SUPERIOR BANCORP
As filed with the Securities and Exchange Commission on
August 8, 2006
Registration
No. 333-
SECURITIES AND EXCHANGE
COMMISSION
Washington, D.C.
20549
Form S-4
REGISTRATION
STATEMENT
UNDER
THE SECURITIES ACT OF
1933
SUPERIOR BANCORP
(Exact Name of Registrant as
Specified in its Charter)
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Delaware
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6711
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63-1201350
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(State or Other Jurisdiction
of
Incorporation or Organization)
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(Primary Standard Industrial
Classification Code Number)
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(I.R.S. Employer
Identification Number)
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17 North 20th Street
Birmingham, Alabama 35203
(205) 327-1400
(Address, including Zip Code,
and Telephone Number, including Area Code, of Registrants
Principal Executive Offices)
C. Stanley Bailey
Chief Executive Officer
Superior Bancorp
17 North 20th Street
Birmingham, Alabama 35203
(205) 327-1400
(Name, Address, including Zip
Code, and Telephone Number, including Area Code, of Agent for
Service)
Copies to:
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ROBERT E. LEE GARNER
Haskell Slaughter Young & Rediker, LLC
1400 Park Place Tower
2001 Park Place North
Birmingham, Alabama 35203
(205) 251-1000
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RALPH F. MACDONALD, III
Jones Day
420 Peachtree Street N.E.
Suite 800
Atlanta, Georgia 30309
(404) 581-8622
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Approximate date of commencement of proposed sale to the
public: As soon as practicable after the
effective date of this Registration Statement.
If the securities being registered on this Form are to be
offered in connection with the formation of a holding company
and there is compliance with General Instruction G, check the
following box. o
If this form is filed to register additional securities for an
offering pursuant to Rule 462(b) under the Securities Act,
check the following box and list the Securities Act registration
number of the earlier effective registration statement for the
same offering. o
If this form is a post-effective amendment filed pursuant to
Rule 462(d) under the Securities Act, check the following
box and list the Securities Act registration statement number of
the earlier, effective registration statement for the same
offering. o
CALCULATION OF REGISTRATION FEE
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Title of Each Class of
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Proposed Maximum
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Proposed Maximum
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Securities to be
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Amount to be
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Offering Price
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Aggregate Offering
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Amount of
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Registered
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Registered(1)
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per Unit
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Price(2)
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Registration Fee
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Common Stock, par value
$.001 per share
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8,892,926
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N/A
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$85,816,735.90
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$9,182.39
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(1)
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Represents the maximum amount of
common stock, par value $.001 per share (Superior
Bancorp common stock), of Superior Bancorp issuable upon
the consummation of the merger of Community Bancshares, Inc.
with and into Superior Bancorp, assuming the conversion of each
outstanding share of common stock, par value $.01 per share
(Community Bancshares common stock), of Community
Bancshares, Inc. into 0.8974 shares of Superior Bancorp
common stock.
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(2)
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In accordance with
Rule 457(f), the registration fee is based on the average
of the high and low prices for a share of Community Bancshares
common stock as of August 3, 2006, as reported on the
NASDAQ Capital Market, multiplied by the number of shares of
common stock of Community Bancshares to be exchanged in the
merger.
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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 this Registration
Statement shall become effective on such date as the Securities
and Exchange Commission, acting pursuant to said
Section 8(a), may determine.
The
information in this joint proxy statement/prospectus is not
complete and may be changed. We may not sell these securities
until the registration statement filed with the Securities and
Exchange Commission is effective. This joint proxy
statement/prospectus is not an offer to sell these securities
and is not soliciting an offer to buy these securities in any
state where the offer or sale is not permitted.
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DATED AUGUST 8, 2006, SUBJECT
TO COMPLETION
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Superior
Bancorp |
Community
Bancshares, Inc. |
PROPOSED
MERGER YOUR VOTE IS VERY IMPORTANT
Each of the boards of directors of Superior Bancorp and
Community Bancshares, Inc. has unanimously approved a
transaction that will result in the merger of Community
Bancshares with and into Superior Bancorp. The stockholders of
Superior Bancorp and Community Bancshares are being asked to
approve the merger at meetings of the stockholders of each
company.
If we complete the merger, Community Bancshares stockholders
will be entitled to receive 0.8974 shares of Superior
Bancorp common stock for each share of Community Bancshares
common stock they own, subject to reduction if Community
Bancshares does not have a net worth of at least $44,333,000 at
the effective time of the merger.
Community Bancshares may establish and declare a cash dividend
ten business days before the closing date equal to, in the
aggregate, the amount, if any, by which the net worth of
Community Bancshares exceeds $44,333,000. The amount of any such
dividend may not be more than $4,400,000 in the aggregate.
We expect that the merger will qualify as a reorganization under
the Internal Revenue Code, in which case Community Bancshares
stockholders will not recognize gain or loss for federal income
tax purposes upon the exchange of their shares of Community
Bancshares common stock for shares of Superior Bancorp common
stock. You should carefully read the description of material
federal tax consequences beginning on page of
this joint proxy statement/prospectus and consult your own tax
advisor.
We cannot complete the merger unless the stockholders of both
companies approve the merger agreement. Each of our boards of
directors unanimously recommends that you vote
FOR the merger agreement and the merger.
Each of Superior Bancorp and Community Bancshares will hold a
meeting of its stockholders to approve the merger. The places,
dates and times of the meetings are as follows:
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Superior Bancorp
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Community Bancshares, Inc.
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,
2006
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,
2006
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Superior Bancorp common stock is quoted on the NASDAQ Global
Market under the ticker symbol SUPR.
YOUR VOTE IS IMPORTANT. Please take the time to vote on the
proposals by completing and mailing the enclosed proxy card,
even if you plan to attend the stockholders meeting.
This joint proxy statement/prospectus provides you with detailed
information about the proposed merger. In addition, you may
obtain information about Superior Bancorp or Community
Bancshares from documents that each has filed with the
Securities and Exchange Commission. We encourage you to read
this entire document carefully. You should also consider
carefully the risk factors we describe beginning on
page of this joint proxy statement/prospectus.
Neither the Securities and Exchange Commission nor any state
securities commission has approved or disapproved of these
securities or determined if this joint proxy
statement/prospectus is truthful or complete. Any representation
to the contrary is a criminal offense. Shares of Superior
Bancorp common stock are not bank accounts or deposits, are not
federally insured by the FDIC and are not insured by any other
state or federal agency.
This joint proxy statement/prospectus is
dated ,
2006, and is first being mailed to stockholders of Superior
Bancorp and Community Bancshares on or
about ,
2006.
JOINT
PROXY STATEMENT/PROSPECTUS
This joint proxy statement/prospectus incorporates by reference
important business and financial information about Superior
Bancorp and Community Bancshares from documents that are not
included in or delivered with this document. This information is
available to you without charge upon your written or oral
request. You can obtain documents incorporated by reference in
this document by requesting them in writing or by telephone from
the appropriate company at the following address:
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Superior Bancorp
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Community Bancshares, Inc.
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17 North 20th Street
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68149 Highway 231 South
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Birmingham, Alabama 35203
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Post Office Box 1000
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(205)
327-1400
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Blountsville, Alabama 35031
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Attention: Tom Jung
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(205) 429-6053
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Attention: William H. Caughran
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Superior Bancorp and Community Bancshares file quarterly and
annual reports with the Securities and Exchange Commission. You
can obtain free copies of this information through the SEC
website at
http://www.sec.gov
or through Superior Bancorps website at
www.superiorbank.com or Community Bancshares website at
www.communitybankal.com.
Stockholders requesting documents should do so
by ,
2006, in order to receive them before the meetings. For
additional information regarding where you can find more
information about Superior Bancorp and Community Bancshares, see
Where You Can Find More Information beginning on
page .
You should rely only on information provided in this joint
proxy statement/prospectus. Neither Superior Bancorp nor
Community Bancshares has authorized anyone else to provide you
with different information. The information in this joint proxy
statement/prospectus about Superior Bancorp and its subsidiaries
has been supplied by Superior Bancorp, and the information in
this joint proxy statement/prospectus about Community Bancshares
and Community Bank has been supplied by Community Bancshares.
Although neither Superior Bancorp nor Community Bancshares has
actual knowledge that would indicate that any statement or
information (including financial statements) relating to the
other party contained herein are inaccurate or incomplete,
neither Superior Bancorp nor Community Bancshares warrants the
accuracy or completeness of such statements or information as
they relate to any other party. Superior Bancorp is not making
an offer of these securities in any state or jurisdiction where
the offer is not permitted. Neither Superior Bancorp nor
Community Bancshares is soliciting proxies in any state or
jurisdiction where the solicitation of proxies is not
permitted.
i
SUPERIOR
BANCORP
NOTICE OF SPECIAL MEETING OF
STOCKHOLDERS
to be
held ,
2006
.m.
Birmingham,
Alabama
NOTICE IS HEREBY GIVEN THAT Superior Bancorp will hold a special
meeting of stockholders
on ,
2006,
at .m.
at
for the following purposes:
1. Merger. To consider and vote
on an Agreement and Plan of Merger, dated as of April 29,
2006, under which Community Bancshares, Inc., a Delaware bank
holding company, will merge with and into Superior Bancorp, a
Delaware-chartered thrift holding company. The merger agreement,
which describes the merger in more detail, is included in the
accompanying joint proxy statement/prospectus as Annex A.
2. Other Business. To transact
such other business as may properly come before the special
meeting or any postponement or adjustments of the special
meeting.
Only stockholders of record at the close of business
on ,
2006 will be entitled to notice of and to vote at the Superior
Bancorp special meeting or any adjournments or postponements
thereof. The approval of the merger agreement requires the
approval of the holders of a majority of the shares of Superior
Bancorp common stock outstanding and entitled to vote at the
meeting.
The board of directors of Superior Bancorp unanimously
recommends that holders of Superior Bancorp common stock vote
FOR the proposals listed above.
It is important that your shares be represented at the
special meeting regardless of the number of shares you own. Even
if you plan to attend the special meeting, we urge you to
complete, sign and date the enclosed proxy card and return it in
the envelope provided as promptly as possible. If you attend the
special meeting, you may vote either in person or by proxy. You
may revoke any proxy you give at any time before its exercise in
the manner described in the joint proxy statement/prospectus.
BY ORDER OF THE BOARD OF DIRECTORS,
C. Stanley Bailey
Chief Executive Officer
,
2006
Birmingham, Alabama
ii
COMMUNITY
BANCSHARES, INC.
NOTICE OF ANNUAL MEETING OF
STOCKHOLDERS
to be
held ,
2006
.m.
Blountsville,
Alabama
NOTICE IS HEREBY GIVEN THAT Community Bancshares, Inc. will hold
its annual meeting of stockholders
on ,
2006,
at .m.
at
for the following purposes:
1. Merger. To consider and vote
on an Agreement and Plan of Merger, dated as of April 29,
2006, under which Community Bancshares will merge with and into
Superior Bancorp, a Delaware-chartered thrift holding company,
headquartered in Birmingham, Alabama. The merger agreement,
which describes the merger in more detail, is included in the
accompanying joint proxy statement/prospectus as Annex A.
2. Election of Directors. To
elect Messrs. Stacey W. Mann, Philip J. Timyan and Jimmie
A. Trotter as Class I directors of Community Bancshares, to
serve until the earlier of the completion of the merger with
Superior Bancorp or Community Bancshares 2009 Annual
Meeting of Stockholders.
3. Other Business. To transact
such other business as may properly come before the annual
meeting or any postponement or adjustments of the annual meeting.
Only stockholders of record at the close of business on
August 15, 2006, will be entitled to notice of and to vote
at the Community Bancshares annual meeting or any adjournments
or postponements thereof. The approval of the merger agreement
requires the approval of the holders of a majority of the shares
of the Community Bancshares common stock outstanding and
entitled to vote at the meeting. The election of nominees as
directors requires the affirmative vote of the holders of shares
of common stock representing a plurality of the votes cast at
the annual meeting at which a quorum is present. This means that
the three director nominees receiving the most votes will be
elected.
The board of directors of Community Bancshares unanimously
recommends that holders of Community Bancshares common stock
vote FOR the proposals listed above.
It is important that your shares be represented at the annual
meeting regardless of the number of shares you own. Even if you
plan to attend the annual meeting, we urge you to complete, sign
and date the enclosed proxy card and return it in the envelope
provided as promptly as possible. If you attend the annual
meeting, you may vote either in person or by proxy. You may
revoke any proxy you give at any time before its exercise in the
manner described in the joint proxy statement/prospectus.
BY ORDER OF THE BOARD OF DIRECTORS,
Patrick M. Frawley
Chairman, Chief Executive Officer and President
,
2006
Blountsville, Alabama
DO NOT
SEND STOCK CERTIFICATES WITH YOUR PROXY CARD.
iii
TABLE OF
CONTENTS
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EX-5 OPINION OF HASKELL SLAUGHTER YOUNG & REDIKER LLC |
EX-23.1 CONSENT OF CARR, RIGGS & INGRAM, LLC, AS TO SUPERIOR BANCORP |
EX-23.2 CONSENT OF ERNST & YOUNG LLP, AS TO SUPERIOR BANCORP |
EX-23.3 CONSENT OF CARR, RIGGS & INGRAM, LLC, AS TO COMMUNITY BANCSHARES, INC. |
EX-99.1 CONSENT OF SANDLER O'NEILL & PARTNERS, L.P. |
EX-99.2 CONSENT OF BURKE CAPITAL GROUP, LLC |
EX-99.3 CONSENT OF FIG PARTNERS LLC |
EX-99.4 FORM OF PROXY FOR SUPERIOR BANCORP |
EX-99.5 FORM OF PROXY FOR COMMUNITY BANCSHARES, INC. |
vii
QUESTIONS
AND ANSWERS ABOUT THE MERGER
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Q: |
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What are Superior Bancorp and Community Bancshares proposing
at the stockholders meetings? |
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A: |
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At the meetings, the stockholders of each company will be asked
to vote for a proposal to approve the Agreement and Plan of
Merger between Superior Bancorp and Community Bancshares by
which Community Bancshares will be merged with and into Superior
Bancorp. Since Community Bancshares is considering approval of
the merger as part of its annual meeting of stockholders, its
stockholders will also be asked to elect directors to serve
until the earlier of the consummation of the merger with
Superior Bancorp or Community Bancshares 2009 annual
meeting of stockholders. |
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Q: |
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What should I do now? |
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A: |
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After carefully reviewing this document, please indicate on your
proxy card how you want to vote and sign and date your proxy
card. Mail your signed proxy card in the enclosed return
envelope as soon as possible to ensure that your shares are
represented at the applicable meeting. |
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If you sign, date and send in your proxy and do not indicate how
you want to vote, your proxy will be voted in favor of the
merger agreement and the merger. If you do not sign and send in
your proxy and if you do not attend and cast your vote in person
at the applicable meeting, it will have the same effect as a
vote against the merger agreement and the merger. |
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Q: |
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What vote is required to approve the merger? |
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A: |
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Approval of the merger agreement requires the affirmative vote
of a majority of the outstanding shares of both Community
Bancshares common stock and Superior Bancorp common stock. The
non-officer directors of Community Bancshares have agreed,
subject to their fiduciary duties, to
vote shares, or
approximately % of the outstanding
shares in favor of the merger. See The Merger
Interests of Directors, Officers and Others in the
Merger Share Ownership of Officers and
Directors beginning on page and
The Merger Interests of Directors, Officers
and Others in the Merger Support Agreements
beginning on page . |
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Q: |
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What do the Superior Bancorp and Community Bancshares boards
of directors recommend? |
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A. |
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The boards of directors of Superior Bancorp and Community
Bancshares have both unanimously approved and adopted the merger
and the merger agreement. Accordingly, the boards of directors
of both Superior Bancorp and Community Bancshares unanimously
recommend that their stockholders vote
FOR approval of the merger agreement
and the merger. |
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Q: |
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What will Community Bancshares stockholders receive in the
merger? |
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A. |
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Community Bancshares stockholders will receive
0.8974 shares of Superior Bancorp common stock for each
share of Community Bancshares common stock. The exchange ratio
is subject to adjustment if Community Bancshares does not have a
net worth, as defined in the merger agreement, of at least
$44,333,000 at the effective time of the merger. |
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Q: |
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What happens to the options and warrants previously granted
by Community Bancshares with respect to the merger? |
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A. |
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All outstanding Community Bancshares options and warrants will
be cancelled and the holders will receive cash in exchange for
each option or warrant equal to the amount resulting when the
number of shares obtainable under the options or warrants held
is multiplied by the difference between $10.50 and the exercise
price per share of the option or warrant. See The
Merger The Merger Agreement Treatment of
Community Bancshares Stock Options on
page . |
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Q: |
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Will Community Bancshares stockholders be able to trade
Superior Bancorp common stock they receive pursuant to the
merger? |
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A: |
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Yes. Superior Bancorp common stock issued pursuant to the merger
will be registered under the Securities Act of 1933 and will be
listed on the NASDAQ Global Market under the ticker symbol
SUPR. All shares of Superior Bancorp common stock
that you receive pursuant to the merger will be freely
transferable unless you are deemed an affiliate of Community
Bancshares at the time of the merger or become an affiliate of
Superior |
viii
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Bancorp. Affiliates of Community Bancshares may, however, be
able to freely sell the shares they receive pursuant to the
merger, subject to applicable securities regulations. See
The Merger Resale of Superior Bancorp Common
Stock by Affiliates on page . |
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Q: |
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Is the Community Bancshares merger conditioned on the
consummation of the proposed merger of Kensington Bankshares,
Inc. with Superior Bancorp? |
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A. |
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No. The Community Bancshares merger is not conditioned on
the completion of the Kensington Bankshares merger. Each merger
is independent of the other. |
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Q: |
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Can I change my vote after I have mailed my signed proxy
card? |
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A: |
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Yes. You can change your vote at any time before your proxy is
voted at the meeting. You can do this in one of three ways.
First, you can send a written notice stating that you would like
to revoke your proxy. Second, you can complete and submit a new
proxy card. If you choose either of these two methods, you must
submit your notice of revocation or your new proxy card to
Community Bancshares or Superior Bancorp, as appropriate, at the
address below, before the meeting. Third, you can attend the
applicable meeting and vote in person. Simply attending the
meeting, however, will not revoke your proxy. |
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Q: |
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Should I send in my stock certificates now? |
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A: |
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No. After the merger is completed, we will send you written
instructions on exchanging your Community Bancshares stock
certificates for Superior Bancorp stock certificates. |
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Q: |
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When do you expect the merger to be completed? |
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A: |
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We expect to complete the merger in the third or fourth quarter
of 2006. However, we cannot assure you when or if the merger
will occur. We must first obtain the approvals of our respective
stockholders and the necessary regulatory approvals and various
conditions specified in the merger agreement must be satisfied
or waived. |
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Q: |
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Who can help answer my questions? |
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A: |
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If you have more questions about the merger or the meetings or
if you need additional copies of this joint proxy
statement/prospectus, you should contact: |
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Superior Bancorp
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Community Bancshares, Inc.
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17 North Twentieth Street
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68149 Highway 231 South
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Birmingham, Alabama 35203
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Post Office Box 1000
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Attention: Investor
Relations Tom Jung
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Blountsville, Alabama 35031
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Telephone:
(205) 327-1400
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Attention: William H. Caughran
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Telephone: (205) 429-6053
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ix
SUMMARY
OF JOINT PROXY STATEMENT/PROSPECTUS
This summary highlights selected information from this joint
proxy statement/prospectus and may not contain all of the
information that is important to you. For a more complete
understanding of the merger and for a more complete description
of the legal terms of the merger agreement, you should carefully
read this entire joint proxy statement/prospectus and the
documents to which we have referred you. This will help you to
understand the merger and related matters fully and their legal
terms. See Where You Can Find More Information
beginning on page .
The
Companies
(See pages and )
Superior Bancorp
17 North 20th Street
Birmingham, Alabama 35203
(205) 327-1400
Superior Bancorp is a Delaware-chartered thrift holding company,
headquartered in Birmingham, Alabama. Superior Bancorp was known
as The Banc Corporation until May 18, 2006, when its
stockholders approved the change of its corporate name to
Superior Bancorp. Superior Bancorp offers a broad range of
banking and related services through Superior Bank (formerly
known as The Bank), its principal subsidiary. Superior Bank is a
federal savings bank with a total of 26 branches, 19 locations
throughout the state of Alabama and seven locations along
Floridas panhandle. Superior Bank also has loan production
offices in Montgomery, Alabama, Tallahassee, Florida and Panama
City, Florida. At March 31, 2006, Superior Bancorp had
assets of approximately $1.432 billion, loans of
approximately $989.6 million, deposits of approximately
$1.078 billion and stockholders equity of
approximately $105.8 million.
On March 6, 2006, Superior Bancorp announced that it had
signed a definitive agreement to merge with Kensington
Bankshares, Inc. Kensington Bankshares is the holding company
for First Kensington Bank, a Florida state bank with eight
branches in the Tampa Bay area. Under the terms of the merger
agreement, Superior Bancorp has agreed to issue 1.60 shares
of its common stock for each share of Kensington Bankshares
common stock. Based on closing prices per share for Superior
Bancorp common stock for a period shortly before the Kensington
Bankshares merger agreement was executed, the transaction was
valued at approximately $71.2 million. The actual value at
consummation will be based on Superior Bancorp share price at
that time. The Tampa Bay area would be Superior Bancorps
largest market if the transaction closes and has a higher
projected population growth than any of Superior Bancorps
current banking markets. The Kensington Bankshares merger is
currently expected to occur during the third quarter of 2006.
