<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 9, 1998
REGISTRATION NO. 333-
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------------
ALABAMA NATIONAL BANCORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 6712 63-1114426
(STATE OR OTHER (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
JURISDICTION CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
OF INCORPORATION OR
ORGANIZATION)
----------------
1927 FIRST AVENUE NORTH
BIRMINGHAM, ALABAMA 35203
(205) 583-3600
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICE)
----------------
JOHN H. HOLCOMB, III
CHAIRMAN AND CHIEF EXECUTIVE OFFICER
1927 FIRST AVENUE NORTH
BIRMINGHAM, ALABAMA 35203
(205) 583-3600
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
----------------
COPIES TO:
CHRISTOPHER B. HARMON, ESQ. DAVID C. SHOBE, ESQ.
MAYNARD, COOPER & GALE, P.C. FOWLER, WHITE, GILLEN, BOGGS,
1901 SIXTH AVENUE NORTH VILLAREAL AND BAKER, P.A.
SUITE 2400 501 EAST KENNEDY BLVD.
BIRMINGHAM, ALABAMA 35203 SUITE 1700
TAMPA, FLORIDA 33601
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF THE SECURITIES TO THE
PUBLIC: As soon as practicable after this Registration Statement has become
effective.
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. [_]
----------------
CALCULATION OF REGISTRATION FEE
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PROPOSED
PROPOSED MAXIMUM
AMOUNT MAXIMUM AGGREGATE AMOUNT OF
TITLE OF EACH CLASS OF TO BE OFFERING PRICE OFFERING REGISTRATION
SECURITIES TO BE REGISTERED REGISTERED PER UNIT(1) PRICE(1) FEE
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common, $1.00 par value..... 575,000 $9.68 $5,567,034 $1,642
</TABLE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
(1) Estimated solely for the purpose of calculating the registration fee in
accordance with Rule 457(f)(2) based upon the book value of all
outstanding shares of Public Bank Corporation as of December 31, 1997.
----------------
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>
PUBLIC BANK CORPORATION
2500 13TH STREET
ST. CLOUD, FLORIDA 34769
, 1998
Dear Shareholder:
You are cordially invited to attend a special meeting of the shareholders
(the "Special Meeting") of Public Bank Corporation ("PBC"), to be held at the
principal executive office of Public Bank, 2500 13th Street, St. Cloud,
Florida, on May , 1998, at .m. Eastern Time.
At this important meeting, you will be asked to consider and vote upon the
approval of an Agreement and Plan of Merger dated as of March 5, 1998 (the
"Merger Agreement"), which provides for the merger of PBC with and into
Alabama National BanCorporation ("ANB") (the "Merger"). If the Merger is
consummated, each outstanding share of PBC common stock will be converted into
the right to receive 0.2353134 shares of the common stock, par value $1.00, of
ANB, subject to possible upward adjustment in certain circumstances. The
accompanying Proxy Statement and Prospectus provides a detailed description of
the proposed Merger, including the conditions to consummation of the Merger.
The affirmative vote of the holders of at least a majority of the shares of
PBC common stock entitled to vote at the Special Meeting is required for
approval of the Merger Agreement. Accordingly, your vote is important, no
matter how large or how small your holdings are.
Enclosed are a Notice of Special Meeting, a Proxy Statement and Prospectus
and a proxy for the Special Meeting. Please give this information your careful
attention.
The Board of Directors of PBC has carefully reviewed and considered the
terms and conditions of the proposed Merger Agreement and has received an
opinion from Alex Sheshunoff & Co. Investment Banking that the Merger is fair
to the PBC shareholders from a financial point of view. THE BOARD OF DIRECTORS
HAS UNANIMOUSLY APPROVED THE MERGER AGREEMENT AND UNANIMOUSLY RECOMMENDS THAT
YOU VOTE FOR APPROVAL OF THE MERGER AGREEMENT.
In view of the importance of the action to be taken, we urge you to
complete, sign and date the enclosed proxy and to return it promptly in the
enclosed envelope, whether or not you plan to attend the Special Meeting.
Sending in your proxy now will not interfere with your right to attend the
Special Meeting or to vote your shares personally at the Special Meeting if
you wish to do so.
Sincerely,
P. Douglas Freedle
Chief Executive Officer
<PAGE>
PUBLIC BANK CORPORATION
2500 13TH STREET
ST. CLOUD, FLORIDA 34769
----------------
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON MAY , 1998
----------------
, 1998
TO THE SHAREHOLDERS OF PUBLIC BANK CORPORATION
NOTICE IS HEREBY GIVEN that a special meeting of shareholders (the "Special
Meeting") of Public Bank Corporation ("PBC") will be held at the principal
executive office of Public Bank, 2500 13th Street, St. Cloud, Florida on May
, 1998, at .m., Eastern Time, for the following purposes:
1. To consider and vote upon a proposal to approve the Agreement and Plan
of Merger, dated as of March 5, 1998 (the "Merger Agreement"), by and
between Alabama National BanCorporation ("ANB") and PBC, pursuant to which,
among other matters, (a) PBC would be merged with and into ANB (the
"Merger"), and (b) each share of PBC common stock will be converted into
the right to receive 0.2353134 shares of ANB common stock, subject to
possible upward adjustment in certain circumstances. A copy of the Merger
Agreement is set forth in Appendix A to the accompanying Proxy Statement
and Prospectus and is hereby incorporated by reference herein.
2. To transact such other business as may properly come before the
Special Meeting or any adjournment thereof.
Only shareholders of record at the close of business on , 1998, are
entitled to receive notice of and to vote at the Special Meeting or any
adjournments thereof. Approval of the Merger Agreement requires the
affirmative vote of the holders of at least a majority of the shares of PBC
common stock entitled to vote at the Special Meeting.
THE BOARD OF DIRECTORS OF PBC UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE
FOR APPROVAL OF THE MERGER AGREEMENT.
Each shareholder has the right to dissent from the Merger and demand payment
of the fair value of his shares if the Merger is consummated. The right of any
shareholder to receive such payment is contingent upon strict compliance with
requirements of Sections 607.1301, 607.1302, and 607.1320 of the Florida
Business Corporation Act (the "Florida Dissent Provisions"). The full text of
the Florida Dissent Provisions is set forth in Appendix B to the Proxy
Statement and Prospectus and is incorporated herein by reference. For a
summary of the requirements of the Florida Dissent Provisions, see "GENERAL
INFORMATION--Dissenters' Rights" in the Proxy Statement and Prospectus.
By order of the Board of Directors
P. Douglas Freedle
Chief Executive Officer
WE URGE YOU TO SIGN AND RETURN THE ENCLOSED PROXY AS PROMPTLY AS POSSIBLE
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING IN PERSON. IF YOU DO ATTEND
THE MEETING, YOU MAY THEN WITHDRAW YOUR PROXY IF YOU WISH. THE PROXY MAY BE
REVOKED AT ANY TIME PRIOR TO ITS EXERCISE.
<PAGE>
PROXY STATEMENT
PUBLIC BANK CORPORATION
FOR SPECIAL MEETING
OF SHAREHOLDERS
TO BE HELD ON
MAY , 1998
----------------
PROSPECTUS
ALABAMA NATIONAL BANCORPORATION
575,000 SHARES COMMON STOCK
----------------
This Proxy Statement and Prospectus ("Proxy Statement") is being furnished
to the shareholders of Public Bank Corporation, a Florida corporation ("PBC"),
in connection with the solicitation of proxies by the Board of Directors of
PBC from holders of outstanding shares of common stock, par value $ .01 per
share, of PBC ("PBC Common Stock"), for use at PBC's meeting of shareholders
as shown above and at any and all adjournments or postponements 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 March 5, 1998 (the
"Merger Agreement"), pursuant to which PBC will merge with and into Alabama
National BanCorporation, a Delaware corporation ("ANB") (the "Merger"). Except
as described herein, each share of PBC Common Stock issued and outstanding at
the Effective Time (described below) shall be converted into the right to
receive 0.2353134 shares of ANB common stock, par value $1.00 per share ("ANB
Common Stock"), subject to possible upward adjustment in certain
circumstances, as described herein. See "THE MERGER--TERMS OF THE MERGER."
SEE "RISK FACTORS" BEGINNING ON PAGE FOR A DISCUSSION OF CERTAIN FACTORS
WHICH SHOULD BE CONSIDERED BY SHAREHOLDERS OF PBC IN EVALUATING THE MERGER.
This Proxy Statement, the accompanying Notice of Meeting and the other
documents enclosed herewith are being first mailed to the shareholders of PBC
on or about April , 1998.
----------------
THESE SECURITIES 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. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. THE SECURITIES
OFFERED HEREBY ARE NOT DEPOSITS, SAVINGS ACCOUNTS OR OTHER
OBLIGATIONS OF A BANK AND ARE NOT INSURED BY THE FEDERAL DEPOSIT
INSURANCE CORPORATION OR ANY OTHER GOVERNMENTAL AGENCY.
----------------
The date of this Proxy Statement is , 1998
<PAGE>
AVAILABLE INFORMATION
ANB 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 statements and other information with the Securities and
Exchange Commission (the "Commission"). Such reports, proxy statements and
other information filed by ANB can be inspected and copied at the public
reference facilities maintained by the Commission at Room 1024, Judiciary
Plaza, 450 Fifth Street, N.W., Washington D.C. 20549, and at the Commission's
Regional Offices in New York (75 Park Place, 14th Floor, New York, New York
10007) and Chicago (500 West Madison Street, Suite 1400, Chicago, Illinois
60661). Copies of such materials can be obtained from the Public Reference
Section of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549,
at prescribed rates. In addition, the Commission maintains a site on the World
Wide Web at http://www.sec.gov that contains reports, proxy statements, and
other information regarding ANB and other registrants that file electronically
with the Commission.
ANB has filed with the Commission a Registration Statement (No. 333- ) on
Form S-4 (together with any amendments thereto, the "Registration Statement")
under the Securities Act of 1933, as amended (the "Securities Act"), with
respect to the shares of ANB Common Stock to be issued pursuant to the Merger
Agreement. This Proxy Statement does not contain all of the information set
forth in the Registration Statement and the exhibits thereto, portions of
which were omitted in accordance with the rules and regulations of the
Commission. For further information regarding ANB and the ANB Common Stock
offered hereby, reference is made to the complete Registration Statement,
including all amendments thereto and the schedules and exhibits filed as a
part thereof. Statements contained herein or in any document incorporated by
reference herein as to the contents of documents are necessarily summaries of
the documents, and each statement is qualified in its entirety by reference to
the copy of the applicable document filed with the Commission. In addition,
ANB Common Stock is traded on the NASDAQ National Market System. Reports,
proxy statements, and other information concerning ANB may be inspected at the
office of the National Association of Securities Dealers, Inc., 1735 K Street,
N.W., Washington, D.C. 70006.
All information contained in this Proxy Statement pertaining to ANB and its
subsidiaries has been supplied by ANB, and all information pertaining to PBC
and its subsidiaries has been supplied by PBC.
NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED HEREIN AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED. THIS DOCUMENT DOES NOT CONSTITUTE AN OFFER OR SOLICITATION BY
ANYONE IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS NOT
AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT
QUALIFIED TO DO SO OR TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER
OR SOLICITATION. NEITHER THE DELIVERY OF THIS DOCUMENT NOR ANY DISTRIBUTION OF
SECURITIES MADE HEREUNDER SHALL UNDER ANY CIRCUMSTANCES CREATE AN IMPLICATION
THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF ANB OR PBC SINCE THE DATE
HEREOF OR THAT THE INFORMATION HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO
ITS DATE.
FORWARD-LOOKING STATEMENTS
Statements related to ANB or the Merger contained in this Proxy Statement
which are not historical facts are forward-looking statements. In addition,
ANB, through its senior management, may make from time to time forward-looking
public statements concerning the matters described herein. Such forward-
looking statements are necessarily estimates reflecting the best judgment of
ANB's senior management based upon current information and involve a number of
risks and uncertainties. Certain factors which could affect the accuracy of
such forward-looking statements are identified in the section entitled "Risk
Factors" herein and in ANB's Annual Report on Form 10-K for the year ended
December 31, 1997, which is incorporated herein by reference. Forward-looking
statements contained in this Proxy Statement or in other public statements of
ANB or its senior management should be considered in light of those factors.
There can be no assurance that such factors or other factors will not affect
the accuracy of such forward-looking statements. See "RISK FACTORS" and
"INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE."
1
<PAGE>
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents previously filed by ANB with the Commission
(Commission File No. 0-25160) pursuant to the Exchange Act are hereby
incorporated by reference in this Proxy Statement:
1. ANB's Annual Report on Form 10-K for the year ended December 31, 1997;
and
2. ANB's Proxy Statement for its 1998 Annual Meeting of Shareholders.
All documents filed by ANB pursuant to Sections 13(a), 13(c), 14 or 15(d) of
the Exchange Act after the date of this Proxy Statement and before the date of
the Special Meeting shall be deemed to be incorporated by reference herein and
to be a part hereof from the date of this filing. Any statement contained
herein or in a document incorporated by reference herein shall be deemed to be
modified or superseded for purposes of the Registration Statement and this
Proxy Statement to the extent that another statement contained herein, in any
supplement hereto or in any other subsequently filed document which also is
incorporated by reference herein, modifies or supersedes such statement. Any
such statement so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute a part of the Registration Statement,
this Proxy Statement or any supplement hereto.
THIS PROXY STATEMENT INCORPORATES BY REFERENCE DOCUMENTS WHICH ARE NOT
PRESENTED HEREIN OR DELIVERED HEREWITH. ON THE WRITTEN OR ORAL REQUEST OF ANY
PERSON TO WHOM THIS PROXY STATEMENT IS DELIVERED, ANB WILL PROVIDE, WITHOUT
CHARGE, A COPY OF ANY OR ALL OF THE DOCUMENTS INCORPORATED HEREIN BY REFERENCE
PERTAINING TO IT (OTHER THAN EXHIBITS TO SUCH DOCUMENTS WHICH ARE NOT
SPECIFICALLY INCORPORATED BY REFERENCE IN SUCH DOCUMENTS). WRITTEN OR
TELEPHONE REQUESTS FOR SUCH COPIES SHOULD BE DIRECTED TO KIMBERLY MOORE,
SECRETARY, ALABAMA NATIONAL BANCORPORATION, 1927 FIRST AVENUE NORTH,
BIRMINGHAM, ALABAMA 35203, (205) 583-3600. IN ORDER TO ENSURE TIMELY DELIVERY
OF SUCH DOCUMENTS, ANY REQUEST SHOULD BE MADE BY , 1998.
2
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
AVAILABLE INFORMATION....................................................... 1
FORWARD-LOOKING STATEMENTS.................................................. 1
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE............................. 2
SUMMARY..................................................................... 5
Parties to the Merger..................................................... 5
Shareholder Meeting....................................................... 5
The Merger................................................................ 6
Selected Consolidated Financial Data...................................... 9
ANB SELECTED CONSOLIDATED FINANCIAL DATA (HISTORICAL)....................... 10
PBC SELECTED CONSOLIDATED FINANCIAL DATA (HISTORICAL)....................... 12
Pro Forma Selected Consolidated Financial Data (Unaudited)................ 13
PRO FORMA SELECTED CONSOLIDATED FINANCIAL DATA.............................. 14
Comparative Per Share Data................................................ 16
RISK FACTORS................................................................ 17
Determination of Terms and Exchange Ratio................................. 17
Restrictions on Dividends................................................. 17
Competition............................................................... 17
Supervision and Regulation................................................ 17
Monetary Policies......................................................... 18
Reserve for Loan Losses................................................... 18
Tax Considerations........................................................ 18
Interests of Certain Persons in the Transaction........................... 18
Restrictions on Resale of ANB Common Stock................................ 18
GENERAL INFORMATION......................................................... 19
Meeting, Record Dates and Votes Required.................................. 19
Proxies................................................................... 19
Dissenters' Rights........................................................ 20
Recommendation of Board of Directors...................................... 21
THE MERGER.................................................................. 22
Terms of the Merger....................................................... 22
Effective Time............................................................ 23
Background of and Reasons for the Merger.................................. 23
Opinion of Alex Sheshunoff & Co. Investment Banking....................... 25
Surrender of Certificates................................................. 29
Conditions to Consummation of the Merger.................................. 30
Regulatory Approvals...................................................... 31
Conduct of Business Pending the Merger.................................... 32
Douglas Freedle Voting Agreement.......................................... 33
Waiver and Amendment; Termination; Termination Fee........................ 34
Management and Operations After the Merger................................ 34
Interests of Certain Persons in the Merger................................ 34
Federal Income Tax Consequences........................................... 35
Accounting Treatment...................................................... 36
Expenses and Fees......................................................... 36
Resales of ANB Common Stock............................................... 36
PRO FORMA FINANCIAL STATEMENTS.............................................. 37
</TABLE>
3
<PAGE>
<TABLE>
<S> <C>
DESCRIPTION OF ANB CAPITAL STOCK........................................... 42
General.................................................................. 42
Common Stock............................................................. 42
Preferred Stock.......................................................... 42
Certain Anti-Takeover Effects............................................ 42
EFFECT OF MERGER ON RIGHTS OF SHAREHOLDERS................................. 43
Charter and Bylaw Provisions............................................. 44
Shareholder Approval of Mergers.......................................... 44
Dissenters' Rights....................................................... 44
Shareholders Meetings and Voting......................................... 45
Dividends................................................................ 46
Preemptive Rights........................................................ 46
Liquidation Rights....................................................... 46
Limitation of Liability and Indemnification.............................. 47
Antitakeover Legislation................................................. 47
CERTAIN INFORMATION CONCERNING ANB......................................... 49
General.................................................................. 49
CERTAIN INFORMATION CONCERNING PBC......................................... 49
Description of Business.................................................. 49
Information About Voting Securities and Principal Holders Thereof........ 54
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS OF PBC......................................................... 55
Financial Condition...................................................... 55
Loans.................................................................... 56
Investment Securities.................................................... 58
Deposits................................................................. 59
Capital Resources........................................................ 59
Results of Operations.................................................... 60
Interest Sensitivity..................................................... 62
Market Risk.............................................................. 63
Provisions and Allowance For Loan Losses................................. 64
Nonperforming Assets..................................................... 66
Non-interest Income...................................................... 67
Non-interest Expense..................................................... 68
Income Taxes, Inflation And Other Issues................................. 68
LEGAL MATTERS.............................................................. 69
EXPERTS.................................................................... 69
</TABLE>
APPENDICES
Appendix A--Agreement and Plan of Merger
Appendix B--Provisions of Florida Business Corporation Act Relating to
Dissenters' Rights
Appendix C--Consolidated Financial Statements of Public Bank Corporation
Appendix D--Opinion of Alex Sheshunoff & Co. Investment Banking
4
<PAGE>
SUMMARY
The following is a brief summary of certain information contained elsewhere
in this Proxy Statement. The following summary is not intended to be a complete
description of all material information regarding ANB, PBC and the matters to
be considered at the Special Meeting and is qualified in all respects by the
information appearing elsewhere or incorporated by reference in this Proxy
Statement, the Appendices hereto and the documents referred to herein. The
Merger Agreement, a copy of which is set forth in Appendix A to this Proxy
Statement, is incorporated herein and reference is made thereto for a complete
description of the terms of the Merger. As used in this Proxy Statement, the
terms "ANB" and "PBC" refer to such corporations, respectively, and where the
context so requires, such corporations and their respective subsidiaries.
PARTIES TO THE MERGER
ANB. ANB is a registered bank holding company subject to supervision and
regulation by the Board of Governors of the Federal Reserve System ("Federal
Reserve") and is a corporation organized under the laws of the State of
Delaware. Its main office is located at 1927 First Avenue North, Birmingham,
Alabama 35203 (Telephone Number: (205) 583-3600). ANB is currently the parent
of three national banks, National Bank of Commerce of Birmingham (Birmingham,
Alabama and the Birmingham metropolitan area), First Citizens Bank, National
Association (Talladega, Alabama) and Citizens & Peoples Bank, National
Association (Cantonment, Florida); three state member banks, Alabama Exchange
Bank (Tuskegee, Alabama), Bank of Dadeville (Dadeville, Alabama) and First Gulf
Bank (Baldwin County, Alabama); and one state nonmember bank, First American
Bank (Decatur, Alabama) (collectively the "Banks"). In addition, ANB is the
ultimate parent entity of one securities brokerage firm, NBC Securities, Inc.
(Birmingham, Alabama); one receivables factoring company, Corporate Billing,
Inc. (Decatur, Alabama); and one insurance agency, Ashland Insurance, Inc.
(Ashland, Alabama).
At December 31, 1997, ANB had total assets of approximately $1.27 billion,
total deposits of approximately $929.0 million, total net loans of
approximately $842.8 million and total shareholders' equity of approximately
$97.9 million. Additional information about ANB is included elsewhere in this
Proxy Statement and in documents incorporated by reference in this Proxy
Statement. See "SUMMARY--SELECTED CONSOLIDATED FINANCIAL DATA," "AVAILABLE
INFORMATION," "INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE" and "CERTAIN
INFORMATION REGARDING ANB."
PBC. PBC is a one-bank holding corporation organized under the laws of the
State of Florida and registered under the Bank Holding Company Act of 1956, as
amended. It also is subject to supervision and regulation by the Federal
Reserve. PBC's principal offices are located at 2500 13th Street, St. Cloud,
Florida, 34769-4112 (Telephone Number: (407) 892-7137). PBC is the parent
corporation of Public Bank, a Florida bank with two locations in Osceola
County, Florida. Public Bank is organized as a state-chartered bank and
conducts substantially the same business operations as a typical independent
commercial bank, offering a wide range of consumer and commercial banking
services. In addition to Public Bank, PBC is the parent entity of Public
Mortgage Corporation ("PMC"), an inactive corporation.
At December 31, 1997, PBC had total assets of approximately $50.4 million and
total shareholders' equity of approximately $5.6 million. Public Bank's total
deposits as of December 31, 1997 were approximately $44.5 million, and its net
loans totaled approximately $30 million. Additional information about PBC is
found elsewhere in this Proxy Statement. See "SUMMARY--SELECTED CONSOLIDATED
FINANCIAL DATA," "CERTAIN INFORMATION CONCERNING PBC," "MANAGEMENT'S DISCUSSION
AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF PBC" and
APPENDIX C.
SHAREHOLDER MEETING
The Special Meeting will be held at .m. local time, on May , 1998, at
the main office of Public Bank, 2500 13th Street, St. Cloud, Florida 34769. The
purpose of the Special Meeting is to consider and
5
<PAGE>
vote upon approval of the Merger Agreement. The Board of Directors of PBC has
fixed the close of business on , 1998 as the record date for determining
shareholders entitled to notice of and to vote at the Special Meeting (the
"Record Date"). As of such date, there were 2,337,309 shares of PBC Common
Stock issued and outstanding and entitled to be voted at the Special Meeting.
See "GENERAL INFORMATION--MEETING, RECORD DATES AND VOTES REQUIRED."
THE MERGER
Terms. The Merger Agreement provides that PBC will merge with and into ANB.
Each share of PBC Common Stock outstanding immediately prior to the Effective
Time (as defined below), other than shares with respect to which dissenters'
appraisal rights shall have been perfected and certain shares owned by PBC or
its subsidiaries, will be converted into the right to receive 0.2353134 shares
of ANB Common Stock. The number of shares of ANB Common Stock to be exchanged
for each share of PBC Common stock is referred to as the "Exchange Ratio."
Pursuant to the terms of the Merger Agreement, the Exchange Ratio is subject to
upward adjustment. If the average share price of ANB Common Stock for the
twenty (20) consecutive NASDAQ Market System trading days ending on the fifth
business day prior to the Effective Time (the "Average ANB Share Price") is
less than $25.00, the Exchange Ratio could be adjusted upward to a maximum
Exchange Ratio of 0.2460094, depending on the Average ANB Share Price. Cash
will be paid by ANB in lieu of the issuance of fractional shares. See "RISK
FACTORS," "THE MERGER--TERMS OF THE MERGER" and "--WAIVER AND AMENDMENT;
TERMINATION; TERMINATION FEE."
Effective Time. The Merger will become effective (i) on the date and at the
time the Certificate of Merger reflecting the merger of ANB and PBC shall be
accepted for filing by the Secretary of State of Delaware (the "Certificate of
Merger"), and the Articles of Merger shall be accepted for filing by the
Department of State of Florida, or (ii) on such date and at such time
subsequent to the filing of the Certificate of Merger with the Secretary of
State of Delaware as may be specified by the Parties in the Certificate of
Merger (provided that such subsequent date and time shall not be later than a
time on the 30th day after the date that the Certificate of Merger is filed),
which filing shall not occur until after all conditions contained in the Merger
Agreement have been satisfied or waived, including receipt of all regulatory
approvals, expiration of all statutory waiting periods and the approval of the
Merger Agreement by the shareholders of PBC (the "Effective Time"). See "THE
MERGER--EFFECTIVE TIME."
Recommendation of PBC Board of Directors; Opinion of Alex Sheshunoff & Co.
Investment Banking. The Board of Directors of PBC considered numerous factors
in approving the Merger Agreement. The PBC Board of Directors also obtained an
opinion from an independent investment banking firm, Alex Sheshunoff & Co.
Investment Banking ("Sheshunoff"), with respect to the fairness of the
transaction from the standpoint of PBC's shareholders. Sheshunoff conducted an
analysis of the values of the two companies and determined a range of values
and acceptable exchange ratios and issued an opinion to the effect that the
terms of the Merger are fair, from a financial point of view, to PBC's
shareholders. PBC has paid, or will pay, Sheshunoff professional fees in the
amount of $30,000, plus reasonable out of pocket expenses, in connection with
the issuance of the fairness opinion. See "THE MERGER--BACKGROUND OF AND
REASONS FOR THE MERGER" and "--OPINION OF ALEX SHESHUNOFF & CO. INVESTMENT
BANKING."
THE BOARD OF DIRECTORS OF PBC RECOMMENDS THAT SHAREHOLDERS OF PBC VOTE FOR
APPROVAL OF THE MERGER AGREEMENT.
Vote Required. Approval of the Merger Agreement will require the affirmative
vote of the holders of at least a majority of the outstanding shares of PBC
Common Stock. The directors and executive officers of PBC beneficially owned,
as of the Record Date, and are entitled to vote, a total of 1,988,558 shares of
PBC Common Stock at the Special Meeting, or 85.08% of the outstanding shares
entitled to be voted. Mr. Douglas Freedle, Chairman of the Board and Chief
Executive Officer of PBC and holder of the power to vote an aggregate of
6
<PAGE>
1,814,518 shares of PBC Common Stock on the Record Date (approximately 77.63%
of the outstanding shares entitled to be voted), has entered into an agreement
with ANB whereby he agreed, subject to certain conditions, to vote in favor of
the Merger. Mr. Freedle's agreement to vote in favor of the Merger assures
approval of the Merger by the PBC shareholders, subject to the termination
rights contained in the Merger Agreement. See "GENERAL INFORMATION--MEETINGS,
RECORD DATES AND VOTES REQUIRED" and "THE MERGER--DOUGLAS FREEDLE VOTING
AGREEMENT."
Exchange of Certificates. No later than five days after the Effective Time,
AmSouth Bank, as Exchange Agent, will mail to each holder of record of PBC
Common Stock at the Effective Time a transmittal letter, with instructions and
return envelope, to use in effecting the exchange of certificates representing
such PBC Common Stock for certificates representing shares of ANB Common Stock
and for cash in lieu of fractional shares. If requested, the Exchange Agent
shall mail transmittal materials to any shareholder who holds more than ten
percent of the outstanding stock of PBC and who requests that such materials be
given to him or her prior to the Effective Time, and if such materials are
returned to the Exchange Agent in proper form with such shareholder's
certificates representing PBC Common Stock at least five business days prior to
the Effective Time, the Exchange Agent shall deliver to the shareholder at the
closing of the transactions contemplated by the Merger Agreement (the
"Closing") the consideration specified in the Agreement. Beginning six months
after the Effective Time, dividends and other distributions payable with
respect to ANB Common Stock will be paid to the holder of an unsurrendered PBC
Common Stock certificate only upon surrender of such certificate. See "THE
MERGER--SURRENDER OF CERTIFICATES."
Conditions to Consummation. The obligations of ANB and PBC to consummate the
Merger are subject to various conditions, including (i) approval of the Merger
Agreement and the transactions provided for therein by the PBC shareholders,
(ii) receipt of regulatory approvals required in connection with the Merger and
expiration of statutory waiting periods, (iii) receipt of any other consents
necessary to the consummation of the Merger, (iv) receipt of certain opinions
of counsel, (v) receipt by PBC of an opinion of fairness from Sheshunoff and
(vi) the receipt by ANB of a letter from Coopers & Lybrand L.L.P. concurring
with the conclusions of ANB's and PBC's management that no conditions exist
with respect to each company which would preclude accounting for the Merger as
a pooling of interests. See "THE MERGER--CONDITIONS TO CONSUMMATION OF THE
MERGER," and "--REGULATORY APPROVALS."
Federal Income Tax Consequences. The Merger is intended to be a tax-free
reorganization in which no gain or loss will be recognized by ANB or PBC and no
gain or loss will be recognized by PBC shareholders, except in respect of cash
received for fractional shares and except for dissenting shareholders who
receive cash payments. Counsel for ANB has delivered an opinion to the effect
that, for federal income tax purposes, under current law, assuming the Merger
will take place as described in the Merger Agreement and that certain factual
matters represented by ANB and PBC are true and correct at the time of the
consummation of the Merger, the Merger will constitute a reorganization within
the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended
(the "Code"). See "THE MERGER--FEDERAL INCOME TAX CONSEQUENCES."
BECAUSE CERTAIN TAX CONSEQUENCES OF THE MERGER MAY VARY DEPENDING UPON THE
PARTICULAR CIRCUMSTANCES OF EACH SHAREHOLDER, IT IS RECOMMENDED THAT EACH
SHAREHOLDER CONSULT SUCH HOLDER'S TAX ADVISOR CONCERNING THE FEDERAL (AND ANY
STATE, LOCAL OR FOREIGN) TAX CONSEQUENCES OF THE MERGER IN SUCH HOLDER'S
PARTICULAR CIRCUMSTANCES.
Accounting Treatment. The Merger is expected to qualify as a "pooling of
interests" for accounting and financial reporting purposes. The receipt of a
letter from Coopers & Lybrand L.L.P., independent certified public accountants,
concurring with the conclusions of ANB's and PBC's management that no
conditions exist with respect to either company that would preclude accounting
for the Merger as a pooling of interests is a condition to consummation of the
Merger. See "THE MERGER--ACCOUNTING TREATMENT."
7
<PAGE>
Market Prices. The following table sets forth the market value of ANB Common
Stock; the market value of PBC Common Stock; and the market value of PBC Common
Stock on an equivalent per share basis determined as if the Effective Time were
(i) March 4, 1998, the business day immediately preceding the announcement of
the execution of the Merger Agreement and (ii) , 1998, the last day for
which such information could be calculated prior to the mailing of this Proxy
Statement:
<TABLE>
<CAPTION>
ANB PBC EQUIVALENT PRICE
COMMON STOCK (1) COMMON STOCK (2) PER SHARE OF PBC(3)
---------------- ---------------- -------------------
<S> <C> <C> <C>
March 4, 1998......... $27.00 N/A $6.35
, 1998............
</TABLE>
- --------
(1) Determined on an historical basis with reference to the last sales price as
reported on the NASDAQ National Market for each particular date.
(2) There is no established public trading market for the PBC Common Stock on
which an historical market value could be based.
(3) Determined on an equivalent price per share basis by multiplying the ANB
market value on each particular date by the Exchange Ratio of 0.2353134.
Resales of ANB Stock. The shares of ANB Common Stock issued pursuant to the
Merger Agreement will be freely transferable under federal securities law,
except for shares issued to any shareholder who may be deemed an "affiliate" of
PBC for purposes of Rule 145 under the Securities Act (generally including
directors, executive officers and beneficial owners of ten percent of any class
of capital stock). Affiliates may not sell their shares of ANB Common Stock
acquired in the Merger, except (i) upon registration, (ii) in compliance with
Rule 145 under the Securities Act, or (iii) pursuant to another applicable
exemption from the registration requirements of the Securities Act. See "RISK
FACTORS," "THE MERGER--RESALES OF ANB COMMON STOCK" and "-- INTERESTS OF
CERTAIN PERSONS IN THE MERGER."
Waiver and Amendment; Termination; Termination Fee. Either ANB or PBC may
waive or extend the time for performance by the other of obligations under the
Merger Agreement, and the Boards of Directors of each of ANB and PBC may agree,
subject to certain limitations imposed by Delaware and Florida law, to amend
the Merger Agreement. The Merger Agreement may be terminated at any time prior
to the Effective Time (i) by mutual consent, (ii) in the event of a breach of a
representation, warranty, covenant or agreement by the non-breaching party
under certain circumstances, (iii) by either party (provided such terminating
party is not in material breach of any material obligation in the Merger
Agreement) in the event any required regulatory approval is denied or not
obtained or the shareholders of PBC fail to approve the Merger, (iv) by either
party in the event there is a material adverse effect on the business,
operations or financial conditions of the other party that is not remedied, (v)
in the event any of the conditions precedent to the Merger cannot be satisfied
or fulfilled by December 31, 1998, and such failure was not the fault of the
terminating party, (vi) by ANB, if the holders of greater than 7% of the
outstanding shares of PBC Common Stock properly assert their dissenters' rights
under the Florida Business Corporation Act ("FBCA"), (vii) by PBC, if a
majority of the disinterested members of the Board of Directors of PBC shall
have determined to enter into an agreement with respect to an acquisition or
merger transaction proposal which it considers superior to the Merger, provided
that if PBC terminates the Merger Agreement as a result of a superior
acquisition or merger proposal, PBC shall pay to ANB a termination fee of
$500,000, or (viii) by PBC if the average share price of ANB Common Stock (as
determined pursuant to the terms of the Merger Agreement) is $23.00 or less.
See "THE MERGER--WAIVER AND AMENDMENT; TERMINATION; TERMINATION FEE."
Certain Differences in Shareholders' Rights. At the Effective Time, PBC
shareholders, whose rights are governed by PBC's Articles of Incorporation and
Bylaws and by the FBCA, will automatically become ANB shareholders, and their
rights as ANB shareholders will be determined by ANB's Certificate of
Incorporation and Bylaws and by the Delaware General Corporation Law ("DGCL").
The rights of ANB's shareholders differ
8
<PAGE>
from the rights of PBC shareholders in certain important respects. See "EFFECT
OF MERGER ON RIGHTS OF SHAREHOLDERS."
Dissenters' Rights. PBC shareholders have the right to dissent from the
Merger Agreement and, upon satisfaction of certain specified procedures, to
receive cash in respect of the "fair value" of their shares of PBC Common Stock
in accordance with applicable Florida law. The procedures to be followed by
dissenting shareholders are summarized under "GENERAL INFORMATION--DISSENTERS'
RIGHTS." A copy of the applicable Florida statutory provisions is set forth in
Appendix B to this Proxy Statement. FAILURE TO FOLLOW PRECISELY SUCH PROVISIONS
AS ARE APPLICABLE MAY RESULT IN LOSS OF DISSENTERS' RIGHTS.
In general, any dissenting shareholder who perfects his statutory dissenters'
rights to be paid the "fair value" of his stock in cash will recognize gain or
loss for federal income tax purposes upon receipt of such cash. See "THE
MERGER--FEDERAL INCOME TAX CONSEQUENCES."
If a significant number of shares of PBC Common Stock are held by
shareholders who dissent and elect to receive cash in lieu of their shares, the
Merger might not qualify for pooling-of-interests accounting treatment. Such
accounting treatment is a condition to ANB's obligation to effect the Merger.
In addition, the Merger Agreement may be terminated by ANB if the holders of
more than 7% of the outstanding shares of PBC Common Stock invoke their
dissenters' rights. Further, dissent by holders of a significant number of
shares of PBC Common Stock could cause the Merger not to qualify as a tax-free
reorganization for federal income tax purposes. See "THE MERGER--ACCOUNTING
TREATMENT," "--CONDITIONS TO CONSUMMATION OF THE MERGER" and "--FEDERAL INCOME
TAX CONSEQUENCES."
SELECTED CONSOLIDATED FINANCIAL DATA
The following tables present for ANB and PBC, on an historical basis,
selected consolidated financial data and ratios. This information is based on
the consolidated financial statements of ANB, incorporated herein by reference,
and of PBC, included herein as Appendix C, and should be read in conjunction
therewith and with notes thereto. See "AVAILABLE INFORMATION," "INCORPORATION
OF CERTAIN DOCUMENTS BY REFERENCE," "PRO FORMA FINANCIAL STATEMENTS" and
APPENDIX C.
9
<PAGE>
ANB SELECTED CONSOLIDATED FINANCIAL DATA (HISTORICAL)
(AMOUNTS IN THOUSANDS, EXCEPT RATIOS AND PER SHARE DATA)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------------------
1997(1) 1996(1) 1995(1) 1994(1) 1993(1)
---------- ---------- ---------- -------- --------
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Interest income............ $ 90,388 $ 83,180 $ 53,067 $ 40,970 $ 34,515
Interest expense........... 42,840 38,246 26,555 17,243 13,990
---------- ---------- ---------- -------- --------
Net interest income........ 47,548 44,934 26,512 23,727 20,525
Provision for loan losses
(benefit of recoveries)... 2,988 885 1,016 1,596 (50)
---------- ---------- ---------- -------- --------
Net interest income after
provision for loan losses
(benefit of recoveries)... 44,560 44,049 25,496 22,131 20,575
Net securities gains
(losses).................. (8) (84) 26 (52) 222
Noninterest income......... 18,047 17,510 9,160 5,820 6,776
Noninterest expense........ 45,461 44,053 26,849 19,720 20,298
---------- ---------- ---------- -------- --------
Income before income
taxes..................... 17,138 17,422 7,833 8,179 7,275
Provision for income
taxes..................... 5,458 5,281 901 736 838
---------- ---------- ---------- -------- --------
Income before minority
interest in earnings of
consolidated subsidiary... 11,680 12,141 6,932 7,443 6,437
Minority interest in
earnings of consolidated
subsidiary................ 12 14 650 750 236
---------- ---------- ---------- -------- --------
Net income................. $ 11,668 $ 12,127 $ 6,282 $ 6,693 $ 6,201
========== ========== ========== ======== ========
BALANCE SHEET DATA:
Total assets............... $1,274,166 $1,110,729 $1,027,099 $607,638 $545,348
Earning assets............. 1,109,202 1,013,789 929,677 560,900 506,676
Securities................. 214,012 182,009 199,830 128,346 128,899
Loans...................... 842,790 785,282 680,172 422,307 351,990
Allowance for loan losses.. 12,829 11,011 10,421 6,506 7,307
Deposits................... 928,970 858,103 841,899 506,256 457,644
Short-term debt............ 27,750 42,105 21,280 12,717 7,350
Long-term debt............. 14,587 12,939 1,089 2,132 1,376
Stockholders' equity....... 97,933 88,803 78,144 43,520 35,496
WEIGHTED AVERAGE SHARES
OUTSTANDING--DILUTED(2)... 8,884 8,756 4,955 4,464 4,316
PER COMMON SHARE DATA:
Net income--diluted(3)..... $ 1.31 $ 1.38 $ 1.10 $ 1.34 $ 1.27
Book value (period
end)(4)................... 11.32 10.38 9.16 7.05 5.78
Tangible book value (period
end)(4)...................... 10.32 9.48 8.27 6.55 5.21
Dividends declared......... 0.46 0.28 -- -- --
PERFORMANCE RATIOS:
Return on average assets... 1.01% 1.17% 0.95% 1.18% 1.22%
Return on average equity... 12.42 14.48 13.58 17.89 18.54
Net interest margin(5)..... 4.53 4.70 4.29 4.49 4.34
Net interest margin
(taxable equivalent)(5)... 4.64 4.79 4.39 4.64 4.48
ASSET QUALITY RATIOS:
Allowance for loan losses
to period end loans....... 1.52% 1.40% 1.53% 1.54% 2.08%
Allowance for loan losses
to period end
nonperforming loans(6).... 245.48 356.92 320.55 354.36 240.28
Net charge-offs
(recoveries) to average
loans..................... 0.15 0.04 0.05 0.68 (0.11)
Nonperforming assets to
period end loans and
foreclosed property(6).... 0.79 0.46 0.57 0.54 1.18
CAPITAL AND LIQUIDITY
RATIOS:
Average equity to average
assets.................... 8.10% 8.06% 6.98% 6.59% 6.58%
Leverage (4.00% required
minimum)(7)............... 7.58 8.13 10.59 8.25 6.78
Risk-based capital
Tier 1 (4.00% required
minumum)(7).............. 9.38 10.28 10.51 11.17 9.99
Total (8.00% required
minimum)(7).............. 10.63 11.38 11.59 12.30 11.14
Average loans to average
deposits.................. 89.24 87.06 82.36 81.35 75.98
</TABLE>
10
<PAGE>
- --------
(1) On November 30, 1997, First American Bancorp ("FAB") merged with and into
ANB ("the FAB Merger"). Pursuant to the terms of the FAB Merger, each share
of FAB common stock was converted into .7199 shares of ANB Common Stock.
The FAB Merger was accounted for as a pooling-of-interests. On September
30, 1996, FIRSTBANC Holding Company, Inc. ("FIRSTBANC") was merged with and
into ANB, with each share of common stock of FIRSTBANC being converted into
7.12917 shares of ANB Common Stock. The FIRSTBANC merger was accounted for
as a pooling of interests. On December 29, 1995, National Commerce
Corporation ("NCC") and Commerce Bankshares, Inc. ("CBS") merged with and
into ANB (the "NCC Merger"). Pursuant to the terms of the NCC Merger, each
share of NCC common stock was converted into 348.14 shares of ANB Common
Stock and each share of CBS common stock was converted into 7.0435 shares
of ANB Common Stock for a total of 3,106,981 shares (or 50.1%) of ANB
Common Stock. The NCC Merger was accounted for as a "reverse acquisition,"
whereby NCC is deemed to have acquired ANB for financial reporting
purposes. However, ANB remained as the continuing legal entity and
registrant for Securities and Exchange Commission filing purposes.
Consistent with the reverse acquisition accounting treatment, the
historical income statement information included in the Five-Year Summary
of Selected Financial Data of ANB is that of NCC for years prior to 1996.
The balance sheet information included in the historical Five-Year Summary
of Selected Financial Data of ANB is that of NCC for years prior to 1995,
as adjusted for subsequent poolings-of-interest. The historical Five-Year
Summary of Selected Financial Data for all periods have been restated to
include the results of operations of FAB and FIRSTBANC from the earliest
period presented, except for dividends per common share.
(2) The weighted average common shares and common equivalent shares outstanding
are those of NCC, CBS, FAB, and FIRSTBANC converted into ANB common and
common equivalents at the applicable exchange ratios.
(3) Net income per common share--diluted is calculated based upon net income as
adjusted for cash dividends on preferred stock.
(4) Book value and tangible book value at December 31, 1994 and 1993 are
calculated on the outstanding common shares of NCC, CBS, FAB, and FIRSTBANC
converted at the applicable exchange ratio.
(5) Net interest income divided by average earning assets.
(6) Nonperforming loans and nonperforming assets includes loans past due 90
days or more that are still accruing interest.
(7) Based upon fully phased-in requirements.
11
<PAGE>
PBC SELECTED CONSOLIDATED FINANCIAL DATA (HISTORICAL)
(AMOUNTS IN THOUSANDS, EXCEPT RATIOS AND PER SHARE DATA)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------
1997 1996 1995 1994 1993
--------- ------- ------- -------- --------
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Interest income............... $ 3,588 $ 3,255 $ 3,156 $ 2,628 $ 2,318
Interest expense.............. 1,161 1,183 1,217 922 881
--------- ------- ------- -------- --------
Net interest income........... 2,427 2,072 1,939 1,706 1,437
Provision for loan losses..... 60 60 125 62 55
--------- ------- ------- -------- --------
Net interest income after
provision for loan losses.... 2,367 2,012 1,814 1,644 1,382
Net securities gains.......... -- -- -- -- 13
Noninterest income............ 790 701 733 758 659
Noninterest expense........... 1,920 1,830 1,950 1,982 1,933
--------- ------- ------- -------- --------
Income before income taxes.... 1,237 883 597 420 121
Provision for income taxes.... 394 203 50 -- --
--------- ------- ------- -------- --------
Net income.................... $ 843 $ 680 $ 547 $ 420 $ 121
========= ======= ======= ======== ========
BALANCE SHEET DATA:
Total assets.................. $ 50,426 $47,104 $44,241 $ 41,646 $ 39,945
Earning assets................ 44,968 42,303 40,638 36,151 34,533
Securities.................... 8,894 12,695 11,633 14,936 13,852
Loans......................... 30,538 25,963 23,027 19,973 16,056
Allowance for loan losses..... 469 393 353 310 343
Deposits...................... 44,454 42,062 40,026 37,973 36,731
Short-term debt............... -- -- -- -- --
Long-term debt................ -- -- -- -- --
Stockholders' equity.......... 5,567 4,724 4,044 3,498 3,078
WEIGHTED AVERAGE SHARES
OUTSTANDING--DILUTED......... 2,337 2,312 2,236 2,076 1,972
PER COMMON SHARE DATA:
Net income--diluted(1)........ $ 0.36 $ 0.29 $ 0.24 $ 0.20 $ 0.06
Book value (period end)....... 2.38 2.02 3.45 2.78 2.25
Tangible book value (period
end)......................... 2.38 2.02 3.45 2.78 2.25
Dividends declared............ -- -- -- -- --
PERFORMANCE RATIOS:
Return on average assets...... 1.77% 1.51% 1.26% 1.02% 0.32%
Return on average equity...... 18.56 17.06 16.02 14.41 5.03
Net interest margin(2)........ 5.58 4.96 4.94 4.83 4.52
Net interest margin (taxable
equivalent)(2)............... 5.58 4.96 4.94 4.83 4.52
ASSET QUALITY RATIOS:
Allowance for loan losses to
period end loans............. 1.54% 1.51% 1.53% 1.55% 2.14%
Allowance for loan losses to
period end nonperforming
loans(3)..................... 11,725.00 422.58 98.60 1,000.00 1,106.45
Net charge-offs (recoveries)
to average loans............. (0.06) 0.08 0.38 0.54 0.39
Nonperforming assets to period
end loans and foreclosed
property(3).................. 0.97 1.47 1.76 0.84 3.99
CAPITAL AND LIQUIDITY RATIOS:
Average equity to average
assets....................... 9.52% 8.83% 7.89% 7.05% 6.43%
Leverage (4.00% required
minimum)(4).................. 11.00 10.40 9.70 8.47 8.23
Risk-based capital
Tier 1 (4.00% required
minumum)(4)................. 12.40 12.50 11.60 11.84 10.64
Total (8.00% required
minimum)(4)................. 13.40 13.50 12.60 12.89 11.82
Average loans to average
deposits..................... 67.59 59.55 54.75 45.90 44.05
</TABLE>
- --------
(1) Net Income per common share-diluted is calculated assuming conversion of
convertible preferred stock.
(2) Net interest income divided by average earning assets.
(3) Nonperforming loans and nonperforming assets include loans past due 90 days
or more that are still accruing interest.
(4) Based upon fully phased-in requirements.
12
<PAGE>
PRO FORMA SELECTED CONSOLIDATED FINANCIAL DATA (UNAUDITED)
The following table sets forth pro forma combined selected consolidated
financial data and ratios giving effect to the Merger on a pooling-of-interests
accounting basis for the five years ended December 31, 1997. The data are not
necessarily indicative of the results of the future operations of either entity
or the actual results that would have occurred had the Merger been consummated
as of the beginning of the periods presented, and should be read in conjunction
with the Unaudited Pro Forma Combined Condensed Consolidated Financial
Statements appearing elsewhere in this Proxy Statement and the consolidated
financial statements of ANB, incorporated herein by reference, and the
consolidated financial statements of PBC, included herein as Appendix C. See
"INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE," "PRO FORMA FINANCIAL
STATEMENTS" and APPENDIX C.
13
<PAGE>
PRO FORMA SELECTED CONSOLIDATED FINANCIAL DATA
(AMOUNTS IN THOUSANDS, EXCEPT RATIOS AND PER SHARE DATA)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------------------
1997 1996 1995 1994 1993
---------- ---------- ---------- -------- --------
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Interest income............ $ 93,976 $ 86,435 $ 56,223 $ 43,598 $ 36,833
Interest expense........... 44,001 39,429 27,772 18,165 14,871
---------- ---------- ---------- -------- --------
Net interest income........ 49,975 47,006 28,451 25,433 21,962
Provision for loan losses.. 3,048 945 1,141 1,658 5
---------- ---------- ---------- -------- --------
Net interest income after
provision for loan
losses.................... 46,927 46,061 27,310 23,775 21,957
Net securities gains
(losses).................. (8) (84) 26 (52) 235
Noninterest income......... 18,837 18,211 9,893 6,578 7,435
Noninterest expense........ 47,381 45,883 28,799 21,702 22,231
---------- ---------- ---------- -------- --------
Income before income
taxes..................... 18,375 18,305 8,430 8,599 7,396
Provision for income
taxes..................... 5,852 5,484 951 736 838
---------- ---------- ---------- -------- --------
Income before minority
interest in earnings of
consolidated subsidiary... 12,523 12,821 7,479 7,863 6,558
Minority interest in
earnings of consolidated
subsidiary................ 12 14 650 750 236
---------- ---------- ---------- -------- --------
Net income................. $ 12,511 $ 12,807 $ 6,829 $ 7,113 $ 6,322
========== ========== ========== ======== ========
BALANCE SHEET DATA:
Total assets............... $1,324,592 $1,157,833 $1,071,340 $649,284 $585,293
Earning assets............. 1,154,170 1,056,092 970,315 597,051 541,209
Securities................. 222,906 194,704 211,463 143,282 142,751
Loans...................... 873,328 811,245 703,199 442,280 368,046
Allowance for loan losses.. 13,298 11,404 10,774 6,816 7,650
Deposits................... 973,424 900,165 881,925 544,229 494,375
Short-term debt............ 27,750 42,105 21,280 12,717 7,350
Long-term debt............. 14,587 12,939 1,089 2,132 1,376
Stockholders' equity....... 103,500 93,527 82,188 47,018 38,574
WEIGHTED AVERAGE SHARES
OUTSTANDING--DILUTED(1)... 9,434 9,300 5,481 4,953 4,780
PER COMMON SHARE DATA:
Net income--diluted(2)..... $ 1.33 $ 1.38 $ 1.09 $ 1.29 $ 1.17
Book value (period
end)(3)................... 11.25 10.76 9.22 7.15 5.86
Tangible book value (period
end)(3)...................... 10.30 9.86 8.34 6.66 5.31
Dividends declared......... 0.46 0.28 -- -- --
PERFORMANCE RATIOS:
Return on average assets... 1.04% 1.18% 0.97% 1.17% 1.16%
Return on average equity... 12.71 14.60 13.75 17.64 17.63
Net interest margin(4)..... 4.57 4.71 4.33 4.51 4.35
Net interest margin
(taxable equivalent)(4)... 4.67 4.80 4.43 4.65 4.48
ASSET QUALITY RATIOS:
Allowance for loan losses
to period end loans....... 1.52% 1.41% 1.53% 1.54% 2.08%
Allowance for loan losses
to period end
nonperforming loans(5).... 254.26 358.84 298.53 365.08 249.02
Net charge-offs
(recoveries) to average
loans..................... 0.14 0.04 0.07 0.68 (0.08)
Nonperforming assets to
period end loans and
foreclosed property(5).... 0.80 0.50 0.61 0.56 1.31
CAPITAL AND LIQUIDITY
RATIOS:
Average equity to average
assets.................... 8.16% 8.09% 7.04% 6.62% 6.57%
Leverage (4.00% required
minimum)(6)............... 7.72 8.23 10.51 8.25 6.89
Risk-based capital
Tier 1 (4.00% required
minimum)(6).............. 9.52 10.65 10.81 11.41 10.38
Total (8.00% required
minimum)(6).............. 10.77 11.75 11.89 12.54 11.50
Average loans to average
deposits.................. 88.26 85.77 80.10 78.70 73.63
</TABLE>
14
<PAGE>
- --------
(1) The weighted average common shares and common equivalent shares outstanding
are of ANB plus PBC converted at the exchange ratio of 0.2353134 shares of
ANB Common Stock for each share of PBC Common stock. For the purpose of
these pro forma selected consolidated financial data, it is assumed that
550,000 shares of ANB Common Stock will be issued in consummating the
Merger. The actual number of shares of ANB Common Stock issued in the
Merger, as determined by the Merger Agreement, may be as high as 575,000
shares. See "THE MERGER--TERMS OF THE MERGER."
(2) Net income per common share--diluted is calculated based upon net income as
adjusted for cash and stock dividends on preferred stock and assuming
conversion of convertible preferred stock.
(3) Book value and tangible book value are calculated on the total shares of
ANB Common Shares plus shares of PBC Common Stock converted at the exchange
ratio of 0.2353134 shares ANB Common Stock for each share of PBC Common
Stock. For the purpose of these pro forma selected consolidated financial
data, it is assumed that 550,000 shares of ANB Common Stock will be issued
in consummating the Merger. The actual number of shares of ANB Common Stock
issued in the Merger, as determined by the Merger Agreement, may be as high
as 575,000 shares. See "THE MERGER--TERMS OF THE MERGER."
(4) Net interest income divided by average earning assets.
(5) Nonperforming loans and nonperforming assets include loans past due 90 days
or more that are still accruing interest.
(6) Based upon fully phased-in requirements.
15
<PAGE>
COMPARATIVE PER SHARE DATA
The following table presents selected comparative per share data for ANB
Common Stock and PBC Common Stock on a historical basis, for ANB Common Stock
on a pro forma basis reflecting consummation of the Merger and for the PBC
Common Stock on an equivalent pro forma basis reflecting consummation of the
Merger. Such information has been been prepared giving effect to the Merger on
a pooling-of-interests basis. See "THE MERGER--ACCOUNTING TREATMENT." The data
is not necessarily indicative of the results of future operations of either
entity or the actual results that would have occurred had the Merger been
consummated as of the beginning of the periods presented. The information is
derived from and should be read in conjunction with the consolidated historical
financial statements of ANB, incorporated herein by reference, and the
consolidated financial statements of PBC included herein as Appendix C, and the
unaudited pro forma financial information appearing elsewhere in this Proxy
Statement. See "INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE," "PRO FORMA
FINANCIAL STATEMENTS," and "APPENDIX C."
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------
1997 1996 1995
------- ------- -------
<S> <C> <C> <C>
ANB COMMON STOCK
Net income per common share--diluted:
Historical...................................... $ 1.31 $ 1.38 $ 1.10
Pro forma combined.............................. 1.33 1.38 1.09
Dividends paid per common share:
Historical...................................... 0.46 0.28 --
Book value per common share (end of period)
Historical...................................... 11.32 10.38 9.16
Pro forma combined.............................. 11.25 10.76 9.22
PBC COMMON STOCK
Net income per common share:
Historical...................................... $ 0.36 $ 0.29 $ 0.24
Equivalent pro forma(1)......................... 0.31 0.32 0.26
Dividends paid per common share:
Historical...................................... -- -- --
Equivalent pro forma(1)......................... 0.11 0.07 --
Book value per common share (end of period)
Historical...................................... 2.38 2.02 3.45
Equivalent pro forma(1)......................... 2.65 2.53 2.17
</TABLE>
- --------
(1) PBC equivalent pro forma amounts are computed by multiplying the ANB pro
forma amount by the exchange ratio of 0.2353134 shares of ANB Common Stock
for each share of PBC Common Stock. It is assumed that 550,000 shares of
ANB Common Stock will be issued in consummating the Merger. The actual
number of Shares of ANB Common Stock issued in the Merger to holders of PBC
Common Stock, as determined by the Merger Agreement, may be as high as
575,000 shares. See "THE MERGER--TERMS OF THE MERGER."
16
<PAGE>
RISK FACTORS
Shareholders of PBC are urged to consider carefully the following factors,
together with the other information contained in the Proxy Statement, in
evaluating an interest in ANB Common Stock:
DETERMINATION OF TERMS AND EXCHANGE RATIO
The terms of the Merger, including the Exchange Ratio, were determined by
arms-length negotiations between ANB and PBC. ANB and PBC considered the book
value, earnings per share, potential market values and the projected financial
performance of the combined company in evaluating the Exchange Ratio. No
effort was made to determine the going concern or liquidation values of ANB
and PBC. See "THE MERGER--BACKGROUND OF AND REASONS FOR THE MERGER" and "THE
MERGER--OPINION OF ALEX SHESHUNOFF & CO. INVESTMENT BANKING."
RESTRICTIONS ON DIVIDENDS
The principal business operations of ANB are conducted through the Banks.
Cash available to pay dividends to shareholders of ANB is derived primarily,
if not entirely, from dividends paid by the Banks. After the Merger, the
ability of the Banks and Public Bank to pay dividends to ANB as well as ANB's
ability to pay dividends to its stockholders will continue to be subject to
and limited by certain legal and regulatory restrictions. Further, any lenders
making loans to ANB may impose financial covenants that may be more
restrictive than regulatory requirements with respect to the payment of
dividends by ANB. There can be no assurance of whether or when ANB may pay
dividends after the Merger. See "INCORPORATION OF CERTAIN DOCUMENTS BY
REFERENCE."
COMPETITION
The banking business is highly competitive, particularly in the Banks' and
Public Bank's market areas. The Banks and Public Bank compete as financial
intermediaries with other commercial banks, savings associations, credit
unions, mortgage banking companies, securities brokerage companies, insurance
companies and money market mutual funds operating in Alabama and elsewhere.
Many of these competitors have substantially greater resources and lending
limits than ANB, the Banks and Public Bank. Additionally, non-depository
institution competitors are generally not subject to the extensive regulations
applicable to ANB, the Banks and Public Bank. Pursuant to the recently
effective Riegle-Neal Interstate Banking and Branching Efficiency Act
("Riegle-Neal Act"), bank holding companies can acquire financial
institutions, and commercial banks can merge with other banks, on a nationwide
basis, further increasing competition. See "INCORPORATION OF CERTAIN DOCUMENTS
BY REFERENCE."
SUPERVISION AND REGULATION
The banking industry is heavily regulated. Subsequent to the Merger, ANB,
the Banks and Public Bank will be subject, in certain respects, to regulation
by the Federal Reserve, the Federal Depository Insurance Corporation (the
"FDIC"), the Office of the Comptroller of the Currency ("OCC"), the Alabama
State Banking Department and the Florida State Banking Department. The success
of ANB, the Banks and Public Bank depends not only on competitive factors but
also on state and federal regulations affecting banks and bank holding
companies. The regulations are primarily intended to protect depositors, not
shareholders. Recent and proposed changes to the regulation of the financial
institution industry and the ultimate effect of such changes cannot be
predicted. The effects of the implementation of new legislation applicable to
ANB, the Banks and Public Bank, including the Community Development and
Regulatory Improvement Act and the Riegle-Neal Act, cannot be measured at this
time. The enactment of the Federal Deposit Insurance Corporation Improvement
Act of 1991 ("FDICIA") changed the framework of federal regulation of banks
and contains a number of provisions that affect the operation of banks,
including the establishment of a system of prompt corrective action for
insured depository institutions that set regulatory capital categories for
such institutions. Regulations now affecting ANB, the Banks and Public Bank
may be modified at any time, and there is no assurance that such modification
will
17
<PAGE>
not adversely affect the business of ANB, the Banks and Public Bank. See
"INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE."
MONETARY POLICIES
Interest rates are largely dependent on the rate of interest established
from time to time by the Federal Reserve for funds made available to financial
institutions by the Federal Reserve. During 1994 and 1995, the Federal Reserve
changed its discount rate five times. During 1996 and 1997, interest rates
established by the Federal Reserve were relatively stable. However, due to the
potential for volatility of such monetary policy, there can be no assurance
that actions by monetary and fiscal authorities will not have an adverse
effect on the deposit levels, net interest margin, loan demand or the business
and earnings of the Banks and Public Bank.
RESERVE FOR LOAN LOSSES
Management of each of the Banks and Public Bank maintains an allowance for
loan losses based upon, among other things, historical experience, an
evaluation of economic conditions and regular reviews of delinquencies and
loan portfolio quality. Based upon such factors, management makes various
assumptions and judgments about the ultimate collectibility of the respective
loan portfolios and provides an allowance for potential loan losses based upon
a percentage of the outstanding balances and for specific loans when their
ultimate collectibility is considered questionable. Although each of ANB and
PBC believes that allowances for loan losses at each of the Banks and Public
Bank, respectively, are adequate, there can be no assurance that such
allowances will prove sufficient to cover future losses. Future adjustments
may be necessary if economic conditions differ or adverse developments arise
with respect to non-performing or performing loans of the Banks and Public
Bank. Material additions to the allowance for loan losses of the Banks and
Public Bank would result in a material decrease in ANB's net income, and
possibly its capital, and could result in its inability to pay dividends,
among other adverse consequences. See "INCORPORATION OF CERTAIN DOCUMENTS BY
REFERENCE," "SUMMARY--PARTIES TO THE MERGER" and "CERTAIN INFORMATION
CONCERNING PBC."
