<COVER LETTER>
Writer's Direct Dial No.: (205) 254-1005
E-mail Address: [email protected]
February 5, 1997
FILED VIA EDGAR
Securites and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Re: United Security Bancshares, Inc./Registration Statement on Form S-4
On behalf of our client, United Security Bancshares, Inc.,
transmitted herewith for filing is the above-referenced registration
statement on Form S-4, filed via the EDGAR system. The other party
to the merger to which this Form S-4 relates, First Bancshares, Inc.,
is neither a registrant nor a reporting company under the Securities
Exchange Act of 1934.
The registration fee of $5,484.00 has been deposited. Please
do not hesitate to contact the undersigned at (205) 254-1055 if you
have any questions or comments.
Very truly yours,
/s/ J. Michael Savage
J. Michael Savage
JMS/ead
Attachment
cc: Jack M. Wainwright, III
Larry M. Sellers
Fred L. Huggins
C. Henry Marston
Mark L. Dew
</COVER LETTER>
<PAGE>
As filed with the Securities and Exchange Commission on February 6, 1997
Registration No. 333-______
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form S-4
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
UNITED SECURITY BANCSHARES, INC.
(Exact name of registrant as specified in its charter)
Alabama 6712 63-0843362
(State or other jurisdiction (Primary Standard (I.R.S. Employer
of incorporation or Industrial Classification Identification
organization) Code Number) No.)
131 West Front Street
P. O. Box 249
Thomasville, AL 36784
(334) 636-5424
(Address, including zip code, and telephone number of
registrant's principal executive office)
JACK M. WAINWRIGHT, III
President and Chief Executive Officer
131 West Front Street
P. O. Box 249
Thomasville, AL 36784
(334) 636-5424
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
Copies to:
C. HENRY MARSTON J. MICHAEL SAVAGE
Walston, Wells, Anderson & Bains Maynard, Cooper & Gale, P.C.
500 Financial Center 1901 Sixth Avenue North
505 20th Street North Suite 2400
Birmingham, Alabama 35203 Birmingham, Alabama 35203
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 ont his 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>
Title of Each Class of Amount to be Proposed Maximum Proposed Maximum Amount of
Securities to be Registered Registered Price Per Unit (1) Aggregate Price(1) Registration Fee
<S> <C> <C> <C> <C>
Common, $0.01 par value 1,400,000 $12.92 $18,094,000 $5,484
<FN>
(1) Estimated solely for the purpose of calculating the
registration fee in accordance with Rule 457(f)(2) as of September
30, 1996.
</FN>
</TABLE>
The registrant hereby amends this Registration Statement on
such date or dates as may be necessary to delay its effective date
until the registrant shall file a further amendment which
specifically states that this Registration Statement shall
thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall
become effective on such date as the Commission, acting pursuant to
said Section 8(a), may determine.
<PAGE>
CROSS REFERENCE SHEET
1. Forepart of Registration Statement
Outside Front Cover Page of Prospectus.........Facing Page; Cover Page;
Cross Reference Sheet
2. Inside Front and Outside Back
Cover Pages of Prospectus............Inside Front Cover Page; AVAILABLE
INFORMATION; TABLE OF CONTENTS
3. Risk Factors, Ratio of Earnings to Fixed
Charges and Other Information...................................SUMMARY
4. Terms of Termination................................SUMMARY; THE MERGER
DESCRIPTION OF USB CAPITAL
STOCK; EFFECT OF MERGER ON
RIGHTS OF SHAREHOLDERS
5. Pro Forma Financial Information.........PRO FORMA FINANCIAL INFORMATION
6. Material Contracts with Company
Being Acquired...............................................THE MERGER
7. Additional Information Required for Reoffering By
Persons and Parties Deemed to be Underwriters.........................*
8. Interests of Named Experts and Counsel....................LEGAL MATTERS
9. Disclosure of Commission Position on
Indemnification for Securities Liability..............................*
10. Information With Respect to S-3 Registrants...........................*
11. Incorporation of Certain Information by Reference.....................*
12. Information With Respect to S-2 or
S-3 Registrants..................................AVAILABLE INFORMATION;
INCORPORATION OF CERTAIN
DOCUMENTS BY REFERENCE
13. Incorporation of Certain Information
by Reference...................................INCORPORATION OF CERTAIN
DOCUMENTS BY REFERENCE
14. Information With Respect to Registrants Other
Than S-3 or S-2 Registrants...........................................*
15. Information With Respect to S-3 Companies.............................*
16. Information With Respect to S-2 or S-3 Companies......................*
17. Information With Respect to Companies Other
Than S-3 or S-2 Companies.....................SUMMARY; FBI MANAGEMENT'S
DISCUSSION AND ANALYSIS;
BUSINESS OF FBI; CONSOLIDATED
FINANCIAL STATEMENTS OF
FIRST BANCSHARES, INC.
(Appendix C)
18. Information if Proxies, Consents or
Authorizations are to be Solicited.....................INCORPORATION OF
CERTAIN DOCUMENTS
BY REFERENCE; SUMMARY; GENERAL
INFORMATION; THE MERGER
19. Information if Proxies, Consents or
Authorizations are not to be Solicited
or in an Exchange Offer...............................................*
*Not applicable and therefore not included
<PAGE>
United Security Bancshares, Inc.
131 West Front Street
Thomasville, Alabama 36784
February ___, 1997
Dear Shareholder:
You are cordially invited to attend a special meeting of the
shareholders of United Security Bancshares, Inc. ("USB"), to be
held at the principal executive office of United Security Bank, 131
West Front Street, Thomasville, Alabama, on _____________, 1997, at
10:00 a.m., Central Time.
At this important meeting, you will be asked to consider and
vote upon the approval of an Agreement and Plan of Merger, dated as
of August 19, 1996 (the "Merger Agreement"), which provides for the
merger of First Bancshares, Inc. ("FBI") with and into USB and the
merger of FBI's wholly-owned subsidiary bank, First Bank and Trust,
with and into USB's wholly-owned subsidiary bank, United Security
Bank (the "Merger"). If the Merger is consummated, each
outstanding share of FBI common stock will be converted into the
right to receive 5.8321 shares of the common stock, par value $.01,
of USB. The accompanying Joint Proxy Statement and Prospectus
provides a detailed description of the proposed Merger, including
the conditions to consummation of the Merger.
The affirmative vote of the holders of at least two-thirds of
the shares of USB common stock entitled to vote at the Special
Meeting is required for approval of the Merger Agreement.
Accordingly, your vote is important, no matter how large or how
small your holdings are.
Enclosed are the Notice of Special Meeting, the Joint Proxy
Statement and Prospectus and proxy for the Special Meeting,
together with copies of USB's 1995 Annual Report to Shareholders
and Part I of its 1996 Third Quarter Report on Form 10-Q. Please
give this information your careful attention.
The Board of Directors of USB has carefully reviewed and
considered the terms and conditions of the proposed Merger
Agreement and has received an opinion from its financial advisor,
Chaffe & Associates, Inc., that the Merger is fair to the USB
shareholders from a financial point of view. The Board of
Directors has unanimously approved the Merger Agreement and
unanimously recommends that you vote FOR approval of the Merger
Agreement.
In view of the importance of the action to be taken, we urge
you to complete, sign and date the enclosed proxy and to return it
promptly in the enclosed envelope, whether or not you plan to
attend the Special Meeting. Sending in your proxy now will not
interfere with your right to attend the Special Meeting or to vote
your shares personally at the Special Meeting if you wish to do so.
Sincerely,
Jack M. Wainwright, III
President and Chief Executive Officer
<PAGE>
United Security Bancshares, Inc.
Thomasville, Alabama 36784
_______________
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON ____________, 1997
_______________
February ____, 1997
To the Shareholders of United Security Bancshares, Inc.
NOTICE IS HEREBY GIVEN that a special meeting of shareholders
(the "Special Meeting") of United Security Bancshares, Inc. ("USB")
will be held at the principal executive office of United Security
Bank, 131 West Front Street, Thomasville, Alabama, on
_______________, 1997, at 10:00 a.m. Central Time, for the
following purposes:
1. To consider and vote upon a proposal to approve the
Agreement and Plan of Merger, dated as of August19, 1996 (the
"Merger Agreement"), by and between USB and First Bancshares, Inc.
("FBI"), pursuant to which, among other matters (a) FBI would be
merged with and into USB, (b) FBI's wholly-owned subsidiary bank,
First Bank & Trust, would be merged with and into USB's
wholly-owned subsidiary bank, United Security Bank, and (c) each
share of FBI common stock will be converted into the right to
receive 5.8321 shares of USB common stock. The Merger Agreement
further provides for an amendment to USB's Articles of
Incorporation (a) to increase its authorized common stock from
2,400,000 shares to 10,000,000 shares, (b) to increase the maximum
size of USB's Board of Directors from 15 to 20, (c) to deny
preemptive rights to USB shareholders, (d) to provide for a 2/3's
supermajority voting requirement by the Board of Directors to
approve significant corporate events or to add or remove members of
senior management, and (e) to change the name of USB to a new name
to be agreed upon by FBI and USB. A copy of the Merger Agreement
is set forth in Appendix A to the accompanying Joint Proxy
Statement and Prospectus and is hereby incorporated by reference
herein.
2. To transact such other business as may properly come
before the Special Meeting or any adjournment thereof.
Only shareholders of record at the close of business on
__________, 1997, are entitled to receive notice of and to vote at
the Special Meeting or any adjournments thereof. Approval of the
Merger Agreement requires the affirmative vote of the holders of at
least two-thirds of the shares of USB Common Stock entitled to vote
at the Special Meeting.
THE BOARD OF DIRECTORS OF USB UNANIMOUSLY RECOMMENDS THAT
SHAREHOLDERS VOTE FOR APPROVAL OF THE MERGER AGREEMENT.
Each shareholder has the right to dissent from the Merger
Agreement and demand payment of the fair value of his shares if the
Merger is consummated. The right of any shareholder to receive
such payment is contingent upon strict compliance with requirements
of Article 13 of the Alabama Business Corporation Act. The full
text of Article 13 is set forth in Appendix B to the Joint Proxy
Statement and Prospectus and is incorporated herein by reference.
For a summary of the requirements of Article 13, see "GENERAL
INFORMATION--Dissenters' Rights" in the Joint Proxy Statement and
Prospectus.
By order of the Board of Directors
Jack M. Wainwright, III
President and Chief Executive Officer
WE URGE YOU TO SIGN AND RETURN THE ENCLOSED PROXY AS PROMPTLY
AS POSSIBLE WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING IN
PERSON. IF YOU DO ATTEND THE MEETING, YOU MAY THEN WITHDRAW YOUR
PROXY IF YOU WISH. THE PROXY MAY BE REVOKED AT ANY TIME PRIOR TO
ITS EXERCISE.
<PAGE>
First Bancshares, Inc.
131 Main Street
Grove Hill, Alabama 36451
February ___, 1997
Dear Shareholder:
You are cordially invited to attend a special meeting of the
shareholders of First Bancshares, Inc. ("FBI"), to be held at the
principal executive office of First Bank & Trust, 131 Main Street,
Grove Hill, Alabama, on _____________, 1997, at 2:00 p.m., Central
Time.
At this important meeting, you will be asked to consider and
vote upon the approval of an Agreement and Plan of Merger, dated as
of August 19, 1996 (the "Merger Agreement"), which provides for the
merger of FBI with and into United Security Bancshares, Inc.
("USB") and the merger of FBI's wholly-owned subsidiary bank, First
Bank and Trust, with and into USB's wholly-owned subsidiary bank,
United Security Bank (the "Merger"). If the Merger is consummated,
each outstanding share of FBI common stock will be converted into
the right to receive 5.8321 shares of the common stock, par value
$.01, of USB. The accompanying Joint Proxy Statement and
Prospectus provides a detailed description of the proposed Merger,
including the conditions to consummation of the Merger.
The affirmative vote of the holders of at least 75% of the
shares of FBI common stock entitled to vote at the Special Meeting
is required for approval of the Merger Agreement. Accordingly,
your vote is important, no matter how large or how small your
holdings are.
Enclosed are the Notice of Special Meeting, the Joint Proxy
Statement and Prospectus and proxy for the Special Meeting,
together with copies of USB 1995 Annual Report to Shareholders and
Part I of its 1996 Third Quarter Report on Form 10-Q. Please give
this information your careful attention.
The Board of Directors of FBI has carefully reviewed and
considered the terms and conditions of the proposed Merger
Agreement and has received an opinion from its financial advisor,
Baxter, Fentriss and Company, that the Merger is fair to the FBI
shareholders from a financial point of view. The Board of
Directors has unanimously approved the Merger Agreement and
unanimously recommends that you vote FOR approval of the Merger
Agreement.
In view of the importance of the action to be taken, we urge
you to complete, sign and date the enclosed proxy and to return it
promptly in the enclosed envelope, whether or not you plan to
attend the Special Meeting. Sending in your proxy now will not
interfere with your right to attend the Special Meeting or to vote
your shares personally at the Special Meeting if you wish to do so.
Sincerely,
Fred Huggins
President and Chief Executive Officer
<PAGE>
First Bancshares, Inc.
131 Main Street
Grove Hill, Alabama 36451
_______________
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON ____________, 1997
_______________
February ___, 1997
To the Shareholders of First Bancshares, Inc.
NOTICE IS HEREBY GIVEN that a special meeting of shareholders
(the "Special Meeting") of First Bancshares, Inc. ("FBI") will be
held at the principal executive office of First Bank & Trust, 131
Main Street, Grove Hill, Alabama, on _______________, 1997, at
20:00 p.m. Central Time, for the following purposes:
1. To consider and vote upon a proposal to approve the
Agreement and Plan of Merger, dated as of August19, 1996 (the
"Merger Agreement"), by and between FBI and United Security
Bancshares, Inc. ("USB"), pursuant to which, among other matters
(a) FBI would be merged with and into USB, (b) FBI's wholly-owned
subsidiary bank, First Bank & Trust, would be merged with and into
USB's wholly-owned subsidiary bank, United Security Bank, and (c)
each share of FBI common stock will be converted into the right to
receive 5.8321 shares of USB common stock. The Merger Agreement
further provides for an amendment to USB's Articles of
Incorporation (a) to increase its authorized common stock from
2,400,000 shares to 10,000,000 shares, (b) to increase the maximum
size of USB's Board of Directors from 15 to 20, (c) to deny
preemptive rights to USB shareholders, (d) to provide for a 2/3's
supermajority voting requirement by the Baord of Directors to
approve significant corporate events or to add or remove members of
senior management, and (e) to change the name of USB to a new name
to be agreed upon by FBI and USB. A copy of the Merger Agreement
is set forth in Appendix A to the accompanying Joint Proxy
Statement and Prospectus and is hereby incorporated by reference
herein.
2. To transact such other business as may properly come
before the Special Meeting or any adjournment thereof.
Only shareholders of record at the close of business on
__________, 1997, are entitled to receive notice of and to vote at
the Special Meeting or any adjournments thereof. Approval of the
Merger Agreement requires the affirmative vote of the holders of at
least 75% of the shares of FBI Common Stock entitled to vote at the
Special Meeting.
THE BOARD OF DIRECTORS OF FBI UNANIMOUSLY RECOMMENDS THAT
SHAREHOLDERS VOTE FOR APPROVAL OF THE MERGER AGREEMENT.
Each shareholder has the right to dissent from the Merger
Agreement and demand payment of the fair value of his shares if the
Merger is consummated. The right of any shareholder to receive
such payment is contingent upon strict compliance with requirements
of Article 13 of the Alabama Business Corporation Act. The full
text of Article 13 is set forth in Appendix B to the Joint Proxy
Statement and Prospectus and is incorporated herein by reference.
For a summary of the requirements of Article 13, see "GENERAL
INFORMATION--Dissenters' Rights" in the Joint Proxy Statement and
Prospectus.
By order of the Board of Directors
Fred Huggins
President and Chief Executive Officer
WE URGE YOU TO SIGN AND RETURN THE ENCLOSED PROXY AS PROMPTLY
AS POSSIBLE WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING IN
PERSON. IF YOU DO ATTEND THE MEETING, YOU MAY THEN WITHDRAW YOUR
PROXY IF YOU WISH. THE PROXY MAY BE REVOKED AT ANY TIME PRIOR TO
ITS EXERCISE.
<PAGE>
JOINT PROXY STATEMENT
UNITED SECURITY BANCSHARES, INC. FIRST BANCSHARES, INC.
For Special Meeting For Special Meeting
Of Shareholders Of Shareholders
To Be Held On To Be Held On
[____________], 1997 [____________], 1997
PROSPECTUS
UNITED SECURITY BANCSHARES, INC.
Common Stock
___________________________
This Joint Proxy Statement and Prospectus ("Joint Proxy
Statement") is being furnished to the shareholders of United
Security Bancshares, Inc., an Alabama corporation ("USB"), and
First Bancshares, Inc., an Alabama corporation ("FBI"), in
connection with the solicitation of proxies by the Board of
Directors of USB from holders of outstanding shares of common
stock, par value $0.01 per share, of USB ("USB Common Stock"), and
the solicitation of proxies by the Board of Directors of FBI from
holders of outstanding shares of Class A voting common stock, par
value $5.00 per share, of FBI ("FBI Common Stock"), for use at
their respective special meetings of shareholders as shown above
(the "Special Meetings"). The purpose of each of the Special
Meetings is to consider and vote upon that certain Agreement and
Plan of Merger, dated as of August 19, 1996 (the "Merger
Agreement"), pursuant to which FBI will merge with and into USB,
and FBI's wholly-owned subsidiary bank, First Bank & Trust ("First
Bank"), will merge with and into USB's wholly-owned subsidiary
bank, United Security Bank ("USB Bank"). The two mergers are
referred to collectively herein as the "Merger." Except as
described herein, each share of FBI Common Stock issued and
outstanding at the Effective Time (described below) shall be
converted into the right to receive 5.8321 shares of USB Common
Stock (the "Exchange Ratio"). See "The Merger--Terms of the
Merger."
This Joint Proxy Statement also serves as a prospectus with
respect to the issuance of up to approximately 1,400,000 shares of
USB Common Stock that are issuable to the shareholders of FBI upon
consummation of the Merger. Copies of USB's Annual Report to
Shareholders for the fiscal year ended December 31, 1995, and of
PartI of its Quarterly Report on Form 10-Q for the quarter ended
September 30, 1996, accompany this Joint Proxy Statement.
See "Risk Factors" for a discussion of certain factors which
should be considered by shareholders of USB and FBI.
This Joint Proxy Statement, the accompanying Notices of
Special Meeting and the other documents enclosed herewith are being
first mailed to the shareholders of USB and FBI on or about
[_________], 1997.
_________________________
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY
STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THE JOINT PROXY STATEMENT. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE. THE SECURITIES OFFERED HEREBY ARE NOT
DEPOSITS, SAVINGS ACCOUNTS OR OTHER OBLIGATIONS
OF A BANK AND ARE NOT INSURED BY THE FEDERAL
DEPOSIT INSURANCE CORPORATION OR ANY
OTHER GOVERNMENTAL AGENCY.
___________________________
The date of this Joint Proxy Statement is __________, 1997
<PAGE>
AVAILABLE INFORMATION
USB is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"),
and in accordance therewith files reports, proxy statements and
other information with the Securities and Exchange Commission (the
"Commission"). Such reports, proxy statements and other
information filed by USB can be inspected and copied at the public
reference facilities maintained by the Commission at Room 1024,
Judiciary Plaza, 450 Fifth Street, N.W., Washington D.C. 20549, and
at the Commission's Regional Offices in New York (75 Park Place,
14th Floor, New York, New York 10007) and Chicago (Northwestern
Atrium Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661). Copies of such materials can be obtained from the
Public Reference Section of the Commission at 450 Fifth Street,
N.W., Washington, D.C. 20549, at prescribed rates. USB has filed
with the Commission a Registration Statement (No. 33-____) on Form
S-4 (together with any amendments thereto, the "Registration
Statement") under the Securities Act of 1933, as amended (the
"Securities Act"), with respect to the shares of USB Common Stock
to be issued pursuant to the Merger Agreement. This Joint Proxy
Statement does not contain all of the information set forth in the
Registration Statement and the exhibits thereto, portions of which
were omitted in accordance with the rules and regulations of the
Commission. For further information regarding USB and the USB
Common Stock offered hereby, reference is made to the complete
Registration Statement, including all amendments thereto and the
schedules and exhibits filed as a part thereof. Statements
contained herein or in any document incorporated by reference
herein as to the contents of documents are necessarily summaries of
the documents, and each statement is qualified in its entirety by
reference to the copy of the applicable document filed with the
Commission.
All information contained in this Joint Proxy Statement
pertaining to USB and its subsidiary has been supplied by USB, and
all information pertaining to FBI and its subsidiaries has been
supplied by FBI.
No person is authorized to give any information or to make any
representations other than those contained herein and, if given or
made, such information or representations must not be relied upon
as having been authorized. This document does not constitute an
offer or solicitation by anyone in any jurisdiction in which such
offer or solicitation is not authorized or in which the person
making such offer or solicitation is not qualified to do so or to
any person to whom it is unlawful to make such offer or
solicitation. Neither the delivery of this document nor any
distribution of securities made hereunder shall under any
circumstances create an implication that there has been no change
in the affairs of USB or FBI since the date hereof or that the
information herein is correct as of any time subsequent to its
date.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents previously filed by USB with the
Commission (Commission File No. 000-14549) pursuant to the Exchange
Act are hereby incorporated by reference in this Joint Proxy
Statement:
1. USB's Annual Report on Form 10-K for the year ended
December 31, 1995;
2. USB's Quarterly Reports on Form 10-Q for the quarters
ended March 31, 1996, June 30, 1996 and September 30, 1996;
3. USB's 1995 Annual Report to Shareholders; and
4. USB's Proxy Statement for its 1996 Annual Meeting of
Shareholders.
Any statement contained herein or in a document incorporated
by reference herein shall be deemed to be modified or superseded
for purposes of the Registration Statement and this Joint Proxy
Statement to the extent that another statement contained herein, in
any supplement hereto or in any other subsequently filed document
which also is incorporated by reference herein, modifies or
supersedes such statement. Any such statement so modified or
superseded shall not be deemed, except as so modified or
superseded, to constitute a part of the Registration Statement,
this Joint Proxy Statement or any supplement hereto.
<PAGE>
This Joint Proxy Statement incorporates by reference documents
which are not presented herein or delivered herewith. On the
written or oral request of any person to whom this Joint Proxy
Statement is delivered, USB will provide, without charge, a copy of
any or all of the documents incorporated herein by reference (other
than exhibits to such documents which are not specifically
incorporated by reference in such documents). Written or telephone
requests for such copies should be directed to Larry M. Sellers,
Secretary, United Security Bancshares, Inc., 131 West Front Street,
Thomasville, Alabama 36784, (334) 636-5424. In order to ensure
timely delivery of such documents, any request should be made by
________________, 1997.
TABLE OF CONTENTS
AVAILABLE INFORMATION........................................................2
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE..............................2
SUMMARY......................................................................6
Parties to the Merger...................................................6
Shareholder Meetings....................................................7
The Merger..............................................................7
Selected Consolidated Financial Data...................................10
Comparative Per Share Data.............................................15
Summary Capital Ratios.................................................16
RISK FACTORS................................................................16
Determination of Terms and Exchange Ratios.............................16
Restrictions on Dividends..............................................16
Competition............................................................16
Supervision and Regulation.............................................17
Monetary Policies......................................................17
Reserve for Loan Losses................................................17
Tax Considerations.....................................................17
Interests of Certain Persons in the Transaction........................18
Restrictions on Resale and USB Common Stock............................18
GENERAL INFORMATION.........................................................18
Special Meetings, Record Dates and Votes Required......................18
Proxies................................................................19
Dissenters' Rights.....................................................20
Recommendations of Boards of Directors.................................22
THE MERGER..................................................................22
Terms of the Merger....................................................22
Effective Time.........................................................22
Background of and Reasons for the Merger...............................23
Opinions of Financial Advisors.........................................24
Amendment of USB Articles of Incorporation.............................28
Amendment of USB Bylaws................................................28
Effect on Employee Benefit Plan........................................28
Surrender of Certificates..............................................29
Conditions to Consummation of the Merger...............................29
Regulatory Approvals...................................................31
Conduct of Business Pending the Merger.................................31
Waiver and Amendment; Termination......................................34
Management and Operations After the Merger.............................35
Interests of Certain Persons in the Merger.............................35
Certain Federal Income Tax Consequences................................36
Accounting Treatment...................................................37
Expenses and Fees......................................................37
Resales of USB Common Stock............................................37
PRO FORMA FINANCIAL INFORMATION.............................................38
Pro Forma Combined Condensed Consolidated Statement of
Condition..........................................................38
Pro Forma Combined Condensed Consolidated Statements of
Income.............................................................39
Notes to Pro Forma Combined Condensed Consolidated
Financial Statements (Unaudited)...................................40
COMPARATIVE MARKET PRICES AND DIVIDENDS.....................................40
Market Prices..........................................................40
Dividends..............................................................40
DESCRIPTION OF USB CAPITAL STOCK............................................40
EFFECT OF MERGER ON RIGHTS OF SHAREHOLDERS..................................41
Authorized Capital Stock...............................................42
Special Meetings of Shareholders.......................................42
Required Shareholder Votes.............................................42
Director Liability.....................................................42
Indemnification........................................................42
Amendment of Articles of Incorporation.................................43
Responses to Tender Offers.............................................43
Preemptive Rights......................................................43
Proxy Requirements.....................................................43
FBI MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS....................................43
FINANCIAL CONDITION.........................................................44
Average Assets and Liabilities.........................................44
Distribution of Average Assets, Liabilities and
Shareholders' Equity...............................................45
Loans..................................................................45
Distribution of Loans by Category......................................46
Selected Loans by Type and Maturity....................................46
Investment Securities..................................................46
Maturity Distribution of Investment Securities.........................47
Investment Securities and Investment Securities Available
for Sale...........................................................47
Trading Activity.......................................................48
Deposits and Short-Term Borrowings.....................................48
Average Deposits.......................................................48
Maturities of Time Deposits of $100,000 or More........................49
Short Term Borrowings..................................................49
Long Term Debt.........................................................49
Asset/Liability Management.............................................49
Liquidity..............................................................49
Interest Rate Sensitivity..............................................49
Interest Rate Sensitivity Analysis.....................................50
Capital Resources......................................................50
Risk-Based Capital.....................................................51
RESULTS OF OPERATIONS.......................................................51
Net Interest Revenue...................................................51
Net Interest Revenue...................................................52
Analysis of Interest Increases (Decreases).............................53
Provision and Allowance for Loan Losses................................53
Summary of Loan Loss Experience........................................54
NON-PERFORMING ASSETS.......................................................55
Non-Interest Revenue...................................................55
Non-Interest Expense...................................................55
Income Taxes, Inflation and Other Issues...............................56
FBI FIRST NINE MONTHS 1996..................................................56
Comparing the nine months ended September 30, 1996,
to the nine months ended September 30, 1995........................56
Comparing the Nine Months Ended September 30, 1996,
to the Year Ended December 31, 1995................................57
Acceptance Loan Company................................................57
Loan Loss Experience and Non-Performing Assets.........................57
Summary of Loan Loss Experience........................................58
BUSINESS OF FBI.............................................................58
Bank Activities........................................................58
Certain Management Information.........................................58
FBI Security Ownership.................................................60
SUPERVISION, REGULATION, AND EFFECTS OF GOVERNMENTAL POLICY.................61
Bank Holding Company Regulation........................................61
Bank Regulation........................................................62
Capital Adequacy.......................................................64
Recent Legislative and Regulatory Developments.........................65
Effects of Governmental Policies.......................................67
LEGAL MATTERS...............................................................67
EXPERTS.....................................................................68
APPENDICES
Appendix A--Agreement and Plan of Merger
Appendix B--Provisions of Alabama Business Corporation Act
Relating to Dissenters' Rights
Appendix C--First Bancshares, Inc. Consolidated Financial
Statements
Appendix D--Opinion of Chaffe & Associates, Inc.
Appendix E--Opinion of Baxter Fentriss and Company
Copies of USB's Annual Report to Shareholders for the fiscal
year ended December 31, 1995, and of PartI of its Quarterly Report
on Form 10-Q for the quarter ended September 30, 1996, accompany
this Joint Proxy Statement.
<PAGE>
SUMMARY
The following is a brief summary of certain information
relating to the Merger contained elsewhere in this Joint Proxy
Statement. The following summary is not intended to be a complete
description of all material information regarding USB, FBI and the
matters to be considered at the Special Meetings and is qualified
in all respects by the information appearing elsewhere or
incorporated by reference in this Joint Proxy Statement, the
Appendices hereto and the documents referred to herein. The Merger
Agreement, a copy of which is set forth in Appendix A to this Joint
Proxy Statement, is incorporated herein and reference is made
thereto for a complete description of the terms of the Merger. As
used in this Joint Proxy Statement, the terms "USB" and "FBI" refer
to such corporations, respectively, and where the context so
requires, such corporations and their respective subsidiaries.
Parties to the Merger
USB. USB is a registered bank holding company subject to
supervision and regulation by the Board of Governors of the Federal
Reserve System ("Federal Reserve") and a corporation organized
under the laws of the State of Alabama. USB owns all the stock of
USB Bank, a state chartered bank under the laws of the State of
Alabama, headquartered in Thomasville, Alabama. USB Bank has eight
banking offices in Clarke, Bibb and Choctaw Counties, Alabama. The
deposits of USB Bank are insured by the Bank Insurance Fund ("BIF")
of the Federal Deposit Insurance Corporation ("FDIC").
At September 30, 1996, USB had total assets of approximately
$239.4 million, total deposits of approximately $182.4 million,
total net loans of approximately $69.4 million and total
shareholders' equity of approximately $26.4 million. USB's
principal executive offices are located at 131 West Front Street,
Thomasville, Alabama 36784, and its telephone number is (334)
636-5424. Additional information about USB is included in
documents incorporated by reference in this Joint Proxy Statement.
See "Selected Consolidated Financial Data" below, "Available
Information" and "Incorporation of Certain Documents by Reference."
FBI. FBI 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 Alabama. FBI
owns all of the stock of First Bank, an Alabama state banking
corporation. First Bank provides a diversified range of banking and
financial services to customers in the commercial and retail
banking fields and has six offices located in Clarke and Bibb
Counties, Alabama. Deposits of First Bank are insured by the BIF
of the FDIC.
FBI also owns all of the stock of I & I, Inc. ("I & I"), which
was organized for the purpose of marketing insurance and investment
securities. I & I is a dormant corporation engaged in no business
activity, and it will be dissolved prior to the Effective Time of
the Merger.
First Bank owns all of the stock of Acceptance Loan Company,
Inc., an Alabama corporation ("Acceptance"). Acceptance is a
finance company organized for the purpose of making consumer loans
and purchasing consumer loans from vendors. At September 30, 1996,
Acceptance had 3,507 loans outstanding totalling approximately
$11.3 million. Acceptance has offices located outside FBI's
banking market area in Monroeville, Alabama; Enterprise, Alabama;
and Greenville, Alabama. FBI owns 50% of the stock of First Bank
Services, Inc., a Florida corporation ("FBS") headquartered in Ft.
Walton Beach, Florida. FBS performs data processing services for
banks, including First Bank and FBS' other shareholder, First
National Bank and Trust of Fort Walton Beach, Florida.
At September 30, 1996, FBI had total assets of approximately
$192.9 million, total deposits of approximately $162.2 million,
total net loans of approximately $138.6 million and total
shareholders' equity of approximately $18.1 million. FBI's
principal executive offices are located at 131 Main Street, Grove
Hill, Alabama 36451, and its telephone number is (334) 275-4111.
See "Selected Consolidated Financial Data" below, "FBI Management's
Discussion and Analysis" and "Business of FBI."
Shareholder Meetings
USB. The Special Meeting of Shareholders of USB (the "USB
Meeting") will be held at 10:00 a.m., local time, on
______________, 1997, at the main office of USB Bank, 131 West
Front Street, Thomasville, Alabama. The purpose of the USB Meeting
is to consider and vote upon approval of the Merger Agreement. The
Board of Directors of USB has fixed the close of business on
_______ __, 1997, as the record date for determining shareholders
entitled to notice of and to vote at the USB Meeting (the "USB
Record Date"). As of such date, there were [2,137,960] shares of
USB Common Stock issued and outstanding and entitled to be voted at
the USB Meeting.
FBI. The Special Meeting of Shareholders of FBI (the "FBI
Meeting") will be held at 2:00 p.m., local time, on
_________________, 1997, at the main office of First Bank, 131 Main
Street, Grove Hill, Alabama. The purpose of the FBI Meeting is to
consider and vote upon approval of the Merger Agreement. The Board
of Directors of FBI has fixed the close of business on ________,
1997, as the record date for determining shareholders entitled to
notice of and to vote at the FBI Meeting (the "FBI Record Date").
As of such date, there were [239,843] shares of FBI Common Stock
issued and outstanding and entitled to be voted at the FBI Meeting.
See "General Information--Special Meetings, Record Dates and
Votes Required."
The Merger
Stock Option Agreements. On July 16, 1996, the Boards of
Directors of USB and FBI approved a letter of intent outlining the
terms of the Merger. Simultaneously with execution of the letter
of intent, USB and FBI executed option agreements in favor of each
other (the "Option Agreements") that are exercisable upon the
occurrence of certain events, including but not limited to the
subsequent agreement by either party to merge or consolidate with
a third party or the purchase by a third party of fifteen percent
or more of the outstanding shares of USB or FBI. In such an event,
the Option Agreements provide for the purchase of up to eight
percent of the outstanding shares of USB or FBI by the other party
at a designated price. Specifically, the option agreement that FBI
executed in favor of USB (the "FBI Option Agreement") provides that
USB may purchase up to 19,200 shares of FBI Common Stock at a price
of $67.00 per share, and the option agreement that USB executed in
favor of FBI (the "USB Option Agreement") provides that FBI may
purchase up to 176,165 shares of USB Common Stock at a price of
$13.13 per share.
If the Merger is consummated, the Option Agreements will
expire on the effective date of the Merger. If the Merger is not
consummated, the Option Agreements will expire upon the termination
of the Merger Agreement, provided that certain conditions are met.
If those conditions are not met, one or both of the Option
Agreements will continue in force for an additional two-month
period.
Terms. The Merger Agreement provides that FBI will merge with
and into USB, and, simultaneously, First Bank will merge with and
into USB Bank (the "Merger"). Each share of FBI Common Stock
outstanding immediately prior to the Effective Time, other than
shares with respect to which dissenters' appraisal rights shall
have been perfected and certain shares owned by FBI or USB or their
subsidiaries, will be converted into the right to receive 5.8321
shares of USB Common Stock. The number of shares of USB Common
Stock to be exchanged for each share of FBI Common stock is
referred to as the "Exchange Ratio." Cash will be paid by USB in
lieu of the issuance of fractional shares. See "Risk Factors,"
"The Merger--Terms of the Merger; Exchange Ratio," and " --Waiver
and Amendment; Termination."
Effective Time. The Merger will become effective on the date
and at the time the Articles of Merger reflecting the merger of USB
and FBI shall be accepted for filing by the Secretary of State of
Alabama, which filing shall not occur until after all conditions
contained in the Merger Agreement have been satisfied or waived,
including receipt of all regulatory approvals, expiration of all
statutory waiting periods and the approval of the Merger Agreement
by the shareholders of USB and FBI (the "Effective Time"). See
"The Merger--Effective Time."
Recommendations of Boards of Directors; Opinions of Financial
Advisors. The two Boards of Directors considered numerous factors
in approving the Merger Agreement. Each Board of Directors also
obtained an opinion from an independent financial advisor with
respect to the fairness of the transaction from the standpoint of
its respective shareholders. Each financial advisor conducted an
analysis of the values of the two companies and determined a range
of values and acceptable exchange ratios and issued preliminary and
final opinions to the effect that the terms of the Merger are fair,
from a financial standpoint, to the shareholders of the respective
companies. USB and FBI have paid, or will pay, their financial
advisors' professional fees in the amount of $19,000 and $10,000,
respectively, plus reasonable out of pocket expenses, in connection
with the issuance of the opinions. In addition, FBI's financial
advisor will be paid an amount equal to .33% of the combined equity
of USB and FBI. See "The Merger--Background of and Reasons for the
Merger" and "--Opinions of Financial Advisors," and Appendices D
and E. Both the Board of Directors of USB and the Board of
Directors of FBI unanimously recommend that shareholders of their
respective companies vote for approval of the Merger Agreement.
Votes Required. Approval of the Merger Agreement will require
the affirmative vote of the holders of at least two-thirds of the
outstanding shares of USB Common Stock and the affirmative vote of
the holders of at least 75% of the outstanding shares of FBI Common
Stock. The directors and executive officers of USB (including
certain family members and related interests) and the directors and
executive officers of FBI beneficially owned, as of the USB Record
Date, and are entitled to vote, a total of 308,359 shares of USB
Common Stock at the USB meeting, or 14.42% of the outstanding
shares entitled to be voted. The directors and executive officers
of FBI (and certain family members and related interests)
beneficially owned, as of the FBI Record Date, and are entitled to
vote, a total of 25,852 shares of FBI Common Stock at the FBI
Meeting, or 10.78% of the outstanding shares entitled to be voted.
The affirmative vote of 1,116,955 shares, or 52.24%, of the USB
Common Stock, when added to those shares beneficially owned by the
directors and executive officers of USB (and certain family members
and related interests) and the directors and executive officers of
FBI, will be required to approve the Merger on behalf of USB. The
affirmative vote of 154,031 shares, or 64.22%, of the FBI Common
Stock, when added to those shares of the FBI Common Stock owned by
the directors and executive officers of FBI (and certain family
members and related interests) will be sufficient to approve the
Merger on behalf of FBI. See "General Information--Special
Meetings, Record Dates and Votes Required."
Exchange of Certificates. Promptly after the Effective Time,
USB Bank, as Exchange Agent, will mail to each holder of record of
FBI Common Stock at the Effective Time a transmittal letter, with
instructions and return envelope, to use in effecting the exchange
of certificates representing such FBI Common Stock for certificates
representing shares of USB Common Stock and for cash in lieu of
fractional shares. Beginning six months after the Effective Time,
dividends and other distributions payable with respect to USB
Common Stock will be paid to the holder of an unsurrendered FBI
Common Stock certificate only upon surrender of such certificate.
See "The Merger--Surrender of Certificates."
Conditions to Consummation. The obligations of USB and FBI to
effect the Merger are subject to various conditions, including (i)
approval of the Merger Agreement and the transactions provided for
therein by the USB and FBI shareholders, (ii) receipt of regulatory
approvals required in connection with the Merger and expiration of
statutory waiting periods, (iii) receipt of any other consents
necessary to consummation of the Merger, and (iv) receipt of
certain opinions of counsel and independent accountants. All
applications necessary to obtain required regulatory approvals have
been filed. Approval of the FDIC was obtained on ______________,
1997, and the 15-day period for Justice Department objection
[expired or will expire] on _________, 1997. Approval for the
merger of USB Bank and First Bank was obtained from the Alabama
State Banking Department on ______ ____________, 1997. See "The
Merger--Conditions to Consummation of the Merger."
Federal Income Tax Consequences. The Merger is intended to be
a tax-free reorganization in which no gain or loss will be
recognized by USB or FBI and no gain or loss will be recognized by
FBI shareholders, except in respect of cash received for fractional
shares and except for dissenting shareholders who receive cash
payments. Counsel for each of USB and FBI have delivered opinions
to the effect that, for federal income tax purposes, under current
law, assuming the Merger will take place as described in the Merger
Agreement and that certain factual matters represented by USB and
FBI 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 of 1986, as amended
(the "Code"). See "The Merger--Certain Federal Income Tax
Consequences."
BECAUSE CERTAIN TAX CONSEQUENCES OF THE MERGER MAY VARY
DEPENDING UPON THE PARTICULAR CIRCUMSTANCES OF EACH SHAREHOLDER, IT
IS RECOMMENDED THAT EACH SHAREHOLDER CONSULT SUCH HOLDER'S TAX
ADVISOR CONCERNING THE FEDERAL (AND ANY STATE, LOCAL OR FOREIGN)
TAX CONSEQUENCES OF THE MERGER IN SUCH HOLDER'S PARTICULAR
CIRCUMSTANCES.
Amendment of Articles of Incorporation and Bylaws. The Merger
Agreement provides that the Articles of Incorporation of USB, the
surviving corporation in the Merger of FBI and USB, will at the
Effective Time be amended to provide for a 2/3's super majority
voting requirement by the Board of Directors to approve significant
corporate events or to add or remove members of senior management.
In addition, the Articles of Incorporation are to be amended (i) to
change the name of USB to a new name to be agreed upon by FBI and
USB, (ii) to increase the number of authorized shares of USB Common
Stock from 2,400,000 to 10,000,000, (iii) to increase the maximum
size of the Board of Directors of USB from fifteen to twenty, and
(iv) to deny preemptive rights to USB shareholders. See, "The
Merger--Amendment of USB Articles of Incorporation" and
"--Amendment of USB Bylaws."
Management and Operations after the Merger. The Merger
Agreement provides that the USB Board of Directors after the
Effective Time will consist of twenty directors--the ten incumbent
directors of USB and the ten incumbent directors of FBI. However, one
of the current directors of FBI has elected not to serve on the Board
of Directors after the Effective Time. See "THE MERGER--Management
and Operations After the Merger." The Merger Agreement also
provides that, at the Effective Time, (i) Jack Wainwright shall be
elected to serve as the President and Chief Executive Officer of
USB, (ii) Fred Huggins shall be elected to serve as the Chairman
and Chief Executive Officer of Acceptance, (iii) Jim Miller shall
be elected to serve as Chairman of the Board of USB, with Fred
Huggins and Ray Sheffield serving as Vice Chairmen of the Board,
and (iv) Fred Huggins shall be elected to serve as Chairman of the
Board of USB Bank, with Don Nichols and Hardie Kimbrough serving as
Vice Chairmen of the Board. All USB directors and officers will
serve in accordance with the Bylaws of USB after the Effective
Time. See "The Merger--Management and Operations After the
Merger."
Interests of Certain Persons in the Merger. Certain of the
directors and officers of USB and FBI have been selected or will be
selected to serve as directors and officers of USB after the
Effective Time. In addition, certain of the directors and
executive officers of FBI and their family members and associates
have ownership interests in USB Common Stock. See "The
Merger--Interests of Certain Persons in the Merger."
Accounting Treatment. The Merger is expected to qualify as a
"pooling of interests" for accounting and financial reporting
purposes. The receipt of a letter from Arthur Andersen LLP,
independent certified public accountants, confirming that the
Merger will qualify for pooling-of-interests accounting treatment
is a condition to consummation of the Merger. See "The
Merger--Accounting Treatment."
Resales of USB Stock. The shares of USB Common Stock issued
pursuant to the Merger Agreement will be freely transferable under
federal securities law, except for shares issued to any shareholder
who may be deemed an "affiliate" of FBI for purposes of Rule 145
under the Securities Act (generally including directors, executive
officers and beneficial owners of ten percent of any class of
capital stock). Affiliates may not sell their shares of USB Common
Stock acquired in the Merger, except upon registration, in
compliance with Rule 145 promulgated under the Securities Act, or
pursuant to another applicable exemption from the registration
requirements of the Securities Act. There is currently no active,
public trading market for USB Common Stock. See "The
Merger--Resales of USB Common Stock," and "Risk Factors."
Waiver and Amendment; Termination. Either USB or FBI may
waive or extend the time for performance by the other of
obligations under the Merger Agreement, and the Boards of Directors
of each of USB and FBI may agree, subject to certain limitations
imposed by Alabama law, to amend the Merger Agreement. The Merger
Agreement may be terminated at any time prior to the Effective Time
(i) by mutual consent, (ii) in the event of a breach of a
representation or warranty or covenant or agreement by the
non-breaching party under certain circumstances, (iii) by either
party in the event any required regulatory approval is denied or
not obtained or the shareholders of either USB or FBI 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 or (v) in the
event any of the conditions precedent to the Merger cannot be
satisfied or fulfilled by March 31, 1997. See "The Merger--Waiver
and Amendments; Termination."
Dissenters' Rights. FBI shareholders and USB shareholders
have the right to dissent from the Merger Agreement and, upon
satisfaction of certain specified procedures, to receive cash in
respect of the "fair value" of their shares of FBI Common Stock or
USB Common Stock in accordance with applicable Alabama law. The
procedures to be followed by dissenting shareholders are summarized
under "General Information--Dissenters' Rights." A copy of the
applicable Alabama statutory provisions is set forth in AppendixB
to this Joint Proxy Statement. Failure to follow precisely such
provisions as are applicable may result in loss of dissenters'
rights.
In general, any dissenting shareholder who perfects his
statutory dissenters' rights to be paid the "fair value" of his
stock in cash will recognize gain or loss for federal income tax
purposes upon receipt of such cash. See "The Merger--Certain
Federal Income Tax Consequences."
If a significant number of shares of FBI Common Stock or USB
Common Stock are held by shareholders who dissent and elect to
receive cash in lieu of their shares, the Merger might not qualify
for pooling-of-interests accounting treatment. Such accounting
treatment is a condition to FBI's and USB's respective obligations
to effect the Merger. In addition, dissent by holders of a
significant number of shares of USB Common Stock or FBI Common
Stock could cause the Merger not to qualify as a tax free
reorganization for federal income tax purposes. See "The
Merger--Accounting Treatment," and "--Certain Federal Income Tax
Consequences."
Selected Consolidated Financial Data
The following tables present for USB and FBI, on a historical
basis, selected consolidated financial data and ratios. This
information is based on the consolidated financial statements of
USB, incorporated herein by reference, and FBI, appearing elsewhere
in this Joint Proxy Statement, and should be read in conjunction
therewith and with notes thereto. See "Available Information,"
"Incorporation of Certain Documents by Reference," "Pro Forma
Financial Information" and Appendix C hereto. The financial data
as of September30, 1996 and 1995, and the nine month periods then
ended are derived from unaudited financial statements; however, in
the opinion of management of USB and FBI, all adjustments necessary
to arrive at a fair statement of results of interim period
operations of the respective companies have been included and are
solely of a normal recurring nature. Results for the nine months
ended September 30, 1996 are not necessarily indicative of results
to be expected for the entire year or for any future period.
<PAGE>
<TABLE>
USB SELECTED CONSOLIDATED FINANCIAL DATA (HISTORICAL)
(Dollars in Thousands Except Per Share Amounts)
<CAPTION>
Nine Months
Ended
September 30 Year Ended December 31,
1996 1995 1995 1994 1993 1992 1991
RESULTS OF OPERATIONS
<S> <C> <C> <C> <C> <C> <C> <C>
Interest revenue $13,434 $11,937 $16,167 $14,025 $12,348 $12,384 $12,698
Interest expense 5,969 5,174 7,002 5,420 4,642 5,434 6,810
Net interest revenue 7,465 6,763 9,165 8,605 7,512 6,914 5,888
Provision for loan
losses 24 -0- -0- 29 51 135 328
Non-interest revenue 1,057 760 1,111 1,041 2,240 2,599 2,146
Non-interest expense 4,093 3,895 5,229 5,231 5,137 5,187 4,624
Income before income
taxes 4,405 3,628 5,047 4,386 4,564 4,191 3,082
Income taxes 1,202 994 1,432 1,161 1,374 1,134 948
Net income before
extraordinary items 3,203 2,634 3,615 3,225 3,190 3,057 2,134
Extraordinary item -0- -0- -0- -0- -0- -0- -0-
Net income 3,203 2,634 3,615 3,225 3,190 3,057 2,134
Earnings per share:
Before extraordinary
item 1.50 1.23 1.69 1.51 1.49 1.43 1.00
Extraordinary item -0- -0- -0- -0- -0- -0- -0-
Net income 1.50 1.23 1.69 1.51 1.49 1.43 1.00
Average number of shares
outstanding (000's) 2,138 2,138 2,138 2,138 2,136 2,133 2,133
PERIOD END STATEMENT
OF CONDITION
Total assets 239,362 199,017 197,468 186,441 168,782 149,848 144,182
Loans 69,365 56,709 54,203 56,733 52,945 49,590 52,769
Deposits 182,354 145,006 146,515 142,284 132,519 130,816 122,005
Shareholders' equity 26,427 24,163 25,229 18,721 19,611 17,159 14,551
AVERAGE BALANCES
Total assets 237,066 197,476 192,868 177,599 158,584 151,445 137,643
Average earning
assets 220,693 184,975 180,417 165,309 148,610 141,911 127,711
Loans 70,205 56,289 56,956 55,842 51,603 52,264 53,021
Deposits 179,494 144,676 144,645 140,124 131,654 125,901 115,279
Shareholders' equity 26,727 23,683 22,981 19,114 18,424 15,643 13,646
PERFORMANCE RATIOS
Net income to:(1)
Average total
assets 1.80% 1.78% 1.87% 1.82% 2.01% 2.02% 1.55%
Average shareholders'
equity 15.98% 14.83% 15.73% 16.87% 17.31% 19.54% 15.64%
Average shareholders'
equity to average
total assets 11.27% 11.90% 11.92% 10.76% 11.62% 10.33% 9.91%
Dividend payout ratio 26.03% 26.78% 26.02% 27.84% 24.36% 22.68% 28.17%
<FN>
(1) Annualized for the periods ended September 30, 1996 and 1995.
