SECURITIES AND EXCHANGE COMMISSION
Washington, D C 20549
FORM 10-Q
(Mark One)
( x ) Quarterly Report Pursuant to Section 13 or 15 (2) of the Securities
Exchange Act of 1934
( ) Transition Report Pursuant to Section 13 or 15 (2) of the Securities
Exchange Act of 1934
FOR THE QUARTER ENDED JUNE 30, 1995
Commission File Number 0-14549
UNITED SECURITY BANCSHARES, INC.
(Exact Name of Registrant as Specified in its Charter)
Alabama 63-0843362
(State of Other Jurisdiction of (I R S Employer Identification
Incorporation or Organization Number
131 West Front Street (334) 636-5424
Post Office Box 249 (Registrant's Telephone
Thomasville, AL 36784 Number Including Area
(Address and Zip Code of Code)
Principal Executive Offices)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities and Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes (x). No ( ).
Shares of common stock ($.01 par value) outstanding as of June 30, 1995:
2,137,960.
Total Number of Pages: 20
Exhibit Index at Page: 13
<PAGE>
UNITED SECURITY BANCSHARES, INC AND SUBSIDIARY
INDEX TO FORM 10-Q
Page
[CAPTION]
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
[S] [C]
Consolidated Statements of Condition at June 30, 1995 4
(Unaudited), and December 31, 1994
Consolidated Statements of Income (Unaudited) for the 5
Six Months Ended June 30, 1995 and 1994
Consolidated Statements of Income (Unaudited) for the 6
Three Months Ended June 30, 1995 and 1994
Consolidated Statements of Cash Flows (Unaudited) for 7
the Six Months Ended June 30, 1995 and 1994
Notes to Consolidated Financial Statements 8
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 9
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 12
EXHIBIT INDEX 13
SIGNATURE PAGE
Signatures 14
<PAGE>
PART I.
FINANCIAL INFORMATION
<PAGE>
<TABLE>
UNITED SECURITY BANCSHARES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CONDITION
(UNAUDITED)
<CAPTION>
June 30, December 31,
ASSETS 1995 1994
<S> <C> <C>
Cash and due from banks $ 6,649,583 $ 7,190,823
Federal funds sold 2,675,000 0
TOTAL CASH AND CASH EQUIVALENTS 9,324,583 7,190,823
Investment securities (market value of
$23,726,675 and $21,594,206, respectively) 23,073,767 22,126,539
Investment securities available for sale 95,912,594 90,587,661
Loans 58,243,823 58,061,776
Less: Unearned interest on loans (544,368) (556,356)
Less: Allowance for possible loan losses (785,719) (772,000)
NET LOANS 56,913,736 56,733,420
Premises and equipment 3,709,541 3,876,828
Accrued interest receivable 1,879,547 1,853,986
Other assets 3,253,470 4,071,778
TOTAL ASSETS $194,067,238 $186,441,035
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES
Deposits:
Demand - non-interest bearing $ 22,664,298 $ 23,491,541
Demand - interest bearing 22,893,522 26,582,602
Savings 15,721,348 14,323,733
Time 82,833,571 77,886,065
TOTAL DEPOSITS 144,112,739 142,283,941
Federal funds purchased 0 7,400,000
Securities sold under repurchase agreements 39,563 220,614
U.S. Treasury tax and loan 813,730 531,474
Other borrowings 19,000,000 9,500,000
Dividend payable 235,176 224,486
Accrued interest payable 1,033,131 800,647
Other liabilities 610,068 911,224
Current portion long-term debt 5,083,333 5,083,333
Long-term debt 722,223 763,889
TOTAL LIABILITIES 171,649,963 167,719,608
SHAREHOLDERS' EQUITY
Common stock, par value per share; $.01 - in 1995,
$.25 - in 1994 authorized 2,400,000 - in 1995,
600,000 - in 1994 issued; 2,202,060 - in 1995,
550,515 - in 1994 22,021 137,628
Surplus 5,761,552 5,645,945
Net unrealized loss on
available for sale securities (816,407) (3,217,137)
Retained earnings 17,704,529 16,409,411
Less: Treasury stock - 64,100 shares in 1995
and 16,025 shares in 1994, at cost (254,420) (254,420)
TOTAL SHAREHOLDERS' EQUITY 22,417,275 18,721,427
$194,067,238 $186,441,035
See Notes to Consolidated Financial Statements.