TAX CONSIDERATIONS
It is intended that the Merger will be treated as a reorganization within
the meaning of Section 368 of the Code. Based upon certain representations
made by the managements of ANB and PBC, Maynard, Cooper & Gale, P.C., counsel
to ANB, has delivered an opinion to ANB and PBC regarding the federal income
tax effects of the Merger, described under the caption "THE MERGER--FEDERAL
INCOME TAX CONSEQUENCES."
NO RULING HAS BEEN REQUESTED FROM THE INTERNAL REVENUE SERVICE ("IRS") AS TO
ANY FEDERAL INCOME TAX CONSEQUENCES IN CONNECTION WITH THE MERGER, AND THE
OPINION OF COUNSEL DESCRIBED ABOVE IS NOT BINDING ON THE IRS. FURTHER, BECAUSE
CERTAIN TAX CONSEQUENCES OF THE MERGER MAY VARY DEPENDING UPON THE PARTICULAR
CIRCUMSTANCES OF EACH SHAREHOLDER AND OTHER FACTORS, EACH HOLDER OF PBC STOCK
IS URGED TO CONSULT SUCH HOLDER'S OWN TAX ADVISOR TO DETERMINE THE PARTICULAR
TAX CONSEQUENCES TO SUCH HOLDER OF THE MERGER (INCLUDING THE APPLICATION AND
EFFECT OF STATE, LOCAL AND OTHER TAX LAWS).
INTERESTS OF CERTAIN PERSONS IN THE TRANSACTION
Directors and officers of ANB and PBC (and certain of their family members
and related interests) have personal interests in the Merger that may present
them with conflicts of interest in connection with the Merger. The Boards of
Directors of ANB and PBC are aware of this and have considered personal
interests disclosed in this Proxy Statement in their evaluation of the Merger.
See "THE MERGER--BACKGROUND OF AND REASONS FOR THE MERGER" and "THE MERGER--
INTERESTS OF CERTAIN PERSONS IN THE MERGER."
RESTRICTIONS ON RESALE OF ANB COMMON STOCK
Affiliates of PBC who receive ANB Common Stock pursuant to the Merger will
be restricted on the resale of such ANB Common Stock pursuant to Rule 145
under the Securities Act. Additionally, individuals who are
18
<PAGE>
not affiliates of PBC but who will become affiliates of ANB after the Merger
will be restricted on the resale of any ANB Common Stock, whether or not
received in the Merger, pursuant to Rule 144 under the Securities Act. An
affiliate of PBC who will also be an affiliate of ANB after the Merger will be
subject to the restrictions on resale contained in both Rule 145 and Rule 144.
An "affiliate" is generally a person that, directly or indirectly, controls an
entity and generally includes all officers, directors and 10% shareholders of
such entity. See "THE MERGER--RESALES OF ANB COMMON STOCK" and "--INTERESTS OF
CERTAIN PERSONS IN THE MERGER."
GENERAL INFORMATION
MEETING, RECORD DATES AND VOTES REQUIRED
The Special Meeting of Shareholders of PBC will be held at . m. local
time, on May , 1998, at the main office of Public Bank, 2500 13th Street, St.
Cloud, Florida 34769. The purpose of the meeting is to consider and vote upon
a proposal to approve the Merger Agreement, which provides for, among other
things, the Merger. Only holders of record of PBC Common Stock at the close of
business on April , 1998, will be entitled to notice of and to vote at the
Special Meeting. As of the Record Date, there were 2,337,309 shares of PBC
Common Stock issued, outstanding and entitled to be voted. There were PBC
shareholders of record on the Record Date. Each share of PBC Common Stock will
be entitled to one vote at the Special Meeting.
The presence, in person or by proxy, of holders of a majority of the issued
and outstanding shares of PBC Common Stock entitled to vote at the Special
Meeting is necessary to constitute a quorum at such meeting.
Approval of the Merger Agreement on behalf of PBC, pursuant to the FBCA,
will require the affirmative vote of the holders of at least a majority of the
outstanding shares of PBC Common Stock entitled to be voted thereon. A failure
to return the enclosed proxy or a vote to abstain will have the same effect as
a vote against approval of the Merger Agreement. As of the Record Date,
1,988,558 shares of PBC Common Stock, or 85.08% of the total shares of PBC
Common Stock outstanding, were beneficially owned and entitled to be voted by
directors and executive officers of PBC and certain family members and related
interests. P. Douglas Freedle, Chairman of the Board and Chief Executive
Officer of PBC with the power to vote an aggregate of 1,814,518 shares of PBC
Common Stock (approximately 77.63% of the outstanding shares entitled to
vote), has entered into an agreement with ANB whereby he has agreed to vote in
favor of the Merger. Mr. Freedle's agreement to vote in favor of the Merger
assures approval of the Merger by the PBC Shareholders, subject to the
termination rights contained in the Merger Agreement. See "THE MERGER--DOUGLAS
FREEDLE VOTING AGREEMENT."
Dissenters' rights may be demanded by PBC shareholders who do not vote in
favor of the Merger and who follow the specified procedures of Florida law.
See "DISSENTERS' RIGHTS" below.
PROXIES
The enclosed PBC proxies are solicited on behalf of the Board of Directors
of PBC for use in connection with the Special Meeting and any adjournment or
adjournments thereof. HOLDERS OF PBC COMMON STOCK ARE REQUESTED TO COMPLETE,
DATE AND SIGN THE ACCOMPANYING PROXY AND RETURN IT PROMPTLY TO PBC IN THE
ENCLOSED ENVELOPE. FAILURE TO RETURN A PROPERLY EXECUTED PROXY OR TO VOTE AT
THE SPECIAL MEETING WILL HAVE THE SAME EFFECT AS A VOTE AGAINST APPROVAL OF
THE MERGER AGREEMENT. PBC SHAREHOLDERS SHOULD NOT FORWARD ANY STOCK
CERTIFICATES WITH THEIR PROXIES.
A PBC shareholder who has executed and delivered a proxy may revoke it at
any time before such proxy is voted by giving a later written proxy, by giving
written revocation to the Secretary of PBC, provided such later proxy or
revocation is actually received by PBC before the vote of the shareholders, or
by voting in person at the Special Meeting. Any shareholder attending the
Special Meeting may vote in person whether or not a proxy has been previously
filed. The shares represented by all properly executed proxies received in
time for the Special Meeting, unless said proxies are revoked, will be voted
in accordance with the instructions therein. IF INSTRUCTIONS ARE NOT GIVEN,
PROPERLY EXECUTED PROXIES RECEIVED WILL BE VOTED FOR APPROVAL OF THE MERGER
AGREEMENT.
19
<PAGE>
Other Matters. PBC will bear the costs of solicitation of proxies for the
Special Meeting. Such solicitation will be made by mail but also may be made
by telephone, facsimile or in person by the directors, officers and employees
of PBC.
The management of PBC is not aware of any business to be acted upon at the
Special Meeting other than the proposal to approve the Merger Agreement. If
other matters are properly brought before the Special Meeting or any
adjournment thereof, the enclosed proxy, if properly signed, dated and
returned, will be voted in accordance with the recommendation of PBC's
management or, if there is no such recommendation, in the discretion of the
individuals named as proxies therein.
DISSENTERS' RIGHTS
Under the FBCA, shareholders of a corporation generally have the right to
dissent from certain corporate actions, including the consummation of a plan
of merger, and obtain payment of the fair value of their shares. If the Merger
is consummated, holders of record of PBC Common Stock who follow the
procedures specified by Sections 607.1301, 607.1302 and 607.1320 of the FBCA
(the "Florida Dissent Provisions") will be entitled to determination and
payment in cash of the "fair value" of their stock as of the day prior to the
Special Meeting. Such value is exclusive of any appreciation in anticipation
of the Merger, unless such exclusion would be inequitable, but includes "a
fair and equitable" rate of interest thereon. Shareholders who elect to follow
such procedures are referred to herein as "Dissenting Shareholders".
A VOTE IN FAVOR OF THE MERGER AGREEMENT BY A HOLDER OF PBC COMMON STOCK WILL
RESULT IN THE WAIVER OF THE SHAREHOLDER'S RIGHT TO DEMAND PAYMENT FOR HIS OR
HER SHARES PURSUANT TO THE FLORIDA DISSENT PROVISIONS.
The following summary of the Florida Dissent Provisions is not intended to
be a complete statement of such provisions, the full text of which is attached
as Appendix B to this Proxy Statement, and is qualified in its entirety by
reference thereto.
Under the Florida Dissent Provisions, a shareholder of PBC may dissent from
the Merger by following the following procedures: (i) the Dissenting
Shareholder must deliver to PBC, prior to the Special Meeting, written notice
of his intent to demand payment for his shares; (ii) the Dissenting
Shareholder must refrain from voting in favor of the Merger; (iii) within ten
(10) days after the date of the Special Meeting, PBC shall give written notice
of authorization of the Merger by the shareholders to such Dissenting
Shareholder; and (iv) within twenty (20) days after the giving of notice to
the Dissenting Shareholder, the Dissenting Shareholder shall file with PBC a
notice of election and a demand for payment of the fair value of his shares.
Any Dissenting Shareholder filing an election to dissent shall deposit his
certificates for certificated shares with PBC simultaneously with the filing
of the election to dissent. A shareholder may dissent as to less than all of
the shares of PBC Common Stock held by him, and in such event, he is treated
as two separate shareholders. Once PBC offers to pay the Dissenting
Shareholder for his shares, the notice of election cannot be withdrawn except
with the consent of PBC. However, the right of a Dissenting Shareholder to be
paid the fair value of his shares shall cease if (i) the demand is withdrawn,
(ii) the proposed Merger is abandoned, (iii) no demand or petition for
determination of fair value by a court has been made or is filed within the
time provided by law or (iv) a court of competent jurisdiction determines that
such shareholder is not entitled to the relief provided by the Florida Dissent
Provisions.
Within ten (10) days after the later of the expiration of the period in
which the Dissenting Shareholder may file his notice of election to dissent or
the Effective Time of the Merger, PBC is required to make a written offer to
each Dissenting Shareholder to purchase the shares of PBC Common Stock at a
price deemed by the surviving corporation to be the fair value of such shares.
If, within thirty (30) days after the making of such offer, any shareholder
accepts the same, payment therefor shall be made within ninety (90) days after
the later of the date such offer was made or the consummation of the Merger.
However, if within such thirty (30) day period the surviving corporation and
the Dissenting Shareholder are unable to agree with respect to a price, then
the surviving corporation, within thirty (30) days after receipt of written
demand from such Dissenting Shareholder
20
<PAGE>
given within sixty (60) days after the Effective Time of the Merger, shall, or
at its election within such period may, file an action in a court of competent
jurisdiction in the county in which PBC maintained its registered office
requesting that the fair value of the shares of PBC Common Stock be
determined. If PBC or the surviving corporation shall fail to institute such
proceedings, any Dissenting Shareholder may do so in the name of PBC. All
Dissenting Shareholders, except for those that have agreed upon a value with
the surviving corporation, are deemed to be parties to the proceeding as an
action against their shares. In such proceeding, the court may, if it so
elects, appoint one or more persons as appraisers to receive evidence and
recommend a decision on the question of fair value. The surviving corporation
shall pay each Dissenting Shareholder the amount found to be due within ten
(10) days after final determination of the proceedings. Upon payment of such
judgment, the Dissenting Shareholder will cease to have any interest in the
shares of PBC Common Stock.
Any judgment rendered in any dissent proceeding may, at the discretion of
the court, include an allowance for interest at such rate as the court may
deem fair and equitable. The cost and expenses of any such dissent proceeding
shall be determined by the court and shall be assessed against the surviving
corporation, but all or any part of such costs and expenses may be apportioned
and assessed against the Dissenting Shareholders, in such amount as the court
deems equitable, if the court determines that the surviving corporation made
an offer to the Dissenting Shareholders and the shareholders' failure to
accept such offer was arbitrary, vexatious or not in good faith. The expenses
awarded by the court shall include compensation for, and reasonable expenses
of, any appraiser but shall not include the fees and expenses of counsel or
experts employed by any party. If the fair value of the shares of PBC Common
Stock, as determined by the proceeding, materially exceeds the amount which
the corporation initially offered to pay, or if no offer was made, the court,
in its discretion, may award to any shareholder who is a party to the
proceeding such sum as the court may determine to be reasonable compensation
for any expert attorney or expert employed by the shareholder in the
proceeding.
RECOMMENDATION OF BOARD OF DIRECTORS
The Board of Directors of PBC recommends that the shareholders of PBC vote
FOR the proposal to approve the Merger Agreement. See "THE MERGER--BACKGROUND
OF AND REASONS FOR THE MERGER."
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<PAGE>
THE MERGER
The following information concerning the Merger, insofar as it relates to
matters contained in the Merger Agreement, is qualified in its entirety by
reference to the Merger Agreement, which is attached hereto as Appendix A and
incorporated herein by reference. The information contained herein with
respect to the opinion of the financial advisor to PBC is qualified in its
entirety by reference to the opinion of such financial advisor, which is
attached hereto as Appendix D and incorporated herein by reference.
TERMS OF THE MERGER
At the Effective Time, PBC will merge with and into ANB. In the Merger, each
share of PBC Common Stock outstanding immediately prior to the Effective Time,
other than shares with respect to which dissenters' rights shall have been
perfected, and also excluding shares held by PBC or its subsidiaries other
than in a fiduciary capacity or as a result of debts previously contracted,
will be converted into and exchanged for the right to receive 0.2353134 shares
of ANB Common Stock (the "Exchange Ratio"). Pursuant to the terms of the
Merger Agreement, the Exchange Ratio is subject to upward adjustment based on
the Average ANB Share Price. If the Average ANB Share Price is $24.00 or less,
then the Exchange Ratio shall be increased by an additional 0.010696 shares of
ANB Common Stock per share of PBC Common Stock. Therefore, the Exchange Ratio
would increase to 0.2460094 (0.2353134 + 0.010696) if the Average ANB Share
Price is less than $24.00.
If the Average ANB Share Price is below $25.00, but greater than $24.00,
then the Exchange Ratio shall be increased by an amount equal to (a) .010696
multiplied by (b) a fraction, (i) the numerator of which is the difference
between $25.00 and the Average ANB Share Price and (ii) the denominator of
which is $1.00 (the "Fraction"), which, assuming that no holders of PBC Common
Stock exercise their dissenters' rights, is the equivalent of an additional
aggregate number of shares to be issued in the Merger in an amount equal to
25,000 shares multiplied by the Fraction.
Examples. Assuming no PBC Shareholder exercises dissenters' rights and
assuming that the issued and outstanding shares of PBC Common Stock are the
same as of the Effective Time as they were on the Record Date, the following
table sets forth the following information based on a range of assumed Average
ANB Share Prices: (i) the total number of shares of ANB Common Stock which
would be delivered pursuant to the Merger Agreement (the "Aggregate Merger
Consideration"); (ii) the "Aggregate Dollar Value" of the ANB Common Stock
delivered pursuant to the Merger; (iii) the resulting "Selling Price per
Share" of PBC Common Stock; and (iv) the number of shares of ANB Common Stock
which each share of PBC Common Stock would represent the right to receive (the
Exchange Ratio):
<TABLE>
<CAPTION>
AVERAGE ANB AGGREGATE MERGER AGGREGATE SELLING PRICE PER EXCHANGE
SHARE PRICE(1) CONSIDERATION DOLLAR VALUE PBC SHARE(2) RATIO
-------------- ---------------- ------------ ----------------- --------
<S> <C> <C> <C> <C>
$26.00 550,000 $14,300,000 $6.12 0.2353134
25.00 550,000 13,750,000 5.88 0.2353134
24.50 562,500 13,781,250 5.90 0.2406614
24.00 575,000 13,800,000 5.90 0.2460094
</TABLE>
- --------
(1) The range of Average ANB Share Price presented is for illustration only
and is not indicative of historical or future market values for ANB Common
Stock. The table is intended to show the effect of possible increases or
decreases in the market value of ANB Common Stock on the Exchange Ratio.
See "Market Value of Securities."
(2) Rounded to the nearest whole cent.
On April , 1998, the average ANB Common Stock price as reported on the
NASDAQ National Market System was $ . At this price (i) the Aggregate Merger
Consideration would be $ , (ii) the Aggregate Dollar Value would be $ ,
(iii) the Selling Price per PBC Share would be $ and (iv) the Exchange
Ratio would be 0.2353134. Note that if the Average ANB Share Price is $25.00
or greater, the Exchange Ratio will always be 0.2353134.
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<PAGE>
No fractional shares of ANB Common Stock will be issued in respect of PBC
Common Stock, and cash will be paid by ANB in lieu of issuance of such
fractional shares. The amount paid in lieu of fractional shares will be
calculated by multiplying such fractional part of a share of ANB Common Stock
by the Average ANB Share Price. No holder of PBC Common Stock who would
otherwise have been entitled to a fractional share of ANB Common Stock will be
entitled to dividends, voting rights or any right as holder with respect to
such fractional shares.
Holders of PBC Common Stock will have the right to dissent from the Merger
Agreement and receive a cash payment equal to the fair value of their shares,
all in conformity with the FBCA. See "GENERAL INFORMATION--DISSENTERS'
RIGHTS."
EFFECTIVE TIME
Articles of Merger will be filed with the Secretary of State of the State of
Florida, and a Certificate of Merger will be filed with the Secretary of State
of the State of Delaware, as soon as practicable after all conditions
contained in the Merger Agreement have been satisfied or lawfully waived,
including receipt of all regulatory approvals, and expiration of all statutory
waiting periods, and the approval of the Merger Agreement by the shareholders
of PBC. The Effective Time of the Merger will be at the time the Certificate
of Merger shall be accepted for filing by the Secretary of State of Delaware
(or such later time as the parties may agree).
BACKGROUND OF AND REASONS FOR THE MERGER
In July of 1996, PBC's Chairman and Chief Executive Officer, P. Douglas
Freedle, was invited to ANB's annual investment conference at the Sandestin
Beach Resort in Sandestin, Florida. At this conference Mr. Freedle met the
officers of ANB and of ANB's principal operating bank, National Bank of
Commerce of Birmingham ("NBC"). PBC was familiar with NBC's correspondent
banking operations, and, after studying the financial statements and other
information available on ANB and NBC in particular, Mr. Freedle left the
Sandestin conference with the idea that Public Bank might consider becoming a
correspondent bank of NBC. On September 19, 1996, the Board of Public Bank
authorized becoming a correspondent bank of NBC. The resulting relationship
led to subsequent meetings between officers of PBC, Public Bank and NBC, which
led to Public Bank engaging NBC to prepare Public Bank's Asset Liability
Management Reports on a quarterly basis.
In July of 1997, Mr. Freedle again attended ANB's investment conference and
this time was approached by John H. Holcomb, III, Chairman and Chief Executive
Officer of ANB, to discuss the Florida banking industry in general and to
request a personal meeting with Mr. Freedle. Shortly thereafter, Mr. Holcomb
and other associates of ANB met with Mr. Freedle and discussed ANB's entry
into the Florida panhandle area. They discussed generally ANB's interest in
banks in the central Florida area outlined by Gainesville, Sebring, Daytona
Beach and the outskirts of Tampa. ANB expressed a general interest in the core
deposits of banks in those areas. Follow-up conversations expanded upon Mr.
Freedle's interest in borrowing funds from ANB as may be required for new bank
charters, acquisitions and his financial interests in general. Mr. Holcomb
requested an additional meeting on October 24, 1997. In the interim, various
officers of PBC and ANB held a number of telephone conversations on the
banking industry in general.
When Mr. Holcomb and an associate met with Mr. Freedle on October 24, 1997,
Mr. Holcomb expressed an interest in using Public Bank as ANB's platform for
building a central Florida network of banks. In light of this interest, Mr.
Freedle fully discussed the financial condition of Public Bank with Mr.
Holcomb and asked what Mr. Holcomb estimated to be PBC's worth. Mr. Holcomb
responded by letter dated October 30, 1997 that ANB valued Public Bank at 2.37
times book value, or $11 million (for the bank only). Mr. Freedle decided to
explore this opportunity further. He obtained more financial information on
ANB and reviewed the latest acquisition of ANB to evaluate the terms of that
transaction. After discussing the matter with certain advisors, Mr. Freedle
and his advisors concluded that 2.37 could be in the range of reasonable
valuations for Public Bank; however, they believed any multiple should also
include the holding company, and the multiple should be applied at closing and
be based upon the receipt of a certain number of ANB shares of common stock,
using the market
23
<PAGE>
price of ANB shares on November 18, 1997. At this point all conversations were
still in the exploratory stage and no definite offer had been made by either
party.
On November 18, 1997, Mr. Freedle and Mr. Holcomb discussed Mr. Holcomb's
letter and Mr. Freedle's ideas on valuations. On November 28, 1997, Mr.
Holcomb wrote to Mr. Freedle requesting a meeting with Mr. Freedle during the
week of December 8, 1997, in order to review the assets of the holding
company. Included in the letter was information on pooling of interests and
SEC registration issues. On December 10, 1997, Mr. Holcomb met with Mr.
Freedle and reviewed and discussed PBC's and Public Bank's operations with Mr.
Freedle. On December 22, 1997, following a number of telephone conversations
about PBC's financial condition, Mr. Holcomb expressed a willingness to pay
the price of 500,000 shares of ANB common stock for PBC in a tax-free
exchange. On January 7, 1998, accompanied by William E. Matthews, Senior Vice
President of NBC, and a representative of ANB's independent accounting firm,
Mr. Holcomb met with Mr. Freedle in Tampa to review financial and tax data
pertaining to PBC and Public Bank. At Mr. Holcomb's invitation, on January 19,
1998, Mr. Freedle visited the headquarters of ANB in Birmingham and met with
various senior management and department heads of ANB and NBC. Mr. Freedle,
together with various ANB and NBC officers, then attended a presentation given
by ANB to J.C. Bradford & Co. in Nashville, Tennessee, on January 20, 1998. At
the January 20, 1998 meeting and during the days that followed through January
28, 1998, various discussions took place between the parties on issues
relating to pricing, employees, directors and merger issues generally. On
January 28, 1998, terms were discussed by both parties for a merger proposal
that seemed acceptable for review by the full Board of Directors of PBC,
subject to receipt of a fairness opinion from a suitable investment banking
firm. The first draft of the Merger Agreement was received on January 29,
1998. On February 19, 1998, the Board of Directors of PBC, at a meeting
attended by a representative of PBC's counsel, Fowler, White, Gillen, Boggs,
Villareal and Banker, P.A. ("Fowler White"), approved proceeding with merger
negotiations with ANB, and named Messrs. Freedle and Tucker as the designated
representatives of PBC to handle all communications and inquiries regarding
specific terms of the proposed merger and questions about PBC for purposes of
ANB's due diligence. The Board also authorized retaining an appropriate
investment banking firm to render a fairness opinion regarding the proposed
transaction. Also, on February 19, 1998, the Board of Directors of Public Bank
met and ratified the actions taken by the Board of PBC, and agreed to make
available to ANB certain information about Public Bank.
The ANB Board held its regular meeting on February 19, 1998, and considered
the potential Merger as one of the items on its agenda. Mr. Holcomb presented
financial information regarding PBC to the ANB Board along with information
relating to other PBC operational issues, including information regarding the
PBC market area and market share, banking practices, loan losses and
information regarding employees, management and directors. After thorough and
careful consideration, the ANB Board determined that, based on the factors
described below and a share exchange not to exceed 575,000 total shares of ANB
Common Stock to be issued, the Merger was in the best interests of ANB and its
shareholders. The ANB Board authorized its officers to finalize negotiations
for the Merger. On March 5, 1998, the PBC Board met to discuss the Merger.
Following a presentation by Mr. Holcomb, a presentation by a representative of
Sheshunoff, and a presentation by a representative of Fowler White, the PBC
Board approved the definitive Merger Agreement and approved the Merger.
ANB's Reasons for the Merger.
In approving the Merger Agreement and the Merger, the ANB Board considered a
number of factors concerning the benefits of the Merger. Without assigning any
relative or specific weights to the factors, the ANB Board of Directors
considered the following material factors:
(a) the information presented to the directors by the management of ANB
concerning the business, operations, earnings, asset quality and financial
condition of PBC, including the composition of the earning assets portfolio
of PBC;
(b) the financial terms of the Merger, including the relationship of the
value of the consideration issuable in the Merger to the market value,
tangible book value and earnings per share of PBC;
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(c) the nonfinancial terms of the Merger, including the treatment of the
Merger as a tax-free exchange of PBC Common Stock for ANB Common Stock for
federal income tax purposes;
(d) the likelihood of the Merger being approved by applicable regulatory
authorities without undue conditions or delay;
(e) the opportunity for reducing the noninterest expense of the
operations of PBC and the ability of the operations of PBC after the
Effective Time to contribute to the earnings of ANB;
(f) the attractiveness of the PBC franchise, the market position of PBC
in each of the markets in which it operates, and the compatibility of the
franchise of PBC in central Florida with the operations of ANB in its
market areas; and
(g) the compatibility of the community banking orientation of the
operations of PBC to that of ANB and the Banks.
PBC's Reasons for the Merger. In approving the Merger Agreement and the
Merger, the Board of PBC considered a number of factors and criteria regarding
the potential benefits of the Merger. Without assigning relative or specific
weights to those factors, the PBC Board considered the following material
factors:
(a) ANB's ability to provide additional financial services to the
customers of Public Bank;
(b) ANB's ability, due to its superior capitalization, to facilitate
Public Bank's addition of bank branches which would increase customer
convenience;
(c) the impact of ANB's reputation as an owner and operator of community
banks on Public Bank's image as a community bank;
(d) ANB's experience in owning and operating community banks and the
value thereof to the St. Cloud/Kissimmee communities;
(e) ANB's commitment to using the Public Bank organization as a platform
to create a central Florida network of community banks as an opportunity
for the growth and enhancement of the St. Cloud/Kissimmee communities;
(f) ANB's reputation for maintaining continuity of qualified, local
personnel in merged banks;
(g) the marketability and liquidity of ANB's securities;
(h) the ability of ANB's growth potential to enhance shareholder value;
and
(i) the overall ability of the Merger to enhance shareholder value.
After receipt of a preliminary fairness opinion from Sheshunoff, the PBC
Board approved the Merger Agreement because it believed the exchange ratio
represented in the definitive agreement was fair to the shareholders of PBC,
would enhance shareholder values, represented an opportunity for PBC
shareholders to gain liquidity in their investments in PBC, and could provide
growth and other opportunities to the St. Cloud/Kissimmee communities. In
addition, the Board noted that ANB has a reputation for maintaining continuity
of directors, management and personnel at merged entities.
PBC's Board of Directors recommends that PBC shareholders vote FOR approval
of the Merger Agreement.
OPINION OF ALEX SHESHUNOFF & CO. INVESTMENT BANKING
PBC retained Sheshunoff to provide its opinion with respect to the fairness
of the consideration to be received by PBC's shareholders in connection with
the Merger and related matters. Sheshunoff did not participate in determining
or recommending the Exchange Ratio and did not participate in any solicitation
of interests for the acquisition of PBC. As of March 5, 1998, Sheshunoff
rendered its written opinion that, as of such date, the consideration to be
received in the Merger Agreement was fair from a financial point of view to
the holders of PBC Common Stock.
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The full text of Sheshunoff's opinion, which sets forth, among other things,
assumptions made, procedures followed, matters considered and limitations on
the review undertaken, is attached as Appendix D to this Proxy Statement.
PBC's shareholders are urged to read the Sheshunoff opinion carefully and in
its entirety. Sheshunoff's opinion is addressed to the PBC Board and does not
constitute a recommendation to any shareholder of PBC as to how such
shareholder should vote at the Special Meeting.
In connection with rendering its written opinion, Sheshunoff, among other
things: (i) analyzed certain internal financial statements and other financial
and operating data concerning PBC prepared by the management of PBC; (ii)
analyzed certain publicly available financial statements, both audited and
unaudited, of PBC, including its audited financial statements for the two
years ended December 31, 1996 and December 31, 1997 and the quarterly call
reports for the twelve months ended December 31, 1997; (iii) analyzed certain
publicly available financial statements, both audited and unaudited, of ANB,
including its Form 10-K for the year ended December 31, 1996 and the draft
Form 10-K for the year ended December 31, 1997, the annual report for the year
ended December 31, 1996 and its quarterly reports for the quarters ended
March, June and September, 1997; (iv) analyzed certain financial projections
of PBC prepared by the management of PBC; (v) discussed certain aspects of the
past and current business operations, financial condition and future prospects
of PBC and ANB with certain members of their respective managements; (vi)
reviewed reported market prices and historical trading activity of ANB's
common stock and certain analysts' projections of ANB's potential 1998
earnings per share; (vii) compared the financial performance of ANB and the
prices and trading activity of ANB's common stock with that of certain other
comparable publicly traded companies and their securities; (viii) reviewed
certain security analysts' reports of ANB's common stock prepared by various
investment banking firms; (ix) reviewed the financial terms, to the extent
publicly available, of certain comparable precedent transactions; (x) reviewed
a draft of the Merger Agreement; (xi) reviewed and discussed with ANB senior
management certain internal analyses and forecasts of cost savings, operating
efficiencies, revenue effects and financial synergies expected by ANB to be
achieved as a result of the Merger; and (xii) performed such other analyses as
Sheshunoff has deemed appropriate.
In connection with its review, Sheshunoff relied upon and assumed the
accuracy and completeness of all of the foregoing information provided to it
or made publicly available, and Sheshunoff has not assumed any responsibility
for independent verification of such information. With respect to the
financial projections, Sheshunoff assumed that they have been reasonably
prepared on a basis reflecting the best currently available estimates and
judgments of the future financial performance of PBC. However, the assumptions
used to make projections of future performance are not certain to become
reality. If the projections do not become reality, actual performance may vary
substantially from the projected results. Sheshunoff has not made any
independent evaluation or appraisal of the assets or liabilities of PBC, nor
has Sheshunoff been furnished with any such appraisals, and Shesunoff has not
examined any individual loan files of PBC. Sheshunoff personnel are not
experts in the evaluation of loan portfolios for the purposes of assessing the
adequacy of the allowance for losses with respect thereto and have assumed
that such allowances for each of PBC and ANB are, in the aggregate, adequate
to cover such losses.
With respect to ANB, Sheshunoff relied solely upon publicly available data
regarding ANB's financial condition and performance. Sheshunoff discussed this
publicly available information with the management of ANB. Sheshunoff did not
conduct any independent evaluation or appraisal of the assets, liabilities or
business prospects of ANB, was not furnished with any evaluations or
appraisals, and did not review any individual credit files of ANB. Shesunoff
personnel are not experts in the evaluation of loan portfolios for the
purposes of assessing the adequacy of the allowance for losses with respect
thereto and have assumed that such allowance for ANB is, in the aggregate,
adequate to cover such losses.
Sheshunoff's opinion is necessarily based on economic, market and other
conditions as in effect on, and the information made available to Sheshunoff
as of March 5, 1998.
In connection with rendering its opinion, Sheshunoff performed a variety of
financial analyses. The preparation of a fairness opinion involves various
determinations as to the most appropriate and relevant methods
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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 consideration to be received
by the holders of PBC Common Stock is to some extent a subjective one based on
the experience and judgment of Sheshunoff and not merely the result of
mathematical analysis of financial data. Accordingly, notwithstanding the
separate factors summarized below, Sheshunoff 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 Sheshunoff's view of the actual
value of PBC.
In performing its analyses, Sheshunoff made numerous assumptions with
respect to industry performance, business and economic conditions and other
matters, many of which are beyond the control of PBC. The analyses performed
by Sheshunoff are not necessarily indicative of actual values or future
results, which may be significantly more or less favorable than suggested by
such analyses. The analyses do not purport to be appraisals or to reflect the
prices at which a company might actually be sold. In addition, Sheshunoff's
analyses should not be viewed as determinative of the PBC Board's or the PBC
Management's opinion with respect to the value of PBC.
The following is a summary of the analyses performed by Sheshunoff in
connection with its opinion dated as of March 5, 1998:
Analysis of Selected Transactions. Sheshunoff performed an analysis of
premiums paid in selected pending or recently completed acquisitions of
banking organizations in the southeastern U.S. and in the State of Florida,
with comparable characteristics to the PBC and ANB transaction. Two sets of
comparable transactions were analyzed to ensure a thorough comparison.
The first set of comparable transactions was comprised to reflect the
profitability, asset size and regional location of PBC. The guideline
transactions specifically consisted of eight mergers and acquisitions of bank
organizations throughout the southeastern U.S. between March 3, 1997 and March
3, 1998 in which the seller's total assets equaled $100 million or less, the
seller's return on average equity was greater than 10.0% and the seller's
equity to assets ratio was greater than 10.0%, in which the deal consideration
was for common stock only. This group of comparable transactions included the
following transactions: Savannah Bancorp/Bryan Bancorp of GA; Colonial
BancGroup/First Central Bank; Mercantile Bankshares/Marshall National Bank &
Trust; F&M National Corp/Peoples Bank of VA; PAB Bankshares/Investors
Financial Corp; FNB Corporation/Seminole Bank; BankUnited Financial/Central
Bank; and Union Bankshares Corp/Rappahannock Bankshares. The analysis yielded
multiples of the transactions' purchase price relative to: (i) book value
ranging from 1.99 times to 3.53 times with an average of 2.74 times and a
median of 2.65 times (compared with PBC's deal of 2.64 times December 31, 1997
book value); (ii) last 12 months earnings, ranging from 14.5 times to 29.9
times, with an average of 22.0 times and a median of 22.4 times (compared with
PBC's deal of 17.5 times last 12 months earnings as of December 31, 1997);
(iii) total assets ranging between 23.9% and 41.3%, with an average of 33.6%
and a median of 34.0% (compared with PBC's deal of 29.2% of December 31, 1997
total assets); and (iv) total deposits ranging between 31.6% and 50.8%, with
an average of 39.7% and a median of 38.4% (compared with PBC's deal of 33.1%
of December 31, 1997 total deposits).
The second set of comparable transactions was comprised to reflect the
specific pricing of small bank mergers in Florida. The guideline transactions
specifically consisted of eight mergers and acquisitions of banking
organizations in Florida from March 3, 1997 to March 3, 1998, in which the
seller's total assets were less than $100 million and in which the deal
consideration was for common stock only. This group of comparable transactions
included the following transactions: FNB Corporation/Seminole Bank; BankUnited
Financial/Central Bank; American Bancshares/Murdock Florida Bank; Colonial
BancGroup/First Central Bank; FNB Corporation/West Coast Bank; Huntington
Bancshares/Bank of Winter Park; FNB Corporation/Indian Rocks State Bank; and
Colonial BancGroup/First Independence. The analysis yielded multiples of the
transactions' purchase price relative to: (i) book value ranging from 1.23
times to 3.34 times, with an average of
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2.33 times and a median of 2.38 times (compared with PBC's deal of 2.64 times
December 31, 1997 book value); (ii) last 12 months earnings ranging from 13.1
times to 29.9 times with an average of 20.1 times and a median of 20.0 times
(compared with PBC's deal of 17.5 times last 12 months earnings as of December
31, 1997); (iii) total assets ranging between 12.3% and 41.3% with an average
of 22.9% and a median of 21.8% (compared with PBC's deal of 29.2% of December
31, 1997 total assets); and (iv) total deposits ranging between 13.9% and
50.8% with an average of 26.7% and a median of 25.2% (compared with PBC's deal
of 33.1% of December 31, 1997 total deposits).
Discounted Cash Flow Analysis. Using discounted cash flow analysis,
Sheshunoff estimated the present value of the future stream of after-tax cash
flow that PBC could produce through the year 2002, under various
circumstances, assuming that PBC performed in accordance with the
earnings/return projections of management. Sheshunoff estimated the terminal
value for PBC by applying multiples of earnings ranging from 12 times to 18
times to projected year 2002 earnings and then discounting the cash flow
streams, dividends paid to the shareholders (assuming all earnings in excess
of that required to maintain a tangible equity to asset percentage of 8.5% are
paid out in dividends) and terminal value, using discount rates ranging from
12% to 16% chosen to reflect different assumptions regarding the required
rates of return of PBC and the inherent risk surrounding the underlying
projections. This discounted cash flow analysis indicated a range of $4.65 per
share to $7.22 per share. This compares favorably to the PBC deal value of
$6.29 per share.
Sheshunoff also performed a cash flow analysis using an estimated terminal
value for PBC at the end of the period by applying multiples of book value
ranging from 2.00 times to 2.70 times and then discounting the cash flow
streams, dividends paid to the shareholders (assuming all earnings in excess
of that required to maintain a tangible equity to tangible asset percentage of
8.50% are paid out in dividends) and terminal value using discount rates
ranging from 12% to 16% chosen to reflect different assumptions regarding the
required rates of return of PBC and the inherent risk surrounding the
underlying projections. This discounted cash flow analysis indicated a range
of $4.02 per share to $5.58 per share. This compares favorably to the PBC deal
value of $6.29 per share.
Comparable Company Analysis. Sheshunoff compared selected balance sheet
data, asset quality, capitalization and profitability measures and market
statistics using financial data at or for the twelve months ended December 31,
1997 and market data as of March 4, 1998 for ANB to a group of selected
southeastern bank holding companies which Sheshunoff deemed to be relevant.
The group of selected southeastern bank holding companies (the "Comparable
Composite") included Anchor Financial Corporation, Carolina First Corp.,
Capital City Bancorp Inc., Century South Banks, Inc., Hancock Holding Co.,
Fidelity National Corp. and Whitney Holding Co. This comparison, among other
things, showed that: (i) ANB's equity to asset percentage was 7.69%, compared
to an average of 9.50% and a median of 9.95% for the Comparable Composite;
(ii) for the last twelve months ended December 31, 1997, ANB's return on
average equity was 12.42%, compared to an average of 11.51% and a median of
11.38 % for the Comparable Composite; (iii) for the last twelve months ended
December 31, 1997, ANB's return on average assets was 1.01%, compared to an
average of 0.99% and a median of 1.13% for the Comparable Composite; (iv) as
of December 31, 1997, ANB's non-performing loans to net loans ratio was 0.59%,
compared to an average of 0.30% and a median of 0.32% for the Comparable
Composite; (v) ANB's market price per share as of March 4, 1998 to book value
per share as of December 31, 1997 was 2.39 times, compared to an average of
2.55 times and median of 2.39 times for the Comparable Composite; and (vi)
ANB's market price per share as of March 4, 1998, to its earnings per share
for the twelve months ended December 31, 1997 was 20.6 times, compared to an
average of 25.4 times and median of 24.2 times for the Comparable Composite.
Sheshunoff also compared selected stock market results of ANB to the
publicly available corresponding data of other composites which Sheshunoff
deemed to be relevant, including SNL's index of all publicly traded banks and
the S&P 500. Results from indexing the S&P 500, SNL's index of all publicly
traded banks, the southeastern Composite and ANB's stock from October 4, 1997
to March 4, 1998 revealed similar relationships in price movements of ANB's
stock to the price movements of SNL's index of all publicly traded banks. The
analysis revealed that price movements of ANB's stock was above the price
movements of the S&P 500 and southeastern Composite.
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Sheshunoff discussed certain aspects of the past and current business
operations, financial condition and future prospects of ANB with certain
members of the management of ANB. Sheshunoff also reviewed certain security
analysts' reports of ANB prepared by two other investment banking firms.
Sheshunoff expresses no opinion on the future market price of ANB common
stock.
No company or transaction used in the comparable company and comparable
transaction analyses is identical to PBC 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 PBC and other factors that could affect the public trading
value of the companies to which they are being compared. Mathematical analysis
(such as determining the average or median) is not in itself a meaningful
method of using comparable company data.
As part of its investment banking business, Sheshunoff is regularly engaged
in the valuation of securities in connection with mergers and acquisitions and
valuations for estate, corporate and other purposes. PBC's Board of Directors
decided to retain Sheshunoff based on its experience as a financial advisor in
mergers and acquisitions of financial institutions and its knowledge of
financial institutions.
Pursuant to an engagement letter dated February 26, 1998, between PBC and
Sheshunoff, PBC agreed to pay Sheshunoff a $30,000 fee. PBC has also agreed to
indemnify and hold harmless Sheshunoff and its officers and employees against
certain liabilities in connection with its services under the engagement
letter, except for liabilities resulting from the negligence of Sheshunoff.
SURRENDER OF CERTIFICATES
No later than five days after the Effective Time, AmSouth Bank, acting in
the capacity of exchange agent for ANB (the "Exchange Agent"), will mail to
each former holder of record of PBC Common Stock a form letter of transmittal,
together with instructions and a return mailing envelope (collectively, the
"Exchange Materials"), for the exchange of such holders' PBC Common Stock
certificates for certificates representing shares of ANB Common Stock and cash
in lieu of fractional shares. If requested, the Exchange Agent shall mail
Exchange Materials to any shareholder who holds more than ten percent of the
outstanding stock of PBC and who requests that such materials be given to him
or her prior to the Effective Time, and if such materials are returned to the
Exchange Agent in proper form with such shareholder's certificates
representing PBC Common Stock at least five business days prior to the
Effective Time, the Exchange Agent shall deliver to the shareholder at the
Effective Time the consideration specified in the Merger Agreement. HOLDERS OF
PBC COMMON STOCK SHOULD NOT SEND IN THEIR CERTIFICATES UNTIL THEY RECEIVE THE
EXCHANGE MATERIALS FROM THE EXCHANGE AGENT.
Upon receipt of the Exchange Materials, former holders of PBC Common Stock
should complete the letter of transmittal in accordance with the instructions
and mail the letter of transmittal together with all stock certificates
representing shares of PBC Common Stock to the Exchange Agent in the return
envelope provided. Upon receipt of the certificates and satisfactory related
documentation, ANB will issue, and the Exchange Agent will mail, to such
holder of PBC Common Stock a check in the amount of any payment in respect of
fractional shares of PBC Common Stock payable to the surrendering shareholder
and a certificate representing the number of shares of ANB Common Stock to
which such holder is entitled pursuant to the Merger Agreement. No
certificates of ANB Common Stock and no payment in respect of fractional
shares will be delivered to a holder of PBC Common Stock unless and until such
holder shall have delivered to the Exchange Agent certificates representing
the shares of PBC Common Stock owned by such holder and in respect of which
such holder claims payment is due or such documentation and security in
respect of lost or stolen certificates as may be required by the Exchange
Agent.
Former shareholders of record of PBC will be entitled to vote after the
Effective Time at any meeting of ANB shareholders the number of whole shares
of ANB Common Stock into which such holders' respective
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shares of PBC Common Stock are converted, regardless of whether such holders
have exchanged their certificates representing PBC Common Stock for
certificates representing ANB Common Stock.
Beginning six months after the Effective Time, no dividend or other
distribution payable after the Effective Time with respect to ANB Common Stock
issued to replace PBC Common Stock will be paid to the holder of an
unsurrendered PBC Common Stock certificate until the holder surrenders such
certificate, at which time such holder will be entitled to receive all
previously withheld dividends and distributions, without interest.
After the Effective Time, there will be no transfers on PBC's stock transfer
books of shares of PBC Common Stock issued and outstanding at the Effective
Time. If certificates representing shares of PBC Common Stock are presented
for transfer after the Effective Time, they will be returned to the presenter
together with a form of letter of transmittal and exchange instructions.
Neither ANB nor the Exchange Agent shall be liable to a holder of PBC Common
Stock for any amounts paid or properly delivered in good faith to a public
official pursuant to any applicable abandoned property law.
CONDITIONS TO CONSUMMATION OF THE MERGER
The respective obligations of ANB and PBC to effect the Merger are subject
to the satisfaction of the following conditions prior to the Effective Time:
(i) shareholder approval of PBC shall have been received;
(ii) all regulatory approvals shall have been received and waiting
periods shall have expired, and no such approval shall be conditioned or
restricted in a manner which, in the opinion of the Board of Directors of
ANB or PBC, materially adversely impacts the Merger so as to render it
inadvisable;
(iii) all consents necessary to avoid a material adverse effect on the
relevant party shall have been obtained;
(iv) no court or regulatory authority shall have taken any action that
restricts, prohibits or makes illegal the transactions provided for in the
Merger Agreement, and no action shall have been instituted seeking to
restrain the Merger which renders its consummation inadvisable;
(v) ANB shall have received a letter, dated as of the Effective Time,
from Coopers & Lybrand L.L.P., concurring with the conclusions of ANB's and
PBC's management that no conditions exist with respect to each company
which would preclude accounting for the Merger as a pooling of interests;
(vi) ANB and PBC shall have received a written opinion of counsel from
Maynard, Cooper & Gale, P.C. to the effect that the Merger will qualify as
a tax-free reorganization within the meaning of Section 368(a) of the Code;
(vii) the Registration Statement on Form S-4 shall have become effective
under the Securities Act, and no stop order suspending the effectiveness of
the Registration Statement shall have been issued and no proceeding for
that purpose shall have been commenced by the Commission; and
(viii) ANB and each of P. Douglas Freedle and Robert Tucker shall have
signed a noncompete and nonsolicitation agreement.
The obligations of ANB to effect the Merger are further subject to the
satisfaction or waiver of the following conditions:
(i) the representations and warranties of PBC in the Merger Agreement
shall be true as if made at the Effective Time;
(ii) the agreements and covenants of PBC in the Merger Agreement shall
have been performed and complied with by the Effective Time;
(iii) PBC shall have delivered to ANB certain certificates of its
corporate officers provided for in the Merger Agreement;
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(iv) PBC shall have delivered to ANB an opinion of its counsel as
provided in the Merger Agreement; and
(v) the directors and executive officers of PBC shall have given to PBC a
release of certain claims, if any, against PBC as provided in the Merger
Agreement.
The obligations of PBC to effect the Merger are further subject to the
satisfaction or waiver of the following conditions:
(i) the representations and warranties of ANB in the Merger Agreement
shall be true as if made at the Effective Time;
(ii) the agreements and covenants of ANB in the Merger Agreement shall
have been performed and complied with by the Effective Time;
(iii) ANB shall have delivered to PBC certain certificates of its
corporate officers provided for in the Merger Agreement;
(iv) ANB shall have delivered to PBC an opinion of its counsel as
provided in the Merger Agreement;
(v) PBC shall have received an opinion from Sheshunoff that the Exchange
Ratio is fair to it and its shareholders;
(vi) The ANB Common Stock to be issued in the Merger shall have been
qualified as a NASDAQ "National Market System Security"; and
(vii) The directors and executive officers of PBC shall have received
from PBC a release of certain claims, if any, as provided in the Merger
Agreement.
REGULATORY APPROVALS
The Merger is conditioned upon receipt of the necessary regulatory
approvals. Bank holding companies and banks are regulated extensively under
both federal and state law. ANB is subject to regulation by the Federal
Reserve. The Bank Holding Company Act requires a bank holding company to
obtain the prior approval of the Federal Reserve before it may acquire
substantially all of the assets of any bank or ownership or control of any
voting shares of any bank if, after such acquisition, it would own or control,
directly or indirectly, more than five percent of the voting shares of any
such bank. Accordingly, on March 18, 1998, ANB filed an application with the
Federal Reserve pursuant to Section 3 of the Bank Holding Company Act.
In evaluating the Merger, the Federal Reserve must consider, 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.
The relevant statutes prohibit the Federal Reserve from approving the Merger
if (i) it would result in a monopoly or would be in furtherance of any
combination or conspiracy to monopolize or attempt to monopolize the business
of banking in any part of the United States or (ii) its effect in any section
of the country may be to substantially lessen competition or to tend to create
a monopoly, or if it would be a restraint of trade in any other manner, unless
the Federal Reserve finds that any anticompetitive effects are outweighed
clearly by the public interest and the probable effect of the transaction in
meeting the convenience and needs of the communities to be served. The Merger
may not be consummated until the 30th day (which may be reduced to 15 days)
following the date of the Federal Reserve approval, during which time the
United States Department of Justice may challenge the transaction on antitrust
grounds. The commencement of any antitrust action would stay the effectiveness
of the approval of the Federal Reserve, unless a court of competent
jurisdiction specifically orders otherwise. There can be no assurance that
such regulatory approval will be obtained or as to the timing of any such
approval.
Public Bank is subject to regulation by the Florida Department of Banking
and Finance (the "Department"). Pursuant to the requirements of Section 658.28
of the Florida Statutes, any proposed change in control, whether direct or
indirect, of a state bank must be submitted to the Department in the form of
an application for approval of such proposed change in ownership. ANB
submitted an application to indirectly
31
<PAGE>
acquire Public Bank (through the Merger of PBC with and into ANB) to the
Department on March 26, 1998. In considering the application, Section 658.28
of the Florida Statutes provides that the Department shall issue its approval
if, after investigation, the Department determines that (i) the proposed new
owners are qualified by reputation, character, experience and financial
responsibility to control the bank in a legal and proper manner and (ii) the
interests of the other stockholders, if any, and the depositors, and creditors
of the bank and the interests of the public generally will not be jeopardized
by the proposed change in ownership, controlling interest or management. There
can be no assurance that such regulatory approval will be obtained or as to
the timing of any such approval.
CONDUCT OF BUSINESS PENDING THE MERGER
The Merger Agreement requires that each of PBC and ANB shall preserve its
business organization, goodwill, relationships with depositors, customers and
employees and take no action that would adversely affect its ability to
perform under the Merger Agreement. In addition, PBC has agreed that, without
the consent of ANB, it will not:
(i) amend its Articles of Incorporation, Bylaws or other governing
instruments or those of any of its subsidiaries;
(ii) incur additional debt obligations except in the ordinary course of
business;
(iii) repurchase, redeem or otherwise acquire or exchange any shares, or
any securities convertible into any shares of the stock of itself or any of
its subsidiaries or declare or pay any dividend or make any other
distribution in respect of its capital stock;
(iv) except as provided in the Merger Agreement, issue, sell, pledge,
encumber or enter into any contract to issue, sell, pledge or encumber, or
authorize any of the foregoing, any additional shares of PBC Common Stock
or any other capital stock of PBC or any subsidiary, or any options,
warrants, conversion or other rights to acquire any such stock;
(v) adjust, split, combine or reclassify any of its capital stock or that
of any of its subsidiaries, or authorize any of the foregoing, other than
in the ordinary course of business for reasonable and adequate
consideration;
(vi) except as specifically provided in the Merger Agreement, acquire any
direct or indirect equity interest in any entities, other than in
connection with foreclosures in the ordinary course of business and
acquisitions of control by depository institution subsidiaries in a
fiduciary capacity;
(vii) grant any increase in compensation or benefits of the employees or
officers of PBC or any of its subsidiaries, except in accordance with past
practices with respect to employees or enter into, grant or pay bonuses,
severance agreements, or material increases in fees or other compensation
to officers and directors;
(viii) enter into any employment contract without an unconditional right
to terminate without liability;
(ix) adopt any new employee benefit plans or make any material changes to
any existing employee benefit plans other than as required by law or that
is necessary or advisable to maintain the tax qualified status of any such
plan;
(x) make any significant change in any accounting methods or systems of
internal accounting controls, except as appropriate to conform to changes
in regulatory accounting requirements or generally accepted accounting
principles;
(xi) commence any litigation other than in accordance with past practice,
settle any litigation involving any liability for material monetary damages
or, except in the ordinary course of business, modify, amend, terminate,
waive, release, compromise or assign any material rights, contracts or
claims;
(xii) operate its business otherwise than in the ordinary course, or in a
manner not consistent with safe and sound banking practices or applicable
law;
(xiii) fail to file timely any report required to be filed with any
regulatory authorities;
32
<PAGE>
(xiv) make any loan or advance to any shareholder owning 5% or more of
the outstanding shares of PBC Common Stock, director or officer of PBC or
any of its subsidiaries, or any of the members of their immediate families,
except for unfunded loan commitments or renewals of existing loans in
existence on the date of the Merger Agreement;
(xv) cancel without payment in full, or modify any contract relating to,
any loan or other obligation receivable from any shareholder, director,
officer or employee of PBC or any of its subsidiaries or any of their
immediate families;
(xvi) enter into any contract for services or otherwise with any of the
holders of 5% or more of PBC Common Stock, or the directors, officers or
employees of PBC or any of its subsidiaries or any members of their
immediate families;
(xvii) modify, amend or terminate any material contract, except in the
ordinary course of business and for fair consideration;
(xviii) file any application to relocate or terminate the operations of
any of its banking offices or any of its subsidiaries;
(xix) except in accordance with applicable law, change its or any of its
subsidiary's lending, investment, liability management and other material
banking policies in any material respect; or
(xx) intentionally take any action reasonably expected to jeopardize or
delay the receipt of any regulatory approval required to consummate the
Merger.
ANB has agreed that, without the consent of PBC, it will not:
(i) other than the potential acquisition of other financial institutions,
enter into any material contract or conduct not in the ordinary course of
business, or not consistent with safe and sound banking practices and
applicable laws;
(ii) intentionally take any action reasonably expected to jeopardize or
delay the receipt of any regulatory approval required to consummate the
Merger;
(iii) fail to file timely any report required to be filed with any
regulatory authorities, including the SEC;
(iv) take any action that would cause the ANB Common Stock to cease to be
traded on the NASDAQ, except for certain exceptions specified in the Merger
Agreement;
(v) take any action that would cause ANB to have an insufficient number
of shares of ANB Common Stock to fulfill its obligations under the Merger
Agreement; or
(vi) if the Merger does not occur, for a period of two years after the
termination of the Merger Agreement, (A) induce or attempt to induce any
employee of PBC, Public Bank or certain specified individuals to leave his
or her employment or employ or solicit such persons for employment or (B)
purchase a financial institution which has its main office located in
Osceola County, Florida, or allow any ANB subsidiary to establish a main
office in Osceola County, Florida.
Each party has also agreed to give written notice to the other promptly upon
becoming aware of the occurrence of any event which is likely to constitute a
Material Adverse Effect within the meaning given to such term in the Merger
Agreement or constitute a breach of any of its representations, warranties or
covenants contained in the Merger Agreement and to use its reasonable efforts
to remedy any such condition or breach.
DOUGLAS FREEDLE VOTING AGREEMENT
P. Douglas Freedle, Chairman of the Board and Chief Executive Officer of PBC
with the power to vote an aggregate of 1,814,518 shares of PBC Common Stock,
comprising 77.63% of the total shares of PBC Common Stock issued and
outstanding as of the Record Date, has agreed, pursuant to a voting agreement
between Mr. Freedle and ANB (the "Voting Agreement"), to vote his shares in
favor of the Merger. As a result, because Mr. Freedle has the power to vote a
majority of the shares of PBC Common Stock issued and outstanding and
33
<PAGE>
entitled to vote at the Special Meeting, his agreement to vote in favor of the
Merger assures approval of the Merger by the PBC Shareholders, subject to the
termination rights contained in the Merger Agreement.
Mr. Freedle has also agreed with ANB to certain transfer restrictions
relating to pooling-of-interests accounting which include, among other things,
his agreement (i) not to transfer any of his shares of PBC Common Stock except
as provided in the Voting Agreement and the Merger Agreement, and (ii) not to
transfer any shares of ANB Common Stock acquired by him in the Merger until
the publication of financial results covering at least 30 days of post-Merger
combined operations of PBC and ANB.
WAIVER AND AMENDMENT; TERMINATION; TERMINATION FEE
Prior to the Effective Time, either ANB or PBC may waive or extend the time
for the compliance or fulfillment by the other with any and all of its
obligations under the Merger Agreement and may, to the extent permitted by
law, amend the Merger Agreement in writing with the approval of the Board of
Directors of each of PBC and ANB.
The Merger Agreement may be terminated at any time prior to the Effective
Time, as follows: (i) by mutual consent, (ii) in the event of a breach of a
representation or warranty or covenant or agreement by the non-breaching party
under certain circumstances, (iii) by either party (provided that such
terminating party is not in material breach of any material obligation in the
Merger Agreement), in the event any required regulatory approval is denied or
not obtained or the shareholders of PBC fail to approve the Merger, (iv) by
either party, in the event there is a material adverse effect on the business,
operations or financial conditions of the other party that is not remedied,
(v) by either party, in the event any of the conditions precedent to the
Merger cannot be satisfied or fulfilled or the Merger is not consummated by
December 31, 1998, and such failure was not the fault of the terminating
party; (vi) by ANB, if the holders of greater than 7.0% of the outstanding
shares of PBC Common Stock properly assert their dissenters' rights under the
FBCA; (vii) by PBC, if a majority of the disinterested members of the Board of
Directors of PBC shall have determined to enter into an agreement with respect
to an acquisition or merger transaction proposal which it considers superior
to the Merger; provided that if PBC terminates the Merger Agreement under such
circumstances of a superior acquisition or merger proposal, PBC shall pay to
ANB a termination fee of $500,000; or (viii) by PBC if the average share price
of ANB Common Stock (as determined pursuant to the Merger Agreement) is $23.00
or less.
In the event of the termination of the Merger Agreement, the Merger
Agreement shall become void and have no effect, except that the
confidentiality requirements shall survive such termination and such
termination will not relieve a breaching party from liability for an uncured
willful breach of the representation, warranty, covenant or agreement giving
rise to the termination.
MANAGEMENT AND OPERATIONS AFTER THE MERGER
Upon the Effective Time of the Merger, Robert Tucker will resign as an
officer and director of Public Bank and Mr. Freedle will resign as an officer
and director of Public Bank. Mr. Holcomb will be added to the Board of
Directors of PBC.
All current ANB directors and officers will continue to serve ANB in
accordance with the bylaws of ANB after the Effective Time. See "The Merger--
Interests of Certain Persons in the Merger." All directors and officers of
each of the subsidiaries of ANB after the Effective Time will continue to
serve in accordance with the terms of the bylaws of each such subsidiary. ANB
intends that most of the personnel at Public Bank will remain with Public Bank
in their current capacity following the Merger.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
No director or executive officer of ANB has any material direct or indirect
financial interest in PBC or the Merger, except as a director, executive
officer or shareholder of ANB or its subsidiaries.
34
<PAGE>
Pursuant to the Merger Agreement, ANB has granted certain demand
registration rights to Douglas Freedle relating to the shares of ANB Common
Stock which Mr. Freedle will receive upon the consummation of the Merger.
Pursuant to these demand registration rights, subject to certain conditions,
ANB has agreed to register some or all of Mr. Freedle's shares of ANB Common
Stock with the Commission, if Mr. Freedle is restricted from transfer of his
shares of ANB Common Stock without such registration. See "THE MERGER--DOUGLAS
FREEDLE VOTING AGREEMENT" and "--RESALES OF ANB COMMON STOCK."
In the normal course of business, Public Bank makes loans to directors and
officers of PBC, including loans to certain related persons and entities. Such
loans are made on substantially the same terms, including interest rates and
collateral, as those prevailing at the time for comparable transactions with
other customers, and, in the opinion of management of PBC, do not involve more
than the normal risk of collectibility. As of December 31, 1997, the amount of
these loans (including amounts available under lines of credit) by Public Bank
to PBC directors and officers was 4.52% of PBC's total loans.
FEDERAL INCOME TAX CONSEQUENCES
Neither ANB nor PBC has requested or will receive an advance ruling from the
Internal Revenue Service as to the tax consequences of the Merger. Maynard,
Cooper & Gale, P.C., counsel for ANB, has delivered opinions to ANB and PBC
that, for federal income tax purposes, under current law, assuming that the
Merger will take place as described in the Merger Agreement and that certain
factual matters represented by ANB and PBC (including the representation that
PBC shareholders will maintain sufficient equity ownership interests in ANB
after the Merger) are true and correct at the time of consummation of the
Merger, the Merger will constitute a reorganization within the meaning of
Section 368(a) of the Code, and ANB and PBC will each be a party to the
reorganization within the meaning of Section 368(b) of the Code.
Assuming that the Merger will take place as described in the Merger
Agreement and that certain factual matters represented by ANB and PBC
(including the representation that PBC shareholders will maintain sufficient
equity ownership interests in ANB after the Merger) are true and correct at
the time of consummation of the Merger, then, in the opinion of Maynard,
Cooper & Gale, P.C., the following will be the material federal income tax
consequences of the Merger: (i) no gain or loss will be recognized by ANB or
PBC in the Merger; (ii) the shareholders of PBC will recognize no gain or loss
upon the exchange of their PBC Common Stock solely for shares of ANB Common
Stock; (iii) the basis of the ANB Common Stock received by the PBC
shareholders in the proposed transaction will, in each instance, be the same
as the basis of the PBC Common Stock surrendered in exchange therefor; (iv)
the holding period of the ANB Common Stock received by the PBC shareholders
will, in each instance, include the period during which the PBC Common Stock
surrendered in exchange therefor was held, provided that the PBC Common Stock
was held as a capital asset on the date of the exchange; (v) the payment of
cash to PBC shareholders in lieu of fractional share interests of ANB Common
Stock will be treated for federal income tax purposes as if the fractional
shares were distributed as part of the exchange and then were redeemed by ANB;
these cash payments will be treated as having been received as distributions
in full payment in exchange for the stock redeemed as provided in Section
302(a) of the Code; and (vi) where solely cash is received by a PBC
shareholder in exchange for his PBC Common Stock pursuant to the exercise of
dissenters' rights, such cash will be treated as having been received in
redemption of his PBC Common Stock, subject to the provisions and limitations
of Section 302 of the Code.
