<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 29, 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 (I.R.S. EMPLOYER
JURISDICTION OF IDENTIFICATION NO.)
INCORPORATION OR
ORGANIZATION)
(PRIMARY STANDARD INDUSTRIAL CLASSIFICATION CODE NUMBER)
---------------
1927 FIRST AVENUE NORTH
BIRMINGHAM, ALABAMA 35203
(205) 583-3600
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER OF REGISTRANT'S PRINCIPAL
EXECUTIVE OFFICE)
---------------
JOHN H. HOLCOMB, III
CHAIRMAN AND CHIEF EXECUTIVE OFFICER
1927 FIRST AVENUE NORTH
BIRMINGHAM, AL 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. ROBERT C. SCHWARTZ, ESQ.
MAYNARD, COOPER & GALE, P.C. SMITH, GAMBRELL & RUSSELL, LLP
1901 SIXTH AVENUE NORTH SUITE 3100, PROMENADE II
SUITE 2400 1230 PEACHTREE STREET N.E.
BIRMINGHAM, ALABAMA 35203 ATLANTA, GEORGIA 30309
(205) 254-1000 (404) 815-3758
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
AMOUNT MAXIMUM PROPOSED
TITLE OF EACH CLASS OF TO BE PRICE MAXIMUM AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED PER UNIT(1) AGGREGATE PRICE(1) REGISTRATION FEE
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common, $1.00 par
value................. 570,000 $8.79 $5,008,754 $1,392
</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 Community Bank of Naples, National Association as of
June 30, 1998.
---------------
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 SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
[COMMUNITY BANK OF NAPLES, N.A. LETTERHEAD]
MERGER PROPOSED--YOUR VOTE IS
VERY IMPORTANT
The board of directors of Community Bank of Naples, National Association has
agreed to a merger of Naples with Citizens & Peoples Bank, National
Association, a national bank located in Pensacola, Florida. Before we can
complete this merger, the agreement must be approved by Naples shareholders.
We are sending you this proxy statement-prospectus to ask you to vote in favor
of the merger.
We believe the merger will provide our bank with increased capabilities in
serving individuals, businesses and corporate clients in and around Naples,
and will, therefore create more value for Naples shareholders.
If the merger is completed, Naples shareholders will receive 0.53271 shares of
common stock in Alabama National BanCorporation, the parent of Citizens &
Peoples, for each share they own just before the merger. We estimate that, on
completion of the merger, the former Naples shareholders will own about 4.83%
of the outstanding stock of Alabama National.
The merger cannot be completed unless two-thirds (66 2/3%) of Naples
shareholders approve it. We have scheduled a special shareholder meeting for
you to vote on the merger.
In considering the proposed merger, you are encouraged to read the section in
this proxy statement-prospectus entitled "Risk Factors" beginning on page 14.
YOUR VOTE IS VERY IMPORTANT. Whether or not you plan to attend our special
shareholder meeting, please take the time to vote by completing and mailing
the enclosed proxy card. If you sign, date and mail your proxy card without
indicating how you want to vote, we will vote your proxy in favor of the
merger.
The date, time and place of the special meeting is:
Newgate Tower
5150 Tamiami Trail North
Naples, Florida 34103
This proxy statement-prospectus provides you with detailed information about
the proposed merger. You can also get information about Alabama National from
documents Alabama National has filed with the Securities and Exchange
Commission. We encourage you to read this entire document carefully.
Sincerely,
Robert Guididas
President and Chief Executive
Officer Community Bank of Naples,
N.A.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OF THE SECURITIES TO BE ISSUED UNDER THIS PROXY
STATEMENT-PROSPECTUS OR DETERMINED IF THIS PROXY STATEMENT-PROSPECTUS IS
ACCURATE OR ADEQUATE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE. THESE SECURITIES ARE NOT SAVINGS OR DEPOSIT ACCOUNTS OR OTHER
OBLIGATIONS OF ANY BANK OR NON-BANK SUBSIDIARY OF ANY OF THE PARTIES, AND
THEY ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE
BANK INSURANCE FUND OR ANY OTHER GOVERNMENTAL AGENCY.
<PAGE>
THIS PROXY STATEMENT-PROSPECTUS IS DATED , 1998 AND WAS FIRST MAILED TO
SHAREHOLDERS ON OR ABOUT , 1998
WE HAVE NOT BEEN AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY REPRESENTATION
ABOUT THE MERGER OR NAPLES OR ALABAMA NATIONAL THAT DIFFERS FROM, OR ADDS TO,
THE INFORMATION IN THIS PROXY STATEMENT-PROSPECTUS OR IN DOCUMENTS THAT ARE
PUBLICLY FILED WITH THE SECURITIES AND EXCHANGE COMMISSION. THEREFORE, IF
ANYONE DOES GIVE YOU DIFFERENT OR ADDITIONAL INFORMATION, YOU SHOULD NOT RELY
ON IT.
IF YOU ARE IN A JURISDICTION WHERE IT IS UNLAWFUL TO OFFER TO EXCHANGE OR SELL,
OR TO ASK FOR OFFERS TO EXCHANGE OR BUY, THE SECURITIES OFFERED BY THIS PROXY
STATEMENT-PROSPECTUS OR TO ASK FOR PROXIES, OR IF YOU ARE A PERSON TO WHOM IT
IS UNLAWFUL TO DIRECT SUCH ACTIVITIES, THEN THE OFFER PRESENTED BY THIS PROXY
STATEMENT-PROSPECTUS DOES NOT EXTEND TO YOU.
THE INFORMATION CONTAINED IN THIS PROXY STATEMENT-PROSPECTUS SPEAKS ONLY AS OF
ITS DATE UNLESS THE INFORMATION SPECIFICALLY INDICATES THAT ANOTHER DATE
APPLIES.
INFORMATION IN THIS PROXY STATEMENT-PROSPECTUS ABOUT ALABAMA NATIONAL HAS BEEN
SUPPLIED BY ALABAMA NATIONAL, AND INFORMATION ABOUT NAPLES HAS BEEN SUPPLIED BY
NAPLES.
A WARNING ABOUT FORWARD-LOOKING STATEMENTS
Alabama National and Naples make forward-looking statements in this document
that are subject to risks and uncertainties. These forward-looking statements
include information about possible or assumed future results of our operations
or the performance of the combined bank after the merger. Also, when any of the
words "believes," "expects," "anticipates" or similar expressions are used,
forward-looking statements are being made. Many possible events or factors
could affect the future financial results and performance of each of Alabama
National and Naples and the combined bank after the merger. This could cause
results or performance to differ materially from those expressed in those
forward-looking statements. You should consider these risks when you vote on
the merger. These possible events or factors include the following:
1. Alabama National's revenues after the merger are lower than expected,
Alabama National's restructuring charges are higher than it expects, the
combined bank loses more deposits, customers or business than we expect, or
our operating costs after the merger are greater than we expect;
2. competition among depository and other financial institutions increases
significantly;
3. we have more trouble obtaining regulatory approvals for the merger than we
expect;
4. we have more trouble integrating our businesses or retaining key personnel
than we expect;
5. our costs savings from the merger are less than we expect, or we are unable
to obtain those cost savings as soon as we expect;
6. changes in the interest rate environment reduce our margins;
7. general economic or business conditions are worse than we expect;
8. legislative or regulatory changes adversely affect our business;
9. technological changes and systems integration are harder to make or more
expensive than we expect;
10. adverse changes occur in the securities markets; and
11. the timely resolution of any Year 2000 issues by Alabama National and its
customers and suppliers.
<PAGE>
COMMUNITY BANK OF NAPLES, NATIONAL ASSOCIATION
----------------
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON DECEMBER 21, 1998
----------------
Community Bank of Naples, National Association will hold a special meeting of
shareholders at Newgate Tower, 5150 Tamiami Trail North in Naples, Florida at
local time on December 21, 1998 to vote on:
1. The Agreement and Plan of Merger, dated as of September 21, 1998, by and
between Alabama National BanCorporation, Citizens & Peoples Bank, National
Association, a subsidiary of Alabama National, and Community Bank of
Naples, National Association, and the transactions contemplated by that
document. These transactions include the merger of Naples into Citizens &
Peoples and the issuance of shares of Alabama National common stock to
Naples shareholders.
2. Any other matters that properly come before the special meeting, or any
adjournments or postponements of the special meeting.
Record holders of Naples common stock at the close of business on November 2,
1998, will receive notice of and may vote at the special meeting, including any
adjournments or postponements. The Agreement and Plan of Merger requires
approval by two-thirds (66 2/3%) of the outstanding shares of Naples.
Holders of Naples common stock may exercise dissenters' rights under Section
215a of the National Bank Act. We have attached a copy of that law as an
Appendix to the accompanying proxy statement-prospectus.
Robert Guididas
President and Chief Executive
Officer
, 1998
PLEASE MARK, SIGN, DATE AND RETURN YOUR PROXY PROMPTLY, WHETHER OR NOT YOU PLAN
TO ATTEND THE SPECIAL MEETING. YOUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS
THAT YOU VOTE FOR APPROVAL OF THE MATTERS THAT YOU WILL VOTE ON AT THE SPECIAL
MEETING.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
SUMMARY.................................................................... 1
Parties to the Merger.................................................... 1
Shareholder Meeting to Approve Merger.................................... 2
The Merger............................................................... 2
Selected Historical Consolidated Financial Data.......................... 6
Pro Forma Selected Consolidated Financial Data........................... 10
Comparative Per Share Data............................................... 13
RISK FACTORS............................................................... 14
Restrictions on Dividends................................................ 14
Fixed Merger Consideration Despite Potential Change in Relative Stock
Prices.................................................................. 14
Supervision and Regulation............................................... 14
Monetary Policies........................................................ 15
Allowance for Loan Losses................................................ 15
Interests of Certain Persons in the Transaction.......................... 15
GENERAL INFORMATION........................................................ 16
Meeting, Record Dates and Votes Required................................. 16
Proxies and Other Matters................................................ 16
Dissenters' Rights....................................................... 17
Recommendation of Board of Directors..................................... 18
THE MERGER................................................................. 19
Terms of the Merger...................................................... 19
Effective Time........................................................... 19
Post-Merger Reorganization............................................... 20
Background of and Reasons for the Merger................................. 20
Opinions of Keefe, Bruyette & Woods, Inc................................. 23
Effect on Certain Employee Benefit Plans of Naples....................... 27
Surrender of Certificates................................................ 27
Conditions to Consummation of the Merger................................. 28
Regulatory Approvals..................................................... 30
Conduct of Business Pending the Merger................................... 31
Waiver and Amendment; Termination; Termination Fee....................... 33
Management and Operations After the Merger............................... 33
Interests of Certain Persons in the Merger............................... 34
Federal Income Tax Consequences.......................................... 34
Accounting Treatment..................................................... 36
Expenses and Fees........................................................ 36
Resales of Alabama National Common Stock................................. 36
PRO FORMA FINANCIAL INFORMATION............................................ 37
DESCRIPTION OF ALABAMA NATIONAL CAPITAL STOCK.............................. 44
General.................................................................. 44
Common Stock............................................................. 44
Preferred Stock.......................................................... 44
Certain Anti-Takeover Effects............................................ 45
EFFECT OF MERGER ON RIGHTS OF SHAREHOLDERS................................. 47
Charter and Bylaw Provisions............................................. 47
Shareholder Approval of Mergers.......................................... 47
Dissenters' Rights....................................................... 48
</TABLE>
i
<PAGE>
<TABLE>
<S> <C>
Shareholders Meetings and Voting........................................ 48
Dividends............................................................... 50
Preemptive Rights....................................................... 50
Liquidation Rights...................................................... 50
Limitation of Liability and Indemnification............................. 51
Antitakeover Legislation................................................ 51
CERTAIN INFORMATION CONCERNING ALABAMA NATIONAL........................... 53
General................................................................. 53
Recent Developments..................................................... 53
CERTAIN INFORMATION CONCERNING NAPLES..................................... 54
Description of Business................................................. 54
Supervision and Regulation.............................................. 59
Information About Voting Securities and Principal Holders Thereof....... 62
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS OF NAPLES..................................................... 64
Financial Condition..................................................... 64
Loans................................................................... 65
Investment Securities................................................... 67
Deposits................................................................ 68
Capital Resources....................................................... 69
Results of Operations................................................... 70
Interest Sensitivity.................................................... 74
Market Risk............................................................. 75
Provisions and Allowance for Loan Losses................................ 77
Nonperforming Assets.................................................... 79
Noninterest Income...................................................... 80
Noninterest Expense..................................................... 80
Income Taxes, Inflation and Other Issues................................ 80
Year 2000 Issues........................................................ 81
LEGAL MATTERS............................................................. 82
EXPERTS................................................................... 82
WHERE YOU CAN FIND MORE INFORMATION....................................... 83
APPENDICES
Appendix A-Agreement and Plan of Merger
Appendix B-Provisions of National Bank Act Relating to Dissenters'
Rights
Appendix C-Consolidated Financial Statements of Community Bank of
Naples, National Association
Appendix D-Opinion of Keefe, Bruyette & Woods, Inc.
</TABLE>
ii
<PAGE>
SUMMARY
This summary highlights selected information from this proxy statement-
prospectus. It does not contain all of the information that is important to
you. You should carefully read this entire document and the other documents to
which we refer. These will give you a more complete description of the
transactions we are proposing. For more information about Alabama National, see
"Where You Can Find More Information" (page 83). Each item in this summary
refers to the pages where that subject is discussed more fully.
PARTIES TO THE MERGER
ALABAMA NATIONAL BANCORPORATION (PAGE 53)
1927 First Avenue
North Birmingham, Alabama 35203
(205) 583-3650
Alabama National is the sixth largest bank holding company headquartered in the
State of Alabama, with nine bank subsidiaries in Alabama, Florida and Georgia.
Alabama National, through its subsidiary banks, provides full banking services
to individuals and businesses.
At June 30, 1998, Alabama National had total assets of about $1.38 billion,
total deposits of about $1.08 billion, and total shareholders' equity of about
$109 million.
CITIZENS & PEOPLES BANK, NATIONAL ASSOCIATION
201 North Palafox Street
Pensacola, Florida 32501
(850) 435-8887
Citizens & Peoples is a wholly owned subsidiary of Alabama National. It is a
national bank providing commercial banking services through its main office
located in Cantonment, Florida and branch office located in Pensacola, Florida.
As of June 30, 1998, Citizens & Peoples total assets were about $25 million,
deposits were about $21 million and shareholders' equity was about $4 million.
COMMUNITY BANK OF NAPLES, NATIONAL ASSOCIATION (PAGE 54)
Newgate Tower
5150 Tamiami Trail North
Naples, Florida 34103
(941) 649-1500
Naples is a national bank, providing commercial banking services through its
main office located in Naples, Florida. As of June 30, 1998, Naples' total
assets were about $79 million, deposits were about $70 million and
shareholders' equity was about $5 million.
1
<PAGE>
SHAREHOLDER MEETING TO APPROVE MERGER (PAGE 16)
We will hold the Naples special meeting at .m. local time, on December 21,
1998, at the executive office of Naples, Newgate Tower, 5150 Tamiami Trail
North, Naples, Florida 34103. At this important meeting, we will ask Naples
shareholders to (i) consider and vote upon approval of the merger agreement and
(ii) act on any other matters that may be put to a vote at the Naples special
meeting. You may vote at the Naples meeting if you owned Naples shares at the
close of business on November 2, 1998. As of such date, there were 1,000,000
shares of Naples common stock issued and outstanding and entitled to be voted
at the special meeting.
THE MERGER (PAGE 19)
TERMS (PAGE 19). The merger agreement is the document that governs the merger
of Naples with Citizens & Peoples, and the issuance of shares of Alabama
National common stock to Naples shareholders in connection with the merger. We
encourage you to read the merger agreement which is attached to this proxy
statement-prospectus as Appendix A. The merger agreement provides for the
merger of Naples with and into Citizens & Peoples. Naples shareholders will
receive 0.53271 shares of Alabama National common stock for each share of
Naples common stock they own just before the merger. Naples shareholders will
receive cash instead of fractional shares resulting from application of the
exchange ratio.
POST-MERGER REORGANIZATION (PAGE 20). Following the merger of Naples with
Citizens & Peoples, Citizens & Peoples plans to transfer all of the assets and
liabilities associated with Naples to a newly formed national bank subsidiary
of Citizens & Peoples headquartered in Naples, Florida. Alabama National will
then cause Citizens & People to transfer the stock of this new bank to Alabama
National. The effect of this reorganization is that the deposits, loans and
other assets and liabilities of Naples will be owned by a direct, wholly-owned
subsidiary of Alabama National located in Naples, Florida.
REGULATORY APPROVALS; EFFECTIVE TIME (PAGE 19). We cannot complete the merger
unless we obtain the approval of the Board of Governors of the Federal Reserve
System and the Office of the Comptroller of the Currency. The merger will
become effective as of the time specified in the merger approval to be issued
by the Comptroller of the Currency. We will not ask for this approval until all
conditions contained in the merger agreement have been satisfied or waived,
including (i) receipt of all regulatory approvals, and expiration of all
statutory waiting periods and (ii) the approval of the merger agreement by the
shareholders of Naples. While we do not know of any reason why we should not
obtain the necessary regulatory approvals in a timely manner, we cannot be
certain when or if we can obtain them.
RECOMMENDATION OF NAPLES BOARD OF DIRECTORS; OPINION OF KEEFE, BRUYETTE &
WOODS, INC. (PAGE 18, 23). The Naples board of directors believes that the
merger is fair to you and in your best interests, and recommends that you vote
FOR the proposal to approve the merger and the merger agreement. The Naples
board of directors believes that the merger will provide Naples with increased
capabilities in serving individuals, businesses and corporate clients in and
around Naples, and will therefore create more value for Naples shareholders. In
deciding to approve the merger, the Naples board of directors considered the
opinion of Keefe, Bruyette & Woods, Inc., that the proposed
2
<PAGE>
exchange ratio was fair from a financial point of view to Naples shareholders.
We have attached as Appendix D the written opinion of Keefe, Bruyette dated
October 26, 1998. You should read it carefully to understand the assumptions
made, matters considered and limitations of the review undertaken by Keefe,
Bruyette in providing its opinion.
VOTE REQUIRED (PAGE 16). In order to approve the merger, Naples shareholders
holding at least two-thirds (66 2/3%) of the outstanding shares of Naples
common stock must vote for the merger agreement. The directors and executive
officers of Naples beneficially owned, as of November 2, 1998, a total of
277,000 shares (27.7%) of Naples common stock. Each member of the board of
directors of Naples and certain officers of Naples have agreed, subject to
certain conditions, to vote their shares of Naples common stock in favor of the
merger.
EXCHANGE OF CERTIFICATES (PAGE 27). Holders of Naples stock certificates will
need to exchange them for new certificates. Shortly after we complete the
merger, Alabama National will send Naples shareholders detailed instructions on
how to exchange their shares. Please do not send us any stock certificates
until you receive these instructions.
CONDITIONS TO COMPLETION OF THE MERGER (PAGE 28). The completion of the merger
depends on meeting a number of conditions, including the following: (i) Naples
shareholders must approve the merger agreement, (ii) we must receive all
required regulatory approvals and any waiting periods required by law must have
passed, (iii) we must receive consents of third parties necessary to the
consummation of the merger, (iv) we must receive certain opinions of counsel,
(v) we must receive a fairness opinion from Keefe, Bruyette and (vi) Alabama
National must receive a letter from PricewaterhouseCoopers LLP concurring with
the conclusions of Alabama National's and Naples' management that no conditions
exist with respect to each company which would preclude accounting for the
merger as a "pooling of interests."
FEDERAL INCOME TAX CONSEQUENCES (PAGE 34). We expect that Naples, Alabama
National and Citizens & Peoples and their respective shareholders will not
recognize any gain or loss for U.S. Federal income tax purposes as a result of
the merger, except in connection with any cash that Naples shareholders receive
instead of fractional shares or as a result of exercising their dissenter's
rights. Naples and Alabama National have received an opinion of
PricewaterhouseCoopers LLC that this will be the case. This opinion is filed as
an exhibit to the Registration Statement of which this proxy statement-
prospectus forms a part. This opinion will not bind the Internal Revenue
Service, which could take a different view.
This tax treatment may not apply to all Naples shareholders, and will not apply
to any Naples shareholder who exercises dissenters' rights under the National
Bank Act. Determining the actual tax consequence of the merger to you as an
individual taxpayer can be complicated. The tax treatment will depend on your
specific situation and many variables not within our control. You should
consult your own tax advisor for a full understanding of this merger's federal
and state tax consequences.
MANAGEMENT AND OPERATIONS AFTER THE MERGER (PAGE 33). Following the merger, the
Citizens & Peoples board of directors will consist of the six incumbent
directors of Citizens & Peoples. Robert
3
<PAGE>
Guididas, the President and Chief Executive Officer of Naples, will serve as
President of the proposed newly formed bank subsidiary of Alabama National in
Naples, Florida and Patrick J. Philbin will serve as Executive Vice President.
All current Alabama National and Citizens & Peoples officers will continue to
serve in their current positions after the completion of the merger. It is
expected that certain of the current board members of Naples will become
members of the board of directors of the reorganized Naples bank.
INTERESTS OF CERTAIN PERSONS IN THE MERGER THAT ARE DIFFERENT FROM YOURS (PAGE
34). Certain directors and officers of Alabama National and Naples have
interests in the merger agreement that are different from your interests.
Certain directors and officers of Alabama National and Naples have been
selected or will be selected to serve as directors and officers of Alabama
National, Citizens & Peoples and/or the reorganized new Naples bank after the
merger. In addition, certain Naples' officers will enter into employment
agreements with a subsidiary of Alabama National upon completion of the merger.
A further condition of closing that at least four current board members of
Naples enter into noncompete agreements with Alabama National upon completion
of the merger. Under these noncompete agreements, about $50,000 will be paid to
each director signing such agreements.
ACCOUNTING TREATMENT (PAGE 36). We expect the merger to qualify as a "pooling
of interests," which means that, for accounting and financial reporting
purposes, we will treat Naples and Citizens & Peoples as if they had always
been one bank. Either of Naples or Alabama National has the right not to
complete the merger if it does not receive a letter from Alabama National's
independent accountants concurring with the conclusions of Alabama National's
and Naples' management that no conditions exist with respect to each company
which would preclude accounting for the merger as a pooling of interests.
MARKET PRICES. The following table sets forth (i) the market value of Alabama
National common stock, (ii) the market value of Naples common stock and (iii)
the market value of Naples common stock on an equivalent per share basis
determined as if the completion of the merger occurred on (A) September 18,
1998, the business day immediately preceding the announcement of the execution
of the merger agreement and (B) , 1998, the last day for which such
information could be calculated prior to the mailing of this proxy statement-
prospectus:
<TABLE>
<CAPTION>
ALABAMA NATIONAL NAPLES EQUIVALENT PRICE
COMMON STOCK(1) COMMON STOCK(2) PER SHARE OF NAPLES(3)
---------------- --------------- ----------------------
<S> <C> <C> <C>
September 18, 1998...... $27.00 N/A $14.38
, 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 Naples common stock
on which an historical market value could be based.
(3) Determined on an equivalent price per share basis by multiplying the
Alabama National market value on each particular date by the exchange ratio
of 0.53271.
4
<PAGE>
RESALES OF ALABAMA NATIONAL STOCK (PAGE 36). The shares of Alabama National
common stock issued to Naples shareholders in the merger will be freely
transferable under federal securities law, except for shares issued to any
shareholder who may be deemed an "affiliate" of Naples for purposes of Rule 145
under the Securities Act (generally including directors, executive officers and
beneficial owners of 10% of any class of capital stock). Affiliates will be
subject to certain restrictions on resales of newly acquired Alabama National
shares.
WAIVER AND AMENDMENT; TERMINATION; TERMINATION FEE (PAGE 33). Either Alabama
National or Naples may waive or extend the time for performing the others'
obligations under the merger agreement. In addition, the Boards of Directors of
each of Alabama National and Naples may agree to amend the merger agreement.
The merger agreement may be terminated at any time prior to completion of the
merger by the agreement of Naples and Alabama National.
Either company can also terminate the merger agreement under the following
circumstances:
(i) if any governmental body whose approval is necessary to complete the
merger makes a final decision not to approve the merger;
(ii) if we do not complete the merger by June 30, 1999;
(iii) if Naples shareholders do not approve the merger agreement;
(iv) if Naples or Alabama National, as the case may be, materially violates
any of its representations, warranties or obligations under the merger
agreement; or
(v) if there is a material adverse change to the business of either Naples
or Alabama National.
Generally, the entity seeking to terminate the merger agreement may not itself
be in violation of the merger agreement.
In addition, Alabama National can terminate the merger agreement if greater
than 5% of the outstanding Naples shares have asserted dissenters' rights under
the National Bank Act.
Naples can terminate the merger agreement under certain circumstances if it
chooses to enter into a transaction that it considers superior to the merger
with Citizens & Peoples. If Naples terminates the merger agreement to enter
into such a superior transaction, it has agreed to pay Alabama National a
termination fee of $750,000.
DIFFERENCES IN YOUR RIGHTS AS A SHAREHOLDER (PAGE 47). As a Naples shareholder,
your rights are currently governed by Naples' Articles of Association and
Bylaws and by the National Bank Act. Upon completion of the merger, you will
automatically become an Alabama National shareholder, and your rights as an
Alabama National shareholder will be determined by Alabama National's
Certificate of Incorporation and Bylaws and by the Delaware General Corporation
Law. The rights of Alabama National's shareholders differ from the rights of
Naples shareholders in certain important respects.
DISSENTERS' RIGHTS (PAGE 18). As a Naples shareholder, you have the right to
dissent from the merger and to receive cash (rather than Alabama National
common stock) in respect of the "fair value" of your shares of Naples common
stock. To do this, you must follow certain procedures
5
<PAGE>
required by the National Bank Act, including filing notices with us and VOTING
AGAINST the merger. The procedures to be followed by dissenting shareholders
are summarized under "GENERAL INFORMATION-DISSENTERS' RIGHTS" at page 18. A
copy of the National Bank Act's statutory provisions regarding dissenters'
rights is set forth in Appendix B to this proxy statement-prospectus. FAILURE
TO FOLLOW PRECISELY SUCH PROVISIONS AS ARE APPLICABLE MAY RESULT IN LOSS OF
YOUR DISSENTERS' RIGHTS.
If a significant number of shares of Naples common stock are held by
shareholders who dissent and elect to receive cash rather than Alabama National
Stock, the merger might not qualify for pooling-of-interests accounting
treatment. Such accounting treatment is a condition to Alabama National's
obligation to complete the merger. In addition, the merger agreement may be
terminated by Alabama National if the holders of more than 5% of the
outstanding shares of Naples common stock invoke their dissenters' rights.
Further, dissent by holders of a significant number of shares of Naples common
stock could cause the merger not to qualify as a tax-free reorganization for
Federal income tax purposes.
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA
The following tables present for Alabama National and Naples, on an historical
basis, selected financial data and ratios. This information is based on the
consolidated financial statements of Alabama National that it has presented in
its filings with the Securities and Exchange Commission, and financial
statements of Naples, included herein as Appendix C, and should be read in
conjunction with those financial statements and their accompanying notes.
6
<PAGE>
ALABAMA NATIONAL SELECTED CONSOLIDATED FINANCIAL DATA (HISTORICAL)
(AMOUNTS IN THOUSANDS, EXCEPT RATIOS AND PER SHARE DATA)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
JUNE 30, YEAR ENDED DECEMBER 31,
---------------------- ---------------------------------------------------------
1998(1) 1997(1)(8) 1997(1)(8) 1996(1)(8) 1995(1)(8) 1994(1)(8) 1993(1)(8)
---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Interest income......... $ 50,170 $ 45,786 $ 90,388 $ 83,180 $ 53,067 $ 40,970 $ 34,515
Interest expense........ 25,117 21,232 42,840 38,246 26,555 17,243 13,990
---------- ---------- ---------- ---------- ---------- -------- --------
Net interest income..... 25,053 24,554 47,548 44,934 26,512 23,727 20,525
Provision for loan
losses (benefit of
recoveries)............ 523 1,749 2,988 885 1,016 1,596 (50)
---------- ---------- ---------- ---------- ---------- -------- --------
Net interest income
after provision for
loan losses (benefit of
recoveries)............ 24,530 22,805 44,560 44,049 25,496 22,131 20,575
Net securities gains
(losses)............... 173 12 (8) (84) 26 (52) 222
Noninterest income...... 13,380 9,029 18,047 17,510 9,160 5,820 6,776
Noninterest expense..... 26,310 22,512 45,461 44,053 26,849 19,720 20,298
---------- ---------- ---------- ---------- ---------- -------- --------
Income before income
taxes.................. 11,773 9,334 17,138 17,422 7,833 8,179 7,275
Provision for income
taxes.................. 3,644 2,955 5,458 5,281 901 736 838
---------- ---------- ---------- ---------- ---------- -------- --------
Income before minority
interest in earnings of
consolidated
subsidiary............. 8,129 6,379 11,680 12,141 6,932 7,443 6,437
Minority interest in
earnings of
consolidated
subsidiary............. 12 6 12 14 650 750 236
---------- ---------- ---------- ---------- ---------- -------- --------
Net income.............. $ 8,117 $ 6,373 $ 11,668 $ 12,127 $ 6,282 $ 6,693 $ 6,201
========== ========== ========== ========== ========== ======== ========
BALANCE SHEET DATA:
Total assets............ $1,372,579 $1,207,226 $1,274,166 $1,110,729 $1,027,099 $607,638 $545,348
Earning assets.......... 1,192,551 1,100,552 1,109,202 1,013,789 929,677 560,900 506,676
Securities.............. 232,131 207,202 214,012 182,009 199,830 128,346 128,899
Loans................... 903,335 833,555 842,790 785,282 680,172 422,307 351,990
Allowance for loan
losses................. 14,116 12,755 12,829 11,011 10,421 6,506 7,307
Deposits................ 1,078,673 978,094 928,970 858,103 841,899 506,256 457,644
Short-term debt......... 12,900 30,000 27,750 42,105 21,280 12,717 7,350
Long-term debt.......... 24,572 9,613 14,587 12,939 1,089 2,132 1,376
Stockholders' equity.... 109,269 98,804 97,933 88,803 78,144 43,520 35,496
Weighted Average Shares
Outstanding--Diluted
(2).................... 9,470 9,442 8,884 8,756 4,955 4,464 4,316
PER COMMON SHARE DATA:
Net income--diluted
(3).................... $ 0.86 $ 0.67 $ 1.31 $ 1.38 $ 1.10 $ 1.34 $ 1.27
Book value (period end)
(4).................... 11.86 10.82 11.32 10.38 9.16 7.05 5.78
Tangible book value
(period end) (4)....... 10.94 9.97 10.32 9.48 8.27 6.55 5.21
Dividends declared...... 0.30 0.23 0.46 0.28 -- -- --
PERFORMANCE RATIOS:
Return on average
assets................. 1.19% 1.10% 1.01% 1.17% 0.95% 1.18% 1.22%
Return on average
equity................. 15.18 13.25 12.42 14.48 13.58 17.89 18.54
Net interest margin
(5).................... 4.17 4.60 4.53 4.70 4.29 4.49 4.34
Net interest margin
(taxable equivalent)
(5).................... 4.25 4.70 4.64 4.79 4.39 4.64 4.48
ASSET QUALITY RATIOS:
Allowance for loan
losses to period end
loans.................. 1.56% 1.53% 1.52% 1.40% 1.53% 1.54% 2.08%
Allowance for loan
losses to period end
nonperforming loans
(6).................... 327.75 268.24 245.48 356.92 320.55 354.36 240.28
Net charge-offs
(recoveries) to average
loans.................. (0.07) 0.10 0.15 0.04 0.05 0.68 (0.11)
Nonperforming assets to
period end loans and
foreclosed property
(6).................... 0.63 0.71 0.79 0.46 0.57 0.54 1.18
CAPITAL AND LIQUIDITY
RATIOS:
Average equity to
average assets......... 7.85% 8.27% 8.10% 8.06% 6.98% 6.59% 6.58%
Leverage (4.00% required
minimum) (7)........... 7.49 7.79 7.58 8.13 10.59 8.25 6.78
Risk-based capital
Tier 1 (4.00% required
minimum) (7).......... 10.02 10.39 9.38 10.28 10.51 11.17 9.99
Total (8.00% required
minimum) (7).......... 11.26 11.64 10.63 11.38 11.59 12.30 11.14
Average loans to average
deposits............... 87.48 88.28 89.24 87.06 82.36 81.35 75.98
</TABLE>
7
<PAGE>
- --------
(1) On November 30, 1997, First American Bancorp ("FAB") merged with and into
Alabama National ("the FAB Merger"). Pursuant to the terms of the FAB
Merger, each share of FAB common stock was converted into 0.7199 shares of
Alabama National's 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 Alabama National, with each
share of common stock of FIRSTBANC being converted into 7.12917 shares of
Alabama National 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 Alabama
National ("the NCC Merger"). Pursuant to the terms of the NCC Merger, each
share of NCC common stock was converted into 348.14 shares of Alabama
National common stock and each share of CBS common stock was converted into
7.0435 shares of Alabama National common stock for a total of 3,106,981
shares (or 50.1%) of Alabama National common stock. The NCC Merger was
accounted for as a "reverse acquisition," whereby NCC is deemed to have
acquired Alabama National for financial reporting purposes. However,
Alabama National 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 Alabama National Selected Consolidated
Financial Data is that of NCC for years prior to 1996. The balance sheet
information included in the Alabama National Selected Consolidated
Financial Data is that of NCC for years prior to 1995, as adjusted for
subsequent poolings of interest. The Alabama National Selected Consolidated
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 share and common equivalent shares outstanding
are those of NCC, CBS, FAB, and FIRSTBANC converted into Alabama National
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 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.
(8) Data presented herein for years ended December 31, 1997, 1996, 1995, 1994
and 1993 does not include Public Bank Corporation, which was merged into
Alabama National on May 29, 1998 and Community Financial Corporation, which
was merged into Alabama National on October 2, 1998. See "CERTAIN
INFORMATION CONCERNING ALABAMA NATIONAL-RECENT DEVELOPMENTS" at page 53 for
more information regarding Community Financial Corporation.
8
<PAGE>
NAPLES SELECTED CONSOLIDATED FINANCIAL DATA (HISTORICAL)
(AMOUNTS IN THOUSANDS, EXCEPT RATIOS AND PER SHARE DATA)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED
JUNE 30, DECEMBER 31,
---------------- -----------------
1998 1997 1997 1996 (3)
------- ------- ------- --------
<S> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Interest income.......................... $ 2,563 $ 1,020 $ 2,758 $ 372
Interest expense......................... 1,278 448 1,262 149
------- ------- ------- -------
Net interest income...................... 1,285 572 1,496 223
Provision for loan losses................ 78 138 223 90
------- ------- ------- -------
Net interest income after provision for
loan losses............................. 1,207 434 1,273 133
Noninterest income....................... 94 33 107 4
Noninterest expense...................... 844 649 1,316 688
------- ------- ------- -------
Income (loss) before income taxes........ 457 (182) 64 (551)
Provision for (benefit of) income taxes.. 170 (68) 24 (205)
------- ------- ------- -------
Net income (loss)........................ $ 287 $ (114) $ 40 $ (346)
======= ======= ======= =======
BALANCE SHEET DATA:
Total assets............................. $78,881 $39,511 $71,790 $19,634
Earning assets........................... 73,802 34,961 67,200 16,458
Securities............................... 40,426 17,233 16,209 8,679
Loans.................................... 32,228 16,601 27,701 6,049
Allowance for loan losses................ 391 228 313 90
Deposits................................. 70,417 34,881 64,601 14,615
Long-term debt........................... 2,000 -- 2,000 --
Stockholders' equity..................... 5,009 4,547 4,747 4,655
Weighted Average Shares Outstanding--
Basic................................... 1,000 1,000 1,000 348
PER COMMON SHARE DATA:
Net income (loss)--basic................. $ 0.29 $ (0.11) $ 0.04 $ (0.99)
Book value (period end).................. 5.01 4.55 4.75 4.66
Tangible book value (period end)............ 4.96 4.48 4.69 4.58
Dividends declared....................... -- -- -- --
PERFORMANCE RATIOS:
Return on average assets................. 0.75% (0.72)% 0.10% (5.82)%
Return on average equity................. 11.77 (5.03) 0.87 (20.77)
Net interest margin(1)................... 3.63 4.08 4.04 4.24
ASSET QUALITY RATIOS:
Allowance for loan losses to period end
loans................................... 1.21% 1.37% 1.13% 1.49%
Allowance for loan losses to period end
nonperforming loans(2).................. 782.00 -- 626.00 --
Net charge-offs (recoveries) to average
loans................................... -- -- -- --
Nonperforming assets to period end loans
and foreclosed property(2).............. 0.16 -- 0.18 --
CAPITAL AND LIQUIDITY RATIOS:
Average equity to average assets......... 6.41% 14.28% 11.22% 28.01%
Leverage (4.00% required minimum)........ 6.52 14.11 8.06 28.40
Risk-based capital
Tier 1 (4.00% required minimum)......... 11.64 19.77 15.40 51.96
Total (8.00% required minimum).......... 12.56 20.78 16.45 52.99
Average loans to average deposits........ 43.79 41.56 48.37 20.17
</TABLE>
- --------
(1) Net interest income divided by average earning assets.
(2) Nonperforming loans and nonperforming assets include loans past due 90 days
or more that are still accruing interest.
(3) Naples was incorporated and began its organizational phase in October,
1995. The December 31, 1996 financial statements include the organizational
phase which extended through August 26, 1996, the date that banking
operations began.
9
<PAGE>
PRO FORMA SELECTED CONSOLIDATED FINANCIAL DATA
The following table sets forth financial results of Naples and Alabama National
as if the companies had been combined for the periods shown ("pro forma
results"). You should not assume that Naples and Alabama National would have
achieved the pro forma results if they had actually been combined during the
periods shown. For additional pro forma information, you should read "Pro Forma
Information" beginning on page 37.
10
<PAGE>
PRO FORMA SELECTED CONSOLIDATED FINANCIAL DATA
(AMOUNTS IN THOUSANDS, EXCEPT RATIOS AND PER SHARE DATA)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
JUNE 30, YEAR ENDED DECEMBER 31,
---------------------- ------------------------------------------------------
1998 1997 1997 1996 1995 1994 1993
---------- ---------- ---------- ---------- ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Interest income......... $ 52,733 $ 46,806 $ 93,146 $ 83,552 $ 53,067 $ 40,970 $ 34,515
Interest expense........ 26,395 21,680 44,102 38,395 26,555 17,243 13,990
---------- ---------- ---------- ---------- ---------- -------- --------
Net interest income..... 26,338 25,126 49,044 45,157 26,512 23,727 20,525
Provision for loan
losses (benefit of
recoveries)............ 601 1,887 3,211 975 1,016 1,596 (50)
---------- ---------- ---------- ---------- ---------- -------- --------
Net interest income
after provision for
loan losses (benefit of
recoveries)............ 25,737 23,239 45,833 44,182 25,496 22,131 20,575
Net securities gains
(losses)............... 173 12 (8) (84) 26 (52) 222
Noninterest income...... 13,474 9,062 18,154 17,514 9,160 5,820 6,776
Noninterest expense
(7).................... 27,170 23,177 46,809 44,773 26,849 19,720 20,298
---------- ---------- ---------- ---------- ---------- -------- --------
Income before income
taxes.................. 12,214 9,136 17,170 16,839 7,833 8,179 7,275
Provision for income
taxes.................. 3,808 2,881 5,470 5,064 901 736 838
---------- ---------- ---------- ---------- ---------- -------- --------
Income before minority
interest in earnings of
consolidated
subsidiary............. 8,406 6,255 11,700 11,775 6,932 7,443 6,437
Minority interest in
earnings of
consolidated
subsidiary............. 12 6 12 14 650 750 236
---------- ---------- ---------- ---------- ---------- -------- --------
Net income.............. $ 8,394 $ 6,249 $ 11,688 $ 11,761 $ 6,282 $ 6,693 $ 6,201
========== ========== ========== ========== ========== ======== ========
BALANCE SHEET DATA:
Total assets............ $1,451,460 $1,246,737 $1,345,956 $1,130,363 $1,027,099 $607,638 $545,348
Earning assets.......... 1,266,353 1,135,513 1,176,402 1,030,247 929,677 560,900 506,676
Securities.............. 272,557 224,435 230,221 190,688 199,830 128,346 128,899
Loans................... 935,563 850,156 870,491 791,331 680,172 422,307 351,990
Allowance for loan
losses................. 14,507 12,983 13,142 11,101 10,421 6,506 7,307
Deposits................ 1,149,090 1,012,975 993,571 872,718 841,899 506,256 457,644
Short-term debt......... 12,900 30,000 27,750 42,105 21,280 12,717 7,350
Long-term debt.......... 26,572 9,613 16,587 12,939 1,089 2,132 1,376
Stockholders' equity
(7).................... 114,228 103,321 102,640 93,438 78,144 43,520 35,496
Weighted Average Shares
Outstanding--Diluted
(1).................... 10,017 9,981 9,426 8,943 4,955 4,464 4,316
PER COMMON SHARE DATA:
Net income--diluted
(2).................... $ 0.84 $ 0.63 $ 1.24 $ 1.32 $ 1.10 1.34 $ 1.27
Book value (period end)
(3).................... 11.72 10.68 11.18 10.77 9.16 7.05 5.78
Tangible book value
(period end) (3)....... 10.85 9.93 10.23 9.87 8.27 6.55 5.21
Dividends declared...... 0.30 0.23 0.46 0.28 -- -- --
PERFORMANCE RATIOS:
Return on average
assets................. 1.17% 1.05% 0.98% 1.13% 0.95% 1.18% 1.22%
Return on average
equity................. 15.04 12.43 11.89 13.80 13.58 17.89 18.54
Net interest margin
(4).................... 4.14 4.59 4.52 4.70 4.29 4.49 4.34
Net interest margin
(taxable equivalent)
(4).................... 4.21 4.69 4.62 4.80 4.39 4.64 4.48
ASSET QUALITY RATIOS:
Allowance for loan
losses to period end
loans.................. 1.55% 1.53% 1.51% 1.40% 1.53% 1.54% 2.08%
Allowance for loan
losses to period end
nonperforming loans
(5).................... 332.96 273.04 249.09 359.84 320.55 354.36 240.28
Net charge-offs
(recoveries) to average
loans.................. (0.03) 0.05 0.14 0.04 0.05 0.68 (0.11)
Nonperforming assets to
period end loans and
foreclosed property
(5).................... 0.61 0.70 0.77 0.46 0.58 0.54 1.18
CAPITAL AND LIQUIDITY
RATIOS:
Average equity to
average assets......... 7.77% 8.43% 8.21% 8.18% 6.98% 6.59% 6.58%
Leverage (4.00% required
minimum) (6)........... 7.45 7.95 7.71 8.54 10.59 8.25 6.78
Risk-based capital
Tier 1 (4.00% required
minimum) (6)........... 10.09 10.63 9.50 10.71 10.50 11.16 9.99
Total (8.00% required
minimum) (6)........... 11.33 11.87 10.74 11.81 11.60 12.32 11.91
Average loans to average
deposits............... 84.73 86.97 87.71 86.80 81.92 81.35 75.98
</TABLE>
11
<PAGE>
- --------
(1) The weighted average common shares and common equivalent shares outstanding
are of Alabama National plus Naples converted at the exchange ratio of
0.53271 shares of Alabama National common stock for each share of Naples
common stock. For the purpose of these pro forma selected consolidated
financial data, the shares of Alabama National common stock and common
equivalent shares to be issued as a result of the consummation of the
merger is calculated by multiplying the exchange ratio by the number of
Naples common shares and common equivalent shares actually outstanding.
(2) Net income per common share-diluted is calculated based upon net income as
adjusted for minority interests in earnings of consolidated subsidiaries
and cash dividends on preferred stock.
(3) Book value and tangible book value are calculated on the total shares of
Alabama National common stock plus shares of Naples common stock converted
at the exchange ratio of 0.53271 shares of Alabama National common stock
for each share of Naples common stock. For the purpose of this pro forma
selected consolidated financial data, it is assumed that 532,710 shares of
Alabama National common stock will be issued in consummating the merger.
This figure is calculated by multiplying the exchange ratio by the number
of Naples common shares actually outstanding.
(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.
(7) Includes amounts necessary to conform the recognition of compensation
expense, net of income taxes, related to stock options to that of Alabama
National.
12
<PAGE>
COMPARATIVE PER SHARE DATA
The following table presents selected comparative per share data for Alabama
National common stock and Naples common stock on a historical basis, for
Alabama National common stock on a pro forma basis reflecting consummation of
the merger and for the Naples common stock on an equivalent pro forma basis
reflecting consummation of the merger. Such information has been prepared
giving effect to the merger on a pooling of interests basis. 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 Alabama National, incorporated herein by reference, the
consolidated financial statements of Naples included herein as Appendix C, and
the Pro Forma Financial Information appearing on page 37 of this proxy
statement-prospectus.
<TABLE>
<CAPTION>
SIX MONTHS YEAR ENDED DECEMBER
ENDED 31,
JUNE 30, ----------------------
1998 1997 1996 1995(2)
---------- ------ ------ -------
<S> <C> <C> <C> <C>
ALABAMA NATIONAL COMMON STOCK
Net income per common share--diluted:
Historical................................. $ 0.86 $ 1.31 $ 1.38 $1.10
Pro forma combined......................... 0.84 1.24 1.32 1.10
Dividends paid per common share:
Historical................................. 0.30 0.46 0.28 --
Book value per common share (end of period)
Historical................................. 11.86 11.32 10.38 9.16
Pro forma combined......................... 11.72 11.18 10.77 9.16
NAPLES COMMON STOCK
Net income (loss) per common share--basic:
Historical................................. $ 0.29 $ 0.04 $(0.99) $ --
Pro forma equivalent (1)................... 0.45 0.66 0.70 --
Dividends paid per common share:
Historical................................. -- -- -- --
Pro forma equivalent (1)................... 0.16 0.25 0.15 --
Book value per common share (end of period)
Historical................................. 5.01 4.75 4.66 --
Pro forma equivalent (1)................... 6.24 5.96 5.74 --
</TABLE>
- --------
(1) Naples equivalent pro forma amounts are computed by multiplying the Alabama
National pro forma amount by the exchange ratio of 0.53271 shares of
Alabama National common stock for each share of Naples common stock. See
"THE MERGER-TERMS OF THE MERGER."
(2) Banking operations for Naples did not commence until 1996.
13
<PAGE>
RISK FACTORS
In addition to the other information included in this proxy statement-
prospectus shareholders of Naples are urged to consider carefully the following
factors in determining whether to approve the merger agreement:
RESTRICTIONS ON DIVIDENDS
The principal business operations of Alabama National are conducted through its
subsidiary banks. Cash available to pay dividends to shareholders of Alabama
National is derived primarily, if not entirely, from dividends paid by the
banks. After the merger, the ability of the banks to pay dividends to Alabama
National as well as Alabama National'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 Alabama National
may impose financial covenants that may be more restrictive than regulatory
requirements with respect to the payment of dividends by Alabama National.
There can be no assurance of whether or when Alabama National may pay dividends
after the merger.