</TABLE>
<PAGE>
<TABLE>
UNITED SECURITY BANCSHARES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
<CAPTION>
Six months ended June 30,
1995 1994
INTEREST INCOME
<S> <C> <C>
Interest and fees on loans $2,692,066 $2,278,438
Interest on investment securities:
Taxable 352,650 624,123
Tax-exempt 475,504 404,899
Dividends 5,000 0
833,154 1,029,022
Interest on investment securities
available for sale 4,352,370 3,136,846
Interest on trading securities 6,084 28,066
Interest on federal funds sold 15,767 7,976
Interest on rate swaps 14,616 119,295
TOTAL INTEREST INCOME 7,914,057 6,599,643
INTEREST EXPENSE
Interest on deposits 2,651,162 2,208,721
Interest on short-term borrowings 503,705 141,629
Interest on long-term debt 176,007 154,467
TOTAL INTEREST EXPENSE 3,330,874 2,504,817
Net interest income 4,583,183 4,094,826
Provision for possible loan losses 0 13,000
NET INTEREST INCOME AFTER
PROVISION FOR POSSIBLE LOAN LOSSES 4,583,183 4,081,826
NON-INTEREST INCOME
Service and penalty charges on deposit accounts 406,306 396,450
Credit life insurance commissions 12,492 23,443
Other income 78,436 64,650
Securities gains (losses):
Investment securities (154,132) 210,612
Trading securities 9,559 (161,094)
Options 161,007 114,125
TOTAL NON-INTEREST INCOME 513,668 648,186
NON-INTEREST EXPENSES
Salaries 1,189,437 1,137,575
Employee benefits 173,948 181,929
Occupancy expense 157,358 163,891
Furniture and equipment expense 314,160 300,939
Stationery and operating supplies 70,475 66,283
Telephone expense 76,490 85,137
FDIC assessment 158,138 147,583
Other expenses 503,376 547,788
TOTAL NON-INTEREST EXPENSES 2,643,382 2,631,125
Income before income taxes 2,453,469 2,098,887
Applicable income taxes 688,000 550,000
NET INCOME $1,765,469 $1,548,887
Average number of shares outstanding 2,137,960 2,137,960
Net income per share $ .83 $ .72
See Notes to Consolidated Financial Statements.
</TABLE>
<PAGE>
<TABLE>
UNITED SECURITY BANCSHARES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
<CAPTION>
Three months ended June 30,
1995 1994
INTEREST INCOME
<S> <C> <C>
Interest and fees on loans $1,376,995 $1,158,744
Interest on investment securities:
Taxable 170,912 301,101
Tax-exempt 240,721 209,090
Dividends 5,000 0
416,633 510,191
Interest on investment securities
available for sale 2,175,868 1,725,736
Interest on trading securities 1,474 3,237
Interest on federal funds sold 12,553 1,599
Interest on rate swaps 10,504 60,029
TOTAL INTEREST INCOME 3,994,027 3,459,536
INTEREST EXPENSE
Interest on deposits 1,369,810 1,128,165
Interest on short-term borrowings 272,572 105,942
Interest on long-term debt 88,895 61,207
TOTAL INTEREST EXPENSE 1,731,277 1,295,314
Net interest income 2,262,750 2,164,222
Provision for possible loan losses 0 7,000
NET INTEREST INCOME AFTER
PROVISION FOR POSSIBLE LOAN 2,262,750 2,157,222
NON-INTEREST INCOME
Service and penalty charges on deposit accounts 207,119 197,216
Credit life insurance commissions 7,400 11,566
Other income 24,754 29,236
Securities gains (losses):
Investment securities 123,126 2,010
Trading securities (6,187) 34,062
Options 105,944 76,813
TOTAL NON-INTEREST INCOME 462,156 350,903
NON-INTEREST EXPENSES
Salaries 619,450 586,537
Employee benefits 96,462 93,791
Occupancy expense 79,292 78,938
Furniture and equipment expense 156,235 153,828
Stationery and operating supplies 38,643 30,970
Telephone expense 38,285 42,248
FDIC assessment 79,358 73,800
Other expenses 277,383 263,334
TOTAL NON-INTEREST EXPENSES 1,385,108 1,323,446
Income before income taxes 1,339,798 1,184,679
Applicable income taxes 371,000 318,000
NET INCOME $ 968,798 $ 866,679
Average number of shares outstanding $2,137,960 $2,137,960
Net income per share $ .45 $ .41
See Notes to Consolidated Financial Statements.
