996 (as
adjusted), and were $1.55 million or approximately 7% lower than 1995
non-interest expenses (as adjusted) of $23.60 million. Management continues to
be pleased with the progress made in reducing American's overhead to a level
that is more consistent with industry benchmarks. For 1997, the salaries, wages
and related expenses amount of $11.42 million represented a 7% decline from the
$12.28 million reported during 1996 and was $2.71 million or 19% less than 1995
salaries, wages and related expenses of $14.13 million. During 1997, employee
benefits expense declined 22% from $3.64 million to $2.85 million primarily
reflecting a lower level of management incentive compensation expense and the
reversal of accrued severance and termination benefits recorded in 1996 (see
Income Statement Review - Non-Interest Expense). For the same period, other
personnel expenses were stable at $.26 million.
INCOME STATEMENT REVIEW
Net Interest Income
Net interest income is American's largest source of earnings and
represents the difference between interest and fees on earning assets and
interest expense on interest-bearing liabilities. For purposes of the following
discussion, management has elected not to restate interest income or net
interest income to its fully taxable equivalent basis due to the insignificant
level of earning assets which generate tax-free sources of interest income.
Table 2, Rate/Volume Analysis, details the change in net interest income by
caption, which resulted from volume and rate differences occurring in 1997 and
1996.
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<PAGE> 62
TABLE 2: RATE/VOLUME ANALYSIS (1)
<TABLE>
<CAPTION>
1997 CHANGE FROM 1996 1996 CHANGE FROM 1995
---------------------------------- ---------------------------------
DUE TO AVERAGE DUE TO AVERAGE
-------------------- --------------------
(Dollars in thousands) VOLUME RATE TOTAL VOLUME RATE TOTAL
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Earning Assets:
Loans, net of unearned income $ 3,206 $(408) $ 2,798 $ 281 $(419) $ (138)
Investment securities and securities
available for sale (2,170) 488 (1,682) 25 514 539
Interest-bearing deposits in other banks (4) (1) (5) (6) 1 (5)
Federal funds sold (250) 12 (238) (223) (64) (287)
- ----------------------------------------------------------------------------------------------------------------------------
Total interest income 782 91 873 77 32 109
- ----------------------------------------------------------------------------------------------------------------------------
Interest-Bearing Liabilities:
NOW accounts (11) (213) (224) 17 (65) (48)
Savings accounts (41) -- (41) (54) 1 (53)
Money market deposit accounts (82) 41 (41) (184) (49) (233)
Time deposits of $100,000 and over 319 (95) 224 (153) 83 (70)
Other time deposits (494) (278) (772) 1,024 419 1,443
Securities sold under agreements to
repurchase, federal funds purchased
and other short-term borrowings 111 11 122 221 (243) (22)
Notes payable (29) 22 (7) (1,024) 48 (976)
- ----------------------------------------------------------------------------------------------------------------------------
Total interest expense (227) (512) (739) (153) 194 41
- ----------------------------------------------------------------------------------------------------------------------------
Change in net interest income $ 1,009 $ 603 $ 1,612 $ 230 $(162) $ 68
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) This table shows the change in net interest income for comparative periods
based on either changes in average volume or changes in average rates for
earning assets and interest bearing liabilities. Changes which are not
solely due to volume changes or solely due to rate changes have been
attributed to rate changes.
For 1997, the higher adjusted earnings level of American in
comparison with 1996 resulted primarily from higher net interest income, which
increased $1.61 million or 8% to $23.1 million. For 1995, net interest income
was $21.4 million. The improved net interest income was attributable both to an
increased level of interest income and to reduced interest expenses. During
1997, interest rates exhibited nominal volatility at the short end of the yield
curve (maturities of two years or less) with a single Fed tightening of .25% in
the target federal funds rate during March. The majority of American's earning
assets and interest-bearing liabilities are priced, repriced or administered
consistent with the levels of certain short-term interest rates such as the
federal funds rate, the prime rate or various CMT indices. For 1997, the
majority of the change in American's net interest income and net interest margin
was explained by volume variances in the average balances outstanding.
Exceptions to this statement are the result of the contractual repricing of
existing assets and liabilities to current market rates.
During the current year, interest income increased by $.87 million
or 2% to $41.4 million compared with interest income of $40.5 million and $40.4
million during 1996 and 1995, respectively. The increased level of interest
income for 1997 included a $2.80 million increase in interest and fees on loans
as the average balance of loans increased $35.5 million or 12% continuing an
upward trend that began in the fourth quarter of 1996. Thus, the significant
interest income growth resulted from a more favorable mix of earning assets
since the loan growth was primarily funded from maturities, sales and repayments
of securities available for sale. As a result, the yield on earning assets
improved to 8.15% from 7.92% in 1996. During 1995, the earning asset yield was
7.89%.
A substantial portion of the new loans originated and funded during
late 1996 and continuing through 1997 resulted from a long-standing relationship
with an originator of lease financing for primarily investment grade companies
which was rekindled during 1996 (see Balance Sheet Review - Loans for a more
detailed discussion of this relationship). These borrowers exhibit very high
credit quality characteristics, and, as a result, these loans are priced
consistent with the market yield on the public debt of the obligor or a
comparably rated company. This factor, among others, influenced the weighted
average yield on loans which declined from 9.18% in 1995 to 8.92% during 1997.
At December 31, 1997, the Bank had credit outstanding to a diverse group of
these borrowers in the amount of $35.50 million with a weighted average yield of
approximately 7.13%. These relationships represent a conscious effort by
American to diversify credit risk at the Bank level.
The higher level of interest and fees on loans reported during 1997
was partially offset by a $1.68 million decline in interest on investment
securities and securities available for sale. This decline was primarily
volume-related
59
<PAGE> 63
and resulted from the substitution of higher yielding loans for lower yielding
securities. For 1997, the average balance of investment securities and
securities available for sale declined $34.28 million and the yield on
securities increased from 6.33% in 1996 to 6.64% in 1997. For 1995, the yield on
securities was 6.07%. Interest on federal funds sold also declined during 1997
as management adopted a more aggressive strategy of investing available funds to
take advantage of the term structure of interest rates. During 1997, the average
balance of federal funds sold declined $4.78 million or 41% to $7.01 million. As
a result, interest on federal funds sold declined to $.38 million from $.62
million in 1996 and the yield on federal funds sold rose from 5.23% in 1996 to
5.40% for 1997. During 1995, the average balance of federal funds sold was
$15.64 million with interest earnings of $.90 million and a yield of 5.78%.
During 1997, total interest expense decreased $.74 million to $18.35
million compared to $19.09 million in 1996. For 1995, total interest expense was
$19.05. Approximately $.51 million of the current year decline was the result of
favorable rate variances as the average rate on interest-bearing liabilities
declined from 4.59% to 4.49%. These rate variances were the result of the
maturity of two-year Flex certificates of deposit and the reduction of the
administered rate on NOW accounts. The remainder of the decreased interest
expense was caused by volume declines in average interest-bearing liabilities,
which decreased from $416 million in 1996 to $409 million in 1997. During 1995
average interest-bearing liabilities were $416 million and the average rate paid
was 4.58%.
Interest expense on administered rate deposit accounts (defined as
NOW, savings and money market deposit accounts) reflected a decline of $.31
million to $2.62 million during 1997. Unfavorable volume variances occurred
during 1997 as the average balances of these captions declined $5.89 million or
4% while the weighted average rate fell to 2.00% from 2.13% in 1996. The only
significant rate variance occurred on NOW accounts whose weighted average rate
declined from 1.83% in 1996 to 1.38% during 1997 reflecting management's
decision to reduce the rate paid on these accounts to a level more consistent
with prevailing short-term interest rates. During 1995, the administered rate
account average balances were $145.88 million with a weighted average rate of
2.23%.
During 1997, interest expense on time deposits of $100,000 and over
increased $.22 million or 10% as the average balance of this caption increased
$5.47 million or 14% from $38.15 million in 1996 to $43.62 million for 1997. The
average rate paid on time deposits of $100,000 and over declined to 5.61% in
1997 from 5.83% in 1996. For 1995, the average rate paid on time deposits of
$100,000 and over was 5.61%, interest expense was $2.29 million and the average
balance was $40.88 million. For 1997, a significant rate variance occurred in
the other time deposits caption and was the result of the maturity of
approximately $50 million of two-year Flex certificates of deposit. See Balance
Sheet Review - Deposits for a general discussion of the Flex certificate of
deposit product and the balance impact of these Flex certificate maturities.
These certificates carried a weighted average rate of approximately 6.80% and
approximately $35 million of these certificates were retained through conversion
to a new certificate of deposit product bearing an average cost of 5.61%. As a
result, interest expense for this caption fell from $10.90 million in 1996 to
$10.13 million in 1997, and the average rate declined from 5.87% to 5.71% for
the same period. The average rates paid on securities sold under agreements to
repurchase, federal funds purchased and other short-term borrowings were 5.03%,
5.01% and 5.50%, during 1997, 1996 and 1995, respectively. The rates on these
sources of funds closely track short-term interest rates over time.
For 1997, the net interest margin of 4.54% reflected dramatic
improvement from its level of 4.19% in 1996. For 1995, the net interest margin
was 4.17%. During 1997, the earning asset yield improved 23 basis points while
the cost of funds declined 10 basis points. The largest contributors to the
improved margin were the growth in the loan portfolio and the maturity and
conversion of the two-year Flex certificates to a lower-yielding new certificate
of deposit product. The loan portfolio growth is reflected in the steady
improvement in the earning asset yield as higher yielding loans replaced lower
yielding securities. Over the comparative three-year period, the earning asset
yield has improved to 8.15% in 1997 compared to 7.89% in 1995. At the same time,
the cost of funds on average interest-bearing liabilities has declined to 4.49%
in 1997 from 4.58% for 1995 reflecting volume and rate variances in the other
time deposits caption as the two-year Flex certificates matured and converted to
a lower-yielding certificate product.
Provision for Loan Losses
American recorded a provision for loan losses of $1.63 million
during 1997 compared to $1.75 million in 1996 and a credit of $.28 million for
1995 (see Table 3, Allowance for Loan Losses Activity and Allocation Analysis,
for an analysis of activity in the allowance for loan losses). American'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. The Bank's Risk Management Committee meets quarterly and,
among other agenda items, determines the provision for loan losses to be
recorded for
60
<PAGE> 64
the subsequent quarter. For the prior two years, American's provision for loan
losses exceeded the net charge-offs recognized. During 1997, American's key
credit quality measures reflected continued improvement and all critical
measures of asset quality are slightly worse than management standards. See
Asset Quality - Allowance for Loan Losses for a more detailed discussion of the
various factors considered in assessing American's asset quality.
TABLE 3: ALLOWANCE FOR LOAN LOSSES ACTIVITY AND ALLOCATION ANALYSIS
<TABLE>
<CAPTION>
(Dollars in thousands) 1997 1996 1995 1994 1993
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Beginning allowance for loan losses $3,453 $3,134 $3,303 $3,663 $4,081
- ---------------------------------------------------------------------------------------------------------------------
Charge-offs:
Commercial and industrial 536 1,533 28 183 914
Commercial mortgage 7 -- 93 506 55
Residential mortgage -- -- 20 93 23
Real estate construction and
land development 2 -- 40 379 32
Consumer installment 213 342 358 280 817
- ---------------------------------------------------------------------------------------------------------------------
Total charge-offs 758 1,875 539 1,441 1,841
- ---------------------------------------------------------------------------------------------------------------------
Recoveries:
Commercial and industrial 87 113 174 42 52
Commercial mortgage 46 1 2 -- 10
Residential mortgage 4 3 73 2 3
Real estate construction and
land development 3 166 217 -- 101
Consumer installment 130 161 179 247 121
- ---------------------------------------------------------------------------------------------------------------------
Total recoveries 270 444 645 291 287
- ---------------------------------------------------------------------------------------------------------------------
Net charge-offs (recoveries) 488 1,431 (106) 1,150 1,554
- ---------------------------------------------------------------------------------------------------------------------
Provision (credit) for loan losses 1,625 1,750 (275) 790 1,136
- ---------------------------------------------------------------------------------------------------------------------
Ending allowance for loan losses $4,590 $3,453 $3,134 $3,303 $3,663
- ---------------------------------------------------------------------------------------------------------------------
Ratio of net charge-offs to average
loans outstanding, net unearned
income 0.14% 0.47% (0.04)% 0.37% 0.60%
- ---------------------------------------------------------------------------------------------------------------------
Allocation of allowance for loan losses by category:
Commercial and industrial $ 795 $ 578 $ 786 $1,023 $1,274
Commercial mortgage 1,587 929 702 998 918
Residential mortgage 323 156 166 158 215
Real estate construction and
land development 430 201 275 290 246
Consumer installment 206 72 70 149 203
Unallocated 1,249 1,517 1,135 685 807
- ---------------------------------------------------------------------------------------------------------------------
$4,590 $3,453 $3,134 $3,303 $3,663
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
Non-Interest Income
For 1997, total other income of $5.65 million, net of securities
transactions, decreased $.39 million or 6% from the $6.04 million reported in
1996. For 1995, total other income, net of securities transactions, was $6.38
million. The majority of the decline occurred in the service charges on deposits
caption which fell $.28 million or 6% to $4.05 million during 1997. For 1996 and
1995, the service charges on deposits caption was $4.32 million and $4.63
million, respectively. Management believes that the ability to achieve
continuously higher levels of service charges from traditional bank services and
products has been eroded by a permanent alteration of consumer behavior patterns
in recent years. This altered behavior has been reinforced by the high profile
attention of the media and Congress toward bank service charges, particularly
deposit-based fees.
Competition in the Jacksonville market dictates the nature and frequency
of service charge and fee changes. The declines in service charges experienced
by American have been largely volume related as customers close or consolidate
smaller balance accounts where the incidence of service charges and fees is
greater. Consumers are also incurring fewer fees for such items as the
processing of checks drawn against insufficient funds. For the three-year
comparative period, service charges assessed on customers writing checks against
insufficient funds fell from $2.03 million in 1995 to $1.50 million in 1997. The
decline in this caption was mitigated by the passage of legislation which
allowed banks and other owners of automated teller machines to assess a
surcharge to foreign (non-bank) customers withdrawing funds from an ATM. For
1997 and 1996, these service charges totaled $.21 million and $.04 million,
respectively. Customers are also conscious of their alternatives to traditional
banking services and products and are sensitive to fees imposed in relation to
value received. The rapid growth in recent years of credit unions, which have
historically not relied on service
61
<PAGE> 65
charges and fees as a major source of revenue, has only exacerbated customer
perceptions of bank service charge structures. Fee income opportunities continue
to pose a significant strategic challenge to American and to the banking
industry generally.
In 1997, trust fees remained stable at $.58 million reflecting a nominal
increase over the $.57 million reported in 1996. For 1995, trust fees were $.60
million. For the comparative three year period, trust fees have remained a
stable source of non-interest income as trust fees as a percentage of total
other income (adjusted for securities transactions) were 10%, 9% and 9% for
1997, 1996 and 1995, respectively. At year-end 1997, trust assets totaled
$101.13 million. The Trust Committee regularly assesses the market and
determines the need to revise fees related to the Bank's various trust
activities.
For 1997, other operating income of $1.02 million reflected a $.12 million
or 10% decline from the $1.14 million amount reported in 1996. For 1995, other
operating income was $1.15 million. This caption represents a relatively stable
source of revenue for American. The major components of this caption are data
processing income, other fee income and other income (primarily gains on sales
of assets). For 1997, data processing income declined $.07 million or 41% to
$.10 million reflecting the loss of two customers due to American's decision to
outsource its data processing capabilities. Other fee income, which includes
amounts associated with safe deposit box rentals, miscellaneous fee income and
rental income, remained stable at $.91 million compared to $.93 million in 1996.
Finally, the other income caption reflected gains on the disposition of assets
(primarily sales of other real estate) of $.01 million for 1997 and $.04 million
in 1996.
Non-Interest Expense
Non-interest expenses were impacted by numerous non-recurring amounts for
the three years under review (see Financial Overview for a discussion of
non-recurring items). For 1997, non-interest expenses, net of non-recurring
amounts, were stable at $22.05 million compared to $21.97 million in 1996.
Compared to 1995 non-interest expenses (as adjusted) of $23.60 million, the 1997
level of expenses was $1.55 million or approximately 7% lower. Since the
re-engineering effort undertaken in 1995, management has maintained a close
watch over American's discretionary spending and its staffing levels. A primary
management goal during this time period has been the continued reduction of
American's overhead to a level at least consistent with its peer group.
For 1997, the salaries, wages and related expenses caption was $11.42
million representing a $.86 million or 7% decline from the $12.28 million amount
reported in 1996. For 1995, salaries, wages and related expenses were $14.13
million. The significant categories of this caption include salaries (including
the effect of capitalized salaries pursuant to SFAS 91), employee benefits and
other personnel expense. During 1997, salaries expense decreased from $8.38
million to $8.30 million or $.08 million and 1% reflecting management's
attention to American's staffing levels and nominal salary increases reflecting
the lower level of inflation in the economy. For the same period, employee
benefits expense declined $.79 million or 22% from $3.64 million to $2.85
million. This decrease was the result of a reduced level of management incentive
compensation which declined approximately $.36 million and the reversal of $.24
million of an accrual established during 1996 to fund severance and termination
benefits associated with American's decision to outsource its data processing
activities. The other personnel expenses caption remained stable at $.26 million
during 1997.
Total occupancy and equipment expenses were $3.99 million in 1997 compared
to $3.81 million in 1996 reflecting a $.18 million or 5% increase. For 1995,
occupancy and equipment expenses were $3.68 million. This caption is comprised
of building and occupancy expense, equipment expense and computer service and
maintenance expense. In 1997, building and occupancy expense of $2.05 million
was flat compared to the 1996 expense level of $2.03 million. Also, equipment
expenses were stable at $1.14 million for 1997. However, this caption includes
the depreciation associated with the replacement during 1997 of the Bank's
automated teller machines, which have been accounted for as capitalized lease
obligations. Depreciation expense on furniture, fixtures and equipment increased
$.11 million or 15% as a result of this equipment replacement decision. This
incremental depreciation expense has been partially offset by a reduction in the
repairs and maintenance expense associated with the replaced ATM's. Computer
service and maintenance expense rose $.15 million or 23% during 1997.
For 1997, other operating expenses were $9.49 million or $3.22 million and
51% greater than the $6.27 million reported during 1996. As previously noted in
the Financial Overview section, certain material, non-recurring expenses were
incurred in 1997. Net of these non-recurring amounts, other operating expenses
in 1997 would have been $6.41 million representing a $.26 million or 4% increase
from 1996. Total other operating expenses were $6.54 million during
62
<PAGE> 66
1995. The major components of this caption include: legal and professional fees;
advertising, entertainment and donations; telephone, postage and supplies; and
other expenses. Net of non-recurring amounts, legal and professional fees
increased $.12 million or 6% during 1997. For 1997, the advertising,
entertainment and donations caption declined 21% from $.49 million to $.39
million. The primary factor in this decline was management's business decision
to reverse a previously accrued, multi-year charitable pledge in the amount of
$.08 million. The telephone, postage and supplies caption decreased from $1.20
million to $1.17 million, a decline of $.04 million or 3% in 1997. Finally, for
1997, total other expenses increased from $2.50 million to $4.81 million
reflecting management's decision to establish an accrual in the amount of $2.25
million for certain contingent liability exposures (see Financial Overview for a
discussion of this accrual). No other account in the total other expenses
caption reflects a material change from its 1996 level.
Income Taxes
Income tax expense was $1.24 million for 1997 compared to $1.30 million in
1996 and $1.08 million for 1995 (see Note 10. Income Taxes). Although income tax
expense remained stable in 1997 compared to 1996, American's income before
income tax expense declined from $3.87 million in 1996 to $2.14 million in 1997
which indicates a substantially higher level of taxable income in 1997 relative
to 1996. The effect of the higher level of taxable income for 1997 is reflected
in the substantial increase in American's effective tax rate for the current
year. In 1997, the effective tax rate was 57.8% compared to effective tax rates
of 33.5% and 29.7% in 1996 and 1995, respectively.
During 1997, expenses associated with the possible sale of American of
approximately $.68 million were non-deductible for federal income tax purposes.
Under current federal income tax rules and regulations these sale-related
expenses must be capitalized by the seller. In addition, American recorded an
accrual related to the potential liability associated with the possible adverse
outcome of a current Internal Revenue Service examination (see Note 17.
Commitments and Contingencies). American's estimate of the amount of tax
deficiency, which may be owed at some future date, constitutes income tax
expense, which is not deductible for federal income tax purposes. These two
items combined to create the greater than expected effective tax rate for 1997.
For 1996 and 1995, the effective tax rates differ from the expected statutory
rates due primarily to tax-exempt interest income, to deductible dividends paid
on American's stock held by the ESOP and to deductible dividends paid with
respect to shares issued pursuant to certain stock bonus award plans.
BALANCE SHEET REVIEW
Earning Assets
Earning assets constitute American's source of interest revenue, which is
the largest component of total revenue. Both the average balance of earning
assets and the mix of earning assets are important to the generation of interest
income. The key components of earning assets are loans and investment securities
and securities available for sale. Management views the loan portfolio as the
primary generator of interest revenue and American's most significant source of
business risk - specifically, credit risk or the possibility of borrower
defaults. The securities portfolio exists primarily as a source of liquidity and
secondarily to generate interest income. Interest rate risk is assumed as part
of the management of American's securities portfolio; however, American is
exposed only to nominal credit risk as a result of its securities investing
activities (see Market Risk Management for a discussion of the types of market
risks to which American is exposed). Table 4, Average Balances and Interest
Rates, includes the average balances of major categories of assets, liabilities
and equity as well as the rates earned or paid on these categories for the three
year period ended December 31, 1997.
63
<PAGE> 67
TABLE 4: AVERAGE BALANCES AND INTEREST RATES
<TABLE>
<CAPTION>
1997 1996
-------------------------------- -----------------------------------
AVERAGE AVERAGE AVERAGE AVERAGE
(Dollars in thousands) BALANCE INTEREST RATE BALANCE INTEREST RATE
- -------------------------------------------------------------------------------- -----------------------------------
<S> <C> <C> <C> <C> <C> <C>
Assets:
Loans, net of unearned income(1) $339,675 $30,305 8.92% $304,207 $27,507 9.04%
Investment securities and securities
available for sale(2) 161,111 10,692 6.64 195,390 12,374 6.33
Interest-bearing deposits in other banks 488 25 5.12 568 30 5.28
Federal funds sold 7,014 379 5.40 11,793 617 5.23
- -----------------------------------------------------------------------------------------------------------------------
Total earning assets 508,288 $41,401 8.15% 511,958 $40,528 7.92%
- -----------------------------------------------------------------------------------------------------------------------
Cash and due from banks 23,498 24,499
Other assets 25,861 26,658
Allowance for loan losses (3,542) (3,188)
- -----------------------------------------------------------------------------------------------------------------------
Total assets $554,105 $559,927
- -----------------------------------------------------------------------------------------------------------------------
Liabilities:
NOW accounts $ 47,508 $ 656 1.38% $ 48,114 $ 880 1.83%
Savings accounts 37,795 757 2.00 39,864 798 2.00
Money market deposit accounts 45,861 1,207 2.63 49,076 1,248 2.54
Time deposits of $100,000 and over 43,623 2,448 5.61 38,154 2,224 5.83
Other time deposits 177,280 10,127 5.71 185,692 10,899 5.87
- -----------------------------------------------------------------------------------------------------------------------
Total interest-bearing deposits 352,067 15,195 4.32 360,900 16,049 4.45
Securities sold under agreements to
repurchase, federal funds purchased
and other short-term borrowings 51,904 2,611 5.03 49,685 2,489 5.01
Notes payable 5,105 544 10.66 5,384 551 10.23
- -----------------------------------------------------------------------------------------------------------------------
Total interest-bearing liabilities 409,076 $18,350 4.49% 415,969 $19,089 4.59%
Demand deposits 99,865 98,927
Other liabilities 4,964 5,106
- -----------------------------------------------------------------------------------------------------------------------
Total liabilities 513,905 520,002
- -----------------------------------------------------------------------------------------------------------------------
Stockholders' Equity:
Preferred stock 34 48
Common stock 1,181 1,159
Additional paid in capital 10,984 10,937
Retained earnings 28,001 27,781
- -----------------------------------------------------------------------------------------------------------------------
Total stockholders' equity 40,200 39,925
- -----------------------------------------------------------------------------------------------------------------------
Total liabilities and
stockholder's equity $554,105 $559,927
- -----------------------------------------------------------------------------------------------------------------------
Interest rate spread 3.66% 3.33%
Net yield on earning assets $23,051 4.54% $21,439 4.19%
- -----------------------------------------------------------------------------------------------------------------------
<CAPTION>
1995
--------------------------------
AVERAGE AVERAGE
(Dollars in thousands) BALANCE INTEREST RATE
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Assets:
Loans, net of unearned income(1) $301,150 $27,645 9.18%
Investment securities and securities
available for sale(2) 194,971 11,835 6.07
Interest-bearing deposits in other banks 684 35 5.12
Federal funds sold 15,643 904 5.78
- --------------------------------------------------------------------------------
Total earning assets 512,448 $40,419 7.89%
- --------------------------------------------------------------------------------
Cash and due from banks 26,220
Other assets 26,804
Allowance for loan losses (3,711)
- --------------------------------------------------------------------------------
Total assets $561,761
- --------------------------------------------------------------------------------
Liabilities:
NOW accounts $ 47,270 $ 928 1.96%
Savings accounts 42,566 851 2.00
Money market deposit accounts 56,043 1,481 2.64
Time deposits of $100,000 and over 40,882 2,294 5.61
Other time deposits 167,529 9,456 5.64
- --------------------------------------------------------------------------------
Total interest-bearing deposits 354,290 15,010 4.24
Securities sold under agreements to
repurchase, federal funds purchased
and other short-term borrowings 45,663 2,511 5.50
Notes payable 16,335 1,527 9.35
- --------------------------------------------------------------------------------
Total interest-bearing liabilities 416,288 $19,048 4.58%
Demand deposits 102,538
Other liabilities 5,117
- --------------------------------------------------------------------------------
Total liabilities 523,943
- --------------------------------------------------------------------------------
Stockholders' Equity:
Preferred stock 51
Common stock 1,164
Additional paid in capital 8,694
Retained earnings 27,909
- --------------------------------------------------------------------------------
Total stockholders' equity 37,818
- --------------------------------------------------------------------------------
Total liabilities and
stockholder's equity $561,761
- --------------------------------------------------------------------------------
Interest rate spread 3.31%
Net yield on earning assets $21,371 4.17%
- --------------------------------------------------------------------------------
</TABLE>
(1) AVERAGE BALANCES INCLUDE NON-ACCRUAL LOANS. INTEREST INCOME INCLUDES FEES
ON LOANS OF APPROXIMATELY $939,000, $820,000 AND $896,000 IN 1997, 1996 AND
1995, RESPECTIVELY.
(2) AVERAGE YIELDS ON SECURITIES AVAILABLE FOR SALE HAVE BEEN CALCULATED ON
AMORTIZED COST.
During 1997, average earning assets of $508.29 million declined $3.67
million or 1% from the $511.96 million reported in 1996. For 1995, average
earning assets were $512.45 million. The ratio of earning assets to total
assets, which is a key balance sheet efficiency ratio, improved to 92% from the
91% levels reported for both 1996 and 1995. Although the volume of average
earning assets remained stable over the three-year comparison period, the mix of
earning assets reflected a clear trend toward higher yielding loan balances. For
1997, the ratio of average loans to average earning assets was 67% compared to a
ratio of 59% for both 1996 and 1995. On an average balance basis, this trend
reflects $38.53 million of incremental loan outstanding during 1997 as compared
to 1995. This revised mix of earning assets since 1995 has resulted in an
improved earning asset yield of 8.15% for 1997 compared to 7.92% and 7.89%
during 1996 and 1995, respectively.
Loans
The loan portfolio represents American's primary source of revenue
(including both interest and fee revenue) and is the key element of overall
profitability. The Bank's lending strategy is to maintain high credit quality
standards and to grow the loan portfolio at a rate consistent with growth rates
experienced by American's peers. American maintains loan policies and
procedures, including standardized underwriting procedures, authority guidelines
by lender, a committee-based approval process, a strict focus on risk-rating
each credit at the time it is underwritten and approved, and a pricing model for
commercial originations. The lending function is process-based with separate
processes for lending originations, credit quality (including problem credit
administration and loan operations) and a centralized risk management function.
The risk management process, among other matters, monitors and manages the
credit risk in the loan portfolio (see Asset Quality).
The major categories of lending include commercial, real estate and
consumer. American's lending activities are predominately focused in the
Jacksonville market, and, as such, American's lending activities are not
geographically
64
<PAGE> 68
diversified. In addition, American is heavily reliant on its real estate lending
activities, which includes a concentration of real estate collateral associated
with all general loan types. For analytical purposes, the following narrative
concerning balance changes within American's loan portfolio includes references
to year-end loan balances by loan caption as opposed to average balances due to
the uneven loan growth rates experienced by American during the past two years.
American experienced the majority of its 1996 loan growth during the fourth
quarter and, as such, the average balances for 1996 were only nominally
impacted. During 1997, loan growth occurred primarily during the first half of
the year with stable outstandings maintained during the second half of the year.
Loan demand remained strong during 1997, although loan underwriting and pricing
standards within the industry appear to be weakening.
For 1997, average total loans increased to $339.68 million representing a
$35.47 million or 12% growth over the balance reported for 1996 (see Note 4.
Loans and Allowance for Loan Losses). During 1996, average total loans remained
stable at $304.21 million compared to $301.15 million for 1995. On a comparative
year-end basis, the majority of this growth occurred in the residential mortgage
loan caption which includes home equity lines of credit. This caption increased
$15.96 million or 25% during 1997. During 1996, the Bank began a renewed
emphasis on home equity lending. Approximately 57% of the 1997 growth in this
caption was home equity related. With respect to residential mortgage lending,
during 1995, American discontinued, for strategic reasons, a mortgage banking
operation, which had been created during 1993. Instead, American elected to
originate and retain residential mortgage loans for current Bank customers.
Shortly after the announcement by American of its possible sale, substantially
all residential mortgage loan origination activity was discontinued. Other loan
categories reporting growth (on an actual year-end basis) during 1997 were
commercial and industrial loans, which increased $3.25 million or 3% and
commercial mortgage loans, which rose $5.42 million or 6% for the year. Consumer
loans continue to represent a diminishing proportion of the total loan portfolio
declining from $50.74 million or 17% of year-end total loans in 1995 to $22.08
million or 6% of year-end loans for 1997. The majority of this decline is the
result of repayments in the indirect lending portfolio since this product was
discontinued in 1995. For 1996, loan growth, which occurred primarily during the
fourth quarter, was primarily centered in the commercial and industrial caption
which grew (on an actual year-end basis) $37.78 million or 52% compared to 1995.
The commercial and industrial caption includes a portfolio of approximately
$35.50 million in loans to primarily investment grade borrowers with the
remainder of the caption represented primarily by local borrowers with revenues
between three and twenty million.
During 1996, the Bank re-emphasized an existing relationship with a
regional originator of lease financing to primarily investment grade borrowers.
This relationship has provided the Bank with a reliable source of short-term,
high quality credits for its commercial loan portfolio. These credits represent
loans for which the Bank has agreed to discount, at prevailing bond market
rates, the future payments by the borrower pursuant to a lease agreement between
the borrower and the regional leasing company. The primary source of repayment
to the Bank is the borrower's cash flow and the collateral is comprised of an
assignment of the underlying lease and a security interest in the leased asset.
These loans are cost-effective to underwrite, short-term in nature, provide for
monthly amortization and are direct obligations of the borrowers. Management
believes this relationship enables American to diversify its credit risk and
offers an appropriate risk/return relationship due to the strong underlying
credit characteristics of the borrowers.
Investment Securities and Securities Available for Sale
The securities portfolio represents a primary source of liquidity and also
comprises a major source of interest income for American. The Treasury
Management Committee of the Bank monitors the activity in the securities
portfolio. This committee, in conjunction with the Risk Management Committee,
utilizes the securities portfolio to alter the interest rate risk and liquidity
profiles of American consistent with American's current operating plan and its
assessment of future economic variables. Securities are classified as either
investment securities, which American has the positive intent and ability to
hold to maturity, or securities available for sale. At December 31, 1997,
securities available for sale of $140.02 million represented 96% of the
securities portfolio. Management believes that this securities mix provides
American with the appropriate level of flexibility to manage its interest rate
risk and liquidity. Investment decisions are based upon a detailed analysis of a
particular security's rate, maturity, liquidity and credit quality
characteristics. The narrative that follows primarily focuses either on
securities available for sale or on the combined securities portfolios (referred
to as the securities portfolio). Table 5, Maturity of Investment Securities,
presents a detailed analysis of American's securities as to type and maturity.
65
<PAGE> 69
TABLE 5: MATURITY OF INVESTMENT SECURITIES
<TABLE>
<CAPTION>
DECEMBER 31, 1997
---------------------------------------------------------------------
AVAILABLE FOR SALE HELD TO MATURITY
---------------------------------- ------------------------------
Amortized Fair Year-End Amortized Fair Year-End
(Dollars in thousands) Cost Value Yield Cost Value Yield
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
U.S. Treasury:
Due in one year or less $ 14,998 $ 15,032 5.90% -- -- --
Due after one year through five years -- -- -- -- -- --
Due after five years through ten years -- -- -- -- -- --
Due after ten years -- -- -- -- -- --
- ----------------------------------------------------------------------------------------------------------------------
Total 14,998 15,032 5.90 -- -- --
- ----------------------------------------------------------------------------------------------------------------------
U.S. Government agency securities:
Due in one year or less 1,000 990 3.33 -- -- --
Due after one year through five years 5,383 5,387 6.33 -- -- --
Due after five years through ten years 19,255 19,330 7.01 -- -- --
Due after ten years 5,000 4,999 7.50 -- -- --
- ----------------------------------------------------------------------------------------------------------------------
Total 30,638 30,706 6.85 -- -- --
- ----------------------------------------------------------------------------------------------------------------------
Obligations of states and political
subdivisions:
Due in one year or less -- -- -- $ 670 $ 680 6.52%
Due after one year through five years -- -- -- 469 489 5.74
Due after five years through ten years -- -- -- 902 915 4.67
Due after ten years -- -- -- -- -- --
- ----------------------------------------------------------------------------------------------------------------------
Total -- -- -- 2,041 2,084 5.52
- ----------------------------------------------------------------------------------------------------------------------
Mortgage-backed securities:
Due in one year or less 7,120 7,033 4.91 65 65 7.20
Due after one year through five years 71,379 71,850 6.90 4,317 4,509 8.73
Due after five years through ten years 3,256 3,339 6.74 -- -- --
Due after ten years 4,827 4,903 6.73 -- -- --
- ----------------------------------------------------------------------------------------------------------------------
Total 86,582 87,125 6.72 4,382 4,574 8.70
- ----------------------------------------------------------------------------------------------------------------------
Other equity securities:
Due in one year or less -- -- -- -- -- --
Due after one year through five years -- -- -- -- -- --
Due after five years through ten years -- -- -- -- -- --
Due after ten years 3,741 7,155 6.48 -- -- --
- ----------------------------------------------------------------------------------------------------------------------
Total 3,741 7,155 6.48 -- -- --
- ----------------------------------------------------------------------------------------------------------------------
Total securities $135,959 $140,018 6.65% $6,423 $6,658 7.69%
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
The average balance of the securities portfolio of $161.11 million
decreased $34.28 million or 18% during 1997 compared to a stable level for this
caption during the comparative 1995 to 1996 period (see Note 2. Securities
Available for Sale and Note 3. Investment Securities). On a comparative year-end
basis for 1997, securities available for sale decreased $33.86 million or 19% to
$140.02 million, while year-end investment securities fell $2.94 million or 31%.
For both 1997 and 1996, sales, maturities and repayments of securities were used
primarily to fund loan growth. As a result, the mix of earning assets was
favorably altered in a manner that resulted in significantly improved interest
revenue. For 1997, the securities portfolio represented 32% of average earning
assets compared to 38% for both 1996 and 1995.
For year-end 1997, the securities available for sale caption was
comprised of U.S. Treasury securities (11%), U.S. Government agency securities
(22%), mortgage-backed securities (62%) and other equity securities (5%). The
mix of this portfolio was comparable at year-end 1996. Mortgage-backed
securities represent approximately two-thirds of this portfolio for the
three-year comparison period. This caption is primarily composed of fixed-rate,
pass-through certificates and collateralized mortgage obligations. Investments
in mortgage-backed securities expose American to prepayment risk in the event
that long-term mortgage rates decline and the underlying mortgage collateral
prepays at a faster than anticipated rate. In this case, the yield, the carrying
value and the fair value of a mortgage-backed security can be negatively
impacted. To mitigate this risk, American buys primarily short average life
mortgage-backed securities and assesses the returns from the security over an
appropriate range of interest rate movements and related prepayment assumptions.