FIXED MERGER CONSIDERATION DESPITE POTENTIAL CHANGE IN RELATIVE STOCK PRICES
Upon completion of the merger, each share of Naples common stock will be
converted into the right to receive 0.53271 shares of Alabama National common
stock. This exchange ratio will not be adjusted in the event of any increase or
decrease in the price of Alabama National common stock. The price of Alabama
National common stock when the merger takes place may vary from its closing
price at the date of this proxy statement-prospectus and at the date of the
special meeting of shareholders of Naples. For example, during the twelve month
period ending on October 31, 1998 (the most recent practicable date prior to
the printing of this proxy statement-prospectus), the closing price of Alabama
National common stock varied from a low of $ to a high of $ and ended
that period at $ , (see "Market Prices" on page 4 for further information).
Such variations may be the result of changes in the business, operations or
prospects of Alabama National, Naples or the merged companies, regulatory
considerations, general market and economic conditions and other factors.
Holders of common stock of Naples are urged to obtain current market quotations
for Alabama National common stock.
SUPERVISION AND REGULATION
The banking industry is heavily regulated. Subsequent to the merger, Alabama
National and its subsidiary banks will be subject, in certain respects, to
regulation by the Board of Governors of the Federal Reserve System (the
"Federal Reserve"), the Federal Depository Insurance Corporation (the "FDIC"),
the Office of the Comptroller of the Currency (the "OCC"), the Alabama State
Banking Department, the Florida Department of Banking and Finance and the
Georgia State Banking Department. The success of Alabama National 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. The ultimate effect of recent and
proposed changes to the regulation of the financial institution industry cannot
be predicted. The effects of the implementation of new legislation applicable
to Alabama
14
<PAGE>
National and its subsidiary banks, including the Community Development and
Regulatory Improvement Act and the Riegle-Neal Interstate Banking and Branching
Efficiency 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
Alabama National and Naples may be modified at any time, and there is no
assurance that such modification(s) will not adversely affect the business of
Alabama National and its subsidiary banks.
MONETARY POLICIES
The results of operations of Alabama National and Naples are affected by credit
policies of monetary authorities, particularly the Federal Reserve. The
instruments of monetary policy employed by the Federal Reserve include open
market operations in U.S. government securities, changes in the discount rate
on bank borrowings and changes in reserve requirements against bank deposits.
In view of changing conditions in the national economy and in the money
markets, no prediction can be made as to possible future changes in interest
rates, deposit levels, loan demand or the business and earnings of the Banks
and Naples.
ALLOWANCE FOR LOAN LOSSES
Management of each of Alabama National's subsidiary banks and of Naples
maintains an allowance for loan losses based upon, among other things, (i)
historical experience, (ii) an evaluation of economic conditions and (iii)
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. Management then 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 Alabama National and Naples believes
that the allowance for loan losses at each of their companies 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 Alabama National and Naples. Material additions to the
allowance for loan losses of Alabama National and Naples would result in a
material decrease in Alabama National's net income, and possibly its capital,
and could result in its inability to pay dividends, among other adverse
consequences.
INTERESTS OF CERTAIN PERSONS IN THE TRANSACTION
Directors and officers of Alabama National and Naples (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 Alabama National and Naples are aware of this and
have considered the personal interests disclosed in this Proxy Statement-
Prospectus in their evaluation of the merger. Reference should be made to "THE
MERGER-BACKGROUND OF AND REASONS FOR THE MERGER" at page 20 and "THE MERGER-
INTERESTS OF CERTAIN PERSONS IN THE MERGER" at page 34 for a description of
such potential conflicts of interest.
15
<PAGE>
GENERAL INFORMATION
MEETING, RECORD DATES AND VOTES REQUIRED
A special meeting of Shareholders of Naples will be held at .m. local
time, on , 1998 (the "Special Meeting"), at the executive office of
Naples, Newgate Tower, 5150 Tamiami Trail North, Naples, Florida 34103. The
purpose of the meeting is to consider and vote upon a proposal to approve the
Agreement and Plan of Merger dated September 21, 1998 among Naples, Alabama
National and Citizens & Peoples (the "Merger Agreement"), which provides for,
among other things, the merger of Naples with and into Citizens & Peoples (the
"Merger"). Only holders of record of Naples common stock at the close of
business on November 2, 1998 (the "Record Date"), will be entitled to notice of
and to vote at the Special Meeting. As of the Record Date, there were 1,000,000
shares of Naples common stock issued, outstanding and entitled to be voted.
There were Naples shareholders of record on the Record Date. Each
share of Naples 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 Naples 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 Naples, pursuant to the National
Bank Act, will require the affirmative vote of the holders of at least two-
thirds (66 2/3%) of the outstanding shares of Naples common stock entitled to
be voted thereon. In order to vote for the Merger Agreement, Naples
shareholders must vote for their approval on the enclosed proxy or attend the
Special Meeting and vote for the Merger Agreement. As of the Record Date,
277,000 shares of Naples common stock, or 27.7% of the total shares of Naples
common stock outstanding, were beneficially owned and entitled to be voted by
directors and executive officers of Naples. Certain officers and directors of
Naples with the power to vote an aggregate of 277,000 shares of Naples common
stock (approximately 27.7% of the outstanding shares entitled to vote), have
entered into agreements with Alabama National whereby they have agreed to vote
in favor of the Merger.
Dissenters' rights may be demanded by Naples shareholders who do not vote in
favor of the Merger and who follow the specified procedures of the National
Bank Act. See "DISSENTERS' RIGHTS" below.
PROXIES AND OTHER MATTERS
The enclosed Naples proxies are solicited on behalf of the board of directors
of Naples for use in connection with the Special Meeting and any adjournment or
adjournments thereof. HOLDERS OF NAPLES COMMON STOCK ARE REQUESTED TO COMPLETE,
DATE AND SIGN THE ACCOMPANYING PROXY AND RETURN IT PROMPTLY TO NAPLES IN THE
ENCLOSED ENVELOPE. FAILURE TO RETURN A PROPERLY EXECUTED PROXY OR TO VOTE AT
THE NAPLES MEETING WILL HAVE THE SAME EFFECT AS A VOTE AGAINST APPROVAL OF THE
MERGER AGREEMENT. NAPLES SHAREHOLDERS SHOULD NOT FORWARD ANY STOCK CERTIFICATES
WITH THEIR PROXIES.
A Naples shareholder who has executed and delivered a proxy may revoke it at
any time before such proxy is voted (i) by giving a later written proxy, (ii)
by giving written revocation to the Secretary of Naples, provided such later
proxy or revocation is actually received by Naples before the vote of the
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shareholders, or (iii) 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.
Naples 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 Naples.
If a quorum is not obtained, or if fewer shares of Naples common stock are
voted in favor of approval of the Merger than the number required for approval,
it is expected that the Special Meeting will be postponed or adjourned for the
purpose of allowing additional time for obtaining additional proxies or votes,
and, at any subsequent reconvening of such Special Meeting, all proxies will be
voted in the same manner as such proxies would have been voted at the original
convening of the meeting (except for any proxies which have theretofore
effectively been revoked), notwithstanding that they might have been
effectively voted on the same or any other matter at a previous meeting.
The management of Naples 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 the Naples'
management or, if there is no such recommendation, in the discretion of the
individuals named as proxies therein.
DISSENTERS' RIGHTS
Under the National Bank Act, shareholders of a national banking association
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 Naples common
stock who follow the procedures specified by Sections 215a(b), (c) and (d) of
the National Bank Act, 12 U.S.C. (S) 215a(b), (c) and (d) (the "National Bank
Dissent Provisions"), will be entitled to determination and payment in cash of
the "fair value" of their stock as of the effective date of the Merger.
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 NAPLES COMMON STOCK WILL
RESULT IN THE WAIVER OF THE SHAREHOLDER'S RIGHT TO DEMAND PAYMENT FOR HIS OR
HER SHARES PURSUANT TO THE NATIONAL BANK DISSENT PROVISIONS.
The following summary of the provisions of Sections 215a(b), (c) and (d) of the
National Bank Act 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-prospectus, and is qualified in its entirety by reference thereto.
Also included in Appendix B is a copy of Banking Circular No. 259 issued by the
Comptroller of the Currency on March 5, 1992.
Under the National Bank Dissent Provisions, any shareholder of Naples who votes
against the Merger, or who has given notice in writing to Naples or Alabama
National at or prior to the Special
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Meeting that he or she dissents from the plan of merger set forth in the Merger
Agreement, shall be entitled to receive in cash the value of the shares of
Naples common stock held by such stockholder, if and when the Merger is
consummated, upon written request made to Alabama National at any time before
thirty days after the date of consummation of the Merger, which notice is
accompanied by the surrender of such shareholder's stock certificates
representing the shares of Naples common stock with respect to which such
shareholder has elected to exercise his or her right to dissent. The value of
such Naples common stock shall be determined:
(i) as of the effective date of the Merger;
(ii) by a committee of three persons, one to be selected by the vote of the
holders of the majority of Naples common stock, the owners of which are
entitled to payment in cash, one selected by the directors of Citizens &
Peoples, and the third selected by the two so selected (the "Naples
Dissenters' Committee").
Subject to the provisions discussed below, the valuation agreed upon by any two
of the three appraisers comprising the Naples Dissenters' Committee shall
govern.
If the value fixed by the Naples Dissenters' committee is not satisfactory to a
dissenting shareholder who has requested payment as described above, such
shareholder may, within five days after being notified of the appraised value,
appeal to the Comptroller of the Currency, who shall cause a reappraisal to be
made, which shall be final and binding as to the value of the shares of the
stockholder making such appeal. If, within 90 days from the date of
consummation of the Merger, for any reason, one or more of the appraisers is
not selected by the Naples Dissenters' Committee as set forth in the National
Bank Dissent Provisions, or the Naples Dissenters' Committee fails to determine
the value of such shares, the Comptroller of the Currency shall upon request of
any interested party, cause an appraisal of such dissenting shares of Naples
common stock to be made, which shall be final and binding on all parties. The
expenses of the Comptroller of the Currency in making the reappraisal or the
appraisal, as the case may be, shall be paid by Alabama National.
The shares of stock of Alabama National which would have been delivered to such
dissenting shareholders had they not requested payment shall be sold by Alabama
National at an advertised public auction. Alabama National shall have the right
to purchase any of such shares at such public auction, if it is the highest
bidder therefor. Alabama National may repurchase such shares for the purpose of
reselling such shares within 30 days thereafter to such person or persons and
at such price not less than par as its board of directors by resolution may
determine. If the shares are sold at public auction at a price greater than the
amount paid to the dissenting shareholders, the excess in such price shall be
paid to such dissenting shareholders.
The foregoing does not purport to be a complete statement of the provisions of
the National Bank Act relating to statutory dissenters' rights and is qualified
in its entirety by reference to the National Bank Dissent Provisions, which are
reproduced in full in Appendix B to this proxy statement- prospectus and which
are incorporated herein by reference.
RECOMMENDATION OF BOARD OF DIRECTORS
The board of directors of Naples recommends that the shareholders of Naples
vote FOR the proposal to approve the Merger Agreement. See "THE MERGER-
BACKGROUND OF AND REASONS FOR THE MERGER."
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THE MERGER
The following information concerning the Merger 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 Naples 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 date and time when the Merger becomes effective (the "Effective Time"),
Naples will merge with and into Citizens & Peoples, a wholly owned subsidiary
of Alabama National. In the Merger, each share of Naples common stock
outstanding immediately prior to the Effective Time, other than shares with
respect to which dissenters' rights shall have been perfected, will be
converted into and exchanged for the right to receive 0.53271 shares of Alabama
National common stock (the "Exchange Ratio"). If the Merger is consummated,
approximately 4.83% of the outstanding shares of Alabama National common stock
will be held by former Naples shareholders. In addition, options held to
purchase shares of Naples common stock will be converted into options to
purchase 0.53271 shares of Alabama National common stock for each share of
Naples common stock, pursuant to the terms of the Merger Agreement. See "THE
MERGER-EFFECT ON EMPLOYEE BENEFIT PLANS OF NAPLES."
No fractional shares of Alabama National common stock will be issued in respect
to Naples common stock, and cash will be paid by Alabama National 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
Alabama National common stock by the average of the high and low sales price of
one share of Alabama National common stock reported on the NASDAQ National
Market System on each of the ten trading days ending on the fifth business day
prior to the Effective Time. No holder of Naples common stock who would
otherwise have been entitled to a fractional share of Alabama National common
stock will be entitled to dividends, voting rights or any right as holder with
respect to such fractional shares.
Holders of Naples 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 National Bank Act. See "GENERAL INFORMATION-
DISSENTERS' RIGHTS."
EFFECTIVE TIME
A formal effective date merger request shall be made by the parties with the
Office of the Comptroller of the Currency (the "OCC"). This request shall be
made 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 Naples. The Effective
Time of the Merger will be as of the time specified in the Merger approval to
be issued by the OCC.
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POST-MERGER REORGANIZATION
It is the intention of Alabama National that, immediately after the Effective
Time, Citizens & Peoples will enter into a series of transactions involving the
assets and liabilities of Naples (the "Proposed Reorganization"). More
specifically, the assets and liabilities that were associated with Naples shall
be transferred from Citizens & Peoples to a newly formed national bank
subsidiary of Citizens & Peoples headquartered in Naples, Florida to be known
as Community Bank of Naples, National Association ("New Naples"). Alabama
National will then commit certain additional capital to New Naples and cause
Citizens & Peoples to dividend to Alabama National the stock held by Citizens &
Peoples in New Naples. New Naples will thereafter be operating as a wholly-
owned subsidiary of Alabama National. The Proposed Reorganization is subject to
certain regulatory approvals of each of the OCC, the FDIC and the Federal
Reserve. There can be no assurance that such regulatory approvals will be
obtained. However, the Proposed Reorganization is not a condition of closing of
the Merger.
BACKGROUND OF AND REASONS FOR THE MERGER
Alabama National management came in contact with Naples management through
Alabama National's investment department. John Holcomb, Alabama National's
Chairman and Chief Executive Officer, often travels with officers of Alabama
National's investment department as they visit banks in the Southeast. Mr.
Holcomb met with Robert Guididas, Naples' President and Chief Executive
Officer, on one such investment department trip on February 25, 1998. During
this meeting, the parties discussed not only investment strategies but also
operating strategies. From these discussions, it became apparent to both
parties that Naples fit well with Alabama National's community banking
strategy. Following this meeting, Mr. Holcomb and Mr. Guididas held multiple
telephone conversations in late February and early March, 1998, during which
they discussed the commonality of their operating strategies and the potential
benefits to both parties of a merger. Mr. Holcomb returned to Naples on March
13, 1998 for another meeting with Mr. Guididas, at which time they further
discussed the possibility of a merger. Both parties were in agreement that a
merger could be beneficial to their respective shareholders. On March 30, 1998,
Mr. Guididas visited Mr. Holcomb in Birmingham for additional conversations
about a merger and for preliminary discussions about exchange ratio ranges and
other merger terms.
On May 4, 1998, Mr. Holcomb, Mr. Guididas, and Donald W. Delson of Keefe,
Bruyette & Woods, Inc. ("Keefe, Bruyette") held a telephone conference in which
they discussed potential transaction terms. Mr. Holcomb returned to Naples on
May 27, 1998 for a meeting with Mr. Guididas and Mr. Delson. The parties
discussed the exchange ratio and other transaction terms. Subsequent to this
meeting, a tentative agreement was reached in early July, 1998 on an exchange
ratio at approximately 0.45514 shares of Alabama National common stock for each
share of Naples common stock.
After the parties had reached this tentative agreement as to the exchange
ratio, Alabama National management conducted a due diligence examination of
Naples on July 18, 1998 at Naples' offices. Mr. Guididas, along with Gerard
McHale, a Naples director, and two representatives of Keefe, Bruyette visited
Alabama National to conduct due diligence of Alabama National on July 20, 1998.
After compiling and analyzing the information obtained during the due diligence
period, both parties determined that they wished to pursue the transaction
further.
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The parties then began the negotiation of a definitive agreement for the merger
of Alabama National and Naples. The parties agreed upon the form of the
document in late July. The Naples board met on July 31, 1998 to discuss and
vote upon the merger. At that meeting, Naples' board of directors discussed the
terms of the proposed transaction with management. In addition, Keefe,
Bruyette, in its role as financial advisor to Naples, presented the Naples
board of directors with an opinion that the terms of the transaction were fair
to Naples shareholders, from a financial standpoint. After deliberation, the
Naples board of directors voted five to three to approve the merger. The three
dissenting board members, by voting against the transaction, also indicated
that they would not sign an agreement to vote their shares in favor of the
Merger, which agreements were a condition of Alabama National's offer. The
parties then temporarily ceased talks until early September, 1998, at which
time Mr. Holcomb held a telephone conference with Naples directors George
Wilson and Donald Holton. A meeting followed in Naples on September 14, 1998,
with Mr. Holcomb, William E. Matthews, Alabama National's Chief Financial
Officer, and Mr. Wilson. Mr. Holton participated in this meeting by telephone.
At this meeting, the parties tentatively agreed upon an exchange ratio of
0.53271. Naples' board of directors then held a meeting on September 21, 1998,
at which meeting it voted unanimously to approve the transaction. The Naples
board of directors further authorized its officers to execute the Merger
Agreement and to take all other action necessary to consummate the transaction.
Mr. Holcomb and Mr. Matthews returned to Naples on September 21, 1998, at which
time the Merger Agreement was executed by both parties.
At the regularly scheduled June 18, 1998 meeting of the Alabama National board
of directors, Mr. Holcomb and Mr. Matthews presented information on Naples and
the potential Naples merger to the Alabama National board of directors.
Information presented to the Alabama National board of directors related to
Naples included financial information, market share, banking practices and
banking personnel. After deliberation and careful consideration of information
presented to the Alabama National Board, the Alabama National board of
directors authorized its officers to move forward with the consummation of the
merger with Naples. Subsequently, after negotiations indicated that Alabama
National might be successful in reaching a merger agreement with Naples, the
Alabama National board of directors, by unanimous written consent as of July
21, 1998, formally approved the merger and authorized Alabama National's
officers to execute the Merger Agreement and to take all other action necessary
to consummate the transaction.
Alabama National's Reasons for the Merger. In approving the Merger Agreement
and the Merger, the Alabama National board of directors considered a number of
factors concerning the benefits of the Merger. Without assigning any relative
or specific weights to the factors, the Alabama National board of directors
considered the following material factors:
(a) the information presented to the directors by the management of Alabama
National concerning the business, operations, earnings, asset quality and
financial condition of Naples, including the composition of the earning
assets portfolio of Naples;
(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 Naples;
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(c) the nonfinancial terms of the Merger, including the treatment of the
Merger as a tax-free exchange of Naples common stock for Alabama National
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 Naples and the ability of the operations of Naples after the Effective
Time to contribute to the earnings of Alabama National;
(f) the attractiveness of the Naples franchise, the market position of
Naples in the markets in which it operates, and the compatibility of the
franchise of Naples in Naples, Florida with the operations of Alabama
National in its market areas; and
(g) the compatibility of the community banking orientation of the
operations of Naples to that of Alabama National and the subsidiary banks
of Alabama National (the "Banks").
Naples' Reasons for the Merger. In approving the Merger Agreement and the
Merger, the board of directors of Naples considered a number of factors and
criteria regarding the potential benefits of the Merger. Without assigning
relative or specific weights to those factors, the Naples board of directors
considered the following material factors:
(a) the financial terms of the Merger. In this regard, the Naples board of
directors considered, among other things, the opinion of Keefe, Bruyette as
to the fairness of the exchange ratio, from a financial point of view, to
the shareholders of Naples and the fact that Alabama National common stock
has a more liquid trading market than Naples common stock;
(b) a comparison of Naples as an independent entity with the Merger,
particularly as to shareholder value. The Naples board of directors
considered the benefits that could reasonably be expected to accrue to
Naples shareholders from the Merger;
(c) certain financial and other information concerning Alabama National.
Such information included, among other things, information with respect to
the business, operations, condition and future prospects of Alabama
National;
(d) the non-financial terms and structure of the Merger, in particular, the
fact that the Merger qualifies as a tax-free reorganization for Naples
shareholders;
(e) the likelihood of the Merger being approved by the appropriate
regulatory authorities without undue conditions or delay;
(f) the limited adverse impact, generally, of the Merger on the various
constituencies served by Naples, including its employees, customers and the
community;
(g) the compatibility of management and the business philosophies of Naples
and Alabama National; and
(h) the belief that a larger combined entity would be more likely to
continue independent banking operations in a banking environment of "big
bank" mergers and acquisitions.
THE NAPLES BOARD OF DIRECTORS RECOMMENDS THAT NAPLES SHAREHOLDERS VOTE FOR THE
APPROVAL OF THE MERGER AGREEMENT.
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OPINIONS OF KEEFE, BRUYETTE & WOODS, INC.
On September 16, 1998, the Naples board of directors held a meeting to evaluate
the proposed Merger. At that meeting, Keefe, Bruyette delivered to the Naples
Board an opinion (which opinion was subsequently confirmed by delivery of a
written opinion, dated September 21, 1998) to the effect that, as of the date
of such opinion and based upon and subject to certain matters stated therein,
the Exchange Ratio was fair, from a financial point of view, to the holders of
the Naples common stock. In connection with its opinion dated the date of this
proxy statement-prospectus, Keefe, Bruyette updated certain analyses performed
in connection with its opinion and reviewed the assumptions on which such
analyses were based and the factors considered in connection therewith.
Keefe, Bruyette has delivered to the Naples Board its updated written opinion
dated the date of this proxy statement-prospectus to the effect that as of such
date the Exchange Ratio is fair, from a financial point of view, to the holders
of Naples common stock. Keefe, Bruyette's opinion is addressed to the Naples
Board and does not constitute a recommendation as to how any stockholder of
Naples should vote with respect to the Merger Agreement.
THE FULL TEXT OF THE OPINION OF KEEFE, BRUYETTE, WHICH SETS FORTH A DESCRIPTION
OF THE PROCEDURES FOLLOWED, ASSUMPTIONS MADE, MATTERS CONSIDERED AND LIMITS ON
THE REVIEW UNDERTAKEN, IS ATTACHED TO THIS PROXY STATEMENT-PROSPECTUS AS
APPENDIX D AND IS INCORPORATED HEREIN BY REFERENCE. STOCKHOLDERS OF NAPLES ARE
URGED TO READ THE OPINION IN ITS ENTIRETY. THE FOLLOWING SUMMARY OF THE OPINION
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE FULL TEXT OF THE OPINION.
In rendering its opinion, Keefe, Bruyette (i) reviewed, among other things, the
Merger Agreement, Annual Reports to stockholders and Call Reports since
inception of Naples and Annual Reports on Form 10-K of Alabama National for the
four years ended December 31, 1997, certain interim reports to stockholders and
Quarterly Reports on Form 10-Q of Alabama National, and forecasts for Naples
prepared by management; (ii) held discussions with members of senior management
of Naples and Alabama National regarding past and current business operations,
regulatory relationships, financial condition and future prospects of the
respective companies; (iii) compared certain financial and stock market
information for Alabama National with similar information for certain other
companies the securities of which are publicly traded; (iv) reviewed the
financial terms of certain recent business combinations in the banking
industry; and (v) performed such other studies and analyses as it considered
appropriate.
In conducting its review and arriving at its opinion, Keefe, Bruyette relied
upon and assumed the accuracy and completeness of all of the financial and
other information provided to it or publicly available, and Keefe, Bruyette did
not attempt to verify such information independently. Keefe, Bruyette relied
upon the management of Naples as to the reasonableness and achievability of the
financial and operating forecasts and projections (and assumptions and bases
therefor) provided to Keefe, Bruyette and assumed that such forecasts and
projections reflected the best available estimates and judgments of such
management and that such forecasts and projections will be realized in the
amounts and in the time periods estimated by such management. Keefe, Bruyette
also assumed, without independent verification, that the aggregate allowances
for loan losses for Naples and Alabama National are adequate to cover such
losses. Keefe, Bruyette did not make or obtain any
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evaluations or appraisals of the property of Naples or Alabama National, nor
did Keefe, Bruyette examine any individual credit files.
The following is a summary of the material financial analyses employed by
Keefe, Bruyette in connection with providing its opinion.
(a) Financial Summary of the Alabama National Offer. Keefe, Bruyette calculated
multiples which were based on the assumed per share purchase price of $13.58
(derived by multiplying the Exchange Ratio of 0.53271 by $25.50, the last
reported sale price for the Alabama National common stock on September 15,
1998. Naples' June 30, 1998 stated and fully diluted tangible book value was
$4.68, and its 1998 and 1999 diluted earnings per share estimates were $0.56
and $0.91, respectively. Based on this data, the price to stated and fully
diluted tangible book value multiple was 2.90 times, and the price to the 1998
and 1999 earnings estimates per share was 24.3 and 14.9 times, respectively.
(b) Analysis of Selected Merger Transactions. Keefe, Bruyette reviewed certain
financial data related to a set of recent comparable acquisitions of bank
holding companies in the Florida region completed with common stock
consideration and transaction values less than $70 million.
Keefe, Bruyette calculated an average of the Florida comparable group's
multiple of price to the targets' trailing 12 months earnings as 22.2 times
compared to a multiple of 24.3 times 1998 estimated earnings for the Merger; an
average premium to the targets' stated book value of 278% compared to a premium
of 290% associated with the Merger; an average premium to the targets' tangible
book value of 282% compared to a premium of 290% associated with the Merger and
an average price to assets of 24.36% compared to 18.43% associated with the
Merger.
No company or transaction used as a comparison in the above analysis is
identical to Naples, Alabama National or the Merger. Accordingly, an analysis
of the results of the foregoing is not mathematical; rather, it involves
complex considerations and judgments concerning differences in financial and
operating characteristics of the companies and other factors that could affect
the public trading value of the companies to which they are being compared.
(c) Selected Peer Group Analysis. Keefe, Bruyette compared the financial
performance and market performance of Alabama National based on various
financial measures of earnings performance, operating efficiency, capital
adequacy and asset quality and various measures of market performance,
including market/book values, price to earnings and dividend yields to those of
a group of comparable holding companies. For purposes of such analysis, the
financial information used by Keefe, Bruyette was as of and for the quarter
ended June 30, 1998 and the market price information was as of September 15,
1998. The companies in the peer group were southeastern banks that had total
assets ranging from approximately $1.1 billion to $2.4 billion.
Keefe, Bruyette's analysis showed the following concerning Alabama National'
financial performance: return on equity for the most recent quarter was 15.25%,
compared with an average of 12.66% for the peer group; return on assets for the
most recent quarter was 1.20%, compared with an average of 1.12% for the group;
the net interest margin for the most recent quarter was 4.29%, compared with an
average of 4.46% for the group; the efficiency ratio for the most recent
quarter was 67.56%, compared with an average of 58.41% for the group; the
equity to assets ratio was
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7.96%, compared to an average of 9.38% for the group and the ratio of loan loss
reserve to total loans was 1.56%, compared to an average of 1.37% for the
group.
Keefe, Bruyette's analysis further showed the following concerning Alabama
National's market performance: that its price to earnings multiple based on
1998 estimated earnings was 14.2 compared to an average for the group of 16.8
times; that its price to book value multiple was 2.15 times compared to a group
average of 2.12 times and its dividend yield was 2.35% compared to an average
for the group of 1.83%. For purposes of the above calculations, all earnings
estimates for Alabama National are based upon the published I/B/E/S consensus
estimates.
(d) Contribution Analysis. Keefe, Bruyette analyzed the relative contribution
of each of Alabama National and Naples to the pro forma balance sheet and
income statement items of the combined entity, including assets, common equity,
market capitalization, deposits and estimated 1998 net income. Keefe, Bruyette
compared the relative contribution of such balance sheet and income statement
items with the estimated pro forma ownership of 6% for Naples stockholders
based on an exchange ratio of 0.53271. The contribution showed that Naples
would contribute approximately 5% of the combined assets, 4% of the combined
common equity, 6% of the combined deposits and 4% of the combined estimated
1998 net income.
(e) Financial Impact Analysis. Keefe, Bruyette performed a pro forma merger
analysis that combined projected income statement and balance sheet
information. Assumptions regarding the accounting treatment, acquisition
adjustments, cost savings, revenue enhancements and treatment of Naples
employee stock options were used to calculate the financial impact that the
Merger would have on certain projected financial results of Alabama National.
This analysis indicated that the Merger is expected to (i) be dilutive to
estimated earnings in 1999 (excluding the effect of a non-recurring merger and
restructuring charge to be incurred in connection with the Merger),
(ii) increase estimated return on equity in 1999 and (iii) decrease the fully
diluted and tangible book value and the leverage ratio. This analysis was based
on analysts' and the respective managements' estimates of Alabama National and
Naples' 1999 earnings per share and on Alabama National management's estimates
of expected cost savings and revenue enhancements. These projections were
discussed with the management of each of Alabama National and Naples. The
actual results achieved by Alabama National following the Merger will vary from
the projected results, and the variations may be material.
(f) Shareholder Value Analysis. Keefe, Bruyette estimated the present value of
the future cash flows that would accrue to a holder of a share of Naples common
stock assuming the stockholder held the stock through the year 2002 and then
sold it at the end of year 2002. The analysis was based on several assumptions,
including an earnings per share of $0.91 in 1999 and a 17% earnings per share
growth rate. In an independent scenario, a terminal value was calculated for
2002 by multiplying Naples' projected 2002 earnings by a price/earnings
multiple of 12.75 times, generating an estimated $18.78 per share cash flow to
shareholders. This terminal valuation was discounted at a rate of 13%,
producing a present value of $10.83 per share. In a sale based on forward
earnings, a price/earnings multiple of 14.93 times 1999 earnings was calculated
using an exchange ratio of 0.53271 and a current Alabama National stock price
of $25.50. The resulting bid price was $13.58 per share.
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Keefe, Bruyette stated that the shareholder value analysis is a widely-used
valuation methodology but noted that it relies on numerous assumptions,
including asset and earnings growth rates, terminal values and discount rates.
The analysis did not purport to be indicative of the actual values or expected
values of Naples common stock.
(g) Other Analysis. Keefe, Bruyette also reviewed selected investment research
reports, earnings estimates, historical stock price performance relative to the
S&P 500 and to an index of bank and thrift stocks, and other financial data for
Alabama National.
The summary contained herein provides a description of the material analyses
prepared by Keefe, Bruyette in connection with the rendering of its opinion.
The summary set forth above does not purport to be a complete description of
the analyses performed by Keefe, Bruyette in connection with the rendering of
its opinion. The preparation of a fairness opinion is not necessarily
susceptible to partial analysis or summary description. Keefe, Bruyette
believes that its analyses and the summary set forth above must be considered
as a whole and that selecting portions of its analyses without considering all
analyses, or selecting part of the above summary, without considering all
factors and analyses, would create an incomplete view of the processes
underlying the analyses set forth in Keefe, Bruyette's presentations and
opinion. The ranges of valuations resulting from any particular analysis
described above should not be taken to be Keefe, Bruyette's view of the actual
value of Naples and Alabama National. The fact that any specific analysis has
been referred to in the summary above is not meant to indicate that such
analysis was given greater weight than any other analyses.
In performing its analyses, Keefe, Bruyette made numerous assumptions with
respect to industry performance, general business and economic conditions and
other matters, many of which are beyond the control of Naples and Alabama
National. The analyses performed by Keefe, Bruyette are not necessarily
indicative of actual values or actual future results that may be significantly
more or less favorable than suggested by such analyses. Such analyses were
prepared solely as part of Keefe, Bruyette's analysis of the fairness, from a
financial point of view, of the exchange ratio in the Merger. These analyses
were provided to the Naples Board in connection with the delivery of Keefe,
Bruyette's opinion. The analyses do not purport to be appraisals nor do they
reflect the prices at which a company actually might be sold or the prices at
which any securities may trade at the present time or at any time in the
future. In addition, as described above, Keefe, Bruyette's opinion, along with
its presentation to the Naples Board, was just one of many factors taken into
consideration by the Naples Board in unanimously approving the Merger
Agreement.
As part of its investment banking business, Keefe, Bruyette is continually
engaged in the valuation of banking businesses and their securities in
connection with mergers and acquisitions, negotiated underwritings, competitive
biddings, secondary distributions of listed and unlisted securities, private
placements and valuations for estate, corporate and other purposes. As
specialists in the securities of banking companies, Keefe, Bruyette has
experience in, and knowledge of, the valuation of banking enterprises. In the
ordinary course of its business as a broker-dealer, Keefe, Bruyette may from
time to time purchase securities from, and sell securities to, Naples and
Alabama National, and as a market maker in securities, Keefe, Bruyette may from
time to time have a long or short position in, and buy or sell, debt or equity
securities of Naples and Alabama National for Keefe, Bruyette's own account and
for the accounts of its customers.
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Naples has agreed to pay Keefe, Bruyette at the closing of the transaction, a
cash fee of $275,000. Pursuant to the Keefe, Bruyette engagement agreement,
Naples also agreed to indemnify Keefe, Bruyette against certain liabilities,
including liabilities under the federal securities laws.
EFFECT ON CERTAIN EMPLOYEE BENEFIT PLANS OF NAPLES
Naples Stock Option Plan. Certain stockholders of Naples hold options ("Naples
Options") providing for the purchase of an aggregate of 70,000 additional
shares of Naples common stock pursuant to stock option agreements issued under
the Community Bank of Naples, National Association 1996 Stock Option Plan (the
"Naples Option Plan"). Pursuant to the Merger Agreement, at the Effective Time,
Alabama National, through Citizens & Peoples, will assume the obligations
arising under or pursuant to the Naples Option Plan. Each Naples Option will be
converted into an option to acquire the number of shares of Alabama National
common stock equal to the number of shares of Naples common stock subject to
such Naples Option multiplied by the Exchange Ratio, at a price equal to the
exercise price for the Naples Option at issue divided by the Exchange Ratio. At
the Effective Time, the outstanding Naples Options to purchase 70,000 shares of
Naples common stock will be converted to options to purchase 37,289 shares of
Alabama National common stock. The other terms and conditions of said options,
including without limitation the vesting schedules and duration of the options,
shall remain as provided for in the Naples Option Plan and stock option
agreements issued thereunder.
401(k) Plan. Naples maintains a 401(k) defined contribution plan for its
employees (the "401(k) Plan"). The parties have not yet determined whether the
Naples 401(k) plan will remain an independent plan after the Merger, or whether
it will be merged into Alabama National's 401(k) defined contribution plan.
SURRENDER OF CERTIFICATES
Promptly after the Effective Time, SunTrust Bank, Atlanta, acting in the
capacity of exchange agent for Alabama National (the "Exchange Agent"), will
mail to each former holder of record of Naples 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'
Naples common stock certificates for certificates representing shares of
Alabama National common stock and cash in lieu of fractional shares. HOLDERS OF
NAPLES 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 Naples 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 Naples common stock to the Exchange Agent in the return
envelope provided. Upon receipt of the certificates and related documentation,
Alabama National will issue, and the Exchange Agent will mail, to such holder
of Naples common stock a check in the amount of any payment in respect of
fractional shares of Naples common stock payable to the surrendering
shareholder and a certificate representing the number of shares of Alabama
National common stock to which such holder is entitled pursuant to the Merger
Agreement. No certificates of Alabama National common stock and no payment in
respect of fractional shares will be delivered to a holder of Naples common
stock unless and until such holder shall have delivered to
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the Exchange Agent certificates representing the shares of Naples 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 Naples will be entitled to vote after the
Effective Time at any meeting of Alabama National shareholders the number of
whole shares of Alabama National common stock into which such holders'
respective shares of Naples common stock are converted, regardless of whether
such holders have exchanged their certificates representing Naples common stock
for certificates representing Alabama National common stock.
Beginning six months after the Effective Time, no dividend or other
distribution payable after the Effective Time with respect to Alabama National
common stock issued to replace Naples common stock will be paid to the holder
of an unsurrendered Naples 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 Naples' stock transfer
books of shares of Naples common stock issued and outstanding at the Effective
Time. If certificates representing shares of Naples 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 Alabama National nor the Exchange Agent shall be liable to a holder of
Naples 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 Alabama National and Naples to effect the Merger
are subject to the satisfaction of the following conditions prior to the
Effective Time:
(i) shareholder approval of Naples and Board of Director approval of Naples
and Citizens & Peoples 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 Alabama
National or Naples, 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) Alabama National shall have received a letter, dated as of the
Effective Time, from PricewaterhouseCoopers LLP, concurring with the
conclusions of Alabama National's and Naples' management that no conditions
exist with respect to each company which would preclude accounting for the
Merger as a pooling of interests.
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(vi) Alabama National and Naples shall have received a written opinion from
PricewaterhouseCoopers LLP to the effect that the Merger will qualify as a
tax-free reorganization within the meaning of Section 368(a) of the
Internal Revenue Code of 1986, as amended and that the Proposed
Reorganization will not adversely affect the tax treatment of the Merger.
The parties have received this opinion from PricewaterhouseCoopers LLP,
which is dated as of October 29, 1998. The Merger Agreement had required as
a condition of Closing that an opinion regarding tax matters be obtained
from Maynard, Cooper & Gale, P.C. In connection with the negotiation of the
Merger Agreement, Alabama National engaged PricewaterhouseCoopers, LLP to
consider various tax issues associated with the Merger and the Proposed
Reorganization. See "The Merger-Post-Merger Reorganization." Pursuant to a
letter agreement dated October 26, 1998, the parties agreed that, after
consideration of the nature of the transaction, as a condition of Closing,
PricewaterhouseCoopers LLP would provide an opinion regarding the tax
effects of the Merger in lieu of the condition that Maynard, Cooper & Gale,
P.C. provide an opinion regarding the tax effects of the Merger;
(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 Securities and Exchange
Commission ("SEC");
(viii) Alabama National and each of Robert Guididas and Patrick Philbin
shall have signed an employment agreement; and
(ix) Alabama National and Citizens & Peoples shall have received from at
least four members of the Naples Board certain noncompete agreements.
The obligations of Alabama National to effect the Merger are further subject to
the satisfaction or waiver of the following conditions:
(i) the representations and warranties of Naples in the Merger Agreement
shall be true as if made at the Effective Time;
(ii) the agreements and covenants of Naples in the Merger Agreement shall
have been performed and complied with by the Effective Time;
(iii) Naples shall have delivered to Alabama National certain certificates
of its corporate officers provided for in the Merger Agreement;
(iv) Naples shall have delivered to Alabama National an opinion of its
counsel as provided in the Merger Agreement;
(v) immediately prior to the Effective Time, Naples shall have a minimum
net worth (as defined in the Merger Agreement) of $4,250,000;
(vi) Alabama National shall have received from Hacker, Johnson, Cohen &
Grieb, P.A., a comfort letter dated as of the Effective Time with respect
to such matters relating to the financial statements of Naples as Alabama
National and Citizens & Peoples may reasonably request; and
(vii) Naples shall have delivered to Alabama National documentation, in a
form reasonably satisfactory to Alabama National, rescinding prior
authorization by the board of directors of Naples of certain Naples stock
appreciation rights as provided in the Merger Agreement.
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The obligations of Naples to effect the Merger are further subject to the
satisfaction or waiver of the following conditions:
(i) the representations and warranties of Alabama National in the Merger
Agreement shall be true as if made at the Effective Time;
(ii) the agreements and covenants of Alabama National in the Merger
Agreement shall have been performed and complied with by the Effective
Time;
(iii) Alabama National shall have delivered to Naples certain certificates
of its corporate officers as provided for in the Merger Agreement;
(iv) Alabama National shall have delivered to Naples an opinion of its
counsel as provided in the Merger Agreement;
(v) Naples shall have received from PricewaterhouseCoopers LLP a comfort
letter dated as of the Effective Time with respect to such matters relating
to the financial statements of Alabama National as Naples may reasonably
request;
(vi) Naples shall have received an opinion from Keefe, Bruyette that the
Exchange Ratio is fair to it and its shareholders from a financial point of
view; and
(vii) the Alabama National common stock to be issued in the Merger shall
have been qualified as a NASDAQ "National Market System Security".
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. The National Bank Act and the Bank Merger Act require national
banks to obtain the prior approval of the office of the OCC before consummating
a merger or a similar transaction. Accordingly, on October 9, 1998, Citizens &
Peoples filed an application with the OCC for permission to proceed with the
Merger.
In evaluating the Merger, the OCC must consider, among other factors, the
financial and managerial resources and future prospects of the institutions,
the probable effects of the merger on the convenience and needs of the
communities to be served and the performance of the parties in helping to meet
the credit needs of their respective communities. The relevant statutes
prohibit the OCC 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 OCC 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 the
United States Department of Justice may reduce 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
OCC, 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.
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It should be noted that OCC approval or possible approval of the Merger:
(i) reflects only the OCC's view that the transaction does not contravene
applicable competitive standards imposed by law and is consistent with
regulatory policies relating to safety and soundness;
(ii) is not an OCC opinion that the proposed combination is financially
favorable to the stockholders or that the OCC has considered the adequacy
of the terms of the transaction; and
(iii) IS NOT AN ENDORSEMENT OF OR RECOMMENDATION FOR THE MERGER.
In addition to the regulatory approvals necessary to complete the Merger,
there are certain regulatory approvals necessary to complete the Proposed
Reorganization. See "THE MERGER-POST-MERGER REORGANIZATION." Since the
consummation of the Proposed Reorganization is not condition of the completion
of the Merger, the Merger may be consummated whether or not such Proposed
Reorganization regulatory approvals are obtained. The regulatory approvals
necessary to complete the Proposed Reorganization include the following: (i)
approval of the OCC for (a) the formation of New Naples, (b) the transfer of
the assets and liabilities of Naples to New Naples by Citizens & Peoples and
(c) Citizens & Peoples to dividend the stock of New Naples to Alabama
National, (ii) approval of the Federal Reserve for (a) Alabama National to
acquire 100% of the stock of New Naples and (b) New Naples to become a member
of the Federal Reserve System, and (iii) the approval of the FDIC to provide
FDIC insurance for the deposits of New Naples. There can be no assurance that
the above-described regulatory approvals will be obtained nor of the timing of
any such approvals.
CONDUCT OF BUSINESS PENDING THE MERGER
The Merger Agreement requires that until the Effective Time each of Naples and
Alabama National 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, Naples has agreed that, without the consent of Alabama National, 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 Naples common
stock or any other capital stock of Naples 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;
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(vii) grant any increase in compensation or benefits of the employees or
officers of Naples 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;
(xiv) make any loan or advance to any shareholder owning 5% or more of the
outstanding shares of Naples common stock, director or officer of Naples 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 Naples 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 Naples common stock, or the directors, officers or
employees of Naples 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;
(xx) intentionally take any action reasonably expected to jeopardize or
delay the receipt of any regulatory approval required to consummate the
Merger; or
(xxi) take any action that would cause the transactions provided for in the
Merger Agreement to be subject to requirements imposed by any anti-takeover
laws, and Naples shall take all necessary steps within its control to
exempt (or ensure the continued exemption of) the transactions provided for
in the Merger Agreement from any anti-takeover law.
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Alabama National has agreed that, without the consent of Naples, it will not:
(i) fail to file timely any report required to be filed with any regulatory
authorities, including the SEC; or
(ii) take any action that would cause the Alabama National common stock to
cease to be traded on the NASDAQ, except for certain exceptions specified
in the Merger Agreement.
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.
WAIVER AND AMENDMENT; TERMINATION; TERMINATION FEE
Prior to the Effective Time, either Alabama National or Naples may waive or
extend the time for the compliance or fulfillment by the other of 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 Naples and Alabama National.
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 Naples 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 June 30,
1999, and such failure was not the fault of the terminating party; (vi) by
Alabama National, if the holders of greater than 5% of the outstanding shares
of Naples common stock properly assert their dissenters' rights under the
National Bank Act; or (vii) by Naples, if a majority of the disinterested
members of the board of directors of Naples 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 Naples terminates
the Merger Agreement under such circumstances of a superior acquisition or
merger proposal, Naples shall pay to Alabama National a termination fee of
$750,000.
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 and termination fee provisions 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
From and after the Effective Time, the Alabama National board of directors will
consist of the 13 current directors of Alabama National. The Merger Agreement
provides that from and after the Effective Time, the board of directors of
Citizens & Peoples will consist of the 6 current directors of Citizens &
Peoples. Such directors are to serve in accordance with the bylaws of Alabama
National and Citizens & Peoples, respectively. It is also anticipated that
certain of the current directors of Naples will be appointed as directors of
New Naples.
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All current Alabama National officers will continue to serve Alabama National
in accordance with the bylaws of Alabama National after the Effective Time. The
Merger Agreement further provides that, pursuant to the terms of two separate
employment agreements, after the Effective Time, Robert Guididas will serve as
President of New Naples and Patrick Philbin will serve as Executive Vice
President of New Naples. All directors and officers of each of the subsidiaries
of Alabama National after the Effective Time will continue to serve in
accordance with the terms of the bylaws of each such subsidiary.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
All of the current directors of Alabama National will serve as directors of
Alabama National after the Effective Time. As set forth above under "THE
MERGER-MANAGEMENT AND OPERATIONS AFTER THE MERGER," certain officers of Alabama
National and its subsidiaries will continue to serve as officers of such
entities and certain officers of Naples will serve as officers of New Naples
after the Effective Time. No director or executive officer of Alabama National
has any material direct or indirect financial interest in Naples or the Merger,
except as a director, executive officer or shareholder of Alabama National or
its subsidiaries.
In the normal course of business, Naples makes loans to directors and officers
of Naples, 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 Naples, do not involve
more than the normal risk of collectibility. As of June 30, 1998, the amount of
these loans (including amounts available under lines of credit) by Naples to
Naples directors and officers was 1% of Naples' total loans.
A condition precedent to the obligations set forth in the Merger Agreement is
that Robert Guididas will, as of the Effective Time, enter into an employment
agreement whereby Mr. Guididas agrees, among other things, to serve as
President of New Naples for a period of three years, unless earlier terminated
pursuant to the terms of this employment agreement. Pursuant to Mr. Guididas'
employment agreement, Mr. Guididas will receive (i) a one-time signing bonus
equal to $113,712, (ii) annual compensation of not less than $93,600 for the
term of his employment agreement and (iii) certain other fringe benefits.
Another condition precedent to the obligations set forth in the Merger
Agreement is that Patrick Philbin will, as of the Effective Time, enter into an
employment agreement whereby Mr. Philbin agrees, among other things, to serve
as Executive Vice President of New Naples for a period of three years, unless
earlier terminated pursuant to the terms of his Employment Agreement. Pursuant
to Mr. Philbin's employment agreement, Mr. Philbin will receive (i) a one-time
signing bonus equal to $81,590, (ii) annual compensation of not less than
$72,800 for the term of his employment agreement and (iii) certain other fringe
benefits.
A further condition precedent to the obligations set forth in the Merger
Agreement is that at least four of the directors of Naples sign agreements with
Alabama National whereby they agree not to compete in the banking industry in
Collier County, Florida for a period of eighteen months from the Effective
Date. The Naples directors that agree to execute such noncompete agreements
will receive a one-time cash payment of approximately $50,000.
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FEDERAL INCOME TAX CONSEQUENCES
Neither Alabama National nor Naples has requested or will receive an advance
ruling from the Internal Revenue Service as to the tax consequences of the
Merger. PricewaterhouseCoopers LLC has delivered an opinion to Alabama National
and Naples that, for federal income tax purposes, under current law, assuming
that (i) the Merger will take place as described in the Merger Agreement, and
(ii) certain factual matters represented by Alabama National and Naples
(including the representation that Naples shareholders will maintain sufficient
equity ownership interests in Alabama National 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 Internal Revenue
Code (the "Code"), and Alabama National and Naples will each be a party to the
reorganization within the meaning of Section 368(b) of the Code.