</TABLE>
<PAGE>
<TABLE>
UNITED SECURITY BANCSHARES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<CAPTION>
Six months ended June 30,
1995 1994
Cash flows from operating activities:
<S> <C> <C>
Net income $ 1,765,469 $ 1,548,887
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 202,910 206,927
Provision for possible loan losses 0 13,000
Amortization of intangible assets 281,023 95,837
Investment securities (gains) losses 154,132 (210,612)
Loss on sale of other real estate 0 8,500
Net securities premium amortization 227,138 800,395
Net decrease in trading securities 0 1,111,875
(Increase) decrease in:
Interest receivable (25,561) (145,340)
Other assets (903,153) (375,469)
Increase (decrease) in:
Interest payable 232,484 92,782
Other liabilities (301,156) (678,183)
Net cash provided by operating activities 1,633,286 2,468,599
Cash flows from investing activities:
Proceeds from maturities and prepayments of
investment securities 506,930 3,239,047
Purchases of investment securities (1,397,040) (822,891)
Proceeds from sales of investment
securities available for sale 25,797,013 18,428,919
Proceeds from maturities/calls of
investment securities available for sale 693,767 11,370,464
Purchases of investment securities
available for sale (28,412,932) (45,143,425)
Net increase in loans (180,316) (1,621,885)
Purchase of premises and equipment (35,623) (117,247)
Proceeds from sale of other real estate 0 45,500
Net cash used in investing activities (3,028,201) (14,621,518)
Cash flows from financing activities:
Net increase (decrease) in demand and
savings deposits (3,118,708) 3,997,868
Net increase in time deposits 4,947,506 2,985,951
Net increase in short-term
borrowings 2,201,205 6,878,729
Repayments of long-term debt (41,666) (41,667)
Dividends paid (459,662) (418,846)
Acquisition of treasury stock 0 (4,862)
Sale of treasury stock 0 5,092
Net cash provided by financing activities 3,528,675 13,402,265
Net increase in cash and cash
equivalents $ 2,133,760 $ 1,249,346
Cash and cash equivalents, beginning of
period 7,190,823 5,043,695
Cash and cash equivalents, end of period $ 9,324,583 $ 6,293,041
Supplemental disclosures of cash flow
information:
Cash paid during the period for:
Interest $ 3,098,714 $ 2,394,485
Income taxes $ 748,486 $ 580,801
Supplemental schedule of noncash investing
and financing activities:
Dividends declared but unpaid $ 235,176 $ 224,486
See Notes to Consolidated Financial Statements.
</TABLE>
<PAGE>
UNITED SECURITY BANCSHARES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Note A - General
The consolidated financial statements include the accounts of United Security
Bancshares, Inc. (Bancshares) and its subsidiary. All significant intercompany
accounts have been eliminated.
The interim financial statements are unaudited but, in the opinion of
management, reflect all adjustments necessary for a fair presentation of results
for such periods. Such adjustments are of a normal, recurring nature. The
results of operation for any interim period are not necessarily indicative of
results for the full year. These financial statements should be read in
conjunction with the financial statements and notes thereto contained in the
Annual Report for the year ended December 31, 1994, of United Security
Bancshares, Inc. and subsidiary.