66
<PAGE> 70
The investment securities portfolio was $6.42 million at year-end,
which represented a $2.94 million or 31% decline from 1996 (see Note 3.
Investment Securities). For 1995, the investment securities portfolio was $26.96
million. During 1995, American elected to make a one-time transfer of securities
from the investment securities portfolio to the securities available for sale
portfolio. This transfer was done to provide for additional liquidity to fund
loan growth. At year-end 1997, approximately 32% of this portfolio was
represented by obligations of states and political subdivisions and the balance
was invested in mortgage-backed securities.
For 1997, the yield on the securities portfolio was 6.64% or 31
basis points greater than the 1996 yield. For 1995, the portfolio yield was
6.07%. Many factors influence the yield on American's securities portfolio,
including mix (particularly the amount invested in mortgage-backed securities),
maturity, the absolute level of interest rates, the term structure of interest
rates and rate volatility. Due to the insignificant level of tax-exempt
securities in the total securities portfolio, the yields quoted above have not
been adjusted to their fully-taxable equivalent basis.
At December 31, 1997, the fair value of investment securities
exceeded their amortized cost by $.24 million compared to a net unrealized gain
of $.38 million at the end of 1996. The securities available for sale portfolio
reflected net unrealized gains of $4.06 million in 1997 and $2.37 million for
1996. The majority of the net unrealized gain for these two years is a result of
American's long-term investment in the equity securities of a Nasdaq National
Market System listed company which has a cost basis of $.07 million and a fair
value at December 31, 1997 of $3.54 million.
Liquidity and Funding Sources
Management defines liquidity as the ability of American to meet its
current and future obligations in the normal course of business. For American,
this definition includes the ability to honor existing and prospective loan
commitments and deposit withdrawals, make capital expenditures, fund operations
cost-effectively and pay dividends. The Treasury Management Committee of the
Bank is primarily responsible for monitoring and maintaining American's
liquidity objectives. Liquidity is generated by operating earnings, by
converting liquid assets to cash, by generating new deposits or by drawing upon
certain market-based sources of funds. Many factors influence American's ability
to meet its liquidity needs, including trends within American's market area,
American's reputation, factors affecting the banking industry generally and
macro-economic conditions. The securities available for sale caption represents
American's most immediate source of liquidity at the present time; however, the
ability to sell from this portfolio cost-effectively is significantly influenced
by its maturity structure and the level and volatility of interest rates. Other
significant funding sources include: deposits, short-term borrowings and cash
flows from operations. See Table 6, Loan Maturities, and Table 5, Maturity of
Investment Securities, for an analysis of the anticipated maturities of loans
and investments which constitute major sources of liquidity for American.
Management believes that the level of liquidity is adequate to meet current and
future liquidity requirements.
TABLE 6: LOAN MATURITIES(1)
<TABLE>
<CAPTION>
OVER ONE OVER
ONE YEAR THROUGH FIVE
(December 31, 1997 - Dollars in thousands) OR LESS FIVE YEARS YEARS TOTAL
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Commercial and industrial $ 41,875 $ 65,013 $ 7,312 $114,200
Commercial mortgage 21,228 59,292 21,509 102,029
Residential mortgage 34,036 5,884 41,029 80,949
Real estate construction and land
development 23,266 603 -- 23,869
Consumer installment 6,369 14,684 1,022 22,075
- ----------------------------------------------------------------------------------------------
Total loans $126,774 $145,476 $70,872 $343,122
- ----------------------------------------------------------------------------------------------
Loans with fixed rates $ 14,834 $130,935 $68,509 $214,278
Loans with floating or adjustable rates 111,940 14,541 2,363 128,844
- ----------------------------------------------------------------------------------------------
Total loans $126,774 $145,476 $70,872 $343,122
- ----------------------------------------------------------------------------------------------
</TABLE>
(1) FIXED RATE LOANS ARE SCHEDULED BY FINAL MATURITY AND VARIABLE AND
ADJUSTABLE RATE LOANS ARE SCHEDULED BY REPRICING FREQUENCY
Deposits
Deposits represent the largest and, generally, most cost-effective
source of funds to American and are fundamental to the business of banking.
Moreover, American's historical experience with large certificates of deposit
indicates that these balances exhibit little volatility over varying interest
rate cycles and have consistently represented a stable source of funding for
American.
67
<PAGE> 71
Average total deposits were $451.93 million for 1997, or
approximately $7.90 million or 2% less than the $459.83 million reported during
1996 (see Note 6. Deposits). For 1995, average total deposits were $456.83
million. For 1997, the average balance of demand deposits was stable at $99.87
million compared to $98.93 million and $102.54 million for 1996 and 1995,
respectively. Average interest-bearing deposits were $352.07 million, $360.90
million and $354.29 million, for 1997, 1996 and 1995, respectively. The ratio of
average interest-bearing deposits to average deposits was approximately 80% for
each of the three years in the comparison period. For 1997, the average rate on
average interest-bearing deposits was 4.32%, while the average rate paid for
1996 and 1995 was 4.45% and 4.24%, respectively.
During 1997, the average balance of administered rate deposit
accounts (NOW, savings and money market deposit accounts) decreased $5.89
million or 4% from $137.05 million to $131.16 million. Approximately 55% of this
decline were centered in money market deposit accounts which fell $3.22 million
or 7% in 1997. For 1995, the average balance of administered rate accounts was
$145.88 million. During 1997, the Bank introduced a money market deposit account
product (for both commercial and personal depositors) which provided for tiered
pricing based upon balances maintained. The top tiers pay a competitive rate
(currently 5.13% for commercial and 4.75% for personal) and the weighted average
rates for commercial and personal accounts at year-end 1997 were 4.48% and
4.56%, respectively. Of the approximately $49 million of money market deposit
accounts maintained at year end 1997, approximately $21 million are deposited in
the tiered rate product. Management anticipates that tiered deposit account
balances will represent an increasing proportion of this caption and that the
weighted average rate will approach the top tier rate over time.
During 1997, the average balance of time deposits of $100,000 and
over of $43.62 million or 12% of average interest-bearing deposits increased
$5.47 million or 14% from 1996. The average balance of time deposits of $100,000
and over was $38.15 million or 11% and $40.88 million or 12% of average
interest-bearing deposits for 1996 and 1995, respectively. The 1997 growth
effectively mitigated the decline of $8.41 million in the other time deposits
caption resulting from the maturity of the two-year Flex certificates of
deposit. Management believes that the majority of these $100,000 and over
depositors are long-term customers and that these deposits represent a stable
source of funding for the Bank. The Bank does not actively bid on $100,000 and
over certificates of deposit as a source of funding. Table 7, Maturities of Time
Deposits $100,000 and Over provides maturity information for these deposits.
TABLE 7: MATURITIES OF TIME DEPOSITS $100,000 AND OVER
<TABLE>
<CAPTION>
DECEMBER 31, 1997
--------------------
(Dollars in thousands) BALANCE PERCENT
---------------------------------------------
<S> <C> <C>
3 months or less $17,288 35.68%
Over 3 to 6 months 7,642 15.77
Over 6 to 12 months 9,623 19.86
Over 12 months 13,898 28.69
---------------------------------------------
Total $48,451 100.00%
---------------------------------------------
</TABLE>
The most significant volume variance occurred in the other time
deposits caption and was the result of the maturity of the two-year Flex
certificates of deposit during early 1997. The average balance of other time
deposits decreased $8.41 million to $177.28 million during 1997 compared to
growth of $18.16 million for 1996, while the average rate paid on these deposits
declined from 5.87% in 1996 to 5.71% during 1997. For a brief period during 1993
and again in early 1995, the Bank marketed the Flex certificate of deposit with
terms of 2, 3, 4 and 5 years. This consumer product included an attractive
interest rate as well as a feature that allowed the customer to make additional
deposits (up to $100,000 per customer) to the certificate at the original rate.
Due to the decline in interest rates in 1995, the Bank experienced rapid growth
in this product during 1995 and at year-end 1995 the balance in the product was
approximately $80 million. During 1996, this growth rate slowed and, at year-end
1996, the balance was approximately $91 million. During 1997, approximately $50
million of the Flex certificates with an average rate of 6.80% matured.
Customers holding the maturing Flex certificates were offered a new two-year
certificate of deposit product which contained no option to make additional
deposits after opening and was priced at a nominal premium to current
certificate rates of comparable maturity. During 1997 approximately $35 million
or 70% of the maturing Flex certificates were converted into the new product at
an average rate of 5.61%. Management considers this significant downward
repricing of maturing Flex certificates to have been extremely successful even
though it did contribute to the deposit decline experienced during 1997.
Approximately $43 million of remaining Flex certificates (3, 4 and 5-year) are
included in the other time-deposit caption at December 31, 1997 with an average
rate of 6.84%.
Short-Term Borrowings
68
<PAGE> 72
The remaining significant sources of funds for the Bank are
securities sold under agreements to repurchase, federal funds purchased and
other short-term borrowings (see Note 7. Short-Term Borrowings). The other
short-term borrowings caption consists of Federal Home Loan Bank advances which
are generally used to fund short-term liquidity needs. The Bank is a member of
the Federal Home Loan Bank of Atlanta and utilizes advances as an alternative to
other short-term funding sources. American had no advances outstanding for the
years-ended 1997 and 1996. For the two-year period, the average balance of this
caption is primarily comprised of repurchase agreements with commercial
customers who traditionally have been depositors, but who seek slightly higher
returns on their short-term available cash balances. For 1997, the average
balance of this caption increased $2.22 million to $51.90 million or 13% of
average interest-bearing liabilities. On a comparative basis, the average
balance of this caption was $49.69 million or 12% of average interest-bearing
liabilities and $45.66 million or 11% of average interest-bearing liabilities
for 1996 and 1995, respectively. The average rates paid on this caption were
5.03%, 5.01% and 5.50%, during 1997, 1996 and 1995, respectively. Management
believes that the repurchase agreements represent a stable source of funds and
anticipates nominal volatility in these balances.
Cash Flows from Operations
Net cash provided by operating activities for 1997 was $7.46 million
which included net income of $.90 million adjusted for certain non-cash charges
and credits to income, primarily the provision for loan losses, depreciation and
amortization and changes in other assets and other liabilities. The Consolidated
Statements of Cash Flows provides an analysis of operating, investing and
financing activities for the three years ended December 31, 1997.
Stockholders' Equity and Regulatory Capital Adequacy
American and the Bank are subject to certain minimum regulatory
capital adequacy measures which have been legislated by Congress and implemented
by the various bank regulatory agencies. Specifically, American and its Bank are
subject to the regulatory capital adequacy requirements of the Federal Reserve
System and the Office of the Comptroller of the Currency, respectively. In
addition, prudent business practices require that capital be maintained at a
level adequate to support the current and future business operations of
American. Management continuously monitors and assesses the current and
projected capital adequacy levels of American and the Bank based on factors such
as earnings trends, asset quality, internal growth rates and the economic
outlook. Management believes that as of December 31, 1997, American and the Bank
meet all capital adequacy requirements to which they are subject.
Total stockholders' equity at year-end 1997 was $40.75 million or
$.43 million and 1% less than the $41.18 million reported at the end of 1996.
For 1995, total stockholders' equity was $40.31 million. The ratio of year-end
stockholders' equity to year-end assets was 7.50%, 7.28% and 7.30%, for 1997,
1996 and 1995, respectively. During 1997, American declared aggregate dividends
on outstanding common and preferred shares totaling $2.50 million compared to
net income of $.90 million. Dividends were declared monthly on the common shares
and quarterly on the preferred shares. American's dividend policy is to maximize
the current cash return to shareholders consistent with management's
expectations of current period earnings, balance sheet growth rates and asset
quality. During December 1997, American recorded charges associated with certain
non-recurring events which reduced American's reported earnings to a level less
than management had anticipated at the time the current year dividend was
established (see Financial Overview for a discussion of these non-recurring
charges). As a result, dividends exceeded earnings for 1997. Management
anticipates that 1998 earnings will adequately cover dividends for the year.
During 1996 and 1995, American's earnings exceeded the level of dividend
payments. During 1997, stockholders' equity was positively impacted by a $1.10
million increase in the unrealized gain, net of tax, related to the securities
available for sale portfolio.
At December 31, 1997, American's tier 1 risk-based capital ratio was
10.29% and the total risk-based capital ratio was 11.53%, compared with 10.86%
and 11.80% at December 31, 1996. The primary reasons for the decline in
American's risk-based capital ratios were the lower level of equity at year-end
1997 and the significant growth in the loan portfolio and related increase in
risk-weighted assets which is the denominator in the risk-based capital ratio
computation. For year-end 1997, American's leverage ratio was 7.00%, exactly the
same as the 1996 ratio. These regulatory capital ratios, as well as the separate
capital adequacy measurements of the Bank, exceed the minimum capital adequacy
ratios established by the appropriate federal bank regulatory agencies for
"well-capitalized" institutions (see Note 16). Regulatory Matters for a more
detailed discussion of the minimum capital adequacy requirements and the various
factors that management and the regulatory agencies consider when assessing the
adequacy of an institution's capital.
ASSET QUALITY
69
<PAGE> 73
American's primary business risk is credit risk. The extension of
credit to customers entails the possibility that the customer may not perform in
accordance with the loan's contractual terms. American's Risk Management
Committee measures, monitors and manages the credit risk inherent in the loan
portfolio based on management standards established for all key credit quality
measures, which are reviewed and revised annually. In addition, the Bank's
credit quality process contains an asset management group which is available to
work with troubled borrowers to remedy credit-related concerns. American
maintains credit policies, which include the appropriate underwriting criteria
for the types of loans American originates, as well as detailed procedures
relating to the approval of credit and compliance with loan policy. Loan
approval authority is delegated based on the size and risk rating of the credit.
Certain aggregate exposures must be approved by the Bank's Executive Committee.
Loan policies and procedures are continuously updated as circumstances warrant.
American's loan review process is conducted within the Bank's independent risk
management process. The scope of loan review includes annual reviews of more
than 90% of all loans in excess of $1 million. All other performing loans are
reviewed using a risk-based approach and all criticized and classified loans are
periodically reviewed.
American's credit risk objective is to maximize the risk-adjusted
returns from its lending activities. To accomplish this objective, American
utilizes a loan pricing model for commercial extensions of credit (including
real-estate loans), and maintains a pricing matrix based on risk-rating, term
and collateral for consumer loans. The primary basis of loan pricing is the
proposed risk rating, and to a lesser extent the pricing is influenced by the
term of the loan and the extent of the overall relationship with the customer.
American's credit origination process begins with the risk rating assigned by
the lender to the loan based on a nine point risk-rating system. All of
American's applicable loans are risk-rated, and, by policy, all new loans must
be risk-rated before they are booked. American uses credit-scoring software to
underwrite most retail and certain small business credit requests.
Risk Elements
Risk element assets consist of non-accrual loans, renegotiated
loans, other real estate, loans past due 90 days or more and still accruing,
potential problem loans and loan concentrations. Renegotiated loans are those
where the Bank has offered concessions to the borrower due to deterioration in
its financial condition and repayment ability. Potential problem loans are those
which are now current, but where management has doubts as to the borrower's
ability to comply with the present repayment terms. These loans are carefully
monitored and their classification may be changed if circumstances so dictate.
Potential problem loans totaled $4.20 million at year-end 1997. Management
believes the specific reserves established for these credits were adequate at
year-end 1997. During April 1998, one of these potential problem loans, in the
amount of $3.88 million, was refinanced by an unrelated lender and the Bank
recorded a charge-off of 0.38 million. The Bank had established at year-end 1997
a specific reserve of $.85 million for the estimated loss exposure related to
this credit. American is exposed to certain loan concentrations due to its size
and the limited geographic span of its operations. Virtually all of American's
loans are generated within the greater Jacksonville market and the majority of
its loans are secured by real estate. Table 8, Risk Elements, details American's
non-performing assets for the last five years.
TABLE 8: RISK ELEMENTS
<TABLE>
<CAPTION>
(Dollars in thousands) 1997 1996 1995 1994 1993
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Nonaccrual loans $1,906 $2,306 $ 878 $ 624 $1,263
Renegotiated loans 1,399 1,467 1,533 1,590 2,061
- ---------------------------------------------------------------------------------------------------
Total non-performing loans 3,305 3,773 2,411 2,214 3,324
Other real estate 761 1,106 1,241 1,144 1,256
- ---------------------------------------------------------------------------------------------------
Total non-performing assets $4,066 $4,879 $3,652 $3,358 $4,580
- ---------------------------------------------------------------------------------------------------
Past due 90 days or more $ -- $ 259 $ 93 $ 13 $ 269
- ---------------------------------------------------------------------------------------------------
Non-performing loans to loans,
net of unearned income 0.96% 1.15% 0.82% 0.70% 1.18%
- ---------------------------------------------------------------------------------------------------
Non-performing assets to loans,net
of unearned income plus other
real estate 1.18% 1.48% 1.24% 1.06% 1.62%
- ---------------------------------------------------------------------------------------------------
</TABLE>
70
<PAGE> 74
American's non-performing loans declined $.46 million or 12% from
$3.77 million in 1996 to $3.31 million in 1997. These levels of non-performing
loans represent .96% and 1.15% of total loans, net of unearned income,
respectively for 1997 and 1996. For 1995, non-performing loans were $2.41
million and the ratio of non-performing loans to total loans was .82%. The other
real estate caption has continued to decline from its 1995 level of $1.24
million to $1.11 million in 1996 and $.76 million for 1997. For the year ended
December 31, 1997, non-performing assets were $4.07 million or $.81 million and
17% less than the 1996 amount of $4.88 million. For 1995, non-performing assets
were $3.65 million. As a percentage of total loans plus other real estate,
non-performing assets were 1.24% in 1995, 1.48% for 1996 and 1.18% during 1997.
The majority of non-accrual loans are secured by real estate and management
believes that the specific reserve allocated to each loan is adequate to absorb
any potential loss associated with the loan. American had no loans 90 days or
more past due and still accruing interest at year-end 1997 and $.26 million at
the end of 1996. Management continuously analyzes and assesses its loan
portfolio to assure that problem loans are identified and resolved quickly and
efficiently and to provide for potential losses as they become evident. See Note
1. Summary of Significant Accounting Policies for a discussion of the accounting
policies relating to non-performing assets.
Net Charge-Offs
Net charge-offs of $.49 million or .14% of average loans, net of
unearned income, were reported during 1997 which represented a $.94 million or
66% reduction from the $1.43 million or .47% of average loans outstanding
recorded in 1996. Table 3, Allowance for Loan Losses Activity and Allocation
Analysis, provides detailed charge-off and recovery information for the most
recent five year period. For 1997, total charge-offs were $.76 million and total
recoveries of previously charged-off loans were $.27 million, while total
charge-offs were $1.88 million in 1996 and total recoveries amounted to $.44
million. During 1996, the Bank recorded a charge-off of $1.30 million associated
with the significant credit deterioration of a commercial borrower. The balance
of $1.2 million owed by this borrower was transferred to non-accrual status and
the Bank commenced discussions with the borrower to retire the remaining
outstanding debt. During 1997, the borrower's business was liquidated and the
debt was partially repaid with the remaining balance being charged off.
Approximately $.47 million or 61% of 1997 total charge-offs were associated with
the liquidation of this borrower. The composition of charge-offs for 1997 was
approximately 71% commercial and industrial with the balance applying to the
consumer loan portfolio. For 1996, approximately 82% of total charge-offs were
centered in the commercial and industrial portfolio. For 1995, net recoveries of
$.11 million were recorded to the allowance for loan losses.
Allowance for Loan Losses
The allowance for loan losses is established through a charge to
expense and is maintained at a level deemed adequate by management to absorb the
losses inherent in the loan portfolio. Recognized losses are charged to the
allowance and recoveries on loans previously charged off are credited to the
allowance (see Note 4. Loans and Allowance for Loan Losses).
The adequacy of the allowance for loan losses is evaluated by the
Risk Management Committee on a quarterly basis. The evaluation is based upon a
review of the loan portfolio which encompasses, among other things, a review of
certain individual loans or homogeneous groups of loans, the amount and quality
of collateral, industry concentrations, historical loss experience, non-accrual
and delinquency trends, classified and criticized loans, risk-ratings, portfolio
growth and mix, and current and anticipated economic conditions. This evaluation
further encompasses a review of the adequacy of the specific reserve allocated
to each significant classified and criticized loan. In addition to these
specific reserves, a general allocation based on historical loss experience is
provided for the entire loan portfolio for inherent, but unidentified losses.
Table 3, Allowance for Loan Losses Activity and Allocation Analysis, analyzes
the activity in the allowance for loan losses and provides an allocation of the
allowance for loan losses to specified loan categories for the past five years.
At December 31, 1997, the allowance for loan losses was $4.59
million or 1.34% of year-end loans, net of unearned income. This level reflects
an increase of $1.14 million or 33%, in comparison with the $3.45 million or
1.05% of total loans at the end of 1996. For 1995, the allowance was $3.13
million or 1.07% of total loans, net of unearned income. During early 1998,
management reassessed the loss exposure of certain non-performing and potential
problem loans which existed at year-end 1997 and increased the balance of the
allowance for loan losses by $.90 million through a fourth quarter 1997 charge
to earnings. This reassessment and resulting provision for loan losses was
reviewed and concurred with by SouthTrust. During March 1998, the Risk
Management Committee directed that approximately $.51 million of these loans be
charged-off in March. For the years-ended 1997, 1996 and 1995, the allowance for
loan losses as a percentage of non-performing loans was 139%, 92% and 130%,
respectively. Management considers the allowance for loan losses at December 31,
1997 to be appropriate and adequate to absorb potential losses inherent in the
loan portfolio.
71
<PAGE> 75
MARKET RISK MANAGEMENT
Market risk arises from the potential loss of future earnings, fair
values, or cash flows associated with financial instruments resulting from
fluctuations in interest rates, foreign currency exchange rates, commodity
prices and equity security prices. American has established and uses risk
management policies to monitor and limit its exposure to market risk. The
primary market risk that American is exposed to is interest rate risk.
In the normal course of its deposit gathering and lending
activities, American is exposed to interest rate risk. American's overall goal
with respect to interest rate risk management is to optimize net interest income
while simultaneously reducing to a reasonable level the volatility of this
income caused by changes in interest rates. In carrying out this overall goal,
American primarily utilizes on-balance sheet strategies to manage its interest
rate risk. These strategies include securities transactions within the
securities available for sale portfolio as well as active management of the mix,
maturities, rates, and repricing characteristics of loans and retail and
wholesale funding sources. As of December 31, 1997, American had no off-balance
sheet interest rate contracts.
The Treasury Management Committee of the Bank oversees the interest
rate risk management process and reviews and recommends for approval related
policy guidelines. This committee meets monthly and reviews current economic
conditions, liquidity, capital levels, securities holdings, securities
transactions and American's interest rate risk profile.
In measuring its exposure to interest rate risk, American uses both
static gap reporting methods and financial modeling to simulate net interest
income under various interest rate scenarios utilizing dynamic balance sheet
strategies. The modeling considers the mix of floating versus fixed rate assets
and liabilities, contractual maturities and repricing, prepayment estimates for
the existing balance sheet and growth assumptions for projecting future balance
sheets. As of December 31, 1997, American considered itself asset sensitive,
based on these other measurement approaches, which generally indicates that net
interest income will be adversely impacted during a declining interest rate
environment as assets are expected to reprice faster than liabilities.
All of American's financial instruments are classified as
non-trading. Table 9, Interest Rate Risk Analysis summarizes those American
financial instruments which are exposed to interest rate risk. Cash and due from
banks and demand deposits are excluded from the table since these financial
instruments are non-interest bearing. The significant assumptions and
limitations related to this presentation are listed as accompanying notes to
Table 9.
TABLE 9: INTEREST RATE RISK ANALYSIS(1)
<TABLE>
<CAPTION>
(December 31, 1997 - FAIR
Dollars in thousands) 1998 1999 2000 2001 2002 BEYOND TOTAL VALUE
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Loans, net of unearned income(2)
Fixed rate $ 47,224 $40,064 $32,728 $28,092 $15,402 $50,768 $214,278 $213,960
Average interest rate 8.32% 8.23% 8.45% 8.59% 8.78% 8.07% 8.33%
Floating rate 90,184 8,220 5,493 4,041 3,866 16,552 128,356 127,676
Average interest rate 9.50% 9.28% 9.14% 8.99% 8.82% 8.45% 9.30%
Securities(3)
Fixed rate 45,284 10,501 43,750 10,536 3,254 7,336 120,661 121,375
Average interest rate 6.19% 7.48% 7.10% 6.67% 6.71% 7.21% 6.75%
Floating rate 1,000 2,171 897 1,973 4,465 11,215 21,721 25,301
Average interest rate 3.33% 6.62% 6.65% 6.30% 6.50% 6.67% 6.44%
Other earning assets
Fixed rate 350 -- -- -- -- -- 350 350
Average interest rate 6.00% -- -- -- -- -- 6.00%
Floating rate 7,484 -- -- -- -- -- 7,484 7,484
Average interest rate 5.38% -- -- -- -- -- 5.38%
- ----------------------------------------------------------------------------------------------------------------------------------
Total earning assets $191,526 $60,956 $82,868 $44,642 $26,987 $85,871 $492,850 $496,146
Average interest rate 8.23% 8.19% 7.76% 8.07% 8.16% 7.89% 8.07%
- ----------------------------------------------------------------------------------------------------------------------------------
Interest-bearing deposits
Fixed rate $126,606 $51,176 $32,237 $ 1,746 $ 5,005 -- $216,770 $219,018
Average interest rate 5.51% 5.54% 7.04% 5.46% 5.72% -- 5.75%
Floating rate(4) 137,018 1,672 -- -- 104 -- 138,794 138,794
Average interest rate 2.29% 5.13% -- -- 6.25% -- 2.32%
</TABLE>
72
<PAGE> 76
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Other interest-bearing liabilities
Fixed rate 760 779 3,352 122 54 -- 5,067 5,107
Average interest rate 8.81% 8.84% 8.96% 8.30% 8.30% -- 8.90%
Floating rate(5) 41,002 -- -- -- -- -- 41,002 41,002
Average interest rate 4.82% -- -- -- -- -- 4.82%
- ----------------------------------------------------------------------------------------------------------------------------
Total interest-bearing liabilities $305,386 $53,627 $35,589 $1,868 $5,163 -- $401,633 $403,921
Average interest rate 3.98% 5.57% 7.22% 5.65% 5.76% -- 4.51%
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Based on expected maturity, unless otherwise indicated
(2) Based on contractual principal repayment for amortizing loans except for
$26,014,000 of home equity lines of credit which have been included in
1998; all demand loans have been included in 1998
(3) Based on amortized cost and includes both securities available for sale and
investment securities
(4) All NOW, savings, and money market deposit accounts have been included in
1998 amounting to $133,531,000
(5) Comprised solely of securities sold under agreements to repurchase entered
into on an overnight basis with commercial customers
COMPARISON OF 1996 WITH 1995
For the year ended December 31, 1996, American reported net income
of $2.57 million and basic earnings per share of $2.30 compared to net income of
$2.56 million and basic earnings per share of $2.31 for 1995. Reported earnings
for both 1996 and 1995 included significant fluctuations in the provision for
loan losses as well as material, non-recurring items. During 1996, a provision
for loan losses of $1.75 million was recorded, while for 1995 American recorded
a credit of $.28 million in the provision for loan losses. For 1996, the
provision for loan losses included a special charge in December of $1.30 million
associated with the significant credit deterioration of a commercial borrower.
Net securities gains of $.50 million were reported during 1996, while net
securities losses of $.04 million were recognized in 1995. During 1996,
management decided to outsource American's data processing activities which
resulted in a charge of $.38 million for severance accruals and technology
write-offs. For 1995, reported earnings included $.74 million associated with
severance payments related to staff reductions.
Net interest income was stable during 1996 as this caption increased
$.07 million or less than 1% to $21.44 million. For 1995, net interest income
was $21.37 million. During 1996, the net interest margin increased two basis
points to 4.19% reflecting nominal changes in the level and mix of average
earning assets and a relatively stable interest rate environment. The flat net
interest income level reported during 1996 reflected minimal changes in the
levels of both interest income and interest expense.
During 1996, interest income increased $.11 million or less than 1%
to $40.53 million compared with interest income of $40.42 million during 1995.
During 1996, average earning assets decreased $.49 million or less than 1%,
while year-end earning assets were $16.65 million or 3% greater than the amount
reported at year-end 1995. The growth rate of average earning assets was
negatively impacted by the sale in 1995 of approximately $26 million of
residential mortgage loans. The proceeds of this sale were used to retire
existing long-term advances from the Federal Home Loan Bank of Atlanta and to
reduce short-term borrowings of the Bank. The increase in year-end earning
assets was the result of $35.07 million of growth in loans, net of unearned
income, that occurred primarily during the last few months of 1996. This loan
growth, although substantial, occurred too late in the year to positively
influence the level and mix of average earning assets and the resulting earning
asset yield. Approximately 60% of the net loan growth was funded by a
combination of a $13.27 million decrease in year-end investment securities and
securities available for sale, a $4.80 million decline in federal funds sold and
a $2.72 million reduction in the balance of cash and due from banks. During
1996, management initiated an effort to improve the yield on earning assets by
investing available liquidity in securities available for sale and minimizing
the balances of federal funds sold. In the past, management had utilized federal
funds sold as a source of immediate liquidity; however, recently certain
liability-related sources of funds have become readily available. During 1996,
the yield on average earning assets increased three basis points to 7.92% in
spite of a .25% reduction in the target federal funds rate which occurred in
January of that year.
During 1996, total interest expense increased $.04 million or less
than 1% to $19.09 million compared to $19.05 million in 1995. For 1996, average
interest-bearing liabilities decreased $.32 million or less than 1% to $415.97
million, while the cost of funds on average interest-bearing liabilities
stabilized at 4.59% for 1996 compared to 4.58% for 1995. On a year-end basis,
total deposits increased $6.11 million or 1% and total liabilities grew from
$512.17 million to $524.69 million or by 2%. Growth continued during 1996 in the
other time deposits caption, which increased $7.74 million or 4% on a year-end
basis. This caption includes the Flex certificate of deposit offered initially
during 1993 and again in 1995, which contained an attractive interest rate as
well as a feature that allowed customers to make additional deposits (up to
$100,000 per customer) to the certificate at the original interest rate. The 14%
growth rate of this product for 1996 was substantially reduced from the growth
rate experienced during 1995. The 1996 year-end balance of the Flex certificates
was $91 million or 48% of the other time deposits caption. Approximately $50
million or 55% of this total is comprised of two-year certificates that matured
during early 1997. On a related matter, during
73
<PAGE> 77
1996, the Bank entered into an interest rate swap to receive interest at a fixed
rate of 5.00% and to pay interest based on one month LIBOR (average rate of
5.45% during 1996). The purpose of the swap was to hedge American's exposure to
declining interest rates caused by potential growth in the Flex certificates.
The notional amount of the swap was $40 million and it matured on April 10,
1997. During 1996, the Bank recorded a reduction in interest income of $.18
million associated with this swap. See Income Statement Review - Net Interest
Income and Balance Sheet Review - Deposits for a general discussion of the Flex
certificate of deposit product.
For 1996, total other income, net of securities transactions, of
$6.04 million decreased $.35 million or 5% from its 1995 level of $6.38 million.
The decreased level of non-interest income in 1996 is the result of lower
service charges on deposits, which declined 7% or $.31 million to $4.32 million
during 1996. The year 1996 continued a trend of diminishing sources of fee
income from traditional deposit-based products and services. Customer behavior
patterns, as influenced by their increased sensitivity to pricing, along with
fierce competition from non-banks continues to present American and the
commercial banking industry generally with difficult decisions concerning fee
income opportunities. Management continues to seek alternative sources of fee
income that can be cost-effectively delivered to the customer. For 1996, trust
fees remained stable at $.57 million compared to $.60 million reported in 1995.
Other operating income of $1.14 million reflected a less than 1% decline from
the $ 1.15 million reported in 1995.
Total 1996 non-interest expenses, net of non-recurring amounts, of
$21.97 million were $1.63 million or approximately 7% lower than 1995
non-interest expenses (as adjusted) of $23.60 million. Material, non-recurring
amounts for 1996 included management's decision to outsource American's data
processing activities and to record a charge of $.38 million for severance
accruals and technology write-offs. On a comparative basis, material,
non-recurring items in 1995 included a $.74 million charge associated with
severance payments related to staff reductions. The majority of the decline in
total non-interest expenses occurred in the salaries, wages and related expenses
caption which, net of non-recurring amounts, declined $1.38 million or 10% to
$12.01 million during 1996. These reductions reflect the organization-wide
action taken by management during 1995 to aggressively reduce American's
non-interest expenses to a level consistent with its peer group. As a result of
American's focus on the customer and its continued commitment to productivity
improvements, the occupancy and equipment caption increased $.13 million during
1996. This caption includes the expenses associated with significant Bank
investments in new technology made during 1995 and early 1996. During 1996,
other operating expenses declined $.27 million or 4% compared to 1995.
Total stockholders' equity at year-end 1996 was $41.18 million or
$.87 million and 2% greater than the $40.31 million reported at the end of 1995.
The ratio of year-end stockholders' equity to year-end assets was 7.28% and
7.30%, for 1996 and 1995, respectively. The growth rate of stockholders' equity
was impacted by the decision to increase the monthly cash dividend on common
stock to an annual rate of $2.04 per share by year-end 1996. American's dividend
policy is to maximize the current cash return to shareholders consistent with
management's expectations of current period earnings, balance sheet growth rates
and asset quality. During 1996 and 1995, American's earnings exceeded the level
of dividend payments. With respect to risk-based capital, at December 31, 1996,
American's tier 1 risk-based capital ratio was 10.86% and the total risk-based
capital ratio was 11.80%, compared with 11.40% and 12.32% at December 31, 1995.
These risk-based capital measures declined due to the growth experienced in
American's loan portfolio during 1996. For year-end 1996, American's leverage
ratio was 7.00% compared to 7.06% at year-end 1995. Each of these regulatory
capital ratios, as well as the separate capital adequacy measures of the Bank,
exceed the minimum capital adequacy ratios established by the appropriate
federal bank regulatory agencies for "well-capitalized" institutions.
American's non-performing loans increased $1.36 million or 56% from
$2.41 million in 1995 to $3.77 million in 1996. These levels of non-performing
loans represent 1.15% and .82% of total loans, net of unearned income,
respectively, for 1996 and 1995. During December 1996, the Bank recorded a
charge-off in the amount of $1.30 million to a commercial borrower. This
charge-off was the result of significant year-end deterioration in the
borrower's financial condition and repayment prospects. The remaining carrying
value of this relationship was approximately $1.20 million and was placed on
non-accrual status at year-end. American's provision for loan losses, which
included the effect of this charge-off, was $1.75 million during 1996 compared
to a credit to the provision for 1995 in the amount of $.28 million. Excluding
this unusual charge-off, net charge-offs for 1996 were $.13 million or .04% of
average loans. Management continuously analyzes and assesses its loan portfolio
to assure that problem loans are identified and resolved quickly and efficiently
and to provide for potential losses, as they become evident. The adequacy of the
allowance for loan losses is evaluated by the Risk Management Committee on a
quarterly basis. For the years ended 1996 and 1995, the allowance for loan
losses as a percentage of non-performing loans was 92% and 130%, respectively.
At year-end 1996, the allowance for loan losses was $3.45 million or 1.05% of
loans, net of unearned income, compared to $3.13 million and 1.07% for year-end
1995. Management considers the allowance for loan losses at December 31, 1996 to
be appropriate and adequate to absorb potential losses inherent in the loan
portfolio.
74
<PAGE> 78
FOURTH QUARTER MANAGEMENT DISCUSSION
For the quarter ended December 31, 1997, American reported a net
loss of $1.56 million and losses per share of $1.45 compared to a net loss of
$.18 million and losses per share of $.20 for the same quarter of 1996. The
results of both comparative quarters were negatively impacted by special charges
to the provision for loan losses and by the recording of certain material,
non-recurring amounts. During the fourth quarter of 1997, American recorded an
incremental provision for loan losses of $.90 million and a total provision for
loan losses of $1.05 million for the quarter. This additional provision resulted
from a reassessment during early 1998 of the loss exposure of certain
non-performing and potential problem loans that existed at year-end 1997 (see
Balance Sheet Review - Allowance for Loan Losses for a discussion of these
loans). On a comparative basis, American recorded an additional charge of $1.30
million during the fourth quarter of 1996 and a total provision for loan losses
of $1.45 million for the quarter. The additional charge related to the
significant year-end 1996 deterioration in the repayment prospects of a
commercial borrower. For the same quarterly comparison period, adjusted
earnings, defined as net income adjusted for the after-tax effect (at a 35.27%
rate) of securities transactions and material, non-recurring amounts, were $.86
million for the fourth quarter of 1997 compared to a $.16 million net loss
computed for the fourth quarter of 1996.