THE DISCUSSION SET FORTH ABOVE IS BASED UPON THE OPINION OF MAYNARD, COOPER
& GALE, P.C., AND APPLIES ONLY TO PBC SHAREHOLDERS WHO HOLD PBC COMMON STOCK
AS A CAPITAL ASSET, AND MAY NOT APPLY TO SPECIAL SITUATIONS, SUCH AS PBC
SHAREHOLDERS, IF ANY, WHO RECEIVED THEIR PBC COMMON STOCK UPON EXERCISE OF
EMPLOYEE STOCK OPTIONS OR OTHERWISE AS COMPENSATION AND PBC SHAREHOLDERS THAT
ARE INSURANCE COMPANIES, SECURITIES DEALERS, FINANCIAL INSTITUTIONS OR FOREIGN
PERSONS. IT DOES NOT ADDRESS THE STATE, LOCAL OR FOREIGN TAX ASPECTS OF THE
MERGER OR ANY TAX CONSEQUENCES OF A SUBSEQUENT TRANSACTION INVOLVING
35
<PAGE>
ANB COMMON STOCK, INCLUDING ANY REDEMPTION OR TRANSFER OF ANB COMMON STOCK.
THIS DISCUSSION IS BASED ON CURRENTLY EXISTING PROVISIONS OF THE CODE,
EXISTING AND PROPOSED TREASURY REGULATIONS THEREUNDER, AND CURRENT
ADMINISTRATIVE RULINGS AND COURT DECISIONS. ALL OF THE FOREGOING ARE SUBJECT
TO CHANGE AND ANY SUCH CHANGE COULD AFFECT THE CONTINUING VALIDITY OF THIS
DISCUSSION. EACH PBC SHAREHOLDER SHOULD CONSULT HIS OWN TAX ADVISOR WITH
RESPECT TO THE SPECIFIC TAX CONSEQUENCES OF THE MERGER, INCLUDING THE
APPLICATION AND EFFECT OF STATE, LOCAL AND FOREIGN TAX LAWS.
ACCOUNTING TREATMENT
ANB will account for the Merger as a pooling-of-interests transaction in
accordance with generally accepted accounting principles, which, among other
things, require that the number of shares of PBC Common Stock acquired for
cash pursuant to the exercise of dissenters' rights or in lieu of fractional
shares not exceed 10% of the outstanding shares of PBC Common Stock. Under
this accounting treatment, assets and liabilities of PBC will be added to
those of ANB at their recorded book values, and the shareholders' equity of
the two companies will be combined in ANB's consolidated balance sheet.
Financial statements of ANB issued after the Effective Time of the Merger will
be restated to reflect the consolidated operations of ANB and PBC as if the
Merger had taken place prior to the periods covered by the financial
statements. The receipt of a letter from Coopers & Lybrand L.L.P., independent
certified public accountants, concurring with the conclusions of ANB's and
PBC's management that no conditions exist with respect to each company that
would preclude accounting for the Merger as a pooling of interests, is a
condition to the consummation of the Merger.
EXPENSES AND FEES
The Merger Agreement provides that each of the parties will bear and pay all
costs and expenses incurred by it in connection with the transactions
contemplated by the Merger Agreement, including fees and expenses of their
respective accountants and counsel, except that ANB shall pay the expenses for
filing, registration, printing and mailing related to this Proxy Statement,
and the expenses relating to regulatory and application fees relating to
necessary regulatory approvals.
RESALES OF ANB COMMON STOCK
The shares of ANB Common Stock issued pursuant to the Merger Agreement will
be freely transferrable under the Securities Act, except for shares issued to
any shareholder who may be deemed to be an "affiliate" (generally including,
without limitation, directors, certain executive officers and beneficial
owners of 10% or more of a class of capital stock) of PBC for purposes of Rule
145 under the Securities Act as of the date of the Special Meeting or for
purposes of applicable interpretations regarding pooling-of-interests
accounting treatment. Affiliates may not sell their shares of ANB Common Stock
acquired in connection with the Merger except pursuant to an effective
registration statement under the Securities Act covering such shares or in
compliance with Rule 145 promulgated under the Securities Act or another
applicable exemption from the registration requirements of the Securities Act
and until such time as financial results covering at least 30 days of combined
operations of ANB and PBC after the Merger have been published. ANB may place
restrictive legends on certificates representing ANB Common Stock issued to
all persons who are deemed "affiliates" of PBC under Rule 145. This Proxy
Statement does not cover resales of ANB Common Stock received by any person
who may be deemed to be an affiliate of PBC.
36
<PAGE>
PRO FORMA FINANCIAL STATEMENTS
PRO FORMA COMBINED CONDENSED CONSOLIDATED STATEMENT OF CONDITION
The following unaudited Pro Forma Combined Condensed Consolidated Statement
of Condition combines the historical consolidated statements of condition of
ANB and PBC giving effect to the Merger, which will be accounted for as a
pooling-of-interests, as if it had been effective December 31, 1997, after
giving effect to the pro forma adjustments. For a description of pooling-of-
interests accounting treatment, see "THE MERGER--ACCOUNTING TREATMENT." This
financial data should be read in conjunction with the historical consolidated
financial statements, including the respective notes thereto, of PBC, which
are included herein as Appendix C, and of ANB, which are incorporated by
reference in this Proxy Statement. See "AVAILABLE INFORMATION" and
"INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE," and "APPENDIX C." This pro
forma financial information is not necessarily indicative of the actual
financial position that would have occurred had the Merger been consummated on
December 31, 1997, nor is it necessarily indicative of the future financial
position.
PRO FORMA COMBINED CONDENSED CONSOLIDATED STATEMENT OF CONDITION
AS OF DECEMBER 31, 1997 (UNAUDITED)
(IN THOUSANDS, EXCEPT RATIOS)
<TABLE>
<CAPTION>
HISTORICAL
------------------- PRO FORMA PRO FORMA
ANB PBC ADJUSTMENTS COMBINED
---------- ------- ---------------- ----------
<S> <C> <C> <C> <C> <C>
ASSETS
Cash and cash
equivalents.............. $ 44,829 $ 3,754 $ 48,583
Investments............... 214,012 8,894 222,906
Loans, net of allowance
for loan losses.......... 829,961 30,069 860,030
Premises and equipment.... 31,539 1,291 32,830
Intangibles, net.......... 8,726 -- 8,726
Other assets.............. 145,099 6,418 151,517
---------- ------- ------ ------ ----------
Total assets.......... $1,274,166 $50,426 $ -- $ -- $1,324,592
========== ======= ====== ====== ==========
LIABILITIES
Deposits.................. $ 928,970 $44,454 $ 973,424
Short-term borrowings..... 27,750 -- 27,750
Other liabilities......... 204,926 405 205,331
Long-term debt............ 14,587 -- -- -- 14,587
---------- ------- ------ ------ ----------
Total liabilities..... 1,176,233 44,859 -- -- 1,221,092
STOCKHOLDERS' EQUITY
Common stock.............. 8,648 23 23(1) 550(1) 9,198
Additional paid-in
capital.................. 61,551 4,217 4,217(1) 3,690(1) 65,241
Retained earnings......... 27,369 1,327 28,696
Unearned restricted
stock.................... (92) -- (92)
Unrealized gains (losses)
on investments available
for sale................. 457 -- -- -- 457
---------- ------- ------ ------ ----------
Total stockholders'
equity............... 97,933 5,567 4,240 4,240 103,500
---------- ------- ------ ------ ----------
Total liabilities and
stockholders'
equity............... $1,274,166 $50,426 $4,240 $4,240 $1,324,592
========== ======= ====== ====== ==========
Capital ratios:
Average equity to
average assets......... 8.10% 9.52% 8.16%
Leverage................ 7.58 11.00 7.72
Tier 1 risk-based
capital................ 9.38 12.40 9.52
Total risk-based
capital................ 10.63 13.40 10.77
</TABLE>
37
<PAGE>
- --------
(1) To record the issuance of approximately 550,000 shares of ANB Common Stock
in exchange for all of the outstanding common shares of PBC Common Stock.
For the purpose of these pro forma selected consolidated financial data,
it is assumed that 550,000 shares of ANB Common Stock will be issued in
consummating the Merger. The actual ANB Common Stock issued, as determined
by the Merger Agreement, may be as high as 575,000 shares. The Merger is
expected to be accounted for as a pooling-of-interests. See "THE MERGER--
TERMS OF THE MERGER."
<TABLE>
<CAPTION>
OUTSTANDING
SHARES
-----------
<S> <C> <C>
PBC outstanding shares........................... 2,337,309
Conversion ratio, as agreed upon................. 0.2353134
-----------
ANB shares to be issued.......................... 550,000
Par value of 550,000 shares issued at $1.00 per
share........................................... $ 550,000
Shares issued at par value....................... $ 550,000
Total capital stock of PBC....................... 4,239,957
-----------
Excess recorded as an increase to additional
paid-in capital................................. 3,689,957
-----------
4,239,957
To eliminate PBC capital stock:
Common stock at par value...................... (23,373)
Additional paid-in capital..................... (4,216,584)
-----------
(4,239,957)
-----------
Net change in equity......................... $ --
===========
</TABLE>
38
<PAGE>
PRO FORMA COMBINED CONDENSED CONSOLIDATED STATEMENTS OF INCOME
The following unaudited Pro Forma Combined Condensed Consolidated Statements
of Income present the combined consolidated statements of income of ANB and
PBC assuming the companies had been combined for each period presented on a
pooling-of-interests accounting basis, after giving effect to the pro forma
adjustments. For a description of pooling-of-interests accounting treatment,
see "THE MERGER--ACCOUNTING TREATMENT." This financial data should be read in
conjunction with the historical consolidated financial statements, including
the respective notes thereto, of ANB, which are incorporated by reference in
this Proxy Statement and PBC, included herein as Appendix C. See "AVAILABLE
INFORMATION," "INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE," and "APPENDIX
C." This pro forma financial information is not necessarily indicative of the
actual operating results that would have occurred had the Merger been
consummated as of the beginning of the periods presented, nor is it
necessarily indicative of future operating results.
PRO FORMA COMBINED CONDENSED CONSOLIDATED STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1997 (UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
HISTORICAL
-------------- PRO FORMA PRO FORMA
ANB PBC ADJUSTMENTS COMBINED
------- ------ --------------- ---------
<S> <C> <C> <C> <C> <C>
Interest income....................... $90,388 $3,588 $ -- $ -- $93,976
Interest expense...................... 42,840 1,161 -- -- 44,001
------- ------ ------- ------ -------
Net interest income................... 47,548 2,427 -- -- 49,975
Provision for loan losses............. 2,988 60 -- -- 3,048
Noninterest income.................... 18,039 790 -- -- 18,829
Noninterest expense................... 45,461 1,920 -- -- 47,381
------- ------ ------- ------ -------
Income before income taxes............ 17,138 1,237 -- -- 18,375
Provision for income taxes............ 5,458 394 -- -- 5,852
------- ------ ------- ------ -------
Income before minority interest in
earnings of consolidated subsidiary.. 11,680 843 -- -- 12,523
Minority interest in earnings of
consolidated subsidiary.............. 12 -- -- -- 12
------- ------ ------- ------ -------
Net income............................ $11,668 $ 843 $ -- $ -- $12,511
======= ====== ======= ====== =======
Earnings per common share--diluted.... $ 1.31 $ 0.36 $ 1.33
======= ====== =======
Average common shares outstanding--
diluted(1)........................... 8,884 2,337 ( 2,337) 550 9,434
======= ====== ======= ====== =======
</TABLE>
- --------
(1) The actual number of shares of ANB Common Stock issued in the Merger to
holders of PBC Common Stock, as determined by the Merger Agreement, may be
as high as 575,000 shares. The Merger is expected to be accounted for as a
pooling-of-interests. See "THE MERGER--TERMS OF THE MERGER."
39
<PAGE>
PRO FORMA COMBINED CONDENSED CONSOLIDATED STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1996 (UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
HISTORICAL
-------------- PRO FORMA PRO FORMA
ANB PBC ADJUSTMENTS COMBINED
------- ------ -------------- ---------
<S> <C> <C> <C> <C> <C>
Interest income........................ $83,180 $3,255 $ -- $ -- $86,435
Interest expense....................... 38,246 1,183 -- -- 39,429
------- ------ ------- ----- -------
Net interest income.................... 44,934 2,072 -- -- 47,006
Provision for loan losses.............. 885 60 -- -- 945
Noninterest income..................... 17,426 701 -- -- 18,127
Noninterest expense.................... 44,053 1,830 -- -- 45,883
------- ------ ------- ----- -------
Income before income taxes............. 17,422 883 -- -- 18,305
Provision for income taxes............. 5,281 203 -- -- 5,484
------- ------ ------- ----- -------
Income before minority interest in
earnings of consolidated subsidiary... 12,141 680 -- -- 12,821
Minority interest in earnings of
consolidated subsidiary............... 14 -- -- -- 14
------- ------ ------- ----- -------
Net income............................. $12,127 $ 680 $ -- $ -- $12,807
======= ====== ======= ===== =======
Earnings per common share--diluted..... $ 1.38 $ 0.29 $ 1.38
======= ====== =======
Average common shares outstanding--
diluted(1)............................ 8,756 2,312 (2,312) 544 9,300
======= ====== ======= ===== =======
</TABLE>
- --------
(1) The actual number of shares of ANB Common Stock issued in the Merger to
holders of PBC Common Stock, as determined by the Merger Agreement, may be
as high as 575,000 shares. The Merger is expected to be accounted for as a
pooling-of-interests. See "THE MERGER--TERMS OF THE MERGER."
40
<PAGE>
PRO FORMA COMBINED CONDENSED CONSOLIDATED STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1995 (UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
HISTORICAL
-------------- PRO FORMA PRO FORMA
ANB PBC ADJUSTMENTS COMBINED
------- ------ ------------- ---------
<S> <C> <C> <C> <C> <C>
Interest income......................... $53,067 $3,156 $ -- $-- $56,223
Interest expense........................ 26,555 1,217 -- -- 27,772
------- ------ ------- ---- -------
Net interest income..................... 26,512 1,939 -- -- 28,451
Provision for loan losses............... 1,016 125 -- -- 1,141
Noninterest income...................... 9,186 733 -- -- 9,919
Noninterest expense..................... 26,849 1,950 -- -- 28,799
------- ------ ------- ---- -------
Income before income taxes.............. 7,833 597 -- -- 8,430
Provision for income taxes.............. 901 50 -- -- 951
------- ------ ------- ---- -------
Income before minority interest in
earnings of consolidated subsidiary.... 6,932 547 -- -- 7,479
Minority interest in earnings of
consolidated subsidiary................ 650 -- -- -- 650
------- ------ ------- ---- -------
Net income.............................. $ 6,282 $ 547 $ -- $-- $ 6,829
======= ====== ======= ==== =======
Earnings per common share--diluted...... $ 1.10 $ 0.24 $ 1.09
======= ====== =======
Average common shares outstanding--
diluted(1)............................. 4,955 2,236 (2,236) 526 5,481
======= ====== ======= ==== =======
</TABLE>
- --------
(1) The actual number of shares of ANB Common Stock issued in the Merger to
holders of PBC Common Stock, as determined by the Merger Agreement, may be
as high as 575,000 shares. The Merger is expected to be accounted for as a
pooling-of-interests. See "THE MERGER--TERMS OF THE MERGER."
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DESCRIPTION OF ANB CAPITAL STOCK
GENERAL
The authorized capital stock of ANB currently consists of shares of ANB
Common Stock, par value $1.00 per share, and 100,000 shares of preferred
stock, par value $1.00 per share (the "ANB Preferred Stock"). The following is
a summary description of ANB's capital stock.
COMMON STOCK
Holders of shares of ANB Common Stock are entitled to receive such dividends
as may from time to time be declared by the ANB Board out of funds legally
available therefor. Holders of ANB Common Stock are entitled to one vote per
share on all matters on which the holders of ANB Common Stock are entitled to
vote and do not have cumulative voting rights. Holders of ANB Common Stock
have no preemptive, conversion, redemption or sinking fund rights. In the
event of a liquidation, dissolution or winding-up of ANB, holders of ANB
Common Stock are entitled to share equally and ratably in the assets of ANB,
if any, remaining after the payment of all debts and liabilities of ANB and
the liquidation preference of any outstanding Preferred Stock. The outstanding
shares of ANB Common Stock are, and the shares of ANB Common Stock offered by
ANB hereby when issued will be, fully paid and nonassessable. The rights,
preferences and privileges of holders of ANB Common Stock are subject to any
class or series of ANB Preferred Stock that ANB may issue in the future.
PREFERRED STOCK
The ANB Certificate of Incorporation, as amended (the "Certificate"),
provides that the Board of Directors is authorized without further action by
the holders of the ANB Common Stock to provide for the issuance of shares of
ANB Preferred Stock in one or more classes or series and to fix the
designations, powers, preferences and relative participating options and other
rights, qualifications, limitations and restrictions thereof, including the
dividend rate, conversion rights, voting rights, redemption price and
liquidation preference, and to fix the number of shares to be included in any
such class or services. Any share of ANB Preferred Stock so issued may rank
senior to the ANB Common Stock with respect to the payment of dividends or
amounts upon liquidation, dissolution, or winding-up, or both. In addition,
any such shares of ANB Preferred Stock may have class or series voting rights.
Upon completion of this Merger, ANB will not have any shares of ANB Preferred
Stock outstanding. Issuances of ANB Preferred Stock, while providing ANB with
flexibility in connection with general corporate purposes, may, among other
things, have an adverse effect on the rights of holders of ANB Common Stock,
and in certain circumstances such issuances could have the effect of
decreasing the market price of the ANB Common Stock. The ANB Board, without
stockholder approval, may issue ANB Preferred Stock with voting or conversion
rights which could adversely affect the voting power of the holders of the ANB
Common Stock. ANB has no present plan to issue any shares of ANB Preferred
Stock.
CERTAIN ANTI-TAKEOVER EFFECTS
The provisions of the ANB Certificate, the ANB Bylaws and the DGCL
summarized in the following paragraphs may be deemed to have anti-takeover
effects and may delay, defer or prevent a tender offer or takeover attempt
that a stockholder might consider to be in such stockholder's best interest,
including those attempts that might result in a premium over the market price
for the shares held by stockholders and may make removal of management more
difficult.
Authorized but Unissued Stock
The authorized but unissued shares of ANB Common Stock and ANB Preferred
Stock will be available for future issuance without stockholder approval.
These additional shares may be utilized for a variety of corporate purposes
including future public offerings to raise additional capital, corporate
acquisitions and employee benefit plans. The existence of authorized but
unissued and unreserved ANB Common Stock and ANB Preferred Stock may enable
the Board of Directors to issue shares to persons friendly to current
management which could render more difficult or discourage any attempt to
obtain control of ANB by means of a proxy contest, tender offer, merger or
otherwise, and thereby protect the continuity of ANB's management.
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Limitations on Shareholder Action by Written Consent and Limitations on
Calling Shareholder Meetings.
The ANB Certificate of Incorporation and ANB Bylaws prohibit stockholder
action by written consent in lieu of a meeting and provide that stockholder
action can be taken only at an annual or special meeting of stockholders. The
ANB Bylaws provide that subject to the rights of holders of any series of ANB
Preferred Stock to elect additional directors under specified circumstances,
special meetings of stockholders can be called only by the ANB Board or the
Chairman of the ANB Board. Shareholders will not be permitted to call a
special meeting of stockholders. Such provision may have the effect of
delaying consideration of a stockholder proposal until the next annual meeting
unless a special meeting is called by the ANB Board or the Chairman of the ANB
Board.
Section 203 of the Delaware Corporation Law
Subject to certain exclusions summarized below, Section 203 of the DGCL
("Section 203") prohibits any "Interested stockholder" from engaging in a
"Business Combination" with a Delaware corporation for three years following
the date such person became an Interested stockholder. "Interested
stockholder" generally includes: (a)(i) any person who is the beneficial owner
of 15% or more of the outstanding voting stock of the corporation or (ii) any
person who is an affiliate or associate of the corporation and who was the
beneficial owner of 15% or more of the outstanding voting stock of the
corporation at any time within three years before the date on which such
person's status as an Interested stockholder is determined; and (b) the
affiliates and associates of such person. Subject to certain exceptions, a
"Business Combination" includes (i) any merger or consolidation of the
corporation or a majority-owned subsidiary of the corporation; (ii) the sale,
lease, exchange, mortgage, pledge, transfer or other disposition of assets of
the corporation or a majority-owned subsidiary of the corporation having an
aggregate market value equal to 10% of more of either the aggregate market
value of all assets of the corporation determined on a consolidated basis or
the aggregate market value of all the outstanding stock of the corporation;
(iii) any transaction that results in the issuance or transfer by the
corporation or a majority-owned subsidiary of the corporation of any stock of
the corporation or the subsidiary to the Interested stockholder except
pursuant to a transaction that effects a pro rata distribution to all
stockholders of the corporation; (iv) any transaction involving the
corporation or a majority-owned subsidiary of the corporation that has the
effect of increasing the proportionate share of the stock of any class or
series or securities convertible into the stock of any class or series of the
corporation or the subsidiary that is owned by the Interested stockholder; and
(v) any receipt by the Interested stockholder of the benefit (except
proportionately as a stockholder) of any loans, advances, guarantees, pledges
or other financial benefits provided by or through the corporation or a
majority-owned subsidiary of the corporation.
Section 203 does not apply to a Business Combination if (i) before a person
became an Interested stockholder, the board of directors of the corporation
approved either the transaction in which the Interested stockholder became an
Interested stockholder or the Business Combination; (ii) upon consummation of
the transaction that resulted in the person becoming an Interested
stockholder, the Interested stockholder owned at least 85% of the voting stock
of the corporation outstanding at the time the transaction commenced (other
than certain excluded shares); or (iii) following a transaction in which the
person became an Interested stockholder the Business Combination is (a)
approved by the board of directors of the corporation and (b) authorized at a
regular or special meeting of stockholders (and not by written consent) by the
affirmative vote of the holders of at least two-thirds of the outstanding
voting stock of the corporation not owned by the Interested stockholder.
EFFECT OF MERGER ON RIGHTS OF SHAREHOLDERS
As a result of the Merger, holders of PBC Common Stock will be exchanging
shares of PBC, a Florida corporation governed by the FBCA, PBC's Restated
Articles of Incorporation ("PBC's Articles"), and PBC's Bylaws, for shares of
ANB, a Delaware corporation governed by the DGCL and ANB's Certificate and
ANB's Bylaws. Certain significant differences exist between the rights of PBC
shareholders and those of ANB shareholders. The differences deemed material by
PBC and ANB are summarized below. The following discussion is necessarily
general; it is not intended to be a complete statement of all differences
affecting the
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rights of shareholders and their respective entities, and it is qualified in
its entirety by reference to the FBCA and the DGCL, as well as to ANB's
Certificate and Bylaws and PBC's Articles and Bylaws.
CHARTER AND BYLAW PROVISIONS
ANB's Certificate and Bylaws contain certain provisions which may make ANB a
less attractive target for an acquisition of control by anyone who does not
have the support of ANB's Board of Directors and shareholders. Such provisions
include, among other things, (a) the limitation that shareholder action cannot
be taken without a meeting and (b) the ability of the ANB Board of Directors
to issue preferred stock and to fix the designation, preferences and other
rights of such preferred stock. See "DESCRIPTION OF ANB COMMON STOCK."
PBC's Articles and Bylaws prohibit a number of actions affecting the capital
stock of PBC unless the majority of the Preferred Shares approve such actions.
Such actions include the payment of cash or stock dividends on the Common
Stock, stock splits or reverse splits, issuance of capital stock, change of
the par value of the Common Stock or Preferred Stock, the participation in a
reclassification or consolidation with or merger into any other corporation,
or the transfer of all of PBC's properties or assets to any person, the
issuance of debentures or debts senior to the Preferred Stock, the issuance of
designation of any other shares of a different class of Preferred Stock, the
sale, loan or other encumbrance of the shares of Public Bank, the adoption of
any preemptive rights or cumulative voting, or the liquidation or dissolution
of PBC or Public Bank. The Articles of PBC do not provide for preemptive
rights or cumulative voting. There are currently no preferred shares of PBC
issued and outstanding.
The foregoing summary is qualified in its entirety by reference to ANB's
Certificate and Bylaws, which are available upon written request from ANB and
which are on file with the Commission, and to the Restated Articles of
Incorporation and Bylaws of PBC, which are available upon request from PBC.
See "AVAILABLE INFORMATION" and "INCORPORATION OF CERTAIN DOCUMENTS BY
REFERENCE".
SHAREHOLDER APPROVAL OF MERGERS
Both the FBCA and the DGCL permit a merger to become effective without the
approval of the surviving corporation's shareholders if the articles of
incorporation of the surviving corporation do not change following the merger,
the amount of the surviving corporation's common stock to be issued or
delivered under the plan of merger does not exceed 20% of the total shares of
outstanding voting stock immediately prior to the acquisition, and the board
of directors of the surviving corporation adopts a resolution approving the
plan of merger.
Where shareholder approval is required under either the FBCA or the DGCL, a
merger can generally be approved by a majority vote of the outstanding shares
of capital stock of each class entitled to vote thereon. If the proposed
merger or other business combination were to involve an "Interested Person" or
"Affiliated Transaction," however, both the FBCA and the DGCL impose
supermajority approval requirements with certain qualifications. The ANB
Certificate does not contain any supermajority requirements. See "EFFECT OF
MERGER ON RIGHTS OF SHAREHOLDERS --ANTITAKEOVER LEGISLATION."
DISSENTERS' RIGHTS
Under the FBCA, a shareholder is entitled to dissent and obtain payment of
the fair value of his shares in the event of, among other things, (a)
consummation of a plan of merger to which the corporation is a party, if
either (i) shareholder approval is required and the shareholder is entitled to
vote on the merger or (ii) the corporation is a subsidiary that is owned 80%
by and is merged into its parent; (b) consummation of a plan of share exchange
to which the corporation is a party as the corporation whose shares will be
acquired, if the shareholder is entitled to vote on the plan; (c) consummation
of a sale or exchange of substantially all of the property of the corporation
other than in the usual and regular course of the business if shareholder
approval is required; (d) an amendment to the Articles of Incorporation that
materially and adversely affects rights in respect of the dissenter's shares
in specified ways; (e) in the event of a control share acquisition as
discussed in Section 607.0902 of the FBCA; or (f) any corporate action taken
pursuant to a shareholder vote to the extent that the Articles of
Incorporation provide that dissenters' rights shall apply. See "THE MERGER--
DISSENTERS' RIGHTS."
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<PAGE>
Under the DGCL, a shareholder has the right, in connection with certain
mergers or consolidations, to dissent from certain corporate transactions and
receive the fair market value (excluding any appreciation or depreciation as a
consequence or in expectation of the transaction) of his shares in cash in
lieu of the consideration he otherwise would have received in the transaction.
Such fair value is determined by the Delaware Court of Chancery if a petition
for appraisal is timely filed. In addition, a Delaware corporation may, but is
not required to, provide in its certificate of incorporation that appraisal
rights shall be available to shareholders in certain other events regarding
which appraisal rights are not otherwise available. No such provision is
included in ANB's Certificate.
Under the DGCL, appraisal rights will not be available to shareholders of a
corporation (unless the certificate of incorporation provides otherwise, which
the ANB Certificate does not) if the shares are listed on a national
securities exchange or quoted on the NASDAQ National Market or held of record
by more than 2,000 shareholders and shareholders are permitted by the terms of
the merger or consolidation to accept in exchange for their shares: (a) shares
of stock of the surviving or resulting corporation; (b) shares of stock of
another corporation listed on a national securities exchange or held of record
by more than 2,000 shareholders; (c) cash in lieu of fractional shares of such
stock; or (d) any combination of the consideration listed in (a) through (c)
above. In addition, appraisal rights will not be available to shareholders of
a Delaware corporation in a merger if such corporation is the surviving
corporation and no vote of its shareholders is required. See "COMPARISON OF
RIGHTS OF SHAREHOLDERS OF ANB AND PBC--SHAREHOLDER APPROVAL OF MERGERS."
SHAREHOLDERS MEETINGS AND VOTING
Special Meetings. Under the FBCA, a special meeting of shareholders of a
Florida corporation may be called by the holders of shares entitled to cast
not less than 10% of all shares entitled to vote at the meeting, unless a
different percentage, not to exceed 50%, is provided in the articles of
incorporation. PBC's Bylaws provide that special meetings of shareholders may
be called only by the President, Board of Directors or at the request of
holders of not less than 10% of its outstanding stock entitled to vote at the
meeting.
Under the DGCL, shareholders of Delaware corporations do not have a right to
call special meetings unless such right is conferred upon the shareholders in
the corporation's certificate of incorporation or bylaws. ANB's Certificate
does not confer the right to its shareholders to call a special shareholders
meeting.
Actions Without a Meeting. Under the FBCA and the DGCL, the shareholders may
take action without a meeting if a consent in writing to such action is signed
by the shareholders having the minimum number of votes that would be necessary
to take such action at a meeting, unless prohibited in the articles or
certificate of incorporation. PBC's Articles and Bylaws do not prohibit such
action by written consent. ANB's Certificate denies shareholder action by
written consent.
Election and Removal of Directors. Under the FBCA and the DGCL, the
directors of a corporation shall be elected by a plurality of the votes cast
by the holders of shares entitled to vote in the election of directors at a
meeting of shareholders at which a quorum is present, unless the articles or
certificate of incorporation provides for cumulative voting. Cumulative voting
means that a shareholder may multiply the number of votes he or she is
entitled to cast (i.e., the number of shares he or she owns) by the number of
directors for whom he or she is entitled to vote and cast the product for a
single candidate or distribute the product among two or more candidates.
Neither PBC's Articles nor ANB's Certificate provide for cumulative voting.
See "DESCRIPTION OF ANB COMMON STOCK," and "EFFECT OF MERGER ON RIGHTS OF
SHAREHOLDERS--PBC COMMON AND PREFERRED STOCK."
Under the FBCA, and if cumulative voting is not authorized, as in the case
of PBC, once a director has been elected, he or she may be removed if the
number of votes cast to remove him is greater than the number of votes cast
not to remove him, unless the articles of incorporation provide that directors
may be removed only for cause. PBC's Articles do not contain such a provision.
Under the DGCL, unless the certificate of incorporation provides otherwise, in
the case of a corporation whose board of directors is staggered shareholders
may effect a removal of a director only for cause. ANB's Certificate does not
provide for a classified or staggered Board.
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Voting on Other Matters. Under the FBCA and the DGCL, an amendment to the
articles or certificate of incorporation requires the approval of the holders
of at least a majority of the outstanding shares of the corporation entitled
to vote thereon, unless otherwise specified in the articles of incorporation.
Neither of ANB's Certificate nor PBC's Articles contains a provision
increasing this voting requirement.
Under both the FBCA and the DGCL, a corporation may sell, lease, exchange or
otherwise dispose of all, or substantially all, of its property and assets
(with or without the goodwill), otherwise than in the usual and regular course
of its business, only with the approval of the holders of a majority of all of
the outstanding shares of the corporation entitled to vote thereon, unless the
articles of incorporation require a greater vote. PBC's Articles require a
greater vote inasmuch as they require a majority vote of the Preferred Shares.
ANB's Certificate does not require a greater vote.
Under both the FBCA and the DGCL, the dissolution of a corporation must be
approved by the holders of a majority of the corporation's stock entitled to
vote thereon, unless the articles or certificate of incorporation requires the
vote of a larger portion of the outstanding stock. PBC's Articles require
approval of a majority of the Preferred Shares before dissolution. ANB's
Certificate does not require a greater vote.
DIVIDENDS
The FBCA provides that a corporation may declare and pay a dividend to its
shareholders to the extent the corporation's total assets exceed the sum of
its total liabilities plus the amount that would be needed, in the case of
dissolution, to satisfy the preferential rights of shareholders whose
preferential rights are superior to those receiving the dividend (a surplus),
unless the corporation would not be able to pay its debts as they become due
in the usual course of business. In addition to these limitations, there are
various statutory limitations on the ability of Public Bank to pay dividends
to PBC, which is the primary source of funds from which PBC may declare
dividends to the PBC shareholders.
The DGCL provides that dividends may be declared from the corporation's
surplus or, if there is no surplus, from its net profits (not only out of
surplus) 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. In addition,
substantially all of the funds available for the payment of dividends by ANB
are derived from the Banks, and there are various statutory limitations on the
ability of the Banks to pay dividends to ANB. See "INCORPORATION OF CERTAIN
DOCUMENTS BY REFERENCE."
Holders of ANB Common Stock are entitled to receive dividends ratably when,
as and if declared by ANB's Board of Directors from assets legally available
therefor, after payment of all dividends on preferred stock, if any is
outstanding.
PREEMPTIVE RIGHTS
Under both the FBCA and the DGCL, shareholders do not possess preemptive
rights as to the issuance of additional or treasury securities by the
corporation, unless the corporation's articles of incorporation provide
otherwise. Neither PBC's Articles nor the ANB Certificate provide for
preemptive rights.
LIQUIDATION RIGHTS
Generally under both the FBCA and the DGCL, shareholders are entitled to
share ratably in the distribution of assets upon the dissolution of their
corporation. Preferred shareholders typically do not participate in the
distribution of assets of a dissolved corporation beyond their established
contractual preferences. Once the rights of preferred shareholders have been
fully satisfied, common shareholders are entitled to the distribution of any
remaining assets.
Upon liquidation, dissolution or the winding up of the affairs of PBC,
holders of PBC Preferred Stock shall be entitled to the par value of their
shares plus any accrued but unpaid dividends before any distributions or
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payments are made to any of the Common Stock. After such Preferred Shares
receive in full any accrued but unpaid dividends and the full par value of the
Shares, they shall not share in any other distributions with the Common Stock.
Holders of ANB Common Stock are entitled to receive their pro rata portion of
the remaining assets of ANB after the holders of ANB Preferred Stock, if any,
have been paid in full any sums to which they may be entitled. As of the date
hereof, no ANB Preferred Stock has been issued by ANB. Pursuant to ANB's
Certificate, the ANB Board has discretion to set liquidation preferences for
ANB's Preferred Stock. PBC Preferred Stock has a liquidation value of $100.00
per share, plus accrued and unpaid dividends. At this time there are no issued
and outstanding shares of PBC Preferred Stock.
LIMITATION OF LIABILITY AND INDEMNIFICATION
PBC. The PBC Articles do not provide for any indemnification to PBC
officers, directors or employees, as permitted by the FBCA. The Bylaws of PBC
do provide for indemnification or reimbursement by PBC of any person for any
reasonable expenses actually incurred in connection with any action, suit or
proceeding, civil or criminal, to which he or she or shall be made a part by
reason of, among other things, his or her being or having been a director,
officer, or employee of PBC; provided, however, that no such reimbursement
shall occur if the person is adjudged guilty or liable of gross negligence,
willful misconduct or criminal act in the performance of his or her duties to
the corporation. In any event, it is mandatory for a Florida corporation to
indemnify a director, officer, employee or agent against expenses actually and
reasonably incurred in successfully defending an action, provided the person
acted in good faith and in a manner reasonably believed to be in, or not
opposed to, the best interests of the corporation.
ANB. Delaware law permits a corporation to set limits on the extent of a
director's liability. Under the ANB Certificate, a director will not be liable
to ANB or its shareholders for monetary damages for any breach of fiduciary
duty as a director, except for (a) breach of a director's duty of loyalty, (b)
acts or omissions not in good faith or which involve intentional misconduct or
a knowing violation of law, (c) an unlawful payment of dividends or an
unlawful stock purchase or redemption, or (d) any transaction from which the
director derived any improper personal benefit. The ANB Certificate authorizes
the indemnification of ANB's directors, officers and others to the fullest
extent permitted by law. Delaware law permits a corporation to indemnify its
officers, directors, employees and agents if such person acted in good faith
and in a manner he reasonably believed to be in or not opposed to the best
interests of the corporation. Indemnification is not allowed under Delaware
law, absent a court order to the contrary, if the officer, director, employee
or agent seeking indemnification has been finally adjudged to be liable to the
corporation.
ANTITAKEOVER LEGISLATION
Affiliated Transactions and Certain Business Combinations. The FBCA requires
that any "affiliated transaction," which term includes a merger, sale of
significant assets of the corporation and similar extraordinary corporate
transactions, between the corporation and an interested shareholder (generally
defined as any person who is the beneficial owner of more than 10% of the
outstanding voting shares of the corporation) be approved by the affirmative
vote of the holders of two-thirds of the voting shares of the corporation
other than the shares beneficially owned by the interested shareholder. The
voting requirements of the FBCA will not apply, however, to an affiliated
transaction if: (a) the affiliated transaction has been approved by a majority
of the corporation's disinterested directors; (b) the corporation has not had
more than 300 shareholders at any time during the preceding three years; (c)
the interested shareholder has been the beneficial owner of at least 80% of
the corporation's outstanding voting shares for at least five years; (d) the
interested shareholder is the beneficial owner of at least 90% of the
outstanding voting shares of the corporation; or (e) certain fair price
requirements have been met. The statute also provides that the restrictions
contained therein shall not apply to any corporation whose articles of
incorporation or bylaws contain a provision expressly electing not to be
governed thereby. The PBC Articles do not contain such a provision.
The DGCL similarly prohibits a corporation from entering into certain
"business combinations" between the corporation and an "interested
stockholder" (generally defined as any person who is the beneficial owner of
more than 15% of the outstanding voting shares of the corporation), unless the
corporation's Board of Directors has previously approved either (a) the
business combination in question or (b) the stock acquisition by which
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such interested stockholder's beneficial ownership interest reached 15%. The
prohibition lasts for three years from the date the interested stockholder's
beneficial ownership reached 15%. Notwithstanding the preceding, the DGCL
allows a corporation to enter into a business combination with an interested
stockholder if: (a) the business combination is approved by the corporation's
Board of Directors and is authorized by an affirmative vote of at least two-
thirds of the outstanding voting stock of the corporation which is not owned
by the interested stockholder; or (b) such interested stockholder owned at
least 85% of the outstanding voting stock of the corporation. The statute also
provides that the restrictions contained therein shall not apply to any
corporation whose certificate of incorporation contains a provision expressly
electing not to be governed thereby. The ANB Certificate does not contain such
a provision.
Control Share Regulation. Unless the articles of incorporation or bylaws
provide otherwise, the FBCA restricts the voting rights of a person who
acquires "control shares" in an "issuing public corporation." "Control shares"
are defined under the FBCA as those shares that, when added to all other
shares of the issuing public corporation owned by a person or in respect to
which that person may exercise or direct the exercise of voting power, would
entitle that person to exercise the voting power of the corporation in the
election of directors within any of the following ranges of voting power: (a)
one-fifth or more but less than one-third of all voting power; (b) one-third
or more but less than a majority of all voting power; or (c) a majority or
more of all voting power. An "issuing public corporation" is a corporation
that has: (a) 100 or more shareholders; (b) its principal place of business,
its principal office or substantial assets within Florida; and (c) either (i)
more than 10% of its shareholders reside in Florida, (ii) more than 10% of its
shares are owned by Florida residents, or (iii) 1,000 shareholders reside in
Florida. The bylaws of PBC opt out of the application of the "control share"
sections of the FBCA and, since ANB will acquire 100% of the PBC Common Stock
pursuant to the Merger Agreement, Florida's "control share" anti-takeover
statute would not in any event apply to the transaction contemplated thereby.
The effect of this statute is discussed below only to illustrate the
differences between Delaware and Florida law.
If a control share acquisition has been made, the control shares have no
voting rights unless the holders of a majority of shares (other than those
held by the acquirer and the corporation's officers and employee-directors)
grant voting rights to those shares by resolution. Any person who proposes to
make or has made a control share acquisition (an "Acquiror") may, at his or
her election, deliver an acquiring person statement to the issuing public
corporation setting forth certain information concerning the Acquiror and the
acquisition of his shares, together with a request for a shareholders meeting
to determine his voting rights, which meeting must be held within 50 days of
the date of the request. The Acquiror must pay the expenses of the
shareholders meeting.
If an Acquiror acquires a majority of the outstanding shares of the
corporation and is granted full voting rights pursuant to the procedure
outlined above, the other shareholders of the corporation have dissenters'
rights to require the corporation to purchase their shares for a "fair value."
The term "fair value" is defined as a value not less than the highest price
paid per share by the acquirer in the control share acquisition.
The DGCL does not contain a similar "control share" provision.
Although certain of the specific differences between the voting and other
rights of PBC's shareholders and ANB's shareholders are discussed above, the
foregoing summary is not intended to be a complete statement of the
comparative rights of such shareholders under Florida and Delaware law, or the
rights of such persons under the respective charters and Bylaws of ANB and
PBC. Nor is the identification of certain specific differences meant to
indicate that other differences do not exist. The foregoing summary is
qualified in its entirety by reference to the particular requirements of the
FBCA and the DGCL and the specific provisions of ANB's Certificate and Bylaws
and PBC's Articles of Incorporation and Bylaws.
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CERTAIN INFORMATION CONCERNING ANB
GENERAL
ANB is a registered bank holding company subject to supervision and
regulation by the Federal Reserve and is a corporation organized under the
laws of the State of Delaware. Its main office is located at 1927 First Avenue
North, Birmingham, Alabama 35203 (Telephone Number: (205) 583-3600). ANB is
currently the parent of three national banks, National Bank of Commerce of
Birmingham (Birmingham, Alabama and the Birmingham metropolitan area), First
Citizens Bank, National Association (Talladega, Alabama) and Citizens &
Peoples Bank, National Association (Cantonment, Florida); three state member
banks, Alabama Exchange Bank (Tuskegee, Alabama), Bank of Dadeville
(Dadeville, Alabama) and First Gulf Bank (Baldwin County, Alabama); and one
state nonmember bank, First American Bank (Decatur, Alabama) (collectively the
"Banks"). In addition, ANB is the ultimate parent entity of one securities
brokerage firm, NBC Securities, Inc. (Birmingham, Alabama); one receivables
factoring company, Corporate Billing, Inc. (Decatur, Alabama); and one
insurance agency, Ashland Insurance, Inc. (Ashland, Alabama).
At December 31, 1997, ANB had total assets of approximately $1.27 billion,
total deposits of approximately $929.0 million, total net loans of
approximately $842.8 million and total shareholders' equity of approximately
$97.9 million. Additional information about ANB is included in documents
incorporated by reference in this Proxy Statement. See "SUMMARY--SELECTED
CONSOLIDATED FINANCIAL DATA", "AVAILABLE INFORMATION" and "INCORPORATION OF
CERTAIN DOCUMENTS BY REFERENCE."
CERTAIN INFORMATION CONCERNING PBC
DESCRIPTION OF BUSINESS
General. PBC is a one-bank holding company incorporated under the laws of
the State of Florida in September 1984 and registered under the Bank Holding
Company Act of 1956, as amended (the "BHC Act"), on October 15, 1984. PBC's
principal assets are all of the issued and outstanding shares of capital stock
of Public Bank. In addition, to Public Bank, PBC's other assets are cash and
Public Mortgage Corporation, an inactive mortgage company subsidiary which had
no assets or liabilities at December 31, 1997.
Public Bank was formed as a Florida state-chartered bank in 1981. Public
Bank has two banking locations in Osceola County, Florida. PBC acquired Public
Bank in a holding company conversion, through a three for one exchange of PBC
shares for Public Bank shares, effective January 1, 1986.
The principal executive offices of PBC and Public Bank are located at 2500
13th Street, St. Cloud, Florida, 34769-4112, and the telephone number is (407)
892-7137. In addition to its principal office, Public Bank operates a branch
bank in Kissimmee, Florida.
Banking Services. Public Bank conducts substantially the same business
operations as a typical independent commercial bank. Public Bank offers a wide
range of consumer and commercial banking services traditionally offered by
commercial banks, such as personal and commercial checking accounts, regular
negotiable order of withdrawal ("NOW") accounts, certificates of deposit,
money market accounts, savings accounts, IRA accounts, money orders,
traveler's cheques, safe deposit boxes and wire transfers. These depository
services are further complemented by direct deposit programs, night depository
services and banking by mail. Public Bank also originates a variety of loans,
including, but not limited to, commercial and consumer loans, and loans
secured by deposit accounts and other marketable collateral. All accounting
and statement processing is handled by Public Bank's internal proof and
bookkeeping departments using its computer systems. In addition, Public Bank
makes extensive use of computer terminals in its teller and lobby locations
that permit efficient handling and tracking of new accounts, loans and other
paper intensive services and provides every employee of Public Bank a complete
customer profile at all times.
49
<PAGE>
Market Area. The St. Cloud/Kissimmee communities are located in Osceola
County, Florida, which is located in the central part of the State of Florida.
The University of Florida's 1996 population estimate for Osceola County,
reprinted in the 1997 edition of the Florida Statistical Abstracts, sets the
residential population of Osceola County at approximately 139,700. Public Bank
estimates that a majority of its customers reside or do business in Osceola
County.
Operating Strategy. The principal business of Public Bank is to attract
deposits from the general public and to invest those funds in various types of
loans and other interest-earning assets, primarily short and intermediate-term
government securities. Funds for the operations of Public Bank are provided
through proceeds from the sale of investments and loans, from amortization and
repayment of outstanding loans, and from interest, fees earned and borrowings.
Earnings of Public Bank depend primarily upon the difference between (1) the
interest and fees received by the bank from loans, banking services and
miscellaneous banking transactions, the securities held in its investment
portfolio and other investments and (2) expenses incurred by Public Bank in
connection with obtaining funds for lending (including interest paid on
deposits and other borrowings) and expenses relating to day-to-day operations.
To the extent market conditions permit, Public Bank follows a strategy
intended to insulate the bank's interest rate gap from adverse changes in
interest rates by maintaining spreads through its ability to adjust its
interest-earning assets and interest-bearing liabilities. It is Public Bank's
intention that its interest-earning assets have a high degree of sensitivity
to interest rate changes. See "-- MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF PBC." Public Bank's ability
to reduce interest rate risk in its loan and investment portfolios will depend
upon a number of factors, many of which are beyond its control, including,
among others, competition for loans and deposits in its market area and
conditions prevailing in the secondary market.
The primary sources of Public Bank's funds for lending and for other general
business purposes are the bank's capital, deposits, loan repayments and
borrowings. Public Bank expects that loan repayments will be relatively stable
sources of funds, while deposit inflows and outflows will be influenced by
prevailing interest rates, money market and general economic conditions.
Generally, short-term borrowings may be used to compensate for reductions in
normal sources of funds while longer-term borrowings may be used to support
expanded lending activities.
Public Bank's customers are primarily individuals, professional firms, and
small- and medium-size businesses located in the bank's primary market area.
Public Bank continually seeks to develop new business through an ongoing
program of personal calls on both present and potential customers. As a local
independent bank, Public Bank utilizes traditional local advertising media as
well as direct mailings, telephone contacts, and brochures to promote the bank
and develop loans and deposits. In addition, a majority of the directors of
Public Bank have worked and/or lived in or near the bank's market area for a
number of years. Public Bank believes that this factor, coupled with the past
and continued involvement of the directors, officers and employees in various
local community activities will further promote the bank's image as a
financial institution.
Competition. The banking industry in general, and Public Bank's market area
in particular, is characterized by significant competition for both deposits
and lending opportunities. In its market area, Public Bank competes with other
commercial banks, savings and loan associations, credit unions, finance
companies, mutual funds, insurance companies, brokerage and investment banking
firms and various other nonbank competitors. Competition for deposits may have
the effect of increasing the rates of interest Public Bank will pay on
deposits, which would increase the bank's cost of money and possibly reduce
its net income. Competition for loans may have the effect of lowering the rate
of interest Public Bank will receive on its loans, which would lower the
bank's return on invested assets and possibly reduce its net income. Many of
Public Bank's competitors have been in existence for a significantly longer
period of time than Public Bank, and are larger and have greater financial and
other resources and lending limits than Public Bank and may offer certain
services, such as trust powers, that the bank does not provide at this time.
The profitability of Public Bank depends upon its ability to compete in its
market area. At the present time, Public Bank is unable to predict the extent
to which competition may adversely affect its financial condition and
operating results.
50
<PAGE>
In order to compete with major financial institutions and others in Public
Bank's market area, the bank emphasizes specialized services, local
promotional activity and personal contacts by its officers, directors and
employees. Public Bank believes that its community-oriented operating
philosophy and personalized banking services are competitive factors in which
it has strength.
Supervision and Regulation. PBC and Public Bank are subject to a number of
statutes and regulations affecting financial institutions. These laws and
regulations are intended to protect depositors, not stockholders. As a bank
holding company, PBC is subject to, among other things, the Bank Holding
Company Act of 1956, as amended (the "BHCA"), regulation by the Board of
Governors of the Federal Reserve System (the "Federal Reserve"), the
requirements of the Federal Deposit Insurance Corporation Improvement Act of
1991 ("FDICIA") and the provisions of the Financial Institution Reform,
Recovery and Enforcement Act of 1989 ("FIRREA").
The Federal Reserve requires PBC to file annual reports and provide the
Federal Reserve with such other information and reports as the Federal Reserve
may request from time to time. The Federal Reserve is also authorized to
conduct examinations of PBC and its subsidiaries, including Public Bank. Under
the BHCA, prior approval of the Federal Reserve is required for the merger or
consolidation with another bank holding company. PBC, except as noted below,
is also prohibited from engaging directly or indirectly in activities other
than those of banking, managing or controlling banks or furnishing services to
its subsidiaries. PBC may, however, with Federal Reserve approval, engage in,
and may own shares of companies engaged in, certain activities found by the
Federal Reserve to be "so closely related to banking or managing or
controlling banks as to be a proper incident thereto. Under Federal Reserve
policy, bank holding companies are expected to act as a source of financial
strength to, and to commit resources to support, their subsidiary banks. This
support may be required at times when absent such Federal Reserve policy, the
holding company may not be inclined to provide it. In addition, any capital
loans by a bank holding company to any bank subsidiary are subordinate in
right of payment to deposits and to certain other indebtedness of such
subsidiary bank. In the event of a bank holding company's bankruptcy, any
commitment by the bank holding company to a federal bank regulatory agency to
maintain the capital of a subsidiary bank will be assumed by the bankruptcy
trustee and entitled to a priority payment.
FDICIA establishes several requirements and restrictions applicable to
insured banks that are deemed to be "undercapitalized" and to bank holding
companies that control undercapitalized banks. Among these provisions are
restrictions on capital distributions, including dividend payments,
restrictions on asset growth, the establishment of branch offices and merger
and acquisition transactions, as well as provisions requiring bank holding
companies to guarantee the capital adequacy of certain subsidiary banks and
the divestiture of both bank and nonbank subsidiaries by bank holding
companies in certain circumstances.
FIRREA generally allows bank holding companies to acquire healthy savings
and loan associations as well as failed or failing savings and loan
associations. However, FIRREA also provides for a cross guarantee which may
require a multi-bank holding company to indemnify the Federal Deposit
Insurance fund against losses it incurs with respect to such company's
affiliated banks, effectively making a bank holding company's equity
investment in healthy bank subsidiaries available to the FDIC to assist the
company's failing or failed bank subsidiaries. FIRREA also grants regulatory
agencies the ability to levy expanded civil and criminal penalties against
certain "institution-affiliated parties" who cause or are likely to cause
material financial loss to or a significant adverse effect on a regulated
institution or who knowingly or recklessly violate a law or regulation, breach
a fiduciary duty or engage in an unsafe or unsound practice. Institution-
affiliated parties are defined to include management, employees, and agents of
a financial institution, independent contractors such as attorneys and
accountants and others who participate in the conduct of the financial
institution's affairs. These practices
51
<PAGE>
can include the failure of an institution to timely file required reports, the
filing of false or misleading information, or the submission of inaccurate
reports. Civil penalties may be as high as $1 million a day for such
violations. Criminal penalties for some financial institution crimes have been
increased to 20 years. In addition, regulators are provided with greater
flexibility to commence enforcement actions against institutions and
institution-affiliated parties. Possible enforcement actions include the
termination of deposit insurance. Further, FIRREA expands the appropriate
banking agencies' power to issue cease and desist orders that may, among other
things, require affirmative action to correct any harm resulting from a
violation or practice, including restitution, reimbursement, indemnification
or guarantees against loss. A financial institution may also be ordered to
restrict its growth, dispose of certain assets, rescind agreements or
contracts, or take other actions as determined by the ordering agency to be
appropriate.
PBC is also restricted in its activities by the provisions of the Glass-
Steagall Act, which prohibits PBC from engaging as principal in the issue,
flotation, underwriting, public sale, or distribution of securities. The
interpretations, scope and application of the provisions of the Glass-Steagall
Act currently are being considered and reviewed by regulators and legislators
and the interpretation and application of certain of those provisions have
been challenged in the federal courts.
In addition to the foregoing federal laws, the provisions of the Florida
Business Corporation Act apply to PBC.
Since Public Bank is organized as a Florida-chartered commercial bank, its
operations are primarily subject to supervision and regulation by the State of
Florida and as a non-member bank, the FDIC. Florida and federal regulations
include requirements for the maintenance of reserves against deposits, as well
as restrictions relating to loans, investments, payment of dividends,
branching and other activities. Accordingly, the Department and the FDIC
conduct regular examinations of Public Bank, reviewing the adequacy of the
loan loss reserves, quality of loans and investments, liquidity, propriety of
management practices, compliance with laws and regulations, and other aspects
of Public Bank's operations. In addition to these regular examinations, Public
Bank must furnish to the FDIC quarterly reports containing detailed financial
statements and schedules. Under FDIC regulation, Public Bank is subject to
deposit insurance assessments. As Public Bank's primary federal regulator, the
FDIC has authority to impose penalties, initiate civil and administrative
actions, and take other steps intended to prevent Public Bank from engaging in
unsafe or unsound practices. The FDIC also establishes rates for the payment
of premiums by federally insured banks and savings associations for deposit
insurance. A Bank Insurance Fund ("BIF") is maintained for commercial banks
and a Savings Association Insurance Fund ("SAIF") is maintained for savings
associations. BIF insurance of deposits may be terminated by FDIC, after
notice and hearing, upon a finding that an institution has violated any
applicable law, regulation, rule, order or condition imposed by the FDIC. When
conditions warrant, the FDIC may impose less severe sanctions as an
alternative to termination of insurance. Management of Public Bank does not
know of any present condition pursuant to which the FDIC would seek to impose
sanctions on Public Bank or terminate insurance of its deposits.
Public Bank also is subject to the provisions of the Community Reinvestment
Act of 1977 (the "CRA"), which imposes an obligation on Public Bank to help
meet the credit needs of its entire communities, including low- and moderate-
income neighborhoods. The CRA does not establish specific lending requirements
or programs for financial institutions nor does it limit Public Bank's
discretion to develop the types of products and services that it believes are
best suited to its particular communities, consistent with the CRA. The CRA
requires the appropriate federal bank regulatory agency (in the case of Public
Bank, the FDIC), in connection with its regular examination of a bank, to
assess the bank's record in meeting the credit needs of the community serviced
by the Bank.
Interest and certain other changes collected or contracted for by Public
Bank are subject to state usury laws and certain federal laws concerning
interest rates. Public Bank's loan operations are also subject to federal laws
applicable to credit transactions, such as, among others, the Federal Truth-
in-Lending Act governing disclosures of credit terms to consumer borrowers,
and the Equal Credit Opportunity Act prohibiting discrimination on the basis
of race, creed or other prohibited factors in extending credit. The deposit
operations of Public Bank are
52
<PAGE>
subject to the Electronic Funds Transfer Act and Regulation E issued by the
Federal Reserve Board to implement that Act, which govern automatic deposits
to and withdrawals from deposit accounts and customers' rights and liabilities
arising from the use of automated teller machines and other electronic banking
services, and the Truth-in-Savings Act which governs disclosure of the fees
and yields upon deposit accounts with Public Bank. All of the services
provided by Public Bank to its customers are subject to the Right to Financial
Privacy Act, which imposes a duty to maintain confidentiality of consumer
financial records and prescribes procedures for complying with the
administrative subpoenas of financial records.
As a Florida-chartered commercial bank, Public Bank is subject to the laws
of Florida as to the payment of dividends. Under the Florida Financial
Institutions Code, the prior approval of the Department is required if the
total of all dividends declared by a bank in any calendar year will exceed the
sum of the bank's net profits for that year and its retained net profits for
the preceding two years. Under Federal law, if, in the opinion of the federal
banking regulator, a bank or thrift under its jurisdiction is engaged in or is
about to engage in an unsafe or unsound practice (which, depending on the
financial condition of the depository institution, could include the payment
of dividends), such regulation may require, after notice and hearing, that
such institution cease and desist from such practice. The federal banking
agencies have indicated that paying dividends that deplete a depository
institution's capital base to an inadequate level would be an unsafe and
unsound banking practice. Under the Prompt Corrective Action regulations
adopted by the federal banking agencies in December 1992, a depository
institution may not pay any dividend to its holding company if payment would
cause it to become undercapitalized or if it already is undercapitalized. In
addition, PBC and Public Bank are required to comply with the capital adequacy
standards established by the Federal Reserve (for PBC), and the FDIC (for
Public Bank).
Under Florida banking regulations, Public Bank is required to maintain a
daily liquidity position equal to at least 15 percent of its total transaction
accounts and eight percent of its total nontransaction accounts, less those
deposits of public funds for which security has been pledged as provided by
law. Public Bank may satisfy its liquidity requirements with cash on hand
(including cash items in process of collection), deposits held with the
Federal Reserve, demand deposits due from correspondent banks, Federal funds
sold, interest-bearing deposits maturing in 31 days or less and the market
value of certain unencumbered, rated, investment-grade securities and
securities issued by Florida or any county, municipality or other political
subdivision within the State. The FDIC also reviews Public Bank's liquidity
position as part of its examination and imposes similar requirements on Public
Bank. Any Florida-chartered commercial bank that fails to comply with its
liquidity requirements generally may not further diminish liquidity either by
making any new loans (other than by discounting or purchasing bills of
exchange payable at sight) or by paying dividends.
THE FOREGOING IS A SUMMARY OF THE PRINCIPAL RELEVANT LAWS, RULES AND
REGULATIONS GOVERNING BANKS AND BANK HOLDING COMPANIES, BUT DOES NOT, HOWEVER,
PURPORT TO BE A COMPLETE SUMMARY OF ALL APPLICABLE LAWS, RULES AND REGULATIONS
GOVERNING PUBLIC BANK AND PBC.
Employees. As of March 23, 1998, Public Bank employed 35.5 full-time
equivalent employees, of which 2 were executive officers, and 3 part-time
employees. Public Bank does not anticipate any material increase in its work
force in the near future. Public Bank's employees are not represented by a
collective bargaining group, and the bank considers its relations with its
employees to be excellent. Public Bank provides employees certain benefits
customary in the banking industry, which include major medical insurance,
group term life insurance and normal vacation and sick leave.
Properties. The main office of Public Bank and PBC is located at 2500 13th
Street, St. Cloud, Florida, 34769-4112. It is a two story, modern glass and
concrete building situated on Highway 192, which is the main thoroughfare
through St. Cloud. The office has 5 drive-in lanes, 7 lobby teller stations,
safe deposit boxes and the most advanced computerized ATM machine available
today. The Kissimmee Branch Office is located at 737 W. Oak Street, Kissimmee,
Florida 34741-4937. It is a one story building located across the street from
the Kissimmee facility of the Osceola Regional Medical Center. Customers of
this location consist mainly of nearby businesses and local residents. Along
with an ATM, the Kissimmee branch has 3 drive-in lanes
53
<PAGE>
as well as 4 lobby teller stations. Public Bank owns each of the main office
and the Kissimmee branch office. As of December 31, 1997, deposits from both
locations totalled $44,967,346.
INFORMATION ABOUT VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF
Market Price and Dividends. There is no established public trading market
for the PBC Common Stock. As of the Record Date, PBC Common Stock was held by
153 holders of record. PBC has never paid dividends on its common stock. See
"SUMMARY--THE MERGER--MARKET PRICES."
Security Ownership of Certain Beneficial Owners and Management. The
following table sets forth, as of the Record Date, (i) the names and addresses
of each beneficial owner of more than 5% of PBC Common Stock known to the
Board of Directors of PBC, showing the amount and nature of such beneficial
ownership, (ii) the names of each director and executive officer of PBC and
Public Bank, with the number of shares of PBC Common Stock owned beneficially
by each of them, and (iii) the number of shares of PBC Common Stock owned
beneficially by all directors and executive officers as a group.