Note B - Stock Split
At the Company's annual meeting on April 25, 1995, the shareholders ratified a
change in the par value of the Company's stock from $.25 to $.01 per share.
Additionally, the shareholders also approved an increase in the number of
authorized shares from 600,000 shares to 2,400,000 shares in order for the
Company to effect a four-for-one split of its stock payable to shareholders of
record on that date. All references in the accompanying financial statements
to the number of common shares and per share amounts for 1994 have been restated
to reflect the stock split.
Note C - Contingencies
The Company is a defendant in two related lawsuits claiming unspecified damages
filed by two customers alleging fraud and misrepresentation over a $1.6 million
loan commitment. The cases are just in the discovery stages and have not
progressed sufficiently to determine the likelihood of unfavorable outcomes or
appraisal of damages, if any. Management believes the outcome of the litigation
will not have a material adverse effect on the financial position of the
Company.
The Company is also involved in other litigation arising in the normal course
of business which is not expected to have a material effect on the financial
position of the Company.
Note D - Reclassifications
Certain balances in the prior year have been reclassified to conform with the
presentation adopted in the current year.
<PAGE>
Item 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
For the Six Months Ended June 30, 1995
The following discussion and financial information are presented to aid in an
understanding of the current financial position and results of operations of
United Security Bancshares, Inc. ("United Security"). United Security is the
Parent Holding Company of United Security Bank (the "Bank"), and it has no
operations of any consequence other than the ownership of its subsidiary. The
emphasis of this discussion is a comparison of Assets, Liabilities, and Capital
for the six months ended June 30, 1995, to year-end 1994; while comparing income
for the six months ended June 30, 1995, to income for the six months ended June
30, 1994. All yields and ratios presented and discussed herein are based on the
cash basis and not on the tax-equivalent basis.
COMPARING THE SIX MONTHS ENDED JUNE 30, 1995, TO THE SIX MONTHS ENDED JUNE 30,
1994:
Net income increased $216,582 (13.98%) which increased net income per share to
$.83 from $.72. The increase is due primarily to improved net interest income
and virtually no growth in non-interest expenses.
Net interest income increased $501,357 or 12.28% over the first half of 1994.
Volume, rate, and yield changes contributed to this increase. Total interest-
earning assets increased by $9,127,477 or 5.39% while interest-bearing
liabilities increased $4,815,580 or 3.38% in the first half of 1995 compared to
the first half of 1994. These volume changes favoring the interest earning
assets coupled with increased interest rates over the first half of 1995 has
contributed to the increased net interest income due to the improved spread
between the yield on assets and the rates paid on liabilities.
Operating income (income excluding taxes and securities transactions) increased
$501,791 or 25.93% in the first half of 1995 compared to the same period in
1994. Management's investment strategy continued to be directed more toward
interest income generation through the investment portfolio by restructuring the
fixed rate portion of the portfolio into floating rates or other fixed rates.
Some losses were taken in the investment securities portfolio in order to secure
a better yield position. This investment strategy was implemented in 1994. and
the increase of total interest income of $1,314,414 or 19.92% in the first half
of 1995 over the same period in 1994 is the result.
Total interest expense increased $826,057 or 32.98% in the first half of 1995
compared to the same period in 1994. Interest expense on short-term borrowings
increased $362,076 during the first half of 1995 compared to the first half of
1994. Short-term borrowing consists of U. S. Treasury Demand Notes in the
Treasury, Tax, and Loan Accounts, borrowings from the Federal Home Loan Bank,
and securities sold under repurchase agreements. These borrowings are used to
satisfy short-term funding needs including arbitrage when advantageous to the
Bank. The interest expense increase is primarily the result of higher interest
rates coupled with an increase in total interest-bearing deposits of $2,656,041
or 2.23%.
Total non-interest expense remained flat with only a $12,257 increase. This
reduction of growth in non-interest expense is a result of management's efforts
to control expenses.