Completion of the merger is subject to approval by the
stockholders of both corporations, to the receipt of required
regulatory approvals and to the satisfaction of usual and
customary closing conditions. There can be no assurance if or
when the Kensington Bankshares merger will be completed.
Superior Bancorp common stock is traded on the NASDAQ Global
Market under the symbol SUPR.
As used in this joint proxy statement/prospectus, the term
Superior Bancorp refers to Superior Bancorp and its
subsidiaries and affiliates, including Superior Bank, unless the
context requires otherwise.
Community Bancshares, Inc.
68149 Highway 231 South
Post Office Box 1000
Blountsville, Alabama 35031
(205) 429-6053
Community Bancshares is a Delaware-chartered bank holding
company, headquartered in Blountsville, Alabama. Community
Bancshares conducts its banking operations through Community
Bank, an Alabama-chartered bank with 17 banking offices in
Alabama. Community Bancshares also operates a consumer finance
subsidiary, 1st Community Credit Corporation, and two
insurance agency subsidiaries, Community Insurance Corp. and
Southern Select Insurance, Inc. At March 31, 2006,
Community Bancshares had assets of approximately
$576.3 million, loans of approximately $354.0 million,
deposits of approximately $441.3 million and
stockholders equity of approximately $43.2 million.
1
Community Bancshares common stock is traded on the NASDAQ
Capital Market under the symbol COMB.
As used in this joint proxy statement/prospectus, the term
Community Bancshares refers to Community Bancshares,
Inc. and its subsidiaries and affiliates, including Community
Bank, unless the context requires otherwise.
The
Stockholder Meetings
(See page )
Superior Bancorp will hold a special meeting of stockholders
on ,
2006, at .m., local time,
at ,
Birmingham, Alabama.
Community Bancshares will hold its annual meeting of
stockholders
on ,
2006, at .m., local time,
at ,
Blountsville, Alabama.
At each meeting, stockholders will be asked to vote on a
proposal to approve and adopt the merger agreement providing for
the merger of Community Bancshares with and into Superior
Bancorp and on any other business that properly arises during
the meeting. Since Community Bancshares is holding its annual
meeting of stockholders, its stockholders will also be asked to
elect three Class 1 directors to serve until the earlier of
the consummation of the merger with Superior Bancorp or
Community Bancshares 2009 annual meeting of stockholders.
The
Merger
(See page )
If the conditions for completing the merger are satisfied,
Community Bancshares will merge with and into Superior Bancorp.
Superior Bancorp will be the surviving corporation, and
Community Bancshares will cease to exist. Upon the effective
date of the merger, Community Bank will merge with and into
Superior Bank.
We have attached the merger agreement to this joint proxy
statement/prospectus as Annex A. The merger agreement is
the legal document that establishes the terms and conditions of
the merger, and you should read the entire merger agreement
carefully.
Board of
Directors of the Surviving Corporation
(See page )
At the effective time of the merger, the boards of directors of
Superior Bancorp and its subsidiaries, including Superior Bank,
will consist of those persons serving before the effective time.
Superior Bancorp will elect two independent members of the
current Community Bancshares board of directors to the board of
directors of Superior Bancorp and Superior Bank at the first
board meeting after the effective time of the merger.
Reasons
for the Merger
(See page )
In reaching its decision to approve and adopt the merger
agreement, the board of directors of Superior Bancorp considered
a number of factors as generally supporting its decision,
including the following:
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the opportunity to consolidate Superior Bancorps Alabama
market presence and to rationalize its current branch system;
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the addition of branches in the Huntsville market without the
expense and time needed for establishing de novo branches
in the Huntsville market;
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the numerous customer relationships Community Bank has in the
North Alabama market;
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the expected impact on future earnings of the combined companies;
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the expected impact on stockholder value of the combined
companies;
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the financial terms of recent business combinations in the
financial services industry and a comparison of the multiples of
selected combinations with the terms of the proposed transaction
with Community Bancshares; and
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the opinions of Sandler ONeill & Partners L.P.
and Burke Capital Group, L.L.C. that the consideration to be
received by Community Bancshares stockholders pursuant to
the merger agreement is fair from a financial point of view to
Superior Bancorps stockholders.
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In reaching its decision to approve and adopt the merger
agreement, the board of directors of Community Bancshares
considered a number of factors as generally supporting its
decision, including the following:
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the financial terms of the merger, including the relationship of
the merger consideration to be received by the stockholders of
Community Bancshares to the earnings per share, assets,
deposits, and the tangible and total book values of Community
Bancshares common stock, and to the contribution analyses of the
respective institutions in the merger compared to their
percentage ownership, in total assets, net loans, total deposits
and total equity in the combined company;
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the estimated discounted cash flow values of Community
Bancshares common stock;
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comparable transactions;
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the fact that stockholders of Community Bancshares will receive
the merger consideration in shares of Superior Bancorp common
stock, which is publicly traded with greater average daily
volume than Community Bancshares common stock;
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the potentially significant costs of protecting the
stockholders interests generally against the proxy contest
initiated by a New York based hedge fund;
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the opinion rendered by FIG Partners LLC that from a financial
standpoint the exchange of Community Bancshares common stock for
Superior Bancorp common stock on the terms and conditions set
forth in the merger agreement is fair to the stockholders of
Community Bancshares from a financial point of view;
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the likelihood that the growth of Community Bancshares without
the affiliation with a larger holding company would be limited
because of Community Bancshares need for increased
capital, personnel and other resources to support growth, the
costs of rationalizing its branches, including the likelihood of
recouping substantial existing investments in slow-growing
markets located long distances from Community Bancshares
principal operations and the costs of complying with
Section 404 of the Sarbanes-Oxley Act of 2002;
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the treatment of the merger as a tax-free exchange for federal
income tax purposes with respect to the Community Bancshares
common stock exchanged for Superior Bancorp common stock;
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trends in the markets for financial services and increased
competition;
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the likelihood that affiliation with a larger holding company
would provide the opportunity to realize economies of scale,
increase efficiencies of operations, and enhance the development
of new products and services to better serve Community
Bancshares customers;
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the potential benefits and opportunities for employees of
Community Bancshares, as a result of both employment
opportunities and benefit plans in a larger
organization; and
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the likelihood of the mergers being approved by applicable
regulatory authorities without adverse conditions or delay.
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Boards of
Directors of Superior Bancorp and Community Bancshares Recommend
Stockholder Approval
Each of the boards of directors of Superior Bancorp and
Community Bancshares believes that the merger is in the best
interests of its respective company and its respective
stockholders and recommends that stockholders vote
FOR the approval of the merger
agreement and the merger.
3
Opinion
of Superior Bancorps Financial Advisors
(See page )
Each of Sandler ONeill & Partners, L.P. and Burke
Capital Group, L.L.C. delivered a written opinion to the board
of directors of Superior Bancorp to the effect that, as of
April 29, 2006, and subject to various assumptions and
limitations in their respective opinions, the consideration for
which shares of Community Bancshares common stock will be
exchanged in the merger is fair from a financial point of view
to Superior Bancorp stockholders.
The opinions of Sandler ONeill & Partners, L.P. and
Burke Capital Group, L.L.C. are attached to this joint proxy
statement/prospectus as Annexes B and C, respectively. You
should read the entire opinions carefully in connection with
your consideration of the merger.
Opinion
of Community Bancshares Financial Advisor
(See page )
FIG Partners LLC delivered a written opinion to the board of
directors of Community Bancshares to the effect that, as of
April 29, 2006, and subject to various assumptions and
limitations in its opinion, the consideration for which shares
of Community Bancshares common stock will be exchanged in the
merger is fair from a financial point of view to Community
Bancshares stockholders.
The opinion of FIG Partners LLC is attached to this joint proxy
statement/prospectus as Annex D. You should read the entire
opinion carefully in connection with your consideration of the
merger.
Vote
Required
To approve the merger, a majority of the outstanding shares of
Community Bancshares common stock entitled to vote at the annual
meeting and a majority of the outstanding shares of Superior
Bancorp common stock entitled to vote at the special meeting
must vote for the merger agreement and the merger.
Community
Bancshares Stockholders Will Receive Shares of Superior Bancorp
Common Stock
(See page )
When the merger is completed, Community Bancshares stockholders
will have the right to receive 0.8974 shares of Superior
Bancorp common stock in exchange for each share of Community
Bancshares common stock they own, subject to the following
provisions. In the event that the actual net worth, as defined
in the merger agreement, of Community Bancshares is less than
$44,333,000, then the exchange ratio shall be reduced by a
factor equal to the percentage obtained by dividing (1) the
amount by which the net worth of Community Bancshares is less
than $44,333,000 by (2) $44,333,000.
Community
Bancshares Optionholders and Warrantholders Will Receive Cash in
Exchange for Community Bancshares Options and Warrants
(See page )
At the effective time of the merger, all outstanding Community
Bancshares options and warrants will be cancelled and each
holder of a Community Bancshares option or warrant will be
entitled to receive in exchange for each option or warrant cash
equal to the amount resulting when the number of shares
obtainable under the options or warrants held is multiplied by
the difference between $10.50 and the exercise price per share
of the option or warrant.
Community
Bancshares May Declare a Dividend Before the Effective Date of
the Merger
(See page )
Community Bancshares may establish and declare, 10 business days
before the closing date of the merger, a cash dividend with
respect to Community Bancshares common stock equal to the
amount, if any, Community Bancshares net worth, as defined
in the merger agreement, exceeds $44,333,000, provided the
aggregate amount of the dividend does not exceed $4,400,000.
Community Bancshares cannot predict whether or not its net worth
will exceed $44,333,000 at the relevant time, or whether a
dividend may be declared or paid, in whole or in part.
4
Listing
of Superior Bancorp Common Stock
(See page )
Superior Bancorp common stock issued pursuant to the merger will
be registered under the Securities Act of 1933 and will be
listed on the NASDAQ Global Market under the ticker symbol
SUPR. Shares of Superior Bancorp common stock that
Community Bancshares stockholders will receive will be freely
transferable unless the stockholder is an affiliate of Community
Bancshares at the time of the merger. Affiliates of Community
Bancshares may, however, be able to freely sell the shares they
receive in the merger subject to the terms of any affiliate
agreement and any applicable securities laws.
Other
Interests of Officers and Directors of Community Bancshares in
the Merger
(See page )
You should be aware that the officers and directors of Community
Bancshares, who are also stockholders of Community Bancshares,
have interests in the merger that are different from or in
addition to your interests. Patrick M. Frawley,
currently the Chairman, President and Chief Executive Officer of
Community Bancshares, and Stacey W. Mann, currently the
President of Community Bank, and other executive officers of
Community Bancshares have entered into discussions with Superior
Bancorp about entering consulting/employment agreements with
Superior Bancorp, which may be executed prior to consummation of
the merger. In addition, two independent Community Bancshares
directors, who will be selected by Superior Bancorp, will be
elected as Superior Bancorp directors and Superior Bank
directors at the first board meeting after the effective time of
the merger. Further, Community Bancshares is obligated to
provide extended coverage under its officers and directors
liability insurance policy for six years following the effective
date of the merger, and Superior Bancorp has agreed to indemnify
the current officers and directors of Community Bancshares for a
period of six years following the effective date of the merger.
Share
Ownership of Directors and Executive Officers
(See page )
As
of ,
2006, the directors and executive officers of Superior Bancorp
beneficially owned and were entitled to vote
approximately shares,
or approximately % of the
outstanding shares, of Superior Bancorp common stock. Superior
Bancorps directors have unanimously approved the merger
agreement and are expected to vote in favor of the merger
agreement and the merger.
As
of ,
2006, the directors and executive officers of Community
Bancshares beneficially owned and were entitled to vote
approximately shares,
or approximately % of the shares of
Community Bancshares common stock. Community Bancshares
non-officer directors have agreed in writing to
vote shares of Community
Bancshares common stock for which they have voting power, or
approximately % of the shares of
Community Bancshares, in favor of the merger agreement and the
merger.
Conditions
to the Completion of the Merger
(See page )
In order to complete the merger, Superior Bancorp and Community
Bancshares must satisfy a number of mutual conditions, including
the following:
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the merger agreement will have been approved by the Superior
Bancorp stockholders and the Community Bancshares stockholders;
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all necessary regulatory approvals and consents will have been
received from the Office of Thrift Supervision, the SEC and
other regulatory authorities;
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all other consents will have been obtained that are required for
the consummation of the merger for the prevention of a default
under any contract or permit which if not obtained is reasonably
likely to have a material adverse effect on the party subject to
the contract or permit;
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no court or governmental agency will have enacted, issued or
enforced any law or order or taken any other action to prohibit
or restrict the merger;
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the registration statement of which this joint proxy
statement/prospectus forms a part will have been declared
effective by the SEC and will not be subject to a stop order and
no other proceedings are pending or threatened by the SEC, any
bank regulatory agency or any state; and
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Superior Bancorp and Community Bancshares will each have
received an opinion of Balch & Bingham LLP regarding
the tax consequences of the merger.
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The obligation of Superior Bancorp to complete the merger is
subject to the satisfaction of the following conditions, among
others:
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all representations and warranties of Community Bancshares
contained in the merger agreement are true and correct in all
material respects and Community Bancshares will have performed
in all material respects all agreements and covenants required
by the merger agreement to be performed by Community Bancshares;
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Community Bancshares will have a net worth, as defined in the
merger agreement, of not less than $44,333,000;
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Community Bancshares will have provided certain closing
certificates with respect to the merger and the financial and
regulatory condition of Community Bancshares and its
subsidiaries;
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Superior Bancorp will have received an opinion of Jones Day,
counsel to Community Bancshares, as to certain legal matters;
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Community Bancshares will have used its best efforts to obtain
an agreement from its directors, executive officers and
affiliates regarding the sale and disposition of such
persons stock;
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the opinions of Sandler ONeill & Partners, L.P.
and Burke Capital Group, L.L.C. that the terms of the merger
agreement and merger are fair to the stockholders of Superior
Bancorp from a financial point of view will not have been
withdrawn before the effective time of the merger;
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each of the executive officers and directors of Community
Bancshares will have delivered a letter to Superior Bancorp to
the effect that he or she is not aware of any claims he or she
may have against Community Bancshares; and
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Community Bancshares will have paid off in full and terminated
its line of credit with First Commercial Bank and all liens and
collateral for the line of credit will have been released in
full.
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The obligations of Community Bancshares are subject to the
satisfaction or waiver of the following conditions:
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all representations and warranties of Superior Bancorp contained
in the merger agreement will be true and correct in all material
respects, and Superior Bancorp will have performed in all
material respects all agreements and covenants required by the
merger agreement to be performed by Superior Bancorp;
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Superior Bancorp will have provided certain closing certificates
with respect to the merger and the financial and regulatory
condition of Superior Bancorp and its subsidiaries;
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Community Bancshares will have received the opinion of
Balch & Bingham LLP, counsel to Superior Bancorp, as to
certain legal matters;
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the opinion of FIG Partners LLC that the terms of the merger
agreement and the merger are fair to the stockholders of
Community Bancshares from a financial point of view will not
have been withdrawn before the effective time of the merger;
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the shares of Superior Bancorp common stock to be issued in the
merger will have been approved for listing on the NASDAQ Global
Market;
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the board of directors of Community Bancshares will have made no
determination that the merger has become impractical because of
any state of war, declaration of a banking moratorium or a
general suspension of trading of Superior Bancorp common stock
on the NASDAQ Global Market; and
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Superior Bancorp will have assumed all obligations of Community
Bancshares under the Indenture with respect to the debentures
issued by Community Bancshares and the trust preferred
securities issued by Community (AL) Capital Statutory
Trust I, a wholly owned subsidiary of Community Bancshares.
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Except for stockholder approval and other legal and regulatory
requirements, any condition to the merger may be waived by the
company entitled to assert the condition.
Regulatory
Approvals
(See page )
The merger of Community Bank into Superior Bank must be approved
by the Office of Thrift Supervision. Superior Bancorp has filed
on ,
2006, all of the required notices and applications with the
Office of Thrift Supervision.
No
Solicitation of Other Transactions By Community Bancshares
(See page )
Community Bancshares has agreed that it will not initiate or
encourage any discussions regarding a business combination of
Community Bancshares with any other party.
Termination
of the Merger Agreement
(See page )
The boards of directors of Superior Bancorp and Community
Bancshares may agree to mutually terminate the merger agreement
without completing the merger even after their respective
stockholders approve the merger. In addition, Superior Bancorp
or Community Bancshares can terminate the merger agreement if
any of the following occurs:
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The other party is in material breach of its representations or
warranties under the merger agreement, the breach has not been
or cannot be cured within 30 days after notice of the
breach, and the breach would provide the non-breaching party the
ability to refuse to consummate the merger;
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The other party is in material breach of any of its covenants or
other agreements under the merger agreement which has not been
or cannot be cured within 30 days after notice of the
breach or if the party has not satisfied all of its conditions
or obligations; or
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The merger is not completed by March 31, 2007.
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Community Bancshares may terminate the merger agreement in any
of the following events:
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if its board of directors determines by majority vote at any
time during the five-day period commencing on the date that all
regulatory approvals and consents are received (the
determination date) that, on the determination date,
(1) the ten-day average closing price of Superior Bancorp
common stock is less than $9.94, and (2) the number
obtained by dividing the Superior Bancorp stock price on the
determination date by the reference Superior Bancorp stock price
of $11.70 is less than the Bank Index Ratio minus 0.15. The Bank
Index Ratio is equal to the quotient obtained by dividing the
average of the NASDAQ Bank Index as reported on NASDAQ for the
ten consecutive trading days immediately preceding the
determination date by 3193.47. Community Bancshares must give
Superior Bancorp notice of its election to terminate, and
Superior Bancorp will have the option to pay additional
consideration in stock, cash or a combination of both so that
the aggregate consideration payable by Superior Bancorp per
share will be valued at the lesser of (1) the product
obtained by multiplying (A) the product of 0.85 and $11.70
by (B) the exchange ratio and (2) the product obtained
by multiplying (A) the Bank Index Ratio and $11.70
multiplied by (B) the exchange ratio. If Superior Bancorp
elects to pay such additional consideration within the five day
period, the merger agreement will not be terminated; or
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if before the approval of the merger agreement by the
stockholders of Community Bancshares, the board of directors of
Community Bancshares has (1) withdrawn or modified or
changed its recommendation or approval of the merger agreement
and the merger consideration in a manner adverse to Superior
Bancorp to
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approve and permit Community Bancshares to accept a superior
proposal, and (2) determined after consideration of written
advice of Community Bancshares legal counsel that the
termination of the merger agreement is necessary to comply with
its fiduciary duties under applicable laws; provided, however,
that at least two business days before any such termination
Community Bancshares will negotiate with Superior Bancorp to
amend the merger agreement to enable Community Bancshares to
proceed with the merger (the Fiduciary Duty Termination
Rights).
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Superior Bancorp may terminate the merger agreement in any of
the following events (the Superior Bancorp Termination
Rights):
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the board of directors of Community Bancshares fails to reaffirm
its approval of the merger upon Superior Bancorps request
or resolves not to reaffirm the merger;
|
|
|
|
the board of directors of Community Bancshares does not include
in its proxy statement its recommendation, without modification
or qualification, that Community Bancshares stockholders approve
the merger or withdraws, qualifies or modifies, or proposes
publicly to withdraw, qualify or modify, in any manner adverse
to Superior Bancorp, its recommendation to Community Bancshares
stockholders to approve the merger;
|
|
|
|
the board of directors of Community Bancshares affirms,
recommends or authorizes entering into any acquisition
transaction other than the merger or the board of Community
Bancshares does not recommend against any tender or exchange
offer or takes no position with respect to any tender or
exchange offer within ten business days of commencement of a
tender or exchange offer; or
|
|
|
|
the board of directors of Community Bancshares negotiates or
authorizes any negotiations with a third party regarding a
proposal other than the merger.
|
Termination
Fees
(See page )
If (1) Community Bancshares terminates the merger agreement
pursuant to its Fiduciary Duty Termination Rights or (2) if
Superior Bancorp terminates the merger agreement pursuant to the
Superior Bancorp Termination Rights, and Community Bancshares
thereafter enters into a definitive agreement with respect to an
acquisition proposal or transaction, then Community Bancshares
will pay to Superior Bancorp a termination fee of $4,000,000.
Kensington
Bankshares Transaction
(See Page )
The merger is independent of the proposed merger of Kensington
Bankshares with and into Superior Bancorp, and accordingly, the
consummation of, or the failure to consummate, the Kensington
Bankshares merger will have no impact on either Superior
Bancorps or Community Bancshares obligation to
complete the merger.
Accounting
Treatment
(See page )
The merger will be accounted for using the purchase method of
accounting for financial reporting purposes.
Material
Federal Income Tax Consequences
(See page )
Superior Bancorp and Community Bancshares expect that the merger
will qualify as a reorganization under the Internal Revenue
Code. Balch & Bingham LLP will opine that the
merger will qualify as a reorganization for federal income tax
purposes. If the merger does qualify as a reorganization,
Community Bancshares stockholders will generally not recognize
gain or loss for federal income tax purposes upon the exchange
of their shares of Community Bancshares common stock for
Superior Bancorp common stock. The tax consequences of the
merger to you will depend on the facts of your own situation.