Ownership of PBC Common Stock by its directors and certain executive
officers as follows:
<TABLE>
<CAPTION>
NUMBER PERCENTAGE
NAME POSITION WITH PBC POSITION WITH BANK OF SHARES OUTSTANDING
---- ----------------- ------------------ --------- -----------
<S> <C> <C> <C> <C>
P. Douglas Freedle Chief Executive Officer, Vice Chairman, 1,814,518 77.6
4224 Bay to Bay Blvd. Chairman, President & Director
Tampa, Florida 33629 Director
H. Clay Whaley, Jr. Director Director 60,713 2.6
2500 W. 13th St.
St. Cloud, Florida 34769
B. Robert Tucker Vice Chairman, Director Chairman, Director 23,749 1.0
2500 W. 13th St.
St. Cloud, Florida 34769
Henry C. Yates Director Director 25,304 1.1
2500 W. 13th St.
St. Cloud, Florida 34769
H.E. McClain -- Director 24,974 1.1
2500 W. 13th St.
St. Cloud, Florida 34769
Charles L. Hodgins -- Director 27,779 1.2
2500 W. 13th St.
St. Cloud, Florida 34769
Jack Shoffner Secretary, President, Director 11,521 0.5
2500 W. 13th St. Vice President
St. Cloud, Florida 34769
Charles Anderson Treasurer Senior Vice -- --
2500 W. 13th St. President and
St. Cloud, Florida 34769 Cashier
Directors and executive 1,988,558 85.08
officers as a group
</TABLE>
- --------
* Indicates less than 1%.
The persons listed above will receive the same Exchange Ratio as the other
PBC Shareholders for each share of PBC Common Stock held at the Effective
Time.
54
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS OF PBC
The following discussion and financial information are presented to aid in
an understanding of the current financial position and results of operations
of PBC and should be read in conjunction with the Audited Financial Statements
and Notes thereto included herein. PBC is the parent holding company of Public
Bank, and it has no operations of consequence other than the ownership of its
subsidiaries. The emphasis of this discussion will be on the years 1997 and
1996.
At December 31, 1997, PBC had consolidated assets of approximately $50.4
million and operated two banking locations in Osceola County, Florida, through
Public Bank. PBC's primary business is banking; therefore, loans and
investments are the principal source of income.
This discussion contains certain forward looking statements with respect to
the financial condition, results of operation and business of PBC and Public
Bank related, among other things to: trends or uncertainties which will impact
future operating results, liquidity and capital resources, and the
relationship between those trends or uncertainties and nonperforming loans and
other loans; the effect of the market's perception of future inflation and
real returns and the monetary policies of the Federal Reserve on short and
long term interest rates; and the effect of interest rate changes on liquidity
and interest rate sensitivity management. 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) difficulty integrating the operations of PBC and ANB; and
(b) general economic conditions, either nationally or in Florida, are
less favorable than expected.
FINANCIAL CONDITION
Average Assets and Liabilities
From 1996 to 1997 PBC's average assets increased $2.5 million or 5.6%.
During the same period average interest bearing deposits increased $805,000,
while non-interest bearing deposits increased by $1.2 million. PBC carried no
foreign loans or deposits in any period discussed.
Average investment securities decreased by $1.6 million or 15.0% during the
period 1996 to 1997. Loans and deposits increased significantly during this
same period because emphasis was placed on growth in these areas. Loans, net
of unearned income, averaged $28.9 million during 1997 compared to $24.3
million during 1996, an increase of 19.0%. The decrease in average investment
securities was used to fund loan growth during the period.
55
<PAGE>
The following table depicts PBC's average balance sheets for the years
ending December 31, 1997 and 1996:
AVERAGE BALANCES
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------
1997 1996
----------- -----------
<S> <C> <C>
ASSETS:
Cash and due from banks............................ $ 2,415 $ 1,798
Funds sold......................................... 5,234 6,501
Securities......................................... 9,327 10,969
Loans, net of unearned income...................... 28,927 24,316
Allowance for loan losses.......................... (429) (377)
----------- -----------
Loans, net of allowance for loan losses............ 28,498 23,939
----------- -----------
Premises and equipment............................. 1,310 1,373
Other assets....................................... 915 574
----------- -----------
Total assets................................... $ 47,699 $ 45,154
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY:
Deposits:
Demand deposits.................................. $ 9,289 $ 8,129
Interest-bearing transaction accounts............ 6,815 6,033
Savings and money market deposits................ 10,851 11,480
Time deposits.................................... 15,841 15,189
----------- -----------
Total deposits................................. 42,796 40,831
----------- -----------
Accrued interest and other liabilities............. 360 336
Stockholders' equity............................... 4,543 3,987
----------- -----------
Total liabilities and stockholders' equity..... $ 47,699 $ 45,154
=========== ===========
</TABLE>
LOANS
Net loans, at December 31, 1997, were $30.5 million, an increase from $26.0
million at December 31, 1996. At December 31, 1997, commercial and financial
loans represented 29.1% of total loans, real estate-mortgage and construction
loans represented 62.4% of total loans, and consumer loans represented 8.5% of
total loans.
For asset and liability management purposes, of the outstanding loans, $10.1
million or 33.3% of total loans, net of unearned income, mature within one
year or may be repriced within one year due to a variable rate arrangement.
56
<PAGE>
The table immediately below shows the classification of loans by major
category at December 31, 1997 and 1996. The second table depicts maturities of
selected loan categories for loans maturing after one year.
COMPOSITION OF LOAN PORTFOLIO
(AMOUNTS IN THOUSANDS, EXCEPT PERCENTAGES)
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------------------------------------------------------------------------
1997 1996 1995 1994 1993
----------------- ----------------- ----------------- ----------------- -----------------
PERCENT PERCENT PERCENT PERCENT PERCENT
AMOUNT OF TOTAL AMOUNT OF TOTAL AMOUNT OF TOTAL AMOUNT OF TOTAL AMOUNT OF TOTAL
------- -------- ------- -------- ------- -------- ------- -------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Commercial and
financial.............. $ 8,906 29.14% $ 7,410 28.51% $ 7,673 33.28% $ 6,005 29.99% $ 4,126 25.58%
Real estate:
Construction........... 998 3.27 1,322 5.09 963 4.18 658 3.29 931 5.77
Mortgage............... 18,067 59.10 14,995 57.70 12,398 53.77 11,742 58.63 9,375 58.13
Consumer................ 2,594 8.49 2,262 8.70 2,022 8.77 1,619 8.09 1,697 10.52
------- ------ ------- ------ ------- ------ ------- ------ ------- ------
Total gross loans...... 30,565 100.00% 25,989 100.00% 23,056 100.00% 20,024 100.00% 16,129 100.00%
====== ====== ====== ====== ======
Unearned income......... (27) (26) (29) (51) (73)
------- ------- ------- ------- -------
Total loans, net of
unearned income....... 30,538 25,963 23,027 19,973 16,056
Allowance for loan
losses................. (469) (393) (353) (310) (343)
------- ------- ------- ------- -------
Total net loans........ $30,069 $25,570 $22,674 $19,663 $15,713
======= ======= ======= ======= =======
</TABLE>
LOAN MATURITY AND SENSITIVITY TO CHANGES IN INTEREST RATES
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31, 1997
----------------------------------------
OVER ONE YEAR
ONE YEAR THROUGH FIVE OVER FIVE
OR LESS YEARS YEARS TOTAL
-------- ------------- --------- -------
<S> <C> <C> <C> <C>
Commercial and financial.............. $1,865 $ 6,084 $ 957 $ 8,906
Real estate--construction............. 719 212 67 998
Real estate--mortgage................. 1,172 13,172 3,723 18,067
Consumer.............................. 777 1,752 65 2,594
</TABLE>
<TABLE>
<CAPTION>
PREDETERMINED FLOATING
RATES RATES
------------- --------
<S> <C> <C>
Maturing after one year but within five years............ $15,774 $5,446
Maturing after five years................................ 3,977 835
------- ------
$19,751 $6,281
======= ======
</TABLE>
PBC's rollover/renewal policy consists of a re-evaluation of maturing loans
to determine whether such loans will be renewed (or rolled over) and, if so,
at what amount, rate and maturity.
57
<PAGE>
INVESTMENT SECURITIES
The following table summarizes investment securities and available for sale
securities for the periods presented.
INVESTMENT SECURITIES
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------------
1997 1996
------------- ---------------
COST MARKET COST MARKET
------ ------ ------- -------
<S> <C> <C> <C> <C>
U.S. Treasury.................................... $8,495 $8,524 $10,490 $10,497
U.S. Government Agencies......................... -- -- 2,000 1,996
------ ------ ------- -------
Total.......................................... $8,495 $8,524 $12,490 $12,493
====== ====== ======= =======
AVAILABLE FOR SALE SECURITIES
(AMOUNTS IN THOUSANDS)
<CAPTION>
DECEMBER 31,
-----------------------------
1997 1996
------------- ---------------
COST MARKET COST MARKET
------ ------ ------- -------
<S> <C> <C> <C> <C>
Equity securities................................ $ 399 $ 399 $ 205 $ 205
------ ------ ------- -------
Total.......................................... $ 399 $ 399 $ 205 $ 205
====== ====== ======= =======
</TABLE>
The maturities and weighted average yields of investment securities at
December 31, 1997, are presented in the following table using the average
stated contractual maturites.
INVESTMENT SECURITIES MATURITY DISTRIBUTION AND YIELDS
(AMOUNTS IN THOUSANDS, EXCEPT YIELDS)
<TABLE>
<CAPTION>
DECEMBER 31, 1997
------------------------------------------------------------------------------------------------
AFTER ONE BUT AFTER FIVE BUT
WITHIN ONE YEAR WITHIN FIVE YEARS WITHIN TEN YEARS AFTER TEN YEARS OTHER SECURITIES
---------------- ------------------ ----------------- ----------------- ------------------
AMOUNT YIELD AMOUNT YIELD AMOUNT YIELD AMOUNT YIELD AMOUNT YIELD
-------- ------- --------- -------- -------- ------- -------- ------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
U.S. Treasury........... $ 6,496 6.04% $ 1,999 6.17% $ -- -- % $ -- -- % $ -- -- %
-------- ------ --------- ------- -------- ------- -------- ------- -------- --------
Total.................. $ 6,496 6.04% $ 1,999 6.17% $ -- -- % $ -- -- % $ -- -- %
======== ====== ========= ======= ======== ======= ======== ======= ======== ========
SECURITIES AVAILABLE FOR SALE MATURITY DISTRIBUTION AND YIELDS
(AMOUNTS IN THOUSANDS, EXCEPT YIELDS)
<CAPTION>
DECEMBER 31, 1997
------------------------------------------------------------------------------------------------
AFTER ONE BUT AFTER FIVE BUT
WITHIN ONE YEAR WITHIN FIVE YEARS WITHIN TEN YEARS AFTER TEN YEARS OTHER SECURITIES
---------------- ------------------ ----------------- ----------------- ------------------
AMOUNT YIELD AMOUNT YIELD AMOUNT YIELD AMOUNT YIELD AMOUNT YIELD
-------- ------- --------- -------- -------- ------- -------- ------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Equity securities....... $ -- -- % $ -- -- % $ -- -- % $ -- -- % $ 399 3.00%
-------- ------ --------- ------- -------- ------- -------- ------- -------- --------
Total.................. $ -- -- % $ -- -- % $ -- -- % $ -- -- % $ 399 3.00%
======== ====== ========= ======= ======== ======= ======== ======= ======== ========
</TABLE>
58
<PAGE>
DEPOSITS
Between 1996 and 1997, PBC experienced growth in each total deposits as
shown in the table below. Non-interest bearing demand deposits increased by
$1.9 million, or 22.6% from year-end 1996 to year-end 1997. Interest bearing
deposits increased $542,000 or 1.6% during the same period.
PBC has maintained a stable base of non-interest bearing demand deposits
despite consumer trends toward interest bearing deposits. At December 31,
1996, non-interest bearing demand deposits were 19.5% of total deposits and by
1997 this ratio had increased to 22.6%.
The table below summarizes deposits of PBC for the dates indicated:
DEPOSITS
(AMOUNTS IN THOUSANDS, EXCEPT PERCENTAGES)
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------------------------------------------------------------
1997 1996 1995 1994 1993
---------------- ---------------- ---------------- ---------------- ----------------
PERCENT PERCENT PERCENT PERCENT PERCENT
AMOUNT OF TOTAL AMOUNT OF TOTAL AMOUNT OF TOTAL AMOUNT OF TOTAL AMOUNT OF TOTAL
------- -------- ------- -------- ------- -------- ------- -------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Demand.................. $10,029 22.56% $ 8,179 19.45% $ 7,195 17.98% $ 6,880 18.12% $ 6,604 17.98%
NOW..................... 7,372 16.58 6,065 14.42 5,802 14.50 6,235 16.42 5,694 15.50
Savings and money
market................. 9,704 21.83 13,258 31.52 11,047 27.60 14,143 37.24 14,116 38.43
Time less than
$100,000............... 11,966 26.93 10,467 24.88 11,500 28.73 8,065 21.24 7,967 21.69
Time greater than
$100,000............... 5,383 12.10 4,093 9.73 4,482 11.19 2,650 6.98 2,350 6.40
------- ------ ------- ------ ------- ------ ------- ------ ------- ------
Total deposits......... $44,454 100.00% $42,062 100.00% $40,026 100.00% $37,973 100.00% $36,731 100.00%
======= ====== ======= ====== ======= ====== ======= ====== ======= ======
</TABLE>
The following table reflects maturities of time-deposits of $100,000 or more
at December 31, 1997. Time deposits include both certificates of deposit and
time deposit open accounts. Deposits of $5.4 million in this category
represented 12.1% of total deposits at year-end 1997. Management does not
actively pursue these deposits as a means to fund interest earning assets, and
as a result, rates paid on these deposits do not differ from rates paid on
smaller denomination certificates of deposit.
MATURITIES OF CERTIFICATES OF DEPOSIT AND OTHER TIME DEPOSITS OF $100,000 OR
MORE
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31, 1997
----------------------------------------------------
AFTER ONE AFTER THREE AFTER SIX
WITHIN THROUGH THROUGH THROUGH AFTER
ONE THREE SIX TWELVE TWELVE
MONTH MONTHS MONTHS MONTHS MONTHS TOTAL
------ --------- ----------- --------- ------ ------
<S> <C> <C> <C> <C> <C> <C>
Other time deposits of
$100,000 or more......... $-- $2,165 $-- $1,318 $1,900 5,383
==== ====== ==== ====== ====== ======
Total................... $-- $2,165 $-- $1,318 $1,900 $5,383
==== ====== ==== ====== ====== ======
</TABLE>
CAPITAL RESOURCES
Shareholders' equity increased by $843,000 to $5.6 million at year-end 1997
from $4.7 million at year-end 1996.
The Federal Reserve and the FDIC require that bank holding companies and
banks have a minimum of Tier I capital equal to not less than 4% of risk
adjusted assets and total capital equal to not less than 8% of risk adjusted
assets. Tier I capital consists of common shareholders' equity. Tier II
capital includes reserves for loan losses up to 1.25% of risk adjusted assets.
Tier I capital was $5.6 million at December 31, 1997, and total (Tier I plus
Tier II) capital was $6.0 million at December 31, 1997. Tier I and total
capital ratios were 12.4% and 13.4%, respectively at December 31, 1997. Both
ratios were above the regulatory minimums.
59
<PAGE>
ANALYSIS OF CAPITAL
(AMOUNTS IN THOUSANDS, EXCEPT PERCENTAGES)
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------------
1997 1996 1995
----------- ---------- --------
<S> <C> <C> <C>
Tier 1 Capital................................. $ 5,567 $ 4,724 $ 4,044
Tier 2 Capital................................. 469 393 353
------- ------- -------
Total qualifying capital....................... $ 6,036 $ 5,117 $ 4,397
======= ======= =======
Risk-adjusted total assets (including off-
balance sheet exposures)...................... $45,045 $37,904 $34,897
Tier 1 risk-based capital ratio (4.00% required
minimum)...................................... 12.40% 12.50% 11.60%
Total risk-based capital ratio (8.00%
required minimum)........................... 13.40 13.50 12.60
Tier 1 leverage ratio (4.00% required
minimum)...................................... 11.00 10.40 9.70
<CAPTION>
TIER 1 RISK TOTAL RISK TIER 1
BASED BASED LEVERAGE
----------- ---------- --------
<S> <C> <C> <C>
Public Bank Corporation........................ 12.40% 13.40% 11.00%
Public Bank.................................... 10.80 11.80 9.50
Required minimums.............................. 4.00 8.00 4.00
</TABLE>
RESULTS OF OPERATIONS
Net Interest Income
Net interest income, which is the difference between interest income earned
on earning assets and the interest expense paid on interest-bearing
liabilities, is the largest component of a bank's earnings. Net interest
income increased by $355,000, or 17.1%, in 1997 compared to a 6.9% increase in
1996. Increased loan volume was the primary reason for the growth in net
interest income. Average earning assets increased by $1.7 million, or 4.1%, in
1997. This increase in earning assets is partly offset by the volume increase
of $805,000, or 2.5%, in average interest-bearing liabilities. Growth in
average interest-earning assets exceeded that in average interest-bearing
liabilities by $897,000.
While the average volume of the interest-bearing liabilities increased 2.5%
in 1997, the average rate of interest paid decreased from 3.62% in 1996 to
3.46% in 1997, a decrease of 16 basis points. Average earning assets increased
4.1% in 1997, while the average yield increased from 7.79% in 1996 to 8.25% in
1997, an increase of 46 basis points.
The percentage of earning assets funded by interest-bearing liabilities also
affects PBC's net interest income. PBC's earning assets are funded by
interest-bearing liabilities, non interest-bearing demand deposits and
stockholders' equity. The net return on earning assets funded by non interest-
bearing demand deposits and stockholders' equity exceeds the net return on
earning assets funded by interest bearing liabilities. PBC maintains a
relatively consistent percentage of earning assets that are funded by non
interest-bearing liabilities. In 1997, 22.2% of PBC's average earning assets
were funded by non interest-bearing liabilities as opposed to 20.3% in 1996.
The earning assets funded by non interest-bearing liabilities had a positive
impact on the net interest income.
60
<PAGE>
Presented below is an analysis of net interest income, weighted average
yields on earnings assets and weighted average rates paid on interest-bearing
liabilities.
AVERAGE BALANCES, INCOME AND EXPENSES AND RATES
(AMOUNTS IN THOUSANDS, EXCEPT YIELDS AND RATES)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------
1997 1996
----------------------- -----------------------
AVERAGE INCOME/ YIELD/ AVERAGE INCOME/ YIELD/
BALANCE EXPENSE RATE BALANCE EXPENSE RATE
------- ------- ------ ------- ------- ------
<S> <C> <C> <C> <C> <C> <C>
ASSETS:
Earning assets:
Loans (1) (3)................. $28,927 $2,723 9.41% $24,316 $2,291 9.42%
Securities:
Taxable...................... 9,327 577 6.19 10,969 619 5.64
Funds sold.................... 5,234 288 5.50 6,501 345 5.31
------- ------ ------- ------
Total earning assets (2)... 43,488 3,588 8.25 41,786 3,255 7.79
------- ------ ------- ------
Cash and due from banks........ 2,415 1,798
Premises and equipment......... 1,310 1,373
Other assets................... 915 574
Allowance for loan losses...... (429) (377)
------- -------
Total assets............... $47,699 $45,154
======= =======
LIABILITIES:
Interest-bearing liabilities:
Interest-bearing transaction
accounts..................... $ 6,815 81 1.19 $ 6,033 84 1.39
Savings and money market
deposits..................... 10,851 225 2.07 11,480 254 2.21
Time deposits................. 15,841 855 5.40 15,189 845 5.56
------- ------ ------- ------
Total interest-bearing
liabilities............... 33,507 1,161 3.46 32,702 1,183 3.62
------- ------ ---- ------- ------ ----
Demand deposits................ 9,289 8,129
Accrued interest and other
liabilities................... 360 336
Stockholders' equity........... 4,543 3,987
------- -------
Total liabilities and
stockholders' equity...... $47,699 $45,154
======= =======
Net interest spread............ 4.79% 4.17%
==== ====
Net interest income/margin on a
taxable equivalent basis...... 2,427 5.58% 2,072 4.96%
==== ====
Tax equivalent adjustment (2).. -- --
------ ------
Net interest income/margin..... $2,427 5.58% $2,072 4.96%
====== ==== ====== ====
</TABLE>
- --------
(1) Average loans include nonaccrual loans. All loans and deposits are
domestic.
(2) Tax equivalent adjustments are based on the assumed rate of 34%, and do
not give effect to the disallowance for Federal income tax purposes of
interest expense related to tax-exempt assets.
(3) Fees in the amount of $32,000 and $37,000 are included in interest and
fees on loans for 1997 and 1996, respectively.
61
<PAGE>
The following table sets forth the effect which varying levels of earning
assets and interest-bearing liabilities and the applicable rates had on
changes in net interest income for 1997. For the purposes of this table,
changes which are not solely attributable to volume or rates are allocated to
volume and rate on a pro rata basis.
ANALYSIS OF CHANGES IN NET INTEREST INCOME
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31, 1997
COMPARED TO 1996
VARIANCE DUE TO
-----------------------
VOLUME YIELD/RATE TOTAL
------ ---------- -----
<S> <C> <C> <C>
EARNING ASSETS:
Loans.................................................. $434 $ (2) $432
Securities:
Taxable.............................................. (98) 56 (42)
Tax exempt........................................... -- -- --
Cash balances in other banks........................... -- -- --
Funds sold............................................. -- -- --
Funds sold............................................. (69) 12 (57)
---- ---- ----
Total interest income.............................. 267 66 333
INTEREST-BEARING LIABILITIES:
Interest-bearing transaction accounts.................. 10 (13) (3)
Savings and money market deposits...................... (14) (15) (29)
Time deposits.......................................... 35 (25) 10
Funds purchased........................................ -- -- --
Other short-term borrowings............................ -- -- --
Long-term debt......................................... -- -- --
---- ---- ----
Total interest expense............................. 31 (53) (22)
---- ---- ----
Net interest income on a taxable equivalent basis.. $236 $119 355
==== ====
Taxable equivalent adjustment.......................... --
----
Net interest income.................................... $355
====
</TABLE>
INTEREST SENSITIVITY
PBC monitors and manages the pricing and maturity of its assets and
liabilities in order to diminish the potential adverse impact that changes in
interest rates could have on net interest income. The principal monitoring
technique employed by PBC is the measurement of the interest sensitivity
"gap," which is the positive or negative dollar difference between assets and
liabilities that are subject to interest rate repricing within a given period
of time. Interest rate sensitivity can be managed by repricing assets and
liabilities, selling securities available for sale, replacing an asset or
liability at maturity or by adjusting the interest rate during the life of an
asset or liability.
PBC evaluates interest sensitivity risk and then formulates guidelines
regarding asset generation and repricing, and sources and prices of off-
balance sheet commitments in order to decrease interest sensitivity risk. PBC
uses computer simulations to measure the net income effect of various interest
rate scenarios. The modeling reflects interest rate changes and the related
impact on net income over specified periods of time.
62
<PAGE>
The following table illustrates PBC's interest rate sensitivity at December
31, 1997, assuming the relevant assets and liabilities are collected and paid,
respectively, based upon historical experience rather than their stated
maturities.
INTEREST SENSITIVITY ANALYSIS
(AMOUNTS IN THOUSANDS, EXCEPT RATIOS)
<TABLE>
<CAPTION>
DECEMBER 31, 1997
-----------------------------------------------------------------
AFTER ONE AFTER THREE
THROUGH THROUGH
WITHIN ONE THREE TWELVE WITHIN ONE GREATER THAN
MONTH MONTHS MONTHS YEAR ONE YEAR TOTAL
---------- --------- ----------- ---------- ------------ -------
<S> <C> <C> <C> <C> <C> <C>
ASSETS:
Earning assets:
Loans(1)............... $ 7,705 $ 557 $ 1,896 $10,158 $20,376 $30,534
Securities(2).......... -- -- 6,496 6,496 1,999 8,495
Funds sold............. 5,536 -- -- 5,536 -- 5,536
------- ------- ------- ------- ------- -------
Total interest-
earning assets..... $13,241 $ 557 $ 8,392 $22,190 $22,375 $44,565
LIABILITIES:
Interest-bearing
liabilities:
Interest-bearing
deposits:
Demand deposits....... $ -- $ -- $ 7,372 $ 7,372 $ -- $ 7,372
Savings and money
market deposits...... 5,621 -- -- 5,621 4,083 9,704
Time deposits(3)...... -- 4,120 5,968 10,088 7,261 17,349
------- ------- ------- ------- ------- -------
Total interest-
bearing
liabilities........ $ 5,621 $ 4,120 $13,340 $23,081 $11,344 $34,425
------- ------- ------- ------- ------- -------
Period gap.............. $ 7,620 $(3,563) $(4,948) $ (891) $11,031
======= ======= ======= ======= =======
Cumulative gap.......... $ 7,620 $ 4,057 $ (891) $ (891) $10,140 $10,140
======= ======= ======= ======= ======= =======
Ratio of cumulative gap
to total earning
assets................. 17.10% 9.10% (2.00)% (2.00)% 22.75%
</TABLE>
- --------
(1) Excludes nonaccrual loans of $4,000.
(2) Excludes available for sale equity securities of $399,000.
(3) Excludes matured certificates which have not been redeemed by the customer
and on which no interest is accruing.
MARKET RISK
PBC's earnings are dependent on its net interest income which is the
difference between interest income earned on all earning assets, primarily
loans and securities, and interest paid on all interest bearing liabilities,
primarily deposits. Market risk is the risk of loss from adverse changes in
market prices and rates. PBC's market risk arises primarily from inherent
interest rate risk in its lending, investing and deposit gathering activities.
PBC seeks to reduce its exposure to market risk through actively monitoring
and managing its interest rate risk. Management relies upon static "gap"
analysis to determine the degree of mismatch in the maturity and repricing
distribution of interest earning assets and interest bearing liabilities which
quantifies, to a large extent, the degree of market risk inherent in PBC's
balance sheet. Gap analysis is further augmented by simulation analysis to
evaluate the impact of varying levels of prevailing interest rates and the
sensitivity of specific earning assets and interest bearing liabilities to
changes in those prevailing rates. Simulation analysis consists of evaluating
the impact on net interest income given changes from 200 basis points below to
200 basis points above the current prevailing rates. Management makes certain
assumptions as to the effect varying levels of interest rates have on certain
earning assets and interest bearing liabilities, which assumptions consider
both historical experience and consensus estimates of outside sources.
63
<PAGE>
With respect to the primary earning assets, loans and securities, certain
features of individual types of loans introduce uncertainty as to their
expected performance at varying levels of interest rates. In some cases,
imbedded options exist whereby the borrower may elect to repay the obligation
at any time. These imbedded prepayment options make anticipating the
performance of those instruments difficult given changes in prevailing rates.
At December 31, 1997, essentially every loan, net of unearned income (totaling
$30.5 million, or 60.6% of total assets), carries such imbedded options.
Management believes that assumptions used in its simulation analysis about the
performance of financial instruments with such imbedded options are
appropriate. However, the actual performance of these financial instruments
may differ from management's estimates due to several factors, including the
diversity and sophistication of the customer base, the general level of
prevailing interest rates and the relationship to their historical levels, and
general economic conditions. The difference between those assumptions and
actual results, if significant, could cause the actual results to differ from
those indicated by the simulation analysis.
Deposits totaled $44.5 million, or 88.2%, of total assets at December 31,
1997. Since deposits are the primary funding source for earning assets, the
associated market risk is considered by management in its simulation analysis.
Generally, it is anticipated that deposits will be sufficient to support
funding requirements. However, the rates paid for deposits at varying levels
of prevailing interest rates have a significant impact on net interest income
and therefore, must be quantified by PBC in its simulation analysis.
Specifically, PBC's spread, the difference between the rates earned on earning
assets and rates paid on interest bearing liabilities, is generally higher
when prevailing rates are higher. As prevailing rates reduce, the spread tends
to compress, with severe compression at very low prevailing interest rates.
This characteristic is called "spread compression" and adversely affects net
interest income in the simulation analysis when anticipated prevailing rates
are reduced from current rates. Management relies upon historical experience
to estimate the degree of spread compression in its simulation analysis.
Management believes that such estimates of possible spread compression are
reasonable. However, if the degree of spread compression varies from that
expected, the actual results could differ from those indicated by the
simulation analysis.
The following table illustrates the results of simulation analysis used by
PBC to determine the extent to which market risk would have affected the net
interest margin if prevailing interest rates differed from actual rates during
1997. Because of the inherent use of estimates and assumptions in the
simulation model used to derive this information, the actual results for 1997
and, certainly, the future impact of market risk on PBC's net interest margin,
may differ from that found in the table.
MARKET RISK
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
CHANGE FROM
NET INTEREST 1997 NET INTEREST
CHANGE IN PREVAILING INTEREST RATES INCOME AMOUNT INCOME AMOUNT
- ----------------------------------- ------------- -----------------
<S> <C> <C>
+200 basis points.............................. $2,442 0.62%
+100 basis points.............................. 2,434 0.29
0 basis points................................ 2,427 --
- -100 basis points.............................. 2,383 (1.81)
- -200 basis points.............................. 2,338 (3.67)
</TABLE>
PROVISIONS AND ALLOWANCE FOR LOAN LOSSES
Throughout the year PBC management estimates the likely level of future
losses to determine whether the allowance for loan losses is adequate to
absorb losses in the existing portfolio. The allowance for loan losses is a
valuation allowance which quantifies this estimate. Management's judgment as
to the amount of anticipated losses on existing loans involves the
consideration of current and anticipated economic conditions and their
potential effects on specific borrowers; results of examinations of the loan
portfolio by regulatory agencies; and management's internal review of the loan
portfolio. In determining the collectibility of certain loans, PBC management
also considers the fair value of any underlying collateral. The amounts
ultimately realized may differ from the carrying value of these assets due to
economic, operating or other conditions beyond PBC's control.
64
<PAGE>
While it is possible that in particular periods PBC may sustain losses which
are substantial relative to the allowance for loan losses, it is the judgment
of PBC management that the allowance for loan losses reflected in the
consolidated statements of condition is adequate to absorb estimated losses
which may exist in the current loan portfolio.
Management reviews the loan portfolio and determines the adequacy of the
allowance at each month end. Appropriate adjustments to the allowance are made
through the provision for loan losses.
65
<PAGE>
The table below sets for certain information with respect to PBC's average
loans, allowance for loan losses, charge-offs and recoveries for the five
years ended December 31, 1997.
ALLOWANCE FOR LOAN LOSSES
(AMOUNTS IN THOUSANDS, EXCEPT PERCENTAGES)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------------
1997 1996 1995 1994 1993
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Total loans outstanding at end of
period, net of unearned income... $30,538 $25,963 $23,027 $19,973 $16,056
======= ======= ======= ======= =======
Average amount of loans
outstanding, net of unearned
income........................... $28,927 $24,316 $21,654 $17,503 $15,297
======= ======= ======= ======= =======
Allowance for loan losses at
beginning of period.............. $ 393 $ 353 $ 310 $ 343 $ 348
Charge-offs:
Commercial, financial and
agricultural................... 9 15 62 137 181
Real estate--mortgage........... 9 9 185 -- --
Consumer........................ -- 8 4 8 15
------- ------- ------- ------- -------
Total charge-offs............. 18 32 251 145 196
------- ------- ------- ------- -------
Recoveries:
Commercial, financial and
agricultural................... 19 9 165 50 109
Real estate--mortgage........... 9 -- -- -- 23
Consumer........................ 6 3 4 -- 4
------- ------- ------- ------- -------
Total recoveries.............. 34 12 169 50 136
------- ------- ------- ------- -------
Net charge-offs (recoveries).. (16) 20 82 95 60
Provision for loan losses......... 60 60 125 62 55
------- ------- ------- ------- -------
Allowance for loan losses at
period-end....................... $ 469 $ 393 $ 353 $ 310 $ 343
======= ======= ======= ======= =======
Allowance for loan losses to
period-end loans................. 1.54% 1.51% 1.53% 1.55% 2.14%
Net charge-offs (recoveries) to
average loans.................... (0.06) 0.08 0.38 0.54 0.39
</TABLE>
At year-end 1997 the allowance was $469,000, as compared to $393,000 at
year-end 1996 and $353,000 at year-end 1995. The allowance at year-end 1997 to
ending loans was 1.54%, and this ratio has been relatively consistent from
year to year since 1994. The allowance was considered adequate at December 31,
1997.
PBC experienced net recoveries of $16,000 in 1997 and net charge-offs of
$20,000 in 1996. The ratio of net recoveries to average loans for 1997 is
(0.06)%, compared with a ratio of net charge-offs to average loans for 1996 of
0.08%.
NONPERFORMING ASSETS
Nonperforming assets are loans on a non-accrual basis, accruing loans 90
days or more past due, renegotiated loans, and other real estate owned. PBC
had no accruing loans 90 days or more past due for the years 1997, 1996, and
1995. Nonaccrual loans totaled approximately $4,000 at year-end 1997 and
$93,000 in 1996. Other real estate owned was $294,000 at year-end 1997 and
1996. Total nonperforming assets decreased to $298,000 in 1997 from $387,000
in 1996, for a total decrease of $89,000, or 23.0%.
66
<PAGE>
The following table summarizes nonperforming assets for the periods
indicated:
NONPERFORMING ASSETS
(AMOUNTS IN THOUSANDS, EXCEPT PERCENTAGES)
<TABLE>
<CAPTION>
AT DECEMBER 31,
--------------------------------------------
1997 1996 1995 1994 1993
--------- ------ ----- -------- --------
<S> <C> <C> <C> <C> <C>
Nonaccrual loans................. $ 4 $ 93 $ 358 $ 31 $ 31
Restructured loans............... -- -- -- -- --
Loans past due 90 days or more
and still accruing.............. -- -- -- -- --
--------- ------ ----- -------- --------
Total nonperforming loans...... 4 93 358 31 31
Other real estate owned.......... 294 294 49 138 635
--------- ------ ----- -------- --------
Total nonperforming assets..... $ 298 $ 387 $ 407 $ 169 $ 666
========= ====== ===== ======== ========
Allowance for loan losses to
period-end loans................ 1.54% 1.51% 1.53% 1.55% 2.14%
Allowance for loan losses to
period-end nonperforming loans.. 11,725.00 422.58 98.60 1,000.00 1,106.45
Allowance for loan losses to
period-end nonperforming
assets.......................... 157.38 101.55 86.73 183.43 51.50
Net charge-offs (recoveries) to
average loans................... (0.06) 0.08 0.38 0.54 0.39
Nonperforming assets to period-
end loans and foreclosed
property........................ 0.97 1.47 1.76 0.84 3.99
Nonperforming loans to period-end
loans........................... 0.01 0.36 1.55 0.16 0.19
</TABLE>
In accordance with regulatory standards, loans are classified as non-accrual
when the collection of principal or interest is 90 days or more past due or
when, in management's judgment, such principal or interest will not be
collectible in the ordinary course of business, unless in the opinion of
management the loan is both adequately secured and in the process of
collection.
PBC has identified loans totaling approximately $448,000, or 1.47% of the
loan portfolio at December 31, 1997, through the Public Bank's internal loan
evaluation program in which some concern exists about the borrower's ability
to comply with present repayment terms. These loans are not included as non-
performing assets and are categorized as "watch" for internal evaluation
purposes only. These credits, however, were considered in determining the
adequacy of the allowance for possible loan losses and, while current, are
regularly monitored for changes with a particular industry or general economic
trends which could cause the borrowers severe financial difficulties. PBC
management does not expect a significant loss in any of these loans.
NONINTEREST INCOME
Total noninterest income increased $89,000 or 12.7% from 1996 to 1997.
Increases occurred in all major categories of noninterest income. The
following table depicts major sources of noninterest income for the periods
indicated:
NONINTEREST INCOME
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------
1997 1996 1995
------- ------- -------
<S> <C> <C> <C>
Service charges on deposit accounts................... $ 674 $ 654 $ 610
Gain on disposal of assets and deposits............... 39 (3) 37
Other................................................. 77 50 86
------- ------- -------
Total noninterest income............................ $ 790 $ 701 $ 733
======= ======= =======
</TABLE>
67
<PAGE>
NONINTEREST EXPENSE
Total noninterest expense increased $90,000 form 1996 to 1997, or 4.9%. The
largest item in this category is salaries. Salaries increased $86,000 from
1996 to 1997 or 10.1%. PBC's other expenses were generally flat from 1996 to
1997. The following table summarizes noninterest expenses for the periods
indicated:
NONINTEREST EXPENSE
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------
1997 1996 1995
------- ------- -------
<S> <C> <C> <C>
Salaries and employee benefits......................... $ 935 $ 849 $ 916
Net furniture and occupancy expense.................... 304 297 316
Advertising............................................ 84 53 60
Banking assessments.................................... 18 14 56
Data processing expenses............................... 177 164 140
Legal and professional fees............................ 43 67 62
Other.................................................. 359 386 400
------- ------- -------
Total noninterest expense............................ $ 1,920 $ 1,830 $ 1,950
======= ======= =======
</TABLE>
INCOME TAXES, INFLATION AND OTHER ISSUES
Income tax expense was $394,000 in 1997, compared to $203,000 in 1996.
Income tax expense was significantly higher in 1997 due primarily to increased
pre-tax income and limitation on the utilization of net operating loss
carryforwards.
Because PBC's assets and liabilities are essentially monetary in nature, the
effect of inflation on PBC's assets differs greatly from that of most
commercial and industrial companies. Inflation can have an impact on the
growth of total assets in the banking industry and the resulting need to
increase capital at higher than normal rates in order to maintain an
appropriate equity to assets ratio. Inflation also can have a significant
effect on other expenses, which tend to rise during periods of general
inflation. Management believes, however, that PBC's financial results are
influenced more by its ability to react to changes in interest rates than by
inflation.
Except as discussed in this Management's Discussion and Analysis, PBC
management is not aware of any trends, events or uncertainties that will have
or that are reasonably likely to have a material effect on liquidity, capital
resources or operations. Management is not aware of any current
recommendations by regulatory authorities which, if implemented, would have
such an effect.
68
<PAGE>
LEGAL MATTERS
The legality of the ANB Common Stock to be issued in the Merger will be
passed upon by Maynard, Cooper & Gale, P.C., Birmingham, Alabama ("Maynard,
Cooper"). As of April 1, 1998, attorneys in the law firm of Maynard, Cooper
owned an aggregate of 34,274 Shares of ANB Common Stock.
Certain legal matters in connection with the Merger will be passed upon for
PBC by Fowler, White, Gillen, Boggs, Villareal and Baker, P.A., Tampa, Florida
("Fowler, White").
Maynard, Cooper has rendered an opinion with respect to the federal tax
consequences of the Merger. See "THE MERGER--FEDERAL INCOME TAX CONSEQUENCES."
EXPERTS
The consolidated financial statements of ANB as of December 31, 1997 and
1996 and for the years ended December 31, 1997 and 1996, incorporated herein
by reference, have been incorporated herein in reliance on the report, which
includes an explanatory paragraph regarding the combination and restatement of
the 1995 financial statements and the 1996 change in accounting method for
stock-based compensation, of Coopers & Lybrand L.L.P., independent
accountants, given on the authority of that firm as experts in accounting and
auditing.
The consolidated statements of income, changes in stockholders' equity and
cash flows of ANB for the year ended December 31, 1995, incorporated by
reference in this Proxy Statement have been incorporated herein in reliance on
the report of Coopers & Lybrand L.L.P., independent accountants, to the extent
indicated in their report thereon and in part on the report of Ernst & Young
LLP, independent auditors. The financial statements referred to above are
included in reliance upon such reports given upon the authority of such firms
as experts in accounting and auditing.
The consolidated financial statements of PBC as of December 31, 1997 and
1996 and for each of the two years ended December 31, 1997 have been included
herein in reliance on the report of Osburn, Henning and Company, P.A.,
independent certified public accountants, given upon the authority of such
firm as experts in accounting and auditing.
69
<PAGE>
APPENDIX A
----------
AGREEMENT AND PLAN OF MERGER
<PAGE>
APPENDIX A
AGREEMENT AND PLAN OF MERGER
BY AND BETWEEN
PUBLIC BANK CORPORATION
AND
ALABAMA NATIONAL BANCORPORATION
DATED AS OF
MARCH 5, 1998
<PAGE>
[EXECUTION COPY]
AGREEMENT AND PLAN OF MERGER
----------------------------
THIS AGREEMENT AND PLAN OF MERGER (this "Agreement") is made and entered
into as of March 5, 1998 by and between PUBLIC BANK CORPORATION ("PBC"), a
corporation organized and existing under the laws of the State of Florida, with
its principal office located in St. Cloud, Florida, and ALABAMA NATIONAL
BANCORPORATION ("ANB"), a corporation organized and existing under the laws of
the State of Delaware, with its principal office located in Birmingham, Alabama.
PREAMBLE
--------
The Boards of Directors of PBC and ANB are of the opinion that the
transactions described herein are in the best interests of the parties and their
respective stockholders. This Agreement provides for the merger of PBC with and
into ANB. At the effective time of such merger, the outstanding shares of the
capital stock of PBC shall be converted into the right to receive shares of the
common stock of ANB (except as provided herein). As a result, stockholders of
PBC shall become stockholders of ANB, and ANB shall continue to conduct the
business and operations of PBC. The transactions described in this Agreement
are subject to the approvals of the stockholders of PBC, the Florida Department
of Banking and Finance and the Board of Governors of the Federal Reserve System,
and the satisfaction of certain other conditions described in this Agreement.
It is the intention of the parties to this Agreement that the merger (i) for
federal income tax purposes shall qualify as a "reorganization" within the
meaning of Section 368(a) of the Internal Revenue Code and (ii) for accounting
purposes shall qualify for treatment as a "pooling of interests."
Certain terms used in this Agreement are defined in Section 11.1 of this
Agreement.
NOW, THEREFORE, in consideration of the above and the mutual warranties,
representations, covenants and agreements set forth herein, the parties agree as
follows:
ARTICLE 1
TRANSACTIONS AND TERMS OF MERGER
--------------------------------
1.1 MERGER. Subject to the terms and conditions of this Agreement, at the
------
Effective Time, PBC shall be merged with and into ANB in accordance with the
provisions of Section 252 of the DGCL and Section 607.1107 of the FBCA and with
the effect provided in Sections 259 and 261 of the DGCL (the "Merger"). ANB
shall be the Surviving Corporation resulting from
A-1
<PAGE>
the Merger and shall continue to be governed by the Laws of the State of
Delaware. The Merger shall be consummated pursuant to the terms of this
Agreement, which has been approved and adopted by the ANB Board and the PBC
Board.
1.2 TIME AND PLACE OF CLOSING. The Closing will take place at 9:00 A.M.
-------------------------
on the date that the Effective Time occurs (or the immediately preceding day if
the Effective Time is earlier than 9:00 A.M.), or at such other time as the
Parties, acting through their chief executive officers or chief financial
officers, may mutually agree. The place of Closing shall be at the offices of
Maynard, Cooper & Gale, P.C., Birmingham, Alabama, or such other place as may be
mutually agreed upon by the Parties.
1.3 EFFECTIVE TIME. The Merger and other transactions provided for in
--------------
this Agreement shall become effective: (i) on the date and at the time the
Certificate of Merger reflecting the Merger shall be accepted for filing by the
Secretary of State of the State of Delaware, and the Articles of Merger shall be
accepted for filing by the Department of State of Florida, or (ii) on such date
and at such time subsequent to the filing of the Certificate of Merger with the
Secretary of State of the State of Delaware as may be specified by the Parties
in the Certificate of Merger (provided that such subsequent date and time shall
not be later than a time on the 30th day after the date that the Certificate of
Merger is filed) (the "Effective Time"). Subject to the terms and conditions
hereof, unless otherwise mutually agreed upon in writing by the chief executive
officers or chief financial officers of each Party, the Parties shall use their
reasonable efforts to cause the Effective Time to occur on the last business day
of the month in which the later of the following occurs: (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, and (ii) the date on which the stockholders of PBC approve
this Agreement to the extent such approval is required by applicable Law.
ARTICLE 2
TERMS OF MERGER
---------------
2.1 CERTIFICATE OF INCORPORATION. The Certificate of Incorporation of ANB
----------------------------
in effect immediately prior to the Effective Time shall be the Certificate of
Incorporation of the Surviving Corporation immediately following the Effective
Time.
2.2 BYLAWS. The Bylaws of ANB in effect immediately prior to the
------
Effective Time shall be the Bylaws of the Surviving Corporation immediately
following the Effective Time, until otherwise amended or repealed.
2.3 DIRECTORS. The directors of the Surviving Corporation from and after
---------
the Effective Time shall consist of the incumbent directors of ANB.
A-2
<PAGE>
ARTICLE 3
MANNER OF CONVERTING SHARES
---------------------------
3.1 CONVERSION OF SHARES. Subject to the provisions of this Article 3, at
--------------------
the Effective Time, by virtue of the Merger and without any action on the part
of the holders thereof, the shares of the constituent corporations shall be
converted as follows:
(A) Each share of ANB Common Stock issued and outstanding immediately prior
to the Effective Time shall remain issued and outstanding from and after the
Effective Time.
(B) Subject to subsection 3.1(d) below, each share of PBC Common Stock
(excluding shares held by any PBC Company, other than in a fiduciary capacity or
as a result of debts previously contracted, and excluding shares held by
stockholders who perfect their dissenters' rights of appraisal as provided in
Section 3.4 of this Agreement) issued and outstanding at the Effective Time
shall cease to be outstanding and shall be converted into and exchanged for the
right to receive .2353134 shares of ANB Common Stock (the "Exchange Ratio").
(C) Subject to subsection 3.1(d) below, assuming that no holders of PBC
Common Stock exercise their rights under the Dissenter Provisions, the holders
of PBC Common Stock (including individuals holding PBC Options) shall receive in
the aggregate 550,000 shares of ANB Common Stock.
(D) (i) If the Average Quoted Price is $24.00 or less, then the Exchange
Ratio automatically shall be increased by an amount equal to an additional
.010696 shares of ANB Common Stock per share of PBC Common Stock, which,
assuming that no holders of PBC Common Stock exercise their rights under
the Dissenter Provisions, is the equivalent of an additional 25,000 shares
of ANB Common Stock in the aggregate.
(ii) If the Average Quoted Price is below $25.00, but greater than
$24.00, then the Exchange Ratio automatically shall be increased by an
amount equal to (A) .010696 multiplied by (B) a fraction, (x) the numerator
of which is the difference between $25.00 and the Average Quoted Price and
(y) the denominator of which is $1.00 (the "Fraction"), which, assuming
that no holders of PBC Common Stock exercise their rights under the
Dissenter Provisions, is the equivalent of an additional aggregate number
of shares in an amount equal to 25,000 multiplied by the Fraction.
(iii) Notwithstanding anything to the contrary contained in this
Section 3.1(d) or otherwise in this Agreement, in no event shall the
aggregate upward adjustment (if any) to the Exchange Ratio or the total
number of shares of ANB Common Stock to be exchanged hereunder exceed
.010696 or 25,000 shares of ANB Common Stock, respectively.
A-3
<PAGE>
3.2 ANTI-DILUTION PROVISIONS. In the event PBC changes the number of
------------------------
shares of PBC Common Stock issued and outstanding prior to the Effective Time as
a result of a stock split, stock dividend or similar recapitalization with
respect to such stock and the record date therefor shall be prior to the
Effective Time, the Exchange Ratio shall be proportionately adjusted. In the
event ANB changes the number of shares of ANB Common Stock issued and
outstanding prior to the Effective Time as a result of a stock split, stock
dividend or similar recapitalization with respect to such stock and the record
date therefor shall be prior to the Effective Time, the Exchange Ratio shall be
proportionately adjusted.
3.3 SHARES HELD BY PBC. Each of the shares of PBC Common Stock held by
------------------
any PBC Company, other than in a fiduciary capacity or as a result of debts
previously contracted, shall be canceled and retired at the Effective Time and
no consideration shall be issued in exchange therefor.
3.4 DISSENTING STOCKHOLDERS. Any holder of shares of PBC Common Stock who
-----------------------
perfects his dissenters' rights of appraisal in accordance with and as
contemplated by Section 607.1320 of the FBCA (the "Dissenter Provisions") shall
be entitled to receive the value of such shares in cash as determined pursuant
to such provision of Law; provided, however, that no such payment shall be made
to any dissenting stockholder unless and until such dissenting stockholder has
complied with the applicable provisions of the FBCA and surrendered to the
Surviving Corporation the certificate or certificates representing the shares
for which payment is being made; provided, further, nothing contained in this
Section 3.4 shall in any way limit the right of ANB to terminate this Agreement
and abandon the Merger under Section 10.1(i). In the event that after the
Effective Time a dissenting stockholder of PBC fails to perfect, or effectively
withdraws or loses, his right to appraisal and of payment for his shares, the
Surviving Corporation shall issue and deliver the consideration to which such
holder of shares of PBC Common Stock is entitled under this Article 3 (without
interest) upon surrender by such holder of the certificate or certificates
representing shares of PBC Common Stock held by him.
3.5 FRACTIONAL SHARES. No certificates or scrip representing fractional
-----------------
shares of ANB Common Stock shall be issued upon the surrender of certificates
for exchange; no dividend or distribution with respect to ANB Common Stock shall
be payable on or with respect to any fractional share; and such fractional share
interests shall not entitle the owner thereof to vote or to any other rights of
a stockholder of ANB. In lieu of any such fractional share, ANB shall pay to
each former stockholder of PBC who otherwise would be entitled to receive a
fractional share of ANB Common Stock an amount in cash (without interest)
determined by multiplying (a) the Average Quoted Price by (b) the fraction of a
share of ANB Common Stock to which such holder would otherwise be entitled.
A-4
<PAGE>
ARTICLE 4
EXCHANGE OF SHARES
------------------
4.1 EXCHANGE PROCEDURES. No later than five days after the Effective
-------------------
Time, the Surviving Corporation shall cause the Exchange Agent to mail to the
former stockholders of PBC appropriate transmittal materials (which shall
specify that delivery shall be effected, and risk of loss and title to the
certificates theretofore representing shares of PBC Common Stock shall pass,
only upon proper delivery of such certificates to the Exchange Agent). If
requested, the Exchange Agent shall mail transmittal materials to any
shareholder who holds more than ten percent of the outstanding stock of PBC and
who requests that such materials be given to him or her prior to the Effective
Time and if such materials are returned to the Exchange Agent in proper form
with such shareholder's certificates representing PBC Common Stock at least five
business days prior to the Effective Time, the Exchange Agent shall deliver to
the Shareholder at Closing the consideration specified in Section 3.1 of this
Agreement. After the Effective Time, each holder of shares of PBC Common Stock
not surrendered at Closing (other than shares to be canceled pursuant to Section
3.3 of this Agreement or as to which dissenters' rights of appraisal have been
perfected as provided in Section 3.4 of this Agreement) issued and outstanding
at the Effective Time shall surrender the certificate or certificates
representing such shares to the Exchange Agent and shall promptly upon surrender
thereof receive in exchange therefor the consideration provided in Section 3.1
of this Agreement, together with all undelivered dividends or distributions with
respect to such shares (without interest thereon) pursuant to Section 4.2 of
this Agreement. To the extent required by Section 3.5 of this Agreement, each
holder of shares of PBC Common Stock issued and outstanding at the Effective
Time also shall receive, upon surrender of the certificate or certificates
representing such shares, cash in lieu of any fractional share of ANB Common
Stock to which such holder may be otherwise entitled (without interest). The
Surviving Corporation shall not be obligated to deliver the consideration to
which any former holder of PBC Common Stock is entitled as a result of the
Merger until such holder surrenders his certificate or certificates representing
the shares of PBC Common Stock for exchange as provided in this Section 4.1.
The certificate or certificates for PBC Common Stock so surrendered shall be
duly endorsed as the Exchange Agent may require. Any other provision of this
Agreement notwithstanding, neither the Surviving Corporation nor the Exchange
Agent shall be liable to a holder of PBC Common Stock for any amounts paid or
property delivered in good faith to a public official pursuant to any applicable
abandoned property Law.
4.2 RIGHTS OF FORMER PBC STOCKHOLDERS. At the Effective Time, the stock
---------------------------------
transfer books of PBC shall be closed as to holders of PBC Common Stock
immediately prior to the Effective Time, and no transfer of PBC Common Stock by
any such holder shall thereafter be made or recognized. Until surrendered for
exchange in accordance with the provisions of Section 4.1 of this Agreement,
each certificate theretofore representing shares of PBC Common Stock ("PBC
Certificate"), other than shares to be canceled pursuant to Section 3.3 of this
Agreement or as to which dissenters' rights of appraisal have been perfected as
provided in Section 3.4 of this Agreement, shall from and after the Effective
Time represent for all purposes
A-5
<PAGE>
only the right to receive the consideration provided in Sections 3.1 and 3.5 of
this Agreement in exchange therefor. To the extent permitted by Law, former
stockholders of record of PBC Common Stock shall be entitled to vote after the
Effective Time at any meeting of Surviving Corporation stockholders the number
of whole shares of ANB Common Stock into which their respective shares of PBC
Common Stock are converted, regardless of whether such holders have exchanged
their PBC Certificates for certificates representing ANB Common Stock in
accordance with the provisions of this Agreement. Whenever a dividend or other
distribution is declared by the Surviving Corporation on the ANB Common Stock,
the record date for which is at or after the Effective Time, the declaration
shall include dividends or other distributions on all shares issuable pursuant
to this Agreement. Notwithstanding the preceding sentence, any person holding
any PBC Certificate at or after six (6) months after the Effective Time (the
"Cutoff") shall not be entitled to receive any dividend or other distribution
payable after the Cutoff to holders of ANB Common Stock, which dividend or other
distribution is attributable to such person's ANB Common Stock represented by
said PBC Certificate held after the Cutoff, until such person surrenders said
PBC Certificate for exchange as provided in Section 4.1 of this Agreement.
However, upon surrender of such PBC Certificate, both the ANB Common Stock
certificate (together with all such undelivered dividends or other
distributions, without interest) and any undelivered cash payments to be paid
for fractional share interests (without interest) shall be delivered and paid
with respect to each share represented by such PBC Certificate.
4.3 LOST OR STOLEN CERTIFICATES. If any holder of PBC Common Stock
---------------------------
convertible into the right to receive shares of ANB Common Stock is unable to
deliver the PBC Certificate that represents PBC Common Stock, the Exchange
Agent, in the absence of actual notice that any such shares have been acquired
by a bona fide purchaser, shall deliver to such holder the shares of ANB Common
Stock to which the holder is entitled for such shares upon presentation of the
following: (a) evidence to the reasonable satisfaction of ANB that any such PBC
Certificate has been lost, wrongfully taken or destroyed; (b) such security or
indemnity as may be reasonably requested by ANB to indemnify and hold ANB and
the Exchange Agent harmless; and (c) evidence satisfactory to ANB that such
person is the owner of the shares theretofore represented by each PBC
Certificate claimed by the holder to be lost, wrongfully taken or destroyed and
that the holder is the person who would be entitled to present such PBC
Certificate for exchange pursuant to this Agreement.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF PBC
-------------------------------------
PBC hereby represents and warrants to ANB as follows:
5.1 ORGANIZATION, STANDING AND POWER. PBC is a corporation duly
--------------------------------
organized, validly existing and in good standing under the Laws of the State of
Florida, and has the corporate power and authority to carry on its business as
now conducted and to own, lease and operate its Assets and to incur its
Liabilities. PBC is duly qualified or licensed to transact
A-6
<PAGE>
business as a foreign corporation in good standing in the states of the United
States and foreign jurisdictions where the character of its Assets or the nature
or conduct of its business requires it to be so qualified or licensed, except
for such jurisdictions in which the failure to be so qualified or licensed is
not reasonably likely to have, individually or in the aggregate, a Material
Adverse Effect on PBC. PBC has delivered to ANB complete and correct copies of
its Articles of Incorporation and Bylaws and the articles of incorporation,
bylaws and other, similar governing instruments of each of its Subsidiaries, in
each case as amended through the date hereof.
5.2 AUTHORITY; NO BREACH BY AGREEMENT.
---------------------------------
(A) PBC has the corporate power and authority necessary to execute, deliver
and perform its obligations under this Agreement and to consummate the
transactions provided for herein. The execution, delivery and performance of
this Agreement and the consummation of the transactions provided for herein,
including the Merger, have been duly and validly authorized by all necessary
corporate action on the part of PBC, subject to the approval of this Agreement
by the holders of a majority of the outstanding shares of PBC Common Stock.
Subject to such requisite stockholder approval and required regulatory consents,
this Agreement represents a legal, valid and binding obligation of PBC,
enforceable against PBC in accordance with its terms (except in all cases as
such enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar Laws affecting the enforcement of
creditors' rights generally and except that the availability of the equitable
remedy of specific performance or injunctive relief is subject to the discretion
of the court before which any proceeding may be brought).
(B) Neither the execution and delivery of this Agreement by PBC, nor the
consummation by PBC of the transactions provided for herein, nor compliance by
PBC with any of the provisions hereof, will (i) conflict with or result in a
breach of any provision of PBC's Articles of Incorporation or Bylaws, or (ii)
constitute or result in a Default under, or require any Consent pursuant to, or
result in the creation of any Lien on any Asset of any PBC Company under, any
Contract or Permit of any PBC Company where failure to obtain such Consent is
reasonably likely to have, individually or in the aggregate, a Material Adverse
Effect on PBC, or, (iii) subject to receipt of the requisite approvals referred
to in Section 9.1(b) of this Agreement, violate any Law or Order applicable to
any PBC Company or any of their respective Assets.
(C) Other than in connection or compliance with the provisions of the
Securities Laws, applicable state corporate and securities Laws, and other than
Consents required from Regulatory Authorities, and other than notices to or
filings with the Internal Revenue Service or the Pension Benefit Guaranty
Corporation with respect to any employee benefit plans, and other than Consents,
filings or notifications which, if not obtained or made, are not reasonably
likely to have, individually or in the aggregate, a Material Adverse Effect on
PBC, no notice to, filing
A-7
<PAGE>
with or Consent of, any public body or authority is necessary for the
consummation by PBC of the Merger and the other transactions contemplated in
this Agreement.
5.3 CAPITAL STOCK.
-------------
(A) The authorized capital stock of PBC consists of (i) 10,000,000 shares
of PBC Common Stock, of which 2,337,309 shares are issued and outstanding, and
(ii) 30,000 shares of PBC preferred stock, of which none are issued and
outstanding. All of the issued and outstanding shares of capital stock of PBC
are duly and validly issued and outstanding and are fully paid and nonassessable
under the FBCA. None of the outstanding shares of capital stock of PBC has been
issued in violation of any preemptive rights of the current or past stockholders
of PBC.
(B) Except as set forth in Section 5.3(a) of this Agreement, there are no
shares of capital stock or other equity securities of PBC outstanding and no
outstanding options, warrants, scrip, rights to subscribe to, calls or
commitments of any character whatsoever relating to, or securities or rights
convertible into or exchangeable for, shares of the capital stock of PBC or
contracts, commitments, understandings or arrangements by which PBC is or may be
bound to issue additional shares of its capital stock or options, warrants or
rights to purchase or acquire any additional shares of its capital stock. PBC
has no liability for dividends declared or accrued, but unpaid, with respect to
any of its capital stock.
5.4 PBC SUBSIDIARIES.
----------------
(A) The PBC Subsidiaries are Public Bank ("PBC Bank") and Public Mortgage
Corporation ("PMC"). PBC Bank is a state non-member bank, duly organized,
validly existing and in good standing under the laws of the State of Florida.
PMC is an inactive corporation with no assets or business. PBC Bank has the
corporate power and authority necessary for it to own, lease and operate its
Assets and to incur its Liabilities and to carry on its business as now
conducted. PBC Bank is duly qualified or licensed to transact business as a
foreign corporation in good standing in the states of the United States and
foreign jurisdictions where the character of its Assets or the nature or
conduct of its business requires it to be so qualified or licensed, except for
jurisdictions in which the failure to be so qualified or licensed is not
reasonably likely to have, individually or in the aggregate, a Material Adverse
Effect on PBC. PBC Bank is an "insured institution" as defined in the Federal
Deposit Insurance Act and applicable regulations thereunder.
(B) The authorized and issued and outstanding capital stock of each PBC
Subsidiary is set forth on Schedule 5.4. PBC or PBC Bank owns all of the issued
------------
and outstanding shares of capital stock of each PBC Subsidiary. No equity
securities of any PBC Subsidiary are or may become required to be issued by
reason of any options, warrants, scrip, rights to subscribe to, calls or
commitments of any character whatsoever relating to, or securities or rights
convertible into or exchangeable for, shares of the capital stock of any such
Subsidiary, and there are no
A-8
<PAGE>
Contracts by which any PBC Subsidiary is bound to issue additional shares of its
capital stock or options, warrants or rights to purchase or acquire any
additional shares of its capital stock or by which any PBC Company is or may be
bound to transfer any shares of the capital stock of any PBC Subsidiary. There
are no Contracts relating to the rights of any PBC Company to vote or to dispose
of any shares of the capital stock of any PBC Subsidiary. All of the shares of
capital stock of each PBC Subsidiary held by a PBC Company are fully paid and
nonassessable under the applicable corporation Law of the jurisdiction in which
such Subsidiary is incorporated and organized and are owned by the PBC Company
free and clear of any Lien. No PBC Subsidiary has any liability for dividends
declared or accrued, but unpaid, with respect to any of its capital stock.