COMPARING THE ENDING FIGURES JUNE 30, 1995, TO ENDING FIGURES DECEMBER 31, 1994:
Total assets increased $7,626,203 (4.09%) to $194,067,238. Net loans increased
$180,316 (.32%) to $56,913,736, while investment securities increased by
$6,272,161 (5.56%) to $118,986,361.
Deposit growth slowed to $1,828,798 or 1.29% when comparing total deposits of
$144,112,739 at June 30, 1995, with $142,283,941 at December 31, 1994.
Federal funds purchased and securities sold under agreements to repurchase
generally mature within one to four days from the transaction date. These funds
are generally used to satisfy daily funding needs. At mid-year June 30, 1995,
the Bank was in a zero balance federal funds purchase position compared to a
federal fund purchase position of $7,400,000 at year-end 1994. Other
borrowings, on the other hand, increased by $9,500,000 during the first half of
1995. The increase represents a move from federal funds purchased to Federal
Home Loan Bank loans maturing in the last half of 1995. Treasury, Tax, and Loan
deposits are on demand and were up by $282,256 in the first half of 1995, while
securities sold under repurchase agreements were down by $181,051 during the
same period when compared to December 31, 1994.
The long-term debt consists of a fixed-rate loan from the Federal Home Loan Bank
secured by investment securities pledged to the Federal Home Loan Bank. This
debt is used to fund a portion of the Bank's long-term fixed-rate mortgages, and
the final installment is due in 2005.
Retained earnings increased $1,295,118 (7.89%), and net unrealized loss on
available-for-sale securities realized an improvement of $2,400,730 in the first
half, which resulted in a stockholders' equity increase of $3,695,848 (19.74%)
to $22,417,275.
Management is not aware of any current recommendations by the regulatory
authorities which would have any adverse effect on the liquidity, capital
resources or operation of the Bank. However, there were three law suits filed
against the Bank during the first half of 1995, which could impact the Bank's
future earnings. Management, however, does not expect any material financial
impact at this time, and the Bank is committed to offer a vigorous defense in
each case.
At United Security Bancshares' Annual Meeting on April 25, 1995, the
shareholders ratified a change in the par value of the Company's stock from $.25
to $.01 per share. The shareholders also approved an increase in the number of
authorized shares from 600,000 shares to 2,400,000 shares in order for the
company to effect a four-for-one split of its stock payable to shareholders of
record on that date. The additional shares were distributed on or about June
12, 1995.
<PAGE>
PART II
OTHER INFORMATION
<PAGE>
Item 6. Exhibits and Reports on Form 8-K
(a) EXHIBITS
Exhibit 3: Restated Articles of Incorporation
Exhibit 27: Financial Data Schedule
(b) No reports on Form 8-K were filed for the quarter ended 6-30-95.
<PAGE>
<TABLE>
EXHIBIT INDEX TO FORM 10-Q FOR 6-30-95
<CAPTION>
Page
<S> <C>
Exhibit 3 15
Exhibit 27 20
</TABLE>
<PAGE>
SIGNATURE PAGE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
UNITED SECURITY BANCSHARES, INC.