You are advised to consult your tax advisor as to the tax
consequences of the merger to you.
8
Dissenters
Rights of Appraisal of Community Bancshares
Stockholders
(See page )
Because Community Bancshares common stock is held by more
than 2,000 persons, there are no dissenters rights of
appraisal with respect to the merger.
Differences
in Stockholders Rights
(See page )
When the merger is completed, if you are a Community Bancshares
stockholder, you will become a stockholder of Superior Bancorp.
The rights of Superior Bancorp stockholders differ from the
rights of Community Bancshares stockholders in certain
significant ways as a result of provisions in Superior
Bancorps restated certificate of incorporation and bylaws.
Risk
Factors
(See page )
See Risk Factors for a discussion of certain risk
factors related to the merger and the business of Superior
Bancorp.
MARKET
PRICE AND DIVIDEND INFORMATION
Superior Bancorp common stock currently trades on the NASDAQ
Global Market under the ticker symbol SUPR. Superior
Bancorp common stock traded on the NASDAQ Global Market under
the ticker symbol TBNC until May 19, 2006. As
of July 14, 2006, there were approximately 833 record
holders of Superior Bancorp common stock.
Community Bancshares common stock has been traded on the NASDAQ
Capital Market since September 20, 2005, under the ticker
symbol COMB. Community Bancshares common stock had
previously been traded since February 26, 2004, on the
over-the-counter
market under the same symbol. Share prices and data presented
below are based on reported information on the
over-the-counter
market and the NASDAQ Capital Market. Before February 26,
2004, Community Bancshares common stock was not traded on NASDAQ
or any other organized market. As of May 26, 2006, there
were approximately 2,204 record holders of Community Bancshares
common stock.
9
The following table sets forth, for the calendar periods
indicated, the range of high and low reported sales prices:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Superior Bancorp
|
|
|
Community Bancshares
|
|
|
|
High
|
|
|
Low
|
|
|
High
|
|
|
Low
|
|
|
2004
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Quarter
|
|
$
|
8.77
|
|
|
$
|
7.14
|
|
|
$
|
6.80
|
|
|
$
|
5.25
|
|
Second Quarter
|
|
|
7.56
|
|
|
|
6.25
|
|
|
|
8.25
|
|
|
|
6.80
|
|
Third Quarter
|
|
|
7.04
|
|
|
|
6.13
|
|
|
|
7.25
|
|
|
|
6.56
|
|
Fourth Quarter
|
|
|
8.74
|
|
|
|
6.93
|
|
|
|
7.25
|
|
|
|
6.60
|
|
2005
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Quarter
|
|
$
|
11.25
|
|
|
$
|
8.00
|
|
|
$
|
7.98
|
|
|
$
|
6.75
|
|
Second Quarter
|
|
|
10.85
|
|
|
|
9.25
|
|
|
|
8.00
|
|
|
|
7.25
|
|
Third Quarter
|
|
|
10.91
|
|
|
|
10.34
|
|
|
|
8.25
|
|
|
|
7.95
|
|
Fourth Quarter
|
|
|
12.00
|
|
|
|
10.49
|
|
|
|
8.74
|
|
|
|
8.07
|
|
2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Quarter
|
|
$
|
11.90
|
|
|
$
|
10.70
|
|
|
$
|
8.65
|
|
|
$
|
8.00
|
|
Second Quarter
|
|
|
11.87
|
|
|
|
10.71
|
|
|
|
10.50
|
|
|
|
8.35
|
|
Third Quarter
(through ,
2006)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
On April 28, 2006, the last reported sale price for
Superior Bancorp common stock before the public announcement of
the merger was $11.25 per share.
On ,
2006, the last reported sale price for Superior Bancorp common
stock was $ per share.
On April 28, 2006, the last reported sale price for
Community Bancshares common stock before the public announcement
of the merger was $10.44 per share.
On ,
2006, the last reported sale price for Community Bancshares
common stock was $ per share.
Dividends
Holders of Superior Bancorp common stock are entitled to receive
dividends when, as and if declared by the board of directors.
Superior Bancorp derives cash available to pay dividends
primarily, if not entirely, from dividends paid to Superior
Bancorp by its subsidiaries. There are certain restrictions that
limit Superior Banks ability to pay dividends to Superior
Bancorp and, in turn, Superior Bancorps ability to pay
dividends to its stockholders. Superior Bancorps ability
to pay dividends will depend on its earnings and financial
condition, liquidity and capital requirements, the general
economic and regulatory climate, its ability to service any
equity or debt obligations senior to Superior Bancorp common
stock and other factors deemed relevant by its board of
directors.
Although thrift holding companies are not currently subject to
specific capital requirements or specific restrictions on the
payment of dividends or other capital distributions, federal
regulations prescribe such restrictions on subsidiary savings
institutions. Superior Bank must notify the Office of Thrift
Supervision 30 days before declaring any dividend to
Superior Bancorp. In addition, the financial impact of a holding
company on its subsidiary institution is a matter that is
evaluated by the Office of Thrift Supervision, and the Office of
Thrift Supervision has authority to order cessation of
activities or divestiture of subsidiaries deemed to pose a
threat to the safety and soundness of the institution.
Superior Bancorp paid dividends on its preferred stock
aggregating $4.92 per preferred share in 2005. All preferred
stock of Superior Bancorp was converted into Superior Bancorp
common stock effective July 1, 2005. Superior Bancorp does
not currently pay dividends on its common stock, but expects to
evaluate its common stock dividend policy from time to time as
circumstances indicate, subject to applicable regulatory
restrictions.
Community Bancshares is subject to various regulatory policies
and requirements that affect the payment of dividends, including
the requirement to maintain adequate capital. The Board of
Governors of the Federal Reserve
10
System (Federal Reserve) may prohibit the payment of
dividends to Community Bancshares stockholders if it
determines that the payment would constitute an unsafe or
unsound practice. The Federal Reserves position is that a
bank holding company should not pay dividends if it is
experiencing earnings weaknesses or other financial pressures
and should not pay dividends that exceed its net income for the
current year and the past two years. In addition, a bank holding
company must not pay dividends if such payment would affect its
ability to provide adequate support for its subsidiary banks.
Community Bancshares was prohibited from paying dividends
without prior Federal Reserve approval from April 2001 until
March 2005.
Community Bancshares has not declared or paid any dividends on
its common stock since December 31, 2000. Generally, the
payment of dividends on Community Bancshares common stock is
subject to the prior payment of principal and interest on
long-term debt, the retention of sufficient earnings and capital
in its operating subsidiaries and regulatory restrictions.
Dividends from Community Bank historically have been the primary
source of cash and income to Community Bancshares and,
consequently, any restrictions on Community Banks ability
to pay dividends may limit, and have limited, Community
Bancshares liquidity and ability to pay dividends on
Community Bancshares common stock.
11
COMPARATIVE
PER SHARE INFORMATION
The following summary presents selected information about
Superior Bancorps and Community Bancshares net
income (loss) per share and book value per share of common
stock, respectively, in comparison with pro forma information
giving effect to the merger. The selected financial information
should be read in conjunction with the historical consolidated
financial statements of Superior Bancorp, the historical
consolidated financial statements of Community Bancshares and
the related notes thereto, which are incorporated by reference
into this joint proxy statement/prospectus.
The following information is not necessarily indicative of the
combined results of operations or combined financial position
that would have resulted had the merger been consummated at the
beginning of the periods indicated, nor is it necessarily
indicative of the future combined results of operations or
financial position.
|
|
|
|
|
|
|
|
|
|
|
As of and for the
|
|
|
|
Three Months Ended
|
|
|
Year Ended
|
|
|
|
March 31, 2006
|
|
|
December 31, 2005
|
|
|
Net Income (Loss) per Common
Share Basic
|
|
|
|
|
|
|
|
|
Superior Bancorp
|
|
|
|
|
|
|
|
|
Historical
|
|
$
|
.04
|
|
|
$
|
(.42
|
)
|
Pro Forma Combined
|
|
|
.03
|
|
|
|
(.23
|
)
|
Community Bancshares
|
|
|
|
|
|
|
|
|
Historical
|
|
|
.01
|
|
|
|
.19
|
|
Pro Forma Equivalent
|
|
|
.03
|
|
|
|
(.21
|
)
|
Net Income (Loss) per Common
Share Diluted
|
|
|
|
|
|
|
|
|
Superior Bancorp
|
|
|
|
|
|
|
|
|
Historical
|
|
|
.04
|
|
|
|
(.42
|
)
|
Pro Forma Combined
|
|
|
.03
|
|
|
|
(.23
|
)
|
Community Bancshares
|
|
|
|
|
|
|
|
|
Historical
|
|
|
.01
|
|
|
|
.19
|
|
Pro Forma Equivalent
|
|
|
.03
|
|
|
|
(.21
|
)
|
Book Value per Common
Share
|
|
|
|
|
|
|
|
|
Superior Bancorp
|
|
|
|
|
|
|
|
|
Historical
|
|
|
5.27
|
|
|
|
5.26
|
|
Pro Forma Combined
|
|
|
7.00
|
|
|
|
N/A
|
|
Community Bancshares
|
|
|
|
|
|
|
|
|
Historical
|
|
|
4.91
|
|
|
|
4.94
|
|
Pro Forma Equivalent
|
|
|
6.28
|
|
|
|
N/A
|
|
Dividends Declared per Common
Share
|
|
|
|
|
|
|
|
|
Superior Bancorp
|
|
|
|
|
|
|
|
|
Community Bancshares
|
|
|
|
|
|
|
|
|
Community Bancshares Pro Forma
Equivalent(a)
|
|
|
|
|
|
|
|
|
|
|
|
(a) |
|
Neither Superior Bancorp nor Community Bancshares paid any cash
dividends on its common stock for the periods ended
March 31, 2006, and December 31, 2005. Dividends can
be paid in future periods when and if declared by Superior
Bancorps or Community Bancshares board of directors,
subject to applicable regulatory restrictions. See Market
Price and Dividend Information beginning on
page . |
12
UNAUDITED
PRO FORMA CONDENSED
The following unaudited pro forma condensed consolidated
financial information is based on the historical financial
statements of Superior Bancorp and Community Bancshares and has
been prepared to illustrate the effects of the merger of
Community Bancshares with and into Superior Bancorp. The
unaudited pro forma condensed consolidated statement of
financial condition as of March 31, 2006 and the unaudited
pro forma condensed consolidated statements of operations for
the three months ended March 31, 2006 and for the year
ended December 31, 2005 give effect to this merger,
accounted for under the purchase method of accounting.
The unaudited pro forma condensed consolidated statement of
operations for the three months ended March 31, 2006 has
been derived from the unaudited interim financial statements of
Superior Bancorp and Community Bancshares included or
incorporated by reference in this joint proxy
statement/prospectus or in the parties respective SEC
filings. The unaudited pro forma condensed consolidated
statement of operations for the year ended December 31,
2005 is based on the audited financial statements of Superior
Bancorp and Community Bancshares included or incorporated by
reference in this joint proxy statement/prospectus prospectus or
in the parties respective SEC filings. These unaudited pro
forma condensed consolidated statements of operations give
effect to the transaction as if it had been consummated as of
January 1, 2005. The unaudited pro forma condensed
consolidated financial statements do not give effect to any
anticipated cost savings or revenue enhancements in connection
with the transaction.
The unaudited pro forma condensed consolidated financial
statements should be considered together with the historical
financial statements of Superior Bancorp and Community
Bancshares, including the respective notes to those statements,
included or incorporated by reference in this joint proxy
statement/prospectus prospectus or in the parties
respective SEC filings. The pro forma information is based on
certain assumptions described in the accompanying Note 1 to
Unaudited Pro Forma Condensed Consolidated Financial Information
and does not necessarily indicate the consolidated financial
position or the results of operations in the future or the
consolidated financial position or the results of operations
that would have been realized had the merger transaction been
consummated during the periods or as of the date for which the
pro forma information is presented.
13
Superior
Bancorp and Subsidiaries
Unaudited
Pro Forma Condensed Consolidated Statement of Financial
Condition
As of
March 31, 2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Historical
|
|
|
Pro Forma
|
|
|
|
|
|
|
|
|
|
Community
|
|
|
Acquisition
|
|
|
Pro Forma
|
|
|
|
Superior Bancorp
|
|
|
Bancshares
|
|
|
Adjustments
|
|
|
Combined
|
|
|
|
(In thousands, except per share data)
|
|
|
ASSETS
|
Cash and due from banks
|
|
$
|
29,412
|
|
|
$
|
17,003
|
|
|
$
|
(8,142
|
)(b)
|
|
$
|
38,148
|
|
|
|
|
|
|
|
|
|
|
|
|
(125
|
)(c)
|
|
|
|
|
Interest bearing deposits in other
banks
|
|
|
8,668
|
|
|
|
2,320
|
|
|
|
|
|
|
|
10,988
|
|
Federal funds sold
|
|
|
4,905
|
|
|
|
23,387
|
|
|
|
|
|
|
|
28,292
|
|
Investment securities
|
|
|
238,706
|
|
|
|
131,550
|
|
|
|
|
|
|
|
370,256
|
|
Mortgage loans held for sale
|
|
|
17,711
|
|
|
|
1,024
|
|
|
|
|
|
|
|
18,735
|
|
Loans, net of unearned income
|
|
|
989,576
|
|
|
|
351,658
|
|
|
|
(4,000
|
)(b)
|
|
|
1,337,234
|
|
Less: Allowance for loan losses
|
|
|
(11,999
|
)
|
|
|
(5,112
|
)
|
|
|
|
|
|
|
(17,111
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loans
|
|
|
977,577
|
|
|
|
346,546
|
|
|
|
(4,000
|
)
|
|
|
1,320,123
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Premises and equipment, net
|
|
|
56,388
|
|
|
|
22,332
|
|
|
|
(879
|
)(b)
|
|
|
77,841
|
|
Accrued interest receivable
|
|
|
6,638
|
|
|
|
3,589
|
|
|
|
|
|
|
|
10,227
|
|
Stock in FHLB
|
|
|
10,272
|
|
|
|
4,156
|
|
|
|
|
|
|
|
14,428
|
|
Cash surrender value of life
insurance
|
|
|
39,535
|
|
|
|
|
|
|
|
|
|
|
|
39,535
|
|
Goodwill and intangible assets
|
|
|
12,018
|
|
|
|
2,971
|
|
|
|
6,526
|
(b)
|
|
|
82,023
|
|
|
|
|
|
|
|
|
|
|
|
|
60,508
|
(b)
|
|
|
|
|
Other assets
|
|
|
30,137
|
|
|
|
21,418
|
|
|
|
2,819
|
(b)
|
|
|
54,374
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
1,431,967
|
|
|
$
|
576,296
|
|
|
$
|
56,707
|
|
|
$
|
2,064,970
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND
STOCKHOLDERS EQUITY
|
Deposits
|
|
$
|
1,077,853
|
|
|
$
|
441,282
|
|
|
$
|
(2,000
|
)(b)
|
|
$
|
1,517,135
|
|
Advances from FHLB
|
|
|
166,090
|
|
|
|
67,200
|
|
|
|
1,895
|
(b)
|
|
|
235,185
|
|
Federal funds borrowed and security
repurchase agreements
|
|
|
31,006
|
|
|
|
330
|
|
|
|
|
|
|
|
31,336
|
|
Long-term debt
|
|
|
3,703
|
|
|
|
|
|
|
|
|
|
|
|
3,703
|
|
Junior subordinated debentures owed
to unconsolidated subsidiary trusts
|
|
|
31,959
|
|
|
|
10,310
|
|
|
|
5,400
|
(b)
|
|
|
47,669
|
|
Accrued expenses and other
liabilities
|
|
|
15,553
|
|
|
|
13,929
|
|
|
|
3,970
|
(b)
|
|
|
33,452
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
1,326,164
|
|
|
|
533,051
|
|
|
|
9,265
|
|
|
|
1,868,480
|
|
Stockholders
Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock
|
|
|
20
|
|
|
|
900
|
|
|
|
(900
|
)(a)
|
|
|
28
|
|
|
|
|
|
|
|
|
|
|
|
|
8
|
(b)
|
|
|
|
|
Surplus
|
|
|
88,743
|
|
|
|
50,925
|
|
|
|
(6,310
|
)(a)
|
|
|
180,792
|
|
|
|
|
|
|
|
|
|
|
|
|
47,559
|
(b)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(125
|
)(c)
|
|
|
|
|
Retained earnings
|
|
|
22,344
|
|
|
|
(1,553
|
)
|
|
|
1,553
|
(a)
|
|
|
22,344
|
|
Other equity
|
|
|
|
|
|
|
278
|
|
|
|
(278
|
)(a)
|
|
|
|
|
Accumulated other comprehensive loss
|
|
|
(3,505
|
)
|
|
|
(4,914
|
)
|
|
|
4,914
|
(a)
|
|
|
(3,505
|
)
|
Treasury stock, at cost
|
|
|
(310
|
)
|
|
|
(1,021
|
)
|
|
|
1,021
|
(a)
|
|
|
(310
|
)
|
Unearned ESOP stock
|
|
|
(1,489
|
)
|
|
|
(1,370
|
)
|
|
|
|
|
|
|
(2,859
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total stockholders
equity
|
|
|
105,803
|
|
|
|
43,245
|
|
|
|
47,442
|
|
|
|
196,490
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and
stockholders equity
|
|
$
|
1,431,967
|
|
|
$
|
576,296
|
|
|
$
|
56,707
|
|
|
$
|
2,064,970
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of common shares outstanding
|
|
|
20,085
|
|
|
|
8,892
|
|
|
|
7,980
|
(b)
|
|
|
28,065
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total book value per common share
|
|
$
|
5.27
|
|
|
$
|
4.91
|
|
|
|
|
|
|
$
|
7.00
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tangible book value per common share
|
|
$
|
4.67
|
|
|
$
|
4.57
|
|
|
|
|
|
|
$
|
4.08
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equivalent pro forma book value
per common share for Superior Bancorp common shares exchanged
for Community Bancshares common shares
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
6.28
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
14
|
|
|
(a) |
|
To eliminate equity of Community Bancshares. |
|
(b) |
|
To record issuance of common stock and cash payments to
purchase 100% of Community Bancshares; to record and adjust
assets acquired and liabilities assumed at their estimated fair
market values and related merger and transaction costs. See
Note 1 to Unaudited Pro Forma Condensed Consolidated
Financial Information for detail.
|
|
(c) |
|
To record direct costs of issuing common stock. |
|
|
|
|
|
Professional fees
|
|
$
|
75
|
|
Printing costs
|
|
|
50
|
|
|
|
|
|
|
|
|
$
|
125
|
|
|
|
|
|
|
15
Superior
Bancorp and Subsidiaries
Unaudited
Pro Forma Condensed Consolidated Statement of Operations
For the
Three-Months Ended March 31, 2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Historical
|
|
|
Pro Forma
|
|
|
|
|
|
|
Superior
|
|
|
Community
|
|
|
Acquisition
|
|
|
Pro Forma
|
|
|
|
Bancorp
|
|
|
Bancshares
|
|
|
Adjustments
|
|
|
Combined
|
|
|
|
(In thousands, except per share data)
|
|
|
Interest income
|
|
$
|
21,649
|
|
|
$
|
8,890
|
|
|
$
|
579
|
(a)
|
|
$
|
31,016
|
|
|
|
|
|
|
|
|
|
|
|
|
(102
|
)(e)
|
|
|
|
|
Interest expense
|
|
|
11,645
|
|
|
|
3,949
|
|
|
|
60
|
(b)
|
|
|
15,654
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income
|
|
|
10,004
|
|
|
|
4,941
|
|
|
|
417
|
|
|
|
15,362
|
|
Provision for loan losses
|
|
|
600
|
|
|
|
795
|
|
|
|
|
|
|
|
1,395
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income after
provision for loan losses
|
|
|
9,404
|
|
|
|
4,146
|
|
|
|
417
|
|
|
|
13,967
|
|
Noninterest income
|
|
|
2,502
|
|
|
|
1,348
|
|
|
|
|
|
|
|
3,850
|
|
Noninterest expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Salaries and employee benefits
|
|
|
5,869
|
|
|
|
2,630
|
|
|
|
|
|
|
|
8,499
|
|
Occupancy, furniture and equipment
expense
|
|
|
1,847
|
|
|
|
977
|
|
|
|
(70
|
)(g)
|
|
|
2,754
|
|
Other operating expenses
|
|
|
3,090
|
|
|
|
1,848
|
|
|
|
375
|
(c)
|
|
|
5,313
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Noninterest expenses
|
|
|
10,806
|
|
|
|
5,455
|
|
|
|
305
|
|
|
|
16,566
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes
|
|
|
1,100
|
|
|
|
39
|
|
|
|
112
|
|
|
|
1,251
|
|
Income tax expense
(benefit)
|
|
|
250
|
|
|
|
(15
|
)
|
|
|
41
|
(d)
|
|
|
276
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
850
|
|
|
$
|
54
|
|
|
$
|
71
|
|
|
$
|
975
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic net income per common
share
|
|
$
|
0.04
|
|
|
$
|
0.01
|
|
|
|
|
|
|
$
|
0.03
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted net income per common
share
|
|
$
|
0.04
|
|
|
$
|
0.01
|
|
|
|
|
|
|
$
|
0.03
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares
outstanding
|
|
|
20,015
|
|
|
|
8,762
|
|
|
|
7,980
|
(f)
|
|
|
27,995
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares
outstanding, assuming dilution
|
|
|
20,673
|
|
|
|
9,002
|
|
|
|
7,980
|
(f)
|
|
|
28,653
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pro forma equivalent net income
per common share for Superior Bancorp common shares exchanged
for Community Bancshares common shares
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
0.03
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
0.03
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) |
|
To record amortization of fair value adjustment of loans
and investments over a 3 to 5 year period using
straight-line and accelerated methods which approximate the
interest method.