5.5 FINANCIAL STATEMENTS. Attached hereto as Schedule 5.5 are copies of
-------------------- ------------
all PBC Financial Statements and PBC Call Reports for periods ended prior to the
date hereof, and PBC will deliver to ANB promptly copies of all PBC Financial
Statements and PBC Call Reports prepared subsequent to the date hereof. The PBC
Financial Statements (as of the dates thereof and for the periods covered
thereby) present or will present, as the case may be, fairly the consolidated
financial position of the PBC Companies as of the dates indicated and the
consolidated results of operations, changes in stockholders' equity and cash
flows of the PBC Companies for the periods indicated, in accordance with GAAP
(subject to exceptions as to consistency specified therein or as may be
indicated in the notes thereto or, in the case of interim financial statements,
to normal year-end adjustments that are not material). The PBC Call Reports
have been prepared in material compliance with the rules and regulations of the
respective federal or state banking regulator with which they were filed.
5.6 ABSENCE OF UNDISCLOSED LIABILITIES. No PBC Company has any
----------------------------------
Liabilities that have, individually or in the aggregate, a Material Adverse
Effect on PBC, except Liabilities accrued or reserved against in the
consolidated balance sheets of PBC as of December 31, 1997, included in the PBC
Financial Statements or reflected in the notes thereto. No PBC Company has
incurred or paid any Liability since December 31, 1997, except for such
Liabilities incurred or paid in the ordinary course of business consistent with
past business practice and which would not have, individually or in the
aggregate, a Material Adverse Effect on PBC, it being understood that the
payment of normal, recurring expenses does not have a Material Adverse Effect.
5.7 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as set forth on Schedule
------------------------------------ --------
5.7, since December 31, 1997 (i) there have been no events, changes or
- ---
occurrences that have had, individually or in the aggregate, a Material Adverse
Effect on PBC, and (ii) the PBC Companies have not taken any action, or failed
to take any action, prior to the date of this Agreement, which action or
failure, if taken after the date of this Agreement, would represent or result in
a material breach or violation of any of the covenants and agreements of PBC
provided in Article 7 of this Agreement.
A-9
<PAGE>
5.8 TAX MATTERS.
-----------
(A) All Tax returns required to be filed by or on behalf of any of the PBC
Companies have been timely filed or requests for extensions have been timely
filed, granted and have not expired for periods ended on or before December 31,
1996, and all returns filed are complete and accurate in all material respects.
All Taxes shown as due on filed returns have been paid. There is no audit
examination, deficiency, refund Litigation or matter in controversy pending, or
to the Knowledge of PBC, threatened, with respect to any Taxes that, if
adversely determined, would have, individually or in the aggregate, a Material
Adverse Effect on PBC, except as reserved against in the PBC Financial
Statements delivered prior to the date of this Agreement. All Taxes and other
Liabilities due with respect to completed and settled examinations or concluded
Litigation have been fully paid.
(B) None of the PBC Companies has executed an extension or waiver of any
statute of limitations on the assessment or collection of any Tax due (excluding
such statutes that relate to years currently under examination by the Internal
Revenue Service or other applicable taxing authorities) that is currently in
effect.
(C) Adequate provision for any Taxes due or to become due for any of the
PBC Companies for the period or periods through and including the date of the
respective PBC Financial Statements has been made and is reflected on such PBC
Financial Statements.
(D) Deferred Taxes of the PBC Companies have been provided for in
accordance with GAAP.
5.9 LOAN PORTFOLIO; DOCUMENTATION AND REPORTS.
-----------------------------------------
(A) Except as disclosed in Schedule 5.9, none of the PBC Companies is a
------------
creditor as to any written or oral loan agreement, note or borrowing arrangement
including, without limitation, leases, credit enhancements, commitments and
interest-bearing assets (the "Loans"), other than Loans the unpaid principal
balance of which does not exceed $25,000 per Loan or $50,000 in the aggregate,
under the terms of which the obligor is, as of the date of this Agreement, over
90 days delinquent in payment of principal or interest or in default of any
other material provisions. Except as otherwise set forth in Schedule 5.9, none
------------
of the PBC Companies is a creditor as to any Loan, including without limitation
any loan guaranty, to any director, executive officer or 10% stockholder
thereof, or to the Knowledge of PBC, any Person, corporation or enterprise
controlling, controlled by or under common control of any of the foregoing.
Except as set forth in Schedule 5.9, none of the PBC Companies holds any Loans
------------
in the original principal amount in excess of $25,000 per Loan or $50,000 in the
aggregate that since January 1, 1995 have been classified by any bank examiner,
whether regulatory or internal, as other loans Specifically Mentioned, Special
Mention, Substandard, Doubtful, Loss, Classified, Criticized, Credit Risk
Assets, concerned loans or words of similar import.
A-10
<PAGE>
(B) The documentation relating to each Loan made by any PBC Company and to
all security interests, mortgages and other liens with respect to all collateral
for loans is adequate for the enforcement of the material terms of such Loan,
security interest, mortgage or other lien, except for inadequacies in such
documentation which will not, individually or in the aggregate, have a Material
Adverse Effect on PBC.
(C) Each of the PBC Companies has timely filed all material reports,
registrations and statements, together with any amendments required to be made
with respect thereto, that it was required to file since December 31, 1992 with
(i) the FRB, (ii) the FDIC and (iii) any state regulatory authority ("State
Regulator") (collectively "Regulatory Authorities") and all other material
reports and statements required to be filed by it since December 31, 1992,
including, without limitation, any report or statement required to be filed
pursuant to the laws, rules or regulations of the United States, the FRB, the
FDIC or any State Regulator, and has paid all fees and assessments due and
payable in connection therewith. Except as set forth in Schedule 5.9 and as
------------
otherwise provided herein, and except for normal examinations conducted by a
Regulatory Authorities in the regular course of the business of the PBC
Companies, to the Knowledge of PBC, no Regulatory Authority has initiated any
proceeding or, to the Knowledge of PBC, investigation into the business or
operations of any PBC Company since December 31, 1991. To the Knowledge of PBC,
there is no unresolved violation, criticism or exception by any Regulatory
Authority with respect to any report or statement or lien or any examinations of
any PBC Company.
5.10 ASSETS; INSURANCE. The PBC Companies have marketable title, free and
-----------------
clear of all Liens, to all of their respective Assets, except as noted in the
PBC Financial Statements, statutory liens not yet delinquent, or immaterial
defects in title and encumbrances which do not materially impair the value or
use for the purposes for which they are held. One of the PBC Companies has good
and marketable fee simple title to the real property described in Schedule
--------
5.10(a) and has an enforceable leasehold interest in the real property described
- -------
in Schedule 5.10(b), if any. All Assets that are material to PBC's business on
----------------
a consolidated basis, held under leases or subleases by any of the PBC Companies
are to the Knowledge of PBC held under valid Contracts enforceable against PBC
and to the Knowledge of PBC against the other party thereto in accordance with
their respective terms (except as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium, or other Laws affecting the
enforcement of creditors' rights generally and except that the availability of
the equitable remedy of specific performance or injunctive relief is subject to
the discretion of the court before which any proceedings may be brought), and to
the Knowledge of PBC each such Contract is in full force and effect and to the
Knowledge of PBC there is not under any such Contract any Default or claim of
Default by PBC or PBC Bank or, to the Knowledge of PBC, by any other party to
the Contract. Schedule 5.10(c) contains a list of all policies of fire, theft,
----------------
liability and other insurance maintained with respect to the Assets or
businesses of the PBC Companies and the fidelity and blanket bonds maintained by
any of the PBC Companies. The Assets of the PBC Companies include in all
material respects all assets required to operate the business of the PBC
Companies as now conducted.
A-11
<PAGE>
5.11 ENVIRONMENTAL MATTERS.
---------------------
(A) To the Knowledge of PBC, each PBC Company, its Participation
Facilities and its Loan Properties are, and have been, in compliance with all
Environmental Laws, except for violations that are not reasonably likely to
have, individually or in the aggregate, a Material Adverse Effect on PBC.
(B) There is no Litigation pending or, to the Knowledge of PBC, threatened
before any court, governmental agency or authority or other forum in which any
PBC Company or any of its Participation Facilities has been or, with respect to
threatened Litigation, may be named as a defendant (i) for alleged noncompliance
(including by any predecessor) with any Environmental Law or (ii) relating to
the release into the environment of any Hazardous Material (as defined below) or
oil, whether or not occurring at, on, under or involving a site owned, leased or
operated by any PBC Company or any of its Participation Facilities, except for
such Litigation pending or threatened that is not reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on PBC.
(C) There is no Litigation pending or, to the Knowledge of PBC, threatened
before any court, governmental agency or board or other forum in which any of
its Loan Properties (or PBC with respect to such Loan Property) has been or,
with respect to threatened Litigation, may be named as a defendant or
potentially responsible party (i) for alleged noncompliance (including by any
predecessor) with any Environmental Law or (ii) relating to the release into the
environment of any Hazardous Material or oil, whether or not occurring at, on,
under or involving a Loan Property, except for such Litigation pending or
threatened that is not reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on PBC.
(D) To the Knowledge of PBC, there is no reasonable basis for any
Litigation of a type described in subsections (b) or (c), except such as is not
reasonably likely to have, individually or in the aggregate, a Material Adverse
Effect on PBC.
(E) To the Knowledge of PBC, during the period of (i) any PBC Company's
ownership or operation of any of its respective current properties, (ii) any PBC
Company's participation in the management of any Participation Facility or (iii)
any PBC Company's holding of a security interest in a Loan Property, there have
been no releases of Hazardous Material or oil in, on, under or affecting such
properties, except such as are not reasonably likely to have, individually or in
the aggregate, a Material Adverse Effect on PBC. Prior to the period of (i) any
PBC Company's ownership or operation of any of its respective current
properties, (ii) any PBC Company's participation in the management of any
Participation Facility, or (iii) any PBC Company's holding of a security
interest in a Loan Property, to the Knowledge of PBC, there were no releases of
Hazardous Material or oil in, on, under or affecting any such property,
Participation Facility or Loan Property, except such as would not have,
individually or in the aggregate, a Material Adverse Effect on PBC.
A-12
<PAGE>
5.12 COMPLIANCE WITH LAWS. PBC is duly registered as a bank holding
--------------------
company under the BHC Act. Each PBC Company has in effect all Permits necessary
for it to own, lease or operate its Assets and to carry on its business as now
conducted, except for those Permits the absence of which are not reasonably
likely to have, individually or in the aggregate, a Material Adverse Effect on
PBC, and there has occurred no Default under any such Permit except for those
which would not have a Material Adverse Effect on PBC. Except as may be
disclosed on Schedule 5.12, none of the PBC Companies:
-------------
(A) is in violation of any Laws, Orders or Permits applicable to its
business or employees conducting its business, except for violations that do not
have, individually or in the aggregate, a Material Adverse Effect on PBC; or
(B) has received any notification or communication from any agency or
department of federal, state or local government or any Regulatory Authority or
the staff thereof (i) asserting that any PBC Company is not in compliance with
any of the Laws or Orders that such governmental authority or Regulatory
Authority enforces, where such noncompliance is reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on PBC, (ii)
threatening to revoke any Permits, the revocation of which would have,
individually or in the aggregate, a Material Adverse Effect on PBC, or (iii)
requiring any PBC Company to enter into or consent to the issuance of a cease
and desist order, formal agreement, directive, commitment or memorandum of
understanding, or to adopt any board resolution or similar undertaking, that
restricts materially the conduct of its business, or in any manner relates to
its capital adequacy, its credit or reserve policies, its management or the
payment of dividends.
5.13 LABOR RELATIONS; EMPLOYEES.
--------------------------
(A) No PBC Company is the subject of any Litigation asserting that it or
any other PBC Company has committed an unfair labor practice (within the meaning
of the National Labor Relations Act or comparable state Law) or seeking to
compel it or any other PBC Company to bargain with any labor organization as to
wages or conditions of employment, nor is there any strike or other labor
dispute involving any PBC Company, pending or threatened, nor to its Knowledge,
is there any activity involving any PBC Company's employees seeking to certify a
collective bargaining unit or engaging in any other organization activity.
(B) Schedule 5.13(b) contains a true and complete list showing the names
----------------
and current annual salaries of all current executive officers of each of the PBC
Companies and lists for each such person the amounts paid, payable or expected
to be paid as salary, bonus payments and other compensation for 1996 and 1997.
Schedule 5.13(b) also sets forth the name and offices held by each officer and
- ----------------
director of each of the PBC Companies.
A-13
<PAGE>
5.14 EMPLOYEE BENEFIT PLANS.
----------------------
(A) Schedule 5.14 lists, and PBC has delivered or made available to ANB
-------------
prior to the execution of this Agreement copies of, all pension, retirement,
profit-sharing, deferred compensation, stock option, employee stock ownership,
severance pay, vacation, bonus or other incentive plan, all other written or
unwritten employee programs, arrangements or agreements, all medical, vision,
dental or other health plans, all life insurance plans, and all other employee
benefit plans or fringe benefit plans, including, without limitation, "employee
benefit plans" as that term is defined in Section 3(3) of ERISA, currently
adopted, maintained by, sponsored in whole or in part by, or contributed to by
any PBC Company or Affiliate thereof for the benefit of employees, retirees,
dependents, spouses, directors, independent contractors or other beneficiaries
and under which employees, retirees, dependents, spouses, directors, independent
contractors or other beneficiaries are eligible to participate (collectively,
the "PBC Benefit Plans"). Any of the PBC Benefit Plans which is an "employee
pension benefit plan," as that term is defined in Section 3(2) of ERISA, is
referred to herein as a "PBC ERISA Plan." Each PBC ERISA Plan which is also a
"defined benefit plan" (as defined in Section 414(j) of the Internal Revenue
Code) is referenced to herein as an "PBC Pension Plan". No PBC Pension Plan is
or has been a multiemployer plan within the meaning of Section 3(37) of ERISA.
(B) All PBC Benefit Plans and the administration thereof are in compliance
with the applicable terms of ERISA, the Internal Revenue Code and any other
applicable Laws, the breach or violation of which would have, individually or in
the aggregate, a Material Adverse Effect on PBC. Each PBC ERISA Plan which is
intended to be qualified under Section 401(a) of the Internal Revenue Code has
received a favorable determination letter from the Internal Revenue Service, and
PBC is not aware of any circumstances that would result in revocation of any
such favorable determination letter. To the Knowledge of PBC, no PBC Company
has engaged in a transaction with respect to any PBC Benefit Plan that, assuming
the taxable period of such transaction expired as of the date hereof, would
subject any PBC Company to a tax or penalty imposed by either Section 4975 of
the Internal Revenue Code or Section 502(i) of ERISA in amounts which are
reasonably likely to have, individually or in the aggregate, a Material Adverse
Effect on PBC. There are no actions, suits, arbitrations or claims, including
any investigations or audits by the Internal Revenue Service or any other
governmental authority, pending (other than routine claims for benefits) or to
the Knowledge of PBC threatened against, any PBC Benefit Plan or any PBC Company
with regard to any PBC Benefit Plan, any trust which is a part of any PBC
Benefit Plan, any trustee, fiduciary, custodian, administrator or other person
or entity holding or controlling assets of any PBC Benefit Plan.
(C) No PBC ERISA Plan which is a defined benefit pension plan has any
"unfunded current liability," as that term is defined in Section 302(d)(8)(A) of
ERISA, and the fair market value of the assets of any such plan exceeds the
plan's "benefit liabilities," as that term is defined in Section 4001(a)(16) of
ERISA, when determined under actuarial factors that would apply if the plan
terminated in accordance with all applicable legal requirements. Since the date
of the most recent actuarial valuation, there has been (i) no material change in
the financial
A-14
<PAGE>
position of any PBC Pension Plan, (ii) no change in the actuarial assumptions
with respect to any PBC Pension Plan, (iii) no increase in benefits under any
PBC Pension Plan as a result of plan amendments or changes in applicable Law
which is reasonably likely to have, individually or in the aggregate, a Material
Adverse Effect on PBC or to materially adversely affect the funding status of
any such plan. Neither any PBC Pension Plan nor any "single-employer plan,"
within the meaning of Section 4001(a)(15) of ERISA, currently or formerly
maintained by any PBC Company, or the single-employer plan of any entity which
is considered one employer with PBC under Section 4001 of ERISA or Section 414
of the Internal Revenue Code or Section 302 of ERISA (whether or not waived) (an
"ERISA Affiliate") has an "accumulated funding deficiency" within the meaning of
Section 412 of the Internal Revenue Code or Section 302 of ERISA, which is
reasonably likely to have a Material Adverse Effect on PBC. No PBC Company has
provided, or is required to provide, security to a PBC Pension Plan or to any
single-employer plan of an ERISA Affiliate pursuant to Section 401(a)(29) of the
Code.
(D) No Liability under Subtitle C or D of Title IV of ERISA has been or is
expected to be incurred by any PBC Company with respect to any ongoing, frozen
or terminated single-employer plan or the single-employer plan of any ERISA
Affiliate, which Liability is reasonably likely to have a Material Adverse
Effect on PBC. No PBC Company has incurred any withdrawal Liability with
respect to a multiemployer plan under Subtitle B of Title IV of ERISA
(regardless of whether based on contributions of an ERISA Affiliate), which
Liability is reasonably likely to have a Material Adverse Effect on PBC. No
notice of a "reportable event," within the meaning of Section 4043 of ERISA for
which the 30-day reporting requirement has not been waived, has been required to
be filed for any PBC Pension Plan or by any ERISA Affiliate within the 12-month
period ending on the date hereof.
(E) No PBC Company has any obligations for retiree health and life benefits
under any of the PBC Benefit Plans, and there are no restrictions on the rights
of such PBC Company to amend or terminate any such plan without incurring any
Liability thereunder, which Liability is reasonably likely to have a Material
Adverse Effect on PBC.
(F) Neither the execution and delivery of this Agreement nor the
consummation of the transactions provided for herein will (i) result in any
payment (including, without limitation, severance, unemployment compensation,
golden parachute or otherwise) becoming due to any director or any employee of
any PBC Company from any PBC Company under any PBC Benefit Plan or otherwise,
(ii) increase any benefits otherwise payable under any PBC Benefit Plan, or
(iii) result in any acceleration of the time of payment or vesting of any such
benefit, where such payment, increase or acceleration is reasonably likely to
have, individually or in the aggregate, a Material Adverse Effect on PBC.
(G) With respect to all PBC Benefit Plans (whether or not subject to ERISA
and whether or not qualified under Section 401(a) of the Internal Revenue Code),
all contributions due (including any contributions to any trust account or
payments due under any insurance policy) previously declared or otherwise
required by Law or contract to have been made and any
A-15
<PAGE>
employer contributions (including any contributions to any trust account or
payments due under any insurance policy) accrued but unpaid as of the date
hereof will be paid by the time required by Law or contract. All contributions
made or required to be made under any PBC Benefit Plan have been made and such
contributions meet the requirements for deductibility under the Internal Revenue
Code, and all contributions which are required and which have not been made have
been properly recorded on the books of PBC.
5.15 MATERIAL CONTRACTS. Except as set forth on Schedule 5.15, none of the
------------------ -------------
PBC Companies, nor any of their respective Assets, businesses or operations, is
a party to, or is bound or affected by, or receives benefits under, (i) any
employment, severance, termination, consulting or retirement Contract with any
Person; (ii) any Contract relating to the borrowing of money by any PBC Company
or the guarantee by any PBC Company of any such obligation (other than Contracts
evidencing deposit liabilities, purchases of federal funds, fully-secured
repurchase agreements, trade payables and Contracts relating to borrowings or
guarantees made and letters of credit); (iii) any Contract relating to
indemnification or defense of any director, officer or employee of any of the
PBC Companies or any other Person, except as may be provided in an PBC Company's
articles of incorporation or bylaws; (iv) any Contract with any labor union; (v)
any Contract relating to the disposition or acquisition of any interest in any
business enterprise; (vi) any Contract relating to the extension of credit to,
provision of services for, sale, lease or license of Assets to, engagement of
services from, or purchase, lease or license of Assets from, any 5% stockholder,
director or officer of any of the PBC Companies, any member of the immediate
family of the foregoing or, to the Knowledge of PBC, any related interest (as
defined in Regulation O promulgated by the FRB) ("Related Interest") of any of
the foregoing, except with regard to deposit accounts; (vii) any Contract (A)
which limits the freedom of any of the PBC Companies to compete in any line of
business or with any Person or (B) which limits the freedom of any other Person
to compete in any line of business with any PBC Company; (viii) any Contract
providing a power of attorney or similar authorization given by any of the PBC
Companies, except as issued in the ordinary course of business with respect to
routine matters; and (ix) any Contract (other than deposit agreements and
certificates of deposits issued to customers entered into in the ordinary course
of business and letters of credit) that involves the payment by any of the PBC
Companies of amounts aggregating $5,000 or more in any twelve-month period
(together with all Contracts referred to in Sections 5.10 and 5.14(a) of this
Agreement, the "PBC Contracts"). None of the PBC Companies is in material
Default under any PBC Contract which is material to PBC's business. All of the
indebtedness of any PBC Company for money borrowed is prepayable at any time by
such PBC Company without penalty or premium.
5.16 LEGAL PROCEEDINGS. Except as set forth on Schedule 5.16, there is no
----------------- -------------
Litigation instituted or pending, or, to the Knowledge of PBC, threatened (or
unasserted but considered probable of assertion and which if asserted would have
at least a reasonable probability of an unfavorable outcome) against any PBC
Company, or against any Asset, interest, or right of any of them, that, if
adversely determined, would have, individually or in the aggregate, a Material
Adverse Effect on PBC, nor are there any Orders of any Regulatory Authorities,
other
A-16
<PAGE>
governmental authorities or arbitrators outstanding against any PBC Company,
that, if adversely determined, would have, individually or in the aggregate, a
Material Adverse Effect on PBC.
5.17 REPORTS. Since January 1, 1995, or the date of organization if later,
-------
each PBC Company has timely filed all reports and statements, together with any
amendments required to be made with respect thereto, that it was required to
file with (i) any Regulatory Authorities or (ii) any applicable state securities
or banking authorities (except failures to file or late filings which are not
reasonably likely to have, individually or in the aggregate, a Material Adverse
Effect on PBC). As of their respective dates, each of such reports and
documents, including the financial statements, exhibits, and schedules thereto,
complied in all material respects with all applicable Laws except for such
failures to comply which will not have a Material Adverse Effect on PBC.
5.18 STATEMENTS TRUE AND CORRECT. No representation, warranty, covenant or
---------------------------
other statement by any PBC Company or any Affiliate thereof contained in this
Agreement, the Exhibits and Schedules hereto, or any other document, agreement
or instrument delivered by a PBC Company to ANB in connection with the Closing
contains or will contain any untrue statement of material fact or will omit to
state a material fact necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. None of the
information supplied or to be supplied by any PBC Company or any Affiliate
thereof for inclusion in the documents to be prepared by ANB in connection with
the transactions provided for in this Agreement, including without limitation
(i) documents to be filed with the SEC, including without limitation the
Registration Statement on Form S-4 of ANB registering the shares of ANB Common
Stock to be offered to the holders of PBC Common Stock, and all amendments
thereto (as amended, the "S-4 Registration Statement") and the Proxy Statement
and Prospectus in the form contained in the S-4 Registration Statement, and all
amendments and supplements thereto (as amended and supplemented, the "Proxy
Statement/Prospectus"), (ii) filings pursuant to any state securities and blue
sky Laws, and (iii) filings made in connection with the obtaining of Consents
from Regulatory Authorities, in the case of the S-4 Registration Statement, at
the time the S-4 Registration Statement is declared effective pursuant to the
1933 Act, in the case of the Proxy Statement/Prospectus, at the time of the
mailing thereof and at the time of the meeting of stockholders to which the
Proxy Statement/Prospectus relates, and in the case of any other documents, the
time such documents are filed with a Regulatory Authority and/or at the time
they are distributed to stockholders of ANB or PBC, contains or will contain any
untrue statement of a material fact or fails to state any material fact required
to be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading. All
documents that any PBC Company or any Affiliate thereof is responsible for
filing with any Regulatory Authority in connection with the transactions
provided for herein will comply as to form in all material respects with the
provisions of applicable Law, except no representation is made regarding
information supplied by ANB for inclusion therein.
A-17
<PAGE>
5.19 REGULATORY MATTERS. To the Knowledge of PBC, no PBC Company or any
------------------
Affiliate thereof has taken any action or has any Knowledge of any fact or
circumstance that is reasonably likely to materially impede or delay receipt of
any Consents of Regulatory Authorities referred to in Section 9.1(b) of this
Agreement or result in the imposition of a condition or restriction of the type
referred to in the last sentence of such Section.
5.20 OFFICES. The headquarters of each PBC Company and each other office,
-------
branch or facility maintained and operated by each PBC Company (including
without limitation representative and loan production offices and operations
centers) and the locations thereof are listed on Schedule 5.20. Except as set
-------------
forth on Schedule 5.20, none of the PBC Companies maintains any other office or
-------------
branch or conducts business at any other location, or has applied for or
received permission to open any additional office or branch or to operate at any
other location.
5.21 DATA PROCESSING SYSTEMS. Public Bank does check processing on its
-----------------------
owned equipment utilizing software provided by Kirchman Corporation pursuant to
a licensing agreement dated August 5, 1994 (the "Kirchman Licensing Agreement").
The Kirchman Licensing Agreement is a valid and binding agreement enforceable
against Public Bank and, to the Knowledge of Public Bank, against Kirchman in
accordance with its terms, except in all cases as such enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
similar Laws affecting the enforcement of creditors' rights generally and except
that the availability of the equitable remedy of specific performance or
injunctive relief is subject to the discretion of the court before which any
proceeding may be brought, and to the Knowledge of PBC the software licensed
pursuant to the Kirchman Licensing Agreement is performing in accordance with
the specifications set forth in the Kirchman Licensing Agreement.
5.22 ADMINISTRATION OF TRUST ACCOUNTS. PBC Bank does not possess and does
--------------------------------
not exercise trust powers.
5.23 BROKER'S FEES. Neither PBC nor any of its Subsidiaries nor any of
-------------
their respective officers or directors has employed any broker or finder or
incurred any liability for any broker's fees, commissions or finder's fees in
connection with any of the transactions provided for in this Agreement.
5.24 OPINION OF COUNSEL. PBC has no Knowledge of any facts that would
------------------
preclude issuance of the opinion of counsel referred to in Section 9.2(d).
5.25 TAKEOVER LAWS. PBC has taken all action required to be taken by it in
-------------
order to exempt this Agreement and the transactions provided for hereby and this
Agreement and the transactions provided for hereby are exempt from, the
requirements of any "moratorium", "control share", "fair price" or other anti-
takeover laws and regulations (collectively, "Takeover Laws") of the State of
Florida, including Sections 607.0901 and 607.0902 of the FBCA.
A-18
<PAGE>
ARTICLE 6
REPRESENTATIONS AND WARRANTIES OF ANB
-------------------------------------
ANB hereby represents and warrants to PBC as follows:
6.1 ORGANIZATION, STANDING AND POWER. ANB is a corporation duly
--------------------------------
organized, validly existing, and in good standing under the Laws of the State of
Delaware, and has the corporate power and authority to carry on its business as
now conducted and to own, lease and operate its Assets and to incur its
Liabilities. ANB is duly qualified or licensed to transact business as a
foreign corporation in good standing in the states of the United States and
foreign jurisdictions where the character of its Assets or the nature or conduct
of its business requires it to be so qualified or licensed, except for such
jurisdictions in which the failure to be so qualified or licensed is not
reasonably likely to have, individually or in the aggregate, a Material Adverse
Effect on ANB. ANB has delivered to PBC complete and correct copies of its
Certificate of Incorporation and Bylaws and the articles of incorporation,
bylaws and other, similar governing instruments of each of its Subsidiaries, in
each case as amended through the date hereof.
6.2 AUTHORITY; NO BREACH BY AGREEMENT.
---------------------------------
(A) ANB has the corporate power and authority necessary to execute,
deliver and perform its obligations under this Agreement and to consummate the
transactions provided for herein. The execution, delivery and performance of
this Agreement and the consummation of the transactions provided for herein,
including the Merger, have been duly and validly authorized by all necessary
corporate action on the part of ANB. Subject to required regulatory consents,
this Agreement represents a legal, valid and binding obligation of ANB,
enforceable against ANB in accordance with its terms (except in all cases as
such enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar Laws affecting the enforcement of
creditors' rights generally and except that the availability of the equitable
remedy of specific performance or injunctive relief is subject to the discretion
of the court before which any proceeding may be brought).
(B) Neither the execution and delivery of this Agreement by ANB, nor the
consummation by ANB of the transactions provided for herein, nor compliance by
ANB with any of the provisions hereof, will (i) conflict with or result in a
breach of any provision of ANB's Certificate of Incorporation or Bylaws, or (ii)
constitute or result in a Default under, or require any Consent pursuant to, or
result in the creation of any Lien on any Asset of any ANB Company under, any
Contract or Permit of any ANB Company, where failure to obtain such Consent is
reasonably likely to have, individually or in the aggregate, a Material Adverse
Effect on ANB, or, (iii) subject to receipt of the requisite approvals referred
to in Section 9.1(b) of this Agreement, violate any Law or Order applicable to
any ANB Company or any of their respective Assets.
A-19
<PAGE>
(C) Other than in connection or compliance with the provisions of the
Securities Laws, applicable state corporate and securities Laws, and rules of
the NASD, and other than Consents required from Regulatory Authorities, and
other than notices to or filings with the Internal Revenue Service or the
Pension Benefit Guaranty Corporation with respect to any employee benefit plans,
and other than Consents, filings or notifications which, if not obtained or
made, are not reasonably likely to have, individually or in the aggregate, a
Material Adverse Effect on ANB, no notice to, filing with or Consent of, any
public body or authority is necessary for the consummation by ANB of the Merger
and the other transactions contemplated in this Agreement.
6.3 CAPITAL STOCK. The authorized capital stock of ANB consists of (i)
-------------
10,000,000 shares of ANB Common Stock, of which 8,648,120 shares are issued and
outstanding, and (ii) 100,000 shares of preferred stock, $1.00 par value per
share, none of which is issued and outstanding. All of the issued and
outstanding shares of ANB Common Stock are, and all of the shares of ANB Common
Stock to be issued in exchange for shares of PBC Common Stock upon consummation
of the Merger, when issued in accordance with the terms of this Agreement, will
be, duly and validly issued and outstanding and fully paid and nonassessable
under the DGCL. None of the outstanding shares of ANB Common Stock has been,
and none of the shares of ANB Common Stock to be issued in exchange for shares
of PBC Common Stock upon consummation of the Merger will be, issued in violation
of any preemptive rights of the current or past stockholders of ANB. ANB has
granted options to purchase no more than 411,037 shares of ANB Common Stock
under the ANB Stock Plan. On April 25, 1996, the ANB Board terminated the ANB
Stock Plans. In addition, in 1996, ANB adopted a Performance Share Plan and a
Deferred Compensation Plan for Directors who are not Employees of ANB, pursuant
to which additional shares of ANB Common Stock have been and will continue to be
awarded or issued, as the case may be. Schedule 6.3 contains a description of
------------
each of these plans, including without limitation the number of shares reserved,
the number of shares currently awarded and the potential future obligation with
respect thereto.
6.4 ANB SUBSIDIARIES.
----------------
(A) The ANB Subsidiaries owned directly by ANB are Alabama Exchange Bank;
First Citizens Bank, National Association; First American Bank; Citizens &
Peoples Bank, National Association; Bank of Dadeville; First Gulf Bank and
National Bank of Commerce of Birmingham. First Citizens Bank, National
Association, Citizens & Peoples Bank, National Association and National Bank of
Commerce of Birmingham are national banking associations duly organized and
validly existing under the Laws of the United States of America. Each of
Alabama Exchange Bank, Bank of Dadeville and First Gulf Bank is a state member
bank of the Federal Reserve System, duly organized and validly existing under
the Laws of the State of Alabama. First American Bank is a state non-member
bank, duly organized and validly existing under the laws of the State of
Alabama. Each ANB Subsidiary is in good standing under the Laws of the
jurisdiction in which it is incorporated or organized, and each ANB Subsidiary
has the corporate power and authority necessary for it to own, lease and operate
its Assets and to incur its Liabilities and to carry on its business as now
conducted. Each ANB Subsidiary is duly
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qualified or licensed to transact business as a foreign corporation in good
standing in the States of the United States and foreign jurisdictions where the
character of its Assets or the nature or conduct of its business requires it to
be so qualified or licensed, except for jurisdictions in which the failure to be
so qualified or licensed is not reasonably likely to have, individually or in
the aggregate, a Material Adverse Effect on ANB. Each ANB Subsidiary that is a
depository institution is an "insured institution" as defined in the Federal
Deposit Insurance Act and applicable regulations thereunder.
(B) ANB or one of its Subsidiaries owns greater than 99% of the issued and
outstanding shares of capital stock of each ANB Subsidiary. No equity
securities of any ANB Subsidiary are or may become required to be issued by
reason of any options, warrants, scrip, rights to subscribe to, calls or
commitments of any character whatsoever relating to, or securities or rights
convertible into or exchangeable for, shares of the capital stock of any such
Subsidiary, and there are no Contracts by which any ANB Subsidiary is bound to
issue additional shares of its capital stock or options, warrants or rights to
purchase or acquire any additional shares of its capital stock or by which any
ANB Company is or may be bound to transfer any shares of the capital stock of
any ANB Subsidiary. There are no Contracts relating to the rights of any ANB
Company to vote or to dispose of any shares of the capital stock of any ANB
Subsidiary. All of the shares of capital stock of each ANB Subsidiary held by
an ANB Company are fully paid and nonassessable under the applicable corporation
Law of the jurisdiction in which such Subsidiary is incorporated or organized
and are owned by the ANB Company free and clear of any Lien. No ANB Subsidiary
has any liability for dividends declared or accrued, but unpaid, with respect to
any of its capital stock.
6.5 FINANCIAL STATEMENTS. Attached hereto as Schedule 6.5 are copies of
-------------------- ------------
all ANB Financial Statements and ANB Regulatory Reports for periods ended prior
to the date hereof and ANB will deliver to PBC promptly copies of all ANB
Financial Statements and ANB Regulatory Reports prepared subsequent to the date
hereof. The ANB Financial Statements (as of the dates thereof and for the
periods covered thereby) present or will present, as the case may be, fairly the
consolidated financial position of the ANB Companies as of the dates indicated
and the consolidated results of operations, changes in stockholders' equity, and
cash flows of the ANB Companies for the periods indicated, in accordance with
GAAP (subject to exceptions as to consistency specified therein or as may be
indicated in the notes thereto or, in the case of interim financial statements,
to normal year-end adjustments that are not material). The ANB Regulatory
Reports have been prepared in material compliance with the rules and regulations
of the FRB.
6.6 ABSENCE OF UNDISCLOSED LIABILITIES. No ANB Company has any
----------------------------------
Liabilities that have, individually or in the aggregate, a Material Adverse
Effect on ANB, except Liabilities accrued or reserved against in the
consolidated balance sheets of ANB as of September 30, 1997 included in the ANB
Financial Statements or reflected in the notes thereto. No ANB Company has
incurred or paid any Liability since September 30, 1997, except for such
Liabilities incurred
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or paid in the ordinary course of business consistent with past business
practice and which do not have, individually or in the aggregate, a Material
Adverse Effect on ANB.
6.7 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as set forth on Schedule
------------------------------------ --------
6.7, since September 30, 1997 (i) there have been no events, changes or
- ---
occurrences that have had, or are reasonably likely to have, individually or in
the aggregate, a Material Adverse Effect on ANB, and (ii) the ANB Companies have
not taken any action, or failed to take any action, prior to the date of this
Agreement, which action or failure, if taken after the date of this Agreement,
would represent or result in a material breach or violation of any of the
covenants and agreements of ANB provided in Article 7 of this Agreement.
6.8 TAX MATTERS.
-----------
(A) All Tax returns required to be filed by or on behalf of any of the ANB
Companies have been timely filed or requests for extensions have been timely
filed, granted, and have not expired for periods ended on or before December 31,
1996, and all returns filed are complete and accurate in all material respects.
All Taxes shown as due on filed returns have been paid. There is no audit
examination, deficiency, refund Litigation or matter in controversy pending, or,
to the Knowledge of ANB, threatened, with respect to any Taxes that, if
adversely determined, would have, individually or in the aggregate, a Material
Adverse Effect on ANB, except as reserved against in the ANB Financial
Statements delivered prior to the date of this Agreement. All Taxes and other
Liabilities due with respect to completed and settled examinations or concluded
Litigation have been fully paid.
(B) None of the ANB Companies has executed an extension or waiver of any
statute of limitations on the assessment or collection of any Tax due (excluding
such statutes that relate to years currently under examination by the Internal
Revenue Service or other applicable taxing authorities) that is currently in
effect.
(C) Adequate provision for any Taxes due or to become due for any of the
ANB Companies for the period or periods through and including the date of the
respective ANB Financial Statements has been made and is reflected on such ANB
Financial Statements.
(D) Deferred Taxes of the ANB Companies have been provided for in
accordance with GAAP.
6.9 [INTENTIONALLY OMITTED].
-----------------------
6.10 ASSETS; INSURANCE. The ANB Companies have marketable title, free and
-----------------
clear of all Liens, to all of their respective Assets except as noted in the ANB
Financial Statements, statutory liens not yet delinquent, or immaterial defects
in title and encumbrances which do not materially impair the value or the use
for the purposes for which they are held. All Assets which are material to
ANB's business on a consolidated basis, held under leases or subleases by
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any of the ANB Companies, are to the Knowledge of ANB held under valid Contracts
enforceable against ANB and, to the Knowledge of ANB, against the other party
thereto in accordance with their respective terms (except as enforceability may
be limited by applicable bankruptcy, insolvency, reorganization, moratorium, or
other Laws affecting the enforcement of creditors' rights generally and except
that the availability of the equitable remedy of specific performance or
injunctive relief is subject to the discretion of the court before which any
proceedings may be brought), and, to the Knowledge of ANB, each such Contract is
in full force and effect. The policies of fire, theft, liability and other
insurance maintained with respect to the Assets or businesses of the ANB
Companies provide adequate coverage under current industry practices against
loss or Liability, and the fidelity and blanket bonds in effect as to which any
of the ANB Companies is a named insured are reasonably sufficient. The Assets
of the ANB Companies include in all material respects all assets required to
operate the business of the ANB Companies as now conducted.
6.11 ENVIRONMENTAL MATTERS.
---------------------
(A) To the Knowledge of ANB, each ANB Company, its Participation
Facilities and its Loan Properties are, and have been, in compliance with all
Environmental Laws, except for violations that are not reasonably likely to
have, individually or in the aggregate, a Material Adverse Effect on ANB.
(B) There is no Litigation pending or, to the Knowledge of ANB, threatened
before any court, governmental agency or authority or other forum in which any
ANB Company or any of its Participation Facilities has been or, with respect to
threatened Litigation, may be named as a defendant (i) for alleged noncompliance
(including by any predecessor) with any Environmental Law or (ii) relating to
the release into the environment of any Hazardous Material (as defined below) or
oil, whether or not occurring at, on, under or involving a site owned, leased or
operated by any ANB Company or any of its Participation Facilities, except for
such Litigation pending or threatened that is not reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on ANB.
(C) There is no Litigation pending or, to the Knowledge of ANB, threatened
before any court, governmental agency or board or other forum in which any of
its Loan Properties (or ANB in respect of such Loan Property) has been or, with
respect to threatened Litigation, may be named as a defendant or potentially
responsible party (i) for alleged noncompliance (including by any predecessor)
with any Environmental Law or (ii) relating to the release into the environment
of any Hazardous Material or oil, whether or not occurring at, on, under or
involving a Loan Property, except for such Litigation pending or threatened that
is not reasonably likely to have, individually or in the aggregate, a Material
Adverse Effect on ANB.
(D) To the Knowledge of ANB, there is no reasonable basis for any
Litigation of a type described in subsections (b) or (c), except such as is not
reasonably likely to have, individually or in the aggregate, a Material Adverse
Effect on ANB.
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(E) To the Knowledge of ANB, during the period of (i) any ANB Company's
ownership or operation of any of its respective current properties, (ii) any ANB
Company's participation in the management of any Participation Facility or (iii)
any ANB Company's holding of a security interest in a Loan Property, there have
been no releases of Hazardous Material or oil in, on, under or affecting such
properties, except such as are not reasonably likely to have, individually or in
the aggregate, a Material Adverse Effect on ANB. Prior to the period of (i) any
ANB Company's ownership or operation of any of its respective current
properties, (ii) any ANB Company's participation in the management of any
Participation Facility, or (iii) any ANB Company's holding of a security
interest in a Loan Property, to the Knowledge of ANB, there were no releases of
Hazardous Material or oil in, on, under or affecting any such property,
Participation Facility or Loan Property, except such as would not have,
individually or in the aggregate, a Material Adverse Effect on ANB.
6.12 COMPLIANCE WITH LAWS. ANB is duly registered as a bank holding
--------------------
company under the BHC Act. Each ANB Company has in effect all Permits necessary
for it to own, lease or operate its Assets and to carry on its business as now
conducted, except for those Permits the absence of which are not reasonably
likely to have, individually or in the aggregate, a Material Adverse Effect on
ANB, and there has occurred no Default under any such Permit, except for those
which would not have a Material Adverse Effect on ANB. Except as may be
disclosed on Schedule 6.12, none of the ANB Companies:
-------------
(A) is in violation of any Laws, Orders or Permits applicable to its
business or employees conducting its business, except for violations that do not
have, individually or in the aggregate, a Material Adverse Effect on ANB; or
(B) has received any notification or communication from any agency or
department of federal, state or local government or any Regulatory Authority or
the staff thereof (i) asserting that any ANB Company is not in compliance with
any of the Laws or Orders that such governmental authority or Regulatory
Authority enforces, where such noncompliance is reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on ANB, (ii)
threatening to revoke any Permits, the revocation of which would have,
individually or in the aggregate, a Material Adverse Effect on ANB, or (iii)
requiring any ANB Company to enter into or consent to the issuance of a cease
and desist order, formal agreement, directive, commitment or memorandum of
understanding, or to adopt any board resolution or similar undertaking, that
restricts materially the conduct of its business, or in any manner relates to
its capital adequacy, its credit or reserve policies, its management or the
payment of dividends.
6.13 LABOR RELATIONS. No ANB Company is the subject of any Litigation
---------------
asserting that it or any other ANB Company has committed an unfair labor
practice (within the meaning of the National Labor Relations Act or comparable
state Law) or seeking to compel it or any other ANB Company to bargain with any
labor organization as to wages or conditions of employment, nor is there any
strike or other labor dispute involving any ANB Company, pending or threatened,
or to its Knowledge, is there any activity involving any ANB Company's
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<PAGE>
employees seeking to certify a collective bargaining unit or engaging in any
other organization activity.
6.14 EMPLOYEE BENEFIT PLANS.
----------------------
(A) No ANB Pension Plan is or has been a multiemployer plan within the
meaning of Section 3(37) of ERISA.
(B) All ANB Benefit Plans and the administration thereof are in compliance
with the applicable terms of ERISA, the Internal Revenue Code and any other
applicable Laws the breach or violation of which would have, individually or in
the aggregate, a Material Adverse Effect on ANB. Each ANB ERISA Plan which is
intended to be qualified under Section 401(a) of the Internal Revenue Code has
received a favorable determination letter from the Internal Revenue Service, and
ANB is not aware of any circumstances that would result in revocation of any
such favorable determination letter. To the Knowledge of ANB, no ANB Company
has engaged in a transaction with respect to any ANB Benefit Plan that, assuming
the taxable period of such transaction expired as of the date hereof, would
subject any ANB Company to a tax or penalty imposed by either Section 4975 of
the Internal Revenue Code or Section 502(i) of ERISA in amounts which are
reasonably likely to have, individually or in the aggregate, a Material Adverse
Effect on ANB. There are no actions, suits, arbitrations or claims, including
any investigations or audits by the Internal Revenue Service or any other
governmental authority, pending (other than routine claims for benefits) or, to
the Knowledge of ANB, threatened against, any ANB Benefit Plan or any ANB
Company with regard to any ANB Benefit Plan, any trust which is a part of any
ANB Benefit Plan, any trustee, fiduciary, custodian, administrator or other
person or entity holding or controlling assets of any ANB Benefit Plan.
(C) No ANB ERISA Plan which is a defined benefit pension plan has any
"unfunded current liability," as that term is defined in Section 302(d)(8)(A) of
ERISA, and the fair market value of the assets of any such plan exceeds the
plan's "benefit liabilities," as that term is defined in Section 4001(a)(16) of
ERISA, when determined under actuarial factors that would apply if the plan
terminated in accordance with all applicable legal requirements. Since the date
of the most recent actuarial valuation, there has been (i) no material change in
the financial position of any ANB Pension Plan, (ii) no change in the actuarial
assumptions with respect to any ANB Pension Plan, (iii) no increase in benefits
under any ANB Pension Plan as a result of plan amendments or changes in
applicable Law which is reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on ANB or materially adversely affect the
funding status of any such plan. Neither any ANB Pension Plan nor any "single-
employer plan," within the meaning of Section 4001(a)(15) of ERISA, currently or
formerly maintained by any ANB Company, or the single-employer plan of any ERISA
Affiliate has an "accumulated funding deficiency" within the meaning of Section
412 of the Internal Revenue Code or Section 302 of ERISA, which is reasonably
likely to have a Material Adverse Effect on ANB. No ANB Company has provided,
or is required to provide, security to an ANB Pension Plan or to any single-
employer plan of an ERISA Affiliate pursuant to Section 401(a)(29) of the Code.
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<PAGE>
(D) No Liability under Subtitle C or D of Title IV of ERISA has been or is
expected to be incurred by any ANB Company with respect to any ongoing, frozen
or terminated single-employer plan or the single-employer plan of any ERISA
Affiliate, which Liability is reasonably likely to have a Material Adverse
Effect on ANB. No ANB Company has incurred any withdrawal Liability with
respect to a multiemployer plan under Subtitle B of Title IV of ERISA
(regardless of whether based on contributions of an ERISA Affiliate), which
Liability is reasonably likely to have a Material Adverse Effect on ANB. No
notice of a "reportable event," within the meaning of Section 4043 of ERISA for
which the 30-day reporting requirement has not been waived, has been required to
be filed for any ANB Pension Plan or by any ERISA Affiliate within the 12-month
period ending on the date hereof.
(E) No ANB Company has any obligations for retiree health and life
benefits under any of the ANB Benefit Plans, and there are no restrictions on
the rights of such ANB Company to amend or terminate any such plan without
incurring any Liability thereunder, which Liability is reasonably likely to have
a Material Adverse Effect on ANB.
(F) Neither the execution and delivery of this Agreement nor the
consummation of the transactions provided for herein will (i) result in any
payment (including, without limitation, severance, unemployment compensation,
golden parachute or otherwise) becoming due to any director or any employee of
any ANB Company from any ANB Company under any ANB Benefit Plan or otherwise,
(ii) increase any benefits otherwise payable under any ANB Benefit Plan, or
(iii) result in any acceleration of the time of payment or vesting of any such
benefit, where such payment, increase or acceleration is reasonably likely to
have, individually or in the aggregate, a Material Adverse Effect on ANB.
(G) With respect to all ANB Benefit Plans (whether or not subject to ERISA
and whether or not qualified under Section 401(a) of the Internal Revenue Code),
all contributions due (including any contributions to any trust account or
payments due under any insurance policy) previously declared or otherwise
required by Law or contract to have been made and any employer contributions
(including any contributions to any trust account or payments due under any
insurance policy) accrued but unpaid as of the date hereof will be paid by the
time required by Law or contract. All contributions made or required to be made
under any ANB Benefit Plan have been made and such contributions meet the
requirements for deductibility under the Internal Revenue Code, and all
contributions which are required and which have not been made have been properly
recorded on the books of ANB.
6.15 MATERIAL CONTRACTS. ANB has filed as an exhibit to its annual report
------------------
on Form 10-K each Contract required to be so filed under the 1934 Act and the
rules and regulations promulgated thereunder. None of the ANB Companies is in
Default under any ANB Contract, other than Defaults which are not reasonably
likely to have, individually or in the aggregate, a Material Adverse Effect on
ANB. All of the indebtedness of any ANB Company for money borrowed is
prepayable at any time by such ANB Company without penalty or premium.
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6.16 LEGAL PROCEEDINGS. Except as set forth on Schedule 6.16, there is no
----------------- -------------
Litigation instituted or pending, or, to the Knowledge of ANB, threatened (or
unasserted but considered probable of assertion and which if asserted would have
at least a reasonable probability of an unfavorable outcome) against any ANB
Company, or against any Asset, interest, or right of any of them, that, if
adversely determined, would have, individually or in the aggregate, a Material
Adverse Effect on ANB, nor are there any Orders of any Regulatory Authorities,
other governmental authorities or arbitrators outstanding against any ANB
Company, that, if adversely determined, would have, individually or in the
aggregate, a Material Adverse Effect on ANB.
6.17 REPORTS. Since January 1, 1993, or the date of organization if later,
-------
each ANB Company has filed all reports and statements, together with any
amendments required to be made with respect thereto, that it was required to
file with (i) the SEC, including, but not limited to, Forms 10-K, Forms 10-Q,
Forms 8-K, and proxy statements, (ii) other Regulatory Authorities, and (iii)
any applicable state securities or banking authorities (except, in the case of
state securities authorities, failures to file which are not reasonably likely
to have, individually or in the aggregate, a Material Adverse Effect on ANB).
As of their respective dates, each of such reports and documents, including the
financial statements, exhibits, and schedules thereto, complied in all material
respects with all applicable Laws. As of its respective date, each such report
and document did not, in all material respects, 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.
6.18 STATEMENTS TRUE AND CORRECT. No representation, warranty, covenant or
---------------------------
other statement by any ANB Company or any Affiliate thereof contained in this
Agreement, the Exhibits or Schedules hereto, or any other document, agreement or
instrument delivered by an ANB Company to PBC in connection with the Closing
contains or will contain any untrue statement of material fact or will omit to
state a material fact necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. None of the
information supplied or to be supplied by any ANB Company or any Affiliate
thereof for inclusion in the Proxy Statement/Prospectus to be mailed to PBC's
stockholders in connection with the PBC Stockholders' Meeting, and any other
documents to be filed by an ANB Company or any Affiliate thereof with the SEC or
any other Regulatory Authority in connection with the transactions provided for
herein, will, at the respective time such documents are filed, and with respect
to the Proxy Statement/Prospectus, when first mailed to the stockholders of PBC,
be false or misleading with respect to any material fact, or omit to state any
material fact necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, or, in the case of the
Proxy Statement or any amendment thereof or supplement thereto, at the time of
the PBC Stockholders' Meeting be false or misleading with respect to any
material fact, or omit to state any material fact necessary to correct any
statement in any earlier communication with respect to the solicitation of any
proxy for the PBC Stockholders' Meeting. All documents that any ANB Company or
any Affiliate thereof is responsible for filing with any Regulatory Authority in
connection with the transactions provided for herein will comply as to
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form in all material respects with the provisions of applicable Law, except no
representation is made regarding information supplied by PBC for inclusion
therein.
6.19 REGULATORY MATTERS. No ANB Company or any Affiliate thereof has taken
------------------
any action or has any Knowledge of any fact or circumstance that is reasonably
likely to materially impede or delay receipt of any Consents of Regulatory
Authorities referred to in Section 9.1(b) of this Agreement or result in the
imposition of a condition or restriction of the type referred to in the last
sentence of such Section.
6.20 ADMINISTRATION OF TRUST ACCOUNTS. The ANB Companies have properly
--------------------------------
administered, in all respects material and which could reasonably be expected to
be material to the business, operations or financial condition of the ANB
Companies, taken as a whole, all accounts for which they act as a fiduciary,
including, but not limited to, accounts for which they serve as a trustee,
agent, custodian, personal representative, guardian, conservator or investment
advisor, in accordance with the terms of the governing documents and applicable
state and federal Law, regulation and common Law. None of the ANB Companies nor
any director, officer or employee of the ANB Companies has committed any breach
of trust with respect to any such fiduciary account which will have a Material
Adverse Effect on ANB. The accounting for each such fiduciary account in the
aggregate is true and correct in all material respects and accurately reflects
the assets of such fiduciary accounts in all material respects.
6.21 1934 ACT COMPLIANCE. The Proxy Statement/Prospectus will comply in
-------------------
all material respects with applicable provisions of the 1933 Act and the 1934
Act and the rules and regulations thereunder.
6.22 OPINION OF COUNSEL. ANB has no Knowledge of any facts that would
------------------
preclude issuance of the opinion of counsel referred to in Section 9.3(d).
ARTICLE 7
CONDUCT OF BUSINESS PENDING CONSUMMATION
----------------------------------------
7.1 COVENANTS OF BOTH PARTIES.
-------------------------
(A) Unless the prior written consent of the other Party shall have been
obtained, and except as otherwise expressly provided for herein, each Party
shall and shall cause each of its Subsidiaries to (i) preserve intact its
business organization, goodwill, relationships with depositors, customers and
employees, and Assets and maintain its rights and franchises, and (ii) take no
action, except as required by applicable Law, or in accordance with safe and
sound banking practice, which would (A) adversely affect the ability of any
Party to obtain any Consents required for the transactions provided for herein
without imposition of a condition or restriction of the type referred to in the
last sentences of Section 9.1(b) or 9.1(c) of this
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Agreement or (B) adversely affect the ability of any Party to perform its
covenants and agreements under this Agreement.
(B) During the period from the date of this Agreement to the Effective
Time, each of ANB and PBC shall cause its Designated Representative (and, if
necessary, representatives of any of its Subsidiaries) to confer on a regular
and frequent basis with the Designated Representative of the other Party hereto
and to report on the general status of its and its Subsidiaries' ongoing
operations. Each of ANB and PBC shall permit the other Party hereto to make
such investigation of its business or properties and its Subsidiaries and of
their respective financial and legal conditions as the investigating Party may
reasonably request. Each of ANB and PBC shall promptly notify the other Party
hereto concerning (a) any material change in the normal course of its or any of
its Subsidiaries' businesses or in the operation of their respective properties
or in their respective conditions; (b) any material governmental complaints,
investigations or hearings (or communications indicating that the same may be
contemplated) or the institution or the threat, to the Knowledge of such Party,
of any material Litigation involving it or any of its Subsidiaries; and (c) the
occurrence or impending occurrence of any event or circumstance that would cause
or constitute a breach of any of the representations, warranties or covenants
contained herein; and each of ANB and PBC shall, and shall cause each of their
respective Subsidiaries to, use its best efforts to prevent or promptly respond
to same. The foregoing notwithstanding, all contacts between ANB personnel and
PBC personnel and all requests for information shall be made only to and cleared
through the PBC Designated Representative and shall be reasonable in nature and
such that they will not unduly interfere with or disrupt PBC's business. ANB
shall take reasonable steps to ensure that its employees who can reasonably be
expected to have contact with PBC or PBC Bank prior to Closing have knowledge of
the procedural requirements of this Section 7.1(b). If after ANB takes such
steps, an employee of ANB inadvertently breaches the covenant of ANB set forth
herein, ANB shall notify the PBC Designated Representative of such breach as
soon as it is discovered and shall take all reasonably requested action to
ensure that no further breaches occur. After one such occurrence, any
subsequent failure by ANB or its employees to adhere to such procedure shall be
deemed a material breach of this Agreement, giving PBC the right to terminate
this Agreement upon written notice to ANB.
7.2 COVENANTS OF PBC. From the date of this Agreement until the earlier
----------------
of the Effective Time or the termination of this Agreement, PBC covenants and
agrees that it 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 the chief executive officer, president or chief
financial officer of ANB, which consent shall not be unreasonably withheld:
(A) amend the Certificate or Articles of Incorporation, Bylaws or other
governing instruments of any PBC Company; or
(B) incur any additional debt obligation or other obligation for borrowed
money except in the ordinary course of the business of PBC Subsidiaries
consistent with past practices (which
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shall include, for PBC Subsidiaries that are depository institutions, creation
of deposit liabilities, purchases of federal funds, sales of certificates of
deposit, advances from the FRB or the Federal Home Loan Bank, entry into
repurchase agreements fully secured by U.S. government or agency securities and
issuances of letters of credit), or impose, or suffer the imposition, on any
share of stock held by any PBC Company of any Lien or permit any such Lien to
exist; or
(C) repurchase, redeem or otherwise acquire or exchange, directly or
indirectly, any shares, or any securities convertible into any shares, of the
capital stock of any PBC Company, or, declare or pay any dividend or make any
other distribution in respect of PBC's capital stock; or
(D) except for this Agreement, issue, sell, pledge, encumber, enter into
any Contract to issue, sell, pledge, or encumber, authorize the issuance of, or
otherwise permit to become outstanding, any additional shares of PBC Common
Stock or any other capital stock of any PBC Company, or any stock appreciation
rights, or any option, warrant, conversion or other right to acquire any such
stock, or any security convertible into any shares of such stock; or
(E) adjust, split, combine or reclassify any capital stock of any PBC
Company or issue or authorize the issuance of any other securities with respect
to or in substitution for shares of its capital stock or sell, lease, mortgage
or otherwise encumber any shares of capital stock of any PBC Subsidiary or any
Asset other than in the ordinary course of business for reasonable and adequate
consideration; or
(F) except as disclosed on Schedule 7.2(f), acquire any direct or indirect
---------------
equity interest in any Person, other than in connection with (i) foreclosures in
the ordinary course of business and (ii) acquisitions of control by a depository
institution Subsidiary in its fiduciary capacity; or
(G) grant any increase in compensation or benefits to the employees or
officers of any PBC Company, except in accordance with past practices with
respect to employees; pay any bonus except in accordance with the provisions of
any applicable program or plan adopted by the PBC Board prior to the date of
this Agreement; enter into or amend any severance agreements with officers of
any PBC Company; grant any material increase in fees or other increases in
compensation or other benefits to directors of any PBC Company; or
(H) enter into or amend any employment Contract between any PBC Company
and any Person (unless such amendment is required by Law) that the PBC Company
does not have the unconditional right to terminate without Liability (other than
Liability for services already rendered), at any time on or after the Effective
Time; or
(I) adopt any new employee benefit plan of any PBC Company or make any
material change in or to any existing employee benefit plans of any PBC Company
other than any such
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<PAGE>
change that is required by Law or that, in the opinion of counsel, is necessary
or advisable to maintain the tax qualified status of any such plan; or
(J) make any material change in any accounting methods or systems of
internal accounting controls, except as may be appropriate to conform to changes
in regulatory accounting requirements or GAAP; or
(K) (i) commence any Litigation other than in accordance with past
practice, (ii) settle any Litigation involving any Liability of any PBC Company
for material money damages or material restrictions upon the operations of any
PBC Company, or, (iii) except in the ordinary course of business, modify, amend
or terminate any material Contract or waive, release, compromise or assign any
material rights or claims; or
(L) enter into any material transaction or course of conduct not in the
ordinary course of business, or not consistent with safe and sound banking
practices, or not consistent with applicable Laws; or
(M) fail to file timely any report required to be filed by it with any
Regulatory Authority where such failure has a Material Adverse Effect on PBC; or
(N) make any Loan or advance to any 5% stockholder, director or officer of
PBC or any of the PBC Subsidiaries, or any member of the immediate family of the
foregoing, or any Related Interest (Known to PBC or any of its Subsidiaries) of
any of the foregoing, except for advances under unfunded loan commitments in
existence on the date of this Agreement and specifically described on Schedule
--------
7.2(n); or
- ------
(O) cancel without payment in full, or modify in any material respect any
Contract relating to, any loan or other obligation receivable from any
stockholder, director or officer of any PBC Company or any member of the
immediate family of the foregoing, or any Related Interest (Known to PBC or any
of its Subsidiaries) of any of the foregoing; or
(P) enter into any Contract for services or otherwise with any of the 5%
stockholders, directors, officers or employees of any PBC Company or any member
of the immediate family of the foregoing, or any Related Interest (Known to PBC
or any of its Subsidiaries) of any of the foregoing; or
(Q) modify, amend or terminate any material Contract or waive, release,
compromise or assign any material rights or claims, except in the ordinary
course of business and for fair consideration; or
(R) file any application to relocate or terminate the operations of any
banking office of it or any of its Subsidiaries; or
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<PAGE>
(S) except in accordance with applicable Law, change its or any of its
Subsidiaries' lending, investment, liability management and other material
banking policies in any material respect; or
(T) intentionally take any action that would reasonably be expected to
jeopardize or delay the receipt of any of the regulatory approvals required in
order to consummate the transactions provided for in this Agreement; or
(U) take any action that would cause the transactions provided for in this
Agreement to be subject to requirements imposed by any Takeover Law and PBC
shall take all necessary steps within its control to exempt (or ensure the
continued exemption of) the transactions provided for in this Agreement from, or
if necessary challenge the validity or applicability of, any applicable Takeover
Law, as now or hereafter in effect, including, without limitation, Sections
607.0901 and 607.0902 of the FBCA and Takeover Laws of any other State that
purport to apply to this Agreement or the transactions provided for herein.