DATE: July 21, 1995
BY:
Larry M. Sellers
Its Vice-President, Secretary and Treasurer
(Duly Authorized Officer and Principal Financial Officer)
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
See Notes to Consolidated Financial Statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> JUN-30-1995
<CASH> 6,649,583
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 2,675,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 95,912,594
<INVESTMENTS-CARRYING> 23,073,767
<INVESTMENTS-MARKET> 23,726,675
<LOANS> 57,699,455
<ALLOWANCE> 785,719
<TOTAL-ASSETS> 194,067,238
<DEPOSITS> 144,112,739
<SHORT-TERM> 19,853,293
<LIABILITIES-OTHER> 1,878,375
<LONG-TERM> 5,805,556
<COMMON> 22,021
0
0
<OTHER-SE> 22,395,254
<TOTAL-LIABILITIES-AND-EQUITY> 194,067,238
<INTEREST-LOAN> 2,692,066
<INTEREST-INVEST> 5,221,991
<INTEREST-OTHER> 0
<INTEREST-TOTAL> 7,914,057
<INTEREST-DEPOSIT> 2,651,162
<INTEREST-EXPENSE> 3,330,874
<INTEREST-INCOME-NET> 4,583,183
<LOAN-LOSSES> 0
<SECURITIES-GAINS> 16,434
<EXPENSE-OTHER> 2,643,382
<INCOME-PRETAX> 2,453,469
<INCOME-PRE-EXTRAORDINARY> 1,765,469
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,765,469
<EPS-PRIMARY> .83
<EPS-DILUTED> .83
<YIELD-ACTUAL> 5.41
<LOANS-NON> 218,108
<LOANS-PAST> 225,037
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 1,493,869
<ALLOWANCE-OPEN> 772,000
<CHARGE-OFFS> 16,116
<RECOVERIES> 29,835
<ALLOWANCE-CLOSE> 785,719
<ALLOWANCE-DOMESTIC> 785,719
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
RESTATED ARTICLES OF INCORPORATION
OF
UNITED SECURITY BANCSHARES, INC.
The undersigned, acting as incorporator of a corporation under the Code of
Alabama, adopts the following Articles of Incorporation for such corporation:
FIRST: The name of the corporation is United Security Bancshares, Inc.
SECOND: The period of its duration is perpetual.
THIRD: The purpose or purposes for which the corporation is organized are
to engage in business as a bank holding company under the Bank Holding Company
act of 1956, as amended, and to transact any or all lawful business for which
corporations may be incorporated under the Alabama Business Corporation Act.
FOURTH: The aggregate number of shares which the corporation shall have
authority to issue is 2,400,000 shares of common stock, par value of $0.01 per
share.
FIFTH: The address of the initial registered office of the corporation is
131 West Front Street, Thomasville, Alabama, 36784, and the name of the initial
registered agent at such address is Robert F. Adams.
SIXTH: The number of directors constituting the initial Board of Directors
of the corporation is nine (9), and the names and addresses of the persons who
are to serve as directors until the first annual meeting of shareholders or
until their successors are elected and shall qualify are:
NAME ADDRESS
Robert F. Adams Post Office Box 249
Thomasville, Alabama 36784
W. H. Andrews, Jr. Post Office Box 249
Thomasville, Alabama 36784
B. A. Cogle, Jr. Post Office Box 249
Thomasville, Alabama 36784
William G. Harrison, Jr. Post Office Box 249
Thomasville, Alabama 36784
Donald C. Nichols Post Office Box 249
Thomasville, Alabama 36784
L. E. Pope Post Office Box 249
Thomasville, Alabama 36784
Harold H. Spinks Post Office Box 249
Thomasville, Alabama 36784
William L. Spinks Post Office Box 249
Thomasville, Alabama 36784
J. C. Stanley Post Office Box 249
Thomasville, Alabama 36784
SEVENTH: The name and address of each incorporator is:
Robert F. Adams Post Office Box 249
Thomasville, Alabama 36784
EIGHTH: In amplification and not in limitation of the applicable
provisions of the Act:
Section 1.