For the same comparison period, net interest income was $5.63
million for the fourth quarter of 1997 or $.07 million and 1% higher than the
$5.56 million reported for the fourth quarter of 1996. The improvement resulted
from the improved mix of loans and the maturity of the two-year Flex
certificates of deposit. Other income of $1.34 million was recorded during the
fourth quarter of 1997 and was $.19 million or 12% less than the $1.53 million
reported in the fourth quarter of 1996. A generally lower level of service
charge and fee income on deposits was the primary contributor to this decline.
Net securities gains of $3 thousand were reported during the fourth quarter of
1997 compared to net securities gains of $.36 million for the same quarter of
1996. Other expenses, net of material, non-recurring amounts, were $4.59 million
in the 1997 fourth quarter or $1.25 million and 21% less than the $5.84 million
recorded for the same quarter of 1996. The lower level of other expenses
recorded during the fourth quarter of 1997 reflected management's continued
emphasis on managing American's overhead expenses. See Table 10, Selected
Quarterly Data, for a comparison of American's results of operations and related
information for 1996 and 1997.
TABLE 10: SELECTED QUARTERLY DATA
<TABLE>
<CAPTION>
1997 1996
---------------------------------------- -------------------------------------
(Dollars in thousands except for per share data) FOURTH THIRD SECOND FIRST FOURTH THIRD SECOND FIRST
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net interest income $ 5,627 $5,713 $5,968 $5,743 $5,559 $5,418 $5,385 $5,077
Provision for loan losses 1,050 150 275 150 1,450 150 150 --
------- ------ ------ ------ ------ ------ ------ ------
Net interest income after provision
for loan losses 4,577 5,563 5,693 5,593 4,109 5,268 5,235 5,077
Other income (excluding securities
transactions) 1,338 1,386 1,407 1,519 1,530 1,454 1,481 1,570
Securities gains (losses), net 3 (2) (36) -- 360 3 7 128
Other expenses 7,432 6,031 5,771 5,667 6,218 4,911 5,602 5,621
- ------------------------------------------------------------------------------------------------------------------------------------
Income (loss) before income tax expense (1,514) 916 1,293 1,445 (219) 1,814 1,121 1,154
Income tax expense (benefit) 45 264 456 473 (41) 653 313 371
- ------------------------------------------------------------------------------------------------------------------------------------
Net income (loss) $(1,559) $ 652 $ 837 $ 972 $ (178) $1,161 $ 808 $ 783
- ------------------------------------------------------------------------------------------------------------------------------------
Basic earnings (losses) per common share $ (1.45) $ 0.58 $ 0.75 $ 0.87 $(0.20) $ 1.06 $ 0.73 $ 0.71
Diluted earnings (losses) per common share (1.45) 0.58 0.75 0.87 (0.20) 1.05 0.72 0.70
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
75
<PAGE> 79
BENEFICIAL OWNERSHIP OF AMERICAN CAPITAL STOCK
The following table sets forth information as of the Record Date
with respect to those persons known by American to be the beneficial owners of
more than 5% of the outstanding shares of American Stock, and as to shares of
American Stock beneficially owned by the officers and directors of American
individually and by all officers and directors of American as a group, exclusive
of the 236,853 shares of American Common Stock subject to the Stock Option. See
"THE MERGER - Background of and Reasons for the Merger."
<TABLE>
<CAPTION>
Shares of American Shares of American Percent of
Name and Address of Common Stock Percent of Preferred Stock Preferred
Beneficial Owner Beneficially Owned(1) Common Stock Beneficially Owned(2) Stock(2)
---------------- --------------------- ------------ --------------------- ---------
<S> <C> <C> <C> <C>
DIRECTORS AND EXECUTIVE OFFICERS:
Raymond K. Mason, Sr. 356.911 B 3.65
2022 Hendricks Avenue 346.603 C 3.39
Jacksonville, Florida 32207 328.940 D 3.02
----------
475,349(3) 40.16% 1,032.454(3) 3.34
----------- ----- ----------
Raymond K. Mason, Jr. 365.899 B 3.74
2031 Hendricks Avenue 354.020 C 3.46
Jacksonville, Florida 32207 337.178 D 3.09
----------
218,763(4) 18.48% 1,057.097(4) 3.42
----------- ----- ----------
T. Keith Perry 272.145 B 2.79
2031 Hendricks Avenue 274.906 C 2.69
Jacksonville, Florida 32207 280.751 D 2.58
----------
54,947(3) 4.64% 827.802(5) 2.68
----------- ----- ----------
Charles J. Franson
c/o Franson, Aldridge & Sands, P.A.
1551 Atlantic Blvd., Suite 200
Jacksonville, Florida 32207 55,404(6) 4.68% N/A N/A
----------- ----- ---------- -----
All directors and executive 1,787.867 B 18.30
officers as a group (9 1,782.958 C 17.44
people) (7) 1,782.394 D 16.36
----------
819,639.009 69.24% 5,353.219 17.33
----------- ----- ----------
5% SHAREHOLDER:
American Banks of Florida, Inc.
Employee Stock Ownership Plan
and Trust(8
c/o American National Bank 9,770.534 B 100%
of Florida 10,225.266 C 100%
2031 Hendricks Avenue 10,897.256 D 100%
Jacksonville, Florida 32207) 149,115 12.60% 30,893.056 100%
----------- ----- ---------- -----
TOTAL 968,754.099 81.84% 30,893.056 100%
=========== ===== ========== =====
</TABLE>
- -----------------------------------
(1) Unless otherwise noted, the owner has sole voting and dispositive power.
(2) The amounts shown below reflect the number and percent of shares
beneficially owned by the shareholders listed below for each American
Series B Preferred Stock, identified by the letter B, American Series C
Preferred Stock, identified by the letter C, and American Series D
Preferred Stock, identified by the letter D.
(3) The amount shown includes 4,340 shares owned by Mr. Mason individually,
398,225 shares owned jointly by Mr. and Mrs. Mason; 37,281 shares owned by
Rebuilding Service, Inc., a corporation owned and controlled by Mr. Mason;
10,000 shares owned by Acorn Ventures, Inc., a corporation controlled by
Mr. Mason; and 20,000 shares owned by Eagle Foundation, Inc., a 501(c)(3)
charitable foundation established by Mr. and Mrs. Mason and whose Board of
Trustees consists of Mrs. Mason and Mr. and Mrs. Mason's two daughters.
Also, included in the amount are 5,503 shares of American Common Stock,
356.911 shares of American Series B Preferred Stock, 346.603 shares of
American Series C Preferred Stock, and 328.940 shares of American Series D
Preferred Stock allocated to Mr. Mason's account under the American ESOP as
of December 31, 1997.
(4) The amount shown includes 170,000 shares owned by Mr. Mason, Jr.
individually; 30,000 shares owned by Mr. Mason, Jr. subject to certain
restrictions provided in a Stock Bonus Agreement between Mr. Mason, Jr. and
American dated May 26, 1995 and subject to a dispute (See "MERGER - Effect
of the Merger on the American Stock Bonus Agreements"); and one third of
the 27,899 shares owned by RCK, Inc., a corporation owned and controlled by
Mr. Mason, Jr., Mr.Perry and Mr. Franson. Also, included in the amount
shown are 9,463 shares of American Common Stock, 365.899 shares of American
76
<PAGE> 80
Series B Preferred Stock, 354.020 shares of American Series C Preferred
Stock, and 337.178 shares of American Series D Preferred Stock allocated to
Mr. Mason, Jr.'s account under the American ESOP as of December 31, 1997.
(5) The amount shown includes 12,089 shares owned jointly by Mr. and Mrs.
Perry; 30,000 shares owned by Mr. Perry subject to certain restrictions
provided in a Stock Bonus Agreement between Mr. Perry and American dated
May 26, 1995 and subject to a dispute (See "MERGER - Effect of the Merger
on the American Stock Bonus Agreements"); and one third of the 27,899
shares owned by RCK, Inc., a corporation owned and controlled by Mr. Mason,
Jr., Mr. Perry, and Mr. Franson. Also, included in the amount shown are
3,559 shares of American Common Stock, 272.145 shares of American Series B
Preferred Stock, 274.906 shares of American Series C Preferred Stock, and
280.751 shares of American Series D Preferred Stock allocated to Mr.
Perry's account under the American ESOP as of December 31,1997.
(6) The amount shown includes 12,240 shares owned by Mr. Franson individually;
30,000 shares owned by Mr. Franson subject to certain restrictions provided
in a Stock Bonus Agreement between Mr. Franson and American dated May 26,
1995 and subject to a dispute (See "MERGER - Effect of the Merger on the
American Stock Bonus Agreements"); 3,864 shares held by Mr. Franson's IRA;
and one third of the 27,899 shares owned by RCK, Inc., a corporation owned
and controlled by Mr. Mason, Jr., Mr. Perry and Mr. Franson.
(7) The amount includes (except as listed separately above in (3), (4), and
(5)) 3,667 shares of American Common Stock owned individually, jointly with
spouse, or as custodian for minor by two officers. Also included (except as
listed separately above in (3), (4), and (5)) are 11,509.099 shares of
American Common Stock, 792.912 shares of American Series B Preferred Stock,
807.429 shares of American Series C Preferred Stock and 835.525 shares of
Series D Preferred stock allocated to five officers' accounts under the
American ESOP as of December 31, 1997.
(8) The ESOP Shares are held by AMNAB & CO as nominee for American National
Bank of Florida as Trustee of the American ESOP and include the shares
beneficially owned in (3), (4), (5) and (7).
77
<PAGE> 81
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); and
(ii) SouthTrust's Current Report on Form 8-K, dated
January 12, 1998 (Commission File No. 0-3613).
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.
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 ____________ ___, ____, the
partners and associates of the firm of Bradley Arant Rose & White LLP
beneficially owned approximately __________ 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, have been audited by Arthur Andersen
LLP, independent public accountants, as indicated in their reports thereon 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 American Banks of Florida,
Inc. and subsidiaries included in this Proxy Statement/Prospectus have been
audited by Arthur Andersen LLP, 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.
78
<PAGE> 82
ADDITIONAL INFORMATION
OTHER BUSINESS
The Board of Directors of American 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.
SHAREHOLDER PROPOSALS
No proposals to be presented at American's 1998 Annual Meeting of
Shareholders which would be held if the Merger is not consummated were received
by American prior to ____________ ___, ____, the date on which, under American's
By-Laws, such proposals were required to be submitted to American in order for a
shareholder of American to have the right to have such proposal included in
American's proxy materials for such annual meeting.
79
<PAGE> 83
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Stockholders and Board of Directors of
American Banks of Florida, Inc.:
We have audited the accompanying consolidated balance sheets of AMERICAN
BANKS OF FLORIDA, INC. (a Florida corporation) AND SUBSIDIARIES 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 American Banks of Florida,
Inc. and subsidiaries 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.
/s/ Arthur Andersen LLP
Jacksonville, Florida
March 13, 1998
F-1
<PAGE> 84
AMERICAN BANKS OF FLORIDA, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
1997 1996
---------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
ASSETS
Cash and due from banks..................................... $ 27,383 27,660
Earning Assets:
Federal funds sold........................................ 7,400 3,200
Interest-bearing deposits in other banks.................. 434 687
Securities available for sale............................. 140,018 173,881
Investment securities (fair value $6,658 in 1997 and
$9,740 in 1996)........................................ 6,423 9,358
Loans..................................................... 343,122 328,814
Less:
Unearned income........................................ (488) (643)
Allowance for loan losses.............................. (4,590) (3,453)
-------- -------
Net loans............................................ 338,044 324,718
-------- -------
Total earning assets................................. 492,319 511,844
-------- -------
Bank premises and equipment, net............................ 17,391 18,517
Interest and income receivable.............................. 3,402 3,629
Other assets, net........................................... 2,794 4,218
-------- -------
Total assets......................................... $543,289 565,868
======== =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Deposits:
Demand................................................. $ 94,810 106,136
NOW accounts........................................... 48,255 49,620
Savings................................................ 36,077 38,374
Money market deposit accounts.......................... 49,199 44,398
Time deposits of $100,000 and over..................... 48,451 39,498
Other time deposits.................................... 173,582 188,885
-------- -------
Total deposits....................................... 450,374 466,911
Securities sold under agreements to repurchase and federal
funds purchased........................................ 41,002 48,045
Accrued interest payable on deposits...................... 1,117 1,288
Other liabilities......................................... 4,975 3,217
Notes payable............................................. 5,067 5,228
-------- -------
Total liabilities.................................... 502,535 524,689
-------- -------
Stockholders' Equity:
Preferred stock, $1 par value per share, $30 liquidation
value per share, cumulative, convertible, and
redeemable, authorized 2,000,000 shares; 30,893 and
34,792 shares outstanding in 1997 and 1996,
respectively........................................... 30 34
Common stock, $1 par value per share, authorized 2,000,000
shares; 1,183,751 and 1,179,700 shares issued and
outstanding in 1997 and 1996, respectively............. 1,184 1,180
Capital in excess of par value............................ 11,026 10,948
Retained earnings......................................... 25,886 27,485
Unrealized gain on securities available for sale, net of
tax.................................................... 2,628 1,532
-------- -------
Total stockholders' equity........................... 40,754 41,179
-------- -------
Total liabilities and stockholders' equity........... $543,289 565,868
======== =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-2
<PAGE> 85
AMERICAN BANKS OF FLORIDA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
<TABLE>
<CAPTION>
1997 1996 1995
-------------- -------------- --------------
(DOLLARS IN THOUSANDS EXCEPT FOR PER SHARE DATA)
<S> <C> <C> <C>
Interest Income:
Interest and fees on loans......................... $ 30,305 27,507 27,645
Interest on securities available for sale and
investment securities........................... 10,692 12,374 11,835
Interest on federal funds sold..................... 379 617 904
Interest on interest-bearing deposits in other
banks........................................... 25 30 35
---------- ---------- ----------
Total interest income........................... 41,401 40,528 40,419
---------- ---------- ----------
Interest Expense:
Interest on deposits............................... 15,195 16,049 15,010
Interest on notes payable.......................... 544 551 1,527
Interest on securities sold under agreements to
repurchase, federal funds purchased and other
short-term borrowings........................... 2,611 2,489 2,511
---------- ---------- ----------
Total interest expense.......................... 18,350 19,089 19,048
---------- ---------- ----------
Net interest income............................. 23,051 21,439 21,371
Provision (credit) for loan losses................. 1,625 1,750 (275)
---------- ---------- ----------
Net interest income after provision for loan
losses........................................ 21,426 19,689 21,646
---------- ---------- ----------
Other Income:
Service charges on deposits........................ 4,047 4,324 4,633
Trust fees......................................... 582 571 602
Securities gains (losses), net..................... (35) 498 (37)
Other operating income............................. 1,021 1,140 1,149
---------- ---------- ----------
Total other income.............................. 5,615 6,533 6,347
---------- ---------- ----------
Other Expenses:
Salaries, wages and related expenses............... 11,417 12,275 14,129
Occupancy and equipment expenses................... 3,992 3,808 3,675
Other operating expenses........................... 9,492 6,269 6,542
---------- ---------- ----------
Total other expenses............................ 24,901 22,352 24,346
---------- ---------- ----------
Income Before Income Tax Expense..................... 2,140 3,870 3,647
Income tax expense................................... 1,238 1,296 1,084
---------- ---------- ----------
Net income...................................... $ 902 2,574 2,563
========== ========== ==========
Earnings Per Common Share:
Basic.............................................. $ .75 2.30 2.31
Diluted............................................ $ .74 2.27 2.25
Average Common Shares:
Basic.............................................. 1,087,007 1,062,003 1,050,072
Diluted............................................ 1,090,821 1,077,099 1,078,170
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE> 86
AMERICAN BANKS OF FLORIDA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
<TABLE>
<CAPTION>
LOANS TO UNREALIZED
EMPLOYEE GAIN (LOSS) ON
CAPITAL IN STOCK SECURITIES
PREFERRED COMMON EXCESS OF RETAINED OWNERSHIP AVAILABLE
STOCK STOCK PAR VALUE EARNINGS PLAN FOR SALE
--------- ------ ---------- -------- --------- --------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Balance at January 1, 1995...................... $ 51 1,079 10,496 25,886 (691) (2,810)
Repurchase of 5,619 shares of common stock.... -- (6) (51) (129) -- --
Issuance of common stock; conversion of
preferred stock, 2,459 shares............... (3) 3 -- -- -- --
Amortization of unearned compensation from
Stock Bonus Award Plans..................... -- -- 318 -- -- --
Principal reductions of loans to Employee
Stock Ownership Plan........................ -- -- -- -- 494 --
Change in unrealized gain (loss) on securities
available for sale, net of tax, during
1995........................................ -- -- -- -- -- 4,378
Cash dividends:
Preferred stock............................. -- -- -- (139) -- --
Common stock................................ -- -- -- (1,132) -- --
Net income.................................... -- -- -- 2,563 -- --
---- ----- ------ ------ ---- ------
Balance at December 31, 1995.................... $ 48 1,076 10,763 27,049 (197) 1,568
Issuance of common stock:
Stock Bonus Award Plans, 90,000 shares........ -- 90 2,946 -- -- --
Conversion of preferred stock, 13,730
shares.................................... (14) 14 -- -- -- --
Deferral of compensation expense relating to
Stock Bonus Award Plans..................... -- -- (3,036) -- -- --
Amortization of unearned compensation from
Stock Bonus Award Plans..................... -- -- 275 -- -- --
Principal reductions of loans to Employee
Stock Ownership Plan........................ -- -- -- -- 197 --
Change in unrealized gain (loss) on securities
available for sale, net of tax, during
1996........................................ -- -- -- -- -- (36)
Cash dividends:
Preferred stock............................. -- -- -- (131) -- --
Common stock................................ -- -- -- (2,007) -- --
Net income.................................... -- -- -- 2,574 -- --
---- ----- ------ ------ ---- ------
Balance at December 31, 1996.................... $ 34 1,180 10,948 27,485 -- 1,532
Issuance of common stock; conversion of
preferred stock, 4,051 shares............... (4) 4 -- -- -- --
Amortization of unearned compensation from
Stock Bonus Award Plans..................... -- -- 78 -- -- --
Change in unrealized gain (loss) on securities
available for sale, net of tax, during
1997........................................ -- -- -- -- -- 1,096
Cash dividends:
Preferred stock............................. -- -- -- (92) -- --
Common stock................................ -- -- -- (2,409) -- --
Net income.................................... -- -- -- 902 -- --
---- ----- ------ ------ ---- ------
Balance at December 31, 1997.................... $ 30 1,184 11,026 25,886 -- 2,628
==== ===== ====== ====== ==== ======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE> 87
AMERICAN BANKS OF FLORIDA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
<TABLE>
<CAPTION>
1997 1996 1995
-------- ------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income............................................... $ 902 2,574 2,563
Adjustments to reconcile net income to net cash provided
by operating activities:
Provision (credit) for loan losses.................... 1,625 1,750 (275)
Depreciation and amortization of bank premises and
equipment........................................... 1,519 1,440 1,216
Net amortization of securities available for sale and
investment securities............................... 385 833 1,085
Losses (gains) on dispositions of securities available
for sale and investment securities, net............. 35 (498) (3)
Losses (gains) on dispositions of bank premises and
equipment........................................... (11) 40 (65)
Employee benefit accrual increase (decrease).......... 83 199 (425)
Net deferred income tax expense (benefit)............. (381) (72) 1
Net decrease (increase) in interest and income
receivable.......................................... 227 198 (64)
Net decrease in other assets.......................... 1,207 204 313
Net increase (decrease) in accrued interest payable on
deposits............................................ (171) (2) 505
Net increase (decrease) in other liabilities.......... 2,147 (567) (1,894)
Other, net............................................ (109) (19) 173
-------- ------- -------
Net cash provided by operating activities........... 7,458 6,080 3,130
-------- ------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Net decrease (increase) in interest-bearing deposits in
other banks........................................... 253 28 (175)
Purchases of securities available for sale............... (30,062) (87,597) (32,078)
Proceeds from sales and maturities of securities
available for sale.................................... 65,210 81,668 15,453
Purchases of investment securities....................... -- -- (1,089)
Proceeds from maturities of investment securities........ 2,924 17,370 23,325
Proceeds from the sale of loans previously held for
investment............................................ -- -- 26,092
Net increase in loans.................................... (14,808) (35,244) (4,463)
Purchases of bank premises and equipment................. (310) (358) (1,443)
Proceeds from sales of bank premises and equipment....... 75 6 97
-------- ------- -------
Net cash provided by (used in) investing
activities....................................... 23,282 (24,127) 25,719
-------- ------- -------
</TABLE>
F-5
<PAGE> 88
AMERICAN BANKS OF FLORIDA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS -- (CONTINUED)
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
<TABLE>
<CAPTION>
1997 1996 1995
-------- ------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase (decrease) in deposits...................... (16,537) 6,108 11,551
Net increase (decrease) in securities sold under
agreements to repurchase, federal funds purchased and
other short-term borrowings........................... (7,043) 7,233 (14,133)
Repayments of notes payable.............................. (736) (871) (24,106)
Principal reductions of loans to Employee Stock Ownership
Plan.................................................. -- 197 494
Repurchases of common stock.............................. -- -- (186)
Cash dividends paid...................................... (2,501) (2,138) (2,619)
-------- ------- -------
Net cash provided by (used in) financing
activities....................................... (26,817) 10,529 (28,999)
-------- ------- -------
Net increase (decrease) in cash and cash equivalents....... 3,923 (7,518) (150)
Cash and cash equivalents at beginning of year............. 30,860 38,378 38,528
-------- ------- -------
Cash and cash equivalents at end of year................... $ 34,783 30,860 38,378
======== ======= =======
SUPPLEMENTAL DISCLOSURES:
Interest paid............................................ $ 18,542 19,091 18,924
Income tax payments...................................... 1,060 2,134 2,622
NON-CASH INVESTING AND FINANCING ACTIVITIES:
Transfer of loans to other real estate................... -- 279 1,203
Transfer of investment securities to securities available
for sale.............................................. -- -- 60,470
Acquisition of bank equipment under capital lease
arrangements.......................................... 543 307 788
Exchange of an equity security for a loan................ -- 1,225 --
Conversion of preferred stock into common stock.......... 117 408 70
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-6
<PAGE> 89
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997, 1996 AND 1995
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Introduction
American Banks of Florida, Inc. and subsidiaries (the "Company"), through
American National Bank of Florida, its wholly-owned subsidiary ("subsidiary
bank"), is engaged in traditional commercial banking activities that include,
among others, lending, deposit and trust products and services in Duval and Clay
counties.
The accounting and reporting policies and practices of the Company conform
to generally accepted accounting principles and to predominant practices within
the banking industry. The following is a description of the more significant of
these policies and practices.
Consolidation Policy
The consolidated financial statements of the Company include the accounts
and results of operations of the subsidiary bank and other subsidiaries, all of
which are wholly-owned. All material intercompany transactions and accounts have
been eliminated in consolidation.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Securities Available for Sale and Investment Securities
Securities are classified based on management's intent on the date of
purchase. Investment securities are those that the Company has the positive
intent and ability to hold to maturity and are carried at amortized cost.
Securities available for sale are carried at fair value, with unrealized gains
and losses, net of tax, reported as a separate component of stockholders'
equity. The amortized cost of investment securities and securities available for
sale is adjusted for amortization of premiums and accretion of discounts over
the expected maturities using the interest method for mortgage-backed securities
and the straight-line method for all other debt securities. The use of the
straight-line method for all debt securities other than mortgage-backed
securities does not differ materially from the interest method. Amortization of
premiums and accretion of discounts are included in interest income. Gains and
losses are recognized using the specific identification method.
Loans
Loans are stated at the principal amount outstanding, net of unearned
income and the allowance for loan losses. Loan fees and certain direct
origination costs are capitalized and recognized as an adjustment of the yield
over the lives of the related loans. Interest income is accrued based on the
outstanding balances. If, as a result of loan evaluation procedures, management
determines that collectibility of future principal or interest on a particular
loan is questionable, that loan is placed on a non-accrual status. Interest
income on non-accrual loans is recognized only as received.
Allowance for Loan Losses
The Company's policy is to charge recognized loan losses to the allowance
for loan losses. Recoveries on loans previously charged off are added back to
the allowance. Provisions for loan losses are charged to earnings
F-7
<PAGE> 90
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
and added to the allowance to maintain it at a level deemed appropriate by
management to absorb known and inherent risks in the loan portfolio.
The provision for loan losses is based upon management's periodic detailed
analysis of the Company's loan portfolio, which encompasses a review of the
financial strength of borrowers, related collateral pledged, historical loan
loss experience, current economic conditions, the risk characteristics of the
various types of loans and other pertinent factors.
Impaired loans are loans for which it is probable that the creditor will be
unable to collect all amounts due according to the contractual terms of the loan
agreement. An impaired loan is measured based on either the present value of
expected future cash flows, the loan's observable market price, or the fair
value of the collateral. When the measure of the impaired loan is less than the
recorded investment in the loan, the impairment is recorded through a valuation
allowance. Valuation allowances related to impaired loans are included in the
allowance for loan losses. The Company reports as impaired loans all non-accrual
loans except residential mortgage loans and consumer installment loans. Cash
receipts related to impaired loans are applied to either principal under the
cost recovery method or to interest income under the cash basis method. Any
change in the present value of expected future cash flows is recognized through
the allowance for loan losses.
Bank Premises and Equipment
Bank premises and equipment, including leases meeting criteria for
capitalization, are stated at cost less accumulated depreciation and
amortization. Depreciation expense is computed principally by use of the
straight-line method over the estimated useful lives of the respective assets.
Income Taxes
The Company files consolidated Federal and state income tax returns. Under
an intercompany tax allocation arrangement, income tax charges or credits are
generally allocated to the Company and each subsidiary on the basis of their
respective taxable income or loss included in the consolidated income tax
returns.
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases. Deferred tax assets and liabilities are measured using enacted tax rates
applicable to the years in which the deferred tax asset or liability is expected
to be recovered or settled. The effect of a change in tax rates on deferred tax
assets and liabilities is recognized in income in the year that includes the
enactment date.
Trust Accounts
Assets held by the subsidiary bank in a fiduciary capacity for customers
are not included in the consolidated balance sheets, as such items are not
assets of the Company. Trust fees are recognized on the cash basis in accordance
with customary banking practice. The results of trust operations would not be
materially different if reported on the accrual method.
Off-Balance-Sheet Financial Instruments
In the ordinary course of business the Company engages in off-balance-sheet
financial transactions consisting of commitments to extend credit, commercial
letters of credit and standby letters of credit. Such financial instruments are
recorded in the financial statements when they are funded or become payable.
Cash and Cash Equivalents
For the purpose of presentation in the consolidated statement of cash
flows, cash and cash equivalents include cash and due from banks and federal
funds sold. Generally, federal funds are sold for one-day periods.
F-8
<PAGE> 91
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Earnings Per Share
Basic earnings per share is computed by dividing net income applicable to
common stockholders by the weighted average number of shares of common stock
outstanding for the period. Diluted earnings per share is computed by dividing
such net income by the sum of such weighted average number of shares and
potentially dilutive shares including convertible preferred stock and restricted
shares of certain stock bonus award plans.
Adoption of New Accounting Principles
The Company adopted Statement of Financial Accounting Standards ("SFAS")
No. 128, "Earnings Per Share," on December 31, 1997. This statement provides new
computation and disclosure requirements for earnings per share. Adoption of this
statement did not have a material impact on the financial condition or results
of operations of the Company.
In June 1997, the Financial Accounting Standards Board ("FASB") issued SFAS
No. 130, "Reporting Comprehensive Income." This statement provides new
accounting and reporting standards for reporting and displaying comprehensive
income and its components in a full set of general-purpose financial statements.
The Company adopted this statement on January 1, 1998. Adoption of this
statement did not have a material impact on the financial condition or results
of operations of the Company.
Reclassifications
Prior year amounts have been reclassified to conform with current year
presentation.
2. SECURITIES AVAILABLE FOR SALE
Amortized cost and fair value of securities available for sale at December
31, 1997 and 1996 and fair value at December 31, 1995 are summarized as follows:
<TABLE>
<CAPTION>
1997
---------------------------------------------------------
GROSS GROSS FAIR
AMORTIZED UNREALIZED UNREALIZED VALUE
COST GAINS LOSSES (CARRYING VALUE)
--------- ---------- ---------- ----------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
U.S. Treasury
securities............. $ 14,998 38 (4) 15,032
U.S. Government agency
securities............. 30,638 129 (61) 30,706
Mortgage-backed
securities............. 86,582 866 (323) 87,125
Other equity
securities............. 3,741 3,474 (60) 7,155
-------- ----- ------ -------
$135,959 4,507 (448) 140,018
======== ===== ====== =======
</TABLE>
<TABLE>
<CAPTION>
1996 1995
--------------------------------------------------------- ----------------
GROSS GROSS FAIR FAIR
AMORTIZED UNREALIZED UNREALIZED VALUE VALUE
COST GAINS LOSSES (CARRYING VALUE) (CARRYING VALUE)
--------- ---------- ---------- ---------------- ----------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
U.S. Treasury
securities............. $ 15,996 71 (42) 16,025 $ 4,991
U.S. Government agency
securities............. 46,073 31 (588) 45,516 42,672
Mortgage-backed
securities............. 105,706 870 (744) 105,832 114,382
Other debt securities.... -- -- -- -- 1,225
Other equity
securities............. 3,741 2,967 (200) 6,508 6,281
-------- ----- ------ ------- --------
$171,516 3,939 (1,574) 173,881 $169,551
======== ===== ====== ======= ========
</TABLE>
F-9
<PAGE> 92
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Securities available for sale with a carrying value of $92,625,000 at
December 31, 1997 were pledged as collateral for public deposits, trust assets,
repurchase agreements and for other purposes as required by contract or law.
Amortized cost and fair value of debt securities available for sale at
December 31, 1997, by maturity, are shown below. Contractual maturities are used
for all debt securities except mortgage-backed securities which are presented at
their expected maturities. Expected maturities will differ from contractual
maturities because borrowers may have the right to call or prepay obligations
with or without call or prepayment penalties.
<TABLE>
<CAPTION>
1997
-----------------------------
AMORTIZED FAIR VALUE
COST (CARRYING VALUE)
--------- ----------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Due in one year or less..................................... $ 23,118 23,054
Due after one year through five years....................... 76,762 77,238
Due after five years through ten years...................... 22,511 22,669
Due after ten years......................................... 9,827 9,902
-------- -------
$132,218 132,863
======== =======
</TABLE>
Proceeds from sales of securities available for sale were $12,844,000 and
$42,786,000 during 1997 and 1996, respectively. Gross gains of $233,000 and
$538,000 and gross losses of $235,000 and $43,000 were realized on those sales
during 1997 and 1996, respectively. During 1995, the Company did not sell any
securities available for sale.
3. INVESTMENT SECURITIES
Amortized cost and fair value of investment securities at December 31, 1997
and 1996 and amortized cost at December 31, 1995 are summarized as follows:
<TABLE>
<CAPTION>
1997
-----------------------------------------------------
AMORTIZED GROSS GROSS
COST UNREALIZED UNREALIZED FAIR
(CARRYING VALUE) GAINS LOSSES VALUE
---------------- ---------- ---------- -----
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Obligations of states and
political subdivisions.... $2,041 44 (1) 2,084
Mortgage-backed
securities................ 4,382 192 -- 4,574
------ --- --- -----
$6,423 236 (1) 6,658
====== === === =====
</TABLE>
<TABLE>
<CAPTION>
1996 1995
----------------------------------------------------- ----------------
AMORTIZED GROSS GROSS AMORTIZED
COST UNREALIZED UNREALIZED FAIR COST
(CARRYING VALUE) GAINS LOSSES VALUE (CARRYING VALUE)
---------------- ---------- ---------- ----- ----------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
U.S. Treasury securities.... $ -- -- -- -- $15,149
Obligations of states and
political subdivisions.... 3,295 140 (3) 3,432 3,652
Mortgage-backed
securities................ 6,063 251 (6) 6,308 8,158
------ --- --- ----- -------
$9,358 391 (9) 9,740 $26,959
====== === === ===== =======
</TABLE>
F-10
<PAGE> 93
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Investment securities with a carrying value of $2,595,000 at December 31,
1997 were pledged as collateral for public deposits, trust assets, repurchase
agreements and for other purposes as required by contract or law.
Amortized cost and fair value of debt investment securities at December 31,
1997, by maturity, are shown below. Contractual maturities are used for all debt
securities except mortgage-backed securities which are presented at their
expected maturities. Expected maturities will differ from contractual maturities
because borrowers may have the right to call or prepay obligations with or
without call or prepayment penalties.
<TABLE>
<CAPTION>
1997
-------------------------
AMORTIZED
COST FAIR
(CARRYING VALUE) VALUE
---------------- -----
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Due in one year or less..................................... $ 734 745
Due after one year through five years....................... 4,787 4,998
Due after five years through ten years...................... 902 915
------ -----
$6,423 6,658
====== =====
</TABLE>
4. LOANS AND ALLOWANCE FOR LOAN LOSSES
A five-year comparative summary of the loan portfolio at December 31,
follows:
<TABLE>
<CAPTION>
1997 1996 1995 1994 1993
-------- -------- -------- -------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Commercial and industrial loans... $114,200 110,947 73,172 79,023 69,364
Commercial mortgage loans......... 102,029 96,605 86,763 84,829 82,495
Residential mortgage loans........ 80,949 64,992 58,255 74,368 56,653
Real estate construction and land
development loans............... 23,869 23,296 25,085 24,189 32,748
Consumer installment loans........ 22,075 32,974 50,739 53,547 41,769
-------- -------- -------- -------- --------
Gross loans..................... $343,122 328,814 294,014 315,956 283,029
======== ======== ======== ======== ========
</TABLE>
The Company extends loans primarily to customers located in Duval and Clay
counties within the State of Florida. Although the Company's loan portfolio is
diversified, a significant portion of its loans are secured by real estate.
At December 31, 1997 and 1996, loans considered impaired, included in
non-accrual loans, amounted to $984,000 and $1,795,000, respectively. Included
in the allowance for loan losses is $235,000 related to $841,000 of impaired
loans at December 31, 1997 and $184,000 related to $1,366,000 of impaired loans
at December 31, 1996. The remaining impaired loans have no allowance for loan
losses because these loans are carried at or below the fair value of the
underlying collateral. For the years ended December 31, 1997 and 1996, the
average recorded investment in impaired loans was $980,000 and $640,000,
respectively; and $2,000 and $39,000, respectively, of interest income was
recognized on loans while they were impaired. Such income was recognized on a
cash-basis.
F-11
<PAGE> 94
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Following is a table classifying non-performing loans and summarizing the
effect on interest income:
<TABLE>
<CAPTION>
NON-ACCRUAL RENEGOTIATED
LOANS LOANS
----------- ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
December 31, 1997 and the year then ended:
Amount of non-performing loans............................ $1,906 1,399
Interest at contractual rates............................. 269 134
Interest recorded as income............................... 121 100
December 31, 1996 and the year then ended:
Amount of non-performing loans............................ $2,306 1,467
Interest at contractual rates............................. 374 140
Interest recorded as income............................... 269 105
</TABLE>
At December 31, 1997, the Company was not committed to lend any material
additional funds to debtors whose loans were non-performing.
In the ordinary course of business, the Company makes loans to its
executive officers and directors as well as to other related parties. These
loans are made on substantially the same terms, including interest rates and
collateral, as those prevailing at the time for comparable transactions with
unrelated parties and do not involve more than the normal risk of
collectibility. The principal amount of loans extended to directors, executive
officers or principal holders of equity securities of the Company and other
related parties was $2,535,000 and $9,387,000 at December 31, 1997 and 1996,
respectively. During 1997, $8,474,000 in new loans and advances on lines of
credit were made and repayments totaled $15,326,000.