7.3 COVENANTS OF ANB.
----------------
(A) From the date of this Agreement until the earlier of the Effective
Time or the termination of this Agreement, ANB covenants and agrees that it 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
the chief executive officer, president or chief financial officer of PBC, which
consent shall not be unreasonably withheld:
(i) other than the potential acquisition of other financial
institutions, enter into any material transaction or course of conduct not
in the ordinary course of business, or not consistent with safe and sound
banking practices, or not consistent with applicable Laws; or
(ii) intentionally take any action, except as required by applicable
Law or safe and sound banking practices, that would reasonably be expected
to jeopardize or delay the receipt of any of the regulatory approvals
required in order to consummate the transactions contemplated by this
Agreement; or
(iii) take any action that would cause ANB to have an insufficient
number of shares of ANB Common Stock to fulfill its obligations.
(B) From the date of this Agreement until the earlier of the termination
of this Agreement or thirty-six (36) months after the Effective Time, ANB
covenants and agrees that it 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:
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(i) fail to file timely any report required to be filed by it with
Regulatory Authorities, including the SEC; or
(ii) take any action that would cause the ANB Common Stock to cease
to be traded on the NASDAQ or another National Securities Exchange;
provided, however, that any action or transaction in which the ANB Common
Stock is converted into cash or another marketable security that is traded
on a National Securities Exchange shall not be deemed a violation of this
Section 7.3(a)(ii).
(C) If the Merger does not occur, from the date of this Agreement until
two (2) years after the termination of this Agreement, ANB covenants and agrees
that it 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 the chief executive officer, president or chief financial officer of
PBC:
(i) (A) induce or attempt to induce any employee of PBC or PBC Bank,
or Robert Tucker, George A. Leugers, Bonnie E. Lovell, Rina E. Pedretti,
Linda York and Paul Johnson (collectively, the "PBC Employees") to leave
his or her employment; or (B) employ, attempt to employ or solicit for
employment, or assist any person to employ any PBC Employee; provided,
however, notwithstanding anything to the contrary contained herein, if the
employment of a PBC Employee is terminated for any reason, whether
voluntary or involuntary, after the expiration of twelve (12) months
thereafter, ANB shall not be prohibited from hiring such PBC Employee; or
(ii) purchase a financial institution whose main office is located in
Osceola County, Florida, or allow any of its financial institution
Subsidiaries to establish a main office in Osceola County, Florida.
(D) If the Merger does occur, from the date of this Agreement until two
(2) years after the Effective Time, ANB covenants and agrees that it 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 Freedle:
(i) induce or attempt to induce Robert Tucker, George A. Leugers, Bonnie E.
Lovell, Rina E. Pedretti, Linda York and Paul Johnson (collectively, the
"Freedle Employees") to leave his or her employment; or (ii) employ, attempt to
employ or solicit for employment, or assist any person to employ any Freedle
Employee; provided, however, notwithstanding anything to the contrary contained
herein, if the employment of a Freedle Employee is terminated for any reason,
whether voluntary or involuntary, after the expiration of twelve (12) months
thereafter, ANB shall not be prohibited from hiring such Freedle Employee.
7.4 ADVERSE CHANGES IN CONDITION. Each Party agrees to give written
----------------------------
notice promptly to the other Party upon becoming aware of the occurrence or
impending occurrence of any event or circumstance relating to it or any of its
Subsidiaries that (i) is reasonably likely
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<PAGE>
to have, individually or in the aggregate, a Material Adverse Effect on it or
(ii) would cause or constitute a material breach of any of its representations,
warranties or covenants contained herein, and to use its commercially reasonable
best efforts to prevent or promptly to remedy the same.
7.5 REPORTS. Each Party and its Subsidiaries shall deliver to the other
-------
Party copies of all reports filed with Regulatory Authorities promptly after the
same are filed.
7.6 ACQUISITION PROPOSALS. Except with respect to this Agreement and the
---------------------
transactions provided for herein, PBC expressly agrees that neither PBC nor any
of its Subsidiaries, nor any representative retained by PBC or any of its
Subsidiaries or any Affiliate thereof will solicit any Acquisition Proposal by
any Person until the earlier of the termination of this Agreement or the
consummation of the Merger. PBC shall promptly notify ANB orally and in writing
in the event it or any of its Subsidiaries receives any inquiry or proposal of a
substantive and ongoing nature from a bona fide purchaser relating to any such
transaction.
7.7 NASDAQ QUALIFICATION. ANB shall, prior to the Effective Time, secure
--------------------
designation of all ANB Common Stock to be issued in the Merger as a NASDAQ
"national market system security" within the meaning of Rule 11Aa2-1 of the SEC.
7.8 DIRECTORS' AND OFFICERS' INDEMNIFICATION AND D & O POLICY COVERAGE.
------------------------------------------------------------------
To the extent, if any, not provided by an existing right of indemnification or
other agreement or policy, from and after the Effective Time, ANB shall, to the
fullest extent permitted under applicable Law, indemnify, defend and hold
harmless the present and former officers and directors of PBC against all
losses, expenses (including reasonable attorney's fees), claims, damages or
liabilities arising out of actions or omissions occurring at or prior to the
Effective Time that are in whole or in part based on, or arising out of the fact
that such Person is or was a director or officer of PBC or arising out of or
pertaining to the transactions provided for in this Agreement. Additionally,
ANB shall keep in place for a period of two (2) years after the Effective Time,
for the benefit of all past and present PBC Company officers and directors,
indemnity directors and officers liability insurance coverage with a reputable
insurance company which coverage shall be at least as comprehensive and at least
at the same coverage levels as existed at the PBC Companies immediately prior to
the Effective Time and shall provide such officers and directors with insurance
coverage for any claims made against such persons which relate to their actions
as an officer and/or director of any PBC Company prior to the Effective Time.
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ARTICLE 8
ADDITIONAL AGREEMENTS
---------------------
8.1 REGULATORY MATTERS.
------------------
(A) ANB shall promptly prepare and file the S-4 Registration Statement
with the SEC. ANB shall use its commercially reasonable best efforts to have the
S-4 Registration Statement declared effective under the 1933 Act as promptly as
practicable after such filing. PBC shall mail the Proxy Statement/Prospectus to
its stockholders simultaneously with delivery of notice of the meeting of
stockholders called to approve the Merger. ANB shall also use its commercially
reasonable best efforts to obtain all necessary state securities Law or "Blue
Sky" permits and approvals required to carry out the transaction provided for in
this Agreement, and PBC shall furnish all information concerning PBC and the
holders of PBC Common Stock as may be requested in connection with any such
action. If at any time prior to the Effective Time of the Merger any event shall
occur which should be set forth in an amendment of, or a supplement to, the
Proxy Statement/Prospectus, PBC will promptly inform ANB and cooperate and
assist ANB in preparing such amendment or supplement and mailing the same to the
stockholders of PBC. As of the date of the execution of this Agreement, and
assuming the absence of any additional material factors, unless the PBC Board in
its good faith judgment determines that it is otherwise required by Law or its
fiduciary duties, it is the intent of the PBC Board that the Proxy
Statement/Prospectus shall contain the recommendation of the PBC Board in favor
of the Merger and, subject to the foregoing, the PBC Board shall recommend that
the holders of PBC Common Stock vote for and adopt the Merger provided for in
the Proxy Statement/Prospectus and this Agreement.
(B) The Parties shall cooperate with each other and use their commercially
reasonable best efforts to promptly prepare and file all necessary
documentation, to effect all applications, notices, petitions and filings and to
obtain as promptly as practicable all Consents of all third parties and
Regulatory Authorities which are necessary or advisable to consummate the
transactions contemplated by this Agreement. ANB and PBC shall have the right
to review in advance, and to the extent practicable each will consult the other
on, in each case subject to applicable Laws relating to the exchange of
information, all the information relating to ANB or PBC, as the case may be, and
any of their respective Subsidiaries, which appear in any filing made with, or
written materials submitted to, any third party or any Regulatory Authority in
connection with the transactions contemplated by this Agreement. In exercising
the foregoing right, each of the Parties hereto shall act reasonably and as
promptly as practicable. The Parties hereto agree that they will consult with
each other with respect to the obtaining of all Permits and Consents, approvals
and authorizations of all third parties and Regulatory Authorities necessary or
advisable to consummate the transactions provided for in this Agreement, and
each Party will keep the other apprised of the status of matters relating to
completion of the transactions provided for in this Agreement.
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<PAGE>
(C) ANB and PBC shall, upon request, furnish each other all information
concerning themselves, their Subsidiaries, directors, officers and stockholders
and such other matters that as may be reasonably necessary or advisable in
connection with the Proxy Statement/Prospectus, the S-4 Registration Statement
or any other statement, filing, notice or application made by or on behalf of
ANB, PBC or any of their Subsidiaries to any Regulatory Authority in connection
with the Merger and the other transactions provided for in this Agreement.
(D) ANB and PBC shall promptly furnish each other with copies of written
communications received by ANB or PBC, as the case may be, or any of their
respective Subsidiaries, Affiliates or associates from, or delivered by any of
the foregoing to, any Regulatory Authority in respect of the transactions
provided for herein.
(E) ANB will indemnify and hold harmless PBC and their respective officers
and directors and PBC will indemnify and hold harmless ANB and its directors and
officers, from and against any and all actions, causes of actions, losses,
damages, expenses or liabilities to which any such entity, or any director,
officer or controlling person thereof, may become subject under applicable Laws
(including the 1933 Act and the 1934 Act) and rules and regulations thereunder
and will reimburse the other, and any such director, officer or controlling
person for any legal or other expenses reasonably incurred in connection with
investigating or defending any actions, whether or not resulting in liability,
insofar as such losses, damages, expenses, liabilities or actions arise out of
or are based upon any untrue statement or alleged untrue statement of a material
fact contained in any such request, statement, application, report or material
or arise out of or are based upon the omission or alleged omission to state
therein a material fact required to be stated therein, or necessary in order to
make the statement therein not misleading, but only insofar as any such
statement or omission was made in reliance upon and in conformity with
information furnished in writing in connection therewith by such indemnifying
Party for use therein.
8.2 ACCESS TO INFORMATION.
---------------------
(A) Upon reasonable notice and subject to the restrictions set forth in
Section 7.1 (b) and applicable Laws relating to the exchange of information,
from the date of this Agreement, ANB and PBC shall, and shall cause each of
their respective Subsidiaries to, afford to each other's Designated
Representative, reasonable access during the period prior to the Effective Time,
to all its properties, books, contracts, commitments and records and, during
such period, each of ANB and PBC shall, and shall cause each of their respective
Subsidiaries to, make available to the other's Designated Representative (i) a
copy of each report, schedule, registration statement and other document filed
or received by it during such period pursuant to the requirements of the
Securities Laws or Federal or state banking Laws (other than reports or
documents which such Party is not permitted to disclose under applicable Law, in
which case such Party shall notify the other Party of the nondisclosure and the
nature of such information) and (ii) also other information concerning its
business, properties and personnel as the other party may reasonably request.
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<PAGE>
(B) All information furnished by ANB to PBC or its representatives
pursuant hereto shall be treated as the sole property of ANB and, if the Merger
shall not occur, PBC and its representatives shall return to ANB all of such
written information and all documents, notes, summaries or other materials
containing, reflecting or referring to, or derived from, such information. PBC
shall, and shall use its best efforts to cause its representatives to, keep
confidential all such information, and shall not directly or indirectly use such
information for any competitive or other commercial purpose. The obligation to
keep such information confidential shall continue for five years from the date
the proposed Merger is abandoned and shall not apply to (i) any information
which (x) was already in PBC's possession prior to the disclosure thereof by
ANB; (y) was then generally known to the public; or (z) was disclosed to PBC by
a third party not bound by an obligation of confidentiality, or (ii) disclosures
made as required by Law.
(C) All information furnished by PBC or its Subsidiaries to ANB or its
representatives pursuant hereto shall be treated as the sole property of PBC
and, if the Merger shall not occur, ANB and its representatives shall return to
PBC all of such written information and all documents, notes, summaries or other
materials containing, reflecting or referring to, or derived from, such
information. ANB shall, and shall use its best efforts to cause its
representatives to, keep confidential all such information, and shall not
directly or indirectly use such information for any competitive or other
commercial purpose. The obligation to keep such information confidential shall
continue for five years from the date the proposed Merger is abandoned and shall
not apply to (i) any information which (x) was already in ANB's possession prior
to the disclosure thereof by PBC or any of its Subsidiaries; (y) was then
generally known to the public; or (z) was disclosed to ANB by a third party not
bound by an obligation of confidentiality, or (ii) disclosures made as required
by Law.
(D) No investigation by either of the parties or their respective
representatives shall affect the representations and warranties of the other set
forth herein.
8.3 EFFORTS TO CONSUMMATE. Subject to the terms and conditions of this
---------------------
Agreement, each of PBC and ANB shall use its commercially reasonable best
efforts to take, or cause to be taken, all actions, and to do, or cause to be
done, all things necessary, proper or advisable under applicable Laws to
consummate and make effective, as soon as practicable after the date of this
Agreement, the transactions provided for in this Agreement, including without
limitation obtaining of all of the Consents.
8.4 PBC STOCKHOLDERS' MEETING. PBC shall call a meeting of its
-------------------------
stockholders (the "PBC Stockholders' Meeting") to be held as soon as reasonably
practicable after the date of this Agreement for the purpose of voting upon this
Agreement and such other related matters as it deems appropriate. In connection
with the PBC Stockholders' Meeting (a) PBC shall prepare with the assistance of
ANB a notice of meeting; (b) ANB shall furnish all information concerning it
that PBC may reasonably request in connection with conducting the PBC
Stockholders' Meeting; (c) ANB shall prepare and furnish to PBC for distribution
to PBC's
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<PAGE>
stockholders the Proxy Statement/Prospectus; (d) PBC shall furnish all
information concerning it that ANB may reasonably request in connection with
preparing the Proxy Statement/Prospectus; (e) subject to the provisions of
Section 8.8(b), the PBC Board shall recommend to its stockholders the approval
of this Agreement; and (f) subject to the provisions of Section 8.8(b), PBC
shall use its commercially reasonable best efforts to obtain its stockholders'
approval. The Parties will use their commercially reasonable best efforts to
prepare a preliminary draft of the Proxy Statement/Prospectus within 30 days of
the date of this Agreement, and will consult with one another on the form and
content of the Proxy Statement/Prospectus (including the presentation of draft
copies of such proxy materials to the other) prior to delivery to PBC's
stockholders. PBC will use its commercially reasonable best efforts to deliver
notice of meeting and, the Proxy Statement/Prospectus as soon as practicable
after receipt of all required regulatory approvals and the expiration of all
applicable waiting periods.
8.5 CERTIFICATES OF OBJECTIONS. As soon as practicable (but in no event
--------------------------
more than three business days) after the PBC Stockholders' Meeting, PBC shall
deliver to ANB a certificate of the Secretary of PBC containing the names of the
stockholders of PBC that both (a) gave written notice prior to the taking of the
vote on this Agreement at the PBC Stockholders' Meeting that they dissent from
the Merger, and (b) voted against approval of this Agreement or abstained from
voting with respect to the approval of this Agreement ("Certificate of
Objections"). The Certificate of Objections shall include the number of shares
of PBC Common Stock held by each such stockholder and the mailing address of
each such stockholder.
8.6 PRESS RELEASES. Prior to the Effective Time, ANB and PBC shall obtain
--------------
the prior consent of the other Party as to the form and substance of any press
release or other public disclosure materially related to this Agreement or any
other transaction provided for herein; provided, however, that nothing in this
Section 8.6 shall be deemed to prohibit any Party from making any disclosure
which it deems necessary or advisable, with the advice of counsel, in order to
satisfy such Party's disclosure obligations imposed by Law.
8.7 EXPENSES. Except as otherwise provided herein, each Party shall bear
--------
and pay their own costs and expenses incurred in connection with the
transactions provided for herein, including fees and expenses of financial or
other consultants, investment bankers, accountants and counsel. The costs and
expenses of preparing, printing and mailing the Proxy Statement/Prospectus shall
be paid by ANB, and all filing and other fees paid to the SEC or any other
Regulatory Authority in connection with the Merger and the transactions
contemplated hereunder, shall be paid by ANB. Nothing contained herein shall
limit either Party's rights under Article 10 to recover any damages arising out
of a Party's willful breach of any provision of this Agreement.
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<PAGE>
8.8 FAILURE TO CLOSE.
----------------
(A) ANB expressly agrees to consummate the transactions provided for herein
upon the completion of all conditions to Closing and shall not take any action
reasonably calculated to prevent the Closing and shall not unreasonably delay
any action reasonably required to be taken by it to facilitate the Closing.
(B) PBC expressly agrees to consummate the transactions provided for
herein upon the completion of all conditions to Closing and shall not take any
action reasonably calculated to prevent the Closing and shall not unreasonably
delay any action reasonably required to be taken by it to facilitate the
Closing. Notwithstanding any other provision of this Agreement, to the extent
required by the fiduciary obligations of the PBC Board, as determined in good
faith by a majority of the PBC Board based on the advice of PBC's outside
counsel, PBC may:
(i) in response to an unsolicited request therefor, participate in
discussions or negotiations with, or furnish information with respect to
PBC pursuant to a customary confidentiality agreement (as determined by
PBC's outside counsel) to, any person concerning an Acquisition Proposal
involving PBC or any of its Subsidiaries; and
(ii) approve or recommend (and, in connection therewith withdraw or
modify its approval or recommendation of this Agreement or the Merger) a
superior Acquisition Proposal involving PBC or any of its Subsidiaries or
enter into an agreement with respect to such superior Acquisition Proposal
(for purposes of this Agreement, "superior Acquisition Proposal," when used
with reference to PBC or any of its Subsidiaries, means a bona fide
Acquisition Proposal involving PBC or any of its Subsidiaries made by a
third party which a majority of the disinterested members of the PBC Board
determines in its good faith judgment (based on the advice of PBC's
independent financial advisor) to be more favorable to PBC's stockholders
than the Merger, and for which financing, to the extent required, is then
committed).
PBC shall promptly advise ANB in writing of any Acquisition Proposal involving
PBC or any of its Subsidiaries or any inquiry with respect to or which could
lead to any such Acquisition Proposal and the identity of the Person making any
such Acquisition Proposal or inquiry and will keep ANB fully informed of the
status and details of any such Acquisition Proposal or inquiry.
8.9 FAIRNESS OPINION. The PBC Board shall engage a financial advisor
----------------
(the "PBC Financial Advisor") reasonably acceptable to ANB to act as advisor to
the PBC Board during the transaction and to opine separately as to the fairness
from a financial point of view of the Exchange Ratio. Such fairness opinion
shall be reviewed by the PBC Board and shall contain analysis for each of PBC
and ANB based on a review of each of their historical performance, current
financial condition and market area analysis along with the PBC Financial
Advisor's understanding of future prospects in the banking industry. The PBC
Financial Advisor shall determine and set forth in its fairness opinion the
range of fair market values of PBC and ANB
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<PAGE>
using standard valuation methods for banks. It is expected that said fairness
opinion shall be issued as soon as practicable before the signing of this
Agreement. The PBC Board may, at its option, elect to have the final fairness
opinion updated immediately prior to the mailing of the Proxy
Statement/Prospectus and at the Effective Time.
8.10 ACCOUNTING AND TAX TREATMENT. Each of the Parties undertakes and
----------------------------
agrees to use its best efforts to cause the Merger, and to Knowingly take no
action which would cause the Merger not to qualify for pooling-of-interests
accounting treatment and treatment as a "reorganization" within the meaning of
Section 368(a) of the Internal Revenue Code for federal income tax purposes.
8.11 DEMAND REGISTRATION.
-------------------
(A) ANB Covenants. With respect to the ANB Common Stock to be issued to
-------------
Freedle in connection with the Merger, but only if Freedle complies with the
terms and conditions of Section 8.11(c) hereof ANB covenants and agrees:
(i) upon written demand by Freedle on or prior to the date which is
forty-five (45) days prior to the expiration of the applicable volume
limitations on resales by Freedle of such securities under SEC Rule 145, to
file with the SEC as soon as practicable, but in any event not before the
first published report of ANB including at least thirty (30) days of
combined operations of ANB and PBC which occurs after the Merger, a
Registration Statement on Form S-3, and all amendments thereto (as amended,
the "S-3 Registration Statement"), respecting the registration of shares of
the ANB Common Stock to be issued pursuant to this Agreement for the
purpose of registering said shares of ANB Common Stock with the SEC and to
keep such Registration Statement effective for a period expiring no earlier
than the first anniversary of the Effective Time;
(ii) to use its best efforts to cause the S-3 Registration Statement
to become effective as soon as possible after ANB's receipt of Freedle's
written demand in accordance with Section 8.11(a)(i) above, and to prepare
and file with the SEC, as expeditiously as possible, any amendments and
supplements to the S-3 Registration Statement that may be necessary;
(iii) to furnish to Freedle, as expeditiously as possible, such
documents as Freedle may reasonably request in order to facilitate the
public sale or other disposition of the shares of ANB Common Stock owned by
Freedle and so registered;
(iv) to use its best efforts to register or qualify, as expeditiously
as possible, the shares of ANB Common Stock covered by the S-3 Registration
Statement under the securities or Blue Sky Laws of those states set forth
on schedules to be furnished to ANB by Freedle within fifteen (15) days
after the effective date of the S-3 Registration
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Statement listing those states in which it is reasonable that registration
or qualification will be required to enable Freedle, through registered
broker-dealers, to consummate the public sale or other disposition of such
ANB Common Stock, and do any and all other acts and things that may be
necessary or desirable to enable Freedle, through registered broker-
dealers, to consummate the public sale or other disposition of the ANB
Common Stock owned by him; provided, however, that Freedle shall furnish in
-------- -------
writing to ANB such information regarding Freedle and the distribution
proposed by him as ANB may request in writing and as shall be required in
connection with any registrations, qualifications or compliance;
(v) to pay all expenses incurred by ANB in complying with this
Section 8.11(a), including without limitation registration fees, exchange
listing fees, printing expenses, fees and disbursements of counsel for ANB,
state Blue Sky fees and expenses, and the expense of any special audits
incident to or required by any such registration, but excluding
underwriting discounts and selling commissions, if any;
(vi) in the event of any registration of shares of the ANB Common
Stock pursuant to this Section 8.11(a), to indemnify and hold harmless
Freedle, any underwriter of such shares of ANB Common Stock and each other
person, if any, who controls such underwriter within the meaning of the
1933 Act or the 1934 Act, against any losses, claims, damages or
liabilities, joint or several, to which Freedle or such underwriter or
controlling person may become subject under the 1933 Act, the 1934 Act,
state securities Laws or otherwise, insofar as such losses, claims, damages
or liabilities (or actions with respect thereto) arise out of or are based
upon any untrue statement of any material fact contained in the S-3
Registration Statement, any preliminary prospectus or prospectus contained
in the S-3 Registration Statement, or any amendment or supplement to such
S-3 Registration Statement, or arise out of or are based upon the omission
or alleged omission to state a material fact required to be stated therein
or necessary to make the statements therein not misleading; and ANB will
reimburse Freedle and each such underwriter and controlling person for any
legal or any other expenses reasonably incurred by Freedle or such
underwriter or controlling person in connection with investigating or
defending any such loss, claim, damage or action; provided, however; that
-------- -------
ANB will not be liable in any such case to the extent that any such loss,
claim, damage or liability arises out of or is based upon any untrue
statement or omission made in such S-3 Registration Statement, preliminary
prospectus or prospectus, or any such amendment or supplement, in reliance
upon and in conformity with information furnished to ANB, in writing, by or
on behalf of Freedle or such underwriter or controlling person specifically
for use in the preparation thereof; and
(vii) to remove (A) any legend for pooling purposes which it has
placed upon any of the certificates representing ANB Common Stock issued in
connection with the transactions contemplated hereby at the end of thirty
(30) days after the first published report of ANB including at least thirty
(30) days of combined operations of ANB and
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PBC which occurs after the Merger, but in any event no longer than 135 days
after the Effective Time, and (B) any other legend which it has placed upon
any of the certificates representing ANB Common Stock issued to any
Affiliate of PBC in connection with the transactions contemplated hereby,
at the end of twelve (12) months from the Effective Time, unless such
shares may be sold sooner under Rule 145(d)(2) or (3) or any replacement or
revision thereto.
(B) Covenants of Freedle. With respect to the shares of ANB Common Stock
--------------------
that may be registered pursuant to Section 8.11(a) and sold by Freedle, prior to
any obligation on behalf of ANB to comply with Section 8.11(a) hereof with
respect to any such shares of ANB Common Stock to be issued to Freedle, Freedle
shall enter into an agreement with ANB whereby, among other things, he shall
covenant and agree to indemnify and hold harmless ANB, each of its directors and
officers and each underwriter (if any) and each person, if any, who controls ANB
or any such underwriter within the meaning of the 1933 Act or the 1934 Act,
against any losses, claims, damages or liabilities, joint or several, to which
ANB, such directors and officers, underwriter or controlling person may become
subject under the 1933 Act, the 1934 Act, state securities laws or otherwise,
insofar as such losses, claims, damages or liabilities (or actions in respect
thereof) arise out of or are based upon any untrue statement or alleged untrue
statement of a material fact contained in any S-3 Registration Statement under
which such shares of ANB Common Stock were registered under the 1933 Act, any
preliminary prospectus or final prospectus contained in the S-3 Registration
Statement, or any amendment or supplement to the S-3 Registration Statement, or
prospectus, or arise out of or are based upon any omission or alleged omission
to state a material fact required to be stated therein or necessary to make the
statements therein not misleading, if the statement or omission was made in
reliance upon and in conformity with information furnished in writing to ANB by
or on behalf of Freedle, specifically for use in connection with the preparation
of such S-3 Registration Statement, prospectus, amendment or supplement;
provided, however, that the obligation of Freedle thereunder shall be limited to
- -------- -------
such losses, claims, damages or liabilities as arise out of or are based upon
information furnished in writing by or on behalf of or withheld by Freedle.
(C) Conditions to Indemnification Under Sections 8.11(a) and 8.11(b). Each
----------------------------------------------------------------
party entitled to indemnification under Sections 8.11(a) or 8.11(b) (the
"Indemnified Party") shall give notice to the party required to provide
indemnification (the "Indemnifying Party") promptly after such Indemnified Party
has actual Knowledge of any claim as to which indemnity may be sought, and shall
permit the Indemnifying Party to assume the defense of any such claim or any
Litigation resulting therefrom; provided, that counsel for the Indemnifying
--------
Party, who shall conduct the defense of such claim of Litigation, shall be
approved by the Indemnified Party (whose approval shall not be unreasonably
withheld); and provided, further, that the failure of any Indemnified Party to
-------- -------
give notice as provided herein shall not relieve the Indemnifying Party of its
obligations under Section 8.11(a) or Section 8.11(b), as applicable, unless and
to the extent the failure to notify materially adversely affects the defense of
such action. The Indemnified Party may participate in such defense at such
party's expense; provided, however, that the Indemnifying Party shall pay such
-------- -------
expense if representation of such Indemnifying Party by the
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counsel retained by the Indemnifying Party would be inappropriate due to actual
or potential differing interests between the Indemnified Party and any other
party represented by such counsel in such proceeding. No Indemnifying Party, in
the defense of any such claim or Litigation shall, except with the consent of
each Indemnifying Party, consent to entry of any judgment or enter into any
settlement which does not include as an unconditional term thereof the giving by
the claimant or plaintiff to such Indemnified Party or a release from all
liability in respect of such claim or Litigation.
ARTICLE 9
CONDITIONS PRECEDENT TO OBLIGATIONS TO CONSUMMATE
-------------------------------------------------
9.1 CONDITIONS TO OBLIGATIONS OF EACH PARTY. The respective obligations
---------------------------------------
of each Party to perform this Agreement and consummate the Merger and the other
transactions provided for herein are subject to the satisfaction of the
following conditions, unless waived by both Parties pursuant to Section 11.4 of
this Agreement:
(A) STOCKHOLDER APPROVAL. The stockholders of PBC shall have approved this
--------------------
Agreement by the requisite vote, and the consummation of the transactions
provided for herein, as and to the extent required by Law and by the provisions
of any governing instruments, and PBC shall have furnished to ANB certified
copies of resolutions duly adopted by its stockholders evidencing same.
(B) REGULATORY APPROVALS. All Consents of, filings and registrations with,
--------------------
and notifications to, all Regulatory Authorities required for consummation of
the Merger shall have been obtained or made and shall be in full force and
effect and all waiting periods required by Law shall have expired. No Consent
obtained from any Regulatory Authority that is necessary to consummate the
transactions provided for herein shall be conditioned or restricted in a manner
(including without limitation 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 Party would so materially adversely impact the
economic or business benefits of the transactions provided for in this Agreement
as to render inadvisable the consummation of the Merger.
(C) CONSENTS AND APPROVALS. Each Party shall have obtained any and all
----------------------
Consents required for consummation of the Merger (other than those referred to
in Section 9.1(b) of this Agreement) or for the preventing of any Default under
any Contract or Permit of such Party which, if not obtained or made, would have,
individually or in the aggregate, a Material Adverse Effect on such Party. No
Consent so obtained which is necessary to consummate the transactions provided
for herein shall be conditioned or restricted in a manner which in the
reasonable judgment of the Board of Directors of either Party would so
materially adversely impact the economic or business benefits of the
transactions contemplated by this Agreement as to render inadvisable the
consummation of the Merger.
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(D) LEGAL PROCEEDINGS. No court or Regulatory Authority of competent
-----------------
jurisdiction shall have enacted, issued, promulgated, enforced or entered any
Law or Order (whether temporary, preliminary or permanent) or taken any other
action that prohibits, restricts or make illegal consummation of the
transactions provided for in this Agreement. No action or proceeding shall have
been instituted by any Person, and the Parties shall not have Knowledge of any
threatened action or proceeding by any Person, which seeks to restrain the
consummation of the transactions provided for in this Agreement which, in the
opinion of the ANB Board or the PBC Board, renders it impossible or inadvisable
to consummate the transactions provided for in this Agreement.
(E) POOLING LETTER. ANB shall have received a letter, dated as of the
--------------
Effective Time, in form and substance reasonably acceptable to it, from Coopers
& Lybrand, L.L.P., to the effect that the Merger will qualify for pooling-of-
interests accounting treatment.
(F) TAX MATTERS. PBC and ANB shall have received a written opinion of
-----------
counsel from Maynard, Cooper & Gale, P.C., in form reasonably satisfactory to
them (the "Tax Opinion"), to the effect that (i) the Merger will constitute a
reorganization within the meaning of Section 368(a) of the Internal Revenue
Code, (ii) the exchange in the Merger of PBC Common Stock for ANB Common Stock
will not give rise to gain or loss to the stockholders of PBC with respect to
such exchange (except to the extent of any cash received), and (iii) neither PBC
nor ANB will recognize gain or loss as a consequence of the Merger (except for
income and deferred gain recognized pursuant to Treasury regulations issued
under Section 1502 of the Internal Revenue Code). In rendering such Tax
Opinion, counsel for ANB shall be entitled to rely upon representations of
officers of PBC and ANB reasonably satisfactory in form and substance to such
counsel.
(G) S-4 REGISTRATION STATEMENT EFFECTIVE. The S-4 Registration Statement
------------------------------------
shall have become effective under the 1933 Act and no stop order suspending the
effectiveness of the S-4 Registration Statement shall have been issued and no
proceeding for that purpose shall have been initiated or threatened by the SEC.
(H) NONCOMPETE AND NONSOLICITATION AGREEMENT WITH FREEDLE AND TUCKER. ANB
----------------------------------------------------------------
and each of Freedle and Robert Tucker shall have executed and delivered a
noncompete and nonsolicitation agreement in the form attached hereto as
Exhibit C.
- ---------
9.2 CONDITIONS TO OBLIGATIONS OF ANB. The obligations of ANB to perform
--------------------------------
this Agreement and consummate the Merger and the other transactions provided for
herein are subject to the satisfaction of the following conditions, unless
waived by ANB pursuant to Section 11.4(a) of this Agreement:
(A) REPRESENTATIONS AND WARRANTIES. The representations and warranties of
------------------------------
PBC set forth or referred to in this Agreement shall be true and correct as of
the date of this Agreement and as of the Effective Time with the same effect as
though all such representations
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and warranties had been made on and as of the Effective Time (provided that
representations and warranties which are confined to a specified date shall
speak only as of such date), except (i) as expressly contemplated by this
Agreement or (ii) for representations and warranties (other than the
representations and warranties set forth in Section 5.3 of this Agreement, which
shall be true in all material respects) the inaccuracies of which relate to
matters that do not, individually or in the aggregate, have a Material Adverse
Effect on PBC.
(B) PERFORMANCE OF AGREEMENTS AND COVENANTS. Each and all of the
---------------------------------------
agreements and covenants of PBC to be performed and complied with pursuant to
this Agreement and the other agreements provided for herein prior to the
Effective Time shall have been duly performed and complied with in all material
respects.
(C) CERTIFICATES. PBC shall have delivered to ANB (i) a certificate, date
------------
as of the Effective Time and signed on its behalf by its chief executive officer
and its chief financial officer, to the effect that the conditions of its
obligations set forth in Section 9.2(a) and 9.2(b) of this Agreement have been
satisfied, and (ii) certified copies of resolutions duly adopted by the PBC
Board and the PBC stockholders evidencing the taking of all corporate action
necessary to authorize the execution, delivery and performance of this
Agreement, and the consummation of the transactions provided for herein, all in
such reasonable detail as ANB and its counsel shall request.
(D) OPINION OF COUNSEL. PBC shall have delivered to ANB an opinion of
------------------
Fowler, White, et. al., counsel to PBC, dated as of the Closing, in
substantially the form of Exhibit A hereto.
---------
(E) RELEASE OF CLAIMS. The Directors and Executive Officers of PBC shall
-----------------
have given to PBC a release in the form of Exhibit D.
---------
9.3 CONDITIONS TO OBLIGATIONS OF PBC. The obligations of PBC to perform
--------------------------------
this Agreement and consummate the Merger and the other transactions provided for
herein are subject to the satisfaction of the following conditions, unless
waived by PBC pursuant to Section 11.4(b) of this Agreement:
(A) REPRESENTATIONS AND WARRANTIES. The representations and warranties of
------------------------------
ANB set forth or referred to in this Agreement shall be true and correct as of
the date of this Agreement and as of the Effective Time with the same effect as
though all such representations and warranties had been made on and as of the
Effective Time (provided that representations and warranties which are confined
to a specified date shall speak only as of such date), except (i) as expressly
contemplated by this Agreement or (ii) for representations and warranties (other
than the representations and warranties set forth in Section 6.3 of this
Agreement, which shall be true in all material respects) the inaccuracies of
which relate to matters that do not have, individually or in the aggregate, a
Material Adverse Effect on ANB.
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<PAGE>
(B) PERFORMANCE OF AGREEMENTS AND COVENANTS. Each and all of the
---------------------------------------
agreements and covenants of ANB to be performed and complied with pursuant to
this Agreement and the other agreements provided for herein prior to the
Effective Time shall have been duly performed and complied with in all material
respects.
(C) CERTIFICATES. ANB shall have delivered to PBC (i) a certificate, dated
------------
as of the Effective Time and signed on its behalf by its chief executive officer
and its chief financial officer, to the effect that the conditions of its
obligations set forth in Section 9.3(a) and 9.3(b) of this Agreement have been
satisfied, and (ii) certified copies of resolutions duly adopted by the ANB
Board evidencing the taking of all corporate action necessary to authorize the
execution, delivery and performance of this Agreement, and the consummation of
the transactions contemplated hereby, all in such reasonable detail as PBC and
its counsel shall request.
(D) OPINION OF COUNSEL. ANB shall have delivered to PBC an opinion of
------------------
Maynard, Cooper & Gale, P.C., counsel to ANB, dated as of the Effective Time, in
substantially the form of Exhibit B hereto.
---------
(E) FAIRNESS OPINION. PBC shall have received from the PBC Financial
----------------
Advisor the fairness opinion described in Section 8.9 stating that the Exchange
Ratio provided for in this Agreement and recommended by PBC to its stockholders
is fair to PBC and its stockholders from a financial point of view as of the
time of mailing of the Proxy Statement/Prospectus and, if requested by the PBC
Board, such Financial Advisor shall have reconfirmed such opinion as of the
Effective Time.
(F) ANB COMMON STOCK. The ANB Common Stock to be issued in the Merger
----------------
shall have been qualified as a NASDAQ "national market system security" pursuant
to Section 7.7 hereof.
(G) RELEASE OF CLAIMS The Directors and Executive Officers of PBC shall
-----------------
have received from PBC a release in the form of Exhibit E.
---------
ARTICLE 10
TERMINATION
-----------
10.1 TERMINATION. Notwithstanding any other provision of this Agreement,
-----------
and notwithstanding the approval of this Agreement by the stockholders of PBC,
this Agreement may be terminated and the Merger abandoned at any time prior to
the Effective Time:
(A) by mutual written consent of the ANB Board and the PBC Board; or
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<PAGE>
(B) by the Board of Directors of either Party in the event of a breach by
the other Party of any representation or warranty contained in this Agreement
which cannot be or has not been cured within thirty (30) days after the giving
of written notice to the breaching Party of such breach and which breach would
have, individually or in the aggregate, a Material Adverse Effect on the
breaching Party; or
(C) by the Board of Directors of either Party in the event of a material
breach by the other Party of any covenant, agreement or other obligation
contained in this Agreement which cannot be or has not been cured within thirty
(30) days after the giving of written notice to the breaching Party of such
breach; or
(D) by the Board of Directors of either Party (provided that the
terminating Party is not then in material breach of any representation,
warranty, covenant, agreement or other obligation contained in this Agreement)
if (i) any Consent of any Regulatory Authority required for consummation of the
Merger and the other transactions provided for herein shall have been denied by
final nonappealable action of such authority or if any action taken by such
Authority is not appealed within the time limit for appeal, or (ii) the
stockholders of PBC fail to vote their approval of this Agreement and the
transactions provided for herein at its Stockholders' Meeting where the
transactions are presented to such PBC stockholders for approval and voted upon;
or
(E) by ANB, upon written notice to PBC, if there shall have occurred any
Material Adverse Effect to the business, operations or financial condition of
PBC taken as a whole and such Material Adverse Effect shall not have been
remedied within 15 days after receipt by PBC of notice in writing from ANB
specifying the nature of such Material Adverse Effect and requesting that it be
remedied; or
(F) by PBC, upon written notice to ANB, if there shall have occurred any
Material Adverse Effect to the business, operations, or financial condition of
ANB taken as a whole and such Material Adverse Effect shall not have been
remedied within 15 days after receipt by ANB of notice in writing from PBC
specifying the nature of such Material Adverse Effect and requesting that it be
remedied; or
(G) by the Board of Directors of either Party if the Merger shall not have
been 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 this Agreement by the Party electing to terminate pursuant to this
Section 10.1(g); or
(H) by the Board of Directors of either Party if any of the conditions
precedent to the obligations of such Party to consummate the Merger cannot be
satisfied or fulfilled by the date specified in Section 10.1(g) of this
Agreement and such failure was not the fault of the terminating party; or
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<PAGE>
(I) by the ANB Board if the holders of in excess of seven percent (7.0%)
of the outstanding shares of PBC Common Stock properly assert their dissenters'
rights of appraisal pursuant to Section 607.1320 of the FBCA; or
(J) by PBC, to the extent that a majority of the disinterested members of
the PBC Board shall have determined to enter into an agreement with respect to a
superior Acquisition Proposal as contemplated by Section 8.8(b); provided that,
concurrently with such termination, PBC shall pay to ANB a termination fee equal
to $500,000; in such an event, ANB shall not be entitled to receive any
additional amounts (for damages, expenses, costs or otherwise) from PBC, its
officers, directors or shareholders; or
(K) by the PBC Board if the Average Quoted Price is $23.00 or less.
10.2 EFFECT OF TERMINATION. In the event of the termination and
---------------------
abandonment of this Agreement pursuant to Section 10.1 of this Agreement, this
Agreement shall become void and have no effect, except that (i) the provisions
of this Section 10.2 and Article 11 and Sections 7.3(c) 8.2, 8.7 and 10.1(j) of
this Agreement shall survive any such termination and abandonment, and (ii) a
termination pursuant to Sections 10.1(b), 10.1(c) or 10.1(h) of this Agreement
shall not relieve the breaching Party from Liability for an uncured willful
breach of a representation, warranty, covenant, obligation or agreement giving
rise to such termination.
10.3 NON-SURVIVAL OF REPRESENTATIONS AND COVENANTS. The respective
---------------------------------------------
representations, warranties, obligations, covenants and agreements of the
Parties shall not survive the Effective Time, except for the provisions of this
Section 10.3 and Articles 1-4, Sections 7.3 (a), (b) and (d), 8.2 (b) and (c),
8.11 and Article 11 of this Agreement which shall survive the Effective Time.
ARTICLE 11
MISCELLANEOUS
-------------
11.1 DEFINITIONS. Except as otherwise provided herein, the capitalized
-----------
terms set forth below (in their singular and plural forms as applicable) shall
have the following meanings:
"ACQUISITION PROPOSAL" with respect to a Party shall mean any tender
offer or exchange offer or any proposal for a merger, acquisition of all of
the stock or Assets of, or other business combination involving such Party
or any of its Subsidiaries or the acquisition of a substantial equity
interest in, or a substantial portion of the assets of, such Party or any
of its Subsidiaries, including a plan of liquidation of a Party or any of
its Subsidiaries, other than the transaction provided for in this
Agreement.
"1933 ACT" shall mean the Securities Act of 1933, as amended.
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"1934 ACT" shall mean the Securities Exchange Act of 1934, as amended.
"AFFILIATE" of a Person shall mean: (i) any other Person directly, or
indirectly through one or more intermediaries, controlling, controlled by
or under common control with such Person; (ii) any officer, director,
partner, employer, or direct or indirect beneficial owner of any 10% or
greater equity or voting interest of such Person; or (iii) any other Person
for which a Person described in clause (ii) acts in any such capacity.
"AGREEMENT" shall mean this Agreement and Plan of Merger, including
the Exhibits and Schedules delivered pursuant hereto and incorporated
herein by reference. References to "the date of this Agreement," "the date
hereof" and words of similar import shall refer to the date this Agreement
was first executed, March 5, 1998.
"ANB" shall mean Alabama National BanCorporation, a Delaware
corporation.
"ANB ALLOWANCE" shall have the meaning provided in Section 6.9 of this
Agreement.
"ANB BANKS" shall mean and include Alabama Exchange Bank; First
Citizens Bank, National Bank; First American Bank; Citizens & Peoples Bank,
National Association; Bank of Dadeville; First Gulf Bank; and National Bank
of Commerce of Birmingham.
"ANB BENEFIT PLAN" shall mean all pension, retirement, profit-sharing,
deferred compensation, stock option, employee stock ownership, severance
pay, vacation, bonus, or other incentive plan, all other written employee
programs, arrangements, or agreements, all medical, vision, dental, or
other health plans, all life insurance plans, and all other employee
benefit plans or fringe benefit plans, including, without limitation,
"employee benefit plans" as that term is defined in Section 3(3) of ERISA,
currently adopted, maintained by, sponsored in whole or in part by, or
contributed to by any ANB Company or Affiliate thereof for the benefit of
employees, retirees, dependents, spouses, directors, independent
contractors, or other beneficiaries and under which employees, retirees,
dependents, spouses, directors, independent contractors, or other
beneficiaries are eligible to participate.
"ANB BOARD" shall mean the Board of Directors of ANB.
"ANB COMMON STOCK" shall mean the $1.00 par value common stock of ANB.
"ANB COMPANIES" shall mean, collectively, ANB and all ANB
Subsidiaries.
"ANB ERISA PLAN" shall mean any of the ANB Benefit Plans which is an
"employee pension benefit plan," as that term is defined in Section 3(2) of
ERISA.
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<PAGE>
"ANB FINANCIAL STATEMENTS" shall mean (i) the consolidated statements
of conditions (including related notes and schedules, if any) of ANB as of
December 31, 1996, 1995 and 1994, and the related statements of income,
changes in stockholders' equity, and cash flows (including related notes
and schedules, if any) for the years then ended, as filed by ANB in SEC
Documents, and (ii) the consolidated statements of condition of ANB
(including related notes and schedules, if any) and related statements of
income, changes in stockholders' equity and cash flows (including related
notes and schedules, if any) included in SEC Documents filed with respect
to periods ended subsequent to December 31, 1996.
"ANB PENSION PLAN" shall mean each ANB ERISA Plan which is also a
"defined benefit plan" (as defined in Section 414(j) of the Internal
Revenue Code).
"ANB REGULATORY REPORTS" shall mean (i) the Consolidated Financial
Statements for Bank Holding Companies, Form FRY 9C, for the years ended
December 31, 1996 and 1995, as filed by ANB with the FRB and (ii) the
Consolidated Financial Statements for Bank Holding Companies, Form FRY 9C,
delivered by ANB to PBC with respect to periods ended subsequent to
December 31, 1996.
"ANB STOCK PLAN" shall mean the existing stock option plans of ANB
designated as the "ANB 1994 Stock Option Plan", the "ANB Long-Term
Incentive Compensation Plan" and the "ANB Performance Share Plan".
"ANB SUBSIDIARIES" shall mean the Subsidiaries of ANB, which shall
include the ANB Subsidiaries described in Section 6.4 of this Agreement and
any corporation, bank, savings association, or other organization acquired
as a Subsidiary of ANB in the future and owned by ANB at the Effective
Time.
"ARTICLES OF MERGER" shall mean the Articles of Merger to be signed by
ANB and PBC and filed with the Department of State of Florida relating to
the Merger as contemplated by Section 1.1 of this Agreement.
"ASSETS" of a Person shall mean all of the assets, properties,
businesses and rights of such Person of every kind, nature, character and
description, whether real, personal or mixed, tangible or intangible,
accrued or contingent, or otherwise relating to or utilized in such
Person's business, directly or indirectly, in whole or in part, whether or
not carried on the books and records of such Person, and whether or not
owned in the name of such Person or any Affiliate of such Person and
wherever located.
"AVERAGE QUOTED PRICE" shall mean the price derived by adding the
averages of the high and low sales price reported on NASDAQ on each of the
twenty (20) consecutive trading days ending on the fifth business day prior
to the Effective Time, and dividing such sum by twenty (20).
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"BHC ACT" shall mean the federal Bank Holding Company Act of 1956, as
amended.
"CERTIFICATE OF MERGER" shall mean the Certificate of Merger to be
executed by ANB and filed with the Secretary of State of Delaware relating
to the Merger as contemplated by Section 1.1 of this Agreement.
"CERTIFICATE OF OBJECTIONS" shall have the meaning provided in Section
8.5 of this Agreement.
"CLOSING" shall mean the closing of the transactions provided for
herein, as described in Section 1.2 of this Agreement.
"CONSENT" shall mean any consent, approval, authorization, clearance,
exemption, waiver or similar affirmation by any Person pursuant to any
Contract, Law, Order or Permit.
"CONTRACT" shall mean any written or oral agreement, arrangement,
authorization, commitment, contract, indenture, instrument, lease,
obligation, plan, practice, restriction, understanding or undertaking of
any kind or character, or other document to which any Person is a party or
that is binding on any Person or its capital stock, Assets or business.
"CUTOFF" shall have the meaning provided in Section 4.2 of this
Agreement.
"DEFAULT" shall mean (i) any breach or violation of or default under
any Contract, Order or Permit, (ii) any occurrence of any event that with
the passage of time or the giving of notice or both would constitute a
breach or violation of or default under any Contract, Order or Permit, or
(iii) any occurrence of any event that with or without the passage of time
or the giving of notice would give rise to a right to terminate or revoke,
change the current terms of, or renegotiate, or to accelerate, increase, or
impose any Liability under, any Contract, Order or Permit, where, in any
such event, such Default would have, individually or in the aggregate, a
Material Adverse Effect on a Party.
"DGCL" shall mean the Delaware General Corporation Law.
"DESIGNATED OFFICER"
(a) with respect to PBC shall mean Freedle, Robert Tucker, Jack A.
Shoffner and D. Charles Anderson; and
(b) with respect to ANB shall mean John H. Holcomb, III, Richard
Murray and William E. Matthews.
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"DESIGNATED REPRESENTATIVE"
(a) with respect to PBC shall mean Freedle and/or Robert Tucker, and
(b) with respect to ANB shall mean John H. Holcomb, III and/or
William E. Matthews.
"DISSENTER PROVISIONS" shall have the meaning provided in Section 3.4
of this Agreement.
"EFFECTIVE TIME" shall mean the date and time at which the Merger
becomes effective as provided in Section 1.3 of this Agreement.
"ENVIRONMENTAL LAWS" shall mean all Laws which are administered,
interpreted or enforced by the United States Environmental Protection
Agency and state and local agencies with jurisdiction over pollution or
protection of the environment.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended.
"ERISA AFFILIATE" shall have the meaning provided in Section 5.14 of
this Agreement.
"EXCHANGE AGENT" shall mean AmSouth Bank.
"EXCHANGE RATIO" shall have the meaning given such term in Section 3.1
hereof.
"FBCA" shall mean the Florida Business Corporation Act.
"FDIC" shall mean the Federal Deposit Insurance Corporation.
"FRB" OR "FEDERAL RESERVE BOARD" shall mean Board of Governors of the
Federal Reserve System.
"FRACTION" shall have the meaning set forth in Section 3.1(d)(ii) of
this Agreement.
"FREEDLE" shall mean P. Douglas Freedle.
"FREEDLE EMPLOYEES" shall have the meaning set forth in Section
7.3(d).
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"GAAP" shall mean generally accepted accounting principles,
consistently applied during the periods involved.
"HAZARDOUS MATERIAL" shall mean any pollutant, contaminant, or
hazardous substance within the meaning of the Comprehensive Environment
Response, Compensation, and Liability Act, 42 U.S.C. (S) 9601 et seq., or
any similar federal, state or local Law.
"INDEMNIFIED PARTY" shall have the meaning set forth in Section
8.11(c) of this Agreement.
"INDEMNIFYING PARTY" shall have the meaning set forth in Section
8.11(c) of this Agreement.
"INTERNAL REVENUE CODE" shall mean the Internal Revenue Code of 1986,
as amended, and the rules and regulations promulgated thereunder.
"KNOWLEDGE" as used with respect to a Party shall mean (a) the actual
knowledge of the Designated Officers of such Party and (b) the Knowledge
that a prudent individual serving in a similar role to any of the
Designated Officers could reasonably be expected to know in the performance
of his duties.
"LAW" shall mean any code, law, ordinance, regulation, reporting or
licensing requirement, rule, or statute applicable to a Person or its
Assets, Liabilities or business, including without limitation those
promulgated, interpreted or enforced by any of the Regulatory Authorities.
"LIABILITY" shall mean any direct or indirect, primary or secondary,
liability, indebtedness, obligation, penalty, cost or expense (including
without limitation costs of investigation, collection and defense), claim,
deficiency, guaranty or endorsement of or by any Person (other than
endorsements of notes, bills, checks and drafts presented for collection or
deposit in the ordinary course of business) of any type, whether accrued,
absolute or contingent, liquidated or unliquidated, matured or unmatured,
or otherwise.
"LIEN" shall mean any conditional sale agreement, default of title,
easement, encroachment, encumbrance, hypothecation, infringement, lien,
mortgage, pledge, reservation, restriction, security interest, title
retention or other security arrangement, or any adverse right or interest,
charge or claim of any nature whatsoever of, on or with respect to any
property or property interest, other than (i) Liens for current property
Taxes not yet due and payable, (ii) for depository institution Subsidiaries
of a Party, pledges to secure deposits and other Liens incurred in the
ordinary course of the banking business, and (ii) Liens which would not
have, individually or in the aggregate, a Material Adverse Effect on a
Party.
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<PAGE>
"LITIGATION" shall mean any action, arbitration, cause of action,
claim, complaint, criminal prosecution, demand letter, governmental or
other examination or investigation, hearing, inquiry, administrative or
other proceeding or notice (written or oral) by any Person alleging
potential Liability or requesting information relating to or affecting a
Party, its business, its Assets (including without limitation Contracts
related to it), or the transactions provided for in this Agreement, but
shall not include regular, periodic examinations of depository institutions
and their Affiliates by Regulatory Authorities.
"LOAN PROPERTY" shall mean any property owned by a Party in question
or by any of its Subsidiaries or in which such Party or Subsidiary holds a
security interest, and, where required by the context, includes the owner
or operator of such property, but only with respect to such property.
"LOANS" shall have the meaning set forth in Section 5.9(a) of this
Agreement.
"MATERIAL" for purposes of this Agreement shall be determined in light
of the facts and circumstances of the matter in question; provided that any
specific monetary amount stated in this Agreement shall determine
materiality in that instance.
"MATERIAL ADVERSE EFFECT" on a Party shall mean an event, change or
occurrence that has a material adverse impact on (i) the financial
position, results of operations or business of such Party and its
Subsidiaries, taken as a whole, or (ii) the ability of such Party to
perform its obligations under this Agreement or to consummate the Merger or
the other transactions provided for in this Agreement; provided that
"material adverse impact" shall not be deemed to include the impact of (x)
changes in banking and similar Laws of general applicability or
interpretations thereof by courts of governmental authorities, (y) changes
in generally accepted accounting principles or regulatory accounting
principles generally applicable to banks and their holding companies and
(z) the Merger on the operating performance of the Parties.
"MERGER" shall mean the merger of PBC with and into ANB referred to in
Section 1.1 of this Agreement.
"NASD" shall mean the National Association of Securities Dealers, Inc.
"NASDAQ" shall mean the National Association of Securities Dealers
Automated Quotations System.
"OCC" shall mean the Office of the Comptroller of the Currency.
"ORDER" shall mean any administrative decision or award, decrees,
injunction, judgment, order, quasi-judicial decision or award, ruling, or
writ of any federal, state,
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<PAGE>
local or foreign or other court, arbitrator, mediator, tribunal,
administrative agency or Regulatory Authority.
"PARTICIPATION FACILITY" shall mean any facility in which the Party in
question or any of its Subsidiaries participates in the management and,
where required by the context, includes the owner or operator or such
property, but only with respect to such property.
"PARTY" shall mean either PBC or ANB, and "PARTIES" shall mean both
PBC and ANB.
"PBC" shall mean Public Bank Corporation, a Florida corporation.
"PBC BANK" shall have the meaning set forth in Section 5.4(a) of this
Agreement.
"PBC BENEFIT PLANS" shall have the meaning set forth in Section
5.14(a) of this Agreement.
"PBC BOARD" shall mean the Board of Directors of PBC.
"PBC CALL REPORTS" shall mean (i) the Reports of Income and Condition
of PBC Bank for the years ended December 31, 1996 and 1995, as filed with
the FDIC and the FRB and (ii) the Reports of Income and Condition of PBC
Bank delivered by PBC to ANB with respect to periods ended subsequent to
December 31, 1996.
"PBC CERTIFICATE" shall have the meaning provided in Section 4.2 of
this Agreement.
"PBC COMMON STOCK" shall mean the $.10 par value Class A voting common
stock of PBC.
"PBC COMPANIES" shall mean, collectively, PBC and all PBC
Subsidiaries.
"PBC CONTRACTS" shall have the meaning set forth in Section 5.15 of
this Agreement.
"PBC EMPLOYEES" shall have the meaning set forth in Section 7.3(a) of
this Agreement.
"PBC ERISA PLANS" shall have the meaning set forth in Section 5.14(a)
of this Agreement.
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<PAGE>
"PBC FINANCIAL ADVISOR" shall have the meaning set forth in Section
8.9 of this Agreement.
"PBC FINANCIAL STATEMENTS" shall mean (i) the consolidated balance
sheets (including related notes and schedules, if any) of PBC as of
December 31, 1997, 1996 and 1995, and the related statements of income,
changes in stockholders' equity and cash flows (including related notes and
schedules, if any) for the years then ended, as delivered by PBC to ANB,
and (ii) the consolidated balance sheets of PBC (including related notes
and schedules, if any) and related statements of income, changes in
stockholders' equity and cash flows (including related notes and schedules,
if any) delivered by PBC to ANB with respect to periods ended subsequent to
December 31, 1997.
"PBC PENSION PLAN" shall have the meaning set forth in Section 5.14(a)
of this Agreement.
"PBC STOCKHOLDERS' MEETING" shall mean the meeting of the stockholders
of PBC to be held pursuant to Section 8.4 of this Agreement, including any
adjournment or adjournments thereof.
"PBC SUBSIDIARIES" shall mean the Subsidiaries of PBC, which shall
include the PBC Subsidiaries described in Section 5.4 of this Agreement and
any corporation, bank, savings association or other organization acquired
as a Subsidiary of PBC in the future and owned by PBC at the Effective
Time.
"PERMIT" shall mean any federal, state, local and foreign governmental
approval, authorization, certificate, easement, filing, franchise, license,
notice, permit or right to which any Person is a party or that is or may be
binding upon or inure to the benefit of any Person or its securities,
Assets or business.
"PERSON" shall mean a natural person or any legal, commercial or
governmental entity, such as, but not limited to, a corporation, general
partnership, joint venture, limited partnership, limited liability company,
trust, business association, group acting in concert or any person acting
in a representative capacity.
"PMC" shall mean Public Mortgage Corporation, a Florida corporation.
"PROXY STATEMENT/PROSPECTUS" shall have the meaning set forth in
Section 5.18 of this Agreement.
"REGISTRATION STATEMENT" shall mean the Registration Statement on Form
S-4 or Form S-3, or other appropriate form, filed with the SEC by ANB under
the 1933 Act in connection with the transactions contemplated by this
Agreement.
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<PAGE>
"REGULATORY AUTHORITIES" shall mean, collectively, the Federal Trade
Commission, the United States Department of Justice, the FRB, the OCC, the
FDIC, all state regulatory agencies having jurisdiction over the Parties
and their respective Subsidiaries, the NASD and the SEC.
"RELATED INTERESTS" shall have the meaning set forth in Section 5.15
of this Agreement.
"S-3 REGISTRATION STATEMENT" shall have the meaning set forth in
Section 8.11(a)(i) of this Agreement.
"S-4 REGISTRATION STATEMENT" shall have the meaning set forth in
Section 5.18 of this Agreement.
"SEC" shall mean the Securities and Exchange Commission.
"SEC DOCUMENTS" shall mean all reports and registration statements
filed, or required to be filed, by a Party or any of its Subsidiaries with
any Regulatory Authority pursuant to the Securities Laws.
"SECURITIES LAWS" shall mean the 1933 Act, the 1934 Act, the
Investment Company Act of 1940 as amended, the Investment Advisors Act of
1940, as amended, the Trust Indenture Act of 1939, as amended, and the
rules and regulations of any Regulatory Authority promulgated thereunder.
"STATE REGULATOR" shall have the meaning set forth in Section 5.9(c)
of this Agreement.
"SUBSIDIARIES" shall mean all those corporations, banks, associations
or other entities of which the entity in question owns or controls 50% or
more of the outstanding equity securities either directly or through an
unbroken chain of entities as to each of which 50% or more of the
outstanding equity securities is owned directly or indirectly by its
parent; provided, however, there shall not be included any such entity
acquired through foreclosure or any such entity the equity securities of
which are owned or controlled in a fiduciary capacity.
"SURVIVING CORPORATION" shall mean ANB as the surviving corporation in
the Merger.
"TAKEOVER LAWS" shall have the meaning set forth in Section 5.22 of
this Agreement.
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<PAGE>
"TAX OPINIONS" shall have the meaning set forth in Section 9.1(f) of
this Agreement.
"TAXES" shall mean any federal, state, county, local, foreign and
other taxes, assessments, charges, fares, and impositions, including
interest and penalties thereon or with respect thereto.
11.2 ENTIRE AGREEMENT. Except as otherwise expressly provided herein, this
----------------
Agreement (including the documents and instruments referred to herein)
constitutes the entire agreement between the Parties with respect to the
transactions provided for herein and supersedes all prior arrangements or
understandings with respect thereto, written or oral. Nothing in this Agreement
expressed or implied is intended to confer upon any Person, other than the
Parties or their respective successors, any right, remedies, obligations or
liabilities under or by reason of this Agreement.
11.3 AMENDMENTS. To the extent permitted by Law, this Agreement may be
----------
amended by a subsequent writing signed by each of the Parties upon the approval
of the Boards of Directors of each of the Parties; provided, however, that after
approval of this Agreement by the holders of PBC Common Stock, there shall be
made no amendment that pursuant to the FBCA or DGCL requires further approval by
the PBC stockholders without the further approval of the PBC stockholders.