|
|
(b) |
|
To record amortization of fair value adjustment of
deposits and borrowings over a 3 to 25 year period using
straight-line and accelerated methods which approximate the
interest method.
|
|
(c) |
|
To record amortization of core deposit intangible over a
7 year period using an accelerated method. |
16
|
|
|
|
|
Amortization
|
|
|
|
|
Year 1
|
|
$
|
1,750
|
|
Year 2
|
|
|
1,500
|
|
Year 3
|
|
|
1,250
|
|
Year 4
|
|
|
1,000
|
|
Year 5
|
|
|
750
|
|
Year 6
|
|
|
500
|
|
Year 7
|
|
|
250
|
|
|
|
|
|
|
|
|
$
|
7,000
|
|
|
|
|
|
|
|
|
|
(d) |
|
To record the tax effect of adjustments at a 37% marginal
tax rate. |
|
(e) |
|
Adjust interest income for loss of earnings due to cash
payments at the federal funds rate of 5%. |
|
(f) |
|
Common stock issued to acquire Community Bancshares. |
|
(g) |
|
To record reduction in depreciation expense related to
decrease in carrying value of equipment and software. |
17
Superior
Bancorp and Subsidiaries
Unaudited
Pro Forma Condensed Consolidated Statement of Operations
For the
Year Ended December 31, 2005
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Historical
|
|
|
Pro Forma
|
|
|
|
|
|
|
Superior
|
|
|
Community
|
|
|
Acquisition
|
|
|
Pro Forma
|
|
|
|
Bancorp
|
|
|
Bancshares
|
|
|
Adjustments
|
|
|
Combined
|
|
|
|
(In thousands, except per share data)
|
|
|
Interest income
|
|
$
|
77,280
|
|
|
$
|
32,357
|
|
|
$
|
2,983
|
(a)
|
|
$
|
112,207
|
|
|
|
|
|
|
|
|
|
|
|
|
(413
|
)(e)
|
|
|
|
|
Interest expense
|
|
|
38,255
|
|
|
|
13,934
|
|
|
|
573
|
(b)
|
|
|
52,762
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income
|
|
|
39,025
|
|
|
|
18,423
|
|
|
|
1,997
|
|
|
|
59,445
|
|
Provision for loan losses
|
|
|
3,500
|
|
|
|
796
|
|
|
|
|
|
|
|
4,296
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income after
provision for loan losses
|
|
|
35,525
|
|
|
|
17,627
|
|
|
|
1,997
|
|
|
|
55,149
|
|
Noninterest income
|
|
|
14,697
|
|
|
|
7,042
|
|
|
|
|
|
|
|
21,739
|
|
Noninterest expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Salaries and employee benefits
|
|
|
23,104
|
|
|
|
10,922
|
|
|
|
|
|
|
|
34,026
|
|
Occupancy, furniture and equipment
expense
|
|
|
7,680
|
|
|
|
3,861
|
|
|
|
(279
|
)(g)
|
|
|
11,262
|
|
Management separation costs
|
|
|
15,467
|
|
|
|
|
|
|
|
|
|
|
|
15,467
|
|
Other operating expenses
|
|
|
14,369
|
|
|
|
7,815
|
|
|
|
1,750
|
(c)
|
|
|
23,934
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Noninterest expenses
|
|
|
60,620
|
|
|
|
22,598
|
|
|
|
1,471
|
|
|
|
84,689
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before income taxes
|
|
|
(10,398
|
)
|
|
|
2,071
|
|
|
|
526
|
|
|
|
(7,801
|
)
|
Income tax expense
(benefit)
|
|
|
(4,612
|
)
|
|
|
422
|
|
|
|
195
|
(d)
|
|
|
(3,995
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
|
(5,786
|
)
|
|
|
1,649
|
|
|
|
331
|
|
|
|
(3,806
|
)
|
Preferred stock dividends
|
|
|
305
|
|
|
|
|
|
|
|
|
|
|
|
305
|
|
Effect of early conversion of
preferred stock
|
|
|
2,006
|
|
|
|
|
|
|
|
|
|
|
|
2,006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) available to
common shareholders
|
|
$
|
(8,097
|
)
|
|
$
|
1,649
|
|
|
$
|
331
|
|
|
$
|
(6,117
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic net income (loss) per
common share
|
|
$
|
(0.42
|
)
|
|
$
|
0.19
|
|
|
|
|
|
|
$
|
(0.23
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted net income (loss) per
common share
|
|
$
|
(0.42
|
)
|
|
$
|
0.19
|
|
|
|
|
|
|
$
|
(0.23
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares
outstanding
|
|
|
19,154
|
|
|
|
8,592
|
|
|
|
7,980
|
(f)
|
|
|
27,134
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares
outstanding, assuming dilution
|
|
|
19,154
|
|
|
|
8,780
|
|
|
|
7,980
|
(f)
|
|
|
27,134
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pro forma equivalent net loss
per common share for Superior Bancorp common shares exchanged
for Community Bancshares common shares
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(0.21
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(0.21
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
18
|
|
|
(a) |
|
To record amortization of fair value adjustment of loans
and investments over a 3 to 5 year period using
straight-line and accelerated methods which approximate the
interest method.
|
|
(b) |
|
To record amortization of fair value adjustment of
deposits and borrowings over a 3 to 25 year period using
straight-line and accelerated methods which approximate the
interest method.
|
|
(c) |
|
To record amortization of an estimated core deposit
intangible over a 7 year period using an accelerated method.
|
|
(d) |
|
To record the tax effect of adjustments at a 37% marginal
tax rate. |
|
(e) |
|
Adjust interest income for loss of earnings due to cash
payments at the federal funds rate of 5%. |
|
(f) |
|
Common stock issued to acquire Community Bancshares. |
|
(g) |
|
To record reduction in depreciation expense related to
decrease in carrying value of equipment and software. |
19
Note 1
Unaudited Pro Forma Condensed Consolidated Financial
Information
|
|
|
|
|
|
|
Community
|
|
|
|
Bancshares
|
|
|
|
(In thousands, except
|
|
|
|
per share amounts)
|
|
|
Pro forma outstanding shares of
acquired corporation
|
|
|
8,892
|
|
Exchange ratio per merger agreement
|
|
|
0.8974
|
|
|
|
|
|
|
Total Superior Bancorp shares to
be issued
|
|
|
7,980
|
|
Fair value of Superior Bancorp
stock
|
|
$
|
11.38
|
(a)
|
|
|
|
|
|
Fair value of stock to be issued
|
|
$
|
90,812
|
|
Payment for outstanding options
and warrants
|
|
|
6,736
|
(b)
|
Pro forma transaction costs
|
|
|
301
|
(c)
|
|
|
|
|
|
Total pro forma purchase
price
|
|
|
97,849
|
|
|
|
|
|
|
Net assets of acquired corporation
per historical financial statements
|
|
|
43,245
|
|
Increase (decrease) in net
assets to be acquired to reflect certain pro forma premerger
transactions
|
|
|
|
|
Common stock dividend
|
|
|
|
(d)
|
Retirement of debt
|
|
|
|
(e)
|
Merger costs
|
|
|
(1,105
|
)(f)
|
|
|
|
|
|
Pro forma net assets to be acquired
|
|
|
42,140
|
|
|
|
|
|
|
Purchase accounting adjustments
to carrying value of asset or liability: (j)
|
|
|
|
|
Loans
|
|
|
(4,000
|
)
|
Equipment and software
|
|
|
(879
|
)
|
Core deposit intangible
|
|
|
6,526
|
(g)
|
Goodwill recorded on books of
acquired corporation
|
|
|
(2,497
|
)
|
Deposits
|
|
|
2,000
|
|
FHLB borrowings
|
|
|
(1,895
|
)
|
Junior subordinated debentures
|
|
|
(5,400
|
)
|
Contractual obligations
|
|
|
(3,470
|
)(h)
|
Severance benefits
|
|
|
(500
|
)
|
Other assets deferred
income taxes
|
|
|
2,819
|
(i)
|
|
|
|
|
|
Net pro forma purchase
accounting adjustments
|
|
|
(7,296
|
)
|
|
|
|
|
|
Goodwill
|
|
$
|
63,005
|
|
|
|
|
|
|
|
|
|
(a) |
|
Based on the closing stock price several days prior to
and after the agreement was reached and announced. |
|
(b) |
|
Pro forma amount of cash to be paid for Community
Bancshares stock options and warrants. |
|
|
|
|
|
Per Option Value as defined in
agreement
|
|
|
|
|
Dollar per option or warrant
|
|
$
|
10.500
|
|
Less: Weighted average exercise
price per option or warrant
|
|
|
6.720
|
|
|
|
|
|
|
Per Option Value
|
|
$
|
3.780
|
|
Total stock options and
warrants outstanding
|
|
|
1,782
|
|
|
|
|
|
|
Total pro forma amount of cash
due to option and warrant holders
|
|
$
|
6,736
|
|
|
|
|
|
|
|
|
|
(c) |
|
The following pro forma merger costs are expected to be
incurred by Superior Bancorp: |
20
|
|
|
|
|
Professional fees
|
|
$
|
80
|
|
Investment banking
|
|
|
185
|
|
Consulting
|
|
|
36
|
|
|
|
|
|
|
|
|
$
|
301
|
|
|
|
|
|
|
|
|
|
(d) |
|
Community Bancshares may establish and declare ten days
before the closing date of the merger a cash dividend equal to
an amount that Community Bancshares net worth, as defined in the
merger agreement, exceeds $44.3 million provided the
aggregate amount of the dividend does not exceed
$4.4 million
|
|
(e) |
|
Community Bancshares must retire its line of credit with
a regional financial institution. |
|
(f) |
|
The following pro forma merger costs are expected to be
incurred by Community Bancshares: |
|
|
|
|
|
Professional fees
|
|
$
|
345
|
|
Investment banking
|
|
|
760
|
|
|
|
|
|
|
|
|
$
|
1,105
|
|
|
|
|
|
|
|
|
|
(g) |
|
Estimated to be approximately 3.0% of non-time deposits
for Community Bancshares. |
|
|
|
|
|
Pro forma core deposit intangible
|
|
$
|
7,000
|
|
Less: Existing core deposit
intangible
|
|
|
(474
|
)
|
|
|
|
|
|
Net pro forma core deposit
intangible adjustment
|
|
$
|
6,526
|
|
|
|
|
|
|
|
|
|
(h) |
|
Pro forma contractual obligations |
|
|
|
|
|
Employment contracts
|
|
$
|
3,000
|
|
Data processing
|
|
|
320
|
|
Other
|
|
|
150
|
|
|
|
|
|
|
Pro forma contractual obligations
|
|
$
|
3,470
|
|
|
|
|
|
|
|
|
|
(i) |
|
Assumes 37% marginal tax rate. |
|
(j) |
|
These purchase accounting adjustments are preliminary
estimates and are subject to change primarily as a result of
changes in market interest rates or decline in credit quality of
the loan portfolio.
|
21
UNAUDITED
PRO FORMA CONDENSED
The following unaudited pro forma condensed consolidated
financial information is based on the historical financial
statements of Superior Bancorp, Kensington Bankshares and
Community Bancshares and has been prepared to illustrate the
effects of the mergers of Kensington Bankshares and Community
Bancshares with and into Superior Bancorp. The unaudited pro
forma condensed consolidated statement of financial condition as
of March 31, 2006 and the unaudited pro forma condensed
consolidated statements of operations for the three months ended
March 31, 2006 and for the year ended December 31,
2005 give effect to these mergers, accounted for under the
purchase method of accounting.
The unaudited pro forma condensed consolidated statement of
operations for the three months ended March 31, 2006 has
been derived from the unaudited interim financial statements for
Superior Bancorp, Kensington Bankshares and Community Bancshares
included or incorporated by reference in this joint proxy
statement/prospectus or in the parties respective SEC
filings. The unaudited pro forma condensed consolidated
statement of operations for the year ended December 31,
2005 is based on the audited financial statements of Superior
Bancorp, Kensington Bankshares and Community Bancshares included
or incorporated by reference in this joint proxy
statement/prospectus or in the parties respective SEC
filings. These unaudited pro forma condensed consolidated
statements of operations give effect to the transactions as if
they had been consummated as of January 1, 2005. The
unaudited pro forma condensed consolidated financial statements
do not give effect to any anticipated cost savings or revenue
enhancements in connection with these transactions.
The unaudited pro forma condensed consolidated financial
statements should be considered together with the historical
financial statements of Superior Bancorp, Kensington Bankshares
and Community Bancshares, including the respective notes to
those statements, included or incorporated by reference in this
joint proxy statement/prospectus or in the parties
respective SEC filings. The pro forma information is based on
certain assumptions described in the accompanying Note 1 to
Unaudited Pro Forma Condensed Consolidated Financial Information
and does not necessarily indicate the consolidated financial
position or the results of operations in the future or the
consolidated financial position or the results of operations
that would have been realized had the merger transactions been
consummated during the periods or as of the date for which the
pro forma information is presented.
22
Superior
Bancorp and Subsidiaries
Unaudited
Pro Forma Condensed Consolidated Statements of Financial
Condition
As of
March 31, 2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Historical
|
|
|
Pro Forma
|
|
|
|
|
|
|
Superior
|
|
|
Kensington
|
|
|
Community
|
|
|
Acquisition
|
|
|
Pro Forma
|
|
|
|
Bancorp
|
|
|
Bankshares
|
|
|
Bancshares
|
|
|
Adjustments
|
|
|
Combined
|
|
|
|
(In thousands, except per share data)
|
|
|
ASSETS
|
Cash and due from banks
|
|
$
|
29,412
|
|
|
$
|
5,213
|
|
|
$
|
17,003
|
|
|
$
|
(9,589
|
)(b)
|
|
$
|
41,814
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(225
|
)(c)
|
|
|
|
|
Interest bearing deposits in other
banks
|
|
|
8,668
|
|
|
|
|
|
|
|
2,320
|
|
|
|
|
|
|
|
10,988
|
|
Federal funds sold
|
|
|
4,905
|
|
|
|
5,740
|
|
|
|
23,387
|
|
|
|
|
|
|
|
34,032
|
|
Investment securities
|
|
|
238,706
|
|
|
|
184,127
|
|
|
|
131,550
|
|
|
|
(3,349
|
)(b)
|
|
|
551,034
|
|
Mortgage loans held for sale
|
|
|
17,711
|
|
|
|
|
|
|
|
1,024
|
|
|
|
|
|
|
|
18,735
|
|
Loans, net of unearned income
|
|
|
989,576
|
|
|
|
137,153
|
|
|
|
351,658
|
|
|
|
(4,250
|
)(b)
|
|
|
1,474,137
|
|
Less: Allowance for loan losses
|
|
|
(11,999
|
)
|
|
|
(1,011
|
)
|
|
|
(5,112
|
)
|
|
|
|
|
|
|
(18,122
|
) -
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loans
|
|
|
977,577
|
|
|
|
136,142
|
|
|
|
346,546
|
|
|
|
(4,250
|
)
|
|
|
1,456,015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Premises and equipment, net
|
|
|
56,388
|
|
|
|
5,631
|
|
|
|
22,332
|
|
|
|
(1,039
|
)(b)
|
|
|
83,312
|
|
Accrued interest receivable
|
|
|
6,638
|
|
|
|
2,187
|
|
|
|
3,589
|
|
|
|
|
|
|
|
12,414
|
|
Stock in FHLB
|
|
|
10,272
|
|
|
|
|
|
|
|
4,156
|
|
|
|
|
|
|
|
14,428
|
|
Cash surrender value of life
insurance
|
|
|
39,535
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
39,535
|
|
Goodwill and intangible assets
|
|
|
12,018
|
|
|
|
|
|
|
|
2,971
|
|
|
|
10,026
|
(b)
|
|
|
129,537
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
104,522
|
(b)
|
|
|
|
|
Other assets
|
|
|
30,137
|
|
|
|
886
|
|
|
|
21,418
|
|
|
|
3,549
|
(b)
|
|
|
55,990
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
1,431,967
|
|
|
$
|
339,926
|
|
|
$
|
576,296
|
|
|
$
|
99,645
|
|
|
$
|
2,447,834
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND
STOCKHOLDERS EQUITY
|
Deposits
|
|
$
|
1,077,853
|
|
|
$
|
298,206
|
|
|
$
|
441,282
|
|
|
$
|
(3,000
|
)(b)
|
|
$
|
1,814,341
|
|
Advances from FHLB
|
|
|
166,090
|
|
|
|
|
|
|
|
67,200
|
|
|
|
1,895
|
(b)
|
|
|
235,185
|
|
Federal funds borrowed and security
repurchase agreements
|
|
|
31,006
|
|
|
|
12,271
|
|
|
|
330
|
|
|
|
|
|
|
|
43,607
|
|
Long-term debt
|
|
|
3,703
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,703
|
|
Junior subordinated debentures owed
to unconsolidated subsidiary trusts
|
|
|
31,959
|
|
|
|
|
|
|
|
10,310
|
|
|
|
5,400
|
(b)
|
|
|
47,669
|
|
Accrued expenses and other
liabilities
|
|
|
15,553
|
|
|
|
1,143
|
|
|
|
13,929
|
|
|
|
4,980
|
(b)
|
|
|
35,605
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
1,326,164
|
|
|
|
311,620
|
|
|
|
533,051
|
|
|
|
9,275
|
|
|
|
2,180,110
|
|
Stockholders
Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock
|
|
|
20
|
|
|
|
37
|
|
|
|
900
|
|
|
|
(937
|
)(a)
|
|
|
34
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
14
|
(b)
|
|
|
|
|
Surplus
|
|
|
88,743
|
|
|
|
21,112
|
|
|
|
50,925
|
|
|
|
884
|
(a)
|
|
|
252,020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
90,581
|
(b)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(225
|
)(c)
|
|
|
|
|
Retained earnings
|
|
|
22,344
|
|
|
|
7,157
|
|
|
|
(1,553
|
)
|
|
|
(5,604
|
)(a)
|
|
|
22,344
|
|
Other equity
|
|
|
|
|
|
|
|
|
|
|
278
|
|
|
|
(278
|
)(a)
|
|
|
|
|
Accumulated other comprehensive loss
|
|
|
(3,505
|
)
|
|
|
|
|
|
|
(4,914
|
)
|
|
|
4,914
|
(a)
|
|
|
(3,505
|
)
|
Treasury stock, at cost
|
|
|
(310
|
)
|
|
|
|
|
|
|
(1,021
|
)
|
|
|
1,021
|
(a)
|
|
|
(310
|
)
|
Unearned ESOP stock
|
|
|
(1,489
|
)
|
|
|
|
|
|
|
(1,370
|
)
|
|
|
|
|
|
|
(2,859
|
) -
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total stockholders
equity
|
|
|
105,803
|
|
|
|
28,306
|
|
|
|
43,245
|
|
|
|
90,370
|
|
|
|
267,724
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and
stockholders equity
|
|
$
|
1,431,967
|
|
|
$
|
339,926
|
|
|
$
|
576,296
|
|
|
$
|
99,645
|
|
|
$
|
2,447,834
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of common shares
outstanding
|
|
|
20,085
|
|
|
|
3,711
|
|
|
|
8,892
|
|
|
|
14,210
|
(b)
|
|
|
34,295
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total book value per common share
|
|
$
|
5.27
|
|
|
$
|
7.63
|
|
|
$
|
4.91
|
|
|
|
|
|
|
$
|
7.81
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tangible book value per common share
|
|
$
|
4.67
|
|
|
$
|
7.63
|
|
|
$
|
4.57
|
|
|
|
|
|
|
$
|
4.03
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
23
|
|
|
(a) |
|
To eliminate equity of Kensington Bankshares and
Community Bancshares. |
|
(b) |
|
To record issuance of common stock and cash payments to
purchase 100% of Kensington Bankshares and Community Bancshares;
to record and adjust assets acquired and liabilities assumed at
their estimated fair market values and related merger and
transaction costs. See Note 1 to Unaudited Pro Forma
Condensed Consolidated Financial Information for detail.