Allowance for Loan Losses
Below is a three-year comparative summary of the activity in the allowance
for loan losses:
<TABLE>
<CAPTION>
1997 1996 1995
------ ----- -----
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Balance at beginning of the year............................ $3,453 3,134 3,303
Losses charged to the allowance........................... 758 1,875 539
Recoveries credited to the allowance...................... (270) (444) (645)
------ ----- -----
Net loan charge-offs (recoveries)...................... 488 1,431 (106)
------ ----- -----
Provision (credit) for loan losses........................ 1,625 1,750 (275)
------ ----- -----
Balance at end of the year.................................. $4,590 3,453 3,134
====== ===== =====
</TABLE>
F-12
<PAGE> 95
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
5. BANK PREMISES AND EQUIPMENT
Bank premises and equipment at December 31, 1997 and 1996 are summarized as
follows:
<TABLE>
<CAPTION>
ESTIMATED
USEFUL LIVES
(YEARS) 1997 1996
------------ ------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Land...................................................... -- $ 5,352 5,352
Buildings................................................. 15-40 12,809 12,787
Leasehold improvements.................................... 2-15 652 663
Furniture, fixtures, and equipment........................ 3-15 9,636 10,329
Capitalized equipment leases.............................. 5 1,638 1,095
------- -------
30,087 30,226
Accumulated depreciation and amortization................. (12,696) (11,709)
------- -------
Bank premises and equipment, net.......................... $17,391 18,517
======= =======
</TABLE>
The future minimum rental payments for capital leases and non-cancelable
operating leases with initial or remaining terms of one year or more at December
31, 1997 are as follows:
<TABLE>
<CAPTION>
CAPITAL OPERATING
LEASES LEASES
-------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
1998........................................................ $ 408 151
1999........................................................ 398 136
2000........................................................ 332 124
2001........................................................ 132 121
2002........................................................ 55 119
Later years................................................. -- 193
------ ---
Total minimum lease payments.............................. 1,325 844
===
Less: Amounts representing interest......................... (180)
------
Present value of net minimum lease payments................. $1,145
======
</TABLE>
Rental expense for certain facilities and equipment under operating leases
amounted to $262,000, $278,000 and $400,000 during 1997, 1996 and 1995,
respectively.
6. DEPOSITS
Interest expense on time deposits of $100,000 and over amounted to
$2,448,000, $2,224,000 and $2,294,000 for 1997, 1996 and 1995, respectively.
F-13
<PAGE> 96
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
At December 31, 1997, the scheduled maturities of time deposits are as
follows:
<TABLE>
<CAPTION>
TIME DEPOSITS TIME DEPOSITS
$100,000 LESS THAN
AND OVER $100,000
------------- -------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
1998........................................................ $34,553 95,440
1999........................................................ 8,662 44,186
2000........................................................ 3,668 28,569
2001........................................................ 451 1,395
2002 and thereafter......................................... 1,117 3,992
------- -------
$48,451 173,582
======= =======
</TABLE>
7. SHORT-TERM BORROWINGS
Short-term borrowings at December 31, 1997 and 1996 are summarized as
follows:
<TABLE>
<CAPTION>
SECURITIES
FEDERAL SOLD UNDER OTHER
FUNDS AGREEMENTS SHORT-TERM
PURCHASED TO REPURCHASE BORROWINGS
--------- ------------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Balance, 1997.......................................... $ -- 41,002 --
Maximum indebtedness at any month-end.................. 10,500 57,111 14,000
Daily average indebtedness outstanding................. 1,277 49,657 970
Average rate paid for the year......................... 5.64% 5.00 5.88
Average rate paid on period-end borrowings............. -- 4.82 --
Balance, 1996.......................................... $ -- 48,045 --
Maximum indebtedness at any month-end.................. 4,285 61,077 --
Daily average indebtedness outstanding................. 1,944 47,741 --
Average rate paid for the year......................... 5.25% 5.00 --
Average rate paid on period-end borrowings............. -- 4.85 --
</TABLE>
8. NOTES PAYABLE
Notes payable included in the consolidated balance sheets at December 31,
1997 and 1996 are as follows:
<TABLE>
<CAPTION>
1997 1996
------ -----
(DOLLARS IN
THOUSANDS)
<S> <C> <C>
9%, interest payable quarterly with quarterly principal
payments of $125 commencing October 1, 1995 through April
1, 2000 with remaining balance due July 1, 2000
(refinanced during 1997).................................. $ -- 4,344
9%, interest payable quarterly with quarterly principal
payments of approximately $109 commencing April 1, 1997
through January 1, 2000, with remaining balance due April
1, 2000 (secured by 51% of the common stock of the
subsidiary bank).......................................... 3,922 --
Capitalized lease obligations............................... 1,145 884
------ -----
$5,067 5,228
====== =====
</TABLE>
Principal maturities, during the next five years, of notes payable
outstanding at December 31, 1997 are as follows: 1998, $760,000; 1999, $779,000;
2000, $3,352,000; 2001, $122,000; 2002, $54,000.
F-14
<PAGE> 97
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
9. PREFERRED STOCK
The Company has outstanding three series of voting, cumulative, convertible
and redeemable preferred stock which are issued to its Employee Stock Ownership
Plan ("ESOP"). The terms of the preferred stock series' are as follows:
<TABLE>
<CAPTION>
SERIES B SERIES C SERIES D
-------- -------- --------
<S> <C> <C> <C>
Year of issuance........................................... 1990 1991 1992
Number of shares originally issued......................... 13,334 13,334 13,334
Aggregate series issuance price............................ $400,000 400,000 400,000
Annual dividend per share.................................. $ 2.70 3.00 2.70
Liquidation value per share................................ $ 30.00 30.00 30.00
Number of shares outstanding at December 31, 1997.......... 9,771 10,225 10,897
</TABLE>
At the option of the ESOP trustee, each share of the preferred stock is
convertible into one share of common stock. However, if at conversion the fair
value of the common stock is less than $30 per share, then the preferred stock
is convertible into common shares having a fair value equal to $30 per share.
Additionally, if the preferred stock is converted, due to distributions to
terminated ESOP participants, during the first ten years after issuance, a
conversion premium will be paid initially equal to the annual dividend,
decreasing 10% each year the stock remains outstanding.
After seven years from issuance, the preferred stock is redeemable at the
option of the Company at $30 per share. However, if redemption occurs during the
first ten years after issuance, a call premium will be paid initially equal to
the annual dividend, decreasing 10% each year the stock remains outstanding. The
redemption price along with any call premium is payable in common shares having
an equal fair value. Under certain circumstances, the preferred stock may be
redeemed at the option of the Company prior to seven years from issuance. The
Series B became eligible for redemption by the Company on March 19, 1997;
however, the Company does not intend to redeem these shares.
During 1997, 3,899 preferred shares were converted into 4,051 common
shares. During 1996, 13,603 preferred shares were converted into 13,730 common
shares. Included in these converted preferred shares were 10,609 Series A
preferred shares converted December 26, 1996 by the trustee, in response to a
Notice of Redemption issued by the Company.
10. INCOME TAXES
The components of income tax expense are as follows:
<TABLE>
<CAPTION>
1997 1996 1995
------- ----- -----
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Current:
Federal................................................... $ 1,556 1,326 1,049
State..................................................... 63 42 34
------- ----- -----
1,619 1,368 1,083
------- ----- -----
Deferred:
Federal................................................... (360) (57) 1
State..................................................... (21) (15) --
------- ----- -----
(381) (72) 1
------- ----- -----
Total income tax expense............................... $ 1,238 1,296 1,084
======= ===== =====
</TABLE>
F-15
<PAGE> 98
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The following table summarizes the difference between total income tax
expense and the amount computed by applying the expected federal income tax rate
to income before income tax expense:
<TABLE>
<CAPTION>
1997 1996 1995
------- ----- -----
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Income before income tax expense............................ $ 2,140 3,870 3,647
------- ----- -----
Tax at 34%.................................................. 727 1,316 1,240
------- ----- -----
Increase (decrease) in taxes:
Tax exempt interest and dividends......................... (71) (80) (171)
State income tax, net of federal income tax benefit....... 28 19 37
Deductible dividends paid................................. (62) (124) (106)
Sale related expenses..................................... 230 -- --
Non-deductible expenses................................... 360 51 53
Other, net................................................ 26 114 31
------- ----- -----
Total increase (decrease) in taxes..................... 511 (20) (156)
------- ----- -----
Total income tax expense............................... $ 1,238 1,296 1,084
======= ===== =====
Effective rate.............................................. 57.8% 33.5 29.7
======= ===== =====
</TABLE>
Deferred income taxes reflect the impact of differences between the
financial statement carrying values and tax bases of assets and liabilities. The
temporary differences which created deferred tax assets and liabilities at
December 31, 1997 and 1996 are as follows:
<TABLE>
<CAPTION>
1997 1996
----------------------- -----------------------
DEFERRED DEFERRED DEFERRED DEFERRED
TAX TAX TAX TAX
ASSETS LIABILITIES ASSETS LIABILITIES
-------- ----------- -------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Loan loss reserve................................. $1,725 -- $1,339 --
Other real estate transactions.................... 73 -- 83 --
Depreciation...................................... 288 -- 262 --
SFAS No. 115 equity adjustment.................... -- 1,431 -- 833
Other............................................. 566 426 509 347
------ ----- ------ -----
Total deferred taxes......................... $2,652 1,857 $2,193 1,180
====== ===== ====== =====
</TABLE>
Net deferred tax assets included in other assets in the consolidated
balance sheets were $795,000 and $1,013,000 at December 31, 1997 and 1996,
respectively. The Company has not recorded a valuation allowance as it has
sufficient refundable taxes paid in available carryback years to realize its
recorded deferred tax assets.
11. FAIR VALUE OF FINANCIAL INSTRUMENTS
Fair value estimates, methods, and assumptions for certain financial
instruments are set forth below.
Cash and Short-Term Investments
For cash and short-term investments (including cash and due from banks,
federal funds sold, and interest-bearing deposits in other banks), the carrying
value is a reasonable estimate of fair value.
F-16
<PAGE> 99
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Securities Available for Sale and Investment Securities
The fair values of securities available for sale and investment securities
are based on quoted market prices or dealer quotes. If a quoted market price is
not available, fair value is estimated using quoted market prices for similar
securities.
Loans
Fair values are estimated for portfolios of loans with similar financial
characteristics. Loans are segregated by type such as commercial and industrial,
commercial mortgage, residential mortgage, real estate construction and land
development, and consumer installment.
The fair value of loans is calculated by discounting scheduled cash flows
through the estimated maturity dates using estimated market discount rates that
reflect the credit and interest rate risk inherent in the loan portfolio. The
estimate of maturity is based on the Company's experience with repayments of
each loan classification, modified, as required, by an estimate of the effect of
current economic and lending conditions. The effect of non-performing loans is
considered in assessing the credit risk inherent in the fair value estimate.
Deposits
The fair value of deposits with no stated maturity, such as demand deposit
accounts, NOW accounts, savings accounts, and money market deposit accounts, is
the amount payable on demand as of the balance sheet date. The fair value of
fixed-maturity certificates of deposit is based on the discounted value of
contractual cash flows. The discount rate is estimated using the rates currently
offered for deposits of similar remaining maturities. The fair value estimates
do not include the benefit that results from the low-cost funding provided by
the deposits compared to the cost of borrowing funds in the market.
Securities Sold Under Agreements to Repurchase and Federal Funds Purchased
The carrying value approximates fair value because of the short-term nature
of these instruments.
Notes Payable
The fair value of the Company's notes payable is estimated based on current
rates offered the Company for debt of similar remaining maturities.
F-17
<PAGE> 100
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The Company's estimates of the fair value of its financial instruments are
as follows:
<TABLE>
<CAPTION>
1997 1996
------------------- -------------------
CARRYING FAIR CARRYING FAIR
VALUE VALUE VALUE VALUE
-------- ------- -------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Financial assets:
Cash and short-term investments............... $ 35,217 35,217 $ 31,547 31,547
Securities available for sale................. 140,018 140,018 173,881 173,881
Investment securities......................... 6,423 6,658 9,358 9,740
Loans, net of unearned income................. 342,634 328,171
Less: Allowance for loan losses............... (4,590) (3,453)
Net loans.................................. 338,044 341,636 324,718 326,694
Financial liabilities:
Deposits:
Without stated maturities.................. $228,341 228,341 $238,528 238,528
With stated maturities..................... 222,033 224,281 228,383 231,834
Securities sold under agreements to repurchase
and federal funds purchased................ 41,002 41,002 48,045 48,045
Notes payable................................. 5,067 5,107 5,228 5,270
</TABLE>
Limitations
Fair value estimates are made at a specific point in time, based on
relevant market data and information about the financial instrument. These
estimates do not reflect any premium or discount that could result from offering
for sale at one time the Company's entire holdings of a particular instrument.
Because no market exists for a significant portion of the Company's financial
instruments, fair value estimates are based on judgments regarding future
expected loss experience, current economic conditions, risk characteristics of
various financial instruments, and other factors. These estimates are subjective
in nature and involve uncertainties and matters of significant judgment and
therefore cannot be determined with precision. Changes in assumptions could
significantly affect the estimates.
12. EMPLOYEE BENEFIT PLANS
The Company's ESOP is funded by annual discretionary contributions of
either the Company's common stock or cash. Cash contributions of $100,000,
$125,000 and $541,000 were made to the ESOP during 1997, 1996 and 1995,
respectively.
The Company has established stock bonus award plans for certain key
officers. Certain of the plans provide for the issuance of common stock as of
the date of grant. Other plans provide for the issuance of shares of common
stock based upon the attainment of a specified profitability goal. As of January
1, 1996, all eligible shares had been issued. Under the plans, no amounts are
paid by the grantees as consideration and the shares contain certain
restrictions as outlined in the plan documents. For the performance-based plans,
restrictions lapse equally over a five-year period based on the profitability of
the Company as measured by return on assets. For all other plans, restrictions
lapse during 1998. All of the stock bonus award plans contain provisions which
allow for accelerated vesting of the shares upon the occurrence of certain
events, including the sale of a majority interest of the stock of the Company
(Note 20 "Subsequent Event"). The following is a schedule of shares subject to
restrictions:
F-18
<PAGE> 101
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
PERFORMANCE OTHER
BASED PLANS PLANS
----------- -------
<S> <C> <C>
Shares subject to restrictions at December 31, 1995......... -- 27,000
1996 shares awarded subject to restrictions............... 90,000 --
1996 shares released from restrictions.................... -- (13,000)
------ -------
Shares subject to restrictions at December 31, 1996......... 90,000 14,000
1997 shares released from restrictions.................... -- (11,000)
------ -------
Shares subject to restrictions at December 31, 1997......... 90,000 3,000
====== =======
</TABLE>
Compensation expense recorded during 1997, 1996 and 1995 was $78,000,
$275,000 and $318,000, respectively.
With respect to the performance-based plans, 90,000 shares of common stock
issued pursuant to the 1995 stock bonus agreements between the Company and
Raymond K. Mason, Jr., Charles J. Franson, and T. Keith Perry are subject to a
dispute concerning the validity of their issuance. Management does not believe
that this dispute will have a material adverse effect on the Company, although
the outcome of the dispute may have an impact on the consideration received by
each shareholder in the transaction referred to in Note 20 "Subsequent Event."
The Company has established a 401(k) employee benefit plan. All employees
who have completed at least one year of employment and are at least twenty-one
years of age are eligible to participate in the plan. The Company contributes to
the plan, on a matching basis, cash equal to $.75 per $1.00 of the employee's
contribution, up to a maximum of 5% of compensation. The Company's matching
contributions amounted to $243,000, $244,000 and $275,000 during 1997, 1996 and
1995, respectively .
13. OFF-BALANCE-SHEET FINANCIAL INSTRUMENTS
The Company's consolidated balance sheets do not reflect various
commitments and contingent liabilities which arise in the normal course of
business and which involve elements of credit risk, interest rate risk, and
liquidity risk. These off-balance-sheet commitments and contingent liabilities
at December 31, 1997 and 1996 are as follows:
<TABLE>
<CAPTION>
1997 1996
-------- ------
(NOTIONAL AMOUNTS
IN THOUSANDS)
<S> <C> <C>
Commitments to extend credit................................ $105,446 94,930
Standby letters of credit................................... $ 4,279 2,465
</TABLE>
Of the commitments to extend credit presented above, $17,624,000 and
$20,814,000 related to construction loan commitments at December 31, 1997 and
1996, respectively.
Both commitments to extend credit and standby letters of credit include
exposure to some credit loss in the event of non-performance of the customer.
However, the Company generally uses the same credit and collateral policies and
procedures for credit commitments and letters of credit as those used for
extensions of credit that are recorded on the consolidated balance sheets.
Because these instruments have fixed maturity dates, and because many of them
expire without being drawn upon, they do not generally present any significant
liquidity risk to the Company. The majority of these commitments are generally
structured for terms not exceeding one year using floating interest rates.
To manage its interest rate sensitivity, the subsidiary bank entered into
an interest rate swap agreement with an unrelated counterparty on January 10,
1996. The notional amount of the interest rate swap was $40,000,000 on which the
subsidiary bank received a fixed rate of interest equal to 5% and paid a
floating rate of interest equal to 1 month LIBOR (reset monthly). The term of
the interest rate swap was 15 months and
F-19
<PAGE> 102
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
expired April 10, 1997. The subsidiary bank made net payments to the
counterparty amounting to $52,000 and $178,000 during 1997 and 1996,
respectively, which is reflected as a decrease in interest income earned on
loans in the consolidated statements of income.
14. EARNINGS PER SHARE
The reconciliation between basic and diluted earnings per common share is
as follows:
<TABLE>
<CAPTION>
1997 1996 1995
-------- -------- --------
(DOLLARS AND SHARES IN THOUSANDS,
EXCEPT PER SHARE DATA)
<S> <C> <C> <C>
Basic:
Net income................................................ $ 902 2,574 2,563
Preferred stock dividends................................. (92) (131) (139)
----- ----- -----
Net income applicable to common stockholders................ $ 810 2,443 2,424
===== ===== =====
Basic earnings per common share............................. $ .75 2.30 2.31
----- ----- -----
Average common shares....................................... 1,087 1,062 1,050
----- ----- -----
Diluted:
Net income applicable to common stockholders.............. $ 810 2,443 2,424
Dividends on dilutive, convertible preferred stock........ -- -- --
----- ----- -----
Net income applicable to common stockholders................ $ 810 2,443 2,424
===== ===== =====
Diluted earnings per common share........................... $ .74 2.27 2.25
----- ----- -----
Average common shares....................................... 1,087 1,062 1,050
Stock bonus award plans................................... 4 15 28
----- ----- -----
Average common shares -- diluted............................ 1,091 1,077 1,078
===== ===== =====
</TABLE>
15. RELATED-PARTY TRANSACTIONS
The subsidiary bank leases office space to an affiliate, in which a
director of the Company has an ownership interest. Lease payments by the
affiliate to the subsidiary bank were $152,000, $147,000 and $141,000 during
1997, 1996 and 1995, respectively.
During 1996, an affiliate, in which certain directors and officers of the
Company have ownership interests, acquired from the ESOP shares of Company
common stock in exchange for cash of approximately $400,000, determined by an
appraised value of $34.62 per share. The purpose of this transaction was to
provide liquidity to the ESOP to enable it to fund cash distributions to
terminated participants.
During April 1996, an affiliate of the Company redeemed all outstanding
shares of its Series A cumulative preferred stock held by the Company in
exchange for a promissory note secured by shares of the Company's common stock.
All material terms including rate, payment amounts and maturity date remained
the same. During 1997, the promissory note was repaid.
16. REGULATORY MATTERS
The principal source of cash flow for the parent company is dividends from
the subsidiary bank. Payment of dividends by the subsidiary bank is subject to
certain regulatory restrictions. The most common restriction limits dividends
declared to the subsidiary bank's net profits for the current year, combined
with net retained profits for the preceding two years. Payment of dividends is
also limited by minimum capital requirements, which the subsidiary bank exceeds.
On December 31, 1997, $1,411,000 was available for payment of dividends.
F-20
<PAGE> 103
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Banking subsidiaries are required by law to maintain noninterest-bearing
deposits to meet reserve requirements. At December 31, 1997, these deposits
totaled $3,601,000.
The Company and the subsidiary bank are subject to regulatory capital
requirements administered by federal banking agencies. Failure to meet minimum
capital requirements can initiate actions by regulators that, if undertaken,
could have an effect on the Company's financial statements. Under capital
adequacy guidelines and the regulatory framework for prompt corrective action,
the Company must meet capital guidelines that involve quantitative measures of
the Company's assets, liabilities, and certain off-balance-sheet items. The
Company's capital amounts and classification are also subject to qualitative
judgments by the regulators. Management believes, as of December 31, 1997, that
the Company meets all capital adequacy requirements to which it is subject.
As of December 31, 1997, the Federal Reserve Bank of Atlanta and the
Comptroller of the Currency consider the Company to be "well capitalized" under
the regulatory framework for prompt corrective action. To be categorized as well
capitalized, the Company must maintain minimum ratios as set forth in the table.
There are no conditions or events that management believes have changed the
Company's category.
The Company's actual capital amounts and ratios are presented below:
<TABLE>
<CAPTION>
CAPITAL LEVELS
-----------------------------------------------------
ADEQUATELY
ACTUAL CAPITALIZED WELL CAPITALIZED
--------------- --------------- -----------------
AS OF DECEMBER 31, 1997 AMOUNT RATIO AMOUNT RATIO AMOUNT RATIO
----------------------- ------- ----- ------- ----- -------- ------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Total risk-based capital (to risk
weighted assets):(1)
Consolidated........................... $42,714 11.53% $29,646 8.00% $37,058 10.00%
Subsidiary Bank........................ 45,108 12.16 29,681 8.00 37,101 10.00
Tier 1 capital (to risk weighted
assets):(1)
Consolidated........................... 38,124 10.29 14,823 4.00 22,235 6.00
Subsidiary Bank........................ 40,518 10.92 14,840 4.00 22,260 6.00
Tier 1 capital (to average assets):(1)
Consolidated........................... 38,124 7.00 16,343 3.00 27,239 5.00
Subsidiary Bank........................ 40,518 7.45 16,319 3.00 27,198 5.00
</TABLE>
- ---------------
(1) As defined by the regulations.
<TABLE>
<CAPTION>
CAPITAL LEVELS
-----------------------------------------------------
ADEQUATELY
ACTUAL CAPITALIZED WELL CAPITALIZED
--------------- --------------- -----------------
AS OF DECEMBER 31, 1996 AMOUNT RATIO AMOUNT RATIO AMOUNT RATIO
----------------------- ------- ----- ------- ----- -------- ------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Total risk-based capital (to risk
weighted assets):(1)
Consolidated........................... $43,097 11.80% $29,209 8.00% $36,511 10.00%
Subsidiary Bank........................ 43,806 12.01 29,185 8.00 36,481 10.00
Tier 1 capital (to risk weighted
assets):(1)
Consolidated........................... 39,644 10.86 14,604 4.00 21,907 6.00
Subsidiary Bank........................ 40,353 11.06 14,592 4.00 21,889 6.00
Tier 1 capital (to average assets):(1)
Consolidated........................... 39,644 7.00 17,000 3.00 28,333 5.00
Subsidiary Bank........................ 40,353 7.15 16,926 3.00 28,210 5.00
</TABLE>
- ---------------
(1) As defined by the regulations.
F-21
<PAGE> 104
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
17. COMMITMENTS AND CONTINGENCIES
The Company's federal income tax returns for the years ended December 31,
1992 through 1995 are currently being examined by the Internal Revenue Service
(the "Service"). No adjustments have been proposed at this time; however, the
Service has provided the Company with certain "Explanations of Items," which
represent the Service's preliminary position and which may ultimately represent
proposed adjustments to be included in the Revenue Agent's Report. These items,
if asserted in their entirety, include amounts which could increase the
Company's taxable income during the tax years under audit by approximately $7.7
million, which would result in a deficiency (including penalties and after-tax
interest) of approximately $4.1 million. Management disagrees with the informal
position taken by the Service and intends to vigorously defend against it.
On May 14, 1997, the subsidiary bank entered into an agreement with a
third-party vendor to provide data processing services. In June, the Company's
Board of Directors notified the Company's stockholders that a consensus had
developed among the members of the board of directors that it was in the best
interest of the Company and its stockholders to explore the possibility of the
Company's sale or merger. On July 1, 1997, the subsidiary bank advised the
vendor of the potential sale and instructed it to suspend data processing
conversion activities immediately. The vendor claims that payments aggregating
approximately $1.7 million are due pursuant to the agreement. Management of the
Company disputes this claim and the parties have commenced a dispute resolution
process as outlined in the agreement.
Although the ultimate outcome of these matters is unknown at the present
time, management believes that the Company's exposure will not result in a
significant adverse impact on the consolidated financial position, liquidity, or
results of operations of the Company.
18. SUPPLEMENTARY INFORMATION
Components of other expenses in excess of 1% of total interest income and
total other income which are not disclosed separately elsewhere, are presented
below for each of the respective years.
<TABLE>
<CAPTION>
1997 1996 1995
------ ----- -----
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Professional fees........................................... $3,122 2,078 1,787
Item processing services.................................... 535 488 219*
Printing and supplies....................................... 553 542 589
Contingent liabilities...................................... 2,247 --* 100*
FDIC/OCC assessments........................................ 179* 122* 676
</TABLE>
- ---------------
* Less than 1% of the appropriate threshold.
19. LEGAL MATTERS
In the ordinary course of its lending activities, the Company routinely
initiates actions to foreclose real estate and other collateral securing its
loans. Certain borrowers are defending these actions or have filed counterclaims
against the Company. The Company is defending or has been threatened with
various other litigation arising from its banking activities. In the opinion of
management, these proceedings will not have a significant adverse effect on the
Company's financial condition, operations, or liquidity.
20. SUBSEQUENT EVENT
On February 18, 1998, SouthTrust Corporation ("SouthTrust"), SouthTrust of
Alabama, Inc. and the Company entered into a definitive merger agreement in
which SouthTrust will acquire all of the outstanding capital stock of the
Company. The transaction is structured as a tax-free, stock-for-stock exchange
of approximately 2.157 shares of SouthTrust common stock for each share of
Company common stock and will
F-22
<PAGE> 105
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
be accounted for as a pooling of interests. The merger is subject to approval by
the stockholders of the Company and the receipt of approvals from all
appropriate regulatory authorities. The transaction is expected to close during
the second or third quarter of 1998.
21. PARENT COMPANY FINANCIAL INFORMATION
The following are condensed statements of the financial condition of the
parent company at December 31:
PARENT COMPANY BALANCE SHEETS
<TABLE>
<CAPTION>
1997 1996
---------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Assets:
Cash...................................................... $ 3,221 2,291
Securities available for sale (amortized cost of $95 in
1997 and 1996)......................................... 3,568 3,062
Investment in subsidiary bank............................. 40,957 40,163
Loans..................................................... -- 1,021
Premises and equipment.................................... 65 136
Other assets.............................................. 677 797
------- ------
Total assets........................................... $48,488 47,470
======= ======
Liabilities:
Other liabilities......................................... 3,812 1,947
Notes payable............................................. 3,922 4,344
------- ------
Total liabilities...................................... 7,734 6,291
------- ------
Stockholders' equity........................................ 40,754 41,179
------- ------
Total liabilities and shareholders' equity............. $48,488 47,470
======= ======
</TABLE>
F-23
<PAGE> 106
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The operating results of the parent company for the three years ended
December 31, are shown below:
PARENT COMPANY STATEMENTS OF INCOME
<TABLE>
<CAPTION>
1997 1996 1995
------- ----- -----
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Income:
Income from subsidiary bank:
Dividends.............................................. $ 4,000 3,750 2,525
Interest............................................... 42 34 20
Other operating income.................................... 75 389 133
------- ----- -----
Total income........................................... 4,117 4,173 2,678
------- ----- -----
Expenses:
Salaries, wages and related expenses...................... 235 839 1,237
Interest on notes payable................................. 406 436 511
Other operating expenses.................................. 3,548 906 783
------- ----- -----
Total expenses......................................... 4,189 2,181 2,531
------- ----- -----
Income before income taxes and equity in undistributed
income of subsidiaries.................................... (72) 1,992 147
Income tax benefit.......................................... 949 647 970
------- ----- -----
Income before equity in undistributed income of
subsidiaries.............................................. 877 2,639 1,117
Equity in undistributed income of subsidiaries.............. 25 (65) 1,446
------- ----- -----
Net income............................................. $ 902 2,574 2,563
======= ===== =====
</TABLE>
F-24
<PAGE> 107
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The cash flows for the parent company for the three years ended December
31, are shown below:
PARENT COMPANY STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
1997 1996 1995
------- ------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Cash flows from operating activities:
Net income................................................ $ 902 2,574 2,563
Adjustments to reconcile net income to net cash provided
by operating activities:
Equity in undistributed (earnings) losses of
subsidiaries........................................... (25) 65 (1,446)
Depreciation of premises and equipment.................... 16 4 11
Gain on dispositions of securities available for sale..... -- (262) --
Gain on dispositions of premises and equipment............ (13) (5) --
Amortization of unearned compensation..................... 78 275 318
Net deferred income tax benefit........................... (4) (11) (26)
Decrease (increase) in other assets....................... (130) 13 2,724
Increase in other liabilities............................. 1,941 3 694
Other, net................................................ 30 11 52
------- ------- -------
Net cash provided by operating activities.............. 2,795 2,667 4,890
------- ------- -------
Cash flows from investing activities:
Proceeds from sales of securities available for sale...... -- 220 204
Net decrease in loans..................................... 1,021 248 93
Purchases of premises and equipment....................... (7) (84) --
Proceeds from sales of premises and equipment............. 75 79 --
------- ------- -------
Net cash provided by investing activities.............. 1,089 463 297
------- ------- -------
Cash flows from financing activities:
Repayments of notes payable............................... (453) (697) (2,070)
Principal reductions of loans to Employee Stock Ownership
Plan................................................... -- 197 494
Repurchases of common stock............................... -- -- (186)
Cash dividends paid....................................... (2,501) (2,138) (2,619)
------- ------- -------
Net cash used in financing activities.................. (2,954) (2,638) (4,381)
------- ------- -------
Net increase in cash and cash equivalents................... 930 492 806
Cash and cash equivalents at the beginning of the year...... 2,291 1,799 993
------- ------- -------
Cash and cash equivalents at the end of the year............ $ 3,221 2,291 1,799
======= ======= =======
</TABLE>
F-25
<PAGE> 108
EXHIBIT A
================================================================================
AGREEMENT AND PLAN OF MERGER
by and between
American Banks of Florida, Inc.,
SouthTrust Corporation and
SouthTrust of Alabama, Inc.
Dated as of February 18, 1998
================================================================================
<PAGE> 109
TABLE OF CONTENTS
ARTICLE I
CERTAIN DEFINITIONS
ARTICLE II
THE MERGER; EFFECTS OF THE MERGER
<TABLE>
<S> <C> <C>
2.01. The Merger..............................................................A-4
(a) The Surviving Corporation......................................A-4
(b) Effectiveness And Effects Of The Merger........................A-5
(c) Certificate Of Incorporation And By-Laws.......................A-5
2.02. Effective Date And Effective Time.......................................A-5
2.03. Tax Consequences........................................................A-5
ARTICLE III
MERGER CONSIDERATION; EXCHANGE PROCEDURES
3.01. Merger Consideration....................................................A-5
(a) Outstanding Company Common Stock...............................A-5
(b) Outstanding Company Preferred Stock............................A-6
(c) Outstanding Merger Sub Common Stock............................A-6
3.02. Rights As Stockholders; Stock Transfers.................................A-6
3.03. Fractional Shares.......................................................A-6
3.04. Exchange Procedures.....................................................A-6
3.05. Dissenting Stockholders.................................................A-7
3.06. Anti-Dilution Provisions................................................A-7
3.07. Treasury Shares.........................................................A-8
ARTICLE IV
ACTIONS PENDING MERGER
4.01. Ordinary Course.........................................................A-8
4.02. Capital Stock...........................................................A-8
4.03. Dividends, Etc..........................................................A-8
4.04. Compensation; Employment Agreements; Etc................................A-8
4.05. Benefit Plans...........................................................A-9
4.06. Acquisitions And Dispositions...........................................A-9
4.07. Amendments..............................................................A-9
4.08. Accounting Methods......................................................A-9
4.09. Adverse Actions.........................................................A-9
4.10. Agreements..............................................................A-9
ARTICLE V
REPRESENTATIONS AND WARRANTIES
5.01. Disclosure Schedules...................................................A-10
5.02. Standard...............................................................A-10
5.03. Representations And Warranties.........................................A-10
</TABLE>
A-ii
<PAGE> 110
<TABLE>
<S> <C> <C>
(a) Organization, Standing and Authority..........................A-10
(b) Shares........................................................A-10
(c) Subsidiaries..................................................A-11
(d) Corporate Power...............................................A-11
(e) Corporate Authority...........................................A-11
(f) No Defaults...................................................A-11
(g) Financial Reports And SEC Documents...........................A-12
(h) Litigation; Regulatory Action.................................A-12
(i) Compliance With Laws..........................................A-12
(j) Defaults......................................................A-13
(k) No Brokers....................................................A-13
(l) Employee Benefit Plans........................................A-13
(m) Labor Matters.................................................A-14
(n) Takeover Laws.................................................A-14
(o) Environmental Matters.........................................A-14
(p) Tax Treatment.................................................A-14
(q) Regulatory Approvals..........................................A-14
(r) No Material Adverse Effect....................................A-14
(s) Adequacy of Allowance and Other Matters.......................A-14
ARTICLE VI
COVENANTS
6.01. Best Efforts...........................................................A-16
6.02. Stockholder Approvals..................................................A-16
6.03. Registration Statement.................................................A-16
6.04. Press Releases.........................................................A-17
6.05. Access; Information....................................................A-17
6.06. Acquisition Proposals..................................................A-17
6.07. Affiliate Agreements...................................................A-18
6.08. Takeover Laws..........................................................A-18
6.09. No Rights Triggered....................................................A-18
6.10. Shares Listed..........................................................A-19
6.11. Regulatory Applications................................................A-19
6.12. Indemnification; Directors' And Officers' Insurance....................A-19
6.13. Continuing Employees...................................................A-21
6.14. Notification Of Certain Matters........................................A-21
6.15. Certain Modifications; Restructuring Charges...........................A-22
6.16. Sale of Certain Real Property..........................................A-22
6.17. Bank Merger............................................................A-22
6.18. Stock Option Agreement.................................................A-22
6.19. Compliance with WARN...................................................A-22
ARTICLE VII
CONDITIONS TO CONSUMMATION OF THE MERGER
7.01. Shareholder Vote.......................................................A-23
7.02. Regulatory Approvals...................................................A-23
7.03. Third Party Consents...................................................A-23
7.04. No Injunction, Etc.....................................................A-23
7.05. Representations, Warranties And Covenants Of Parent....................A-23
7.06. Representations, Warranties And Covenants Of The Company...............A-23
</TABLE>
A-iii
<PAGE> 111
<TABLE>
<S> <C> <C>
7.07. Effective Registration Statement.......................................A-23
7.08. Tax Opinion............................................................A-24
7.09. Listing................................................................A-24
7.10. Pooling Treatment......................................................A-24
7.11. Escrow of Disputed Shares..............................................A-24
7.12. Dissent................................................................A-25
ARTICLE VIII
TERMINATION
8.01 Termination............................................................A-25
(a) Mutual Consent................................................A-25
(b) Breach........................................................A-25
(c) Delay.........................................................A-25
(d) No Approval...................................................A-25
8.02. Effect Of Termination And Abandonment..................................A-26
ARTICLE IX
MISCELLANEOUS
9.01. Survival...............................................................A-26
9.02. Waiver; Amendment......................................................A-26
9.03. Counterparts...........................................................A-26
9.04. Governing Law..........................................................A-26
9.05. Expenses...............................................................A-26
9.06. Confidentiality........................................................A-26
9.07. Notices................................................................A-26
9.08. Entire Understanding; No Third Party Beneficiaries.....................A-27
9.09. Headings...............................................................A-27
</TABLE>
A-iv
<PAGE> 112
AGREEMENT AND PLAN OF MERGER, dated as of February 18, 1998
(this "Agreement"), by and between American Banks of Florida, Inc. (the
"Company"), and SouthTrust Corporation ("Parent") and SouthTrust of Alabama,
Inc., a wholly-owned direct subsidiary of Parent ("Merger Sub").