</FN>
</TABLE>
<PAGE>
<TABLE>
FBI SELECTED CONSOLIDATED FINANCIAL DATA (HISTORICAL)
(Dollars in Thousands Except Per Share Amounts)
<CAPTION>
Nine Months
Ended
September 30 Year Ended December 31,
1996 1995 1995 1994 1993 1992 1991
RESULTS OF OPERATIONS
<S> <C> <C> <C> <C> <C> <C> <C>
Interest revenue $12,209 $10,405 $14,404 $ 9,315 $ 8,847 $ 9,263 $ 9,054
Interest expense 5,245 4,565 6,296 3,675 3,721 4,215 4,960
Net interest revenue 6,964 5,840 8,108 5,640 5,126 5,048 4,094
Provision for loan
losses 351 178 255 195 335 211 198
Non-interest revenue 1,053 1,098 1,444 1,209 940 788 919
Non-interest expense 4,584 3,929 5,669 5,120 3,252 3,025 2,886
Income before income
taxes 3,082 2,831 3,628 1,534 2,479 2,600 1,929
Income taxes 855 841 793 206 690 776 662
Net income 2,227 1,990 2,835 1,328 1,789 1,824 1,267
Earnings per share:
Net income 9.28 8.40 11.95 5.71 7.69 7.84 5.34
Average number of shares
outstanding (000's) 240 237 237 233 233 233 237
PERIOD END STATEMENT OF CONDITION
Total assets 192,879 183,425 179,652 122,128 122,999 114,875 107,310
Loans 138,595 123,545 127,797 82,870 75,475 59,930 53,767
Deposits 162,163 157,810 157,866 105,250 101,782 96,265 91,987
Shareholders' equity 18,094 15,939 16,566 12,876 12,187 10,606 8,853
AVERAGE BALANCES
Total assets 186,747 167,432 171,462 123,513 120,607 112,010 96,460
Average earning
assets 172,375 154,003 157,504 114,787 111,440 105,240 88,576
Loans 133,924 111,511 115,190 79,608 65,987 56,845 48,666
Deposits 160,322 146,704 149,418 104,664 99,789 93,145 84,724
Shareholders' equity 17,032 14,043 14,607 13,061 11,842 9,715 8,006
PERFORMANCE RATIOS
Net income to: (1)
Average total assets 1.59% 1.58% 1.65% 1.08% 1.48% 1.63% 1.31%
Average shareholders'
equity 17.43% 18.89% 19.41% 10.17% 15.11% 18.78% 15.83%
Average shareholders'
equity to average
total assets 9.12% 8.39% 8.52% 10.57% 9.82% 8.67% 8.30%
Dividend payout ratio 11.32% 5.08% 8.04% 14.91% 11.07% 9.54% 12.87%
<FN>
(1) Annualized for the periods ended September 30, 1996 and 1995
</FN>
</TABLE>
<PAGE>
The following table sets forth pro forma combined selected
consolidated financial data and ratios giving effect to the Merger
on a pooling-of-interest accounting basis for the nine months ended
September 30, 1996 and 1995 and the five years ended December 31,
1995. The data are not necessarily indicative of the results of the
future operations of either entity or the actual results that would
have occurred had the Merger been consummated September 30, 1996,
and should be read in conjunction with the Unaudited Pro Forma
Combined Condensed Consolidated Financial Statements appearing
elsewhere in this Joint Proxy Statement and the consolidated
financial statements of USB, incorporated herein by reference, and
FBI, appearing elsewhere in this Joint Proxy Statement. See
"Incorporation of Certain Documents by Reference", "Pro Forma
Financial Information" and Appendix C.
<TABLE>
COMBINED PRO FORMA SELECTED CONSOLIDATED FINANCIAL DATA
(Dollars In Thousands Except Per Share Amounts)
<CAPTION>
Nine Months
Ended
September 30 Year Ended December 31,
1996 1995 1995 1994 1993 1992 1991
RESULTS OF OPERATIONS
<S> <C> <C> <C> <C> <C> <C> <C>
Interest revenue $ 25,643 $ 22,342 $ 30,571 $ 23,340 $ 21,001 $ 21,611 $ 21,752
Interest expense 11,214 9,739 13,298 9,095 8,363 9,649 11,770
Net interest revenue 14,429 12,603 17,273 14,245 12,638 11,962 9,982
Provision for loan
losses 375 178 255 224 386 346 526
Non-interest revenue 2,110 1,858 2,555 2,250 3,180 3,387 3,065
Non-interest expense 8,677 7,824 10,898 10,351 8,389 8,212 7,510
Income before income
taxes 7,487 6,459 8,675 5,920 7,043 6,791 5,011
Income taxes 2,057 1,835 2,225 1,367 2,064 1,910 1,610
Net income 5,430 4,624 6,450 4,553 4,979 4,881 3,401
Earnings per share:
Net income 1.53 1.31 1.83 1.30 1.42 1.40 0.97
Average number of shares
outstanding (000's) 3,538 3,520 3,520 3,497 3,495 3,492 3,515
PERIOD END STATEMENT
OF CONDITION
Total assets 432,241 382,442 377,120 308,569 291,781 264,723 251,492
Loans 207,960 180,254 182,000 129,603 128,420 109,520 106,536
Deposits 344,517 302,816 304,381 247,534 234,301 227,081 213,992
Shareholders' equity 44,521 40,102 41,795 31,597 31,798 27,765 23,404
AVERAGE BALANCES
Total assets 423,813 364,908 364,330 301,112 279,191 263,455 234,103
Average earning assets 393,068 338,978 337,921 280,096 260,050 247,151 216,287
Loans 204,129 167,800 172,146 135,450 117,590 109,109 101,687
Deposits 339,816 291,380 294,063 244,788 231,443 219,046 200,003
Shareholders' equity 43,759 37,726 37,588 32,175 30,266 25,358 21,652
PERFORMANCE RATIOS
Net income to: (1)
Average total assets 1.71% 1.69% 1.77% 1.51% 1.78% 1.85% 1.45%
Average shareholders'
equity 16.55% 16.34% 17.16% 14.15% 16.45% 19.25% 15.71%
Average shareholders'
equity to average
total assets 10.33% 10.34% 10.32% 10.69% 10.84% 9.63% 9.25%
Dividend payout ratio 20.00% 17.44% 18.12% 24.07% 19.58% 17.77% 22.47%
<FN>
(1) Annualized for the periods ended September 30, 1996 and 1995.
</FN>
</TABLE>
<PAGE>
Comparative Per Share Data
The following table presents selected comparative per share
data for USB Common Stock and FBI Common Stock on a historical
basis, for USB Common Stock on a pro forma basis reflecting
consummation of the Merger and for the FBI 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 accounting basis. See "The
Merger--Accounting Treatment." The data is not necessarily
indicative of the results of the future operations of either entity
or the actual results that would have occurred had the Merger been
consummated September 30, 1996. The information is derived from
and should be read in conjunction with the consolidated historical
financial statements of USB, including related notes thereto, which
are incorporated by reference, and the consolidated historical
financial statements of FBI, including the notes thereto, and the
unaudited pro forma financial information appearing elsewhere in
this Joint Proxy Statement. See "Available Information,"
"Incorporation of Certain Documents by Reference," "Pro Forma
Financial Information" and Appendix C hereto.
<TABLE>
<CAPTION>
Nine Months Ended Year Ended December 31,
September 30, 1996 1995 1994 1993
<S> <C> <C> <C> <C>
USB Common Stock
Net income per common share
before extraordinary item:
Historical 1.50 1.69 1.51 1.49
Pro forma combined 1.54 1.83 1.30 1.43
Dividends paid per common share:
Historical 0.39 0.44 0.42 0.36
Pro forma combined 0.30 0.33 0.31 0.28
Book value per common share
(at end of period):
Historical 12.36 11.80 8.76 9.17
Pro forma combined 12.59 11.82 9.04 9.10
FBI Common Stock
Net income per common share
before extraordinary item:
Historical 9.29 11.95 5.71 7.69
Pro forma equivalent (1) 8.98 10.67 7.58 8.34
Dividends paid per common share:
Historical 0.93 0.95 0.85 0.85
Pro forma equivalent (1) 1.74 1.92 1.81 1.63
Book value per common share
(at end of period):
Historical 75.44 69.07 55.36 52.40
Pro forma equivalent (1) 73.43 68.94 52.72 53.07
<FN>
(1) FBI pro forma equivalent amounts are computed by multiplying the pro forma
combined amount by a factor of 5.8321 to reflect the exchange ratio of
5.8321 shares of USB Common Stock for each share of FBI Common Stock. See
"The Merger--Terms of the Merger; Exchange Ratio."
</FN>
</TABLE>
<PAGE>
Summary Capital Ratios
The following table sets forth the risk-based capital ratios
for USB, FBI and pro forma for the combined company, together with
the minimum ratios required by regulatory agencies, as of September
30, 1996. See "Supervision, Regulation, and Effects of
Governmental Policy--Capital Adequacy."
<TABLE>
<CAPTION>
Combined
USB FBI (Pro Forma)
Risk-based capital ratios
<S> <C> <C> <C>
Tier I capital 17.92% 10.54% 14.22%
Total capital (Tier I and II) 18.77% 11.73% 15.24%
Minimum risk-based capital ratios
Tier I capital 4.00% 4.00% 4.00%
Total capital (Tier I and II) 8.00% 8.00% 8.00%
Tier I leverage ratio 10.63% 7.91% 9.43%
Minimum Tier I leverage ratio 4.00% - 5.00% 4.00% - 5.00% 4.00% - 5.00%
</TABLE>
RISK FACTORS
Shareholders of USB and FBI are urged to carefully consider
the following factors:
Determination of Terms and Exchange Ratios
The terms of the Merger, including the Exchange Ratio, were
determined by arms-length negotiations between USB and FBI. USB
and FBI considered the book value, earnings per share, potential
market values and the projected financial performance of the
combined company in evaluating the Exchange Ratio. No effort was
made to determine the going concern or liquidation values of USB
and FBI. See "The Merger--Background of and Reason for the Merger"
and "The Merger--Opinions of Financial Advisors."
Restrictions on Dividends
The principal business operations of USB and FBI are conducted
through their subsidiary banks (collectively, the "Banks"). Cash
available to pay dividends to stockholders of USB and FBI is
derived primarily, if not entirely, from dividends paid by the
Banks. After the Merger, the ability of USB Bank, as the surviving
subsidiary bank, to pay dividends to USB as well as USB's ability
to pay dividends to its stockholders will be subject to and limited
by certain legal and regulatory restrictions. Further, any lenders
making loans to USB may impose financial covenants that may be more
restrictive than regulatory requirements with respect to the
payment of dividends by USB. There can be no assurance of whether
or when USB may pay dividends after the Merger. See "Comparative
Market Prices and Dividends" and "Supervision, and Effects of
Government Policy."
Competition
The banking business is highly competitive, particularly in
the Banks' market areas. The Banks compete as financial
intermediaries with other commercial banks, savings associations,
credit unions, mortgage banking companies, securities brokerage
companies, insurance companies and money market mutual funds
operating in Alabama and elsewhere. Many of these competitors have
substantially greater resources and lending limits than USB and FBI
and the Banks. Additionally, non-depository institution
competitors are generally not subject to the extensive regulations
applicable to USB and FBI and the Banks. As of September 29, 1995,
pursuant to the Riegle-Neal Interstate Banking and Branching
Efficiency Act, commercial banks may now acquire financial
institutions nationwide, further increasing competition.
Supervision and Regulation
The banking industry is heavily regulated. Subsequent to the
Merger, USB and USB Bank will be subject to regulation by the
Federal Reserve, the FDIC and the Alabama State Banking Department.
The success of USB and USB Bank depends not only on competitive
factors but also on state and federal regulations affecting banks,
thrifts, and bank and thrift holding companies. The regulations
are primarily intended to protect depositors, not shareholders.
Recent and proposed changes to the regulation of the financial
institution industry and the ultimate effect of such changes cannot
be predicted. The effects of the implementation of new legislation
applicable to USB and FBI and the 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 USB and FBI and the
Banks may be modified at any time, and there is no assurance that
such modification will not adversely affect the business of USB and
FBI and the Banks. See "Supervision, and Effects of Government
Policies."
Monetary Policies
Interest rates are largely dependent on the rate of interest
established from time to time by the Federal Reserve for funds made
available to financial institutions by the Federal Reserve. During
1994 and the first nine months of 1995, the Federal Reserve changed
its discount rate five times. During 1996, Federal Reserve -
established interest rates have been relatively stable. However,
due to the potential for volatility of such monetary policy, there
can be no assurance that actions by monetary and fiscal authorities
will not have an adverse effect on the deposit levels, net interest
margin, loan demand or the business and earnings of USB Bank.
Reserve for Loan Losses
Management of each Bank maintains an allowance for loan losses
based upon, among other things, historical experience, an
evaluation of economic conditions and regular reviews of
delinquencies and loan portfolio quality. Based upon such factors,
management makes various assumptions and judgments about the
ultimate collectibility of the respective loan portfolios and
provides an allowance for potential loan losses based upon a
percentage of the outstanding balances and for specific loans when
their ultimate collectibility is considered questionable. Although
each of USB and FBI believes that allowances for loan losses at
each of the Banks are adequate, there can be no assurance that such
allowances will prove sufficient to cover future losses. Future
adjustments may be necessary if economic conditions differ or
adverse developments arise with respect to non-performing or
performing loans of the Banks. Material additions to the allowance
for loan losses of USB Bank, as the surviving Bank, would result in
a material decrease in USB's net income, and possibly its capital,
and could result in its inability to pay dividends, among other
adverse consequences. See "Incorporation by Reference" and "FBI
Management's Discussion and Analysis of Financial Condition and
Results of Operations--Provision and Allowance for Loan Losses."
Tax Considerations
It is intended that the Merger will be treated as a
reorganization within the meaning of Section 368 of the Code.
Based upon certain representations made by the managements of USB
and FBI, Maynard, Cooper & Gale, P.C. and Walston, Wells, Anderson
& Bains have each delivered an opinion regarding the federal income
tax effects of the Merger, described under the caption "The
Merger--Federal Income Tax Consequences."
No ruling has been requested from the Internal Revenue Service
("IRS") as to any federal income tax consequences in connection
with the Merger, and the opinions of counsel described above are
not binding on the IRS. Further, because certain tax consequences
of the Merger may vary depending upon the particular circumstances
of each shareholder and other factors, each holder of USB stock or
FBI stock is urged to consult such holder's own tax advisor to
determine the particular tax consequences to such holder of the
Merger (including the application and effect of state, local and
other tax laws).
Interests of Certain Persons in the Transaction
Directors and officers of USB and FBI have personal interests
in the Merger that may present them with conflicts of interest in
connection with the Merger. The Boards of Directors of USB and FBI
are aware of this and have considered personal interests disclosed
in this Joint Proxy Statement in their evaluation of the Merger.
See "The Merger--Background of and Reasons for the Merger" and "The
Merger--Interests of Certain Persons in the Merger."
Restrictions on Resale and USB Common Stock
Affiliates of FBI who receive USB Common Stock pursuant to the
Merger will be restricted on the resale of such USB Common Stock
pursuant to Rule 145 of the Securities Act. Additionally,
individuals who are not affiliates of FBI but who will become
affiliates of USB after the Merger will be restricted on the resale
of any USB Common Stock, whether or not received in the Merger,
pursuant to Rule 144 of the Securities Act. An affiliate of FBI
who will also be an affiliate of USB after the Merger will be
subject to the restrictions on resale of both Rule 145 and Rule
144. An "affiliate" is generally a person that, directly or
indirectly, controls an entity and generally includes all officers,
directors and 10% shareholders of such entity. See "The
Merger--Resales of USB Common Stock."
GENERAL INFORMATION
Special Meetings, Record Dates and Votes Required
USB Meeting. The Special Meeting of Shareholders of USB will
be held at 10:00 a.m., local time, on ________________, 1997, at
the main office of USB Bank, 131 West Front Street,
Thomasville, Alabama. The purpose of the USB Meeting is to
consider and vote upon a proposal to approve the Merger Agreement,
which provides for, among other things, the Merger. Only holders
of record of USB Common Stock at the close of business on the USB
Record Date, ______________________, 1997, will be entitled to
notice of and to vote at the USB Meeting. As of the USB Record
Date there were [2,137,960] shares of USB Common Stock issued,
outstanding and entitled to be voted. There were approximately
[564] USB shareholders, of record or through registered clearing
agents, on the USB Record Date. Each share of USB Common Stock
will be entitled to one vote at the USB Meeting.
The presence, in person or by proxy, of holders of the
majority of the issued and outstanding shares of USB Common Stock
entitled to vote at the USB Meeting is necessary to constitute a
quorum at such meeting.
Approval of the Merger Agreement on behalf of USB, pursuant to
the Alabama Business Corporation Act ("ABCA"), will require the
affirmative vote of the holders of at least two-thirds of the
outstanding shares of USB Common Stock entitled to be voted
thereon. A failure to return the enclosed proxy or a vote to
abstain will have the same effect as a vote against the Merger. As
of the USB Record Date, 308,359 shares of USB Common Stock, or
14.42% of the total shares of USB Common Stock outstanding, were
beneficially owned and entitled to be voted by directors and
executive officers of USB and certain family members and related
interests and by directors and executive officers of FBI and
certain family members and related interests. Assuming all such
shares are voted in favor of the Merger, the affirmative vote of
the holders of 1,116,955 additional shares of USB Common Stock will
be required for approval.
Dissenters' rights may be demanded by USB shareholders who do
not vote in favor of the Merger and who follow the specified
procedures of Alabama law. See "Dissenters' Rights" below.
Approval of the Merger Agreement will be deemed to constitute
approval of the issuance of the number of shares of USB Common
Stock into which shares of FBI Common Stock may be converted in the
Merger and approval of amendments to USB's Articles of
Incorporation (i) to change the name of USB to a new name to be
agreed upon by FBI and USB, (ii) to increase the number of
authorized shares of USB from 2,400,000 to 10,000,000, (iii) to
increase the maximum size of the Board of Directors of USB from
fifteen to twenty, (iv) to deny preemptive rights to USB
shareholders, and (v) to provide for a 2/3's super majority voting
requirement by the Board of Directors to approve significant
corporate events or to add or remove members of senior management.
See "The Merger--Amendment of USB Articles of Incorporation."
FBI Meeting. The Special Meeting of Shareholders of FBI will
be held at 2:00 p.m., local time, on ___________________, 1997, at
the main office of First Bank, 131 Main Street, Grove Hill,
Alabama. The purpose of the meeting is to consider and vote upon
a proposal to approve the Merger Agreement, which provides for,
among other things, the Merger. Only holders of record of FBI
Common Stock at the close of business on the FBI Record Date,
_____________, 1997, will be entitled to notice of and to vote at
the FBI Meeting. As of the FBI Record Date, there were [239,843]
shares of FBI Common Stock issued, outstanding and entitled to be
voted. There were 274 FBI shareholders of record on the FBI Record
Date. Each share of FBI Common Stock will be entitled to one vote
at the FBI Meeting.
The presence, in person or by proxy, of holders of a majority
of the issued and outstanding shares of FBI Common Stock entitled
to vote at the FBI Meeting is necessary to constitute a quorum at
such meeting.
Approval of the Merger Agreement on behalf of FBI, pursuant to
FBI's Articles of Incorporation, will require the affirmative vote
of the holders of at least 75% of the outstanding shares of FBI
Common Stock entitled to be voted thereon. A failure to return the
enclosed proxy or a vote to abstain will have the same effect as a
vote against approval of the Merger Agreement. As of the FBI
Record Date, 25,852 shares of FBI Common Stock, or 10.78% of the
total shares of FBI Common Stock outstanding, were beneficially
owned and entitled to be voted by directors and executive officers
of FBI and certain family members and related interests. Assuming
all such shares are voted in favor of the Merger, the affirmative
votes of the holders of 154,031 additional shares of FBI Common
Stock will be required for approval.
Dissenters' rights may be demanded by FBI shareholders who do
not vote in favor of the Merger and who follow the specified
procedures of Alabama law. See "Dissenters' Rights" below.
Proxies
USB. The enclosed USB proxies are solicited on behalf of the
Board of Directors of USB for use in connection with the USB
Meeting and any adjournment or adjournments thereof. Holders of
USB Common Stock are requested to complete, date and sign the
accompanying proxy and return it promptly to USB in the enclosed
envelope. Failure to return a properly executed proxy or to vote
at the USB Meeting will have the same effect as a vote against
approval of the Merger Agreement.
A USB shareholder who has executed and delivered a proxy may
revoke it at any time before such proxy is voted by giving a later
written proxy, by giving written revocation to the Corporate
Secretary of USB, provided such later proxy or revocation is
actually received by USB before the vote of the shareholders, or by
voting in person at the USB meeting. Any shareholder attending the
USB 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 USB 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.
FBI. The enclosed FBI proxies are solicited on behalf of the
Board of Directors of FBI for use in connection with the FBI
Meeting and any adjournment or adjournments thereof. Holders of
FBI Common Stock are requested to complete, date and sign the
accompanying proxy and return it promptly to FBI in the enclosed
envelope. Failure to return a properly executed proxy or to vote
at the FBI Meeting will have the same effect as a vote against
approval of the Merger Agreement. FBI shareholders should not
forward any stock certificates with their proxy.
An FBI shareholder who has executed and delivered a proxy may
revoke it at any time before such proxy is voted by giving a later
written proxy, by giving written revocation to the Corporate
Secretary of FBI, provided such later proxy or revocation is
actually received by FBI before the vote of the shareholders, or by
voting in person at the FBI Meeting. Any shareholder attending the
FBI 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 FBI 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.
Other Matters. USB and FBI will each bear the costs of
solicitation of proxies for their respective Special Meetings.
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 USB or FBI, as the case may be.
Neither the management of USB nor the management of FBI is
aware of any business to be acted upon at the Special Meetings
other than approval of proposals to approve the Merger Agreement.
If other matters are properly brought before either or both of the
Special Meetings or any adjournment thereof, the enclosed proxy, if
properly signed, dated and returned, will be voted in accordance
with the recommendation of the respective company's management or,
if there is no such recommendation, in the discretion of the
individuals named as proxies therein.
Dissenters' Rights
If the Merger is consummated, holders of record of USB Common
Stock or FBI Common Stock who follow the procedures specified by
Article 13 of the ABCA ("Article 13") will be entitled to
determination and payment in cash of the "fair value" of their
stock immediately before the Effective Time, excluding value
resulting from the anticipation of the Merger but including "a fair
and equitable" rate of interest thereon. Shareholders who elect to
follow such procedures are referred to herein as "Dissenting
Shareholders".
A VOTE IN FAVOR OF THE MERGER AGREEMENT BY A HOLDER OF USB
COMMON STOCK OR FBI COMMON STOCK WILL RESULT IN THE WAIVER OF THE
SHAREHOLDER'S RIGHT TO DEMAND PAYMENT FOR HIS OR HER SHARES.
The following summary of the provisions of Article 13 is not
intended to be a complete statement of such provisions, the full
text of which is attached as Appendix B to this Joint Proxy
Statement, and is qualified in its entirety by reference thereto.
A holder of FBI Common Stock electing to exercise dissenters'
rights (1) must deliver to FBI, before the vote at the FBI Meeting,
written notice of his or her intent to demand payment for his or
her shares if the Merger is effectuated, and (2) must not vote in
favor of the Merger Agreement. A holder of USB Common Stock
electing to exercise dissenters' rights (1) must deliver to USB,
before the vote at the USB Meeting, written notice of his or her
intent to demand payment for his or her shares if the Merger is
effectuated, and (2) must not vote in favor of the Merger
Agreement. The requirement of such written notice is in addition
to and separate from the requirement that such shares not be voted
in favor of the Merger Agreement, and the requirement of such
written notice is not satisfied by voting against the Merger
Agreement either in person or by proxy. The requirement that such
shares not be voted in favor of the Merger Agreement will be
satisfied if no proxy is returned and such shares are not voted in
person. Because a properly executed and delivered proxy which is
left blank will, unless revoked, be voted FOR approval of the
Merger Agreement, in order to be assured that such shareholder's
shares are not voted in favor of the Merger Agreement, a Dissenting
Shareholder who votes by proxy must not leave the proxy blank but
must (i) vote AGAINST the approval of the Merger Agreement or (ii)
affirmatively ABSTAIN from voting. Neither a vote against approval
of the Merger Agreement nor an abstention will satisfy the
requirement that a written notice of intent to demand payment be
delivered to FBI or USB, as the case may be, before the vote on the
Merger Agreement.
Both holders of record and beneficial owners of FBI Common
Stock or USB Common Stock are entitled to assert dissenters' rights
for the shares registered in the name of or held for the benefit of
that holder or owner. The dissenters' rights may be asserted with
respect to less than all shares of FBI Common Stock or USB Common
Stock held of record by such holder only if such holder dissents
with respect to all shares beneficially owned by any one person and
notifies FBI or USB, as the case may be, in writing of the name and
address of each person on whose behalf such record holder is
asserting dissenters' rights. A beneficial shareholder, in order
to assert his or her dissenters' rights, must submit to FBI or USB,
as the case may be, the record shareholder's written consent to the
dissent prior to or contemporaneously with such assertion and must
dissent with respect to all shares of which he or she is the
beneficial shareholder or over which he or she has the power to
vote. Where no number of shares is expressly mentioned, the
notice of intent to demand payment will be presumed to cover all
shares held in the name of the record holder.
Within 10 days after the Effective Time, USB, as the surviving
corporation in the Merger, will send a written dissenters' notice
to each Dissenting Shareholder of record at the Effective Time who
did not vote in favor of the Merger and who duly filed a written
notice of intent to demand payment in accordance with the
foregoing. The dissenters' notice will specify the deadline by
which time USB must receive a payment demand from such Dissenting
Shareholder. The deadline will be no fewer than 30 days or more
than 60 days after the date the dissenters' notice is delivered.
It is the obligation of Dissenting Shareholders to initiate all
necessary action to perfect their dissenters' rights within the
time periods prescribed in Article 13 and the dissenters' notice.
If no payment demand is timely received from a Dissenting
Shareholder, all dissenters' rights will be lost, notwithstanding
any previously submitted written notice of intent to demand
payment. Each Dissenting Shareholder who demands payment retains
all other rights of a shareholder until those rights are cancelled
or modified by the Merger. A Dissenting Shareholder who demands
payment in accordance with the foregoing may not thereafter
withdraw that demand and accept the terms offered under the Merger
Agreement unless USB shall consent thereto.
Within 20 days of the formal payment demand, a Dissenting
Shareholder who has made a demand must submit his share certificate
or certificates to USB, so that a notation to that effect may be
placed on such certificate or certificates and the shares returned
to the Dissenting Shareholder with the notation thereon. A
shareholder's failure to submit shares for notation will, at USB's
option, terminate the holder's rights as a dissenter, unless a
court of competent jurisdiction determines otherwise.
Promptly after the Effective Time, USB shall offer to pay each
Dissenting Shareholder who complied with Article 13 the amount USB
estimates to be the fair value of such Dissenting Shareholder's
shares, plus accrued interest. Each Dissenting Shareholder who
agrees to accept the above referenced offer of payment in full
satisfaction of his or her demand must surrender to USB the
certificate or certificates representing his or her FBI or USB
shares in accordance with the terms of the dissenters' notice.
Upon receiving the certificate or certificates, USB shall pay each
Dissenting Shareholder the fair value of his or her shares, plus
accrued interest. Upon receiving payment, a Dissenting Shareholder
ceases to have any interest in the shares.
A Dissenting Shareholder who has made a payment demand may
notify USB in writing of his or her own estimate of the fair value
of his or her shares and the amount of interest due, and demand
payment of his or her estimate, or reject the offer made to such
shareholder and demand payment of the fair value of his or her
shares and interest due, if: (i) the Dissenting Shareholder
believes that the amount offered him or her is less than the fair
value of his or her shares or that the interest due is incorrectly
calculated; (ii) USB fails to make an offer as required by Article
13 within sixty (60) days after the date set for demanding payment;
or (iii) USB, having failed to consummate the Merger, does not
release the transfer restrictions imposed on shares within sixty
(60) days after the date set for demanding payment; provided,
however, that a Dissenting Shareholder waives his or her right to
demand payment different from that offered unless he or she
notifies USB of his or her demand in writing within thirty (30)
days after USB offered payment for his or her shares.
If a demand for payment remains unsettled, USB shall commence
a proceeding within sixty (60) days after receiving the second
payment demand and petition the court to determine the fair value
of the shares and accrued interest. If the proceeding is not
commenced within the sixty (60) day period, each Dissenting
Shareholder whose demand remains unsettled shall be entitled to
receive the amount demanded. Such a proceeding will be filed in
the Circuit Court of Clarke County, Alabama. Each Dissenting
Shareholder made a party to the proceeding is entitled to judgment
for the amount the court finds to be the fair value of the his or
her shares, plus accrued interest. Upon payment of the judgment
and surrender to USB of the certificate or certificates
representing the judicially appraised shares, a Dissenting
Shareholder will cease to have any interest in the shares. The
court may assess costs incurred in such a proceeding against all or
some of the Dissenting Shareholders, in amounts the court finds
equitable, to the extent the court finds that such Dissenting
Shareholders acted arbitrarily, vexatiously, or not in good faith
in demanding payment different from that initially offered by USB.
The Court may also assess the reasonable fees and expenses of
counsel and experts against all or some of the Dissenting
Shareholders if the court finds that such Dissenting Shareholders
acted arbitrarily, vexatiously or not in good faith with respect to
the rights provided in Article 13.
Recommendations of Boards of Directors
The Board of Directors of USB recommends that the shareholders
of USB vote FOR the proposal to approve the Merger Agreement. The
Board of Directors of FBI recommends that the shareholders of FBI
vote FOR the proposal to approve the Merger Agreement. See "The
Merger--Background of and Reasons for the Merger."
THE MERGER
The following information concerning the Merger, insofar as it
relates to matters contained in the Merger Agreement, is qualified
in its entirety by reference to the Merger Agreement, which is
attached hereto as Appendix A and incorporated herein by reference.
The information contained herein with respect to the opinions of
the financial advisors to USB and FBI is qualified in its entirety
by reference to the respective opinions of such financial advisors,
which are attached hereto as Appendices E and F and incorporated
herein by reference.
Terms of the Merger
At the Effective Time, FBI will merge with and into USB, and
First Bank will merge with and into USB Bank. In the Merger, each
share of FBI Common Stock outstanding immediately prior to the
Effective Time, other than shares with respect to which dissenters'
rights shall have been perfected, and also excluding shares held by
FBI or its subsidiaries or by USB or its subsidiary, in each case
other than in a fiduciary capacity or as a result of debts
previously contracted, will be converted into and exchanged for the
right to receive 5.8321 shares of USB Common Stock.
No fractional shares of USB Common Stock will be issued in
respect to FBI Common Stock, and cash will be paid by USB 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 USB Common Stock by the book value of one share
of USB Common Stock as of the most recent month-end prior to the
Effective Time. No holder of FBI Common Stock who would otherwise
have been entitled to a fractional share of USB Common Stock will
be entitled to dividends, voting rights or any right as holder with
respect to such fractional shares.
Holders of FBI Common Stock and USB 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 ABCA. See "General Information--Dissenters' Rights."
Effective Time
Articles of Merger will be filed with the Secretary of State
of the State of Alabama, 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 both USB and FBI. The
Effective Time of the Merger will be at the time Articles of Merger
shall be accepted for filing by the Secretary of State of Alabama
(or such later time as the parties may agree).
Background of and Reasons for the Merger
Since 1994, management of USB has considered various
possibilities for increased asset and earningsgrowth, including
possible new branches, acquisition of existing branches of other
area banks and the chartering of new banks within USB's market
area.
USB and Brent Banking Company ("Brent") entered into an
Agreement and Plan of Share Exchange on January 15, 1996. The
acquisition was completed on May 31, 1996, and Brent was merged
with USB on June 1, 1996. The shareholders of Brent received
$1,762.50 in cash for each share of Brent stock. There were no
dissenting Brent shares. The 4,000 shares of Brent stock
outstanding resulted in a total cash purchase price of $7,050,000.
The book value of Brent was $4,658,000, resulting in a premium of
$2,392,000 or 1.51 times book value. No borrowing was required to
finance the acquisition of Brent Banking Company. The acquisition
was accounted for as a purchase by USB in accordance with generally
accepted accounting principles, and the unaudited USB financial
statements incorporated by reference herein reflect the Brent
Banking Company purchase.
In the early part of 1994, representatives of USB and FBI
began discussions on the feasibility and the practicability of
organizing and operating a community development corporation to
promote, participate in, and fund community projects that might not
otherwise get funded. As a result of these discussions, Allied
Community Development Corporation ("Allied"), an Alabama nonprofit
corporation, was formed by USB, FBI and Merchants Bank, three
independent, community-owned banking corporations in Clarke County,
Alabama. Allied was incorporated to improve the quality of life in
the service areas served by its member banking institutions.
In October of 1995, after a meeting of the board of Allied
Community Development Corporation, the CEO's of USB and FBI were
engaged in a conversation about possible community projects. It
was agreed by both CEOs that community service could be strongly
enhanced and there could be many other benefits available through
efficiencies if USB and FBI were to merge.
Because FBI was searching for a permanent CEO at that time and
had not been successful in locating an acceptable candidate, it was
decided that additional exploratory discussions should be conducted
with USB about the possibility of a merger. On December 14, 1995,
the Boards of USB and FBI met to discuss a merger of equals and the
implications of a merger of the two institutions. At this meeting,
a committee made up of Mr. Jim Miller, Mr. Jack Wainwright, Mr.
Fred Huggins and respective counsel was authorized to meet
informally with the Federal Reserve to discuss the merger issue.
On January 5, 1996, this committee met with representatives of
the Federal Reserve Board in Atlanta. After this meeting, both
Boards were briefed in separate meetings, and preliminary data was
prepared for the Federal Reserve Board.
The CEO's of USB and FBI had several discussions, and they, in
turn, discussed the possibility with their respective Boards,
advisors, and counsel. This discussion continued through the
Spring of 1996.
On June 11, 1996, both Boards met separately with Baxter
Fentriss and Company ("Baxter Fentriss"), an investment banker, to
discuss the merger further. On June 18, 1996, the Board of USB
authorized its CEO, Mr. Jack Wainwright, to meet with FBI's CEO,
Mr. Fred Huggins, to work out the details of a merger agreement.
That meeting was held on the same day, and the CEOs came to a basic
understanding concerning the Merger.
On July 16, 1996, the Boards of the respective companies met
to discuss and approve an agreement in principle to merge. The
companies announced an agreement in principle to merge on July 17,
1996. After further negotiation, the Merger Agreement was executed
on August 19, 1996, on behalf of both parties.
Reasons for the Merger. Numerous factors were considered by
the two Boards in approving and recommending the terms of the
Merger to their respective shareholders. They included an analysis
of the financial structure, results of operations and prospects of
USB and FBI, the composition of the businesses of the two
organizations, the overall compatibility of the management of the
organizations, the outlook for both organizations in the banking
and financial services industry and the opinions of Baxter Fentriss
and Company and Chaffe & Associates, Inc. as to the fairness of the
terms of the Merger from a financial point of view. See "Opinions
of Financial Advisors" below, "Available Information," "Incorporation
of Certain Documents by Reference," "Comparative Market Prices and
Dividends" and "Business of FBI."
USB's and FBI's Boards of Directors believe the Merger will
improve shareholder value as well as provide a foundation for
strong, long-term returns. Additionally, the Merger will result in
more diversity in earning assets. FBI has a larger based loan
portfolio, while USB has a larger, more diverse investment
portfolio. The diversity of the combined assets, coupled with the
stable deposit base and strong capital position of both banks, will
strengthen the competitive position of the surviving bank.
USB has a strong community-minded philosophy and a commitment
to community banking. By merging with FBI and First Bank, a
like-minded Bank, the USB Board believes that opportunities to
expand and employ more resources to the communities financial
service needs will be increased.
Technological changes are occurring rapidly in the financial
industry, and the FBI Board of Directors believes that a combined
financial institution will enhance the merged bank's ability to
provide customers the benefits these changes bring, including more
convenient, less costly delivery systems. The FBI Board also
believes that a combined management team will be capable of
operating a stronger, more productive and efficient financial
institution capable of providing more diverse products and improved
methods of service at lower costs.
Opinions of Financial Advisors
USB Advisor. USB retained Chaffe & Associates, Inc.
("Chaffe") to render a fairness opinion in connection with the
Merger. Chaffe was selected by USB's Board of Directors on the
basis of Chaffe's experience and expertise in transactions
similar to the Merger and Chaffe's reputation in the banking and
investment communities. Chaffe is a recognized investment banking
firm and is experienced in the securities industry, in investment
analysis and appraisal, and in related corporate finance and
investment banking activities, including mergers and acquisitions,
corporate recapitalization, and valuations for estate, corporate
and other purposes. Chaffe is frequently retained to perform
similar services for other banks and bank holding companies.
In connection with Chaffe's engagement to render a fairness
opinion to USB with respect to the Merger, USB instructed Chaffe
to evaluate the fairness to USB's shareholders, from a financial
point of view, of the Exchange Ratio, pursuant to the provisions of
the Merger Agreement, and to conduct such investigations as Chaffe
deemed appropriate for such purposes. USB did not place any
limitations on the scope or manner of Chaffe's investigation and
review. The Exchange Ratio to be received by FBI's shareholders
was determined by USB and FBI in their negotiations.
Chaffe rendered its opinion to USB's Board on January 31,
1997, to the effect that, based upon and subject to the assumptions
made, the factors considered, the review undertaken and the
limitations stated and based upon such other matters as Chaffe
considered relevant, as of September 30, 1996, the Exchange Ratio
was fair, from a financial point of view, to the holders of USB
Common Stock (the "Fairness Opinion").
The full text of Chaffe's Fairness Opinion is attached hereto
as Appendix D and is incorporated by reference. The summary
description of the Fairness Opinion set forth herein is qualified
in its entirety by reference to Appendix D. USB's shareholders are
urged to read the Fairness Opinion in its entirety in connection
with the Joint Proxy Statement for a description of the procedures
followed, assumptions made, matters considered and limitations on
the review undertaken by Chaffe. Chaffe's opinion is directed only
to the fairness of the Exchange Ratio, from a financial point of
view, to USB's shareholders and does not constitute a
recommendation to any USB shareholder as to how such shareholder
should vote at the Special Meeting.
In connection with rendering its opinion, Chaffe, among other
things: (i) reviewed the Joint Proxy Statement of USB and FBI for
this proposed transaction in substantially the form to be sent to
stockholders, including a copy of the Merger Agreement; (ii)
reviewed and analyzed certain publicly-available financial
statements and other information of USB and FBI, respectively;
(iii) reviewed and analyzed certain internal financial statements
and other financial and operating data concerning USB and FBI,
prepared by the managements of USB and FBI, respectively, including
financial projections; (iv) discussed the past and current
operations and financial condition, and the prospects of USB and
FBI with senior executives of USB and FBI, respectively; (v)
reviewed the historical prices and trading volumes of the shares of
USB Common Stock and FBI Common Stock; (vi) compared the financial
performance of USB and FBI, and the prices and trading activity of
the USB Common Stock and FBI Common Stock, with that of certain
other comparable publicly-traded companies and their securities;
(vii) reviewed and discussed with senior managements of USB and FBI
the strategic objectives of the Merger, and the synergies and
certain other benefits of the Merger; (viii) reviewed the financial
terms of business combinations in the commercial banking industry
specifically and other industries generally, which Chaffe deemed
generally comparable to the proposed transaction; (ix) considered
a number of valuation methodologies, including among others, those
that incorporate book value, deposit base premium, capitalization
of earnings and relative contribution, and (x) performed such
other studies and analyses as Chaffe deemed appropriate to its
opinion.
In its review, Chaffe relied, without independent
verification, upon the accuracy and completeness of the historical
and projected financial information, and all other information
reviewed by it for purposes of its opinion. Chaffe did not make or
obtain an independent review or appraisal of USB's or FBI's assets
or liabilities, nor was Chaffe furnished with any such appraisals.
Chaffe relied solely on USB and FBI for information as to the
adequacy of their respective loan loss reserves and values of other
real estate owned. With respect to projected financial results,
including the estimates of synergies and other benefits expected to
result from the Merger, Chaffe assumed that they were reasonably
prepared on bases reflecting the best currently available estimates
and judgements of the managements of USB and FBI of future
financial performances of their respective companies. This opinion
was necessarily based upon market, economic and other conditions as
they existed on, and could be evaluated as of, September 30, 1996.
Chaffe expressed no opinion on the tax consequences of the proposed
transaction.
The following is a summary of selected analyses performed by
Chaffe in connection with its fairness opinion. The summary set
forth below does not purport to be a complete description of the
analyses performed in this regard, but does include all material
analyses.
Analysis of Selected Financial Data. Chaffe reviewed FBI's
financial data and calculated growth rates for various balance
sheet and income statement line items. FBI's net interest income
increased at a 18.6% compounded growth rate from December 31, 1991
to December 31, 1995, while net income increased at a 22.3%
compounded annual growth rate for the same time period. Annualized
net income for the nine months ended September 30, 1996, was 4.7%
higher than 1995 net income.
Analysis of Selected Merger Transactions. In order to obtain
a valuation range for FBI, Chaffe performed an analysis of prices
paid for selected banks or bank holding companies with characteristics
comparable to FBI, although Chaffe noted no transaction was identical
to the Merger proposed. Comparable transactions were considered to be
transactions announced in the United States for the period
September 30, 1995 through September 30, 1996, in which the sellers
(1) had total assets of between 50% to 150% of the total assets of
the buyers and (2) had total assets less than $1 billion. These
transactions were, in general, considered to be mergers of equals.
The median and mean tangible equity ratios of the peer group of
sellers were comparable although slightly higher than FBI's ratios,
while the ROAA and ROAE of the peer group were lower than FBI's
ratios. With respect to this group of transactions and the
proposed Merger, Chaffe compared the prices to be received by the
peer group as a multiple of their tangible equity, their earnings
per share for the four quarters prior to the announcement of such
transactions, and their total assets. Chaffe determined that the
USB/FBI transaction value was comparable to the range of value which
resulted from this analysis.
Discounted Cash Flow Analysis. Using a discounted cash flow
analysis of FBI, Chaffe determined the net present value for the
FBI Common Stock based on the net present value of the stream of
after-tax cash flows of FBI. This stream of after-tax cash flows was
based on annualized figures for FBI as of September 30, 1996, and
included assumptions relating to earnings and growth thereafter based
on information from managements of USB and FBI. Chaffe reviewed
these forecasts and assessed the likelihood of FBI achieving such
forecasts. Chaffe then discounted these cash flow streams assuming
an estimated required rate of return for FBI of 16.7%. Chaffe
determined that the transaction value was within the range of net
present values which resulted from this analysis.
Review of Relative Contribution. Chaffe determined the
relative contribution of FBI to USB after giving pro forma effect
to the Merger. Chaffe determined that FBI stockholders would
receive approximately 40% of the pro forma ownership of the
combined company, while FBI would contribute to the combined
company approximately 45% of the assets, approximately 37% of the
tangible equity, approximately 66% of net loans, approximately 47%
of deposits, and approximately 41% of 9/30/96 annualized net income
after giving FBI credit for the synergies anticipated from the
Merger.
Chaffe determined potential accretion or dilution to USB's
earnings per share for 1996 annualized, and projected 1997. Chaffe
took into account the sale of one branch office to be required by
federal regulators and an additional 5% deposit run-off that may be
experienced in the transaction, as per USB management. Chaffe
determined that the transaction should be accretive to USB's
earnings per share including the effect of synergies expected in
the Merger.
In arriving at its Fairness Opinion, Chaffe did not rely on
any single analysis, but relied on a combination of factors
derived from all of the analytical procedures employed. The
preparation of a fairness opinion is a complex process and is not
necessarily susceptible to partial analysis or summary description.
Conclusions based on these analyses are not necessarily mathematical.
Chaffe believes that the summary set forth above and Chaffe's
analysis must be considered as a whole and that selecting portions
of its analyses performed by Chaffe are not necessarily indicative
of actual values or actual future results, which may be significantly
more or less favorable than suggested by such analyses. Additionally,
analyses relating to the value of businesses do not purport to be
appraisals or necessarily reflect the prices at which businesses
actually may be sold. 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 analysis.
Neither Chaffe nor any of its officers or employees has any
interest in USB Common Stock or FBI Common Stock. USB will pay
Chaffe approximately $19,000 in fees plus out-of-pocket expenses
for rendering its Fairness Opinion. The fee to be received by
Chaffe in connection with its services to USB is not dependent or
contingent upon the occurrence or lack thereof of any transaction.
USB has agreed to indemnify and hold harmless Chaffe, its
subsidiaries and affiliates, and its officers, directors,
shareholders, employees, attorneys, agents and representatives, and
the successor and assigns of each of the foregoing parties from and
against any person claiming to have relied on Chaffe's advice or
services, or the performance or nonperformance thereof, or claiming
to have been entitled to some benefit therefrom, or claiming that
such services were not adequately performed, and all related
damage, claim, demand, expense or cost of any kind or nature,
including reasonable attorney fees and expenses, arising directly
or indirectly, from or in any way related to, the opinion or any
other services performed by Chaffe, provided that Chaffe has not
been negligent or guilty of reckless or willful misconduct in
connection with the opinion, or any other services.
FBI Advisor. Baxter Fentriss has acted as financial advisor
to FBI in connection with the merger. On August 19, 1996, Baxter
Fentriss delivered to FBI its opinion that as of such date, and on
the basis of matters referred to herein, the offer is fair, from a
financial point of view, to the holders of FBI Common Stock. In
rendering its opinion Baxter Fentriss consulted with the management
of FBI and USB; reviewed the Agreement and Plan of Reorganization
and Merger, and certain publicly-available information on the
parties; and reviewed certain additional materials made available
by the management of the respective banks.
In addition, Baxter Fentriss discussed with the management of
FBI and USB their respective businesses and outlook. Baxter
Fentriss was involved in the negotiations with USB. No limitations
were imposed by FBI's Board upon Baxter Fentriss with respect to
the investigation made or procedures followed by it in rendering
its opinion. The full text of Baxter Fentriss' written opinion is
attached as Appendix E to this Joint Proxy Statement and should be
read in its entirety with respect to the procedures followed,
assumptions made, matters considered, and qualifications and
limitations on the review undertaken by Baxter Fentriss in
connection therewith.
Baxter Fentriss' opinion is directed to FBI's Board of
Directors only, and is directly only to the fairness, from a
financial point of view, of the Exchange Ratio. It does not
address FBI's underlying business decision to effect the proposed
merger, nor does it constitute a recommendation to any FBI
shareholder as to how such shareholder should vote with respect to
the Merger at the Meeting or as to any other matter.
Baxter Fentriss' opinion was one of many factors taken into
consideration by FBI's Board in making its determination to approve
the Merger Agreement, and the receipt of Baxter Fentriss' opinion
is a condition precedent to FBI's consummating the Merger. The
opinion of Baxter Fentriss does not address the relative merits of
the Merger as compared to any alternative business strategies that
might exist for FBI or the effect of any other business combination
in which FBI might engage.
Baxter Fentriss, as part of its investment banking business,
is continually engaged in the valuation of financial institutions
and their securities in connection with mergers and acquisitions
and valuations for estate, corporate and other purposes. Baxter
Fentriss is a nationally ranked advisor to firms in the financial
services industry on mergers and acquisitions. FBI selected Baxter
Fentriss as its financial advisor because Baxter Fentriss is an
investment banking firm focusing on banking transactions, and
because of the firm's extensive experience and expertise in
transactions similar to the Merger. Baxter Fentriss is not
affiliated with USB or FBI.
In connection with rendering its opinion to FBI's Board of
Directors, Baxter Fentriss performed a variety of financial
analyses. In conducting its analyses and arriving at its opinion
as expressed herein, Baxter Fentriss considered such financial and
other factors as it deemed appropriate under the circumstances
including, among others, the following: (i) the historical and
current financial condition and results of operations of USB and
FBI including interest income, interest expense, interest
sensitivity, noninterest income, noninterest expense, earnings,
book value, returns on assets and equity, capitalization, the
amount and type of non-performing assets, the impact of holding
certain non-earning real estate assets, the reserve for loan losses
and possible tax consequences resulting from the transaction; (ii)
the business prospects of USB and FBI; (iii) the economies of USB's
and FBI's respective market areas; (iv) the historical and current
market for FBI and USB Common Stock; and (v) the nature and terms
of certain other merger transactions that it believed to be
relevant. Baxter Fentriss also considered its assessment of
general economic, market, financial and regulatory conditions and
trends, as well as its knowledge of securities valuation generally,
and its knowledge of merger transactions in Alabama.
In connection with rendering its opinion, Baxter Fentriss
reviewed (i) the Agreement; (ii) drafts of this Joint Proxy
Statement; (iii) the Annual Reports to shareholders, including the
audited financial statements of FBI and USB, and the Annual Reports
of FBI and USB for the year ended December 31, 1995; (iv) pro forma
combined unaudited condensed balance sheets as of December 31, 1995
and pro forma combined statements of income for the year ended
December 31, 1995; and (v) certain additional financial and
operating information with respect to the business, operations and
prospects of USB and FBI as it deemed appropriate. Baxter Fentriss
also (a) held discussions with members of the senior management of
USB and FBI regarding the historical and current business
operation, financial condition and future prospects of their
respective companies; (b) reviewed the historical market prices and
trading activity for the common stock of FBI and USB; (c) compared
the results of operations of FBI and USB with those of certain
banking companies that it deemed to be relevant; (d) analyzed the
pro forma financial impact of the Merger on USB; (e) analyzed the
pro forma financial impact of the Merger on FBI; and (f) conducted
such other studies, analyses, inquiries and examinations as Baxter
Fentriss deemed appropriate.
The following is a summary of selected analyses performed by
Baxter Fentriss in connection with its opinion.
1. Stock Price History. Baxter Fentriss studied the
history of the trading prices and volume for FBI and USB Common
Stock and compared that to publicly traded banks in Alabama and to
the price offered by USB. Baxter Fentriss considered the possible
impact on USB's stock price following the merger if the company
became listed and began to trade closer to the average Alabama bank
on a price to earnings basis. On this basis there could be an
86.4% improvement in the combined market value of the two banks,
assuming an average Alabama price to earnings ratio of 11.7 for
publicly traded Alabama bank holding companies as of May 31, 1996.
2. Comparative Analysis. Baxter Fentriss compared
ownership received in the resultant merger, versus the relative
equity, earnings, market value and customer relationships
contributed by FBI. As of March 31, 1996, FBI was contributing
38.5% of the capital, 39.0% of the earnings, 36.4% of the Market
value and 45.2% of the customers. For this FBI shareholders were
receiving 39.55% of the ownership in the resultant company.
3. Baxter Fentriss considered the pro forma impact of the
transaction and concluded the transaction should have a positive
short and long-term impact on USB's earnings per share, book value
share and stock price.
4. Baxter Fentriss performed a discounted cash flow
analysis to determine hypothetical relative present values for FBI
and USB as a long term investment. Baxter Fentriss concluded that
based on the relative present values of each company (38.35% for
FBI and 61.65% for USB), the resultant ownership of FBI
shareholders after the merger was fair.
5. Baxter Fentriss considered the significant
organizational commitments to FBI in the merger with USB. FBI will
staff 50% of USB's Board, provide the Vice Chairman of USB, provide
the Chairman of the combined bank and provide several key
management positions. Such commitments suggest a "marriage of
equals" type transaction as opposed to a premium sale.
Using publicly available information on FBI and USB and
applying the capital guidelines of banking regulators, Baxter
Fentriss' analysis indicated that the Merger would be accretive to
the capital and earnings capacity of USB and would, therefore,
likely not be opposed by the banking regulatory agencies from a
capital perspective. Furthermore, Baxter Fentriss considered the
likely market overlap and the Federal Reserve guidelines with
regard to market concentration and did not believe there to be a
significant issue with regard to possible antitrust concerns.
Baxter Fentriss has relied, without any independent
verification, upon the accuracy and completeness of all financial
and other information reviewed. Baxter Fentriss has assumed that
all estimates, including those as to possible economies of scale,
were reasonably prepared by management, and reflect their best
current judgments. Baxter Fentriss did not make an independent
appraisal of the assets or liabilities of either FBI or USB, and
has not been furnished such an appraisal.