Assuming that (i) the Merger will take place as described in the Merger
Agreement, and (ii) certain factual matters represented by Alabama National and
Naples (including the representation that Naples shareholders will maintain
sufficient equity ownership interests in Alabama National after the Merger) are
true and correct at the time of consummation of the Merger, then, in the
opinion of PricewaterhouseCoopers LLC, the following will be the material
federal income tax consequences of the Merger: (i) no gain or loss will be
recognized by Alabama National or Naples in the Merger; (ii) the shareholders
of Naples will recognize no gain or loss upon the exchange of their Naples
common stock solely for shares of Alabama National common stock; (iii) the
basis of the Alabama National common stock received by the Naples shareholders
in the proposed transaction will, in each instance, be the same as the basis of
the Naples common stock surrendered in exchange therefor; (iv) the holding
period of the Alabama National common stock received by the Naples shareholders
will, in each instance, include the period during which the Naples common stock
surrendered in exchange therefor was held, provided that the Naples common
stock was held as a capital asset on the date of the exchange; (v) the payment
of cash to Naples shareholders in lieu of fractional share interests of Alabama
National 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 Alabama National; these cash payments will be treated as having
been received as distributions in full payment in exchange for the stock
redeemed as provided in Code Section 302(a) of the Code; and (vi) where solely
cash is received by an Alabama National or Naples shareholder in exchange for
his Alabama National or Naples common stock pursuant to the exercise of
dissenters' rights, such cash will be treated as having been received in
redemption of his Alabama National or Naples 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
PRICEWATERHOUSECOOPERS LLC, AND APPLIES ONLY TO NAPLES SHAREHOLDERS WHO HOLD
NAPLES COMMON STOCK AS A CAPITAL ASSET, AND MAY NOT APPLY TO SPECIAL
SITUATIONS, SUCH AS NAPLES SHAREHOLDERS, IF ANY, WHO RECEIVED THEIR NAPLES
COMMON STOCK UPON EXERCISE OF EMPLOYEE STOCK OPTIONS OR OTHERWISE AS
COMPENSATION AND NAPLES 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 ALABAMA NATIONAL COMMON STOCK, INCLUDING ANY
35
<PAGE>
REDEMPTION OR TRANSFER OF ALABAMA NATIONAL 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 NAPLES 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
Alabama National 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 Naples 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 Naples common
stock. Under this accounting treatment, assets and liabilities of Naples will
be added to those of Alabama National at their recorded book values, and the
shareholders' equity of the two companies will be combined on Alabama
National's consolidated balance sheet. Financial statements of Alabama National
issued after the Effective Time of the Merger will be restated to reflect the
consolidated operations of Alabama National and Naples as if the Merger had
taken place prior to the periods covered by the financial statements. The
receipt of a letter from PricewaterhouseCoopers LLP, independent accountants,
concurring with the conclusions of Alabama National's and Naples' management
that no conditions exist 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 filing, registration and
application fees, printing and mailing fees and expenses, and fees and expenses
of their respective accountants and counsel.
RESALES OF ALABAMA NATIONAL COMMON STOCK
The shares of Alabama National 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 Naples for
purposes of Rule 145 under the Securities Act as of the date of the Naples
Meetings or for purposes of applicable interpretations regarding pooling-of-
interests accounting treatment. Affiliates may not sell their shares of Alabama
National 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 Alabama National and Naples after the Merger
have been published. Alabama National may place restrictive legends on
certificates representing Alabama National common stock issued to all persons
who are deemed "affiliates" of Naples under Rule 145. This proxy statement-
prospectus does not cover resales of Alabama National common stock received by
any person who may be deemed to be an affiliate of Naples.
36
<PAGE>
PRO FORMA FINANCIAL INFORMATION
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
Alabama National and Naples giving effect to the Merger, which will be
accounted for as a pooling of interests, as if it had been effective June 30,
1998, 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 Naples which are included herein as Appendix C, and of Alabama
National which are incorporated by reference in this Proxy Statement. See
"WHERE YOU CAN FIND MORE INFORMATION," 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 June 30, 1998, nor is it
necessarily indicative of the future financial position.
PRO FORMA COMBINED CONDENSED CONSOLIDATED STATEMENT OF CONDITION
AS OF JUNE 30, 1998 (UNAUDITED)
(IN THOUSANDS, EXCEPT RATIOS)
<TABLE>
<CAPTION>
HISTORICAL
------------------------ PRO FORMA PRO FORMA
ALABAMA NATIONAL NAPLES ADJUSTMENTS COMBINED
---------------- ------- ---------------- ----------
<S> <C> <C> <C> <C> <C>
ASSETS
Cash and cash
equivalents............ $ 76,366 $ 5,196 $ 81,562
Investments............. 232,131 39,829 271,960
Loans, net of allowance
for loan losses........ 889,219 31,837 921,056
Premises and equipment.. 32,714 648 33,362
Intangibles, net........ 8,476 53 8,529
Other assets............ 133,673 1,318 134,991
---------- ------- ------ ------ ----------
Total assets........... $1,372,579 $78,881 $ -- $ -- $1,451,460
========== ======= ====== ====== ==========
LIABILITIES
Deposits................ $1,078,673 $70,417 $1,149,090
Short-term borrowings... 12,900 -- 12,900
Other liabilities....... 147,165 1,455 50(2) 148,670
Long-term debt.......... 24,572 2,000 -- -- 26,572
---------- ------- ------ ------ ----------
Total liabilities...... 1,263,310 73,872 -- 50 1,337,232
STOCKHOLDERS' EQUITY
Common stock............ 9,215 2,500 2,500(1) 533(1) 9,748
Additional paid-in
capital................ 65,321 2,500 2,500(1) 4,467(1) 69,788
Retained earnings....... 34,155 (19) 50 (2) 34,086
Unearned restricted
stock.................. (46) -- (46)
Unrealized gains
(losses) on investments
available for sale..... 624 28 -- -- 652
---------- ------- ------ ------ ----------
Total stockholders'
equity................ 109,269 5,009 5,050 5,000 114,228
---------- ------- ------ ------ ----------
Total liabilities and
stockholders' equity.. $1,372,579 $78,881 $5,050 $5,050 $1,451,460
========== ======= ====== ====== ==========
Capital ratios:
Average equity to
average assets........ 7.85% 6.41% 7.77%
Leverage............... 7.49 6.52 7.45
Tier 1 risk-based
capital............... 10.02 11.64 10.09
Total risk-based
capital............... 11.26 12.56 11.33
</TABLE>
- --------
(1) To record the issuance of 532,710 shares of Alabama National common stock
in exchange for all of the outstanding common shares of Naples common
stock. For the purpose of these pro forma selected consolidated financial
data, it is assumed that 532,710 shares of Alabama National common stock
will be issued in consummating the Merger. This figure is calculated by
multiplying the exchange ratio by the number of Naples common shares
actually outstanding at June 30, 1998. The Merger is expected to be
accounted for as a pooling of interests. See "THE MERGER-TERMS OF THE
MERGER."
37
<PAGE>
<TABLE>
<CAPTION>
OUTSTANDING
SHARES
-----------
<S> <C> <C>
Naples outstanding shares............................ 1,000,000
Conversion ratio, as agreed upon..................... 0.53271
----------
Alabama National shares to be issued................. 532,710
Par value of 532,710 shares issued at $1.00 per
share............................................... $ 532,710
Shares issued at par value........................... $ 532,710
Total capital stock of Naples........................ 5,000,000
----------
Excess recorded as an increase to additional paid-in
capital............................................. 4,467,290
-----------
5,000,000
To eliminate Naples capital stock:
Common stock at par value.......................... (2,500,000)
Additional paid-in capital......................... (2,500,000)
-----------
(5,000,000)
-----------
Net change in equity............................. $ --
===========
</TABLE>
- --------
(2) Includes amounts necessary to conform the recognition of compensation
expense, net of income taxes, related to stock options to that of Alabama
National.
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 Alabama
National and Naples 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 Alabama National, which are
incorporated by reference in this Proxy Statement, and of Naples, included
herein as Appendix C. See "WHERE YOU CAN FIND MORE INFORMATION," 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 SIX MONTHS ENDED JUNE 30, 1998 (UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
PRO FORMA
HISTORICAL ADJUSTMENTS
----------------------- ----------------- PRO FORMA
ALABAMA NATIONAL NAPLES DEBIT CREDIT COMBINED
---------------- ------ ------ ------ ---------
<S> <C> <C> <C> <C> <C>
Interest income......... $50,170 $2,563 $ -- $-- $52,733
Interest expense........ 25,117 1,278 -- -- 26,395
------- ------ ------ ---- -------
Net interest income..... 25,053 1,285 -- -- 26,338
Provision for loan loss-
es..................... 523 78 -- -- 601
Noninterest income...... 13,553 94 -- -- 13,647
Noninterest expense..... 26,310 844 16 (1) -- 27,170
------- ------ ------ ---- -------
Income before income
taxes.................. 11,773 457 (16) -- 12,214
Provision for income
taxes.................. 3,644 170 -- 6 (1) 3,808
------- ------ ------ ---- -------
Income before minority
interest in earnings of
consolidated
subsidiary............. 8,129 287 (16) (6) 8,406
Minority interest in
earnings of
consolidated
subsidiary............. 12 -- -- -- 12
------- ------ ------ ---- -------
Net income.............. $ 8,117 $ 287 $ (16) $ (6) $ 8,394
======= ====== ====== ==== =======
Earnings per common
share--dilutive........ $ 0.86 $ 0.29 $ 0.84
======= ====== =======
Average common shares
outstanding--dilutive.. 9,470 1,000 (1,000) 547 10,017
======= ====== ====== ==== =======
</TABLE>
- --------
(1) Includes amounts necessary to conform the recognition of compensation
expense, net of income taxes, related to stock options to that of Alabama
National.
39
<PAGE>
PRO FORMA COMBINED CONDENSED CONSOLIDATED STATEMENT OF INCOME
FOR THE SIX MONTHS ENDED JUNE 30, 1997 (UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
HISTORICAL
----------------------- PRO FORMA PRO FORMA
ALABAMA NATIONAL NAPLES ADJUSTMENTS COMBINED
---------------- ------ ---------------- ---------
<S> <C> <C> <C> <C> <C>
Interest income......... $45,786 $1,020 $ -- $-- $46,806
Interest expense........ 21,232 448 -- -- 21,680
------- ------ ------- ---- -------
Net interest income..... 24,554 572 -- -- 25,126
Provision for loan
losses................. 1,749 138 -- -- 1,887
Noninterest income...... 9,041 33 -- -- 9,074
Noninterest expense..... 22,512 649 16 (1) -- 23,177
------- ------ ------- ---- -------
Income (loss) before
income taxes........... 9,334 (182) (16) -- 9,136
Provision for (benefit
of) income taxes....... 2,955 (68) -- 6 (1) 2,881
------- ------ ------- ---- -------
Income (loss) before
minority interest in
earnings of
consolidated
subsidiary............. 6,379 (114) (16) (6) 6,255
Minority interest in
earnings of
consolidated subsidi-
ary.................... 6 -- -- -- 6
------- ------ ------- ---- -------
Net income (loss)....... $ 6,373 $ (114) $ (16) $ (6) $ 6,249
======= ====== ======= ==== =======
Earnings (loss) per com-
mon share--dilutive.... $ 0.67 $(0.11) $ 0.63
======= ====== =======
Average common shares
outstanding--dilutive.. 9,442 1,000 (1,000) 539 9,981
======= ====== ======= ==== =======
</TABLE>
- --------
(1) Includes amounts necessary to conform the recognition of compensation
expense, net of income taxes, related to stock options to that of Alabama
National.
40
<PAGE>
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
ALABAMA NATIONAL NAPLES ADJUSTMENTS COMBINED
---------------- ------ ---------------- ---------
<S> <C> <C> <C> <C> <C>
Interest income......... $90,388 $2,758 $ -- $-- $93,146
Interest expense........ 42,840 1,262 -- -- 44,102
------- ------ ------- ---- -------
Net interest income..... 47,548 1,496 -- -- 49,044
Provision for loan
losses................. 2,988 223 -- -- 3,211
Noninterest income...... 18,039 107 -- -- 18,146
Noninterest expense..... 45,461 1,316 32 (1) -- 46,809
------- ------ ------- ---- -------
Income before income
taxes.................. 17,138 64 (32) -- 17,170
Provision for income
taxes.................. 5,458 24 -- 12 (1) 5,470
------- ------ ------- ---- -------
Income before minority
interest in earnings of
consolidated
subsidiary............. 11,680 40 (32) (12) 11,700
Minority interest in
earnings of
consolidated
Subsidiary............. 12 -- -- -- 12
------- ------ ------- ---- -------
Net income.............. $11,668 $ 40 $ (32) $(12) $11,688
======= ====== ======= ==== =======
Earnings per common
share--dilutive........ $ 1.31 $ 0.04 $ 1.24
======= ====== =======
Average common shares
outstanding--dilutive.. 8,884 1,000 (1,000) 542 9,426
======= ====== ======= ==== =======
</TABLE>
- --------
(1) Includes amounts necessary to conform the recognition of compensation
expense, net of income taxes, related to stock options to that of Alabama
National.
41
<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
ALABAMA NATIONAL NAPLES ADJUSTMENTS COMBINED
---------------- ------ --------------- ---------
<S> <C> <C> <C> <C> <C>
Interest income......... $83,180 $ 372 $ -- $ -- $83,552
Interest expense........ 38,246 149 -- -- 38,395
------- ------ ----- ----- -------
Net interest income..... 44,934 223 -- -- 45,157
Provision for loan
losses................. 885 90 -- -- 975
Noninterest income...... 17,426 4 -- -- 17,430
Noninterest expense..... 44,053 688 32 (1) -- 44,773
------- ------ ----- ----- -------
Income (loss) before
income taxes........... 17,422 (551) (32) -- 16,839
Provision for (benefit
of) income taxes....... 5,281 (205) -- 12 (1) 5,064
------- ------ ----- ----- -------
Income (loss) before
minority interest in
earnings of
consolidated
subsidiary............. 12,141 (346) (32) (12) 11,775
Minority interest in
earnings of
consolidated
Subsidiary............. 14 -- -- -- 14
------- ------ ----- ----- -------
Net income (loss)--
dilutive............... $12,127 $ (346) $ (32) $ (12) $11,761
======= ====== ===== ===== =======
Earnings (loss) per
common share--
dilutive............... $ 1.38 $(0.99) $ 1.32
======= ====== =======
Average common shares
outstanding--dilutive.. 8,756 348 (348) 187 8,943
======= ====== ===== ===== =======
</TABLE>
- --------
(1) Includes amounts necessary to conform the recognition of compensation
expense, net of income taxes, related to stock options to that of Alabama
National.
42
<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
ALABAMA NATIONAL NAPLES(1) ADJUSTMENTS COMBINED
---------------- --------- ----------- ---------
<S> <C> <C> <C> <C> <C>
Interest income.............. $53,067 $-- $ -- $ -- $53,067
Interest expense............. 26,555 -- -- -- 26,555
------- ---- ----- ----- -------
Net interest income.......... 26,512 -- -- -- 26,512
Provision for loan losses.... 1,016 -- -- -- 1,016
Noninterest income........... 9,186 -- -- -- 9,186
Noninterest expense.......... 26,849 -- -- -- 26,849
------- ---- ----- ----- -------
Income before income taxes... 7,833 -- -- -- 7,833
Provision for income taxes... 901 -- -- -- 901
------- ---- ----- ----- -------
Income before minority
interest in earnings of
consolidated subsidiary..... 6,932 -- -- -- 6,932
Minority interest in earnings
of consolidated Subsidiary.. 650 -- -- -- 650
------- ---- ----- ----- -------
Net income--dilutive......... $ 6,282 $-- $ -- $ -- $ 6,282
======= ==== ===== ===== =======
Earnings per common share--
dilutive.................... $ 1.10 $-- $ 1.10
======= ==== =======
Average common shares
outstanding--dilutive....... 4,955 -- -- -- 4,955
======= ==== ===== ===== =======
</TABLE>
- --------
(1) Banking operations for Naples did not begin until 1996.
43
<PAGE>
DESCRIPTION OF ALABAMA NATIONAL CAPITAL STOCK
GENERAL
The authorized capital stock of Alabama National currently consists of
17,500,000 shares of Alabama National common stock, par value $1.00 per share,
and 100,000 shares of preferred stock, par value $1.00 per share (the "Alabama
National Preferred Stock"). The following is a summary description of Alabama
National's capital stock.
COMMON STOCK
Holders of shares of Alabama National common stock are entitled to receive such
dividends as may from time to time be declared by the Alabama National board of
directors out of funds legally available therefor. Holders of Alabama National
common stock are entitled to one vote per share on all matters on which the
holders of Alabama National common stock are entitled to vote and do not have
cumulative voting rights. Holders of Alabama National common stock have no
preemptive, conversion, redemption or sinking fund rights. In the event of a
liquidation, dissolution or winding-up of Alabama National, holders of Alabama
National common stock are entitled to share equally and ratably in the assets
of Alabama National, if any, remaining after the payment of all debts and
liabilities of Alabama National and the liquidation preference of any
outstanding Preferred Stock. The outstanding shares of Alabama National common
stock are, and the shares of Alabama National common stock offered by Alabama
National hereby when issued will be, fully paid and nonassessable. The rights,
preferences and privileges of holders of Alabama National common stock are
subject to any class or series of Alabama National Preferred Stock that Alabama
National may issue in the future.
PREFERRED STOCK
The Alabama National Certificate of Incorporation, as amended, provides that
the board of directors is authorized without further action by the holders of
the Alabama National common stock to provide for the issuance of shares of
Alabama National 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 Alabama National Preferred Stock so issued
may rank senior to the Alabama National 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 Alabama National Preferred Stock may
have class or series voting rights. Upon completion of this Merger, Alabama
National will not have any shares of Alabama National Preferred Stock
outstanding. Issuances of Alabama National Preferred Stock, while providing
Alabama National with flexibility in connection with general corporate
purposes, may, among other things, have an adverse effect on the rights of
holders of Alabama National common stock, and in certain circumstances such
issuances could have the effect of decreasing the market price of the Alabama
National common stock. The Alabama National Board, without stockholder
approval, may issue Alabama National Preferred Stock with voting or conversion
rights which could adversely affect the voting power of the holders of the
Alabama National common stock. Alabama National has no present plan to issue
any shares of Alabama National Preferred Stock.
44
<PAGE>
CERTAIN ANTI-TAKEOVER EFFECTS
The provisions of the Alabama National Certificate of Incorporation, the
Alabama National Bylaws and the Delaware General Corporation Law (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 Alabama
National common stock and Alabama National 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 Alabama
National common stock and Alabama National 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
Alabama National by means of a proxy contest, tender offer, merger or
otherwise, and thereby protect the continuity of Alabama National's management.
Limitations on Shareholder Action by Written Consent and Limitations on Calling
Shareholder Meetings. The Alabama National Certificate of Incorporation and
Alabama National 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 Alabama National Bylaws provide that
subject to the rights of holders of any series of Alabama National Preferred
Stock to elect additional directors under specified circumstances, special
meetings of stockholders can be called only by the Alabama National board of
directors or the Chairman of the Alabama National board of directors.
Stockholders 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 Alabama National board of directors or the Chairman of the Alabama National
board of directors.
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% or more of
either the aggregate market value of all assets of the corporation determined
45
<PAGE>
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 of
securities convertible into the stock of any class or series of securities 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.
46
<PAGE>
EFFECT OF MERGER ON RIGHTS OF SHAREHOLDERS
As a result of the Merger, holders of Naples common stock will be exchanging
shares of Naples, a national banking association governed by the National Bank
Act, Naples' Articles of Association, and Naples' Bylaws, for shares of Alabama
National, a Delaware corporation governed by the DGCL, Alabama National's
Certificate of Incorporation and Alabama National's Bylaws. Certain significant
differences exist between the rights of Naples shareholders and those of
Alabama National shareholders. The differences deemed material by Naples and
Alabama National are summarized below. The following discussion is necessarily
general; it is not intended to be a complete statement of all differences
affecting the rights of shareholders and their respective entities, and it is
qualified in its entirety by reference to the National Bank Act and the DGCL,
as well as to Alabama National's Certificate of Incorporation and Bylaws and
Naples' Articles of Association and Bylaws.
CHARTER AND BYLAW PROVISIONS
Alabama National's Certificate of Incorporation and Bylaws contain certain
provisions which may make Alabama National a less attractive target for an
acquisition of control by anyone who does not have the support of Alabama
National's board of directors and shareholders. Such provisions include, among
other things, the ability of the Alabama National board of directors to issue
preferred stock and to fix the designation, preferences and other rights of
such preferred stock. See "DESCRIPTION OF ALABAMA NATIONAL COMMON STOCK."
Naples' Articles of Association and Bylaws do not contain any provision
providing for such action on behalf of the board of directors.
SHAREHOLDER APPROVAL OF MERGERS
The National Bank Act provides that a merger or a sale of assets by a national
bank, such as Naples, must be approved by the bank's board of directors and by
the vote of the holders of at least two thirds (66 2/3%) of each class of its
capital stock.
The DGCL permits a merger to become effective without the approval of the
surviving corporation's stockholders provided certain requirements are met.
Under the DGCL, if the certificate 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, no stockholder
approval is required. Where stockholder approval is required under 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, unless the certificate
of incorporation require a greater vote. If the proposed merger or other
business combination were to involve an "interested person" or "affiliated
transaction," however, the DGCL imposes supermajority approval requirements
with certain qualifications. Neither Alabama National's Certificate of
Incorporation nor Naples' Articles of Association contain any supermajority
requirements. See "-ANTITAKEOVER LEGISLATION."
DISSENTERS' RIGHTS
Under the National Bank Act, a shareholder of a national bank is entitled to
dissent and obtain the value of his or her shares in the event of (a) the
consummation of a conversion into or a merger or
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consolidation with a state bank in the same state or (b) the approval by the
OCC of the consolidation with or merger into a national bank. See "GENERAL
INFORMATION-DISSENTERS' RIGHTS."
Under the DGCL, a stockholder 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 stockholders in certain other events regarding which
appraisal rights are not otherwise available. No such provision is included in
Alabama National's Certificate of Incorporation.
Under the DGCL, appraisal rights will not be available to stockholders of a
corporation (unless the certificate of incorporation provides otherwise, which
Alabama National's Certificate of Incorporation 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 stockholders and stockholders 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 stockholders is
required. See "-SHAREHOLDER APPROVAL OF MERGERS."
SHAREHOLDERS MEETINGS AND VOTING
Special Meetings. Pursuant to Naple's Articles of Association and Bylaws, any
one or more shareholders owning, in the aggregate, not less than 25% of the
stock of Naples may call a special meeting of shareholders at any time.
Under the DGCL, stockholders of Delaware corporations do not have a right to
call special meetings of shareholders unless such right is conferred upon the
stockholders in the corporation's certificate of incorporation or bylaws.
Alabama National's Certificate of Incorporation does not confer the right to
its shareholders to call a special meeting of shareholders.
Actions Without a Meeting. Under the National Bank Act, no action of a national
bank, such as Naples, requiring shareholder approval may be taken without such
a meeting, and Naples shareholders do not have the power to consent in writing,
without such a meeting, to the taking of any action.
Under the DGCL, the stockholders may take action without a meeting if a consent
in writing to such action is signed by the stockholders having the minimum
number of votes that would be necessary to take such action at a meeting,
unless prohibited in the corporation's certificate of incorporation. Alabama
National's Certificate of Incorporation denies shareholder action by written
consent.
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Election and Removal of Directors. Pursuant to the Articles of Association and
Bylaws of Naples, when any vacancy occurs among the board of directors, a
majority of the remaining members of the board of directors may appoint a
director to fill such vacancy (i) at any regular meeting of the board of
directors, or (ii) at a special meeting of the board of directors called for
that purpose at which a quorum is present. If the directors remaining in office
constitute fewer than a quorum of the board of directors, a director may be
appointed to fill a vacancy (i) by the affirmative vote of a majority of all
the directors remaining in office, or (ii) by shareholders at a special meeting
of shareholders called for that purpose. At any such shareholder meeting, each
shareholder entitled to vote has the right to vote by cumulative voting, which
is the ability to multiply the number of votes he or she is entitled to cast by
the number of vacancies being filled and cast the product for a single
candidate or distribute the product among two or more candidates.
Under 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 stockholders at which a quorum is present, unless the
certificate of incorporation provides for cumulative voting. Alabama National's
Certificate of Incorporation does not provide for cumulative voting. See
"DESCRIPTION OF ALABAMA NATIONAL COMMON STOCK."
Pursuant to Naples' Articles of Association and Bylaws, a director may be
removed by the shareholders at a meeting called to remove him or her for a
failure to fulfill one of the affirmative requirements for qualification as a
director, or for cause. However, a director may not be removed if the number of
votes sufficient to elect him or her under cumulative voting is voted against
the removal.
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. Alabama National's
Certificate of Incorporation does not provide for a classified or staggered
Board.
Voting on Other Matters. On all other matters other than the election of
directors, each Naples shareholder, pursuant to the Articles of Association of
Naples, is entitled to one vote for each share of stock held by him or her.
Naples' Articles of Association may be amended at any regular or special
meeting of shareholders by the affirmative vote of the holders of a majority of
the stock of Naples. Each shareholder shall be entitled to one vote per share.
Under the DGCL, an amendment to the 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. Alabama National's Certificate of Incorporation does
not contain a provision increasing this voting requirement.
The National Bank Act provides that a sale of assets by a national bank, such
as Naples, must be approved by the bank's board of directors and by the vote of
the holders of at least two-thirds (66 2/3%) of each class of its capital
stock.
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Under 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 corporation's
certificate incorporation or bylaws require a greater vote. Alabama National's
Certificate of Incorporation does not require a greater vote.
Under the National Bank Act, the dissolution of a national bank must be
approved by the holders of two-thirds (66 2/3%) of its stock. Under 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 certificate of
incorporation requires the vote of a larger portion of the outstanding stock.
Alabama National's Certificate of Incorporation does not require a greater
vote.
DIVIDENDS
As a national bank, Naples can pay dividends only to the extent that the
retained net profits (including the portion transferred to surplus) exceed bad
debts (as determined by regulation).
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 Alabama National are
derived from the Banks, and there are various statutory limitations on the
ability of the Banks to pay dividends to Alabama National. See "RISK FACTORS-
RESTRICTIONS ON DIVIDENDS" and "WHERE YOU CAN FIND MORE INFORMATION."
Holders of Alabama National common stock are entitled to receive dividends
ratably when, as and if declared by Alabama National's board of directors from
assets legally available therefor, after payment of all dividends on preferred
stock, if any is outstanding.
PREEMPTIVE RIGHTS
Pursuant to Naples' Articles of Association, in the event of any increase in
common stock of Naples by the sale of additional shares, each shareholder shall
be generally entitled to subscribe to such additional shares of common stock in
proportion to the number of shares of common stock owned at the time the
increase is authorized by the shareholders. However, holders of Naples common
stock shall not have any preemptive rights to purchase or subscribe for any
shares of common stock for all or any part of such number of shares that are
issued from time to time and used exclusively for the implementation of any
employee compensation program.
Alabama National's Certificate of Incorporation does not provide for preemptive
rights.
LIQUIDATION RIGHTS
Generally, under both the National Bank Act and the DGCL, shareholders are
entitled to share ratably in the distribution of assets upon dissolution.
Preferred shareholders typically do not
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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. Holders of Alabama National common stock
are entitled to receive their pro rata portion of the remaining assets of
Alabama National after the holders of Alabama National Preferred Stock, if any,
have been paid in full any sums to which they may be entitled. As of the date
hereof, no Alabama National Preferred Stock has been issued by Alabama
National. Pursuant to Alabama National's Certificate of Incorporation, the
Alabama National board of directors has discretion to set liquidation
preferences for Alabama National's Preferred Stock. See "DESCRIPTION OF ALABAMA
NATIONAL CAPITAL STOCK."
LIMITATION OF LIABILITY AND INDEMNIFICATION
Naples. Pursuant to Naples' Articles of Association, a director, officer or
employee of Naples may be generally indemnified for reasonable expenses
incurred as a result of his involvement in any lawsuit by virtue of his
position with Naples if he or she acted in good faith, and in a manner he or
she believed to be in or not opposed to the best interests of Naples, and with
respect to any criminal action, he or she had no reasonable cause to believe
the conduct was unlawful. No indemnification shall be made in respect to any
matter in which such person has been adjudged liable except to the extent the
adjudicating court finds such person reasonably entitled. In addition, a
director, officer or employee of Naples shall not be indemnified in respect of
any administrative proceeding or action instituted by an appropriate bank
regulatory agency which proceeding or action results in a final order assessing
civil money penalties or requiring affirmative action by an individual or
individuals in the form of payments to Naples.
Alabama National. Delaware law permits a corporation to set limits on the
extent of a director's liability. Under the Alabama National Certificate of
Incorporation, a director will not be liable to Alabama National or its
stockholders 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. Alabama National's Certificate of
Incorporation further authorizes the indemnification of Alabama National'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
The National Bank Act prohibits a person or group of persons from acquiring
"control" of a national bank unless the OCC has been given 60 days' prior
written notice of the proposed acquisition and, within that time period, the
OCC has not issued a disapproval or extended for up to another 30 days the
period during which such a disapproval may be issued. Generally speaking, the
acquisition of 25% or more of the outstanding Naples common stock, among other
things, would constitute control of Naples. Furthermore, any "company" would be
required to obtain the approval
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of the Federal Reserve before generally acquiring 25% or more of the
outstanding shares of Naples common stock or otherwise obtaining control over
Naples.
The DGCL 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 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 (66 2/3%) 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 Alabama National Certificate of Incorporation does
not contain such a provision.
Although certain of the specific differences between the voting and other
rights of Naples's shareholders and Alabama National's shareholders are
discussed above, the foregoing summary is not intended to be a complete
statement of the comparative rights of such shareholders under the laws of the
National Bank Act and Delaware law, or the rights of such persons under the
respective charters and bylaws of Alabama National and Naples. 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 National Bank Act and the DGCL
and the specific provisions of Alabama National's Certificate of Incorporation
and Bylaws and Naples' Articles of Association and Bylaws.
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CERTAIN INFORMATION CONCERNING ALABAMA NATIONAL
GENERAL
Alabama National 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). Alabama
National is currently the parent of (i) three national banks, National Bank of
Commerce of Birmingham (Birmingham, Alabama and the Birmingham metropolitan
area), First Citizens Bank N.A. (Talladega, Alabama) and Citizens & Peoples
(Pensacola, Florida); (ii) three state member banks, Alabama Exchange Bank
(Tuskegee, Alabama), Bank of Dadeville (Dadeville, Alabama) and First Gulf Bank
(Baldwin County, Alabama); and (iii) three state nonmember banks, First
American Bank (Decatur, Alabama), Public Bank (St. Cloud, Florida) and Georgia
State Bank (Mableton, Georgia). In addition, Alabama National 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 June 30, 1998, Alabama National had total assets of approximately $1.37
billion, total deposits of approximately $1.08 billion, total net loans of
approximately $903 million and total shareholders' equity of approximately $109
million. Additional information about Alabama National is included in documents
incorporated by reference in this proxy statement-prospectus. See "SUMMARY-
SELECTED CONSOLIDATED FINANCIAL DATA," and "WHERE YOU CAN FIND MORE
INFORMATION."
RECENT DEVELOPMENTS
On October 2, 1998, Alabama National announced the completion of the merger of
Community Financial Corporation ("CFC"), headquartered in Mableton, Georgia,
with and into Alabama National. At June 30, 1998, CFC had total assets of
approximately $124 million total deposits of approximately $105 million, total
net loans of approximately $66 million and total shareholders' equity of
approximately $11 million. CFC's banking subsidiary, Georgia State Bank, serves
its customer base through four offices located in Mableton, Powder Springs,
Austell and Hiram, Georgia.
On October 14, 1998, Alabama National announced its earnings (unaudited) and
certain other financial information (unaudited) for the third quarter and nine
months ended September 30, 1998. Alabama National reported third quarter 1998
net income of $4.36 million and earnings per common share of $0.46 (diluted)
and $0.47 (basic). This compares with net income of $3.56 million and earnings
per common share of $0.38 (diluted) and $0.39 (basic) for the 1997 third
quarter. Third quarter 1998 return on average assets and return on average
equity were 1.25% and 15.59%, respectively. Net income for the first nine
months of 1998 was $12.48 million, or $1.32 (diluted) and $1.35 (basic) per
share. This compares with net income of $9.94 million and earnings per common
share of $1.05 (diluted) and $1.09 (basic) for the first nine months of 1997.
First nine months of 1998 return on average assets and return on average equity
were 1.22% and 15.32%, respectively. Total assets were $1.48 billion and total
loans were $926.2 million at September 30, 1998. Total deposits were $1.06
billion and stockholders' equity was $114.2 million at September 30, 1998.
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CERTAIN INFORMATION CONCERNING NAPLES
DESCRIPTION OF BUSINESS
General
Naples commenced operations in 1996 as a full service commercial bank, without
trust powers, in Naples, Florida. In October 1997, the board of directors of
Naples began to move forward with the preparation and filing of the necessary
regulatory applications to reorganize Naples into a holding company structure
(the "Holding Company Reorganization"). On June 1, 1998, shareholders of
Naples, at the 1998 Annual Meeting of Shareholders of Naples, duly approved and
authorized the Holding Company Reorganization. In light of the Merger, the
board of directors of Naples has decided to delay consummation of the Holding
Company Reorganization. If the Merger is not consummated, the board of
directors of Naples expects to consummate the Holding Company Reorganization as
soon as practicable.
Naples offers a full range of interest bearing and non-interest bearing
accounts, including commercial and retail checking accounts, money market
accounts, individual retirement and Keogh accounts, regular interest bearing
statement savings accounts, certificates of deposit, commercial loans, real
estate loans and consumer/installment loans. In addition, Naples provides such
consumer services as U.S. Savings Bonds, wire transfers, automatic teller
services, travelers checks, cashiers checks, safe deposit boxes, bank by mail
services and direct deposit services.
Naples is located on the ground floor of a seven-story commercial facility,
located at 5150 Tamiami Trail North in Naples, Florida.
Market Area and Competition
The primary service area for Naples presently consists of an area in
northwestern Collier County, Florida, which includes part of the City of Naples
and the communities of North Naples, Vanderbilt Beach and Bonita Shores. The
market area is bounded on the west by the Gulf of Mexico and on the east by
Interstate 75. Competition among financial institutions in the Naples, Florida
area is intense. There are currently 21 commercial banks, with 89 branches, and
four savings and loan associations, with four branch offices, within Naples'
primary service area.
Naples is in competition with existing area financial institutions other than
commercial banks and savings and loan associations, including insurance
companies, consumer finance companies, brokerage houses, credit unions and
other business entities which have recently been invading the traditional
banking markets. The extent to which other types of financial institutions
compete with commercial banks has increased significantly within the past few
years as a result of federal and state legislation which has, in several
respects, deregulated financial institutions. The full impact of existing
legislation and subsequent laws that deregulated the financial services
industry cannot be fully assessed or predicted.
Deposits
Naples offers a full range of interest bearing and non-interest bearing
accounts, including commercial and retail checking accounts, money market
accounts, individual retirement and Keogh accounts, regular interest bearing
statement savings accounts and certificates of deposit with fixed rates and a
range of maturity date options. The sources of deposits are residents,
businesses and employees of businesses within Naples' market area. Naples pays
competitive interest rates on time and savings
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deposits. In addition, Naples has implemented a service charge fee schedule
competitive with other financial institutions in Naples' market area, covering
such matters as maintenance fees on checking accounts, per item processing fees
on checking accounts, returned check charges and the like.
There are no material seasonal factors that would have an adverse impact on the
Bank's deposits. No material deposit liabilities have been incurred from
outside the Bank's service area.
Loan Portfolio
Naples engages in a full complement of lending activities, including
commercial, consumer/ installment and real estate loans.
Lending is directed principally towards individuals and businesses whose
demands for funds fall within Naples' legal lending limits and which are
potential deposit customers of Naples. This category of loans includes loans
made to individuals, partnerships or corporate borrowers, which are obtained
for a variety of business purposes. Particular emphasis is placed on small and
middle market commercial loans and owner occupied commercial and residential
real estate loans. Naples has no foreign loans outstanding.
Naples may originate loans and participate with other banks with respect to
loans which exceed Naples' lending limits. Management of Naples does not
believe that loan participations necessarily pose any greater risk of loss than
loans which Naples originates.
No material portion of Naples' outstanding loans was concentrated within a
single industry or group of related industries, with the exception of
residential and commercial mortgage loans. As of June 30, 1998, 82% of Naples'
outstanding loans consisted of residential and commercial mortgage loans. There
are no material seasonal factors that would have an adverse impact on Naples'
outstanding loans. However, because Naples derives a substantial portion of its
business from mortgage loans, to the extent that fluctuations and changes occur
in the housing industry, Naples' business could fluctuate as well.
The following is a description of each of the major categories of loans in
Naples' loan portfolio:
Commercial, Financial and Agricultural. These loans are customarily granted to
local business customers on a fully collateralized basis to meet local credit
needs. The loans can be extended for periods of between one year and five years
and are usually structured to fully amortize over the term of the amortization
up to ten years. The terms and loan structure are dependent on the collateral
and strength of the borrower. The loan to value ratios typically range from 50%
to 75%. The risks of these types of loans depend on the general business
conditions of the local economy and the local business borrower's ability to
sell its products and services in order to generate sufficient business profits
to repay Naples under the agreed upon terms and conditions. The value of the
collateral held by Naples as a measure of safety against loss is most volatile
in this loan category. There are presently no agricultural loans in the bank's
loan portfolio.
Real Estate-Construction. These loans are made for the construction of single
family residences in Naples' market area. The loans are granted to qualified
individuals with down payments which are typically at least 20% of the
appraised value or contract price, whichever is less. The interest rates
typically fluctuate at 1% to 2% above Naples' prime interest rate during the
six-month construction period, and Naples generally charges a fee of 1% to 2%
in addition to the normal closing costs.
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These loans generally command higher rates and fees commensurate with the risk
warranted in the construction lending field. The risk in construction lending
is dependent upon the performance of the builder in building the project to the
plans and specifications of the borrower and the bank's ability to administer
and control all phases of the construction disbursements. Upon completion of
the construction period, the mortgage is converted to a permanent loan and
normally sold to an investor in the secondary mortgage market.
Real Estate--Mortgage. These loans are granted to qualified individuals for the
purchase of existing single family residences in Naples' market area. Both
fixed and variable rate loans are offered with competitive terms and fees
consistent with national mortgage investor guidelines. For mortgage loans held
for sale, Naples sells the mortgages within a period of 30 days to 365 days
after closing to a pre-determined mortgage investor and retains the origination
fees. The risk of this type of activity depends on the salability of the loan
to national investors and interest rate changes. Delivering these loans to the
end investor on a mandatory basis and meeting the investor's quality control
procedures limits Naples' risk of making adjustable rate mortgage loans. The
risk assumed by Naples is conditioned upon Naples' internal controls, loan
underwriting and market conditions in the national mortgage market. Naples
retains loans for its portfolio when it has sufficient liquidity to fund the
needs of its established customers and when rates are favorable to retain the
loans. The loan underwriting standards and policies are generally the same for
both loans sold in the secondary market and those retained in Naples'
portfolio.
Naples' adjustable rate mortgages include lifetime interest rate caps. No loans
carry a prepayment penalty clause and therefore can be paid out or refinanced
at a fixed rate. These loans are priced using indices such as U.S. Treasuries,
and should not lag behind funding costs.
Installment Loans. These loans are granted to individuals for the purchase of
personal goods such as automobiles, recreational vehicles, mobile homes and for
the improvement of single family real estate in the form of second mortgages.
Naples typically obtains a lien against the item purchased by the borrower and
holds title until the loan is repaid in full. These loans are generally granted
for periods ranging between one and five years at fixed rates of interest 1% to
4% above Naples' prime interest rate. The loan to value ratios generally range
from 60% to 80%. Loss or decline of the borrower's income due to layoff,
divorce or unexpected medical expenses could cause an increased risk of default
to Naples. In the event of default, a shortfall in the value of the collateral
may pose a loss to Naples in this loan category.
Naples also offers home equity loans to qualified borrowers. The interest rate
floats at 1% to 2% above the prime interest rate quoted in The Wall Street
Journal and it is capped at 18%. The loan to appraised value normally will not
exceed 85% and the maturity is limited to ten years. Generally, Naples requires
a first or second mortgage position and loans are made on principal residences
only.
Investments
As of June 30, 1998, investment securities comprised approximately 50% of
Naples' assets, federal funds sold comprised approximately 1% of the bank's
assets, and loans comprised approximately 40% of the bank's assets. Naples
invests primarily in direct obligations of the United States, obligations
guaranteed as to principal and interest by the United States and obligations of
agencies of
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the United States. In addition, Naples enters into federal funds transactions
with its principal correspondent banks, and primarily acts as a net seller of
such funds. The sale of federal funds amounts to a short term loan from Naples
to another bank. A national bank's lending and investment limits are separate
and distinct requirements.
Asset/Liability Management
It is the Naples' objective to manage assets and liabilities to provide a
satisfactory, consistent level of profitability within the framework of
established cash, loan, investment, borrowing and capital policies. Certain of
the officers of Naples are responsible for monitoring policies and procedures
that are designed to ensure an acceptable composition of asset/liability mix,
stability and leverage of all sources of funds while adhering to prudent
banking practices. It is the overall philosophy of management to support asset
growth primarily through growth of core deposits, which include deposits of all
categories made by individuals, partnerships and corporations. Management of
Naples seeks to invest the largest portion of its assets in commercial,
consumer and real estate loans.
Naples regards certificates of deposits of $100,000 or more as volatile
deposits. Since its opening in 1996, Naples has maintained sufficient liquidity
to repay these deposits on maturity. While Naples does not generally pursue
these types of deposits, at times it is profitable to do so and this option is
exercised when deemed prudent by management. This accounts for the volatility
in this liability category.
Securities sold subject to repurchase are only done on an exception basis to
maintain account relationships. As of June 30, 1998, Naples had entered into
repurchase agreements totalling $241,000. Naples has available three overnight
federal funds purchased lines totaling $2.5 million which may be used to meet
liquidity needs. As of June 30, 1998, Naples had no balances outstanding under
these lines.
Naples' asset/liability mix is monitored on a daily basis with a quarterly
report reflecting interest sensitive assets and interest sensitive liabilities
being prepared and presented to the Naples' board of directors. The objective
of this policy is to control interest sensitive assets and liabilities so as to
minimize the impact of substantial movements in interest rates on the bank's
earnings.
Correspondent Banking
Correspondent banking involves the providing of services by one bank to another
bank which cannot provide that service for itself from an economic or practical
standpoint. Naples is required to purchase correspondent services offered by
larger banks, including check collections, purchase of federal funds, security
safekeeping, investment services, coin and currency supplies, overline and
liquidity loan participations and sales of loans to or participations with
correspondent banks.
Naples may sell loan participations to correspondent banks with respect to
loans which exceed the Bank's lending limit. As of June 30, 1998, portions of
seven loans were sold to other banks.
Data Processing
Naples has entered into a data processing servicing agreement with First
Integrated Systems, an outside service bureau. Under the agreement, Naples
receives a full range of data processing services,
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including an automated general ledger, deposit accounting, commercial, real
estate and installment lending data processing and central information file.
See "MANAGEMENT'S DISCUSSION AND ANALYSIS-YEAR 2000 ISSUES."
Facilities
The Bank's only office is located on the ground floor of a seven-story
commercial building in Naples, Florida. The facility consists of 6,800 square
feet, three teller stations, 14 offices, a vault, a night depository, two
drive-in windows and a board/conference room.
Employees
Naples presently employs 18 full-time equivalent persons, including six
officers. Naples will hire additional persons as needed, including additional
tellers and customer service representatives. Management of Naples believes
that its employee relations are good. Currently, Messrs. Guididas and Philbin
are the only employees of Naples subject to employment agreements. There are no
collective bargaining agreements or other employment agreements covering any
other Naples employee.
Monetary Policies
The results of operations of Naples are affected by credit policies of monetary
authorities, particularly the Federal Reserve Board. The instruments of
monetary policy employed by the Federal Reserve Board include open market
operations in U.S. Government securities, changes in the discount rate on
member bank borrowings, changes in reserve requirements against member bank
deposits and limitations on the types of transaction accounts that member banks
may offer the general public. In view of changing conditions in the national
economy and in the money markets, as well as the effect of action by monetary
and fiscal authorities, including the Federal Reserve Board, no prediction can
be made as to possible future changes in interest rates, deposit levels, loan
demand or the business and earnings of Naples.
SUPERVISION AND REGULATION
General. Naples operates in a highly regulated environment, and its business
activities are governed by statute, regulation and administrative policies. The
business activities of Naples are closely supervised by a number of federal
regulatory agencies, including the OCC and the Federal Deposit Insurance
Corporation (the "FDIC").
Loans and extensions of credit by national banks are subject to legal lending
limitations. Under federal law, a national bank may generally grant to any
borrower loans and extensions of credit in an amount up to 15% of the bank's
capital and surplus, plus up to an additional 10% of the bank's capital and
surplus, if the amount exceeding the 15% general limit is fully secured by
readily marketable collateral having a market value determined by reliable and
continuously available price quotations of at least 100% of the amount of the
loan or extension of credit that exceeds the bank's 15% general limit. Loans
and extensions of credit may exceed the lending limit, however, if they qualify
under one of several exceptions. Such exceptions include certain loans or
extensions of credit arising from the discount of commercial or business paper,
the purchase of bankers' acceptances,
58
<PAGE>
loans secured by documents of title, loans secured by U.S. obligations and
loans to or guaranteed by the federal government.
Capital Adequacy Requirements. Naples is subject to regulatory capital
requirements imposed by the OCC. The OCC has issued risk-based capital
guidelines for banks which make regulatory capital requirements more sensitive
to differences in risk profiles of various banking organizations. The OCC's
requirements provide that national banks must have capital equivalent to 8% of
weighted risk assets. The risk weights assigned to assets are based primarily
on credit risks. Depending upon the riskiness of a particular asset, it is
assigned to a risk category. For example, securities with an unconditional
guarantee by the United States government are assigned to the lowest risk
category. A risk weight of 50% is assigned to loans secured by owner-occupied
one to four family residential mortgages. The aggregate amount of assets
assigned to each risk category is multiplied by the risk weight assigned to
that category to determine the weighted values, which are added together to
determine total risk-weighted assets.
The OCC has also implemented minimum capital leverage ratios to be used in
tandem with the risk-based guidelines in assessing the overall capital adequacy
of national banks. Under these rules, national banks are required to maintain a
ratio of 4% "Tier 1" capital to total assets (net of goodwill). Tier 1 capital
includes common shareholders equity, noncumulative perpetual preferred stock
and minority interests in the equity accounts of consolidated subsidiaries,
less certain intangible assets. As of June 30, 1998, Naples' Tier 1 risk-based
capital ratio was 12.56% and its Tier 1 leverage ratio was 6.52%. These ratios
are well above the minimum standards.
The OCC's guidelines provide that intangible assets are generally deducted from
Tier 1 capital in calculating a bank's risk-based capital ratio. However,
certain intangible assets which meet specified criteria ("qualifying
intangibles") such as mortgage servicing rights are retained as a part of Tier
1 capital. The OCC currently maintains that only mortgage servicing rights and
purchased credit card relationships meet the criteria to be considered
qualifying intangibles. The OCC's guidelines formerly provided that the amount
of such qualifying intangibles that may be included in Tier 1 capital was
strictly limited to a maximum of 25% of total Tier 1 capital. The OCC has
amended its guidelines to increase the limitation on such qualifying
intangibles from 25% to 50% of Tier 1 capital and further to permit the
inclusion of purchased credit card relationships as a qualifying intangible
asset.