|
|
(c) |
|
To record direct costs of issuing common stock. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Kensington
|
|
|
Community
|
|
|
|
|
|
|
Bankshares
|
|
|
Bancshares
|
|
|
Total
|
|
|
Professional fees
|
|
$
|
50
|
|
|
$
|
75
|
|
|
$
|
125
|
|
Printing costs
|
|
|
50
|
|
|
|
50
|
|
|
|
100
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
100
|
|
|
$
|
125
|
|
|
$
|
225
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
24
Superior
Bancorp and Subsidiaries
Unaudited
Pro Forma Condensed Consolidated Statement of Operations
For the
Three-Months Ended March 31, 2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Historical
|
|
|
Pro Forma
|
|
|
|
|
|
|
Superior
|
|
|
Kensington
|
|
|
Community
|
|
|
Acquisition
|
|
|
Pro Forma
|
|
|
|
Bancorp
|
|
|
Bankshares
|
|
|
Bancshares
|
|
|
Adjustments
|
|
|
Combined
|
|
|
|
(In thousands, except per share data)
|
|
|
Interest income
|
|
$
|
21,649
|
|
|
$
|
4,907
|
|
|
$
|
8,890
|
|
|
$
|
767
|
(a)
|
|
$
|
36,092
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(121
|
)(e)
|
|
|
|
|
Interest expense
|
|
|
11,645
|
|
|
|
2,344
|
|
|
|
3,949
|
|
|
|
143
|
(b)
|
|
|
18,081
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income
|
|
|
10,004
|
|
|
|
2,563
|
|
|
|
4,941
|
|
|
|
503
|
|
|
|
18,011
|
|
Provision for loan losses
|
|
|
600
|
|
|
|
|
|
|
|
795
|
|
|
|
|
|
|
|
1,395
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income after
provision for loan losses
|
|
|
9,404
|
|
|
|
2,563
|
|
|
|
4,146
|
|
|
|
503
|
|
|
|
16,616
|
|
Noninterest income
|
|
|
2,502
|
|
|
|
80
|
|
|
|
1,348
|
|
|
|
|
|
|
|
3,930
|
|
Noninterest expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Salaries and employee benefits
|
|
|
5,869
|
|
|
|
772
|
|
|
|
2,630
|
|
|
|
|
|
|
|
9,271
|
|
Occupancy, furniture and equipment
expense
|
|
|
1,847
|
|
|
|
223
|
|
|
|
977
|
|
|
|
(78
|
)(g)
|
|
|
2,969
|
|
Other operating expenses
|
|
|
3,090
|
|
|
|
340
|
|
|
|
1,848
|
|
|
|
563
|
(c)
|
|
|
5,841
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Noninterest expenses
|
|
|
10,806
|
|
|
|
1,335
|
|
|
|
5,455
|
|
|
|
485
|
|
|
|
18,081
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes
|
|
|
1,100
|
|
|
|
1,308
|
|
|
|
39
|
|
|
|
18
|
|
|
|
2,465
|
|
Income tax expense
(benefit)
|
|
|
250
|
|
|
|
429
|
|
|
|
(15
|
)
|
|
|
7
|
(d)
|
|
|
671 -
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
850
|
|
|
$
|
879
|
|
|
$
|
54
|
|
|
$
|
11
|
|
|
$
|
1,794
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic net income per common
share
|
|
$
|
0.04
|
|
|
$
|
0.24
|
|
|
$
|
0.01
|
|
|
|
|
|
|
$
|
0.05
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted net income per common
share
|
|
$
|
0.04
|
|
|
$
|
0.24
|
|
|
$
|
0.01
|
|
|
|
|
|
|
$
|
0.05
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares
outstanding
|
|
|
20,015
|
|
|
|
3,711
|
|
|
|
8,762
|
|
|
|
14,210
|
(f)
|
|
|
34,225
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares
outstanding, assuming dilution
|
|
|
20,673
|
|
|
|
3,725
|
|
|
|
9,002
|
|
|
|
14,210
|
(f)
|
|
|
34,883
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) |
|
To record amortization of fair value adjustment of
loans and investments over a 3 to 5 year period using
straight-line and accelerated methods which approximate the
interest method.
|
|
(b) |
|
To record amortization of fair value adjustment of
deposits and borrowings over a 3 to 25 year period using
straight-line and accelerated methods which approximate the
interest method.
|
25
|
|
|
(c) |
|
To record amortization of core deposit intangible
over a 7 year period using an accelerated method.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Kensington
|
|
|
Community
|
|
|
|
|
Amortization
|
|
Bankshares
|
|
|
Bancshares
|
|
|
Total
|
|
|
Year 1
|
|
$
|
875
|
|
|
$
|
1,750
|
|
|
|
2,625
|
|
Year 2
|
|
|
750
|
|
|
|
1,500
|
|
|
|
2,250
|
|
Year 3
|
|
|
625
|
|
|
|
1,250
|
|
|
|
1,875
|
|
Year 4
|
|
|
500
|
|
|
|
1,000
|
|
|
|
1,500
|
|
Year 5
|
|
|
375
|
|
|
|
750
|
|
|
|
1,125
|
|
Year 6
|
|
|
250
|
|
|
|
500
|
|
|
|
750
|
|
Year 7
|
|
|
125
|
|
|
|
250
|
|
|
|
375
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
3,500
|
|
|
$
|
7,000
|
|
|
$
|
10,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(d) |
|
To record the tax effect of adjustments at a 37% marginal
tax rate. |
|
(e) |
|
Adjust interest income for loss of earnings due to cash
payments at the federal funds rate of 5%. |
|
(f) |
|
Common stock issued to acquire Kensington Bankshares and
Community Bancshares. |
|
(g) |
|
To record reduction in depreciation expense related to
decrease in carrying value of equipment and software: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Kensington
|
|
|
Community
|
|
|
|
|
|
|
Bankshares
|
|
|
Bancshares
|
|
|
Total
|
|
|
|
|
$
|
8
|
|
|
$
|
70
|
|
|
$
|
78
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
26
Superior
Bancorp and Subsidiaries
Unaudited
Pro Forma Condensed Consolidated Statements of Operations
For the
Year Ended December 31, 2005
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Historical
|
|
|
Pro Forma
|
|
|
|
|
|
|
Superior
|
|
|
Kensington
|
|
|
Community
|
|
|
Acquisition
|
|
|
Pro Forma
|
|
|
|
Bancorp
|
|
|
Bankshares
|
|
|
Bancshares
|
|
|
Adjustments
|
|
|
Combined
|
|
|
|
(In thousands, except per share data)
|
|
|
Interest income
|
|
$
|
77,280
|
|
|
$
|
16,058
|
|
|
$
|
32,357
|
|
|
$
|
3,778
|
(a)
|
|
$
|
128,982
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(491
|
)(e)
|
|
|
|
|
Interest expense
|
|
|
38,255
|
|
|
|
6,247
|
|
|
|
13,934
|
|
|
|
1,073
|
(b)
|
|
|
59,509
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income
|
|
|
39,025
|
|
|
|
9,811
|
|
|
|
18,423
|
|
|
|
2,214
|
|
|
|
69,473
|
|
Provision for loan losses
|
|
|
3,500
|
|
|
|
|
|
|
|
796
|
|
|
|
|
|
|
|
4,296
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income after
provision for loan losses
|
|
|
35,525
|
|
|
|
9,811
|
|
|
|
17,627
|
|
|
|
2,214
|
|
|
|
65,177
|
|
Noninterest income
|
|
|
14,697
|
|
|
|
257
|
|
|
|
7,042
|
|
|
|
|
|
|
|
21,996
|
|
Noninterest expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Salaries and employee benefits
|
|
|
23,104
|
|
|
|
3,017
|
|
|
|
10,922
|
|
|
|
|
|
|
|
37,043
|
|
Occupancy, furniture and equipment
expense
|
|
|
7,680
|
|
|
|
1,330
|
|
|
|
3,861
|
|
|
|
(311
|
)(g)
|
|
|
12,560
|
|
Management separation costs
|
|
|
15,467
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15,467
|
|
Other operating expenses
|
|
|
14,369
|
|
|
|
1,083
|
|
|
|
7,815
|
|
|
|
2,625
|
(c)
|
|
|
25,892
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Noninterest expenses
|
|
|
60,620
|
|
|
|
5,430
|
|
|
|
22,598
|
|
|
|
2,314
|
|
|
|
90,962
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before income taxes
|
|
|
(10,398
|
)
|
|
|
4,638
|
|
|
|
2,071
|
|
|
|
(100
|
)
|
|
|
(3,789
|
)
|
Income tax expense
(benefit)
|
|
|
(4,612
|
)
|
|
|
1,758
|
|
|
|
422
|
|
|
|
(37
|
)(d)
|
|
|
(2,469
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
|
(5,786
|
)
|
|
|
2,880
|
|
|
|
1,649
|
|
|
|
(63
|
)
|
|
|
(1,320
|
)
|
Preferred stock dividends
|
|
|
305
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
305
|
|
Effect of early conversion of
preferred stock
|
|
|
2,006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) available to
common shareholders
|
|
$
|
(8,097
|
)
|
|
$
|
2,880
|
|
|
$
|
1,649
|
|
|
$
|
(63
|
)
|
|
$
|
(3,631
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic net income (loss) per
common share
|
|
$
|
(0.42
|
)
|
|
$
|
0.78
|
|
|
$
|
0.19
|
|
|
|
|
|
|
$
|
(0.11
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted net income (loss) per
common share
|
|
$
|
(0.42
|
)
|
|
$
|
0.76
|
|
|
$
|
0.19
|
|
|
|
|
|
|
$
|
(0.11
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares
outstanding
|
|
|
19,154
|
|
|
|
3,710
|
|
|
|
8,592
|
|
|
|
14,210
|
(f)
|
|
|
33,364
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares
outstanding, assuming dilution
|
|
|
19,154
|
|
|
|
3,798
|
|
|
|
8,780
|
|
|
|
14,210
|
(f)
|
|
|
33,364
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) |
|
To record amortization of fair value adjustment of
loans and investments over a 3 to 5 year period using
straight-line and accelerated methods which approximate the
interest method.
|
|
(b) |
|
To record amortization of fair value adjustment of
deposits over a 3 to 25 year period using straight-line and
accelerated methods which approximate the interest method.
|
|
(c) |
|
To record amortization of core deposit intangible
over a 7 year period using an accelerated method.
|
|
(d) |
|
To record the tax effect of adjustments at a 37%
marginal tax rate.
|
|
(e) |
|
Adjust interest income for loss of earnings due to
cash payments at the federal funds rate of 5%.
|
|
(f) |
|
Common stock issued to acquire Kensington Bankshares
and Community Bancshares.
|
|
(g) |
|
To record reduction in depreciation expense related
to decrease in carrying value of equipment and software:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Kensington
|
|
|
Community
|
|
|
|
|
|
|
Bankshares
|
|
|
Bancshares
|
|
|
Total
|
|
|
|
|
$
|
32
|
|
|
$
|
279
|
|
|
$
|
311
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
27
Note 1
Unaudited Pro Forma Condensed Consolidated Financial
Information
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Kensington
|
|
|
Community
|
|
|
|
|
|
|
Bankshares
|
|
|
Bancshares
|
|
|
Total
|
|
|
|
(In thousands, except per share amounts)
|
|
|
Pro forma outstanding shares of
acquired corporation
|
|
|
3,711
|
|
|
|
8,892
|
|
|
|
|
|
Exchange ratio per merger agreement
|
|
|
1.6000
|
|
|
|
0.8974
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Superior Bancorp shares to be
issued for outstanding shares
|
|
|
5,938
|
|
|
|
7,980
|
|
|
|
|
|
Superior Bancorp shares to be
issued for outstanding options
|
|
|
292
|
(b)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Superior Bancorp shares to
be issued
|
|
|
6,230
|
|
|
|
7,980
|
|
|
|
14,210
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value of Superior Bancorp
stock
|
|
$
|
11.45
|
(a)
|
|
$
|
11.38
|
(a)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value of stock to be issued
|
|
$
|
71,334
|
|
|
$
|
90,812
|
|
|
$
|
162,146
|
|
Payment for outstanding options
and warrants
|
|
|
|
|
|
|
6,736
|
(c)
|
|
|
6,736
|
|
Pro forma transaction costs
|
|
|
528
|
(d)
|
|
|
301
|
(d)
|
|
|
829
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total pro forma purchase
price
|
|
|
71,862
|
|
|
|
97,849
|
|
|
|
169,711
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net assets of acquired corporation
per historical financial statements
|
|
|
28,306
|
|
|
|
43,245
|
|
|
|
71,551
|
|
Increase (decrease) in net
assets to be acquired to reflect certain pro forma premerger
transactions
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock dividend
|
|
|
|
|
|
|
|
(e)
|
|
|
|
|
Retirement of debt
|
|
|
|
|
|
|
|
(f)
|
|
|
|
|
Merger costs
|
|
|
(919
|
)(g)
|
|
|
(1,105
|
)(g)
|
|
|
(2,024
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pro forma net assets to be acquired
|
|
|
27,387
|
|
|
|
42,140
|
|
|
|
69,527
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase accounting adjustments
to carrying value of asset or liability:(k)
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment securities
|
|
|
(3,349
|
)
|
|
|
|
|
|
|
(3,349
|
)
|
Loans
|
|
|
(250
|
)
|
|
|
(4,000
|
)
|
|
|
(4,250
|
)
|
Equipment and software
|
|
|
(160
|
)
|
|
|
(879
|
)
|
|
|
(1,039
|
)
|
Core deposit intangible
|
|
|
3,500
|
(h)
|
|
|
6,526
|
(h)
|
|
|
10,026
|
|
Goodwill recorded on books of
acquired corporation
|
|
|
|
|
|
|
(2,497
|
)
|
|
|
(2,497
|
)
|
Other assets Florida
bank charter to be sold
|
|
|
1,000
|
|
|
|
|
|
|
|
1,000
|
|
Deposits
|
|
|
1,000
|
|
|
|
2,000
|
|
|
|
3,000
|
|
FHLB borrowings
|
|
|
|
|
|
|
(1,895
|
)
|
|
|
(1,895
|
)
|
Junior subordinated debentures
|
|
|
|
|
|
|
(5,400
|
)
|
|
|
(5,400
|
)
|
Contractual obligations
|
|
|
(760
|
)(i)
|
|
|
(3,470
|
)(i)
|
|
|
(4,230
|
)
|
Severance benefits
|
|
|
(250
|
)
|
|
|
(500
|
)
|
|
|
(750
|
)
|
Other assets deferred
income taxes
|
|
|
(270
|
)(j)
|
|
|
2,819
|
(j)
|
|
|
2,549
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net pro forma purchase
accounting adjustments
|
|
|
461
|
|
|
|
(7,296
|
)
|
|
|
(6,835
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Goodwill
|
|
$
|
44,014
|
|
|
$
|
63,005
|
|
|
$
|
107,019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) |
|
Based on the closing stock price several days prior to
and after the agreements were reached and announced. |
28
|
|
|
(b) |
|
Pro forma amount of shares to be exchanged for
Kensingtons Bankshares stock options. |
|
|
|
|
|
|
|
Kensington
|
|
|
|
Bankshares
|
|
|
Per Option Value as defined in
agreement
|
|
|
|
|
Dollar per option
|
|
$
|
18.288
|
|
Less: Weighted average exercise
price per option
|
|
|
8.140
|
|
|
|
|
|
|
Per Option Value
|
|
$
|
10.148
|
|
Total stock options
outstanding
|
|
|
329
|
|
|
|
|
|
|
Total stock options outstanding
times Per Option Value
|
|
$
|
3,339
|
|
Divided by per share amount per
merger agreement
|
|
|
11.43
|
|
|
|
|
|
|
Total shares to be exchanged for
options
|
|
|
292
|
|
|
|
|
|
|
|
|
|
(c) |
|
Pro forma amount of cash to be paid for Community
Bancshares stock options and warrants. |
|
|
|
|
|
|
|
Community
|
|
|
|
Bancshares
|
|
|
Per Option Value as defined in
agreement
|
|
|
|
|
Dollar per option or warrant
|
|
$
|
10.500
|
|
Less: Weighted average exercise
price per option or warrant
|
|
|
6.720
|
|
|
|
|
|
|
Per Option Value
|
|
$
|
3.780
|
|
Total stock options and
warrants outstanding
|
|
|
1,782
|
|
|
|
|
|
|
Total pro forma amount of cash
due to option and warrant holders
|
|
$
|
6,736
|
|
|
|
|
|
|
|
|
|
(d) |
|
The following pro forma merger costs are expected to be
incurred by Superior Bancorp: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Kensington
|
|
|
Community
|
|
|
|
|
|
|
|
|
|
Bankshares
|
|
|
Bancshares
|
|
|
Total
|
|
|
|
|
|
|
Professional fees
|
|
$
|
150
|
|
|
$
|
80
|
|
|
$
|
230
|
|
|
|
|
|
Investment banking
|
|
|
267
|
|
|
|
185
|
|
|
|
452
|
|
|
|
|
|
Consulting
|
|
|
111
|
|
|
|
36
|
|
|
|
147
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
528
|
|
|
$
|
301
|
|
|
$
|
829
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(e) |
|
Community Bancshares may establish and declare ten days
before the closing date of the merger a cash dividend equal to
an amount that Community Bancshares net worth exceeds $44.
3 million provided the aggregate amount of the dividend
does not exceed $4.4 million.
|
|
(f) |
|
Community Bancshares must retire its line of credit with
a regional financial institution. |
|
(g) |
|
The following pro forma merger costs are expected to be
incurred by Kensington Bankshares and Community Bancshares:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Kensington
|
|
|
Community
|
|
|
|
|
|
|
Bankshares
|
|
|
Bancshares
|
|
|
Total
|
|
|
Professional fees
|
|
$
|
163
|
|
|
$
|
345
|
|
|
$
|
508
|
|
Investment banking
|
|
|
756
|
|
|
|
760
|
|
|
|
1,516
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
919
|
|
|
$
|
1,105
|
|
|
$
|
2,024
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
29
|
|
|
(h) |
|
Estimated to be approximately 4.0% and 3.0% of non-time
deposits for Kensington Bankshares and Community Bancshares,
respectively.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Kensington
|
|
|
Community
|
|
|
|
|
|
|
Bankshares
|
|
|
Bancshares
|
|
|
Total
|
|
|
Pro forma core deposit intangible
|
|
$
|
3,500
|
|
|
$
|
7,000
|
|
|
$
|
10,500
|
|
Less: Existing core deposit
intangible
|
|
|
|
|
|
|
(474
|
)
|
|
|
(474
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net pro forma core deposit
intangible adjustment
|
|
$
|
3,500
|
|
|
$
|
6,526
|
|
|
$
|
10,026
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(i) |
|
Pro forma contractual obligations |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Kensington
|
|
|
Community
|
|
|
|
|
|
|
Bankshares
|
|
|
Bancshares
|
|
|
Total
|
|
|
Employment contracts
|
|
$
|
|
|
|
$
|
3,000
|
|
|
$
|
3,000
|
|
Data processing
|
|
|
760
|
|
|
|
320
|
|
|
|
1,080
|
|
Other
|
|
|
|
|
|
|
150
|
|
|
|
150
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pro forma contractual obligations
|
|
$
|
760
|
|
|
$
|
3,470
|
|
|
$
|
4,230
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(j) |
|
Assumes 37% marginal tax rate. |
|
(k) |
|
These purchase accounting adjustments are preliminary
estimates and are subject to change primarily as a result of
changes in market interest rates or decline in credit quality of
the loan portfolio.