WITNESSETH:
WHEREAS, the Boards of Directors of the Company and Parent
have determined that it is in the best interests of their respective companies
and their stockholders to consummate the strategic business combination
transaction provided for herein in which the Company will, subject to the terms
and conditions set forth herein, merge (the "Merger") with and into Merger Sub
so that Merger Sub is the surviving corporation in the Merger;
WHEREAS, the parties desire to make certain representations,
warranties and agreements in connection with the Merger and also to prescribe
certain conditions to the Merger; and
WHEREAS, the parties intend that the Merger constitute a
"reorganization" within the meaning of Section 368(a) of the Code;
NOW, THEREFORE, in consideration of the mutual covenants,
representations, warranties and agreements contained herein, and intending to be
legally bound hereby, the parties agree as follows:
ARTICLE I
CERTAIN DEFINITIONS
As used in this Agreement, the following terms shall have the
meanings set forth below:
"ABCA" shall have the meaning set forth in Section 2.01(a).
"Affiliate" shall have the meaning set forth in Section
6.07(a).
"Agreement" shall have the meaning set forth in the recitals
to this Agreement.
"ANBF" shall have the meaning set forth in Section 4.03.
"Articles of Incorporation" shall have the meaning set forth
in Section 4.07.
"BCA" shall have the meaning set forth in Section 2.01(b).
"By-Laws" shall have the meaning set forth in Section 4.07.
"Claim" shall have the meaning set forth in Section 6.12(a).
"Code" shall mean the Internal Revenue Code of 1986, as
amended.
"Company" shall have the meaning set forth in the recitals to
this Agreement.
"Company Common Stock" shall have the meaning set forth in
Section 3.01(a).
"Company Meeting" shall have the meaning set forth in Section
6.02.
A-1
<PAGE> 113
"Company Preferred Stock" shall mean the Series A Preferred
Stock, Series B Preferred Stock, Series C Preferred Stock and Series D
Preferred Stock of the Company.
"Company Stock" shall mean Company Common Stock and Company
Preferred Stock.
"Compensation and Benefit Plans" shall have the meaning set
forth in Section 5.03(l).
"Confidential Memorandum" shall mean the confidential
memorandum prepared by Wheat First to assist interested parties in
making their evaluation of the Company and sent to such parties between
September 5, 1997 and September 15, 1997.
"Confidentiality Agreement" shall mean the Confidentiality
Agreement, dated September 5, 1997, between the Company (represented by
Wheat First) and Parent.
"Continuing Employees" shall have the meaning set forth in
Section 6.13.
"Disclosure Schedule" shall have the meaning set forth in
Section 5.01.
"Dissenting Shares" shall have the meaning set forth in
Section 3.05.
"Effective Date" shall have the meaning set forth in Section
2.02.
"Effective Time" shall have the meaning set forth in Section
2.02.
"Environmental Laws" shall have the meaning set forth in
Section 5.03(o).
"ERISA" shall mean the Employee Retirement Income Security Act
of 1974, as amended.
"ERISA Affiliate" shall have the meaning set forth in Section
5.03(l).
"Evaluation Material" shall mean all financial statements and
other documents provided by the Company directly or through Wheat First
to Parent in contemplation of the Merger.
"Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended, and the rules and regulations thereunder.
"Exchange Agent" shall have the meaning set forth in Section
3.04(a).
"Exchange Fund" shall have the meaning set forth in Section
3.04(a).
"Exchange Ratio" shall have the meaning set forth in Section
3.01(a).
"FDIC" shall mean the Federal Deposit Insurance Corporation.
"Federal Reserve Board" shall mean the Board of Governors of
the Federal Reserve System.
"Indemnified Party" shall have the meaning set forth in
Section 6.12(a).
"Liens" shall mean any charge, mortgage, pledge, security
interest, restriction, claim, lien, or encumbrance.
"Material Adverse Effect" shall mean with respect to the
Company or Parent, respectively, any
A-2
<PAGE> 114
effect that (i) is material and adverse to the financial position,
results of operations or business of the Company and its Subsidiaries
taken as a whole, or Parent and its Subsidiaries taken as a whole,
respectively, or (ii) would materially impair the ability of the
Company or Parent, respectively, to perform its obligations under this
Agreement or otherwise materially threaten or materially impede the
consummation of the Merger and the other transactions contemplated by
this Agreement; provided, however, that Material Adverse Effect shall
not be deemed to include the impact of (a) changes in banking and
similar laws of general applicability or interpretations thereof by
courts or governmental authorities, (b) changes in generally accepted
accounting principles or regulatory accounting requirements applicable
to banks or savings associations and their holding companies generally,
(c) actions or omissions of the Company, Parent or Merger Sub taken
with the prior written consent of the Company or Parent, as applicable,
in contemplation of the transactions contemplated hereby, (d)
circumstances affecting banks and their holding companies generally,
and (e) the effects of the Merger and compliance with the provisions of
this Agreement on the operating performance of such party and its
Subsidiaries.
"Maximum Amount" shall have the meaning set forth in Section
6.12(c).
"Merger" shall have the meaning set forth in the recitals to
this Agreement and in Section 2.01(a).
"Merger Consideration" shall have the meaning set forth in
Section 3.01.
"Merger Sub" shall have the meaning set forth in the recitals
to this Agreement.
"Merger Sub Common Stock" shall have the meaning set forth in
Section 3.01(c).
"NASDAQ" shall mean the Nasdaq Stock Market, Inc.'s National
Market.
"New Certificates" shall have the meaning set forth in Section
3.04(a).
"OCC" shall mean the Office of the Comptroller of the
Currency.
"Old Certificates" shall have the meaning set forth in Section
3.02.
"OTS" shall mean the Office of Thrift Supervision.
"Parent" shall have the meaning set forth in the recitals to
this Agreement.
"Parent Common Stock" shall have the meaning set forth in
Section 3.01(a).
"Past Service Credit" shall have the meaning set forth in
Section 6.13(b).
"Pension Plan" shall have the meaning set forth in Section
5.03(l).
"Per Share Stock Consideration" shall have the meaning set
forth in Section 3.01(a).
"Person" or "person" shall mean any individual, bank,
corporation, partnership, joint venture, association, joint-stock
company, business trust or unincorporated organization.
"Previously Disclosed" by a party shall mean information set
forth in its Disclosure Schedule.
"Proxy Statement" shall have the meaning set forth in Section
6.03.
"Registration Statement" shall have the meaning set forth in
Section 6.03.
A-3
<PAGE> 115
"Regulatory Authorities" shall have the meaning set forth in
Section 5.03(h).
"Rights" shall mean, with respect to any person, securities or
obligations convertible into or exchangeable for, or giving any person
any right to subscribe for or acquire, or any options, calls or
commitments relating to, shares of capital stock of such person.
"SEC" shall mean the Securities and Exchange Commission.
"SEC Documents" shall have the meaning set forth in Section
5.03(g).
"Securities Act" shall mean the Securities Act of 1933, as
amended, and the rules and regulations thereunder.
"ST-Bank" shall have the meaning set forth in Section 6.17.
"ST PS Plan" shall have the meaning set forth in Section 6.13.
"ST Retirement Plan" shall have the meaning set forth in
Section 6.13.
"Subsidiary" and "Significant Subsidiary" shall have the
meanings ascribed to them in Rule 1-02 of Regulation S-X of the SEC;
provided, that for purposes of Article V, Merger Sub shall be deemed a
Significant Subsidiary of Parent.
"Surviving Corporation" shall have the meaning set forth in
Section 2.01(a).
"Takeover Laws" shall have the meaning set forth in Section
5.03(n).
"Tax Returns" shall have the meaning set forth in Section
5.03(u).
"Taxes" shall mean all taxes, charges, fees, levies or other
assessments, including, without limitation, all net income, gross
income, gross receipts, sales, use, ad valorem, goods and services,
capital, transfer, franchise, profits, license, withholding, payroll,
employment, employer health, excise, estimated, severance, stamp,
occupation, property or other taxes, custom duties, fees, assessments
or charges of any kind whatsoever, together with any interest and any
penalties, additions to tax or additional amounts imposed by any taxing
authority.
"Treasury Shares" shall have the meaning set forth in Section
3.01(a).
"Wheat First" shall mean Wheat First Securities, Inc., the
Company's investment banking firm.
ARTICLE II
THE MERGER; EFFECTS OF THE MERGER
2.01. The Merger.
(a) The Surviving Corporation. At the Effective Time,
the Company shall merge with and into Merger Sub (the "Merger"), the separate
corporate existence of the Company shall cease and Merger Sub shall survive and
continue to exist as an Alabama corporation (Merger Sub, as the surviving
corporation in the Merger, sometimes being referred to herein as the "Surviving
Corporation"). Parent may at any time change the method of effecting the
combination with the Company (including without limitation the provisions of
this Article II) if and to the extent it deems such change to be desirable,
including without limitation to provide for a merger of the Company directly
into Parent, in which Parent is the surviving corporation; provided, however,
that no such
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change shall (A) alter or change the Merger Consideration, (B) cause the
combination to not constitute a "reorganization" within the meaning of Section
368(a) of the Code or (C) materially impede or delay consummation of the
transactions contemplated by this Agreement.
(b) Effectiveness And Effects Of The Merger. Subject
to the satisfaction or waiver of the conditions set forth in Article VII in
accordance with this Agreement, the Merger shall become effective upon the
occurrence of both (i) the filing in the Department of State of Florida of
articles of merger and (ii) the filing in the Office of the Secretary of State
of Alabama of articles of merger, or such later date and time as may be set
forth in the articles of merger, in accordance with Section 607.1105 of the
Florida Business Corporation Act (the "BCA") and Section 10- 2B-11.05 of the
Alabama Business Corporation Act (the "ABCA"). The Merger shall have the effects
prescribed in Section 607.1106 of the BCA and Section 10-2B-11.06 of the ABCA.
(c) Certificate Of Incorporation And By-Laws. The
certificate of incorporation and by-laws of the Surviving Corporation shall be
those of Merger Sub, as in effect immediately prior to the Effective Time.
2.02. Effective Date And Effective Time.
Subject to the satisfaction or waiver of the
conditions as set forth in Article VII in accordance with this Agreement, the
parties shall cause the effective date of the Merger (the "Effective Date") to
occur on (1) the third business day to occur after the last of the conditions
set forth in Sections 7.01, 7.02, 7.03 and 7.09 shall have been satisfied or
waived in accordance with the terms of this Agreement or (2) such other date to
which the parties may agree in writing. The time on the Effective Date when the
Merger shall become effective is referred to as the "Effective Time.
2.03. Tax Consequences.
It is intended that the Merger shall qualify as a
reorganization under Section 368(a) of the Code.
ARTICLE III
MERGER CONSIDERATION; EXCHANGE PROCEDURES
3.01. Merger Consideration.
Subject to the provisions of this Agreement, Parent
shall issue a total of 2,620,188 shares of common stock of Parent (the "Merger
Consideration") for all of the issued and outstanding Company Stock. As of the
date of this Agreement and assuming the conversion of all of the Company
Preferred Stock into the common stock, par value $1.00 per share, of the Company
("Company Common Stock"), a total of 1,214,644.056 shares of Company Common
Stock would be issued and outstanding, which total includes 90,000 shares of
Company Common Stock (the "Disputed Shares") issued to certain officers and
directors of the Company (the "Grantees"), which are the subject of a dispute.
The nature of such dispute and the manner for disposing of the Disputed Shares
in connection with the transactions contemplated by this Agreement are more
fully set forth and described in Section 7.11 hereof. Unless the dispute
regarding the Disputed Shares is resolved prior to the Effective Time in a
manner consistent with Sections 7.10 and 7.11 hereof, immediately prior to the
Effective Time the Disputed Shares will be delivered to the Escrow Agent in
accordance with Section 7.11 and will be held and disposed of in accordance with
Section 7.11 and the Escrow Agreement. If the dispute regarding the Disputed
Shares is resolved prior to the Effective Time in accordance with Sections 7.10
and 7.11, the consideration which is or would have been applicable to the
Disputed Shares will be distributed in accordance with such resolution;
provided, however, that if such resolution is that the Disputed Shares shall be
canceled and treated as not issued, then such consideration shall be allocated,
on a pro rata basis, to increase the amount of Parent Common Stock, the right to
receive which the other shares of Common Stock will be converted into pursuant
to clause (a) of this Section 3.01.
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Subject to the foregoing and Section 7.11 hereof regarding the
Disputed Shares, at the Effective Time, automatically by virtue of the Merger
and without any action on the part of any party or stockholder:
(a) Outstanding Company Common Stock. Each share
(excluding (i) shares held by any of the Company's Subsidiaries or by Parent or
any of its Subsidiaries, in each case other than in a fiduciary capacity or as a
result of debts previously contracted ("Treasury Shares") and (ii) Dissenting
Shares) of Company Common Stock, including the Disputed Shares, shall become and
be converted into the right to receive 2.157165292 shares (subject to adjustment
as set forth herein, the "Exchange Ratio") of common stock (the "Parent Common
Stock") of Parent (the "Per Share Stock Consideration"). The parties acknowledge
that the Exchange Ratio is calculated before adjustment for Parent's stock split
described below, and will be adjusted to reflect such stock split as described
in Section 3.06.
(b) Outstanding Company Preferred Stock. Each share
of the Company Preferred Stock, excluding any Treasury Shares, issued and
outstanding immediately prior to the Effective Time, shall become and be
converted into the right to receive the number of shares of Parent Common Stock
equal to the product of the Per Share Stock Consideration multiplied by the
number of shares of Company Common Stock into which such Preferred Stock was
convertible.
(c) Outstanding Merger Sub Common Stock. Each share
of the common stock of Merger Sub ("Merger Sub Common Stock") issued and
outstanding immediately prior to the Effective Time shall be unchanged and shall
remain issued and outstanding as common stock of the Surviving Corporation.
3.02. Rights As Stockholders; Stock Transfers.
At the Effective Time, holders of Company Stock shall
cease to be, and shall have no rights as, stockholders of the Company, other
than to receive any dividend or other distribution with respect to such Company
Stock with a record date occurring prior to the Effective Time and the
consideration provided under this Article III (each certificate representing
such shares, an "Old Certificate"). After the Effective Time, there shall be no
transfers on the stock transfer books of the Company or the Surviving
Corporation of shares of Company Stock.
3.03. Fractional Shares.
Notwithstanding any other provision hereof, no
fractional shares of Parent Common Stock and no certificates or scrip therefor,
or other evidence of ownership thereof, will be issued in the Merger; instead,
Parent shall pay to each holder of Company Stock who would otherwise be entitled
to a fractional share of Parent Common Stock (after taking into account all Old
Certificates delivered by such holder) an amount in cash (without interest)
determined by multiplying such fraction by the average of the last sale prices
of Parent Common Stock, as reported by NASDAQ (as reported in The Wall Street
Journal or, if not reported therein, in another authoritative source), for the
five NASDAQ trading days immediately preceding the Effective Date. Such payment
with respect to fractional shares is merely intended to provide a mechanical
rounding off of, and is not a separately bargained for consideration. If more
than one certificate representing shares of Company Common Stock shall be
surrendered for the account of the same holder, the number of shares of Parent
Common Stock for which certificates have been surrendered shall be computed on
the basis of the aggregate number of shares represented by the certificates as
surrendered.
3.04. Exchange Procedures.
(a) At or prior to the Effective Time, Parent shall
deposit, or shall cause to be deposited, with the designated exchange agent (the
"Exchange Agent"), for the benefit of the holders of Old Certificates (which for
purposes of this Section 3.04 shall include certificates formerly representing
shares of Company Preferred Stock), for exchange in accordance with this Article
III, certificates representing the shares of Parent Stock ("New Certificates")
and an estimated amount of cash (such cash and New Certificates, together with
any dividends or distributions with respect thereto (without any interest
thereon), being hereinafter referred to as the "Exchange Fund") to be paid
pursuant to this Article III in exchange for outstanding shares of Company
Stock.
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(b) As promptly as practicable after the Effective
Date, Parent shall send or cause to be sent to each former holder of record of
shares (other than Treasury Shares or Dissenting Shares) of Company Stock
immediately prior to the Effective Time transmittal materials for use in
exchanging such stockholder's Old Certificates for the consideration set forth
in this Article III. Parent shall cause the New Certificates into which shares
of a stockholder's Company Stock are converted on the Effective Date and any
fractional share interests or dividends or distributions which such person shall
be entitled to receive to be delivered to such stockholder upon delivery to the
Exchange Agent of Old Certificates representing such shares of Company Stock (or
indemnity reasonably satisfactory to Parent and the Exchange Agent, if any of
such certificates are lost, stolen or destroyed) owned by such stockholder. No
interest will be paid on any such cash to be paid pursuant to this Article III
upon such delivery.
(c) Notwithstanding the foregoing, neither the
Exchange Agent nor any party hereto shall be liable to any former holder of
Company Stock for any amount properly delivered to a public official pursuant to
applicable abandoned property, escheat or similar laws.
(d) No dividends or other distributions with respect
to Parent Common Stock with a record date occurring after the Effective Time
shall be paid to the holder of any unsurrendered Old Certificate representing
shares of Company Stock converted in the Merger into shares of such Parent
Common Stock until the holder thereof shall surrender such Old Certificate in
accordance with this Article III. After the surrender of an Old Certificate in
accordance with this Article III, the record holder thereof shall be entitled to
receive any such dividends or other distributions, without any interest thereon,
which theretofore had become payable with respect to shares of Parent Common
Stock represented by such Old Certificate.
(e) Any portion of the Exchange Fund that remains
unclaimed by the stockholders of the Company for twelve months after the
Effective Time shall be paid to Parent. Any stockholders of the Company who have
not theretofore complied with this Article III shall thereafter look only to
Parent for payment of the shares of Parent Common Stock, cash in lieu of any
fractional shares and unpaid dividends and distributions on the Parent Common
Stock deliverable in respect of each share of Company Stock such stockholder
holds as determined pursuant to this Agreement, in each case without any
interest thereon.
3.05. Dissenting Stockholders.
Notwithstanding anything in this Agreement to the
contrary, shares of Company Stock which are issued and outstanding immediately
prior to the Effective Time and which are held by stockholders who did not vote
in favor of the adoption of this Agreement, who are entitled to demand the fair
value of such shares of Company Stock under Section 607.1320 of the BCA, and who
comply with all of the relevant provisions of such Section (the "Dissenting
Shares") shall not be converted into or be exchangeable for the right to receive
Parent Common Stock (unless and until such holders shall have failed to perfect
or shall have effectively withdrawn or lost their dissenters' rights under the
BCA), but shall instead be entitled to all applicable dissenters' rights as are
prescribed by the BCA. If any such holder shall have failed to perfect or shall
have effectively withdrawn or lost such dissenters' rights, such holder's shares
of Company Stock shall thereupon be converted into and become exchangeable for
the right to receive, as of the Effective Time, Parent Common Stock, without any
interest thereon. The Company shall give Parent (i) prompt notice of any written
demands for payment for any Company Stock under Section 607.1320 of the BCA,
attempted withdrawals of such demands, and any other instruments served pursuant
to the BCA and received by the Company relating to dissenters' rights, and (ii)
the opportunity to participate in all negotiations and proceedings with respect
to the exercise of dissenters' rights under the BCA. The Company shall not,
except with the prior written consent of Parent, voluntarily make any payment
with respect to any demands for payment for Company Stock under Section 607.1320
of the BCA, offer to settle or settle any such demands or approve any withdrawal
of any such demands.
3.06. Anti-Dilution Provisions.
In the event Parent changes (or establishes a record
date for changing) the number of shares of Parent Common Stock issued and
outstanding prior to the Effective Date as a result of a stock split, stock
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dividend, recapitalization or similar transaction with respect to the
outstanding Parent Common Stock and the record date therefor shall be prior to
the Effective Date, the Exchange Ratio shall be proportionately adjusted; in
particular, the Exchange Ratio will be proportionately adjusted to take into
account the three-for-two stock split recently announced by Parent with a record
date of February 13, 1998 and a distribution date of February 26, 1998.
3.07. Treasury Shares.
Each of the shares of Company Stock held as Treasury
Shares immediately prior to the Effective Time shall be canceled and retired at
the Effective Time and no consideration shall be issued in exchange therefor.
ARTICLE IV
ACTIONS PENDING MERGER
From the date hereof until the Effective Time, except as
expressly contemplated by this Agreement, (i) without the prior written consent
of Parent (which consent shall not be unreasonably withheld or delayed) the
Company will not, and will cause each of its Subsidiaries not to, and (ii)
without the prior written consent of the Company (which consent shall not be
unreasonably withheld or delayed) Parent will not, and will cause each of its
Subsidiaries not to:
4.01. Ordinary Course.
In the case of the Company, conduct its business and
that of its Subsidiaries other than in the ordinary and usual course or, to the
extent consistent therewith, fail to use reasonable efforts to preserve intact
their business organizations and assets and maintain their rights, franchises
and existing relations with customers, suppliers, employees and business
associates; and, in the case of the Company and Parent, take any action that
would (i) adversely affect the ability of any party to obtain any necessary
approvals of any Regulatory Authorities required for the transactions
contemplated hereby, or (ii) adversely affect its ability to perform any of its
material obligations under this Agreement.
4.02. Capital Stock.
In the case of the Company, other than (i) pursuant
to Rights Previously Disclosed in its Disclosure Schedule and currently
outstanding as of the date hereof, or (ii) upon conversion of shares of Company
Preferred Stock pursuant to the terms thereof, (x) issue, sell or otherwise
permit to become outstanding, or authorize the creation of, any additional
shares of capital stock, any stock appreciation rights or any Rights, (y) enter
into any agreement with respect to the foregoing, or (z) permit any additional
shares of capital stock to become subject to new grants of employee stock
options, stock appreciation rights, or similar stock-based employee rights.
4.03. Dividends, Etc.
(a) Make, declare, pay or set aside for payment any
dividend (other than (i) in the case of the Company (A) monthly cash dividends
on Company Common Stock in an amount not to exceed the greater of (I) $0.17 per
share and (II) the product of the Exchange Ratio multiplied by Parent's
then-effective quarterly dividend multiplied by one third, (B) dividends payable
on Company Preferred Stock at a rate not exceeding the rate provided for in the
terms thereof, and (C) dividends from the Company's wholly-owned subsidiary,
American National Bank of Florida ("ANBF") (provided such dividends in amount or
frequency are not in contravention of any applicable OCC or other regulations),
to the Company and (ii) in the case of Parent, regular cash dividends on Parent
Common Stock in accordance with its usual custom and practice, and cash
dividends on any other outstanding issues of preferred stock in accordance with
terms thereof and dividends from Subsidiaries to Parent or another Subsidiary of
Parent, as applicable) on or in respect of, or declare or make any distribution
on any shares of its capital stock, or, (b) in the case of the Company only,
directly or indirectly adjust, split, combine, redeem, reclassify, purchase or
otherwise acquire, any shares of its capital stock, other than (1) as Previously
Disclosed in its Disclosure Schedule, (2) in the case of the Company, pursuant
to the terms of the Company Preferred Stock, or (3) in the ordinary course
pursuant to employee benefit plans.
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4.04. Compensation; Employment Agreements; Etc.
In the case of the Company and its Subsidiaries,
enter into or amend any written employment, severance or similar agreements or
arrangements with any of its directors, officers or employees, or grant any
salary or wage increase or increase any employee benefit (including incentive or
bonus payments), except for (i) normal individual increases in compensation to
employees in the ordinary course of business consistent with past practice, (ii)
extensions of employee bonus incentive programs or special incentive programs as
set forth in the Disclosure Schedule or (iii) other changes as are provided for
herein or as may be required by law or to satisfy contractual obligations
existing as of the date hereof or additional grants of awards to newly hired
employees consistent with past practice or such changes that, either
individually or in the aggregate, would not reasonably be expected to result in
a material liability to the Company or its Subsidiaries.
4.05. Benefit Plans.
In the case of the Company and its Subsidiaries,
enter into or amend (except as may be required by applicable law, to satisfy
contractual obligations existing as of the date hereof or, subject to the
consent of Parent, which consent shall not be withheld unreasonably, any other
amendment) any pension, retirement, stock option, stock purchase, savings,
profit sharing, deferred compensation, consulting, bonus, group insurance or
other employee benefit, incentive or welfare contract, plan or arrangement, or
any trust agreement related thereto, in respect of any of its directors,
officers or other employees, including without limitation taking any action that
accelerates the vesting or exercise of any benefits payable thereunder.
4.06. Acquisitions And Dispositions.
In the case of the Company (other than by way of
foreclosures or acquisitions of control in a bona fide fiduciary capacity or in
satisfaction of debts previously contracted in good faith, in each case in the
ordinary and usual course of business consistent with past practice), without
the consent of Parent, dispose of or discontinue any portion of its assets,
business or properties, which is material to it and its Subsidiaries taken as a
whole, or acquire all or any portion of, the business or property of any other
entity, or sell, transfer or otherwise dispose of those certain 150,000 shares
of International Speedway Corp. Class B Stock. Parent will not, and will cause
its Subsidiaries not to, make any acquisition or take any other action which
would materially adversely affect its ability to consummate the transactions
contemplated by this Agreement.
4.07. Amendments.
In the case of the Company, amend its amended and
restated articles of incorporation (the "Articles of Incorporation") or its
by-laws (the "By-Laws").
4.08. Accounting Methods.
Implement or adopt any change in its accounting
principles, practices or methods, other than as may be required by generally
accepted accounting principles.
4.09. Adverse Actions.
(1) Take any action that would, or is reasonably
likely to, prevent or impede the Merger from qualifying as a reorganization
within the meaning of Section 368(a) of the Code; or (2) knowingly take any
action that is intended or is reasonably likely to result in (x) any of its
representations and warranties set forth in this Agreement being or becoming
untrue in any material respect at any time prior to the Effective Time, (y) any
of the conditions to the Merger set forth in Article VII not being satisfied or
(z) a material violation of any provision of this Agreement except, in each
case, as may be required by applicable law.
4.10. Agreements.
Agree or commit to do anything prohibited by Sections
4.01 through 4.09.
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ARTICLE V
REPRESENTATIONS AND WARRANTIES
Company and Parent each hereby represents and warrants to the
other as follows:
5.01. Disclosure Schedules.
On or prior to the date hereof, Parent has delivered
to the Company and the Company has delivered to Parent a schedule (respectively,
its "Disclosure Schedule") setting forth, among other things, items the
disclosure of which is necessary or appropriate in relation to any or all of its
representations and warranties; provided, that (i) no such item is required to
be set forth in a Disclosure Schedule as an exception to a representation or
warranty if its absence is not reasonably likely to result in the related
representation or warranty being deemed untrue or incorrect under the standard
established by Section 5.02, and (ii) the mere inclusion of an item in a
Disclosure Schedule shall not be deemed an admission by a party that such item
represents a material exception or fact, event or circumstance or that such item
is reasonably likely to result in a Material Adverse Effect.
5.02. Standard.
No representation or warranty of Parent or the
Company contained in Section 5.03 shall be deemed untrue or incorrect, and no
party hereto shall be deemed to have breached a representation or warranty, as a
consequence of the existence of any fact, circumstance or event unless such
fact, circumstance or event, individually or taken together with all other
facts, circumstances or events inconsistent with any paragraph of Section 5.03
has had or is expected to have a Material Adverse Effect.
5.03. Representations And Warranties.
Subject to Sections 5.01 and 5.02 and except as
Previously Disclosed in its Disclosure Schedule, the Company hereby represents
and warrants to Parent, and Parent hereby represents and warrants to the
Company, to the extent applicable, in each case with respect to itself and its
Subsidiaries, as follows:
(a) Organization, Standing and Authority. Such party
is a corporation duly organized, validly existing and in good standing under the
laws of the jurisdiction of its organization. Such party is duly qualified to do
business and is in good standing in the states of the United States and foreign
jurisdictions where its ownership or leasing of property or the conduct of its
business requires it to be so qualified, except for such jurisdiction in which
the failure to be so qualified is not reasonably likely to have, individually or
in the aggregate, a Material Adverse Effect on such party. It has in effect all
federal, state, local, and foreign governmental authorizations necessary for it
to own or lease its properties and assets and to carry on its business as it is
now conducted.
(b) Shares. (i) As of the date hereof, the authorized capital
stock of the Company consists solely of 2,000,000 shares of Company Common
Stock, of which, as of January 31, 1998, 1,183,751 shares were outstanding,
2,000,000 shares of Company Preferred Stock, of which 13,334 shares have been
designated as Series A Preferred Stock, of which, as of January 31, 1998, no
shares were outstanding, 13,334 shares have been designated as Series B
Preferred Stock, of which, as of January 31, 1998, 9,770.534 shares were
outstanding, 13,334 shares have been designated as Series C Preferred Stock, of
which, as of January 31, 1998, 10,225.266 shares were outstanding, and 13,335
shares have been designated as Series D Preferred Stock, of which, as of January
31, 1998, 10,897.256 shares were outstanding. As of the date hereof, the
authorized capital stock of Parent consists solely of 300,000,000 shares of
Parent Common Stock, of which, as of September 30, 1997, 100,451,728 shares were
outstanding, and 5,000,000 shares of Parent Preferred Stock, of which, as of
January 31, 1998, no shares were outstanding. As of the Effective Time, and
assuming the conversion of all of the Company Preferred Stock and any other
right to acquire Company Common Stock (and assuming for purposes of this Section
5.03(b) that all of the Disputed Shares are outstanding as of the Effective
Time), there would be outstanding 1,214,644.056 shares of Company Common Stock.
As of September 30, 1997, no shares of Company Common Stock and 658,115 shares
of Parent Common Stock were held in treasury. The outstanding shares of such
party's capital stock are validly issued and outstanding, fully paid and
nonassessable, and subject to no preemptive rights (and were not issued in
violation of any preemptive rights). As of the date hereof, except as disclosed
in the Disclosure Schedule or, in the case of Parent, its SEC Documents, there
are no shares of such party's capital stock authorized and reserved for
issuance, such party does not have any Rights issued or outstanding with respect
to its capital stock, and such party does
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not have any commitment to authorize, issue or sell any such shares or Rights,
except pursuant to this Agreement, as the case may be. Since January 31, 1998,
the Company has issued no shares of its capital stock or rights in respect
thereof or reserved any shares for such purposes except pursuant to plans or
commitments Previously Disclosed in its Disclosure Schedule.
(ii) In the case of the representations and
warranties of Parent: (i) the outstanding shares of Merger Sub Common Stock are
validly issued and outstanding, fully paid and nonassessable, and subject to no
preemptive rights; and (ii) the shares of Parent Stock to be issued in exchange
for shares of Company Stock in the Merger, when issued in accordance with the
terms of this Agreement, will be duly authorized, validly issued, fully paid and
nonassessable.
(c) Subsidiaries. (i) (A) Such party has Previously
Disclosed in its Disclosure Schedule or, in the case of Parent, its SEC
Documents, a list of all of its Subsidiaries together with the jurisdiction of
organization of each such Subsidiary, (B) it owns, directly or indirectly at
least 99% of the issued and outstanding shares of each of its Significant
Subsidiaries, (C) no equity securities of any of its Significant Subsidiaries
are or may become required to be issued (other than to it or a Subsidiary of it)
by reason of any Rights, (D) there are no contracts, commitments, understandings
or arrangements by which any of such Significant Subsidiaries is or may be bound
to sell or otherwise transfer any shares of the capital stock of any such
Significant Subsidiaries (other than to it or a Subsidiary of it), (E) there are
no contracts, commitments, understandings, or arrangements relating to its
rights to vote or to dispose of such shares (other than to it or a Subsidiary of
it), and (F) all of the shares of capital stock of each such Significant
Subsidiary held by it or its Subsidiaries are fully paid and (except pursuant to
12 U.S.C. Sec. 55 or equivalent state statutes in the case of bank Subsidiaries)
nonassessable and are owned by it or its Subsidiaries free and clear of any
Liens.
(ii) In the case of the representations and
warranties of the Company, the Company does not own (other than in a bona fide
fiduciary capacity or in satisfaction of a debt previously contracted)
beneficially, directly or indirectly, any shares of any equity securities or
similar interests of any person, or any interest in a partnership or joint
venture of any kind.
(iii) Each of such party's Significant Subsidiaries
has been duly organized and is validly existing in good standing under the laws
of the jurisdiction of its organization, and is duly qualified to do business
and in good standing in the jurisdictions where its ownership or leasing of
property or the conduct of its business requires it to be so qualified. Each of
such Significant Subsidiaries has in effect all federal, state, local, and
foreign governmental authorizations necessary for it to own or lease its
properties and assets and to carry on its business as it is now conducted.
(d) Corporate Power. Such party and each of its
Significant Subsidiaries has the corporate power and authority to carry on its
business as it is now being conducted and to own all its properties and assets;
and it has (and, in the case of the representations and warranties of Parent,
Merger Sub will have as of the Effective Time) the corporate power and authority
to execute, deliver and perform its obligations under this Agreement and to
consummate the transactions contemplated hereby.
(e) Corporate Authority. Subject to receipt of the
requisite approval by the holders of a majority of Company Common Stock entitled
to vote thereon and the requisite vote of the holders of a majority of each
class of the Company Preferred Stock entitled to vote thereon (in the case of
the Company), this Agreement and the transactions contemplated hereby have been
authorized by all necessary corporate action of it, and this Agreement is a
legal, valid and binding agreement of it, enforceable in accordance with its
terms (except as such enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium, fraudulent transfer and similar laws of
general applicability relating to or affecting creditors' rights or by general
equity principles).
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(f) No Defaults. Subject to receipt of the
regulatory approvals, and expiration of the waiting periods, referred to in
Section 7.02 and the required filings under federal and state securities laws,
the execution, delivery and performance of this Agreement and the consummation
of the transactions contemplated hereby by it do not and will not (i) constitute
a breach or violation of, or a default under, any law, rule or regulation or any
judgment, decree, order, governmental permit or license, or agreement, indenture
or instrument of it or of any of its Significant Subsidiaries or to which it or
any of its Significant Subsidiaries or properties is subject or bound, (ii)
constitute a breach or violation of, or a default under, its articles or
certificate of incorporation or by-laws, or (iii) require any consent or
approval under any such law, rule, regulation, judgment, decree, order,
governmental permit or license agreement, indenture or instrument.
(g) Financial Reports And SEC Documents. (1) In the
case of the Company, its audited financial statements for the years ended
December 31, 1994, 1995, and 1996, and all other financial statements included
in the Evaluation Material, the Confidential Memorandum and the other Evaluation
Material provided by the Company to Parent, taken as a whole, did not and will
not contain any untrue statement of a material fact or omit to state a material
fact necessary to make the statements made therein, in light of the
circumstances under which they were made, not misleading; and each of the
audited financial statements (including related notes and schedules thereto)
fairly presents and will fairly present the financial position of the Company as
of its date, and each of the statements of income and changes in stockholders'
equity and cash flows (including any related notes or schedules thereto) fairly
presents and will fairly present the result of operations, changes in
stockholders' equity and changes in cash flows, as the case may be, of the
Company for the periods to which it relates, in each case in accordance with
generally accepted accounting principles consistently applied during the periods
involved, except in each case as may be noted therein, and subject to normal
year-end audit adjustments in the case of unaudited statements.
(2) In the case of Parent, its Annual Report on Form
10-K for the fiscal year ended December 31, 1996, and all other reports,
registration statements, definitive proxy statements or information statements
filed or to be filed by it or any of its Subsidiaries subsequent to December 31,
1996 under the Securities Act, or under Sections 13(a), 13(c), 14 and 15(d) of
the Exchange Act, in the form filed, or to be filed (collectively, its "SEC
Documents"), with the SEC (i) complied or will comply in all material respects
as to form with the applicable requirements under the Securities Act or the
Exchange Act, as the case may be, and (ii) taken as a whole, did not and will
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 made
therein, in light of the circumstances under which they were made, not
misleading; and each of the balance sheets contained in or incorporated by
reference into any such SEC Document (including the related notes and schedules
thereto) fairly presents and will fairly present the financial position of
Parent as of its date, and each of the statements of income and changes in
stockholders' equity and cash flows or equivalent statements in such SEC
Documents (including any related notes and schedules thereto) fairly presents
and will fairly present the results of operations, changes in stockholders'
equity and changes in cash flows, as the case may be, of Parent for the periods
to which they relate, in each case in accordance with generally accepted
accounting principles consistently applied during the periods involved, except
in each case as may be noted therein, subject to normal year-end audit
adjustments in the case of unaudited statements.
(h) Litigation; Regulatory Action. (i) No
litigation, claim or other proceeding before any court or governmental agency is
pending against it or any of its Subsidiaries except as Previously Disclosed in
its Disclosure Schedule and, to the best of its knowledge, no such litigation,
claim or other proceeding has been threatened.
(ii) Neither it nor any of its Subsidiaries or
properties is a party to or is subject to any order, decree, agreement,
memorandum of understanding or similar arrangement with, or a commitment letter
or similar submission to, any federal or state governmental agency or authority
charged with the supervision or regulation of financial institutions or issuers
of securities or engaged in the insurance of deposits (including, without
limitation, the OCC, the Federal Reserve Board, the FDIC and the OTS) or the
supervision or regulation of it or any of its Subsidiaries (collectively, the
"Regulatory Authorities").