In addition, the OCC has adopted rules which clarify treatment of asset sales
with recourse not reported on a national bank's balance sheet. Among assets
affected are mortgages sold with recourse under Federal National Mortgage
Association, Federal Home Loan Mortgage Corporation and Federal Farm Credit
Bank programs. The rules clarify that even though those transactions are
treated as asset sales for bank Call Report purposes, those assets will still
be subject to a capital charge under the risk-based capital guidelines.
Both the risk-based capital guidelines and the leverage ratio are minimum
requirements, applicable only to top-rated banking institutions. Institutions
operating at or near these levels are expected to have well-diversified risk,
high asset quality, high liquidity, good earnings and in general, have to be
considered strong banking organizations rated composite 1 under the CAMEL
rating system for banks. Institutions with lower ratings and institutions with
high levels of risk or experiencing or
59
<PAGE>
anticipating significant growth would be expected to maintain ratios 100 to 200
basis points above the stated minimums.
The OCC and the FDIC have adopted regulations revising their risk-based capital
guidelines to ensure that the guidelines take adequate account of interest rate
risk. Interest rate risk is the adverse effect that changes in market interest
rates may have on a bank's financial condition and is inherent to the business
of banking. Under these regulations, when evaluating a bank's capital adequacy,
the agency's capital standards now explicitly include a bank's exposure to
declines in the economic value of its capital due to changes in interest rates.
The exposure of a bank's economic value generally represents the change in the
present value of its assets, less the change in the value of its liabilities,
plus the change in the value of its interest rate off-balance sheet contracts.
The OCC and the FDIC have also issued a joint policy statement which provides
guidance on sound practices for managing interest rate risk. In the policy
statement, the agencies emphasize the necessity of adequate oversight by a
bank's board of directors and senior management and of a comprehensive risk
management process. The policy statement also describes the critical factors
affecting the agencies' evaluations of a bank's interest rate risk when making
a determination of capital adequacy. The agencies' risk assessment approach
used to evaluate a bank's capital adequacy for interest rate risk relies on a
combination of quantitative and qualitative factors. Banks that are found to
have high levels of exposure and/or weak management practices will be directed
by the agencies to take corrective action.
The Federal Deposit Insurance Corporation Improvement Act of 1991 (the
"FDICIA"), enacted on December 19, 1991, provides for a number of reforms
relating to the safety and soundness of the deposit insurance system,
supervision of domestic and foreign depository institutions and improvement of
accounting standards. One aspect of the FDICIA involves the development of a
regulatory monitoring system requiring prompt action on the part of banking
regulators with regard to certain classes of undercapitalized institutions.
While the FDICIA does not change any of the minimum capital requirements, it
directs each of the federal banking agencies to issue regulations putting the
monitoring plan into effect. The FDICIA creates five "capital categories"
("well capitalized," "adequately capitalized," "undercapitalized,"
"significantly undercapitalized" and "critically undercapitalized") which are
defined in the FDICIA and which will be used to determine the severity of
corrective action the appropriate regulator may take in the event an
institution reaches a given level of undercapitalization. For example, an
institution which becomes "undercapitalized" must submit a capital restoration
plan to the appropriate regulator outlining the steps it will take to become
adequately capitalized. Upon approving the plan, the regulator will monitor the
institution's compliance. Before a capital restoration plan will be approved,
any entity controlling a bank (i.e., holding companies) must guarantee
compliance with the plan until the institution has been adequately capitalized
for four consecutive calendar quarters. The liability of the holding company is
limited to the lesser of 5% of the institution's total assets or the amount
which is necessary to bring the institution into compliance with all capital
standards. In addition, "undercapitalized" institutions will be restricted from
paying management fees, dividends and other capital distributions. Further,
these institutions will be subject to certain asset growth restrictions and
will be required to obtain prior approval from the appropriate regulator to
open new branches or expand into new lines of business.
As an institution's capital levels decline, the extent of action to be taken by
the appropriate regulator increases, restricting the types of transactions in
which the institution may engage and ultimately
60
<PAGE>
providing for the appointment of a receiver for certain institutions deemed to
be critically undercapitalized.
In order to comply with the FDICIA, the OCC and the FDIC have adopted
regulations defining operational and managerial standards relating to internal
controls, loan documentation, credit underwriting criteria, interest rate
exposure, asset growth, and compensation, fees and benefits.
In response to the directive issued under the FDICIA, the regulators have
established regulations which, among other things, prescribe the capital
thresholds for each of the five capital categories established by the FDICIA.
The following table reflects the capital thresholds:
<TABLE>
<CAPTION>
TOTAL RISK - TIER 1 RISK - TIER 1
BASED CAPITAL BASED CAPITAL LEVERAGE
RATIO RATIO RATIO
------------- ------------- --------
<S> <C> <C> <C>
greater than greater than greater than
or equal to or equal to or equal to
Well capitalized(1)........................ 10% 6% 5%
greater than greater than greater than
or equal to or equal to or equal to
Adequately Capitalized(1).................. 8 4 4(2)
less than less than less than
Undercapitalized(4)........................ 8 4 4(3)
less than less than
Significantly Undercapitalized(4).......... 6 3 3
Critically Undercapitalized................ -- -- 2(5)
</TABLE>
- --------
(1) An institution must meet all three minimums.
(2) 3% for composite 1-rated institutions, subject to appropriate federal
banking agency guidelines.
(3) less than 3% for composite 1-rated institutions, subject to appropriate
federal banking agency guidelines.
(4) An institution falls into this category if it is below the specified
capital level for any of the three capital measures.
(5) Ratio of tangible equity to total assets.
Reporting Requirements. Naples' operations, including reserves for loan losses
and other contingencies, loans, investments, borrowings, deposits, mergers,
issuances of securities, payments of dividends, interest rates payable on
deposits, interest rates or fees chargeable on loans, establishment of
branches, consolidation or corporate reorganization, and maintenance of books
and records, are regulated and examined by the OCC and the FDIC. Accordingly,
Naples is required by the OCC and the FDIC to prepare reports on its financial
condition and to conduct an annual external audit of its financial affairs, in
compliance with minimum standards and procedures prescribed by the OCC and the
FDIC.
The scope of regulation and permissible activities of Naples is subject to
change by future federal legislation. In addition, regulators sometimes require
higher capital levels on a case-by-case basis based on such factors as the risk
characteristics or management of a particular institution. Naples is not aware
of any attributes of their operating plan that would cause regulators to impose
higher requirements.
INFORMATION ABOUT VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF
Market Price and Dividends. There is no established public trading market for
Naples' common stock. As of June 30, 1998, there were 214 record holders of
Naples' common stock.
Naples has never paid any cash dividend. See "EFFECT OF MERGER ON RIGHTS OF
SHAREHOLDERS-DIVIDENDS" for a discussion of the present restrictions on the
payment of dividends of Naples' common stock, and the restrictions which will
limit the future payment of dividends on Alabama National's common stock upon
consummation of the merger.
61
<PAGE>
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 Naples common stock showing the amount and
nature of such beneficial ownership, (ii) the names of each director and
executive officer of Naples and the number of shares of Naples common stock
owned beneficially by each of them, and (iii) the number of shares of Naples
common stock owned beneficially by all directors and executive officers as a
group.
<TABLE>
<CAPTION>
SHARES OF COMMON STOCK PERCENT OF
BENEFICIAL OWNER BENEFICIALLY OWNED(1) OUTSTANDING SHARES
---------------- ---------------------- ------------------
<S> <C> <C>
Thomas G. Brown(2)................. 95,000 9.5%
4500 Executive Drive
Naples, Florida 34119
Robert Guididas(3)................. 44,000 4.2
Donald I. Holton(4)................ 80,000 8.0
319 Neapolitan Way
Naples, Florida 34103
Ronald C. May...................... 5,000 *
Gerard A. McHale, Jr.(5)........... 10,000 1.0
A. James Meerpohl(6)............... 20,000 2.0
Oliver H. Raymond ................. 78,000 7.8
2319 Gulf Shore Blvd. N.
Naples, Florida 34103
Patrick J. Philbin(7).............. 38,000 3.7
George Vega........................ 5,000 *
George A. Wilson................... 20,000 2.0
Donald J. York(8).................. 2,000 *
All directors and officers as a
group (10 persons)................ 319,000 30.6%
</TABLE>
- --------
* Represents less than 1%.
(1) "Beneficial Ownership" includes shares for which an individual, directly or
indirectly, has or shares voting or investment power or both and also
includes options which are exercisable within sixty days of the date
hereof. Beneficial ownership as reported in the above table has been
determined in accordance with Rule 13d-3 of the Securities Exchange Act of
1934, as amended. The percentages are based upon 1,000,000 shares
outstanding, except for certain parties who hold options to purchase common
stock which are exercisable within sixty days of the date hereof. The
percentages for those parties who hold options which are exercisable within
sixty days are based upon the sum of 1,000,000 shares plus the number of
shares subject to options held by them, as indicated in the following
notes.
(2) Includes (i) 78,000 shares registered in the names of certain companies in
which Mr. Brown has a controlling interest; and (ii) 1,000 shares
registered in the names of certain individuals of Mr. Brown's immediate
family.
(3) Includes (i) 11,000 shares held in an individual retirement account for the
benefit of Mr. Guididas; (ii) 1,000 shares registered in the name of Mr.
Guididas' spouse; and (iii) 24,000 shares subject to presently exercisable
stock options.
(4) Includes (i) 15,000 shares registered in the name of a company in which Mr.
Holton has a controlling interest; and (ii) 15,000 shares registered in the
name of Mr. Holton's spouse.
(5) Includes 10,000 shares held in an individual retirement account for the
benefit of Mr. McHale.
(6) Includes (i) 16,000 shares held in an individual retirement account for the
benefit of Mr. Meerpohl; and (ii) 2,000 shares held in an individual
retirement account for the benefit of Mr. Meerpohl's spouse.
(7) Includes (i) 6,000 shares held in an individual retirement account for the
benefit of Mr. Philbin; and (ii) 18,000 shares subject to presently
exercisable stock options.
(8) Includes 2,000 shares held in an individual retirement account for the
benefit of Mr. York.
62
<PAGE>
MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF NAPLES
The following discussion and financial information are presented to aid in an
understanding of the current financial position and results of operations of
Naples and should be read in conjunction with the Financial Statements and
Notes thereto included herein at Appendix C. The emphasis of this discussion
will be on the six month periods ending June 30, 1998 and 1997 and the years
1997 and 1996. Since Naples initiated operations on August 26, 1996, the year
ending December 31, 1996 represents only 128 days of operations. The reader is
cautioned to be mindful of this shorter period of operations in 1996 when
comparing balance sheet and statement of operations items to 1997. Combined
with Naples' strong market, significant growth has been experienced during 1997
as compared with 1996.
At June 30, 1998, Naples had assets of approximately $78.9 million and operated
in Collier County, Florida. Naples' primary business is banking; therefore,
loans and investments are the principal source of income.
FINANCIAL CONDITION
Average Assets and Liabilities
Due to the relative youth of Naples, percentage growth rates of assets and
liabilities appear large. In addition to the strong growth of the Collier
County market, Naples' management has experience with other banking
institutions in the area and has been successful in attracting customers to the
bank. During the six months ended June 30, 1998 average assets increased $44.3
million, or 139.6%, from the six months ended June 30, 1997. From 1996 to 1997
average assets increased $34.9 million, or 587.6%. The primary emphasis of
Naples' growth strategy is in the lending area.
During the six months ended June 30, 1998 average deposits increased $41.4
million, or 153.9%, compared with the six months ended June 30, 1997. From 1996
to 1997 average deposits increased $31.1 million, or 814.3%. Naples carried no
foreign loans or deposits in any period discussed.
63
<PAGE>
The following table depicts Naples' average balance sheets for the six months
ending June 30, 1998 and 1997 and for the years ending December 31, 1997 and
1996:
AVERAGE BALANCE SHEETS
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS YEAR ENDED
ENDED JUNE 30, DECEMBER 31,
---------------- ---------------
1998 1997 1997 1996
------- ------- ------- ------
<S> <C> <C> <C> <C>
ASSETS:
Cash and due from banks..................... $ 4,367 $ 2,499 $ 2,720 $ 339
Funds sold.................................. 14,601 3,066 4,889 1,335
Securities.................................. 26,209 13,775 15,204 3,158
Loans, net of unearned income............... 29,908 11,178 16,903 771
Allowance for loan losses................... (357) (153) (206) (8)
------- ------- ------- ------
Loans, net of allowance for loan losses..... 29,551 11,025 16,697 763
Premises and equipment...................... 667 733 718 230
Other assets................................ 638 635 666 122
------- ------- ------- ------
Total assets............................ $76,033 $31,733 $40,894 $5,947
======= ======= ======= ======
LIABILITIES AND STOCKHOLDERS' EQUITY:
Deposits:
Demand deposits........................... $ 7,135 $ 4,222 $ 4,997 $ 580
Interest-bearing transaction accounts..... 17,647 9,875 10,935 1,028
Savings and money market deposits......... 22,601 5,343 9,524 631
Time deposits............................. 20,909 7,455 9,490 1,583
------- ------- ------- ------
Total deposits.......................... 68,292 26,895 34,946 3,822
------- ------- ------- ------
Funds purchased............................. 43 65 173 --
Short-term debt............................. -- -- -- --
Long-term debt.............................. 2,000 -- 877 --
Accrued interest and other liabilities...... 823 240 310 459
Stockholders' equity........................ 4,875 4,533 4,588 1,666
------- ------- ------- ------
Total liabilities and stockholders'
equity................................. $76,033 $31,733 $40,894 $5,947
======= ======= ======= ======
</TABLE>
LOANS
Net loans, at December 31, 1997, were $27.4 million, an increase from $6.0
million from the net loan balance at December 31, 1996. At December 31, 1997,
commercial and financial loans represented 20.2% of total loans, real estate-
mortgage and construction loans represented 72.0% of total loans, and consumer
loans represented 7.7% of total loans.
At June 30, 1998, $23.1 million, or 71.5%, of total loans, net of unearned
interest, mature within one year or may be repriced within one year due to a
variable rate arrangement.
64
<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
---------------- ---------------
PERCENT PERCENT
OF OF
AMOUNT TOTAL AMOUNT TOTAL
------- ------- ------ -------
<S> <C> <C> <C> <C>
Commercial, financial and agricultural....... $ 5,972 21.56% $1,320 21.80%
Real estate:
Construction............................... 2,541 9.17 946 15.63
Mortgage--residential...................... 10,233 36.95 1,574 26.00
Mortgage--commercial....................... 6,779 24.48 1,228 20.28
Mortgage--other............................ -- -- -- --
Consumer..................................... 2,148 7.76 983 16.24
Other........................................ 24 .09 3 .05
------- ------ ------ ------
Total gross loans.......................... 27,697 100.00% 6,054 100.00%
====== ======
Unearned income.............................. 4 (5)
------- ------
Total loans, net of unearned income........ 27,701 6,049
Allowance for loan losses.................... (313) (90)
------- ------
Total net loans............................ $27,388 $5,959
======= ======
</TABLE>
LOAN MATURITY AND SENSITIVITY TO CHANGES IN INTEREST RATES
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31, 1997
---------------------------------------
OVER ONE
ONE YEAR YEAR THROUGH OVER FIVE
OR LESS FIVE YEARS YEARS TOTAL
-------- ------------ --------- -------
<S> <C> <C> <C> <C>
Commercial, financial and
agricultural......................... $3,834 $1,089 $1,049 $ 5,972
Real estate--construction............. 605 1,313 623 2,541
Real estate--mortgage................. 5,579 2,228 9,205 17,012
Consumer.............................. 66 1,398 684 2,148
</TABLE>
<TABLE>
<CAPTION>
PREDETERMINED FLOATING
RATES RATES
------------- --------
<S> <C> <C>
Maturing after one year but within five years............ $1,832 $ 4,196
Maturing after five years................................ 1,333 10,228
------ -------
$3,165 $14,424
====== =======
</TABLE>
Naples' 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.
65
<PAGE>
INVESTMENT SECURITIES
The following tables summarize securities at the dates indicated:
AVAILABLE-FOR-SALE SECURITIES
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------------
1997 1996
--------------- -------------
COST MARKET COST MARKET
------- ------- ------ ------
<S> <C> <C> <C> <C>
U.S. Treasury.................................... $ 5,021 $ 5,059 $2,525 $2,536
U.S. Government Agencies......................... 8,003 8,029 4,507 4,497
Mortgage backed securities....................... 1,499 1,520 -- --
Other............................................ 597 597 150 150
------- ------- ------ ------
Total.......................................... $15,120 $15,205 $7,182 $7,183
======= ======= ====== ======
</TABLE>
HELD TO MATURITY SECURITIES
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------
1997 1996
------------- -------------
COST MARKET COST MARKET
------ ------ ------ ------
<S> <C> <C> <C> <C>
U.S. Treasury...................................... $ 497 $ 502 $ 495 $ 502
U.S. Government Agencies........................... 507 508 1,001 1,003
------ ------ ------ ------
Total............................................ $1,004 $1,010 $1,496 $1,505
====== ====== ====== ======
</TABLE>
The maturities and weighted average yields of securities available for sale and
held-to-maturity securities at December 31, 1997, are presented in the
following table using the average stated contractual maturities.
SECURITIES AVAILABLE FOR SALE MATURITY DISTRIBUTION AND YIELDS
(AMOUNTS IN THOUSANDS, EXCEPT YIELDS)
<TABLE>
<CAPTION>
DECEMBER 31, 1997
----------------------------------------------------------------------------------
AFTER ONE BUT
WITHIN ONE WITHIN FIVE AFTER FIVE BUT OTHER
YEAR YEARS WITHIN TEN YEARS AFTER TEN YEARS 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........... $1,502 6.06% $ 3,557 6.24% $ -- -- % $ -- -- % $ -- -- %
U.S. Government
Agencies............... 999 6.39 6,530 6.42 500 6.79 -- -- -- --
Mortgage backed
securities............. -- -- 1,035 6.74 485 6.84 -- -- -- --
Equity securities....... -- -- -- -- -- -- -- -- 597 6.94
------ ------- --------- -------- -----
Total.................. $2,501 6.19% $11,122 6.39% $ 985 6.81% $ -- -- $ 597 6.94%
====== ==== ======= ==== ========= ======== ======== ====== ===== ====
</TABLE>
66
<PAGE>
SECURITIES HELD TO MATURITY, MATURITY DISTRIBUTION AND YIELDS
(AMOUNTS IN THOUSANDS, EXCEPT YIELDS)
<TABLE>
<CAPTION>
DECEMBER 31, 1997
---------------------------------------------------------------------------------------
WITHIN ONE AFTER ONE BUT AFTER FIVE BUT OTHER
YEAR WITHIN FIVE YEARS WITHIN TEN YEARS AFTER TEN YEARS 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........... $-- -- $ 497 6.44% $ -- -- % $ -- -- % $-- -- %
U.S. Government
Agencies............... -- -- -- -- 507 6.75 -- -- -- --
---- -------- -------- -------- ----
Total................. $-- -- $ 497 6.44% $ 507 6.75% $ -- -- $-- --
==== === ======== ======== ======== ======== ======== ======= ==== ===
</TABLE>
DEPOSITS
Between 1996 and 1997, Naples experienced growth in each type of deposit as
shown in the table below. Non interest-bearing demand deposits increased by
$4.5 million, or 182.3% from year-end 1996 to year-end 1997. Interest-bearing
demand deposits increased $12.5 million, or 291.0%, savings and money market
deposits increased $25.8 million, or 969.4%, and time deposits increased $7.2
million, or 138.6%, during the same period.
The table below summarizes deposits of Naples for the dates indicated:
DEPOSITS
(AMOUNTS IN THOUSANDS, EXCEPT PERCENTAGES)
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------------
1997 1996
--------------- ---------------
PERCENT PERCENT
OF OF
AMOUNT TOTAL AMOUNT TOTAL
------- ------- ------- -------
<S> <C> <C> <C> <C>
Demand........................................ $ 7,034 10.89% $ 2,492 17.05%
NOW........................................... 16,009 24.78 4,097 28.03
Savings and money market...................... 29,216 45.23 2,854 19.53
Time less than $100,000....................... 4,614 7.14 4,707 32.21
Time greater than $100,000.................... 7,728 11.96 465 3.18
------- ------ ------- ------
Total deposits.............................. $64,601 100.00% $14,615 100.00%
======= ====== ======= ======
</TABLE>
67
<PAGE>
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 $7.7 million in this category represented
12.0% 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 ONE THROUGH THROUGH SIX THROUGH AFTER
MONTH THREE MONTHS MONTHS TWELVE MONTHS TWELVE MONTHS TOTAL
---------- ------------ ----------- ------------- ------------- ------
<S> <C> <C> <C> <C> <C> <C>
Certificates of deposit
of $100,000 or more.... $968 $559 $1,157 $4,944 $100 $7,728
==== ==== ====== ====== ==== ======
</TABLE>
CAPITAL RESOURCES
Shareholders' equity increased by $262,000 to $5.0 million at June 30, 1998
from $4.7 million at year-end 1997. The increase is primarily attributable to
net income of $287,000 partially offset by a reduction of $25,000 in unrealized
gains on available for sale securities.
The Office of the Comptroller of the Currency and the FDIC require that 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 $4.9 million at June 30, 1998, and total (Tier I plus Tier II)
capital was $5.3 million at June 30, 1998. Tier I and total capital ratios were
11.64% and 12.56%, respectively at June 30, 1998. Both ratios were above the
regulatory minimums.
ANALYSIS OF CAPITAL
(AMOUNTS IN THOUSANDS, EXCEPT PERCENTAGES)
<TABLE>
<CAPTION>
JUNE DECEMBER 31,
30, ---------------
1998 1997 1996
------- ------- ------
<S> <C> <C> <C>
Tier 1 Capital...................................... $ 4,928 $ 4,633 $4,576
Tier 2 Capital...................................... 391 313 90
------- ------- ------
Total qualifying capital.......................... $ 5,319 $ 4,946 $4,666
======= ======= ======
Risk-adjusted total assets (including off-balance
sheet exposures)................................... $42,337 $30,075 $8,806
Tier 1 risk-based capital ratio (4.00% required
minimum)........................................... 11.64% 15.40% 51.96%
Total risk-based capital ratio (8.00% required
minimum)........................................... 12.56 16.45 52.99
Tier 1 leverage ratio (4.00% required minimum)...... 6.52 8.06 28.40
</TABLE>
68
<PAGE>
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
$713,000, or 124.7%, in the six months ended June 30, 1998 ("the 1998 six
months") compared with the six months ended June 30, 1997 ("the 1997 six
months"). Average earning assets increased by $42.7 million, or 152.4%, in the
1998 six months compared to the 1997 six months. During the 1998 six months
this increase in earning assets was substantially funded by a volume increase
of $40.5 million, or 177.9%, in average interest-bearing liabilities. Despite
the increase in net interest income during the 1998 six months compared with
the 1997 six months, the net interest spread and net interest margin decreased
by 13 and 45 basis points, respectively. The decline in the net interest spread
and net interest margin is primarily attributable to increased reliance on time
deposits and Federal Home Loan Bank advances as a proportion of overall funding
because these funding sources are among the highest cost interest-bearing
liability. Also, since a larger proportion of earning assets are invested in
Federal funds sold and securities purchased under resell agreements, the
interest spread and net interest margin are reduced because these assets yield
less than alternatives. The following analyzes net interest income, weighted
average yields on earning assets and weighted average rates paid on interest-
bearing liabilities.
69
<PAGE>
AVERAGE BALANCES, INCOME AND EXPENSES AND RATES
(AMOUNTS IN THOUSANDS, EXCEPT YIELDS AND RATES)
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE30,
-----------------------------------------------
1998 1997
----------------------- -----------------------
AVERAGE INCOME/ YIELD/ AVERAGE INCOME/ YIELD/
BALANCE EXPENSE RATE BALANCE EXPENSE RATE
------- ------- ------ ------- ------- ------
<S> <C> <C> <C> <C> <C> <C>
ASSETS:
Earning assets:
Loans(1)(2).................. $29,908 $1,356 9.07% $11,178 $ 500 8.95%
Securities................... 26,209 809 6.17 13,775 439 6.37
Funds sold................... 14,601 398 5.45 3,066 81 5.28
------- ------ ------- ------
Total earning assets....... 70,718 2,563 7.25 28,019 1,020 7.28
------- ------ ------- ------
Cash and due from banks........ 4,367 2,499
Premises and equipment......... 667 733
Other assets................... 638 635
Allowance for loan losses...... (357) (153)
------- -------
Total assets............... $76,033 $31,733
======= =======
LIABILITIES:
Interest-bearing liabilities:
Interest-bearing transaction
accounts.................... $17,647 236 2.67 $ 9,875 138 2.79
Savings deposits............. 22,601 431 3.81 5,343 99 3.71
Time deposits................ 20,909 546 5.22 7,455 209 5.61
Funds purchased.............. 43 1 4.65 65 2 6.15
Long-term borrowings......... 2,000 64 6.40 -- --
------- ------ ------- ------
Total interest-bearing
liabilities............... 63,200 1,278 4.04 22,738 448 3.94
------- ------ ---- ------- ------ ----
Demand deposits................ 7,135 4,222
Accrued interest and other
liabilities................... 823 240
Stockholders' equity........... 4,875 4,533
------- -------
Total liabilities and
stockholders' equity...... $76,033 $31,733
======= =======
Net interest spread............ 3.21% 3.34%
==== ====
Net interest income/margin..... $1,285 3.63% $ 572 4.08%
====== ==== ====== ====
</TABLE>
- --------
(1) Average loans include nonaccrual loans. All loans and deposits are
domestic.
(2) Fees in the amount of $28,000 and $9,000 are included in interest and fees
on loans for the 1998 six months and the 1997 six months, respectively.
Net interest income increased $1.3 million in 1997 compared to 1996, an
increase of 570.9%. Increased loan and securities volume were the primary
reasons for the growth in net interest income. Average earning assets increased
by $31.7 million, or 602.8%, during 1997 as compared with 1996. During 1997,
average interest-bearing liabilities increased $26.7 million, or 823.8%. During
1997, compared with 1996, the net interest spread increased 91 basis points and
net interest margin decreased 20 basis points.
70
<PAGE>
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)(2)................... $16,903 $1,513 8.95% $ 771 $100 12.97%
Securites..................... 15,204 977 6.43 3,158 199 6.30
Funds sold.................... 4,889 268 5.48 1,335 73 5.47
------- ------ ------ ----
Total earning assets........ 36,996 2,758 7.45 5,264 372 7.07
------- ------ ------ ----
Cash and due from banks......... 2,720 339
Premises and equipment.......... 718 230
Other assets.................... 666 122
Allowance for loan losses....... (206) (8)
------- ------
Total assets................ $40,894 $5,947
======= ======
LIABILITIES:
Interest-bearing liabilities:
Interest-bearing transaction
accounts..................... $10,935 300 2.74 $1,028 34 3.31
Savings and money market
deposits..................... 9,524 359 3.77 631 23 3.65
Time deposits................. 9,490 537 5.66 1,583 92 5.81
Funds purchased............... 173 10 5.78 -- --
Long-term borrowings.......... 877 56 6.39 -- --
------- ------ ------ ----
Total interest-bearing
liabilities................ 30,999 1,262 4.07 3,242 149 4.60
------- ------ ---- ------ ---- -----
Demand deposits................. 4,997 580
Accrued interest and other
liabilities.................... 310 459
Stockholders' equity............ 4,588 1,666
------- ------
Total liabilities and
stockholders' equity....... $40,894 $5,947
======= ======
Net interest spread............. 3.38% 2.47%
==== =====
Net interest income/margin...... $1,496 4.04% $223 4.24%
====== ==== ==== =====
</TABLE>
- --------
(1) Average loans include nonaccrual loans. All loans and deposits are
domestic.
(2) Fees in the amount of $12,000 and $28,000 are included in interest and fees
on loans for 1997 and 1996, respectively.
The percentage of earning assets funded by interest-bearing liabilities also
affects Naples' net interest income. Naples' 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. Naples maintains a
relatively consistent percentage of earning assets that are funded by non
interest-bearing liabilities. During the 1998 six months, 10.1% of Naples's
average earning assets were funded by non interest-bearing liabilities compared
with 15.1% in the 1997 six months. In 1997, 13.5% of Naples' average earning
assets were funded by non interest-bearing liabilities as opposed to 11.0% in
1996. The earning assets funded by non interest-bearing liabilities had a
positive impact on the net interest income.
71
<PAGE>
The following tables set 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 the 1998 six months and 1997 and 1996. For the
purposes of these tables, 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>
JUNE 30
-------------------------
1998 COMPARED TO 1997
VARIANCE DUE TO
-------------------------
VOLUME YIELD/RATE TOTAL
------ ---------- ------
<S> <C> <C> <C>
EARNING ASSETS:
Loans................................................ $ 849 $ 7 $ 856
Securities........................................... 384 (14) 370
Funds sold........................................... 314 3 317
------ ---- ------
Total interest income.............................. 1,547 (4) 1,543
INTEREST-BEARING LIABILITIES:
Interest-bearing transaction accounts................ 104 (6) 98
Savings and money market deposits.................... 329 3 332
Time deposits........................................ 353 (16) 337
Funds purchased...................................... (1) -- (1)
Long-term borrowings................................. 64 -- 64
------ ---- ------
Total interest expense............................. 849 (19) 830
------ ---- ------
Net interest income.................................. $ 698 $ 15 $ 713
====== ==== ======
</TABLE>
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................................................. $1,453 $(40) $1,413
Securities............................................ 774 4 778
Funds sold............................................ 195 -- 195
------ ---- ------
Total interest income............................... 2,422 (36) 2,386
INTEREST-BEARING LIABILITIES:
Interest-bearing transaction accounts................. 273 (7) 266
Savings and money market deposits..................... 335 1 336
Time deposits......................................... 447 (2) 445
Funds purchased....................................... 10 -- 10
Long-term borrowings.................................. 56 -- 56
------ ---- ------
Total interest expense.............................. 1,121 (8) 1,113
------ ---- ------
Net interest income................................... $1,301 $(28) $1,273
====== ==== ======
</TABLE>
72
<PAGE>
INTEREST SENSITIVITY
Naples 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 Naples 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.
Naples 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. Naples 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.
The following table illustrates Naples's interest rate sensitivity at June 30,
1998, 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>
JUNE 30, 1998
--------------------------------------------------------------------
AFTER ONE AFTER THREE
WITHIN ONE THROUGH THROUGH WITHIN GREATER THAN
MONTH THREE MONTHS TWELVE MONTHS ONE YEAR ONE YEAR TOTAL
---------- ------------ ------------- -------- ------------ -------
<S> <C> <C> <C> <C> <C> <C>
ASSETS:
Earning assets:
Loans................. $12,548 $1,313 $ 9,194 $23,055 $ 9,173 $32,228
Securities(1)......... 1,498 3,390 21,184 26,072 13,757 39,829
Funds sold............ 1,148 -- -- 1,148 -- 1,148
------- ------ ------- ------- ------- -------
Total interest-
earning assets..... $15,194 $4,703 $30,378 $50,275 $22,930 $73,205
LIABILITIES:
Interest-bearing
liabilities:
Interest-bearing
deposits:
Demand deposits..... $ 7,026 $ -- $ -- $ 7,026 $10,538 $17,564
Savings deposits.... 5,963 -- -- 5,963 8,931 14,894
Time deposits....... 2,146 2,783 25,525 30,454 445 30,899
Funds purchased....... 241 -- -- 241 -- 241
Long-term borrowings.. -- -- -- -- 2,000 2,000
------- ------ ------- ------- ------- -------
Total interest-
bearing
liabilities........ $15,376 $2,783 $25,525 $43,684 $21,914 $65,598
------- ------ ------- ------- ------- -------
Period gap.............. $ (182) $1,920 $ 4,853 $ 6,591 $ 1,016
======= ====== ======= ======= =======
Cumulative gap.......... $ (182) $1,738 $ 6,591 $ 6,591 $ 7,607 $ 7,607
======= ====== ======= ======= ======= =======
Ratio of cumulative gap
to total earning
assets................. (0.25)% 2.37% 9.00% 9.00% 10.39%
</TABLE>
- --------
(1) Excludes investment equity securities of $597,000.
73
<PAGE>
MARKET RISK
Naples'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. Naples's market risk arises primarily from inherent
interest rate risk in its lending, investing and deposit gathering activities.
Naples 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 Naples'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.
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
$27.7 million, or 38.6% of total assets), carried 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 $64.6 million, or 90.0%, 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 Naples in its simulation analysis.
Specifically, Naples'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 effects
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.
74
<PAGE>
The following table illustrates the results of simulation analysis used by
Naples to determine the extent to which market risk would have effected net
interest income 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 Naples's net interest
margin, may differ from that found in the table.
MARKET RISK
(AMOUNTS IN THOUSANDS, EXCEPT PERCENTAGES)
DECEMBER 31, 1997
<TABLE>
<CAPTION>
CHANGE FROM
NET INTEREST 1997 NET INTEREST
CHANGE IN PREVAILING INTEREST RATES INCOME AMOUNT INCOME AMOUNT
- ----------------------------------- ------------- -----------------
<S> <C> <C>
+ 200 basis points.............................. $1,660 10.96%
+ 100 basis points.............................. 1,578 5.48
0 basis points.................................. 1,496
- -100 basis points............................... 1,391 (7.02)
- -200 basis points............................... 1,286 (14.04)
</TABLE>
PROVISIONS AND ALLOWANCE FOR LOAN LOSSES
Throughout the year Naples 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, Naples 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 Naples's control.
While it is possible that in particular periods Naples may sustain losses which
are substantial relative to the allowance for loan losses, it is the judgment
of Naples 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.
75
<PAGE>
The table below sets forth certain information with respect to Naples' average
loans, allowance for loan losses, charge-offs and recoveries for the 1998 six
months and the two years ended December 31, 1997.
ALLOWANCE FOR LOAN LOSSES
(AMOUNTS IN THOUSANDS, EXCEPT PERCENTAGES)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED
JUNE 30, DECEMBER 31,
---------- ---------------
1998 1997 1996
---------- ------- ------
<S> <C> <C> <C>
Total loans outstanding at end of period, net of
unearned income.................................. $32,228 $27,701 $6,049
======= ======= ======
Average amount of loans outstanding, net of
unearned income.................................. $29,908 $16,903 $ 771
======= ======= ======
Allowance for loan losses at beginning of period.. $ 313 $ 90 $ --
Charge-offs:
Commercial, financial and agricultural.......... -- -- --
Real estate--mortgage........................... -- -- --
Consumer........................................ -- -- --
Total charge-offs............................. -- -- --
Recoveries:
Commercial, financial and agricultural.......... -- -- --
Real estate--mortgage........................... -- -- --
Consumer........................................ -- -- --
------- ------- ------
Total recoveries.............................. -- -- --
------- ------- ------
Net charge-offs (recoveries).................. -- -- --
Provision for loan losses......................... 78 223 90
------- ------- ------
Allowance for loan losses at period-end........... $ 391 $ 313 $ 90
======= ======= ======
Allowance for loan losses to period-end loans..... 1.21% 1.13% 1.49%
Net charge-offs (recoveries) to average loans..... -- -- --
</TABLE>
At June 30, 1998 and year-end 1997 the allowance for loan losses was $391,000
and $313,000, respectively, compared to $90,000 at year-end 1996. The allowance
at June 30, 1998 to ending loans was 1.21%, compared to 1.13% at December 31,
1997 and 1.49% at December 31, 1996. The allowance was considered adequate at
June 30, 1998.
Naples has no charge-off history since its inception.
76
<PAGE>
NONPERFORMING ASSETS
Nonperforming assets are loans on a non-accrual basis, accruing loans 90 days
or more past due, restructured loans, and other real estate owned. At June 30,
1998 and December 31, 1997, nonperforming assets totaled $50,000. There were no
nonperforming assets at year-end 1996. The following table summarizes
nonperforming assets for the periods indicated:
NONPERFORMING ASSETS
(AMOUNTS IN THOUSANDS, EXCEPT PERCENTAGES)
<TABLE>
<CAPTION>
AT DECEMBER
AT JUNE 30, 31,
----------- --------------
1998 1997 1996
----------- ------- -----
<S> <C> <C> <C>
Nonaccrual loans.................................. $ 50 $ 50 $ --
Restructured loans................................ -- -- --
Loans past due 90 days or more and still
accruing......................................... -- -- --
------- ------- -----
Total nonperforming loans....................... 50 50 --
Other real estate owned........................... -- -- --
------- ------- -----
Total nonperforming assets...................... $ 50 $ 50 $ --
======= ======= =====
Allowance for loan losses to period-end loans..... 1.21% 1.13% 1.49%
Allowance for loan losses to period-end
nonperforming loans.............................. 782.00 626.00 --
Allowance for loan losses to period-end
nonperforming assets............................. 782.00 626.00 --
Net charge-offs (recoveries) to average loans..... -- -- --
Nonperforming assets to period-end loans and
foreclosed property.............................. 0.16 0.18 --
Nonperforming loans to period-end loans........... 0.16 0.18 --
</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.
Naples has identified loans totaling approximately $42,000, or 0.13% of the
loan portfolio at June 30, 1998, through its 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 nonperforming 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. Naples management does not expect
a significant loss in any of these loans.
77
<PAGE>
NONINTEREST INCOME
Total noninterest income increased $61,000 or 184.8% from the 1997 six months
to the 1998 six months and $103,000 from 1996 to 1997. Increases occurred in
each 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>
SIX MONTHS
ENDED YEAR ENDED
JUNE 30, DECEMBER 31,
------------ -------------
1998 1997 1997 1996
----- ----- ------ ------
<S> <C> <C> <C> <C>
Service charges on deposit accounts................. $ 44 $ 30 $ 101 $ 3
Investment services income.......................... -- -- -- --
Trust fees.......................................... -- -- -- --
Origination and sale of mortgage loans.............. -- -- -- --
Securities gains (losses)........................... -- -- -- --
Other............................................... 50 3 6 1
----- ----- ------ -----
Total noninterest income.......................... $ 94 $ 33 $ 107 $ 4
===== ===== ====== =====
</TABLE>
NONINTEREST EXPENSE
Total noninterest expense increased $195,000 from the 1997 six months to the
1998 six months, or 30.0%. Total noninterest expense increased $628,000, or
91.3%, from 1996 to 1997. The following table summarizes noninterest expenses
for the periods indicated:
NONINTEREST EXPENSE
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED
JUNE 30, DECEMBER 31,
----------- --------------
1998 1997 1997 1996
----- ----- ------- ------
<S> <C> <C> <C> <C>
Salaries and employee benefits....................... $ 388 $ 353 $ 610 $ 366
Net occupancy expense................................ 145 152 321 136
Postage and freight.................................. 13 8 17 6
Printing and reproduction............................ 16 19 35 27
Banking assessments.................................. 18 8 19 --
Data processing expenses............................. 34 29 32 12
Legal and professional fees.......................... 22 25 39 13
Loss on disposition of other real estate owned....... -- -- -- --
Other................................................ 208 55 243 128
----- ----- ------- -----
Total noninterest expense.......................... $ 844 $ 649 $ 1,316 $ 688
===== ===== ======= =====
</TABLE>
INCOME TAXES, INFLATION AND OTHER ISSUES
Income tax expense was $170,000 during the 1998 six months compared to a tax
benefit of $68,000 during the 1997 six months, for an effective rate of 37.2%
and 37.4%, respectively. Income tax
78
<PAGE>
expense was $24,000 in 1997 for an effective rate of 37.5%, compared with a tax
benefit of $205,000 in 1996, an effective rate of 37.2%.
Because Naples' assets and liabilities are essentially monetary in nature, the
effect of inflation on Naples' 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 Naples' 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, Naples
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.
YEAR 2000 ISSUES
Naples is aware of the many areas affected by the Year 2000 computer issue as
addressed by the Federal Financial Institutions Examination Council ("FFIEC")
in its interagency statement which provided an outline for institutions to
effectively manage the Year 2000 challenges. A Year 2000 plan has been approved
by the board of directors which includes multiple phases, tasks to be
completed, and target dates for completion. Issues addressed therein include
awareness, assessment, validation, implementation, testing, and contingency
planning. Progress under this plan is reported to the board of directors on a
regular basis.
Naples has formed a Year 2000 committee that is charged with the oversight of
completing the project on a timely basis. Naples has completed its awareness,
assessment and renovation phases and is actively involved in validating and
implementing the plan. At the present time, Naples is into its testing phase
and anticipates that this phase will be substantially completed by December 31,
1998. Since it routinely upgrades and purchases technologically advanced
software and hardware on a continual basis, Naples has determined that the cost
of making modifications to correct any Year 2000 issues will not materially
affect reported operating results.
Naples vendors and suppliers have been contacted for written confirmation of
their products readiness for Year 2000 compliance. Negative or deficient
responses are analyzed and periodically reviewed to prescribe timely actions
within Naples' contingency planning. Naples' main service provider has
completed testing of its mission critical application software and item
processing software. FFIEC guidance on testing Year 2000 compliance of service
providers states that proxy tests are acceptable compliance tests. In proxy
testing, the service provider tests with a representative sample of financial
institutions that use a particular service, with the results of such testing
shared with all similarly situated clients of the service provider. While
Naples will conduct its own user acceptance testing of mission critical
applications, it has authorized the acceptance of proxy testing to provide
supplemental assurance, since proxy tests have been conducted with financial
institutions that are similar in type and complexity to its own, using the same
version of the Year 2000 ready software and the same hardware and operating
systems.
79
<PAGE>
Naples also recognizes the importance of determining that its borrowers are
facing the Year 2000 problem in a timely manner to avoid deterioration of the
loan portfolio solely due to this issue. All material relationships have been
identified to assess the inherent risks. Deposit customers have received
statement stuffers and informational material in this regard. Naples plans to
work on a one-on-one basis with any borrower who has been identified as having
high Year 2000 risk exposure.
Accordingly, management does not believe that Naples will incur significant
additional costs associated with the Year 2000 issue. Yet, there can be no
assurances that all hardware and software that Naples will use will be Year
2000 compliant. Management can not predict the amount of financial difficulties
it may incur due to customer and vendor inability to perform according to their
agreements with Naples or the effects that other third parties may bring as a
result of this issue. Therefore, there can be no assurance that the failure or
delay of others to address the issue or that the costs involved in such process
will not have a material adverse impact on Naples' business, financial
condition, and results of operations.
Naples' contingency plans relative to Year 2000 issues have not been finalized.
These plans are evolving as the testing of systems progresses. During the
testing phase (scheduled for completion by December 31, 1998) management will
develop and modify a "worst case scenario" contingency plan based on testing
results. It is also anticipated that Naples' deposit customers will have
increased demands for cash in the latter part of 1999 and correspondingly
management will maintain higher liquidity levels to address this demand.
LEGAL MATTERS
The legality of the Alabama National common stock to be issued in the Merger
will be passed upon by Maynard, Cooper & Gale, P.C., Birmingham, Alabama
("Maynard, Cooper"). As of October , 1998, attorneys in the law firm of
Maynard, Cooper owned an aggregate of 34,274 Shares of Alabama National common
stock.
Certain legal matters in connection with the Merger will be passed upon for
Naples by Smith, Gambrell & Russell, LLP, Atlanta, Georgia.
EXPERTS
The consolidated financial statements of Alabama National as of December 31,
1997 and 1996 and for the years ended December 31, 1997 and 1996, incorporated
herein by reference in this proxy statement-prospectus, 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
PricewaterhouseCoopers LLP, independent accountants, given on the authority of
that firm as experts in accounting and auditing.
The consolidated statements of income, changes in shareholders' equity and cash
flows of Alabama National for the year ended December 31, 1995, incorporated by
reference in this proxy statement- prospectus have been incorporated herein in
reliance on the report of PricewaterhouseCoopers LLP, 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.
80
<PAGE>
The financial statements of Naples as of December 31, 1997 and 1996 and for the
years then ended have been included herein in reliance on the report of Hacker,
Johnson, Cohen & Grieb, P.A., independent certified public accountants, given
upon the authority of such firm as experts in accounting and auditing.
WHERE YOU CAN FIND MORE INFORMATION
Alabama National files annual, quarterly and special reports, proxy statements
and other information with the SEC. You may read and copy any reports,
statements or other information that the companies file with the SEC at the
SEC's public reference rooms in Washington, D.C., New York, New York and
Chicago, Illinois. Please call the SEC at 1-800-SEC-0330 for further
information on the public reference rooms. These SEC filings are also available
to the public from commercial document retrieval services and at the Internet
world wide web site maintained by the SEC at "http://www.sec.gov." In addition,
Alabama National common stock is traded on the NASDAQ National Market System.
Reports, proxy statements and other information should also be available for
inspection at the offices of the National Association of Securities Dealers,
Inc., 1735 K Street, N.W., Washington, D.C. 70006.
Alabama National filed a Registration Statement on Form S-4 (the "Registration
Statement") to register with the SEC the Alabama National common stock to be
issued to Naples shareholders in the Merger. This proxy statement-prospectus is
a part of that Registration Statement and constitutes a prospectus of Alabama
National. As allowed by SEC rules, this proxy statement-prospectus does not
contain all the information you can find in Alabama National's Registration
Statement.
The SEC allows Alabama National to "incorporate by reference" information into
this proxy statement-prospectus, which means that the companies can disclose
important information to you by referring you to another document filed
separately with the SEC. The information incorporated by reference is
considered part of this proxy statement-prospectus, except for any information
superseded by information contained directly in this proxy statement-prospectus
or in later filed documents incorporated by reference in this proxy statement-
prospectus.
This proxy statement-prospectus incorporates by reference the documents set
forth below that Alabama National has previously filed with the SEC. These
documents contain important information about Alabama National. Some of these
filings have been amended by later filings, which are also listed.
<TABLE>
<CAPTION>
SEC FILINGS (FILE NO. 0-
25160) PERIOD/AS OF DATE
------------------------ ------------------------------------------------
<S> <C>
Annual Report on Form 10-
K Year ended December 31, 1997
Quarterly Reports on Form
10-Q Quarters ended March 31, 1998 and June 30, 1998;
Current Reports on Form
8-K June 11, 1998; and October 5, 1998
</TABLE>
81
<PAGE>
Alabama National also incorporates by reference additional documents that may
be filed with the SEC between the date of this proxy statement-prospectus and
the consummation of the Merger or the termination of the Merger Agreement.
These include periodic reports, such as Annual Reports on Form 10-K, Quarterly
Reports on Form 10-Q and Current Reports on Form 8-K, as well as proxy
statements.
Alabama National has supplied all information contained or incorporated by
reference in this proxy statement-prospectus relating to Alabama National and
Citizens & Peoples, and Naples has supplied all such information relating to
Naples.
As noted in the "Surrender of Certificates" section of this proxy statement-
prospectus on page , Naples shareholders should not send in their Naples
certificates until they receive the transmittal materials from the exchange
agent. Registered Naples shareholders who have further questions about their
share certificates, the conversion of certificates into book-entry form or the
exchange of their Naples common stock for Alabama National common stock should
call the stock transfer agent at 1-800-568-3476.
You can obtain any of the documents incorporated by reference through Alabama
National, the SEC or the SEC Internet web site as described above. Documents
incorporated by reference are available from Alabama National without charge.
