July 16, 1996
BY HAND DELIVERY
Board of Directors
First Bancshares, Inc.
131 Main Street
Grove Hill, Alabama 36451
Gentlemen:
On behalf of United Security Bancshares, Inc., ("United") and United
Security Bank, I am pleased to submit the following merger-of-equals proposal:
1. Merger. Subject to the terms and conditions set forth in this letter
and to a complete due diligence review of each party to this letter and the
negotiation and execution of a Definitive Agreement and Plan of Reorganization
(the "Definitive Agreement"), United proposes a "merger of equals" whereby First
Bancshares, Inc. ("FBI") will be merged with and into United and the subsidiary
banks of each party would be merged into one entity. The Definitive Agreement
will contain a requirement of applicable regulatory and shareholder approvals,
among other terms, conditions, representations and indemnifications from parties
as are customary in transactions of this nature.
By executing this letter, FBI represents to us that there are currently
outstanding 239,843 shares of common stock of FBI (the "Common Stock"), and
there are no other options, warrants, rights or convertible securities
(collectively, the "Rights") that are exercisable for shares of Common Stock
or other equity securities of any description of FBI. If the transaction is
consummated, each share of Common Stock will be converted into 5.8321 shares
of common stock of United. The exchange ratio will be adjusted for any stock
splits and stock dividends declared subsequent to the date of this letter.
2. Due Diligence: Confidentiality. United and FBI agree to hold any
materials obtained from the other party in confidence and to use such materials
only to evaluate the proposed transaction. If the proposed transaction is not
consummated, each party shall promptly return all such materials. Nothing
contained herein shall preclude either party from using information publicly
available or received from third parties for purposes other than the proposed
transaction.
Board of Directors
First Bancshares, Inc.
July 16, 1996
Page 2
3. Board of Directors. All directors of FBI at closing shall become
directors of United. Directors of United will select the board of the combined
banking institution, which will be comprised of twelve directors, six from each
institution. Prior to the proposed merger, the respective boards of United and
FBI shall meet, evaluate and mutually agree upon the following items:
a) a name for the resulting organization;
b) policies for the new organization; and
c) other matters that the parties may deem appropriate.
4. Executive Officers. At closing, Jack Wainwright, currently President
and Chief Executive Officer of United, shall enter into a three-year contract to
continue as President and Chief Executive Officer of the resulting entity, and
Fred Huggins, currently Chairman and Chief Executive Officer of FBI, shall
serve as chairman and CEO of a finance subsidiary of the resulting organization.
The Chairman of the resulting holding company will be Jim Miller, with Fred
Huggins and Ray Sheffield serving as Vice Chairmen. The Chairman of the
resulting bank will be Fred Huggins, with Don Nichols and Hardie Kimbrough
serving as Vice Chairmen.
5. Incentive Program. United and FBI shall use their best efforts to
develop a stock option or other incentive program to enhance the retention of
key senior officers at both organizations.
6. Bylaw Changes. The resulting entity will adopt amendment(s) to its
bylaws providing for super majority voting provisions that will require a two-
thirds (66.7%) board majority to approve significant corporate events or changes
in its senior management.
7. Reciprocal Options. United and FBI shall simultaneously execute and
deliver the option agreements attached hereto as Exhibits A and B.
8. Other Negotiations: Board Approvals. Upon the signing of this
letter of intent, United and FBI shall discontinue any discussions with any
party other than the respective parties hereto with respect to the sale of any
assets or stock of United or FBI, or the merger of United or FBI with a third
party, and neither United nor FBI shall solicit, review or accept any
proposal from any third party with respect to any such sales. The respective
boards of directors of United and FBI have unanimously approved the proposed
transaction, subject to an acceptable due diligence investigation and any
necessary approvals, and each such board (and all members thereof) has agreed
to use its best efforts to enter into the Definitive Agreement and to obtain
the necessary regulatory and shareholder approvals.
9. Closing. United and FBI agree to use their best efforts to effect
a closing of the transactions contemplated herein no later than December 31,
1996.
Board of Directors
First Bancshares, Inc.
July 16, 1996
Page 3
10. Public Announcements. United and FBI agree that any announcement or
disclosure relating to the proposed transaction shall be made only with the
consent of both United and FBI, which consent shall not be unreasonably
withheld, unless such disclosure is required by law and time does not permit
the obtaining of such consent, or such consent is withheld.
11. Expenses. Each party to this letter of intent shall bear its own
expenses, except as specifically provided to the contrary.
12. Best Efforts. United and FBI shall use their best efforts to enter
into the Definitive Agreement and to consummate the transactions provided for
herein. Notwithstanding the foregoing, except for the provisions set forth in
paragraph 7 and 8, this letter of intent is not intended to be a legally binding
contract, nor is it intended to confer any legal rights or remedies on the
parties hereto. If a Definitive Agreement has not been signed by both parties
on or before August 19, 1996, then this proposal will be terminated and of no
further force and effect, unless extended by mutual written consent of the
parties hereto; except that the confidentiality agreement contained in paragraph
2 herein shall survive.
This proposal will be considered withdrawn at 5:00 p.m., July 16, 1996, if
we have not received a favorable response from you by that time.
We hope this meets with your approval. If additional information is needed
or further discussion is required, please let us know.
For the Board of Directors of United
By: /s/ Jack M. Wainwright, III
Jack M. Wainwright, III
Its: President and Chief Executive Officer
Accepted and Agreed to this 16th
day of July, 1996.
For the Board of Directors of FBI
By: /s/ Fred L. Huggins
Fred Huggins
Its: President and Chief Executive Officer