|
30
SELECTED
FINANCIAL DATA SUPERIOR BANCORP
The following table sets forth selected historical financial
data from Superior Bancorp for the periods and dates indicated
and should be read in conjunction with Superior Bancorps
consolidated financial statements including the related notes
and Managements Discussion and Analysis of Financial
Condition and Results of Operations incorporated by
reference herein.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
|
|
|
|
March 31,
|
|
|
As of and For the Year Ended December 31,
|
|
|
|
2006
|
|
|
2005
|
|
|
2005
|
|
|
2004
|
|
|
2003
|
|
|
2002
|
|
|
2001
|
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selected Statement of Financial
Condition Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
1,431,967
|
|
|
$
|
1,426,934
|
|
|
$
|
1,415,469
|
|
|
$
|
1,423,128
|
|
|
$
|
1,171,626
|
|
|
$
|
1,406,800
|
|
|
$
|
1,207,397
|
|
Loans, net of unearned income
|
|
|
989,576
|
|
|
|
942,391
|
|
|
|
963,253
|
|
|
|
934,868
|
|
|
|
856,941
|
|
|
|
1,138,537
|
|
|
|
999,156
|
|
Allowance for loan losses
|
|
|
11,999
|
|
|
|
12,957
|
|
|
|
12,011
|
|
|
|
12,543
|
|
|
|
25,174
|
|
|
|
27,766
|
|
|
|
12,546
|
|
Investment securities
|
|
|
238,706
|
|
|
|
264,559
|
|
|
|
242,595
|
|
|
|
288,308
|
|
|
|
141,601
|
|
|
|
73,125
|
|
|
|
68,847
|
|
Deposits
|
|
|
1,077,853
|
|
|
|
1,079,565
|
|
|
|
1,043,696
|
|
|
|
1,067,206
|
|
|
|
889,935
|
|
|
|
1,107,798
|
|
|
|
952,235
|
|
Advances from FHLB and other
borrowings
|
|
|
197,096
|
|
|
|
193,903
|
|
|
|
214,496
|
|
|
|
205,546
|
|
|
|
131,919
|
|
|
|
174,922
|
|
|
|
135,900
|
|
Notes payable
|
|
|
3,703
|
|
|
|
3,913
|
|
|
|
3,755
|
|
|
|
3,965
|
|
|
|
1,925
|
|
|
|
|
|
|
|
|
|
Junior subordinated debentures owed
to unconsolidated trusts
|
|
|
31,959
|
|
|
|
31,959
|
|
|
|
31,959
|
|
|
|
31,959
|
|
|
|
31,959
|
|
|
|
31,959
|
|
|
|
31,959
|
|
Stockholders Equity
|
|
|
105,803
|
|
|
|
99,001
|
|
|
|
105,065
|
|
|
|
100,539
|
|
|
|
100,122
|
|
|
|
76,541
|
|
|
|
76,853
|
|
Selected Statement of Operations
Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income
|
|
$
|
21,649
|
|
|
$
|
18,186
|
|
|
$
|
77,280
|
|
|
$
|
66,160
|
|
|
$
|
76,213
|
|
|
$
|
88,548
|
|
|
$
|
90,418
|
|
Interest expense
|
|
|
11,645
|
|
|
|
8,579
|
|
|
|
38,255
|
|
|
|
28,123
|
|
|
|
33,487
|
|
|
|
40,510
|
|
|
|
50,585
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income
|
|
|
10,004
|
|
|
|
9,607
|
|
|
|
39,025
|
|
|
|
38,037
|
|
|
|
42,726
|
|
|
|
48,038
|
|
|
|
39,833
|
|
Provision for loan losses
|
|
|
600
|
|
|
|
750
|
|
|
|
3,500
|
|
|
|
975
|
|
|
|
20,975
|
|
|
|
51,852
|
|
|
|
7,454
|
|
Noninterest income
|
|
|
2,502
|
|
|
|
1,247
|
|
|
|
9,583
|
|
|
|
10,527
|
|
|
|
14,592
|
|
|
|
15,123
|
|
|
|
9,773
|
|
Gain on sale of branches
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
739
|
|
|
|
48,264
|
|
|
|
|
|
|
|
|
|
Insurance proceeds
|
|
|
|
|
|
|
|
|
|
|
5,114
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Prepayment penalty FHLB
advances
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,532
|
|
|
|
|
|
|
|
|
|
Loss on sale of loans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,293
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Management separation costs
|
|
|
|
|
|
|
12,377
|
|
|
|
15,467
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Noninterest expense
|
|
|
10,806
|
|
|
|
10,945
|
|
|
|
45,153
|
|
|
|
45,644
|
|
|
|
55,398
|
|
|
|
42,669
|
|
|
|
38,497
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before income taxes
(benefit)
|
|
|
1,100
|
|
|
|
(13,218
|
)
|
|
|
(10,398
|
)
|
|
|
391
|
|
|
|
26,677
|
|
|
|
(31,360
|
)
|
|
|
3,655
|
|
Income tax expense (benefit)
|
|
|
250
|
|
|
|
(5,057
|
)
|
|
|
(4,612
|
)
|
|
|
(796
|
)
|
|
|
9,178
|
|
|
|
(12,959
|
)
|
|
|
966
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
|
850
|
|
|
|
(8,161
|
)
|
|
|
(5,786
|
)
|
|
|
1,187
|
|
|
|
17,499
|
|
|
|
(18,401
|
)
|
|
|
2,689
|
|
Preferred stock dividends
|
|
|
|
|
|
|
|
|
|
|
305
|
|
|
|
446
|
|
|
|
219
|
|
|
|
|
|
|
|
|
|
Effect of early conversion of
preferred stock
|
|
|
|
|
|
|
|
|
|
|
2,006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income applicable to
common stockholders
|
|
$
|
(850
|
)
|
|
$
|
(8,161
|
)
|
|
$
|
(8,097
|
)
|
|
$
|
741
|
|
|
$
|
17,280
|
|
|
$
|
(18,401
|
)
|
|
$
|
2,689
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Per Share Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) basic
|
|
$
|
0.04
|
|
|
$
|
(0.44
|
)
|
|
$
|
(0.42
|
)
|
|
$
|
0.04
|
|
|
$
|
0.99
|
|
|
$
|
(1.09
|
)
|
|
$
|
0.19
|
|
diluted(1)
|
|
$
|
0.04
|
|
|
$
|
(0.44
|
)
|
|
$
|
(0.42
|
)
|
|
$
|
0.04
|
|
|
$
|
0.95
|
|
|
$
|
(1.09
|
)
|
|
$
|
0.19
|
|
Weighted average shares
outstanding basic
|
|
|
20,015
|
|
|
|
18,406
|
|
|
|
19,154
|
|
|
|
17,583
|
|
|
|
17,492
|
|
|
|
16,829
|
|
|
|
14,272
|
|
Weighted
average shares outstanding diluted(1)
|
|
|
20,673
|
|
|
|
18,406
|
|
|
|
19,154
|
|
|
|
17,815
|
|
|
|
18,137
|
|
|
|
16,829
|
|
|
|
14,302
|
|
Book value at period end
|
|
$
|
5.27
|
|
|
$
|
4.95
|
|
|
$
|
5.26
|
|
|
$
|
5.31
|
|
|
$
|
5.31
|
|
|
$
|
4.35
|
|
|
$
|
5.41
|
|
Tangible book value per share
|
|
$
|
4.67
|
|
|
$
|
4.29
|
|
|
$
|
4.65
|
|
|
$
|
4.62
|
|
|
$
|
4.59
|
|
|
$
|
3.59
|
|
|
$
|
4.98
|
|
Preferred shares outstanding at
period end
|
|
|
|
|
|
|
62
|
|
|
|
|
|
|
|
62
|
|
|
|
62
|
|
|
|
|
|
|
|
|
|
Common shares outstanding at period
end
|
|
|
20,085
|
|
|
|
18,757
|
|
|
|
19,980
|
|
|
|
17,750
|
|
|
|
17,695
|
|
|
|
17,605
|
|
|
|
14,217
|
|
31
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
|
|
|
|
March 31,
|
|
|
As of and For the Year Ended December 31,
|
|
|
|
2006
|
|
|
2005
|
|
|
2005
|
|
|
2004
|
|
|
2003
|
|
|
2002
|
|
|
2001
|
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Performance Ratios and Other
Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Return on average assets
|
|
|
0.24
|
%
|
|
|
(2.31
|
)%
|
|
|
(0.41
|
)%
|
|
|
0.09
|
%
|
|
|
1.29
|
%
|
|
|
(1.36
|
)%
|
|
|
0.23
|
%
|
Return on average
stockholders equity
|
|
|
3.27
|
|
|
|
(32.80
|
)
|
|
|
(5.68
|
)
|
|
|
1.18
|
|
|
|
19.08
|
|
|
|
(19.89
|
)
|
|
|
3.53
|
|
Net interest margin(2)(3)
|
|
|
3.21
|
|
|
|
3.06
|
|
|
|
3.14
|
|
|
|
3.31
|
|
|
|
3.50
|
|
|
|
3.93
|
|
|
|
3.83
|
|
Net interest spread(3)(4)
|
|
|
3.01
|
|
|
|
2.94
|
|
|
|
3.00
|
|
|
|
3.20
|
|
|
|
3.35
|
|
|
|
3.70
|
|
|
|
3.43
|
|
Noninterest income to average
assets(5)
|
|
|
0.69
|
|
|
|
0.68
|
|
|
|
0.77
|
|
|
|
0.82
|
|
|
|
1.03
|
|
|
|
0.99
|
|
|
|
0.73
|
|
Noninterest expense to average
assets(6)
|
|
|
3.09
|
|
|
|
3.00
|
|
|
|
3.19
|
|
|
|
3.52
|
|
|
|
4.07
|
|
|
|
3.15
|
|
|
|
3.34
|
|
Efficiency ratio(7)
|
|
|
86.72
|
|
|
|
89.91
|
|
|
|
87.99
|
|
|
|
91.72
|
|
|
|
100.09
|
|
|
|
67.85
|
|
|
|
80.56
|
|
Average loan to average deposit
ratio
|
|
|
94.37
|
|
|
|
87.95
|
|
|
|
88.82
|
|
|
|
92.16
|
|
|
|
100.69
|
|
|
|
105.35
|
|
|
|
100.40
|
|
Average interest-earning assets to
average interest bearing liabilities
|
|
|
105.07
|
|
|
|
104.36
|
|
|
|
104.58
|
|
|
|
104.88
|
|
|
|
105.82
|
|
|
|
107.04
|
|
|
|
108.26
|
|
Assets Quality Ratios:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for loan losses to
nonperforming loans
|
|
|
290.53
|
%
|
|
|
183.97
|
%
|
|
|
252.76
|
%
|
|
|
169.36
|
%
|
|
|
78.59
|
%
|
|
|
105.00
|
%
|
|
|
100.99
|
%
|
Allowance for loan losses to loans,
net of unearned income
|
|
|
1.21
|
|
|
|
1.37
|
|
|
|
1.25
|
|
|
|
1.34
|
|
|
|
2.94
|
|
|
|
2.44
|
|
|
|
1.26
|
|
Nonperforming
assets(NPA) to loans plus NPAs, net of unearned
income
|
|
|
0.56
|
|
|
|
1.06
|
|
|
|
0.68
|
|
|
|
1.32
|
|
|
|
4.41
|
|
|
|
2.53
|
|
|
|
1.70
|
|
Nonaccrual loans to loans, net of
unearned income
|
|
|
0.42
|
|
|
|
0.74
|
|
|
|
0.47
|
|
|
|
0.68
|
|
|
|
3.46
|
|
|
|
2.17
|
|
|
|
0.79
|
|
Net loan charge-offs to average
loans
|
|
|
0.25
|
|
|
|
0.14
|
|
|
|
0.43
|
|
|
|
1.52
|
|
|
|
2.21
|
|
|
|
3.35
|
|
|
|
0.42
|
|
Net loan charge-offs to average
loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for loan losses
|
|
|
102.00
|
|
|
|
44.80
|
|
|
|
115.20
|
|
|
|
1,395.49
|
|
|
|
111.87
|
|
|
|
72.69
|
|
|
|
51.88
|
|
Allowance for loan losses
|
|
|
20.69
|
|
|
|
10.52
|
|
|
|
33.57
|
|
|
|
108.47
|
|
|
|
93.21
|
|
|
|
135.74
|
|
|
|
30.82
|
|
Capital Ratios:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tier 1 risk-based capital ratio
|
|
|
10.25
|
%
|
|
|
11.34
|
%
|
|
|
10.15
|
%
|
|
|
10.05
|
%
|
|
|
12.60
|
%
|
|
|
6.51
|
%
|
|
|
9.44
|
%
|
Total risk-based capital ratio
|
|
|
11.17
|
|
|
|
10.06
|
|
|
|
11.08
|
|
|
|
11.51
|
|
|
|
14.07
|
|
|
|
8.83
|
|
|
|
11.41
|
|
Leverage ratio
|
|
|
8.38
|
|
|
|
7.90
|
|
|
|
8.30
|
|
|
|
7.98
|
|
|
|
9.72
|
|
|
|
3.70
|
|
|
|
7.92
|
|
|
|
|
(1) |
|
Common stock equivalents of 287,000, 775,000 and
1,002,000 shares were not included in computing diluted
earnings per share for the years ended December 31, 2002,
2004 and 2005, respectively, because their effects were
antidilutive. Also, common stock equivalents of
1,327,000 shares were not included in computing diluted
earnings per share for March 31, 2005 because the effect
was antidilutive. |
|
(2) |
|
Net interest income divided by average earning assets. |
|
(3) |
|
Calculated on a taxable equivalent basis. |
|
(4) |
|
Yield on average interest-earning assets less rate on average
interest-bearing liabilities. |
|
(5) |
|
Noninterest income has been adjusted for certain nonrecurring
items such as gain on sale of branches, insurance proceeds,
change in fair value of derivatives and investment security
gains (losses). |
|
(6) |
|
Noninterest expense has been adjusted for certain nonrecurring
items such as loss on sale of assets and management separation
costs. |
|
(7) |
|
Efficiency ratio is calculated by dividing noninterest expense,
adjusted for management separation costs, losses on other real
estate and the loss on sale of assets, by noninterest income,
adjusted for gain on sale of branches, insurance proceeds,
changes in fair values of derivatives and investment security
gains (losses), plus net interest income on a fully taxable
equivalent basis. |
32
SELECTED
FINANCIAL DATA COMMUNITY BANCSHARES, INC.
The following table sets forth historical selected financial
data for Community Bancshares, Inc. for the periods and dates
indicated and should be read in conjunction with the related
consolidated financial statements, including the related notes,
and Managements Discussion and Analysis of Financial
Condition and Results of Operations incorporated by
reference herein.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
|
|
|
|
March 31,
|
|
|
As of and For the Year Ended December 31,
|
|
|
|
2006
|
|
|
2005
|
|
|
2005
|
|
|
2004
|
|
|
2003
|
|
|
2002
|
|
|
2001
|
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selected Statement of Financial
Condition Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
576,296
|
|
|
$
|
546,386
|
|
|
$
|
571,284
|
|
|
$
|
552,355
|
|
|
$
|
557,912
|
|
|
$
|
566,953
|
|
|
$
|
727,591
|
|
Loans, net of unearned income
|
|
|
354,030
|
|
|
|
304,802
|
|
|
|
336,462
|
|
|
|
300,380
|
|
|
|
316,207
|
|
|
|
359,184
|
|
|
|
501,519
|
|
Allowance for loan losses
|
|
|
5,112
|
|
|
|
4,589
|
|
|
|
4,736
|
|
|
|
4,625
|
|
|
|
14,358
|
|
|
|
9,784
|
|
|
|
7,292
|
|
Investment securities
|
|
|
131,550
|
|
|
|
148,991
|
|
|
|
136,405
|
|
|
|
147,168
|
|
|
|
156,271
|
|
|
|
123,901
|
|
|
|
121,679
|
|
Deposits
|
|
|
441,282
|
|
|
|
443,184
|
|
|
|
438,904
|
|
|
|
448,915
|
|
|
|
453,946
|
|
|
|
459,464
|
|
|
|
617,706
|
|
Advances from FHLB and other
borrowings
|
|
|
67,200
|
|
|
|
38,000
|
|
|
|
67,200
|
|
|
|
38,000
|
|
|
|
38,000
|
|
|
|
38,000
|
|
|
|
38,000
|
|
Notes payable
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,169
|
|
|
|
3,578
|
|
|
|
4,667
|
|
Junior subordinated debentures owed
to unconsolidated trusts
|
|
|
10,310
|
|
|
|
10,310
|
|
|
|
10,310
|
|
|
|
10,310
|
|
|
|
10,310
|
|
|
|
10,310
|
|
|
|
10,310
|
|
Stockholders Equity
|
|
|
43,245
|
|
|
|
40,539
|
|
|
|
43,149
|
|
|
|
41,520
|
|
|
|
34,676
|
|
|
|
39,668
|
|
|
|
38,395
|
|
Selected Statement of Operations
Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income
|
|
$
|
8,890
|
|
|
$
|
7,485
|
|
|
$
|
32,357
|
|
|
$
|
30,226
|
|
|
$
|
32,627
|
|
|
$
|
40,657
|
|
|
$
|
47,487
|
|
Interest expense
|
|
|
3,949
|
|
|
|
3,296
|
|
|
|
13,934
|
|
|
|
12,925
|
|
|
|
14,265
|
|
|
|
17,152
|
|
|
|
24,634
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income
|
|
|
4,941
|
|
|
|
4,189
|
|
|
|
18,423
|
|
|
|
17,301
|
|
|
|
18,362
|
|
|
|
23,505
|
|
|
|
22,853
|
|
Provision for loan losses
|
|
|
795
|
|
|
|
259
|
|
|
|
796
|
|
|
|
987
|
|
|
|
11,381
|
|
|
|
10,033
|
|
|
|
6,096
|
|
Noninterest income
|
|
|
1,348
|
|
|
|
1,801
|
|
|
|
7,042
|
|
|
|
6,473
|
|
|
|
6,730
|
|
|
|
7,446
|
|
|
|
8,133
|
|
Noninterest expense
|
|
|
5,455
|
|
|
|
5,427
|
|
|
|
22,598
|
|
|
|
23,021
|
|
|
|
35,398
|
|
|
|
29,071
|
|
|
|
28,792
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing
operations before income taxes
|
|
|
39
|
|
|
|
304
|
|
|
|
2,071
|
|
|
|
(234
|
)
|
|
|
(21,687
|
)
|
|
|
(8,153
|
)
|
|
|
(3,902
|
)
|
Income tax (benefit)
expense continuing operations
|
|
|
(15
|
)
|
|
|
99
|
|
|
|
422
|
|
|
|
303
|
|
|
|
(8,587
|
)
|
|
|
(2,487
|
)
|
|
|
(1,521
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) from continuing
operations
|
|
|
54
|
|
|
|
205
|
|
|
|
1,649
|
|
|
|
(537
|
)
|
|
|
(13,100
|
)
|
|
|
(5,666
|
)
|
|
|
(2,381
|
)
|
Net income from discontinued
operations, net of tax
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,927
|
|
|
|
958
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
54
|
|
|
$
|
205
|
|
|
$
|
1,649
|
|
|
$
|
(537
|
)
|
|
$
|
(13,100
|
)
|
|
$
|
261
|
|
|
$
|
(1,423
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Per Share Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income basic
|
|
$
|
0.01
|
|
|
$
|
0.02
|
|
|
$
|
0.19
|
|
|
$
|
(0.06
|
)
|
|
$
|
(2.79
|
)
|
|
$
|
0.06
|
|
|
$
|
(0.31
|
)
|
diluted(1)
|
|
$
|
0.01
|
|
|
$
|
0.02
|
|
|
$
|
0.19
|
|
|
$
|
(0.06
|
)
|
|
$
|
(2.79
|
)
|
|
$
|
0.06
|
|
|
$
|
(0.31
|
)
|
Weighted average shares
outstanding basic
|
|
|
8,761
|
|
|
|
8,510
|
|
|
|
8,592
|
|
|
|
8,271
|
|
|
|
4,695
|
|
|
|
4,642
|
|
|
|
4,572
|
|
Weighted average shares
outstanding diluted(1)
|
|
|
9,002
|
|
|
|
8,650
|
|
|
|
8,780
|
|
|
|
8,350
|
|
|
|
4,695
|
|
|
|
4,642
|
|
|
|
4,572
|
|
Book value at period end
|
|
$
|
4.91
|
|
|
$
|
4.76
|
|
|
$
|
4.94
|
|
|
$
|
4.89
|
|
|
$
|
5.12
|
|
|
$
|
8.55
|
|
|
$
|
8.32
|
|
Tangible book value per share
|
|
$
|
4.57
|
|
|
$
|
4.48
|
|
|
$
|
4.60
|
|
|
$
|
4.61
|
|
|
$
|
4.76
|
|
|
$
|
7.97
|
|
|
$
|
7.75
|
|
Preferred shares outstanding at
period end
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common shares outstanding at period
end
|
|
|
8,807
|
|
|
|
8,525
|
|
|
|
8,733
|
|
|
|
8,495
|
|
|
|
6,769
|
|
|
|
4,637
|
|
|
|
4,613
|
|
33
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
|
|
|
|
March 31,
|
|
|
As of and For the Year Ended December 31,
|
|
|
|
2006
|
|
|
2005
|
|
|
2005
|
|
|
2004
|
|
|
2003
|
|
|
2002
|
|
|
2001
|
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Performance Ratios and Other
Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Return on average assets
|
|
|
0.04
|
%
|
|
|
0.15
|
%
|
|
|
0.30
|
%
|
|
|
(0.10
|
)%
|
|
|
(2.35
|
)%
|
|
|
0.04
|
%
|
|
|
(0.20
|
)%
|
Return on average
stockholders equity
|
|
|
0.48
|
|
|
|
1.91
|
|
|
|
3.80
|
|
|
|
(1.14
|
)
|
|
|
(35.42
|
)
|
|
|
0.61
|
|
|
|
(3.31
|
)
|
Net interest margin(2)
|
|
|
3.94
|
|
|
|
3.59
|
|
|
|
3.84
|
|
|
|
3.56
|
|
|
|
3.76
|
|
|
|
4.47
|
|
|
|
4.31
|
|
Net interest spread(3)
|
|
|
3.56
|
|
|
|
3.33
|
|
|
|
3.53
|
|
|
|
3.26
|
|
|
|
3.53
|
|
|
|
4.07
|
|
|
|
3.72
|
|
Noninterest income to average
assets(4)
|
|
|
1.03
|
|
|
|
1.50
|
|
|
|
1.27
|
|
|
|
1.14
|
|
|
|
1.01
|
|
|
|
1.08
|
|
|
|
0.94
|
|
Noninterest expense to average
assets(5)
|
|
|
3.66
|
|
|
|
3.98
|
|
|
|
3.98
|
|
|
|
4.03
|
|
|
|
4.94
|
|
|
|
4.36
|
|
|
|
3.95
|
|
Efficiency ratio(6)
|
|
|
81.63
|
|
|
|
86.27
|
|
|
|
86.03
|
|
|
|
93.92
|
|
|
|
114.64
|
|
|
|
90.65
|
|
|
|
96.43
|
|
Average loan to average deposit
ratio
|
|
|
78.52
|
|
|
|
67.78
|
|
|
|
73.09
|
|
|
|
70.37
|
|
|
|
73.15
|
|
|
|
81.73
|
|
|
|
86.05
|
|
Average interest-earning assets to
average interest bearing liabilities
|
|
|
111.95
|
|
|
|
108.99
|
|
|
|
110.63
|
|
|
|
111.41
|
|
|
|
107.85
|
|
|
|
112.22
|
|
|
|
112.60
|
|
Asset Quality Ratios:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for loan losses to
nonperforming loans
|
|
|
151.56
|
%
|
|
|
196.78
|
%
|
|
|
130.43
|
%
|
|
|
281.50
|
%
|
|
|
83.77
|
%
|
|
|
67.09
|
%
|
|
|
88.87
|
%
|
Allowance for loan losses to loans,
net of unearned income
|
|
|
1.44
|
|
|
|
1.51
|
|
|
|
1.41
|
|
|
|
1.54
|
|
|
|
4.54
|
|
|
|
2.72
|
|
|
|
1.45
|
|
Nonperforming assets
(NPA) to loans plus NPAs, net of unearned income
|
|
|
2.08
|
|
|
|
4.00
|
|
|
|
3.99
|
|
|
|
4.10
|
|
|
|
7.45
|
|
|
|
6.07
|
|
|
|
2.49
|
|
Nonaccrual loans to loans, net of
unearned income
|
|
|
0.78
|
|
|
|
0.59
|
|
|
|
0.91
|
|
|
|
0.37
|
|
|
|
4.47
|
|
|
|
2.81
|
|
|
|
1.17
|
|
Net loan charge-offs to average
loans
|
|
|
0.48
|
|
|
|
0.39
|
|
|
|
0.21
|
|
|
|
3.43
|
|
|
|
2.06
|
|
|
|
1.64
|
|
|
|
1.19
|
|
Net loan charge-offs as a
percentage of:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for loan losses
|
|
|
52.70
|
|
|
|
113.90
|
|
|
|
86.06
|
|
|
|
1,086.12
|
|
|
|
59.81
|
|
|
|
67.91
|
|
|
|
97.07
|
|
Allowance for loan losses
|
|
|
32.79
|
|
|
|
25.71
|
|
|
|
14.46
|
|
|
|
231.78
|
|
|
|
47.41
|
|
|
|
70.16
|
|
|
|
84.05
|
|
Capital Ratios:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tier 1 risk-based capital ratio
|
|
|
11.74
|
%
|
|
|
12.26
|
%
|
|
|
11.58
|
%
|
|
|
11.83
|
%
|
|
|
10.51
|
%
|
|
|
12.00
|
%
|
|
|
9.59
|
%
|
Total risk-based capital ratio
|
|
|
12.99
|
|
|
|
13.52
|
|
|
|
12.83
|
|
|
|
13.09
|
|
|
|
11.80
|
|
|
|
13.68
|
|
|
|
11.17
|
|
Leverage ratio
|
|
|
7.90
|
|
|
|
7.79
|
|
|
|
7.75
|
|
|
|
7.31
|
|
|
|
6.38
|
|
|
|
7.64
|
|
|
|
6.39
|
|
|
|
|
(1) |
|
Common stock equivalents. |
|
(2) |
|
Net interest income divided by average earning assets. |
|
(3) |
|
Yield on average interest-earning assets less rate on average
interest-bearing liabilities. |
|
(4) |
|
Noninterest income excludes the gain on sale of branches, change
in fair value of derivatives and investment security gains
(losses), as well as noninterest income associated with
discontinued operations. |
|
(5) |
|
Noninterest expense excludes certain nonrecurring items such as
loss on sale of assets, including foreclosed assets, and
litigation, fraud or burglary expenses, as well as noninterest
expenses associated with discontinued operations. |
|
(6) |
|
Efficiency ratio is calculated by dividing noninterest expense,
as adjusted in footnote 5, by noninterest income, as
adjusted in footnote 4, plus net interest income. |
|
(7) |
|
The selected financial data for Community Bancshares presented
above have been adjusted to reflect certain restatements as
presented in Community Bancshares Annual Report on
Form 10-K/A
for the year ended December 31, 2005, filed June 14,
2006 with the SEC. See Where You Can Find Additional
Information beginning on
page . |
FORWARD-LOOKING
STATEMENTS
The Private Securities Litigation Reform Act of 1995 provides a
safe harbor for forward-looking statements made or incorporated
by reference in this joint proxy statement/prospectus. Some of
the disclosures in this joint proxy statement/prospectus,
including any statements preceded by, followed by or which
include the words may,
34
could, should, will,
would, hope, might,
believe, expect, anticipate,
estimate, intend, plan,
assume or similar expressions constitute
forward-looking statements.