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(iii) Neither it nor any of its Subsidiaries has been
advised by any Regulatory Authority that such Regulatory Authority is
contemplating issuing or requesting (or is considering the appropriateness of
issuing or requesting) any such order, decree, agreement, memorandum of
understanding, commitment letter or similar submission.
(i) Compliance With Laws. It and each of its
Subsidiaries: (i) in the conduct of its business, is in compliance with all
applicable federal, state, local and foreign statutes, laws, regulations,
ordinances, rules, judgments, orders or decrees applicable thereto or to the
employees conducting such businesses, including, without limitation, the Equal
Credit Opportunity Act, the Fair Housing Act, the Community Reinvestment Act,
the Home Mortgage Disclosure Act and all other applicable fair lending laws and
other laws relating to discriminatory business practices;
(ii) has all permits, licenses, authorizations,
orders and approvals of, and has made all filings, applications and
registrations with, all Regulatory Authorities that are required in order to
permit them to conduct their businesses substantially as presently conducted;
all such permits, licenses, certificates of authority, orders and approvals are
in full force and effect and, to the best of its knowledge, no suspension or
cancellation of any of them is threatened; and
(iii) has received, since December 31, 1996, no
notification or communication from any Regulatory Authority (A) asserting that
it or any of its Subsidiaries is not in compliance with any of the statutes,
regulations, or ordinances which such Regulatory Authority enforces, (B)
threatening to revoke any license, franchise, permit, or governmental
authorization, (C) threatening or contemplating revocation or limitation of, or
which would have the effect of revoking or limiting, federal deposit insurance
(nor, to its knowledge, do any grounds for any of the foregoing exist) or (D)
failing to approve any proposed acquisition, or stating its intention not to
approve acquisitions proposed to be effected by it within a certain time period
or indefinitely.
(j) Defaults. Neither it nor any of its
Subsidiaries is in default under any contract, agreement, commitment,
arrangement, lease, insurance policy, or other instrument to which it is a
party, by which its respective assets, business, or operations may be bound or
affected, or under which it or its respective assets, business, or operations
receives benefits, and there has not occurred any event that, with the lapse of
time or the giving of notice or both, would constitute such a default.
(k) No Brokers. No action has been taken by it that
would give rise to any valid claim against any party hereto for a brokerage
commission, finder's fee or other like payment with respect to the transactions
contemplated by this Agreement, excluding, in the case of the Company, a fee to
be paid to Wheat First which has been heretofore disclosed to Parent.
(l) Employee Benefit Plans. (i) Such party's
Disclosure Schedule or, in the case of Parent, its SEC Documents, contains a
complete list of all written bonus, vacation, deferred compensation, pension,
retirement, profit-sharing, thrift, savings, employee stock ownership, stock
bonus, stock purchase, restricted stock and stock option plans, all employment
or severance contracts, all medical, dental, disability, health and life
insurance plans, all other employee benefit and fringe benefit plans, contracts
or arrangements and any applicable "change of control" or similar provisions in
any plan, contract or arrangement maintained or contributed to by it or any of
its Subsidiaries for the benefit of officers, former officers, employees, former
employees, directors, former directors, or the beneficiaries of any of the
foregoing (collectively, "Compensation and Benefit Plans").
(ii) True and complete copies of its Compensation
and Benefit Plans, including, but not limited to, any trust instruments and/or
insurance contracts, if any, forming a part thereof, and all amendments thereto
have been supplied to the other party.
(iii) No material liability under Title IV of ERISA
has been or is reasonably expected to be incurred by it or any of its
Subsidiaries or any entity which is considered one employer with it under
Section 4001(a)(15) of ERISA or Section 414 of the Code (an "ERISA Affiliate").
No notice of a "reportable event", within
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the meaning of Section 4043 of ERISA for which the 30-day reporting requirement
has not been waived, has been required to be filed for any "employee pension
benefit plan" within the meaning of Section 3(2) of ERISA ("Pension Plan") of it
or any of its Subsidiaries or by any ERISA Affiliate within the past 12 months.
(iv) All contributions, premiums and payments
required to be made under the terms of any Compensation and Benefit Plan of it
or any of its Subsidiaries have been made. Neither any Pension Plan of it or any
of its Subsidiaries nor any single-employer plan of an ERISA Affiliate of it or
any of its Subsidiaries has an "accumulated funding deficiency" (whether or not
waived) within the meaning of Section 412 of the Code or Section 302 of ERISA.
Neither it nor any of its Subsidiaries has provided, or is required to provide,
security to any Pension Plan or to any single-employer plan of an ERISA
Affiliate pursuant to Section 401(a)(29) of the Code.
(v) Under each Pension Plan of it or any of its
Subsidiaries which is a defined benefit plan, as of the last day of the most
recent plan year ended prior to the date hereof, the actuarially determined
present value of all "benefit liabilities", within the meaning of Section
4001(a)(16) of ERISA (as determined on the basis of the actuarial assumptions
contained in the Plan's most recent actuarial valuation) did not exceed the then
current value of the assets of such Plan, and there has been no adverse change
in the financial condition of such Plan (with respect to either assets or
benefits) since the last day of the most recent Plan year.
(m) Labor Matters. Neither it nor any of its
Subsidiaries is a party to, or is bound by any collective bargaining agreement,
contract or other agreement or understanding with a labor union or labor
organization, nor is it or any of its Subsidiaries the subject of a proceeding
asserting that it or any such Subsidiaries has committed an unfair labor
practice (within the meaning of the National Labor Relations Act) or seeking to
compel it or such Subsidiaries to bargain with any labor organization as to
wages and conditions of employment.
(n) Takeover Laws. It has taken all action required
to be taken by it in order to exempt this Agreement and the transactions
contemplated hereby from, and this Agreement and the transactions contemplated
hereby are exempt from, the requirements of any "moratorium", "control share",
"fair price" or other antitakeover laws and regulations (collectively, "Takeover
Laws") of the State of Florida in the case of the representations and warranties
of the Company.
(o) Environmental Matters. (i) As used in this
Agreement, "Environmental Laws" means all applicable local, state and federal
environmental, health and safety laws and regulations, including, without
limitation, the Resource Conservation and Recovery Act, the Comprehensive
Environmental Response, Compensation, and Liability Act, the Clean Water Act,
the Federal Clean Air Act, and the Occupational Safety and Health Act, and all
regulations promulgated thereunder, in each case as amended as of the date
hereof.
(ii) Except for matters which would not be reasonably
expected to result in a Material Adverse Effect: (A) such Party, its
Subsidiaries and any property presently owned, leased or operated by any of them
are in compliance with all Environmental Laws; (B) there are no claims, notices,
civil, criminal or administrative actions, suits, hearings or proceedings
pending, or, to the knowledge of such Party, investigations or inquiries
threatened, against such Party or its Subsidiaries that are based on or related
to any actual or alleged violation of Environmental Laws; and (C) no lien
exists, and no condition exists which would reasonably be expected to result in
the filing of a lien, against any property of such Party or any of its
Subsidiaries under any Environmental Law.
(p) Tax Treatment. As of the date hereof, it is
aware of no reason why the Merger will fail to qualify as a reorganization under
Section 368(a) of the Code.
(q) Regulatory Approvals. The approval of the
following regulatory authorities is necessary to consummate the Merger: the
Federal Reserve Board and, possibly, the regulatory authorities of the States in
which the Company and its Subsidiaries operate. As of the date hereof, neither
of the Company nor Parent is aware of any reason why the approvals of such
regulatory authorities will not be received.
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(r) No Material Adverse Effect. Since December 31,
1996, (i) it and its Subsidiaries have conducted their respective businesses in
the ordinary and usual course (excluding incurrence of expenses related to this
Agreement and the transactions contemplated hereby) and (ii) no event has
occurred or circumstance arisen that, individually or taken together with all
other facts, circumstances and events (described in any paragraph of Section
5.03 or otherwise), is reasonably likely to have a Material Adverse Effect with
respect to it.
(s) Adequacy of Allowance and Other Matters. The
allowances for possible loan losses as shown on the financial statements of the
Company as of and for the period ending December 31, 1997 were, and the
allowance for possible loan losses to be shown on the financial statements of
the Company as of any date subsequent to the execution of this Agreement, will
be, adequate to provide for possible losses, net of recoveries as relating to
loans previously charged-off, in respect of loans outstanding (including accrued
interest receivable) of the Company and its Subsidiaries and other extensions of
credit (including letters of credit, or commitments to make loans or extend
credit) and each such allowance has been established in accordance with
generally accepted accounting principles.
(t) Absence of Undisclosed Liabilities. In the case
of the Company and its Subsidiaries, neither the Company nor any of its
Subsidiaries has any liabilities that are reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on the Company,
except liabilities which are accrued or reserved against in the financial
statements of the Company as of and for the period ended December 31, 1997, or
reflected in the notes thereto or otherwise disclosed in the Disclosure Schedule
and except for liabilities incurred since such date in the ordinary course of
business of the Company. Since December 31, 1997, neither the Company nor any of
its Subsidiaries has incurred or paid any liability which would have a Material
Adverse Effect on the Company.
(u) Tax Matters. In the case of the Company and its
Subsidiaries:
(i) Each of the Company and its Subsidiaries has
filed all returns, declarations, estimates, information returns, and statements
required to be filed under federal, state, local, or any foreign tax laws ("Tax
Returns") required to be filed. All Taxes owed by any of the Company and its
Subsidiaries (whether or not shown on any Tax Return) have been paid. None of
the Company and its Subsidiaries currently is the beneficiary of any extension
of time within which to file any income Tax Return. No written claim has been
made by an authority in a jurisdiction where any of the Company and its
Subsidiaries does not file Tax Returns that it is or may be subject to taxation
by that jurisdiction, which claim is currently pending. There are no liens,
encumbrances, charges, or other security interests on any of the assets of any
of the Company and its Subsidiaries that arose in connection with any failure
(or alleged failure) to pay any Tax.
(ii) Each of the Company and its bSubsidiaries has
withheld and paid all Taxes required to have been withheld and paid in
connection with amounts paid or owing to any employee, independent contractor,
creditor, stockholder, or other third party, except as set forth in the
Disclosure Schedule.
(iii) There is no dispute or claim concerning any Tax
Liability of any of the Company and its Subsidiaries either claimed or raised by
any authority in writing. The Disclosure Schedule lists all federal, state,
local, and foreign income Tax Returns filed with respect to any of the Company
and its Subsidiaries for taxable periods ended on or after December 31, 1994,
indicates such of those Tax Returns that have been audited, and indicates such
of those Tax Returns that currently are the subject of audit. The Company has
made available to Parent correct and complete copies of all federal income Tax
Returns, examination reports, and statements of deficiencies filed by, relating
to, assessed against or agreed to by any of the Company and its Subsidiaries
since December 31, 1994.
(iv) None of the Company and its Subsidiaries has
waived any statute of limitations in respect of Taxes, which waiver has not yet
expired, or agreed to any extension of time with respect to a Tax assessment or
deficiency, which extension is currently in effect.
(v) None of the Company and its Subsidiaries has
filed a consent under Code ss.341(f) concerning collapsible corporations. None
of the Company and its Subsidiaries has made any payments, is obligated to make
any payments, or is a party to any agreement that under certain circumstances
could obligate it to make any payments that will not be deductible under Code
ss.280G, except as set forth in the Disclosure Schedule. None of the Company and
its Subsidiaries is a party to any Tax allocation or sharing agreement. None of
the Company and its Subsidiaries (A) has been a member of an affiliated group
within the meaning of Code ss.1504(a) filing a consolidated federal income Tax
Return (other than a group the common parent of which was the Company) or (B)
has any Liability for the Taxes of any Person (other than any of the Company and
its Subsidiaries) under Reg. ss.1.1502-6 (or any similar provision of state,
local, or foreign law), as a transferee or successor, by contract, or
otherwise.
(vi) The Disclosure Schedule sets forth the
following information with respect to each of the Company and its Subsidiaries
as of the most recent practicable date: (A) the amount of any net operating
loss, net capital loss, unused investment or other credit, unused foreign tax,
or excess
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charitable contribution allocable to the Company or any Subsidiary; and (B) the
amount of any deferred gain or loss allocable to the Company or any Subsidiary
arising out of any "deferred intercompany transaction" as that term is defined
in Regulation ss.1.1502-13 of the regulations promulgated under the Code.
(v) No Untrue Statements or Omissions. In the case of
the Company, no representation or warranty contained in Article V of this
Agreement or in the Disclosure Schedule 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. In the case of Parent, no representation or warranty
contained in Article V of this Agreement or in the Disclosure Schedule of Parent
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 VI
COVENANTS
The Company hereby covenants to and agrees with Parent, and
Parent hereby covenants to and agrees with the Company, that:
6.01. Best Efforts.
(a) Subject to the terms and conditions of this
Agreement, it shall use its best efforts in good faith to take, or cause to be
taken, all actions, and to do, or cause to be done, all things necessary, proper
or desirable, or advisable under applicable laws, so as to permit consummation
of the Merger as promptly as practicable and otherwise to enable consummation of
the transactions contemplated hereby and shall cooperate fully with the other
parties hereto to that end.
(b) Notwithstanding anything in this Agreement to the
contrary, each of Parent and the Company shall promptly take, or cause its
affiliates to take, if required by or necessary to resolve any objection of the
Department of Justice or its staff, the Federal Reserve Board or its staff, any
state attorney general or its staff or any other governmental agency, in each
case in order to consummate the transactions contemplated hereby, all steps
(including executing agreements and submitting to judicial or administrative
orders) to secure regulatory approval or government clearance (including by
avoiding or setting aside any preliminary or permanent injunction or other order
of any United States federal or state court of competent jurisdiction or any
other governmental authority), including, without limitation, all steps to make
arrangements for or to effect the divestiture of particular assets or deposit
liabilities or categories of assets or deposit liabilities or businesses of
Parent or any of its affiliates or the Company or any of its Subsidiaries. Each
of Parent and the Company represents and warrants that such party's affiliates
have full power and authority to effect the transactions contemplated by this
Section 6.01(b).
6.02. Stockholder Approvals.
The Company shall take, in accordance with applicable
law, applicable stock exchange or NASDAQ rules and its Articles of Incorporation
and By-Laws, all action necessary to convene an appropriate meeting of
stockholders of the Company to consider and vote upon the approval of this
Agreement and any other matters required to be approved by the Company's
stockholders for consummation of the Merger (including any adjournment or
postponement, the "Company Meeting") as promptly as practicable after the
Registration Statement is declared effective. The Board of Directors of the
Company shall (subject to compliance with its fiduciary duties as advised by
counsel) recommend such approval, and the Company shall take all reasonable
lawful action to solicit such approval by its respective stockholders.
6.03. Registration Statement.
(a) Each of Parent and the Company agrees to
cooperate in the preparation of a registration statement on Form S-4 (the
"Registration Statement") to be filed by Parent with the SEC in connection with
the issuance of Parent Stock in the Merger (including the proxy statement and
prospectus and other proxy solicitation materials of the Company constituting a
part thereof (the "Proxy Statement") and all related documents). Provided the
Company has cooperated as required above, Parent agrees to file the Registration
Statement with the
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SEC as promptly as practicable, but in no event later than 45 days after the
date of this Agreement. Each of the Company and Parent agrees to use all
reasonable efforts to cause the Registration Statement to be declared effective
under the Securities Act as promptly as reasonably practicable after filing
thereof. Parent also agrees to use all reasonable efforts to obtain all
necessary state securities law or "Blue Sky" permits and approvals required to
carry out the transactions contemplated by this Agreement. The Company agrees to
furnish to Parent all information concerning the Company, its Subsidiaries,
officers, directors and stockholders as may be reasonably requested in
connection with the foregoing.
(b) Each of the Company and Parent agrees, as to
itself and its Subsidiaries, that none of the information supplied or to be
supplied by it for inclusion or incorporation by reference in (i) the
Registration Statement will, at the time the Registration Statement and each
amendment or supplement thereto, if any, becomes effective under the Securities
Act, contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the statements
therein not misleading, and (ii) the Proxy Statement and any amendment or
supplement thereto will, at the date of mailing to stockholders and at the time
of the Company Meeting, contain any untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary to make
the statements therein not misleading or any statement which, in the light of
the circumstances under which such statement is made, will be false or
misleading with respect to any material fact, or will omit to state any material
fact necessary in order to make the statements therein not false or misleading
or necessary to correct any statement in any earlier statement in the Proxy
Statement or any amendment or supplement thereto. Each of the Company and Parent
further agrees that if it shall become aware prior to the Effective Date of any
information that would cause any of the statements in the Proxy Statement to be
false or misleading with respect to any material fact, or to omit to state any
material fact necessary to make the statements therein not false or misleading,
to promptly inform the other party thereof and to take the necessary steps to
correct the Proxy Statement.
(c) In the case of Parent, Parent will advise the
Company, promptly after Parent receives notice thereof, of the time when the
Registration Statement has become effective or any supplement or amendment has
been filed, of the issuance of any stop order or the suspension of the
qualification of the Parent Common Stock for offering or sale in any
jurisdiction, of the initiation or threat of any proceeding for any such
purpose, or of any request by the SEC for the amendment or supplement of the
Registration Statement or for additional information.
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6.04. Press Releases.
It will not, without the prior approval of the other
party, issue any press release or written statement for general circulation
relating to the transactions contemplated hereby, except as otherwise required
by applicable law or regulation.
6.05. Access; Information.
(a) Upon reasonable notice and subject to applicable
laws relating to the exchange of information, it shall afford the other party
and its officers, employees, counsel, accountants and other authorized
representatives, access, during normal business hours throughout the period
prior to the Effective Date, to all of its properties, books, contracts,
commitments and records and, during such period, it shall furnish promptly to
such other party and representatives (i) a copy of each material report,
schedule and other document filed by it pursuant to the requirements of federal
or state securities or banking laws, and (ii) all other information concerning
the business, properties and personnel of it as the other may reasonably
request.
(b) It will not use any information obtained pursuant
to this Section 6.05 for any purpose unrelated to the consummation of the
transactions contemplated by this Agreement and, if this Agreement is
terminated, will hold all information and documents obtained pursuant to this
paragraph in confidence (as provided in, and subject to the provisions of, the
Confidentiality Agreement). No investigation by either party of the business and
affairs of another shall affect or be deemed to modify or waive any
representation, warranty, covenant or agreement in this Agreement, or the
conditions to either party's obligation to consummate the transactions
contemplated by this Agreement.
6.06. Acquisition Proposals.
Without the prior written consent of Parent, the
Company shall not, and shall cause its Subsidiaries and its and its
Subsidiaries' officers, directors, agents, advisors and affiliates not to,
solicit or encourage inquiries or proposals with respect to, or engage in any
negotiations concerning, or provide any confidential information to, or have any
discussions with, any person relating to, any tender offer or exchange offer
for, or any proposal for the acquisition of a substantial equity interest in, or
a substantial portion of the assets of, or any merger or consolidation with, the
Company or any of its Significant Subsidiaries; provided, however, that the
Board of Directors of the Company, on behalf of the Company, may furnish or
cause to be furnished information and may participate in such discussions and
negotiations directly or through its representatives if such Board of Directors,
after having consulted with and considered the advice of outside counsel, has
determined that the failure to provide such information or participate in such
negotiations and discussions may cause the members of such Board of Directors to
breach their fiduciary duties under applicable laws. The Company shall promptly
(within 24 hours) advise Parent of its receipt of any such proposal or inquiry,
of the substance thereof, and of the identity of the person making such proposal
or inquiry.
6.07. Affiliate Agreements.
Set forth in the Disclosure Schedule is a list of
each person that, to the best of the Company's knowledge, is or is reasonably
likely to be, as of the date of the Company Meeting, deemed to be an "affiliate"
of the Company (each, an "Affiliate") as that term is used in Rule 145 under the
Securities Act. Simultaneously with the execution of this Agreement, each
Affiliate has executed and delivered to Parent an affiliate agreement in the
form attached hereto as Exhibit 6.07.
6.08. Takeover Laws
No party shall take any action that would cause the
transactions contemplated by this Agreement to be subject to requirements
imposed by any Takeover Law and each of them shall take all necessary steps
within its control to exempt (or ensure the continued exemption of) the
transactions contemplated by this Agreement from, or if necessary challenge the
validity or applicability of, any applicable Takeover Law, as now or hereafter
in effect, that purport to apply to this Agreement or the transactions
contemplated hereby or thereby.
6.09. No Rights Triggered.
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Each of Company and Parent shall take all steps
necessary to ensure that the entering into of this Agreement and the
consummation of the transactions contemplated hereby and any other action or
combination of actions, or any other transactions contemplated hereby, except as
disclosed in the Disclosure Schedule, do not and will not result in the grant of
any rights to any person (i) under its articles or certificate of incorporation
or by-laws, or (ii) under any material agreement to which it or any of its
Subsidiaries is a party.
6.10. Shares Listed.
In the case of Parent, Parent shall use its best
efforts to list, prior to the Effective Date, on NASDAQ, upon official notice of
issuance, the shares of Parent Common Stock to be issued to the holders of
Company Stock in the Merger.
6.11. Regulatory Applications.
Parent and the Company and their respective
Subsidiaries shall cooperate and use their respective best efforts (i) to
prepare all documentation, to effect all filings and to obtain all permits,
consents, approvals and authorizations of all third parties and Regulatory
Authorities necessary to consummate the transactions contemplated by this
Agreement, including, without limitation, any such approvals or authorizations
required by the Federal Reserve Board, and the regulatory authorities of the
States in which the Company and its Subsidiaries operate, and (ii) to cause the
Merger to be consummated as expeditiously as practicable. Provided the Company
has cooperated as required above, Parent agrees to file the requisite
applications to be filed by it with the Federal Reserve Board, and the
regulatory authorities of the States in which the Company and its Subsidiaries
operate as promptly as practicable, but in no event later than 30 days after the
date of this Agreement. Each of Parent and the Company shall have the right to
review in advance, and to the extent practicable each will consult with the
other, in each case subject to applicable laws relating to the exchange of
information, with respect to, all material written information submitted to any
third party or any Regulatory Authorities in connection with the transactions
contemplated by this Agreement. In exercising the foregoing right, each of the
parties hereto agrees to act reasonably and as promptly as practicable. Each
party hereto agrees that it will consult with the other party hereto with
respect to the obtaining of all material permits, consents, approvals and
authorizations of all third parties and Regulatory Authorities necessary or
advisable to consummate the transactions contemplated by this Agreement and each
party will keep the other party apprised of the status of material matters
relating to completion of the transactions contemplated hereby.
Each party agrees, upon request, to furnish the other party
with all information concerning itself, its Subsidiaries, directors, officers
and stockholders and such other matters as may be reasonably necessary or
advisable in connection with any filing, notice or application made by or on
behalf of such other party or any of its Subsidiaries to any Regulatory
Authority.
6.12. Indemnification; Directors' And Officers' Insurance.
(a) In the event of any threatened or actual claim,
action, suit, proceeding or investigation, whether civil, criminal or
administrative, including, without limitation, any such claim, action, suit,
proceeding or investigation in which any person who is now, or has been at any
time prior to the date of this Agreement, or who becomes prior to the Effective
Time, a director, officer, employee, agent or fiduciary of the Company or any of
its Subsidiaries (the "Indemnified Parties") is, or is threatened to be, made a
party based in whole or in part on, or arising in whole or in part out of, or
pertaining to (i) the fact that he is or was a director, officer, employee or
agent of the Company, any of its Subsidiaries or any of their respective
predecessors, or was prior to the Effective Time serving at the request of the
Company, any of its Subsidiaries or any of their respective predecessors as a
director, officer or employee of another corporation, partnership, trust or
other enterprise,] or (ii) this Agreement, or any of the transactions
contemplated hereby and all actions taken by an Indemnified Party in connection
herewith, whether in any case asserted or arising before or after the Effective
Time, the parties hereto agree to cooperate and use their best efforts to defend
against and respond thereto. It is understood and agreed that after the
Effective Time, Parent shall indemnify and hold harmless, as and to the fullest
extent permitted by law, each such Indemnified Party against any losses, claims,
damages, liabilities, costs, expenses (including attorney's fees and expenses in
advance of the final disposition of any claim, suit, proceeding or investigation
to each Indemnified Party to the fullest extent permitted by law upon receipt of
an undertaking from such Indemnified Party to repay such
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advanced expenses if it is finally and unappealably determined that such
Indemnified Party was not entitled to indemnification hereunder), judgments,
fines and amounts paid in settlement in connection with any such threatened or
actual claim, action, suit, proceeding or investigation, and in the event of any
such threatened or actual claim, action, suit, proceeding or investigation
(whether asserted or arising before or after the Effective Time), the
Indemnified Parties may retain counsel reasonably satisfactory to them;
provided, however, that (1) Parent shall have the right to assume the defense
thereof and upon such assumption Parent shall not be liable to any Indemnified
Party for any legal expenses of other counsel or any other expenses subsequently
incurred by any Indemnified Party in connection with the defense thereof, except
that if Parent elects not to assume such defense, or counsel for the Indemnified
Parties advises the Indemnified Parties that there are or may be (whether or not
any have yet actually arisen) issues which raise conflicts of interest between
Parent and the Indemnified Parties, the Indemnified Parties may retain counsel
reasonably satisfactory to them, and Parent shall pay the fees and expenses of
such counsel for the Indemnified Parties, (2) Parent shall not be liable for any
settlement effected without its prior written consent (which consent shall not
be unreasonably withheld) and (3) Parent shall have no obligation hereunder to
any Indemnified Party when and if a court of competent jurisdiction shall
ultimately determine, and such determination shall have become final and
nonappealable, that indemnification of such Indemnified Party in the manner
contemplated hereby is prohibited by applicable law. Any Indemnified Party
wishing to claim indemnification under this Section 6.12, upon learning of any
such claim, action, suit, proceeding or investigation, shall notify Parent
thereof; provided, that the failure to so notify shall not affect the
obligations of Parent under this Section 6.12 except (and only) to the extent
such failure to notify materially prejudices Parent. Parent's obligations under
this Section 6.12 shall continue in full force and effect for a period of six
(6) years from the Effective Time; provided, however, that all rights to
indemnification in respect of any claim (a "Claim") asserted or made within such
period shall continue until the final disposition of such claim.
(b) Without limiting any of the obligations under
paragraph (a) of this Section 6.12, Parent agrees that all rights to
indemnification and all limitations of liability existing in favor of the
Indemnified Parties as provided in the Articles of Incorporation or By-Laws or
in the similar governing documents of any of the Company's Subsidiaries as in
effect as of the date of this Agreement with respect to matters occurring on or
prior to the Effective Time shall survive the Merger and shall continue in full
force and effect, without any amendment thereto, for a period of six (6) years
from the Effective Time; provided, however, that all rights to indemnification
in respect of any Claim asserted or made within such period shall continue until
the final disposition of such Claim; provided further, however, that nothing
contained in this Section 6.12(b) shall be deemed to preclude the liquidation,
consolidation or merger of the Company or any Company Subsidiary, in which case
all of such rights to indemnification and limitations on liability shall be
deemed to so survive and continue notwithstanding any such liquidation,
consolidation or merger and shall constitute rights which may be asserted
against Parent. Nothing contained in this Section 6.12(b) shall be deemed to
preclude any rights to indemnification or limitations on liability provided in
the Articles of Incorporation or By-Laws or the similar governing documents of
any of the Company's Subsidiaries with respect to matters occurring subsequent
to the Effective time to the extent that the provisions establishing such rights
or limitations are not otherwise amended to the contrary.
(c) Parent shall use its reasonable best efforts (and
the Company and its Subsidiaries shall cooperate prior to the Effective Time in
these efforts) to maintain in effect for a period of six years after the
Effective Time all existing directors' and officers' liability insurance policy
or policies of the Company and its Subsidiaries (provided, that Parent 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, any
other policy) with respect to claims arising from facts or events which occurred
prior to the Effective Time and covering persons who are currently covered by
such insurance; provided, that Parent shall not be obligated to make premium
payments for such six-year period in respect of such policy or policies (or
coverage replacement of such policy) which exceed, for the portion related to
the Company's and its Subsidiaries' directors and officers, 200% of the annual
premium payments with respect to the Company's and its Subsidiaries' current
policy or policies in effect as of the date of this Agreement (the "Maximum
Amount"). If the amount of the premiums necessary to maintain or procure such
insurance coverage exceeds the Maximum Amount, Parent shall use its reasonable
best efforts to maintain the most advantageous policies of directors' and
officers'
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liability insurance obtainable for a premium equal to the Maximum Amount.
(d) In the event Parent or any of its successors or
assigns (i) consolidates with or merges into any other person and shall not be
the continuing or surviving corporation or entity of such consolidation or
merger, or (ii) transfers or conveys all or substantially all of its properties
and assets to any person, then, and in each such case, to the extent necessary,
proper provision shall be made so that the successors and assigns of Parent
shall assume the obligations set forth in this Section 6.12.
(e) The provisions of this Section 6.12 are intended
to be for the benefit of, and shall be enforceable by, each Indemnified Party
and his or her successors, heirs and representatives.
6.13. Continuing Employees.
To the extent permitted by applicable law, from and
after the Effective Time, the employees of the Company and its Subsidiaries who
are continuing employees of Parent or its Subsidiaries (including the Company
and its Subsidiaries) (the "Continuing Employees") shall be entitled to
participate in Parent's employee benefit plans, including welfare and fringe
benefit plans but excluding the SouthTrust Corporation Revised Retirement Income
Plan (the "ST Retirement Plan") and the SouthTrust Corporation Employees' Profit
Sharing Plan (the "ST PS Plan"), on the same basis and subject to the same
conditions as are applicable to any newly employed, comparably situated employee
of Parent or a Subsidiary; provided, however, that
(a) with respect to Parent's group medical benefits
plan, each Continuing Employee shall be credited for eligible expenses incurred
by such Continuing Employee and his or her dependents (if applicable) under the
Company group medical benefits plan during the calendar year including the
Effective Date for purposes of satisfying the deductible provisions under
Parent's group medical benefits plan for such current year, and all waiting
periods under said plans and preexisting conditions or exclusions shall be
waived with respect to all Continuing Employees and their dependents; and
(b) credit for each such Continuing Employee's past
service with Company and its Subsidiaries prior to the Effective Time ("Past
Service Credit") shall be given for purposes of:
(i) determining vacation and sick leave benefits and
accruals in accordance with the established policies of Parent; and
(ii) establishing eligibility for participation in
such employee benefit plans and for purposes of determining the scheduling of
vacations and other determinations which are based on length of service;
provided, however, that, 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 in the 1990 discounted stock plan of
Parent.
From and after January 1 following the Effective
Time, for purposes of determining eligibility to participate in, and vesting in
accrued benefits under, both the ST Retirement Plan and the ST PS Plan,
employment of a Continuing Employee by Company and the Company Significant
Subsidiaries shall be credited as if it were employment by Parent, but such
service shall not be credited for purposes of determining benefit accrual under
the ST Retirement Plan. Parent also shall cause the Surviving Corporation and
its Subsidiaries to assume and agree to perform the Company's obligations under
all employment, severance, consulting and other compensation contracts disclosed
in the Company Disclosure Schedule, including without limitation the Company
Employee Severance Protection Plan and the Retention and Severance Agreements
between the Company and certain of its Employees.
(c) The parties agree that appropriate steps shall
be taken to terminate the Company's 401(k) Profit Sharing Plan as of a date
immediately prior to the Effective Time.
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6.14. Notification Of Certain Matters.
Each of the Company and Parent shall give prompt
notice to the other of any fact, event or circumstance known to it that (i) is
reasonably likely, individually or taken together with all other facts, events
and circumstances known to it, to result in any Material Adverse Effect with
respect to it or (ii) would cause or constitute a material breach of any of its
representations, warranties, covenants or agreements contained herein.
6.15. Certain Modifications; Restructuring Charges.
Following the execution of this Agreement, Parent and
the Company will consult with respect to (i) their loan, accrual, reserve,
litigation and real estate evaluation policies and practices (including loan
classifications and levels of reserves) and (ii) the character, amount and
timing of any restructuring charges to be taken by each of Parent and the
Company (and their respective Subsidiaries) in connection with such matters or
otherwise in connection with the transactions contemplated by this Agreement,
including (a) any charge in respect to the write-off or write-down of any asset,
(b) any reserve or other charge relating to the fees and expenses of advisors
and other third parties in connection with the transactions contemplated by this
Agreement, (c) any reserve or other charge relating to severance, termination
and retirement payments in connection with the transactions contemplated by this
Agreement, (d) any reserve or other charge relating to Taxes, or any contractual
or other liability of the Company and its Subsidiaries, including any liability
incurred by the Company and its Subsidiaries in a fiduciary capacity, and (e)
any other appropriate accounting adjustments. Parent and the Company hereby
acknowledge and agree that the decision to effect any change described above,
including the timing and amount thereof, shall be subject to the mutual
agreement of Parent and the Company; provided, that no action shall be taken
pursuant to this Section 6.15 unless such action is consistent with generally
accepted accounting principles. Notwithstanding anything to the contrary set
forth above, the warranties, representations, covenants and agreements of the
Company and its Subsidiaries and the conditions to consummation of the Merger,
contained in this Agreement, shall not be deemed to be untrue, or breached or
otherwise affected in any respect, as a consequence of any action taken pursuant
to this Section 6.15.
6.16. Sale of Certain Real Property.
The Company shall, and shall cause its Subsidiaries
to, prior to the Effective Time, use their best efforts to sell the real
property set forth in Exhibit 6.16 to a third party on terms and conditions
satisfactory to Parent.
6.17. Bank Merger.
It is anticipated that following consummation of the
transactions contemplated by this Agreement, Parent will cause the banking
subsidiary of the Company, ANBF, to be merged with and into the banking
subsidiary of Parent, SouthTrust Bank, National Association ("ST Bank"). The
Company agrees to take such action as is reasonably requested by Parent,
including execution promptly after the date hereof of an appropriate bank merger
agreement and approval thereof by the Board of Directors of ANBF, to cause such
merger to become effective after consummation of the transactions contemplated
by this Agreement; provided, however, that consummation of the transactions
contemplated by this Agreement shall not be contingent upon the consummation of
such bank merger and, except as set forth in this Section 6.17, the obligations
of the Company contained in this Agreement shall be unaffected by such bank
merger and the transactions contemplated thereby.
6.18. Stock Option Agreement.
The Company shall have entered into the Stock Option
Agreement, in the form attached hereto as Exhibit 6.18.
6.19. Compliance with WARN.
The Company agrees to cooperate with Parent to
provide any notices that may be required under the Worker Adjustment and
Retraining Notification Act, 29 U.S.C. ss.ss. 2101, et seq. ("WARN") with
respect to employees of the Company or its Subsidiaries whose termination is
subject to WARN.
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ARTICLE VII
CONDITIONS TO CONSUMMATION OF THE MERGER
The obligations of each of the parties to consummate the
Merger is conditioned upon the satisfaction at or prior to the Effective Time of
each of the following:
7.01. Shareholder Vote.
Approval of the Plan of Merger contained in this
Agreement by the requisite vote of the stockholders of the Company.
7.02. Regulatory Approvals.
All regulatory approvals required to consummate the
transactions contemplated hereby, including, without limitation, those specified
in Section 5.03(q), shall have been obtained and shall remain in full force and
effect and all statutory waiting periods in respect thereof shall have expired.
7.03. Third Party Consents.
All consents or approvals of all persons (other than
Regulatory Authorities) required for the consummation of the Merger shall have
been obtained and shall be in full force and effect, unless the failure to
obtain any such consent or approval is not reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on the Company or
Parent.
7.04. No Injunction, Etc.
No order, decree or injunction of any court or agency
of competent jurisdiction shall be in effect, and no law, statute or regulation
shall have been enacted or adopted, that enjoins, prohibits or makes illegal
consummation of any of the transactions contemplated hereby; provided, however,
that each of Parent and the Company shall have used its best efforts to prevent
any such rule, regulation, injunction, decree or other order, and to appeal as
promptly as possible any injunction, decree or other order that may be entered,
including, without limitation, by proffering its willingness to accept an order
embodying any arrangement required to be made by such party pursuant to Section
6.01(b) of this Agreement (and notwithstanding anything in this Section 7.04 to
the contrary, no terms, conditions or provisions of an order embodying such an
arrangement shall constitute a basis for such party asserting nonfulfillment of
the conditions contained in this Section 7.04).