Baxter Fentriss will be paid an amount equal to .33% of the
combined equity of USB and FBI plus reasonable out-of-pocket
expenses for its services. In addition, Baxter Fentriss will be
paid $10,000, plus reasonable out-of-pocket expenses, for issuing
its fairness opinion in connection with the Merger. The parties
have agreed to indemnify Baxter Fentriss against certain
liabilities, including certain liabilities under federal securities
laws.
Amendment of USB Articles of Incorporation
At the Effective Time, the Articles of Incorporation of USB
will be amended as provided in the Merger Agreement (i) to change
the name of USB to a new name to be agreed upon by FBI and USB,
(ii) to increase the number of authorized shares of USB from
2,400,000 to 10,000,000, (iii) to increase the maximum size of the
Board of Directors of USB from fifteen to twenty, (iv) to deny
preemptive rights to USB shareholders, and (v) to provide for a
2/3's super majority voting requirement by the Board of Directors
to approve significant corporate events or to add or remove members
of senior management. See "The Merger--Amendment of Articles of
Incorporation." See "The Merger--Amendment of USB Articles of
Incorporation."
Amendment of USB Bylaws
At or prior to the Effective Time, the Bylaws of USB will be
amended to provide for a 2/3's supermajority voting requirement by
the Board of Directors to approve significant corporate events or
to add or remove members of its senior management.
Effect on Employee Benefit Plans
USB maintains the United Security Bancshares, Inc. Employee
Stock Ownership Plan (with 401(k) features) ("USB ESOP"). First
Bank and Trust maintains the First Bank and Trust Profit Sharing
Retirement Plan ("First Bank Plan"). The First Bank Plan will be
terminated by First Bank prior to the Merger. First Bank employees
will be eligible to participate in the USB ESOP on and after the
Effective Time and will receive credit for service with First Bank
in determining eligibility to participate and vesting in the USB
ESOP.
Surrender of Certificates
As promptly as practicable after the Effective Time, USB Bank,
acting in the capacity of exchange agent for USB (the "Exchange
Agent"), will mail to each former holder of record of FBI 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' FBI Common Stock certificates for
certificates representing shares of USB Common Stock and cash in
lieu of fractional shares. HOLDERS OF FBI 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 FBI
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 FBI
Common Stock to the Exchange Agent in the return envelope provided.
Upon receipt of the certificates and related documentation, USB
will issue, and the Exchange Agent will mail, to such holder of FBI
Common Stock a check in the amount of any payment in respect of
fractional shares of FBI Common Stock payable to the surrendering
shareholder and a certificate representing the number of shares of
USB Common Stock to which such holder is entitled pursuant to the
Merger Agreement. No certificates of USB Common Stock and no
payment in respect of fractional shares will be delivered to a
holder of FBI Common Stock unless and until such holder shall have
delivered to the Exchange Agent certificates representing the
shares of FBI 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 FBI will be entitled to vote
after the Effective Time at any meeting of USB shareholders the
number of whole shares of USB Common Stock into which such holders'
respective shares of FBI Common Stock are converted, regardless of
whether such holders have exchanged their certificates representing
FBI Common Stock for certificates representing USB Common Stock.
Beginning six months after the Effective Time, no dividend or
other distribution payable after the Effective Time with respect to
USB Common Stock issued to replace FBI Common Stock will be paid to
the holder of an unsurrendered FBI 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 FBI's
stock transfer books of shares of FBI Common Stock issued and
outstanding at the Effective Time. If certificates representing
shares of FBI 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 USB nor the Exchange Agent shall be liable to a holder
of FBI 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 USB and FBI to effect the Merger
are subject to the satisfaction of the following conditions prior
to the Effective Time:
(i) shareholder approval of FBI and USB 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
USB or FBI, 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) USB shall have received a letter, dated as of
the Effective Time, from Arthur Andersen LLP
to the effect that the Merger will qualify for
pooling-of-interests accounting treatment;
(vi) the Registration Statement shall have become
effective under the Securities Act, and no
stop order for that purpose shall have been
commenced by the Commission;
(vii) all necessary state securities permits and
consents shall have been received by USB; and
(viii) USB and Jack Wainwright shall have entered
into an employment agreement whereby Mr.
Wainwright agrees to serve as Chief Executive
Officer of USB for a period of at least three
years from the Effective Time.
The obligations of USB to effect the Merger are further
subject to the satisfaction or waiver of the following conditions:
(i) the representations and warranties of FBI in
the Merger Agreement shall be true as if made
at the Effective Time;
(ii) the agreements and covenants of FBI in the
Merger Agreement shall have been performed and
complied with by the Effective Time;
(iii) FBI shall have delivered to USB certain
certificates of its corporate officers
provided for in the Merger Agreement;
(iv) FBI shall have delivered to USB an opinion of
its counsel as provided in the Merger
Agreement;
(v) there shall have been no determination by the
Board of Directors of USB that a material
adverse event has occurred with respect to FBI
that renders consummation of the Merger
Agreement inadvisable;
(vi) USB shall have received from FBI's independent
accounting firm a satisfactory "comfort
letter"; and
(vii) USB shall have received an opinion from its
financial advisor that the Exchange Ratio is
fair to it and its shareholders.
The obligations of FBI to effect the Merger are further
subject to the satisfaction or waiver of the following conditions:
(i) the representations and warranties of USB in
the Merger Agreement shall be true as if made
at the Effective Time;
(ii) the agreements and covenants of USB in the
Merger Agreement shall have been performed and
complied with by the Effective Time;
(iii) USB shall have delivered to FBI certain
certificates of its corporate officers
provided for in the Merger Agreement;
(iv) USB shall have delivered to FBI an opinion of
its counsel as provided in the Merger
Agreement;
(v) there shall have been no determination by the
Board of Directors of FBI that a material
adverse event has occurred with respect to USB
that renders consummation of the Merger
Agreement inadvisable;
(vi) FBI shall have received from USB's independent
accounting firm a satisfactory "comfort
letter"; and
(vii) FBI shall have received an opinion from its
financial advisor that the Exchange Ratio is
fair to it and its shareholders.
Regulatory Approvals
The Merger is conditioned upon receipt of the necessary
regulatory approvals. On October 1, 1996, USB Bank and First Bank
filed an application with the Federal Deposit Insurance Corporation
("FDIC") pursuant to Section 18(c) of the Federal Deposit Insurance
Act. USB Bank and First Bank have also made the necessary filings
with the Alabama State Banking Department under the Alabama Banking
Code. An application to the Board of Governors of the Federal
Reserve System under Section 3 of the Bank Holding Company Act is
normally required when a merger involves bank holding companies
such as USB and FBI. On November 8, 1996, however, the Federal
Reserve Bank of Atlanta waived this filing requirement pursuant to
Section 225.12(d)(2) of Title 12 of the Code of Federal
Regulations. This regulation authorizes the Federal Reserve to
issue a waiver when the merging parties have filed an application
with another Federal supervisory agency, such as the FDIC, and
several other conditions have been met.
Pursuant to 12 U.S.C. Section1828(c)(4), the FDIC requested a
report on the competitive factors involved in the Merger from
several other Federal agencies, including the United States
Department of Justice (the "Justice Department"). On December 12,
1996, the Justice Department issued its report to the FDIC stating
its belief that the Merger will not have a significantly adverse
effect on competition and concurring in the consummation of the
Merger 15 days after the date of FDIC approval on the condition
that USB Bank complies with certain conditions required by the
Justice Department, including the divestiture of one branch.
Management of USB is of the opinion that the conditions imposed by
the Justice Department will not have a material effect on its
operations or properties. It is anticipated that the branch
divestiture will be consummated within 90 days of the Effective
Time.
On ____________, 1997, the FDIC approved the application filed
with respect to the Merger, and the Justice Department 15-day
waiting period expired on ____________, 1997. The necessary
approval from the Alabama State Banking Department was obtained on
_____________, 1997.
Conduct of Business Pending the Merger
The Merger Agreement requires that each of FBI and USB
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, FBI has agreed that, without the consent of USB, 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) modify, amend or terminate any material
contract, except in the ordinary course of
business and for fair consideration;
(iv) file any application to relocate or terminate
the operation of any of its banking offices or
any of its subsidiaries;
(v) 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;
(vi) 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, other
than regular dividends in an amount not in
excess of $.35 per share of FBI Common Stock
per quarter, declare or pay any dividend or
make any other distribution in respect of its
capital stock;
(vii) except as provided in the Merger Agreement or
the FBI Option 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 FBI
Common Stock or any other capital stock of FBI
or any subsidiary, or any options, warrants,
conversion or other rights to acquire any such
stock;
(viii) 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;
(ix) 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;
(x) grant any increase in compensation of benefits
of the employees or officers of FBI 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;
(xi) enter into any employment contract without an
unconditional right to terminate without
liability;
(xii) 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;
(xiii) 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;
(xiv) commence any litigation other than in
accordance with past practice, settle any
litigation involving any liability for
material or monetary damages or, except in the
ordinary course of business, modify, amend,
terminate, waive, release, compromise or
assign any material rights, contracts or
claims;
(xv) operate its business otherwise than in the
ordinary course, or in a manner not consistent
with safe and sound banking practices or
applicable law;
(xvi) fail to file timely any report required to be
filed with any regulatory authorities;
(xvii) intentionally take any action reasonably
expected to jeopardize or delay the receipt of
any regulatory approval required to consummate
the Merger;
(xviii) make any loan or advance in excess of $20,000,
in the aggregate, to any shareholder owning 2%
or more of the outstanding shares of FBI
Common Stock, director or officer of FBI or
any of its subsidiaries, or any of the members
of their immediate families, except on terms
substantially the same as those prevailing at
the time of such loan or advance for
comparable transactions with other persons
(except for loans or advances to Acceptance);
(xix) 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 FBI or any of
its subsidiaries or any of their immediate
families; or
(xxi) enter into any contract for services or
otherwise with any of the holders of 5% or
more of FBI Common Stock, or the directors,
officers or employees of FBI or any of its
subsidiaries or any members of their immediate
families.
USB has agreed that, without the consent of FBI, 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) modify, amend or terminate any material
contract, except in the ordinary course of
business and for fair consideration;
(iv) file any application to relocate or terminate
the operation of any of its banking offices or
any of its subsidiaries;
(v) 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;
(vi) 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, other
than regular dividends in an amount not in
excess of $.13 per share of USB Common Stock
per quarter, declare or pay any dividend or
make any other distribution in respect of its
capital stock;
(vii) except as provided in the Merger Agreement or
the USB Option 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 USB
Common Stock or any other capital stock of USB
or any subsidiary, or any options, warrants,
conversion or other rights to acquire any such
stock;
(viii) 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;
(ix) 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;
(x) grant any increase in compensation or benefits
to the employees or officers of USB 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;
(xi) enter into any employment contract without an
unconditional right to terminate without
liability;
(xii) 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 a
tax qualified status of any such plan;
(xiii) 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;
(xiv) commence any litigation other than in
accordance with past practice, settle any
litigation involving any liability for
material or monetary damages or, except in the
ordinary course of business, modify, amend,
terminate, waive, release, compromise or
assign any material rights, contracts or
claims;
(xv) operate its business otherwise than in the
ordinary course, or in a manner not consistent
with safe and sound banking practices or
applicable law;
(xvi) fail to file timely any report required to be
filed with any regulatory authorities;
(xvii) intentionally take any action reasonably
expected to jeopardize or delay the receipt of
any regulatory approval required to consummate
the Merger;
(xviii) make any loan or advance in excess of $20,000,
in the aggregate, to any shareholder owning 2%
or more of the outstanding shares of USB
common stock, director or officer of USB or
any of its subsidiaries, or any of the members
of their immediate families, except on terms
substantially the same as those prevailing at
the time of such loan or advance for
comparable transactions with other persons;
(xix) 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 USB or any of
its subsidiaries or any of their immediate
families; or
(xxi) enter into any contract for services or
otherwise with any of the holders of 5% or
more of USB Common Stock, or the directors,
officers or employees of FBI or any of its
subsidiaries or any members of their immediate
families.
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
Prior to the Effective Time, either USB or FBI 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 FBI
and USB.
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 in the event any required regulatory approval
is denied or not obtained or the shareholders of either USB or FBI
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 or (v)
in the event any of the conditions precedent to the Merger cannot
be satisfied or fulfilled by March 31, 1997.
In the event of the termination of the Merger Agreement, the
Merger Agreement shall become void and have no effect, except that
the confidentiality requirements shall survive such termination and
such termination will not relieve a breaching party from liability
for an uncured willful breach of the representation, warranty,
covenant or agreement giving rise to the termination.
Management and Operations After the Merger
The Merger Agreement provides that after the Effective Time,
the USB Board of Directors will consist of 20 directors, including
the ten incumbent directors of USB and the ten current directors of
FBI. However, one of the current directors of FBI has elected not
to serve on the Board of Directors after the Effective Time. See
"BUSINESS OF FBI--Certain Management Information."
The Merger Agreement further provides that, after the
Effective Time, Jack Wainwright shall be elected to serve as the
President and Chief Executive Officer of USB, Fred Huggins shall be
elected to serve as Chairman and Chief Executive Officer of
Acceptance, Jim Miller shall be elected to serve as the Chairman of
the Board of USB, Fred Huggins and Ray Sheffield shall be elected
to serve as Vice Chairmen of the Board of USB, Fred Huggins shall
be elected to serve as Chairman of the Board of USB Bank, and Don
Nichols and Hardie Kimbrough shall be elected to serve as Vice
Chairmen of the Board of USB Bank. All directors and officers will
serve in accordance with the Bylaws of USB after the Effective
Time.
All directors and officers of each of the subsidiaries of USB
as the Surviving Corporation will serve in accordance with the
terms of the Bylaws of each such subsidiary.
Interests of Certain Persons in the Merger
The directors of FBI and USB have been selected to serve as
directors of USB after the Effective Time. As set forth above
under "--Management and Operations After the Merger," certain
officers of USB, FBI and their subsidiaries have been selected to
serve as officers after the Effective Time. For a description of
the compensation received by officers of USB see "Incorporation of
Certain Documents by Reference." For a description of
compensation received by officers of FBI, see "Business of
FBI--Certain Management Information." The parties further
anticipate that, following consummation of the Merger, USB will
issue options for the purchase of USB Common Stock to officers of
USB and its subsidiaries as a part of the compensation of such
officers.
Certain of the directors and executive officers of FBI,
members of their families and certain of their associates own, or
have interests in, shares of USB Common Stock. As of December 18,
1996, they were as follows: Dan Barlow: 24 shares, John C. Gordon:
5,280 shares and Clarence Watters: 5,280 shares.
In the normal course of business, USB Bank makes loans to
directors and officers of USB, and First Bank makes loans to
directors and officers of FBI, respectively, 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 both USB and FBI, do not involve more than the normal
risk of collectibility. The amount of these loans by USB Bank to
USB directors and officers was 4.25% of shareholders' equity for
USB and the amount of loans by First Bank to FBI directors and
officers was 9.73% of shareholders' equity for FBI as of September
30, 1996.
A condition precedent to the obligations set forth in the
Merger Agreement is that Jack M. Wainwright, III, and USB shall
have entered into an employment agreement (the "Employment
Agreement") whereby Mr. Wainwright agrees, among other things, to
serve as Chief Executive Officer of USB for a period of not less
than three (3) years from the Effective Time. Prior to the
Effective Time, Mr. Wainwright and USB will enter into the
Employment Agreement, which provides, among other things, that Mr.
Wainwright will be employed for a period of three (3) years
commencing at the Effective Time as President and Chief Executive
Officer of USB and as President and Chief Executive Officer of USB
Bank. Mr. Wainwright will receive a base salary of
$_______________, with appropriate review annually based on
performance as determined by the USB and USB Bank Boards of
Directors. The Employment Agreement also provides that Mr.
Wainwright is entitled to receive severance compensation in an
amount equal to three times his average annual salary for the
period of the contract if he is terminated for any reason other
than his death or disability, his resignation, his conviction of a
crime of moral turpitude, or the expiration of the Employment
Agreement. Also, Mr. Wainwright will be entitled to such severance
compensation upon any reduction in the level or a change in nature
of his responsibility to USB or to USB Bank.
Certain Federal Income Tax Consequences
Neither USB nor FBI has requested or will receive an advance
ruling from the Internal Revenue Service as to the tax consequences
of the Merger. Maynard, Cooper & Gale, P.C., counsel for USB, and
Walston, Wells, Bains & Anderson, counsel for FBI, have delivered
opinions that, for federal income tax purposes, under current law,
assuming that the Merger will take place as described in the Merger
Agreement and that certain factual matters represented by USB and
FBI (including the representation that FBI shareholders will
maintain sufficient equity ownership interests in USB after the
Merger) are true and correct at the time of consummation of the
Merger, the Merger will constitute a reorganization within the
meaning of Section 368(a) of the Code and USB and FBI will each be
a party to the reorganization within the meaning of Section 368(b)
of the Code.
Assuming that the Merger will take place as described in the
Merger Agreement and that certain factual matters represented by
USB and FBI (including the representation that FBI shareholders
will maintain sufficient equity ownership interests in USB after
the Merger) are true and correct at the time of consummation of the
Merger, then, in the respective opinions of Walston, Wells, Bains
& Anderson, and Maynard, Cooper & Gale, P.C., the following will be
certain federal income tax consequences of the Merger: (i) no gain
or loss will be recognized by USB or FBI in the Merger; (ii)the
shareholders of FBI will recognize no gain or loss upon the
exchange of their FBI Common Stock solely for shares of USB Common
Stock; (iii)the basis of the USB Common Stock received by the FBI
shareholders in the proposed transaction will, in each instance, be
the same as the basis of the FBI Common Stock surrendered in
exchange therefor; (iv)the holding period of the USB Common Stock
received by the FBI shareholders will, in each instance, include
the period during which the FBI Common Stock surrendered in
exchange therefor was held, provided that the FBI Common Stock was
held as a capital asset on the date of the exchange; (v)the payment
of cash to FBI shareholders in lieu of fractional share interests
of USB 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 USB; 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);
and (vi)where solely cash is received by a USB or FBI shareholder
in exchange for his USB or FBI Common Stock pursuant to the
exercise of dissenters' rights, such cash will be treated as having
been received in redemption of his USB or FBI Common Stock, subject
to the provisions and limitations of Code Section 302.
THE DISCUSSION SET FORTH ABOVE IS INCLUDED FOR GENERAL
INFORMATION ONLY AND IS BASED UPON THE RESPECTIVE OPINIONS OF
WALSTON, WELLS, BAINS & ANDERSON, AND MAYNARD, COOPER & GALE, P.C.,
AND APPLIES ONLY TO FBI SHAREHOLDERS WHO HOLD FBI COMMON STOCK AS
A CAPITAL ASSET, AND MAY NOT APPLY TO SPECIAL SITUATIONS, SUCH AS
FBI SHAREHOLDERS, IF ANY, WHO RECEIVED THEIR FBI COMMON STOCK UPON
EXERCISE OF EMPLOYEE STOCK OPTIONS OR OTHERWISE AS COMPENSATION AND
FBI 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 USB COMMON
STOCK, INCLUDING ANY REDEMPTION OR TRANSFER OF USB 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 FBI 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
The Merger is expected to be accounted for as a
pooling-of-interests. The pooling-of-interests method accounts for
a business combination as the uniting of ownership interests of two
or more companies by exchange of equity securities. The recorded
assets and liabilities of USB and FBI will be carried forward to
the combined corporation at their recorded amounts. Income of the
combined corporation will include income of USB and FBI for the
entire fiscal period in which the combination occurs. The reported
income of USB and FBI for prior periods will be combined and
restated as income of the combined corporation. The unaudited pro
forma financial information contained in this Joint Proxy Statement
has been prepared using the pooling-of-interests method of
accounting. The Merger Agreement provides that a condition to
consummation of the Merger is receipt of a letter from Arthur
Andersen LLP, confirming that the Merger qualifies for
pooling-of-interests accounting treatment.
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 Agreement, including
filing, registration and application fees, printing and mailing
fees and expenses, and fees and expenses of their respective
accountants and counsel. It is expected that the total expenses
and fees for USB and FBI will be approximately $________ and
$________, respectively.
Resales of USB Common Stock
The shares of USB 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 FBI for purposes of Rule 145 under the
Securities Act as of the date of the Special Meetings or for
purposes of applicable interpretations regarding
pooling-of-interests accounting treatment. Affiliates may not sell
their shares of USB 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 USB and FBI after the Merger have been
published. USB may place restrictive legends on certificates
representing USB Common Stock issued to all persons who are deemed
"affiliates" of FBI under Rule 145. This Joint Proxy Statement
does not cover resales of USB Common Stock received by any person
who may be deemed to be an affiliate of FBI. There is no current
active, public market for USB Common Stock, and no assurance can be
given that one will develop or, if developed, will continue.
<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 USB and FBI giving effect
to the Merger, which will be accounted for as a
pooling-of-interests, as if it had been effective on September 30,
1996, after giving effect to the pro forma adjustments described in
the accompanying Notes to Pro Forma Condensed Combined Consolidated
Financial Information. 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 USB, which are incorporated by
reference in this Joint Proxy Statement, and of FBI, which appear
elsewhere in this Joint Proxy Statement, and with the condensed
consolidated historical and other pro forma financial information,
including the notes thereto, appearing elsewhere in this Joint
Proxy Statement. See "Available Information," "Incorporation of
Certain Documents by Reference," and Appendix D hereto. This pro
forma financial information is not necessarily indicative of the
actual financial position that would have occurred had the Merger
been consummated on September 30, 1996, nor is it necessarily
indicative of future financial position.
<TABLE>
Pro Forma Combined Condensed Consolidated Statement of Condition
As of September 30, 1996 (Unaudited)
(In Thousands)
<CAPTION>
HISTORICAL
PRO FORMA PRO FORMA
USB FBI ADJUSTMENTS COMBINED
<S> <C> <C> <C> <C>
ASSETS
Cash and cash equivalents $ 11,127 $ 6,282 $ 17,409
Investments available for sale 146,779 36,363 183,142
Investments 1,335 1,843 3,178
Loans, net 69,365 136,895 206,260
Premises and equipment 4,161 2,691 6,852
Other assets 6,595 8,805 15,400
Total assets 239,362 192,879 432,241
LIABILITIES
Deposits 182,354 162,163 344,517
Short-term borrowings 28,184 11,060 39,244
Other liabilities 2,397 1,562 3,959
Total liabilities 212,935 174,785 387,720
SHAREHOLDERS' EQUITY
Common stock 22 240 (226) (1) 36
Additional paid-capital 5,761 2,059 221 (1) 8,041
Net unrealized gain on securities
available for sale (555) (277) (832)
Retained earnings 21,453 16,077 37,530
Treasury stock (254) (5) 5 (1) (254)
Total shareholders' equity 26,427 18,094 44,521
Total liabilities and
shareholders' equity 239,362 192,879 432,241
<FN>
See Notes to Pro Forma Condensed Combined Consolidated Financial
Statements.
</FN>
</TABLE>
<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 USB and FBI 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
described in the accompanying Notes to Pro Forma Combined Condensed
Consolidated Financial Information. 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 USB, which
are incorporated by reference in this Joint Proxy Statement, and of
FBI, which appear elsewhere in the Joint Proxy Statement, and with
the condensed consolidated historical and other pro forma financial
information, including the notes thereto, appearing elsewhere in
this Joint Proxy Statement. See "Available Information,"
"Incorporation of Certain Documents by Reference," and Appendix D
hereto. 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.
<TABLE>
Pro Forma Combined Condensed Consolidated Statements of Income
(Unaudited)
(In Thousands Except Per Share Data)
<CAPTION>
Nine Months
Ended
September 30, Year Ended December 31,
1996 1995 1994 1993
<S> <C> <C> <C> <C>
Interest revenue $25,644 $30,571 $23,341 $21,001
Interest expense 11,214 13,298 9,095 8,363
Net interest revenue 14,430 17,273 14,246 12,638
Provision for loan losses 375 255 224 386
Non-interest revenue 2,110 2,555 2,250 3,179
Non-interest expense 8,678 10,898 10,351 8,389
Income before income taxes 7,487 8,675 5,921 7,042
Income taxes (2,057) (2,225) (1,368) (2,063)
Net income 5,430 6,450 4,553 4,979
Net income per common share 1.54 1.84 1.31 1.43
Average number of shares
outstanding (000's) 3,537 3,521 3,494 3,493
<FN>
See Notes to Pro Forma Combined Condensed Consolidated Financial
Statements.
</FN>
</TABLE>
<PAGE>
Notes to Pro Forma Combined Condensed Consolidated
Financial Statements (Unaudited)
(1) The pro forma combined condensed consolidated financial
statements assume the issuance of 1,398,788 shares of USB
Common Stock in the Merger for 100% of the FBI Common
Stock outstanding immediately prior to the Effective
Time.
(2) Average number of shares outstanding was computed by
applying the Exchange Ratio of 5.8321 to FBI's average
shares outstanding and adding the result to USB's
historical average shares outstanding. Average shares
outstanding do not include shares issuable upon the
exercise of stock options because the effect is not
significant.
(3) In connection with the Merger, USB and FBI may change
certain accounting practices and the classifications of
certain amounts to provide a consistent basis of
accounting for and reporting of the historical and
ongoing operations. The effect of these changes is not
expected to affect materially previously reported
amounts. No provision has been reflected in the
condensed combined consolidated financial statements for
expenses related to the Merger, which are not expected to
have a material impact on results of operations or
financial condition.
(4) Except as described in Notes (1) and (2) above, no pro
forma adjustments are reflected in the pro forma combined
condensed consolidated statements of income.
COMPARATIVE MARKET PRICES AND DIVIDENDS
Market Prices
USB. USB Common Stock is not traded on an exchange or any
organized trading market, but there have been private transactions
in the shares. The most recent reported trades in USB Common Stock
as to which management has any knowledge of the price paid in the
transaction occurred on November 22, 1996, at a price per share of
$15.50, for 428 shares, and on September 5, 1996, at a price per
share of $15.00, for 130 shares.
FBI. FBI Common Stock is not traded on an exchange or any
organized trading market, but there have been private transactions
in the shares. The most recent reported trades in FBI Common Stock
as to which management has any knowledge of the price paid in the
transaction occurred on November 1, 1996, at a price per share of
$77.08, for 960 shares, and on May 10, 1996, at a price per share
of $70.00, for 10 shares.
Dividends
USB declared quarterly cash dividends per share totaling $.42
in 1994 and $.44 in 1995. For 1996, USB declared quarterly cash
dividends per share totaling $.52 per share. For the years 1994
and 1995, FBI declared annual cash dividends per share on FBI
Common Stock of $.95 and $.85, respectively. In 1996 FBI declared
quarterly cash dividends totalling $1.24 per share. Future
dividends on shares of USB (assuming the Merger is consummated) or
of both USB and FBI (assuming the Merger is not consummated) will
depend on their respective earnings, financial condition and other
relevant factors, including governmental policies and regulations.
See "Supervision, Regulation and Effects of Governmental
Policy--Bank Regulation."
DESCRIPTION OF USB CAPITAL STOCK
USB's Certificate of Incorporation currently authorizes the
issuance of 2,400,000 shares of Common Stock, $0.01 par value. As
of the date of this Joint Proxy Statement, 2,137,960 shares of USB
Common Stock are issued and outstanding. Assuming consummation of
the Merger, the number of authorized shares of USB Common Stock
will be increased to 10,000,000. The capital stock of USB does not
represent or constitute a deposit account and is not insured by the
FDIC, the BIF, the Savings Association Insurance Fund or any
governmental agency.
All of the USB Common Stock outstanding is, and all USB Common
Stock to be issued in connection with the Merger will be, fully
paid and nonassessable. No USB Common Stock is subject to call.
USB Common Stock may be issued at such time or times and for
such consideration (not less than the par value thereof) as the USB
Board of Directors may deem advisable, subject to such limitations
as may be set forth in the law of the State of Alabama or in
regulations or orders applicable to USB and its subsidiary. USB
Bank is the Registrar and Transfer Agent for shares of USB Common
Stock.
Holders of USB Common Stock are entitled to receive, to the
extent permitted by law, such dividends as may be declared from
time to time by the USB Board of Directors. USB has the right to,
and may, from time to time, enter into borrowing arrangements or
issue debt instruments, the provisions of which may contain
restrictions on payment of dividends or other distributions on USB
Common Stock. As of the date of this Joint Proxy Statement, no
such restrictions are in effect.
In the event of the voluntary or involuntary liquidation,
dissolution, distribution of assets or winding up of USB, holders
of USB Common Stock will be entitled to receive all of the
remaining assets of USB of whatever kind available for distribution
to shareholders ratably in proportion to the number of shares of
USB Common Stock held. The USB Board of Directors may distribute
in kind to the holders of USB Common Stock such remaining assets of
USB or may sell, transfer or otherwise dispose of all or any part
of such remaining assets to any other person or entity and receive
payment therefor in cash, stock or obligations of such other person
or entity, and may sell all or any part of the consideration so
received and distribute any balance thereof in kind to holders of
USB Common Stock. Neither the merger or consolidation of USB into
or with any other corporation, nor the merger of any other
corporation into it, nor any purchase or redemption of shares of
stock of USB of any class, shall be deemed to be a dissolution,
liquidation or a winding-up of USB for purposes of this paragraph.
Because USB is a holding company, its rights and the rights of
its creditors and shareholders, including the holders of USB Common
Stock, to participate in the distribution of assets of a subsidiary
on its liquidation or recapitalization may be subject to prior
claims of such subsidiary's creditors, except to the extent that
USB itself may be a creditor having recognized claims against such
subsidiary.
Except as provided by law, each holder of USB Common Stock
shall have one vote on all matters voted upon by shareholders with
respect to each share of USB Common Stock held. Holders of USB
Common Stock do not have cumulative voting rights in the election
of directors.
Holders of USB Common Stock have heretofore been entitled to
preemptive rights with respect to USB Common Stock which may have
been issued. Under the terms of the Merger Agreement, USB's
Articles of Incorporation will be amended, if the Merger is
consummated, to deny preemptive rights to holders of USB Common
Stock. See "The Merger--Amendment of USB Articles of
Incorporation."
EFFECT OF MERGER ON RIGHTS OF SHAREHOLDERS
USB and FBI are Alabama corporations subject to the provisions
of the ABCA. Shareholders of FBI, whose rights are governed by
FBI's Articles of Incorporation and Bylaws and the ABCA, will, upon
consummation of the Merger, become shareholders of USB. The rights
of such shareholders as shareholders of USB will then be governed
by USB's Articles of Incorporation and Bylaws, and such rights will
continue to be governed by the ABCA.
Except as set forth below, there are no material differences
between the rights of an FBI shareholder under FBI's Articles of
Incorporation and Bylaws and the rights of a USB shareholder under
USB's Articles of Incorporation and Bylaws. The following summary
does not purport to be a complete discussion of, and is qualified
in its entirety by reference to, the ABCA and the Articles of
Incorporation and Bylaws of each corporation.
Authorized Capital Stock
USB's Articles of Incorporation authorize the issuance of up
to 2,400,000 shares of USB Common Stock ($0.01 par value each), of
which [2,137,960] shares of USB Common Stock were issued and
outstanding as of the USB Record Date. The Merger Agreement
provides that the Articles of Incorporation of USB will be amended
to increase to 10,000,000 the number of authorized shares of USB
Common Stock.
FBI's Articles of Incorporation authorize the issuance of up
to 500,000 shares of FBI Common Stock ($1.00 par value each), of
which [239,843] shares were issued and outstanding as of the FBI
Record Date.
Special Meetings of Shareholders
FBI's Bylaws provide that special meetings of shareholders may
be called for any purpose at any time by only (i) a majority of the
Board of Directors or (ii) a committee of the Board which has been
given such authority by the Board.
USB's Bylaws provide that special meetings of the shareholders
may be called at any time by the President, a majority of the Board
of Directors, or by the holders of at least ten percent of all
votes entitled to be cast on any issue proposed to be considered at
the meeting.
Required Shareholder Votes
USB's Articles of Incorporation and Bylaws contain no
provisions altering the provisions of the ABCA regarding
shareholder voting. Generally, the ABCA requires a majority vote
of the shares voting at a meeting where a quorum is present.
However, a majority of all shares entitled to vote is required to
amend the Articles of Incorporation in a manner giving rise to
dissenters' rights, and two-thirds of all shares entitled to vote
are generally required to approve a merger, or the sale of all or
substantially all of the Corporation's assets.
FBI's Articles of Incorporation provide that the vote of 75%
or more of the shares entitled to vote will be required to approve
any merger or consolidation of FBI with or into any other
corporation, or the sale or other disposition of a substantial part
of FBI's assets.
Director Liability
USB's Articles of Incorporation, as allowed by Alabama law,
provide that a director of USB will have no personal liability to
USB or its shareholders for monetary damages for breach of his or
her fiduciary duty as a director except (a) for any breach of the
director's duty of loyalty to the corporation or its shareholders,
(b) for acts or omissions not in good faith or that involve
intentional misconduct or a knowing violation of laws, (c) for the
payment of certain unlawful dividends in the making of certain
stock purchases or redemptions, or (d) for any transaction from
which the director derived an improper personal benefit. This
provision would absolve directors of personal liability for
negligence in the performance of duties, including gross
negligence. It would not permit a director to be exculpated,
however, for liability for actions involving conflicts of interest
or breaches of the traditional "duty of loyalty" to USB and its
shareholders, and it would not effect the availability of
injunctive or other equitable relief as a remedy. FBI's Articles
of Incorporation contain no such provisions.
Indemnification
USB's Articles of Incorporation provide that a director of USB
shall be indemnified against expenses, judgments, fines and
settlements in connection with litigation. Essentially, USB's
Articles of Incorporation provide that a director of USB must be
indemnified to the fullest extent permitted by Alabama law. FBI's
Articles of Incorporation contain no such provisions. However,
under Alabama law, indemnification is allowable and, in fact,
mandatory for any director who was successful in the defense of any
proceeding relating to such person's actions as a director.
Amendment of Articles of Incorporation
Under the ABCA, an Alabama corporation may amend its Articles
of Incorporation upon recommendation of the Board of Directors and
vote by a majority of the shareholders.
FBI's Articles of Incorporation provide that no merger,
consolidation, liquidation or dissolution of the corporation nor
any action that would result in the sale or other disposition of
all or substantially all the assets of FBI is valid unless first
approved by the affirmative vote of the holders of at least 75% of
the outstanding shares of common stock and that this requirement
may not be amended without approval by the holders of at least 75%
of the outstanding shares of FBI Common Stock.
Responses to Tender Offers
FBI's Articles of Incorporation provide that the Board of
Directors may oppose a tender offer and may consider the
acceptability of the price offered, whether a more favorable price
could be obtained, the impact of the acquisition upon the
employees, depositors and customers of FBI, the reputation and
business practices of the offeror, the value of securities which
the offer is offering, and any antitrust or other legal or
regulatory issues that exist. Moreover, the Board may reject the
offer and is allowed to advise shareholders not to accept the
offer, to engage in litigation against the offer, to file
complaints with regulatory authorities, to acquire the offeror's
securities, to acquire a company to create an antitrust or
regulatory problem for the offeror, or to solicit a more favorable
offer for another individual or entity. USB's Articles of
Incorporation contain no such provisions.
Preemptive Rights
The holders of FBI Common Stock have no preemptive rights to
acquire any additional shares of FBI Common Stock.
The holders of USB Common Stock have preemptive rights as
provided under the ABCA; however, the Merger Agreement provides
that USB's Articles of Incorporation will be amended to deny
preemptive rights to holders of USB Common Stock at the Effective
Time.
Proxy Requirements
USB's Bylaws require that any Proxy must be filed with the
secretary of the Corporation before or at the time of the meeting.
FBI's Bylaws contain no such requirement.
<PAGE>
FBI MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and financial information are
presented to aid in an understanding of the current financial
position and results of operations of FBI and should be read in
conjunction with the Audited Financial Statements and Notes thereto
included herein. FBI is the parent holding company of First Bank
and Acceptance, and owns 50% of the capital stock of FBS, and it
has no operations of consequence other than the ownership of its
subsidiaries. The emphasis of this discussion will be on the years
1995, 1994 and 1993.
At September 30, 1996, FBI had consolidated assets of
approximately $192.88 million and operated six banking locations in
Clarke and Bibb Counties, Alabama. FBI's primary business is
banking; therefore, loans and investments are the principal source
of income.
This discussion contains certain forward looking statements
with respect to the financial condition, results of operation and
business of FBI and First Bank related to, among other things:
(a) trends or uncertainties which will impact future
operating results, liquidity and capital resources, and
the relationship between those trends or uncertainties
and nonperforming loans and other loans;
(b) the effect of the market's perception of future inflation
and real returns and the monetary policies of the Federal
Reserve Board on short and long term interest rates; and
(c) the effect of interest rate changes on liquidity and
interest rate sensitivity management.
These forward looking statements involve certain risks and
uncertainties. Factors that may cause actual results to differ
materially from those contemplated by such forward looking
statements include, among others, the following possibilities:
(d) periods of lower interest rates accelerate the rate at
which the underlying obligations of mortgage-backed securities
and collateralized mortgage obligations are prepaid, thereby
affecting the yield on such securities held by First Bank;
(e) difficulty integrating the operations of USB and FBI; and
(f) general economic conditions, either nationally or in
Alabama, are less favorable than expected.
FINANCIAL CONDITION
Average Assets and Liabilities
From 1991 to 1994 FBI's average assets grew $27.05 million or
28.05%. From 1994 to 1995 average assets increased $47.95 million
or 38.82%.
During the period 1991 to 1995 average loans increased $65.49
million. At the close of business February 17, 1995, FBI purchased
from the Peoples Bank in Bibb County, Alabama, assets totaling
approximately $48.43 million and assumed deposit liabilities of
approximately $46.85 million. During the same period average
interest bearing deposits grew $55.77 million, while non-interest
bearing deposits increased by $8.93 million. FBI carried no
foreign loans or deposits in any period discussed.
Average Investment Securities increased by $1.28 million or
3.57% during the period 1991 to 1995. Loans and deposits increased
significantly during this same period because emphasis was placed
on growth in these areas. Average Investment Securities were
maintained at a constant level during this period to achieve loan
growth.
<TABLE>
Distribution of Average Assets, Liabilities and Shareholders' Equity
(In Thousands)
<CAPTION>
1995 1994 1993 1992 1991
Average Assets:
<S> <C> <C> <C> <C> <C>
Cash and non-interest bearing deposits $ 5,504 $ 2,972 $ 3,846 $ 2,646 $ 4,167
Interest bearing deposits 1,064 2,303 201 201 148
Federal funds sold 4,265 2,796 3,473 1,250 4,053
Investment securities 36,985 30,080 41,779 46,943 35,709
Loans, net(1) 113,550 78,511 65,070 56,098 48,058
Premises and equipment, net 2,061 1,763 1,797 1,541 1,143
Other assets 8,033 5,088 4,441 3,331 3,182
Average Total Assets $171,462 $123,513 $120,607 $112,010 $ 96,460
Average Liabilities and Shareholder's Equity:
Non-interest bearing demand deposits $ 18,032 $ 11,395 $ 10,387 $ 9,198 $ 9,106
Interest bearing demand deposits 37,631 31,290 28,746 26,262 21,090
Savings deposits 13,545 9,736 8,729 7,755 6,787
Time deposits 80,210 52,243 51,927 49,930 47,741
Total Deposits 149,418 104,664 99,789 93,145 84,724
Other liabilities 7,437 5,788 8,976 9,150 3,730
Shareholders' equity 14,607 13,061 11,842 9,715 8,006
Average Total Liabilities and
Shareholders' Equity $171,462 $123,513 $120,607 $112,010 $ 96,460
<FN>
(1) FBI carried no foreign loans or deposits in any of the
periods shown.
</FN>
</TABLE>
Loans
Net loans at December 31, 1995, were $126.11 million, an
increase from $81.74 million at December 31, 1994. Of the $44.37
million increase, $30.54 million is a direct result of the
acquisition of Peoples Bank described above. At December 31, 1995,
commercial, financial and agricultural loans represented 14.86% of
total loans, real estate-mortgage and construction loans
represented 64.36%, and consumer loans represented 20.33% of total
loans.
For asset and liability management purposes, the outstanding
loans in the categories of commercial, financial and agricultural,
real estate-construction and real estate-mortgage, $70.09 million
or 68.79% mature within one year or may be repriced within one year
due to a variable rate arrangement.
The table below shows the classification of loans by major
category at December 31, 1995 and 1994. The second table depicts
maturities of selected loan categories for loans maturing after one
year.
<TABLE>
Distribution of Loans by Category
(In Thousands)
<CAPTION>
December 31,
1995 1994
-------- --------
<S> <C> <C>
Commercial, financial and agricultural $ 18,984 $ 16,859
Real estate - construction 2,085 453
Real estate - mortgage 80,809 49,404
Consumer 25,920 16,155
-------- --------
Total Loans 127,798 82,871
Allowance for loan losses 1,689 1,132
-------- --------
Net Loans $126,109 $ 81,739
</TABLE>
<TABLE>
Selected Loans by Type and Maturity
(In Thousands)
<CAPTION>
December 31, 1995
-------------------------------------------------
Maturing
-------------------------------------------------
After One
Within But Within After
One Year Five Years Five Years Total
-------- ---------- ---------- --------
<S> <C> <C> <S> <C>
Commercial, financial and agricultural $ 13,858 $ 5,126 -0- $ 18,984
Real estate - construction 2,085 -0- -0- 2,085
Real estate - mortgage 54,142 25,051 1,616 80,809
Total 70,085 30,177 1,616 101,878
</TABLE>
FBI's rollover/renewal policy consists of a reevaluation of
maturing loans to determine whether such loans will be renewed (or
rolled over) and, if so, at what amount, rate and maturity.
Investment Securities
Statement of Financial Accounting Standards ("SFAS") No. 115,
Accounting for Certain Investments in Debt and Equity Securities,
requires that only debt securities as to which FBI has the positive
intent and ability to hold to maturity be classified as to be
held-to-maturity and reported at amortized cost; all other debt
securities are reported at fair value. SFAS No. 115 further
requires that unrealized gains and losses on securities classified
as trading account assets be recognized in current operations.
Securities not classified as to be held-to-maturity or trading are
classified as available-for-sale and the related unrealized gains
and losses are excluded from earnings and reported net of tax as a
separate component of shareholders' equity until realized. FBI
adopted SFAS No. 115 effective January 1, 1994, which resulted in
a $477,316 net unrealized loss at December 31, 1994, and a net
unrealized gain of $170,605 at December 31, 1995, which is shown as
a separate component of shareholders equity.
Investment securities not classified as available-for-sale or
trading are carried at cost, adjusted for amortization of premiums
and accretion of discounts. Premiums and discounts are amortized
and accreted to operations using the level yield method, adjusted
to prepayments as applicable. Management has the intent and FBI
has the ability to hold these assets as long-term investments until
their estimated maturities.
Securities within the available-for-sale portfolio may be used
as part of FBI's asset/liability strategy and may be sold in
response to changes in interest rate risk, prepayment risk or
similar economic factors. The specific identification method is
used to compute gains or losses on the sale of these assets.
The maturities and weighted average yields of investment
securities and securities held for sale at December31, 1995, are
presented in the following table using the average stated
contractual maturities. The average stated contractual maturities
may differ from the average expected life because borrowers may
have the right to call or prepay obligations. Taxable equivalent
adjustments, using a 34 percent tax rate, have been made when
calculating yields on tax-exempt obligations. For purposes of the
following table, securities available for sale are shown at
amortized cost.
<TABLE>
Maturity Distribution of Investment Securities
(Dollars in Thousands)
<CAPTION>
December 31, 1995 Maturity
---------------------------------------------------------------------------------------------
Within one Within five Within ten After ten
year years years years Total
--------------- --------------- --------------- --------------- ---------------
Amount Yield Amount Yield Amount Yield Amount Yield Amount Yield
------ ----- ------ ----- ------ ----- ------ ----- ------ -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Securities held to maturity:
Obligations of states and
political subdivisions $ 343 7.98% $ 309 7.70% $ -0- 0.00% $ 67 9.71% $ 719 8.02%
Total securities held to
maturity 343 7.98% 309 7.70% -0- 0.00% 67 9.71% 719 8.02%
Securities available for sale:
U.S. Treasury Securities 2,503 6.07% -0- 0.00% -0- 0.00% -0- 0.00% 2,503 6.07%
U.S. Government Agencies 251 7.41% 3,429 6.12% -0- 0.00% -0- 0.00% 3,680 6.21%
State and political
subdivisions 826 9.06% 2,978 9.89% 3,108 10.12% 5,273 9.78% 12,185 9.80%
Mortgage backed
securities -0- 0.00% 88 5.18% 398 8.58% 11,465 6.38% 11,951 6.44%
Other investments 1,096 6.32% -0- 0.00% -0- 0.00% -0- 0.00% 1,096 6.32%
Total securities available
for sale 4,676 6.73% 6,495 7.74% 3,506 9.95% 16,738 7.45% 31,415 7.69%
</TABLE>
<TABLE>
Investment Securities and Investment Securities Available for Sale
(Dollars in Thousands)
<CAPTION>
December 31,
---------------------------------------------
1995 1994
-------------------- --------------------
Amortized Market Amortized Market
Cost Value Cost Value
--------- ------ --------- ------
<S> <C> <C> <C> <C>
Investment securities held to maturity:
State and political subdivisions $ 719 $ 719 $ 268 $ 268
Investment securities available for sale:
U.S. Treasury Securities 2,503 2,507 997 997
U.S. Government Agencies 3,680 3,670 1,484 1,405
State and political subdivisions 12,185 12,803 11,707 11,324
Mortgage backed securities 11,951 11,697 10,312 10,112
Other investments 1,096 1,052 1,225 1,145
Total available for sale 31,415 31,729 25,725 24,983
</TABLE>
Trading Activity
FBI maintained a trading account from 1992 to 1995, during
which time there was very limited trading volume. Securities
carried in a trading account are carried at the lower of cost or
market value. Fluctuations in market value result in unrealized
gains and losses which are reflected as gains or losses on Trading
Securities on the Income Statement. The trading account produced
a loss of $13,198 in 1992, a gain of $57,313 in 1993, a loss of
$1,473,145 in 1994 and a gain of $280,303 in 1995. The unrealized
loss in 1994 was attributable to one security which was purchased
in 1993 and ultimately sold in 1995. This loss in 1994 was due to
the volatile interest rate environment during 1994 and was the
primary reason that First Bank experienced a much lower level of
net income in 1994 than in 1995 or 1993.
Deposits and Short-Term Borrowings
Between 1993 and 1995, FBI experienced growth in each category
of deposits as shown in the table below. Average non-interest
bearing demand deposits increase by $7.65 million or 73.6% from
1993 to 1995. Average interest bearing demand deposits increased
$8.89 million or 30.91%, average saving deposits increased $4.82
million, or 55.17%, and average time deposits increased $28.28
million or 54.5% during the same period. Much of the deposit
growth occurred from 1994 to 1995 and was primarily the result of
the acquisition of two offices of another bank purchased in Bibb
County with approximately $42.89 million in average deposits. If
the acquisition had not occurred, average deposits would have
increased by approximately $6.74 million, or 6.75% from 1993 to
1995.
FBI has maintained a stable base of non-interest bearing
demand deposits despite consumer trends toward interest bearing
deposits. In 1993, the average balance of non-interest bearing
demand deposits was 10.4% of total average deposits and by 1995
this ratio had increased to 12.1%.
<TABLE>
Average Deposits
(Dollars in Millions)
<CAPTION>
Average for the Year
----------------------------------------------------------------------
1995 1994 1993
--------------------- --------------------- ---------------------
Average Average Average Average Average Average
Amount Rate Amount Rate Amount Rate
Outstanding Paid Outstanding Paid Outstanding Paid
----------- ------- ----------- ------- ----------- -------
<S> <C> <C> <C> <C> <C> <C>
Non-interest bearing demand deposits $ 18,032 -- $ 11,395 -- $ 10,387 --
Interest bearing demand deposits 37,631 2.84% 31,290 2.85% 28,746 2.88%
Savings deposits 13,545 2.98% 9,736 2.97% 8,729 3.07%
Time deposits 80,210 5.47% 52,243 4.32% 51,927 4.42%
Total average deposits 149,418 3.92% 104,664 3.29% 99,789 3.40%
</TABLE>
The following table reflects maturities of time deposits of
$100,000 or more at December 31, 1995. Time deposits include both
certificates of deposit and time deposit open accounts. Deposits
of $21 million in this category represented 13.3% of total deposits
at year-end 1995. Management does not actively pursue these
deposits as a means to fund interest earning assets, and as a
result, rates paid on these deposits differ only by an average of
16 basis points from rates paid on smaller denomination
certificates of deposit.
<TABLE>
Maturities of Time Deposits of $100,000 or More
(In Millions)
<CAPTION>
At December 31, 1995
-------------------------------------------------
Under Over
3 3-6 3-12 12
Months Months Months Months Total
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
*9,170 2,662 4,331 4,848 21,011
<FN>
* Maturities under 3 months include $3.062 million in open time
deposits greater than $100,000.
</FN>
</TABLE>
Short Term Borrowings
At December 31, 1995, short term borrowings consisted of
securities sold under repurchase agreement of $39,565 and an
advance from the Federal Home Loan Bank of Atlanta of $438,596,
which is secured by Federal Home Loan Bank stock and a blanket
floating lien on certain first mortgage loans in First Bank's loan
portfolio. The interest rate is fixed at 6.40% and interest
payments are due monthly. Principal payments of $8,771.93 are due
quarterly. A $17 million line of credit is also available from the
Federal Home Loan Bank.
Long Term Debt
Long term debt consisted of a promissory note in the amount of
$3.38 million as of December 31, 1995. The interest rate on this
note floats with prime minus 10 basis points. Interest on the note
is due quarterly, and principal is to be repaid in annual
installments of $375,500. The debt originated in 1988 to finance
the acquisition of Jackson Bank and Trust and was refinanced in
1995 when an additional $2.7 million was borrowed to finance the
acquisition of the two Bibb County branches discussed previously.
Asset/Liability Management
Effective asset/liability management requires an analysis of
liquidity and interest rate risk factors. Decisions relating to
the structure of the balance sheet are made after management
considers the impact on current and future liquidity needs as well
as the effect on the interest rate sensitivity gap.
Liquidity
Liquidity represents the ability of a bank to meet loan
commitments as well as deposit withdrawals. Liquidity is derived
from both the asset side and liability side of the balance sheet.
On the asset side, liquidity is provided by marketable securities
available for sale, maturing loans, federal funds sold and cash and
cash equivalents. On the liability side, liquidity is provided by
a stable base of core deposits. In addition to the lines of credit
described above under Short Term Borrowings, FBI has a federal
funds line of credit with other correspondent banks totalling $12
million.