These forward-looking statements include, implicitly and
explicitly, the assumptions underlying the statements and other
information with respect to Superior Bancorps and
Community Bancshares beliefs, plans, objectives, goals,
expectations, anticipations, estimates, intentions, financial
condition, results of operations, future performance and
business, including Superior Bancorps and Community
Bancshares expectations and estimates with respect to
Superior Bancorps and Community Bancshares revenues,
expenses, earnings, return on equity, return on assets,
efficiency ratio, asset quality, the adequacy of Superior
Bancorps and Community Bancshares allowance for loan
losses and other financial data and capital and performance
ratios.
Although each of Superior Bancorp and Community Bancshares
believes that the expectations reflected in its forward-looking
statements are reasonable, these statements involve risks and
uncertainties, including those described under Risk
Factors below and in Superior Bancorps and Community
Bancshares Annual Report on
Form 10-K,
which are subject to change based on various important factors
(some of which are beyond Superior Bancorps or Community
Bancshares control). The following factors, among others,
could cause Superior Bancorps and Community
Bancshares financial performance to differ materially from
its goals, plans, objectives, intentions, expectations and other
forward-looking statements: (1) the strength of the United
States economy in general and the strength of the regional and
local economies in which it conducts operations; (2) the
effects of, and changes in, trade, monetary and fiscal policies
and laws, including interest rate policies of the Board of
Governors of the Federal Reserve System; (3) inflation,
interest rate, market and monetary fluctuations;
(4) Superior Bancorps ability to successfully
integrate the assets, liabilities, customers, systems and
management of institutions that Superior Bancorp acquires or
merges into its operations; (5) the timely development of
new products and services in a changing environment, including
the features, pricing and quality compared to the products and
services of its competitors; (6) the willingness of users
to substitute competitors products and services for its
products and services; (7) the impact of changes in
financial services policies, laws and regulations, including
laws, regulations and policies concerning taxes, banking,
securities and insurance, and the application thereof by
regulatory bodies; (8) its ability to resolve any legal or
regulatory proceeding on acceptable terms and its effect on its
financial condition or results of operations;
(9) technological changes; (10) changes in consumer
spending and savings habits; (11) the effect of natural
disasters, such as hurricanes, in its geographic markets; and
(12) regulatory, legal or judicial proceedings.
If one or more of the factors affecting Superior Bancorps
or Community Bancshares forward-looking information and
statements proves incorrect, then its actual results,
performance or achievements could differ materially from those
expressed in, or implied by, forward-looking information and
statements contained in this joint proxy statement/prospectus.
Therefore, Superior Bancorp and Community Bancshares caution you
not to place undue reliance on any forward-looking information
and statements.
Superior Bancorp and Community Bancshares do not intend to
update any forward-looking information and statements, whether
written or oral, to reflect changes. All forward-looking
statements attributable to Superior Bancorp
and/or
Community Bancshares are expressly qualified by these cautionary
statements.
35
RISK
FACTORS
If the merger is consummated, Community Bancshares stockholders
will receive shares of Superior Bancorp common stock in exchange
for their shares of Community Bancshares common stock. You
should be aware of the risks and uncertainties associated with
an investment in Superior Bancorp common stock and should
carefully consider these risks.
Some of the risks and uncertainties involved in an investment in
Superior Bancorp common stock relate to economic conditions
generally and would affect other financial institutions in
similar ways. Some of these factors are identified under the
heading Forward-Looking Statements on
page .
Risks
Relating to the Merger
If the
merger is not completed, Superior Bancorp and Community
Bancshares will have incurred substantial expenses without
realizing the expected benefits.
Superior Bancorp and Community Bancshares have incurred
substantial expenses in connection with the merger. The
completion of the merger depends on the satisfaction of
specified conditions and the receipt of regulatory approvals. We
cannot guarantee that these conditions will be met. If the
merger is not completed, these expenses could have a material
adverse effect on the financial condition of Superior Bancorp
and/or
Community Bancshares because neither company would have realized
the expected benefits of the merger.
The
merger must be approved by the Office of Thrift
Supervision.
Before the merger may be completed, various orders, consents and
approvals must be obtained from the Office of Thrift Supervision
(OTS). The OTS may impose conditions on the
completion of the merger or require changes to the terms of the
merger. Although Superior Bancorp and Community Bancshares do
not currently expect that any such conditions or changes would
be imposed, there can be no assurance that they will not be, and
such conditions or changes could have the effect of delaying
completion of the merger or imposing additional costs on or
limiting the revenues of Superior Bancorp following the merger,
any of which might have a material adverse effect on Superior
Bancorp following the merger. Neither Superior Bancorp nor
Community Bancshares is obligated to complete the merger if the
regulatory approvals or other consents received in connection
with the completion of the merger include any conditions or
restrictions which would have a material adverse effect on
either party.
Superior
Bancorp may fail to realize all of the anticipated benefits of
the merger.
The success of the merger will depend, in part, on Superior
Bancorps ability to realize the anticipated benefits and
cost savings from combining the businesses of Superior Bancorp
and Community Bancshares. However, to realize these anticipated
benefits and cost savings, Superior Bancorp must successfully
combine the businesses of Superior Bancorp and Community
Bancshares. If Superior Bancorp is not able to achieve these
objectives, the anticipated benefits and cost savings of the
merger may not be realized fully or at all or may take longer to
realize than expected.
Superior Bancorp and Community Bancshares have operated, and
until the completion of the merger will continue to operate,
independently. It is possible that the integration process could
result in the loss of key employees, the disruption of each
companys ongoing businesses or inconsistencies in
standards, controls, procedures and policies that could
adversely affect Superior Bancorps ability to maintain its
relationships with the companies respective clients,
customers, depositors and employees or to achieve the
anticipated benefits of the merger. Integration efforts between
the two companies may, to some extent, also divert management
attention and resources, which could be further exacerbated by
efforts to integrate other merged companies. These integration
matters could have an adverse effect on Superior Bancorp during
such transition period.
The
consummation of the Community Bancshares merger is not
conditioned on the consummation of the Kensington Bancshares
merger.
The consummation of the Community Bancshares merger is not
conditioned on the consummation of Superior Bancorps
merger with Kensington Bankshares, which was announced
March 6, 2006, and is expected to close during the
36
third quarter of 2006. There can be no assurance, however, if or
when the merger of Kensington Bankshares with and into Superior
Bancorp will close or, if completed, whether the operations of
Kensington Bankshares will be successfully integrated.
Accordingly, Community Bancshares stockholders should not give
undue weight to the merger with Kensington Bancshares in
evaluating the Community Bancshares merger with Superior
Bancorp. Further, assuming that both mergers are consummated in
the timeframes currently contemplated, managements time
and resources will be focused on the integration of both
entities during the same general time period. This, in turn,
could divert time and resources from other matters, which could
have an adverse effect on Superior Bancorp during the transition
period. See Information about Superior Bancorp
General, beginning on page .
Community
Bancshares directors and executive officers have financial
interests in the merger that are different from, or in addition
to, the interests of Community Bancshares
stockholders.
Community Bancshares executive officers and directors, who
collectively hold approximately % of the outstanding
Community Bancshares stock, have agreed to vote in favor of the
merger agreement and the merger, subject to their fiduciary
duties. In considering these facts and the other information
contained in this document, you should be aware that Community
Bancshares directors and executive officers have financial
interests in the merger that are different from, or in addition
to, the interests of Community Bancshares stockholders. In
addition, these agreements may have the effect of discouraging
persons from making a proposal to acquire Community Bancshares.
Further, certain executive officers of Community Bancshares have
entered into discussions with Superior Bancorp regarding
consulting/employment relationships or agreements with Superior
Bancorp and two independent Community Bancshares directors, who
will be selected by Superior Bancorp, will be elected as
Superior Bancorp and Superior Bank directors at the first board
meeting after the effective time of the merger. These and
certain other additional interests of Community Bancshares
directors and executive officers are described in detail in
The Merger Interests of Directors, Officers
and Others in the Merger, beginning on
page of this joint proxy statement/prospectus.
These circumstances may cause some of Community Bancshares
directors and executive officers to view the proposed
transaction differently than you may view it.
Because the market price of Superior Bancorp common stock
will fluctuate, Community Bancshares stockholders cannot be sure
of the exact market value of Superior Bancorp common stock that
they will receive in the merger.
Under the terms of the merger agreement, each share of Community
Bancshares common stock you own will be converted into the right
to receive 0.8974 shares of Superior Bancorp common stock.
The market price of Superior Bancorp common stock may vary from
the price on the date the merger agreement was signed, the date
that this joint proxy statement/prospectus is mailed to
Community Bancshares stockholders, the date of the annual
meeting of Community Bancshares stockholders and the effective
time of the merger. See Market Price and Dividend
Information, beginning on page .
The market price of Superior Bancorp common stock may change as
a result of a variety of factors, including general market and
economic conditions, changes in Superior Bancorps
business, operations and prospects, and regulatory
considerations. Many of these factors are beyond the control of
Superior Bancorp and are not necessarily related to a change in
the financial performance or condition of Superior Bancorp. As a
result of the fixed exchange ratio, the market value of shares
of Superior Bancorp common stock that a Community Bancshares
stockholder receives in the merger will decline or increase
correspondingly with declines or increases in the market price
of Superior Bancorp common stock prior to and as of the date
shares are exchanged.
There can be no assurance that the value of Superior Bancorp
common stock that Community Bancshares stockholders receive in
the merger will be substantially equivalent to the market price
of Superior Bancorp common stock at the time Community
Bancshares stockholders vote to approve the merger agreement and
the merger. We urge you to obtain current market quotations for
Superior Bancorp common stock. Superior Bancorp common stock is
currently listed on the NASDAQ Global Market under the ticker
symbol SUPR. At the time of the annual meeting, you
will not know the exact value of the consideration you will
receive when the merger is completed.
37
The
exchange ratio will be reduced if Community Bancshares net
worth is less than $44,333,000 at the effective time of the
merger.
It is a condition to the merger that Community Bancshares have a
net worth, as defined in the merger agreement, of at least
$44,333,000 at the effective time of the merger. In the event
that there is a shortfall between $44,333,000 and the actual net
worth of Community Bancshares at the effective time of the
merger, then the exchange ratio will be reduced downward by a
reduction factor equal to the percentage obtained by dividing
the shortfall amount by $44,333,000.
The
value of the stock consideration Community Bancshares
stockholders will receive could be less than $9.94 per
share if the Community Bancshares board of directors does not
exercise its right to terminate the merger agreement upon the
occurrence of certain events.
If, on the date that all necessary consents and regulatory
approvals have been received (the determination date),
(1) the ten-day average closing price of Superior Bancorp
common stock immediately preceding the determination date is
less than $9.94 per share, and (2) the number obtained
by dividing the Superior Bancorp stock price on the
determination date by $11.70 is less than the Bank Index Ratio
minus 0.15, then a majority of the entire board of directors of
Community Bancshares may vote to terminate the merger agreement
at any time during the five-day period after all consents and
approvals have been received. The Bank Index Ratio is equal to
the quotient obtained by dividing (A) the average of the
NASDAQ Bank Index for ten consecutive trading days immediately
preceding the determination date by (B) 3193.47. If
Community Bancshares exercises its option to terminate the
merger agreement, Community Bancshares must give notice to
Superior Bancorp. Superior Bancorp will have the option of
paying additional consideration in the form of Superior Bancorp
common stock, cash or a combination of both so that the
aggregate consideration is valued at the lesser of (1) the
product of 0.85 and $11.70, multiplied by the exchange ratio,
and (2) the product of the Bank Index Ratio and $11.70,
multiplied by the exchange ratio.
No assurance can be given as to whether Community
Bancshares board of directors would exercise the right to
terminate the merger agreement if these conditions are met or
whether Superior Bancorp would agree to pay additional
consideration.
The merger agreement does not provide for a resolicitation of
Community Bancshares stockholders in the event that the
above conditions to Community Bancshares obligations to
close are not met, but the Community Bancshares board of
directors nevertheless chooses to complete the transaction. The
Community Bancshares board of directors has made no decision as
to whether it would exercise its right to terminate the merger
agreement. In considering whether to exercise its right to
terminate the merger agreement, Superior Bancorp expects that
the Community Bancshares board of directors would consider the
relevant facts and circumstances that exist at the time and
would consult with its financial advisor and legal counsel.
The
merger agreement limits Community Bancshares ability to
pursue alternative transactions to the merger and requires
Community Bancshares to pay a termination fee if it
does.
The merger agreement prohibits Community Bancshares and its
directors, officers, representatives and agents from soliciting,
authorizing the solicitation of or, subject to very narrow
exceptions, entering into discussions with any third party
regarding alternative acquisition proposals. The prohibition
limits Community Bancshares ability to pursue offers that
may be superior from a financial point of view from other
possible acquirers. If either Community Bancshares or Superior
Bancorp terminates the merger agreement as a result of certain
events and Community Bancshares enters into a definitive
acquisition agreement with a third party, Community Bancshares
would be required to pay a $4,000,000 termination fee to
Superior Bancorp. This fee makes it less likely that a third
party will make an alternative acquisition proposal.
Superior
Bancorp and Community Bancshares may choose not to proceed with
the merger if it is not completed by March 31, 2007, or if
all conditions to closing are not met or waived.
Either Superior Bancorp or Community Bancshares may terminate
the merger agreement if the merger has not been completed by
March 31, 2007. See The Merger The Merger
Agreement Termination Events, beginning on
page . There can be no assurance that all
conditions to the merger will have been satisfied by
38
March 31, 2007. See The Merger The Merger
Agreement Conditions to Completion of the
Merger, beginning on page .
After
the merger is completed, Community Bancshares stockholders who
receive Superior Bancorp common stock for some or all of their
shares of Community Bancshares common stock will become
stockholders of Superior Bancorp and will have different rights
as stockholders, which may be less advantageous than their
current rights.
Upon completion of the merger, Community Bancshares stockholders
who receive Superior Bancorp common stock for their shares of
Community Bancshares common stock will become stockholders of
Superior Bancorp. Community Bancshares and Superior Bancorp are
both corporations organized under, and subject to, the corporate
laws of the State of Delaware. Differences in Community
Bancshares amended and restated certificate of
incorporation and bylaws and Superior Bancorps restated
certificate of incorporation and bylaws will result in changes
to the rights of Community Bancshares stockholders who become
Superior Bancorp stockholders. For a description of these
changes, see Comparison of the Rights of Community
Bancshares Stockholders and Superior Bancorp Stockholders,
beginning on page of this joint proxy
statement/prospectus. A stockholder of Community Bancshares may
conclude that his or her current rights under Community
Bancshares amended and restated certificate of
incorporation and bylaws are more advantageous than the rights
such stockholder would have as a stockholder of Superior Bancorp
under Superior Bancorps restated certificate of
incorporation and bylaws.
Superior
Bank and Superior Bancorp are subject to different regulation
than Community Bank and Community Bancshares.
Superior Bank is a federal savings bank and Superior Bancorp is
a thrift holding company. Each is subject to supervision by the
OTS. Community Bank is an Alabama state-chartered bank and
Community Bancshares is a bank holding company under the Bank
Holding Company Act of 1956, as amended.
There are a number of material differences between federal
savings banks and thrift holding companies, on the one hand, and
Alabama state-chartered banks and bank holding companies, on the
other hand. Neither Superior Bancorp nor Community Bancshares
can give any assurance as to the effect that any of these
differences will have on the operations of the combined
organizations. Some of these differences include restrictions on
federal savings banks non real estate-related lending not
imposed on Alabama state-chartered banks; differences in
permitted non-banking-related activities; differences in
interstate branching rights; differences in the cost of
supervisory assessments imposed from time to time by the Office
of Thrift Supervision as compared to the Alabama State Banking
Department and the Federal Reserve; and differences in the
nature and extent of other supervisory and regulatory
requirements by the Office of Thrift Supervision as compared to
the Alabama State Banking Department and the Federal Reserve and
the interpretation thereof by such agencies.
Risks
Relating To Superior Bancorps Business
If the
interest payments Superior Bank makes on deposits increase
relative to interest income, Superior Bancorp may be less
profitable.
Superior Bancorps profitability depends to a large extent
on Superior Banks net interest income, which is the
difference between income from interest-earning assets, such as
loans made and investment securities held, and interest paid on
deposits and its borrowings. Superior Bancorps net
interest income is affected not only by actions it takes, but by
changes in general interest rate levels and by other economic
factors beyond Superior Bancorps control. Superior
Bancorps net interest income may be reduced if
(i) more interest-earning assets than interest-bearing
liabilities reprice or mature at a time when interest rates are
declining, or (ii) more interest-bearing liabilities than
interest-earning assets reprice or mature at a time when
interest rates are rising.
In addition, Superior Bancorp may be affected by changes in the
difference between short- and long-term interest rates. For
example, short-term deposits may be used to support longer-term
loans. If the difference between short- and long-term interest
rates becomes smaller, the spread between the rates Superior
Bancorp pays on deposits and borrowings and the rates Superior
Bancorp receives on loans could narrow significantly, decreasing
net interest income.
39
Further, if market interest rates rise rapidly, interest rate
adjustment caps may limit Superior Bancorps ability to
increase interest rates on adjustable-rate mortgage loans, but
Superior Bancorp may have to pay higher interest rates on
deposits and borrowings. This could cause Superior
Bancorps net interest income to decrease.
An
increase in loan prepayments may adversely affect Superior
Bancorps profitability.
The rate at which borrowers prepay loans is dependent on a
number of factors outside Superior Bancorps control,
including changes in market interest rates, conditions in the
housing and financial markets and general economic conditions.
Superior Bancorp cannot always accurately predict prepayment
rates. If the prepayment rates with respect to loans are greater
than Superior Bancorp anticipates, there may be a negative
impact on profitability because Superior Bancorp may not be able
to reinvest prepayment proceeds at rates comparable to those
received on the prepaid loans, particularly in a time of falling
interest rates.