(a) Except as provided in subsection (d) of this Section 1,
the Corporation (which term, for purposes of this Article, includes
any domestic or foreign predecessor entity of the Corporation in a
merger or other transaction in which the predecessor's existence
ceased upon consummation of the transaction) shall indemnify an
individual who is or was a director, officer, employee or agent of
the Corporation or an individual who, while a director, officer,
employee or agent of the Corporation, is or was serving at the
Corporation's request as a director, officer, partner, trustee,
employee or agent of another foreign or domestic corporation,
partnership, joint venture, trust, employee benefit plan or other
enterprise (an "Indemnitee", which term includes, unless the context
requires otherwise, the estate or personal representative of such
individual) who was, is or has threatened to be made a named
defendant or respondent (a "Party") in any threatened, pending or
completed action, suit or proceeding, whether civil, criminal,
administrative or investigative and whether formal or informal (a
"Proceeding") because he or she is or was a director, officer,
employee or agent of the Corporation or, while a director, officer,
employee or agent of the Corporation, is or was serving at the
Corporation's request as a director, officer, partner, trustee,
employee or agent of another foreign or domestic corporation,
partnership, joint venture, trust, employee benefit plan or other
enterprise, against the obligation to pay a judgment, settlement,
penalty, fine (including an excise tax assessed with respect to an
employee benefit plan), all reasonable expenses, including counsel
fees, incurred with respect to a Proceeding ("Liability") incurred
in the Proceeding if:
(1) the Indemnitee conducted himself or herself in
good faith; and
(2) the Indemnitee reasonably believed:
(i) in the case of conduct in his or her
Official Capacity (meaning thereby (a) when used with
respect to a director, the office of director in the
Corporation; and (b) when used with respect to an
individual other than a director, the office in the
Corporation held by an officer or the employment or
agency relationship undertaken by the employee or agent
on behalf of the Corporation; "Official Capacity" does
not include service for any other foreign or domestic
corporation or any partnership, joint venture, trust,
employee benefit plan or other enterprise) with the
Corporation, that the conduct was in its best interest;
and
(ii) in all other cases that the conduct was at
least not opposed to its best interest; and
(3) in case of any criminal Proceeding the Indemnitee
had no reasonable cause to believe his or her conduct was
unlawful.
(b) An Indemnitee is considered to be serving an employee
benefit plan at the Corporation's request if his or her duties to
the Corporation also impose duties on, or otherwise involve services
by, the Indemnitee to the plan or to participants in or
beneficiaries of the plan. An Indemnitee's conduct with respect to
an employee benefit plan for a purpose he or she reasonably believed
to be in the interests of the participants in, and beneficiaries of,
the plan is conduct that satisfies the requirement of subsection
(a)(2)(ii) of this Section 1.
(c) The termination of a Proceeding by judgment, order,
settlement, conviction or upon a plea of nolo contendere or its
equivalent is not, of itself, determinative that the Indemnitee did
not meet the standard of conduct described in this section.
(d) The Corporation shall not indemnify an Indemnitee under
this section:
(1) in connection with a Proceeding by or in the right
of the Corporation in which the Indemnitee was adjudged liable
to the Corporation; or
(2) in connection with any other Proceeding charging
improper personal benefit to the Indemnitee, whether or not
involving action in his or her Official Capacity, in which the
Indemnitee was adjudged liable on the basis that personal
benefit was improperly received by him or her.
(e) Indemnification provided under this section in
connection with a Proceeding by or in the right of the Corporation
is limited to reasonable expenses, including counsel fees, incurred
in connection with the Proceeding.
Section 2. The Corporation shall indemnify an Indemnitee who
was successful, on the merits or otherwise, in the defense of any
Proceeding, or of any claim, issue or matter in such Proceeding,
where he or she was a Party because he or she is or was a director,
officer, employee or agent of the Corporation or, while a director,
officer, employee or agent of the Corporation, is or was serving at
the Corporation's request as a director, officer, partner, trustee,
employee or agent of another foreign or domestic corporation,
partnership, joint venture, trust, employee benefit plan or other
enterprise, against reasonable expenses, including counsel fees,
incurred in connection therewith, notwithstanding that he or she was
not successful on any other claim, issue or matter in any such
Proceeding.
Section 3.
(a) The Corporation may pay for or reimburse the reasonable
expenses, including counsel fees, incurred by an Indemnitee who was
a party to a Proceeding in advance of final disposition of the
Proceeding if:
(1) the Indemnitee furnishes the Corporation a written
affirmation of good faith and belief that he or she has met
the standard of conduct described in Section 1 above;
(2) the Indemnitee furnishes the Corporation a written
undertaking, executed personally or on the Indemnitee's
behalf, to repay the advance if it is ultimately determined
that the Indemnitee did not meet the standard of conduct, or
is not otherwise entitled to indemnification under Section
1(d), unless an indemnification is approved by the court under
the provisions of the Act;
(3) a determination is made that the facts then known
to those making the determination would not preclude
indemnification under this Article EIGHTH.