Interest Rate Sensitivity
By monitoring FBI's interest rate sensitivity, management
attempts to maintain a desired balance between the growth of net
interest revenue and the risks that might result from significant
changes in interest rates in the market. One tool for measurement
of this risk is gap analysis, whereby the repricing of assets and
liabilities are matched across certain time frames. The interest
sensitivity analysis presented in the table below is based on this
type of gap analysis, which assumes that rates earned on interest
earning assets and rates paid on interest bearing liabilities will
move simultaneously in the same direction and to the same extent.
However, the rates associated with these assets and liabilities
actually change at different times and in varying amounts.
Management must consider various interest rate scenarios in order
to make the decisions which will maximize net interest revenue and
maintain the desired range of interest rate risk.
The Interest Sensitivity Analysis table below shows a
cumulative one year net asset sensitive position of $9.58 million
at December 31, 1995. This positive gap position implies that in
a rising rate environment FBI would experience a widening of its
net interest revenue as interest rates paid on liabilities would
increase slower than rates earned on interest earning assets.
Conversely, the table would indicate that in a falling rate
environment, FBI would experience a narrowing of the net interest
margin. However, included in the $56.11 million of rate sensitive
liabilities are $17.60 million in savings, NOW and money market
accounts which, in management's opinion and based on experience,
would not reprice in the same proportions as rate sensitive assets.
For example, in the event that interest rates in the economy rise
substantially over a short period of time, management would not
expect a corresponding increase in rates paid on savings deposits.
Thus, the impact of the positive gap on FBI's net interest margin
would be greater than the table might indicate.
<TABLE>
Interest Rate Sensitivity Analysis
<CAPTION>
At December 31, 1995
------------------------------------------------------------------
(In Thousands of Dollars)
Over 5 Years
& Non Rate
0-3 months 4-12 months 1-5 years Sensitive Total
---------- ----------- --------- ----------- --------
Earning Assets
<S> <C> <C> <C> <C> <C>
Loans $46,336 $37,158 $43,256 $ 1,048 $127,798
Less reserve for loan loss -0- -0- -0- 1,689 1,689
Net loans 46,336 37,158 43,256 (641) 126,109
Investment securities
available for sale 10,948 3,091 5,118 12,572 31,729
Investment securities
held to maturity 17 65 158 479 719
Interest bearing due from banks 93 -0- -0- -0- 93
Federal funds sold 1,640 -0- -0- -0- 1,640
Other interest bearing assets -0- 1,213 -0- -0- 1,213
Total earning assets 59,034 41,527 48,532 12,410 161,503
Interest Bearing Liabilities
Now & savings accounts -0- 14,230 33,190 -0- 47,510
Money market 1,139 3,378 2,222 -0- 6,739
Certificates of deposit 27,243 38,416 16,503 -0- 82,162
Other time deposits 3,062 -0- -0- -0- 3,062
Total interest earning deposits 31,444 56,114 51,915 -0- 139,473
Borrowings 3,420 -0- -0- 654 4,074
Total interest bearing liabilities 34,864 56,114 51,915 654 143,547
Interest Sensitive Gap 24,170 (14,587) (3,383) 11,756 -0-
Cumulative Interest-Sensitive Gap 24,170 9,583 6,200 17,956 -0-
</TABLE>
Capital Resources
Shareholders' equity increased $689,140 from December 31,
1993, to December 31, 1994. At year-end 1995 shareholder's equity
increased to $16.56 million from $12.88 million at year-end 1994.
The Federal Reserve and the FDIC require that bank holding
companies and banks have a minimum of Tier I capital equal to not
less than 4% of risk adjusted assets and total capital equal to not
less than 8% of risk adjusted assets. Tier I capital consists of
common shareholders' equity. Tier II capital includes reserves for
loan losses up to 1.25% of risk adjusted assets. Tier I capital
was $12.49 million at December 31, 1995, and total (Tier I plus
Tier II) capital was $14.06 million at December 31, 1995. Tier I
and total capital ratios were 9.90% and 11.55%, respectively at
December 31, 1995. Both ratios were above the regulatory minimums.
<TABLE>
Risk-Based Capital
(Dollars in Thousands)
<CAPTION>
December 31,
-----------------------------------
1995 1994 1993
-------- -------- ---------
Tier I capital--
<S> <C> <C> <C>
Realized common shareholders' equity $ 12,485 $ 11,965 $ 10,777
Tier II capital--
Allowable portion of the allowance for
loan losses 1,577 1,067 1,010
Risk-adjusted assets 126,135 85,507 80,774
Average assets 179,659 121,174 119,973
Risk-adjusted capital ratios:
Tier I capital 9.90% 13.99% 13.34%
Total capital (Tier I and Tier II) 11.55% 15.24% 14.59%
Minimum risk-based capital guidelines
Tier I capital 4.00% 4.00% 4.00%
Total capital (Tier I and Tier II) 8.00% 8.00% 8.00%
Tier I leverage ratio 6.95% 9.87% 8.98%
</TABLE>
RESULTS OF OPERATIONS
Net Interest Revenue
Net interest revenue, the difference between the rates earned
on assets and the rates paid on liabilities, is the largest
component of a bank's earnings. Net interest income increased by
$2.47 million, or 43.75%, in 1995 compared to a 10.03% increase in
1994. Volume, rate and yield changes contributed to the growth in
net interest income. Average interest-earning assets increased by
$42.72 million, or 37.21%, in 1995. This increase in
interest-earning assets is partly offset by the volume increase of
$39.4 million, or 39.95%, in average interest-bearing liabilities.
Average interest-earning assets outgained average interest-bearing
liabilities by $3.3 million. Most of the volume increase is the
result of the acquisition of two banking offices in Bibb County.
While the average volume of the interest-bearing liabilities
increased 39.94% in 1995, the average rate of interest paid
increased from 3.73% in 1994 to 4.56% in 1995, an increase of 83
basis points. Average interest-earning assets increased 37.21% in
1995, while the average yield increased from 8.12% in 1994 to 9.15%
in 1995, an increase of 103 basis points. Net yield on average
interest-earning assets, however, increased only 15 basis points.
The percentage of earning assets funded by interest-bearing
liabilities also affects FBI's net interest revenue. FBI's earning
assets are funded by interest-bearing liabilities, non
interest-bearing demand deposits and shareholders' equity. The net
return on earning assets funded by non interest-bearing demand
deposits and shareholders equity exceeds the net return on earning
assets funded by interest bearing liabilities. FBI maintains a
relatively consistent percentage of earning assets that are funded
by non interest-bearing liabilities. In 1995, 11.94% of FBI's
average earning assets were funded by non interest-bearing
liabilities as opposed to 10.28% in 1994 and 10.32% in 1993. The
earning assets funded by non interest-bearing liabilities had a
positive impact on the net interest income.
Presented below is an analysis of net interest income,
weighted average yields on earning assets and weighted average
rates paid on interest-bearing liabilities for the past three
years. In order to facilitate comparisons, federally tax-exempt
interest on obligations of state and local governments and on
industrial revenue bonds has been reflected on a fully taxable
equivalent basis, assuming a tax rate of 34%.
<TABLE>
Net Interest Revenue
(Dollars in Thousands)
<CAPTION>
1995 1994 1993
--------------------------------- --------------------------------- --------------------------------
Average Average Interest Average Average Interest Average Average Interest
Amount Rate/ Earned/ Amount Rate/ Earned/ Amount Rate/ Earned/
Outstanding Yield Paid Outstanding Yield Paid Outstanding Yield Paid
----------- ------- -------- ----------- ------- -------- ----------- ------- --------
Interest earning assets
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Taxable securities $ 23,355 6.75% $ 1,576 $ 16,402 6.41% $1,052 $ 27,924 6.30% $1,758
Non-taxable securities 13,630 5.99% 817 13,678 5.74% 785 13,855 6.19% 858
-------- ------- -------- ------ -------- ------
Total securities 36,985 6.47% 2,393 30,080 6.11% 1,837 41,779 6.26% 2,616
Loans(1) 115,190 10.15% 11,692 79,608 9.12% 7,261 65,987 9.27% 6,120
Cash balances in other
banks 1,064 5.92% 63 2,303 4.60% 106 201 9.45% 19
Federal funds sold 4,265 6.00% 256 2,796 3.97% 111 3,473 2.65% 92
-------- ------- -------- ------ -------- ------
Total interest earning
assets 157,504 9.15% 14,404 114,787 8.12% 9,315 111,440 7.94% 8,847
Non-interest earning
assets:
Cash and due from banks 5,504 2,972 3,846
Premises and equipment,
net 2,061 1,763 1,797
Other assets 8,033 5,088 4,441
Allowance for possible
loan losses (1,640) (1,097) (917)
-------- -------- --------
Total $171,462 $123,513 $120,607
-------- -------- --------
-------- -------- --------
Interest bearing liabilities
Interest bearing demand
and savings deposits $ 51,176 2.88% 1,473 $ 41,026 2.88% 1,181 $ 37,475 2.93% 1,098
Time deposits 80,210 5.47% 4,389 52,243 4.32% 2,259 51,927 4.42% 2,297
-------- ------- -------- ------ -------- ------
131,386 4.46% 5,862 93,269 3.69% 3,440 89,402 3.80% 3,395
Other short-term
borrowings 2,871 4.63% 133 3,274 3.85% 126 5,579 3.71% 207
Long-term debt 3,790 7.94% 301 2,104 5.18% 109 2,281 5.22% 119
-------- ------- -------- ------ -------- ------
Total interest bearing
liabilities 138,047 4.56% 6,296 98,647 3.73% 3,675 97,262 3.83% 3,721
Non-interest bearing
liabilities
Demand deposits 18,032 11,395 10,387
Other 776 410 1,116
-------- -------- --------
Total non-interest
bearing liabilities 18,808 11,805 11,503
Shareholders' equity 14,607 13,061 11,842
-------- -------- --------
Total $171,462 $123,513 $120,607
-------- -------- --------
-------- -------- --------
Net Interest Revenue 5.15% 8,108 4.91% 5,640 4.60% 5,126
---- ---- ----
---- ---- ----
Net yield on interest earning assets
Tax equivalent adjustment 421 404 442
------ ------ ------
Net yield on interest earning assets
(tax equivalent) 5.42% $8,529 5.27% $6,044 5.00% $5,568
---- ------ ---- ------ ---- ------
---- ------ ---- ------ ---- ------
<FN>
(1) Loans classified as non-accruing are included in the average
volume classification. Loan fees for all years shown are
included in the interest amounts for loans.
</FN>
</TABLE>
<TABLE>
Analysis of Interest Increases (Decreases)
(In Thousands)
<CAPTION>
1995 Compared to 1994 1994 Compared to 1993
-------------------------- --------------------------
Increase(Decrease) Increase(Decrease)
Due to Change in (1) Due to Change in (1)
-------------------------- --------------------------
Average Average
Volume Rate Net Volume Rate Net
------ ------- ------ ------ ------- ------
Interest Earned On:
<S> <C> <C> <C> <C> <C> <C>
Loans $3,537 $ 894 $4,431 $1,296 $(155) $1,141
Taxable investments 466 58 524 (737) 31 (706)
Non-taxable investments (3) 35 32 (11) (62) (73)
Federal funds and cash balances
in other banks 10 92 102 52 54 106
Total Interest -- Earning Assets 4,010 1,079 5,089 600 (132) 468
Interest Expense On:
Demand and savings deposits 292 -0- 292 102 (19) 83
Time deposits 1,422 708 2,130 14 (52) (38)
Other liabilities 65 134 199 (107) 16 (91)
Total Interest -- Bearing Liabilities 1,779 842 2,621 9 (55) (46)
Interest in Net Interest Income 2,231 237 2,468 591 (77) 514
<FN>
(1) The change in interest due to both rate and volume has been
allocated to volume and rate changes in proportion to the
relationship of the absolute dollar amount of the change in each.
</FN>
</TABLE>
Provision and Allowance for Loan Losses
Throughout the year 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, 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 FBI's control.
While it is possible that in particular periods FBI may
sustain losses which are substantial relative to the allowance for
loan losses, it is the judgment of 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.
The table below sets forth certain information with respect to
FBI's average loans, allowance for loan losses, charge-offs and
recoveries for the five years ended December 31, 1995.
<TABLE>
Summary of Loan Loss Experience
(Dollars in Thousands)
<CAPTION>
Year Ended December 31,
----------------------------------------------------------
1995 1994 1993 1992 1991
----------- ------- ------- ------- -------
Allowance for loan losses-
<S> <C> <C> <C> <C> <C>
balance at beginning of period $ 1,707(1) $ 1,042 $ 826 $ 680 $ 536
Charge-offs:
Commercial, financial and agricultural 149 -0- 40 22 -0-
Real estate - construction -0- -0- -0- -0- -0-
Real estate - mortgage 6 5 46 6 20
Consumer 154 119 97 70 68
Total charge-offs 309 124 183 98 88
Recoveries:
Commercial, financial and agricultural 2 -0- 33 4 7
Real estate - construction -0- -0- -0- -0- -0-
Real estate - mortgage 5 -0- -0- 1 3
Consumer 29 19 31 28 24
Total recoveries 36 19 64 33 34
Net charge-offs (recoveries) 273 105 119 65 54
Addition to allowance charged to
operating expense 255 195 335 211 198
Allowance for loan losses-
balance at end of period 1,689 1,132 1,042 826 680
Loans at end of period, net of
unearned income 127,797 82,870 75,475 59,930 53,767
Ratio of ending allowance to ending loans 1.32% 1.37% 1.38% 1.38% 1.26%
Average loans, net of unearned income 115,190 79,608 65,987 56,845 48,666
Ratio of net charge-offs to average loans .24% .13% .18% .11% .11%
<FN>
(1) $575,000 allowance for loan losses acquired in branch
acquisitions.
</FN>
</TABLE>
At year-end 1995 the allowance was $1.69 million as compared
to $1.13 million at year-end 1994 and $1.04 million at year-end
1993. The allowance at year-end 1995 to ending loans was 1.32%,
and this ratio has been consistent from year to year since 1991.
The allowance was considered adequate at December 31, 1995.
FBI experienced net charge-offs of $118,592 in 1993, $105,416
in 1994, and $273,440 in 1995. Management currently anticipates
that 1996 total charge-offs for all categories, as a percent of
average loans in these categories, will be slightly higher than
1995. Management also anticipates that recoveries in the consumer
category will be approximately $46,000 higher than in 1995. The
ratio of net charge-offs to average loans for 1996 is estimated to
be .35% compared to .24% for 1995.
NON-PERFORMING ASSETS
Non-performing assets are loans on a non-accrual basis,
accruing loans 90 days or more past due, renegotiated loans and
other real-estate owned. FBI's accruing loans 90 days or more past
due from the years 1993, 1994 and 1995 were approximately $263,000,
$533,000 and $1.24 million, respectively. Three large lines of
credit totalling $901,453 accounted for 73% of the $1.24 million
delinquent at year-end 1995. All have been collected or brought
current except for one loan in the amount of $544,986. Non-accrual
loans totalled approximately $454,000 in 1993, $301,000 in 1994 and
none in 1995, while Other Real Estate was none in 1993, $374,226 in
1994, and $63,182 in 1995. Total non-performing assets increased
to $1.32 million in 1995 from $1.21 million in 1994, for a total
increase of $110,000.
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.
FBI has identified loans totalling approximately $1.60 million
or 1.24% of the loan portfolio at December 31, 1995 through the
Bank's internal loan evaluation program in which some concerns
exists about the borrowers ability to comply with present repayment
terms. These loans are not included as non-performing assets and
are categorized as "watch" for internal evaluation purposes only.
These credits, however, were considered in determining the adequacy
of the allowance for possible loan losses and, while current, are
regularly monitored for changes with a particular industry or
general economic trends which could cause the borrowers severe
financial difficulties. Management does not expect a significant
loss in any of these loans.
Non-Interest Revenue
Total non-interest revenue grew 53.72% from 1993 to 1995.
Increases in service charges account for some of this increase;
however, the acquisition of the Bibb County branches is responsible
for most of the increase from 1994 to 1995.
<TABLE>
(In Thousands)
<CAPTION>
Year Ended December 31,
--------------------------
1995 1994 1993
------ ------ ----
<S> <C> <C> <C>
Service charges on deposit accounts $ 922 $ 608 $617
Other revenue 523 601 323
------ ------ ----
Total $1,445 $1,209 $940
</TABLE>
Non-Interest Expense
Total non-interest expense increased $2.42 million, or 74.32%,
from 1993 to 1995. Salary and employee benefits grew $983,000, or
56.72%, for the period 1993 to 1995. The increase occurred in 1995
due to the previously discussed acquisition of the Bibb County
branches. The increase in other non-interest expense from 1993 to
1994 of $1.93 million was the result of a $1.47 million unrealized
loss in the trading account. Other non-interest expense decreased
$577,000 from 1994 to 1995; however, it shows an increase of $1.35
million over 1993. Included in 1995 is $315,500 paid to settle all
pending lawsuits. This amount includes related attorneys' fees.
The other increase is due to the purchase of the two Bibb County
branches, amortization of goodwill in the amount of $158,960, and
amortization of acquisition costs of $40,473.
<TABLE>
(In Thousands)
<CAPTION>
Year Ended December 31,
----------------------------
1995 1994 1993
------ ------ ------
<S> <C> <C> <C>
Salaries $2,142 $1,326 $1,365
Pension and other employee benefits 574 327 368
Net occupancy expenses 259 239 212
Furniture and equipment expenses 267 224 228
Other expenses 2,427 3,004 1,079
------ ------ ------
Total $5,669 $5,120 $3,252
</TABLE>
Income Taxes, Inflation and Other Issues
Income tax expense was $793,364 in 1995 compared to $206,591
and $689,647 respectively in 1994 and 1993. Income tax expense was
significantly lower in 1994 due primarily to the previously
discussed loss in the trading account.
Because FBI's assets and liabilities are essentially monetary
in nature, the effect of inflation on FBI's assets differs greatly
from that of most commercial and industrial companies. Inflation
can have an impact on the growth of total assets in the banking
industry and the resulting need to increase capital at higher than
normal rates in order to maintain an appropriate equity to assets
ratio. Inflation also can have a significant effect on other
expenses, which tend to rise during periods of general inflation.
Management believes, however, that FBI's financial results are
influenced more by its ability to react to changes in interest
rates than by inflation.
Except as discussed in this Management's Discussion and
Analysis, management is not aware of 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 they were implemented, would have
such an effect.
FBI FIRST NINE MONTHS 1996
Comparing the nine months ended September 30, 1996, to the nine
months ended September 30, 1995.
Net income increased $237,000, or 11.91%, increasing net
income per share to 9.28 from 8.40. The improvement is due
primarily to increased net interest income. Net interest income
increased $1,124,000, or 19.25%, compared to the first nine months
of 1995.
Total interest income increased $1,804,000, or 17.34%,
compared to the first nine months of 1995. This increase is due to
the growth in loans. Total interest-earning assets increased by
$4,624,000, or 2.74%, while interest-bearing liabilities increased
$6,144,000, or 4.13%, compared to the first nine months of 1995.
Borrowed funds increased $2,683,000 compared to the September 1995
volume.
Total interest expense increased $680,000, or 14.90%, in the
first nine months of 1996 compared to the same period in 1995.
Interest expense on deposits grew $556,000, or 13.02%, due to
growth in the volume of interest-bearing deposits. The increase in
borrowed funds of $2,683,000 accounted for the remainder of the
increase in interest expense, $240,000 in 1995 compared to $397,000
in 1996.
Total net non-interest expense (non-interest expense less
non-interest income) increased $700,000, or 24.73%. Non-interest
expense increased $672,000, or 17.17%. Salary and employee
benefits increased $547,000. A significant portion of this
increase in employee costs is associated with employees of
Acceptance; fifteen employees have been added to staff the six
offices of Acceptance. The other increase in employee cost is the
result of increased cost of health insurance, cost of living
increases, and the addition of several new employees. Non-interest
income increased only $14,000 compared to September 1995 levels.
Service charges and other fees increased $270,000, or 36.05%, due
primarily to increases in volumes. Other non-interest income
decreased $256,000, or 65.31%, due to the decrease in gains on
trading accounts which declined from $280,000 in 1995 to none in
1996.
Net-operating income (income excluding taxes and securities
transactions) increased $283,000, or 9.95%, at the end of September
1996 compared to the same period in 1995, due primarily to
increased net interest income.
Comparing the Nine Months Ended September 30, 1996, to the Year
Ended December 31, 1995.
Total assets increased $13,227,000, or 7.36%, to $192,879,000.
Net loans increased $10,708,000, or 8.38%, to $138,505,000, while
investment securities increased $4,094,000, or 12.62%, to
$36,541,000. See the discussion of Acceptance below for its impact
on loan growth for the period. Deposits increased by $4,297,000,
or 2.72%, to $162,163,000 in the first nine months of 1996.
Other borrowings increased $6,897,000, or 171.54%, for a total
of $11,060,000 at September 30, 1996. Federal Funds Purchased
increased $2,220,000 and Federal Home Loan Bank Advances increased
$4,973,000 to $5,411,000. Principal amount of $5,000,000 at a rate
of 5.51% matures February 22, 1999. These funds were used to fund
the purchase of Tax Free Municipal Securities. There was no change
in Long Term Debt, which was used to finance the acquisition of
Jackson Bank and Trust in 1988 and the acquisition of the two Bibb
County branches in 1995.
Undivided Profits increased $1,975,000, or 14.01%, and net
unrealized gain on available for sale securities experienced a
$447,000 decrease in the first nine months of 1996, which resulted
in a stockholders' equity increase of $1,528,000, or 9.22%, to
$18,094,000. Net unrealized gain on available for sale securities,
which is mandated by FAS 115, was $170,000 at December 31, 1995.
At September 30, 1996, it was a $277,000 loss.
Acceptance Loan Company
Acceptance Loan Company, a wholly-owned subsidiary of First
Bank, was organized in 1995 to make consumer loans. At December
31, 1995, three offices were in operation: Thomasville, Monroeville
and Jackson. The impact of Acceptance Loan Company on FBI was not
discussed at year-end December 31, 1995, due to the immaterial
effect its results of operations had on FBI in 1995. At the
present time, three additional offices have been opened:
Centreville, Greenville and Enterprise. The results of operations
of Acceptance during the first nine months of 1996 has not had a
material effect on the results of operations of FBI. However,
Acceptance has generated approximately $6.68 million of loans
during the first nine months of 1996, from $1.9 million at
December31, 1995 to $8.58 million at September 30, 1996. As a
result of this increase in loans, FBI's loan loss reserve has
increased by $113,460.
Loan Loss Experience and Non-Performing Assets
The allowance for loan losses at September 30, 1995, and at
September 30, 1996, was, in management's opinion, adequate.
Additions to the allowance through the provision are made after an
analysis of the portfolio considering past experience, size of the
portfolio and current economic conditions. A summary of the
activity in the allowance for loan losses for the nine month
periods ending September 30, 1996, and September 30, 1995, are
presented below:
<TABLE>
Summary of Loan Loss Experience
(In Thousands)
<CAPTION>
Nine Months Ended
September 30,
-----------------
1996 1995
------ ------
Allowance for loan losses-
<S> <C> <C>
balance at beginning of period $1,689 $1,707(1)
Total charge-offs 417 284
Total recoveries 77 24
Addition to allowance charged to
operating expense 351 178
------ ------
Allowance for loan losses-
balance at end of period 1,700 1,625
<FN>
(1) $575,000 loan loss allowance acquired in branch acquisition
February 17, 1995.
</FN>
</TABLE>
BUSINESS OF FBI
FBI is a bank holding company registered under the BHCA.
Through its bank subsidiary, First Bank, FBI provides community
banking services in Southwest Alabama. At September 30, 1996, FBI
had total consolidated assets of approximately $192.88 million,
total consolidated deposits of approximately $162.16 million, and
total consolidated shareholders' equity of approximately $18.09
million.
Bank Activities
First Bank's business consists of: (i) the acceptance of
demand, savings and other time deposits; (ii) the making of loans
to individuals, businesses and institutions; (iii) investment of
excess funds in U.S. Treasury and agency obligations and state,
county and municipal bonds and through the sale of Federal funds;
and (iv) other miscellaneous financial services usually handled for
customers by commercial banks. FBI offers, through First Bank,
commercial lending services, including lines of credit, revolving
credits, term loans, real estate loans and other forms of secured
financing. First Bank also offers installment and other personal
loans, home improvement loans, automobile loans, boat loans and
other consumer financing, safe deposit services and mortgage loans.
FBI extends credit to its customers located primarily within its
market area of Clarke and Bibb Counties, Alabama. Although real
estate is taken as collateral on the majority of the loans in its
portfolio, real estate is generally a secondary source of repayment
after the credit worthiness of the borrower. See "FBI's Management
Discussion and Analysis" for a more complete discussion of FBI's
business.
Certain Management Information
Under the rules established by the Commission, FBI is required
to provide certain information in regard to each director and
executive officer who is or will be a director or executive officer
of USB after consummation of the Merger. Nine of the ten directors
of FBI will become directors of USB upon consummation of the
Merger. The following paragraphs set forth information about each
such director, including the capacities in which each will serve
after the Merger.
Mr. Dan Barlow, age 55, is a director of FBI and is Clarke
County President of First Bank. Mr. Barlow was first employed by
First Bank in 1969, and became a director of FBI in 1972. He will
serve as a director of USB after the Merger.
Mr. John Becton, age 73, is a director of FBI and a former
President and Chief Executive Officer of First Bank. Mr. Becton
joined First Bank in 1966, and retired in 1989. He will serve as
a director of USB after the Merger.
Ms. Linda Breedlove, age 53, is a director of FBI and joint
owner and co-publisher of The South Alabamian, a weekly newspaper
headquartered in Jackson, Alabama. She will serve as a director of
USB after the Merger.
Mr. John C. Gordon, age 39, is a director of FBI and a
businessman engaged in the forestry, timberland and investments
business. He will serve as a director of USB after the Merger.
Mr. Fred L. Huggins, age 61, is a director of FBI, is Chairman
of the Board and Chief Executive Officer of First Bank, and is
retired Judge of Probate, Clarke County, Alabama. He will serve as
a director and Vice Chairman of the Board of USB, Chairman of the
Board of USB Bank, and Chairman and Chief Executive Officer of
Acceptance after the Merger.
Mr. Ray Sheffield, age 58, is a director of FBI and is
President of Deas Insurance, an insurance agency headquartered in
Grove Hill, Alabama, and is a retired Sheriff of Clarke County,
Alabama. He will serve as a director and as Vice Chairman of the
Board of USB after the Merger.
Mr. Clarence Watters, age 65, is a director of FBI and is the
Judge of Probate of Clarke County, Alabama. He will serve as a
director of USB after the Merger.
Mr. Bruce Wilson, age 42, is a director of FBI and an attorney
practicing in Grove Hill, Alabama. He will serve as a director of
USB after the Merger.
Mr. Earnest Woodson, age 68, is a director of FBI and a
retired partner in Woodson Furniture Company, located in Jackson,
Alabama. He will serve as a director of USB after the Merger.
The table below sets forth a summary of the compensation paid
or accrued during 1996 with regard to FBI's current chief executive
officer. No executive officer of FBI who will continue as an
executive officer of USB after the Merger was paid annual salary
and bonuses of as much as $100,000 for any of the last three fiscal
years.
<TABLE>
SUMMARY COMPENSATION TABLE
Annual Compensation
<CAPTION>
Name and Principal Position Year Salary Bonus All Other Compensation ($)(1)
<S> <C> <C> <C> <C>
Fred L. Huggins, Chairman 1996 $76,539 $12,429 $8,735
and Chief Executive Officer 1995(2) $58,500 $ 5,607 $9,968
<FN>
(1) Includes FBI's profit sharing plan and 401-K matching
contributions, use of a company automobile and life insurance
premiums paid by FBI. FBI has a contributory-trusteed
profit-sharing plan for the benefit of employees who qualify as to
age and/or length of service. The annual contribution to the
profit-sharing plan for each participant consists of a
discretionary percentage of First Bank's profit, plus a 401(K)
contribution which matches a discretionary percentage of the
participant's salary reductions.
(2) Mr. Huggins was a vice president of First Bank before
becoming chairman of the board and chief executive officer
in 1995. The information in the table for 1995 includes
compensation paid or accrued for the full year.
</FN>
</TABLE>
FBI Security Ownership
The table below sets forth: (i) the name and address of each
shareholder known by FBI to be the beneficial owner of more than
five percent of the outstanding shares of FBI Common Stock as of
the Record Date; (ii) the number of shares so owned; (iii) the
percent of the total outstanding shares of FBI Common Stock so
owned; (iv) the name of each director of FBI (and all directors and
executive officers as a group); (v) the number of shares of FBI
Common Stock they beneficially owned as of the Record Date; and
(vi) the percent of the total outstanding shares of FBI Common
Stock so owned.
<TABLE>
PRINCIPAL SHAREHOLDERS
<CAPTION>
Name and Address Shares Owned(1) Percent Owned
- ---------------- --------------- -------------
<S> <C> <C>
Inez G. Whisenhunt 16,080(2) 6.70%
P. O. Box 157
Grove Hill, Alabama 36451
Vivian H. Gordon 12,360(2) 5.15%
P. O. Box 58
Grove Hill, Alabama 36451
</TABLE>
<TABLE>
DIRECTORS
<CAPTION>
Name Shares Owned(1) Percent Owned
- ---- --------------- -------------
<S> <C> <C>
Dan Barlow (Director and Executive Officer) 1,409 *
John Becton 3,400 1.42%
Linda Breedlove 600 *
John C. Gordon 11,883(3) 4.90%
Fred L. Huggins (Director and Executive Officer) 600(4) *
Bobby Leach 200 *
Ray Sheffield 3,900(5) 1.63%
Clarence Watters 1,800(6) *
Bruce Wilson 1,020 *
Ernest Woodson 900 *
</TABLE>
<TABLE>
EXECUTIVE OFFICERS
<CAPTION>
Name Shares Owned(1) Percent Owned
- ---- --------------- -------------
<S> <C> <C>
Robert Steen 140 *
TOTAL DIRECTORS AND EXECUTIVE OFFICERS 25,852 10.78%
<FN>
* Less than 1 percent.
(1) Based on information furnished by the respective individuals.
Under applicable regulations, shares are deemed to be
beneficially owned by a person if he directly or indirectly
has or shares the power to vote or to dispose or direct the
disposition of the shares, whether or not he has any economic
interest in the shares. Unless otherwise indicated, the named
beneficial owner has sole voting and dispositive power with
respect to the shares.
(2) John C. Gordon, a director of FBI, is the son of Vivian H.
Gordon and the nephew of Inez G. Whisenhunt, and he may be
deemed to have shared voting and dispositive power with
respect to these shares under powers of attorney.
(3) Includes 600 shares owned jointly with his spouse and 3,600
shares held by a cousin for whom he is conservator; does not
include 16,080 shares owned by Inez G. Whisenhunt or 12,360
shares owned by Vivian H. Gordon. See note (2).
(4) Includes 400 shares owned jointly with his spouse.
(5) Includes 3,300 shares owned jointly with his spouse.
(6) Includes 600 shares owned jointly with his spouse and 600
shares owned jointly with his son.
</FN>
</TABLE>
SUPERVISION, REGULATION, AND EFFECTS OF
GOVERNMENTAL POLICY
Bank holding companies and banks are extensively regulated
under both federal and state law. The following is a brief summary
of certain statutes, rules, and regulations affecting USB, FBI and
their respective subsidiaries. This summary is qualified in its
entirety by reference to the particular statutory and regulatory
provisions referred to below and is not intended to be an
exhaustive description of the statutes or regulations applicable to
the business of USB, FBI or their respective subsidiaries.
Supervision, regulation and examination of banking institutions by
the regulatory agencies are intended primarily for the protection
of depositors, rather than shareholders.
Bank Holding Company Regulation
USB and FBI are bank holding companies under the Bank Holding
Company Act of 1956 ("BHCA") and are registered with, and subject
to supervision by, the Federal Reserve. As bank holding companies,
USB and FBI are both required to file periodic reports and such
additional information as the Federal Reserve may require pursuant
to the BHCA. The Federal Reserve may also examine USB, FBI and
each of their respective subsidiaries.
The BHCA requires prior Federal Reserve approval for, among
other things, the acquisition by a bank holding company of direct
or indirect ownership or control of more than five percent of the
voting shares of substantially all of the assets of any bank, and
for a merger or consolidation of a bank holding company with
another bank holding company. With certain exceptions, the BHCA
prohibits a bank holding company from acquiring direct or indirect
ownership or control of any voting shares of any company which is
not a bank or bank holding company and from engaging directly or
indirectly in any activity other than banking or managing or
controlling banks or performing services for authorized
subsidiaries. A bank holding company may, however, engage in or
acquire an interest in a company that engages in activities which
the Federal Reserve has determined by order or regulation to be so
closely related to banking or managing or controlling banks as to
be properly incident thereto. Such permitted activities include
acting as fiduciary or investment or financial advisor, selling or
underwriting insurance coverage directly related to extensions of
credit, and the leasing of real and personal property.
Under Federal Reserve policy, USB and FBI are expected to act
as a source of financial strength to, and commit resources to
support, each of their respective subsidiary banks. This support
may be required at times when, absent such Federal Reserve policy,
USB and FBI would not be inclined to provide it. In addition, any
capital loans by a bank holding company to any of its subsidiary
banks are subordinate in right of payment to deposits and to
certain other indebtedness of such subsidiary bank. In the event
of a bank holding company's bankruptcy, any commitment by the bank
holding company to a federal bank regulatory agency to maintain the
capital of a subsidiary bank will be assumed by the bankruptcy
trustee and entitled to a priority of payment.
Under the Federal Deposit Insurance Act, as amended ("the
FDIA"), insured depository institutions can be held liable for any
loss incurred by, or reasonably expected to be incurred by, the
FDIC in connection with (i) the default of a commonly controlled
FDIC-insured depository institution or (ii) any assistance provided
by the FDIC to any commonly controlled FDIC-insured depository
institution "in danger in default." "Default" is defined generally
as the existence of certain conditions indicating that a default is
likely to occur in the absence of regulatory assistance.
The Federal Reserve has adopted capital adequacy guidelines
applicable to bank holding companies (see "Capital Adequacy"
below). Federal Reserve policy requires a bank holding company to
act as a source of financial strength to each of its bank
subsidiaries and to commit resources to support each of its
subsidiaries. Such policy also requires a bank holding company to
take measures to preserve and protect bank subsidiaries in
situations where additional investments in a troubled bank may not
otherwise be warranted. As a result, a bank holding company may be
required to lend money to its subsidiaries in the form of capital
notes or other instruments which qualify as capital for regulatory
purposes. In addition, where a bank holding company has more than
one subsidiary depository institution, the holding company's other
subsidiary depository institutions are responsible under a
cross-guarantee for any losses to the FDIC as a result of the
failure of a subsidiary depository institution. Often, bank
holding companies will obtain the funds to provide such companies'
subsidiary banks. However, any loans from the holding company to
such subsidiary banks will likely be unsecured and will be
subordinated to such banks' depositors and perhaps to other
creditors. (See "Recent Legislative and Regulatory Developments"
below.)
The FDIC is authorized to raise insurance premiums in certain
circumstances. Any increase in premiums would have an adverse
effect on USB's and FBI's earnings.
Under the FDIA, insurance of deposits may be terminated by the
FDIC upon a finding that an institution has engaged in unsafe and
unsound practices, is in an unsafe or unsound condition to continue
operations or has violated any applicable law, regulation, rule,
order or condition imposed by a federal bank's regulatory agency.
The Federal Reserve has the right to prevent the continuance
or development of unsafe or unsound banking practices or other
violations of law and to take certain remedial action. In
particular, the Federal Reserve has the power to order a holding
company or its subsidiaries to terminate any activity or terminate
its ownership or control of any subsidiary, despite prior approval
of such activity or such ownership or control, when it has
reasonable cause to believe that continuation of such activity or
such ownership or control constitutes a serious risk to the
financial safety, soundness or stability of any bank subsidiary of
that bank holding company.
In addition to the impact of regulation, commercial banks
generally are affected significantly by the actions of the Federal
Reserve in its attempt to control the money supply and credit
availability in order to influence the economy.
Bank Regulation
USB Bank, an Alabama banking corporation, is a wholly owned
subsidiary of USB, operating under the Alabama Banking Code. First
Bank, an Alabama banking corporation, is a wholly owned subsidiary
of FBI, operating under the Alabama Banking Code. USB Bank and
First Bank are subject to regulation, supervision and examination
by the Superintendent of Banks of the State of Alabama. In
addition, deposits of USB Bank and First Bank are insured by the
FDIC up to the maximum amount permitted by law, and USB Bank and
First Bank are therefore subject to regulation, supervision and
examination by the FDIC.
USB and FBI are legal entities separate and distinct from
their respective subsidiary banks. Various legal limitations
restrict the subsidiary banks from lending or otherwise supplying
funds to USB, FBI or any nonbank subsidiaries of USB or FBI (each
an "affiliate"), generally limiting such transactions with the
affiliate to 10% of the bank's capital and surplus and limiting all
such transactions to 20% of the bank's capital and surplus. Such
transactions, including extensions of credit, sales of securities
or assets and provision of services, also must be on terms and
conditions consistent with safe and sound banking practices,
including credit standards, that are substantially the same or at
least as favorable to the bank as those prevailing at the time for
transactions with unaffiliated companies.
Federal and state banking laws and regulations govern all
areas of the operation of USB's and FBI's respective subsidiary
banks, including reserves, loans, mortgages, capital, issuance of
securities, payment of dividends and establishment of branches.
Federal and state bank regulatory agencies also have the general
authority to limit the dividends paid by insured banks and bank
holding companies if such payments should be deemed to constitute
an unsafe and unsound practice. The respective primary federal
regulators of USB's and FBI's respective subsidiary banks have
authority to impose penalties, initiate civil and administrative
actions and take other steps intended to prevent the banks from
engaging in unsafe or unsound practices.
Federally insured banks are subject, with certain exceptions,
to certain restrictions on extensions of credit to their parent
holding companies or other affiliates, on investments in the stock
or other securities of affiliates and on the taking of such stock
or securities as collateral from any borrower. In addition, such
banks are prohibited from engaging in certain tie-in arrangements
in connection with any extension of credit or the providing of any
property or service.
Banks are also subject to the Community Reinvestment Act of
1977, which requires the appropriate federal bank regulatory
agency, in connection with its regular examination of a bank, to
assess the bank's record in meeting the credit needs of the
community serviced by the bank, including low and moderate income
neighborhoods. The regulatory agency's assessment of the bank's
record is made available to the public. Further, such assessment
is required of any bank which has applied, among other things, to
establish a new branch office that will accept deposits, relocate
an existing office or merge or consolidate with, or acquire the
assets or assume the liabilities of, a federally regulated
financial institution.
Dividends from its subsidiary banks constitute the major
source of funds for dividends to be paid by USB and FBI. The
amount of dividends payable by the subsidiary banks to USB and FBI
depends upon the banks' earnings and capital position, and is
limited by federal and state laws, regulations and policies. In
the case of state non-member bank subsidiaries, such banks are
subject to the laws of the states under which such banks are
chartered. At September 30, 1996, USB Bank had $7,310,505 of
undivided profits legally available for the payment of dividends
and First Bank had $4,931,911 of undivided profits available for
payment of dividends but subject to restrictions as described
below. However, the amount of dividends actually paid during any
one period is strongly affected by USB's and FBI's management
policy of maintaining strong capital positions in USB's and FBI's
respective subsidiary banks. Federal law further provides that no
insured depository institution may make any capital distribution
(which would include a cash dividend) if, after making the
distribution, the institution would not satisfy one or more of its
minimum capital requirements. Moreover, the federal bank
regulatory agencies also have the general authority to limit the
dividends paid by insured banks if such payments should be deemed
to constitute an unsafe and unsound practice.
Under Alabama law, a bank must transfer to surplus each year
at least 10% of its net earnings until the surplus of the bank is
equal to at least 20% of its capital. During this accumulation
period, a bank may not pay a dividend in excess of 90% of its net
earnings. (As of September 30, 1996, USB Bank and First Bank had
each accumulated a surplus equal to at least 20% of capital.)
After this accumulation period, banks must obtain prior written
approval of the Superintendent of the Alabama State Banking
Department if the total of all dividends declared by the bank in
any calendar year will exceed the total of the bank's net earnings
(as defined by statute) for that year combined with its retained
net earnings for the preceding two years, less any required
transfers to surplus. Also, no dividends may be paid from surplus
without the prior written approval of the superintendent.
Furthermore, if, in the opinion of the appropriate federal
bank regulatory authority, a bank under its jurisdiction is engaged
in or is about to engage in an unsafe or unsound practice (which,
depending on the financial condition of the bank, could include the
payment of dividends), such authority may require, after notice and
hearing, that such bank cease and desist from such practice. The
Federal Reserve has indicated that paying dividends that deplete a
bank's capital base to an inadequate level would be an unsafe and
unsound banking practice. In addition, under the FDIA, an insured
bank may not pay any dividend if it is undercapitalized or if
payment would cause it to become undercapitalized. Moreover, the
Federal Reserve has issued a policy statement that provides that
bank holding companies and state member banks should generally only
pay dividends out of current operating earnings.
Capital Adequacy
USB, FBI and their respective subsidiary banks are required to
comply with the applicable capital adequacy standards established
by the FDIC. Currently, there are two basic measures of capital
adequacy: a "risk-based" measure and a "leverage" measure. All
applicable capital standards must be satisfied for an institution
to be considered in compliance.
The capital-based prompt correction action provisions of the
FDIA and the implementing regulations apply to FDIC-insured
depository institutions and are not directly applicable to holding
companies that control such institutions. However, the Federal
Reserve has indicated that, in regulating bank holding companies,
it will take appropriate action at the holding company level based
on an assessment of the effectiveness of supervisory actions
imposed upon subsidiary depository institutions pursuant to such
provisions and regulations. Although the capital categories
defined under the prompt corrective action regulations are not
directly applicable to USB or FBI under existing law and
regulations, if USB or FBI were placed in a capital category, then
USB or FBI would qualify as well-capitalized as of September 30,
1996.
The risk-based capital standards are designed to make
regulatory capital requirements more sensitive to differences in
risk profile among banks and bank holding companies, to account for
off-balance sheet exposure and to minimize disincentives for
holding liquid assets. Assets and off-balance sheet items are
assigned to broad risk categories, each with appropriate weights.
The resulting capital ratios represent capital as a percentage of
total risk-weighted assets and off-balance sheet items.
The minimum standard for the ratio of capital to risk-weighted
assets (including certain off-balance sheet obligations, such as
standby letters of credit) is 8%. At least 50% of that capital
level must consist of common equity, retained earnings and, within
limitations, perpetual preferred stock, less goodwill and certain
other intangibles ("Tier 1 capital"). The remainder ("Tier 2
capital") may consist of a limited amount of other preferred stock,
mandatory convertible securities, subordinated debt and a limited
amount of loan loss reserves. The sum of Tier 1 capital and Tier
2 capital is "total risk-based capital." The Federal Reserve and
the FDIC have proposed to add an interest rate risk component to
their existing risk-based capital requirements.
In 1992, the Federal Reserve issued an interpretive release
with respect to the classification by bank holding companies of
certain subordinated debt as Tier 2 capital. Previously issued
subordinated debt that does not meet all of the requirements set
forth in the release will be considered on a case-by-case basis to
determine whether such debt qualifies as Tier 2 capital. The
release states that as a general rule, previously issued debt may
qualify as Tier 2 capital as long as the non-qualifying provisions
of such debt: (i) have been commonly used by banking
organizations; (ii) do not provide an unreasonably high degree of
protection to the holder in cases not involving bankruptcy or
receivership; and (iii) do not effectively allow the holder to
stand ahead of the general creditors of the financial institution
in cases of bankruptcy or receivership.
The Federal Reserve and the FDIC also have adopted regulations
which supplement the risk-based guidelines to include a minimum
leverage ratio of 3% Tier 1 capital to total assets less goodwill
(the "leverage ratio"). Such agencies have emphasized that the 3%
leverage ratio constitutes a minimum requirement for well-run
banking organizations having diversified risk including no undue
interest rate risk exposure, excellent asset quality, high
liquidity, good earnings and a composite regulatory rating of 1
under the regulatory rating system for banks. Banking
organizations experiencing or anticipating significant growth, as
well as those organizations which do not satisfy the criteria
described above, will be required to maintain a minimum leverage
ratio ranging generally from 4% to 5%.
Bank regulators continue to indicate their desire to raise
capital requirements applicable to the banking industry beyond
current levels. However, neither USB nor FBI is able to predict
whether or when higher capital requirements might be imposed.
Any institution which fails to maintain minimum capital
requirements may be subject to a capital directive which is
enforceable in the same manner and to the same extent as a final
cease and desist order, and must submit a capital plan within 60
days to the FDIC. If the leverage ratio should fall to 2% or less,
the institution may be deemed to be operating in an unsafe or
unsound condition, allowing the FDIC to take various enforcement
actions, including possible termination of insurance or placing the
institution into receivership.
The following tables present the regulatory capital position
at September 30, 1996, for each of USB, USB Bank, FBI and First
Bank:
<TABLE>
(Dollars in Thousands)
<CAPTION>
USB USB Bank FBI First Bank
-------- -------- -------- ----------
Tier I Capital--
<S> <C> <C> <C> <C>
Common shareholders' equity $26,982 $26,928 $18,345 $20,196
Disallowed portion (2,217) (2,217) (3,718) (2,430)
Tier I Capital 24,765 24,711 14,627 17,766
Tier II Capital--
Allowable portion of the
allowance for loan losses 1,175 1,175 1,650 1,650
Total Capital (Tier I and Tier II) 25,940 25,886 16,277 19,416
Risk-adjusted assets 138,173 138,173 138,765 138,412
Quarterly average assets 232,986 232,986 184,839 188,557
Tier I capital 17.92% 17.88% 10.54% 12.84%
Tier II capital 18.77% 18.73% 11.73% 14.03%
Leverage Ratio 10.63% 10.61% 7.91% 9.42%
</TABLE>
The FDIC has adopted regulations under the FDIA governing the
receipt of brokered deposits. Under the regulations, an
FDIC-insured depository institution cannot accept, roll over or
renew brokered deposits unless (i) it is well capitalized or (ii)
it is adequately capitalized and received a waiver from the FDIC.
A depository institution that cannot receive brokered deposits also
cannot offer "pass-through" insurance on certain employee benefit
accounts. Whether or not it has obtained such a waiver, a
depository institution that is not well-capitalized may not pay an
interest rate on any deposits in excess of 75 basis points over
certain prevailing market rates specified by regulation. There are
no such restrictions on a depository institution that is well
capitalized. Because USB Bank and First Bank were well capitalized
as of September 30, 1996, USB and FBI believe that brokered
deposits regulation will have no material effect on the funding
liquidity of USB Bank and First Bank.
Recent Legislative and Regulatory Developments
With the enactment of the Financial Institutions Reform,
Recovery and Enforcement Act of 1989 ("FIRREA") and the Federal
Deposit Insurance Corporation Improvement Act of 1991 ("FDICIA"),
Congress enacted comprehensive legislation affecting the commercial
banking and thrift industries. FIRREA, among other things,
abolished the Federal Savings and Loan Insurance Corporation and
established two new insurance funds under the jurisdiction of the
FDIC: BIF, which insures most commercial banks, and the Savings
Association Insurance Fund, which insures most thrift institutions.
In addition to effecting far-reaching restructuring of the thrift
industry, FIRREA provided for a phased-in increase in the rate of
annual insurance assessments paid by insured depository
institutions. FDICIA provided increased funding for the BIF and
expanded regulation of depository institutions and their
affiliates, including parent holding companies. A significant
portion of the additional BIF funding has been in the form of
borrowings to be repaid by insurance premiums assessed on BIF
members. These premium increases were in addition to the increase
in deposit premiums made during 1991. FDICIA provides for an
increase in the BIF's ratio of reserves to insured deposits to
1.25% within the next 15 years, which was attained within the past
year, resulting in a reduction in current premiums. The result of
these provisions could be a significant increase in the assessment
rate on deposits of BIF members over the next 15 years. FDICIA
provides authority for special assessments against insured deposits
and for the development of a system of assessing deposit insurance
premiums based upon the institution's risk.
In September 1992, the FDIC adopted a new transitional
risk-based premium schedule which increases the assessment rates
for depository institutions. Each financial institution is
assigned to one of three capital groups--well-capitalized,
adequately capitalized or undercapitalized, as defined in the
regulations implementing the prompt corrective action provisions of
FDICIA described below--and further assigned to one of three
subgroups within a capital group on the basis of supervisory
evaluation by the institution's primary federal and, if applicable,
state supervisors and other information relevant to the
institution's financial condition and the risk posed to the
applicable insurance fund. The actual assessment rate applicable
to a particular institution depends upon the risk assessment
classification so assigned to the institution by the FDIC.
Among other things, FDICIA requires the federal banking
agencies to take "prompt corrective action" in respect of banks
that do not meet minimum capital requirements. The five capital
tiers established by the FDICIA and the banking regulators' minimum
requirements for each are summarized as follows:
<TABLE>
<CAPTION>
Total Risk-Based Tier I Risk Based Leverage
Capital Ratio Capital Ratio Ratio
---------------- ----------------- ------------
<S> <C> <C> <C>
Well capitalized 10% or above 6% or above 5% or above
Adequately capitalized 8% or above 4% or above 4% or above
Undercapitalized Less than 8% Less than 4% Less than 4%
Significantly undercapitalized Less than 6% Less than 3% Less than 3%
Critically undercapitalized 2% or less
</TABLE>
An institution may be deemed to be in a capitalization
category that is lower than is indicated by its actual capital
position if it receives an unsatisfactory examination rating.
If a depository institution should fail to meet regulatory
capital requirements, regulatory agencies can require submission
and funding of a capital restoration plan by the institution, place
limits on its activities, require the raising of additional capital
and, ultimately, require the appointment of a conservator or
receiver for the institution. The Federal Reserve and the other
federal depository institution regulatory agencies have recently
adopted regulations to implement the FDICIA "prompt corrective
action" requirements. Under FDICIA, a bank holding company must
guarantee that a subsidiary bank will meet its capital restoration
plan, subject to certain limitations. The obligation of a
controlling bank holding company under FDICIA to fund a capital
restoration plan is limited to the lesser of 5% of an
undercapitalized subsidiary's assets or the amount required to meet
regulatory capital requirements. If the controlling bank holding
company should fail to fulfill its obligations under FDICIA and
files (or has filed against it) a petition under the federal
Bankruptcy Code, the FDIC's claim may be entitled to a priority in
such bankruptcy proceeding over third-party creditors of the bank
holding company.