11.4 WAIVERS.
-------
(A) Prior to or at the Effective Time, ANB, acting through the ANB Board,
chief executive officer or other authorized officer, shall have the right to
waive any Default in the performance of any term of this Agreement by PBC, to
waive or extend the time for the compliance or fulfillment by PBC of any and all
of its obligations under this Agreement, and to waive any or all of the
conditions precedent to the obligations of ANB under this Agreement, except any
condition which, if not satisfied, would result in the violation of any Law. No
such waiver shall be effective unless in writing signed by a duly authorized
officer of ANB.
(B) Prior to or at the Effective Time, PBC, acting through the PBC Board,
chief executive officer or other authorized officer, shall have the right to
waive any Default in the performance of any term of this Agreement by ANB, to
waive or extend the time for the compliance or fulfillment by ANB of any and all
of its obligations under this Agreement, and to waive any or all of the
conditions precedent to the obligations of PBC under this Agreement, except any
condition which, if not satisfied, would result in the violation of any Law. No
such waiver shall be effective unless in writing signed by a duly authorized
officer of PBC.
11.5 ASSIGNMENT. Except as expressly provided for herein, neither this
----------
Agreement nor any of the rights, interests or obligations hereunder shall be
assigned by any Party hereto (whether by operation of Law or otherwise) without
the prior written consent of the other Party.
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<PAGE>
Subject to the preceding sentence, this Agreement will be binding upon, inure to
the benefit of and be enforceable by the Parties and their respective successors
and assigns.
11.6 NOTICES. All notices or other communications which are required or
-------
permitted hereunder shall be in writing and sufficient if delivered by hand, by
facsimile transmission, by registered or certified mail, postage pre-paid, or by
courier or overnight carrier, to the persons at the addresses set forth below
(or at such other address as may be provided hereunder), and shall be deemed to
have been delivered as of the date so delivered:
PBC: Public Bank Corporation
c/o Janus Financial Corporation
4224 Bay-to-Bay Blvd.
Tampa, Florida 33629-6608
Telecopy Number: (813) 831-9993
Attention: Mr. P. Douglas Freedle
Copy to Counsel: Fowler, White, et. al.
Suite 1700, 501 East Kennedy Blvd.
Tampa, Florida 33601
Telecopy Number: (813) 229-8313
Attention: David C. Shobe
ANB: Alabama National BanCorporation
1927 First Avenue North
Birmingham, Alabama 35203
Telecopy Number: (205) 583-3275
Attention: John H. Holcomb, III,
Chief Executive Officer
Copy to Counsel: Maynard, Cooper & Gale, P.C.
1901 Sixth Avenue North
2400 AmSouth/Harbert Plaza
Birmingham, Alabama 35203
Telecopy Number: (205) 254-1999
Attention: Mark L. Drew
11.7 BROKERS AND FINDERS. Each of the Parties represents and warrants that
-------------------
neither it nor any of its officers, directors, employees or Affiliates has
employed any broker or finder or incurred any Liability for any financial
advisory fees, investment bankers' fees, brokerage
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<PAGE>
fees, commissions or finders' fees in connection with this Agreement or the
transactions provided for herein. In the event of a claim by any broker or
finder based upon his or its representing or being retained by or allegedly
representing or being retained by PBC or ANB, each of PBC and ANB, as the case
may be, agrees to indemnify and hold the other Party harmless of and from any
Liability with respect to any such claim.
11.8 GOVERNING LAW. This Agreement shall be governed by and construed in
-------------
accordance with the Laws of the State of Florida, without regard to any
applicable conflicts of Laws, except to the extent federal law shall be
applicable.
11.9 COUNTERPARTS. This Agreement may be executed in one or more
------------
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same instrument.
11.10 CAPTIONS. The captions contained in this Agreement are for
--------
reference purposes only and are not part of this Agreement.
11.11 ENFORCEMENT OF AGREEMENT. The Parties hereto agree that irreparable
------------------------
damage would occur in the event that any of the provisions of this Agreement was
not performed in accordance with its specific terms or was otherwise breached.
It is accordingly agreed that the Parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions hereof in any court of the United States or any state
having jurisdiction, this being in addition to any other remedy to which they
are entitled at law or in equity.
11.12 SEVERABILITY. Any term or provision of this Agreement that is
------------
invalid or unenforceable in any jurisdiction shall, as to that jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction. If any provision of
this Agreement is so broad as to be unenforceable, the provision shall be
interpreted to be only so broad as is enforceable.
11.13 SINGULAR/PLURAL; GENDER. Where the context so requires or permits,
-----------------------
the use of singular form includes the plural, and the use of the plural form
includes the singular, and the use of any gender includes any and all genders.
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<PAGE>
IN WITNESS WHEREOF, each of the Parties has caused this Agreement to be
executed on its behalf and its corporate seal to be hereunto affixed and
attested by its respectively authorized officers as of the day and year first
above written.
Public Bank Corporation
Attest:
By: /s/ Jack Shoffner By: /s/ P. Douglas Freedle
----------------- ----------------------
Its: Secretary P. Douglas Freedle
Its: Chief Executive Officer
[CORPORATE SEAL]
Alabama National BanCorporation
Attest:
By: /s/ Kimberly Moore By: /s/ John H. Holcomb, III
------------------ ------------------------
Its: Secretary John H. Holcomb, III
Its: Chief Executive Officer
[CORPORATE SEAL]
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<PAGE>
LIST OF EXHIBITS
----------------
Exhibit A: Opinion of PBC Counsel
Exhibit B: Opinion of ANB Counsel
Exhibit C: Noncompete Agreement
Exhibit D: Release of PBC
Exhibit E: Release of Directors and
Executive Officers
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<PAGE>
EXHIBIT A
---------
LETTERHEAD OF FOWLER, WHITE, GILLEN, BOGGS, VILLAREAL AND BANKER, P.A.
----------------------------------------------------------------------
[_____________], 1998
BY HAND DELIVERY
- ----------------
Alabama National BanCorporation
1927 First Avenue North
Birmingham, Alabama 35203
Attn: Chairman
Re: Merger of Alabama National BanCorporation and Public Bank Corporation
---------------------------------------------------------------------
Gentlemen:
We are counsel to Public Bank Corporation ("PBC"), a corporation organized
and existing under the laws of the State of Florida, and have represented PBC in
connection with the execution and delivery of the Agreement and Plan of Merger,
dated as of March 5, 1998 (the "Agreement"), by and between Alabama National
BanCorporation ("ANB") and PBC.
This opinion is delivered pursuant to Section 9.2(d) of the Agreement.
Capitalized terms used in this opinion shall have the meaning set forth in the
Agreement.
[NOTE: WE WILL PROVIDE OUR STANDARD FORMAT WHICH REFERENCES ABA LEGAL
OPINION ACCORD.]
Based upon and subject to the foregoing, we are of the opinion that:
1. PBC is a corporation duly organized, validly existing and in good
standing under the laws of the State of Florida with full corporate power and
authority to carry on the business in which it is engaged as described in the
proxy statement used to solicit the approval by the stockholders of PBC of the
transactions provided for in the Agreement ("Proxy Statement"), and to own the
properties owned by it.
2. PBC Bank is a state non-member bank of the Federal Reserve System,
duly organized, validly existing with active status under the laws of the State
of Florida with full corporate power and authority to carry on the business in
which it is engaged as described in the Proxy Statement and to own the
properties owned by it.
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<PAGE>
3. The execution and delivery of the Agreement and compliance with its
terms do not and will not violate or contravene any provision of the Articles of
Incorporation or Bylaws of PBC or, to our knowledge but without any independent
investigation, result in any conflict with, breach of or default or acceleration
under any mortgage, agreement, lease, indenture or other instrument, order,
judgment or decree to which any PBC Company is a party or by which any PBC
Company is bound.
4. In accordance with the Bylaws of PBC and pursuant to resolutions duly
adopted by its Board of Directors and stockholders, the Agreement has been duly
adopted and approved by the Board of Directors of PBC and by the stockholders of
PBC at the Stockholders' Meeting.
5. The Agreement has been duly and validly executed and delivered by PBC
and, assuming valid authorization, execution and delivery by ANB, constitutes a
valid and binding agreement of PBC enforceable in accordance with its terms,
except as enforceability may be limited by bankruptcy, insolvency,
reorganization or similar laws affecting creditors' rights generally; provided,
however, that we express no opinion as to the availability of the equitable
remedy of specific performance. [WE WILL PROVIDE ADDITIONAL EXCEPTIONS WITH OUR
STANDARD FORM.]
6. The authorized capital stock of PBC consists of (i)
[____________________] shares of PBC Common Stock, of which 2.337,309 shares
were issued and outstanding as of [_______________________], 1998, and (ii)
[___________________] shares of PBC Preferred Stock, of which no shares were
issued and outstanding as of [____________________], 1998. The shares of PBC
Common Stock that are issued and outstanding were to our knowledge not issued in
violation of any statutory preemptive rights of shareholders, were duly issued
and are nonassessable under the Florida General Corporation Act. To our
knowledge, without independent investigation, there are no options,
subscriptions, warrants, calls, rights or commitments obligating PBC to issue
any equity securities or acquire any of its equity securities.
This opinion is delivered solely for reliance by ANB.
Sincerely,
_________________________________________
By:______________________________________
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<PAGE>
EXHIBIT B
---------
LETTTERHEAD OF MAYNARD, COOPER & GALE, P.C.
-------------------------------------------
[_____________], 1998
BY HAND DELIVERY
- ----------------
Public Bank Corporation
_______________________
_______________________
Attn: Chairman
RE: MERGER OF ALABAMA NATIONAL BANCORPORATION AND PUBLIC BANK CORPORATION
---------------------------------------------------------------------
Gentlemen:
We are counsel to Alabama National BanCorporation ("ANB"), a corporation
organized and existing under the laws of the State of Delaware, and have
represented ANB in connection with the execution and delivery of the Agreement
and Plan of Merger, dated as of March 5, 1998 (the "Agreement"), by and between
Public Bank Corporation ("PBC") and ANB.
This opinion is delivered pursuant to Section 9.3(d) of the Agreement.
Capitalized terms used in this opinion shall have the meaning set forth in the
Agreement.
In rendering this opinion, we have examined the corporate books and records
of ANB, and made such other investigations as we have deemed necessary. We have
relied upon certificates of public officials and officers of ANB as to certain
questions of fact.
Based upon and subject to the foregoing, we are of the opinion that:
1. ANB is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware with full corporate power and
authority to carry on the business in which it is engaged as described in the
proxy statement used to solicit the approval by the stockholders of PBC of the
transactions provided for the Agreement ("Proxy Statement"), and to own the
properties owned by it.
2. The execution and delivery of the Agreement and compliance with its
terms do not and will not violate or contravene any provision of the Certificate
of Incorporation or Bylaws of ANB, or, to the best of our knowledge but without
any independent investigation, result in any conflict with, breach of, or
default or acceleration under any mortgage, agreement, lease,
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<PAGE>
Public Bank Corporation
_______________________, 1998
Page 66
indenture or other instrument, order, judgment or decree to which any ANB
Company is a party or by which any ANB Company is bound.
3. In accordance with the Bylaws of ANB and pursuant to resolutions duly
adopted by its Board of Directors and stockholders, the Agreement has been duly
adopted and approved by the Board of Directors and stockholders of ANB.
4. The Agreement has been duly and validly executed and delivered by ANB
and, assuming valid authorization, execution and delivery by PBC, constitutes a
valid and binding agreement of ANB enforceable in accordance with its terms,
except as enforceability may be limited by bankruptcy, insolvency,
reorganization, or similar laws affecting creditors' rights generally; provided,
however, that we express no opinion as to the availability of the equitable
remedy of specific performance.
5. The authorized capital stock of ANB consists of 10,000,000 shares of
ANB Common Stock, of which [______________________] shares were issued and
outstanding as of [_____________], 1998, and 100,000 shares of preferred stock,
$1.00 par value, none of which is issued and outstanding. The shares of ANB
Common Stock that are issued and outstanding were not issued in violation of any
statutory preemptive rights of shareholders, were duly issued and are fully paid
and nonassessable under the Delaware General Corporation Law. The shares of ANB
Common Stock to be issued to the stockholders of PBC as contemplated by the
Agreement are duly authorized, and when properly issued and delivered following
consummation of the Merger will be validly issued, fully paid and nonassessable.
To our knowledge, except as set forth in Section 6.3(a) of the Agreement, there
are no options, subscriptions, warrants, calls, rights or commitments obligating
ANB to issue any equity securities or acquire any of its equity securities.
This opinion is delivered solely for reliance by PBC.
Sincerely,
MAYNARD, COOPER & GALE, P.C.
By: _________________________
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<PAGE>
EXHIBIT C
---------
NONCOMPETE AND NONSOLICITATION AGREEMENT
This Non-compete and Non-solicitation Agreement (this "Agreement") is
effective [________________], 1998 (the "Effective Date"), by and between Public
Bank, a Florida banking corporation ("Bank"); Alabama National BanCorporation, a
Delaware corporation ("ANB"); and [________________] ("Executive").
Recitals
--------
WHEREAS, since its inception, the Bank has been a wholly-owned subsidiary
of Public Bank Corporation ("PBC"), a corporation organized and existing under
the laws of the State of [Florida];
WHEREAS, Executive has been [the majority] [a] shareholder and [Chief
Executive Officer] [__________________] of PBC;
WHEREAS, pursuant to that certain Agreement and Plan of Merger dated as of
[_________________], 1998 between PBC and ANB (the "Merger Agreement"), the
parties have agreed that PBC shall merge with and into ANB, and the Bank shall
become a wholly-owned subsidiary of ANB; and
WHEREAS, as of the time that the transactions provided for in the Merger
Agreement are consummated, Executive's affiliation with PBC and the Bank will
terminate and, as a condition to the consummation of the transactions provided
for in the Merger Agreement, the parties have agreed to enter into this
Agreement.
Agreement
---------
NOW THEREFORE, in of the mutual recitals and covenants
contained herein, the parties hereby agree as follows:
1. DISCLOSURE OF INFORMATION.
-------------------------
(a) Executive acknowledges that any documents and information, whether
written or not, that came into Executive's possession or knowledge during
Executive's affiliation (as a shareholder, officer, employee or otherwise) with
PBC and/or Bank, including, without limitation the financial and business
conditions, goals and operations of customers of PBC and/or
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Bank or any of their respective affiliates or subsidiaries as the same may exist
from time to time (collectively, "Confidential Information"), are valuable,
special and unique assets of PBC's and Bank's business. Executive will not,
after the Effective Date, (i) disclose any written Confidential Information to
any person, firm, corporation, association or other entity not employed by or
affiliated with ANB or Bank for any reason or purpose whatsoever, or (ii) use
any written Confidential Information for any reason (other than to further the
business of ANB and/or Bank). In the event of a breach or threatened breach by
Executive of the provisions of this Section 1, in addition to all other remedies
available to ANB and Bank, ANB and Bank shall be entitled to an injunction
restraining Executive from disclosing any written Confidential Information or
from rendering any services to any person, firm, corporation, association or
other entity to whom any written Confidential Information has been disclosed or
is threatened to be disclosed. Executive further agrees that he will not
divulge to any person, firm, corporation, association or other entity not
employed by or affiliated with ANB or Bank, any of PBC's or Bank's business
methods, sales, services or techniques, to the extent they constitute
Confidential Information, regardless of whether the same is written or not.
(b) If Executive breaches or violates the terms of his agreement not
to disclose, he will pay any damages proven by ANB and/or Bank, including
reasonable attorney fees, whether or not suit be instituted.
2. COMPETITION.
-----------
(a) For a period of two (2) years after the Effective Date, Executive
will not, individually or as an employee, agent, officer, director or
shareholder of or otherwise through any corporation or other business
organization, directly or indirectly, (i) in Osceola County, Florida, carry on
or engage in the business of banking or any related business or (ii) without the
prior written consent of ANB, (A) induce or attempt to induce any employee or
agent of ANB or Bank (or any of their respective subsidiaries or affiliates) to
leave his or her employment; (B) employ, attempt to employ or solicit for
employment, or assist any person to employ any employee or agent of Bank;
provided that Executive may employ any such person after such person has been
unemployed by the Bank for a period of twelve (12) months; or (C) solicit,
attempt to solicit, communicate with, call upon, canvass or interfere with the
relationships of Bank with any person that: (1) is a customer of Bank or PBC as
of the Effective Date, (2) was a customer of Bank or PBC at any time within 12
months prior to the Effective Date, or (3) is a prospective customer of Bank or
PBC who has been pursued as a prospective customer by or on behalf of Bank or
PBC at any time within 12 months prior to the Effective Date.
(b) Executive represents that his experience and capabilities are such
that the provisions of this Section 2 will not prevent him from earning a
livelihood.
(c) If Executive violates any of the provisions of Section 2(a) above,
the period during which the covenants set forth therein shall apply shall be
extended one (1) day for each day in which a violation of such covenants occurs;
if suit be brought to enforce such
A-68
<PAGE>
covenants and one or more violations by Executive be established, then ANB and
Bank shall be entitled to an injunction restraining Executive from further
violations for a period of two (2) years from the date of the final decree, less
only such number of days that Executive shall have not violated such covenants.
The purpose of this provision is to prevent Executive from profiting from his
own wrong if he violates such covenants.
(d) If Executive breaches or violates the terms of the covenants set
forth in Section 2(a), he will pay all costs incurred by ANB or Bank in
enforcing the terms of this Agreement, including without limitation the securing
of an injunction hereunder, including a reasonable attorney's fee, whether or
not suit be instituted.
(e) For purposes of Section 2(a), Executive shall be deemed to be
engaged in any activity engaged in by a person or an entity between Executive
and whom or which no deduction is allowable in respect to any loss from the sale
or exchange of property pursuant to Section 267 of the Internal Revenue Code of
1986 or whose stock in any corporation or interest in any partnership would be
deemed to be owned by Executive pursuant to Section 318 of the Internal Revenue
Code of 1986.
3. DEFAULT.
-------
(a) If Executive breaches or violates any of the covenants,
conditions, or terms of this Agreement on his part to be performed, ANB and Bank
shall, in addition to any other remedies provided for in this Agreement or
otherwise, have the right, without notice to Executive, to obtain a writ of
injunction against him restraining him from violating any such covenant,
condition, or term, such notice being hereby expressly waived by Executive.
(b) Additionally, in the event of any conduct by Executive violating
any provision of this Agreement, ANB and Bank shall be entitled, if either or
them so elects, to institute and prosecute proceedings in any court of competent
jurisdiction, either at law or in equity, to obtain damages for such conduct, to
enforce specific performance of such provision or to obtain any other relief or
any combination of the foregoing that ANB or Bank may elect to pursue.
4. NOTICE. For the purposes of this Agreement, notices and demands shall
------
be deemed given when mailed by United States mail, addressed in the case of Bank
to Public Bank, [_______________________________], Attention: Chairman of the
Board of Directors, with a copy to ANB at Alabama National BanCorporation, 1927
First Avenue North, Birmingham, Alabama 35203, Attention: Chief Executive
Officer; or in the case of ANB to the address listed above; or in the case of
Executive to [____________________], at [__________________].
5. MISCELLANEOUS. No provision of this Agreement may be modified, waived
-------------
or discharged unless such modification, waiver or discharge is agreed to in
writing. The validity, interpretation, construction and performance of this
Agreement shall be governed by the laws
A-69
<PAGE>
of the State of Florida. This Agreement supersedes and cancels any prior
agreement or understanding entered into between Executive and Bank or Executive
and PBC.
6. VALIDITY. The invalidity of any provision or provisions of this
--------
Agreement shall not affect any other provision of this Agreement, which shall
remain in full force and effect, nor shall the invalidity of a portion of any
provision of this Agreement affect the balance of such provision.
7. PARTIES. This Agreement shall be binding upon and shall inure to the
-------
benefit of any successors or assigns to Bank or ANB. Executive may not assign
any of his rights or delegate any of his duties or obligations under this
Agreement or any portion hereof.
8. NO EMPLOYMENT AGREEMENT. This Agreement does not provide Executive
-----------------------
any right of Employment by ANB or Bank.
[Signatures on following page.]
A-70
<PAGE>
IN WITNESS WHEREOF, this Agreement has been duly executed and delivered
-------------------
by Executive and by a duly authorized officer of each of Bank and ANB as of the
date first above written.
Witnesses: "EXECUTIVE":
________________________ ___________________________________
________________________
________________________
"BANK":
Attest: Public Bank
By: ________________________ By: _______________________________
Its:_______________________ Its: Chairman of the Board of Directors
[Corporate Seal]
"ANB":
Attest: Alabama National BanCorporation
By:________________________ By:________________________________
Its:________________________ Its: Chief Executive Officer
[Corporate Seal]
A-71
<PAGE>
EXHIBIT D
---------
RELEASE OF CLAIMS BY DIRECTORS AND OFFICERS OF
PUBLIC BANK CORPORATION AND
PUBLIC BANK
THIS RELEASE OF CLAIMS ("Release") dated as of __________________, 1998, is
executed and delivered by the person executing below to Public Bank Corporation,
a Florida corporation (the "Company"), and its wholly owned subsidiary, Public
Bank, a Florida banking corporation (the "Bank").
WHEREAS, Alabama National BanCorporation ("ANB") is to acquire the Company
pursuant to that certain Agreement and Plan of Merger dated as of March 5, 1998
(the "Agreement") by and among the Company and ANB; and
WHEREAS, ANB has required as a condition to such acquisition that the
undersigned execute and deliver this Release to confirm the absence of any
claims by the undersigned against the Company or its subsidiaries, including the
Bank ("Subsidiaries");
NOW, THEREFORE, in consideration of the premises contained herein and ten
dollars and other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the undersigned hereby agrees as follows:
SECTION 1. RELEASE. The undersigned hereby RELEASES and FOREVER
DISCHARGES the Company and its Subsidiaries from all manners of action, causes
of action, suits, debts, sums of money, accounts, reckonings, bonds, bills,
specialties, covenants, contracts, controversies, agreements, premises,
variances, trespasses, damages, judgments, executions, claims and demands
whatsoever, whether in law or in equity, which the undersigned ever had, now
has, or hereafter can, shall or may have against the Company or its
Subsidiaries, in respect of any and all agreements and obligations incurred on
or prior to the date hereof, or in respect of any event occurring or
circumstances existing on or prior to the date hereof; provided, however, that
the Company and its Subsidiaries shall not be released from any of their
respective obligations or liabilities to the undersigned (i) in respect of
accrued compensation for wages or salary or fees earned or as otherwise
permitted by any written agreement with the Company or its Subsidiaries which is
attached hereto as Exhibit A; (ii) in connection with any indebtedness or
contractual obligation or liability to the undersigned existing on the date
hereof; and (iii) as to rights of indemnification pursuant to the Articles of
Incorporation or Association or Bylaws of the Company and its Subsidiaries or
under the Agreement.
SECTION 2. SUCCESSORS. This Release shall be binding upon the undersigned
and his or her heirs, devisees, administrators, executors, personal
representatives, successors and assigns
A-72
<PAGE>
and shall inure to the benefit of the Company and its Subsidiaries and their
respective successors and assigns.
SECTION 3. GOVERNING LAW. This Release shall be governed by and construed
in accordance with the laws of the State of Florida, without giving effect to
Florida principles of conflicts of law.
SECTION 4. COUNTERPARTS. This Release may be executed in several
counterparts, each of which shall be deemed to be an original and all of which
shall constitute one and the same instrument.
SECTION 5. MODIFICATION. This Release may be modified only by a written
instrument executed by the undersigned and the Company and its Subsidiaries.
IN WITNESS WHEREOF, the undersigned has executed this Release effective as
of the date first above written.
________________________________________________
________________________________________________
STATE OF FLORIDA )
COUNTY OF ______________ )
This instrument was acknowledged before me on ___________________,
1998 by ___________________.
_____________________________________________
Notary Public in and for the State of Florida
_____________________________________________
Notary's Name Typed or Printed
My Commission Expires:_______________________
A-73
<PAGE>
EXHIBIT E
---------
RELEASE OF CLAIMS BY PUBLIC BANK CORPORATION
AND PUBLIC BANK
THIS RELEASE OF CLAIMS ("Release") dated as of ___________________, 1998,
is executed and delivered by Public Bank Corporation, a Florida corporation (the
"Company"), and Public Bank, a Florida state bank (the "Bank").
WHEREAS, the persons listed on Exhibit A attached hereto and made a part
---------
hereof constitute the duly elected directors ("Directors") of the Company and
the Bank on the date hereof:
WHEREAS, Alabama National BanCorporation, a Delaware corporation ("ANB"),
is to acquire the Company pursuant to that certain Agreement and Plan of Merger
dated as of March 5, 1998 by and between ANB and the Company ("Agreement"),
whereby the Company will be merged with and into ANB; and
WHEREAS, the Company has required as a condition to such acquisition that
the Directors be released of any claims by the Company or the Bank against the
Directors;
NOW, THEREFORE, in consideration of the premises contained herein and ten
dollars and other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the Company and the Bank hereby agree as
follows:
SECTION 1. RELEASE. The Company and the Bank hereby RELEASE and FOREVER
DISCHARGE the Directors from all manner of action, causes of action, suits,
debts, sums of money, accounts, reckonings, bonds, bills, specialties,
covenants, controversies, agreements, premises, variances, trespasses, damages,
judgments, executions, claims and demands whatsoever, whether in law or in
equity, which the Company or the Bank ever had, now have or hereafter can, shall
or may have against the Directors, in respect of any and all agreements and
obligations incurred on or prior to the date hereof, or in respect of any events
occurring or circumstances existing on or prior to the date hereof; provided,
however, that no Director shall be released from (i) any action arising from
fraud in connection with the transactions contemplated by the Agreement or
otherwise, or (ii) his or her obligations or liabilities to the Company or the
Bank in connection with any indebtedness or any contractual obligation or
liability of such director to the Company or the Bank existing on the date
hereof.
SECTION 2. SUCCESSORS. This Release shall be binding upon the Company,
and the Bank and their respective successors and assigns and shall insure to the
benefit of the Directors and their respective heirs, devisees, administrators,
executors, successors and assigns.
A-74
<PAGE>
SECTION 3. GOVERNING LAW. This Release shall be governed by and construed
in accordance with the laws of the State of Florida, without giving effect to
Florida principles of conflicts of law.
SECTION 4. COUNTERPARTS. This Release may be executed in several
counterparts, each of which shall be deemed to be an original and all of which
shall constitute one and the same instrument.
SECTION 5. MODIFICATION. This Release may be modified as to any Director
only by a written instrument executed by the undersigned and such Director.
IN WITNESS WHEREOF, the Company and the Bank have executed this Release
effective as of the date first above written.
PUBLIC BANK CORPORATION
By: _____________________________________________
Name:____________________________________________
Title:___________________________________________
STATE OF FLORIDA )
COUNTY OF ______________ )
This instrument was acknowledged before me on ___________________,
1998, by __________________, as the _______________________ of Public
Bank Corporation, a Florida corporation.
____________________________________________
Notary Public in and or the State of Florida
____________________________________________
Notary's Name Typed or Printed
My Commission Expires:______________________
PUBLIC BANK
By:_______________________________________
Name:_____________________________________
Title:____________________________________
A-75
<PAGE>
STATE OF FLORIDA )
COUNTY OF )
This instrument was acknowledged before me on __________________, 1998
by ____________________, as the _____________________ of Public Bank,
a Florida state bank.
____________________________________________
Notary Public in and or the State of Florida
____________________________________________
Notary's Name Typed or Printed
My Commission Expires:______________________
A-76
<PAGE>
APPENDIX B
----------
PROVISIONS OF FLORIDA BUSINESS CORPORATION ACT
RELATING TO DISSENTERS' RIGHTS
<PAGE>
FLORIDA BUSINESS CORPORATION ACT
607.1301 DISSENTER'S RIGHTS; DEFINITIONS. -- The following definitions apply
to ss. 607.1302 and 607.1320:
(1) "Corporation" means the issuer of the shares held by a dissenting
shareholder before the corporate action or the surviving or acquiring
corporation by merger or share exchange of that issuer.
(2) "Fair value" with respect to a dissenter's shares, means the value of the
shares as of the close of business on the day prior to the shareholders'
authorization date, excluding any appreciation or depreciation in anticipation
of the corporate action unless exclusion would be inequitable.
(3) "Shareholders' authorization date" means the date on which the
shareholders' vote authorizing the proposed action was taken, the date on which
the corporation received written consents without a meeting from the requisite
number of shareholders in order to authorize the action, or, in the case of a
merger pursuant to s. 607.1104, the day prior to the date on which a copy of the
plan of merger was mailed to each shareholder of record of the subsidiary
corporation.
607.1302 RIGHT OF SHAREHOLDERS TO DISSENT. --
(1) Any shareholder of a corporation has the right to dissent from, and obtain
payment of the fair value of his 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;
B-1
<PAGE>
(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
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 accured 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; 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 shares.
(2) A shareholder dissenting from any amendment specified in paragraph (1)(e)
has the right to dissent only as to those of his shares which are adversely
affected by the amendment.
(3) A shareholder may dissent as to less than all the shares registered in his
name. In that event, his rights shall be determined as if the shares as to
which he has dissented and his other shares were registered in the names of
different shareholders.
(4) Unless the articles of incorporation otherwise provide, this section does
not apply with respect to a plan of merger or share exchange or a proposed sale
or exchange of property, to the holders of shares of any class or series which,
on the record date fixed to determine the shareholders entitled to vote at the
meeting of shareholders at which such action is to be acted upon or to consent
to any such action without a meeting, were either registered on a national
securities exchange or designated as a national market system security on an
interdealer quotation
B-2
<PAGE>
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 this shares under
this section may not challenge the corporate action creating his entitlement
unless the action is unlawful or fraudulent with respect to the shareholder or
the corporation.
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
his intent to demand payment for his shares if the proposed action is
effectuated, and
2. Not vote his 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 his written consent or, if such a request is
not made, with in 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 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, any shareholder who
elects to dissent shall file with the corporation a notice of such election,
stating his name and address, the number, classes, and series of shares as to
which he dissents, and a demand for payment of the fair value of his 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 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
B-3
<PAGE>
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 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 shares shall cease,
and he shall be reinstated to have all his rights as a shareholder as of the
filing of his notice of election, including any intervening preemptive rights
and the right to payment of any intervening dividend or other distribution or,
if any such rights have expired or any such dividend or distribution other than
in cash has been completed, in lieu thereof, at the election of the corporation,
the fair value thereof in cash as determined by the board as of the time of such
expiration or completion, but without prejudice otherwise to any corporate
proceedings that may have been taken in the interim, if:
(a) Such demand is withdrawn as provided in this section;
(b) The proposed corporate action is abandoned or rescinded or the shareholders
revoke the authority to effect such action;
(c) No demand or petition for the determination of fair value by a court has
been made or filed within the time provided in this section; or
(d) A court of competent jurisdiction determines that such shareholder is not
entitled to the relief provided by this section.
(5) Within 10 days after the expiration of the period in which shareholders may
file their notices of election to dissent, or within 10 days after such
corporate action is effected, whichever is later (but in no case later than 90
days from the shareholders' authorization date), the corporation shall make a
written offer to each dissenting shareholder who has made demand as provided in
this section to pay an amount the corporation estimates to be the fair value for
such shares. If the corporate action has not been consummated before the
expiration of the 90-day period after the shareholders' authorization date, the
offer may be made conditional upon the consummation of such action. Such notice
and offer shall be accompanied by:
(a) A balance sheet of the corporation, the shares of which the dissenting
shareholder holds, as of the latest available date and not more than 12 months
prior to the making of such offer; and
(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 making of such offer any shareholder accepts the
same, payment for his 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
B-4
<PAGE>
accept the same within the period of 30 days thereafter, then the corporation,
30 days after receipt of written demand from any dissenting shareholder 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 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 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 within 10 days after the 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
B-5
<PAGE>
shareholders would have been converted had they assented to the merger shall
have the status of authorized but unissued shares of the surviving corporation.
B-6
<PAGE>
APPENDIX C
----------
CONSOLIDATED FINANCIAL STATEMENTS OF
PUBLIC BANK CORPORATION
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<S> <C>
Report of Independent Certified Public Accountants ............... Page C-1
Consolidated Balance Sheets ...................................... C-2
Consolidated Statements of Operations ............................ C-3
Consolidated Statements of Shareholders' Equity .................. C-4
Consolidated Statements of Cash Flows ............................ C-5
Notes to Consolidated Financial Statements ....................... C-6
</TABLE>
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
--------------------------------------------------
Shareholders
Public Bank Corporation
St. Cloud, Florida
We have audited the accompanying consolidated balance sheets of Public Bank
Corporation and Subsidiary as of December 31, 1997 and 1996, and the related
consolidated statements of operations, shareholders' equity, and cash flows for
the years then ended. These financial statements are the responsibility of the
Company's management. Our responsibility is to report 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 consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Public Bank
Corporation and Subsidiary as of December 31, 1997 and 1996, and the results of
their operations and their cash flows for the years then ended in conformity
with generally accepted accounting principles.
/s/ Osburn, Henning and Company
January 15, 1998
Orlando, Florida
C-1
<PAGE>
PUBLIC BANK CORPORATION AND SUBSIDIARY
--------------------------------------
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
December 31,
--------------------------------
1997 1996
--------------- --------------
<S> <C> <C>
ASSETS
------
Cash and due from banks $ 3,753,508 $ 3,126,751
Federal funds sold 5,536,000 3,645,000
Securities 8,893,707 12,694,532
Loans:
Commercial, financial and agricultural 8,906,082 7,409,633
Real estate construction 997,882 1,322,011
Real estate mortgage 18,067,047 14,995,377
Installment and consumer lines 2,593,916 2,262,352
----------- -----------
Total Loans 30,564,927 25,989,373
Less: Allowance for loan losses (469,090) (392,845)
Unearned income (26,500) (26,408)
----------- -----------
Net Loans 30,069,337 25,570,120
Premises and equipment 1,291,485 1,336,950
Other real estate 294,090 294,090
Other assets 588,017 436,321
----------- -----------
TOTAL ASSETS $50,426,144 $47,103,764
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
Liabilities
- -----------
Deposits:
Noninterest-bearing demand $10,029,103 $ 8,179,041
Savings, NOW and money market 17,075,623 19,323,441
Time under $100,000 11,965,613 10,466,659
Time, $100,000 and over 5,383,236 4,093,237
----------- -----------
Total Deposits 44,453,575 42,062,378
Other liabilities 405,535 317,082
----------- -----------
Total Liabilities 44,859,110 42,379,460
Commitments and Contingencies (Note 14)
- -----------------------------
Shareholders' Equity
- --------------------
Common stock - $.01 par value, 10,000,000
shares authorized; 2,337,309 shares
issued and outstanding 23,373 23,373
Additional paid-in capital 4,216,584 4,216,584
Retained earnings 1,327,077 484,347
----------- -----------
Total Shareholders' Equity 5,567,034 4,724,304
----------- -----------
TOTAL LIABILITIES AND SHAREHOLDERS
EQUITY $50,426,144 $47,103,764
=========== ===========
</TABLE>
See Notes to Consolidated Financial Statements.
C-2
<PAGE>
PUBLIC BANK CORPORATION AND SUBSIDIARY
--------------------------------------
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Year Ended December 31, 1997 1996
----------- ------------
<S> <C> <C>
Interest Income
Interest and fees on loans $2,723,297 $2,290,172
Interest on securities 576,946 619,399
Interest on federal funds sold 287,571 345,261
---------- ----------
Total Interest Income 3,587,814 3,254,832
Interest Expense on Deposits 1,160,637 1,182,877
---------- ----------
Net Interest Income 2,427,177 2,071,955
Provision for Loan Losses 60,000 60,000
---------- ----------
Net Interest Income After
Provision For Loan Losses 2,367,177 2,011,955
Noninterest Income
Service charges and fees 673,367 654,315
Gain (loss) on sale of other real estate
owned 38,368 (3,343)
Other 77,361 50,439
---------- ----------
Total Noninterest Income 789,096 701,411
---------- ----------
Noninterest Expense
Salaries and employee benefits 934,586 848,668
Equipment expenses 165,925 155,192
Occupancy expenses 137,916 141,657
Other operating expenses 681,616 684,523
---------- ----------
Total Noninterest Expense 1,920,043 1,830,040
---------- ----------
Income before income tax 1,236,230 883,326
Income tax 393,500 203,715
---------- ----------
NET INCOME $ 842,730 $ 679,611
========== ==========
Basic earnings per share $.36 $.33
========== ==========
Diluted earnings per share $.36 $.29
========== ==========
</TABLE>
See Notes to Consolidated Financial Statements.
C-3
<PAGE>
PUBLIC BANK CORPORATION AND SUBSIDIARY
--------------------------------------
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
Additional Retained
Par Value Paid-in Earnings
--------------------
Common Preferred Capital (Deficit)
-------- --------- -------- ---------
<S> <C> <C> <C> <C>
BALANCE DECEMBER 31, 1995 $ 4,292 $2,565,500 $1,602,365 $ (127,899)
Preferred stock issued in kind
as dividends on convertible,
preferred stock - 67,800 - (67,365)
Conversion of preferred stock into
1,908,086 shares of common stock 19,081 (2,633,300) 2,614,219 -
Net income for year ended
December 31, 1996 - - 679,611
-------- --------- ---------- ----------
BALANCE DECEMBER 31, 1996 23,373 - 4,216,584 484,347
Net income for year ended
December 31, 1997 - - - 842,730
-------- --------- ---------- ----------
BALANCE DECEMBER 31, 1997 $23,373 $ - $4,216,584 $1,327,077
======== ========= ========== ==========
</TABLE>
See Notes to Consolidated Financial Statements.
C-4
<PAGE>
PUBLIC BANK CORPORATION AND SUBSIDIARY
--------------------------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Year Ended December 31,
1997 1996
----------- -----------
<S> <C> <C>
OPERATING ACTIVITIES
- --------------------
Net income $ 842,730 $ 679,611
Adjustments to reconcile net income to cash
provided by operating activities:
Provision for loan losses 60,000 60,000
Recoveries of prior loan charge-offs 34,592 11,633
Provision for losses on other real estate - 3,485
Depreciation and amortization 87,238 85,105
(Gain) loss on sale of assets 1,070 3,343
Investment security discounts net (6,119) (69,575)
Changes in year-end balances of:
Interest receivable 9,335 47,844
Interest payable (3,235) (10,450)
Income tax payable (60,690) 260,700
Other accounts net (12,034) (356,321)
----------- -----------
Net Cash Provided By Operating
Activities 952,887 715,375
----------- -----------
INVESTING ACTIVITIES
- --------------------
Purchases of investment securities (1,193,091) (9,425,752)
Proceeds from maturities of investment
securities 5,000,035 8,434,475
Decrease (increase) in federal funds sold (1,891,000) 2,333,000
Increase in loans (4,593,809) (3,257,011)
Increase in premises and equipment (39,462) (9,906)
Proceeds from sale of other real estate - 45,227
----------- -----------
Net Cash Used In Investing Activities (2,717,327) (1,879,967)
----------- -----------
FINANCING ACTIVITIES
- --------------------
Net increase in deposits 2,391,197 2,265,494
----------- -----------
Net Cash Provided By Financing
Activities 2,391,197 2,265,494
----------- -----------
Net Increase in Cash and Cash
Equivalents 626,757 1,100,902
Cash and Cash Equivalents:
Beginning 3,126,751 2,025,849
----------- -----------
Ending $ 3,753,508 $ 3,126,751
=========== ===========
</TABLE>
See Notes to Consolidated Financial Statements.
C-5
<PAGE>
PUBLIC BANK CORPORATION AND SUBSIDIARY
--------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - ORGANIZATIONAL BACKGROUND AND BASIS OF FINANCIAL STATEMENT
- --------------------------------------------------------------------
PRESENTATION
------------
Organizational Background and Consolidation Policy
--------------------------------------------------
Public Bank (the Bank) is a state-chartered bank which began banking
operations in 1981. The Bank has two banking locations - St. Cloud and
Kissimmee, Florida. Public Bank Corporation (the Company), a bank holding
company, was organized in 1985 for the purpose of acquiring the Bank through
a three for one exchange of Company shares for Bank shares effective January
1, 1986. In addition, there is an inactive mortgage company subsidiary,
which had no assets or liabilities at December 31, 1997 or December 31, 1996.
All significant intercompany balances and transactions have been eliminated
from the consolidated financial statements.
Reclassification
----------------
Certain amounts and captions presented in the 1996 financial statements have
been reclassified to conform to the 1997 presentation. These
reclassifications had no effect on total assets, liabilities, equity or
operations as previously reported.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
- ---------------------------------------------------
Securities
----------
Investment Securities:
Securities where the Company's intent and ability is to hold to maturity
are classified as investment securities. These securities are stated at
cost, adjusted for amortization of premiums and accretion of discounts. At
December 31, 1997 and 1996, all of the Company's securities were classified
as investment securities.
Securities Available for Sale:
Securities acquired to be held for indefinite periods of time, or sold to
adjust asset/liability strategy, interest rate or credit risks or in
response to other factors are classified as securities available for sale.
The Company had no securities available for sale during either year, or at
December 31, 1997 or 1996.
Amortization and accretion of premiums and discounts are recognized as
adjustments to interest income. Gains and losses, if any, are determined
using the specific identification method.
C-6
<PAGE>
PUBLIC BANK CORPORATION AND SUBSIDIARY
--------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
- ---------------------------------------------------------------
Loans and Allowance For Loan Losses
-----------------------------------
Loans are stated at the amount of unpaid principal, reduced by an allowance
for loan losses and by unearned loan income. Interest on substantially all
loans is calculated by using the simple interest method on daily balances of
the principal amounts outstanding except for those classified as nonaccrual
loans. The accrual of interest is discontinued when future collection of
principal or interest in accordance with the contractual terms may be
doubtful.
Loan fees, net of origination costs, are capitalized and amortized as yield
adjustments over the respective loan terms using a method which does not
differ materially from the interest method. Interest and fees on loans
includes loan fees recognized as yield adjustments of approximately $32,000
and $37,000 in 1997 and 1996, respectively.
The allowance for loan losses is established through a provision for loan
losses charged against operations. Loans are charged against the allowance
for loan losses when management believes that the collectibility of the
principal is unlikely. The allowance is an amount that management believes
will be adequate to absorb possible losses on existing loans that may become
uncollectible, based on evaluations of the collectibility of loans, past loan
loss experience and other factors.
Premises and Equipment
----------------------
Premises and equipment are stated at cost, less accumulated depreciation
computed principally on the straight-line method over the estimated useful
lives of the assets. These lives are summarized as follows:
<TABLE>
<CAPTION>
Asset Estimated Lives
----- ---------------
<S> <C>
Building and improvements 15 - 40 years
Equipment and furnishings 5 - 7 years
</TABLE>
Maintenance and repairs to premises and equipment are charged to operations,
and improvements and additions are capitalized.
Other Real Estate
-----------------
Other real estate is carried at the lower of fair value, less estimated costs
to sell, or cost.
C-7
<PAGE>
PUBLIC BANK CORPORATION AND SUBSIDIARY
--------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
- ---------------------------------------------------------------
Income Taxes
------------
The Company uses the liability method of accounting for deferred income
taxes. This method requires the recognition of deferred tax assets and
liabilities for the future tax consequences attributable to differences
between the financial statement carrying amounts of existing assets and
liabilities and their respective tax bases.
Earnings Per Share
------------------
Basic earnings per share are computed by dividing earnings available to
common shareholders by the weighted average number of common shares
outstanding during the period. Diluted earnings per share reflect per share
amounts that would have resulted if dilutive potential common stock had been
converted to common stock. All income is from continuing operations. The
following table reconciles amounts reported in the financial statements:
<TABLE>
<CAPTION>
Year Ended 1997 Year Ended 1996
----------------------------------- ---------------------------------
Income Shares Per Income Shares Per
(Numerator) (Denominator) Share (Numerator) (Denominator) Share
--------- ----------- ----- --------- ----------- -----
<S> <C> <C> <C> <C> <C> <C>
Net income $842,730 $679,611
Less preferred
stock
dividends - (67,365)
Available to
common
share-
holders
basic
earnings -------- ---------
per share 842,730 2,337,309 $.36 612,246 1,866,821 $.33
==== ====
Effect of
dilutive
securities:
Preferred
stock
converted
March 31,
1996 - - 67,365 445,486
-------- --------- --------- ---------
Available to
common
share-
holders
diluted
earnings
per share $842,730 2,337,309 $.36 $679,611 2,312,307 $.29
======== ========= ==== ======== ========= ====
</TABLE>
During the first quarter of 1996, the Company had $2,565,500 outstanding in
$100 par value convertible preferred stock. As more fully described in Note
17, the stock was first issued in 1993 and was converted into 1,908,086 shares
of common stock March 31, 1996. At December 31, 1997 and 1996, the Company's
only class of stock was common stock.
C-8
<PAGE>
PUBLIC BANK CORPORATION AND SUBSIDIARY
--------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
- ---------------------------------------------------------------
Cash Flow Information
---------------------
For purposes of the statements of cash flows, the Company considers cash and
due from banks as cash and cash equivalents. Cash paid for interest was
approximately $1,164,000 and $1,193,000 in 1997 and 1996, respectively.
Income tax of $264,000 and $8,000 was paid in 1997 and 1996, respectively.
NOTE 3 - SECURITIES
- -------------------
Amortized cost and estimated fair value of the Bank's securities, all of which
are classified as investment securities, are as follows:
<TABLE>
<CAPTION>
December 31
--------------------------------------------------------------
1997 1996
---------------------- --------------------------------------
U. S. U. S. U. S.
Treasury Treasury Government
Securities Total Securities Agencies Total
---------- ---------- ----------- ---------- -----------
<S> <C> <C> <C> <C> <C>
Amortized cost $8,494,786 $8,494,786 $10,489,513 $2,000,439 $12,489,952
Gross unrealized:
Gains 28,889 28,889 7,917 - 7,917
Losses - - - (4,269) (4,269)
---------- ---------- ----------- ---------- -----------
Estimated
fair value $8,523,675 $8,523,675 $10,497,430 $1,996,170 $12,493,600
========== ========== =========== ========== ===========
</TABLE>
Securities shown on the accompanying balance sheets include the Company's
investment in a number of community banks of $398,921 and $204,580 at December
31, 1997 and 1996, respectively. These securities represent ownership of less
than 1% and are accounted for using the cost method.
The amortized cost and estimated fair value of investment securities at
December 31, 1997, by contractual maturity, are shown below:
<TABLE>
<CAPTION>
Cost Fair Value
---------- ----------
<S> <C> <C>
Due in one year or less $6,496,032 $6,511,645
Due after one year through five years 1,998,754 2,012,030
---------- ----------
$8,494,786 $8,523,675
========== ==========
</TABLE>
There were no sales of investment securities during either 1997 or 1996.
At December 31, 1997, investment securities with a par value of $1,000,000
were pledged to secure public funds as discussed in Note 7.
C-9
<PAGE>
PUBLIC BANK CORPORATION AND SUBSIDIARY
--------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 4 - ALLOWANCE FOR LOAN LOSSES AND NON-PERFORMING ASSETS
- ------------------------------------------------------------
Changes in the allowance for loan losses during the years ending December 31,
1997 and 1996 were as follows:
<TABLE>
<CAPTION>
1997 1996
---------- ----------
<S> <C> <C>
Beginning balance $ 392,845 $ 353,121
Provision 60,000 60,000
Recoveries 34,592 11,633
Charge-offs (18,347) (31,909)
---------- ----------
Ending Balance $469,090 $392,845
========== ==========
</TABLE>
At December 31, 1997 and 1996, the Bank had one or more loans for which the
accrual of interest had been discontinued. These loans, which are
collateralized by real estate, had balances aggregating $4,545 and $92,837 at
December 31, 1997 and 1996, respectively. Interest which would have otherwise
been recorded on non-accrual loans (including loans placed on non-accrual
during the year and subsequently paid, charged off or foreclosed) was
approximately $470 and $29,300 for 1997 and 1996, respectively.
The Bank had other real estate owned of $294,090 at December 31, 1997 and 1996.
NOTE 5 - PREMISES AND EQUIPMENT
- -------------------------------
Major classifications of these assets are summarized as follows:
<TABLE>
<CAPTION>
December 31,
----------------------
1997 1996
---------- ----------
<S> <C> <C>
Land $ 493,588 $ 493,588
Buildings and improvements 947,145 947,145
Equipment and furnishings 1,511,837 1,499,874
---------- ----------
2,952,570 2,940,607
Accumulated depreciation and amortization 1,661,085 1,603,657
---------- ----------
$1,291,485 $1,336,950
========== ==========
</TABLE>
Depreciation was $86,168 and $84,035 for 1997 and 1996, respectively.
NOTE 6 - OTHER ASSETS
- ---------------------
Other assets at December 31, 1997 and 1996 include interest receivable on the
Bank's loans and securities.
C-10
<PAGE>
PUBLIC BANK CORPORATION AND SUBSIDIARY
--------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 7 - DEPOSITS
- -----------------
At December 31, 1997, the scheduled maturities of time certificates of deposit
are as follows:
<TABLE>
<CAPTION>
<S> <C>
1998 $10,089,002
1999 5,231,332
2000 1,730,215
2001 175,300
2002 and thereafter 123,000
-----------
$17,348,849
===========
</TABLE>
At December 31, 1997, interest-bearing deposits included public funds of
approximately $494,000. Additionally, the Bank has approximately $190,000 in
non-interest-bearing public funds on deposit. These deposits are generally
subject to withdrawal upon demand by the depositor.
NOTE 8 - STOCK OPTIONS
- ----------------------
The Company has an Incentive Stock Option Plan (ISO) intended to cover certain
officers and employees of the Company and the Bank. Under the ISO, options to
purchase up to 100,000 shares of Company stock may be granted at a price not
less than the fair market value at the date of grant. Any options so granted
will, if not exercised or cancelled, expire in May 1998. In conjunction with
the ISO, a like amount of Stock Appreciation Rights (SAR) may, at the
discretion of the Board, be granted with respect to stock options, either at
the time the stock options are granted, or at any time thereafter during the
term of the options. No options or SARs had been granted as of either December
31, 1997 or 1996, leaving 100,000 shares available for future issuance.
NOTE 9 - OTHER OPERATING EXPENSES
- ---------------------------------
Larger components of other operating expenses are as follows:
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------
1997 1996
---------- ----------
<S> <C> <C>
Other outside services $ 176,946 $ 164,019
Marketing and business development 83,829 53,295
Stationary and supplies 80,748 85,466
Postage and delivery 69,670 80,542
Correspondent bank charges 61,313 52,423
Legal and professional 43,027 67,211
Regulatory fees 17,846 14,057
Fidelity insurance 13,009 20,768
</TABLE>
C-11
<PAGE>
PUBLIC BANK CORPORATION AND SUBSIDIARY
--------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 10 - INCOME TAXES
- ----------------------
Income tax expense consists of the following elements:
<TABLE>
<CAPTION>
1997 1996
-------- -----------------------------
Current Current Deferred Total
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Federal $347,500 $237,215 $(60,000) $177,215
State 46,000 32,500 (6,000) 26,500
-------- -------- -------- --------
Total $393,500 $269,715 $(66,000) $203,715
======== ======== ======== ========
</TABLE>
Current income tax differs from that which would be expected by applying the
statutory federal income tax rate as follows:
<TABLE>
<CAPTION>
1997 1996
--------- ---------
<S> <C> <C>
Income tax expected at statutory rate $420,318 $300,331
Increase (decrease) resulting from:
Net operating loss carryforward (60,690) (60,690)
State income tax, net of federal tax 30,360 21,450
Other, net 3,512 8,624
-------- --------
Current Income Tax $393,500 $269,715
======== ========
</TABLE>
Significant temporary differences and the resultant deferred tax assets and
liabilities at December 31, 1997 and 1996 were as follows:
<TABLE>
<CAPTION>
December 31,
---------------------
1997 1996
-------- ---------
<S> <C> <C>
Net operating loss carryforward $254,400 $ 314,000
OREO reserve 6,400 17,500
Loan loss reserve 17,800 -
Other 10,890 11,374
-------- ---------
Deferred tax assets 289,490 342,874
Valuation allowance (59,245) (119,188)
-------- ---------
Net amount 230,245 223,686
-------- ---------
Accumulated depreciation 144,700 137,500
Loan loss reserve - 5,000
Loan fees and other 19,545 15,186
-------- ---------
Deferred tax liabilities 164,245 157,686
-------- ---------
Net amount included in
financial statements $ 66,000 $ 66,000
======== =========
</TABLE>
At December 31, 1997, the Company has approximately $682,000 in tax net
operating loss carryforwards, approximately $190,000 of which expire in 2006
and $492,000 of which is available through 2007. The loss carryforward usable
in any given year is generally limited to approximately $178,000 under
applicable tax laws.
The Company and the Bank have entered into a tax sharing agreement under which
intercompany current tax settlements are made on a separate return basis.
C-12
<PAGE>
PUBLIC BANK CORPORATION AND SUBSIDIARY
--------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 11 - LOANS TO RELATED PARTIES
- ----------------------------------
Certain officers and directors, and companies in which they held a 10 percent
or more beneficial ownership, were indebted (or, in some cases, guaranteed
loans) to the Bank as follows:
<TABLE>
<CAPTION>
1997 1996
---------- ----------
<S> <C> <C>
Balance January 1 $1,317,904 $ 401,386
New loans and advances 337,573 1,028,218
Repayments (excluding renewals) (225,420) (111,700)
---------- ----------
Balance December 31 $1,430,057 $1,317,904
========== ==========
</TABLE>
The loans summarized above were made in the normal course of business at
prevailing interest rates and terms.
NOTE 12 - DIVIDEND RESTRICTIONS
- -------------------------------
The Company's ability to pay cash dividends is dependent upon dividends it
receives from the Bank. The Bank is limited by applicable banking statutes as
to the amount of dividends it may pay in any given year. Such restrictions
generally limit dividends to an amount not exceeding net income for the
current and two preceding years, unless additional amounts are approved by the
State of Florida.
NOTE 13 - REGULATORY MATTERS
- ----------------------------
The Bank is subject to various regulatory capital requirements administered by
the federal banking agencies. Failure to meet minimum capital requirements can
initiate certain mandatory - and possibly additional discretionary - actions
by regulators that, if undertaken, could have a direct material effect on the
Bank's financial statements. Under capital adequacy guidelines and the
regulatory framework for prompt corrective action, the Bank must meet specific
capital guidelines that involve quantitative measures of the Bank's assets,
liabilities, and certain off-balance-sheet items as calculated under
regulatory accounting practices. The Bank's capital amounts and classification
are also subject to qualitative judgments by the regulators about components,
risk weightings, and other factors.
Quantitative measures established by regulation to ensure capital adequacy
require the Bank to maintain minimum amounts and ratios of Total and Tier I
capital (as defined in the regulations) to risk-weighted assets (as defined),
and of Tier I capital (as defined) to average assets (as defined). If such
minimum amounts and ratios are met, the Bank is considered "adequately
capitalized". If a bank exceeds the requirements of "adequately capitalized"
and meets even more stringent minimum standards, it is considered "well
capitalized". Management believes that as of December 31, 1997 and 1996, the
Bank meets and exceeds all capital adequacy requirements to which it is
subject.
C-13
<PAGE>
PUBLIC BANK CORPORATION AND SUBSIDIARY
--------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 13 - REGULATORY MATTERS (CONTINUED)
- ----------------------------------------
As of December 31, 1997, the most recent notification from the Bank's
regulatory agency categorized the Bank as well capitalized under the
regulatory framework for prompt corrective action. To be categorized as well
capitalized the Bank must maintain total risk-based, Tier I risk-based, and
Tier I leverage ratios as set forth in the table which follows. There are no
conditions or events since that notification that management believes have
changed the institution's category.
<TABLE>
<CAPTION>
Minimum Amount And
Ratio To Remain
Actual Well Capitalized
------------------ ------------------
Amount Ratio Amount Ratio
----------- ----- ----------- -----
(Thousands) (Thousands)
<S> <C> <C> <C> <C>
As of December 31, 1997:
Total Capital
(to Risk Weighted Assets):
Consolidated $6,036 13.4% $4,498 10.0%
Subsidiary Bank $5,266 11.8% $4,460 10.0%
Tier I Capital
(to Risk Weighted Assets):
Consolidated $5,567 12.4% $2,698 6.0%
Subsidiary Bank $4,797 10.8% $2,676 6.0%
Tier I Capital
(to Average Assets):
Consolidated $5,567 11.0% $2,518 5.0%
Subsidiary Bank $4,797 9.5% $2,538 5.0%
As of December 31, 1996:
Total Capital
(to Risk Weighted Assets):
Consolidated $5,117 13.5% $3,781 10.0%
Subsidiary Bank $4,653 12.4% $3,760 10.0%
Tier I Capital
(to Risk Weighted Assets):
Consolidated $4,724 12.5% $2,268 6.0%
Subsidiary Bank $4,260 11.3% $2,256 6.0%
Tier I Capital
(to Average Assets):
Consolidated $4,724 10.4% $2,272 5.0%
Subsidiary Bank $4,260 9.4% $2,262 5.0%
</TABLE>
C-14
<PAGE>
PUBLIC BANK CORPORATION AND SUBSIDIARY
--------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 14 - COMMITMENTS AND CONTINGENCIES
- ---------------------------------------
Financial Instruments With Off-Balance-Sheet Risk
-------------------------------------------------
The financial statements do not reflect various commitments and contingent
liabilities that arise in the normal course of business to meet the
financing needs of customers. These include commitments to extend credit and
honor stand-by letters of credit. These instruments involve, to varying
degrees, elements of credit, interest rate and liquidity risks in excess of
amounts reflected in the balance sheets. The extent of the Company's
involvement in these commitments or contingent liabilities is expressed by
the contractual, or notional, amounts of the instruments.
Commitments to extend credit, which amount to $2,821,000 and $2,765,000 at
December 31, 1997 and 1996, respectively, represent legally binding
agreements to lend to customers with fixed expiration dates or other
termination clauses. Since many commitments are expected to expire without
being funded, committed amounts do not necessarily represent future
liquidity requirements. The amount of collateral obtained, if any, is based
on management's credit evaluation in the same manner as though an immediate
credit extension were to be granted.
Stand-by letters of credit are conditional commitments issued by the Company
guaranteeing the performance of a customer to a third party. The decision
whether to guarantee such performance and the extent of collateral
requirements are made considering the same factors as are considered in
credit extension. The Company had approximately $244,700 and $99,000
outstanding on stand-by letters of credit at December 31, 1997 and 1996,
respectively.
The Company expects no significant losses to be realized in the performance
of its obligations under any of the above instruments.
Concentrations of Credit Risk
-----------------------------
The Bank originates residential and commercial real estate loans, and other
consumer and commercial loans primarily in its Osceola County market area
and adjacent counties in Florida. In addition, the Bank occasionally
purchases loans, primarily in Florida. Although the Bank has a diversified
loan portfolio, a substantial portion of its borrowers' ability to repay
their loans is dependent upon economic conditions in the Bank's market area.
C-15
<PAGE>
PUBLIC BANK CORPORATION AND SUBSIDIARY
--------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 14 - COMMITMENTS AND CONTINGENCIES (CONTINUED)
- ---------------------------------------------------
Use of Estimates in Preparation of Consolidated Financial Statements
--------------------------------------------------------------------
The process of preparing financial statements in conformity with generally
accepted accounting principles requires the use of estimates and assumptions
regarding certain types of assets, liabilities, revenues and expenses. For
the Company, such estimates significantly affect the amount at which the
allowance for loan losses is carried, the amount of the deferred tax assets
that are dependent upon future taxable income and the likelihood and timing
of realization of such assets, and other factors and estimates entering into
the amounts listed in the financial statements. Such estimates relate to
unsettled transactions and events as of the date of the financial statements
and, accordingly, upon settlement it is likely that actual amounts will
differ from currently estimated amounts.
Litigation and Claims
---------------------
The Bank is subject to certain legal proceedings and claims which arise in
the ordinary course of business. In the opinion of management, the amount of
ultimate liability, if any, with respect to these actions will not
materially affect the Bank's future operations.