7.05. Representations, Warranties And Covenants Of Parent.
In the case of the Company's obligations: (i) each of
the representations and warranties contained herein of Parent shall be true and
correct as of the date of this Agreement and upon the Effective Date with the
same effect as though all such representations and warranties had been made on
the Effective Date, except for any such representations and warranties made as
of a specified date, which shall be true and correct as of such date, in any
case subject to the standard set forth in Section 5.02, (ii) each and all of the
agreements and covenants of Parent to be performed and complied with pursuant to
this Agreement on or prior to the Effective Date shall have been duly performed
and complied with in all material respects, and (iii) the Company shall have
received a certificate signed by the Chief Financial Officer of Parent, dated
the Effective Date, to the effect set forth in clauses (i) and (ii) of this
Section 7.05.
7.06. Representations, Warranties And Covenants Of The
Company.
In the case of Parent's obligations: (i) each of the
representations and warranties contained herein of the Company shall be true and
correct as of the date of this Agreement and upon the Effective Date with the
same effect as though all such representations and warranties had been made on
the Effective Date, except for any such representations and warranties made as
of a specified date, which shall be true and correct as of such date, in any
case subject to the standard set forth in Section 5.02, (ii) each and all of the
agreements and covenants of the Company to be performed and complied with
pursuant to this Agreement on or prior to the Effective Date shall have been
duly performed and complied with in all material respects, and (iii) Parent
shall have received a certificate signed by the Chief Financial Officer of the
Company, dated the Effective Date, to the effect set forth in clauses (i) and
(ii) of this Section 7.06.
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7.07. Effective Registration Statement.
The Registration Statement shall have become
effective and no stop order suspending the effectiveness of the Registration
Statement shall have been issued and no proceedings for that purpose shall have
been initiated or threatened by the SEC or any other Regulatory Authority.
7.08. Tax Opinion.
Parent and the Company shall have received an opinion
from Bradley, Arant, Rose & White LLP or such other tax counsel as is reasonably
acceptable to the Company and Parent, dated as of the Effective Date, to the
effect that, if the Merger is consummated in accordance with the terms of this
Agreement the Merger will be treated for Federal income tax purposes as a
reorganization within the meaning of Section 368(a) of the Code. In rendering
such opinion, such counsel may require and rely upon representations and
covenants including those contained in certificates of officers of Parent, the
Company and Merger Sub and others, which representations and covenants are in
form and substance reasonably satisfactory to such counsel.
7.09. Listing.
The shares of Parent Stock issuable pursuant to this
Agreement shall have been approved for listing on the NASDAQ, subject to
official notice of issuance.
7.10. Pooling Treatment.
The Company shall not have taken any actions not
contemplated by the terms hereof that would prevent the Merger from qualifying
for pooling-of-interests accounting treatment under Accounting Principles Board
Opinion No. 16 if closed and consummated in accordance with, and as contemplated
by, the terms of this Agreement. Resolution of the dispute between Raymond K.
Mason, Jr., T. Keith Perry and Charles J. Franson, and Raymond K. Mason, Sr.
shall be conducted as contemplated by the terms hereof.
7.11. Escrow of Disputed Shares.
In the case of the Parent's obligations: immediately
prior to the Effective Time, and provided that the issues relating to the
Disputed Shares have not been resolved earlier in a manner that would not
conflict with the provisions of Sections 7.10 and 7.11 hereof, an escrow
agreement (the "Escrow Agreement") shall be executed among the Company, Raymond
K. Mason, Sr. and the Grantees, the Disputed Shares shall be transferred to an
independent third party (the "Escrow Agent") selected by the parties to act as
escrow agent pursuant to the Escrow Agreement, and, as of the Effective Time,
Parent shall exchange shares of Parent Common Stock for the Disputed Shares at
the Exchange Ratio.
The form and substance of the Escrow Agreement shall
be agreed to by the Grantees, Raymond K. Mason, Sr. and Parent on or before ten
(10) days following the execution and delivery of this Agreement, and shall
provide that (i) the resolution of all issues relating to the Disputed Shares
shall be determined by award of an arbitrator or a final, nonappealable decision
of a court of proper jurisdiction, as determined by and selected by the mutual
agreement of Grantees and Raymond K. Mason, Sr., (ii) the Grantees and Raymond
K. Mason, Sr. may submit to the arbitrator or court their respective views
regarding the proper manner of resolving the issues relating to the Disputed
Shares, including the resolutions which are more preferable to the Grantees and
Raymond K. Mason, Sr., as the case may be, and (iii) all issues respecting the
Disputed Shares shall be resolved by decision of the arbitrator or court, which
decision shall be final and binding on the Company, Raymond K. Mason, Sr. and
the Grantees, and such issues shall not be resolved by a consensual settlement
between Raymond K. Mason, Sr. and the Grantees. In addition, the Escrow
Agreement shall contain such additional terms and provisions as are customary in
agreements of such type, shall not contain any provisions which in Parent's
opinion would be inconsistent with accounting for the transactions contemplated
by the Agreement as a pooling of interests, and must otherwise be acceptable to
Parent. Parent shall have the right to terminate this Agreement if the form and
substance of the Escrow Agreement have not been agreed to within such ten (10)
day period.
In addressing the disposition of the Disputed Shares, the
Escrow Agreement shall further provide:
(i) In the event that it is determined that the
issuance of all of the Disputed Shares
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to the Grantees is valid, the shares of Parent Common Stock exchanged for the
Disputed Shares and transferred to the Escrow Agent pursuant to the Escrow
Agreement shall be released to the Grantees in the proportion to which the
Grantees are entitled to the Disputed Shares.
(ii) In the event that it is determined that the
Grantees are entitled to some number of Disputed Shares less than 90,000, an
appropriate number of shares of Parent Common Stock shall be released to the
Grantees and the remaining shares of Parent Common Stock shall be released, on a
pro rata basis and after adjusting for the release of the Parent Common Stock to
the Grantees pursuant to this Subparagraph (b), to the shareholders of the
Company.
(iii) In the event that it is determined that the
Grantees are entitled to none of the Disputed Shares, then all of the shares of
Parent Common Stock shall be released, on a pro rata basis and after adjusting
for the release of the Parent Common Stock pursuant to this Subparagraph (c), to
the shareholders of the Company.Only whole shares of Parent Common Stock shall
be released by the Escrow Agent in accordance with the foregoing provisions. In
the event that the Grantees or the shareholders of the Company are entitled to
receive a fractional interest in shares of Parent Common Stock, the Escrow Agent
shall pay to the Grantees or the shareholders of the Company, out of the
proceeds derived by the Escrow Agent from the sale of a portion of the Parent
Common Stock, an amount in cash determined in accordance with Section 3.03 of
the Agreement.
7.12. Dissent.
In the case of Parent, the holders of not more than
5% of Company Common Stock, after giving effect to the conversion of Company
Preferred Stock, shall have taken appropriate steps to dissent from the
Merger.It is specifically provided that a failure to satisfy any of the
conditions set forth in Section 7.06 shall only constitute conditions if
asserted by Parent, and a failure to satisfy any of the conditions set forth in
Section 7.05 shall only constitute a condition if asserted by the Company.
ARTICLE VIII
TERMINATION
8.01 Termination.
This Agreement may be terminated, and the Merger may
be abandoned:
(a) Mutual Consent. At any time prior to the
Effective Time, by the mutual consent of Parent and the Company, if the Board of
Directors of each so determines by vote of a majority of the members of its
entire Board.
(b) Breach. At any time prior to the Effective Time,
by Parent or the Company, if its Board of Directors so determines by vote of a
majority of the members of its entire Board, in the event of either: (i) a
breach by the other party of any representation or warranty contained herein
(subject to the standard set forth in Section 5.02), which breach cannot be or
has not been cured within 30 days after the giving of written notice to the
breaching party of such breach; or (ii) a material breach by the other party of
any of the covenants or agreements contained herein, which breach cannot be or
has not been cured within 30 days after the giving of written notice to the
breaching party of such breach.
(c) Delay. At any time prior to the Effective Time,
by Parent or the Company, if its Board of Directors so determines by vote of a
majority of the members of its entire Board, in the event that the Merger is not
consummated by December 31, 1998, except to the extent that the failure of the
Merger then to be consummated arises out of or results from the knowing action
or inaction of the party seeking to terminate pursuant to this Section 8.01(c).
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(d) No Approval. By the Company or Parent, if its
Board of Directors so determines by a vote of a majority of the members of its
entire Board, in the event (i) the approval of the Federal Reserve Board
required for consummation of the Merger and the other transactions contemplated
by the Merger shall have been denied by final nonappealable action of such
Regulatory Authority; provided, that the party seeking termination shall have
complied fully with its obligations under Section 6.01(b) of the Agreement or
(ii) the stockholder approval required by Section 7.01 herein is not obtained at
the Company Meeting.
8.02. Effect Of Termination And Abandonment.
In the event of termination of this Agreement and the
abandonment of the Merger pursuant to this Article VIII, no party to this
Agreement shall have any liability or further obligation to any other party
hereunder except (i) as set forth in Section 9.01, (ii) under the
Confidentiality Agreement and (iii) that termination will not relieve a
breaching party from liability for any willful breach of this Agreement giving
rise to such termination.
ARTICLE IX
MISCELLANEOUS
9.01. Survival.
All representations, warranties, agreements and
covenants contained in this Agreement shall not survive the Effective Time or
termination of this Agreement if this Agreement is terminated prior to the
Effective Time; provided, however, that if the Effective Time occurs, the
agreements of the parties in Sections 6.12, 6.13, 6.14, 6.19, 9.01, 9.04 and
9.08 shall survive the Effective Time, and if this Agreement is terminated prior
to the Effective Time, the agreements of the parties in Sections 6.05(b), 8.02,
9.01, 9.02, 9.04, 9.05, 9.06, 9.07 and 9.08, shall survive such termination.
9.02. Waiver; Amendment.
Prior to the Effective Time, any provision of this
Agreement may be (i) waived by the party benefited by the provision, or (ii)
amended or modified at any time, by an agreement in writing among the parties
hereto approved by their respective Boards of Directors and executed in the same
manner as this Agreement, except that, after the Company Meeting the
consideration to be received by the stockholders of the Company for each share
of Company Stock shall not thereby be decreased. Prior to submission of this
Agreement for approval by the stockholders of the Company, Parent shall
supplement this Agreement by specifying the name of Merger Sub and may make such
amendments as are permitted by Section 2.01 and the Company's Board of Directors
shall approve the supplements and amendments specified in this sentence.
9.03. Counterparts.
This Agreement may be executed in one or more
counterparts, each of which shall be deemed to constitute an original.
9.04. Governing Law.
This Agreement shall be governed by, and interpreted
in accordance with, the laws of the State of Florida, without regard to the
conflict of law principles thereof (except to the extent that mandatory
provisions of Federal law govern).
9.05. Expenses.
Each party hereto will bear all expenses incurred by
it in connection with this Agreement and the transactions contemplated hereby,
except that printing expenses and SEC registration fees shall be borne by
Parent.
9.06. Confidentiality.
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Each of the parties hereto and their respective
agents, attorneys and accountants will maintain the confidentiality of all
information provided in connection herewith in accordance, and subject to the
limitations of, the Confidentiality Agreement.
9.07. Notices.
All notices, requests and other communications
hereunder to a party shall be in writing and shall be deemed given if personally
delivered, telecopied (with confirmation) or mailed by registered or certified
mail (return receipt requested) to such party at its address set forth below or
such other address as such party may specify by notice to the parties hereto.
If to Parent, to:
SouthTrust Corporation
P.O. Box 2554
Birmingham, Alabama 35290
Attn.: Alton E. Yother, Senior Vice President
Fax: (205) 254-6695
With a copy to:
C. Larimore Whitaker, Esq.
Bradley Arant Rose & White LLP
2001 Park Place, Suite 1400
Birmingham, Alabama 35203 Fax: (205) 521-8800
If to the Company, to:
American Banks of Florida, Inc.
2031 Hendricks Avenue
Jacksonville, Florida 3220
Attn.: Raymond K. Mason, Jr., President
Fax: (904) 396-8306
With copies to:
Allen I. Isaacson, P.C.
Fried, Frank, Harris, Shriver & Jacobson
One New York Plaza
New York, New York 10004
Fax: (212) 859-8587
and:
Luther F. Sadler, Jr., Esq.
Foley & Lardner
The Greenleaf Building
200 Laura Street P.O. Box 240
Jacksonville, Florida 32201-0240
Fax: (904) 359-8700
9.08. Entire Understanding; No Third Party Beneficiaries.
Except for the Confidentiality Agreement, which shall
remain in effect, this Agreement represents the entire understanding of the
parties hereto with reference to the transactions contemplated hereby and
thereby and supersede any and all other oral or written agreements heretofore
made. Except for Sections 6.12 and 6.13, nothing in this Agreement expressed or
implied, is intended to confer upon any person, other than the parties
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hereto or their respective successors, any rights, remedies, obligations or
liabilities under or by reason of this Agreement.
9.09. Headings.
The headings contained in this Agreement are for
reference purposes only and are not part of this Agreement.
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IN WITNESS WHEREOF, the parties hereto have caused this
instrument to be executed in counterparts by their duly authorized officers, all
as of the day and year first above written.
AMERICAN BANKS OF FLORIDA, INC.
By: /s/ RAYMOND K. MASON, JR.
--------------------------------
Name: Raymond K. Mason, Jr.
Title: President
SOUTHTRUST CORPORATION
By: /s/ FREDERICK W. MURRAY, JR.
--------------------------------
Name: Frederick W. Murrary Jr.
Title: Executive Vice President
SOUTHTRUST OF ALABAMA, INC.
By: /s/ FREDERICK W. MURRAY, JR..
--------------------------------
Name: Frederick W. Murray, Jr.
Title: President
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EXHIBIT B
STOCK OPTION AGREEMENT
This STOCK OPTION AGREEMENT, dated as of February 18, 1998
(the "Agreement"), is by and between American Banks of Florida, Inc. ("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 February 18, 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 236,853 shares (the "Option Shares") of Common Stock of Issuer,
par value $1.00 per share ("Issuer Common Stock"), at a purchase price per
Option Share (the "Purchase Price") equal to $131.99; 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) termination of the Merger Agreement in
accordance with the terms thereof before the occurrence of a Purchase Event or
Preliminary Purchase Event (other than a termination of the Merger Agreement by
Grantee pursuant to Section 10.1(d) (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 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 exercise of the Option shall be subject to compliance with
applicable law and any required Consent of any Regulatory Authority including,
without limitation, the Bank Holding Company Act of 1956 (the "BHCA"). The
rights set forth in Section 8 shall terminate when the right to exercise the
Option terminates (other than as a result of a complete exercise of the Option)
as set forth herein.
(b) As used herein, a "Purchase Event" means any of the following
events:
(i) After the date of this Agreement, without Grantee's
prior written consent, Issuer shall have authorized, recommended, or
entered into an 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
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"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 15% 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 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 Florida banking or corporate law or any
other applicable law seeking 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 business days nor later than 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).
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4. Payment and Delivery of Certificates.
(a) On each Closing Date, Grantee shall (i) pay to Issuer, in
immediately available funds by wire transfer to a bank account designated by
Issuer, an amount equal to the Purchase Price multiplied by the number of Option
Shares to be purchased on such Closing Date, and (ii) present and surrender this
Agreement to the Issuer at the address of the Issuer specified 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 preemptive rights, and (B)
if the Option is exercised in part only, an executed, new Stock Option Agreement
with the same terms as this Agreement evidencing the right to purchase the
balance of the shares of Issuer Common Stock purchasable hereunder, and (ii)
Grantee shall deliver to Issuer a letter agreeing that Grantee shall not offer
to sell or otherwise dispose of such Option Shares in violation of applicable
federal and state law or of the provisions of this Agreement.
(c) In addition to any other legend that is required by applicable
law, certificates for the Option Shares delivered at each Closing shall be
endorsed with a restrictive legend which shall read substantially as follows:
THE 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 FEBRUARY 18, 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), 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 the Grantee or its assignee, transferee, or
designee.
(e) Issuer agrees (i) that it shall at all times maintain, free
from preemptive 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 Certificate or 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
or Consent of any Regulatory Authority is necessary before the Option may be
exercised, cooperating 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 the 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 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,
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
preemptive right of any shareholder of Issuer, but subject to the voting
restrictions contained in the Certificate 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 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 business, assets,
operations, financial condition or results of operation 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
translations 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.
(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, it, 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.
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(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 and
Issuer shall be the continuing or surviving corporation, but, in connection with
such merger, the then-outstanding shares of Issuer Common Stock shall be changed
into or exchanged for stock or other securities of 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 consummation of any such transaction and upon the terms and
conditions set forth herein, Grantee shall receive for each Option Share with
respect to which the Option has not been exercised an amount of consideration in
the form and equal to the per share amount of consideration that would be
received by the holder of one share of Issuer Common Stock less the Purchase
Price (the "Net Consideration") (and, in the event an election or similar
arrangement with respect to the type of consideration to be received by holders
of Issuer Common Stock, subject to the foregoing, proper provision shall be made
so that the Grantee would have the same election or similar rights as would the
holder of the number of shares of Issuer Common Stock for which the Option is
then exercisable).
8. Repurchase at the Option of Grantee.
(a) Subject to the last sentence of Section 3(a), at the request
of Grantee at any time commencing upon the first occurrence of a Repurchase
Event (as defined in Section 8(d)) and ending 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
(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
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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 pursuant to
Section 3(a).
(c) For purposes of this Agreement, the "Applicable Price" means
the highest of: (i) the highest price per share of Issuer Common Stock paid for
any such share by the person or groups described in Section 8(d)(i) 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 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 form 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) above 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
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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.
(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, 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 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.
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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 reasonably 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 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. After the Option Shares are
registered under the Securities Act, 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), 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
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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, each of
the parties hereto shall bear and pay all costs and expenses incurred by it or
on its behalf in connection with the transactions contemplated hereunder,
including fees and expenses of its own financial consultants, investment
bankers, accountants and counsel.
(b) Waiver and 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 Florida 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):
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If to Issuer to: American Banks of Florida, Inc.
2031 Hendricks Avenue
Jacksonville, Florida 32207
Telecopy Number: (904) 396-8306
Attention: Raymond K. Mason, Jr., President
with a copies to: Fried, Frank, Harris, Shriver & Jacobson
One New York Plaza
New York, New York 10004
Telecopy Number: (212) 859-8587
Attention: Allen I. Isaacson, P.C.
and: Foley & Lardner
The Greenleaf Building
200 Laura Street
P.O. Box 240
Jacksonville, Florida 32201-0240
Telecopy Number: (904) 359-8700
Attention: Luther F. Sadler, Jr., Esq.
If to Grantee to: SouthTrust Corporation
420 North 20th Street
Birmingham, Alabama 35203
Telecopy Number: (205) 254-6697
Attention: Frederick W. Murray, Jr.
Executive Vice President
with a copy to: Bradley Arant Rose & White LLP
2001 Park Place, Suite 1400
Birmingham, Alabama 35203-2736
Telecopy Number: (205) 521-8800
Attention: C. Larimore Whitaker
(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.
ATTEST: AMERICAN BANK OF FLORIDA, INC.
By: /s/ T. KEITH PERRY By: /s/ RAYMOND K. MASON, JR.
---------------------------------- -----------------------------
Its Secretary Raymond K. Mason, Jr.
Its President
ATTEST: SOUTHTRUST CORPORATION
By: /s/ A. D. BARNARD By: /s/ FREDRICK W. MURRARY, JR.
---------------------------------- -----------------------------
Its Secretary Frederick W. Murray, Jr.
Its Executive Vice President
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EXHIBIT C
[Letterhead of Wheat First Securities, Inc.]
, 1998
Board of Directors
American Banks of Florida, Inc.
2031 Hendricks Avenue
Jacksonville, Florida 32207
Members of the Board:
American Banks of Florida, Inc. ("American") and SouthTrust Corporation
("SouthTrust") have entered into a Merger Agreement and a Plan of Merger, dated
as of February 18, 1998 (the "Merger Agreement"), pursuant to which American
will combine with SouthTrust by means of the merger (the "Merger") of American
with and into SouthTrust. Upon consummation of the Merger, each of the
outstanding shares of the common stock, $1.00 par value, of American ("American
Stock")(other than shares held by dissenting shareholders) will be converted
into 3.23574794 shares of the common stock of SouthTrust ("SouthTrust Stock"),
as adjusted in accordance with the terms of the Merger Agreement (the "Exchange
Ratio").
Wheat First Securities, Inc. ("Wheat First") as part of its investment
banking business, is regularly engaged in the valuation of businesses and their
securities in connection with mergers and acquisitions, negotiated
underwritings, competitive biddings, secondary distributions of listed and
unlisted securities, private placements and valuations for estate, corporate and
other purposes. In the ordinary course of our business as a broker-dealer, we
may, from time to time, have a long or short position in, and buy or sell, debt
or equity securities of American or SouthTrust for our own account or for the
accounts of our customers. Wheat First will also receive a fee from American for
our financial advisory services, which include rendering this opinion.
You have asked us whether, in our opinion, the Exchange Ratio is fair,
from a financial point of view, to the holders of American Stock (other than
SouthTrust and its affiliates).
In arriving at the opinion set forth below, we have conducted
discussions with members of senior management of American and SouthTrust
concerning their businesses and prospects and have reviewed certain publicly
available business and financial information and certain other information
prepared or provided to us in connection with the Merger, including, among other
things, the following:
(1) American's Annual Reports to Stockholders and related
financial information for the three fiscal years ended
December 31, 1996, and certain financial data provided by
management of American for the fiscal year ended December 31,
1997;
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(2) Certain financial data provided by management of American for
the periods ended March 31, 1997, June 30, 1997, and September
30, 1997;
(3) SouthTrust's Annual Reports to Stockholders, Annual Reports on
Form 10-K and related financial information for the three
fiscal years ended December 31, 1997;
(4) Certain information released by SouthTrust for the period
ended March 31, 1998;
(5) Certain publicly available information with respect to
historical market prices and trading activities for American
Stock and SouthTrust Common Stock and for certain publicly
traded financial institutions which Wheat First deemed
relevant;
(6) Certain publicly available information with respect to banking
companies and the financial terms of certain other mergers and
acquisitions which Wheat First deemed relevant;
(7) The Merger Agreement;
(8) Certain estimates of the cost savings and revenue enhancements
projected by American and SouthTrust for the combined company;
(9) Other financial information concerning the businesses and
operations of American and SouthTrust, including certain
audited and unaudited financial information and certain
internal financial analyses and forecasts for American and
SouthTrust prepared by the senior managements of those
companies; and
(10) Such financial studies, analyses, inquiries and other matters
as we deemed necessary.
In preparing our opinion, we have relied on and assumed the accuracy
and completeness of all information provided to us or publicly available,
including the representations and warranties of American and SouthTrust included
in the Merger Agreement, and we have not assumed any responsibility for
independent verification of such information. We have relied upon the
managements of American and SouthTrust as to the reasonableness and
achievability of their financial and operational forecasts and projections,
including the estimates of cost savings and revenue enhancements expected to
result from the Merger, and the assumptions and bases therefor, provided to us,
and, with your consent, we have assumed that such forecasts and projections
reflect the best currently available estimates and judgments of such
managements, and that such forecasts and projections will be realized in the
amounts and in the time periods currently estimated by such managements. We also
assumed, without independent verification, that the aggregate allowances for
loan losses and other contingencies for American and SouthTrust are adequate to
cover such losses. Wheat First did not review any individual credit files of
American or SouthTrust, nor did it make an independent evaluation or appraisal
of the assets or liabilities of American or SouthTrust. We also assumed that, in
the course of obtaining the necessary regulatory approvals for the Merger, no
conditions will be imposed that will have a material adverse effect on the
contemplated benefits of the Merger, on a pro forma basis, to SouthTrust.
Our opinion is necessarily based upon market, economic and other
conditions as they exist and can be evaluated on the date hereof and the
information made available to us through the date hereof. Events occurring after
that date could materially affect the assumptions and conclusions contained in
our opinion. We have not undertaken to reaffirm or revise this opinion or
otherwise comment on any events occurring after the date hereof. Wheat First's
opinion is directed to the Board of Directors of American and relates only to
the fairness, from a financial point of view, of the Exchange Ratio to the
holders of American Stock (other
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than SouthTrust and its affiliates) and does not address any other aspect of the
Merger nor constitute a recommendation to any shareholder of American as to how
such shareholder should vote with respect to the Merger. Wheat First's opinion
does not address the relative merits of the Merger as compared to any
alternative business strategies that might exist for American, nor does it
address the effect of any other business combination in which American might
engage.
It is understood that this opinion may be included in its entirety in
the Proxy Statement/ Prospectus. This opinion may not, however, be summarized,
excerpted from or otherwise publicly referred to without our prior written
consent.
On the basis of and subject to the foregoing, we are of the opinion
that as of the date hereof the Exchange Ratio is fair, from a financial point of
view, to the holders of American Stock (other than SouthTrust and its
affiliates).
Very truly yours,
WHEAT FIRST SECURITIES, INC.
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EXHIBIT D
FLORIDA BUSINESS CORPORATION ACT DISSENTERS RIGHTS PROVISIONS
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607.1301. Dissenters' rights; definitions
The following definitions apply to ss. 607.1302 and 607.1320:
(1) "Corporation" means the issuer of the shares held by a dissenting
shareholder before the corporate action or the surviving or acquiring
corporation by merger or share exchange of that issuer.
(2) "Fair value," with respect to a dissenter's shares, means the value of the
shares as of the close of business on the day prior to the shareholders'
authorization date, excluding any appreciation or depreciation in anticipation
of the corporate action unless exclusion would be inequitable.
(3) "Shareholders' authorization date" means the date on which the
shareholders' vote authorizing the proposed action was taken, the date on which
the corporation received written consents without a meeting from the requisite
number of shareholders in order to authorize the action, or, in the case of a
merger pursuant to s. 607.1104, the day prior to the date on which a copy of the
plan of merger was mailed to each shareholder of record of the subsidiary
corporation.
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607.1302. Right of shareholders to dissent
(1) Any shareholder of a corporation has the right to dissent from, and obtain
payment of the fair value of his or her shares in the event of, any of the
following corporate actions:
(a) Consummation of a plan of merger to which the corporation is a party:
1. If the shareholder is entitled to vote on the merger, or
2. If the corporation is a subsidiary that is merged with its parent under s.
607.1104, and the shareholders would have been entitled to vote on action taken,
except for the applicability of s. 607.1104;
(b) Consummation of a sale or exchange of all, or substantially all, of the
property of the corporation, other than in the usual and regular course of
business, if the shareholder is entitled to vote on the sale or exchange
pursuant to s. 607.1202, including a sale in dissolution but not including a
sale pursuant to court order or a sale for cash pursuant to a plan by which all
or substantially all of the net proceeds of the sale will be distributed to the
shareholders within 1 year after the date of sale;
(c) As provided in s. 607.0902(11), the approval of a control-share
acquisition;
(d) Consummation of a plan of share exchange to which the corporation is a
party as the corporation the shares of which will be acquired, if the
shareholder is entitled to vote on the plan;
(e) Any amendment of the articles of incorporation if the shareholder is
entitled to vote on the amendment and if such amendment would adversely affect
such shareholder by:
1. Altering or abolishing any preemptive rights attached to any of his or her
shares;
2. Altering or abolishing the voting rights pertaining to any of his or her
shares, except as such rights may be affected by the voting rights of new shares
then being authorized of any existing or new class or series of shares;
3. Effecting an exchange, cancellation, or reclassification of any of his or
her shares, when such exchange, cancellation, or reclassification would alter or
abolish the shareholder's voting rights or alter his or her percentage of equity
in the corporation, or effecting a reduction or cancellation of accrued
dividends or other arrearages in respect to such shares;
4. Reducing the stated redemption price of any of the shareholder's redeemable
shares, altering or abolishing any provision relating to any sinking fund for
the redemption or purchase of any of his or her shares, or making any of his or
her shares subject to redemption when they are not otherwise redeemable;
5. Making noncumulative, in whole or in part, dividends of any of the
shareholder's preferred shares which had theretofore been cumulative;
6. Reducing the stated dividend preference of any of the shareholder's
preferred shares; or
7. Reducing any stated preferential amount payable on any of the shareholder's
preferred shares upon voluntary or involuntary liquidation; or
(f) Any corporate action taken, to the extent the articles of incorporation
provide that a voting or nonvoting shareholder is entitled to dissent and obtain
payment for his or her shares.
(2) A shareholder dissenting from any amendment specified in paragraph (1)(e)
has the right to dissent only as to those of his or her shares which are
adversely affected by the amendment.
(3) A shareholder may dissent as to less than all the shares registered in his
or her name. In that event, the shareholder's rights shall be determined as if
the shares as to which he or she has dissented and his or her other shares were
registered in the names of different shareholders.
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(4) Unless the articles of incorporation otherwise provide, this section does
not apply with respect to a plan of merger or share exchange or a proposed sale
or exchange of property, to the holders of shares of any class or series which,
on the record date fixed to determine the shareholders entitled to vote at the
meeting of shareholders at which such action is to be acted upon or to consent
to any such action without a meeting, were either registered on a national
securities exchange or designated as a national market system security on an
interdealer quotation system by the National Association of Securities Dealers,
Inc., or held of record by not fewer than 2,000 shareholders.
(5) A shareholder entitled to dissent and obtain payment for his or her shares
under this section may not challenge the corporate action creating his or her
entitlement unless the action is unlawful or fraudulent with respect to the
shareholder or the corporation.
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607.1320. Procedure for exercise of dissenters' rights
(1)(a) If a proposed corporate action creating dissenters' rights under s.
607.1302 is submitted to a vote at a shareholders' meeting, the meeting notice
shall state that shareholders are or may be entitled to assert dissenters'
rights and be accompanied by a copy of ss. 607.1301, 607.1302, and 607.1320. A
shareholder who wishes to assert dissenters' rights shall:
1. Deliver to the corporation before the vote is taken written notice of the
shareholder's intent to demand payment for his or her shares if the proposed
action is effectuated, and
2. Not vote his or her shares in favor of the proposed action. A proxy or vote
against the proposed action does not constitute such a notice of intent to
demand payment.
(b) If proposed corporate action creating dissenters' rights under s. 607.1302
is effectuated by written consent without a meeting, the corporation shall
deliver a copy of ss. 607.1301, 607.1302, and 607.1320 to each shareholder
simultaneously with any request for the shareholder's written consent or, if
such a request is not made, within 10 days after the date the corporation
received written consents without a meeting from the requisite number of
shareholders necessary to authorize the action.
(2) Within 10 days after the shareholders' authorization date, the corporation
shall give written notice of such authorization or consent or adoption of the
plan of merger, as the case may be, to each shareholder who filed a notice of
intent to demand payment for his or her shares pursuant to paragraph (1)(a) or,
in the case of action authorized by written consent, to each shareholder,
excepting any who voted for, or consented in writing to, the proposed action.
(3) Within 20 days after the giving of notice to him or her, any shareholder
who elects to dissent shall file with the corporation a notice of such election,
stating the shareholder's name and address, the number, classes, and series of
shares as to which he or she dissents, and a demand for payment of the fair
value of his or her shares. Any shareholder failing to file such election to
dissent within the period set forth shall be bound by the terms of the proposed
corporate action. Any shareholder filing an election to dissent shall deposit
his or her certificates for certificated shares with the corporation
simultaneously with the filing of the election to dissent. The corporation may
restrict the transfer of uncertificated shares from the date the shareholder's
election to dissent is filed with the corporation.
(4) Upon filing a notice of election to dissent, the shareholder shall
thereafter be entitled only to payment as provided in this section and shall not
be entitled to vote or to exercise any other rights of a shareholder. A notice
of election may be withdrawn in writing by the shareholder at any time before an
offer is made by the corporation, as provided in subsection (5), to pay for his
or her shares. After such offer, no such notice of election may be withdrawn
unless the corporation consents thereto. However, the right of such shareholder
to be paid the fair value of his or her shares shall cease, and the shareholder
shall be reinstated to have all his or her rights as a shareholder as of the
filing of his or her notice of election, including any intervening preemptive
rights and the right to payment of any intervening dividend or other
distribution or, if any such rights have expired or any such dividend or
distribution other than in cash has been completed, in lieu thereof, at the
election of the corporation, the fair value thereof in cash as determined by the
board as of the time of such expiration or completion, but without prejudice
otherwise to any corporate proceedings that may have been taken in the interim,
if:
(a) Such demand is withdrawn as provided in this section;
(b) The proposed corporate action is abandoned or rescinded or the shareholders
revoke the authority to effect such action;
(c) No demand or petition for the determination of fair value by a court has
been made or filed within the time provided in this section; or
(d) A court of competent jurisdiction determines that such shareholder is not
entitled to the relief provided by this section.
(5) Within 10 days after the expiration of the period in which shareholders may
file their notices of election to dissent, or within 10 days after such
corporate action is effected, whichever is later (but in no case later than 90
days from the
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shareholders' authorization date), the corporation shall make a written offer to
each dissenting shareholder who has made demand as provided in this section to
pay an amount the corporation estimates to be the fair value for such shares. If
the corporate action has not been consummated before the expiration of the
90-day period after the shareholders' authorization date, the offer may be made
conditional upon the consummation of such action. Such notice and offer shall be
accompanied by:
(a) A balance sheet of the corporation, the shares of which the dissenting
shareholder holds, as of the latest available date and not more than 12 months
prior to the making of such offer; and
(b) A profit and loss statement of such corporation for the 12-month period
ended on the date of such balance sheet or, if the corporation was not in
existence throughout such 12-month period, for the portion thereof during which
it was in existence.
(6) If within 30 days after the making of such offer any shareholder accepts
the same, payment for his or her shares shall be made within 90 days after the
making of such offer or the consummation of the proposed action, whichever is
later. Upon payment of the agreed value, the dissenting shareholder shall cease
to have any interest in such shares.
(7) If the corporation fails to make such offer within the period specified
therefor in subsection (5) or if it makes the offer and any dissenting
shareholder or shareholders fail to accept the same within the period of 30 days
thereafter, then the corporation, within 30 days after receipt of written demand
from any dissenting shareholder given within 60 days after the date on which
such corporate action was effected, shall, or at its election at any time within
such period of 60 days may, file an action in any court of competent
jurisdiction in the county in this state where the registered office of the
corporation is located requesting that the fair value of such shares be
determined. The court shall also determine whether each dissenting shareholder,
as to whom the corporation requests the court to make such determination, is
entitled to receive payment for his or her shares. If the corporation fails to
institute the proceeding as herein provided, any dissenting shareholder may do
so in the name of the corporation. All dissenting shareholders (whether or not
residents of this state), other than shareholders who have agreed with the
corporation as to the value of their shares, shall be made parties to the
proceeding as an action against their shares. The corporation shall serve a copy
of the initial pleading in such proceeding upon each dissenting shareholder who
is a resident of this state in the manner provided by law for the service of a
summons and complaint and upon each nonresident dissenting shareholder either by
registered or certified mail and publication or in such other manner as is
permitted by law. The jurisdiction of the court is plenary and exclusive. All
shareholders who are proper parties to the proceeding are entitled to judgment
against the corporation for the amount of the fair value of their shares. The
court may, if it so elects, appoint one or more persons as appraisers to receive
evidence and recommend a decision on the question of fair value. The appraisers
shall have such power and authority as is specified in the order of their
appointment or an amendment thereof. The corporation shall pay each dissenting
shareholder the amount found to be due him or her within 10 days after final
determination of the proceedings. Upon payment of the judgment, the dissenting
shareholder shall cease to have any interest in such shares.
(8) The judgment may, at the discretion of the court, include a fair rate of
interest, to be determined by the court.
(9) The costs and expenses of any such proceeding shall be determined by the
court and shall be assessed against the corporation, but all or any part of such
costs and expenses may be apportioned and assessed as the court deems equitable
against any or all of the dissenting shareholders who are parties to the
proceeding, to whom the corporation has made an offer to pay for the shares, if
the court finds that the action of such shareholders in failing to accept such
offer was arbitrary, vexatious, or not in good faith. Such expenses shall
include reasonable compensation for, and reasonable expenses of, the appraisers,
but shall exclude the fees and expenses of counsel for, and experts employed by,
any party. If the fair value of the shares, as determined, materially exceeds
the amount which the corporation offered to pay therefor or if no offer was
made, the court in its discretion may award to any shareholder who is a party to
the proceeding such sum as the court determines to be reasonable compensation to
any attorney or expert employed by the shareholder in the proceeding.
(10) Shares acquired by a corporation pursuant to payment of the agreed value
thereof or pursuant to payment of the judgment entered therefor, as provided in
this section, may be held and disposed of by such corporation as authorized but
unissued shares of the corporation, except that, in the case of a merger, they
may be held and disposed of as the plan of merger otherwise provides. The shares
of the surviving corporation into which the shares of such dissenting
shareholders would have been converted had they assented to the merger shall
have the status of authorized but unissued shares of the surviving corporation.