Undercapitalized depository institutions may be subject to
growth limitations and are required to submit a capital restoration
plan. The federal banking agencies may not accept a capital plan
without determining, among other things, that the plan is based on
realistic assumptions, is likely to succeed in restoring the
depository institution's capital and is guaranteed by the parent
holding company. If a depository institution should fail to submit
an acceptable plan, it will be treated as if it were significantly
undercapitalized.
Significantly undercapitalized depository institutions may be
subject to a number of requirements and restrictions, including
orders to sell sufficient voting stock to become adequately
capitalized and requirements to reduce total assets and to cease
receiving deposits from correspondent banks. Critically
undercapitalized institutions are subject to appointment of a
receiver or conservator. An institution that is not well
capitalized is generally prohibited from accepting brokered
deposits and offering interest rates on deposits higher than the
prevailing rate in its market. In addition, "pass-through"
insurance coverage may not be available for certain employee
benefit accounts.
An insured depository institution may not pay management fees
to any person having control of the institution nor may an
institution, except under certain circumstances and with prior
regulatory approval, make any capital distribution if, after making
such payment or distribution, the institution would be
undercapitalized. FDICIA imposes new restrictions upon the
acceptance of brokered deposits by insured depository institutions
and contains a number of consumer banking provisions, including
disclosure requirements and substantive contractual limitations
with respect to deposit accounts.
FDICIA contains numerous other provisions, including new
reporting requirements, termination of the "too big to fail"
doctrine except in special clearly-defined cases, limitations on
the FDIC's payment of deposits at foreign branches and revised
regulatory standards for, among other things, real estate lending
and capital adequacy.
FDICIA provides that, in the event of the "liquidation or
other resolution" of an insured depository institution, the claims
of depositors of such institution (including claims by the FDIC as
receiver) would be afforded a priority over other general unsecured
claims against the institution. If an insured depository
institution fails, insured and uninsured depositors, along with the
FDIC, will be placed ahead of unsecured, nondeposit creditors,
including a parent holding company such as USB or FBI, in order of
priority of payment.
Effects of Governmental Policies
Many FDICIA provisions did not become effective until December
1992. In addition, many provisions will be implemented through
adoption of regulations that have been or will be proposed by the
various federal banking agencies. Accordingly, the full effect on
USB, FBI and their respective subsidiary banks cannot be assessed
at this time.
Because of concerns relating to the competitiveness and the
safety and soundness of the industry, the Congress is considering,
even after the enactment of FIRREA and FDICIA, a number of
wide-ranging proposals for altering the structure, regulation and
competitive relationships of the nation's financial institutions.
Among such bills are proposals to prohibit banks and bank holding
companies from conducting certain types of activities, to subject
banks to increased disclosure and reporting requirements, to alter
the statutory separation of commercial and investment banking and
to further expand the powers of banks, bank holding companies and
competitors of banks. It cannot be predicted whether or in what
form any of these proposals will be adopted or the extent to which
the business of USB, FBI or their respective subsidiaries may be
affected thereby.
The Riegle-Neal Interstate Banking and Branching Efficiency
Act of 1994 (the "IBBEA") authorized interstate acquisitions of
banks and bank holding companies without geographic limitations
beginning September 29, 1995. In addition, beginning June 1, 1997,
the IBBEA authorizes a bank to merge with a bank in another state
as long as neither of the states has opted out of interstate
branching by May 31, 1997. A bank may establish and operate a de
novo branch in a state in which the bank does not maintain a branch
if that state expressly permits de novo branching. Once a bank has
established branches in a state through an interstate merger
transaction, the bank may establish and acquire additional branches
at any location in the state where any bank involved in the
interstate merger transaction could have established or acquired
branches under applicable Federal or state law. A bank that has
established a branch in a state through de novo branching may
establish and acquire additional branches in such state in the same
manner and to the same extent as a bank having a branch in such
state as a result of an interstate merger. If a state opts out of
interstate branching within the specific time period, no bank in
any other state may establish a branch in the opting out state,
whether through an acquisition or de novo. The State of Alabama
has opted in with respect to interstate branching effective on or
before June 1, 1997.
LEGAL MATTERS
The legality of the USB Common Stock to be issued in the
Merger will be passed upon by Maynard, Cooper & Gale, P.C.,
Birmingham, Alabama ("Maynard Cooper").
Certain legal matters in connection with the Merger will be
passed upon for FBI by Walston, Wells, Anderson & Bains,
Birmingham, Alabama ("Walston Wells").
Each of Maynard Cooper and Walston Wells has rendered opinions
with respect to the federal tax consequences of the Merger. See
"The Merger--Certain Federal Income Tax Consequences."
EXPERTS
The Consolidated Financial Statements of United Security
Bancshares, Inc. as of December 31, 1995 and 1994 and for the three
years ended December 31, 1995, 1994 and 1993 incorporated by
reference in this Joint Proxy Statement have been audited by Smith,
Dukes & Buckalew, independent public accountants, as indicated in
their report with respect thereto and are included herein in
reliance upon the authority of said firm as experts in giving said
reports.
The Consolidated Financial Statements of First Bancshares,
Inc. and subsidiary as of December 31, 1995 and 1994 and for each
of the three years ended December 31, 1995, 1994 and 1993 have been
audited by Dudley, Hopkins, Jones, Sims & Freeman, independent
auditors, as stated in their reports which are included herein and
have been so included in reliance upon the reports of such firm
given upon their authority as experts in accounting and auditing.
<PAGE>
Appendix A
AGREEMENT AND PLAN OF MERGER
by and between
FIRST BANCSHARES, INC.
and
UNITED SECURITY BANCSHARES, INC.
Dated as of
August 19, 1996
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "Agreement") is made
and entered into as of August 19, 1996 by and between FIRST
BANCSHARES, INC. ("FBI"), an Alabama corporation, and its
wholly-owned subsidiary, FIRST BANK AND TRUST, an Alabama banking
corporation, each with its principal office located in Grove Hill,
Alabama; and UNITED SECURITY BANCSHARES, INC. ("USB"), an Alabama
corporation, and its wholly-owned subsidiary, UNITED SECURITY BANK,
an Alabama banking corporation, each with its principal office
located in Thomasville, Alabama.
Preamble
The board of directors of each of FBI and USB are of the
opinion that the transactions described herein are in the best
interests of the parties and their respective stockholders. Each
such board has unanimously approved the proposed transaction,
subject to an acceptable due diligence investigation and any
necessary approvals, and each board (and all members thereof) has
agreed to use its best efforts to obtain the necessary regulatory
and shareholder approvals. This Agreement provides for, among
other things, the merger of FBI with and into USB. At the
effective time of such merger, the outstanding shares of the
capital stock of FBI shall be converted into the right to receive
shares of the common stock of USB (except as provided herein). As
a result, stockholders of FBI shall become stockholders of USB, and
USB shall continue to conduct the business and operations of FBI.
The transactions described in this Agreement are subject to the
approvals of the stockholders of FBI and USB, necessary regulatory
approvals 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, FBI shall be merged with and into
USB in accordance with and with the effect provided in the
provisions of Article 11 of the ABCA (the "Merger"). USB shall be
the Surviving Corporation resulting from the Merger and shall
continue to be governed by the Laws of the State of Alabama. The
Merger shall be consummated pursuant to the terms of this
Agreement, which has been approved and adopted by the respective
Boards of Directors of FBI and USB.
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
at such other time as the Parties, acting through their chief
executive officers or chief financial officers, may mutually agree.
The place of Closing shall be at the offices of Maynard, Cooper &
Gale, P.C., Birmingham, Alabama, or such other place as may be
mutually agreed upon by the Parties.
1.3 Effective Time. The Merger and other transactions
provided for in this Agreement shall become effective on the date
and at the time the Articles of Merger reflecting the Merger shall
be accepted for filing by the Secretary of State of the State of
Alabama (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 occurs the latter to occur of (i) the effective date
(including expiration of any applicable waiting period) of the last
required Consent of any Regulatory Authority having authority over
and approving or exempting the Merger, and (ii) the date on which
the stockholders of FBI and USB approve this Agreement.
1.4 Merger of Banking Subsidiaries. Subject to required
approvals from applicable Regulatory Authorities, at the Effective
Time of the Merger, and contingent upon the occurrence of the
Merger, First Bank and Trust ("First Bank"), an Alabama state bank
and a wholly-owned subsidiary of FBI, shall be merged with and into
United Security Bank ("USB Bank"), an Alabama state bank and the
wholly-owned subsidiary of USB (the "Subsidiary Merger"). USB Bank
shall be the surviving bank (the "Surviving Subsidiary"). The
Board of Directors of each of First Bank and USB Bank, and FBI and
USB, as the sole shareholders of First Bank and USB Bank,
respectively, shall approve the Subsidiary Merger prior to the
Effective Time. The charter and bylaws of USB Bank in effect
immediately prior to the Effective Time shall be the charter and
bylaws of the Surviving Subsidiary, until otherwise amended or
repealed. The directors of the Surviving Subsidiary shall include
six directors selected from the Boards of Directors of each of
First Bank and USB Bank, as determined by the Board of Directors of
the Surviving Corporation.
ARTICLE 2
TERMS OF MERGER
2.1 Articles of Incorporation. The Articles of
Incorporation of USB, amended as provided herein, shall be the
Articles of Incorporation of the Surviving Corporation immediately
following the Effective Time, until thereafter amended in
accordance with applicable Law. As of the Effective Time, the
Articles of Incorporation of USB shall be amended (i) to change the
name of the Surviving Corporation to a new name to be agreed upon
by the parties hereto, (ii) to increase the number of authorized
shares of common stock of the Surviving Corporation from 2,400,000
to 10,000,000, (iii) to increase the maximum size of the Board of
Directors of the Surviving Corporation from fifteen to twenty, (iv)
to deny preemptive rights to its shareholders and (v) to provide
for a 2/3's super majority voting requirement by the Board of
Directors to approve significant corporate events or to add or
remove members of its senior management, all as shall be set forth
in a form of articles of amendment to the articles of incorporation
of USB to be approved by the parties hereto before the calling of
the respective meetings of the stockholders of FBI and the
stockholders of USB which will vote on this Agreement; to the
extent the parties deem necessary or desirable, this Agreement may
be amended or modified to set forth those articles of amendment.
2.2 Bylaws. The Bylaws of USB, as amended hereby, shall
be the Bylaws of the Surviving Corporation immediately following
the Effective Time, until otherwise amended or repealed in
accordance with applicable Law. As of the Effective Time, the
Bylaws of USB shall be amended to provide for the super majority
director voting requirements set forth in Section2.1 above.
2.3 Directors. The directors of the Surviving Corporation
from and after the Effective Time shall consist of the ten
incumbent directors of USB and the ten incumbent directors of FBI.
All such persons shall serve in accordance with the Bylaws of the
Surviving Corporation. The members of the standing committees of
the Board of Directors of the Surviving Corporation shall be
determined by such Board of Directors.
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 USB 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 FBI Common Stock (excluding shares held
by any FBI 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 5.8321 shares
of USB Common Stock (the "Exchange Ratio").
3.2 Anti-Dilution Provisions. In the event FBI changes
the number of shares of FBI 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 USB
changes the number of shares of USB 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 FBI. Each of the shares of FBI Common
Stock held by any FBI 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 FBI
Common Stock who perfects his dissenters' rights of appraisal in
accordance with and as contemplated by Article 13 of the ABCA 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 ABCA and surrendered to the Surviving
Corporation the certificate or certificates representing the shares
for which payment is being made. In the event that after the
Effective Time a dissenting stockholder of FBI fails to perfect, or
effectively withdraws or loses, his right to appraisal and of
payment for his shares, the Surviving Corporation shall issue and
deliver the consideration to which such holder of shares of FBI
Common Stock is entitled under this Article 3 (without interest)
upon surrender by such holder of the certificate or certificates
representing shares of FBI Common Stock held by him.
3.5 Fractional Shares. Notwithstanding any other
provision of this Agreement, each holder of shares of FBI Common
Stock exchanged pursuant to the Merger, who would otherwise have
been entitled to receive a fraction of a share of USB Common Stock
(after taking into account all certificates delivered by such
holder) shall receive, in lieu thereof, cash (without interest) in
an amount equal to such fractional part of a share of USB Common
Stock multiplied by the book value of one share of USB Common Stock
as of the most recent month-end prior to the Effective Time. No
such holder will be entitled to dividends, voting rights or any
other right as a stockholder with respect to any fractional shares.
ARTICLE 4
EXCHANGE OF SHARES
4.1 Exchange Procedures. Promptly after the Effective
Time, the Surviving Corporation shall cause the exchange agent
selected and mutually agreed upon by USB and FBI (the "Exchange
Agent") to mail to the former stockholders of FBI appropriate
transmittal materials (which shall specify that delivery shall be
effected, and risk of loss and title to the certificates
theretofore representing shares of FBI Common Stock shall pass,
only upon proper delivery of such certificates to the Exchange
Agent). After the Effective Time, each holder of shares of FBI
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
FBI 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
USB Common Stock to which such holder may be otherwise entitled
(without interest). The Surviving Corporation shall not be
obligated to deliver the consideration to which any former holder
of FBI Common Stock is entitled as a result of the Merger until
such holder surrenders his certificate or certificates representing
the shares of FBI Common Stock for exchange as provided in this
Section 4.1. The certificate or certificates for FBI Common Stock
so surrendered shall be duly endorsed as the Exchange Agent may
require. Any other provision of this Agreement notwithstanding,
neither the Surviving Corporation nor the Exchange Agent shall be
liable to a holder of FBI 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 FBI Stockholders. At the Effective
Time, the stock transfer books of FBI shall be closed as to holders
of FBI Common Stock immediately prior to the Effective Time, and no
transfer of FBI 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 FBI Common Stock
("FBI 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 FBI
Common Stock shall be entitled to vote after the Effective Time at
any meeting of Surviving Corporation stockholders the number of
whole shares of USB Common Stock into which their respective shares
of FBI Common Stock are converted, regardless of whether such
holders have exchanged their FBI Certificates for certificates
representing USB Common Stock in accordance with the provisions of
this Agreement. Whenever a dividend or other distribution is
declared by the Surviving Corporation on the USB 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 FBI 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 USB Common Stock, which
dividend or other distribution is attributable to such person's USB
Common Stock represented by said FBI Certificate held after the
Cutoff, until such person surrenders said FBI Certificate for
exchange as provided in Section 4.1 of this Agreement. However,
upon surrender of such FBI Certificate, both the USB 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 FBI Certificate.
4.3 Lost or Stolen Certificates. If any holder of FBI
Common Stock convertible into the right to receive shares of USB
Common Stock is unable to deliver the FBI Certificate that
represents FBI 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 USB
Common Stock to which the holder is entitled for such shares upon
presentation of the following: (a) evidence to the reasonable
satisfaction of USB that any such FBI Certificate has been lost,
wrongfully taken or destroyed; (b) such security or indemnity as
may be reasonably requested by USB to indemnify and hold USB and
the Exchange Agent harmless; and (c)evidence satisfactory to USB
that such person is the owner of the shares theretofore represented
by each FBI 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 FBI Certificate for exchange
pursuant to this Agreement.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF FBI
FBI hereby represents and warrants to USB as follows:
5.1 Organization, Standing and Power. FBI is a
corporation duly organized, validly existing and in good standing
under the Laws of the State of Alabama, 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. FBI is
duly qualified or licensed to transact business as a foreign
corporation in good standing in the States of the United States and
foreign jurisdictions where the character of its Assets or the
nature or conduct of its business requires it to be so qualified or
licensed, except for such jurisdictions in which the failure to be
so qualified or licensed is not reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on FBI.
FBI has delivered to USB complete and correct copies of its
Articles of Incorporation and Bylaws and the articles of
incorporation, bylaws and other, similar governing instruments of
each of its Subsidiaries, in each case as amended through the date
hereof.
5.2 Authority; No Breach By Agreement.
(a) FBI 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 FBI, subject to the approval of
this Agreement by the holders of two-thirds of the outstanding
shares of FBI Common Stock. Subject to such requisite stockholder
approval, this Agreement represents a legal, valid and binding
obligation of FBI, enforceable against FBI 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 FBI, nor the consummation by FBI of the transactions provided
for herein, nor compliance by FBI with any of the provisions
hereof, will (i) conflict with or result in a breach of any
provision of FBI's Articles of Incorporation or Bylaws, or (ii)
subject to the receipt of the approval referred to in Schedule
5.2(b)(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 FBI Company under, any Contract or Permit of any FBI
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 FBI Company or any of their respective
Assets.
(c) Other than in connection or compliance with the
provisions of the Securities Laws, applicable state corporate and
securities Laws, and other than Consents required from Regulatory
Authorities, and other than notices to or filings with the Internal
Revenue Service or the Pension Benefit Guaranty Corporation with
respect to any employee benefit plans, and other than Consents,
filings or notifications which, if not obtained or made, are not
reasonably likely to have, individually or in the aggregate, a
Material Adverse Effect on FBI, no notice to, filing with or
Consent of, any public body or authority is necessary for the
consummation by FBI of the Merger and the other transactions
provided for in this Agreement.
5.3 Capital Stock.
(a) The authorized capital stock of FBI consists of
500,000 shares of FBI Common Stock, of which 239,843 shares are
issued and outstanding. FBI currently holds 157 shares of FBI
Common Stock as treasury stock. All of the issued and outstanding
shares of capital stock of FBI are duly and validly issued and
outstanding and are fully paid and nonassessable under the ABCA.
None of the outstanding shares of capital stock of FBI has been
issued in violation of any preemptive rights of the current or past
stockholders of FBI.
(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 FBI outstanding and no outstanding options, warrants,
scrip, rights to subscribe to, calls or commitments of any
character whatsoever relating to, or securities or rights
convertible into or exchangeable for, shares of the capital stock
of FBI or contracts, commitments, understandings or arrangements by
which FBI 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. FBI has no liability
for dividends declared or accrued, but unpaid, with respect to any
of its capital stock.
5.4 FBI Subsidiaries.
(a) The FBI Subsidiaries are First Bank, Acceptance Loan
Company, Inc., I & I, Inc., and First Bank Services, Inc.. First
Bank is a state non-member bank duly organized, validly existing
and in good standing under the laws of the State of Alabama and 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 of Acceptance Loan Company and
I & I, Inc. is an Alabama corporation duly organized, validly
existing and in good standing under the laws of the State of
Alabama. First Bank Services, Inc. is a Florida corporation duly
organized, validly existing and in good standing under the laws of
the State of Florida. Each FBI Subsidiary has the corporate power
and authority to own, lease and operate its Assets and to incur its
Liabilities and to carry on its business as now conducted. Each
FBI Subsidiary is duly qualified or licensed to transact business
as a foreign corporation in good standing in the States of the
United States and foreign jurisdictions where the character of its
Assets or the nature or conduct of its business requires it to be
so qualified or licensed, except for jurisdictions in which the
failure to be so qualified or licensed is not reasonably likely to
have, individually or in the aggregate, a Material Adverse Effect
on FBI. Each FBI Subsidiary that is a depository institution is an
"insured institution" as defined in the Federal Deposit Insurance
Act and applicable regulations thereunder.
(b) The authorized and issued and outstanding capital
stock of each FBI Subsidiary, and the date with respect to which
each representation in this subsection (b) is made with respect to
each FBI Subsidiary, is set forth on Schedule 5.4. Except as set
forth in Schedule 5.4, (i)no equity securities of any FBI
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 FBI 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 FBI
Company is or may be bound to transfer any shares of the capital
stock of any FBI Subsidiary, (ii) there are no Contracts relating
to the rights of any FBI Company to vote or to dispose of any
shares of the capital stock of any FBI Subsidiary, and (iii) all of
the shares of capital stock of each FBI Subsidiary held by a FBI
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 FBI Company free
and clear of any Lien. No FBI Subsidiary has any liability for
dividends declared or accrued, but unpaid, with respect to any of
its capital stock.
5.5 Financial Statements. FBI has delivered to USB copies
of all FBI Financial Statements and FBI Call Reports for periods
prior to the date hereof, and FBI will deliver to USB promptly
copies of all FBI Financial Statements and FBI Call Reports
prepared subsequent to the date hereof. The FBI 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 FBI
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 FBI Companies as of the
dates indicated and the consolidated results of operations, changes
in stockholders' equity and cash flows of the FBI 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). The
FBI 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 FBI Company
has any Liabilities that are reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on FBI,
except Liabilities accrued or reserved against in the consolidated
balance sheets of FBI as of June 30, 1996, included in the FBI
Financial Statements or reflected in the notes thereto. No FBI
company has incurred or paid any Liability since June 30, 1996,
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 FBI.
5.7 Absence of Certain Changes or Events. Except as set
forth on Schedule 5.7, since June 30, 1996 (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 FBI, and (ii) the FBI 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 FBI provided in
Article 7 of this Agreement.
5.8 Tax Matters.
(a) All Tax returns required to be filed by or on behalf
of any of the FBI 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, 1995, and all returns filed
are complete and materially accurate. All Taxes shown as due on
filed returns have been paid. There is no audit examination,
deficiency, refund Litigation or matter in controversy with respect
to any Taxes that might result in a determination that would have,
individually or in the aggregate, a Material Adverse Effect on FBI,
except as reserved against in the FBI 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 FBI 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 FBI Companies for the period or periods through and
including the date of the respective FBI Financial Statements has
been made and is reflected on such FBI Financial Statements.
(d) Deferred Taxes of the FBI Companies have been provided
for in accordance with GAAP.
5.9 Loan Portfolio; Documentation and Reports.
(a) Except as disclosed in Schedule 5.9, none of the FBI
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 (collectively, the "Loans"), other than Loans the unpaid
principal balance of which does not exceed $1,000 per Loan, under
the terms of which the obligor is, as of the date of this
Agreement, over 90 days delinquent in payment of principal or
interest or in default of any other material provisions. Except as
otherwise set forth in Schedule 5.9, none of the FBI 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 FBI, 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 FBI
Companies were solicited, originated and exist in material
compliance with all applicable FBI loan policies, except for
deviations from such policies that (a) have been approved by
current management of FBI, in the case of Loans with an outstanding
principal balance that exceeds $250,000 or (b) in the judgment of
FBI, will not adversely effect the ultimate collectibility of such
Loan. Except as set forth in Schedule 5.9, none of the FBI
Companies holds any Loans that since January 1, 1995 have been
classified by any bank examiner, whether regulatory or internal, as
other loans Specifically Mentioned, Special Mention, Substandard,
Doubtful, Loss, Classified, Criticized, Credit Risk Assets,
concerned loans or words of similar import.
(b) The documentation relating to each Loan made by any
FBI 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 FBI.
(c) Each of the FBI Companies has timely filed all
material reports, registrations and statements, together with any
amendments required to be made with respect thereto, that it was
required to file since December 31, 1991 with (i) the FRB, (ii) the
FDIC and (iii) any state regulatory authority ("State Regulator")
(collectively "Regulatory Agencies") and all other material reports
and statements required to be filed by it since December 31, 1991,
including, without limitation, any report or statement required to
be filed pursuant to the laws, rules or regulations of the United
States or any Regulatory Agencies, and has paid all fees and
assessments due and payable in connection therewith. Except as set
forth in Schedule 5.9 and as otherwise provided herein, and except
for normal examinations conducted by a Regulatory Agency in the
regular course of the business of the FBI Companies, to the
Knowledge of FBI, no Regulatory Agency has initiated any proceeding
or, to the Knowledge of FBI, investigation into the business or
operations of any FBI Company since December 31, 1991. There is no
unresolved violation, criticism or exception by any Regulatory
Agency with respect to any report or statement or lien or any
examinations of any FBI Company, except for those items that will
not, individually or in the aggregate, have a Material Adverse
Effect on FBI.
5. 10 Assets; Insurance. The FBI Companies have good and
marketable title, free and clear of all Liens, to all of their
respective Assets. One of the FBI 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 FBI Companies are in good
condition, reasonable wear and tear excepted, and are usable in the
ordinary course of business consistent with FBI's past practices.
All Assets that are material to FBI's business on a consolidated
basis, held under leases or subleases by any of the FBI 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 FBI or any FBI Subsidiary or, to the Knowledge of FBI,
by any other party to the Contract. The policies of fire, theft,
liability and other insurance maintained with respect to the Assets
or businesses of the FBI Companies provide adequate coverage under
current industry practices against loss or Liability, and the
fidelity and blanket bonds in effect as to which any of the FBI
Companies is a named insured are reasonably sufficient. Schedule
5.10(c) contains a list of all such policies and bonds maintained
by any of the FBI Companies. The Assets of the FBI Companies
include all assets required to operate the business of the FBI
Companies as now conducted.
5.11 Environmental Matters.
(a) To the Knowledge of FBI, each FBI 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 FBI.
(b) There is no Litigation pending or, to the Knowledge of
FBI, threatened before any court, governmental agency or authority
or other forum in which any FBI 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 FBI 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 FBI.
(c) There is no Litigation pending or, to the Knowledge of
FBI, threatened before any court, governmental agency or board or
other forum in which any of its Loan Properties (or FBI 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 FBI.
(d) To the Knowledge of FBI, 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 FBI.
(e) To the Knowledge of FBI, during the period of (i) any
FBI Company's ownership or operation of any of its respective
current properties, (ii) any FBI Company's participation in the
management of any Participation Facility or (iii) any FBI Company's
holding of a security interest in a Loan Property, there have been
no releases of Hazardous Material or oil in, on, under or affecting
such properties, except such as are not reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on FBI.
Prior to the period of (i) any FBI Company's ownership or operation
of any of its respective current properties, (ii) any FBI Company's
participation in the management of any Participation Facility, or
(iii) any FBI Company's holding of a security interest in a Loan
Property, to the Knowledge of FBI, 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 FBI.
5. 12 Compliance with Laws. FBI is duly registered as a
bank holding company under the BHC Act. Each FBI 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 FBI, and there has occurred no Default under any such Permit.
Except as may be disclosed on Schedule 5.12, none of the FBI
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 FBI;
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 FBI 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 FBI, (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 FBI, or (iii) requiring any FBI 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 FBI Company is the subject of any Litigation
asserting that it or any other FBI 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
FBI 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 FBI Company, pending or threatened, or to its
Knowledge, is there any activity involving any FBI Company's
employees seeking to certify a collective bargaining unit or
engaging in any other organization activity.
(b) FBI has delivered to USB a true and complete list
showing the names and current annual salaries of all executive
officers of each of the FBI Companies and showing for each such
person the amounts paid, payable or expected to be paid as salary,
bonus payments and other compensation for 1995 and 1996, and also
showing the name and offices held by each officer and director of
each of the FBI Companies.
5.14 Employee Benefit Plans.
(a) Schedule 5.14 lists, and FBI has delivered or made
available to USB prior to the execution of this Agreement copies
of, all pension, retirement, profit-sharing, deferred compensation,
stock option, employee stock ownership, severance pay, vacation,
bonus or other incentive plan, all other written or unwritten
employee programs, arrangements or agreements, all medical, vision,
dental or other health plans, all life insurance plans, and all
other employee benefit plans or fringe benefit plans, including,
without limitation, "employee benefit plans" as that term is
defined in Section 3(3) of ERISA, currently adopted, maintained by,
sponsored in whole or in part by, or contributed to by any FBI
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 "FBI
Benefit Plans"). Any of the FBI 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 "FBI ERISA Plan." Each
FBI ERISA Plan which is also a "defined benefit plan" (as defined
in Section 414(j) of the Internal Revenue Code) is referred to
herein as a "FBI Pension Plan." No FBI Pension Plan is or has been
a multiemployer plan within the meaning of Section 3(37) of ERISA
or a multiple employee plan within the meaning of Section 413(c) of
the Internal Revenue Code.
(b) All FBI Benefit Plans and the administration thereof
are and have at all times been 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 FBI. All returns, reports or other filings which are required
by any governmental agency or which must be furnished to any person
have been timely filed or furnished. Each FBI 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 FBI is not aware of any circumstances
likely to result in revocation of any such favorable determination
letter. To the Knowledge of FBI, no FBI Company has engaged in a
transaction with respect to any FBI Benefit Plan that, assuming the
taxable period of such transaction expired as of the date hereof,
would subject any FBI 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 FBI. 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 FBI Benefit Plan or any
FBI Company with regard to any FBI Benefit Plan, any trust which is
a part of any FBI Benefit Plan, any trustee, fiduciary, custodian,
administrator or other person or entity holding or controlling
assets of any FBI Benefit Plan, and no basis to anticipate any such
action, suit, arbitration, claim, investigation or audit exists.
(c) No FBI ERISA Plan which is a defined benefit pension
plan has any "unfunded currently 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. There is no unfunded liability with respect to any
FBI Benefit Plan. Since the date of the most recent actuarial
valuation, there has been (i) no material change in the financial
position of any FBI Pension Plan, (ii) no change in the actuarial
assumptions with respect to any FBI Pension Plan, (iii) no increase
in benefits under any FBI 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 FBI or materially adversely affect the funding status of
any such plan. Neither any FBI Pension Plan nor any
"single-employer plan," within the meaning of Section 4001(a)(15)
of ERISA, currently or formerly maintained by any FBI Company, or
the single-employer plan of any entity which is considered one
employer with FBI 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 FBI. No FBI Company has provided
,or is required to provide, security to a FBI 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 FBI Company
with respect to any ongoing, frozen or terminated single-employer
plan or the single-employer plan of any ERISA Affiliate, which
Liability is reasonably likely to have a Material Adverse Effect on
FBI. No FBI Company has incurred any withdrawal Liability with
respect to a multiemployer plan under Subtitle B of Title IV of
ERISA (regardless of whether based on contributions of an ERISA
Affiliate), which Liability is reasonably likely to have a Material
Adverse Effect on FBI. 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 FBI Pension Plan or by any ERISA Affiliate within the 12-month
period ending on the date hereof.
(e) No FBI Company has any obligations for retiree health
and life benefits under any of the FBI Benefit Plans, and there are
no restrictions on the rights of such FBI 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 FBI.
(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 FBI
Company from any FBI Company under any FBI Benefit Plan or
otherwise, (ii) increase any benefits otherwise payable under any
FBI 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 FBI.
(g) With respect to all FBI 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 FBI 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 FBI.
(h) No "prohibited transaction" as defined in Section 406
of ERISA, "reportable event" as defined in Section 4043 of ERISA,
event described in Section 4062(a) or Section 4063(a) of ERISA or
termination or partial termination, or commencement of proceedings
seeking termination with respect to any FBI Pension Plan has
occurred. No notice of intent to terminate an FBI Pension Plan has
been filed with the Pension Benefit Guaranty Corporation ("PBGC")
or provided to affected parties under Section 4041 of ERISA, nor
has any FBI Pension Plan been treated as terminated under Section
4041(e) of ERISA. The PBGC has not instituted proceedings to
terminate, or to appoint a trustee to administer, an FBI Pension
Plan, and no event has occurred or condition exists which might
constitute grounds under Section 4042 of ERISA for the termination
of, or the appointment of a trustee to administer, any FBI Pension
Plan.
(i) With respect to any FBI Benefit Plan that is an
"employee welfare benefit plan" as defined in Section 3(1) of
ERISA, except as disclosed on Schedule 5.14, (i) no such FBI
Benefit Plan is unfunded or funded through a "welfare benefit
fund," as such term is defined in Section 419(e) of the Internal
Revenue Code, (ii) each such FBI Benefit Plan that is a "group
health plan," as such term is defined in Section 5000(b)(1) of the
Internal Revenue Code is in compliance with the applicable
requirements of Section 4980(f) of the Internal Revenue Code, and
(iii) each such FBI Benefit Plan (including any such FBI Benefit
Plan covering retirees or former employees) may be amended or
terminated without material liability to FBI or any of its
Affiliates.
5.15 Material Contracts. Except as set forth on Schedule
5.15, none of the FBI 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
FBI Company or the guarantee by any FBI 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 FBI 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 2%
stockholder, director, officer or employee (other than loans by
First Bank to employees on terms that, as of the time of a
particular loan, are substantially the same as those prevailing for
comparable transactions with other persons) of any of the FBI
Companies, any member of the immediate family of the foregoing or,
to the Knowledge of FBI, any related interest (as defined in
Regulation O promulgated by the FRB) ("Related Interest") of any of
the foregoing; (vii) any Contract which limits the freedom of any
of the FBI Companies to compete in any line of business or with any
Person; (viii) any Contract providing a power of attorney or
similar authorization given by any of the FBI Companies, except as
issued in the ordinary course of business with respect to routine
matters; and (ix) any Contract (other than deposit agreements and
certificates of deposits issued to customers entered into in the
ordinary course of business and letters of credit) that involves
the payment by any of the FBI Companies of amounts aggregating
$25,000 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 "FBI Contracts"). None of the FBI Companies is in
Default under any FBI Contract. Except as set forth in Schedule
5.15, all of the indebtedness of any FBI Company for money borrowed
is prepayable at any time by such FBI Company without penalty or
premium.
5.16 Legal Proceedings. Except as set forth on Schedule
5.16, there is no Litigation instituted or pending, or, to the
Knowledge of FBI, 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 FBI 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 FBI, nor are there any Orders of any
Regulatory Authorities, other governmental authorities or
arbitrators outstanding against any FBI Company, that are
reasonably likely to have, individually or in the aggregate, a
Material Adverse Effect on FBI.
5.17 Reports. Since January 1, 1993, or the date of
organization if later, each FBI 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)
the SEC, (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 FBI). 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; Information in Filings.
No statement, certificate, instrument or other writing furnished or
to be furnished by any FBI Company or any Affiliate thereof to USB
pursuant to this Agreement 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 FBI Company or
any Affiliate thereof for inclusion in the documents to be prepared
by USB in connection with the transactions provided for in this
Agreement, including, without limitation, (i) documents to be filed
with the Securities and Exchange Commission (the "SEC"), including
without limitation the Registration Statement on Form S-4 of USB
registering the shares of USB Common Stock to be offered to the
holders of FBI Common Stock and all amendments thereto (the
"Registration Statement") and the Proxy Statement and Prospectus in
the form contained in the Registration Statement, and all
amendments and supplements thereto (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 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, in the case of the Registration
Statement, at the time the Registration Statement is declared
effective pursuant to the Securities Act of 1933, as amended, and
in the case of any other documents, the time such documents are
filed in final form with any federal or state regulatory authority
and/or at the time they are distributed to stockholders of USB or
FBI, 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 FBI 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 FBI
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.
5.20 Offices. The headquarters of each FBI Company and
each other office, branch or facility maintained and operated by
each FBI 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 FBI 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 FBI
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 FBI
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 USB or
USB's third party provider.
5.22 Intellectual Property. One of the FBI 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 FBI Companies has received any notice of conflict with
respect thereto that asserts the rights of others. The FBI
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 5.23
lists all of the trademarks, trade names, licenses and other
intellectual property used to conduct the businesses of the FBI
Companies.
ARTICLE 6
REPRESENTATIONS AND WARRANTIES OF USB
USB hereby represents and warrants to FBI as follows:
6.1 Organization, Standing, and Power. USB is a
corporation duly organized, validly existing, and in good standing
under the Laws of the State of Alabama, 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. USB is
duly qualified or licensed to transact business as a foreign
corporation in good standing in the States of the United States and
foreign jurisdictions where the character of its Assets or the
nature or conduct of its business requires it to be so qualified or
licensed, except for such jurisdictions in which the failure to be
so qualified or licensed is not reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on USB.
USB has delivered to FBI complete and correct copies of its
Articles of Incorporation and Bylaws and the articles of
incorporation, bylaws and other, similar governing instruments of
each of its Subsidiaries, in each case as amended through the date
hereof.
6.2 Authority; No Breach By Agreement.
(a) USB 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 USB, subject to the approval of
this Agreement by the holders of two-thirds of the outstanding
shares of USB Common Stock. Subject to such requisite stockholder
approval, this Agreement represents a legal, valid and binding
obligation of USB, enforceable against USB 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 USB, nor the consummation by USB of the transactions provided
for herein, nor compliance by USB with any of the provisions
hereof, will (i) conflict with or result in a breach of any
provision of USB's Articles of Incorporation or Bylaws, or (ii)
constitute or result in a Default under, or require any Consent
pursuant to, or result in the creation of any Lien on any Asset of
any USB Company under, any Contract or Permit of any USB Company,
where failure to obtain such Consent is reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on USB,
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 USB Company or any of their respective Assets.
(c) Other than in connection or compliance with the
provisions of the Securities Laws, applicable state corporate and
securities Laws, and other than Consents required from Regulatory
Authorities, and other than notices to or filings with the Internal
Revenue Service or the Pension Benefit Guaranty Corporation with
respect to any employee benefit plans, and other than Consents,
filings or notifications which, if not obtained or made, are not
reasonably likely to have, individually or in the aggregate, a
Material Adverse Effect on USB, no notice to, filing with or
Consent of, any public body or authority is necessary for the
consummation by USB of the Merger and the other transactions
provided for in this Agreement.
6.3 Capital Stock. The authorized capital stock of USB
consists of 2,400,000 shares of USB Common Stock, $.01 par value,
of which 2,137,960 shares are issued and outstanding (not including
treasury shares). USB currently holds 64,100 shares of USB Common
Stock as treasury stock. As a condition precedent to the Merger,
USB will authorize an additional 7,600,000 shares of USB Common
stock. This authorization of additional shares is subject to
stockholder approval. All of the issued and outstanding shares of
USB Common Stock are, and all of the shares of USB Common Stock to
be issued in exchange for shares of FBI 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 ABCA. None
of the outstanding shares of USB Common Stock has been, and none of
the shares of USB Common Stock to be issued in exchange for shares
of FBI Common Stock upon consummation of the Merger will be, issued
in violation of any preemptive rights of the current or past
stockholders of USB.
6.4 USB Subsidiaries.
(a) The only USB Subsidiary is United Security Bank, a
state non-member bank, duly organized and validly existing under
the Laws of the State of Alabama. The USB Subsidiary is in good
standing under the Laws of the jurisdiction in which it is
incorporated or organized, and the USB 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. The USB Subsidiary is duly qualified or licensed to
transact business as a foreign corporation in good standing in the
States of the United States and foreign jurisdictions where the
character of its Assets or the nature or conduct of its business
requires it to be so qualified or licensed, except for
jurisdictions in which the failure to be so qualified or licensed
is not reasonably likely to have, individually or in the aggregate,
a Material Adverse Effect on USB. The USB Subsidiary is a
depository institution and is an "insured institution" as defined
in the Federal Deposit Insurance Act and applicable regulations
thereunder.
(b) The authorized and issued and outstanding capital
stock of the USB Subsidiary, and the date with respect to which
each representation in this subsection (b) is made with respect to
the USB Subsidiary, is set forth on Schedule 6.4(b). USB owns all
of the issued and outstanding shares of capital stock of the USB
Subsidiary. No equity securities of any USB 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 USB
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 USB Company
is or may be bound to transfer any shares of the capital stock of
any USB Subsidiary. There are no Contracts relating to the rights
of any USB Company to vote or to dispose of any shares of the
capital stock of any USB Subsidiary. All of the shares of capital
stock of the USB Subsidiary held by a USB Company are fully paid
and nonassessable under the applicable corporation Law of the
jurisdiction in which such Subsidiary is incorporated or organized
and are owned by the USB Company free and clear of any Lien. No
USB Subsidiary has any liability for dividends declared or accrued,
but unpaid, with respect to any of its capital stock.
6.5 Financial Statements. USB has delivered to FBI copies
of all USB Financial Statements and USB Call Reports for periods
prior to the date hereof, and USB will deliver to FBI promptly
copies of all USB Financial Statements and USB Call Reports
prepared subsequent to the date hereof. The USB 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 USB
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 USB Companies as of the
dates indicated and the consolidated and the consolidated results
of operations, changes in stockholders' equity, and cash flows of
the USB 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). The USB 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.
6.6 Absence of Undisclosed Liabilities. No USB Company
has any Liabilities that are reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on USB,
except Liabilities accrued or reserved against in the consolidated
balance sheets of USB as of June 30, 1996 included in the USB
Financial Statements or reflected in the notes thereto. No USB
Company has incurred or paid any Liability since June 30, 1996,
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 USB.
6.7 Absence of Certain Changes or Events. Except as set
forth on Schedule 6.7, since June 30, 1996, (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 USB, and (ii) the USB 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 USB provided in
Article 7 of this Agreement.
6.8 Tax Matters.
(a) All Tax returns required to be filed by or on behalf
of any of the USB 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, 1995, and all returns
filed are complete and materially accurate. All Taxes shown as due
on filed returns have been paid. There is no audit examination,
deficiency, refund Litigation or matter in controversy with respect
to any Taxes that might result in a determination that would have,
individually or in the aggregate, a Material Adverse Effect on USB,
except as reserved against in the USB 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 USB 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 USB Companies for the period or periods through and
including the date of the respective USB Financial Statements has
been made and is reflected on such USB Financial Statements.
(d) Deferred Taxes of the USB Companies have been provided
for in accordance with GAAP.
6.9 Loan Portfolio; Documentation and Reports.
(a) Except as disclosed in Schedule 6.9, none of the USB
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 (collectively, the "Loans"), other than Loans the unpaid
principal balance of which does not exceed $1,000 per Loan, 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 6.9, none of the USB 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 USB, 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 USB
Companies were solicited, originated and exist in material
compliance with all applicable USB loan policies, except for
deviations from such policies that (a) have been approved by
current management of USB, in the case of Loans with an outstanding
principal balance that exceeds $250,000 or (b) in the judgment of
USB, will not adversely effect the ultimate collectibility of such
Loan. Except as set forth in Schedule 6.9, none of the USB
Companies holds any Loans that since January 1, 1995 have been
classified by any bank examiner, whether regulatory or internal, as
other loans Specifically Mentioned, Special Mention, Substandard,
Doubtful, Loss, Classified, Criticized, Credit Risk Assets,
concerned loans or words of similar import.
(b) The documentation relating to each Loan made by any
USB 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 USB.
(c) Each of the USB Companies has timely filed all
material reports, registrations and statements, together with any
amendments required to be made with respect thereto, that it was
required to file since December 31, 1991 with (i) the FRB, (ii) the
FDIC and (iii) any state regulatory authority ("State Regulator")
(collectively "Regulatory Agencies") and all other material reports
and statements required to be filed by it since December 31, 1991,
including, without limitation, any report or statement required to
be filed pursuant to the laws, rules or regulations of the United
States or any Regulatory Agencies, and has paid all fees and
assessments due and payable in connection therewith. Except as set
forth in Schedule 6.9 and as otherwise provided herein, and except
for normal examinations conducted by a Regulatory Agency in the
regular course of the business of the USB Companies, to the
Knowledge of USB, no Regulatory Agency has initiated any proceeding
or, to the Knowledge of USB, investigation into the business or
operations of any USB Company since December 31, 1991. There is no
unresolved violation, criticism or exception by any Regulatory
Agency with respect to any report or statement or lien or any
examinations of any USB Company, except for those items that will
not, individually or in the aggregate, have a Material Adverse
Effect on USB.
6.10 Assets; Insurance. The USB Companies have good and
marketable title, free and clear of all Liens, to all of their
respective Assets. All tangible properties used in the businesses
of the USB Companies are in good condition, reasonable wear and
tear excepted, and are usable in the ordinary course of business
consistent with USB's past practices. All Assets which are
material to USB's business on a consolidated basis, held under
leases or subleases by any of the USB 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. The policies of fire,
theft, liability and other insurance maintained with respect to the
Assets or businesses of the USB Companies provide adequate coverage
under current industry practices against loss or Liability, and the
fidelity and blanket bonds in effect as to which any of the USB
Companies is a named insured are reasonably sufficient. The Assets
of the USB Companies include all assets required to operate the
business of the USB Companies as now conducted.
6.11 Environmental Matters.
(a) To the Knowledge of USB, each USB 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 USB.
(b) There is no Litigation pending or, to the Knowledge of
USB, threatened before any court, governmental agency or authority
or other forum in which any USB 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 USB 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 USB.
(c) There is no Litigation pending or, to the Knowledge of
USB, threatened before any court, governmental agency or board or
other forum in which any of its Loan Properties (or USB in respect
of such Loan Property) has been or, with respect to threatened
Litigation, may be named as a defendant or potentially responsible
party (i) for alleged noncompliance (including by any predecessor)
with any Environmental Law or (ii) relating to the release into the
environment of any Hazardous Material or oil, whether or not
occurring at, on, under or involving a Loan Property, except for
such Litigation pending or threatened that is not reasonably likely
to have, individually or in the aggregate, a Material Adverse
Effect on USB.
(d) To the Knowledge of USB, 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 USB.
(e) To the Knowledge of USB, during the period of (i) any
USB Company's ownership or operation of any of its respective
current properties, (ii) any USB Company's participation in the
management of any Participation Facility or (iii) any USB Company's
holding of a security interest in a Loan Property, there have been
no releases of Hazardous Material or oil in, on, under or affecting
such properties, except such as are not reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on USB.
Prior to the period of (i) any USB Company's ownership or operation
of any of its respective current properties, (ii) any USB Company's
participation in the management of any Participation Facility, or
(iii) any USB Company's holding of a security interest in a Loan
Property, to the Knowledge of USB, 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 USB.
6.12 Compliance with Laws. USB is duly registered as a
bank holding company under the BHC Act. Each USB 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 USB, and there has occurred no Default under any such Permit.
Except as may be disclosed on Schedule 6.12, none of the USB
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 USB;
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 USB 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 USB, (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 USB, or (iii) requiring any USB Company
to enter into or consent to the issuance of a cease and desist
order, formal agreement, directive, commitment or memorandum of
understanding, or to adopt any board resolution or similar
undertaking, that restricts materially the conduct of its business,
or in any manner relates to its capital adequacy, its credit or
reserve policies, its management or the payment of dividends.
6.13 Labor Relations. No USB Company is the subject of
any Litigation asserting that it or any other USB 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 USB 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 USB Company,
pending or threatened, or to its Knowledge, is there any activity
involving any USB Company's employees seeking to certify a
collective bargaining unit or engaging in any other organization
activity.
6.14 Employee Benefit Plans.
(a) Schedule 6.14 lists, and USB has delivered or made
available to FBI prior to the execution of this Agreement copies
of, all pension, retirement, profit-sharing, deferred compensation,
stock option, employee stock ownership, severance pay, vacation,
bonus or other incentive plan, all other written or unwritten
employee programs, arrangements or agreements, all medical, vision,
dental or other health plans, all life insurance plans, and all
other employee benefit plans or fringe benefit plans, including,
without limitation, "employee benefit plans" as that term is
defined in Section 3(3) of ERISA, currently adopted, maintained by,
sponsored in whole or in part by, or contributed to by any USB
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 "USB
Benefit Plans"). Any of the USB 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 "USB ERISA Plan." Each
USB ERISA Plan which is also a "defined benefit plan" (as defined
in Section 414(j) of the Internal Revenue Code) is referred to
herein as a "USB Pension Plan." No USB Pension Plan is or has been
a multiemployer plan within the meaning of Section 3(37) of ERISA
or a multiple employee plan within the meaning of Section 413(c) of
the Internal Revenue Code.
(b) All USB Benefit Plans and the administration thereof
are and have at all times been 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 USB. All returns, reports or other filings which are required
by any governmental agency or which must be furnished to any person
have been timely filed or furnished. Each USB 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 USB is not aware of any circumstances
likely to result in revocation of any such favorable determination
letter. To the Knowledge of USB, no USB Company has engaged in a
transaction with respect to any USB Benefit Plan that, assuming the
taxable period of such transaction expired as of the date hereof,
would subject any USB 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 USB. 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 USB Benefit Plan or any
USB Company with regard to any USB Benefit Plan, any trust which is
a part of any USB Benefit Plan, any trustee, fiduciary, custodian,
administrator or other person or entity holding or controlling
assets of any USB Benefit Plan, and no basis to anticipate any such
action, suit, arbitration, claim, investigation or audit exists.
(c) No USB ERISA Plan which is a defined benefit pension
plan has any "unfunded currently 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. There is no unfunded liability with respect to any
USB Benefit Plan. Since the date of the most recent actuarial
valuation, there has been (i) no material change in the financial
position of any USB Pension Plan, (ii) no change in the actuarial
assumptions with respect to any USB Pension Plan, (iii) no increase
in benefits under any USB 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 USB or materially adversely affect the funding status of
any such plan. Neither any USB Pension Plan nor any
"single-employer plan," within the meaning of Section 4001(a)(15)
of ERISA, currently or formerly maintained by any USB Company, or
the single-employer plan of any ERISA Affiliate has an "accumulated
funding deficiency" within the meaning of Section 412 of the
Internal Revenue Code or Section 302 of ERISA, which is reasonably
likely to have a Material Adverse Effect on USB. No USB Company
has provided, or is required to provide, security to a USB 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 USB Company
with respect to any ongoing, frozen or terminated single-employer
plan or the single-employer plan of any ERISA Affiliate, which
Liability is reasonably likely to have a Material Adverse Effect on
USB. No USB Company has incurred any withdrawal Liability with
respect to a multiemployer plan under Subtitle B of Title IV of
ERISA (regardless of whether based on contributions of an ERISA
Affiliate), which Liability is reasonably likely to have a Material
Adverse Effect on USB. 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 USB Pension Plan or by any ERISA Affiliate within the 12-month
period ending on the date hereof.
(e) No USB Company has any obligations for retiree health
and life benefits under any of the USB Benefit Plans, and there are
no restrictions on the rights of such USB 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 USB.
(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 USB
Company from any USB Company under any USB Benefit Plan or
otherwise, (ii) increase any benefits otherwise payable under any
USB 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 USB.
(g) With respect to all USB 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 USB 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 USB.
(h) No "prohibited transaction" as defined in Section 406
of ERISA, "reportable event" as defined in Section 4043 of ERISA,
event described in Section 4062(a) or Section 4063(a) of ERISA or
termination or partial termination, or commencement of proceedings
seeking termination with respect to any USB Pension Plan has
occurred. No notice of intent to terminate a USB Pension Plan has
been filed with the Pension Benefit Guaranty Corporation ("PBGC")
or provided to affected parties under Section 4041 of ERISA, nor
has any USB Pension Plan been treated as terminated under Section
4041(e) of ERISA. The PBGC has not instituted proceedings to
terminate, or to appoint a trustee to administer, a USB Pension
Plan, and no event has occurred or condition exists which might
constitute grounds under Section 4042 of ERISA for the termination
of, or the appointment of a trustee to administer, any USB Pension
Plan.
(i) With respect to any USB Benefit Plan that is an
"employee welfare benefit plan" as defined in Section 3(1) of
ERISA, except as disclosed on Schedule 6.14, (i) no such USB
Benefit Plan is unfunded or funded through a "welfare benefit
fund," as such term is defined in Section 419(e) of the Internal
Revenue Code, (ii) each such USB Benefit Plan that is a "group
health plan," as such term is defined in Section 5000(b)(1) of the
Internal Revenue Code is in compliance with the applicable
requirements of Section 4980(f) of the Internal Revenue Code, and
(iii) each such USB Benefit Plan (including any such USB Benefit
Plan covering retirees or former employees) may be amended or
terminated without material liability to USB or any of its
Affiliates.