Naples shareholders may obtain documents incorporated by reference in this
proxy statement-prospectus by requesting them in writing or by telephone at the
following address:
Alabama National BanCorporation
1927 First Avenue North
Birmingham, Alabama 35203
Attn.: Corporate Secretary, Kimberly Moore
Telephone: (205) 583-3600
You should rely only on the information contained or incorporated by reference
in this proxy statement-prospectus. We have not authorized anyone to provide
you with information that is different from what is contained in this proxy
statement-prospectus. This proxy statement-prospectus is dated November ,
1998. You should not assume that the information contained in this proxy
statement-prospectus is accurate as of any date other than that date. Neither
the mailing of this proxy statement-prospectus to shareholders nor the issuance
of Alabama National common stock in the Merger creates any implication to the
contrary.
82
<PAGE>
APPENDIX A
AGREEMENT AND PLAN OF MERGER
<PAGE>
APPENDIX A
AGREEMENT AND PLAN OF MERGER
by and between
COMMUNITY BANK OF NAPLES, NATIONAL ASSOCIATION
and
CITIZENS & PEOPLES BANK, NATIONAL ASSOCIATION
Dated as of
September 21, 1998
A-1
<PAGE>
TABLE OF CONTENTS
-----------------
Page
----
ARTICLE 2
TRANSACTIONS AND TERMS OF MERGER
--------------------------------
1.1 Merger......................................................... A-5
1.2 Time and Place of Closing...................................... A-5
1.3 Effective Time................................................. A-6
ARTICLE 2
TERMS OF MERGER
----------------
2.1 Articles of Association........................................ A-6
2.2 Bylaws......................................................... A-6
2.3 Directors...................................................... A-6
2.4 Name and Business.............................................. A-6
2.5 Assumption of Rights........................................... A-6
2.6 Assumption of Liabilities...................................... A-6
ARTICLE 3
MANNER OF CONVERTING SHARES
---------------------------
3.1 Conversion of Shares........................................... A-6
3.2 Anti-Dilution Provisions....................................... A-7
3.3 Shares Held by NAPLES.......................................... A-7
3.4 Dissenting Stockholders........................................ A-7
3.5 Fractional Shares.............................................. A-7
ARTICLE 4
EXCHANGE OF SHARES
------------------
4.1 Exchange Procedures............................................ A-8
4.2 Rights of Former NAPLES Stockholders........................... A-8
4.3 Lost or Stolen Certificates.................................... A-8
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF NAPLES
----------------------------------------
5.1 Organization, Standing and Power............................... A-9
5.2 Authority; No Breach By Agreement.............................. A-9
5.3 Capital Stock.................................................. A-10
5.4 NAPLES Subsidiaries............................................ A-10
5.5 Financial Statements........................................... A-11
5.6 Absence of Undisclosed Liabilities............................. A-11
5.7 Absence of Certain Changes or Events........................... A-11
5.8 Tax Matters.................................................... A-11
5.9 Loan Portfolio; Documentation and Reports...................... A-12
5.10 Assets; Insurance.............................................. A-13
5.11 Environmental Matters.......................................... A-13
5.12 Compliance with Laws........................................... A-14
A-2
<PAGE>
5.13 Labor Relations; Employees..................................... A-14
5.14 Employee Benefit Plans......................................... A-14
5.15 Material Contracts............................................. A-16
5.16 Legal Proceedings.............................................. A-17
5.17 Reports........................................................ A-17
5.18 Statements True and Correct.................................... A-17
5.19 Accounting, Tax and Regulatory Matters......................... A-17
5.20 Offices........................................................ A-18
5.21 Data Processing Systems........................................ A-18
5.22 Intellectual Property.......................................... A-18
5.23 Administration of Trust Accounts............................... A-18
5.24 Broker's Fees.................................................. A-18
5.25 Regulatory Approvals........................................... A-18
5.26 Opinion of Counsel............................................. A-18
5.27 Takeover Laws.................................................. A-18
5.28 Year 2000...................................................... A-18
ARTICLE 6
REPRESENTATIONS AND WARRANTIES OF C&P AND ANB
---------------------------------------------
6.1 Organization, Standing and Power............................... A-19
6.2 Authority; No Breach By Agreement.............................. A-19
6.3 Capital Stock.................................................. A-20
6.4 Financial Statements........................................... A-20
6.5 Absence of Undisclosed Liabilities............................. A-20
6.6 Absence of Certain Changes or Events........................... A-20
6.7 Compliance with Laws........................................... A-21
6.8 Material Contracts............................................. A-21
6.9 Legal Proceedings.............................................. A-21
6.10 Reports........................................................ A-21
6.11 Statements True and Correct.................................... A-21
6.12 Accounting, Tax and Regulatory Matters......................... A-22
6.13 1934 Act Compliance............................................ A-22
6.14 Regulatory Approvals........................................... A-22
6.15 Opinion of Counsel............................................. A-22
ARTICLE 7
CONDUCT OF BUSINESS PENDING CONSUMMATION
----------------------------------------
7.1 Covenants of Parties........................................... A-22
7.2 Covenants of NAPLES............................................ A-23
7.3 Covenants of ANB............................................... A-25
7.4 Adverse Changes in Condition................................... A-25
7.5 Reports........................................................ A-25
7.6 Acquisition Proposals.......................................... A-25
7.7 NASDAQ Qualification........................................... A-25
A-3
<PAGE>
ARTICLE 8
ADDITIONAL AGREEMENTS
--------------------------------
8.1 Regulatory Matters.............................................. A-25
8.2 Access to Information........................................... A-27
8.3 Efforts to Consummate........................................... A-27
8.4 NAPLES Stockholders' Meeting.................................... A-27
8.5 Certificates of Objections...................................... A-28
8.6 Press Releases.................................................. A-28
8.7 Expenses........................................................ A-28
8.8 Failure to Close................................................ A-28
8.9 Fairness Opinion................................................ A-29
8.10 Accounting and Tax Treatment.................................... A-29
8.11 Agreement of Affiliates......................................... A-29
ARTICLE 9
CONDITIONS PRECEDENT TO OBLIGATIONS TO CONSUMMATE
---------------------------------------------------
9.1 Conditions to Obligations of Each Party......................... A-30
9.2 Conditions to Obligations of ANB and C&P........................ A-31
9.3 Conditions to Obligations of NAPLES............................. A-32
ARTICLE 10
TERMINATION
----------------
10.1 Termination..................................................... A-33
10.2 Effect of Termination........................................... A-34
10.3 Non-Survival of Representations and Covenants................... A-34
ARTICLE 11
MISCELLANEOUS
----------------
11.1 Definitions.................................................... A-34
11.2 Entire Agreement............................................... A-40
11.3 Amendments..................................................... A-40
11.4 Waivers........................................................ A-40
11.5 Assignment..................................................... A-41
11.6 Notices........................................................ A-41
11.7 Brokers and Finders............................................ A-42
11.8 Governing Law.................................................. A-42
11.9 Counterparts................................................... A-42
11.10 Captions....................................................... A-42
11.11 Enforcement of Agreement....................................... A-42
11.12 Severability................................................... A-42
11.13 Singular/Plural; Gender........................................ A-42
List of Exhibits .................................................... A-46
A-4
<PAGE>
[EXECUTION COPY]
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "Agreement") is made and entered into
as of September 21, 1998 by and among COMMUNITY BANK OF NAPLES, NATIONAL
ASSOCIATION ("NAPLES"), a banking association organized and existing under the
laws of the United States, with its principal office located in Naples, Florida;
CITIZENS & PEOPLES BANK, NATIONAL ASSOCIATION ("C&P"), a banking association
organized and existing under the laws of the United States, with its principal
office located in Cantonment, 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 NAPLES, C&P 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 NAPLES with
and into C&P, which is a wholly-owned subsidiary of ANB. At the effective time
of such merger, the outstanding shares of the capital stock of NAPLES shall be
converted into the right to receive shares of the common stock of ANB (except as
provided herein). As a result, stockholders of NAPLES shall become stockholders
of ANB, and the assets and operations of C&P and NAPLES shall be combined under
the charter of C&P. The transactions described in this Agreement are subject to
the approvals of the stockholders of NAPLES and C&P and the Office of the
Comptroller of the Currency 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, NAPLES shall be merged with and into C&P in accordance with the
provisions of 12 U.S.C. (S) 215a and with the effect provided therein (the
"Merger"). C&P shall be the Surviving Association resulting from the Merger and
shall continue to be governed by the laws of the United States. The Merger shall
be consummated pursuant to the terms of this Agreement, which has been approved
and adopted by a majority of the NAPLES Board, the C&P Board and the ANB 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 date and 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.
A-5
<PAGE>
1.3 EFFECTIVE TIME. The Merger and other transactions provided for in this
--------------
Agreement shall become effective as of the time specified in the merger approval
to be issued by the Comptroller of the Currency (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 NAPLES approve this Agreement.
ARTICLE 2
TERMS OF MERGER
---------------
2.1 ARTICLES OF ASSOCIATION. The Articles of Association of C&P in effect
-----------------------
immediately prior to the Effective Time shall be the Articles of Association of
the Surviving Association immediately following the Effective Time.
2.2 BYLAWS. The Bylaws of C&P in effect immediately prior to the Effective
------
Time shall be the Bylaws of the Surviving Association immediately following the
Effective Time, until otherwise amended or repealed.
2.3 DIRECTORS. The directors of the Surviving Association from and after
---------
the Effective Time shall consist of the six (6) incumbent directors of C&P.
2.4 NAME AND BUSINESS. The name of the Surviving Association shall remain
-----------------
Citizens & Peoples Bank, National Association. The business of the Surviving
Association shall be conducted at its main office located in Cantonment,
Florida, and at its legally established branches.
2.5 ASSUMPTION OF RIGHTS. At the Effective Time and thereafter, except as
--------------------
otherwise provided herein, all assets and property (real, personal and mixed,
tangible and intangible, choses in action, rights and credits) then owned by
NAPLES or which would inure to it, shall immediately by operation of law and
without any conveyance, transfer or further action, become the property of the
Surviving Association. The Surviving Association shall be deemed to be a
continuation of NAPLES, and the Surviving Association shall succeed to the
rights of NAPLES.
2.6 ASSUMPTION OF LIABILITIES. All liabilities and obligations of NAPLES
-------------------------
of every kind and description shall be assumed by the Surviving Association, and
the Surviving Association shall be bound thereby in the same manner and to the
same extent that NAPLES was so bound at the Effective Time.
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 and of C&P Common Stock issued and
outstanding immediately prior to the Effective Time shall remain issued and
outstanding from and after the Effective Time.
(B) Each share of NAPLES Common Stock (excluding shares held by any NAPLES
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 0.53271 shares of
ANB Common Stock (the "Exchange Ratio").
A-6
<PAGE>
(C) Certain stockholders of NAPLES hold NAPLES Options providing for the
purchase of an aggregate of 70,000 additional shares of NAPLES Common Stock
pursuant to stock option agreements issued under the Community Bank of Naples
National Association 1996 Stock Option Plan (the "NAPLES Option Plan"). At the
Effective Time, by virtue of the Merger, C&P shall assume the obligations
arising under or pursuant to the NAPLES Option Plan, and C&P shall be vested
with the powers, rights and privileges of NAPLES under the NAPLES Option Plan.
Each NAPLES Option shall be converted into an option to acquire the number of
shares of ANB Common Stock equal to the number of shares of NAPLES Common Stock
subject to such NAPLES Option multiplied by the Exchange Ratio, at a price equal
to the exercise price for the NAPLES Option at issue divided by the Exchange
Ratio. The other terms and conditions of said options, including without
limitation the vesting schedules and duration of the options, shall remain as
provided for in the NAPLES Option Plan and stock option agreements issued
thereunder.
(D) Assuming that no holders of NAPLES Common Stock exercise their rights
under the Dissenter Provisions, the holders of NAPLES Common Stock (including
individuals holding NAPLES Options) shall receive, in the aggregate,
approximately 570,000 shares of ANB Common Stock.
3.2 ANTI-DILUTION PROVISIONS. In the event NAPLES changes the number of
------------------------
shares of NAPLES 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 NAPLES. Each of the shares of NAPLES Common Stock held
---------------------
by any NAPLES 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 NAPLES Common Stock
-----------------------
who perfects his dissenters' rights of appraisal in accordance with and as
contemplated by 12 U.S.C. '' 215a(b)-(d) and any regulations promulgated
thereunder (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 Dissenter Provisions and surrendered to the
Surviving Association the certificate or certificates representing the shares
for which payment is being made; provided, further, that nothing contained in
this Section 3.4 shall in any way limit the right of ANB or C&P 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 NAPLES fails to perfect, or
effectively withdraws or loses, his right to appraisal and of payment for his
shares, ANB shall issue and deliver the consideration to which such holder of
shares of NAPLES Common Stock is entitled under this Article 3 (without
interest) upon surrender by such holder of the certificate or certificates
representing shares of NAPLES 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 NAPLES 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-7
<PAGE>
ARTICLE 4
EXCHANGE OF SHARES
------------------
4.1 EXCHANGE PROCEDURES. Promptly after the Effective Time, the Surviving
-------------------
Association or ANB shall cause the Exchange Agent to mail to the former
stockholders of NAPLES appropriate transmittal materials (which shall specify
that delivery shall be effected, and risk of loss and title to the certificates
theretofore representing shares of NAPLES Common Stock shall pass, only upon
proper delivery of such certificates to the Exchange Agent). After the
Effective Time, each holder of shares of NAPLES Common Stock (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 NAPLES
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). Neither the Surviving Association nor
ANB shall be obligated to deliver the consideration to which any former holder
of NAPLES Common Stock is entitled as a result of the Merger until such holder
surrenders his certificate or certificates representing the shares of NAPLES
Common Stock for exchange as provided in this Section 4.1. The certificate or
certificates for NAPLES Common Stock so surrendered shall be duly endorsed as
the Exchange Agent may require. Any other provision of this Agreement
notwithstanding, neither the Surviving Association, ANB nor the Exchange Agent
shall be liable to a holder of NAPLES 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 NAPLES STOCKHOLDERS. At the Effective Time, the stock
------------------------------------
transfer books of NAPLES shall be closed as to holders of NAPLES Common Stock
immediately prior to the Effective Time, and no transfer of NAPLES 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 NAPLES Common Stock ("NAPLES
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 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 NAPLES Common Stock
shall be entitled to vote after the Effective Time at any meeting of ANB
stockholders the number of whole shares of ANB Common Stock into which their
respective shares of NAPLES Common Stock are converted, regardless of whether
such holders have exchanged their NAPLES Certificates for certificates
representing ANB Common Stock in accordance with the provisions of this
Agreement. Whenever a dividend or other distribution is declared by ANB 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 NAPLES 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 NAPLES Certificate held after the Cutoff, until such
person surrenders said NAPLES Certificate for exchange as provided in Section
4.1 of this Agreement. However, upon surrender of such NAPLES 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 NAPLES Certificate.
4.3 LOST OR STOLEN CERTIFICATES. If any holder of NAPLES Common Stock
---------------------------
convertible into the right to receive shares of ANB Common Stock is unable to
deliver the NAPLES Certificate that represents NAPLES
A-8
<PAGE>
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 NAPLES 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 NAPLES 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 NAPLES Certificate for exchange pursuant to this
Agreement.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF NAPLES
----------------------------------------
NAPLES hereby represents and warrants to C&P and ANB as follows:
5.1 ORGANIZATION, STANDING AND POWER. NAPLES is a national banking
--------------------------------
association duly organized, validly existing and in good standing under the Laws
of the United States 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. NAPLES is duly qualified or licensed to transact business as a
foreign corporation and is 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 NAPLES. NAPLES has delivered to C&P or ANB complete and correct
copies of its Articles of Association 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. NAPLES is an
"insured institution" as defined in the Federal Deposit Insurance Act and
applicable regulations thereunder.
5.2 AUTHORITY; NO BREACH BY AGREEMENT.
---------------------------------
(A) NAPLES 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 NAPLES, subject to the approval of this
Agreement by the holders of two-thirds of the outstanding shares of NAPLES
Common Stock. Subject to such requisite stockholder approval and required
regulatory consents, this Agreement represents a legal, valid and binding
obligation of NAPLES, enforceable against NAPLES 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 NAPLES, nor the
consummation by NAPLES of the transactions provided for herein, nor compliance
by NAPLES with any of the provisions hereof, will (i) conflict with or result in
a breach of any provision of NAPLES's Articles of Association 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 NAPLES Company under, any
Contract or Permit of any NAPLES Company, 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 NAPLES 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
A-9
<PAGE>
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 NAPLES, no notice to, filing with or
Consent of, any public body or authority is necessary for the consummation by
NAPLES of the Merger and the other transactions provided for in this Agreement.
5.3 CAPITAL STOCK.
-------------
(A) The authorized capital stock of NAPLES consists of 10,000,000 shares of
NAPLES Common Stock, of which 1,000,000 shares are issued and outstanding. All
of the issued and outstanding shares of capital stock of NAPLES are duly and
validly issued and outstanding and are fully paid and nonassessable (except for
the assessment contemplated by 12 U.S.C. (S) 55; however, to the Knowledge of
NAPLES, no circumstance or fact exists that provides a basis for an assessment
under such statute). None of the outstanding shares of capital stock of NAPLES
has been issued in violation of any preemptive rights of the current or past
stockholders of NAPLES. Pursuant to the terms of the 1996 Incentive Stock
Option Plan, as of the date of this Agreement, there are outstanding options
("NAPLES Options") with the right to purchase a total of 70,000 shares of NAPLES
Common Stock, as more fully set forth in Schedule 5.3 attached hereto. NAPLES
------------
Options to purchase 42,000 shares of NAPLES Common Stock are now exercisable.
(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 NAPLES outstanding and no
outstanding options, warrants, scrip, rights to subscribe to, calls, stock
appreciation rights or commitments of any character whatsoever relating to, or
securities or rights convertible into or exchangeable for, shares of the capital
stock of NAPLES or contracts, commitments, understandings or arrangements by
which NAPLES 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. NAPLES has no liability for dividends declared or accrued,
but unpaid, with respect to any of its capital stock.
5.4 NAPLES SUBSIDIARIES.
-------------------
(A) The NAPLES Subsidiaries are set forth on Schedule 5.4. To the extent any
------------
NAPLES Subsidiaries exist, each such NAPLES 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 NAPLES
Subsidiary is duly qualified or licensed to transact business as a foreign
corporation and is 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 NAPLES.
(B) The authorized and issued and outstanding capital stock of each NAPLES
Subsidiary is set forth on Schedule 5.4. NAPLES owns all of the issued and
------------
outstanding shares of capital stock of each NAPLES Subsidiary. No equity
securities of any NAPLES 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 NAPLES 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 NAPLES Company is or may be bound to transfer any shares of the capital
stock of any NAPLES Subsidiary. There are no Contracts relating to the rights
of any NAPLES Company to vote or to dispose of any shares of the capital stock
of any NAPLES Subsidiary. All of the shares of capital stock of each NAPLES
Subsidiary held by a NAPLES 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 NAPLES Company free and clear of
any Lien. No NAPLES Subsidiary has any liability for dividends declared or
accrued, but unpaid, with respect to any of its capital stock.
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5.5 FINANCIAL STATEMENTS. Attached hereto as Schedule 5.5 are copies of all
-------------------- ------------
NAPLES Financial Statements and NAPLES Call Reports for periods ended prior to
the date hereof, and NAPLES will deliver to ANB promptly copies of all NAPLES
Financial Statements and NAPLES Call Reports prepared subsequent to the date
hereof. The NAPLES Financial Statements (as of the dates thereof and for the
periods covered thereby) (a) are or, if dated after the date of this Agreement,
will be in accordance with the books and records of the NAPLES Companies, which
have been or will have been, as the case may be, maintained in accordance with
good business practices, and (b) present or will present, as the case may be,
fairly the consolidated financial position of the NAPLES Companies as of the
dates indicated and the consolidated results of operations, changes in
stockholders' equity and cash flows of the NAPLES 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 recurring year-end adjustments that are
not material in amount or effect and the absence of certain footnote
information). The NAPLES 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 NAPLES Company has any
----------------------------------
Liabilities that are reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on NAPLES, except Liabilities accrued or
reserved against in the consolidated balance sheets of NAPLES as of June 30,
1998, included in the NAPLES Financial Statements or reflected in the notes
thereto. No NAPLES Company has incurred or paid any Liability since June 30,
1998, except for such Liabilities incurred or paid in the ordinary course of
business consistent with past business practice and which are not reasonably
likely to have, individually or in the aggregate, a Material Adverse Effect on
NAPLES.
5.7 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as set forth on Schedule
------------------------------------ --------
5.7, since June 30, 1998 (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 NAPLES or its Subsidiaries, (ii) the
NAPLES 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 NAPLES provided in Article 7 of this
Agreement, and (iii) to NAPLES's Knowledge, no fact or condition exists which
NAPLES believes will cause a Material Adverse Effect on NAPLES or its
Subsidiaries in the future.
5.8 TAX MATTERS.
-----------
(A) All Tax returns required to be filed by or on behalf of any of the NAPLES
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,
1997, 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 NAPLES, threatened, with respect to any Taxes that might
result in a determination that would have, individually or in the aggregate, a
Material Adverse Effect on NAPLES, except as reserved against in the NAPLES
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 NAPLES 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
NAPLES Companies for the period or periods through and including the date of the
respective NAPLES Financial Statements has been made and is reflected on such
NAPLES Financial Statements.
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<PAGE>
(D) Deferred Taxes of the NAPLES Companies have been provided for in
accordance with GAAP.
5.9 LOAN PORTFOLIO; DOCUMENTATION AND REPORTS.
-----------------------------------------
(A) Except as disclosed in Schedule 5.9(a), none of the NAPLES 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(a),
---------------
none of the NAPLES 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 NAPLES, any Person, corporation or
enterprise controlling, controlled by or under common control of any of the
foregoing. All of the Loans held by any of the NAPLES Companies were solicited,
originated and exist in material compliance with all applicable NAPLES loan
policies, except for deviations from such policies that (a) have been approved
by current management of NAPLES, in the case of Loans with an outstanding
principal balance that exceeds $25,000, (b) in the judgment of NAPLES, will not
adversely effect the ultimate collectibility of such Loan, or (c) are not
reasonably likely to have, individually or in the aggregate, a Material Adverse
Effect on NAPLES. Except as set forth in Schedule 5.9(a), none of the NAPLES
---------------
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 NAPLES, or by any person or entity hired by NAPLES to conduct a
review of its Loans, as other loans Specifically Mentioned, Special Mention,
Substandard, Doubtful, Loss, Classified, Criticized, Credit Risk Assets,
concerned loans or words of similar import. The allowance for possible loan or
credit losses (the "NAPLES Allowance") shown on the consolidated balance sheets
of NAPLES included in the most recent NAPLES Financial Statements dated prior to
the date of this Agreement was, and the NAPLES Allowance shown on the
consolidated balance sheets of NAPLES included in the NAPLES Financial
Statements as of dates subsequent to the execution of this Agreement will be, as
of the dates thereof, adequate (within the meaning of GAAP and applicable
regulatory requirements or guidelines) to provide for losses relating to or
inherent in the loan and lease portfolios (including accrued interest
receivables) of the NAPLES Companies and other extensions of credit (including
letters of credit and commitments to make loans or extend credit) by the NAPLES
Companies as of the dates thereof, except where the inadequacy of such Allowance
does not have a Material Adverse Effect on NAPLES.
(B) The documentation relating to each Loan made by any NAPLES 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 NAPLES.
(C) Each of the NAPLES 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 its organization with
(i) the OCC, (ii) the FRB, (iii) the FDIC and (iv) any state regulatory
authority ("State Regulator") (collectively "Regulatory Authorities") and all
other material reports and statements required to be filed by it since its
organization, 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(c) and
---------------
as otherwise provided herein, and except for normal examinations conducted by
Regulatory Authorities in the regular course of the business of the NAPLES
Companies, to the Knowledge of NAPLES, no Regulatory Authority has initiated any
proceeding or, to the Knowledge of NAPLES, investigation into the business or
operations of any NAPLES Company since NAPLES' organization as a national
banking association. 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 NAPLES Company.
A-12
<PAGE>
5.10 ASSETS; INSURANCE. The NAPLES Companies have marketable title, free
-----------------
and clear of all Liens, to all of their respective Assets. One of the NAPLES
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 tangible properties
----------------
used in the businesses of the NAPLES Companies are in good condition, reasonable
wear and tear excepted, and are usable in the ordinary course of business
consistent with NAPLES's past practices, except for deficiencies that are not
reasonably likely to have, individually or in the aggregate, a Material Adverse
Effect on NAPLES. All Assets that are material to NAPLES's business on a
consolidated basis, held under leases or subleases by any of the NAPLES
Companies are held under valid Contracts enforceable in accordance with their
respective terms (except as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium, or other Laws affecting the
enforcement of creditors' rights generally and except that the availability of
the equitable remedy of specific performance or injunctive relief is subject to
the discretion of the court before which any proceedings may be brought), and
each such Contract is in full force and effect and there is not under any such
Contract any Default or claim of Default by NAPLES or, to the Knowledge of
NAPLES, by any other party to the Contract. NAPLES management believes that the
policies of fire, theft, liability and other insurance maintained with respect
to the Assets or businesses of the NAPLES Companies provide adequate coverage
against loss or Liability, and the fidelity and blanket bonds in effect as to
which any of the NAPLES Companies is a named insured are, in the reasonable
belief of NAPLES' management, reasonably sufficient. Schedule 5.10(c) contains
----------------
a list of all such policies and bonds maintained by any of the NAPLES Companies.
The Assets of the NAPLES Companies include all assets required to operate the
business of the NAPLES Companies as now conducted.
5.11 ENVIRONMENTAL MATTERS.
---------------------
(A) To the Knowledge of NAPLES, each NAPLES 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 NAPLES.
(B) There is no Litigation pending or, to the Knowledge of NAPLES, threatened
before any court, governmental agency or authority or other forum in which any
NAPLES 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 NAPLES 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 NAPLES.
(C) There is no Litigation pending or, to the Knowledge of NAPLES, threatened
before any court, governmental agency or board or other forum in which any of
its Loan Properties (or NAPLES 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 NAPLES.
(D) To the Knowledge of NAPLES, 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 NAPLES.
(E) To the Knowledge of NAPLES, during the period of (i) any NAPLES Company's
ownership or operation of any of its respective current properties, (ii) any
NAPLES Company's participation in the management of any Participation Facility
or (iii) any NAPLES Company's holding of a security interest in a Loan Property,
there
A-13
<PAGE>
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 NAPLES. Prior to the period of
(i) any NAPLES Company's ownership or operation of any of its respective current
properties, (ii) any NAPLES Company's participation in the management of any
Participation Facility, or (iii) any NAPLES Company's holding of a security
interest in a Loan Property, to the Knowledge of NAPLES, 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 are not reasonably
likely to have, individually or in the aggregate, a Material Adverse Effect on
NAPLES.
5.12 COMPLIANCE WITH LAWS. NAPLES is a duly organized banking association
--------------------
under the National Bank Act. Each NAPLES 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 NAPLES, and there has occurred no Default under any such Permit.
Except as may be disclosed on Schedule 5.12, none of the NAPLES Companies:
-------------
(A) is in violation of any Laws, Orders or Permits applicable to its business
or employees conducting its business, except for violations that are not
reasonably likely to have, individually or in the aggregate, a Material Adverse
Effect on NAPLES; 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 NAPLES 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 NAPLES, (ii)
threatening to revoke any Permits, the revocation of which is reasonably likely
to have, individually or in the aggregate, a Material Adverse Effect on NAPLES,
or (iii) requiring any NAPLES 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 NAPLES Company is the subject of any Litigation asserting that it or
any other NAPLES 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 NAPLES 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 NAPLES Company, pending or threatened, nor to its
Knowledge, is there any activity involving any NAPLES 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 NAPLES
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, 1997 and
1998. Schedule 5.13(b) also sets forth the name and offices held by each
----------------
officer and director of each of the NAPLES Companies.
5.14 EMPLOYEE BENEFIT PLANS.
----------------------
(A) Schedule 5.14 lists, and NAPLES 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,
A-14
<PAGE>
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 NAPLES 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 "NAPLES Benefit Plans"). Any of the NAPLES
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 "NAPLES ERISA
Plan." Each NAPLES 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
"NAPLES Pension Plan". No NAPLES Pension Plan is or has been a multi-employer
plan within the meaning of Section 3(37) of ERISA.
(B) All NAPLES 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 are reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on NAPLES. Each
NAPLES 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 NAPLES is not aware of any circumstances likely to
result in revocation of any such favorable determination letter. To the
Knowledge of NAPLES, no NAPLES Company has engaged in a transaction with respect
to any NAPLES Benefit Plan that, assuming the taxable period of such transaction
expired as of the date hereof, would subject any NAPLES 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 NAPLES. 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 threatened against, any NAPLES Benefit Plan
or any NAPLES Company with regard to any NAPLES Benefit Plan, any trust which is
a part of any NAPLES Benefit Plan, any trustee, fiduciary, custodian,
administrator or other person or entity holding or controlling assets of any
NAPLES Benefit Plan, and no basis to anticipate any such action, suit,
arbitration, claim, investigation or audit exists.
(C) No NAPLES 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 NAPLES Pension Plan, (ii) no change in the
actuarial assumptions with respect to any NAPLES Pension Plan, (iii) no increase
in benefits under any NAPLES 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 NAPLES or to materially adversely
affect the funding status of any such plan. Neither any NAPLES Pension Plan nor
any "single-employer plan," within the meaning of Section 4001(a)(15) of ERISA,
currently or formerly maintained by any NAPLES Company, or the single-employer
plan of any entity which is considered one employer with NAPLES 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 NAPLES. No NAPLES Company has provided, or is required to provide,
security to a NAPLES 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 NAPLES Company with respect to any ongoing,
frozen or terminated single-employer plan or the single-employer plan of any
ERISA Affiliate, which
A-15
<PAGE>
Liability is reasonably likely to have a Material Adverse Effect on NAPLES. No
NAPLES Company has incurred any withdrawal Liability with respect to a multi-
employer 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 NAPLES. 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 NAPLES
Pension Plan or by any ERISA Affiliate within the 12-month period ending on the
date hereof.
(E) No NAPLES Company has any obligations for retiree health and life
benefits under any of the NAPLES Benefit Plans, and there are no restrictions on
the rights of such NAPLES 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 NAPLES.
(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
NAPLES Company from any NAPLES Company under any NAPLES Benefit Plan or
otherwise, (ii) increase any benefits otherwise payable under any NAPLES 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
NAPLES.
(G) With respect to all NAPLES 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 NAPLES 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 NAPLES.
5.15 MATERIAL CONTRACTS. Except as set forth on Schedule 5.15, none of the
------------------ -------------
NAPLES 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 NAPLES
Company or the guarantee by any NAPLES 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 NAPLES Companies or any other Person; (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 NAPLES Companies, any member
of the immediate family of the foregoing or, to the Knowledge of NAPLES, any
related interest (as defined in Regulation O promulgated by the FRB) ("Related
Interest") of any of the foregoing; (vii) any Contract (A) which limits the
freedom of any of the NAPLES 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 NAPLES Company; (viii) any Contract providing a
power of attorney or similar authorization given by any of the NAPLES Companies,
except as issued in the ordinary course of business with respect to routine
matters; or (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 NAPLES 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
"NAPLES Contracts"). None of the NAPLES Companies is in Default under any
NAPLES Contract. All of the indebtedness of any NAPLES Company for money
borrowed is prepayable at any time by such NAPLES Company without penalty or
premium.
A-16
<PAGE>
5.16 LEGAL PROCEEDINGS. Except as set forth on Schedule 5.16, there is no
----------------- -------------
Litigation instituted or pending, or, to the Knowledge of NAPLES, 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 NAPLES
Company, or against any Asset, interest, or right of any of them, that is
reasonably likely to have, individually or in the aggregate, a Material Adverse
Effect on NAPLES, nor are there any Orders of any Regulatory Authorities, other
governmental authorities or arbitrators outstanding against any NAPLES Company,
that are reasonably likely to have, individually or in the aggregate, a Material
Adverse Effect on NAPLES.
5.17 REPORTS. Since January 1, 1995, or the date of organization if later,
-------
each NAPLES 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, 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 NAPLES). 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.
5.18 STATEMENTS TRUE AND CORRECT. No statement, certificate, instrument or
---------------------------
other writing furnished or to be furnished by any NAPLES Company or any
Affiliate thereof to ANB pursuant to this Agreement, including the Exhibits and
Schedules hereto, or any other document, agreement or instrument referred to
herein, 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 NAPLES 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 NAPLES 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 NAPLES, 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 NAPLES 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.
5.19 ACCOUNTING, TAX AND REGULATORY MATTERS. No NAPLES Company or any
--------------------------------------
Affiliate thereof has taken any action or has any Knowledge of any fact or
circumstance that is reasonably likely to (i) prevent the transactions
contemplated hereby, including the Merger, from qualifying for pooling-of-
interests accounting treatment or as a reorganization within the meaning of
Section 368(a) of the Internal Revenue Code, or (ii) 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.
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<PAGE>
5.20 OFFICES. The headquarters of each NAPLES Company and each other office,
-------
branch or facility maintained and operated by each NAPLES 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 NAPLES 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. Except as set forth in Schedule 5.21, the
----------------------- -------------
electronic data processing systems and similar systems utilized in processing
the work of each of the NAPLES Companies, including both hardware and software
(a) are supplied by a third party provider; (b) satisfactorily perform the data
processing function for which they are presently being used; and (c) are wholly
within the possession and control of one of the NAPLES Companies or its third
party provider such that physical access to all software, documentation,
passwords, access codes, backups, disks and other data storage devices and
similar items readily can be made accessible to and delivered into the
possession of ANB or ANB's third party provider.
5.22 INTELLECTUAL PROPERTY. One of the NAPLES Companies owns or possesses
---------------------
valid and binding licenses and other rights to use without payment all material
patents, copyrights, trade secrets, trade names, service marks and trademarks
used in its business; and none of the NAPLES Companies has received any notice
of conflict with respect thereto that asserts the rights of others. The NAPLES
Companies have in all material respects performed all the obligations required
to be performed by them and are not in default in any material respect under any
contract, agreement, arrangement or commitment relating to any of the foregoing.
Schedule 5.22 lists all of the trademarks, trade names, licenses and other
- -------------
intellectual property used to conduct the businesses of the NAPLES Companies.
5.23 ADMINISTRATION OF TRUST ACCOUNTS. NAPLES does not possess and does not
--------------------------------
exercise trust powers.
5.24 BROKER'S FEES. NAPLES has retained the NAPLES Financial Advisor to
-------------
serve as its broker and, as of the Effective Time, shall incur a liability to
the NAPLES Financial Advisor for fees in an amount not to exceed $275,000 and
for expenses not to exceed $15,000 (collectively, the "Broker's Fee") in
connection with the Merger. Other than the NAPLES Financial Advisor and the
Broker's Fee, neither NAPLES 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.
5.25 REGULATORY APPROVALS. NAPLES knows of no reason why all requisite
--------------------
regulatory approvals should not or cannot be obtained.
5.26 OPINION OF COUNSEL. NAPLES has no Knowledge of any facts that would
------------------
preclude issuance of the opinion of counsel referred to in Section 9.2(d).
5.27 TAKEOVER LAWS. NAPLES 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 applicable "moratorium", "control share", "fair price",
"business combination" or other anti-takeover laws and regulations
(collectively, "Takeover Laws") of the State of Florida or of the United States.
5.28 YEAR 2000. Except as disclosed in Schedule 5.28, NAPLES represents
--------- -------------
and warrants that all computer software and hardware necessary for the conduct
of its business (the "Software") is designed to be used prior to, during, and
after the calendar year 2000 A.D., and that the Software will operate during
each such time period without error relating to the year 2000, specifically
including any error relating to, or the product of, date
A-18
<PAGE>
data which represents or references different centuries or more than one
century. NAPLES further represents and warrants that the Software accepts,
calculates, sorts, extracts and otherwise processes date inputs and date values,
and returns and displays date values, in a consistent manner regardless of the
dates used, whether before, on, or after January 1, 2000.
ARTICLE 6
REPRESENTATIONS AND WARRANTIES OF C&P AND ANB
---------------------------------------------
C&P and/or ANB, as the case may be, hereby represent and warrant to NAPLES 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,
C&P is a national banking association duly organized, validly existing, and in
good standing under the Laws of the United States, and each of ANB and C&P 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. Each of ANB
and C&P is duly qualified or licensed to transact business as a foreign
corporation and is 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 or C&P, as the case may be. ANB has delivered, or upon request
will deliver, to NAPLES 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, including C&P, in
each case as amended through the date hereof.
6.2 AUTHORITY; NO BREACH BY AGREEMENT.
---------------------------------
(A) Each of ANB and C&P 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, or prior to the Effective Time will
be, duly and validly authorized by all necessary corporate action on the part of
ANB and C&P. Subject to required regulatory consents, this Agreement represents
a legal, valid and binding obligation of ANB and C&P, enforceable against ANB
and C&P 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. Neither the execution and
delivery of this Agreement by C&P, nor the consummation by C&P of the
transactions provided for herein, nor compliance by C&P with any of the
provisions hereof, will conflict with or result in a breach of any provision of
C&P's Articles of Association or Bylaws.
(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
A-19
<PAGE>
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 or C&P, no notice to, filing with or Consent of, any public body or
authority is necessary for the consummation by ANB and C&P of the Merger and the
other transactions provided for in this Agreement.
6.3 CAPITAL STOCK. The authorized capital stock of C&P, as of the date of
-------------
this Agreement, consists of 40,000 shares of C&P Common Stock, of which 25,000
shares are issued and outstanding. ANB owns all of the outstanding C&P Common
Stock. The authorized capital stock of ANB, as of the date of this Agreement,
consists of (i) 17,500,000 shares of ANB Common Stock, of which 9,419,383 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. Pursuant an
Agreement and Plan of Merger dated as of June 8, 1998, by and between ANB and
Community Financial Corporation, ANB has agreed, subject to certain terms and
conditions, to issue up to an additional 1,132,887 shares of ANB Common Stock in
connection with the transactions provided for therein. 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 NAPLES 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 NAPLES 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 391,037
shares of ANB Common Stock under various stock plans.
6.4 FINANCIAL STATEMENTS. Attached hereto as Schedule 6.4 are copies of
-------------------- ------------
all ANB Financial Statements and ANB Regulatory Reports for periods ended prior
to the date hereof, and ANB will deliver to NAPLES 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) (i) are or, if dated after the date of this Agreement,
will be in accordance with the books and records of the ANB Companies, which are
or will be, as the case may be, complete and correct and which have been or will
have been, as the case may be, maintained in accordance with good business
practices, and (ii) 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 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 in amount or effect). The ANB Regulatory Reports have been prepared in
material compliance with the rules and regulations of the FRB.
6.5 ABSENCE OF UNDISCLOSED LIABILITIES. No ANB Company has any Liabilities
----------------------------------
that are reasonably likely to 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 March 31, 1998 included in the ANB
Financial Statements or reflected in the notes thereto. No ANB Company has
incurred or paid any Liability since March 31, 1998, except for such Liabilities
incurred or paid in the ordinary course of business consistent with past
business practice and which are not reasonably likely to have, individually or
in the aggregate, a Material Adverse Effect on ANB.
6.6 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as set forth on Schedule
------------------------------------ --------
6.6, since March 31, 1998 (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.
A-20
<PAGE>
6.7 COMPLIANCE WITH LAWS. ANB is duly registered as a bank holding company
--------------------
under the BHC Act. Each ANB Company, including C&P, 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
as may be disclosed on Schedule 6.7, 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 are not
reasonably likely to 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 is reasonably likely
to 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.
6.8 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.
6.9 LEGAL PROCEEDINGS. Except as set forth on Schedule 6.9, 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 is
reasonably likely to 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 are reasonably likely to have, individually or in the aggregate, a Material
Adverse Effect on ANB.
6.10 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.
6.11 STATEMENTS TRUE AND CORRECT. No statement, certificate, instrument or
---------------------------
other writing furnished or to be furnished by any ANB Company or any Affiliate
thereof to NAPLES pursuant to this Agreement, the Exhibits or Schedules hereto,
or any other document, agreement or instrument referred to herein contains or
will contain any untrue statement of material fact or will omit to state a
material fact necessary to make the statements
A-21
<PAGE>
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 NAPLES's stockholders in connection with the NAPLES
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 NAPLES, 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
NAPLES 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
NAPLES 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 form in
all material respects with the provisions of applicable Law.
6.12 ACCOUNTING, TAX AND 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 (i) prevent the transactions
contemplated hereby, including the Merger, from qualifying for pooling-of-
interests accounting treatment or as a reorganization within the meaning of
Section 368(a) of the Internal Revenue Code, or (ii) 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.
6.13 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.
6.14 REGULATORY APPROVALS. ANB knows of no reason why all requisite
--------------------
regulatory approvals should not or cannot be obtained.
6.15 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 PARTIES.
--------------------
(A) Unless the prior written consent of ANB or NAPLES, as the case may be,
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, 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 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 NAPLES 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 NAPLES shall permit the other Party hereto to make
A-22
<PAGE>
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 NAPLES 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 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 NAPLES shall, and shall cause each of their
respective Subsidiaries to, use its best efforts to prevent or promptly respond
to same.
7.2 COVENANTS OF NAPLES. From the date of this Agreement until the earlier
-------------------
of the Effective Time or the termination of this Agreement, NAPLES 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 Articles of Association, Bylaws or other governing instruments
of any NAPLES Company; or
(B) incur any additional debt obligation or other obligation for borrowed
money except in the ordinary course of the business of NAPLES Subsidiaries
consistent with past practices (which, for NAPLES, shall include 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 NAPLES 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 NAPLES Company, or, declare or pay any dividend or make any
other distribution in respect of NAPLES'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 NAPLES Common
Stock or any other capital stock of any NAPLES 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 NAPLES
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 NAPLES Subsidiary or
any Asset other than in the ordinary course of business for reasonable and
adequate consideration; or
(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 in its fiduciary capacity;
or
(G) grant any increase in compensation or benefits to the employees or
officers of any NAPLES 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 NAPLES Board prior to the date of
this Agreement; enter into or amend any severance agreements with officers of
any NAPLES Company; grant any material increase in fees or other increases in
compensation or other benefits to directors of any NAPLES Company; or
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(H) enter into or amend any employment Contract between any NAPLES Company
and any Person (unless such amendment is required by Law) that the NAPLES
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 NAPLES Company or make any
material change in or to any existing employee benefit plans of any NAPLES
Company other than any such 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 NAPLES Company for
material money damages or restrictions upon the operations of any NAPLES
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; or
(N) make any Loan or advance to any 5% stockholder, director or officer of
NAPLES or any of the NAPLES Subsidiaries, or any member of the immediate family
of the foregoing, or any Related Interest (Known to NAPLES 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 NAPLES Company or any member of the
immediate family of the foregoing, or any Related Interest (Known to NAPLES 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 NAPLES Company or any
member of the immediate family of the foregoing, or any Related Interest (Known
to NAPLES 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
(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
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(U) take any action that would cause the transactions provided for in this
Agreement to be subject to requirements imposed by any Takeover Law, but NAPLES
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 now or hereafter in effect.
7.3 COVENANTS OF ANB. 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, including C&P, 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 NAPLES, which consent shall not be
unreasonably withheld:
(A) fail to file timely any report required to be filed by it with Regulatory
Authorities, including the SEC; or
(B) 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(b).
7.4 ADVERSE CHANGES IN CONDITION. ANB and NAPLES, as the case may be,
----------------------------
agree 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 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 file all reports
-------
required to be filed by it with Regulatory Authorities between the date of this
Agreement and the Effective Time, and NAPLES shall deliver to ANB copies of all
such reports filed by NAPLES or its Subsidiaries promptly after the same are
filed.
7.6 ACQUISITION PROPOSALS. Except with respect to this Agreement and the
---------------------
transactions provided for herein, NAPLES expressly agrees that neither NAPLES
nor any of its Subsidiaries, nor any representative retained by NAPLES 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. NAPLES shall promptly notify ANB orally and in
writing in the event it or any of its Subsidiaries receives any inquiry or
proposal 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.
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 all reasonable efforts to have the S-4 Registration
Statement declared effective under the 1933 Act as promptly as practicable after
such filing. NAPLES 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 reasonable
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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 NAPLES shall furnish all information concerning NAPLES and the holders of
NAPLES 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, NAPLES will promptly inform ANB and cooperate and assist
ANB in preparing such amendment or supplement and mailing the same to the
stockholders of NAPLES. As of the date of the execution of this Agreement, and
assuming the absence of any additional material factors, unless the NAPLES Board
in its good faith judgment determines that it is otherwise required by Law it is
the intent of the NAPLES Board that the Proxy Statement/Prospectus shall contain
the recommendation of the NAPLES Board in favor of the Merger and, subject to
the foregoing, the NAPLES Board shall recommend that the holders of NAPLES
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 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, C&P and NAPLES shall each 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, C&P or NAPLES, 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.
(C) ANB and NAPLES 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, NAPLES 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 NAPLES shall promptly furnish each other with copies of written
communications received by ANB or NAPLES, 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 NAPLES and its officers and
directors and NAPLES 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.
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8.2 ACCESS TO INFORMATION.
---------------------
(A) Upon reasonable notice and subject to applicable Laws relating to the
exchange of information, from the date of this Agreement, ANB and NAPLES shall,
and shall cause each of their respective Subsidiaries to, afford to the
officers, employees, accountants, counsel and other representatives of the
other, 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 NAPLES shall, and shall cause each of their respective
Subsidiaries to, make available to the other (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.
(B) All information furnished by ANB or C&P to NAPLES or its representatives
pursuant hereto shall be treated as the sole property of ANB or C&P, as the case
may be, and, if the Merger shall not occur, NAPLES and its representatives shall
return to ANB or C&P, as the case may be, all of such written information and
all documents, notes, summaries or other materials containing, reflecting or
referring to, or derived from, such information. NAPLES 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 NAPLES's possession prior to the disclosure thereof by ANB or
C&P; (y) was then generally known to the public; or (z) was disclosed to NAPLES
by a third party not bound by an obligation of confidentiality, or (ii)
disclosures made as required by Law.
(C) All information furnished by NAPLES or its Subsidiaries to ANB or its
representatives or subsidiaries, including C&P, pursuant hereto shall be treated
as the sole property of NAPLES and, if the Merger shall not occur, ANB and its
representatives shall return to NAPLES 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 NAPLES 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 NAPLES, ANB and C&P shall use its 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 NAPLES STOCKHOLDERS' MEETING. NAPLES shall call a meeting of its
----------------------------
stockholders (the "NAPLES 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 NAPLES Stockholders' Meeting (a) NAPLES
shall, with the assistance of ANB, prepare, publish and mail a notice of meeting
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<PAGE>
in accordance with 12 U.S.C. (S) 215a; (b) ANB shall furnish all information
concerning it that NAPLES may reasonably request in connection with conducting
the NAPLES Stockholders' Meeting; (c) ANB shall prepare and furnish to NAPLES
for distribution to NAPLES's stockholders the Proxy Statement/Prospectus; (d)
NAPLES shall furnish all information concerning it that ANB may reasonably
request in connection with preparing the Proxy Statement/Prospectus; (e) the
NAPLES Board shall recommend to its stockholders the approval of this Agreement;
and (f) NAPLES shall use its reasonable best efforts to obtain its stockholders'
approval. The Parties will use their 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 NAPLES's stockholders.