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EXHIBIT E
[Form of Escrow Agreement to be Executed by American Banks of Florida, Inc.
Raymond K. Mason, Sr., Raymond K. Mason, Jr., Charles J. Franson, T. Keith Perry
and the Escrow Agent.]
ESCROW AGREEMENT
THIS ESCROW AGREEMENT, dated __________________1, 1998 (this
"Escrow Agreement"), by and among American Banks of Florida, Inc. (the
"Company"), Messrs. Raymond K. Mason, Jr., T. Keith Perry and Charles J. Franson
(each a "Bonus Stockholder" and, collectively, the "Bonus Stockholders"), Mr.
Raymond K. Mason, Sr. ("Mr. Mason") and [unaffiliated escrow agent2], as escrow
agent (the "Escrow Agent"). Unless otherwise defined herein, or unless the
context requires otherwise, all of the capitalized terms used in this Escrow
Agreement have the same meanings as are ascribed thereto in the Agreement and
Plan of Merger, dated as of February 18, 1998 (the "Merger Agreement"), by and
between the Company, SouthTrust Corporation ("SouthTrust") and SouthTrust of
Alabama, Inc.
WHEREAS, the number of shares of common stock, par value $1.00
per share (the "Common Stock"), of the Company listed opposite each Bonus
Stockholder's name on the Annex attached hereto (the "Bonus Shares"), issued to
such Bonus Stockholders pursuant to the Stock Bonus Agreements dated May 26,
1995 (the "Stock Bonus Agreements"), would, pursuant to the terms of such Stock
Bonus Agreements, become fully vested upon the sale of (I) all or substantially
all of the stock or assets of American National Bank of Florida (the "Bank") or
(ii) a majority interest of the capital stock of the Company; and
WHEREAS, a claim has been made that the Bonus Shares were not
appropriately issued and the Stock Bonus Agreements were not appropriately
authorized, and the Bonus Stockholders dispute such claim (the "Dispute").
NOW, THEREFORE, in consideration of the mutual warranties,
covenants and agreements contained herein, the parties hereto hereby agree as
follows:
1. Resolution of Claim. (I) The resolution of the Dispute
shall be determined by award of an arbitrator or a final, nonappealable decision
of a court of proper jurisdiction, as determined by and selected by the mutual
agreement of the Bonus Stockholders and Mr. Mason, (ii) the Bonus Stockholders
and Mr. Mason may submit to the arbitrator or court their respective views
regarding the proper manner of resolving the issues relating to the Bonus
Shares, including the resolutions which are more preferable to the Bonus
Stockholders and Mr. Mason, as the case may be, and (iii) all issues respecting
the Bonus Shares shall be resolved by decision of the arbitrator or court, which
decision shall be final and binding on the Company, Mr. Mason and the Bonus
Stockholders, and such issues shall not be resolved by a consensual settlement
between the Bonus Stockholders and Mr. Mason. If the parties hereto have failed
to commence proceedings to resolve the Dispute before an arbitrator or a court
of proper jurisdiction, as determined by and selected by the mutual agreement of
the Bonus Stockholders and Mr. Mason, as provided in clause (I) of this
Paragraph 1 on or before 30 days after the Effective Time, such failure shall
not preclude any party hereto from thereafter commencing litigation to resolve
the Dispute before a court of proper jurisdiction; provided, however, that in
any event, including any such failure
- --------
1 Insert date immediately prior to the Effective Time.
2 To be agreed.
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<PAGE> 162
to agree or any such resulting commencement of litigation, the Dispute shall not
be resolved by a consensual settlement between the Bonus Stockholders and Mr.
Mason.
2. Appointment. The Escrow Agent is hereby constituted
and appointed the escrow agent hereunder.
3. Escrow Fund.
(a) Simultaneously with the execution and
delivery of this Agreement, each of the Bonus Stockholders has delivered to and
deposited with the Escrow Agent the certificate or certificates representing his
respective Bonus Shares, with stock powers duly endorsed in blank, receipt of
which is hereby acknowledged.
(b) As soon as practicable after the Effective
Time, the Escrow Agent shall exchange the certificates representing the Bonus
Shares for shares of SouthTrust Common Stock pursuant to the terms of the Merger
Agreement.
(c) The assets held in escrow, including the
SouthTrust Common Stock received by the Escrow Agent in exchange for the Bonus
Shares are referred to herein as the "Escrow Fund".
(d) Subject to and in accordance with the terms
and conditions hereof, the Escrow Agent agrees that it shall receive, hold in
escrow, invest and reinvest, to the extent possible, or release the Escrow Fund
and all certificates representing the Escrow Fund, if any, as provided herein.
4. Dividends, Interest and Other Earnings. All cash and
non-cash dividends or other distributions on the Escrow Fund (other than
dividends or distributions made in the form of SouthTrust stock) shall be
distributed by the Escrow Agent to the Bonus Stockholders promptly after the
receipt of any such dividends or distributions by the Escrow Fund.
5. Voting. The voting rights in respect of the Escrow
Fund, if any, shall be exercised by the Escrow Agent in accordance with
instructions given to the Escrow Agent by each Bonus Stockholder with respect to
his respective share of the Escrow Fund.
6. Release of the Escrow Fund.
(a) In the event that it is determined that the
issuance of all of the Bonus Shares to the Bonus Stockholders is valid, the
Escrow Agent shall release the Escrow Fund, including the shares of SouthTrust
Common Stock, to the Bonus Stockholders in the proportion to which the Bonus
Stockholders are entitled to the Bonus Shares.
(b) In the event that it is determined that the
Bonus Stockholders are entitled to some number of Bonus Shares less than 90,000,
the Escrow Agent shall release a proportion of the Escrow Fund, including an
appropriate number of shares of SouthTrust Common Stock, to the Bonus
Stockholders, and the remaining Escrow Fund shall be released, on a pro rata
basis, to the shareholders of the Company at the Effective Time after adjusting
for the release of the Escrow Fund pursuant to this Subparagraph (b).
(c) In the event that it is determined that the
Bonus Stockholders are entitled to none of the Bonus Shares, then the Escrow
Agent shall release all of the Escrow Fund, including the shares of SouthTrust
Common Stock, on a pro rata basis, to the shareholders of the Company at the
Effective Time after adjusting for the release of the Escrow Fund pursuant to
this Subparagraph (c).
The Escrow Agent shall only release whole shares of
SouthTrust Common Stock in accordance with the foregoing provisions. In the
event that the Bonus Stockholders or the shareholders of the Company at the
Effective Time are entitled to receive a fractional interest in shares of
SouthTrust Common Stock, the Escrow Agent shall pay to the Bonus Stockholders or
such shareholders of the Company, out of the
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<PAGE> 163
proceeds derived by the Escrow Agent from the sale of a portion of the
SouthTrust Common Stock, an appropriate amount in cash.
(d) Notwithstanding Subparagraphs (a) - (c)
above, if litigation or arbitration relating to the Dispute is not commenced
prior to December 31, 1999, the Escrow Agent shall release the Escrow Fund to
each Bonus Stockholder, in proportion to his respective share therein.
(e) The parties agree that neither the Bonus
Shares nor the shares of SouthTrust Common Stock received by the Escrow Agent in
exchange for the Bonus Shares shall be deemed to have substantially vested for
federal income tax purposes (and neither the Company nor any of its affiliates
shall claim any deduction with respect thereto) until the Dispute is resolved;
provided, however, that payments made to the Bonus Stockholders pursuant to
Paragraph 4 hereof shall, for federal income tax purposes, be includible in
income by the Bonus Stockholders as compensation and deductible by the Company
when such payments are made. All tax returns and reports (including information
reports) filed by the parties shall be prepared in a manner that is consistent
with the provisions of this Subparagraph (e). Following the resolution of the
Dispute in accordance with the terms hereof, the number of shares of SouthTrust
Common Stock to which each Bonus Stockholder is entitled shall, for federal
income tax purposes, become fully vested with respect to such Bonus Stockholder.
7. Rights and Duties of the Escrow Agent.
(a) Scope of Undertaking. The Escrow Agent's
duties and responsibilities in connection with this Escrow Agreement shall be
purely ministerial and shall be limited to those expressly set forth in this
Escrow Agreement. The Escrow Agent is not a principal, participant or
beneficiary in any transaction underlying this Escrow Agreement and shall have
no duty to inquire beyond the terms and provisions hereof. The Escrow Agent
shall have no responsibility or obligation of any kind in connection with this
Escrow Agreement or the Escrow Fund and shall not be required to deliver the
Escrow Fund or any part thereof or take any action with respect to any matters
that might arise in connection therewith, other than to receive, hold, invest,
reinvest, vote and release the Escrow Fund as herein provided. The Escrow Agent
shall not be liable for any error in judgment, any act or omission, any mistake
of law or fact, or for anything it may do or refrain from doing in connection
herewith, except for, subject to paragraph (c) below, its own willful misconduct
or gross negligence. It is the intention of the parties hereto that the Escrow
Agent shall not ever be required to use, advance or risk its own funds or
otherwise incur financial liability in the performance of any of its duties or
the exercise of any of its rights and powers hereunder.
(b) Reliance; Liability. The Escrow Agent may
rely on, and shall not be liable for acting or refraining from acting in
accordance with, any written notice, instruction or request or other paper
furnished to it hereunder or pursuant hereto and believed by it to have been
signed or presented by the proper party or parties. The Escrow Agent shall be
responsible for holding, investing, reinvesting and releasing the Escrow Fund
pursuant to this Escrow Agreement; provided, however, that in no event shall the
Escrow Agent be liable for any lost profits, lost savings or other special,
exemplary, consequential or incidental damages in excess of the Escrow Agent's
fee hereunder and provided, further, that the Escrow Agent shall have no
liability for any loss arising from any cause beyond its control, including, but
not limited to, the following: (a) acts of God, force majeure, including,
without limitation, war (whether or not declared or existing), revolution,
insurrection, riot, civil commotion, accident, fire, explosion, stoppage of
labor, strikes and other differences with employees; (b) any delay, error,
omission or default of any mail, courier, telegraph, cable or wireless agency or
operator; or (c) the acts or edicts of any government or governmental agency or
other group or entity exercising governmental powers. The Escrow Agent is not
responsible or liable in any manner whatsoever for the sufficiency, correctness,
genuineness or validity of the subject matter of this Escrow Agreement or any
part hereof or for the transaction or transactions requiring or underlying the
execution of this Escrow Agreement, the form or execution hereof or for the
identity or authority of any person executing this Escrow Agreement or any part
hereof or depositing the Escrow Fund.
(c) Right of Interpleader. Should any
controversy arise involving the parties hereto or any of them or any other
person, firm or entity with respect to this Escrow Agreement or the Escrow
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<PAGE> 164
Fund, or should a substitute escrow agent fail to be designated as provided in
Section 13 hereof, or if the Escrow Agent should be in doubt as to what action
to take, the Escrow Agent shall have the right, but not the obligation, either
to (a) withhold delivery of the Escrow Fund until the controversy is resolved,
the conflicting demands are withdrawn or its doubt is resolved or (b) institute
a petition for interpleader in any court of competent jurisdiction to determine
the rights of the parties hereto. In the event the Escrow Agent is a party to
any dispute, the Escrow Agent shall have the additional right to refer such
controversy to binding arbitration.
8. Indemnification. Mr. Mason and the Bonus Stockholders
hereby jointly and severally indemnify the Escrow Agent, its officers,
directors, partners, employees and agents (each herein called an "Indemnified
Party") against, and hold each Indemnified Party harmless from, any and all
expenses, including, without limitation, attorneys' fees and court costs,
losses, costs, damages and claims, including, but not limited to, costs of
investigation, litigation and arbitration, tax liability and loss on investments
suffered or incurred by any Indemnified Party in connection with or arising from
or out of this Escrow Agreement, except such acts or omissions as may result
from the willful misconduct or gross negligence of such Indemnified Party.
9. Compensation and Reimbursement of Expenses. Any fees
to be paid to the Escrow Agent for its services hereunder in accordance with the
Escrow Agent's fee schedule as in effect from time to time and any expenses
incurred by the Escrow Agent in connection with the performance of its duties
and enforcement of its rights hereunder and otherwise in connection with the
operation, administration and enforcement of this Escrow Agreement, including,
without limitation, attorneys' fees, brokerage costs and related expenses
incurred by the Escrow Agent, will be paid by the Company.
10. Notices. Any notice or other communication required
or permitted to be given under this Escrow Agreement by any party hereto to any
other party hereto shall be considered as properly given if in writing and (a)
delivered against receipt therefor, (b) mailed by registered or certified mail,
return receipt requested and postage prepaid or (c) sent by telefax machine, in
each case to the address or telefax number, as the case may be, set forth below:
If to the Company:
American Banks of Florida, Inc.
2031 Hendricks Avenue
Jacksonville, Florida 32207
Attn.: President
Fax: (904) 396-8306
With a copy to:
SouthTrust Corporation
P.O. Box 2554
Birmingham, Alabama 35203
Attn.: Alton E. Yother, Senior Vice President
Fax: (205) 254-6695
If to the Bonus Stockholders:
Mr. Raymond K. Mason, Jr.
3730 Richmond Street
Jacksonville, Florida 32205
Fax: (904) 388-1098
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<PAGE> 165
Charles J. Franson, Esq.
Franson, Aldridge & Sands, P.A.
1551 Atlantic Boulevard, Suite # 200
Jacksonville, Florida 32207
Fax: (904) 399-3762
Mr. T. Keith Perry
117 Hidden Cove Lane
Ponte Vedra Beach, Florida 32082
Fax: (904) 285-7469
With a copy to:
Allen I. Isaacson, P.C.
Fried, Frank, Harris, Shriver & Jacobson
One New York Plaza
New York, NY 10004
Fax: (212) 859-8587
If to Raymond Mason, Sr.:
Mr. Raymond K. Mason, Sr.
2022 Hendricks Avenue
Jacksonville, Florida 32207
Fax: (904) 264-3921
With a copy to:
Luther F. Sadler, Jr., Esq.
Foley & Lardner
The Greenleaf Building
200 Laura Street (32202)
P.O. Box 240
Jacksonville, Florida 32201
Fax: (904) 359-8700
And a copy to:
Stephen D. Busey, Esq.
Smith Hulsey & Busey
1800 First Union National Bank Tower
Jacksonville, Florida 32202
Fax: (904) 359-7708
If to the Escrow Agent:
[Name]
[Address]
[Address]
Attn.: [Name]
Fax: [Number]
Delivery of any communication given in accordance herewith
shall be effective only upon actual receipt thereof by the party or parties to
whom such communication is directed. Any party to this Escrow
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<PAGE> 166
Agreement may change the address to which communications hereunder are to be
directed by giving written notice to the other party or parties hereto in the
manner provided in this section.
11. Consultation with Legal Counsel. The Escrow Agent may
consult with its counsel or other counsel satisfactory to it concerning any
question relating to its duties or responsibilities hereunder or otherwise in
connection herewith and shall not be liable for any action taken, suffered or
omitted by it in good faith upon the advice of such counsel.
12. Choice of Laws. This Escrow Agreement shall be
construed under, and governed by, the laws of the State of Florida.
13. Resignation. The Escrow Agent may resign hereunder
upon ten (10) days' prior notice to the Company, Mr. Mason and the Bonus
Stockholders. Upon the effective date of such resignation, the Escrow Agent
shall deliver the Escrow Fund to any substitute escrow agent designated by the
Bonus Stockholders and Mr. Mason in writing. If the parties hereto fail to
designate a substitute escrow agent within ten (10) days after the giving of
such notice, the Escrow Agent may institute a petition for interpleader. The
Escrow Agent's sole responsibility after such 10-day notice period expires shall
be to hold the Escrow Fund (without any obligation to reinvest the same) and to
deliver the same to a designated substitute escrow agent, if any, or in
accordance with the directions of a final order or judgment of a court of
competent jurisdiction, at which time of delivery the Escrow Agent's obligations
hereunder shall cease and terminate.
14. Severability. If one or more of the provisions hereof
shall for any reason be held to be invalid, illegal or unenforceable in any
respect under applicable law, such invalidity, illegality or unenforceability
shall not affect any other provisions hereof, and this Escrow Agreement shall be
construed as if such invalid, illegal or unenforceable provision had never been
contained herein, and the remaining provisions hereof shall be given full force
and effect.
15. Termination. This Escrow Agreement shall terminate
upon the release of the entire Escrow Fund in accordance with Section 6 hereof.
16. General. The section headings contained in this
Escrow Agreement are for reference purposes only and shall not affect in any way
the meaning or interpretation of this Escrow Agreement. This Escrow Agreement
and any affidavit, certificate, instrument, agreement or other document required
to be provided hereunder may be executed in two or more counterparts, each of
which shall be deemed an original, but all of which taken together shall
constitute but one and the same instrument. Unless the context shall otherwise
require, the singular shall include the plural and vice-versa, and each pronoun
in any gender shall include all other genders. The terms and provisions of this
Escrow Agreement constitute the entire agreement among the parties hereto in
respect of the subject matter hereof, and neither the Bonus Stockholders nor the
Company, nor Mr. Mason, nor the Escrow Agent has relied on any representations
or agreements of the other, except as specifically set forth in this Escrow
Agreement. This Escrow Agreement or any provision hereof may be amended,
modified, waived or terminated only by written instrument duly signed by the
parties hereto.
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<PAGE> 167
IN WITNESS WHEREOF, the parties have executed this Escrow
Agreement or caused this Escrow Agreement to be executed as of the date first
above written.
AMERICAN BANKS OF FLORIDA, INC.
By:
-----------------------------
Name:
----------------------------
Title:
---------------------------
CHARLES J. FRANSON
--------------------------------
RAYMOND K. MASON, JR.
--------------------------------
RAYMOND K. MASON, SR.
--------------------------------
T. KEITH PERRY
--------------------------------
[ESCROW AGENT]
By:
-----------------------------
Name:
----------------------------
Title:
---------------------------
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<PAGE> 168
<TABLE>
<CAPTION>
Bonus Stockholder Certificate(s) No. Number of Bonus Shares Held
- ----------------------- --------------------- ---------------------------
<S> <C> <C>
Raymond K. Mason, Jr. 30,000
T. Keith Perry 30,000
Charles J. Franson 30,000
</TABLE>
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<PAGE> 169
APPENDIX 1 TO PROXY STATEMENT/PROSPECTUS
AMERICAN BANKS OF FLORIDA, 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 American Banks of Florida, Inc., a
Florida corporation (the "Company"), hereby appoints Raymond K. Mason, Jr. and
T. Keith Perry, 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 _______ _.m., Jacksonville time, at __________________________, Jacksonville,
Florida ______, 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 $1.00 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, please sign in partnership 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 ______ ___, 1998,
relating to the meeting.
Dated: , 1998
--------------------------------
--------------------------------------------
Signature
--------------------------------------------
Signature (If applicable)
PLEASE VOTE, SIGN, DATE AND PROMPTLY RETURN
THIS CARD.
<PAGE> 170
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Restated Certificate of Incorporation 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 attorney's 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, in the case of a derivative action on behalf of the
corporation, if he were not adjudged to be liable for negligence or misconduct.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
The following exhibits are filed as part of this Registration
Statement:
<TABLE>
<S> <C> <C>
2 Agreement and Plan of Merger by and among American Banks of Florida,
Inc., SouthTrust Corporation and SouthTrust of Alabama, Inc. (included
as Exhibit A to the Proxy State ment/Prospectus filed as part of this
Registration Statement).
* 3(a) Composite Restated Bylaws of SouthTrust Corporation.
* 3(b) Composite Restated Certificate of Incorporation of SouthTrust
Corporation.
* 4(a) 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(b) 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(c) Indenture, dated as of May 1, 1987 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(d) Subordinated Indenture, dated as of May 1, 1992, between SouthTrust
Corporation and Chemical Bank, which was filed as Exhibit 4(1)(ii) to
the Registration Statement on Form S-3 of SouthTrust Corporation
(Registration No. 33-44857).
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 Arthur Andersen LLP (with respect to American Banks of
Florida, Inc.)
23(c) Consent of Bradley Arant Rose & White LLP (included in Exhibit 5).
23(d) Consent of Wheat First Securities, Inc.
24 Powers of Attorney.
</TABLE>
- ------------------------
* Incorporated by reference.
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<PAGE> 171
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;
provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not apply if the
Registration Statement is on Form S-3, Form S-8 or Form F-3, and the information
required to be included in a post-effective amendment by those paragraphs is
contained in periodic reports filed with or furnished to the Commission by the
registrant pursuant to Section 13 or 15(d) of the Exchange Act that are
incorporated by reference 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 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
II-2
<PAGE> 172
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.
II-3
<PAGE> 173
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 May 6, 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 May 6, 1998
- ------------------------------------------------- Officer, Director
Wallace D. Malone, Jr. (Principal Executive Officer)
/s/ AUBREY D. BARNARD Secretary, Treasurer and May 6, 1998
- ------------------------------------------------- Controller (Principal
Aubrey D. Barnard Accounting and
Financial Officer)
/s/ JULIAN W. BANTON Director May 6, 1998
- ------------------------------------------------- (Chairman and Chief Executive
Julian W. Banton Officer, SouthTrust Bank, N.A.)
* Director May 6, 1998
- -------------------------------------------------
Allen J. Keesler, Jr.
* Director May 6, 1998
- -------------------------------------------------
Van L. Richey
* Director May 6, 1998
- -------------------------------------------------
Carl F. Bailey
* Director May 6, 1998
- -------------------------------------------------
Rex J. Lysinger
* Director May 6, 1998
- -------------------------------------------------
William C. Hulsey
* Director May 6, 1998
- -------------------------------------------------
John M. Bradford
</TABLE>
II-4
<PAGE> 174
<TABLE>
<S> <C> <C>
* Director May 6, 1998
- -------------------------------------------------
Wm. Kendrick Upchurch, Jr.
* Director May 6, 1998
- -------------------------------------------------
H. Allen Franklin
* Director May 6, 1998
- -------------------------------------------------
F. Crowder Falls
*By /s/ William L. Prater May 6, 1998
----------------------------------------------
William L. Prater
Attorney-in-fact
</TABLE>
II-5
<PAGE> 175
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------- -----------
<S> <C>
2 Agreement and Plan of Merger by and among American Banks of Florida,
Inc., SouthTrust Corporation and SouthTrust of Alabama, Inc.
(included as Exhibit A to the Proxy State ment/Prospectus filed as
part of this Registration Statement).
* 3(a) Composite Restated Bylaws of SouthTrust Corporation.
* 3(b) Composite Restated Certificate of Incorporation of SouthTrust
Corporation.
* 4(a) 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(b) 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(c) Indenture, dated as of May 1, 1987 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(d) Subordinated Indenture, dated as of May 1, 1992, between SouthTrust
Corporation and Chemical Bank, which was filed as Exhibit 4(1)(ii)
to the Registration Statement on Form S-3 of SouthTrust Corporation
(Registration No. 33-44857).
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 Arthur Andersen LLP (with respect to American Banks of
Florida, Inc.)
23(c) Consent of Bradley Arant Rose & White LLP (included in Exhibit 5).
23(d) Consent of Wheat First Securities, Inc.
24 Powers of Attorney.
</TABLE>
- ----------
* Incorporated by reference.
II-6
<PAGE> 1
EXHIBIT 5
May 6, 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
American Banks of Florida, Inc., a Florida corporation ("American") with and
into SouthTrust of Alabama, Inc., an Alabama corporation, and the issuance of up
to 3,930,282 shares of common stock, par value $2.50 per share, of SouthTrust
(the "Shares") and up to 1,164,528 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
American 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:
(i) the Shares and Rights to be offered under the
Registration Statement, to the extent actually issued pursuant to the
Merger, will have been duly and validly authorized and issued and will
be fully paid and nonassessable; and
(ii) under the laws of the State of Delaware, no personal
liability will attach to the ownership of the Shares and Rights.
<PAGE> 2
SouthTrust Corporation
May 6, 1998
Page 2
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)
[Letterhead of Bradley Arant Rose & White LLP]
, 1998
American Banks of Florida, Inc.
2031 Hendricks Avenue
Jacksonville, Florida 32207
Re: Agreement and Plan of Merger by and between American Banks of
Florida, Inc., SouthTrust Corporation and SouthTrust
of Alabama, Inc.
-------------------------------------------------------------
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
February 18, 1998 (the "Merger Agreement"), by and between American Banks of
Florida, Inc. ("American"), SouthTrust and SouthTrust of Alabama, Inc., a
Alabama corporation and a wholly-owned subsidiary of SouthTrust ("Merger Sub").
Specifically, you have requested us to opine that the merger of American with
and into Merger 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 American upon the receipt solely of SouthTrust
voting common stock in exchange for their American stock upon consummation of
the Merger.
This opinion is being rendered pursuant to the requirements of Item
21(a) of the registration statement on Form S-4 (the "Registration Statement")
which is being filed today on SouthTrust's behalf with the Securities Exchange
Commission under the Securities Act of 1933, as amended, and pursuant to Section
7.08 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
American and SouthTrust included in the Merger Agreement.
<PAGE> 2
American Banks of Florida, Inc.
, 1998
Page 2
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, Merger Sub nor American has requested or will receive an advance
ruling from the IRS as to any of the federal income tax effects to holders of
American stock of the Merger, or of any of the federal income tax effects to
SouthTrust, Merger Sub or American 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.
FACTS
SouthTrust is a registered bank holding company and is the common
parent of an affiliated group of corporations, including Merger 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, 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 be 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 between SouthTrust and Mellon Bank, N.A. (now known as
ChaseMellon Shareholder Services LLC), as Rights Agent, and the Certificate of
Designation for the Series A Preferred Stock, copies of each of which are
exhibits to the Registration Statement.
Immediately prior to the Merger, SouthTrust will own 100% of the
capital stock of Merger Sub, and Merger Sub will own 100% of the capital stock
of SouthTrust Bank, National Association, a national banking corporation
("ST-Bank"). Both of Merger Sub and ST-Bank are included in the consolidated
federal income tax return of SouthTrust.
American is a corporation organized pursuant to the laws of
the State of Florida and a registered bank holding company. As of February 18,
1998, the authorized capital stock of American consisted of (I) 2,000,000 shares
of common stock, par value $1.00 per share, of which 1,183,751 shares were
issued and outstanding (the "American Common Stock"); (ii) 2,000,000 shares of
preferred stock, $1.00 par value per share, of which 13,334 shares have been
designated as Series A Preferred Stock, of which, as of January 31, 1998, none
were issued and outstanding, 13,334 shares have been designated as Series B
Preferred Stock, of which, as of January 31, 1998, 9,770.534 were issued and
outstanding, 13,334 shares have been designated as Series C Preferred Stock, of
which,
<PAGE> 3
American Banks of Florida, Inc.
, 1998
Page 3
as of January 31, 1998, 10,225.266 shares were outstanding, and 13,335 shares
have been designated as Series D Preferred Stock, of which, as of January 31,
1998, 10,897.256 shares were issued and outstanding (the "American Preferred
Stock," and together with the American Common Stock, the "American Capital
Stock"), and there has been no change in the number of shares of American
Capital Stock outstanding as of the date hereof. Each of the issued and
outstanding shares of American Preferred Stock is convertible into one share of
American Common Stock. American owns 100% of the issued and outstanding capital
stock of American National Bank of Florida, a national bank and the sole banking
subsidiary of American (the "Bank"). American is an accrual method taxpayer
using a calendar year accounting period.
A dispute has arisen between, on the one hand, Raymond K. Mason, Sr.,
Chairman Emeritus and member of the Board of Directors of American ("Mr.
Mason"), and, on the other hand, Raymond K. Mason, Jr., Charles J. Franson and
T. Keith Perry (the "Bonus Shareholders"), who are also members of the Board of
Directors of American. (Mr. Raymond K. Mason, Jr. is also Chairman, President
and Chief Executive Officer thereof, and Mr. Perry is also Executive Vice
President, Secretary and Treasurer thereof.) This dispute concerns the
enforceability of certain stock bonus agreements, dated May 26, 1995, between
each of the Bonus Shareholders and American (the "Stock Bonus Agreements"),
under which each of the Bonus Shareholders was awarded 30,000 shares of American
Common Stock, for an aggregate of 90,000 shares of American Common Stock (the
"Bonus Shares"). Mr. Mason disputes whether these Stock Bonus Agreements were
duly authorized by the Board of Directors of American and whether American met
certain performance benchmarks set forth in the Stock Bonus Agreements before
such 90,000 shares were issued.
THE PROPOSED TRANSACTIONS
Pursuant to the Merger Agreement the following transactions will take
place:
(1) American will merge with and into Merger Sub in accordance with the
applicable corporation laws of the States of Florida and Alabama (the "Corporate
Laws"), after which Merger Sub will be the surviving corporation. Merger Sub
will acquire all of the assets and assume all of the liabilities of American.
Merger Sub will be the surviving corporation and the separate corporate
existence of American will terminate.
(2) SouthTrust will issue a total of 3,930,282 shares of SouthTrust
Common Stock in exchange for all of the issued and outstanding American Capital
Stock. As of the date of the Merger Agreement and assuming the conversion of all
of the American Preferred Stock into American Common Stock, a total of
1,214,644.056 shares of American Common Stock would be issued and outstanding,
which total includes 90,000 Bonus Shares with respect to which the dispute
described above exists.
(3) Each share of American Capital Stock, including the Bonus Shares,
will become and be converted into the right to receive 3.23574794 shares of
SouthTrust Common Stock, and eight
<PAGE> 4
American Banks of Florida, Inc.
, 1998
Page 4
twenty-sevenths of a Right will be issued with each share of SouthTrust Common
Stock exchanged in the Merger for American Stock.
(4) No fractional shares of SouthTrust Common Stock will be issued in
the Merger; each holder of American Capital Stock who would otherwise be
entitled to receive a fractional share interest, if any, will receive cash in
lieu of a fractional share.
(5) Any holder of American 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.
(6) Unless the dispute regarding the Bonus Shares is resolved prior to
the Effective Time of the Merger in a manner consistent with the Merger
Agreement, immediately prior to the Effective Time of the Merger, the Bonus
Shares will be delivered to the Escrow Agent (as hereinafter defined) and will
be held and disposed of in accordance the Merger Agreement and with the
provisions of the Escrow Agreement (as hereinafter defined). If the dispute
regarding the Bonus Shares is resolved prior to the Effective Time of the Merger
in accordance with the Merger Agreement, the consideration which is or would
have been applicable to the Bonus Shares will be distributed in accordance with
such resolution; if such resolution is that all or some of the Bonus Shares will
be canceled and treated as not issued, then such consideration will be
allocated, on a pro rata basis, to increase the amount of SouthTrust Common
Stock to be received by the American shareholders.
(7) Provided that the issues related to the Bonus Shares have not been
resolved earlier in a manner that would not conflict with the Merger Agreement,
American will enter into an escrow agreement (the "Escrow Agreement") with Mr.
Mason, the Bonus Shareholders and an escrow agent to be agreed upon (the "Escrow
Agent"). The Escrow Agreement will provide for resolution of the dispute between
Mr. Mason and the Bonus Shareholders to be determined by award of an arbitrator
or a final, non-appealable decision of a court of proper jurisdiction, as
determined and selected by the mutual agreement of Mr. Mason and the Bonus
Shareholders. In order to accomplish this result, the Escrow Agreement will
provide that the Bonus Shareholders must deliver to and deposit with the Escrow
Agent the certificate or certificates representing the Bonus Shares.
Accordingly, at the Effective Time of the Merger, the Escrow Agent will exchange
the certificates representing the Bonus Shares for shares of SouthTrust Common
Stock pursuant to the terms of the Merger Agreement (these shares of SouthTrust
Common Stock are referred to as the "Escrow Fund").
(8) In the event it is determined that the issuance of all the Bonus
Shares to the Bonus Shareholders was valid, the Escrow Agent will release the
Escrow Fund to the Bonus Shareholders in the proportions to which the Bonus
Shareholders are entitled to the Bonus Shares. In the event it is determined
that the Bonus Shareholders are entitled to some number of the Bonus Shares less
than 90,000, the Escrow Agent will release a portion of the Escrow Fund to the
Bonus Shareholders, and the remaining Escrow Fund will be released, on a pro
rata basis, to those persons who were shareholders of American at the Effective
Time of the Merger. In the event it is determined that the Bonus Shareholders
are entitled to none of the Bonus Shares, then the Escrow Agent will
<PAGE> 5
American Banks of Florida, Inc.
, 1998
Page 5
release all of the Escrow Fund, on a pro rata basis, to those persons who were
shareholders of American at the Effective Time of the Merger.
REPRESENTATIONS
Officers of American and SouthTrust each have made certain written
representations to us on behalf of their respective institutions by letters 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.
(ii) No gain or loss will be recognized by the shareholders of American
upon the receipt of SouthTrust Common Stock (including the Rights associated
therewith) solely in exchange for their shares of American Capital Stock. In
addition, no gain or loss will be recognized by American stockholders upon the
receipt of the Rights attached to the SouthTrust Common Stock.
(iii) The basis of the SouthTrust Common Stock to be received by the
American shareholders will be the same as the basis of American Capital Stock
surrendered in exchange therefor, except for the basis allocated to any
fractional shares and shares treated as interest.
(iv) The holding period of the shares of SouthTrust Common Stock to be
received by the shareholders of American will include the period during which
American Capital Stock surrendered in exchange therefor was held.
(v) The payment of cash to an American shareholder in lieu of issuing a
fractional share interest in SouthTrust Common Stock will be treated as if the
fractional share actually was issued as part of the Merger and then was redeemed
by SouthTrust. This cash payment will be treated as having been received as a
distribution in full payment in exchange for the stock redeemed. Generally, any
gain or loss recognized upon such exchange will be a capital gain or loss.
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.
Specifically, no opinion is expressed with respect to the federal income tax
consequences of the
<PAGE> 6
American Banks of Florida, Inc.
, 1998
Page 6
Escrow Agreement, other than that the consummation of the transactions
contemplated by the Escrow Agreement will not cause the Merger to fail to
qualify as a reorganization pursuant to Section 368(a) of the Code.
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 Merger 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 Registration Statement
and in the prospectus which is included as part of the Registration Statement.
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 South Trust 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
April 30, 1998
<PAGE> 1
EXHIBIT 23(b)
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
As independent certified public accountants, we hereby consent to the use of our
report and to all references to our Firm included in or made a part of this
registration statement.
/s/ ARTHUR ANDERSEN LLP
Jacksonville, Florida
May 6, 1998
<PAGE> 1
EXHIBIT 23(d)
CONSENT OF FINANCIAL ADVISOR
We hereby consent to the use in this Registration Statement on Form S-4
of our letter to the Board of Directors of American Banks of Florida, Inc.,
included as Appendix C to the Proxy Statement/Prospectus that is a part of this
Registration Statement, and to the references to such letter and to our firm in
such Prospectus. In giving such consent we do not thereby admit that we come
within the category of persons whose consent is required under Section 7 of the
Securities Act of 1933 or the rules and regulations of the Securities and
Exchange Commission thereunder.
/s/ WHEAT FIRST SECURITIES, INC.
Richmond, Virginia
Date: May 6, 1998
<PAGE> 1
EXHIBIT 24
POWERS OF ATTORNEY
<PAGE> 2
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 American Banks of Florida, 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 April, 1998.
/s/ ALLEN J. KEESLER, JR.
--------------------------------------------
Allen J. Keesler, Jr.
<PAGE> 3
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 American Banks of Florida, 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 April, 1998.
/s/ VAN L. RICHEY
--------------------------------------------
Van L. Richey
<PAGE> 4
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 American Banks of Florida, 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 April, 1998.
/s/ CARL F. BAILEY
--------------------------------------------
Carl F. Bailey
<PAGE> 5
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 American Banks of Florida, 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 April, 1998.
/s/ REX J. LYSINGER
--------------------------------------------
Rex J. Lysinger
<PAGE> 6
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 American Banks of Florida, 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 April, 1998.
/s/ WILLIAM C. HULSEY
--------------------------------------------
William C. Hulsey
<PAGE> 7
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 American Banks of Florida, 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 April, 1998.
/s/ JOHN M. BRADFORD
--------------------------------------------
John M. Bradford
<PAGE> 8
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 American Banks of Florida, 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 April, 1998.
/s/ WM. KENDRICK UPCHURCH, JR.
--------------------------------------------
Wm. Kendrick Upchurch, Jr.
<PAGE> 9
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 American Banks of Florida, 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 April, 1998.
/s/ H. ALLEN FRANKLIN
--------------------------------------------
H. Allen Franklin
<PAGE> 10
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 American Banks of Florida, 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 April, 1998.
/s/ F. CROWDER FALLS
--------------------------------------------
F. Crowder Falls