6.15 Material Contracts. Except as set forth on Schedule
6.15, none of the USB 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
USB Company or the guarantee by any USB 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 USB 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 2%
stockholder, director, officer or employee (other than loans by USB
Bank to employees on terms that, as of the time of a particular
loan, are substantially the same as those prevailing for comparable
transactions with other persons) of any of the USB Companies, any
member of the immediate family of the foregoing or, to the
Knowledge of USB, any Related Interest of any of the foregoing;
(vii) any Contract which limits the freedom of any of the USB
Companies to compete in any line of business or with any Person;
(viii) any Contract providing a power of attorney or similar
authorization given by any of the USB Companies, except as issued
in the ordinary course of business with respect to routine matters;
and (ix) any Contract (other than deposit agreements and
certificates of deposits issued to customers entered into in the
ordinary course of business and letters of credit) that involves
the payment by any of the USB Companies of amounts aggregating
$25,000 or more in any twelve-month period (together with all
Contracts referred to in Section 6.10 of this Agreement, the "USB
Contracts"). None of the USB Companies is in Default under any USB
Contract. All of the indebtedness of any USB Company for money
borrowed is prepayable at any time by such USB Company without
penalty or premium.
6.16 Legal Proceedings. Except as set forth on Schedule
6.16, there is no Litigation instituted or pending, or, to the
Knowledge of USB, 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 USB 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 USB, nor are there any Orders of any
Regulatory Authorities, other governmental authorities or
arbitrators outstanding against any USB Company, that are
reasonably likely to have, individually or in the aggregate, a
Material Adverse Effect on USB.
6.17 Reports. Since January 1, 1993, or the date of
organization if later, each USB 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,
(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 USB). As of their respective dates, each of such
reports and documents, including the financial statements,
exhibits, and schedules thereto, complied in all material respects
with all applicable Laws. As of its respective date, each such
report and document did not, in all material respects, contain any
untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the
statements made therein, in light of the circumstances under which
they were made, not misleading.
6.18 Statements True and Correct; Information in Filings.
No statement, certificate, instrument or other writing furnished or
to be furnished by any USB Company or any Affiliate thereof to FBI
pursuant to this Agreement 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 USB Company or
any Affiliate thereof for inclusion in the documents to be prepared
by USB 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 and 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 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, in
the case of the Registration Statement, at the time the
Registration Statement is declared effective pursuant to the
Securities Act of 1933, as amended, and in the case of any other
documents, the time such documents are filed in final form with any
federal or state regulatory authority and/or at the time they are
distributed to stockholders of USB or FBI, 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 USB
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.
6.19 Accounting, Tax and Regulatory Matters. No USB
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.
ARTICLE 7
CONDUCT OF BUSINESS PENDING CONSUMMATION
7.1 Covenants of Both Parties. Unless the prior written
consent of the other Party shall have been obtained, and except as
otherwise expressly provided for herein, each Party shall and shall
cause each of its Subsidiaries to (a) preserve intact its business
organization, goodwill, relationships with depositors, customers
and employees, and Assets and maintain its rights and franchises,
and (b) take no action which would (i) 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 (ii) adversely affect
the ability of any Party to perform its covenants and agreements
under this Agreement.
7.2 Negative Covenants of FBI. From the date of this
Agreement until the earlier of the Effective Time or the
termination of this Agreement, FBI 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 of
USB, which consent shall not be unreasonably withheld:
(a) amend the Articles of Incorporation, Bylaws or other
governing instruments of any FBI Company; or
(b) incur any additional debt obligation or other
obligation for borrowed money except in the ordinary course of the
business of FBI Subsidiaries consistent with past practices (which
shall include, for FBI Subsidiaries that are depository
institutions, creation of deposit liabilities, purchases of federal
funds, sales of certificates of deposit, advances from the FRB or
the Federal Home Loan Bank, entry into repurchase agreements fully
secured by U.S. government or agency securities and issuances of
letters of credit), or impose, or suffer the imposition, on any
share of stock held by any FBI Company of any Lien or permit any
such Lien to exist; or
(c) 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;
(d) file any application to relocate or terminate the
operations of any banking office of it or any of its Subsidiaries;
(e) 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;
(f) 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 FBI Company, or, other
than regular dividends in an amount not in excess of $.35 per share
of FBI Common Stock per quarter, declare or pay any dividend or
make any other distribution in respect of FBI's capital stock; or
(g) except as specifically set forth in this Agreement or
in the FBI Option 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 FBI Common Stock or any other capital stock of
any FBI 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
(h) adjust, split, combine or reclassify any capital stock
of any FBI 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 FBI Subsidiary or any Asset other
than in the ordinary course of business for reasonable and adequate
consideration; or
(i) acquire any direct or indirect equity interest in any
Person, other than in connection with (i) foreclosures in the
ordinary course of business and (ii) acquisitions of control by a
depository institution Subsidiary in its fiduciary capacity; or
(j) grant any increase in compensation or benefits to the
employees or officers of any FBI 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 its Board of Directors prior to the date of this
Agreement; enter into or amend any severance agreements with
officers of any FBI Company; grant any material increase in fees or
other increases in compensation or other benefits to directors of
any FBI Company; or
(k) enter into or amend any employment Contract between
any FBI Company and any Person (unless such amendment is required
by Law) that the FBI 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
(l) adopt any new employee benefit plan of any FBI Company
or make any material change in or to any existing employee benefit
plans of any FBI Company other than any such change that is
required by Law or required by this Agreement or that, in the
opinion of counsel, is necessary or advisable to maintain the tax
qualified status of any such plan; or
(m) make any significant 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
(n) commence any Litigation other than in accordance with
past practice, settle any Litigation involving any Liability of any
FBI Company for material money damages or restrictions upon the
operations of any FBI Company, or, 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
(o) operate its business otherwise than in the ordinary
course of business or enter into any transaction or course of
conduct not in the ordinary course of business, or not consistent
with safe and sound banking practices or applicable Laws; or
(p) fail to file timely any report required to be filed by
it with any Regulatory Authority; or
(q) intentionally take any action that would reasonably be
expected to jeopardize or delay the receipt of any of the approvals
from Regulatory Authorities required in order to consummate the
transactions provided for in this Agreement; or
(r) make any Loan or advance in excess of $20,000, in the
aggregate, to any stockholder owning 2% or more of the outstanding
shares of FBI Common Stock, director or officer of FBI or any of
the FBI Subsidiaries, or any member of the immediate family of the
foregoing, except on terms substantially the same as those
prevailing at the time of such Loan or advance for comparable
transactions with other persons (provided, however, that the
restrictions of this Section 7.2(r) shall not apply to loans or
advances to Acceptance Loan Company, Inc.); or
(s) cancel without payment in full, or modify any Contract
relating to, any loan or other obligation receivable from any
stockholder, director, officer or employee of any FBI Company or
any member of the immediate family of the foregoing, or any Related
Interest (Known to FBI or any of its Subsidiaries) of any of the
foregoing; or
(t) enter into any Contract for services or otherwise with
any of the 5% stockholders, directors, officers or employees of any
FBI Company or any member of the immediate family of the foregoing,
or any Related Interest (Known to FBI or any of its Subsidiaries)
of any of the foregoing.
7.3 Negative Covenants of USB. From the date of this
Agreement until the earlier of the Effective Time or the
termination of this Agreement, USB 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 FBI, which consent shall
not be unreasonably withheld.
(a) except for those items provided for in Article 2
hereof, amend the Articles of Incorporation, Bylaws or other
governing instruments of any USB Company; or
(b) incur any additional debt obligation or other
obligation for borrowed money except in the ordinary course of the
business of USB Subsidiaries consistent with past practices (which
shall include, for USB Subsidiaries that are depository
institutions, creation of deposit liabilities, purchases of federal
funds, sales of certificates of deposit, advances from the FRB or
the Federal Home Loan Bank, entry into repurchase agreements fully
secured by U.S. government or agency securities and issuances of
letters of credit), or impose, or suffer the imposition, on any
share of stock held by any USB Company of any Lien or permit any
such Lien to exist; or
(c) 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;
(d) file any application to relocate or terminate the
operations of any banking office of it or any of its Subsidiaries;
(e) 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;
(f) 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 USB Company, or
declare or, other than regular dividends in an amount not in excess
of $.13 per share of USB Common Stock per quarter, pay any dividend
or make any other distribution in respect of USB's capital stock;
or
(g) except as specifically set forth in this Agreement or
in the USB Option 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 USB Common Stock or any other capital stock of
any USB 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
(h) adjust, split, combine or reclassify any capital stock
of any USB 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 USB Subsidiary or any Asset other
than in the ordinary course of business for reasonable and adequate
consideration; or
(i) acquire any direct or indirect equity interest in any
Person, other than in connection with (i) foreclosures in the
ordinary course of business and (ii) acquisitions of control by a
depository institution Subsidiary in its fiduciary capacity; or
(j) grant any increase in compensation or benefits to the
employees or officers of any USB 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 its Board of Directors prior to the date of this
Agreement; enter into or amend any severance agreements with
officers of any USB Company; grant any material increase in fees or
other increases in compensation or other benefits to directors of
any USB Company; or
(k) enter into or amend any employment Contract between
any USB Company and any Person (unless such amendment is required
by Law) that the USB 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
(l) adopt any new employee benefit plan of any USB Company
or make any material change in or to any existing employee benefit
plans of any USB Company other than any such change that is
required by Law or required by this Agreement or that, in the
opinion of counsel, is necessary or advisable to maintain the tax
qualified status of any such plan; or
(m) make any significant 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
(n) commence any Litigation other than in accordance with
past practice, settle any Litigation involving any Liability of any
USB Company for material money damages or restrictions upon the
operations of any USB Company, or, 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
(o) operate its business otherwise than in the ordinary
course of business or enter into any transaction or course of
conduct not in the ordinary course of business, or not consistent
with safe and sound banking practices or applicable Laws; or
(p) fail to file timely any report required to be filed by
it with any Regulatory Authority; or
(q) intentionally take any action that would reasonably be
expected to jeopardize or delay the receipt of any of the approvals
from Regulatory Authorities required in order to consummate the
transactions provided for in this Agreement; or
(r) make any Loan or advance in excess of $20,000, in the
aggregate, to any stockholder owning 2% or more of the outstanding
shares of FBI Common Stock, director or officer of USB or any of
the USB Subsidiaries, or any member of the immediate family of the
foregoing, except on terms substantially the same as those
prevailing at the time of such Loan or advance for comparable
transactions with other persons; or
(s) cancel without payment in full, or modify any Contract
relating to, any loan or other obligation receivable from any
stockholder, director, officer or employee of any USB Company or
any member of the immediate family of the foregoing, or any Related
Interest (Known to USB or any of its Subsidiaries) of any of the
foregoing; or
(t) enter into any Contract for services or otherwise with
any of the 5% stockholders, directors, officers or employees of any
USB Company or any member of the immediate family of the foregoing,
or any Related Interest (Known to USB or any of its Subsidiaries)
of any of the foregoing.
7.4 Adverse Changes in Condition. Each Party agrees to
give written notice promptly to the other Party upon becoming aware
of the occurrence or impending occurrence of any event or
circumstance relating to it or any of its Subsidiaries that (i) is
reasonably likely 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 reasonable efforts to
prevent or promptly to remedy the same.
7.5 Reports. Each Party and its Subsidiaries shall
deliver to the other Party copies of all reports to Regulatory
Authorities promptly after the same are filed.
7.6 Acquisition Proposals. Except with respect to this
Agreement and the transactions contemplated hereby, each of FBI and
USB expressly agrees that neither it nor any of its respective
Subsidiaries, nor any director, officer, employee, investment
banker, attorney, accountant or other representative (collectively,
"Representatives") retained by it or any of its respective
Subsidiaries or any affiliate thereof will solicit, review or
accept any Acquisition Proposal by any Person until the earlier of
the Termination of this Agreement or the consummation of the
Merger. Each Party shall promptly notify the other orally and in
writing in the event it or any of its Subsidiaries receives any
inquiry or proposal relating to any such transaction.
ARTICLE 8
ADDITIONAL AGREEMENTS
8.1 Regulatory Matters.
(a) USB shall promptly prepare and file the Registration
Statement with the SEC. USB shall use all reasonable efforts to
have the Registration Statement declared effective under the
Securities Act as promptly as practicable after such filing, and
USB shall thereafter mail the Proxy Statement/Prospectus to its
stockholders. FBI shall mail the Proxy Statement/Prospectus to its
stockholders simultaneously with delivery of notice of the meeting
of Stockholders called to approve the Merger. USB shall also use
all reasonable 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 FBI shall furnish
all information concerning FBI and the holders of its common stock
as may be reasonably 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, FBI will promptly
inform USB and cooperate and assist USB in preparing such amendment
or supplement and mailing the same to the stockholders of FBI. As
of the date of the execution of this Agreement, and assuming the
absence of any additional material factors, (i) unless the Board of
Directors of FBI in its good faith judgment determines that it is
otherwise required by law, it is the intent of the Board of
Directors of FBI that the Proxy Statement/Prospectus shall contain
the recommendation of the Board of Directors of FBI in favor of the
Merger and, subject to the foregoing, the Board of Directors shall
recommend that the holders of FBI Common Stock vote for and adopt
the Merger provided for in the Proxy Statement/Prospectus and this
Agreement and (ii) unless the Board of Directors of USB in its good
faith judgment determines that it is otherwise required by law, it
is the intent of the Board of Directors of USB that the Proxy
Statement/Prospectus shall contain the recommendation of the Board
of Directors of USB in favor of the Merger and, subject to the
foregoing, the Board of Directors of USB shall recommend that the
holders of USB 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 permits,
consents, approvals and authorizations of all third parties and
Regulatory Authorities which are necessary or advisable to
consummate the transactions provided for in this Agreement. USB
and FBI shall have the right to review in advance, and to the
extent practicable each will consult the other on, in each case
subject to applicable Laws relating to the exchange of information,
all the information relating to USB or FBI 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
provided for in 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
transaction 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 herein.
(c) USB and FBI 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 Registration Statement or any other
statement, filing, notice or application made by or on behalf of
USB, FBI or any of their Subsidiaries to any Regulatory Authority
in connection with the Merger and the other transactions provided
for in this Agreement.
(d) USB and FBI shall promptly furnish each other with
copies of written communications received by USB or FBI, 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) USB will indemnify and hold harmless FBI and its
respective officers and directors and FBI will indemnify and hold
harmless USB 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 Securities Laws) and rules and regulations
thereunder and will reimburse the other, and any such director,
officer or controlling person for any legal or other expenses
reasonably incurred in connection with investigating or defending
any actions, whether or not resulting in liability, insofar as such
losses, damages, expenses, liabilities or actions arise out of or
are based upon any untrue statement or alleged untrue statement of
a material fact contained in any such request, statement,
application, report or material or arise out of or are based upon
the omission or alleged omission to state therein a material fact
required to be stated therein, or necessary in order to make the
statement therein not misleading, but only insofar as any such
statement or omission was made in reliance upon and in conformity
with information furnished in writing in connection therewith by
such indemnifying party for use therein.
8.2 Filings with State Offices. Upon the terms and
subject to the conditions of this Agreement, USB shall execute and
file the Articles of Merger with the Secretary of State of Alabama
in connection with the Closing.
8.3 Access to Information.
(a) Upon reasonable notice and subject to applicable Laws
relating to the exchange of information, for a period of 45 days
from the date of this Agreement, and for an additional 20 days
immediately preceding the Effective Time, USB and FBI 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 USB and FBI 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) and (ii)
also other information concerning its business, properties and
personnel as the other party may reasonably request. Neither USB
nor FBI nor any of their respective Subsidiaries shall be required
to provide access to or to disclose information where such access
or disclosure would jeopardize the attorney-client privilege of the
institution in possession or control of such information or would
contravene any Law, Order, fiduciary duty or binding agreement
entered into prior to the date of this Agreement.
(b) All information furnished by USB to FBI or its
respective Representatives or Subsidiaries pursuant hereto shall be
treated as the sole property of USB and, if the Merger shall not
occur, FBI, its Subsidiaries and its Representatives shall return
to USB all of such written information and all documents, notes,
summaries or other materials containing, reflecting or referring
to, or derived from, such information. Each of FBI and its
Subsidiaries 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 FBI's possession prior
to the disclosure thereof by USB; (y) was then generally known to
the public; or (z) was disclosed to FBI by a third party not bound
by an obligation of confidentiality or (ii) disclosures made as
required by Law.
(c) All information furnished by FBI or its Subsidiaries
to USB, its Subsidiaries or its Representatives pursuant hereto
shall be treated as the sole property of FBI and, if the Merger
shall not occur, USB, its Subsidiaries and its Representatives
shall return to FBI all of such written information and all
documents, notes, summaries or other materials containing,
reflecting or referring to, or derived from, such information. USB
shall, and shall use its best efforts to cause its Representatives
and Subsidiaries 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 USB's possession prior
to the disclosure thereof by FBI or any of its Subsidiaries; (y)
was then generally known to the public; or (z) was disclosed to USB
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.
8.4 Agreement as to Efforts to Consummate. Subject to the
terms and conditions of this Agreement, each Party agrees to use,
and to cause its Subsidiaries to use, its 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 using its reasonable
efforts to lift or rescind any Order adversely affecting its
ability to consummate the transactions provided for herein and to
cause to be satisfied the conditions referred to in Article 9 of
this Agreement. Each Party shall use, and shall cause each of its
Subsidiaries to use, its reasonable efforts to obtain all Consents
necessary or desirable for the consummation of the transactions
provided for in this Agreement.
8.5 FBI Stockholders' Meeting. FBI shall call a meeting
of its stockholders (the "FBI 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 FBI
Stockholders' Meeting (a) FBI shall prepare with the assistance of
USB a notice of meeting; (b) USB shall furnish all information
concerning it that FBI may reasonably request in connection with
conducting the FBI Stockholders' Meeting; (c) USB shall prepare and
furnish to FBI for distribution to FBI's stockholders the Proxy
Statement/Prospectus; (d) FBI shall furnish all information
concerning it that USB may reasonably request in connection with
preparing the Proxy Statement/Prospectus; (e) FBI shall deliver the
notice of meeting, Proxy Statement/Prospectus and such other
information as it deems appropriate to its stockholders as soon as
practicable following the date of this Agreement; (f) the Board of
Directors of FBI shall recommend to its stockholders the approval
of this Agreement; and (g) FBI 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 FBI's stockholders. FBI will use its
reasonable best efforts to deliver notice of meeting and, the Proxy
Statement/Prospectus as soon as practicable after receipt of all
required Regulatory approvals and the expiration of all applicable
waiting periods.
8.6 USB Stockholders' Meeting. USB shall call a meeting
of its stockholders (the "USB Stockholders Meeting") for the
purpose of voting upon this Agreement and such other related
matters as it deems appropriate. In connection with the USB
Stockholders' Meeting (a) USB shall prepare a notice of meeting and
the Proxy Statement; (b) FBI shall furnish all information
concerning it that USB may reasonably request in connection with
preparing the Proxy Statement/Prospectus; (c) USB shall deliver the
notice of meeting and Proxy Statement/Prospectus to its
stockholders as soon as practicable following the date of this
Agreement; (d) the Board of Directors of USB shall recommend to its
stockholders the approval of this Agreement; and (e) USB 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 (including the
presentation of draft copies of such proxy materials to the other)
prior to delivery to USB's stockholders. USB will use its
reasonable best efforts to deliver notice of meeting and, the Proxy
Statement/Prospectus within time to hold the USB Stockholders'
Meeting as soon as practicable after receipt of all required
Regulatory approvals and the expiration of all applicable waiting
periods.
8.7 Certificates of Objections.
(a) As soon as practicable (but in no event more than
three business days) after the FBI Stockholders' Meeting, FBI shall
deliver to USB a certificate of the Secretary of FBI containing the
names of the stockholders of FBI that both (a) gave written notice
prior to the taking of the vote on this Agreement at the FBI
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 ("FBI Certificate of
Objections"). The FBI Certificate of Objections shall include the
number of shares of FBI Common Stock held by each such stockholder
and the mailing address of each such stockholder.
(b) As soon as practicable (but in no event more than
three business days) after the USB Stockholders' Meeting, USB shall
deliver to FBI a certificate of the Secretary of USB containing the
names of the stockholders of USB that both (a) gave written notice
prior to the taking of the vote on this Agreement at the USB
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 ("USB Certificate of
Objections"). The USB Certificate of Objections shall include the
number of shares of USB Common Stock held by each such stockholder
and the mailing address of each such stockholder.
8.8 Press Releases. Prior to the Effective Time, FBI and
USB shall consult with each other 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 8.8 shall be deemed
to prohibit any Party from making any disclosure that its counsel
deems necessary or advisable in order to satisfy such Party's
disclosure obligations imposed by Law.
8.9 Expenses. Each Party shall bear and pay its own costs
and expenses incurred in connection with the transactions provided
for herein, including fees and expenses of financial or other
consultants, investment bankers, accountants and counsel. The
fees, costs and expenses of (a) printing and mailing the Proxy
Statement/Prospectus, (b) all filing and other fees paid to the SEC
in connection with the Merger and the transactions provided for
herein, (c) Arthur Andersen & Co. in connection with its loan
review of USB Bank and First Bank and (d) legal counsel and any
consultants in connection with the filings and any other dealings
with bank regulators required in connection herewith, shall be
shared equally by USB and FBI; provided, however, that nothing
contained herein shall limit either Party's rights under the
Termination Provision to recover any damages arising out of the
Party's willful breach of any provision of this Agreement.
8.10 Failure to Close.
(a) SB expressly agrees to consummate the transactions
provided for herein upon the completion of all conditions to
Closing and shall not have taken any action reasonably calculated
to prevent the Closing and shall have not unreasonably delayed 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 Board of
Directors of USB, as determined in good faith by a majority of the
disinterested members thereof based on the advice of USB's outside
counsel, USB may:
(i) in response to an unsolicited request therefor,
participate in discussions or negotiations with, or furnish
information with respect to USB pursuant to a customary
confidentiality agreement (as determined by USB's outside counsel)
to, any person concerning an Acquisition Proposal involving USB or
any of its Subsidiaries; and
(ii) approve or recommend (and, in connection
therewith withdraw or modify its approval or recommendation of this
Agreement or the Merger) a superior Acquisition Proposal involving
USB 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 USB or any of its Subsidiaries, means a bona fide
Acquisition Proposal involving USB or any of its Subsidiaries made
by a third party which a majority of the disinterested members of
the Board of Directors of USB determines in its good faith judgment
(based on the advice of USB's independent financial advisor) to be
more favorable to USB's stockholders than the Merger, and for which
financing, to the extent required, is then committed or which, in
the good faith judgment of a majority of such disinterested board
members (based on the advice of USB's independent financial
advisor), is reasonably capable of being financed by such third
party).
USB shall promptly advise FBI in writing of any Acquisition
Proposal involving USB 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. USB will keep FBI fully informed of the
status and details of any such Acquisition Proposal or inquiry.
(b) FBI expressly agrees to consummate the transaction
provided for herein upon the completion of all conditions to
Closing and shall not have taken any action reasonably calculated
to prevent the Closing and shall have not unreasonably delayed 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 Board of
Directors of FBI, as determined in good faith by a majority of the
disinterested members thereof based on the advice of FBI's outside
counsel, FBI may:
(i) in response to an unsolicited request therefor,
participate in discussions or negotiations with, or furnish
information with respect to FBI pursuant to a customary
confidentiality agreement (as determined by FBI's outside counsel)
to, any person concerning an Acquisition Proposal involving FBI or
any of its Subsidiaries; and
(ii) approve or recommend (and, in connection
therewith withdraw or modify its approval or recommendation of this
Agreement or the Merger) a superior Acquisition Proposal involving
FBI 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 FBI or any of its Subsidiaries, means a bona fide
Acquisition Proposal involving FBI or any of its Subsidiaries made
by a third party which a majority of the disinterested members of
the Board of Directors of FBI determines in its good faith judgment
(based on the advice of FBI's independent financial advisor) to be
more favorable to FBI's stockholders than the Merger, and for which
financing, to the extent required, is then committed or which, in
the good faith judgment of a majority of such disinterested board
members (based on the advice of FBI's independent financial
advisor), is reasonably capable of being financed by such third
party).
FBI shall promptly advise USB in writing of any Acquisition
Proposal involving FBI 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. FBI will keep USB fully informed of the
status and details of any such Acquisition Proposal or inquiry.
8.11 Fairness Opinions. The Board of Directors of USB and
FBI shall have separately engaged a broker satisfactory to each of
USB and FBI, (collectively, the "Brokers"), to act as advisors to
each of their Board of Directors during the transaction and to
opine as to the fairness from a financial point of view of the
Exchange Ratio recommended by each to its stockholders. Each
fairness opinion shall be reviewed by the respective Board and
shall contain financial projections for each of USB and FBI based
on a review of each of their historical performance, current
financial condition and market area analysis along with the
Broker's understanding of future prospects in the banking industry.
Each of the Brokers shall determine and set forth in its fairness
opinion the range of fair market values of FBI and USB using
standard valuation methods for banks. It is expected that said
fairness opinions shall be issued as soon as practicable after the
signing of this Agreement. Each of the Brokers has also agreed to
issue a second fairness opinion at the time of the distribution of
the proxy materials to the stockholders of the respective
institutions. Each Board may, at its option, elect to have final
fairness opinions issued immediately prior to the Effective Time in
order to account for any Material Adverse Change that may have
occurred with regard to USB or FBI. Notwithstanding anything to
the contrary contained herein, the parties hereto acknowledge and
agree that they may decide to employ only one Broker to issue
fairness opinions for each institution.
8.12 Accounting and Tax Treatment. Each of the Parties
undertakes and agrees to use its best efforts to cause the Merger
to qualify for, 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.
8.13 Stock Option/Incentive Program. USB and FBI hereby
covenant and agree that, prior to the Effective Time and subject to
requisite shareholder approval, the resulting entity will adopt a
stock option/incentive program to enhance the retention of key
senior officers, which shall be mutually acceptable to FBI and USB.
8.14 Executive Officers. FBI and USB covenant and agree
that Jack Wainwright shall be elected to serve as the President and
Chief Executive Officer of the Surviving Corporation, and Fred
Huggins shall be elected to serve as the Chairman and Chief
Executive Officer of the Acceptance Loan Company, Inc.; Jim Miller
shall be elected to serve as the Chairman of the Board of the
Surviving Corporation, with Fred Huggins and Ray Sheffield serving
as Vice Chairmen thereof; and Fred Huggins shall be elected to
serve as the Chairman of the Board of the Surviving Subsidiary,
with Don Nichols and Hardie Kimbrough serving as Vice Chairmen
thereof.
8.15 Headquarters. FBI and USB covenant and agree that
the headquarters of the Surviving Corporation shall be located in
Thomasville, Alabama.
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 11.5 of this
Agreement:
(a) Stockholder Approval. The stockholders of FBI and USB
shall have approved this Agreement, and the consummation of the
transactions provided for herein.
(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
contemplated by 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 provided for in this Agreement as to render
inadvisable the consummation of the Merger.
(d) Legal Proceedings. No court or governmental 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 Board of Directors of USB or FBI, renders it
impossible or inadvisable to consummate the transactions provided
for in this Agreement.
(e) Pooling Letters. USB shall have received a letter,
dated as of the Effective Time, in form and substance reasonably
acceptable to it, from Arthur Andersen & Co. to the effect that the
Merger will qualify for pooling-of-interests accounting treatment.
(f) Tax Matters. USB and FBI shall have received a
written opinion of counsel from Maynard, Cooper & Gale, P.C. and
Walston, Stabler, Wells, Anderson & Bains respectively, in form
reasonably satisfactory to them (the "Tax Opinions"), 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 FBI Common Stock for USB Common Stock
will not give rise to gain or loss to the stockholders of FBI with
respect to such exchange (except to the extent of any cash
received), and (iii) neither FBI nor USB 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 FBI and USB shall be entitled to rely upon
representations of officer of FBI and USB reasonably satisfactory
in form and substance to such counsel.
(g) Effectiveness of Registration Statement. The
Registration Statement 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 initiated or threatened by the
SEC.
(h) Other Securities Laws. All state securities Permits
and Consents necessary to consummate the transactions provided for
herein shall have been received by USB.
(i) Employment Agreement. Jack M. Wainwright, III and USB
shall have entered into an employment agreement reasonably
satisfactory to both parties whereby he agrees, among other things,
to serve as the Chief Executive Officer of the Surviving
Corporation for a period of not less than three years from the
Effective Time.
9.2 Conditions to Obligations of USB. The obligations of
USB 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 USB
pursuant to Section 11.5(a) of this Agreement:
(a) Representations and Warranties. The representations
and warranties of FBI 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 FBI.
(b) Performance of Agreements and Covenants. Each and all
of the agreements and covenants of FBI 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. FBI shall have delivered to USB (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
FBI's Board of Directors and 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
USB and its counsel shall request.
(d) Opinion of Counsel to FBI. FBI shall have delivered
to USB the opinion of Walston, Stabler, Wells, Anderson & Bains,
counsel to FBI, dated as of the Effective Time in a form
customarily rendered in transactions of this nature. Said opinion
shall indicate that such counsel is not aware of any untrue
statement of a material fact, or the omission of a material fact
necessary to make any statement not misleading in the context in
which such statement is made, in the Registration Statement, Proxy
Statement/Prospectus, and shall include the representation that FBI
is duly organized under the laws of the State of Alabama and, to
the knowledge of such counsel after due inquiry, is in compliance
with all Securities Laws.
(e) Other Corporate Matters. There shall have been no
determination by the Board of Directors of USB that the
consummation of the Merger or the other transactions contemplated
by this Agreement is not in the best interests of USB or its
stockholders by reason of a Material Adverse Change in the
business, operations or financial condition of FBI which occurs
following the execution of this Agreement.
(f) Comfort Letter. USB shall have received from Dudley,
Hopkins, Jones, Sims and Freeman, independent certified public
accountants, a comfort letter dated as of the Effective Time with
respect to such matters relating to the financial condition of FBI
as USB may reasonably request.
(g) Fairness Opinion. USB shall have received from its
Broker the fairness opinion described in Section 8.11 stating that
the Exchange Ratio provided for in this Agreement and recommended
by USB to its stockholders is fair to USB and its stockholders from
a financial point of view.
9.3 Conditions to Obligations of FBI. The obligations of
FBI 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 FBI
pursuant to Section 11.5(b) of this Agreement:
(a) Representations and Warranties. The representations
and warranties of FBI 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 USB.
(b) Performance of Agreements and Covenants. Each and all
of the agreements and covenants of USB 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. USB shall have delivered to FBI (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
USB's Board of Directors 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
FBI and its counsel shall request.
(d) Opinion of Counsel to USB. USB shall have delivered
to FBI the opinion of Maynard, Cooper & Gale, P.C., counsel to USB,
dated as of the Effective Time in a form customarily rendered in
transactions of this nature. Said opinion shall indicate that such
counsel is not aware of any untrue statement of a material fact, or
the omission of a material fact necessary to make any statement not
misleading in the context in which such statement is made, in the
Registration Statement, Proxy Statement/Prospectus, and shall
include the representation that USB is duly organized under the
laws of the State of Alabama and, to the knowledge of such counsel
after due inquiry, is in compliance with all Securities Laws.
(e) Other Corporate Matters. There shall have been no
determination by the Board of Directors of FBI that the
consummation of the Merger or the other transactions contemplated
by this Agreement is not in the best interests of FBI or its
stockholders by reason of a Material Adverse Change in the
business, operations or financial condition of USB which occurs
following the execution of this Agreement.
(f) Comfort Letter. FBI shall have received from Smith,
Dukes & Buckalew, independent certified public accountants, a
comfort letter dated as of the Effective Time with respect to such
matters relating to the financial condition of USB as FBI may
reasonably request.
(g) Fairness Opinion. FBI shall have received from its
Broker the fairness opinion described in Section8.11, stating that
the Exchange Ratio provided for in this Agreement and recommended
by FBI to its stockholders is fair to FBI and its stockholders from
a financial point of view.
ARTICLE 10
TERMINATION
10.1 Termination. Notwithstanding any other provision of
this Agreement, and notwithstanding the approval of this Agreement
by the stockholders of FBI or USB, this Agreement may be terminated
and the Merger abandoned at any time prior to the Effective Time:
(a) by mutual written consent of the Board of Directors of
USB and the Board of Directors of FBI; or
(b) by the Board of Directors of either Party in the event
of a breach by the other Party of any representation or warranty
contained in this Agreement which cannot be or has not been cured
within thirty (30) days after the giving of written notice to the
breaching Party of such breach and which breach 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 Board of Directors of either Party in the event
of a material breach by the other Party of any covenant, agreement
or other obligation contained in this Agreement which cannot be or
has not been cured within thirty (30) days after the giving of
written notice to the breaching Party of such breach; or
(d) by the Board of Directors of either Party (provided
that the terminating Party is not then in material breach of any
representation, warranty, covenant, agreement or other obligation
contained in this Agreement) if (i) any Consent of any Regulatory
Authority required for consummation of the Merger and the other
transactions provided for herein shall have been denied by final
nonappealable action of such authority or if any action taken by
such authority is not appealed within the time limit for appeal, or
(ii)the stockholders of either USB or FBI fail to vote their
approval of this Agreement and the transactions provided for herein
as required by the ABCA at their respective stockholders' meetings
where the transactions are presented for approval and voted upon;
or
(e) by USB, upon written notice to FBI, if there shall
have occurred any Material Adverse Effect to the business,
operations or financial condition of FBI taken as a whole and such
Material Adverse Effect shall not have been remedied within 15 days
after receipt by FBI of notice in writing from USB specifying the
nature of such Material Adverse Effect and requesting that it be
remedied; or
(f) by FBI, upon written notice to USB, if there shall
have occurred any Material Adverse Effect to the business,
operations, or financial condition of USB taken as a whole and such
Material Adverse Effect shall not have been remedied within 15 days
after receipt by USB of notice in writing from FBI specifying the
nature of such Material Adverse Effect and requesting that it be
remedied; or
(g) by the Board of Directors of either Party if the
Merger shall not have been consummated by March 31, 1997, if the
failure to consummate the transactions provided for herein on or
before such date is not caused by any breach of this Agreement by
the Party electing to terminate pursuant to this Section 10.1(g);
or
(h) by the Board of Directors of either Party if any of
the conditions precedent to the obligations of such Party to
consummate the Merger cannot be satisfied or fulfilled by the date
specified in Section 10.1(g) of this Agreement; or
(i) by USB, to the extent that a majority of the
disinterested members of the Board of Directors of USB shall have
determined to enter into an agreement with respect to a superior
Acquisition Proposal as contemplated by Section 8.10(a); provided
that, concurrently with such termination, FBI shall have the right
to exercise the option to purchase shares of USB Common Stock as
provided for in the USB Option Agreement; in such an event, FBI
shall not be entitled to receive any additional amounts (for
damages, expenses, costs or otherwise) from USB, its officers,
directors or shareholders; or
(j) by FBI, to the extent that a majority of the
disinterested members of the Board of Directors of FBI shall have
determined to enter into an agreement with respect to a superior
Acquisition Proposal as contemplated by Section 8.10(b); provided
that, concurrently with such termination, USB shall have the right
to exercise the option to purchase shares of FBI Common Stock as
provided for in the FBI Option Agreement; in such an event, USB
shall not be entitled to receive any additional amounts (for
damages, expenses, costs or otherwise) from FBI, its officers,
directors or shareholders.
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 8.3, 8.9, 8.10, 10.1(i) 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 this Section 10.3 and Articles 2, 3, 4, and 11 of this
Agreement.
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:
"ABCA" shall mean the Alabama Business Corporation Act.
"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; and (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, August 19,
1996.
"Allowance" shall have the meaning provided in Section 6.9 of
this Agreement.
"Articles of Merger" shall mean the Articles of Merger to be
executed by USB and filed with the Secretary of State of Alabama
relating to the Merger as contemplated by Section 1.1 of this
Agreement.
"Assets" of a Person shall mean all of the assets, properties,
businesses and rights of such Person of every kind, nature,
character and description, whether real, personal or mixed,
tangible or intangible, accrued or contingent, or otherwise
relating to or utilized in such Person's business, directly or
indirectly, in whole or in part, whether or not carried on the
books and records of such Person, and whether or not owned in the
name of such Person or any Affiliate of such Person and wherever
located.
"BHC Act" shall mean the federal Bank Holding Company Act of
1956, as amended.
"Closing" shall mean the closing of the transactions provided
for herein, as described in Section 1.2 of this Agreement.
"Consent" shall mean any consent, approval, authorization,
clearance, exemption, waiver or similar affirmation by any Person
pursuant to any Contract, Law, Order or Permit.
"Contract" shall mean any written or oral agreement,
arrangement, authorization, commitment, contract, indenture,
instrument, lease, obligation, plan, practice, restriction,
understanding or undertaking of any kind or character, or other
document to which any Person is a party or that is binding on any
Person or its capital stock, Assets or business.
"Cutoff" shall have the same 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.
"Effective Time" shall mean the date and time at which the
Merger becomes effective pursuant to applicable Law, 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 have the meaning provided in Section
4.1 of this Agreement.
"Exchange Ratio" shall have the meaning provided in Section
3.1 of this Agreement.
"FBI Benefit Plans" shall have the meaning provided in Section
5.14(a) of this Agreement.
"FBI Call Reports" shall mean (i) the Reports of Income and
Condition of First Bank for the years ended December 31, 1995 and
1994, as filed with the FDIC and the FRB and (ii) the Reports of
Income and Condition of First Bank delivered by FBI to USB with
respect to periods ended subsequent to December 31, 1995.
"FBI Certificate" shall have the meaning provided in Section
4.2 of this Agreement.
"FBI Common Stock" shall mean the $5.00 par value Class A
voting common stock of FBI.
"FBI Companies" shall mean, collectively, FBI and all FBI
Subsidiaries.
"FBI Contracts" shall have the meaning set forth in Section
5.15 of this Agreement.
"FBI ERISA Plans" shall have the meaning set forth in Section
5.14(a) of this Agreement.
"FBI Financial Statements" shall mean (i) the consolidated
balance sheets (including related notes and schedules, if any) of
FBI as of December 31, 1995, 1994 and 1993, 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 FBI to USB, and (ii) the consolidated
balance sheets of FBI (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 FBI to USB with respect to periods ended
subsequent to December 31, 1995.
"FBI Option Agreement" shall mean that certain Stock Option
Agreement dated July 16, 1996 executed by FBI and USB pursuant to
which FBI granted to USB, upon the occurrence of certain
conditions, the option to purchase shares of FBI Common Stock.
"FBI Pension Plans" shall have the meaning set forth in
Section 5.14(a) of this Agreement.
"FBI Representatives" shall have the meaning set forth in
Section 8.7 of this Agreement.
"FBI Stockholders' Meeting" shall mean the meeting of the
stockholders of FBI to be held pursuant to Section 8.5 of this
Agreement, including any adjournment or adjournments thereof.
"FBI Subsidiaries" shall mean the Subsidiaries of FBI, which
shall include the FBI Subsidiaries described in Section 5.4 of this
Agreement and any corporation, bank, savings association or other
organization acquired as a Subsidiary of FBI in the future and
owned by FBI at the Effective Time.
"FDIC" shall mean the Federal Deposit Insurance Corporation.
"First Bank" shall have the meaning set forth in Section
5.4(a) of this Agreement.
"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.
"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.
Section9601 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.
"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 FBI with and into USB
referred to in Section 1.1 of this Agreement.
"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 FBI or USB, and "Parties" shall mean
both FBI and USB.
"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 mean the Proxy Statement
and Prospectus in the form contained in the Registration Statement,
and all amendments and supplements thereto, as referenced in
Section 5.18 of this Agreement.
"Registration Statement" shall mean that registration
statement of USB to be filed with the SEC on Form S-4 registering
the shares of USB Common Stock to be offered to the holders of FBI
Common Stock and all amendments thereto, as referenced in Section
5.18 of this Agreement.
"Regulatory Authorities" shall mean, collectively, the Federal
Trade Commission, the United States Department of Justice, the FRB,
the FDIC, all state regulatory agencies having jurisdiction over
the Parties and their respective Subsidiaries and the SEC.
"Related Interests" shall have the meaning set forth in
Section 5.15 of this Agreement.
"Representatives" shall have the meaning set forth in Section
7.6 of this Agreement.
"SEC" shall mean the Securities and Exchange Commission.
"SEC Documents" shall mean all reports and registration
statements filed, or required to be filed, by a Party or any of its
Subsidiaries with any Regulatory Authority pursuant to the
Securities Laws.
"Securities Laws" shall mean the 1933 Act, the 1934 Act, the
Investment Company Act of 1940 as amended, the Investment Advisors
Act of 1940, as amended, the rust Indenture Act of 1939, as
amended, and the rules and regulations of any Regulatory Authority
promulgated thereunder.
"State Regulator" shall have the meaning set forth in Section
5.9(c) of this Agreement.
"Subsidiaries" shall mean all those corporations, banks,
associations or other entities of which the entity in question owns
or controls 50% or more of the outstanding equity securities either
directly or through an unbroken chain of entities as to each of
which 50% or more of the outstanding equity securities is owned
directly or indirectly by its parent; provided, however, there
shall not be included any such entity acquired through foreclosure
or any such entity the equity securities of which are owned or
controlled in a fiduciary capacity.
"Subsidiary Merger" shall mean the merger of First Bank with
and into USB Bank referred to in Section 1.4 of this Agreement.
"Surviving Corporation" shall mean USB as the surviving
corporation in the Merger.
"Surviving Subsidiary" shall mean USB Bank as the surviving
institution in the Subsidiary Merger.
"Tax Opinions" shall have the meaning set forth in Section
9.1(g) 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.
"USB Bank" shall mean United Security Bank.
"USB Benefit Plan" shall have the meaning set forth in Section
6.14(a) of this Agreement.
"USB Call Reports" shall mean (i) the Reports of Income and
Condition of the respective USB Bank for the years ended December
31, 1995 and 1994, as filed with the FDIC and the FRB and (ii) the
Reports of Income and Condition of the USB Bank delivered by USB to
FBI with respect to periods ended subsequent to December 31, 1995.
"USB Common Stock" shall mean the $.01 par value common stock
of USB.
"USB Companies" shall mean, collectively, USB and all USB
Subsidiaries.
"USB Contracts" shall have the meaning set forth in Section
6.15 of this Agreement.
"USB ERISA Plan" shall have the meaning set forth in Section
6.14(a) of this Agreement.
"USB Financial Statements" shall mean (i) the consolidated
statements of conditions (including related notes and schedules, if
any) of USB as of December 31, 1995, 1994 and 1993, 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 USB in SEC Documents, and (ii) the
consolidated statements of condition of USB (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, 1995.
"USB Option Agreement" shall mean that certain Stock Option
Agreement dated July 16, 1996 executed by USB and FBI pursuant to
which USB granted to FBI, upon the occurrence of certain
conditions, the option to purchase shares of USB Common Stock.
"USB Pension Plan" shall have the meaning set forth in Section
6.14(a) of this Agreement.
"USB Regulatory Reports" shall mean the Consolidated Financial
Statements for Bank Holding Companies, Form FRY 9C, for the years
ended December 31, 1995 and 1994, as filed by USB with the FRB and
(ii) the Consolidated Financial Statements for Bank Holding
Companies, Form FRY 9C, delivered by USB to FBI with respect to
periods ended subsequent to December 31, 1995.
"USB Stockholders' Meeting" shall mean the meeting of the
stockholders of USB to be held pursuant to Section 8.6 of this
Agreement, including any adjournment or adjournments thereof.
"USB Subsidiary" shall mean the Subsidiary of USB, which shall
include USB Bank, as described in Section 6.4 of this Agreement,
and any corporation, bank, savings association, or other
organization acquired as a Subsidiary of USB in the future and
owned by USB at the Effective Time.
11.2 Expenses. Each Party shall bear and pay its own
costs and expenses incurred in connection with the transactions
provided for herein, including fees and expenses of financial or
other consultants, investment bankers, accountants and counsel;
provided, however, that nothing contained herein shall limit either
Party's rights under the termination provisions contained in
Article 10 hereof to recover any damages arising out of the other
Party's willful breach of any provision of this Agreement.
11.3 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.
11.4 Amendments. To the extent permitted by Law, this
Agreement may be amended by a subsequent writing signed by each of
the Parties upon the approval of the Boards of Directors of each of
the Parties; provided, however, that after approval of this
Agreement by the respective stockholders of FBI and USB, there
shall be made no amendment that pursuant to the ABCA requires
further approval by the FBI or USB stockholders, without the
further approval of such stockholders.
11.5 Waivers.
(a) Prior to or at the Effective Time, USB, acting through
its Board of Directors, 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 FBI, to waive or
extend the time for the compliance or fulfillment by FBI of any and
all of its obligations under this Agreement, and to waive any or
all of the conditions precedent to the obligations of USB 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
USB.
(b) Prior to or at the Effective Time, FBI, acting through
its Board of Directors, 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 USB, to waive or
extend the time for the compliance or fulfillment by USB of any and
all of its obligations under this Agreement, and to waive any or
all of the conditions precedent to the obligations of FBI under
this Agreement, except any condition which, if no 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
FBI.
11.6 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.
11.7 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:
FBI: First Bancshares, Inc.
131 Main Street
Grove Hill, Alabama 36451
Telecopy Number: (334) 275-8255
Attention: Fred Huggins, President and Chief Executive Officer
Copy to Counsel: Walston, Stabler, Wells, Anderson & Bains
500 Financial Center
505 20th Street North
Birmingham, Alabama 35203
Telecopy Number: (205) 251-0700
Attention: C. Henry Marston
USB: United Security Bancshares, Inc.
131 Front Street
Thomasville, Alabama 36784
Telecopy Number: (334) 636-9606
Attention: Jack M. Wainwright, III,
President and Chief Executive Officer
Copy to Counsel: Maynard, Cooper & Gale, P.C.
1901 Sixth Avenue North
2400 AmSouth/Harbert Plaza
Birmingham, Alabama 35203
Telecopy Number: (205) 254-1999
Attention: Mark L. Drew
11.8 Brokers and Finders. Other than as described in
Section 8.11 of this Agreement, 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 FBI or USB, each of FBI and USB,
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.
11.9 Governing Law. This Agreement shall be governed by
and construed in accordance with the Laws of the State of Alabama,
without regard to any applicable conflicts of Laws, except to the
extent federal law shall be applicable.
11.10 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.
11.11 Captions. The captions contained in this Agreement
are for reference purposes only and are not part of this Agreement.
11.12 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
USB States or any state having jurisdiction, this being in addition
to any other remedy to which they are entitled at law or in equity.
11.13 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.
11.14 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.
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.
Attest: FIRST BANCSHARES, INC.
/s/ Bruce Wilson By: /s/ Fred Huggins
- ------------------------- ------------------------------
Secretary Fred Huggins
Its: President and Chief Executive Officer
[CORPORATE SEAL]
Attest: UNITED SECURITY BANCSHARES, INC.
/s/ Larry M. Sellers By: /s/ Jack M. Wainwright, III
- ------------------------- ------------------------------
Secretary Jack M. Wainwright, III
Its: President and Chief Executive Officer
[CORPORATE SEAL]
Attest: FIRST BANK AND TRUST
/s/ Bruce Wilson By: /s/ Dan Barlow
- ------------------------- ------------------------------
Secretary Dan Barlow
Its: Clarke County President
[CORPORATE SEAL]
Attest: UNITED SECURITY BANK
/s/ W.D. Morgan By: /s/ Jack M. Wainwright, III
- ------------------------- ------------------------------
Assistant Secretary Jack M. Wainwright, III
Its: President and Chief Executive Officer
[CORPORATE SEAL]
<PAGE>
Appendix B
ALABAMA CODE ANNOTATED
TITLE 10. CORPORATIONS, PARTNERSHIPS AND ASSOCIATIONS
CHAPTER 2B. BUSINESS CORPORATIONS
Article 13. Dissenters' Rights
Section 10-2B-13.01. Definitions.
(A) "Corporate action" means the filing of articles of merger or
share exchange by the probate judge or Secretary of State, or
other action giving legal effect to a transaction that is the
subject of dissenters' rights.
(B) "Corporation" means the issuer of shares held by a dissenter before
the corporate action, or the surviving or acquiring corporation by
merger or share exchange of that issuer.
(C) "Dissenter" means a shareholder who is entitled to dissent from
corporate action under Section 10-2B-13.02 and who exercises that
right when and in the manner required by Sections 10-2B-13.20
through 10-2B-13.28.
(D) "Fair Value," with respect to a dissenter's shares, means the value
of the shares immediately before the effectuation of the corporate
action to which the dissenter objects, excluding any appreciation
or depreciation in anticipation of the corporate action unless
exclusion would be inequitable.
(E) "Interest" means interest from the effective date of the corporate
action until the date of payment, at the average rate currently
paid by the corporation on its principal bank loans, or, if none,
at a rate that is fair and equitable under all circumstances.
(F) "Record shareholder" means the person in whose name shares are
registered in the records of a corporation or the beneficial owner
of shares to the extent of the rights granted by a nominee
certificate on file with a corporation.
(G) "Beneficial shareholder" means the person who is a beneficial owner
of shares held in a voting trust or by a nominee as the record
shareholder.
(H) "Shareholder" means the record shareholder or the beneficial
shareholder.
Section 10-2B-13.02. Right to dissent.
(a) A shareholder is entitled to dissent from, and obtain payment of
the fair value of his or her shares in the event of, any of the
following corporate actions:
(1) Consummation of a plan of merger to which the corporation is
a party (i) if shareholder approval is required for the merger by
Section 10-2B-11.03 or the articles of incorporation and the
shareholder is entitled to vote on the merger or (ii) if the
corporation is a subsidiary that is merged with its parent under
Section 10-2B-11.04;
(2) Consummation of a plan of share exchange to which the
corporation is a party as the corporation whose shares will be
acquired, if the shareholder is entitled to vote on the plan;
(3) Consummation of a sale or exchange by all, or substantially
all, of the property of the corporation other than in the usual
and regular course of business, if the shareholder is entitled
to vote on the sale or exchange, including a sale in dissolution,
but not including a sale pursuant to court order or a sale for
cash pursuant to a plan by which all or substantially all
of the net proceeds of the sale will be distributed to the
shareholders within one year after the date of sale;
(4) To the extent that the articles of incorporation of
the corporation so provide, an amendment of the articles of
incorporation that materially and adversely affects rights in
respect to a dissenter's shares because it:
(i) Alters or abolishes a preferential right of the shares;
(ii) Creates, alters, or abolishes a right in respect of
redemption, including a provision respecting a sinking
fund for the redemption or repurchase of the shares;
(iii) Alters or abolishes a preemptive right of the holder
of the shares to acquire shares or other securities;
(iv) Excludes or limits the right of the shares to vote on
any matter, or to cumulate votes, other than a
limitation by dilution through issuance of shares or
other securities with similar voting rights; or
(v) Reduces the number of shares owned by the shareholder
to a fraction of a share if the fractional share so
created is to be acquired for cash under Section
10-2B-6.04; or
(5) Any corporate action taken pursuant to a shareholder vote
to the extent the articles of incorporation, bylaws, or a
resolution of the board of directors provides that voting or
nonvoting shareholders are entitled to dissent and obtain
payment for their shares.