NAPLES will use its reasonable best efforts to publish and deliver notice of
meeting and mail 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 NAPLES Stockholders' Meeting, NAPLES
shall deliver to ANB a certificate of the Secretary of NAPLES containing the
names of the stockholders of NAPLES that both (a) gave written notice prior to
the taking of the vote on this Agreement at the NAPLES 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 NAPLES 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 NAPLES 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. All costs and expenses incurred in connection with the
--------
transactions provided for in this Agreement, including without limitation,
attorneys' fees, accountants' fees, other professional fees and costs related to
expenses of officers and directors of NAPLES and the NAPLES Companies, shall be
paid by the party incurring such costs and expenses; provided, however, without
the consent of ANB, all such costs and expenses incurred by NAPLES and the
NAPLES Companies shall not exceed $75,000, exclusive of the Broker's Fee. Each
Party hereby agrees to and shall indemnify the other Party against any liability
arising from any such fee or payment incurred by such Party. Nothing contained
herein shall limit either Party's rights under Article 10 to recover any damages
arising out of a Party's wilful breach of any provision of this Agreement.
8.8 FAILURE TO CLOSE.
----------------
(A) ANB and C&P expressly agree 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 them to facilitate the
Closing.
(B) NAPLES 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 NAPLES Board, as determined in good
faith by a majority of the NAPLES Board based on the advice of NAPLES's outside
counsel, NAPLES may:
(i) in response to an unsolicited request therefor, participate in
discussions or negotiations with, or furnish information with respect to
NAPLES pursuant to a customary confidentiality agreement (as determined by
NAPLES's outside counsel) to, any person concerning an Acquisition Proposal
involving NAPLES or any of its Subsidiaries; and
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(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 NAPLES 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 NAPLES or any of its Subsidiaries, means a bona fide
Acquisition Proposal involving NAPLES or any of its Subsidiaries made by a
third party which a majority of the disinterested members of the NAPLES Board
determines in its good faith judgment (based on the advice of NAPLES's
independent financial advisor) to be more favorable to NAPLES's stockholders
than the Merger, and for which financing, to the extent required, is then
committed).
NAPLES shall promptly advise ANB in writing of any Acquisition Proposal
involving NAPLES 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 NAPLES Board has engaged Keefe, Bruyette &
----------------
Woods, Inc. (the "NAPLES Financial Advisor") to act as advisor to the NAPLES
Board during the transaction and to opine separately as to the fairness from a
financial point of view of the Exchange Ratio. It is expected that said
fairness opinion shall be issued as soon as practicable after the signing of
this Agreement. The NAPLES Board may, at its option, elect to have the final
fairness opinion updated immediately prior to the Effective Time in order to
account for any Material Adverse Effect that may have occurred with regard to
ANB or NAPLES.
8.10 ACCOUNTING AND TAX TREATMENT. Each of the Parties undertakes and
----------------------------
agrees to use its best efforts to cause the Merger, and to 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 AGREEMENT OF AFFILIATES. NAPLES has disclosed on Schedule 8.11 each
----------------------- -------------
Person whom it reasonably believes is an "affiliate" of NAPLES for purposes of
Rule 145 under the 1933 Act. NAPLES shall use its reasonable efforts to cause
each such Person to deliver to ANB not later than 30 days prior to the Effective
Time a written agreement, substantially in the form of Exhibit A providing that
---------
such Person will not sell, pledge, transfer, or otherwise dispose of the shares
of NAPLES Common Stock held by such Person except as contemplated by such
agreement or by this Agreement and will not sell, pledge, transfer, or otherwise
dispose of the shares of ANB Common Stock to be received by such Person upon
consummation of the Merger except in compliance with applicable provisions of
the 1933 Act and the rules and regulations thereunder and until such time as
financial results covering at least 30 days of combined operations of ANB and
NAPLES have been published within the meaning of Section 201.01 of the SEC's
Codification of Financial Reporting Policies. Shares of ANB Common Stock issued
to such affiliates of NAPLES in exchange for shares of NAPLES Common Stock shall
not be transferable until such time as financial results covering at least 30
days of combined operations of ANB and NAPLES have been published within the
meaning of Section 201.01 of the SEC's Codification of Financial Reporting
Policies, regardless of whether each such affiliate has provided the written
agreement referred to in this Section 8.11 (and ANB shall be entitled to place
restrictive legends upon certificates for shares of ANB Common Stock issued to
affiliates of NAPLES pursuant to this Agreement to enforce the provisions of
this Section 8.11). ANB shall not be required to maintain the effectiveness of
the Registration Statement under the 1933 Act for the purposes of resale of ANB
Common Stock by such affiliates.
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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 AND BOARD APPROVAL. The stockholders of NAPLES shall have
------------------------------
approved this Agreement and the consummation of the transactions provided for
herein by a two-thirds vote, as and to the extent required by Law and by the
provisions of any governing instruments, and NAPLES shall have furnished to ANB
certified copies of resolutions duly adopted by its stockholders evidencing
same. The NAPLES Board and the C&P Board shall have approved the Agreement and
the consummation of the transactions provided for herein in writing by a
majority vote.
(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, is
reasonably likely to 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.
(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 NAPLES 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
PricewaterhouseCoopers, L.L.P., to the effect that the Merger will qualify for
pooling-of-interests accounting treatment.
(F) TAX MATTERS. NAPLES 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 NAPLES Common Stock for ANB Common
Stock will not give rise to gain or loss to the stockholders of NAPLES with
respect to such exchange (except to the extent of any cash received), and (iii)
neither NAPLES 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 NAPLES and ANB reasonably satisfactory in form
and substance to such counsel.
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(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.
9.2 CONDITIONS TO OBLIGATIONS OF ANB AND C&P. The obligations of ANB and
----------------------------------------
C&P 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 and C&P pursuant to Section 11.4(a)
of this Agreement:
(A) REPRESENTATIONS AND WARRANTIES. The representations and warranties of
------------------------------
NAPLES 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 5.3 of this
Agreement, which shall be true in all material respects) the inaccuracies of
which relate to matters that are not reasonably likely to have, individually or
in the aggregate, a Material Adverse Effect on NAPLES.
(B) PERFORMANCE OF AGREEMENTS AND COVENANTS. Each and all of the agreements
---------------------------------------
and covenants of NAPLES 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. NAPLES shall have delivered to ANB and C&P (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 9.2(a) and 9.2(b) of this
Agreement have been satisfied, and (ii) certified copies of resolutions duly
adopted by the NAPLES Board and the NAPLES 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) NONCOMPETE AND NONSOLICITATION AGREEMENTS. ANB and C&P shall have
-----------------------------------------
received from at least four (4) members of the NAPLES Board a duly executed
Noncompete and Nonsolicitation Agreement in the form attached hereto as Exhibit
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B.
- -
(E) EMPLOYMENT AGREEMENTS. NAPLES shall have delivered to ANB and C&P
---------------------
documentation, in a form satisfactory to ANB and C&P in their sole discretion,
evidencing the pre-Closing termination of the Employment Agreements between
NAPLES and each of Robert Guididas and Patrick J. Philbin, and each of Robert
Guididas and Patrick J. Philbin shall have executed and delivered an Employment
Agreement with ANB in the form attached hereto as Exhibit C and Exhibit D,
--------- ---------
respectively.
(F) OPINION OF COUNSEL. NAPLES shall have delivered to ANB and C&P an
------------------
opinion of Smith, Gambrell & Russell, LLP, counsel to NAPLES, dated as of the
Closing, in substantially the form of Exhibit E hereto.
---------
(G) COMFORT LETTER. ANB and C&P shall have received from Hacker, Johnson,
--------------
Cohen & Grieb, PA, independent certified public accountants, a comfort letter
dated as of the Effective Time with respect to such matters relating to the
financial condition of NAPLES as ANB and C&P may reasonably request.
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(H) NET WORTH AND CAPITAL REQUIREMENTS. Immediately prior to the Effective
----------------------------------
Time, NAPLES shall have a minimum net worth of $4,250,000. For purposes of this
Section 9.2(e), "net worth" shall mean the sum of the amounts set forth on the
balance sheet as shareholders' equity (including the par or stated value of all
outstanding capital stock, retained earnings, additional paid-in capital,
capital surplus and earned surplus), less the sum of (i) any amounts at which
shares of capital stock of such person appear on the asset side of the balance
sheet and (ii) any amounts due from or owed by any Subsidiary thereof.
(I) SARS. ANB and C&P shall have received (i) certified resolutions duly
----
adopted by the NAPLES Board rescinding any prior authorization for NAPLES to
adopt a plan providing for the issuance of Stock Appreciation Rights and
cancelling any and all rights thereunder (ii) a duly executed instrument, in a
form satisfactory to ANB and C&P in their sole discretion, from each member of
the NAPLES Board waiving any and all rights to, and interest in, any Stock
Appreciation Rights granted or issued by NAPLES and releasing ANB and C&P from
any and all obligations and liabilities arising out of or related to any such
Stock Appreciation Rights.
9.3 CONDITIONS TO OBLIGATIONS OF NAPLES. The obligations of NAPLES 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 NAPLES pursuant to Section 11.4(b) of this Agreement:
(A) REPRESENTATIONS AND WARRANTIES. The representations and warranties of
------------------------------
ANB and C&P 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 are not reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on ANB.
(B) PERFORMANCE OF AGREEMENTS AND COVENANTS. Each and all of the agreements
---------------------------------------
and covenants of ANB and C&P 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 NAPLES (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 and the C&P 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 NAPLES and its counsel shall request.
(D) OPINION OF COUNSEL. ANB shall have delivered to NAPLES an opinion of
------------------
Maynard, Cooper & Gale, P.C., counsel to ANB, dated as of the Effective Time, in
substantially the form of Exhibit F hereto.
---------
(E) COMFORT LETTER. NAPLES shall have received from PricewaterhouseCoopers,
--------------
independent certified public accountants, a comfort letter dated as of the
Effective Time with respect to such matters relating to the financial condition
of ANB as NAPLES may reasonably request.
(F) FAIRNESS OPINION. NAPLES shall have received from the NAPLES Financial
----------------
Advisor the fairness opinion described in Section 8.9 stating that the Exchange
Ratio provided for in this Agreement and recommended by NAPLES to its
stockholders is fair to NAPLES and its stockholders from a financial point of
view.
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(G) 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.
ARTICLE 10
TERMINATION
-----------
10.1 TERMINATION. Notwithstanding any other provision of this Agreement,
-----------
and notwithstanding the approval of this Agreement by the stockholders of
NAPLES, 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 NAPLES Board; or
(B) by the ANB Board or the NAPLES Board 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 is
reasonably likely, in the opinion of the non-breaching Party, to have,
individually or in the aggregate, a Material Adverse Effect on the breaching
Party; or
(C) by the ANB Board or the NAPLES Board 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 ANB Board or the NAPLES Board (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 NAPLES
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
NAPLES stockholders for approval and voted upon; provided, however, that if the
Merger shall not occur, or if this Agreement shall be terminated, as a result of
or in connection with a superior Acquisition Proposal, NAPLES shall pay to ANB a
termination fee equal to $750,000 concurrently with such termination; or
(E) by the ANB Board if there shall have occurred any Material Adverse Effect
to the business, operations or financial condition of NAPLES taken as a whole
and such Material Adverse Effect shall not have been remedied within 15 days
after receipt by NAPLES of notice in writing from ANB specifying the nature of
such Material Adverse Effect and requesting that it be remedied; or
(F) by the NAPLES Board 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 NAPLES specifying the nature
of such Material Adverse Effect and requesting that it be remedied; or
(G) by the ANB Board or the NAPLES Board if the Merger shall not have been
consummated by June 30, 1999, 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 ANB Board or the NAPLES Board 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 five percent (5%) of the
outstanding shares of NAPLES Common Stock properly assert their dissenters'
rights of appraisal pursuant to the Dissenters' Provisions; or
(J) by the NAPLES Board, to the extent that a majority of the disinterested
members of the NAPLES 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, NAPLES shall pay to
ANB a termination fee equal to $750,000; or
(K) by the ANB Board if any person or entity not a party to this Agreement
initiates a suit, action or similar proceeding with any Regulatory Authority or
in any court or similar tribunal challenging the transaction provided for herein
(including the legality of the Merger).
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 8.2, 8.7, 10.1(d) 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 those covenants and
agreements contained herein which by their terms apply in whole or in part after
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.
"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, September 21, 1998.
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<PAGE>
"ANB" shall mean Alabama National BanCorporation, a Delaware
corporation.
"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 FINANCIAL STATEMENTS" shall mean (i) the consolidated statements of
conditions (including related notes and schedules, if any) of ANB 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 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, 1997.
"ANB OPTIONS" shall have the meaning provided for in Section 3.1(c) of
this Agreement.
"ANB REGULATORY REPORTS" shall mean (i) the Consolidated Financial
Statements for Bank Holding Companies, Form FRY 9C, for the years ended
December 31, 1997 and 1996, as filed by ANB with the FRB and (ii) the
Consolidated Financial Statements for Bank Holding Companies, Form FRY 9C,
delivered by ANB to NAPLES with respect to periods ended subsequent to
December 31, 1997.
"ANB SUBSIDIARIES" shall mean the Subsidiaries of ANB.
"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 of one share of ANB Common Stock
as reported on NASDAQ on each of the ten (10) consecutive trading days
ending on the fifth business day prior to the Effective Time, and dividing
such sum by ten (10).
"BHC ACT" shall mean the federal Bank Holding Company Act of 1956, as
amended.
"BROKER'S FEE" shall have the meaning provided in Section 5.24 of the
Agreement.
"C&P" shall mean Citizens & Peoples Bank, National Association, a
national bank located in Cantonment, Florida.
"C&P COMMON STOCK" shall mean the $1.00 par value common stock of C&P.
"C&P BOARD" shall mean the Board of Directors of C&P.
"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.
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<PAGE>
"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 is reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on a Party.
"DGCL" shall mean the Delaware General Corporation Law.
"DESIGNATED REPRESENTATIVE"
(a) with respect to NAPLES shall mean Robert Guididas; 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 The Bank of New York Trust Company of
Florida, N.A., as successor-in-interest to AmSouth Bank.
"EXCHANGE RATIO" shall have the meaning given such term in Section 3.1
hereof.
"FDIC" shall mean the Federal Deposit Insurance Corporation.
"FRB" OR "FEDERAL RESERVE BOARD" shall mean Board of Governors of the
Federal Reserve System.
"GAAP" shall mean generally accepted accounting principles,
consistently applied during the periods involved.
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<PAGE>
"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.
"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 the actual
knowledge of the officers and directors of such Party and that knowledge
that any director of the Party would have obtained upon a reasonable
examination of the books, records and accounts of such Party and that
knowledge that any officer of the Party would have obtained upon a
reasonable examination of the books, records and accounts of such officer
and such Party.
"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 are not
reasonably likely to have, individually or in the aggregate, a Material
Adverse Effect on a Party.
"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.
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<PAGE>
"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 NAPLES with and into C&P referred to
in Section 1.1 of this Agreement.
"NAPLES" shall mean Community Bank of Naples, National Association, a
national bank located in Naples, Florida.
"NAPLES ALLOWANCE" shall have the meaning provided for in Section 5.9
(c) of this Agreement.
"NAPLES BENEFIT PLANS" shall have the meaning set forth in Section 5.14
(a) of this Agreement.
"NAPLES BOARD" shall mean the Board of Directors of NAPLES.
"NAPLES CALL REPORTS" shall mean (i) the Reports of Income and
Condition of NAPLES for the years ended December 31, 1997 and 1996, as
filed with the OCC and (ii) the Reports of Income and Condition of NAPLES
delivered by NAPLES to ANB with respect to periods ended subsequent to
December 31, 1997.
"NAPLES CERTIFICATE" shall have the meaning provided in Section 4.2 of
this Agreement.
"NAPLES COMMON STOCK" shall mean the $2.50 par value common stock of
NAPLES.
"NAPLES COMPANIES" shall mean, collectively, NAPLES and all NAPLES
Subsidiaries.
"NAPLES CONTRACTS" shall have the meaning set forth in Section 5.15 of
this Agreement.
"NAPLES ERISA PLANS" shall have the meaning set forth in Section
5.14(a) of this Agreement.
"NAPLES FINANCIAL ADVISOR" shall have the meaning set forth in Section
8.9 of this Agreement.
"NAPLES FINANCIAL STATEMENTS" shall mean (i) the consolidated balance
sheets (including related notes and schedules, if any) of NAPLES as of
December 31, 1997 and 1996, 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 NAPLES to ANB,
and (ii) the consolidated balance sheets of NAPLES (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 NAPLES to ANB with respect to periods ended subsequent
to December 31, 1997.
"NAPLES OPTIONS" shall have the meaning provided in Section 5.3(a) of
this Agreement.
"NAPLES OPTION PLAN" shall have the meaning provided in Section 3.1(c)
of this Agreement.
"NAPLES PENSION PLAN" shall have the meaning set forth in Section
5.14(a) of this Agreement.
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<PAGE>
"NAPLES STOCKHOLDERS' MEETING" shall mean the meeting of the
stockholders of NAPLES to be held pursuant to Section 8.4 of this
Agreement, including any adjournment or adjournments thereof.
"NAPLES SUBSIDIARIES" shall mean the Subsidiaries of NAPLES, which
shall include the NAPLES Subsidiaries described in Schedule 5.4 of this
Agreement and any corporation, bank, savings association or other
organization acquired as a Subsidiary of NAPLES in the future and owned by
NAPLES at the Effective Time.
"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, 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 NAPLES, C&P or ANB, and "PARTIES" shall mean
NAPLES, C&P and ANB.
"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.
"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.
"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-4 REGISTRATION STATEMENT" shall have the meaning set forth in
Section 5.18 of this Agreement.
"SEC" shall mean the Securities and Exchange Commission.
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<PAGE>
"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.
"SOFTWARE" shall have the meaning provided for in Section 5.28 of this
Agreement.
"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 ASSOCIATION" shall mean C&P as the surviving national banking
association in the Merger.
"TAKEOVER LAWS" shall have the meaning set forth in Section 5.27 of this
Agreement.
"TAX OPINION" 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 ANB and NAPLES upon the approval of
the Boards of Directors of each of ANB and NAPLES; provided, however, that after
approval of this Agreement by the holders of NAPLES Common Stock, there shall be
made no amendment that pursuant to the National Bank Act, 12 U.S.C. (S) 1, et.
seq., and regulations thereunder requires further approval by the NAPLES
stockholders without the further approval of the NAPLES stockholders.
11.4 WAIVERS.
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(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 NAPLES, to
waive or extend the time for the compliance or fulfillment by NAPLES 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.
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<PAGE>
(B) Prior to or at the Effective Time, NAPLES, acting through the NAPLES
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 or
C&P, to waive or extend the time for the compliance or fulfillment by ANB or C&P
of any and all of its obligations under this Agreement, and to waive any or all
of the conditions precedent to the obligations of NAPLES 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 NAPLES.
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. 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.
Notwithstanding anything herein to the contrary, NAPLES hereby expressly
acknowledges and accepts that (a) C&P may, as of or after the Effective Time,
transfer certain of the assets and liabilities associated with NAPLES to one of
its bank affiliates (the "Affiliate"), (b) to the extent such assets and
liabilities are transferred to the Affiliate, C&P may, without the consent of
NAPLES and without in any way affecting the validity and enforceability of this
Agreement, assign its rights and delegate its duties under this Agreement to the
Affiliate, and (c) to the extent such assets and liabilities are transferred to
the Affiliate, the Affiliate is an intended third-party beneficiary of the
terms, conditions and limitations of this Agreement.
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:
NAPLES: Community Bank of Naples, National Association
Newgate Tower
5150 N. Tamiami Trail
Naples, Florida 34103
Telecopy Number: (941) 649-1411
Attention: Robert Guididas
Copy to Counsel: Smith, Gambrell & Russell, LLP
Suite 3100, Promenade II
1230 Peachtree Street, N.E.
Atlanta, Georgia 30309-3592
Telecopy Number: (404) 815-3509
Attention: Robert C. Schwartz
ANB: Alabama National BanCorporation
1927 First Avenue North
Birmingham, Alabama 35203
Telecopy Number: (205) 583-3275
Attention: John H. Holcomb, III,
Chief Executive Officer
A-41
<PAGE>
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. Except as provided in Section 5.24, 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 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 NAPLES or ANB, each of NAPLES 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 Delaware 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.
[Remainder of page intentionally left blank.]
A-42
<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.
Community Bank of Naples,
National Association
Attest:
By: /s/ Patrick J. Philbin By: /s/ Robert Guididas
---------------------- -------------------
Its: Secretary Robert Guididas
Its: Chief Executive Officer
[BANK SEAL]
STATE OF FLORIDA )
------------ )
)
COLLIER COUNTY )
- ----------
I, the undersigned authority, a Notary Public in and for said County in said
State, hereby certify that Robert Guididas, whose name as Chief Executive
Officer of Community Bank of Naples, National Association, a national banking
association, is signed to the foregoing instrument and who is known to me,
acknowledged before me on this day that, being informed of the contents of said
instrument, he, in his capacity as such officer and with full authority,
executed the same voluntarily for and as the act of said national banking
association.
Given under my hand and official seal this the 21st day of September,
---------
1998.
/s/ Shirley M. Nemeth
---------------------------
Notary Public
[NOTARIAL SEAL]
My Commission Expires: April 20, 2001
----------------
A-43
<PAGE>
Alabama National BanCorporation
Attest:
By: /s/ Kimberly Moore By: /s/ William E. Matthews, V
------------------ --------------------------
Its: Secretary William E. Matthews, V
Its: Executive Vice-President and
Chief Financial Officer
[CORPORATE SEAL]
STATE OF ALABAMA )
)
JEFFERSON COUNTY )
I, the undersigned authority, a Notary Public in and for said County in said
State, hereby certify that William E. Matthews, V, whose name as Executive Vice-
President and Chief Financial Officer of Alabama National BanCorporation, a
corporation, is signed to the foregoing instrument and who is known to me,
acknowledged before me on this day that, being informed of the contents of said
instrument, he, as such officer and with full authority, executed the same
voluntarily for and as the act of said corporation.
Given under my hand and official seal this the 21st day of September,
---------
1998.
/s/ Gina G. Williams
-------------------------
Notary Public
[NOTARIAL SEAL]
My Commission Expires: January 24, 2000
------------------
A-44
<PAGE>
Citizens & Peoples Bank,
National Association
By: /s/ John H. Holcomb, III
------------------------
John H. Holcomb, III
------------------------
Its: Chairman of the Board
-----------------------
STATE OF ALABAMA )
--------------- )
)
JEFFERSON COUNTY )
- ---------
I, the undersigned authority, a Notary Public in and for said County in said
State, hereby certify that John H. Holcomb, III, whose name as Chairman of
-------------------- ------------
Citizens & Peoples Bank, National Association, a national banking association,
is signed to the foregoing instrument and who is known to me, acknowledged
before me on this day that, being informed of the contents of said instrument,
he, in his capacity as such officer and with full authority, executed the same
voluntarily for and as the act of said national banking association.
Given under my hand and official seal this the 21st day of September,
--------
1998.
/s/ Cynthia D. Patton
-------------------------
Notary Public
[NOTARIAL SEAL]
My Commission Expires: June 19, 1999
---------------
A-45
<PAGE>
LIST OF EXHIBITS
Exhibit A: Form of Rule 145 Agreement
Exhibit B: Form of Noncompete and Nonsolicitation Agreement
Exhibit C: Form of Employment Agreement (Guididas)
Exhibit D: Form of Employment Agreement (Philbin)
Exhibit E: Form of Smith, Gambrell & Russell, LLP Opinion
Exhibit F: Form of Maynard, Cooper & Gale, P.C. Opinion
A-46
<PAGE>
Exhibit A
---------
(Form of Rule 145 Agreement)
__________________, 1998
Alabama National BanCorporation
1927 First Avenue North
Birmingham, Alabama 35203
Ladies and Gentlemen:
The undersigned has been advised that as of the date of this letter the
undersigned may be deemed to be an "affiliate" of Community Bank of Naples, a
national banking association organized under the laws of the United States
("NAPLES"), as the term "affiliate" is defined for purposes of paragraphs (c)
and (d) of Rule 145 of the rules and regulations (the "Rules and Regulations")
of the Securities and Exchange Commission (the "Commission") under the
Securities Act of 1933, as amended (the "Act"). Pursuant to the terms of the
Agreement and Plan of Merger dated as of __________________, 1998, (the "Merger
Agreement"), executed by NAPLES; Alabama National BanCorporation, a Delaware
corporation ("ANB"); and Citizens & Peoples Bank, National Association, a
wholly-owned subsidiary of ANB ("C&P"), NAPLES will be merged with and into C&P
(the "Merger").
As a result of the Merger, the undersigned may receive shares of common stock,
par value $1.00 per share, of ANB (such shares received by the undersigned as a
result of the Merger are hereinafter referred to as the "ANB Securities") in
exchange for any shares owned by the undersigned of common stock of NAPLES.
Each of ANB and NAPLES have agreed in the Merger Agreement to use its best
efforts to cause the Merger to qualify for pooling-of-interests accounting
treatment. In order to qualify for pooling-of-interests accounting treatment,
affiliates of NAPLES are required to restrict transactions in ANB Securities for
specified time periods following the Closing of the Merger in compliance with
APB Opinion No. 16.
The undersigned represents, warrants and covenants to ANB that:
a. The undersigned shall not make any sale, transfer or other
disposition of the ANB Securities in violation of the Act or the Rules and
Regulations.
b. The undersigned has carefully read this letter and the Merger
Agreement and discussed the requirements of such documents and other applicable
limitations upon the undersigned's ability to sell, transfer or otherwise
dispose of ANB Securities, to the extent the undersigned has considered
necessary, with the undersigned's counsel or counsel for NAPLES.
c. The undersigned has been advised that the issuance of ANB
Securities to the undersigned pursuant to the Merger has been registered with
the Commission under the Act on a Registration Statement on Form S-4. However,
the undersigned has also been advised that, since at the time the Merger was
submitted for a vote of the shareholders of NAPLES, the undersigned may be
deemed to have been an affiliate of NAPLES and the distribution by the
undersigned of the ANB Securities has not been registered under the Act, the
undersigned may not sell, transfer or otherwise dispose of ANB Securities issued
to the undersigned in the Merger unless (1) such sale, transfer or other
disposition has been registered under the Act, (2) such sale, transfer or other
A-47
<PAGE>
disposition is made in conformity with the volume and other limitations of Rule
145 promulgated by the Commission under the Act (as hereafter amended, "Rule
145"), (3) ANB has received an opinion of counsel reasonably acceptable to ANB
(or other evidence reasonably acceptable to ANB) that such sale, transfer or
other disposition is otherwise exempt from registration under the Act or (4)
Rule 145 is amended by the Commission to eliminate the resale limitations that
are based on a "presumptive underwriter" approach, as currently proposed by the
Commission in Release No. 33-7391 on February 20, 1997 (the "Proposed Rule 145
Amendment").
d. The undersigned understands that ANB is under no obligation to
register the sale, transfer or other disposition of the ANB Securities by the
undersigned or on the undersigned's behalf under the Act or to take any other
action necessary in order to make compliance with an exemption from such
registration available.
e. The undersigned also understands that stop transfer instructions
will be given to ANB's transfer agent with respect to the ANB Securities and
that there will be placed on the certificates for the ANB Securities issued to
the undersigned, or any substitutions therefor, a legend stating in substance:
"THE SHARES REPRESENTED BY THE CERTIFICATE WERE ISSUED IN A
TRANSACTION TO WHICH RULE 145 PROMULGATED UNDER THE SECURITIES ACT OF
1933 APPLIES. THE SHARES REPRESENTED BY THIS CERTIFICATE MAY ONLY BE
TRANSFERRED IN ACCORDANCE WITH THE TERMS OF AN AGREEMENT DATED
_______________, 1998, BETWEEN THE REGISTERED HOLDER HEREOF AND
ALABAMA NATIONAL BANCORPORATION, A COPY OF WHICH AGREEMENT IS ON FILE
AT THE PRINCIPAL OFFICES OF ALABAMA NATIONAL BANCORPORATION."
f. The undersigned also understands that unless the transfer by the
undersigned of the undersigned's ANB Securities has been registered under the
Act or is a sale made in conformity with the provisions of Rule 145, ANB
reserves the right to put the following legend on the certificates issued to the
undersigned's transferee:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 AND WERE ACQUIRED FROM A
PERSON WHO RECEIVED SUCH SHARES IN A TRANSACTION TO WHICH RULE 145
PROMULGATED UNDER THE SECURITIES ACT OF 1933 APPLIES. THE SHARES HAVE
BEEN ACQUIRED BY THE HOLDER NOT WITH A VIEW TO, OR FOR RESALE IN
CONNECTION WITH, ANY DISTRIBUTION THEREOF WITHIN THE MEANING OF THE
SECURITIES ACT OF 1933 AND MAY NOT BE SOLD, PLEDGED OR OTHERWISE
TRANSFERRED EXCEPT IN ACCORDANCE WITH AN EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT OF 1933."
It is understood and agreed that the legends set forth in paragraphs e. and f.
above shall be removed by delivery of substitute certificates without such
legend and the related stop transfer instructions will be lifted forthwith, at
such time as (1) the undersigned is not an affiliate of ANB and a period of at
least one year (as determined in accordance with paragraph (d) of Rule 144 under
the Act) has elapsed since the date of consummation of the Merger, and ANB meets
the requirements of paragraph (c) of Rule 144 under the Act, (2) the undersigned
is not, and has not been for at least three months, an affiliate of ANB, and a
period of at least two years (as determined in accordance with paragraph (d) of
Rule 144 under the Act) has elapsed since the date of consummation of the
Merger, (3) ANB shall have received an opinion of counsel or other evidence, in
each case reasonably acceptable to ANB, that such legend and stop transfer
instructions are not required for purposes of the Act or (4) the Proposed Rule
A-48
<PAGE>
145 Amendment or similar amendments eliminating the restrictions on resale based
on a "presumptive underwriter" approach shall have become final under the Rules
and Regulations.
g. The undersigned agrees that he will not sell, pledge, transfer or
otherwise dispose of any shares of NAPLES common stock within 30 days prior to
the Effective Time (as defined in the Merger Agreement). The undersigned agrees
that until the publication of financial results covering at least 30 days of
post-Merger combined operations of ANB and C&P (the "Holding Period"), he will
not sell, pledge, transfer or otherwise dispose of any shares of the ANB
Securities, except for pledges by the undersigned of all or part of the ANB
Securities to secure full recourse loans which have a loan term that is greater
than the Holding Period, provided the lender for such loan or loans accepts any
pledge of such ANB Securities subject to the terms of this letter agreement.
The undersigned agrees that the shares of ANB Securities to be issued to him in
the Merger will bear a restrictive transfer legend in substantially the
following form:
"THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO AN
AGREEMENT DATED __________________, 1998 WHICH RESTRICTS ANY SALE OR
OTHER TRANSFER OF SUCH SHARES PRIOR TO THE PUBLIC RELEASE BY ALABAMA
NATIONAL BANCORPORATION ("ANB") OF 30 DAYS OF POST-MERGER COMBINED
OPERATIONS OF ANB AND NAPLES, A COPY OF WHICH AGREEMENT IS ON FILE AT
THE PRINCIPAL OFFICES OF ANB."
Following a written request from the undersigned addressed to the Corporate
Secretary of ANB, ANB agrees to instruct its transfer agent to remove the
restrictive legend from any certificates evidencing shares subject hereto
promptly following the expiration of the transfer restrictions described in
Paragraph g.
Execution of this letter should not be considered an admission on the part of
the undersigned that the undersigned is an "affiliate" of NAPLES as described in
the first paragraph of this letter, or as a waiver of any rights the undersigned
may have to object to any claim that the undersigned is such an affiliate on or
after the date of this letter.
Very truly yours,
---------------------------------
[Name of Affiliate]
Accepted this _____ day of __________, 1998 by
ALABAMA NATIONAL BANCORPORATION
By:
--------------------------------
Name:
------------------------------
Title:
-----------------------------
A-49
<PAGE>
Exhibit B
---------
(Form of Noncompete and Nonsolicitation Agreement)
NONCOMPETE AND NONSOLICITATION AGREEMENT
This Noncompete and Nonsolicitation Agreement (this "Agreement") is effective
________________________, 1998 (the "Effective Date"), by and between Alabama
National BanCorporation, a Delaware corporation ("ANB"); [NewCo], a national
banking association ("Bank") and [____________________] ("Shareholder").
Recitals
--------
WHEREAS, pursuant to that certain Agreement and Plan of Merger (the "Merger
Agreement") dated as of September 21, 1998, between Community Bank of Naples,
National Association ("NAPLES"), ANB and a wholly-owned subsidiary of ANB,
Citizens & Peoples Bank, National Association ("C&P"), NAPLES merged with and
into C&P as of the Effective Time, as that term is defined in the Merger
Agreement (the "Merger");
WHEREAS, ANB has established a de novo national bank in Naples, Florida
(Bank), and, simultaneously with or following the Merger, will transfer the
assets and liabilities previously associated with NAPLES from C&P to Bank;
WHEREAS, prior to the Merger, Shareholder was a shareholder of NAPLES and
served as a member of the Board of Directors of NAPLES;
WHEREAS, Shareholder, in his capacity as a Director of NAPLES, has obtained
certain trade secrets and other confidential information pertaining to NAPLES,
including the financial and business conditions, goals and operations of
customers of NAPLES;
WHEREAS, Shareholder has on one or more occasions assisted in establishing a
de novo bank for investment purposes;
WHEREAS, ANB and Bank have a legitimate business interest in protecting
certain of Bank's information and assets previously associated with NAPLES, such
as trade secrets, confidential business information regarding customers,
relationships with prospective and existing customers, and goodwill associated
with NAPLES' ongoing business, name and geographic location; and
WHEREAS, 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 consideration of $47,000 and the mutual recitals and
covenants contained herein, the parties hereby agree as follows:
A-50
<PAGE>
1. DISCLOSURE OF INFORMATION.
-------------------------
(a) Shareholder acknowledges that any documents and information,
whether written or not, that came into Shareholder's possession or knowledge
during Shareholder's affiliation (as a shareholder, officer, director, employee
or otherwise) with NAPLES or that come into Shareholder's possession or
knowledge during Shareholder's affiliation with Bank, including, without
limitation the financial and business conditions, goals and operations of
customers of NAPLES or 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 NAPLES'
and Bank's businesses. Shareholder 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 Shareholder 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
Shareholder 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. Shareholder 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 ANB'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 Shareholder 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 eighteen (18) months after the Effective Date,
Shareholder 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) carry on or engage in the business of
banking or any similar business in Collier County, Florida, (ii) organize,
support, invest in, or engage in any other activity involving the establishment
of a bank or any similar business in Collier County, Florida, (iii) perform
services for, as an employee, consultant or otherwise, any bank, bank holding
company, corporation or other person or entity that has a branch or office in,
or conducts any banking or similar business in, Collier County, Florida, (iv)
solicit or do banking or similar business with any existing or prospective
customer of Bank or ANB or any of their respective subsidiaries or affiliates in
Collier County, Florida; or (v) solicit any employee of Bank or ANB or any of
their subsidiaries or affiliates to leave his or her employment with Bank or ANB
or any of their subsidiaries or affiliates for any reason, or hire any such
employee of Bank or ANB or any of their subsidiaries or affiliates, without the
prior written consent of ANB; provided, however, notwithstanding anything to the
contrary contained herein, (i) if Shareholder is a licensed attorney, he may
perform legal services for banking entities in Collier County, Florida, (ii) if
Shareholder is a licensed insurance agent or otherwise engaged in the insurance
business, he may continue to sell insurance products to banking entities located
in such county, and (iii) Shareholder may make personal investments in other
banking entities located in such county.
(b) Shareholder 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 Shareholder 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 covenants and one or more violations
by Shareholder be established, then ANB and Bank shall be entitled to an
injunction restraining Shareholder from further violations for a period of
eighteen (18) months from the date of the final decree, less only such number of
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<PAGE>
days that Shareholder shall have not violated such covenants. The purpose of
this provision is to prevent Shareholder from profiting from his own wrong if he
violates such covenants.
(d) If Shareholder 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), Shareholder shall be deemed to be
engaged in any activity engaged in by a person or an entity between Shareholder
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 Shareholder pursuant to Section 318 of the Internal
Revenue Code of 1986.
3. DEFAULT.
-------
(a) If Shareholder 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 Shareholder, 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 Shareholder.
(b) Additionally, in the event of any conduct by Shareholder 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 [____________________________________], 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
Shareholder to [___________________________________].
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 of the State of Florida. This Agreement
supersedes and cancels any prior agreement or understanding entered into between
Shareholder and Bank or Shareholder and NAPLES.
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. Shareholder 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
-----------------------
Shareholder any right of Employment by ANB or Bank.
[Signatures on following page.]
A-52
<PAGE>
IN WITNESS WHEREOF, this Agreement has been duly executed and delivered by
Shareholder and by a duly authorized officer of each of Bank and ANB as of the
date first above written.
Witnesses: "SHAREHOLDER":
________________________ ___________________________________
________________________
________________________
"BANK":
Attest: [_____________]
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-53
<PAGE>
Exhibit C
---------
(Form of Employment Agreement - Guididas)
EMPLOYMENT AGREEMENT
--------------------
This Employment Agreement (this "Agreement") is made and entered into this
[_______] day of [______________], 1998 (the "Effective Date"), by and between
Alabama National BanCorporation, a Delaware corporation ("ANB"); [NewCo], a
national banking association ("Bank"; hereinafter together with ANB referred to
as "Employer");/1/ and Robert Guididas ("Executive").
Recitals
--------
WHEREAS, pursuant to that certain Agreement and Plan of Merger (the "Merger
Agreement") dated as of September 21, 1998, between Community Bank of Naples,
National Association ("NAPLES"), ANB and a wholly-owned subsidiary of ANB,
Citizens & Peoples Bank, National Association ("C&P"), NAPLES merged with and
into C&P as of the Effective Time, as that term is defined in the Merger
Agreement (the "Merger");
WHEREAS, prior to the Merger, Executive served as the President and Chief
Executive Officer of NAPLES;
WHEREAS, ANB has established a de novo national bank in Naples, Florida
(Bank), and, simultaneously with or following the Merger, will transfer the
assets and liabilities previously associated with NAPLES from C&P to Bank; and
WHEREAS, as a condition to the consummation of the transactions provided
for in the Merger Agreement, Executive and Employer have agreed to enter into
this Agreement whereby Executive shall serve as the President of Bank.
Agreement
---------
NOW THEREFORE, in consideration of the mutual recitals and covenants
contained herein, and for other good and valuable consideration, the sufficiency
of which is hereby acknowledged, the parties hereby agree as follows:
1. EMPLOYMENT. Employer agrees to employ Executive and Executive
----------
agrees to be employed by Employer, subject to the terms and provisions of this
Agreement.
2. TERM. The employment of Executive by Employer as provided in
----
Section 1 will be for a period of three (3) years commencing at the Effective
Date, unless earlier terminated in accordance with the provisions of Section 9
hereof; provided, however, that the obligations and rights set forth in Sections
7 and 8 hereof shall survive termination of this Agreement (except, under
certain limited circumstances set forth in Section 9(c), the obligations and
rights set forth in Section 8 shall expire upon termination).
- ------------
/1/ ANB intends to establish a de novo national bank in Naples, Florida
("NewCo"). Simultaneously with the Merger, ANB will transfer the assets and
liabilities previously associated with NAPLES from C&P to NewCo. If this
transfer does not occur simultaneously with the Merger, this Agreement will
be amended accordingly.
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<PAGE>
3. DUTIES; EXTENT OF SERVICES. Executive shall perform for Bank all
--------------------------
duties incident to the position of President of Bank, under the direction of the
board of directors of Bank or its designee. In addition, Executive shall engage
in such other services for Bank or its affiliated companies as Employer from
time to time shall direct. The precise services of Executive and the title of
Executive's position may be extended, curtailed or modified by Bank from time to
time without affecting the enforceability of the terms of this Agreement.
Executive shall use his best efforts in, and devote his entire time, attention
and energy, to Bank's business and shall not during the term hereof be engaged
in any other business activity, whether or not such business activity is pursued
for gain, profit or other pecuniary advantage.
4. COMPENSATION. (a) From the Effective Date through the
------------
termination of this Agreement:
(i) Executive's total annual cash salary shall be an amount not less than
Ninety-Three Thousand Six Hundred Dollars ($93,600);
(ii) Executive shall be entitled to vacation days, paid holidays and sick
days, and to participate in Employer's retirement plan, as provided in Bank's
Personnel Policy;
(iii) Executive shall be entitled to continuation of the club
membership previously provided by NAPLES pursuant to that certain Employment
Agreement dated July 15, 1996 by and between Executive and NAPLES; and
(iv) Executive shall be entitled to a monthly automobile allowance of
$400.
(b) Within five (5) days of the Effective Date, Executive shall be
entitled to a one-time bonus in the amount of $113,712, which is an amount equal
to the aggregate cash compensation, including benefits, if any, received by
Executive from NAPLES in the one-year period immediately preceding the Merger.
5. COMPLIANCE WITH RULES AND POLICIES. Executive shall comply with
----------------------------------
all of the rules, regulations, and policies of Employer now or hereinafter in
effect. He shall promptly and faithfully do and perform any and all other
duties and responsibilities which he may, from time to time, be directed to do
by the board of directors of Bank or ANB or their respective designee.
6. REPRESENTATION OF EXECUTIVE. Executive represents to Employer
---------------------------
that he is not subject to any rule, regulation or agreement, including without
limitation, any noncompete agreement, that purports to, or which reasonably
could, be expected to limit, restrict or interfere with Executive's ability to
engage in the activities provided for in this Agreement.
7. DISCLOSURE OF INFORMATION.
-------------------------
(a) Executive acknowledges that any documents and information, whether
written or not, that come into Executive's possession or knowledge during
Executive's course of employment with Employer, including, without limitation
the financial and business conditions, goals and operations of customers of
Bank, ANB 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 Employer's business. Executive will not,
during or after the term of this Agreement, (i) disclose any written
Confidential Information to any person, firm, corporation, association, or other
entity not employed by or affiliated with Employer for any reason or purpose
whatsoever, or (ii) use any written Confidential Information for any reason
other than to further the business of Employer. Executive agrees to return any
written Confidential Information, and all copies thereof, upon the termination
of Executive's employment (whether hereunder or otherwise). In the event of a
breach or threatened breach by Executive of the provisions of this Section 7, in
addition to all other remedies available to Employer, Employer 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
A-55
<PAGE>
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 Employer, any of Employer's business
methods, sales, services, or techniques, 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 Employer, including reasonable
attorney fees, whether or not suit be instituted.
8. COMPETITION.
-----------
(a) During the period of his employment by Employer and for a period of
one (1) year after such employment (whether such employment shall have ended by
reason of the expiration or termination of this Agreement or otherwise),
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) carry on or engage in the business of
banking or any similar business in Collier, Lee, Charlotte or Sarasota County,
Florida, (ii) perform services for, as an employee, consultant or otherwise, any
bank, bank holding company, corporation or other person or entity that has a
branch or office in, or conducts any banking or similar business in, Collier,
Lee, Charlotte or Sarasota County, Florida, (iii) solicit or do banking or
similar business with any existing or prospective customer of Bank or ANB or any
of their respective subsidiaries or affiliates in Collier, Lee, Charlotte or
Sarasota County, Florida; or (iv) solicit any employee of Bank or ANB or any of
their subsidiaries or affiliates to leave his or her employment with Bank or ANB
or any of their subsidiaries or affiliates for any reason, or hire any such
employee of Bank or ANB or any of their subsidiaries or affiliates, without the
prior written consent of ANB.
(b) Executive represents that his experience and capabilities are such
that the provisions of this Section 8 will not prevent him from earning a
livelihood.
(c) If Executive violates the provisions of Section 8(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; and if suit
be brought to enforce such covenants and one or more violations by Executive be
established, then Employer shall be entitled to an injunction restraining
Executive from further violations for a period of one (1) year 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 8(a) not to compete, he will pay all costs incurred by Employer in
securing an injunction hereunder and/or securing payment of the liquidated
damages specified herein, including a reasonable attorney's fee, whether or not
suit be instituted; and Executive waives all right to claim exemptions of
personal property under the laws and Constitution of the State of Florida or any
other state of the United States.
(e) For purposes of Section 8(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.
9. TERMINATION.
-----------
(a) If Employer terminates Executive's employment hereunder "For Cause,"
all rights and obligations specified in Section 8 shall survive any such
termination, and Executive shall not be entitled to any further compensation
from Employer. "For Cause" shall mean (i) abuse of or addiction to intoxicating
drugs (including alcohol); (ii) any act on the part of Executive which
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<PAGE>
constitutes fraud, malfeasance of duty or conduct grossly inappropriate to
Executive's office and is demonstrably likely to lead to material injury to
Bank, ANB or a successor or affiliate of Bank or ANB; (iii) a felony conviction
of Executive; or (iv) the suspension or removal of Executive by federal or state
banking regulatory authorities. In addition, the services of Executive and the
obligations of ANB under this Agreement may be terminated For Cause by Employer
due to the death or total disability of Executive. For purposes of this Section
9, the term "total disability" shall mean Executive's inability, as a result of
illness or injury, to perform the normal duties of his employment for a period
of ninety (90) consecutive days.
(b) If Employer terminates Executive other than For Cause, Executive shall
continue to receive the minimum cash compensation provided for in Section 4(a)
through the third (3rd) anniversary of the Effective Date, and all rights and
obligations specified in Section 8 shall survive such termination through the
fourth (4th) anniversary of the Effective Date.
(c) If Executive terminates his employment hereunder for any reason prior to
the third (3rd) anniversary of the Effective Date, (i) all rights and
obligations specified in Section 8 shall survive any such termination, (ii)
Executive shall not be entitled to any further compensation from Employer, and
(iii) Employer shall (except in the case of Executive's total disability) be
entitled to all remedies available under this Agreement and applicable law;
provided, however, that, at Employer's option, Employer may continue paying to
Executive the minimum cash compensation provided for in Section 4(a) through the
third (3rd) anniversary of the Effective Date, and all rights and obligations
specified in Section 8 shall survive such termination through the fourth (4th)
anniversary of the Effective Date.
(d) The provisions of Section 7 shall survive regardless of any termination
of Executive's employment hereunder, whether voluntary or involuntary.
10. CHANGE IN CONTROL OF ANB. (a) (i) In the event of a "change in
------------------------
control" of ANB during the term of this Agreement, as defined herein, or (ii) in
the event that the Board of Directors of ANB enters into a definitive agreement
during the term of this Agreement that provides for a change in control of ANB
and such change in control occurs within the 12-month period following the
execution of such definitive agreement, Executive shall be entitled, for a
period of thirty (30) days from the date of closing of the transaction effecting
such change in control and at his election, to either (A) give written notice to
ANB of termination of this Agreement, if this Agreement is then in effect, and
to receive a cash payment equal to two hundred percent (200%) of the
compensation, including benefits, if any, received by Executive in the one-year
period immediately preceding the change in control, or (B) give written notice
of a request for payment, if this Agreement has terminated by its terms
subsequent to execution of the definitive agreement referenced in subsection
(ii) hereinabove and Executive is not then employed by an affiliate of ANB or
its successor-in-interest or Executive resigns from his then current position
with an affiliate of ANB or its successor-in-interest, and to receive a cash
payment equal to two hundred percent (200%) of the compensation, including
benefits, if any, received by Executive in the one-year period immediately
preceding the termination of this Agreement. The severance payments provided
for in this Section 10(a) shall be paid in cash, commencing not later than ten
(10) days after the date of notice of termination or notice of request for
payment, as the case may be, by Executive under this Section 10 or ten (10) days
after the date of closing of the transaction effecting the change in control of
ANB, whichever is later.