NOTE 15 - PUBLIC BANK CORPORATION (PARENT COMPANY ONLY) FINANCIAL INFORMATION
- -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
Balance Sheets
- --------------
December 31,
------------------------
1997 1996
---------- ----------
<S> <C> <C>
Assets
Cash and cash equivalents $ 513,771 $ 454,006
Investment in bank subsidiary, at equity 4,796,733 4,259,830
Investment in other community banks 398,921 204,580
Other assets 268 9,238
---------- ----------
Total Assets $5,709,693 $4,927,654
========== ==========
Liabilities
Income tax payable $ 142,659 $ 203,350
Shareholders' Equity 5,567,034 4,724,304
---------- ----------
Total Liabilities and Shareholders' Equity $5,709,693 $4,927,654
========== ==========
</TABLE>
C-16
<PAGE>
PUBLIC BANK CORPORATION AND SUBSIDIARY
--------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 15 - PUBLIC BANK CORPORATION (PARENT COMPANY ONLY) FINANCIAL INFORMATION
- -----------------------------------------------------------------------------
(CONTINUED)
-----------
Statements of Operations
- ------------------------
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------
1997 1996
---------- -----------
<S> <C> <C>
Income from subsidiary:
Interest $ 7,820 $ 5,283
Dividends 296,384 104,198
Other income 10,406 4,386
---------- ----------
314,610 113,867
---------- ----------
Expenses:
Amortization 1,070 1,070
Other 713 3,539
---------- ----------
1,783 4,609
---------- ----------
Income Before Income Tax and Income
of Subsidiary 312,827 109,258
Income tax 7,000 2,116
---------- ----------
Income Before Income of Subsidiary 305,827 107,142
Equity in undistributed income of subsidiary 536,903 540,775
---------- ----------
Net Income $ 842,730 $ 679,611
========== ==========
</TABLE>
Statements of Cash Flows
- ------------------------
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------
1997 1996
---------- -----------
<S> <C> <C>
Operating Activities:
--------------------
Net income $ 842,730 $ 679,611
Adjustments to reconcile net income to
cash provided by operating activities:
Equity in undistributed income of
subsidiary (536,903) (572,469)
Amortization 1,070 1,070
Increase (decrease) in income tax
payable or receivable (60,691) 260,700
Increase (decrease) in accrued expenses
and other liabilities - (131,571)
Change in other assets 7,900 (7,466)
---------- ----------
Net Cash Provided By Operating
Activities 254,106 229,875
---------- ----------
Investing Activities:
--------------------
Investment activity in other community bank
stocks (194,341) (534)
---------- ----------
Net Cash Used In Investing Activities (194,341) (534)
---------- ----------
Net Increase in Cash and Cash
Equivalents 59,765 229,341
Cash and Cash Equivalents at
Beginning of Year 454,006 224,665
---------- ----------
End of Year $ 513,771 $ 454,006
========== ==========
</TABLE>
C-17
<PAGE>
PUBLIC BANK CORPORATION AND SUBSIDIARY
--------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 16 - FAIR VALUE OF FINANCIAL INSTRUMENTS
- ---------------------------------------------
The table which follows shows the estimated fair value and the related
carrying amounts of the Company's financial instruments at December 31, 1997.
For purposes of this disclosure, the estimated fair value for cash and cash
equivalents is considered to approximate their carrying amounts. The estimated
fair value for securities is based on quoted market values for the individual
or equivalent securities. The estimated fair value for loans is based on
interest rates the Company would have charged borrowers at December 31, 1997
for similar loans, maturities and terms.
The estimated fair value for demand and savings deposits is based on their
carrying amount. The estimated fair value for time deposits is based on rates
the Company offered at December 31, 1997 for deposits of similar remaining
maturities. The estimated fair value for other financial instruments and off-
balance-sheet loan commitments are considered to approximate carrying amount
at December 31, 1997. Assets and liabilities of the Company that are not
defined as financial instruments, such as premises and equipment, are excluded
from these disclosures.
<TABLE>
<CAPTION>
Carrying Estimated
Amount Fair Value
-------- ----------
(In Thousands)
<S> <C> <C>
Financial Assets
Cash and cash equivalents $ 9,290 $ 9,290
Federal funds sold 5,536 5,536
Securities 8,894 8,923
Loans 30,565 30,699
Financial Liabilities
Demand and Savings Deposits 27,105 27,105
Time Deposits 17,349 17,443
</TABLE>
Non-financial instruments typically not recognized in the financial statements
nevertheless may have value but are not included in the above disclosures.
These include, among other items, the estimated earnings power of core deposit
accounts, the earnings potential of loan servicing rights, customer goodwill,
and similar items.
While these estimates of fair value are based on management's judgment of the
most appropriate factors, there is no assurance that, were the Company to have
disposed of such items at December 31, 1997, the estimated fair values would
necessarily have been achieved at that date, since market values may differ
depending on various circumstances. The estimated fair values at December 31,
1997 should not necessarily be considered to apply at subsequent dates.
C-18
<PAGE>
PUBLIC BANK CORPORATION AND SUBSIDIARY
--------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 17 - PREFERRED STOCK
- -------------------------
On January 27, 1993, the Company issued $2 million in convertible preferred
stock. The preferred shares were converted into 1,908,086 shares of common
stock of the Company in March, 1996 at $100 per share based upon 65% of the
book value of the common stock at conversion date, adjusted for several items
as defined in the underlying agreement. Before conversion, the preferred
shareholders received quarterly dividends equal to the prime rate plus 2%,
paid through issuance of additional shares of preferred stock.
C-19
<PAGE>
APPENDIX D
----------
OPINION OF ALEX SHESHUNOFF & CO. INVESTMENT BANKING
<PAGE>
ALEX SHESHUNOFF & CO.
INVESTMENT BANKING
March 5, 1998
Board of Directors
Public Bank Corporation
2500 - 13th Street
St. Cloud, FL 34769
Members of the Board:
You have requested our opinion as to the fairness, from a financial point of
view, to the holders of the outstanding shares of common stock of Public Bank
Corporation, St. Cloud, Florida ("PBC"), of the consideration (the "Merger
Consideration") to be received by such holders pursuant to the Agreement and
Plan of Merger dated as of March 5, 1998 (the "Agreement"). The Agreement
provides for the merger (the "Merger") of PBC with and into Alabama National
BanCorporation ("ANB"). Pursuant to section 3.1(b) of the Agreement, each of
PBC's shareholders will have a right to receive 0.2353134 shares (the "Exchange
Ratio") of the common stock of ANB, subject to adjustment under certain
circumstances. Sheshunoff did not participate in the negotiation of either the
Agreement or Exchange Ratio, nor did we participate in PBC's search for a merger
partner.
In connection with our opinion, we have: (i) analyzed certain internal financial
statements and other financial and operating data concerning PBC prepared by the
management of PBC; (ii) analyzed certain publicly available financial
statements, both audited and unaudited, of PBC including their audited financial
statements for the two years ended December 31, 1996 and December 31, 1997 and,
the quarterly call reports for the twelve months ended December 31, 1997; (iii)
analyzed certain publicly available financial statements, both audited and
unaudited, of ANB including their Form 10-K for the year ended December 31, 1996
and the draft Form 10-K for the year ended December 31, 1997, the annual report
for the year ended December 31, 1996 and, their quarterly reports for the
quarters ended March, June and September 30, 1997; (iv) analyzed certain
financial projections of PBC prepared by the management of PBC; (v) discussed
certain aspects of the past and current business operations, financial condition
and future prospects of PBC and ANB with certain members of their respective
management; (vi) reviewed reported
D-1
<PAGE>
Board of Directors
Public Bank Corporation
March 5, 1998
Page 2
market prices and historical trading activity of ANB's common stock and certain
analysts' projections of ANB's potential 1998 earnings per share; (vii) compared
the financial performance of ANB and the prices and trading activity of ANB's
common stock with that of certain other comparable publicly traded companies and
their securities; (viii) reviewed certain security analysis reports of ANB's
common stock prepared by various investment banking firms; (ix) reviewed the
financial terms, to the extent publicly available, of certain comparable
precedent transactions; (x) reviewed a draft of the Agreement; (xi) reviewed and
discussed with ANB senior management certain internal analyses and forecasts of
cost savings, operating efficiencies, revenue effects and financial synergies
expected by ANB to be achieved as a result of the Merger; and (xii) performed
such other analyses as we have deemed appropriate.
We have assumed and relied upon, without independent verification, the accuracy
and completeness of the information reviewed by us for the purposes of this
opinion. We have not made an independent evaluation of the assets or liabilities
of PBC, nor have we been furnished with any such appraisals. With respect to
financial forecasts, we have assumed that they have been reasonably prepared and
reflect the best currently available estimates and judgment of the management of
PBC as to the future financial performance of PBC. We have assumed such forecast
and projection will be realized in the amounts and at the times contemplated
thereby. We discussed publicly available information with the management of ANB.
We did not conduct any independent evaluation or appraisal of the assets,
liabilities or business prospects of ANB nor were we furnished with any
evaluations or appraisals. We are not experts in the evaluation of loan
portfolios for the purposes of assessing the adequacy of the allowance for
losses with respect thereto and have assumed that such allowances for PBC and
ANB are in the aggregate, adequate to cover such losses. In addition, we have
not reviewed any individual credit files or made independent evaluation,
appraisal or physical inspection of the assets or individual properties of PBC
and ANB, nor have we been furnished with any such appraisals.
Our opinion is necessarily based on economic, market and other conditions as in
effect on, and the information made available to us as of the date hereof.
Events occurring after the date hereof could materially affect the assumptions
used in preparing this opinion. We have also assumed that there are no material
changes in PBC's or ANB's assets, financial condition, results of operations,
business or
D-2
<PAGE>
Board of Directors
Public Bank Corporation
March 5, 1998
Page 3
prospects since the respective dates of their financial statements reviewed by
us, and that off-balance sheet activities of PBC and ANB will not materially and
adversely impact the future financial position and results of operations of both
PBC and ANB. We have also assumed the Merger will be completed as set forth in
the Agreement and that no material changes will be made or restrictions imposed
by regulatory or other parties on the terms of the Merger.
Our opinion is limited to the fairness, from a financial point of view, to the
holders of PBC Common Stock of the Merger Consideration received as stated in
the Merger Agreement and does not address FAB's underlying business decision to
undertake the Merger. Moreover, this letter, and the opinion expressed herein,
does not constitute a recommendation to any shareholder as to any approval of
the Merger or the Merger Agreement, nor does it express an opinion on the future
market price of ANB common stock. It is understood that this letter is for the
information of the Board of Directors of PBC and may not be used for any other
purpose without our prior written consent, except that this opinion may be
included in its entirety in any filing, including proxy materials to be sent to
the shareholders of PBC and ANB, filed in a registration statement by ANB with
the Securities and Exchange Commission with respect to the Merger.
Based on the foregoing and such other matters we have deemed relevant, we are of
the opinion as of the date hereof that the Merger Consideration is fair, from a
financial point of view, to the holders of PBC Common Stock.
Very truly yours,
/s/ Alex Sheshunoff & Co
ALEX SHESHUNOFF & CO.
INVESTMENT BANKING
D-3
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
-----------------------------------------
The Certificate of Incorporation, as amended, of ANB contains a provision
which, subject to certain exceptions described below, eliminates the liability
of a director to ANB or its stockholders for monetary damages for any breach of
duty as a director. This provision does not eliminate the liability of the
director (i) for violations of his duty of loyalty to the corporation or its
stockholders, (ii) for acts or omissions not in good faith or involving
intentional misconduct or a knowing violation of law, (iii) under Section 174 of
the Delaware General Corporation Law (the "DGCL") relating to unlawful dividends
and distributions, or (iv) for any transaction from which the director derived
an improper personal benefit.
The Bylaws of ANB require ANB to indemnify any person who was, is or is
threatened to be made a named defendant or respondent in any threatened, pending
or completed action, suit or proceeding, whether civil, criminal, administrative
or investigative, by reason of service by such person as a director of ANB or
any other corporation, including the subsidiary banks of ANB, for which he
served as such at the request of ANB. Directors are entitled to be indemnified
against judgments, penalties, fines, settlements and reasonable expenses
actually incurred by the director in connection with the proceeding, except that
no payments may be made with respect to liability which is not eliminated
pursuant to the provision of ANB's Certificate of Incorporation described in the
preceding paragraph. Directors are also entitled to have ANB advance any such
expenses prior to final disposition of the proceeding, upon delivery of a
written affirmation by the director of his good faith belief that the standard
of conduct necessary for indemnification has been met and a written undertaking
to repay the amounts advanced if it is ultimately determined that the standard
of conduct has not been met.
In addition to the Bylaws of ANB, Section 145(c) of the DGCL requires ANB
to indemnify any director who has been successful on the merits or otherwise in
defending any proceeding described above which has arisen prior to July 1, 1997.
The Delaware Corporation Law also provides that a court may order
indemnification of a director if it determines that the director is fairly and
reasonably entitled to such indemnification.
The Board of Directors of ANB also has the authority to extend to officers,
employees and agents the same indemnification rights held by directors, subject
to all of the accompanying conditions and obligations. The Board of Directors
has extended indemnification rights to all of its executive officers.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
------------------------------------------
(a) Exhibits:
--------
2.1 Agreement and Plan of Merger dated as of March 5, 1998, is found
at Appendix A to the Proxy Statement included in Part I hereof.
4.1 Certificate of Incorporation, filed as Exhibit 3.1 to
Registrant's Registration Statement on Form S-1 (No. 33-83800),
is incorporated herein by reference.
4.1A Certificate of Amendment of Certificate of Incorporation; filed
as Exhibit 3.1A to the Registrant's Annual Report on Form 10-K
for the year ended December 31, 1996 (No. 0-25160), is
incorporated herein by reference.
4.1B Certificate of Merger, filed as Exhibit 3.1B to the Registrant's
Annual Report on Form 10-K for the year ended December 31, 1997
(No. 0-25160), is incorporated herein by reference.
II-1
<PAGE>
4.2 Bylaws, filed as Exhibit 3.2 to Registrant's Registration
Statement on Form S-1 (No. 33-83800), is incorporated herein by
reference.
5.1 Opinion of Maynard, Cooper & Gale, P.C. re legality dated
April 9, 1998.
8.1 Opinion of Maynard, Cooper & Gale, P.C. re tax matters dated
April 9, 1998.
13.1 Registrant's 1997 Annual Report on Form 10-K for the year ended
December 31, 1997 (No. 0-25160), is incorporated herein by
reference.
21.1 Subsidiaries of Registrant, filed as Exhibit (22) to Registrant's
Annual Report on Form 10-K for the year 1997 (No. 0-25160), is
incorporated herein by reference.
23.1 Consent of Coopers & Lybrand L.L.P.
23.2 Consent of Ernst & Young LLP.
23.3 Consent of Osburn, Henning and Company, P.A.
23.4 Consent of Maynard, Cooper & Gale, P.C. is included in their
opinion re legality filed as Exhibit 5.1 hereto.
23.5 Consent of Maynard, Cooper & Gale, P.C. is included in their
opinion re tax matters filed as Exhibit 8.1 hereto.
23.6 Consent of Alex Sheshunoff & Co. Investment Banking is provided
in their fairness opinion included as Appendix C to the Proxy
Statement.
24.1 Power of Attorney (contained on signature page of the
Registration Statement).
99.1 Form of Proxy to be used at Public Bank Corporation special
meeting.
_________________________
(b) Financial Statement Schedules. All Schedules to the consolidated
financial statements required by Article 9 of Regulation S-X are inapplicable
and therefore have been omitted.
(c) Information pursuant to Items 4(b) is included in the Prospectus.
II-2
<PAGE>
ITEM 22. UNDERTAKINGS.
------------
(a) 1. The undersigned registrant hereby undertakes to deliver or cause
to be delivered with the prospectus, to each person to whom the
prospectus is sent or given, the latest annual report to security
holders that is incorporated by reference in the prospectus and
furnished pursuant to and meeting the requirements of Rule 14a-3 or
Rule 14c-3 under the Securities Exchange Act of 1934; and where
interim financial information required to be presented by Article 3 of
Regulation S-X are not set forth in the prospectus, to deliver, or
cause to be delivered to each person to whom the prospectus is sent or
given, the latest quarterly report that is specifically incorporated
by reference in the prospectus to provide such interim financial
information.
2. Insofar as an indemnification for liabilities arising under the
Securities Act of 1933 (the "Act") 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.
3. 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.
(b) The undersigned registrant hereby undertakes to respond to requests
for information that is incorporated by reference into the prospectus
pursuant to Items 4, 10(b), 11, or 13 of this Form, 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.
(c) 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>
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, Alabama, on
the 8th day of April, 1998.
Alabama National BanCorporation
By: /s/ John H. Holcomb, III
----------------------------------------
John H. Holcomb, III, Chairman and
Chief Executive Officer
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints John H. Holcomb, III and Victor E. Nichol, Jr.,
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 any and all amendments to this
Registration Statement, and to file the same, with all exhibits thereto, and
other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in fact and agents, full power and
authority to do and perform each and every act and thing requisite or 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, and each of them or their substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities indicated on the dates indicated below.
Signature Title Dates
--------- ----- -----
/s/ John H. Holcomb, III
- --------------------------- Chairman, Chief Executive April 8, 1998
John H. Holcomb, III Officer, and Director
(Principal Executive Officer)
/s/ Victor E. Nichol, Jr.
- --------------------------- President and Chief Operating April 8, 1998
Victor E. Nichol, Jr. Officer, and Director
/s/ James S. Parks, Jr.
- --------------------------- Senior Vice President-Finance, April 8, 1998
James S. Parks, Jr. Treasurer (Principal Accounting
Officer)
/s/ T. Morris Hackney
- --------------------------- Director April 8, 1998
T. Morris Hackney
/s/ John D. Johns
- --------------------------- Director April 8, 1998
John D. Johns
II-4
<PAGE>
Signature Title Dates
--------- ----- -----
/s/ John J. McMahon, Jr. Director April 8, 1998
- --------------------------
John J. McMahon, Jr.
/s/ C. Phillip McWane Director April 8, 1998
- --------------------------
C. Phillip McWane
/s/ William D. Montgomery Director April 3, 1998
- --------------------------
William D. Montgomery
/s/ Drayton Nabors, Jr. Director April 8, 1998
- --------------------------
Drayton Nabors, Jr.
/s/ G. Ruffner Page, Jr. Director April 8, 1998
- --------------------------
G. Ruffner Page, Jr.
/s/ W. Stancil Starnes Director April 3, 1998
__________________________
W. Stancil Starnes
/s/ Dan M. David Vice Chairman April 8, 1998
- -------------------------- and Director
Dan M. David
/s/ C. Lloyd Nix Director April 8, 1998
- --------------------------
C. Lloyd Nix
/s/ William E. Sexton Director April 8, 1998
- --------------------------
William E. Sexton
II-5
<PAGE>
EXHIBIT 5.1
<PAGE>
Exhibit 5.1
April 9, 1998
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
RE: Registration Statement on Form S-4
Alabama National BanCorporation
Ladies and Gentlemen:
As counsel for Alabama National BanCorporation ("ANB"), we are familiar
with the Certificate of Incorporation and the Bylaws of ANB and the above-
referenced Registration Statement on Form S-4 (the "Registration Statement")
relating to 575,000 shares of the common stock, $1.00 par value per share, of
ANB (the "Shares"). We have examined such public records and corporate
proceedings and other documents as we have deemed necessary or appropriate as a
basis for the opinion expressed below.
Based upon the foregoing, we are of the opinion that the Shares will, when
issued, be validly issued, fully paid and nonassessable.
We hereby consent to the filing of this opinion as an Exhibit to the
Registration Statement.
Very truly yours,
Maynard, Cooper & Gale, P.C.
By: /s/ Christopher B. Harmon
---------------------------------------
Christopher B. Harmon
<PAGE>
EXHIBIT 8.1
<PAGE>
Exhibit 8.1
April 9, 1998
Alabama National BanCorporation
1927 First Avenue North
Birmingham, Alabama 35203
Attention: Chairman and Chief Executive Officer
Public Bank Corporation
2500 13th Street
St. Cloud, FL 34769
Attention: Chief Executive Officer
Re: Agreement and Plan of Merger dated as of March 5, 1998
(the "Merger Agreement") between Public Bank
Corporation ("PBC"); and Alabama National
BanCorporation ("ANB"); which provides for the merger
of PBC with and into ANB
Gentlemen:
This letter is in response to your request that we provide you with our
opinion with respect to certain of the federal income tax consequences of
consummation of the transactions set forth in the Merger Agreement. In
rendering this opinion, we have relied upon the facts presented to us in (i) the
Merger Agreement and (ii) the Proxy Statement and Prospectus filed with the
Securities and Exchange Commission as part of ANB's Registration Statement on
Form S-4, including the exhibits thereto along with the amendments thereto.
Additionally, we have relied upon the representations of management of PBC and
management of ANB set forth in certificates of officers of those entities,
copies of which are attached hereto as Exhibits A and B, respectively. In the
aggregate, the facts relied upon are as set forth in the section of this letter
denominated "FACTS."
<PAGE>
Alabama National BanCorporation
Public Bank Corporation
April 9, 1998
Page 2
In our examination of such documents, we have assumed, with your consent,
that all documents submitted to us as photocopies reproduce the originals
thereof, that such originals are authentic, that all such documents have been or
will be duly executed to the extent required, and that all statements set forth
in such documents are accurate.
We have assumed that the stockholders of PBC approve the Merger Agreement
in accordance with law of Florida, its state of incorporation. We have assumed
that the transactions contemplated by the Merger Agreement, will qualify as
statutory mergers under Delaware and Florida law.
FACTS
-----
ANB is a corporation duly organized, validly existing and in good standing
under the laws of the State of Delaware with its principal executive office
located in Birmingham, Alabama. It presently has 10,000,000 authorized shares of
common capital stock, $1.00 par value per share ("ANB Common Stock"), of which
8,648,120 shares were issued and outstanding as of December 31, 1997.
Additionally, ANB has 100,000 authorized shares of preferred stock, $1.00 par
value per share, none of which were issued and outstanding as of December 31,
1997. Since December 31, 1997, there has been no change in the issued and
outstanding ANB Common Stock (except (i) as will be effected by the transactions
described herein, and (ii) for insignificant changes occurring in the ordinary
course of business), and none of the preferred shares have been issued.
PBC is a corporation duly organized, validly existing and in good standing
under the laws of the State of Florida with its principal executive offices
located in St. Cloud, Florida. As of December 31, 1997, PBC had 10,000,000
authorized shares of common capital stock, each of which had a par value of $.01
per share (the "PBC Common Stock"), of which 2,337,309 were issued and
outstanding as of December 31, 1997. Additionally, PBC has 30,000 authorized
shares of preferred stock, $100 par value per share, none of which were issued
and outstanding as of December 31, 1997.
PBC owns all the stock of Public Bank, a Florida state banking corporation
("Public Bank"). In addition to Public Bank, PBC is the parent of Public
Mortgage Corporation, an inactive corporation.
Numerous factors were considered by the Boards of Directors of PBC and ANB
in approving and recommending to their respective shareholders the terms of the
merger of PBC into ANB (the "Merger"). These included an analysis of the
financial structure; results of operations; prospects of ANB, the bank
subsidiaries of ANB, PBC and Public Bank; the
<PAGE>
Alabama National BanCorporation
Public Bank Corporation
April 9, 1998
Page 3
composition of the businesses of the two organizations; the overall
compatibility of the management of the organizations; the outlook for both
organizations in the banking and financial services industry; and the opinion of
an investment banker as to the fairness of the terms of the Merger from a
financial point of view.
ANB's board of directors considered the information presented to the
directors by the management of ANB concerning (i) the business, operations,
earnings, asset quality, and financial condition of PBC, including the
composition of the earning asset portfolio of PBC, (ii) the financial terms of
the Merger, including the relationship of the value of the consideration
issuable in the Merger to the market value, tangible book value, and earnings
per share of PBC, (iii) the nonfinancial terms of the Merger, including the
treatment of the Merger as a tax-free exchange of PBC Common Stock for ANB
Common Stock for federal income tax purposes, (iv) the likelihood of the Merger
being approved by the applicable regulatory authorities without undue conditions
or delay, (v) the opportunity for reducing the non-interest expense of the
operations of PBC and the ability of the operations of PBC after the Merger to
contribute to the earnings of ANB, (vi) the attractiveness of the PBC franchise,
the market potential of PBC and each of the markets in which it operates, and
the combinability of the franchise of PBC in central Florida with the operation
of ANB in its market, and (vii) the compatibility of the community bank
orientation of the operations of PBC to that of ANB.
PBC's board of directors considered whether the Merger would enhance
shareholder value while protecting the need of its current customer and
determine during the course of negotiations that the merger would satisfy both
of those criteria.
In reaching this conclusion the Board of PBC considered a number of factors
and criteria regarding the potential benefit of the merger. Among these factors
were (i) ANB's ability to provide financial services to the customers of Public
Bank, (ii) ANB's ability, due to its superior capitalization, to facilitate
Public Bank's addition of bank branches which would increase customer
convenience, (iii) the impact of ANB's reputation as an owner and operator of
community banks on Public Bank's image as a community bank, (iv) ANB's
experience in owning and operating community banks and the value thereof to the
St. Cloud/Kissimmee communities, (v) ANB's commitment to use PBC as a platform
to create a central Florida network of community banks as an opportunity for the
growth and enhancement of the St. Cloud/Kissimmee communities, (vi) ANB's
reputation for maintaining continuity of qualified, local personnel in acquired
banks, (vii) the marketability and liquidity of ANB's securities, (viii) the
ability of ANB's growth potential to enhance shareholder value, and (ix) the
overall ability of the Merger to enhance shareholder value.
<PAGE>
Alabama National BanCorporation
Public Bank Corporation
April 9, 1998
Page 4
Additionally PBC's board of directors engaged Alex Sheshunoff & Co.
Investment Banking, to provide its opinion with respect to the fairness of the
consideration to be received by PBC's shareholders in connection with the Merger
and related matters. As of March 5, 1998 Sheshunoff rendered its written
opinion that, as of such date, the consideration to be received in the Merger
Agreement was fair from a financial point of view to the holders of PBC common
stock.
Prior to the Merger, no PBC Common Stock will be held by PBC or any
subsidiary thereof or by ANB, any subsidiary thereof or any director or
executive officer thereof, other than in a fiduciary capacity and, in the case
of PBC, as treasury stock. Upon consummation of the Merger, each share of PBC
Common Stock issued and outstanding immediately prior to the Merger (excluding
shares held by PBC shareholders who perfect their dissenter's rights) shall
cease to be outstanding and shall be converted into .2353134 newly issued shares
of ANB Common Stock. The ANB Common Stock to be issued in the Merger will have
been registered with the Securities and Exchange Commission under the Securities
Act of 1933. The ratio for the exchange of shares of PBC Common Stock for ANB
Common Stock was negotiated through arm's-length bargaining. Accordingly, the
fair market value of the ANB Common Stock and cash consideration, in the case of
fractional shares, will be approximately equal to the fair market value of the
PBC Common Stock surrendered in exchange therefor.
Each share of ANB Common Stock issued and outstanding immediately prior to
the effective time of the Merger shall remain issued and outstanding from and
after the effective time.
As contemplated in the Agreement, PBC will be merged into and become a part
of ANB, which will be the surviving corporation. PBC's separate corporate
existence will cease to exist upon consummation of the Merger. The Merger will
be effected pursuant to the laws of the States of Florida and Delaware. ANB, as
the successor corporation, will acquire all of the assets of PBC (both net and
gross) and assume all of PBC's liabilities. Both the fair market value and
adjusted basis of the assets of PBC to be transferred to ANB will equal or
exceed the sum of liabilities to be assumed by ANB, plus the amount of
liabilities, if any, to which the transferred assets are subject. The
liabilities of PBC to be assumed by ANB and the liabilities to which transferred
assets of PBC are subject were incurred by PBC in the ordinary course of its
business. PBC does not have any indebtedness of ANB or any subsidiary or
affiliate of ANB that was issued, acquired or will be settled at a discount, or
that was issued or acquired in connection with this transaction. Nor does ANB
have any indebtedness of PBC or any subsidiary or affiliate of PBC that was
issued, acquired or will be settled at a discount, or that was issued or
acquired in connection with this transaction.
<PAGE>
Alabama National BanCorporation
Public Bank Corporation
April 9, 1998
Page 5
ANB has no plan or intention to sell or otherwise dispose of any of the
assets of PBC acquired in the transaction, except for dispositions made, or to
be made, in the ordinary course of business. Following the Merger, ANB will
continue the historic business of PBC and use a significant portion of PBC's
assets in such business, including the operation of the banking business of PBC
conducted through Public Bank. ANB has no plan or intention to liquidate Public
Bank, to merge Public Bank into another corporation, or to cause Public Bank to
sell or otherwise dispose of any of the assets of Public Bank, except for
dispositions made in the ordinary course of business.
No fractional shares will be issued in connection with the Merger. In the
event that a fractional share is computed, the shareholder will receive cash in
lieu thereof. The cash payment in lieu of fractional shares is solely for the
purpose of avoiding the expense and inconvenience to ANB of issuing fractional
shares and does not represent separately bargained-for consideration. No one
holder of PBC Common Stock will receive cash greater than the average sales
price of one full share of ANB Common Stock reported on the NASDAQ National
Market during the twenty trading days ending on the fifth business day prior to
the effective date of the Merger, and in the aggregate the maximum amount of
cash consideration that will be paid in the transaction to the holders of PBC
Common Stock in lieu of fractional shares will not exceed the product of (i) the
number of holders of PBC Common Stock on the effective date of the Merger, times
(ii) the value of one full share of ANB Common Stock calculated as set forth
above. The total cash consideration that will be paid in the Merger instead of
issuing fractional shares is not expected to exceed one percent of the total
consideration to be received. Any holder of PBC Common Stock who perfects his
statutory dissenter's rights shall be entitled to receive the value of such
shares in cash, as determined pursuant to the Florida Business Corporation Act.
In the event that Shareholders owning in excess of 7% of the outstanding shares
of PBC Common Stock properly assert their dissenter's rights, ANB's Board of
Directors may terminate the Merger Agreement.
All ANB Common Stock to be received by PBC shareholders will be freely
transferable, except for ANB Common Stock received by persons deemed to be
"affiliates" of PBC who, under Rule 145 of the Securities Act of 1933, will be
restricted as to future sales. As of the effective date of the Merger, each
such affiliate will have entered into an agreement restricting resale of the ANB
Common Stock.
To the best knowledge of management of PBC, no PBC shareholders sold,
exchanged, or otherwise dispose of any of such person's PBC Common Stock to ANB
or a person related to ANB in anticipation of the Merger. ANB has no plan or
intention to reacquire directly or indirectly through a related party any ANB
Common Stock issued in the transaction.
<PAGE>
Alabama National BanCorporation
Public Bank Corporation
April 9, 1998
Page 6
None of the present directors of PBC will be elected to the Board of
Directors of ANB. No shareholder-employee of PBC will receive any consideration
for the PBC Common Stock owned by such shareholder-employee in the form of
compensation for services rendered or to be rendered, and all compensation to
such shareholder-employees for services rendered or to be rendered will be
commensurate with amounts paid to third parties bargaining at arm's length for
similar services.
ANB and PBC will each bear and pay costs and expenses incurred by it, or on
its behalf, in connection with the Merger, including expenses of their
respective accountants and counsel; provided that ANB has agreed to pay all
expenses relating to filing, registration, printing and mailing fees associated
with the Proxy Statement and Prospectus and all application fees relating to the
regulatory applications. Any costs and expenses incurred by a holder of PBC
Common Stock will be for his own account and will not be paid by ANB or PBC.
Neither ANB nor PBC are under the jurisdiction of a court in a Title 11 or
similar case.
As of December 31, 1997, the total assets of PBC, exclusive of cash, cash
items (including receivables other than loans in the ordinary course of
business) and Government securities, were $32,641,850. Of this amount, the total
value of the assets held for investment constitutes $398,921, of which $398,921
consisted of stock and securities. As of the date hereof, there has been no
substantial change in PBC's total assets, that portion of PBC's total assets
held for investment or that portion represented by stock and securities.
As of December 31, 1997, the total assets of ANB, exclusive of cash, cash
items (including receivables) and Government securities, were $1,056,057,000.
Of this amount, the total value of the assets held for investment constitutes
$213,267,000 of which $40,333,000 consisted of stock and securities. As of
the date hereof, there has been no substantial change in ANB's total assets,
that portion of ANB's total assets held for investment or that portion
represented by stock and securities.
<PAGE>
Alabama National BanCorporation
Public Bank Corporation
April 9, 1998
Page 7
LEGAL ANALYSIS
--------------
Section 354(a)(1) of the Internal Revenue Code of 1986 (the "Code")/1/
provides that gain or loss will not be recognized to a transferor stockholder if
stock or securities in a corporation that is a "party to a reorganization" are,
pursuant to a "plan of reorganization," exchanged solely for stock or securities
in another corporation that is also a "party to the reorganization." The
exchange to which section 354(a)(1) applies must be pursuant to a "plan of
reorganization" and the stock and securities surrendered and received must be
the stock and securities of corporations each of which is a "party to a
reorganization" as those terms are defined in section 368. Treas. Reg.
(S)1.354-1(a). Section 354(a)(2)(A) provides that the non-recognition rule of
section 354(a)(1) will not apply if either (i) the principal amount of the
securities received by the transferor exceeds the principal amount of the
securities surrendered by the transferor, or (ii) securities are received by the
transferor but no securities are surrendered by the transferor.
Section 356(a)(1) provides that if the non-recognition rule of section
354(a)(1) would apply to an exchange except that money or "other property" is
received by the transferor in addition to stock or securities in a corporation
that is a "party to a reorganization," then gain will be recognized by the
transferor to the extent of the money and fair market value of the "other
property" received. If such an exchange has the effect of the distribution of a
dividend, then each transferor that receives money or "other property" will have
the gain to be recognized treated as a dividend to the extent of such
transferor's ratable share of the earnings and profits of the corporation in
which the transferor held stock. Code, (S) 356(a)(2). Whether a distribution
----
has the effect of a dividend will be determined based upon principles developed
under sections 356(a)(2) and 302 for determining dividend equivalency. Rev.
Rul. 74-515, 1974-2 C.B. 118. In applying those principles in the context of
section 356, one compares the interest the shareholder actually received in the
acquiring corporation in the reorganization with the interest the shareholder
would have received in the acquiring corporation if solely stock had been
received. Commissioner v. Clark, 489 U.S. 726 (1989); Rev. Rul. 93-61, 1993-2
C.B. 118.
The phrase "other property" does not include "securities" if such
securities would be permitted to be received without the recognition of gain
under the provisions of section 354. Code, (S) 356(d)(2)(A). Further, if
----
securities of a corporation that is "a party to a reorganization" are
surrendered and securities of a corporation that is "a party to a
reorganization" are received which exceed the principal amount of the securities
surrendered, the term "other property" includes only the fair market value of
the excess principal amount. Code, (S)356(d)(2)(B).
----
________________________
/1/ Statutory references are to the Code.
----
<PAGE>
Alabama National BanCorporation
Public Bank Corporation
April 9, 1998
Page 8
In a "reorganization" where cash is paid by the acquiring corporation
that is not separately bargained for but is in lieu of fractional share
interests to which shareholders are entitled, such cash payment will be treated
under section 302(a) as a redemption of the fractional share interest which will
be treated as a distribution in exchange, provided that the redemption is not
essentially equivalent to a dividend. Rev. Rul. 66-365, 1966-2 C.B. 116
amplified Rev. Rul. 81-18, 1981-1 C.B. 122; Rev. Rul. 69-34, 1969-1 C.B. 105.
See also, PLR 9703019. The Internal Revenue Service (the "Service") will
normally rule that a cash distribution in lieu of fractional share interests
arising in a "reorganization" will be in part or full payment in exchange for
the stock redeemed if the cash distribution is undertaken solely for the purpose
of saving the corporation the expense and inconvenience of issuing and
transferring fractional shares and is not separately bargained-for
consideration. Rev. Proc. 77-41, 1977-2 C.B. 574. See e.g. PLR 9701020.
The term "reorganization" is defined in Section 368(a) and includes
under Section 368(a)(1)(A) a statutory merger or what is commonly referred to as
an "A reorganization." See also, Treas. Reg. (S) 1.368-2(b)(1).
--------
In the present matter, PBC will merge into ANB in a statutory merger
under the laws of the States of Florida and Delaware. PBC shareholders will
exchange their shares for ANB Common Stock. Only in the instance where a
fractional share is computed will a PBC shareholder receive cash in lieu of a
fractional share of ANB Common Stock. The distribution of cash, as opposed to
the distribution of a fractional share of ANB Common Stock, is solely for the
purpose of saving ANB the expense and inconvenience of issuing and transferring
fractional shares of ANB Common Stock and is not separately bargained-for
consideration.
In the case of an exchange to which section 354 applies, the basis of
the stock or securities received by the transferor, without the recognition of
gain or loss, shall be the same as that of the stock or securities exchanged,
decreased by (i) the fair market value of any "other property" and money
received by the transferor and (ii) the amount of loss recognized by the
taxpayer on the exchange, and increased by (x) the amount treated as a dividend
and (y) the amount of gain recognized on the exchange, exclusive of the portion
treated as a dividend. Code, (S) 358(a)(1).
----
The holding period of stock of a corporation "a party to a
reorganization" received by a transferor includes the period of time that the
transferor held the stock of the other corporation "a party to the
reorganization" if such stock constitutes a capital asset in the hands of the
transferor. Code, (S) 1223(1). Additionally, for this rule to apply the stock
----
received must have the same basis, in whole or in part, as the stock exchanged.
Generally, a capital asset will
<PAGE>
Alabama National BanCorporation
Public Bank Corporation
April 9, 1998
Page 9
include all property held by a taxpayer exclusive of (i) stock in trade of a
taxpayer or (ii) other property of a kind which would be properly includible in
inventory. Code, (S) 1221(1).
----
In the present matter, a PBC shareholder will have a basis in the ANB
Common Stock received equal to such holder's basis in the PBC Common Stock
surrendered, decreased by the amount of any cash received in lieu of a
fractional share of ANB Common Stock and increased by the amount of gain
recognized as a result of receiving cash in lieu of a fractional share. Such
PBC shareholder will include in the holding period of ANB Common Stock the
holding period of such PBC shareholder unless the PBC Common Stock was not
considered as a capital asset in the hands of such holder.
With respect to the tax treatment of a corporation that is "a party to
a reorganization" which issues stock to a transferor of stock or securities in
another corporation that is a "party to a reorganization," the basis of the
property acquired shall be the same as the basis in the property surrendered
increased by the amount of gain recognized by the transferor on such transfer.
Code, (S) 362(b).
- ----
The term "party to a reorganization" is defined in sections 368(a) and
368(b). The term "plan of reorganization" is defined in the regulations
promulgated under the authority of section 368.
Two additional requirements for a "reorganization" are a "continuity
of business enterprise" and a "continuity of interest" therein on the part of
those persons who, directly or indirectly, were the owners of the enterprise
prior to the reorganization. Treas. Reg. (S) 1.368-1(b).
On January 3, 1997 the Service published a notice of proposed
rulemaking relating to the "continuity of business enterprise" requirement. On
January 23, 1998 the Service issued Treasury Decision 8760 modifying and making
final new continuity of business enterprise regulations. These regulations are
effective for transactions occurring after January 28, 1998. The "continuity of
business enterprise" requirement is satisfied if the acquiring corporation
either (i) continues the acquired corporation's historic business, or (ii) uses
a significant portion of the acquired corporation's historic business assets in
a business. Treas. Reg. (S) 1.368-1(d)(2). With respect to continuing the
historic business of the acquired corporation, the fact that the acquiring
corporation is in the same line of business as the acquired corporation tends to
establish the requisite business continuity. The acquired corporation's
historic business is generally the business it has most recently conducted. If
the acquired corporation has more than one line of business, continuity of
business enterprise requires that only a significant line of business be
<PAGE>
Alabama National BanCorporation
Public Bank Corporation
April 9, 1998
Page 10
conducted. Treas. Reg. (S) 1.368-1(d)(3). With respect to the alternative of
historic business assets continuity, it generally will be satisfied if the
acquiring corporation utilizes a significant portion of the acquired
corporation's historic business assets in a business. An acquired corporation's
historic business assets are those assets used in its historic business.
Whether a "significant" portion of the historic assets are used in a business is
based upon the relative importance of the assets to the operation of the
business. Treas. Reg. (S) 1.368-1(d)(4).
On December 23, 1996, the Service published a notice of proposed
rulemaking relating to the "continuity of interest" requirement. By virtue of
the same Treasury Decision, the revised regulations became effective for
transactions occurring after January 28, 1998. The "continuity of interest"
requirement is satisfied if there exists among the holders of the stock and
securities of either (i) the acquired corporation or (ii) acquiring corporation,
the requisite continuity of interest in the acquiring corporation. Treas. Reg.
(S) 1.368-1(b). For ruling purposes, the Service has stated that the continuity
of interest requirement will be satisfied if one or more shareholders of the
acquired corporation acquire stock of the acquiring corporation, or a
corporation controlling the acquiring corporation, that is equal in value to at
least 50% of the value of all the outstanding stock of the acquired corporation
on the date of the reorganization. Rev. Proc. 77-37, 1977-2 C.B. 568. See,
---
J.E. Seagram Corp. v. Commissioner, 104 TC 100 (1995) (discussion of judicial
authority for less than 50%). Prior to the revised regulations, there was the
further requirement that there not be an intent on behalf of the holders of the
stock of acquired corporations to dispose of the stock received from the
acquiring corporation. The revised regulation has eliminated that requirement
at least as to third parties and permits holders of acquired company stock to
sell the stock received from the acquiring company, other than for sales to the
acquiring company.
In the present matter, ANB will both continue PBC's historic business
and use a significant portion of PBC's historic business assets in such
business. Additionally, former PBC shareholders will acquire in the aggregate
ANB Common Stock equal in value to at least 50% of the value of all of the
outstanding PBC Common Stock on the date of the reorganization, and there is no
known intent to dispose of any ANB Common Stock to ANB or a party related to
ANB.
Additionally, for a transaction to qualify as a reorganization by
virtue of a statutory merger, there must be a business purpose for the
transaction. Treas. Reg. (S)(S) 1.368-1(b); 1.368-2(b)(2). Whether a
transaction has a business purpose is eventually a factual question with no
mathematical safe-harbor available.
<PAGE>
Alabama National BanCorporation
Public Bank Corporation
April 9, 1998
Page 11
In the present matter, ANB should be able by virtue of its size to
realize certain economies of scale and be more competitive with regional and
national providers of financial services. Additionally, holders of PBC Common
Stock will receive in exchange for such shares a security registered under the
Securities Act of 1933 issued by a company that reports under the Securities
Exchange Act of 1934. Based upon similar facts, the Service has ruled in the
past that a reorganization has occurred.
Assuming that a "reorganization" occurs, a "party to a reorganization"
includes both corporations in a transaction qualifying as a reorganization when
one corporation acquires properties of another corporation and, in the case of a
corporation controlling the acquiring corporation, such corporation where its
stock is used in the acquisition. Treas. Reg. (S) 1.368-2(f). A "plan of
reorganization" is a consummated transaction specifically defined as a
reorganization and is not itself a broadening of the term "reorganization."
Treas. Reg. (S) 1.368-2(g).
Although not directly applicable to the present matter, the Service
has held that the "solely for voting stock" requirement of Sections 368(a)(1)(B)
and 368(a)(1)(C) will not be violated if the acquiring corporation pays expenses
of the acquired corporation that are solely and directly related to the
reorganization, but will be violated if the acquiring corporation pays the
individual expenses of the stockholders of the acquired corporation. Rev. Rul.
73-54, 1973-1 C.B. 187; PLR 9701020. Even in statutory mergers, for ruling
purposes, the Service required a representation that each party to the merger
and the stockholders of the acquired corporation will pay their respective
expenses, if any, incurred in connection with the transaction. Rev. Proc. 86-
42, 1986-2 C.B. 722. The Service has stopped ruling on these types of
transactions. Rev. Proc. 98-3, 1998-I.R.B. __ (Section 3.01(24)).
Even though a transaction would otherwise meet all of the requirements
for a "reorganization" as described before, a transaction will not be considered
a "reorganization" if two or more parties to the transaction are "investment
companies," at least as with respect to such "investment company." Code, (S)
----
368(a)(2)(F)(i). For this purpose, the term "investment company" means a
"regulated investment company," a "real estate investment trust," or a
corporation 50% or more of the value of whose total assets are stock and
securities and 80% or more of the value of whose total assets are assets held
for investment. In making this calculation, stock and securities in any
subsidiary are disregarded and the parent corporation is deemed to own its
ratable share of the subsidiary assets, considering for this purpose a
corporation as being a subsidiary if another corporation owns 50% or more of the
combined voting power of all classes of stock entitled to vote, or 50% or more
of the total value of shares of all classes of stock outstanding. Code, (S)
----
368(a)(2)(F)(iii). Additionally, in determining total
<PAGE>
Alabama National BanCorporation
Public Bank Corporation
April 9, 1998
Page 12
assets, there is excluded cash and cash items (including receivables),
government securities and in certain instances other assets acquired. Code, (S)
----
368(a)(2)(F)(iv). Assets are held for investment if (i) they are held primarily
for gain from appreciation in value, production of passive income or both and
(ii) are not held primarily for sale to customers. Prop. Treas. Reg. (S) 1.368-
4(d)(1). Passive income includes interest income if such interest constitutes
passive income for purposes of S corporation taxation. Prop. Treas. Reg. (S)
1.368-4(d)(2). Interest income directly derived in the ordinary course of a
trade or business of lending or financing does not constitute passive income.
Treas. Reg. (S) 1.1362-2(c)(5)(iii)(B). Among the requirements to constitute a
"regulated investment company," is that the company files with its return for
the taxable year an election to be a "regulated investment company" or has made
such election for a previous taxable year. Code, (S) 851(d)(1). A similar
----
requirement is provided to constitute a "real estate investment trust." Code,
----
(S) 856(c)(1).
In the present matter, neither ANB nor PBC has made an election to be
taxed as a regulated investment company or a real estate investment trust.
Accordingly, such entities can constitute an "investment company" only if 50% or
more of the value of their respective assets are stocks and securities and 80%
or more of the value of the total assets are held for investment. In making
these calculations, cash, cash items (including receivables) and Government
securities are excluded and stock and securities in a 50%-owned subsidiary are
disregarded with the parent being deemed to own its ratable share of such
subsidiaries' assets. Otherwise, a "security" includes obligations of state and
local governments, commodity futures contracts, shares of regulated investment
companies, real estate investment trusts and other investments constituting a
security within the meaning of the Investment Company Act of 1940. In the
present matter, neither ANB nor PBC meet the definition of an "investment
company."
With respect to PBC shareholders who elect to exercise their right to
dissent to the Merger, cash received with respect to a dissenter's PBC Common
Stock will be treated as received by the PBC shareholder in redemption of their
PBC Common Stock, subject to the provisions and limitations of Section 302 of
the Code.
OPINION
-------
Based upon the facts set forth herein and assuming that the Merger
will take place as described in the Merger Agreement and that the
representations made by ANB and PBC are true and correct at the time of
consummation of the Merger, it is our opinion that:
<PAGE>
Alabama National BanCorporation
Public Bank Corporation
April 9, 1998
Page 13
(i) the Merger will constitute a reorganization within the meaning
of Section 368 of the Code;
(ii) ANB and PBC will each be a "party to a reorganization" within
the meaning of (S) 368(b) of the Code;
(iii) no gain or loss will be recognized by ANB or PBC in the Merger;
(iv) no gain or loss will be recognized by a PBC shareholder upon
the exchange in the Merger of PBC Common Stock solely for shares of ANB
Common Stock;
(v) the basis of ANB Common Stock to be received in the Merger by a
PBC shareholder will be the same as such person's basis in the PBC Common
Stock exchanged therefor;
(vi) the holding period of ANB Common Stock to be received in the
Merger by a PBC shareholder will include the period during which such
person held the PBC Common Stock exchanged therefor, provided that such PBC
Common Stock was held as a capital asset immediately prior to the
consummation of the Merger;
(vii) the receipt of cash in exchange for a fractional share interest
in a share of ANB Common Stock will be treated as received in exchange for
such fractional share interest;
(viii) no gain or loss will be recognized by ANB or PBC in connection
with the reorganization; and
(ix) the receipt of cash by a PBC shareholder, who exercises his or
her rights to dissent, will be treated as received in exchange for such PBC
Common Stock.
The opinions expressed herein are based upon existing statutory,
regulatory, and judicial authority, any of which may be changed at any time with
retroactive effect. In addition, our opinions are based solely on the documents
that we have examined, the additional information that we have obtained, and the
statements set out therein, which we have assumed and you have confirmed to be
true on the date hereof and will be true on the date on which the proposed
<PAGE>
Alabama National BanCorporation
Public Bank Corporation
April 9, 1998
Page 14
transaction is consummated. Our opinions cannot be relied upon if any of the
facts contained in such documents or if such additional information is, or later
becomes, inaccurate, or if any of the statements set out herein is, or later
becomes, inaccurate. Finally, our opinions are limited to the tax matters
specifically covered thereby, and we have not been asked to address, nor have we
addressed, any other tax consequences of the proposed transaction.
We consent to the use of this opinion as an exhibit to the Registration
Statement (Registration No. _____________) filed by ANB relating to the proposed
Merger and to the reference to us under the headings "RISK FACTORS - Tax
Considerations," "THE MERGER -Federal Income Tax Consequences" and "LEGAL
MATTERS" in the Proxy Statement and Prospectus included in the Registration
Statement. This opinion is being provided solely for the use of ANB. No other
person or party shall be entitled to rely on this opinion.
Very truly yours,
/s/ Maynard, Cooper & Gale, P.C.
<PAGE>
EXHIBIT A
---------
STATEMENT OF FACTS AND REPRESENTATIONS
--------------------------------------
This Statement of Facts and Representations is made on behalf of Public
Bank Corporation ("PBC") to Maynard, Cooper & Gale, P.C., and is intended to be
relied upon in the issuance of an opinion as to certain federal tax consequences
arising from consummation of the transactions described in the Merger Agreement
and Plan of Merger dated March 5, 1998, by and between PBC and Alabama National
BanCorporation ("ANB"). Capitalized terms shall have the meaning assigned to
them in the opinion of Maynard, Cooper & Gale, P.C. dated April 9, 1998, to ANB
and.
1. Both the fair market value and adjusted basis of assets of PBC to be
transferred to ANB will equal or exceed the sum of liabilities to be assumed by
ANB, plus the amount of liabilities, if any, to which the transferred assets are
subject.
2. The ratio for the exchange of shares of PBC Common Stock for ANB
Common Stock was negotiated through arm's-length bargaining. The fair market
value of the ANB Common Stock and cash consideration, in the case of fractional
shares, will be approximately equal to the fair market value of the PBC Common
Stock surrendered in exchange therefor.
3. The liabilities of PBC to be assumed by ANB and the liabilities to
which transferred assets of PBC are subject were incurred by PBC in the ordinary
course of its business.
4. To the best knowledge of management of PBC, there is no plan or
intention by any PBC shareholder to sell, exchange, or otherwise dispose of such
person's PBC Common Stock to ANB or a person related to ANB in anticipation of
the Merger.
5. PBC does not have any indebtedness of ANB or any subsidiary of ANB
that was issued, acquired or will be settled at a discount, or that was issued
or acquired in connection with this transaction.
6. Any cost or expense incurred by a PBC shareholder will be for his own
account and will not be paid by PBC.
7. The payment of cash in lieu of fractional shares of ANB Common Stock
is not an accommodation to, or requested by PBC, but it is the understanding of
PBC that is solely for the purpose of avoiding the expense and inconvenience to
ANB of issuing fractional shares and does not represent separately bargained for
consideration. The total cash consideration that will be paid in the transaction
to PBC shareholders instead of issuing fractional shares of ANB Common Stock
will not exceed one percent (1%) of the total consideration that will be issued
in the transaction to the holders of PBC in exchange for their shares of PBC
Common Stock.
A-1
<PAGE>
8. No shareholder-employee of PBC will receive any consideration for the
PBC Common Stock owned by such shareholder-employee in the form of compensation
for services rendered or to be rendered and all compensation to such
shareholder-employee for services rendered or to be rendered will be
commensurate with amounts paid to third parties bargaining at arm's-length for
similar services.
9. PBC is not under the jurisdiction of a court in a Title 11 or similar
case.
10. As of December 31, 1997, the total assets of PBC, exclusive of cash,
cash items (including receivables other than loans in the ordinary course of
business) and Government securities was $32,641,850. Of this amount, the total
value of the assets held for investments constitutes $398,921, of which $398,921
consists of stock and securities. See Computation Schedule attached hereto for
derivation of these numbers.
11. As of the date hereof, there has been no substantial change from
December 31, 1997 in PBC's total assets or that portion of PBC's total assets
represented by investment securities. Please note that as of March 31, 1998
Public Bank's total assets have grown in the ordinary course of business by more
than $2,000,000 but less than $2,500,000.
12. Except as will be effected by the Merger, there has been no change in
the issued and outstanding PBC Common Stock since December 31, 1997.
13. PBC has not elected to be taxed as a regulated investment company or a
real estate investment trust.
PUBLIC BANK CORPORATION
By: /s/ B. Robert Tucker
-----------------------------------
Its: Vice Chairman
A-2
<PAGE>
EXHIBIT B
---------
STATEMENT OF FACTS AND REPRESENTATIONS
--------------------------------------
This Statement of Facts and Representations is made on behalf of Alabama
National BanCorporation ("ANB"), to Maynard, Cooper & Gale, P.C., and is
intended to be relied upon in the issuance of an opinion as to certain federal
tax consequences arising from consummation of the transactions described in the
Merger Agreement and Plan of Merger dated March 5, 1998, by and between Public
Bank Corporation ("PBC") and ANB. Capitalized terms shall have the meaning
assigned to them in the opinion of Maynard, Cooper & Gale, P.C. dated April 9,
1998, to ANB.
1. The ratio for the exchange of shares of PBC Common Stock for ANB
Common Stock was negotiated through arm's-length bargaining. The fair market
value of the ANB Common Stock and cash consideration in the case of fractional
shares will be approximately equal to the fair market value of the PBC Common
Stock surrendered in exchange therefor.
2. Each share of ANB common stock (excluding shares held by stockholders
who perfect their dissenter's right of appraisal as provided in the Merger
Agreement) issued and outstanding immediately prior to the effective time of the
Merger shall remain issued and outstanding from and after the effective time.
3. ANB does not have any indebtedness of PBC or any subsidiary of PBC
that was issued, acquired or will be settled at a discount, or that was issued
or acquired in connection with this transaction.
4. ANB has no plan or intention to sell or otherwise dispose of any of
the assets of PBC acquired in the transaction, except for dispositions made, or
to be made, in the ordinary course of business or for transfers to another
corporation controlled by ANB. Following the Merger, ANB will continue the
historic business of PBC and use a significant portion of PBC's assets in such
business, including the operation of the banking business of PBC conducted
through First Bank.
5. ANB has no plan or intention to reacquire any ANB Common Stock issued
in this transaction, and ANB has not acquired any PBC Common Stock prior to the
Merger in anticipation of the Merger.
6. None of ANB, its subsidiaries (other than in a fiduciary capacity),
directors and executive officers owned on December 31, 1997 any PBC Common
Stock.
7. The payment of cash in lieu of fractional shares of ANB Common Stock
is solely for the purpose of avoiding the expense and inconvenience to ANB of
issuing fractional shares and does not represent separately bargained for
consideration. The total cash consideration that will be paid in the
transaction to PBC shareholders instead of issuing fractional shares of ANB
B-1
<PAGE>
Common Stock will not exceed one percent (1%) of the total consideration that
will be issued in the transaction to the holders of PBC in exchange for their
shares of PBC Common Stock. The fractional share interests of each PBC Common
Stock will be aggregated, and no PBC shareholder will receive cash in an amount
greater than the book value of one full share of ANB Common Stock determined as
of the month-end immediately preceding the effective date of the Merger.
8. As of December 31, 1997, the total assets of ANB, exclusive of cash,
cash items (including receivables) and Government securities were
$1,056,057,000. Of this amount, the total value of the assets held for
investment constitutes $213,267,000, of which $40,333,000 consists of
stock and securities. As of the date hereof, there has been no substantial
change in ANB's total assets, the portion of ANB's total assets held for
investment, or that portion represented by stock and securities.
9. ANB is not under the jurisdiction of a court in a Title 11 or similar
case.
10. ANB has no plan or intention to liquidate Public Bank, to merge Public
Bank into another corporation, or to cause Public Bank to sell or otherwise
dispose of any of the assets of Public Bank, except for dispositions made in the
ordinary course of business.
11. ANB has not elected to be taxed as a regulated investment company or a
real estate investment trust.
ALABAMA NATIONAL
BANCORPORATION
By: /s/ James S. Parks, Jr.
----------------------------------------
Its: Senior Vice President-Finance,
Controller and Treasurer
B-2
<PAGE>
EXHIBIT 23.1
<PAGE>
Exhibit 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the registration statement on
Form S-4 (File No. 333-_______) of our report dated January 15, 1998, except for
Notes 8 and 19 as to which the dates are January 19, 1998 and March 5, 1998,
respectively, on our audits of the consolidated financial statements of Alabama
National BanCorporation as of December 31, 1997 and 1996, and for each of the
two years in the period ended December 31, 1997. We also consent to the
reference to our firm under the caption "Experts."
/s/ COOPERS & LYBRAND L.L.P.
Birmingham, Alabama
April 8, 1998
<PAGE>
EXHIBIT 23.2
<PAGE>
Exhibit 23.2
Consent of Ernst & Young LLP
We consent to the reference to our firm under the caption "Experts" in the
Registration Statement (Form S-4) and related Prospectus of Alabama National
BanCorporation for the registration of up to 575,000 shares of its common stock
and to the incorporation by reference therein of our report dated February 29,
1996, with respect to the 1995 consolidated financial statements of Alabama
National BanCorporation (not presented separately in the 1997 Annual Report on
Form 10-K) which report is included in Alabama National BanCorporation's Annual
Report (Form 10-K) for the year ended December 31, 1997, filed with the
Securities and Exchange Commission.
/s/ Ernst & Young LLP
Birmingham, Alabama
April 8, 1998
<PAGE>
EXHIBIT 23.3
<PAGE>
Exhibit 23.3
Consent of Osburn, Henning and Company, P.A.
We consent to the use in this Registration Statement of Alabama National
BanCorporation on Form S-4 of our report dated January 15, 1998 of our audit of
the consolidated financial statements of Public Bank Corporation as of December
31, 1997 and for each of the two years then ended appearing in the Prospectus
which is a part of this Registration Statement, and to the reference to our firm
under the caption "Experts" in such Prospectus.
/s/ Osburn, Henning and Company, P.A.
Orlando, Florida
April 3, 1998
<PAGE>
EXHIBIT 99.1
<PAGE>
Exhibit 99.1
REVOCABLE PROXY
Public Bank Corporation
2500 13th Street
St. Cloud, Florida 34769
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF PUBLIC BANK
CORPORATION ("PBC") FOR USE ONLY AT THE SPECIAL MEETING OF SHAREHOLDERS TO BE
HELD ON _________________, 1998, AND AT ANY POSTPONEMENT OR ADJOURNMENT THEREOF
(THE "SPECIAL MEETING").
The undersigned, being a Shareholder of PBC, hereby appoints H. Clay
Whaley, Jr. and Henry C. Yates, and each of them, as Proxies, each with the
power to appoint his substitute, and hereby authorizes them, or either of them,
to represent the undersigned at the Special Meeting and to act with respect to
all votes that the undersigned would be entitled to cast, if then personally
present, on the following matters in accordance with the following instructions
on the reverse side hereof:
1. To consider and vote upon a proposal to approve the Agreement and Plan
of Merger, dated as of March 5, 1998 (the "Merger Agreement"), by and between
PBC and Alabama National BanCorporation ("ANB"), pursuant to which, among other
matters (a) PBC would be merged with and into ANB and (b) each share of PBC
common stock will be converted into the right to receive 0.2353134 shares of ANB
common stock. A copy of the Merger Agreement is set forth in Appendix A to the
accompanying Proxy Statement and Prospectus.
2. To transact such other business as may properly come before the
Special Meeting or any adjournment thereof.
Please mark, date and sign this Proxy below and return promptly using the
enclosed envelope.
THIS PROXY CARD IS CONTINUED ON THE REVERSE SIDE.
PLEASE SIGN ON THE REVERSE SIDE AND RETURN PROMPTLY.
THE UNDERSIGNED ACKNOWLEDGES THAT THE SPECIAL MEETING MAY BE POSTPONED OR
ADJOURNED TO A DATE SUBSEQUENT TO THE DATE SET FORTH ABOVE, AND INTENDS THAT
THIS PROXY SHALL BE EFFECTIVE AT THE SPECIAL MEETING AFTER SUCH POSTPONEMENT(S)
OR ADJOURNMENT(S). THIS PROXY IS REVOCABLE, AND THE UNDERSIGNED MAY REVOKE IT
AT ANY TIME BY DELIVERY OF WRITTEN NOTICE OF SUCH REVOCATION TO PBC, PRIOR TO
THE DATE OF THE SPECIAL MEETING, OR BY ATTENDANCE AT THE SPECIAL MEETING.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED BY THE
UNDERSIGNED. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR THE MERGER.
<TABLE>
<CAPTION>
ELECTION TO APPROVE FOR AGAINST ABSTAIN from
<S> <C> <C> <C>
THE MERGER: Approval of the Merger Approval of the Merger Approval of the Merger
[_] [_] [_]
</TABLE>
Signature(s):_____________________
Date:_____________________________
NOTE: Please sign exactly as name
appears above. When signing as
attorney, executor, administrator,
trustee or guardian, please give
full title as such. If a
corporation, please sign in full
corporation name by president or
other authorized officer. If a
partnership, please sign in
partnership name by authorized
person.