(b) A shareholder entitled to dissent and obtain payment for
shares under this chapter may not challenge the corporate
action creating his or her entitlement unless the action is
unlawful or fraudulent with respect to the shareholder or the
corporation.
Section 10-2B-13.03. Dissent by nominees and beneficial owners.
(a) A record shareholder may assert dissenters' rights as to fewer
than all of the shares registered in his or her name only if
he or she dissents with respect to all shares beneficially owned
by any one person and notifies the corporation in writing of the
name and address of each person on whose behalf he or she asserts
dissenters' rights. The rights of a partial dissenter under this
subsection are determined as if the shares to which he or she
dissents and his or her other shares were registered in the names
of different shareholders.
(b) A beneficial shareholder may assert dissenters' rights as to
shares held on his or her behalf only if:
(1) He or she submits to the corporation the record shareholder's
written consent to the dissent not later than the time the
beneficial shareholder asserts dissenters' rights; and
(2) He or she does so with respect to all shares of which he or
she is the beneficial shareholder or over which he or she has
power to direct the vote.
Section 10-2B-13.20. Notice of dissenters' rights.
(a) If proposed corporate action creating dissenters' rights under
Section 10-2B-13.02 is submitted to a vote at a shareholders'
meeting, the meeting notice must state that shareholders are or
may be entitled to assert dissenters' rights under this article
and be accompanied by a copy of this article.
(b) If corporate action creating dissenters' rights under Section
10-2B-13.02 is taken without a vote of shareholders, the
corporation shall (1) notify in writing all shareholders entitled
to assert dissenters' rights that the action was taken; and (2)
send them the dissenters' notice described in Section 10-2B-13.22.
Section 10-2B-13.21. Notice of intent to demand payment.
(a) If proposed corporate action creating dissenters' rights under
Section 10-2B-13.02 is submitted to a vote at a shareholder's
meeting, a shareholder who wishes to assert dissenters' rights
(1) must deliver to the corporation before the vote is taken
written notice of his or her intent to demand payment or [sic]
his or her shares if the proposed action is effectuated; and
(2) must not vote his or her shares in favor of the proposed
action.
(b) A shareholder who does not satisfy the requirements of subsection
(a) is not entitled to payment for his or her shares under this
article.
Section 10-2B-13.22. Dissenters' notice.
(a) If proposed corporate action creating dissenters' rights under
Section 10-2B-13.02 is authorized at a shareholders' meeting,
the corporation shall deliver a written dissenters' notice to
all shareholders who satisfied the requirements of Section
10-2B-13.21.
(b) The dissenters' notice must be sent no later than 10 days after
the corporate action was taken, and must:
(1) State where the payment demand must be sent;
(2) Inform holders of shares to what extent transfer of the shares
will be restricted after the payment demand is received;
(3) Supply a form for demanding payment;
(4) Set a date by which the corporation must receive the
payment demand, which date may not be fewer than 30 nor more than
60 days after the date the subsection (a) notice is delivered; and
(5) Be accompanied by a copy of this article.
Section 10-2B-13.23. Duty to demand payment.
(a) A shareholder sent a dissenters' notice described in Section
10-2B-13.22 must demand payment in accordance with the terms
of the dissenters' notice.
(b) The shareholder who demands payment retains all other rights
of a shareholder until those rights are canceled or modified
by the taking of the proposed corporate action.
(c) A shareholder who does not demand payment by the date set in
the dissenters' notice is not entitled to payment for his or
her shares under this article.
(d) A shareholder who demands payment under subsection (a) may not
thereafter withdraw that demand and accept the terms offered
under the proposed corporate action unless the corporation
shall consent thereto.
Section 10-2B-13.24. Share restrictions.
(a) Within 20 days after making a formal payment demand, each
shareholder demanding payment shall submit the certificate or
certificates representing his or her shares to the corporation for
(1) notation thereon by the corporation that such demand has been
made and (2) return the shareholder by the corporation.
(b) The failure to submit his or her shares for notation shall, at the
option of the corporation, terminate the shareholders' rights under
this article unless a court of competent jurisdiction, for good and
sufficient cause, shall otherwise direct.
(c) If shares represented by a certificate on which notation has been
made shall be transferred, each new certificate issued therefor
shall bear similar notation, together with the name of the original
dissenting holder of such shares.
(d) A transferee of such share shall acquire by such transfer no rights
in the corporation other than those which the original dissenting
shareholder had after making demand for payment of the fair value
thereof.
Section 10-2B-13.25. Offer of payment.
(a) As soon as the proposed corporate action is taken, or upon receipt
of a payment demand, the corporation shall offer to pay each
dissenter who complied with Section 10-2B-13.23 the amount the
corporation estimates to be the fair value of his or her shares,
plus accrued interest.
(b) The offer of payment must be accompanied by:
(1) The corporation's balance sheet as of the end of a fiscal year
ending not more than 16 months before the date of the offer, an
income statement for that year, and the latest available interim
financial statements, if any;
(2) A statement of the corporation's estimate of the fair value of
the shares;
(3) An explanation of how the interest was calculated;
(4) A statement of the dissenter's right to demand payment
under Section 10-2B-13.28; and
(5) A copy of this article.
(c) Each dissenter who agrees to accept the corporation's offer of
payment in full satisfaction of his or her demand must
surrender to the corporation the certificate or certificates
representing his or her shares in accordance with terms of the
dissenters' notice. Upon receiving the certificate or
certificates, the corporation shall pay each dissenter the fair
value of his or her shares, plus accrued interest, as provided in
subsection (a). Upon receiving payment, a dissenting shareholder
ceases to have any interest in the shares.
Section 10-2B-13.26. Failure to take corporate action.
(a) If the corporation does not take the proposed action within 60 days
after the date set for demanding payment, the corporation shall
release the transfer restrictions imposed on shares.
(b) If, after releasing transfer restrictions, the corporation takes
the proposed action, it must send a new dissenters' notice under
Section 10-2B-13.22 and repeat the payment demand procedure.
Section 10-2B-13.27. Reserved.
Section 10-2B-13.28. Procedure if shareholder dissatisfied with
offer of payment.
(a) A dissenter may notify the corporation in writing of his or her
own estimate of the fair value of his or her shares and amount
of interest due, and demand payment of his or her estimate,
or reject the corporation's offer under Section 10-2B-13.25 and
demand payment of the fair value of his or her shares and interest
due, if:
(1) The dissenter believes that the amount offered under
Section 10-2B-13.25 is less than the fair value of his or her
shares or that the interest due is incorrectly calculated;
(2) The corporation fails to make an offer under Section
10-2B-13.25 within 60 days after the date set for demanding
payment; or
(3) The corporation, having failed to take the proposed
action, does not release the transfer restrictions imposed on
shares within 60 days after the date set for demanding payment.
(b) A dissenter waives his or her right to demand payment under this
section unless he or she notifies the corporation or his or her
demand in writing under subsection (a) within 30 days after the
corporation offered payment for his or her shares.
Section 10-2B-13.30. Court action.
(a) If a demand for payment under Section 10-2B-13.28 remains
unsettled, the corporation shall commence a proceeding within 60
days after receiving the payment demand and petition the court to
determine the fair value of the shares and accrued interest. If
the corporation does not commence the proceeding within the 60 day
period, it shall pay each dissenter whose demand remains unsettled
the amount demanded.
(b) The corporation shall commence the proceeding in the circuit court
of the county where the corporation's principal office (or, if none
in this state, its registered office) is located. If the
corporation is a foreign corporation without a registered office
in this state, it shall commence the proceeding in the county in
this state where the registered office of the domestic corporation
merged with or whose shares were acquired by the foreign
corporation was located.
(c) The corporation shall make all dissenters (whether or not residents
of this state) whose demands remain unsettled parties to the
proceeding as in an action against their shares, and all parties
must be served with a copy of the petition. Nonresidents may be
served by registered or certified mail or by publication as
provided under the Alabama Rules of Civil Procedure.
(d) After service is completed, the corporation shall deposit with the
clerk of the court an amount sufficient to pay unsettled claims of
all dissenters party to the action in an amount per share equal to
its prior estimate of fair value, plus accrued interest, under
Section 10-2B-13.25.
(e) The jurisdiction of the court in which the proceeding is commenced
under subsection (b) is plenary and exclusive. The court may
appoint one or more persons as appraisers to receive evidence and
recommend decision on the question of fair value. The appraisers
have the powers described in the order appointing them, or in any
amendment to it. The dissenters are entitled to the same
discovery rights as parties in other civil proceedings.
(f) Each dissenter made a party to the proceeding is entitled to
judgment for the amount the court finds to be the fair value of
his or her shares, plus accrued interest. If the court's
determination as to the fair value of a dissenter's shares, plus
accrued interest, is higher than the amount estimated by the
corporation and deposited with the clerk of the court pursuant to
subsection (d), the corporation shall pay the excess to the
dissenting shareholder. If the court's determination as to fair
value, plus accrued interest, of a dissenter's shares is less than
the amount estimated by the corporation and deposited with the
clerk of the court pursuant to subsection (d), then the clerk shall
return the balance of funds deposited, less any costs under Section
10-2B-13.31, to the corporation.
(g) Upon payment of the judgment, and surrender to the corporation of
the certificate or certificates representing the appraised shares,
a dissenting shareholder ceases to have any interest in the shares.
Section 10-2B-13.31. Court costs and counsel fees.
(a) The court in an appraisal proceeding commenced under Section
10-2B-13.30 shall determine all costs of the proceeding, including
compensation and expenses of appraisers appointed by the court.
The court shall assess the costs against the corporation, except
that the court may assess costs against all or some of the
dissenters, in amounts the court finds equitable, to the extent the
court finds the dissenters acted arbitrarily, vexatiously, or not
in good faith in demanding payment under Section 10-2B-13.28.
(b) The court may also assess the reasonable fees and expenses of
counsel and experts for the respective parties, in amounts the
court finds equitable
(1) Against the corporation and in favor of any or all dissenters
if the court finds the corporation did not substantially comply
with the requirements of Sections 10-2B-13.20 through 10-2B-13.28;
or
(2) Against either the corporation or a dissenter, in favor of any
other party, if the court finds that the party against whom the
fees and expenses are assessed acted arbitrarily, vexatiously, or
not in good faith with respect to the rights provided by this chapter.
(c) If the court finds that the services of counsel for any dissenter
were of substantial benefit to other dissenters similarly situated,
and that the fees for those services should not be assessed against
the corporation, the court may award to these counsel reasonable
fees to be paid out of the amounts awarded the dissenters who were
benefitted.
Section 10-2B-13.32. Status of shares after payment.
Shares acquired by a corporation pursuant to payment of the
agreed value therefor or to payment of the judgment entered
therefor, as in this chapter provided, may be held and disposed of
by such corporation as in the case of other treasury shares, except
that, in the case of a merger or share exchange, they may be held
and disposed of as the plan of merger or share exchange may
otherwise provide.
<PAGE>
Appendix C
Independent Auditor's Report
To the Board of Directors
and Stockholders
First Bancshares, Inc.
Grove Hill, Alabama
We have audited the accompanying consolidated statements of
financial condition of First Bancshares, Inc. and subsidiaries as
of December 31, 1995 and 1994, and the related consolidated
statements of income, changes in stockholders' equity and cash
flows for each of the three years in the period ended December 31,
1995. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion
on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements. An audit also
includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the consolidated financial
position of First Bancshares, Inc. and subsidiaries at December 31,
1995 and 1994, the consolidated results of their operations and
their cash flows for each of the three years in the period ended
December 31, 1995, in conformity with generally accepted accounting
principles.
Birmingham, Alabama
January 26, 1996
<PAGE>
<TABLE>
FIRST BANCSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
December 31, 1995 and 1994
<CAPTION>
ASSETS 1995 1994
------------ ------------
<S> <C> <C>
Cash and due from banks $ 7,277,436 $ 3,388,803
Interest bearing deposits in other banks 93,011 774,412
Federal funds sold 1,640,000 1,340,000
Trading account securities - 405,775
Equity in unconsolidated investee 618,669 630,669
Investment securities available for sale 31,728,609 24,983,383
Investment securities held to maturity 718,879 267,958
Other investments 2,712,752 2,639,272
Loans, net of unearned income 127,797,227 82,870,302
Less: Allowance for loan losses (1,688,588) (1,131,515)
------------ ------------
Net loans 126,108,639 81,738,787
Premises and equipment, net 2,271,220 1,694,527
Intangibles, net 3,911,221 1,389,485
Accrued interest receivable 1,969,758 1,324,503
Other real estate 63,182 374,226
Deferred taxes 221,175 936,503
Other assets 317,456 239,747
------------ ------------
Total assets $179,652,007 $122,128,050
------------ ------------
------------ ------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits
Noninterest-bearing demand $ 18,392,730 $ 10,468,606
Interest-bearing demand 40,779,678 29,841,079
Savings 13,469,272 10,201,071
Certificates of deposit $100,000
and over 17,948,657 10,791,389
Other time 67,275,430 43,948,027
------------ ------------
Total deposits 157,865,767 105,250,172
Advance from FHLB 438,596 473,684
Securities sold under repurchase
agreements 39,565 1,392,527
Long-term debt 3,594,500 1,470,000
Accrued expenses and other liabilities 1,147,167 665,436
------------ ------------
Total liabilities 163,085,595 109,251,819
Stockholders' equity
Common stock, par value $1 per
share; authorized 500,000
shares; issued 240,000 shares 240,000 240,000
Surplus 2,058,985 1,820,000
Retained earnings 14,101,950 11,494,690
Unrealized gain (loss) on securities
available for sale, net of tax 170,605 (477,316)
Treasury stock at cost - 157 and 7,407
shares, respectively (5,128) (201,143)
------------ ------------
Total stockholders' equity 16,566,412 12,876,231
------------ ------------
Total liabilities and
stockholders' equity $179,652,007 $122,128,050
------------ ------------
------------ ------------
<FN>
See Accompanying Notes to Consolidated Financial Statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
FIRST BANCSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
For the Years Ended December 31, 1995, 1994 and 1993
<CAPTION>
1995 1994 1993
Interest income ----------- ----------- -----------
<S> <C> <C> <C>
Interest and fees on loans $11,691,974 $ 7,261,119 $ 6,120,233
Interest on investment securities
Taxable 1,431,763 922,263 1,599,274
Exempt from Federal income tax 817,469 784,750 857,744
Interest on federal funds sold 256,364 111,117 91,891
Interest on other investments 206,835 236,169 177,607
----------- ----------- -----------
Total interest income 14,404,405 9,315,418 8,846,749
Interest expense
Interest on deposits 5,861,878 3,440,198 3,395,310
Interest on repurchase agreements
and FHLB advance 133,058 125,929 206,515
Interest on long-term debt 301,388 109,033 118,962
----------- ----------- -----------
Total interest expense 6,296,324 3,675,160 3,720,787
----------- ----------- -----------
Net interest income 8,108,081 5,640,258 5,125,962
Provision for loan losses 255,290 195,000 335,000
----------- ----------- -----------
Net interest income after
provision for loan losses 7,852,791 5,445,258 4,790,962
Noninterest income
Service charges and fees 922,246 607,508 617,090
Commissions 97,334 108,439 107,275
Net investment securities gains 28,814 379,299 53,520
Net trading account profit 280,303 - 57,315
Other income 115,827 114,030 104,676
----------- ----------- -----------
Total noninterest income 1,444,524 1,209,276 939,876
Noninterest expenses
Salaries and employee benefits 2,716,163 1,652,605 1,732,939
Net trading account losses - 1,473,145 -
Occupancy expense 258,637 239,093 212,171
Furniture and equipment expense 266,545 224,309 228,216
Insurance and assessments 246,498 268,562 264,153
Other operating expenses 2,180,997 1,262,673 814,489
----------- ----------- -----------
Total noninterest expenses 5,668,840 5,120,387 3,251,968
----------- ----------- -----------
Income before income taxes 3,628,475 1,534,147 2,478,870
Income tax expense 793,364 206,591 689,647
----------- ----------- -----------
Net income $ 2,835,111 $ 1,327,556 $ 1,789,223
----------- ----------- -----------
----------- ----------- -----------
Net income per share $ 11.95 $ 5.71 $ 7.69
----------- ----------- -----------
----------- ----------- -----------
<FN>
See Accompanying Notes to Consolidated Financial Statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
FIRST BANCSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
For the Years Ended December 31, 1995, 1994 and 1993
<CAPTION>
Net Unrealized Gain Total
Common Retained (Loss) on Securities Treausry Stockholders'
Stock Surplus Earnings Available for Sale Stock at Cost Equity
-------- ---------- ----------- --------------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Balance at January 1, 1993 $240,000 $1,820,000 $ 8,773,319 $(26,431) $(201,143) $10,605,745
Net income - - 1,789,223 - - 1,789,223
Dividend declared - - (197,704) - - (197,704)
Net change in unrealized loss
on equity securities - - - (10,173) - ( 10,173)
-------- ----------- ----------- -------- ------- -----------
Balance at December 31, 1993 240,000 1,820,000 10,364,838 (36,604) (201,143) 12,187,091
Adoption of FAS 115 on January 1,
1994, unrealized gain on
securities available for sale,
net of taxes - - - 486,689 - 486,689
Net income - - 1,327,556 - - 1,327,556
Dividend declared - - (197,704) - - (197,704)
Net change in unrealized gain on
securities available for sale,
net of taxes - - - (927,401) - (927,401)
-------- ----------- ----------- -------- ------- -----------
Balance at December 31, 1994 240,000 1,820,000 11,494,690 (477,316) (201,143) 12,876,231
Net income - - 2,835,111 - - 2,835,111
Dividends declared - - (227,851) - - (227,851)
Sale of 7,250 shares of treasury
stock - 238,985 - - 196,015 435,000
Net change in unrealized loss on
securities available for sale,
net of taxes - - - 647,921 - 647,921
-------- ----------- ----------- -------- --------- -----------
Balance at December 31, 1995 $240,000 $ 2,058,985 $14,101,950 $170,605 $ (5,128) $16,566,412
-------- ----------- ----------- -------- --------- -----------
-------- ----------- ----------- -------- --------- -----------
<FN>
See Accompanying Notes to Consolidated Financial Statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
FIRST BANCSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Years Ended December 31, 1995, 1994 and 1993
<CAPTION>
1995 1994 1993
------------ ------------ ------------
Cash flows from operating activities
<S> <C> <C> <C>
Net income $ 2,835,111 $ 1,327,556 $ 1,789,223
Adjustments to reconcile net income
to net cash provided by
operations:
Depreciation and amortization 473,857 255,609 244,090
Net premium amortization 78,786 138,814 275,180
Provision for loan losses 255,290 195,000 335,000
Net investment securities gains (28,814) (379,299) (53,520)
Losses (gains) from other real estate 20,773 45,277 (61,588)
Net decrease (increase) in trading
account securities 405,775 1,494,219 (1,899,994)
Equity in (earnings) loss of investee 12,000 (19,776) 35,507
(Increase) decrease in accrued
interest receivable (411,477) (109,393) 49,765
(Increase) decrease in other assets 224,228 (743,314) 47,596
Increase (decrease) in accrued
interest payable 272,509 (34,029) (61,238)
Increase (decrease) in accrued income
taxes payable (198,591) 9,200 (8,001)
Increase (decrease) in other
liabilities 303,922 47,812 (11,835)
------------ ------------ ------------
Net cash provided by operations 4,243,369 2,227,676 680,185
Cash flows from investing activities
Net decrease (increase) in interest
bearing deposits in other banks 681,401 (573,943) -
Net increase (decrease) in federal funds
sold (300,000) (1,340,000) 1,040,000
Purchases of securities available
for sale (20,279,000) (4,205,156) -
Proceeds from sales of securities
available for sale 21,861,430 10,268,418 -
Proceeds from maturities of securities
available for sale 4,186,876 3,870,124 -
Proceeds from maturities of investment
securities to be held to maturity 892,379 37,859 19,617,509
Proceeds from sales of investment
securities held to maturity - - 4,372,725
Purchases of investment securities to
be held to maturity (1,343,300) - (15,742,233)
Net increase in loans (13,794,405) (7,920,512) (15,814,820)
Purchases of premises and equipment (417,828) (95,071) (188,079)
Capital contributions to investee - (100,400) (546,000)
Purchase of Centreville branch, net
of cash acquired 1,566,943 - -
Proceeds from sale of other real estate - - 212,843
------------ ------------ ------------
Net cash used in investing
activities (6,945,504) (58,681) (7,048,055)
Cash flows from financing activities
Net (decrease) increase in demand
and savings deposits (1,668,742) (422,332) 4,949,502
Net increase in certificates of
deposit and other time deposits 7,315,911 3,890,412 567,124
Net (decrease) increase in repurchase
agreements and federal funds
purchased (1,352,962) 425,527 967,000
Principal payments on long-term debt (1,630,500) (750,000) (570,000)
Proceeds from long-term debt 3,755,000 - -
Net (decrease) increase in advance
from FHLB (35,088) (5,026,316) 500,000
Proceeds from sale of treasury stock 435,000 - -
Dividends paid (227,851) (197,704) (188,265)
------------ ------------ ------------
Net cash provided by
(used in) financing
activities 6,590,768 (2,080,413) 6,225,361
------------ ------------ ------------
Net increase (decrease) in cash and
due from banks 3,888,633 88,582 (142,509)
Cash and due from banks at beginning
of year 3,388,803 3,300,221 3,442,730
------------ ------------ ------------
Cash and due from banks at end of year $ 7,277,436 $ 3,388,803 $ 3,300,221
------------ ------------ ------------
------------ ------------ ------------
Supplemental Cash Flow Information
Selected cash payments and noncash
activities were as follows:
Cash payments for income taxes $ 715,874 $ 839,037 $ 776,801
Cash payments for interest 6,023,815 3,709,189 3,782,025
Noncash investing and financing
activity Assets acquired
by assuming directly
related liabilities 47,005,426 200,000 200,000
<FN>
See Accompanying Notes to Consolidated Financial Statements.
</FN>
</TABLE>
<PAGE>
FIRST BANCSHARES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1995, 1994 and 1993
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accounting policies followed by the Company and its
subsidiaries and the method of applying those policies which affect
the determination of financial condition, results of operations and
cash flows are summarized below.
Reclassifications
Certain reclassifications have been made to the 1994 consolidated
financial statements in order to conform to the 1995 presentation.
Such reclassification had no effect on net income or total assets.
Consolidation
The consolidated financial statements of the Company include the
accounts of the following:
<TABLE>
<CAPTION>
Percentage
Company Owned Parent Company
------- ---------- --------------
<S> <C> <S>
First Bank and Trust 100% First Bancshares, Inc.
I & I, Inc. 100% First Bancshares, Inc.
Acceptance Loan Co., Inc. 100% First Bank and Trust
</TABLE>
All significant intercompany accounts and transactions have been
eliminated.
Branch Acquisition
On February 17, 1995, the Bank acquired the assets of the
Centreville and Woodstock branches of The Peoples Bank of Elba by
assumption of the branches' liabilities and a premium payment of
$2,725,000. The premium payment has been capitalized as goodwill
and is being amortized over a fifteen year period.
Use of Estimates
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
Material estimates that are particularly susceptible to significant
change relate to the determination of the allowance for losses on
loans. While management uses available information to recognize
losses on loans, future additions to the allowances may be
necessary based on changes in local economic conditions. In
addition, regulatory agencies, as an integral part of their
examination process, periodically review the Company's allowance
for losses on loans. Such agencies may require the Company to
recognize additions to the allowances based on their judgments
about information available to them at the time of their
examination.
Investments in Securities
The Bank's investments in securities as of January 1, 1994 and
thereafter are classified in three categories and accounted for as
follows as required by FAS 115.
-- Trading Account Securities. Government bonds and mortgage
backed securities held principally for resale in the near term
are classified as trading securities and recorded at their fair
values. Unrealized gains and losses on trading securities are
included in other income.
-- Investment Securities to Be Held to Maturity. Bonds, notes and
debentures for which the Bank has the positive intent and ability
to hold to maturity are reported at cost, adjusted for amortization
of premiums and accretion of discounts which are recognized in
interest income using the interest method over the period to maturity.
-- Investment Securities Available for Sale. Securities available for
sale consist of bonds, notes, debentures, and certain equity
securities not classified as trading securities nor as securities
to be held to maturity.
Unrealized holding gains and losses, net of deferred income tax, on
securities available for sale are reported as a net amount in a
separate component of stockholders' equity until realized.
Gains and losses on the sale of securities available for sale are
determined using the specific-identification method.
Loans and Allowance for Loan Losses
Loans are stated at the amount of unpaid principal, reduced by
unearned discount and an allowance for loan losses. Interest
income with respect to loans is accrued on the principal amount
outstanding, except for interest on certain consumer loans, which
is recognized over the term of the loan using a method which
approximates a level yield.
The allowance for loan losses is established through a provision
for loan losses charged to expenses. Loans are charged against the
allowance for loan losses when management believes the
collectibility of principal is unlikely. The allowance is the
amount that management believes will be adequate to absorb possible
losses on existing loans which may become uncollectible, based on
evaluation of the collectibility of loans and prior loan loss
experience. The evaluations take into consideration such factors
as changes in the nature and volume of the loan portfolio, overall
portfolio quality, review of specific problem loans, and current
economic conditions that may affect the borrower's ability to pay.
Accrual of interest is discontinued on a loan when management
believes, after considering economic and business conditions and
collection efforts, that the loan is impaired. Any unpaid interest
previously accrued on those loans is reversed from income.
Interest income generally is not recognized on specific impaired
loans unless the likelihood of further loss is remote. Interest
payments received on such loans are applied as a reduction of the
loan principal balance. Interest income on other nonaccrual loans
is recognized only to the extent of interest payments received.
Equity in Unconsolidated Investee
The Bank's investment in its unconsolidated investee is carried at
cost, adjusted for the Bank's proportionate share of its
undistributed earnings or losses. As of December 31, 1995 and
1994, the Bank owned fifty-percent (50%) of First Banking Services,
Inc., Fort Walton Beach, Florida (Note 10). The investee began
operations in September, 1993 and the following is a summary of its
financial position and results of operations:
<TABLE>
<CAPTION>
1995 1994 1993
---------- ---------- ----------
<S> <C> <C> <C>
Current Assets $ 106,188 $ 203,664 $ 6,599
Furniture, equipment and
software, net 866,507 965,176 1,078,516
Other assets 242,584 198,598 73,386
---------- ---------- ----------
Total assets $1,215,279 $1,367,438 $1,158,501
Current liabilities $ - $ 150,078 $ 167,514
Stockholders' equity 1,215,279 1,217,360 990,987
---------- ---------- ----------
Total liabilities and
stockholders' equity $1,215,279 $1,367,438 $1,158,501
---------- ---------- ----------
---------- ---------- ----------
Total revenue $1,173,959 $ 844,609 $ 107,980
---------- ---------- ----------
---------- ---------- ----------
Net loss $ (2,081) $ (14,801) $ (71,013)
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
Bank Premises and Equipment
Bank premises and equipment are stated at cost less accumulated
depreciation and amortization. Depreciation is computed over the
estimated service lives of the assets using accelerated methods.
The estimated service lives are as follows:
<TABLE>
<CAPTION>
Description Estimated Service Life
----------- ----------------------
<S> <C>
Bank premises 10 to 50 years
Furniture and equipment 5 to 10 years
Data processing equipment 5 to 10 years
</TABLE>
Expenditures for maintenance and repairs are charged to operations
as incurred; expenditures for renewals and better- ments are
capitalized and written off by depreciation charges. Property
retired or sold is removed from the asset and related accumulated
depreciation accounts and any profit or loss resulting therefrom is
reflected in the statements of income.
Intangibles, Net
Intangibles is the excess of the cost over net assets acquired and
is being amortized over 40 and 15 year periods using the
straight-line method.
Loan Origination Fees
Loan origination fees are capitalized and recognized as an
adjustment of the yield on the related loan.
Other Real Estate
Other real estate, acquired through partial or total satisfaction
of loans, is carried at the lower of cost or fair market value. At
the date of acquisition, losses are charged to the allowance for
loan losses.
Income Tax Expense
Income taxes are based on amounts reported in the statements of
income, after exclusion of nontaxable income such as interest on
state and municipal securities and certain nondeductible expenses
(See Note 9).
Net Income Per Share
Net income per share has been computed based on the weighted
average number of common shares outstanding of 237,203, 232,593 and
232,593, respectively.
Off Balance Sheet Financial Instruments
In the ordinary course of business the Bank has entered into off
balance sheet financial instruments consisting of commitments to
extend credit, commitments under credit card arrangements,
commercial letters of credit and standby letters of credit. Such
financial instruments are recorded in the financial statements when
they become payable.
Cash and Cash Equivalents
For the purpose of presentation in the Statements of Cash Flows,
cash and cash equivalents are defined as those amounts included in
the statement of financial condition caption "Cash and Due from
Banks."
Effect of New Financial Accounting Standards
The Financial Accounting Standards Board has issued Statement of
Financial Accounting Standards (SFAS) No. 114, "Accounting by
Creditors for Impairment of a Loan." SFAS No. 114, as amended by
SFAS No. 118, became effective January 1, 1995 and requires that
impaired loans that are within the scope of this Statement be
measured based on the present value of expected future cash flows
discounted at the loan's effective interest rate or, as a practical
expendient, at the loan's observable market price or the fair value
of the collateral if the loan is collateral dependent. The
adoption of SFAS No. 114 did not have a material effect on
financial position and results of operations.
In December 1991, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards (SFAS) No. 107,
"Disclosures about Fair Value of Financial Instruments." SFAS No.
107 is effective for fiscal years ending after December 15, 1995
for entities with less than $150 million in total assets as of
December 31, 1992. SFAS No. 107 requires disclosure of the fair
value of financial instruments, both assets and liabilities
recognized and not recognized in the statements of financial
position, for which it is practical to estimate fair value.
NOTE 2 - INVESTMENT SECURITIES
The amounts at which investment securities are carried and their
approximate fair values at December 31, 1995 and 1994 are as
follows:
<TABLE>
<CAPTION>
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
----------- ----------- ----------- -----------
Available for sale - December 31,1995:
U.S. Treasury securities and obligations
<S> <C> <C> <C> <C>
of U.S. government agencies $ 6,182,511 $ 26,698 $ 32,178 $ 6,177,031
Obligations of states and political
subdivisions 12,184,975 633,802 15,840 12,802,937
Mortgage-backed securities 11,951,069 11,242 265,404 11,696,907
Marketable equity securities 1,096,122 - 44,388 1,051,734
----------- ----------- ----------- -----------
Totals $31,414,677 $ 671,742 $ 357,810 $31,728,609
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Held to maturity - December 31, 1995:
Obligations of states and political
subdivisions $ 718,879 $ - $ - $ 718,879
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Available for sale - December 31, 1994:
U.S. Treasury securities and obligations
of U.S. government agencies $ 2,480,585 $ - $ 78,554 $ 2,402,031
Obligations of states and political
subdivisions 11,707,281 78,947 461,829 11,324,399
Mortgage-backed securities 10,311,631 117,506 316,868 10,112,269
Marketable equity securities 1,225,522 - 80,838 1,144,684
----------- ----------- ----------- -----------
Totals $25,725,019 $ 196,453 $ 938,089 $24,983,383
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Held to maturity - December 31, 1994:
Obligations of states and political
subdivisions $ 267,958 $ - $ - $ 267,958
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
</TABLE>
Securities with an amortized cost of $14,377,064 and $12,243,066 at
December 31, 1995 and 1994, respectively, were pledged to secure
United States Government deposits and other public funds and for
other purposes as required or permitted by law.
The amortized cost and estimated fair values of debt securities at
December 31, 1995, by contractual maturity, are shown below.
Expected maturities will differ from contractual maturities because
borrowers may have the right to call or prepay obligations with or
without call or prepayment penalties.
<TABLE>
<CAPTION>
Securities Held to Maturity Securities Available for Sale
--------------------------- -----------------------------
Estimated Estimated
Amortized Fair Amortized Fair
Cost Value Cost Value
-------- --------- ----------- -----------
<S> <C> <C> <C> <C>
Due in one year or less $342,650 $342,650 $ 3,089,099 $ 3,098,729
Due after one year through five years 309,192 309,192 5,092,327 5,220,643
Due after five years through ten years - - 3,814,784 4,056,250
Due after ten years 67,037 67,037 6,371,276 6,604,346
-------- -------- ----------- -----------
718,879 718,879 18,367,486 18,979,968
Mortgage-backed securities - - 11,951,069 11,696,907
-------- -------- ----------- -----------
$718,879 $718,879 $30,318,555 $30,676,875
-------- -------- ----------- -----------
-------- -------- ----------- -----------
</TABLE>
Other investments are comprised of the following as of December 31,
1995 and 1994:
<TABLE>
<CAPTION>
1995 1994
---- ----
Investment in limited partnerships,
<S> <C> <C>
at cost (Note 7) $ 1,500,000 $ 1,500,000
Investment in single premium deferred
annuity policies 1,212,752 1,139,272
----------- -----------
Total $ 2,712,752 $ 2,639,272
----------- -----------
----------- -----------
</TABLE>
Gross realized gains and losses on sales of securities available
for sale were as follows:
<TABLE>
<CAPTION>
Gross Realized Gains Gross Realized Losses
--------------------------------- --------------------------
1995 1994 1993 1995 1994 1993
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Debt securities $129,705 $379,612 $53,510 $100,891 $313 $555
Other securities - - 565 - - -
</TABLE>
NOTE 3 - LOANS
The Bank grants loans to customers primarily in Clarke and Bibb Counties,
Alabama.
At December 31, 1995 and 1994 the composition of the loan portfolio was as
follows:
<TABLE>
<CAPTION>
1995 1994
------------ ------------
<S> <C> <C>
Commercial, industrial and agricultural $ 18,983,872 $ 16,859,336
Real estate - construction 2,085,000 453,000
- mortgage 80,808,107 49,402,821
Loans to individuals for personal
expenditures 26,178,871 16,188,487
All other loans (including overdrafts) 737,150 216,078
------------ ------------
Total loans 128,793,000 83,119,722
Unearned interest and fees (995,773) (249,420)
Allowance for loan losses (1,688,588) (1,131,515)
------------ ------------
Net loans $126,108,639 $ 81,738,787
------------ ------------
------------ ------------
</TABLE>
As of December 31, 1995, there were no loans that the Bank had
specifically classified as impaired. Loans on which the accrual of
interest has been discontinued or reduced amounted to approximately
$301,000 at December 31, 1994. For the year ended December 31,
1994, the difference between gross interest income that would have
been recorded in such period if nonaccruing loans had been current
in accordance with their original terms and the amount of interest
income on those loans that was included in such period's net income
was negligible.
NOTE 4 - ALLOWANCE FOR LOAN LOSSES
A summary of the allowance for loan losses for the years ended
December 31, 1995, 1994 and 1993, follows:
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Balance at beginning of year $1,131,515 $1,041,931 $ 825,523
Allowance acquired in branch
acquisition (Note 1) 575,223 - -
Provision charged to
operations 255,290 195,000 335,000
Recoveries of loans
previously charged off 36,321 19,000 64,101
Loans charged off (309,761) (124,416) (182,693)
---------- ---------- ----------
Balance at end of year $1,688,588 $1,131,515 $1,041,931
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
NOTE 5 - PREMISES AND EQUIPMENT
Components of premises and equipment at December 31, 1995 and 1994
are as follows:
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Land $ 438,897 $ 340,883
Bank premises 2,123,923 1,844,358
Furniture and equipment 2,524,038 2,114,261
----------- -----------
5,086,858 4,299,502
Less: Accumulated depreciation (2,815,638) (2,604,975)
----------- -----------
Net book value $ 2,271,220 $ 1,694,527
----------- -----------
----------- -----------
</TABLE>
NOTE 6 - ADVANCE FROM FEDERAL HOME LOAN BANK
Advances from the Federal Home Loan Bank as of December 31, 1995
and 1994 totaled $438,596 and $473,684, respectively. Interest
rate is fixed and due monthly; principal payments are due
quarterly. The advances are secured by Federal Home Loan Bank
stock and a blanket floating lien on certain first mortgage loans;
maturity date is April 8, 2008.
The Bank has $17,000,000 in available credit from the FHLB.
NOTE 7 - LONG-TERM DEBT
Long-term debt consisted of the following at December 31, 1995 and
1994:
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
Note payable to bank, principal is due annually through December 31,
2004; interest is payable quarterly at New York Prime less 10 basis
points; secured by all capital stock of the Bank. $3,379,500 $1,030,000
Promissory note payable to limited partnership for purchase of investor
units, principal is due annually through June 1, 1996; no stated
interest rate. 215,000 440,000
---------- ----------
Total $3,594,500 $1,470,000
---------- ----------
---------- ----------
</TABLE>
The loan agreement underlying the above bank note includes numerous
covenants that relate to the Company and its subsidiary bank's
operations, financial condition and capital structure. As of
December 31, 1995 the Company and its subsidiary bank were in
compliance with these covenants.
Annual maturities of debt for each of the five years following
December 31, 1995 are as follows:
<TABLE>
<S> <C>
1996 $ 590,500
1997 375,500
1998 375,500
1999 375,500
2000 375,500
Thereafter 1,502,000
</TABLE>
NOTE 8 - PROFIT-SHARING PLAN
The Bank has a contributory-trusteed profit-sharing plan for the
benefit of employees who qualify as to age and/or length of
service. The annual contribution to the profit-sharing plan
consists of a discretionary percentage of the Bank's profit, plus,
a contribution which matches a discretionary percentage of the
participant's salary reductions. The Bank expects to continue the
plan indefinitely; however, the rights to modify, amend or
terminate the plan have been reserved. During 1995, 1994 and 1993,
contributions to the plan charged to operations were $152,326,
$91,986, and $105,143, respectively.
NOTE 9 - INCOME TAX EXPENSE
The components of income tax expense are as follows:
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
Currently Payable:
<S> <C> <C> <C>
Federal $ 412,295 $ 727,787 $ 614,800
State 73,389 120,450 109,136
---------- ---------- ----------
Total currently
payable 485,684 848,237 723,936
Tax effect of temporary
differences 307,680 (641,646) (34,289)
---------- ---------- ----------
Total income tax
expense $ 793,364 $ 206,591 $ 689,647
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
As of December 31, 1995 and 1994, the net deferred tax asset
consisted of the following:
<TABLE>
<CAPTION>
1995 1994
---- ----
Deferred tax asset, net of $55,095
and $327,533 valuation allowance,
respectively:
<S> <C> <C>
Provision for loan losses $ 336,327 $ 52,081
Loss on trading security - 593,147
Net unrealized gain (loss) on
securities available for sale (143,329) 264,319
Write down of other real estate 28,177 19,868
Other - 7,088
---------- ----------
Net deferred tax asset $ 221,175 $ 936,503
---------- ----------
---------- ----------
</TABLE>
The effective tax rate differs significantly from the Federal tax
rate of 34%. A reconciliation between the expected tax and the
actual income tax follows:
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
Expected tax at the Federal
<S> <C> <C> <C>
statutory rate $1,233,682 $ 521,609 $ 842,817
Increases (decreases)
resulting from:
Effect of tax-exempt
income (277,939) (266,815) (291,633)
State excise taxes, less
federal tax benefit 48,437 19,331 72,030
Low income housing tax
credit (40,000) (14,000) (14,000)
Disallowed interest expense 29,713 - -
Change in valuation
allowance (272,438) - -
Provision for loan losses - (13,811) 73,579
Other - net 71,909 (39,723) 6,854
---------- ---------- ----------
$ 793,364 $ 206,591 $ 689,647
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
The Company has an unused capital loss carryover of approximately
$163,000 which can be used to offset future capital gains. The
carryover expires in 1997.
NOTE 10 - RELATED PARTY TRANSACTIONS
The Bank has entered into transactions with its directors,
executive officers, significant shareholders and their affiliates
(related parties). Such transactions were made in the ordinary
course of business on substantially the same terms and conditions,
including interest rates and collateral, as those prevailing at the
same time for comparable transactions with other customers, and did
not, in the opinion of management, involve more than normal credit
risk or present other unfavorable features. The aggregate amount
of loans to such related parties with an aggregate balance greater
than $60,000 at December 31, 1995 and 1994, were $737,097 and
$716,965, respectively. The aggregate amount of such loans
exceeding $60,000 to each person did not exceed 5% of stockholder's
equity.
See Note 13 for data processing fees paid to First Banking
Services, Inc.
NOTE 11 - COMMITMENTS AND CONTINGENCIES
The consolidated financial statements do not reflect the Bank's
various commitments and contingent liabilities which arise in the
normal course of business and which involve elements of credit
risk, interest rate risk and liquidity risk. These commitments and
contingent liabilities are commitments to extend credit and standby
letters of credit. The following is a summary of the Bank's
commitments and contingent liabilities at December 31, 1995 and
1994:
<TABLE>
<CAPTION>
1995 1994
---- ----
Commitments to extend credit:
<S> <C> <C>
Commercial and other lines of credit $13,991,629 $ 2,772,696
Home equity lines of credit 716,812 637,841
Standby letters of credit 375,216 29,000
</TABLE>
Commitments to extend credit and standby letters of credit all
include exposure to some credit loss in the event of nonperformance
of the customer. The Bank's credit policies and procedures for
credit commitments and financial guarantees are the same as those
for extension of credit that are recorded in the consolidated
statement of financial condition. Because these instruments have
fixed maturity dates, and because many of them expire without being
drawn upon, they do not generally present any significant liquidity
risk to the Bank.
The Bank is party to litigation and claims arising in the normal
course of business. Management, after consultation with legal
counsel, believes that the liabilities, if any, arising from such
litigation and claims will not be material to the consolidated
financial statements.
A subsidiary of the Company originates and sells mortgage loans to
a third party investor under a recourse agreement. This agreement
requires the subsidiary to repurchase these loans if they become
non-performing within ninety days of sale. The total amount of
these loans subject to such recourse was $1,099,015 and $478,978 at
December 31, 1995 and 1994, respectively. There have been no
losses on these loans.
NOTE 12 - REGULATORY RESTRICTIONS
Dividends payable by state banks in any year, without prior
approval of the appropriate regulatory authorities, are limited to
the Bank's net profits (as defined) for that year combined with its
retained net profits for the preceding two years.
The subsidiary bank is required by law to maintain minimum cash
reserves to meet regulatory reserve requirements. As of December
31, 1995 the Bank's gross reserve requirement totaled $1,265,000.
NOTE 13 - OTHER OPERATING EXPENSES
Other operating expenses for the years 1995, 1994 and 1993 consist
of the following:
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Professional fees $ 147,931 $ 115,532 $ 76,997
Data processing fees 465,006 346,802 -
Advertising 90,697 82,596 78,304
Telephone 88,777 62,629 52,534
Postage, stationery and
supplies 302,468 166,529 157,082
Consultant fees 68,686 40,274 40,362
Litigation settlement 265,000 - -
Amortization of goodwill and
acquisition cost 257,033 - -
Other operating expense 495,399 448,311 409,210
---------- ---------- --------
Total $2,180,997 $1,262,673 $814,489
---------- ---------- --------
---------- ---------- --------
</TABLE>
NOTE 14 - CONCENTRATIONS OF CREDIT
All of the Bank's loans, commitments and standby letters of credit
have been granted to customers in the Bank's market area.
Investments in state and municipal securities also involve
governmental entities within the Bank's market area. The
concentrations of credit by type of loan or commitment are set
forth in Notes 3 and 11, respectively.
NOTE 15 - FAIR VALUE OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used to estimate the
fair value of each class of financial instruments for which it is
practicable to estimate that value:
Cash, Due from Banks and Short-term Instruments
The carrying amount of cash and short-term instruments approximate
their fair value.
Loans
For variable-rate loans (non-commercial, consumer and real estate)
that reprice frequently and have no significant change in credit
risk, fair values are based on carrying values. For all other
fixed-rate loans, fair values are based on discounted cash flow
analyses.
Deposit Liabilities
The fair values disclosed for demand deposits are, by definition,
equal to the amount payable on demand at the reporting date. The
carrying amounts of variable-rate, fixed-term money market accounts
and certificates of deposit approximate their fair values at the
reporting date. 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.
Long-term Debt and Short-term Borrowings
The carrying amounts 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.
The estimated fair values of the Bank's financial instruments as of
December 31, 1995 are as follows (in thousands):
<TABLE>
<CAPTION>
Estimated
Carrying Fair
Amount Value
-------- ---------
Financial assets
<S> <C> <C>
Cash and due from banks $ 7,370 $ 7,370
Federal funds sold 1,640 1,640
Investment securities 35,779 35,780
Loans 127,798
Less: Allowance for loan losses (1,689)
Loans, net of allowance for loan losses 126,109 128,329
Financial liabilities
Deposits 157,866 158,078
Long-term debt and short-term borrowings 4,073 4,073
Unrecognized financial instruments
Commitments to extend credit 14,708 14,709
Standby letters of credit 375 375
</TABLE>
NOTE 16 - PARENT COMPANY
The condensed financial information for First Bancshares, Inc.
(Parent Company only) is presented as follows:
<TABLE>
Statements of Financial Condition
<CAPTION>
1995 1994
---- ----
Assets
<S> <C> <C>
Cash $ 51,217 $ 41,888
Investment in subsidiaries, at equity 18,443,479 12,422,769
Intangibles, net 1,364,164 1,432,888
Other assets 121,420 8,686
----------- -----------
$19,980,280 $13,906,231
----------- -----------
----------- -----------
Liabilities
Note payable $ 3,379,500 $ 1,030,000
Other liabilities 34,368 -
----------- -----------
3,413,868 1,030,000
Stockholders' equity 16,566,412 12,876,231
----------- -----------
$19,980,280 $13,906,231
----------- -----------
----------- -----------
</TABLE>
<TABLE>
Statements of Income
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Dividend income $ 809,569 $ 806,737 $ 728,457
Expenses
Interest 301,389 109,033 118,962
Amortization 68,724 68,724 68,724
Miscellaneous 7,082 4,616 5,610
---------- ---------- ----------
377,195 182,373 193,296
Operating income before
income tax benefit 432,374 624,364 535,161
Income tax benefit (105,946) (17,624) (44,864)
---------- ---------- ----------
Income before undistributed
income of subsidiaries 538,320 641,988 580,025
Undistributed income of subsidiaries
Net income of subsidiaries 3,106,360 1,492,305 1,937,655
Less: Dividends received 809,569 806,737 728,457
---------- ---------- ----------
Undistributed income
of subsidiary 2,296,791 685,568 1,209,198
---------- ---------- ----------
Net income $2,835,111 $1,327,556 $1,789,223
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
<TABLE>
Statements of Cash Flows
<CAPTION>
1995 1994 1993
Cash flows from operating activities
<S> <C> <C> <C>
Net income $2,835,111 $1,327,556 $1,789,223
Adjustments to reconcile net
income to net cash
provided by operating
activities:
Undistributed
earnings of
subsidiary (2,296,791) (685,568) (1,209,198)
Amortization 68,724 68,724 68,724
(Increase) decrease
in tax receivable
from subsidiary (112,734) (15,574) 20,966
Other 34,370 (1,000) (9,810)
---------- ---------- ----------
Net cash provided
by operating
activities 528,680 694,138 659,905
---------- --------- ---------
Cash flows from financing activities
Principal payments on
long-term debt (1,405,500) (500,000) (460,000)
Dividends paid (227,851) (194,262) (188,265)
Proceeds from long-term debt 3,755,000 - -
Proceeds from sale of treasury
stock 435,000 - -
---------- ---------- ---------
Net cash provided by
(used in) financing
activities 2,556,649 (694,262) (648,265)
---------- ---------- ----------
Cash flows used in investing
activities
Capital contribution to
subsidiary (3,076,000) - -
---------- ---------- ----------
Net increase (decrease) in cash 9,329 (124) 11,640
Cash at beginning of year 41,888 42,012 30,372
---------- ---------- ----------
Cash at end of year $ 51,217 $ 41,888 $ 42,012
---------- ---------- ----------
---------- ---------- ----------
Supplemental disclosure of
cash flow information
Cash paid or (received)
during the year for
Interest $ 301,388 $ 109,033 $ 124,522
Income tax (benefit) 6,788 (2,050) (61,580)
</TABLE>
<PAGE>
Appendix D
[Letterhead of Chaffe & Associates, Inc.]
January 31, 1997
The Board of Directors
United Security Bancshares, Inc.
131 West Front Street
Thomasville, Alabama 36784-3143
Gentlemen:
We understand that United Security Bancshares, Inc. ("USB")
and First Bancshares, Inc. ("FBI") have entered into an Agreement
and Plan of Merger dated as of August 19, 1996 (the "Merger
Agreement"), which provides, among other things, for the merger of
FBI with and into USB and the merger of FBI's wholly-owned
subsidiary, First Bank and Trust, with and into USB's wholly-owned
subsidiary, United Security Bank, (collectively "the Merger").
Pursuant to the Merger Agreement, each issued and outstanding share
of FBI common stock, par value $5.00 per share (the "FBI Common
Stock"), excluding shares held by stockholders who perfect their
dissenter's rights of appraisal, shall cease to be outstanding and
shall convert into and be exchanged for 5.8321 shares of USB common
stock, par value $0.01 per share (the "USB Common Stock") (the
"Exchange Ratio"). The terms and conditions of the Merger and the
Exchange Ratio are more fully described in the Merger Agreement.
You have asked our opinion as to whether the Exchange Ratio
was fair, from a financial point of view, to the stockholders of
USB as of September 30, 1996.
Chaffe & Associates, Inc. ("Chaffe"), through its experience
in the securities industry, investment analysis and appraisal, and
in related corporate finance and investment banking activities,
including mergers and acquisitions, corporate recapitalization, and
valuations for estate, corporate and other purposes, states that it
is competent to provide an opinion as to the fairness of the
Exchange Ratio contemplated herein. Neither Chaffe nor any of its
officers or employees has an interest in USB or FBI Common Stocks.
The fee received for the preparation and delivery of this opinion
is not dependent or contingent upon any transaction.