(b) In addition, if Executive elects to terminate this Agreement pursuant to
this Section 10, Executive shall further be entitled, in lieu of any shares of
Common Stock of ANB issuable upon exercise of stock options to which Executive
may be entitled, to an amount in cash or Common Stock of ANB (or any combination
thereof) as Executive shall in his election designate equal to the excess of the
fair market value of the Common Stock as of the date of closing of the
transaction effecting the change in control over the per share exercise price of
the options held by Executive, times the number of shares of Common Stock
subject to such options (whether or not then fully exercisable). The fair market
value of the Common Stock shall be equal to the closing price of one share of
ANB Common Stock, as reported on NASDAQ. The severance payments provided for in
A-57
<PAGE>
this Section 10(b) shall be paid in full not later than ten (10) days after the
date of notice of termination by Executive under this Section 10 or ten (10)
days after the date of closing of the transaction effecting the change in
control of the Bank, whichever is later.
(c) For purposes of this Section 10, "change in control" of ANB shall mean:
(i) any transaction, whether by merger, consolidation, asset sale, tender
offer, reverse stock split, or otherwise, which results in the
acquisition or beneficial ownership (as such term is defined under
rules and regulations promulgated under the Securities Exchange Act
of 1934, as amended) by any person or entity or any group of persons
or entities acting in concert, of 50% or more of the outstanding
shares of Common Stock of ANB;
(ii) the sale of all or substantially all of the assets of ANB; or
(iii) the liquidation of ANB.
11. 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 [__________________________________________], 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 Executive, to
[_________________________________________].
12. 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 Title 9 of the U.S. Code and the laws of the
State of Florida. This Agreement supersedes and cancels any prior employment
agreement or understanding entered into between Executive and NAPLES, Executive
and ANB, or Executive and Bank.
13. 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.
14. DEFAULT.
-------
(a) If Executive breaches or violates any of the covenants, conditions, or
terms of this Agreement on his part to be performed, Employer shall 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; and, if Employer secures an
injunction against Executive for alleged breaches or violations by him of any
covenant, condition, or term of this Agreement and the injunction is for any
reason dissolved, Executive hereby expressly releases and discharges each of
Bank and ANB from and against any claim which he may have for damages, loss,
cost or expense with respect to, and he will make no claim against either of
Bank or ANB by reason of, the wrongful issuance of any such injunction; and
Executive hereby waives any and all claims for such damages, loss, cost or
expense arising in that connection.
(b) Additionally, in the event of any conduct by Executive violating any
provision of this Agreement, Employer shall be entitled, if it 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 Employer may elect to pursue.
A-58
<PAGE>
15. 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.
16. ARBITRATION. Any controversy or claim between Executive and
-----------
Employer (or any of Bank's or ANB's subsidiaries or affiliates or any officer,
agent, director or employee of Bank, ANB or any of Bank's or ANB's subsidiaries
or affiliates) arising out of, or relating to, this Agreement, or the breach
thereof, shall be resolved by binding arbitration in accordance with the rules
and regulations then obtaining of the American Arbitration Association, and
judgment upon the award rendered may be entered and enforced in any court having
jurisdiction thereof.
17. DEFINITIONS. Any capitalized terms not otherwise defined herein
-----------
shall have the meanings ascribed to them in the Merger Agreement.
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<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":
________________________ ___________________________________
Robert Guididas
"BANK":
Attest: [_____________]
By: By:
________________________ ___________________________________
Its: Secretary Its:
__________________________________
[Corporate Seal]
"ANB":
Attest: Alabama National BanCorporation
By: By:
________________________ ___________________________________
Its: Secretary Its: Chief Executive Officer
[Corporate Seal]
A-60
<PAGE>
EXHIBIT D
---------
(Form of Employment Agreement - Philbin)
EMPLOYMENT AGREEMENT
--------------------
This Employment Agreement (this "Agreement") is made and entered into this
[_______] day of [______________], 1998 (the "Effective Date"), by and between
Alabama National BanCorporation, a Delaware corporation ("ANB"); [NewCo], a
national banking association ("Bank"; hereinafter together with ANB referred to
as "Employer");/1/ and Patrick J. Philbin ("Executive").
Recitals
--------
WHEREAS, pursuant to that certain Agreement and Plan of Merger (the "Merger
Agreement") dated as of September 21, 1998, between Community Bank of Naples,
National Association ("NAPLES"), ANB and a wholly-owned subsidiary of ANB,
Citizens & Peoples Bank, National Association ("C&P"), NAPLES merged with and
into C&P as of the Effective Time, as that term is defined in the Merger
Agreement (the "Merger");
WHEREAS, prior to the Merger, Executive served as the Executive Vice President
and Chief Financial Officer of NAPLES;
WHEREAS, ANB has established a de novo national bank in Naples, Florida
(Bank), and, simultaneously with or following the Merger, will transfer the
assets and liabilities previously associated with NAPLES from C&P to Bank; and
WHEREAS, Executive and Employer have agreed to enter into this Agreement
whereby Executive shall serve as the Executive Vice President of Bank.
Agreement
---------
NOW THEREFORE, in consideration of the mutual recitals and covenants contained
herein, and for other good and valuable consideration, the sufficiency of which
is hereby acknowledged, the parties hereby agree as follows:
1. EMPLOYMENT. Employer agrees to employ Executive and Executive
----------
agrees to be employed by Employer, subject to the terms and provisions of this
Agreement.
2. TERM. The employment of Executive by Employer as provided in
----
Section 1 will be for a period of three (3) years commencing at the Effective
Date, unless earlier terminated in accordance with the provisions of Section 9
hereof; provided, however, that the obligations and rights set forth in Section
7 hereof shall survive termination of this Agreement.
3. DUTIES; EXTENT OF SERVICES. Executive shall perform for Bank all
--------------------------
duties incident to the position of Executive Vice President of Bank, under the
direction of the board of directors of Bank or its designee, in Naples, Florida.
- ----------
/1/ ANB intends to establish a de novo national bank in Naples, Florida
("NewCo"). Simultaneously with the Merger, ANB will transfer the assets and
liabilities previously associated with NAPLES from C&P to NewCo. If this
transfer does not occur simultaneously with the Merger, this Agreement will
be amended accordingly.
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<PAGE>
In addition, Executive shall engage in such other services for Bank or its
affiliated companies as Employer from time to time shall direct. The precise
services of Executive and the title of Executive's position may be extended,
curtailed or modified by Bank from time to time without affecting the
enforceability of the terms of this Agreement. Executive shall use his best
efforts in, and devote his entire time, attention and energy, to Bank's business
and shall not during the term hereof be engaged in any other business activity,
whether or not such business activity is pursued for gain, profit or other
pecuniary advantage.
4. COMPENSATION. (a) From the Effective Date through the termination of
------------
this Agreement:
(i) Executive's total annual cash salary shall be an amount not less than
Seventy-Two Thousand Eight Hundred Dollars ($72,800) with appropriate
review annually based on individual performance and on the
performance of Bank, as determined by the boards of directors of ANB
and Bank;
(ii) Executive shall be entitled to vacation days, paid holidays and sick
days, and to participate in Employer's retirement, health insurance
and other benefit plans, as provided in Bank's Personnel Policy;
(iii) Executive shall be entitled to a monthly automobile allowance of
$400.
(iv) The board of directors of Bank, or its designee, shall evaluate
Executive annually and determine Executive's cash compensation for
the following fiscal year, in the board's sole discretion.
(b) Within sixty (60) days of the Effective Date, Executive shall be entitled
to a one-time bonus in the amount of $81,590, which is an amount equal to the
aggregate cash compensation, including benefits, if any, received by Executive
from NAPLES in the one-year period immediately preceding the Merger.
5. COMPLIANCE WITH RULES AND POLICIES. Executive shall comply with
----------------------------------
all of the rules, regulations, and policies of Employer now or hereinafter in
effect. He shall promptly and faithfully do and perform any and all other
duties and responsibilities which he may, from time to time, be directed to do
by the board of directors of Bank or ANB or their respective designee.
6. REPRESENTATION OF EXECUTIVE. Executive represents to Employer
---------------------------
that he is not subject to any rule, regulation or agreement, including without
limitation, any noncompete agreement, that purports to, or which reasonably
could, be expected to limit, restrict or interfere with Executive's ability to
engage in the activities provided for in this Agreement.
7. DISCLOSURE OF INFORMATION.
-------------------------
(a) Executive acknowledges that any documents and information, whether
written or not, that come into Executive's possession or knowledge during
Executive's course of employment with Employer, including, without limitation
the financial and business conditions, goals and operations of customers of
Bank, ANB 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 Employer's business. Executive will not,
during or after the term of this Agreement, (i) disclose any written
Confidential Information to any person, firm, corporation, association, or other
entity not employed by or affiliated with Employer for any reason or purpose
whatsoever, or (ii) use any written Confidential Information for any reason
other than to further the business of Employer. Executive agrees to return any
written Confidential Information, and all copies thereof, upon the termination
of Executive's employment (whether hereunder or otherwise). In the event of a
breach or threatened breach by Executive of the provisions of this Section 7, in
addition to all other remedies available to Employer, Employer 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
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<PAGE>
he will not divulge to any person, firm, corporation, association, or other
entity not employed by or affiliated with Employer, any of Employer's business
methods, sales, services, or techniques, 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 Employer, including reasonable
attorney fees, whether or not suit be instituted.
8. [INTENTIONALLY OMITTED]
9. TERMINATION.
-----------
(a) If Employer terminates Executive's employment hereunder "For Cause,"
Executive shall not be entitled to any further compensation from Employer. "For
Cause" shall mean (i) abuse of or addiction to intoxicating drugs (including
alcohol); (ii) any act on the part of Executive which constitutes fraud,
malfeasance of duty or conduct grossly inappropriate to Executive's office and
is demonstrably likely to lead to material injury to Bank, ANB or a successor or
affiliate of Bank or ANB; (iii) a felony conviction of Executive; or (iv) the
suspension or removal of Executive by federal or state banking regulatory
authorities. In addition, the services of Executive and the obligations of ANB
under this Agreement may be terminated For Cause by Employer due to the death or
total disability of Executive. For purposes of this Section 9, the term "total
disability" shall mean Executive's inability, as a result of illness or injury,
to perform the normal duties of his employment for a period of ninety (90)
consecutive days.
(b) If Employer terminates Executive other than For Cause, Executive shall
continue to receive the minimum cash compensation provided for in Section 4(a)
through the third (3rd) anniversary of the Effective Date.
(c) If Executive terminates his employment hereunder for any reason prior to
the third (3rd) anniversary of the Effective Date, (i) Executive shall not be
entitled to any further compensation from Employer, and (ii) Employer shall
(except in the case of Executive's total disability) be entitled to all remedies
available under this Agreement and applicable law.
(d) The provisions of Section 7 shall survive regardless of any termination
of Executive's employment hereunder, whether voluntary or involuntary.
10. CHANGE IN CONTROL OF ANB. (a) (i) In the event of a "change in
------------------------
control" of ANB during the term of this Agreement, as defined herein, or (ii) in
the event that the Board of Directors of ANB enters into a definitive agreement
during the term of this Agreement that provides for a change in control of ANB
and such change in control occurs within the 12-month period following the
execution of such definitive agreement, Executive shall be entitled, for a
period of thirty (30) days from the date of closing of the transaction effecting
such change in control and at his election, to either (A) give written notice to
ANB of termination of this Agreement, if this Agreement is then in effect, and
to receive a cash payment equal to two hundred percent (200%) of the
compensation, including benefits, if any, received by Executive in the one-year
period immediately preceding the change in control, or (B) give written notice
of a request for payment, if this Agreement has terminated by its terms
subsequent to execution of the definitive agreement referenced in subsection
(ii) hereinabove and Executive is not then employed by an affiliate of ANB or
its successor-in-interest or Executive resigns from his then current position
with an affiliate of ANB or its successor-in-interest, and to receive a cash
payment equal to two hundred percent (200%) of the compensation, including
benefits, if any, received by Executive in the one-year period immediately
preceding the termination of this Agreement. The severance payments provided
for in this Section 10(a) shall be paid in cash, commencing not later than ten
(10) days after the date of notice of termination or notice of request for
payment, as the case may be, by Executive under this Section 10 or ten (10) days
after the date of closing of the transaction effecting the change in control of
ANB, whichever is later.
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<PAGE>
(b) In addition, if Executive elects to terminate this Agreement pursuant to
this Section 10, Executive shall further be entitled, in lieu of any shares of
Common Stock of ANB issuable upon exercise of stock options to which Executive
may be entitled, to an amount in cash or Common Stock of ANB (or any combination
thereof) as Executive shall in his election designate equal to the excess of the
fair market value of the Common Stock as of the date of closing of the
transaction effecting the change in control over the per share exercise price of
the options held by Executive, times the number of shares of Common Stock
subject to such options (whether or not then fully exercisable). The fair market
value of the Common Stock shall be equal to the closing price of one share of
ANB Common Stock, as reported on NASDAQ. The severance payments provided for in
this Section 10(b) shall be paid in full not later than ten (10) days after the
date of notice of termination by Executive under this Section 10 or ten (10)
days after the date of closing of the transaction effecting the change in
control of the Bank, whichever is later.
(c) For purposes of this Section 10, "change in control" of ANB shall mean:
(i) any transaction, whether by merger, consolidation, asset sale, tender
offer, reverse stock split, or otherwise, which results in the
acquisition or beneficial ownership (as such term is defined under
rules and regulations promulgated under the Securities Exchange Act
of 1934, as amended) by any person or entity or any group of persons
or entities acting in concert, of 50% or more of the outstanding
shares of Common Stock of ANB;
(ii) the sale of all or substantially all of the assets of ANB; or
(iii) the liquidation of ANB.
11. 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 [_________________________________________], 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 Executive, to
[_________________________________________].
12. 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 Title 9 of the U.S. Code and the laws of the
State of Florida. This Agreement supersedes and cancels any prior employment
agreement or understanding entered into between Executive and NAPLES, Executive
and ANB, or Executive and Bank.
13. 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.
14. DEFAULT.
-------
(a) If Executive breaches or violates any of the covenants, conditions, or
terms of this Agreement on his part to be performed, Employer shall 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; and, if Employer secures an
injunction against Executive for alleged breaches or violations by him of any
covenant, condition, or term of this Agreement and the injunction is for any
reason dissolved, Executive hereby expressly releases and discharges each of
Bank and ANB from and against any claim which he may have for damages, loss,
cost or expense with respect to, and he will make no claim against either of
Bank or ANB by reason of, the wrongful issuance of any such injunction; and
Executive hereby waives any and all claims for such damages, loss, cost or
expense arising in that connection.
A-64
<PAGE>
(b) Additionally, in the event of any conduct by Executive violating any
provision of this Agreement, Employer shall be entitled, if it 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 Employer may elect to pursue.
15. 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.
16. ARBITRATION. Any controversy or claim between Executive and
-----------
Employer (or any of Bank's or ANB's subsidiaries or affiliates or any officer,
agent, director or employee of Bank, ANB or any of Bank's or ANB's subsidiaries
or affiliates) arising out of, or relating to, this Agreement, or the breach
thereof, shall be resolved by binding arbitration in accordance with the rules
and regulations then obtaining of the American Arbitration Association, and
judgment upon the award rendered may be entered and enforced in any court having
jurisdiction thereof.
17. DEFINITIONS. Any capitalized terms not otherwise defined herein
-----------
shall have the meanings ascribed to them in the Merger Agreement.
A-65
<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":
________________________ ___________________________________
Patrick J. Philbin
"BANK":
Attest: [_____________]
By: By:
________________________ ___________________________________
Its: Secretary Its:
__________________________________
[Corporate Seal]
"ANB":
Attest: Alabama National BanCorporation
By: By:
________________________ ___________________________________
Its: Secretary Its: Chief Executive Officer
[Corporate Seal]
A-66
<PAGE>
APPENDIX B
PROVISIONS OF NATIONAL BANK ACT
RELATING TO DISSENTERS' RIGHTS
<PAGE>
APPENDIX B
National Bank Act Dissent Provisions; 12 U.S.C. (S) 215a(b)-(d)
- ---------------------------------------------------------------
(B) DISSENTING SHAREHOLDERS
If a merger shall be voted for at the called meetings by the necessary
majorities of the shareholders of each association or State bank participating
in the plan of merger, and thereafter the merger shall be approved by the
Comptroller, any shareholder of any association or State bank to be merged into
the receiving association who has voted against such merger at the meeting of
the association or bank of which he is a stockholder, or has given notice in
writing at or prior to such meeting to the presiding officer that he dissents
from the plan of merger, shall be entitled to receive the value of the shares so
held by him when such merger shall be approved by the Comptroller upon written
request made to the receiving association at any time before thirty days after
the date of consummation of the merger, accompanied by the surrender of his
stock certificates.
(C) VALUATION OF SHARES
The value of the shares of any dissenting shareholder shall be ascertained,
as of the effective date of the merger, by an appraisal made by a committee of
three persons, composed of (1) one selected by the vote of the holders of the
majority of the stock, the owners of which are entitled to payment in cash; (2)
one selected by the directors of the receiving association; and (3) one selected
by the two so selected. The valuation agreed upon by any two of the three
appraisers shall govern. If the value so fixed shall not be satisfactory to any
dissenting shareholder who has requested payment, that shareholder may, within
five days after being notified of the appraised value of his shares, appeal to
the Comptroller, who shall cause a reappraisal to be made which shall be final
and binding as to the value of the shares of the appellant.
(D) APPLICATION TO SHAREHOLDERS OF MERGING ASSOCIATIONS: APPRAISAL BY
COMPTROLLER; EXPENSES OF RECEIVING ASSOCIATION; SALE AND RESALE OF SHARES;
STATE APPRAISAL AND MERGER LAW
If, within ninety days from the date of consummation of the merger, for any
reason one or more of the appraisers is not selected as herein provided, or the
appraisers fail to determine the value of such shares, the Comptroller shall
upon written request of any interested party cause an appraisal to be made which
shall be final and binding on all parties. The expenses of the Comptroller in
making the reappraisal or the appraisal, as the case may be, shall be paid by
the receiving association. The value of the shares ascertained shall be
promptly paid to the dissenting shareholders by the receiving association. The
shares of stock of the receiving association which would have been delivered to
such dissenting shareholders had they not requested payment shall be sold by the
receiving association at an advertised public auction, and the receiving
association shall have the right to purchase any of such shares at such public
auction, if it is the highest bidder therefor, for the purpose of reselling such
shares within thirty days thereafter to such person or persons and at such price
not less than par as its board of directors by resolution may determine. If the
shares are sold at public auction at a price greater than the amount paid to the
dissenting shareholders, the excess in such sale price shall be paid to such
dissenting shareholders. The appraisal of such shares of stock in any State
bank shall be determined in the manner prescribed by the law of the State in
such cases, rather than as provided in this section, if such provision is made
in the State law; and no such merger shall be in contravention of the law of the
State under which such bank is incorporated. The provisions of this subsection
shall apply only to shareholders of (and stock owned by them in) a bank or
association being merged into the receiving association.
B-1
<PAGE>
OFFICE OF THE COMPTROLLER OF THE CURRENCY
STOCK VALUATION METHODS; FEDERAL REGISTER 9150, MARCH 16, 1992
To: Chief Executive Officers of National Banks, Deputy Comptrollers (District),
Department and Division Heads and Examining Personnel.
PURPOSE
This Banking Circular informs all national banks of the valuation methods
used by the Office of the Comptroller of the Currency (OCC) to estimate the
value of a bank's shares when requested to do so by a shareholder dissenting to
the conversion, merger, or consolidation of its bank. The results of appraisals
performed by the OCC between January 1, 1985, and September 30, 1991 are
summarized.
References: 12 U.S.C. 214a, 215 and 215a; 12 CFR 11.590 (item 2)
BACKGROUND
Under 12 U.S.C. 214a, a shareholder dissenting from a conversion,
consolidation, or merger involving a national bank is entitled to receive the
value of his or her shares from the resulting bank. A valuation of the shares
shall be made by a committee of three appraisers (a representative of the
dissenting shareholder, a representative of the resulting bank, and a third
appraiser selected by the other two). If the committee is formed and renders an
appraisal that is acceptable to the dissenting shareholder, the process is
complete and the appraised value of the shares is paid to the dissenting
shareholder by the resulting bank. If, for any reason, the committee is not
formed or if it renders an appraisal that is not acceptable to the dissenting
shareholder, an interested party may request an appraisal by the OCC. 12 U.S.C.
215 provides these appraisal rights to any shareholder dissenting to a
consolidation. Any dissenting shareholder of a target bank in a merger is also
entitled to these appraisal rights pursuant to 12 U.S.C. 215a.
The above provides only a general overview of the appraisal process. The
specific requirements of the process are set forth in the statutes themselves.
METHODS OF VALUATION USED
Through its appraisal process, the OCC attempts to arrive at a fair
estimate of the value of a bank's shares. After reviewing the particular facts
in each case and the available information on a bank's shares, the OCC selects
an appropriate valuation method, or combination of methods, to determine a
reasonable estimate of the shares' value.
Market Value
The OCC uses various methods to estimate the market value of shares being
appraised. If sufficient trading in the shares exists and the prices are
available from direct quotes from the Wall Street Journal or a market-maker,
those quotes are considered in determining the market value. If no market value
is readily available, or if the market value available is not well-established,
the OCC may use other methods of estimating market value, such as in the
investment value and adjusted book value methods.
Investment Value
Investment value requires an assessment of the value to investors of a
share in the future earnings of the target bank. Investment value is estimated
by applying an average price/earnings ratio of banks with similar earnings
potential to the earnings capacity of the target bank.
The peer group selection is based on location, size and earnings patterns.
If the state in which the subject bank is located provides a sufficient number
of comparable banks using location, size and
B-2
<PAGE>
earnings patterns as the criteria for selection, the price/earnings ratios
assigned to the banks are applied to the earnings per share estimated for the
subject bank. In order to select a reasonable peer group when there are too few
comparable independent banks in a location that is comparable to that of the
subject bank, the pool of banks from which a peer group is selected is broadened
by including one-bank holding company banks in a comparable location, and/or by
selecting banks in less comparable locations, including adjacent states, that
have earnings patterns similar to the subject bank.
Adjusted Book Value
The OCC also used an "adjusted book value" method for estimating value.
Historically, the OCC has not placed any weight on the bank's "unadjusted book
value," since that value is based on historical acquisition costs of the bank's
assets, and does not reflect investors' perceptions of the value of the bank as
an ongoing concern. Adjusted book value is calculated by multiplying the book
value of the target bank's assets per share times the average market price to
book value ratio of comparable banking organizations. The average market price
to book value ratio measures the premium or discount to book value, which
investors attribute to shares of similarly situated banking organizations.
Both the investment value method and the adjusted book value method present
appraised values, which are based on the target bank's value as a going concern.
These techniques provide estimates of the market value of the shares of the
subject bank.
OVERALL VALUATION
The OCC may use more than one of the above-described methods in deriving
the value of shares of stock. If more than one method is used, varying weights
may be applied in reaching an overall valuation. The weight given to the value
by a particular valuation method is based on how accurately the given method is
believed to represent market value. For example, the OCC may give more weight
to a market value representing infrequent trading by shareholders than to the
value derived from the investment value method when the subject bank's earnings
trend is so irregular that it is considered to be a poor predictor of future
earnings.
Purchase Premiums
For mergers and consolidations, the OCC recognizes that purchase premiums
do exist and may, in some instances, be paid in the purchase of small blocks of
shares. However, the payment of purchase premiums depends entirely on the
acquisition or control plans of the purchasers, and such payments are not
regular or predictable elements of the market value. Consequently, the OCC's
valuation methods do not include consideration of purchase premiums in arriving
at the value of shares.
For more information regarding the OCC's stock appraisal process contact
the Office of the Comptroller of the Currency, Bank Organization and Structure.
Dated: February 26, 1992.
ROBERT L. CLARKE,
Comptroller of the Currency
B-3
<PAGE>
APPENDIX C
FINANCIAL STATEMENTS OF
COMMUNITY BANK OF NAPLES, NATIONAL ASSOCIATION
<PAGE>
INDEX TO FINANCIAL STATEMENTS
OF
COMMUNITY BANK OF NAPLES, NATIONAL ASSOCIATION
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
1. Independent Auditors' Report regarding the December 31, 1997, 1996
and 1995 Financial Statements........................................ C-2
2. Balance Sheets as of December 31, 1997 and 1996...................... C-3
3. Statements of Operations for the years ended December 31, 1997 and
1996................................................................. C-4
4. Statements of Changes in Stockholders' Equity for the years ended
December 31, 1997 and 1996........................................... C-5
5. Statements of Cash Flows for the years ended December 31, 1997 and
1996................................................................. C-6
6. Notes to Financial Statements........................................ C-7
7. Condensed Balance Sheet as of June 30, 1998 (unaudited)............... C-19
8. Condensed Statements of Income for the periods ended June 30, 1998
and 1997 (unaudited).................................................. C-20
9. Condensed Statement of Changes in Stockholders' Equity for the six
months ended June 30, 1998 (unaudited)................................ C-21
10. Condensed Statements of Cash Flows for the periods ended June 31,
1998 and 1997 (unaudited)............................................. C-22
11. Notes to Unaudited Financial Statements............................... C-23
</TABLE>
C-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
Board of Directors
Community Bank of Naples, National Association
Naples, Florida:
We have audited the accompanying balance sheets of Community Bank of Naples,
National Association (the "Bank") at December 31, 1997 and 1996, and the related
statements of operations, changes in stockholders' equity, and cash flows for
the years then ended. These financial statements are the responsibility of the
Bank's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of the Bank at December 31, 1997
and 1996, and the results of its operations and its cash flows for the years
then ended, in conformity with generally accepted accounting principles.
HACKER, JOHNSON, COHEN & GRIEB PA
Tampa, Florida
February 20, 1998
C-2
<PAGE>
COMMUNITY BANK OF NAPLES, NATIONAL ASSOCIATION
BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------
1997 1996
------------- -----------
<S> <C> <C>
ASSETS
Cash and due from banks $ 3,564,451 2,021,754
Federal funds sold 23,290,000 1,731,000
----------- ----------
Cash and cash equivalents 26,854,451 3,752,754
Securities available for sale 14,608,446 7,033,001
Securities held to maturity 1,004,009 1,495,693
Loans receivable, net of allowance for loan losses of
$313,000 and $90,000 27,388,001 5,958,670
Premises and equipment, net 680,195 739,992
Restricted securities:
Federal Reserve Bank stock, at cost 150,000 150,000
Federal Home Loan Bank stock 446,500 -
Accrued interest receivable and other assets 509,101 299,631
Deferred income taxes 149,209 204,406
----------- ----------
Total assets $71,789,912 19,634,147
=========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Demand deposits 7,034,010 2,492,166
Savings and NOW deposits 16,778,900 4,290,861
Money-market deposits 28,446,237 2,659,836
Time deposits 12,341,856 5,172,268
----------- ----------
Total deposits 64,601,003 14,615,131
Official checks 311,456 305,990
Accrued interest payable and other liabilities 130,228 58,047
Federal Home Loan Bank advances 2,000,000 -
----------- ----------
Total liabilities 67,042,687 14,979,168
----------- ----------
Commitments (Note 4 and 7)
Stockholders' Equity:
Common stock, $2.50 par value 10,000,000 shares authorized
1,000,000 shares issued and outstanding 2,500,000 2,500,000
Additional paid-in capital 2,500,000 2,500,000
Accumulated deficit (305,759) (346,010)
Accumulated other comprehensive income 52,984 989
----------- ----------
Total stockholders' equity 4,747,225 4,654,979
----------- ----------
Total liabilities and stockholders' equity $71,789,912 19,634,147
=========== ==========
</TABLE>
See Accompanying Notes to Financial Statements.
C-3
<PAGE>
COMMUNITY BANK OF NAPLES, NATIONAL ASSOCIATION
STATEMENTS OF OPERATIONS
YEAR ENDED DECEMBER 31,
------------------------
1997 1996
------------ ----------
Interest income:
Loans $1,512,730 100,054
Securities 977,363 199,004
Federal funds sold 267,962 72,510
---------- --------
Total interest income 2,758,055 371,568
---------- --------
Interest expense:
Deposits 1,196,009 123,502
Interest paid during organization - 24,752
Interest on Federal Home Loan Bank advances 56,109 -
Other 10,071 -
---------- --------
Total interest expense 1,262,189 148,254
---------- --------
Net interest income 1,495,866 223,314
Provision for loan losses 223,000 90,000
---------- --------
Net interest income after provision for loan losses 1,272,866 133,314
---------- --------
Noninterest income, service charges and fees 107,042 3,535
---------- --------
Noninterest expenses:
Salaries and employee benefits 609,753 365,925
Occupancy and equipment 320,294 135,876
Advertising 131,118 82,122
Data processing 32,348 11,633
Other 222,144 92,303
---------- --------
Total noninterest expenses 1,315,657 687,859
---------- --------
Earnings (loss) before income taxes (credit) 64,251 (551,010)
Income taxes (credit) 24,000 (205,000)
---------- --------
Net earnings (loss) $ 40,251 (346,010)
========== ========
Basic earnings (loss) per share $.04 (.99)
========== ========
Weighted-average number of shares outstanding 1,000,000 347,945
========== ========
See Accompanying Notes to Financial Statements.
C-4
<PAGE>
COMMUNITY BANK OF NAPLES, NATIONAL ASSOCIATION
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
ACCUMULATED
ADDITIONAL OTHER TOTAL
COMMON PAID-IN ACCUMULATED COMPREHENSIVE STOCKHOLDERS'
STOCK CAPITAL DEFICIT INCOME EQUITY
----------- --------- ------------ ------------- --------------
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1995 $ - - - - -
Sale of stock 2,500,000 2,500,000 - - 5,000,000
Comprehensive income (loss):
Net loss - - (346,010) - -
Net increase in unrealized
appreciation on securities
available for sale, net
of related taxes - - - 989 -
Comprehensive (loss) - - - - (345,021)
----------- --------- ----------- ------------- -------------
Balance at December 31, 1996 2,500,000 2,500,000 (346,010) 989 4,654,979
Comprehensive income:
Net earnings - - 40,251 - -
Net change in unrealized
appreciation on available
for sale securities, net
of related taxes - - - 51,995 -
Comprehensive income - - - - 92,246
----------- --------- ----------- ------------- -------------
Balance at December 31, 1997 $2,500,000 2,500,000 (305,759) 52,984 4,747,225
=========== ========= =========== ============= =============
</TABLE>
See Accompanying Notes to Financial Statements.
C-5
<PAGE>
COMMUNITY BANK OF NAPLES, NATIONAL ASSOCIATION
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------
1997 1996
------------ ------------
<S> <C> <C>
Cash flows from operating activities:
Net earnings (loss) $ 40,251 (346,010)
Adjustments to reconcile net earnings (loss) to net cash
used in operating activities:
Depreciation 81,000 26,132
Provision for loan losses 223,000 90,000
Provision (credit) for deferred income taxes 24,000 (205,000)
Amortization of loan fees, premiums and discounts, net (9,377) 7,240
Increase in accrued interest receivable and other assets (209,470) (299,631)
Increase in accrued interest payable, official
checks, and other liabilities 77,647 364,037
------------ -----------
Net cash provided by (used in) operating activities 227,051 (363,232)
------------ -----------
Cash flows from investing activities:
Purchase of securities held to maturity (507,427) (1,495,409)
Purchase of securities available for sale (9,592,407) (8,033,642)
Maturities of securities held to maturity 999,111 -
Maturities of securities available for sale 2,100,154 1,000,000
Net increase in loans (21,642,954) (6,053,970)
Purchase of Federal Reserve Bank stock - (150,000)
Purchase of Federal Home Loan Bank stock (446,500) -
Purchase of premises and equipment (21,203) (766,124)
------------ -----------
Net cash used in investing activities (29,111,226) (15,499,145)
Cash flows from financing activities:
Net increase in demand, savings, NOW and money-
market deposits 42,816,284 9,442,863
Net increase in time deposits 7,169,588 5,172,268
Advances from organizers - 200,000
Repayment of advances from organizers - (200,000)
Advances from line of credit - 400,000
Repayment of advances on line of credit - (400,000)
Sale of common stock - 5,000,000
Increase in Federal Home Loan Bank advances 2,000,000 -
------------ -----------
Net cash provided by financing activities 51,985,872 19,615,131
------------ -----------
Net increase in cash and cash equivalents 23,101,697 3,752,754
Cash and cash equivalents at beginning of year 3,752,754 -
------------ -----------
Cash and cash equivalents at end of year $ 26,854,451 3,752,754
============ ===========
Supplemental disclosure of cash flow information:
Cash paid during the year for:
Interest $ 1,220,985 127,316
============ ===========
Income taxes $ - -
============ ===========
Noncash transactions-
Net change in unrealized appreciation on securities
available for sale $ 51,995 989
============ ===========
</TABLE>
See Accompanying Notes to Financial Statements.
C-6
<PAGE>
COMMUNITY BANK OF NAPLES, NATIONAL ASSOCIATION
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1996
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION. Community Bank of Naples, National Association (the "Bank")
was incorporated under the laws of the United States and received its
charter from the Comptroller of the Currency. The Bank began its
organizational phase in October, 1995. The 1996 financial statements
include the activities during the organizational phase of the Bank from
January 1, 1996 until the banking operations commenced August 26, 1996 as
well as the banking operations from that date through December 31, 1996.
The Bank offers a wide range of community banking services to individual
and corporate customers through its banking office located in Naples,
Collier County, Florida.
The following is a description of the significant accounting policies and
practices followed by the Bank, which conform the generally accepted
accounting principles and prevailing practices within the banking
industry.
ESTIMATES. The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from
those estimates.
SECURITIES. The Bank must classify its securities as either trading, held
to maturity or available for sale. Trading securities are held
principally for resale and recorded at their fair values. Unrealized
gains and losses on trading securities are included immediately in
earnings. Held-to-maturity securities are those which the Bank has the
positive intent and ability to hold to maturity and are reported at
amortized cost. Available-for-sale securities consist of securities not
classified as trading securities nor as held-to-maturity securities.
Unrealized holding gains and losses, net of tax, on available-for-sale
securities are reported as a net amount in a separate component of
stockholders' equity until realized. Gains and losses on the sale of
available-for-sale securities are determined using the specific-
identification method. Premiums and discounts on securities available for
sale and held to maturity are recognized in interest income using the
interest method over the period to maturity.
LOANS RECEIVABLE. Loans receivable that management has the intent and
ability to hold for the foreseeable future or until maturity or pay-off
are reported at their outstanding principal adjusted for any charge-offs,
the allowance for loan losses, and any deferred fees or costs.
Loan origination fees and certain direct origination costs are
capitalized and recognized as an adjustment of the yield of the related
loan.
The accrual of interest on impaired loans is discontinued when, in
management's opinion, the borrower may be unable to meet payments as they
become due. When interest accrual is discontinued, all unpaid accrued
interest is reversed. Interest income is subsequently recognized only to
the extent cash payments are received.
The allowance for loan losses is increased by charges to income and
decreased by charge-offs (net of recoveries). Management's periodic
evaluation of the adequacy of the allowance is based on known and
inherent risks in the portfolio, adverse situations that may affect the
borrower's ability to repay, the estimated value of any underlying
collateral, and current economic conditions.
(continued)
C-7
<PAGE>
COMMUNITY BANK OF NAPLES, NATIONAL ASSOCIATION
NOTES TO FINANCIAL STATEMENTS, CONTINUED
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
INCOME TAXES. Deferred tax assets and liabilities are reflected at
currently enacted income tax rates applicable to the period in which the
deferred tax assets or liabilities are expected to be realized or
settled. As changes in tax laws or rates are enacted, deferred tax assets
and liabilities are adjusted through the provision for income taxes.
PREMISES AND EQUIPMENT. Premises and equipment are stated at cost less
accumulated depreciation. Depreciation expense is computed on the
straight-line basis over the estimated useful life of each type of asset.
ORGANIZATIONAL COSTS. All preopening expenses have been charged to expense
as incurred. All organizational costs have been deferred and amortized
using the straight-line method over five years.
ADVANCES FROM ORGANIZERS. Certain of the Bank's organizers made interest-
bearing advances of $200,000 to the Bank during the organizational phase.
The advances were repaid to the organizers from the proceeds of the
Bank's common stock offering.
LINE OF CREDIT. During the organizational period, the Bank utilized a line
of credit totaling $400,000 which was repaid. At December 31, 1997 and
1996 the Bank does not have a line of credit.
OFF-BALANCE-SHEET INSTRUMENTS. In the ordinary course of business the Bank
has entered into off-balance-sheet financial instruments consisting of
standby letters of credit and commitments to extend credit. Such
financial instruments are recorded in the financial statements when they
are funded.
ADVERTISING. The Bank expenses all media advertising as incurred.
FAIR VALUES OF FINANCIAL INSTRUMENTS. The following methods and assumptions
were used by the Bank in estimating fair values of financial instruments
disclosed herein:
CASH AND CASH EQUIVALENTS. The carrying amounts of cash and cash
equivalents approximate their fair value.
SECURITIES. Fair values for securities are based on quoted market prices,
where available. If quoted market prices are not available, fair values
are based on quoted market prices of comparable instruments.
FEDERAL HOME LOAN BANK AND FEDERAL RESERVE BANK STOCK. Fair value of the
Bank's investment in Federal Home Loan Bank and Federal Reserve Bank
stock is based on its redemption value.
LOANS. For variable-rate loans that reprice frequently and have no
significant change in credit risk, fair values are based on carrying
values. Fair values for certain fixed-rate mortgage (e.g. one-to-four
family residential), commercial real estate, commercial and consumer
loans are estimated using discounted cash flow analyses, using interest
rates currently being offered for loans with similar terms to borrowers
of similar credit quality.
(continued)
C-8
<PAGE>
COMMUNITY BANK OF NAPLES, NATIONAL ASSOCIATION
NOTES TO FINANCIAL STATEMENTS, CONTINUED
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
FAIR VALUES OF FINANCIAL INSTRUMENTS, CONTINUED.
DEPOSIT LIABILITIES. The fair values disclosed for demand, NOW, money-
market and savings deposits are, by definition, equal to the amount
payable on demand at the reporting date (that is, their carrying
amounts). Fair values for fixed-rate certificates of deposit are
estimated using a discounted cash flow calculation that applies interest
rates currently being offered on certificates to a schedule of aggregated
expected monthly maturities on time deposits.
ACCRUED INTEREST. The carrying amounts of accrued interest approximate
their fair values.
OFF-BALANCE-SHEET INSTRUMENTS. Fair values for off-balance-sheet lending
commitments are based on fees currently charged to enter into similar
agreements, taking into account the remaining terms of the agreements and
the counterparties' credit standing.
PER SHARE AMOUNTS. Earnings (loss) per share ("EPS") of common stock has
been computed on the basis of the weighted-average number of shares of
common stock outstanding. For purposes of calculating diluted EPS because
there is no active trading market for the Company's common stock, the
average book value per share was used. For 1998 and 1997, outstanding
stock options were not dilutive. The weighted-average number of shares
outstanding in 1998 and 1997 was 1,000,000.
STOCK-BASED COMPENSATION. Statement of Financial Accounting Standards No.
123, "Accounting for Stock-Based Compensation" ("Statement 123")
establishes a "fair value" based method of accounting for stock-based
compensation plans and encourages all entities to adopt that method of
accounting for all of their employee stock compensation plans. However,
it also allows an entity to continue to measure compensation cost for
those plans using the intrinsic value based method of accounting
prescribed by APB Opinion No. 25, "Accounting for Stock Issued to
Employees" (Opinion 25). The Bank has elected to follow Opinion 25 and
related interpretations in accounting for its employee stock options.
FUTURE ACCOUNTING REQUIREMENTS. Financial Accounting Standards 130 -
Reporting Comprehensive Income establishes standards for reporting
comprehensive income. The Standard defines comprehensive income as the
change in equity of an enterprise except those resulting from stockholder
transactions. All components of comprehensive income are required to be
reported in a new financial statement that is displayed with equal
prominence as existing financial statements. The Bank will be required to
adopt this Standard effective January 1, 1998. As the Statement addresses
reporting and presentation issues only, there will be no impact on
operating results from the adoption of this Standard.
(continued)
C-9
<PAGE>
COMMUNITY BANK OF NAPLES, NATIONAL ASSOCIATION
NOTES TO FINANCIAL STATEMENTS, CONTINUED
(2) DEBT SECURITIES
Debt securities have been classified according to management's intent. The
carrying amount of securities and their approximate fair values are as
follows:
<TABLE>
<CAPTION>
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
------------ ---------- ---------- ----------
<S> <C> <C> <C> <C>
AVAILABLE FOR SALE:
DECEMBER 31, 1997:
U.S. Treasury securities $ 5,020,875 38,030 - 5,058,905
U.S. Government
Agency securities 8,003,461 26,374 - 8,029,835
Mortgage-backed securities 1,499,335 22,140 1,769 1,519,706
----------- ---------- --------- ----------
$ 14,523,671 86,544 1,769 14,608,446
=========== ========== ========= ==========
DECEMBER 31, 1996:
U.S. Treasury securities 2,524,592 14,351 2,618 2,536,325
U.S. Government
Agency securities 4,506,826 10,752 20,902 4,496,676
----------- ---------- --------- ----------
$ 7,031,418 25,103 23,520 7,033,001
=========== ========== ========= ==========
HELD TO MATURITY:
DECEMBER 31, 1997:
U.S. treasury securities 496,632 5,788 - 502,420
U.S. Government
Agency securities 507,377 362 - 507,739
----------- ---------- --------- ----------
$ 1,004,009 6,150 - 1,010,159
=========== ========== ========= ==========
DECEMBER 31, 1996:
U.S. treasury securities 494,747 6,893 - 501,640
U.S. Government
Agency securities 1,000,946 1,654 - 1,002,600
----------- ---------- --------- ----------
$ 1,495,693 8,547 - 1,504,240
=========== ========== ========= ==========
</TABLE>
There were no sales of debt securities in 1997 or 1996.
The scheduled maturities of debt securities at December 31, 1997 are
as follows:
<TABLE>
AVAILABLE FOR SALE HELD TO MATURITY
---------------------- ---------------------
AMORTIZED FAIR AMORTIZED FAIR
COST VALUE COST VALUE
----------- ---------- -------- ----------
<S> <C> <C> <C> <C>
Due in one year or less $ 2,495,115 2,500,133 - -
Due from one to five years 10,029,221 10,087,988 496,632 502,420
Due from five to ten years 500,000 500,619 507,377 507,739
Mortgage-backed securities 1,499,335 1,519,706 - -
----------- ---------- --------- ----------
$14,523,671 14,608,446 1,004,009 1,010,159
=========== ========== ========= ==========
(continued)
</TABLE>
C-10
<PAGE>
COMMUNITY BANK OF NAPLES, NATIONAL ASSOCIATION
NOTES TO FINANCIAL STATEMENTS, CONTINUED
(2) DEBT SECURITIES, CONTINUED
Available for sale securities, carried at approximately $2,491,000 at
December 31, 1997, were pledged as collateral on Federal Home Loan Bank
advances.
(3) LOANS
The components of loans in the balance sheets are as follows:
<TABLE>
<CAPTION>
AT DECEMBER 31,
-------------------------
1997 1996
------------- ----------
<S> <C> <C>
Commercial and commercial real estate $15,292,357 3,493,415
Residential real estate 10,233,003 1,574,119
Consumer 2,171,574 986,446
----------- ---------
27,696,934 6,053,980
Add (deduct):
Deferred loan fees 4,067 (5,310)
Allowance for loan losses (313,000) (90,000)
----------- ---------
Loans, net $27,388,001 5,958,670
=========== =========
An analysis of the change in the allowance for loan losses follows:
YEAR ENDED DECEMBER 31,
-----------------------
1997 1996
----------- ---------
Beginning balance $ 90,000 -
Provision for loan losses 223,000 90,000
Charge-offs - -
Recoveries - -
----------- ---------
$ 313,000 90,000
=========== =========
</TABLE>
The Bank had no impaired loans in 1997 or 1996.
(continued)
C-11
<PAGE>
COMMUNITY BANK OF NAPLES, NATIONAL ASSOCIATION
NOTES TO FINANCIAL STATEMENTS, CONTINUED
(4) PREMISES AND EQUIPMENT
A summary of premises and equipment follows:
AT DECEMBER 31,
-----------------------
1997 1996
--------- ---------
Bank premises $387,086 385,661
Furniture and fixtures 225,250 219,992
Equipment 174,991 160,471
-------- -------
Total, at cost 787,327 766,124
Less accumulated depreciation 107,132 26,132
-------- -------
Premises and equipment, net $680,195 739,992
======== =======
The Bank leases its office facility under an operating lease. The lease
contains an escalation clause based upon a 1% increase yearly and provides
for annual adjustments for the Bank's prorata share of operating expenses.
Rent expense under operating leases was $168,616 for 1997 and $83,640 for
1996. Estimated future rentals over the remaining noncancellable lease term
is as follows:
OPERATING
YEAR ENDING LEASE
DECEMBER 31, AMOUNT
------------ ----------
1998 $ 131,995
1999 133,310
2000 135,421
2001 138,132
2002 140,077
Thereafter 570,577
----------
Total minimum lease payments $1,249,512
==========
(continued)
C-12
<PAGE>
COMMUNITY BANK OF NAPLES, NATIONAL ASSOCIATION
NOTES TO FINANCIAL STATEMENTS, CONTINUED
(5) DEPOSITS
Time deposits included the following amounts:
<TABLE>
<CAPTION>
AT DECEMBER 31,
-----------------------------
1997 1996
----------- -----------
<S> <C> <C>
Certificates of Deposit $100,000 and over $ 7,728,175 465,120
Certificates of Deposit under $100,000 4,613,681 4,707,148
----------- -----------
$12,341,856 5,172,268
=========== ===========
</TABLE>
A schedule of maturities of certificates of deposit at December 31, 1997
follows:
YEAR ENDING
DECEMBER 31, AMOUNT
------------ -----------
1998 $11,821,646
1999 475,211
2000 -
2001 -
2002 and thereafter 44,999
-----------
$12,341,856
===========
(6) ADVANCES FROM FEDERAL HOME LOAN BANK
A summary of the Bank's borrowings from the Federal Home Loan Bank of
Atlanta (FHLB) by maturity follows:
AT DECEMBER 31,
---------------
MATURITY RATE 1997
------------- ---- -----------
July 25, 2001 6.4% $ 2.000,000
==== ===========
The Bank has entered into a collateral agreement with the FHLB. At December
31, 1997, the Bank's securities available for sale with a carrying value
of approximately $2,491,000 are pledged as collateral to secure such
advances.
(7) FINANCIAL INSTRUMENTS
The Bank is a party to financial instruments with off-balance-sheet risk in
the normal course of business to meet the financing needs of its
customers. These financial instruments are commitments to extend credit
and standby letters of credit and may involve, to varying degrees,
elements of credit and interest-rate risk in excess of the amount
recognized in the balance sheet. The contract amounts of these
instruments reflect the extent of involvement the Bank has in these
financial instruments.
The Bank's exposure to credit loss in the event of nonperformance by the
other party to the financial instrument for commitments to extend credit
and standby letters of credit is represented by the contractual amount of
those instruments. The Bank uses the same credit policies in making
commitments as it does for on-balance-sheet instruments.