(b) The undertaking required by subsection (a)(2) above must
be an unlimited general obligation of the Indemnitee but need not be
secured and may be accepted without reference to financial ability
to make repayment.
(c) Determinations and authorizations of payment under this
section shall be made in the manner specified in Section 4 below.
Section 4.
(a) The Corporation may not indemnify an Indemnitee under
Section 1 above unless authorized in the specific case after a
determination has been made that indemnification of the Indemnitee
is permissible in the circumstances because the Indemnitee has met
the standard of conduct set forth in Section 1 above.
(b) The determination shall be made:
(1) by the board of directors of the Corporation by a
majority vote of a quorum consisting of directors not at the
time Parties to the Proceeding;
(2) if a quorum cannot be obtained under subdivision
(1) above, by a majority vote of a committee duly designated
by the board of directors (in which designation directors who
are Parties may participate) consisting solely of two or more
directors not at the time Parties to the Proceeding;
(3) by special legal counsel;
(i) selected by the board of directors as
committee in the manner prescribed in subdivision (1) or
(2) above; or
(ii) if a quorum of the board of directors
cannot be obtained under subdivision (1) and a committee
cannot be designated under subdivision (2), selected by
a majority vote of the full board of directors (in which
selection directors who are Parties may participate); or
(4) by the shareholders, but shares owned or voted
under the control of Indemnitees who are at the time Parties
to the Proceeding may not be voted on the determination. A
majority of the shares that are entitled to vote on the
transaction by virtue of not being owned by or under the
control of such Indemnitees constitutes a quorum for the
purpose of taking action under this section.
(c) Authorization of indemnification and evaluation as to
reasonableness of expenses shall be made in the same manner as the
determination that indemnification is permissible, except that if
the determination is made by special legal counsel, authorization of
indemnification and evaluation as to reasonableness of expenses
shall be made by those entitled under subsection (b)(3) to select
counsel.
Section 5. The Corporation may purchase and maintain
insurance, or furnish similar protection (including but not limited
to trust funds, self-insurance reserves or the like), on behalf of
an individual who is or was a director, officer, employee or agent
of the Corporation, who, while a director, officer, employee or
agent of the Corporation, is or was serving at the request of the
Corporation as a director, officer, partner, trustee, employee or
agent of another foreign or domestic corporation, partnership, joint
venture, trust, employee benefit plan or other enterprise, against
Liability asserted against or incurred by him or her in that
capacity or arising from his or her status as a director, officer,
employee or agent, whether or not the Corporation would have the
power to indemnify him or her against the same Liability under
Sections 1 or 2 above.
Section 6.
(a) Any indemnification, or advance for expenses, authorized
under this Article EIGHTH shall not be deemed exclusive of and shall
be in addition to that which may be contained in the Corporation's
bylaws, a resolution of its shareholders or board of directors, or
in a contract or otherwise.
(b) This Article EIGHTH does not limit the Corporation's
power to pay or reimburse expenses incurred by an Indemnitee in
connection with the Indemnitee's appearance as a witness in a
Proceeding at a time when he or she has not been made or named
defendant or respondent to the Proceeding.
NINTH: No director of the Corporation shall be personally liable to the
Corporation or its shareholders for monetary damages for breach of fiduciary
duty as a director, except liability for (a) the amount of a financial benefit
received by director to which he or she is not entitled; (b) an intentional
infliction of harm on the Corporation or the shareholders; (c) voting for or
assenting to any unlawful distribution, as defined in the Alabama Business
Corporation Act; (d) an intentional violation of criminal law; or (e) a breach
of the director's duty of loyalty to the Corporation or its shareholders. If
the Alabama Business Corporation Act hereafter is amended to further
eliminate or limit the liability of a director, then a director of the
Corporation, in addition to the circumstances in which a director is not
personally liable as set forth in the preceding sentence, shall not be liable
to the fullest extent permitted by the amended Alabama Business Corporation Act.
INCORPORATOR
/s/ Robert F. Adams
Robert F. Adams