In connection with rendering its opinion, Chaffe, among other
things: (i) reviewed the Joint Proxy Statement of USB and FBI for
this proposed transaction in substantially the form to be sent to
stockholders, including a copy of the Merger Agreement; (ii)
reviewed and analyzed certain publicly-available financial
statements and other information of USB and FBI, respectively;
(iii) reviewed and analyzed certain internal financial statements
and other financial and operating data concerning USB and FBI,
prepared by the managements of USB and FBI, respectively, including
financial projections; (iv) discussed the past and current
operations and financial condition, and the prospects of USB and
FBI with senior executives of USB and FBI, respectively; (v)
reviewed the historical prices and trading volumes of the shares of
USB Common Stock and FBI Common Stock; (vi) compared the financial
performance of USB and FBI, and the prices and trading activity of
the USB Common Stock and FBI Common Stock, with that of certain
other comparable publicly-traded companies and their securities;
(vii) reviewed and discussed with senior managements of USB and FBI
the strategic objectives of the Merger, and the synergies and
certain other benefits of the Merger; (viii) reviewed the financial
terms of business combinations in the commercial banking industry
specifically and other industries generally, which Chaffe deemed
generally comparable to the proposed transaction; (ix) considered
a number of valuation methodologies, including among others, those
that incorporate book value, deposit base premium and
capitalization of earnings, and relative contribution; and (x)
performed such other studies and analyses as we deemed appropriate
to this opinion.
In its review, Chaffe relied, without independent
verification, upon the accuracy and completeness of the historical
and projected financial information, and all other information
reviewed by it for purposes of its opinion. Chaffe did not make or
obtain an independent review or appraisal of USB's or FBI's assets
or liabilities, nor was Chaffe furnished with any such appraisals.
Chaffe relied solely on USB and FBI for information as to the
adequacy of their respective loan loss reserves and values of other
real estate owned. With respect to projected financial results,
including the estimates of synergies and other benefits expected to
result from the Merger, Chaffe assumed that they were reasonably
prepared on bases reflecting the best currently available estimates
and judgements of the managements of USB and FBI of future
financial performances of their respective companies. This opinion
was necessarily based upon market, economic and other conditions as
they existed on, and could be evaluated as of, the date of this
opinion. Chaffe expressed no opinion on the tax consequences of
the proposed transaction.
Based upon and subject to the foregoing and based upon such
other matters as we considered relevant, it is our opinion that as
of September 30, 1996, the Exchange Ratio was fair, from a
financial point of view, to the holders of USB Common Stock.
Very truly yours,
Chaffe & Associates, Inc.
/s/ Chaffe & Associates, Inc.
----------------------------------------
<PAGE>
Appendix E
[Letterhead of Baxter Fentriss and Company]
December 16, 1996
The Board of Directors
First Bancshares, Inc.
131 Main Street
Grove Hill, Alabama 36451
Dear Members of the Board:
United Security Bancshares, Inc., Thomasville, Alabama
("United") and the First Bancshares, Inc., Grove Hill ("FBI") have
entered into an Agreement providing for the merger of FBI into
United ("Merger"). The terms of the Merger are set forth in the
Agreement and Plan of Reorganization and Merger dated August 19,
1996.
The terms of the Merger provide that, with the possible
exception of those shares as to which dissenter's rights may be
perfected, each common share of FBI will be converted into stock of
United.
You have asked our opinion as to whether the proposed
transaction pursuant to the terms of the Merger are fair to the
respective shareholders of FBI from a financial point of view.
In rendering our opinion, we have evaluated the consolidated
financial statements of FBI available to us from published sources.
In addition, we have, among other things: (a) to the extent deemed
relevant, analyzed selected public information of certain other
financial institutions and compared United and FBI from a financial
point of view to the other financial institutions; (b) considered
the historical market price of the common stock of United and FBI;
(c) compared the terms of the Merger with the terms of certain
other comparable transactions to the extent information concerning
such acquisitions was publicly available; (d) reviewed the
Agreement and Plan of Reorganization and related documents; and (e)
made such other analyses and examinations as we deemed necessary.
We also met with various senior officers of United and FBI to
discuss the foregoing as well as other matters that may be
relevant.
We have conducted a due diligence review of United but we have
not reviewed registration statements, proxy materials, regulatory
applications or other documents which must be prepared prior to
completion of any transaction.
We have not independently verified the financial and other
information concerning United, or FBI, or other data which we have
considered in our review. We have assumed the accuracy and
completeness of all such information; however, we have no reason to
believe that such information is not accurate and complete. Our
conclusion is rendered on the basis of securities market conditions
prevailing as of the date hereof and on the conditions and
prospects, financial and otherwise, of United and FBI as they exist
and are known to us as of September 30, 1996.
It is understood that this opinion may be included in its
entirety in any communication by FBI or the Board of Directors to
the stockholders of FBI. The opinion may not, however, be
summarized, excerpted from or otherwise publicly referred to
without our prior written consent.
Basf the opinion that the terms of the Merger
are fair to the shareholders of FBI from a financial point of view.
Very truly yours,
Baxter Fentriss and Company
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 20. Indemnification of Directors and Officers.
The Alabama Business Corporation Act (the "ABCA") gives
Alabama corporations broad powers to indemnify their present and
former directors and officers against expenses incurred in the
defense of any lawsuit to which they are made parties by reason of
being or having been such directors or officers. Subject to
specific conditions and exclusions, the ABCA requires an Alabama
corporation to indemnify directors and officers who successfully
defend actions, and it permits a corporation to indemnify its
directors and officers under other circumstances as the corporation
deems appropriate, if certain statutory standards are met. The
indemnification required and permitted under the ABCA is not
exclusive of any other rights to which those indemnified may be
entitled under any statute, provision of the articles of
incorporation, by-law, agreement, vote of shareholders or
disinterested directors or otherwise. The ABCA also authorizes
Alabama corporations to buy directors' and officers' liability
insurance.
Although USB's By-laws are silent regarding director and
officer indemnification, USB's current Articles of Incorporation,
as amended, mandate that USB shall indemnify its directors and
officers in all cases expressly authorized under the ABCA in which
the specified standards have been met. In general, the applicable
standard is that the individual shall have acted in good faith and
in a manner he reasonably believed to be in or not opposed to the
best interests of the corporation and, with respect to any criminal
action or proceeding, had no reasonable cause to believe his
conduct was unlawful. If the director or officer has been
successful in defending a proceeding, however, indemnification is
mandatory without reference to any such standard. On the other
hand, indemnification is not permitted with respect to litigation
brought by or in the right of the corporation in which the officer
or director is adjudged liable to the corporation or in connection
with any proceeding in which the officer or director is adjudged
liable on the basis that personal benefit was improperly received
by him. This restriction does not apply, however, to the extent
that the court in which the action is brought determines that such
officer or director is entitled to indemnity for particular
expenses.
In addition, USB has entered into an Indemnification Agreement
with each of its directors that provides indemnification to the
fullest extent authorized by the law. These Indemnification
Agreements, like the Articles of Incorporation, as amended, take
advantage of the ABCA's provisions allowing for expansion upon
statutory indemnification and are intended to provide the broadest
rights of indemnification available under the ABCA.
USB has in effect a directors' and officers' liability policy
with Continental Insurance in the amount of $3,000,000. This
policy provides for indemnification of USB's officers and directors
against losses arising from claims asserted against them in their
capacities as officers and directors, subject to limitations and
conditions set forth in the policy.
Item 21. Exhibits and Financial Statement Schedules.
(a) Exhibits:
2.1 Agreement and Plan of Merger dated as of August 19, 1996,
is found at Appendix A to the Joint Proxy Statement and
Prospectus included in Part I hereof.
3.1 Amended and Restated Articles of Incorporation, filed as
Exhibit 3(c) to Registrant's Form 10-Q for the quarter
ended June 30, 1995 (No. 0-14549), is incorporated herein
by reference.
3.2 Bylaws, filed as Exhibit 3(d) to Registrant's Form 10-K
for the year 1987 (No. 0-14549), is incorporated herein
by reference.
5.1 Opinion of Maynard, Cooper & Gale, P.C. re legality dated
February 6, 1997.
8.1* Opinion of Maynard, Cooper & Gale, P.C. re tax matters
dated ______________, 1997.
8.2* Opinion of Walston, Wells, Anderson & Bains re tax matters
dated ___________, 1997.
10.1* Form of Employment Contract between Registrant and Jack
M. Wainwright, III.
10.2 Form of Indemnification Agreement filed as Exhibit 10(e)
to Registrant's Form 10-K for the year 1994 (No. 0-14549)
is incorporated herein by reference.
10.3 Option Agreement dated July 16, 1996, from First Bancshares,
Inc. for the benefit of the Registrant filed as Exhibit
99.2 to Registrant's Form 8-K dated July 16, 1996 (No.
0-14549) is incorporated herein by reference.
10.4 Option Agreement dated July 16, 1996, from the Registrant
for the benefit of First Bancshares, Inc. filed as Exhibit
99.3 to Registrant's Form 8-K dated July 16, 1996 (No.
0-14549) is incorporated herein by reference.
10.5 Agreement for Computer Services dated September 1, 1993,
between First Data Services, Inc. and First Bank and Trust.
10.6 Agreement for Bookkeeping Services dated June 3, 1994,
between First Banking Services, Inc. and First Bank and
Trust.
13.1 Registrant's 1995 Annual Report on Form 10-K for the year
ended December 31, 1995 (No. 0-14549), is incorporated
herein by reference.
13.2 Registrant's Quarterly Report on Form 10-Q for
the quarter ended September 30, 1996 (No. 0-14549), is
incorporated herein by reference.
21.1 Subsidiaries of Registrant, filed as Exhibit (22) to
Registrant's Form 10-K for the year 1995 (No. 0-14549), is
incorporated herein by reference.
23.1 Consent of Smith, Dukes & Buckalew.
23.2 Consent of Dudley, Hopton, Jones, Sims & Freeman.
23.3 Consent of Maynard, Cooper & Gale, P.C. is included in their
opinion re legality filed as Exhibit 5.1 hereto.
23.4* Consent of Maynard, Cooper & Gale, P.C. is included in their
opinion re tax matters filed as Exhibit 8.1 hereto.
23.5* Consent of Walston, Wells, Anderson & Bains is included in
their opinion re tax matters filed as Exhibit 8.2 hereto.
23.6 Consent of Baxter Fentriss and Company.
23.7 Consent of Chaffe & Associates, Inc.
23.8 Consents of persons named to become directors of Registrant
upon consummation of the Merger.
24.1 Power of Attorney (contained on signature page of the
Registration Statement).
99.1 Form of Proxy to be used at United Security Bancshares, Inc.
special meeting.
99.2 Form of Proxy to be used at First Bancshares, Inc. special
meeting.
_________________________
*To be filed by amendment.
(b) Financial Statement Schedules:
None.
Item 22. Undertakings.
(a) 1. The undersigned registrant hereby undertakes to deliver or
cause to be delivered with the prospectus, to each person to
whom the prospectus is sent or given, the latest annual report
to security holders that is incorporated by reference in the
prospectus and furnished pursuant to and meeting the requirements
of Rule 14a-3 or Rule 14c-3 under the Securities Exchange Act of
1934; and where interim financial information required to be
presented by Article 3 of Regulation S-X are not set forth in the
prospectus, to deliver, or cause to be delivered to each person to
whom the prospectus is sent or given, the latest quarterly report
that is specifically incorporated by reference in the prospectus to
provide such interim financial information.
2. Insofar as an indemnification for liabilities arising under the
Securities Act of 1933 (the "Act") may be permitted to directors,
officers and controlling persons of the registrant pursuant to the
foregoing provisions, or otherwise, the registrant has been advised
that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by
the registrant of expenses incurred or paid by a director, officer
or controlling person of the registrant in the successful defense
of any action, suit or proceeding) is asserted by such director,
officer or controlling person in connection with the securities
being registered, the registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed
in the Act and will be governed by the final adjudication of such
issue.
(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.
<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 Thomasville, Alabama, on the 31st day of
January, 1997.
UNITED SECURITY BANCSHARES, INC.
By: /s/ Jack M. Wainwright, III
______________________________________
Jack M. Wainwright, III, President and
Chief Executive Officer
KNOW ALL MEN BY THESE PRESENTS, that each person whose
signature appears below constitutes and appoints Jack M.
Wainwright, III and Larry M. Sellers, 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 Exchange Act of
1933, this Registration Statement has been signed below by the
following persons in the capacities indicated on the dates
indicated below.
Signature Title
_________ _____
/s/ Jack M. Wainwright, III President, Chief Executive January 31, 1997
___________________________ Officer, and Director
Jack M. Wainwright, III (Principal Executive Officer)
/s/ Larry M. Sellers Treasurer (Principal Financial January 31, 1997
___________________________ Officer, Principal Accounting
Larry M. Sellers Officer)
/s/ Gerald P. Corgill Director January 31, 1997
___________________________
Gerald P. Corgill
Director __________, 1997
___________________________
Roy G. Cowan
/s/ William G. Harrison Director January 31, 1997
___________________________
William G. Harrison
/s/ Hardie B. Kimbrough Director January 31, 1997
___________________________
Hardie B. Kimbrough
Director __________, 1997
___________________________
James L. Miller
/s/ D. C. Nichols Director January 31, 1997
___________________________
D. C. Nichols
/s/ Harold H. Spinks Director January 31, 1997
___________________________
Harold H. Spinks
/s/ James C. Stanley Director January 31, 1997
___________________________
James C. Stanley
Director __________, 1997
___________________________
Howard M. Whitted
<PAGE>
Exhibit 5.1
February 6, 1997
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
RE: Registration Statement on Form S-4
United Security Bancshares, Inc.
Ladies and Gentlemen:
As counsel for United Security Bancshares, Inc. ("USB"), we
are familiar with the Articles of Incorporation and the Bylaws of
USB and the above-referenced Registration Statement on Form S-4
(the "Registration Statement") relating to 1,400,000 shares of the
common stock, $.01 par value per share, of USB (the "Shares"). We
have examined such public records and corporate proceedings and
other documents as we have deemed necessary or appropriate as a
basis for the opinion expressed below.
Based upon the foregoing, we are of the opinion that the
Shares will, when issued, be validly issued, fully paid and
nonassessable.
We hereby consent to the filing of this opinion as an Exhibit
to the Registration Statement.
Very truly yours,
Maynard, Cooper & Gale, P.C.
By: --------------------------------
J. Michael Savage
<PAGE>
Exhibit 10.5
AGREEMENT FOR COMPUTER SERVICES
THIS AGREEMENT is dated for reference September 1st, 1993, between
First Data Services, Inc., FDSI, a Florida corporation, and First
Bank & Trust (Client) of Grove Hill, in the state of Alabama.
The parties agree as follows:
1) INSTALLATION PROVISION
A) Commencing on 9/1, 1993, FDSI agrees to provide
services set forth in Attachment 1, considered a part of this
agreement, and shall continue to provide these services in
accordance with the Fee Schedule set forth in Attachment II.
b) FDSI agrees to provide Client with a list of options
and parameters of its existing application software. Client will
endeavor to study the options and parameters, and together with
FDSI, Client will satisfy itself that its operations, customer and
account requirements can be met. FDSI assumes no responsibility
for future problems resulting from Client's omissions or
misunderstandings.
c) Client will furnish FDSI with all data and records
required by FDSI on each account for which the accounting is to be
performed, said data and records to be furnished in a form
acceptable to FDSI.
d) The procedures relating to the following items shall be
following by FDSI and Client as mutually agreed upon prior to the
start of the services: 1) input format; 2) daily pick-up and
delivery of data between FDSI and Client; 3) pick-up and delivery
point.
2) SCHEDULE PROCESSING PROVISIONS
a) Where the foregoing provisions require FDSI and Client
to perform specific acts on a designated day, it is understood that
adjustments may be made when such day is a holiday for either
party.
b) Client agrees to furnish FDSI with any special forms
and any forms imprinted with its corporate symbol and/or name at
its own expense including demand deposit and savings statements.
c) All the original documents and source date will be
returned to their permanent locations at Client's office following
processing. Historical records and date on accounts will be
located at the office of the Client.
3) CONSIDERATION
a) The fees to be charged for the services rendered are
contained in an accompanying fee Schedule (Attachment II),
considered a part of this Agreement. Said Fees shall remain in
effect for original term of the Agreement.
b) FDSI's Fee Schedule shall be adjusted periodically and
shall be effective ninety (90) days after written notice to Client.
Extensions and renewals of the Agreement shall be subjected to the
adjusted Fee Schedule. Fee Schedule shall be determined by the
Board of Directors of FDSI and shall not exceed 15% increase each
year.
4) GENERAL PROVISIONS
a.1) The initial terms of this Agreement is Five (5)
years commencing on the date set forth in paragraph 1.a of this
agreement, shall be automatically renewed for a term of one (1)
year upon the Fifth anniversary of this agreement and each
subsequent anniversary. Either Client or FDSI may terminate this
agreement at the end of the initial term or at the end of any
annual renewal term by giving written notice to the other party six
(6) months in advance.
a.2) This agreement shall become null and void on the
close of business on the day on which:
a. Client is declared insolvent by any Federal or State
Supervisory agency or,
b. Client control and management is assumed by any party
other than those officers duly elected by the Client's
Board of Directors.
a.3) In the event this agreement is rendered null and void per
paragraph 4.a.2 this agreement may be reinstated for 30 days with Client's
new ownership in which Client's new management or its supervisory agency
will do one of the following:
a. Accept the original terms of this agreement and
notify FDSI in writing of its intent to continue processing
under the terms of this agreement.
b. Negotiate a new agreement.
c. Deconvert within the 30 day period.
Should Client's new management fail to take action under this
sub-paragraph, FDSI will discontinue processing at the close of
FDSI's processing on the 30th day and will deliver to Client all
Client's data files on magnetic tape.
b.1) FDSI will be held to a standard of care expected within
the industry at the time services are provided. This standard of care
is not expected to require state-of-the-art electronic data processing
at all times.
b.2) Client agrees to assume the entire responsibility for
the accuracy and the authenticity of any and all records furnished to
FDSI and Client hereby agrees to indemnify, save and hold harmless from
any and all damage, loss, liability, cost, expense or consequence of
any claim of whatever nature and by whomever made that may be made
against FDSI as a result of FDSI acting upon any information furnished
by Client. FDSI will not make any changes to Client data or controls
without consent of Client.
c.1) FDSI agrees to treat the data, records and accounts of
Client as confidential and will not disclose such data, records and
accounts to anyone except Client or those Client designates. FDSI
agrees to exercise resonable care and due diligence in the performance
of the services as if the service were being provided for itself.
c.2) Client agrees to treat and data or records delivered
inadvertently to Client by FDSI that do not belong to Client as the
confidential property of FDSI. Client will notify FDSI of the receipt;
of such material by the fastest manner possible and will release such
material to FDSI without disclosing the fact of its receipt or the
nature of its contents to anyone other than FDSI personnel.
c.3) Client shall report any errors to FDSI in writing within
(30) days following discovery by Client. Such notice shall be a
condition precedent to any clain or the commencement of any legal
proceeding of any kind or nature against FDSI. FDSI agrees to provide
prompt resolution to any problems reported by Client or correct any
problems or errors in computing servicing under this agreement. If FDSI
agrees that an error has been made and that the fault was FDSI's it shall
correct the same at its expense.
c.4) FDSI shall be responsible for any and all claims and
liabilities connected with any breach of duty by reason of negligent acts,
errors or omissions of its employees so long as said claim does not exceed
$500,000.00 per act.
c.5) FDSI shall be responsible for the expense of reconstructing
any records of Client accidently lost, destroyed or stolen while in the
possession of FDSI.
d) FDSI shall not be responsible, and Client agrees to
save and hold it harmless, for any claim for consequential damage
made against FDSI as a result of losses or delays caused by
accident, strikes, fire, flood, war, riot, electricial or
mechanical failure, acts of God or any cause or caused which are
unavoidable or beyond FDSI's control.
e.1) Any new or original material, system program, or
application program that may be developed during the performance of
the Agreement solely by FDSI's employees or jointly by FDSI
employees and Client's personnel, with or without expense to
Client, either printed or in machine readable form, shall belong to
FDSI, it being understood that FDSI shall have an irrevocable and
unrestricted right to use and market worldwide such new original
material.
e.2) Any new or original material, system program or
application program that may be developed during the performance of
the Agreement solely by Client at Client's expense for Client's
sole use and without expense to FDSI shall belong to the Client.
Such material or program shall not be a variation or derivation of
any material or program provided to Client by FDSI under this
Agreement or a separate Agreement or related to material or
programs now provided or developed under Par 4.3.1 above.
f. FDSI has made arrangements with other parties to use
their computer facilities as back-up facilities in the event FDSI
does incur some difficulty that renders FDSI unable to process.
Such arrangements will meet the requirements of regulatory
agencies.
g. Off premise storage of Client records is maintained in
locked storage at a separate location. Client's master filed are
backed up everyday after previous day's processing and transported
to the off premise location. Operating programs and other critical
files are also maintained at an off premise location. The media is
disk pack and/or magnetic tape.
h. FDSI will permit examination of its records and its
procedures at any reasonable time by Client, its agents, its
auditors, or representatives of the Federal or State agency
regulating Client. The agencies include:
1. The Federal Reserve Board and its examining group.
2. The Federal Deposit Insurance Corporation and its exaimining
group.
3. The Comptroller of the Currency and its examining group.
4. The state Banking Commission and its examining group.
i. Upon request of Client, FDSI will furnish a list of its
date processing employees to enable Client to monitor accounts held
by these employees should it deem necessary.
j. Records maintained on magnetic tape or magnetic disk
are owned solely by Client. The media on which these records are
stored, i.e., tapes or disks are owned solely by FDSI.
k. Upon expiration of this Agreement, if Client changes
service companies, FDSI will provide file design and copies of
files to the new servicing company.
Client shall be obligated to purchase from FDSI at FDSI cost any
unused forms that were custom designed for Client's use.
1. FDSI will be responsible for arranging for the
transportation of the necessary material for processing of Client
accounts to and from Client;s main office building. Client will be
responsible for the expense of this transportation.
m. This Agreement supersedes and makes void all
Agreements, if any, between FDSI and Client prior to this
Agreement.
5. ASSIGNMENT
FDSI understands that Client is relying upon the particular
competence, reputation and integrity of FDSI in entering into this
contract. Therefore, FDSI cannot assign this contract or Agreement
for Computer Services to any other data processing entity without
the prior written consent of client.
6. NEW EQUIPMENT OR SYSTEM
a. In the event new hardware or software must be installed
in Client's location after the initial installation and conversion
to allow FDSI to provide the standard computer services
contemplated within the Agreement, then the delivery and
installation charge of such shall be paid by FDSI unless otherwise
agreed upon. The cost of new hardware will be paid by Client. The
cost of new software or a portion thereof may be paid by Client at
FDSI's option.
b. Any and all training of Client personnel to initiate
the computer services shall be included within the schedule of
charges in AttachmentII. FDSI assures the Client that it will
provide competent and qualified training of Client personnel in the
use of the system and will provide sufficient amount of training to
enable a smooth transition to FDSI computer servicing. In the
event the computer service requires different computer hardware or
software in the future, FDSI agrees to train, at FDSI expense,
Client's personnel in the same competent and qualified manner upon
the installation of the new system.
7. MAINTENANCE
FDSI shall pay for all maintenance of equipment owned by FDSI
and installed in Clients location, including eqipment leased or
loaned to Client. Client is responsible for maintenance of
equipment owned by Client.
8. JURISDICTION
This Agreement is entered into and in all respects to be
performed in the State of Florida and therefore Florida law applies
and jurisdiction and venue regarding any disputes within this
Agreement shall be vested in the Courts of Okaloosa County,
Florida.
First Bank and Trust (CLIENT) FIRST DATA SERVICES, INC.
BY: /s/ Catherine Harrell BY: /s/ Robert Steen
TITLE: EDP Manager and Vice President TITLE: Treasurer
DATE: September 1, 1993 DATE: September 1, 1993
ATTACHMENT I
AGREEMENT FOR COMPUTER SERVICES
Bank Services Corporation will provide the following data services:
Demand Deposit Accounting
Savings
Certificates of Deposit
IRA's
Line of Credit (Ready Reserve)
Commerical Loans
Installment Loans (Personal or Consumer Loans)
Mortgage Loans
General Ledger (With Automatic Entry)
On Line Services (Data Entry, Inquiry, Teller Machines)
Central Information File
Microfiche (Upon Bank request)
Item Processing
Visa Cardholders and ATM Interface
Special Projects
In addition, Bank Services Corporation will:
Provide coordination with hardware vendors to insure hardware
capability.
Arrange, with Client's consent, for installation of communication
lines and equipment.
Arrange, with Client's consent, for Courier Services
Provide the necessary data communications adapters and software to
be installed on the FDSI host computer in Fort Walton Beach,
Florida
First Bank and Trust (Client) will be responsible for acquisition
and one-time costs of, including but not limited to;
Wiring the building for terminals and printers
All modems, control units and converters installed by FDSI for
communications
All terminals (CRT;s and Printers) installed in Client's location
for delivery of FDSI Service
All Personal Computer adapters and software, if required, to allow
PC'C to function as CRT's.
Deconversion including charges from previous servicer for test and
conversion taped supplied to FDSI
ATTACHMENT II
AGGREEMENT FOR COMPUTER SERVICES
SCHEDULE OF CHARGES
Account Maintenance
All Applications $140.00 Per Million
Statements N/C Dollars of Assets
Item Procession
Bank (ON-US) Items $ 0.036 each
Proof of Deposit $ 0.017 each
ACH Tapes N/C
Microfiche
Masters $ 4.00 each
Copies-First 3 at no Charge, each add'l .30 each
Credit Bureau Tapes $25.00 each
Visa, outgoing data tape $10.00 each
Special Reports $25.00 each
Special Projects As Negotiated
First Data Services, Inc. will bill at cost and Client will pay the
amounts billed for the following items:
Telephone data lines, data sets Included in above
Courier Cost
Postage Cost
Conversion Cost
Education Cost
All charges will be billed monthly on the 1st or 2nd business day
and will be due within 10 days from receipt.
Account maintenance charges will be calculated on the asset size
reported in the December31, call report. Maintenance charge will
be adjusted for mergers or acquisition during the processing year.
ATTACHMENT III
AGREEMENT FOR COMPUTER SERVICES
First Data Services, Inc., will provide the following data
processing services:
Capture of Federal Reserve Inclearings
Proof of Deposit
Cash Letter Preparation and Delivery to Correspondent to Meet
Earliest deadline possible
Item Transmission to Bank or Bank's Date Processor
Bulk Filing
Statement Preparation Within 24 Hours of Receipt by FDSI
Microfilming of All DDA & Savings Items in Account Number
Sequence and Delivery of Film to Bank
Reject Item Pull
Qualified Return Item Cash Letter
Software for Item Transmission to Bank or Bank's Data Processor
Software for Necessary Transmission to FDSI
Storage of Truncated Items for Six Months
Next Day Delivery to Bank of Internal Bank Items
Balancing and Proper Disposition of All Non-Post Items
In addition, Bank Services Corporation will:
Provide coordination with hardware vendors to insure hardware
compatibility
Arrange, with Client's consent, for installation of communciation
lines and equipment
Arrange, with banks consent for courier services
Provide the necessary data communications adapters and software to
be installed on the FDSI Host computer(s)
First Bank and Trust (Client) will be responsible for:
Adapters and modems for its Computers that are necessary to
establish communications with FDSI
Arrange for and pay for courier service to deliver all items to
FDSI Fort Walton Location and to Return Internal Items and Capture
Reports to Client
ITEM IV
AGREEMENT FOR COMPUTER SERVICES
SCHEDULE OF CHARGES
Per Item Charges:
Inclearing Capture $.010
Proof of Deposit $.015
Bulk Filing and Statement Inserting $.020
Reject Item Pull $.150
Qualified Return Items $.250
Additional Statement Stuffer $.005
Proof and Encoding (one field) $.018
Per Statement Charges:
Statement Preparation and Mailing $.100
Research
Research Time $15.00 Per Hour
Copies from Microfilm $ .25 Each Side
The combined item and statement charges shall be subject to a
minimum of __________ per Month. Additionally, FDSI will bill at
cost and Client will pay the amounts billed for the following items:
Data Communications Charges
Postage for Statement Mailing
<PAGE>
Exhibit 10.6
AGREEMENT FOR BOOKKEEPING SERVICES
THIS AGREEMENT is dated for reference June 3, 1994, between FIRST
BANKING SERVICES, INC. (FBSI), a Florida Corporation, and First
Bank & Trust (Client) of Grove Hill, in the State of Alabama.
THE PARTIES AGREE AS FOLLOWS:
1) INSTALLATION PROVISION
A) Commencing on June 3, 1994, FBSI agrees to provide the
services set forth in Attachment 1, considered a part of this
Agreement, and shall continue to provide these services in
accordance with the Fee Schedule set forth in Attachment II.
B) Client will furnish FBSI with all data and records required by
FBSI on each account for which the servicing is to be performed,
said data and records to be furnished in a form acceptable to FBSI.
C) The procedures relating to the following items shall be followed
by FBSI and Client as mutually agreed upon prior to the start of
the services: (1) daily pick up and delivery of data between
FBSI and Client (2) pickup and delivery point (3) statement
preparation (4) deposit/loan credit verifications (5) telephone
inquiries (6) ATM card rendering (7) return item processing
(8) mailing statements and other computer generated outgoing
items (9) signature agreement maintenance and (10) check orders.
2) SCHEDULE PROCESSING PROVISIONS
A) Where the foregoing provisions require FBSI and Client to
perform specific acts on a designated day, it is understood that
adjustments may be made such day is a holiday for either party.
B) Client agrees to furnish FBSI with any special forms and any
forms imprinted with its Corporate Symbol and/or Name at its
own expense including demand deposit and savings statements.
C) All the original documents and source data will be maintained
at FBSI. Historical records and data on accounts will be
available through on-line inquiry if Client also contracts for
Computer Services with FBSI. Other arrangements will be made if
Client does not contract for such services.located at the office
of the Client.
3) CONSIDERATION
A) The fees to be charged for the services rendered are contained
in an accompanying Fee Schedule (Attachment II), considered a
part of this Agreement. Said Fees shall remain in effect for
the original term of the Agreement.
B) FBSI's basic Fee Schedule shall be adjusted periodically and
shall be effective ninety (90) days after written notice to
Client. Extensions and renewals of the Agreement shall be
subjected to the adjusted Fee Schedule. Fee Schedule shall be
determined by the Board of Directors of FBSI and shall not exceed
fifteen percent (15%) increase each year.
4) GENERAL PROVISIONS
A1) The initial terms of this Agreement is five (5) years commencing
on the date set forth in paragraph 1A of this Agreement,and shall
be automatically renewed for a term of one (1) year upon the fifth
(5th) anniversary of this Agreement and each subsequent
anniversary. Either Client or FBSI may terminate this Agreement
at the end of the initial term or at the end of any annual renewal
term by giving written notice to the other party six (6) months in
advance.
A2) This Agreement shall become null and void on the close of business
on the day on which:
a) Client is declared insolvent by any Federal or State
Supervisory agency or,
b) Client control and management is assumed by any party other
than those Officers duly elected by the Client's Board
of Directors.
A3) In the event this Agreement is rendered null and void per
paragraph 4A2, this Agreement may be reinstated for thirty (30)
days with Client's new ownership in which Client's new Management
or its Supervisory Agency will do one of the following:
a) Accept the original terms of this Agreement and notify FBSI
in writing, of its intent to continue processing under
the terms of this Agreement; or
b) Negotiate a new Agreement.
Should Client's new Management fail to take action under this
sub-paragraph, FBSI will discontinue bookkeeping services at
the close of FBSI's processing on the thirtieth (30th) day and will
deliver to Client all Client's data files.
B1) FBSI will be held to a standard of care expected within the
industry at the time services are provided. This standard of
care is not expected to require state of the art processing at
all times.
B2) Client agrees to assume the entire responsibility for the accuracy
and authenticity of any and all records furnished to FBSI and
Client hereby agrees to indemnify, save, and hold harmless
from any and all damage, loss, liability, cost, expense or
consequence of any claim of whatever nature and by whomever made
that may be made against FBSI as a result of FBSI acting upon any
information furnished by Client. FBSI will not make any changes to
Client data or controls without consent of Client.
C1) FBSI agrees to treat the data, records and accounts of Client as
confidential and will not disclose such data, records and accounts
to anyone except Client or those Client designates. FBSI agrees
to exercise reasonable care and due diligence in the performance
of the services as if the service were being provided for itself.
C2) Client agrees to treat and data or records delivered inadvertently
to Client by FBSI that do not belong to Client as the confidential
property of FBSI. Client will notify FBSI of the receipt of such
material by the fastest manner possible and will release such
material to FBSI without disclosing the fact of its receipt or the
nature of its contents to anyone other than FBSI personnel.
C3) Client shall report any errors to FBSI in writing within thirty
(30) days following discovery by Client. Such notice shall be
a condition precedent to any claim, or the commencement of any
legal proceeding of any kind or nature against FBSI. FBSI agrees
to provide prompt resolution to any problems reported by Client
or correct any problems or errors in bookkeeping services under
this Agreement. If FBSI agrees that an error has been made and
that the fault was FBSI's, it shall correct the same at its
expense.
C4) FBSI shall be responsible for any and all claims and liabilities
connected with any breach of duty by reason of negligent acts,
errors or omissions of its employees so long as said claim does
not exceed $500,000 per act.
C5) FBSI shall be responsible for the expense of reconstructing any
records of Client accidentally lost, destroyed or stolen while in
the possession of FBSI.
D) FBSI shall not be responsible, and Client agrees to save and hold
it harmless, for any claim for consequential damage made against
FBSI as a result of losses or delays caused by accident, strikes,
fire, flood, war, riot, electrical or mechanical failure, acts of
God or any cause or causes which are unavoidable or beyond FBSI's
control.
E) FBSI has made arrangements with other parties to use their computer
facilities as backup facilities in the event FBSI does incur some
difficulty that renders FBSI unable to process. Such arrangements
will meet the requirements of regulatory agencies.
F) Off premise storage of Client records is maintained in locked
storage at a separate location. Client's master files are
backed up every day after previous day's processing and transported
to the off premise location. Client statement information will be
stored on optical storage media.
G) FBSI will permit examination of its records and its procedures at
any reasonable time by Client, its agents, its auditors, or
representatives of the Federal or State agency regulating Client.
The agencies include:
1) The Federal Reserve Board and its examining group
2) The Federal Deposit Insurance Corporation and its
examining group;
3) The Comptroller of the Currency and its examining group; and
4) The State Banking Commission and its examining group.
H) Upon request of Client, FBSI will furnish a list of its employees
to enable Client to monitor accounts held by these employees
should it deem necessary.
I) Records maintained on magnetic tape or magnetic disk are owned
solely by Client. The media on which these records are stored,
i.e., tapes or disks are owned solely by FBSI.
J) Upon expiration of this Agreement, if Client changes service
companies, FBSI will provide file design and copies of files to
the new servicing company. Client shall be obligated to
purchase from FBSI at FBSI's cost, any unused forms that were
custom designed for Client's use.
K) FBSI will be responsible for the transportation of the necessary
material for processing of Client accounts to and from Client's
main office building. Client will be responsible for the expense
of this transportation.
L) This Agreement supersedes and makes void all Agreements, if any,
between FBSI and Client prior to this Agreement.
5) ASSIGNMENT
FBSI understands that Client is relying upon the particular
competence, reputation and integrity of FBSI in entering into this
Contract. Therefore, FBSI cannot assign this Contract or Agreement
for Computer Services to any other Data Processing Entity without
the prior written consent of Client.
6) NEW EQUIPMENT OR SYSTEM
In the event new hardware or software must be installed in Client's
location after the initial installation and conversion to allow
FBSI to provide the standard services contemplated within this
Agreement, then the delivery and installation charge of such shall
be paid by FBSI unless otherwise agreed upon. The cost of new
hardware will be paid by Client. The cost of new software or a
portion thereof may be paid by Client at FBSI's option.
7) MAINTENANCE
FBSI shall pay for all maintenance of equipment owned by FBSI and
installed in Client's location, including equipment leased or
loaned to Client. Client is responsible for maintenance of
equipment owned by Client.
8) JURISDICTION
This Agreement is entered into and in all respects to be performed
in the State of Florida and therefore, Florida law applies and
jurisdiction and venue regarding any disputes within this Agreement
shall be vested in the Courts of Okaloosa County, Florida.
CLIENT FIRST BANKING SERVICES, INC.
First Bank & Trust
BY: /s/ Robert Steen BY: /s/ Jimmy W. Tucker
TITLE: Controller TITLE: General Manager
DATE: 6/3/94 DATE: 6/3/94
ATTACHMENT I (Page 1)
AGREEMENT FOR BOOKKEEPING SERVICES
FIRST BANKING SERVICES, INC. will provide the following bookkeeping
services:
- Statement Rendering
- Bulk Filing
- Telephone Inquiries (excluding return item, fee
waiver, and other such decisions)
- Return Item Processing (excluding decision making)
- Mail (System generated outgoing items only)
- Deposit/Loan credit verification (in response to
signed, written requests only)
- Maintain Signature Agreements
- Check orders
- PBX Operator
- Message Center
FIRST BANKING SERVICES, INC. WILL:
- Provide statement rendering for all statement
accounts of Client;
- Provide bulk filing of checks for all accounts;
- Provide telephone inquiry responses to customer
inquiries excluding return item, fee waiver and other
such inquiries;
- Provide return item processing exclusive of decision;
- Provide mail services for all system generated
outgoing items;
- Perform deposit or loan credit verifications in
response to signed written requests;
- Maintain signature agreements;
- Render ATM cards upon appropriate application and
approval; and
- Provide check order processing.
First Bank & Trust (CLIENT) will be responsible for acquisition and
one time costs of, including but not limited to:
- All modems, control units and converters installed
by FBSI for communications;
- All terminals (CRT's and Printers) installed in
Client's location for delivery of FBSI services; and
- All Personal Computer adapters and software, if
required, to allow PC's to function as CRT's.
First Bank & Trust (CLIENT) will be responsible for:
- Adapters and modems for its computers that are
necessary to establish communications with FBSI
- Arrange for and pay for courier service to deliver
all items to FBSI's Fort Walton Beach location and to
return internal items and capture reports to Client
ATTACHMENT II (Page 1)
AGREEMENT FOR BOOKKEEPING SERVICES
SCHEDULE OF CHARGES
FIRST DATA SERVICES, INC. will bill at cost and Client will pay the
amounts billed for the following items:
Statement Rendering Cost
Bulk Filing Cost
Telephone Inquiries Cost
Return Item Processing Cost
Mail Cost
Deposit/Loan Verifications Cost
Signature Agreement Storage & copies Cost
ATM Card Rendering Cost
Courier Cost
Education Cost
All charges will be billed monthly on the First (1st) or Second
(2nd) business day and will be due within ten (10) days from
receipt.
<PAGE>
Exhibit 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in this registration
statement on Form S-4 of our report dated January 12, 1996, on our
audit of the consolidated financial statements of United Security
Bancshares, Inc. and its subsidiary United Security Bank. We also
consent to the reference of our firm under the caption "Experts."
Smith, Dukes & Buckalew, L.L.P.
Mobile, Alabama
January 31, 1997
<PAGE>
Exhibit 23.2
Consent of Dudley, Hopton-Jones, Sims & Freeman, PLLP
We consent to the use in this Registration Statement of United Security
Bancshares, Inc. on Form S-4 of our report dated January 26, 1996
relating to the financial statements of First Bancshares, Inc. and
to the reference to us under the heading "Experts" in the Joint
Proxy Statement and Prospectus.
Dudley, Hopton-Jones, Sims & Freeman PLLP
Birmingham, Alabama
February 4, 1997
<PAGE>
Exhibit 23.6
CONSENT OF FINANCIAL ADVISORS
We consent to the inclusion of our Fairness Opinion issued to First
Bancshares, Inc. in this registration statement on Form S-4. We
also consent to the reference to our firm under the caption
"Experts."
Baxter Fentriss and Company
Richmond, Virginia
December 16, 1996
<PAGE>
Exhibit 23.7
CONSENT OF CHAFFE & ASSOCIATES, INC.
We consent to the inclusion in the Joint Proxy
Statement/Prospectus forming a part of this Registration Statement
on Form S-4 of our opinion to the Board of Directors of United
Security Bancshares, Inc. dated January 31, 1997, and to be
included as Appendix D to the Joint Proxy Statement/Prospectus, and
to the references to our firm in the Joint Proxy
Statement/Prospectus. In giving such consent, we do not thereby
admit that we come within the category of persons whose consent is
required under Section 7 of the Securities Act of 1933 or the rules
and regulations of the Securities and Exchange Commission
thereunder.
Chaffe & Associates, Inc.
By: /s/ G. F. Gay LeBreton
------------------------------
G. F. Gay LeBreton
Vice President
New Orleans, Louisiana
January 31, 1997
<PAGE>
Exhibit 23.8
CONSENT OF PERSON NAMED TO BECOME A DIRECTOR
The undersigned hereby consents, pursuant to Rule 438 of the
Securities Act of 1933, as amended, to the reference to him under
the caption "THE MERGER--Management and Operations After the
Merger" in the Joint Proxy Statement and Prospectus, which is part
of this Registration Statement on Form S-4 of United Security
Bancshares, Inc.
/s/ Dan Barlow
--------------------------
Grove Hill, Alabama Dan Barlow
January 20, 1997
<PAGE>
Exhibit 23.8
CONSENT OF PERSON NAMED TO BECOME A DIRECTOR
The undersigned hereby consents, pursuant to Rule 438 of the
Securities Act of 1933, as amended, to the reference to him under
the caption "THE MERGER--Management and Operations After the
Merger" in the Joint Proxy Statement and Prospectus, which is part
of this Registration Statement on Form S-4 of United Security
Bancshares, Inc.
/s/ John Becton
-------------------------
Grove Hill, Alabama John Becton
January 20, 1997
<PAGE>
Exhibit 23.8
CONSENT OF PERSON NAMED TO BECOME A DIRECTOR
The undersigned hereby consents, pursuant to Rule 438 of the
Securities Act of 1933, as amended, to the reference to her under
the caption "THE MERGER--Management and Operations After the
Merger" in the Joint Proxy Statement and Prospectus, which is part
of this Registration Statement on Form S-4 of United Security
Bancshares, Inc.
/s/ Linda Breedlove
-------------------------
Grove Hill, Alabama Linda Breedlove
January 20, 1997
<PAGE>
Exhibit 23.8
CONSENT OF PERSON NAMED TO BECOME A DIRECTOR
The undersigned hereby consents, pursuant to Rule 438 of the
Securities Act of 1933, as amended, to the reference to him under
the caption "THE MERGER--Management and Operations After the
Merger" in the Joint Proxy Statement and Prospectus, which is part
of this Registration Statement on Form S-4 of United Security
Bancshares, Inc.
/s/ John C. Gordon
--------------------------
Grove Hill, Alabama John C. Gordon
January 20, 1997
<PAGE>
Exhibit 23.8
CONSENT OF PERSON NAMED TO BECOME A DIRECTOR
The undersigned hereby consents, pursuant to Rule 438 of the
Securities Act of 1933, as amended, to the reference to him under
the caption "THE MERGER--Management and Operations After the
Merger" in the Joint Proxy Statement and Prospectus, which is part
of this Registration Statement on Form S-4 of United Security
Bancshares, Inc.
/s/ Fred L. Huggins
---------------------------
Grove Hill, Alabama Fred L. Huggins
January 17, 1997
<PAGE>
Exhibit 23.8
CONSENT OF PERSON NAMED TO BECOME A DIRECTOR
The undersigned hereby consents, pursuant to Rule 438 of the
Securities Act of 1933, as amended, to the reference to him under
the caption "THE MERGER--Management and Operations After the
Merger" in the Joint Proxy Statement and Prospectus, which is part
of this Registration Statement on Form S-4 of United Security
Bancshares, Inc.
/s/ Ray Sheffield
-------------------------
Grove Hill, Alabama Ray Sheffield
January 20, 1997
<PAGE>
Exhibit 23.8
CONSENT OF PERSON NAMED TO BECOME A DIRECTOR
The undersigned hereby consents, pursuant to Rule 438 of the
Securities Act of 1933, as amended, to the reference to him under
the caption "THE MERGER--Management and Operations After the
Merger" in the Joint Proxy Statement and Prospectus, which is part
of this Registration Statement on Form S-4 of United Security
Bancshares, Inc.
/s/ Clarence Watters
-----------------------------
Grove Hill, Alabama Clarence Watters
January 17, 1997
<PAGE>
Exhibit 23.8
CONSENT OF PERSON NAMED TO BECOME A DIRECTOR
The undersigned hereby consents, pursuant to Rule 438 of the
Securities Act of 1933, as amended, to the reference to him under
the caption "THE MERGER--Management and Operations After the
Merger" in the Joint Proxy Statement and Prospectus, which is part
of this Registration Statement on Form S-4 of United Security
Bancshares, Inc.
/s/ Bruce Wilson
--------------------------
Grove Hill, Alabama Bruce Wilson
January 20, 1997
<PAGE>
Exhibit 23.8
CONSENT OF PERSON NAMED TO BECOME A DIRECTOR
The undersigned hereby consents, pursuant to Rule 438 of the
Securities Act of 1933, as amended, to the reference to him under
the caption "THE MERGER--Management and Operations After the
Merger" in the Joint Proxy Statement and Prospectus, which is part
of this Registration Statement on Form S-4 of United Security
Bancshares, Inc.
/s/ Earnest Woodson
---------------------------
Grove Hill, Alabama Earnest Woodson
January 20, 1997
<PAGE>
Exhibit 99.1
REVOCABLE PROXY
United Security Bancshares, Inc.
131 West Front Street
Thomasville, Alabama 36784
This Proxy is solicited on behalf of the Board of Directors of
United Security Bancshares, Inc. ("USB") for use only at the
Special Meeting of Stockholders to be held on _________________,
1997, and at any postponement or adjournment thereof (the "Special
Meeting").
The undersigned, being a Stockholder of USB, hereby appoints
Jack M. Wainwright, III and Larry M. Sellers, 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 August19, 1996 (the
"Merger Agreement"), by and between USB and First Bancshares, Inc.
("FBI"), pursuant to which, among other matters (a) FBI would be
merged with and into USB, (b) FBI's wholly-owned subsidiary bank,
First Bank & Trust, would be merged with and into USB's
wholly-owned subsidiary bank, United Security Bank, and (c) each
share of FBI common stock will be converted into the right to
receive 5.8321 shares of USB common stock. The Merger Agreement
further provides for an amendment to USB's Articles of
Incorporation (a) to increase its authorized common stock from
2,400,000 shares to 10,000,000 shares, (b) to increase the maximum
size of USB's Board of Directors from 15 to 20, (c) to deny
preemptive rights to USB shareholders, (d) to provide for a 2/3's
supermajority voting requirement by the Board of Directors to
approve significant corporate events or to add or remove members of
senior management, and (e) to change the name of USB to a new name
to be agreed upon by FBI and USB. A copy of the Merger Agreement
is set forth in Appendix A to the accompanying Joint Proxy
Statement and Prospectus.
2. To transact such other business as may properly come
before the Special Meeting or any adjournment thereof.
Please mark, date and sign this Proxy below and return promptly
using the enclosed envelope.
THIS PROXY CARD IS CONTINUED ON THE REVERSE SIDE.
PLEASE SIGN ON THE REVERSE SIDE AND RETURN PROMPTLY.
The undersigned acknowledges that the Special Meeting may be
postponed or adjourned to a date subsequent to the date set forth
above, and intends that this Proxy shall be effective at the
Special Meeting after such postponement(s) or adjournment(s). This
Proxy is revocable, and the undersigned may revoke it at any time
by delivery of written notice of such revocation to USB, 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.
ELECTION TO APPROVE FOR AGAINST ABSTAIN from
THE MERGER: Approval of Approval of Approval of
the Merger the Merger the Merger
[ ] [ ] [ ]
Signature(s): ----------------------------
Date: ------------------------------------
NOTE: Please sign exactly as name appears
above. When signing as attorney, executor,
administrator, trustee or guardian, please
give full title as such. If a corporation,
please sign in full corporation name by
president or other authorized officer. If
a partnership, please sign in partnership
name by authorized person.
<PAGE>
Exhibit 99.2
REVOCABLE PROXY
First Bancshares, Inc.
131 Main Street
Grove Hill, Alabama 36451
This Proxy is solicited on behalf of the Board of Directors of
First Bancshares, Inc. ("FBI") for use only at the Special Meeting
of Stockholders to be held on _________________, 1997, and at any
postponement or adjournment thereof (the "Special Meeting").
The undersigned, being a Stockholder of FBI, hereby appoints
Fred L. Huggins and Robert Steen, 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:
3. To consider and vote upon a proposal to approve the
Agreement and Plan of Merger, dated as of August19, 1996 (the
"Merger Agreement"), by and between FBI and United Security
Bancshares, Inc. ("USB"), pursuant to which, among other matters
(a) FBI would be merged with and into USB, (b) FBI's wholly-owned
subsidiary bank, First Bank & Trust, would be merged with and into
USB's wholly-owned subsidiary bank, United Security Bank, and (c)
each share of FBI common stock will be converted into the right to
receive 5.8321 shares of USB common stock. The Merger Agreement
further provides for an amendment to USB's Articles of
Incorporation (a) to increase its authorized common stock from
2,400,000 shares to 10,000,000 shares, (b) to increase the maximum
size of USB's Board of Directors from 15 to 20, (c) to deny
preemptive rights to USB shareholders, (d) to provide for a 2/3's
supermajority voting requirement by the Board of Directors to
approve significant corporate events or to add or remove members of
senior management, and (e) to change the name of USB to a new name
to be agreed upon by FBI and USB. A copy of the Merger Agreement
is set forth in Appendix A to the accompanying Joint Proxy
Statement and Prospectus.
4. To transact such other business as may properly come
before the Special Meeting or any adjournment thereof.
Please mark, date and sign this Proxy below and return
promptly using the enclosed envelope.
THIS PROXY CARD IS CONTINUED ON THE REVERSE SIDE.
PLEASE SIGN ON THE REVERSE SIDE AND RETURN PROMPTLY.
The undersigned acknowledges that the Special Meeting may be
postponed or adjourned to a date subsequent to the date set forth
above, and intends that this Proxy shall be effective at the
Special Meeting after such postponement(s) or adjournment(s). This
Proxy is revocable, and the undersigned may revoke it at any time
by delivery of written notice of such revocation to USB, 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.
ELECTION TO APPROVE FOR AGAINST ABSTAIN from
THE MERGER: Approval of Approval of Approval of
the Merger the Merger the Merger
[ ] [ ] [ ]
Signature(s): ----------------------------
Date: ------------------------------------
NOTE: Please sign exactly as name appears
above. When signing as attorney, executor,
administrator, trustee or guardian, please
give full title as such. If a corporation,
please sign in full corporation name by
president or other authorized officer. If
a partnership, please sign in partnership
name by authorized person.