(continued)
C-13
<PAGE>
COMMUNITY BANK OF NAPLES, NATIONAL ASSOCIATION
NOTES TO FINANCIAL STATEMENTS, CONTINUED
(7) FINANCIAL INSTRUMENTS, CONTINUED
Commitments to extend credit are agreements to lend to a customer as long
as there is no violation of any condition established in the contract.
Commitments generally have fixed expiration dates or other termination
clauses and may require payment of a fee. Since some of the commitments
are expected to expire without being drawn upon, the total commitment
amounts do not necessarily represent future cash requirements. The Bank
evaluates each customer's credit worthiness on a case-by-case basis. The
amount of collateral obtained if deemed necessary by the Bank upon
extension of credit is based on management's credit evaluation of the
counterparty.
The estimated fair values of the Company's financial instruments were as
follows (in thousands):
<TABLE>
<CAPTION>
AT DECEMBER 31, 1997 AT DECEMBER 31, 1996
-------------------- --------------------
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
---------- -------- ---------- --------
<S> <C> <C> <C> <C>
Financial assets:
Cash and cash equivalents $26,854 26,854 3,753 3,753
Securities available for sale 14,608 14,608 7,033 7,033
Securities held to maturity 1,004 1,010 1,495 1,504
Loans receivable 27,388 27,386 5,959 5,949
Accrued interest receivable 509 509 300 300
Financial liabilities:
Deposit liabilities 64,601 64,620 14,615 14,622
Federal Home Loan Bank advances 2,000 2,007 - -
</TABLE>
A summary of the notional amounts of the Bank's financial instruments with
off balance sheet risk at December 31, 1997 follows:
Unfunded loan commitments at variable rates $ 500,000
==========
Available lines of credit $3,998,234
==========
Standby letters of credit $ 158,800
==========
(continued)
C-14
<PAGE>
COMMUNITY BANK OF NAPLES, NATIONAL ASSOCIATION
NOTES TO FINANCIAL STATEMENTS, CONTINUED
(8) CREDIT RISK
The Bank grants the majority of its loans to borrowers throughout Collier
County, Florida. Although the Bank has a diversified loan portfolio, a
significant portion of its borrowers' ability to honor their contracts is
dependent upon the economy in Collier County, Florida.
(9) INCOME TAXES
The income tax provision (benefit) consisted of the following:
YEAR ENDED DECEMBER 31,
------------------------
1997 1996
----------- -----------
Deferred:
Federal $20,000 (176,000)
State 4,000 (29,000)
------- --------
Total deferred $24,000 (205,000)
======= ========
The income tax provision (benefit) is different than that computed by
applying the Federal statutory rate of 34%, as indicated in the following
analysis:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------
1997 1996
-------------------- -------------------
% OF % OF
PRETAX PRETAX
AMOUNT EARNINGS AMOUNT LOSS
--------- --------- ---------- ------
<S> <C> <C> <C> <C>
Income tax provision (benefit) at
statutory Federal income tax rate $21,850 34% $(187,350) (34)%
Increase (decreases) resulting from:
State taxes, net of federal tax
benefit 2,640 4 (19,140) (3)
Other (490) (1) 1,490 -
------- -- --------- ----
$24,000 37% $(205,000) (37)%
======= == ========= ====
(continued)
</TABLE>
C-15
<PAGE>
COMMUNITY BANK OF NAPLES, NATIONAL ASSOCIATION
NOTES TO FINANCIAL STATEMENTS, CONTINUED
(9) INCOME TAXES, CONTINUED
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities are
presented below.
AT DECEMBER 31,
------------------
1997 1996
--------- -------
Deferred tax assets:
Accumulated depreciation $ 13,000 1,000
Startup costs 47,000 60,000
Net operating loss 270,000 210,000
Other 10,000 8,000
-------- -------
Gross deferred tax asset 340,000 279,000
Less valuation allowance - -
-------- -------
340,000 279,000
-------- -------
Deferred tax liabilities:
Accrued income net of accrued expenses 128,000 59,000
Allowance for loan losses 31,000 15,000
Unrealized appreciation on securities
available for sale 31,791 594
-------- -------
190,791 74,594
-------- -------
Net deferred tax asset $149,209 204,406
======== =======
At December 31, 1997, the Bank has the following net operating loss
carryforwards available to offset future taxable income:
EXPIRATION
----------
2011 $ 559,000
2012 158,000
---------
$ 717,000
=========
(10) RELATED PARTY TRANSACTIONS
In the ordinary course of business, the Bank has made loans at terms and
rates prevailing at the time to officers and directors of the Bank and
to entities in which they hold a financial interest. The aggregate
dollar amount of these loans totaled approximately $766,000 at December
31, 1997. As of the same dates, these individuals and entities had
approximately $338,000 of funds on deposit in the Bank.
(11) INCENTIVE STOCK OPTION PLAN
The Bank established an Incentive Stock Option Plan for officers and
employees of the Bank and reserved 200,000 shares of common stock for
the plan. During 1996, the Bank granted stock options to its executive
officers to purchase 70,000 shares of the Bank's common stock at $5.00
per share. These options vest at the rate of twenty percent at the date
of grant and twenty percent per year until fully vested and are
exercisable for a period of ten years from the date of grant. No options
were exercised during 1997 or 1996. At December 31, 1997 options for
70,000 shares remain outstanding.
(continued)
C-16
<PAGE>
COMMUNITY BANK OF NAPLES, NATIONAL ASSOCIATION
NOTES TO FINANCIAL STATEMENTS, CONTINUED
(11) INCENTIVE STOCK OPTION PLAN, CONTINUED
The Bank adopted Statement of Financial Accounting Standards No. 123,
"Accounting for Stock-Based Compensation," which establishes financial
accounting and reporting standards for stock-based employee compensation
plans. As permitted by this Statement, the Bank has elected to continue
utilizing the intrinsic value method of accounting defined in APB
Opinion No. 25. Due to the exercise price of the options approximating
the market value of the common stock at the date of grant, no
compensation expense has been recognized in the statements of
operations.
In order to calculate the fair value of the options, it was assumed that
the risk-free interest rate was 6.0%, there would be no dividends paid
by the Bank over the exercise period, the expected life of the options
would be the entire exercise period and stock volatility would be zero
due to the lack of an active market for the stock. The following
information pertains to the options granted to purchase common stock in
1996 (in thousands):
1997 1996
----- -----
Weighted-average grant-date fair value of options
issued during the year $ - 158
===== ====
Proforma net earnings (loss) $ 9 (378)
===== ====
(12) PROFIT SHARING PLAN
The Bank sponsors a profit sharing plan established in accordance with the
provisions of Section 401(k) of the Internal Revenue Code. The profit
sharing plan is available to all employees electing to participate after
meeting certain length-of-service requirements. The Bank's contributions
to the plan are discretionary and are determined annually. Expense
relating to the Bank's contributions to the plan was $13,624 for 1997
and $4,995 for 1996.
(13) STOCKHOLDERS' EQUITY
The Bank is subject to certain restrictions on the amount of dividends
that it may declare without prior regulatory approval. At December 31,
1997, no amounts were available for dividends.
(14) 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 judgements by the regulators about
components, risk weightings, and other factors.
Quantitative measures established by regulation to ensure capital adequacy
require the Bank to maintain minimum amounts and ratios (set forth in
the table below) of total and Tier I capital (as defined in the
regulations) to risk-weighted assets (as defined), and of Tier I capital
(as defined) to average assets (as defined). Management believes, as of
December 31, 1997, that the Bank meets all capital adequacy requirements
to which it is subject.
(continued)
C-17
<PAGE>
COMMUNITY BANK OF NAPLES, NATIONAL ASSOCIATION
NOTES TO FINANCIAL STATEMENTS, CONTINUED
(14) REGULATORY MATTERS, CONTINUED
As of December 31, 1997, the most recent notification from the Comptroller
of the Currency categorized the Bank as well capitalized under the
regulatory framework for prompt corrective action. To be categorized as
well capitalized the Bank must maintain minimum total risk-based, Tier I
risk-based, and Tier I leverage ratios as set forth in the table. There
are no conditions or events since that notification that management
believes have changed the Bank's category. The Bank's actual capital
amounts and ratios are also presented in the table (dollars in
thousands).
<TABLE>
<CAPTION>
FOR WELL
FOR CAPITAL CAPITALIZED
ACTUAL ADEQUACY PURPOSES: PURPOSES:
----------------- ------------------- -------------
AMOUNT % AMOUNT % AMOUNT %
------- -------- --------- ---- ------- -----
<S> <C> <C> <C> <C> <C> <C>
AS OF DECEMBER 31, 1997:
Total capital (to Risk
Weighted Assets) $4,946 16.45% $2,406 8.0% $3,008 10.0%
Tier I Capital (to Risk
Weighted Assets) 4,633 15.40 1,203 4.0 1,805 6.0
Tier I Capital
(to Average Assets) 4,633 8.06 2,298 4.0 2,873 5.0
AS OF DECEMBER 31, 1996:
Total capital (to Risk
Weighted Assets) $4,666 52.99% $ 704 8.0% $ 880 10.0%
Tier I Capital (to Risk
Weighted Assets) 4,576 51.96 352 4.0 528 6.0
Tier I Capital
(to Average Assets) 4,576 28.40 644 4.0 806 5.0
</TABLE>
(15) ECONOMIC DEPENDENCE
The Bank's depositors are generally limited to relatively small amounts in
relation to the total of all deposits. However, at December 31, 1997, one
of the Bank's depositors had total deposits of approximately $15.8
million or 24% of the Bank's total deposits. The Bank's high liquidity
position makes it possible for the Bank to fund the withdrawal of these
deposits at any time.
C-18
<PAGE>
COMMUNITY BANK OF NAPLES, NATIONAL ASSOCIATION
CONDENSED BALANCE SHEETS
JUNE 30,
1998
-------------
ASSETS (UNAUDITED)
Cash and due from banks $ 4,048,407
Federal funds sold 1,148,000
-----------
Cash and cash equivalents 5,196,407
Securities available for sale 38,899,421
Securities held to maturity 929,632
Loans receivable, net of allowance for loan losses of $391,000 31,837,100
Premises and equipment, net 647,766
Restricted securities:
Federal Reserve Bank stock, at cost 150,000
Federal Home Loan Bank stock 446,500
Accrued interest receivable and other assets 762,702
Deferred income taxes 11,000
-----------
Total assets $78,880,528
===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Demand deposits 7,060,163
Savings and NOW deposits 18,241,920
Money-market deposits 14,215,979
Time deposits 30,898,615
-----------
Total deposits 70,416,677
Official checks 829,059
Accrued interest payable and other liabilities 385,208
Federal Home Loan Bank advances 2,000,000
Federal funds purchased and other borrowed money 240,830
-----------
Total liabilities 73,871,774
-----------
Stockholders' Equity:
Common stock, $2.50 par value 10,000,000 shares authorized
1,000,000 shares issued and outstanding 2,500,000
Additional paid-in capital 2,500,000
Accumulated deficit (18,816)
Accumulated other comprehensive income 27,570
-----------
Total stockholders' equity 5,008,754
-----------
Total liabilities and stockholders' equity $78,880,528
===========
See Accompanying Notes to Condensed Financial Statements.
C-19
<PAGE>
COMMUNITY BANK OF NAPLES, NATIONAL ASSOCIATION
CONDENSED STATEMENTS OF OPERATIONS
SIX MONTHS ENDED JUNE 30,
--------------------------
1998 1997
------------- -----------
(UNAUDITED)
Interest income:
Loans $1,355,774 500,247
Securities 808,776 438,846
Federal funds sold 398,498 81,325
---------- ---------
Total interest income 2,563,048 1,020,418
---------- ---------
Interest expense:
Deposits 1,213,652 446,377
Interest on Federal Home Loan Bank advances 63,473 -
Federal funds purchased and other borrowed money 1,064 1,923
---------- ---------
Total interest expense 1,278,189 448,300
---------- ---------
Net interest income 1,284,859 572,118
Provision for loan losses 78,000 138,000
---------- ---------
Net interest income after provision for loan losses 1,206,859 434,118
---------- ---------
Noninterest income, service charges and fees 93,530 32,294
---------- ---------
Noninterest expenses:
Salaries and employee benefits 387,760 353,292
Occupancy and equipment 144,864 152,330
Advertising 36,339 83,799
Data processing 34,449 28,872
Other 240,034 30,336
---------- ---------
Total noninterest expenses 843,446 648,629
---------- ---------
Earnings (loss) before income taxes (credit) 456,943 (182,217)
Income taxes (credit) 170,000 (68,000)
---------- ---------
Net earnings (loss) $ 286,943 (114,217)
========== =========
Basic earnings (loss) per share $.29 (.11)
========== =========
Weighted-average number of shares outstanding 1,000,000 1,000,000
========== =========
See Accompanying Notes to Condensed Financial Statements.
C-20
<PAGE>
COMMUNITY BANK OF NAPLES, NATIONAL ASSOCIATION
CONDENSED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
SIX MONTHS ENDED JUNE 30, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
ACCUMULATED
ADDITIONAL OTHER TOTAL
COMMON PAID-IN ACCUMULATED COMPREHENSIVE STOCKHOLDERS'
STOCK CAPITAL DEFICIT INCOME EQUITY
----------- --------- ------------ -------------- -------------
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1997 $2,500,000 2,500,000 (305,759) 52,984 4,747,225
Comprehensive income:
Net earnings (unaudited) - - 286,943 - -
Net decrease in unrealized
appreciation on securities
available for sale, net of
related taxes (unaudited) - - - (25,414) -
Comprehensive income (unaudited) - - - - 261,529
----------- --------- ----------- ------------- -------------
Balance at June 30, 1998
(unaudited) $2,500,000 2,500,000 (18,816) 27,570 5,008,754
=========== ========= =========== ============= =============
</TABLE>
See Accompanying Notes to Condensed Financial Statements.
C-21
<PAGE>
COMMUNITY BANK OF NAPLES, NATIONAL ASSOCIATION
CONDENSED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30,
-----------------------------
1998 1997
--------------- ------------
<S> <C> <C>
Cash flows from operating activities:
Net earnings (loss) $ 286,943 (114,217)
Adjustments to reconcile net earnings (loss) to net cash
used in operating activities:
Depreciation 41,340 40,001
Provision for loan losses 78,000 138,000
Provision (credit) for deferred income taxes 170,000 (68,000)
Amortization of loan fees, premiums and discounts, net (14,068) (9,313)
Increase in accrued interest receivable and other assets (253,601) (190,808)
Increase in accrued interest payable, official
checks, and other liabilities 772,583 (3,439)
------------ -----------
Net cash provided by (used in) operating activities 1,081,197 (207,776)
------------ -----------
Cash flows from investing activities:
Purchase of securities available for sale (29,047,942) (8,596,721)
Maturities of securities held to maturity 74,377 52,588
Maturities of securities available for sale 4,699,762 -
Net increase in loans (4,513,031) (10,543,268)
Purchase of premises and equipment (8,911) (20,385)
------------ -----------
Net cash used in investing activities (28,795,745) (19,107,786)
------------ ----------
Cash flows from financing activities:
Net increase (decrease) in demand, savings, NOW and money-
market deposits (12,741,085) 16,009,395
Net increase in time deposits 18,556,759 3,978,489
Net increase in federal funds purchased and other
borrowed money 240,830 -
------------ -----------
Net cash provided by financing activities 6,056,504 19,987,884
------------ -----------
Net increase (decrease) in cash and cash equivalents (21,658,044) 672,322
Cash and cash equivalents at beginning of period 26,854,451 3,752,754
------------ -----------
Cash and cash equivalents at end of period $ 5,196,407 4,425,076
============ ===========
Supplemental disclosure of cash flow information:
Cash paid during the year for:
Interest $ 1,188,082 437,774
============ ===========
Income taxes $ - -
============ ===========
Noncash transactions:
Net change in unrealized appreciation on securities
available for sale $ 25,414 6,332
============ ===========
</TABLE>
See Accompanying Notes to Financial Statements.
C-22
<PAGE>
COMMUNITY BANK OF NAPLES, NATIONAL ASSOCIATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(1) GENERAL. In the opinion of the management, the accompanying condensed
consolidated financial statements of Community Bank of Naples, National
Association (the "Bank") contain all adjustments (consisting principally
of normal recurring accruals) necessary to present fairly the financial
position at June 30, 1998, and the results of operations and the cash
flows for the six-month periods ended June 30, 1998 and 1997. The results
of operations for the six months ended June 30, 1998 are not necessarily
indicative of the results to be expected for the full year.
(2) LOAN IMPAIRMENT AND CREDIT LOSSES. No loans were identified as impaired at
June 30, 1998 or June 30, 1997. The activity in the allowance for loan
losses was as follows:
FOR THE SIX
MONTHS ENDED
JUNE 30,
-----------------
1998 1997
-------- -------
Balance at beginning of period $313,000 -
Provision charged to earnings 78,000 138,000
Charge-offs, net of recoveries - -
-------- -------
Balance at end of period $391,000 138,000
======== =======
(3) EARNINGS PER SHARE. Earnings per share ("EPS") of common stock has been
computed on the basis of the weighted-average number of shares of common
stock outstanding. There is no public market for the Company's common
stock. Therefore the stock book value was used for purposes of calculating
dilution. The outstanding stock options were not dilutive during the six
months ended June 30, 1997 or 1998.
(continued)
C-23
<PAGE>
COMMUNITY BANK OF NAPLES, NATIONAL ASSOCIATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(4) REGULATORY CAPITAL. The Bank is required to maintain certain minimum
regulatory capital requirements. The following is a summary at June 30,
1998 of the regulatory capital requirements and the Bank's capital on a
percentage basis:
<TABLE>
<CAPTION>
RATIOS OF REGULATORY
THE BANK REQUIREMENT
---------- ------------
<S> <C> <C>
Total capital to risk-weighted assets 12.56% 8.00%
Tier I capital to risk-weighted assets 11.64% 4.00%
Tier I capital to total assets - leverage ratio 6.52% 4.00%
</TABLE>
(5) PROPOSED ACQUISITION OF THE BANK. On September 21, 1998, the Board of
Directors of the Bank approved a definitive agreement for the acquisition
of the Bank by another financial institution (Alabama National
BanCorporation). The acquisition is expected to be completed in the fourth
quarter of 1998 or soon thereafter and is subject to various regulatory
approvals as well as the approval of the shareholders of the Bank.
C-24
<PAGE>
APPENDIX D
OPINION OF KEEFE, BRUYETTE & WOODS, INC.
<PAGE>
[LETTERHEAD OF KEEFE, BRUYETTE & WOODS, INC.]
APPENDIX D
October 26, 1998
Board of Directors
Community Bank of Naples, N.A.
Newgate Tower
5150 N. Tamiami Trail
Naples, FL 34103
Members of the Board:
You have requested our opinion as investment bankers as to the fairness,
from a financial point of view, to the common stockholders of Community Bank of
Naples, N.A. ("Naples") of the consideration to be received by such stockholders
in the proposed merger (the "Merger") of Naples with Alabama National
BanCorporation. ("Alabama National"), pursuant to the Agreement and Plan of
Merger ("Agreement") dated as of September 21, 1998 between Naples and Alabama
National (the "Agreement"). Under the terms of the Merger, stockholders of
Naples will receive 0.53271 shares of Alabama National's common stock as
described in the Agreement (the "Consideration") for each of their shares of
common stock, par value $2.50 per share of Naples. It is our understanding that
the Merger will be accounted for as a pooling accounting transaction under
generally accepted accounting practices.
Keefe, Bruyette & Woods, Inc. as part of its investment banking business,
is continually engaged in the valuation of banking businesses and their
securities in connection with mergers and acquisitions, negotiated
underwritings, competitive biddings, secondary distributions of listed and
unlisted securities, private placements and valuations for estate, corporate and
other purposes. As specialists in the securities of banking companies, we have
experience in, and knowledge of, the valuation of banking enterprises. In the
ordinary course of our business as a broker-dealer, we may, from time to time,
purchase securities from, and sell securities to, Naples and Alabama National
and as a market maker in securities we may from time to time have a long or
short position in, and buy or sell, debt or equity securities of Naples and
Alabama National for our own account and for the accounts of our customers. We
have acted exclusively for the Board of Directors of Naples in rendering this
fairness opinion and will receive a fee from Naples for our services.
In rendering our opinion, we have (i) reviewed, among other things, the
Merger Agreement, Annual Reports to stockholders and Call Reports since
inception of Naples and
<PAGE>
Community Bank of Naples, N.A.
Board of Directors
Page 2
Annual Report on Form 10-K of Alabama National for the four years ended December
31, 1997, certain interim reports to stockholders and Quarterly Reports on Form
10-Q of Alabama National and forecasts for Naples prepared by management; (ii)
held discussions with members of senior management of Naples and Alabama
National regarding past and current business operations, regulatory
relationships, financial condition and future prospects of the respective
companies; (iii) compared certain financial and stock market information for
Alabama National with similar information for certain other companies the
securities of which are publicly traded; (iv) reviewed the financial terms of
certain recent business combinations in the banking industry; and (v) performed
such other studies and analyses as we considered appropriate.
In conducting our review and arriving at our opinion, we have relied upon
and assumed the accuracy and completeness of all of the financial and other
information provided to us or publicly available and we have not assumed any
responsibility for independently verifying any of such information. We have
relied upon the management of Naples as to the reasonableness and achievability
of the financial and operating forecasts and projections (and the assumptions
and bases therefor) provided to us, and we have assumed that such forecasts and
projections reflect the best currently available estimates and judgments of
Naples and that such forecasts and projections will be realized in the amounts
and in the time periods currently estimated by such management. We have also
assumed, without independent verification, that the aggregate allowances for
loan losses for Naples and Alabama National are adequate to cover such losses.
In rendering our opinion, we have not made or obtained any evaluations or
appraisals of the property of Naples or Alabama National, nor have we examined
any individual credit files.
We have considered such financial and other factors as we have deemed
appropriate under the circumstances, including among others the following: (i)
the historical and current financial position and results of operations of
Naples and Alabama National; (ii) the assets and liabilities of Naples and
Alabama National; and (iii) the nature and terms of certain other merger
transactions involving bank holding companies. We have also taken into account
our assessment of general economic, market and financial conditions and our
experience in other transactions, as well as our experience in securities
valuation and our knowledge of the banking industry generally. Our opinion is
necessarily based upon conditions as they exist and can be evaluated on the date
hereof and the information made available to us through the date hereof.
Based upon and subject to the foregoing, it is our opinion that, as of the
date hereof, the Consideration is fair, from a financial point of view, to the
common stockholders of Naples.
Very truly yours,
/s/ Keefe, Bruyette & Woods, Inc.
--------------------------------------
KEEFE, BRUYETTE & WOODS, INC.
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Certificate of Incorporation, as amended, of Alabama National contains a
provision which, subject to certain exceptions described below, eliminates the
liability of a director to Alabama National 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 Alabama National require Alabama National 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 Alabama National or any other corporation, including the
subsidiary banks of Alabama National, for which he served as such at the
request of Alabama National. 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 Alabama National's Certificate of Incorporation described
in the preceding paragraph. Directors are also entitled to have Alabama
National 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 Alabama National, Section 145(c) of the DGCL
requires Alabama National 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 General 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 Alabama National 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:
<TABLE>
<C> <S>
2.1 Agreement and Plan of Merger dated as of September 21, 1998, is found at
Appendix A to the proxy statement--prospectus included in Part I hereof.
</TABLE>
II-1
<PAGE>
<TABLE>
<C> <S>
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.
4.1C Certificate of Amendment of Certificate of Incorporation dated April 24,
1998; filed as Exhibit 3.1C to the Registrant's Quarterly Report on Form
10-Q for the quarter ended March 31, 1998 (No. 0-25160) is incorporated
herein by reference.
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 October 29,
1998.
8.1 Opinion of PricewaterhouseCoopers, LLP re tax matters dated October 29,
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.
23.1 Consent of PricewaterhouseCoopers LLP
23.2 Consent of Ernst & Young LLP.
23.3 Consent of Hacker, Johnson, Cohen & Grieb, 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 PricewaterhouseCoopers, LLP is included in their opinion re
tax matters filed as Exhibit 8.1 hereto.
23.6 Consent of Keefe, Bruyette & Woods, Inc.
24.1 Power of Attorney (contained on signature page of the Registration
Statement).
99.1 Form of Proxy to be used at Community Bank of Naples, National
Association Special Meeting.
</TABLE>
(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.
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
II-2
<PAGE>
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 23RD DAY OF OCTOBER, 1998.
Alabama National BanCorporation
/s/ John H. Holcomb, III
By: _________________________________
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.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ John H. Holcomb, III Chairman, Chief Executive October 23, 1998
______________________________________ Officer, and Director
JOHN H. HOLCOMB, III (Principal Executive
Officer)
/s/ Victor E. Nichol, Jr. President and Chief October 23, 1998
______________________________________ Operating Officer, and
VICTOR E. NICHOL, JR. Director
/s/ William E. Matthews, V Executive Vice President October 23, 1998
______________________________________ and Chief Financial
WILLIAM E. MATTHEWS, V Officer (Principal
Financial Officer)
/s/ James S. Parks, Jr. Senior Vice President- October 23, 1998
______________________________________ Finance, Treasurer
JAMES S. PARKS, JR. (Principal Accounting
Officer)
/s/ T. Morris Hackney Director October 21, 1998
______________________________________
T. MORRIS HACKNEY
</TABLE>
II-4
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ John D. Johns Director October 21, 1998
______________________________________
JOHN D. JOHNS
/s/ John J. McMahon, Jr. Director October 23, 1998
______________________________________
JOHN J. MCMAHON, JR.
/s/ C. Phillip McWane Director October 23, 1998
______________________________________
C. PHILLIP MCWANE
/s/ William D. Montgomery Director October 23, 1998
______________________________________
WILLIAM D. MONTGOMERY
/s/ Drayton Nabers, Jr. Director October 23, 1998
______________________________________
DRAYTON NABERS, JR.
/s/ G. Ruffner Page, jr. Director October 23, 1998
______________________________________
G. RUFFNER PAGE, JR.
/s/ W. Stancil Starnes Director October 24, 1998
______________________________________
W. STANCIL STARNES
/s/ Dan M. David Vice Chairman and Director October 23, 1998
______________________________________
DAN M. DAVID
/s/ C. Lloyd Nix Director October 26, 1998
______________________________________
C. LLOYD NIX
/s/ William E. Sexton Director October 23, 1998
______________________________________
WILLIAM E. SEXTON
</TABLE>
II-5
<PAGE>
EXHIBIT 5.1
[LETTERHEAD OF MAYNARD, COOPER & GALE, P.C.]
October 29, 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 ("Alabama National"), we are
familiar with the Certificate of Incorporation and the Bylaws of Alabama
National and the above-referenced Registration Statement on Form S-4 (the
"Registration Statement") relating to 570,000 shares of the common stock, $1.00
par value per share, of Alabama National (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.
/s/ Christopher B. Harmon
By: _________________________________
CHRISTOPHER B. HARMON
<PAGE>
EXHIBIT 8.1
October 29, 1998
Alabama National BanCorporation
1927 First Avenue North
Birmingham, Alabama 35203
Community Bank of Naples, N.A.
5150 Tamiami Trail North
Naples, Florida 34103
Dear Sirs:
For various business reasons, Community Bank of Naples, N.A. (NAPLES), and
Citizens & Peoples Bank N.A. (C&P), both national banks, and Alabama National
BanCorporation (ANB), a Delaware Corporation, have entered into an Agreement
and Plan of Merger (Agreement) dated as of September 21, 1998. Pursuant to
your request, our letter addresses certain federal income tax consequences of
the proposed transaction as outlined below, including whether the merger will
qualify as a reorganization within the meaning of Section 368(a) of the Internal
Revenue Code of 1986 (I.R.C.), and the federal income tax consequences to
NAPLES, ANB, and NAPLES shareholders.
BACKGROUND
NAPLES operates as a national bank with its office in Naples, Florida. ANB, a
Delaware corporation, is a bank holding company with a wholly owned subsidiary,
C&P, a national bank with its principal office located in Cantonment, Florida.
CERTAIN TERMS OF THE MERGER
At the effective date of the merger, NAPLES will merge with and into C&P, with
C&P as the surviving corporation. Pursuant to the terms of the transaction,
each share of common stock of NAPLES outstanding and held by NAPLES shareholders
other than shares held by shareholders who perfect their dissenter's rights,
will be converted by operation of law and without any action on the part of the
parties or the holders thereof into 0.53271 shares of ANB common stock.
No fractional shares of ANB common stock will be issued. Instead, each holder
of shares of NAPLES stock having a fractional interest arising upon the
conversion of such shares into shares of ANB common stock shall, at the time of
surrender of the certificates previously representing NAPLES stock, be paid in
cash. Any shareholder of NAPLES who does not vote in favor of the Agreement and
who complies with certain procedures relating to the rights of dissenting
shareholders will be entitled to receive payment for the fair value of his or
her NAPLES stock.
The Florida state laws would not allow a direct acquisition of NAPLES by ANB,
due to the date
<PAGE>
of formation of NAPLES.
REPRESENTATIONS OF PARTIES
The party or parties indicated in parentheses have made the following respective
representations as to the merger:
[_] (ANB & NAPLES) ANB and NAPLES intend that the merger will qualify for
federal income tax purposes as a "reorganization" within the meaning of
I.R.C. Section 368(a).
[_] (ANB & NAPLES) The fair market value of the ANB stock and other
consideration received by each NAPLES shareholder will be approximately
equal to the fair market value of the NAPLES stock surrendered in the
exchange.
[_] (NAPLES) There is no plan or intention by the shareholders of NAPLES to
sell, exchange, or otherwise dispose of a number of shares of ANB stock
received in the transaction to ANB (or to a party related, as defined in
Regulation Section 1.368-1(e)(3), to ANB) that will reduce the NAPLES
shareholders' ownership of ANB stock to a number of shares having a value,
as of the date of the transaction, of less than fifty percent of the value
of all of the formerly outstanding stock of NAPLES as of the same date. For
purposes of this representation, shares of NAPLES stock exchanged for cash,
and surrendered by dissenters, or exchanged for cash in lieu of fractional
shares of ANB stock will be treated as outstanding NAPLES stock on the date
of the transaction. Shares of NAPLES stock and shares of ANB stock held by
NAPLES shareholders and otherwise sold, redeemed or disposed of prior or
subsequent to the transaction will be considered in making this
representation.
[_] (NAPLES) C&P will acquire at least 90 percent of the fair market value of
the net assets and at least 70 percent of the fair market value of the gross
assets held by NAPLES immediately prior to the transaction. For purposes of
this representation, amounts paid by NAPLES to dissenters, amounts paid by
NAPLES to shareholders who receive cash or other property, NAPLES assets
used to pay its reorganization expenses, and all redemptions and
distributions (except for regular, normal dividends) made by NAPLES
immediately preceding the transfer, will be included as assets of NAPLES
held immediately prior to the transaction.
[_] (ANB) Prior to the transaction, ANB will be in control of C&P within the
meaning of section 368(c)(1) of the Internal Revenue Code.
[_] (ANB) Following the transaction, C&P will not issue additional shares of its
stock that would result in ANB losing control of C&P within the meaning of
section 368(c)(1) of the Internal Revenue Code.
[_] (ANB) ANB has no plan or intention to reacquire any of its stock issued in
the transaction.
[_] (ANB) ANB has no plan or intention to liquidate C&P; to merge C&P with and
into another corporation; to sell or otherwise dispose of the stock of C&P;
or to cause C&P to sell or
2
<PAGE>
otherwise dispose of any of the assets of NAPLES acquired in the
transaction, except for dispositions made in the ordinary course of
business, transfers described in section 368(a)(2)(c) of the Internal
Revenue Code, or transfers described in the Post-Merger Reorganization
section of the Form S-4 Registration Statement filed with the SEC in
connection with the merger (Registration Statement).
[_] (NAPLES) The liabilities of NAPLES assumed by C&P and the liabilities to
which the transferred assets of NAPLES are subject were incurred by NAPLES
in the ordinary course of its business.
[_] (ANB) Following the transaction, C&P or a member of ANB's affiliated group
will continue the historic business of NAPLES or use a significant portion
of NAPLES' business assets in a business.
[_] (ANB & NAPLES) ANB, C&P, NAPLES, and the shareholders of NAPLES will pay
their respective expenses, if any, incurred in connection with the
transaction.
[_] (ANB & NAPLES) There is no intercorporate indebtedness existing between ANB
and NAPLES or between C&P and NAPLES that was issued, acquired, or will be
settled at a discount.
[_] (ANB & NAPLES) No two parties to the transaction are investment companies as
defined in section 368(a)(2)(f)(iii) and (iv) of the Internal Revenue Code.
[_] (NAPLES) NAPLES is not under the jurisdiction of a court in a title 11 or
similar case within the meaning of section 368(a)(3)(a) of the Internal
Revenue Code.
[_] (NAPLES) The fair market value of the assets of NAPLES transferred to C&P
will equal or exceed the sum of the liabilities assumed by C&P, plus the
amount of any other liabilities, if any, to which the transferred assets are
subject.
[_] (ANB) No stock of C&P will be issued in the transaction.
[_] (ANB) Cash payments in lieu of fractional shares and cash payments to
dissenters will not exceed 10% of the value of NAPLES stock immediately
before the transaction.
[_] (ANB) C&P will acquire NAPLES solely in exchange for ANB voting stock (other
than cash in lieu of fractional shares and cash paid to dissenting
shareholders).
[_] (ANB & NAPLES) The compensation to be paid by ANB or NAPLES to the officers
and employees of NAPLES under any stock option, employment, or noncompete
agreement will be at a rate equal to the fair market value of the services
actually performed and will be commensurate with amounts paid to third
parties bargaining at arm's length for similar services. In addition none of
the compensation to be received by the shareholder-employees of NAPLES will
be part of the consideration for their NAPLES stock.
3
<PAGE>
[_] (NAPLES) At the time of the merger, other than certain stock options, NAPLES
will not have outstanding any warrants, convertible securities, or any other
right pursuant to which any person could acquire stock in NAPLES.
[_] (ANB) The Merger will be consummated in compliance with the material terms
of the Agreement and none of the material terms and conditions therein have
been waived or modified and ANB has no plan or intention to waive or modify
any such material condition.
[_] (ANB & NAPLES) Any incentive stock options acquired from NAPLES and reissued
by ANB as a part of the merger will be issued on substantially the same
terms, so as not to create a material modification as defined in I.R.C.
Section 424.
OPINION OF PRICEWATERHOUSECOOPERS WITH RESPECT TO TAX CONSEQUENCES TO NAPLES,
C&P, AND ANB
The merger of NAPLES with and into C&P will constitute a merger within the
meaning of I.R.C. Section 368(a) provided that the merger qualifies as a
statutory merger pursuant to state or federal law. NAPLES, C&P, and ANB will
each be "a party to the reorganization" within the meaning of I.R.C. Section
368(b). Based upon I.R.C. Sections 357(a) and 361(a), NAPLES will recognize no
gain or loss when it transfers its assets to C&P in a constructive exchange
solely for ANB's stock and the assumption of NAPLES' liabilities by C&P.
Pursuant to I.R.C. Section 1032, no gain or loss will be recognized by ANB or
C&P upon the acquisition by C&P of the assets of NAPLES in exchange for ANB
common stock and the assumption of NAPLES' liabilities. C&P's basis in the
assets acquired in the transaction will be equal to the basis of the assets in
the hands of NAPLES immediately before the transaction per I.R.C. Section
362(b). Pursuant to I.R.C. Section 1223(2), C&P's holding period for each
NAPLES' asset received in the merger will include the period during which the
asset was held by NAPLES immediately before the transaction. The basis of C&P
stock in the hands of ANB will be increased by an amount equal to the basis of
the NAPLES assets acquired by C&P and decreased by the sum of the amount of
liabilities of NAPLES assumed by C&P and the amount of liabilities to which the
assets of NAPLES are subject.
Pursuant to I.R.C. Section 381(a), C&P will succeed to and take into account the
items of NAPLES described in I.R.C. Section 381(c), subject to the conditions
and limitations of I.R.C. Sections 381, 382, 383, 384, and 1502 and the
regulations thereunder. C&P will succeed to and take into account the earnings
and profits, or deficit in earnings and profits, of NAPLES as provided by I.R.C.
Section 382(c)(2) and Section 1.381(c)(2)-1 of the Regulations.
OPINION OF PRICEWATERHOUSECOOPERS WITH RESPECT TO TAX CONSEQUENCES TO NAPLES
SHAREHOLDERS
Pursuant to I.R.C. Section 354, a shareholder who receives solely ANB common
stock in
4
<PAGE>
exchange for NAPLES common stock will recognize no gain or loss on the exchange.
Pursuant to I.R.C. Section 358 the shareholder's tax basis in the ANB common
stock received in the exchange will be the same as the basis of the NAPLES
common stock surrendered, decreased by the amount of cash (if any) received by
the shareholder and increased by the amount of gain (if any) recognized in the
exchange. Pursuant to I.R.C. Section 1223 such shareholder will include the
period during which NAPLES stock was held in his holding period for the ANB
common stock received in the exchange.
The payment of cash in lieu of fractional shares of ANB common stock will be
treated as if the fractional shares were issued as part of the exchange and then
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
I.R.C. Section 302(a) of the Code. Generally, any gain or loss recognized upon
such exchange will be capital gain or loss, provided the fractional share
constitutes a capital asset in the hands of the exchanging shareholder. The
shareholders will recognize capital gain or loss equal to the difference between
the cash received and the basis of the fractional share interest that would have
been issued.
Holders of shares of NAPLES Common Stock who receive cash upon the exercise of
any appraisal rights will incur a taxable transaction for federal income tax
purposes. Such a shareholder will recognize gain or loss measured by the
difference between the tax basis for his or her shares and the amount of cash
received pursuant to I.R.C. Section 1012 (unless the receipt of cash is treated
as a dividend, as described below).
In certain circumstances, the receipt of solely cash by a NAPLES shareholder
could be treated as a dividend (to the extent of the shareholder's ratable share
of applicable earnings and profits) if the shareholder constructively owns
shares of NAPLES Common Stock that are exchanged for ANB Common Stock in the
Merger. Generally, a shareholder constructively owns stock that is owned by
members of the shareholder's family, and by certain controlled or related
partnerships, estates, trusts and corporations, pursuant to the constructive
ownership rules of I.R.C. Section 318, as well as any shares that the
shareholder has an option to acquire.
The receipt of solely cash by a NAPLES shareholder in exchange for his stock
will not be treated as a dividend if such exchange or receipt results in a
meaningful reduction or a substantially disproportionate reduction in the
shareholder's ownership interest or results in a complete termination of the
shareholder's interest, taking into account, in each case, the constructive
ownership rules described above. A complete termination of a shareholder's
interest will occur if, after the receipt of cash in exchange for stock, the
shareholder owns no shares of stock in ANB. Thus, a shareholder who receives
solely cash for all of the stock actually owned by him will generally qualify
for capital gain treatment under the complete termination test if none of the
shares constructively owned by him are exchanged in the merger for ANB Common
Stock and the shareholder does not otherwise own, actually or constructively,
any shares of ANB Common Stock after the merger.
Where the complete termination of interest test is not satisfied with respect to
a particular shareholder (because, for example, NAPLES shares owned by a related
party are exchanged for ANB Common Stock in the merger), that shareholder will
nonetheless generally be entitled to
5
<PAGE>
capital gain treatment if the receipt of cash in exchange for his shares results
in a "substantially disproportionate" reduction or a "meaningful" reduction in
his ownership interest. I.R.C. Section 302 provides that a shareholder's
reduction in ownership interest should normally be "substantially
disproportionate," and capital gain treatment should normally result, if (1) the
shareholder owns less than 50% of the total combined voting power of all classes
of stock immediately after the merger, and (2) the shareholder's proportionate
stock interest in ANB immediately after the merger is 20% or more below what his
proportionate interest in ANB would have been if he had received solely ANB
Common Stock in the merger.
NAPLES shareholders, employees, or directors who receive compensation from ANB
in the form of stock options, employment agreements, or noncompete agreements
may have ordinary income and should consult their own tax advisor. No opinion
is rendered regarding the application of Section 280G of the Internal Revenue
Code.
NAPLES shareholders who constructively own stock in NAPLES should consult a tax
advisor regarding the characterization of cash payments received in the
reorganization in exchange for NAPLES stock as either capital gain income or
dividend income.
SUMMARY OF PRICEWATERHOUSECOOPERS OPINIONS
The merger of C&P and NAPLES will qualify as a tax-free reorganization within
the meaning of I.R.C. Section 368(a), provided that the merger qualifies as a
statutory merger pursuant to state or federal law. C&P's basis in NAPLES'
assets will be the same as NAPLES' basis in its assets before the merger.
NAPLES shareholders will retain a substituted basis in the shares of ANB stock
received in the merger decreased by the amount of cash received and increased by
the amount of gain recognized in the transaction. The only taxable consequences
will be to those shareholders who receive cash in lieu of fractional shares and
those shareholders who receive solely cash in the exchange upon perfecting their
dissenter's rights. Shareholders receiving cash must examine their actual and
constructive ownership of NAPLES and ANB stock for purposes of determining the
tax consequences of the cash payments.
Caveat
- ------
In rendering our opinion, we have relied upon (i) the Agreement; (ii) the
representations given by the parties, which are listed in the "Representations
of Parties" sections; and (iii) such other documents as we have deemed necessary
or appropriate. We have assumed the genuineness of all signatures, the legal
capacity of all natural persons, the authenticity of all documents submitted to
us as originals, the conformity to original documents of all documents submitted
to us as certified, conformed or photostatic copies, and the authenticity of the
originals of such copies. We have also assumed that the Agreement reflects all
the material facts relating to NAPLES, C&P, and ANB. Our opinion is expressly
conditioned on, among other things, the accuracy as of the date hereof, and the
continuing accuracy, of all such facts and representations. If any of the
representations incorporated herein are incorrect in whole or in part, or if the
terms of the Agreement are altered before consummation of the merger, such
inaccuracies or alterations may have a material effect upon our opinion
expressed in this letter.
6
<PAGE>
The foregoing opinion addresses only the items set forth herein and therefore,
no tax opinion is hereby expressed regarding any other federal, state, local, or
other tax issues or about any other matter not specifically mentioned herein.
This letter is not a comprehensive analysis of the income tax consequences to
those NAPLES' shareholders who are subject to special treatment for federal
income tax purposes. NAPLES' shareholders should consult their own tax
advisors regarding the income tax consequences of the merger which are not
addressed in this letter.
Our opinion is based on the relevant provisions of the I.R.C., the regulations
thereunder, and the judicial and administrative interpretations thereof. There
are no assurances that the conclusions reached herein will be accepted by the
Internal Revenue Service or judicial authorities if challenged. Any legislative,
regulatory, administrative, or judicial decisions subsequent to the date of this
opinion may have an impact on the validity of our conclusions. Unless you
specifically request otherwise, we will not update our opinion for changes to
the law, regulations, or the judicial and administrative interpretations
thereof.
This opinion is being furnished only to you in connection with the Merger and
solely for your benefit in connection therewith and may not be used or relied on
for any other purpose (other than inclusion in the proxy statement-prospectus
to be distributed to the shareholders of NAPLES and the related Registration
Statement) and may not be circulated, quoted, or otherwise referred to for any
other purpose without our express written consent.
If you have any questions or comments, please call Kurt Hopper or Mark Borden at
(205) 252-8400.
Very truly yours,
/s/ PricewaterhouseCoopers L.L.P.
PricewaterhouseCoopers L.L.P.
7
<PAGE>
EXHIBIT 21.1
Subsidiaries of the Registrant
<TABLE>
<CAPTION>
NAME OF SUBSIDIARY STATE OF ORGANIZATION
------------------ ---------------------
<S> <C>
National Bank of Commerce of Birmingham.................. National Bank
NBC Securities, Inc. .................................... Alabama
Bank of Dadeville........................................ Alabama
Ashland Insurance, Inc. ................................. Alabama
Alabama Exchange Bank.................................... Alabama
Tuskegee Loan Company, Inc. ............................. Alabama
First Gulf Bank.......................................... Alabama
First Citizens Bank, National Association................ National Bank
Clay County Finance Company, Inc. ....................... Alabama
First American Bank...................................... Alabama
Corporate Billing, Inc. ................................. Alabama
First Allegiance Mortgage, Inc. ......................... Alabama
Citizens & Peoples Bank, National Association............ National Bank
Public Bank.............................................. Florida
Public Mortgage Corporation.............................. Florida
Georgia State Bank....................................... Georgia
</TABLE>
<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/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Birmingham, Alabama
October 23, 1998
<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 570,000 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 1996 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
October 23, 1998
<PAGE>
EXHIBIT 23.3
ACCOUNTANTS' CONSENT
The Board of Directors
Community Bank of Naples, National Association
Naples, Florida
We consent to the use of our report dated February 20, 1998 relating to the
balance sheets as of December 31, 1997 and 1996 and the related statements of
operations, changes in stockholders' equity and cash flows for the years then
ended of Community Bank of Naples, National Association and to the use of our
name under the caption of "Experts", in the Registration Statement on Form S-4
of Alabama National Bancorporation.
/s/ Hacker, Johnson, Cohen & Grieb PA
- -------------------------------------
HACKER, JOHNSON, COHEN & GRIEB PA
Tampa, Florida
October 22, 1998
<PAGE>
EXHIBIT 23.6
CONSENT OF KEEFE, BRUYETTE & WOODS, INC.
We hereby consent to the use in this Registration Statement on Form S-4 of our
letter to the board of directors of the Community Bank of Naples, N.A.
included as Appendix D to the proxy statement-- prospectus forming a part of
this Registration Statement on Form S-4 and to all references to our firm in
such proxy statement--prospectus. In giving such consent, we do not hereby
admit that we come within the category of persons whose consent is required
under Section 7 of the Securities Act of 1933 or the rules and regulations of
the Securities and Exchange Commission thereunder, nor do we admit that we are
experts with respect to any part of such Registration Statement within the
meaning of the term "experts" as used in the Securities Act or the rules and
regulations of the Securities Act or the rules and regulations of the
Securities and Exchange Commission thereunder.
Keefe, Bruyette & Woods, Inc.
/s/ James C. Lott
By: _________________________________
JAMES C. LOTT
Vice President
Dated: October 26, 1998
<PAGE>
EXHIBIT 99.1
REVOCABLE PROXY
COMMUNITY BANK OF NAPLES, NATIONAL ASSOCIATION
NEWGATE TOWER
5150 TAMIAMI TRAIL NORTH
NAPLES, FLORIDA 34103
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF COMMUNITY BANK
OF NAPLES, NATIONAL ASSOCIATION ("NAPLES") 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 Naples, hereby appoints and
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 September 21, 1998 (the "Merger Agreement"), by and between
Naples and Alabama National BanCorporation ("Alabama National"), pursuant to
which, among other matters (a) Naples would be merged with and into Citizens &
Peoples Bank, National Association, a wholly owned subsidiary of Alabama
National (the "Merger") and (b) each share of Naples common stock will be
converted into the right to receive 0.53271 shares of Alabama National common
stock. A copy of the Merger Agreement is set forth in Appendix A to the
accompanying Proxy Statement and Prospectus.
ELECTION TO APPROVE THE MERGER:
[_] ABSTAIN Approval of the Merger
[_] FOR Approval of the Merger
[_] AGAINST Approval of the Merger
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.
<PAGE>
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 NAPLES, 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
AND FOR ALL DIRECTOR NOMINEES.
Signature(s): ____________________
Dated: ___________________________
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.