If
Superior Bancorps allowance for loan losses is inadequate,
then Superior Bancorps profitability will be
reduced.
Superior Bancorp is exposed to the risk that its customers will
be unable to repay their loans in accordance with their terms
and that any collateral securing such loans will be insufficient
to ensure full repayment. Such credit risk is inherent in the
lending business, and failure to adequately assess such credit
risk could have a material adverse effect on Superior
Bancorps financial condition and results of operations.
Superior Bancorp evaluates the collectibility of its loan
portfolio and reviews its evaluation on a regular basis, and
Superior Bancorp provides an allowance for loan losses that
Superior Bancorp believes is adequate based on various factors
that Superior Bancorp believes may affect the credit quality of
loans. However, there can be no assurance that actual loan
losses will not exceed the allowance that has been established,
as such allowance is adjusted from time to time.
If the allowance for loan losses is inadequate for the actual
losses, there could be a material adverse effect on Superior
Bancorps results of operations. In addition, if as a
result of its perception of adverse trends, Superior Bancorp
materially increases the allowance for loan losses in the
future, its earnings would be reduced.
Events
in Superior Bancorp geographic markets could adversely affect
Superior Bancorp.
Superior Bancorps business is concentrated in a limited
number of markets in Alabama and Florida. Changes in general
economic conditions and in the values of real estate in such
geographic markets could have an adverse impact on Superior
Bancorps ability to achieve loan and deposit growth
targets and on its customers ability to repay existing
loans. In addition, natural disasters, such as hurricanes and
tornadoes, in these geographic markets could adversely affect
Superior Bancorps business.
Superior
Bancorp faces substantial competition.
There are numerous competitors in Superior Bancorps
geographic markets, including national, regional and local banks
and thrifts and other financial services businesses, some of
which have substantially greater resources, higher brand
visibility and a wider geographic presence than Superior Bancorp
has. Some of these competitors may offer a greater range of
services, more favorable pricing and greater customer
convenience than Superior Bancorp is able to provide. In
addition, in some markets, there are a significant number of new
banks and other financial institutions that have opened in the
recent past or are expected to open in the near future, and such
new competitors may also seek to exploit Superior Bancorps
markets and customer base. Further, there have been recent
consolidations or announcements of proposed consolidations of
larger banking institutions in Superior Banks market
areas, and such consolidations may have an impact on Superior
Banks market areas. If Superior Bancorp is unable to
maintain and grow its market share in the face of such
competition, its results of operations will be adversely
affected.
Superior
Bancorp and Superior Bank are subject to extensive
regulation.
Superior Bancorps and Superior Banks operations are
subject to regulation by the OTS. Regulation by the OTS is
intended primarily for the protection of depositors and the
deposit insurance fund and not for the benefit of
40
stockholders. Superior Bancorp may incur substantial costs in
complying with such regulations, and failure to comply with them
may expose Superior Bancorp to substantial penalties.
In addition, Superior Bancorp and its subsidiaries are subject
to numerous consumer protection laws and other laws relating to
the operation of financial institutions. Failure to comply with
such laws could expose Superior Bancorp to liability, which
could have a material adverse effect on its results of
operations.
Superior
Bancorp may require additional capital to fund its growth
plans.
Superior Bancorps business strategy includes the expansion
of its business through the development of new locations and
through the acquisition of other financial institutions and, to
the extent permitted by applicable law, complementary businesses
as appropriate opportunities arise. In order to finance such
growth and to maintain required regulatory capital levels,
Superior Bancorp may require additional capital in the future.
There can be no assurance that such capital will be available
upon favorable terms, or at all.
Superior
Bancorp is dependent upon the services of its management
team.
Superior Bancorps operations and strategy are directed by
its senior management team, most of whom have joined Superior
Bancorp since January 2005. Any loss of the services of members
of this management team could have a material adverse effect on
Superior Bancorps results of operations and the ability to
implement Superior Bancorps business strategy.
Risks
Related To an Investment in Superior Bancorp Common
Stock
Superior
Bancorps stock price may be volatile due to limited
trading volume.
Superior Bancorp common stock is traded on the NASDAQ Global
Market. However, the average daily trading volume in Superior
Bancorp common stock is relatively small, typically under
50,000 shares per day and sometimes significantly less than
that. As a result, trades involving a relatively small number of
shares may have a significant effect on the market price of
Superior Bancorp common stock, and it may be difficult for
investors to acquire or dispose of large blocks of stock without
significantly affecting the market price.
Superior
Bancorps ability to pay dividends is
limited.
Superior Bancorps ability to pay dividends is limited by
regulatory requirements and the need to maintain sufficient
consolidated capital to meet the capital needs of its business,
including capital needs related to future growth. Superior
Bancorps primary source of income is the payment of
dividends from Superior Bank to Superior Bancorp. Superior Bank,
in turn, is likewise subject to regulatory requirements
potentially limiting its ability to pay such dividends to
Superior Bancorp and by the need to maintain sufficient capital
for its operations and obligations. Further, Superior Bancorp is
obligated, subject to regulatory limitations, to make periodic
distributions on its trust preferred securities, which reduces
the income that might otherwise be available to pay dividends on
Superior Bancorp common stock. Thus, there can be no assurance
that Superior Bancorp will pay dividends to its common
stockholders, no assurance as to the amount or timing of any
such dividends, and no assurance that such dividends, if and
when paid, will be maintained, at the same level or at all, in
future periods.
The
market price of Superior Bancorp common stock increased
significantly upon a management change in January 2005 in a
relatively short period of time.
The market price of Superior Bancorp common stock, as reported
on the NASDAQ Global Market, increased significantly by
approximately 32% between December 31, 2004 and
December 31, 2005 following the change in Superior
Bancorps management in January 2005. Superior Bancorp
common stock has not had similar increases since then. Superior
Bancorp believes that this increase resulted in part from
investors perception as to the ability of its new senior
management team to execute its business strategy and enhance
stockholder value. There can be no assurance that the market
price of Superior Bancorp common stock will increase at a
similar pace in the future or will even remain at or near its
current level, which is substantially above historic trading
prices prior to 2005.
41
The
issuance of Superior Bancorp common stock in future acquisitions
or capital raising transactions may be dilutive to existing
stockholders.
If Superior Bancorp determines that appropriate strategic
opportunities exist, Superior Bancorp may acquire other
financial institutions and related businesses, subject to
applicable regulatory requirements. Superior Bancorp may use its
common stock for such acquisitions. From time to time, Superior
Bancorp may also seek to raise capital through selling
additional common stock. It is possible that the issuance of
additional common stock in such acquisition or capital
transactions may be dilutive to the interests of existing
stockholders.
THE
SUPERIOR BANCORP SPECIAL MEETING
This joint proxy statement/prospectus is being furnished to the
Superior Bancorp stockholders in connection with the
solicitation of proxies by the Superior Bancorp board of
directors for use at the Superior Bancorp special meeting to
consider and vote upon the approval of the merger agreement and
the merger. Each copy of this joint proxy statement/prospectus
mailed or delivered to Superior Bancorp stockholders is
accompanied by a proxy card for use at the special meeting.
Date, Place and Time. The Superior Bancorp
special meeting is to be held at the principal executive offices
of Superior Bancorp located
at ,
Birmingham,
Alabama ,
on ,
2006, at .m.
Record Date, Quorum and Voting. The Superior
Bancorp board of directors has fixed the close of business
on ,
2006, as the record date for the determination of Superior
Bancorp stockholders entitled to receive notice of and to vote
at the Superior Bancorp special meeting. The presence, in person
or by proxy, of the holders of a majority of the shares of the
Superior Bancorp common stock entitled to vote at the Superior
Bancorp special meeting will constitute a quorum. Each
stockholder of record as of the record date is entitled to one
vote for each share of Superior Bancorp common stock then held.
Vote Required. As
of ,
2006, the Superior Bancorp record date, there
were shares
of Superior Bancorp common stock outstanding. Approval and
adoption of the merger agreement requires the affirmative vote
of a majority of all outstanding shares of Superior Bancorp
common stock entitled to vote thereon; as a result, failures to
vote, broker non-votes and abstentions will be the equivalents
of votes against the merger agreement. Accordingly, approval of
the merger agreement and the merger at the Superior Bancorp
special meeting will require the affirmative vote of the holders
of at
least shares
of Superior Bancorp common stock.
As of the Superior Bancorp record date, directors and executive
officers of Superior Bancorp beneficially owned an aggregate
of shares,
or approximately % of Superior
Bancorp common stock outstanding on such date. The Superior
Bancorp board of directors has unanimously approved the merger
agreement, and all directors and executive officers are expected
to vote in favor of the merger agreement. See The
Merger The Merger Agreement Conditions
to the Completion of the Merger beginning on
page .
Voting and Revocation of Proxies. Shares of
Superior Bancorp common stock represented by a proxy properly
signed and received at or prior to the Superior Bancorp special
meeting, unless subsequently revoked, will be voted in
accordance with the instructions thereon. The proposal to adopt
the merger agreement is a non-discretionary item, meaning that
brokerage firms may not vote shares in their discretion on
behalf of a client if the client has not furnished voting
instructions. Because the merger must be approved by the holders
of a majority of the outstanding shares of the common stock of
both Superior Bancorp and Community Bancshares, abstentions and
broker non-votes will have the same effect as a vote against the
merger. You are urged to complete, sign and date the
accompanying proxy and return it promptly in the enclosed
postage-prepaid envelope.
If a proxy is properly executed and returned without
indicating any voting instructions, shares of Superior Bancorp
common stock represented by the proxy will be voted
FOR approval and adoption of the merger
agreement and the merger.
Any proxy given pursuant to the solicitation may be revoked by
the person giving the proxy at any time before the proxy is
voted by filing an instrument revoking it or by delivering a
duly executed proxy bearing a later date to Superior Bancorp
before or at the special meeting, or by voting in person at the
special meeting. Attendance at the
42
special meeting will not in and of itself constitute a
revocation of a proxy. Only votes cast
FOR approval and adoption of the
merger agreement and the merger or other matters constitute
affirmative votes.
Solicitation of Proxies. In addition to
solicitation by mail, directors, officers and employees of
Superior Bancorp, who will not be specifically compensated for
such services, may solicit proxies from the stockholders of
Superior Bancorp personally or by telephone or other forms of
communication. Superior Bancorp has also engaged Georgeson
Shareholder Communications, Inc. to aid in the solicitation of
proxies, for which Superior Bancorp will pay a fee that will not
exceed $7,500 plus reimbursement of expenses. Superior Bancorp
expects to reimburse brokers, banks, custodians and other
nominees for their reasonable expenses in handling proxy
materials for beneficial owners. Except as otherwise provided in
the merger agreement, Superior Bancorp will bear its own
expenses in connection with the solicitation of proxies for
Superior Bancorp special meeting. See The
Merger The Merger Agreement Expenses and
Fees, on page .
Recommendation of the Superior Bancorp Board of
Directors. The Superior Bancorp board of
directors has unanimously adopted the merger agreement and
believes that the proposed transaction is fair and in the best
interests of Superior Bancorp and its stockholders. The Superior
Bancorp board of directors recommends that its stockholders vote
FOR approval and adoption of the merger
agreement and the merger.
THE
COMMUNITY BANCSHARES ANNUAL MEETING
This joint proxy statement/prospectus is being furnished to
Community Bancshares stockholders in connection with the
solicitation of proxies by the Community Bancshares board of
directors for use at the Community Bancshares annual meeting.
Each copy of this joint proxy statement/prospectus mailed or
delivered to Community Bancshares stockholders is accompanied by
a proxy card for use at the annual meeting. This joint proxy
statement/prospectus is also furnished to Community Bancshares
stockholders as a prospectus in connection with the issuance of
shares of Superior Bancorp common stock upon consummation of the
merger.
Date, Place and Time. The Community Bancshares
annual meeting is to be held at the principal executive offices
of Community Bancshares located
at ,
Blountsville,
Alabama ,
on ,
2006, at a.m.
Record Date, Quorum and Voting. The board of
directors of Community Bancshares has fixed the close of
business on August 15, 2006, as the record date for the
determination of the Community Bancshares stockholders entitled
to receive notice of and to vote at the Community Bancshares
annual meeting. The presence, in person or by proxy, of the
holders of a majority of the shares of Community Bancshares
common stock entitled to vote at the Community Bancshares annual
meeting will constitute a quorum. Each stockholder of record as
of the record date is entitled to one vote for each share then
held.
Vote Required. As of August 15, 2006, the
Community Bancshares record date, there
were shares
of Community Bancshares common stock outstanding. Approval and
adoption of the merger agreement requires the affirmative vote
of a majority of all outstanding shares of Community Bancshares
common stock entitled to vote thereon; as a result, failures to
vote, broker non-votes and abstentions will be the equivalents
of votes against the merger agreement and the merger.
Accordingly, approval of the merger agreement at the Community
Bancshares annual meeting will require the affirmative vote of
the holders of at
least shares
of Community Bancshares common stock.
Each director nominee standing for election must be elected by a
plurality of the votes cast at the annual meeting at which a
quorum is present. This means that the three director nominees
receiving the most votes will be elected. Shares not voted, and
properly voted proxies to withhold authority, will
result in a nominees receiving fewer votes, but will not
be treated as votes against a nominee.
As of the Community Bancshares record date, directors and
executive officers of Community Bancshares beneficially owned an
aggregate
of shares,
or approximately % of the Community
Bancshares common stock, outstanding on such date. The
non-officer directors of Community Bancshares have agreed to
vote the shares of Community Bancshares common stock
beneficially owned by them in favor of the merger agreement and
the merger. See The Merger The Merger
Agreement Support Agreements, beginning on
page .
43
Voting and Revocation of Proxies. Shares of
Community Bancshares common stock represented by a proxy
properly signed and received at or prior to the Community
Bancshares annual meeting, unless subsequently revoked, will be
voted in accordance with the instructions thereon. The proposal
to adopt the merger agreement is a non-discretionary item,
meaning that brokerage firms may not vote shares in their
discretion on behalf of a client if the client has not furnished
voting instructions. Because the merger must be approved by the
holders of a majority of the outstanding shares of the common
stock of both Superior Bancorp and Community Bancshares,
abstentions and broker non-votes will have the same effect as a
vote against the merger.
You are urged to complete, sign and date the accompanying proxy
and return it promptly in the enclosed postage-prepaid envelope.
If a proxy is properly executed and returned without
indicating any voting instructions, shares of Community
Bancshares common stock represented by the proxy will be voted
FOR approval and adoption of the merger agreement
and the merger and FOR the election of the
nominees to the board of directors.
Any proxy given pursuant to the solicitation may be revoked by
the person giving the proxy at any time before the proxy is
voted by filing an instrument revoking it or by delivering a
duly executed proxy bearing a later date to Community Bancshares
before or at the special meeting, or by voting in person at the
special meeting. Attendance at the Community Bancshares special
meeting will not in and of itself constitute a revocation of a
proxy. Only votes cast FOR approval of
the merger agreement and the merger or other matters constitute
affirmative votes.
Solicitation of Proxies. Community Bancshares
has engaged Georgeson Shareholder Communications, Inc. to aid in
the solicitation of proxies for a fee of $6,500 plus the
reimbursement of any
out-of-pocket
expenses. In addition, directors, officers and employees of
Community Bancshares, who will not be specifically compensated
for such services, may solicit proxies from the stockholders of
Community Bancshares personally or by telephone or other forms
of communication. Except as otherwise provided in the Plan of
Merger, Community Bancshares will bear its own expenses in
connection with the solicitation of proxies for the Community
Bancshares annual meeting. See The Merger
Expenses and Fees, on page .
Recommendation of Community Bancshares Board of
Directors. Community Bancshares board of
directors has unanimously adopted the merger agreement and
believes that the proposed transaction is desirable and in the
best interests of Community Bancshares and its stockholders.
Community Bancshares board of directors recommends that
its stockholders vote FOR approval and
adoption of the merger agreement and the merger. Community
Bancshares board of directors also recommends that its
stockholders vote FOR the election of
the nominees listed in this joint proxy statement/prospectus as
directors of Community Bancshares.
Community Bancshares stockholders should not send stock
certificates with their proxy cards. The procedure for the
exchange of shares after the merger is consummated is described
at pages in this joint proxy
statement/prospectus. See The Merger Exchange
of Certificates, beginning on page .
THE
MERGER
We describe and summarize below the principal provisions
of the proposed merger between Superior Bancorp and Community
Bancshares, Inc. This description is not complete and is subject
to, and qualified in its entirety by reference to, the Agreement
and Plan of Merger, the full text of which is attached to this
joint proxy statement prospectus as Annex A. We urge you to
read the Agreement and Plan of Merger carefully and in its
entirety.
Background
of the Merger
During the last several years, there have been significant
developments in the banking and financial services industry.
These developments have included the increased emphasis and
dependence on automation, specialization of products and
services, increased competition from other financial
institutions, a trend toward consolidation and geographic
expansion and changes in regulatory requirements, including the
increased costs of being a public company following the
Sarbanes-Oxley Act of 2002.
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The board of directors and management of Community Bancshares
have periodically reviewed and updated strategic plans for
Community Bancshares, in light of these changes, its markets and
market positions. Community Bancshares has historically received
inquiries regarding its willingness to consider an acquisition
by, or affiliation with, larger financial institutions.
Consistent with its fiduciary obligations to its stockholders,
Community Bancshares has considered such inquiries and evaluated
them with respect to the level and form of consideration
proposed, and the seriousness and specificity that has been
conveyed to Community Bancshares in terms of consideration, as
well as the current and expected future operations of Community
Bancshares, and other considerations and factors deemed relevant
by Community Bancshares, in seeking to provide value to its
stockholders. As the nature of banking has become increasingly
competitive, larger organizations have demonstrated a
willingness to pay a premium for franchises in certain markets.
In considering the market conditions at the end of 2005 and
Community Bancshares situation, including demands by a few
institutional stockholders for the sale of Community Bancshares,
Community Bancshares felt it was necessary to consult with
investment banking firms experienced in the area of financial
institution mergers and acquisitions to evaluate the prospects
of a potential transaction that would both maximize stockholder
value and continue to provide its customers with quality
products and services.
Based upon deliberations by the board of directors of Community
Bancshares in January 2006 regarding the cost of providing the
increasingly broad array of financial products and alternative
delivery channels to remain competitive in the marketplace,
complying with increasingly complex regulations, including the
internal audit controls measures mandated by Section 404 of
the Sarbanes-Oxley Act of 2002, and continuing to deliver
exceptional service to its customers, while still endeavoring to
provide value to its stockholders and the costs and distractions
of a proxy contest by a New York-based hedge fund, the board of
directors of Community Bancshares retained FIG Partners LLC
(FIG) on January 11, 2006, to assist and advise
Community Bancshares in exploring its strategic options, one of
which was a merger with a larger financial institution.
On January 20, 2006, C. Stanley Bailey, Chief Executive
Officer of Superior Bancorp, discussed with Patrick M. Frawley,
Chairman, Chief Executive Officer and President of Community
Bancshares, the possibility of combining their respective
companies. Mr. Bailey and Mr. Frawley agreed to
continue the discussions in the future. On January 31,
2006, Superior Bancorp engaged Sandler ONeill &
Partners, L.P. (Sandler ONeill) to assist and
advise Superior Bancorp in merger discussions with Community
Bancshares.
FIG began its own due diligence on Community Bancshares to help
the board evaluate strategic alternatives that were in the best
interest of Community Bancshares and its stockholders. As part
of this process, beginning in late January and throughout
February, FIG contacted numerous financial institutions
regarding a possible acquisition of Community Bancshares. One of
the institutions contacted by FIG was Superior Bancorp. As a
result of these conversations, a confidentiality agreement was
signed on February 6, 2006, by Superior Bancorp and
Community Bancshares. On February 6, 2006, representatives
of Community Bancshares and FIG met with representatives from
Superior Bancorp, including its financial advisors. At this
meeting, Superior Bancorp and Community Bancshares exchanged
information and discussed the potential benefits of a business
combination between Community Bancshares and Superior Bancorp.
Superior Bancorp provided FIG a list of information it would
need in order to prepare a non-binding letter of intent. This
information was provided to Superior Bancorp on
February 13, 2006.
On February 14, 2006, Superior Bancorp engaged Burke
Capital Group, L.L.C. (Burke Capital) as an
additional financial advisor in connection with merger
discussions with Community Bancshares and to analyze the
proposed transaction and to issue a fairness opinion with
respect to a merger between Superior Bancorp and Community
Bancshares.
On February 23, 2006, Mr. Bailey met with
Mr. Frawley to discuss the complementary strengths and
challenges of the companies and to discuss possible structures
of a merger and potential market valuations.
Concurrently with the conversations with Superior Bancorp, FIG
continued to solicit interest in Community Bancshares from
additional financial institutions. Of the numerous parties
contacted, two others, in addition to Superior Bancorp,
expressed interest in pursuing a transaction with Community
Bancshares; however, both of these parties ultimately decided
not to pursue a transaction and did not conduct due diligence.
45
On March 10, 2006, Superior Bancorp provided Community
Bancshares with a non-binding letter of intent, which became the
basis for future discussions and negotiation of the merger
agreement, and met with representatives of FIG to discuss the
merger. The parties continued to discuss the terms of the merger
over the ensuing days. On March 21, 2006, Community
Bancsharess board of directors met to discuss the terms
proposed by Superior Bancorp and the issues involved in a
possible transaction and to allow representatives from Superior
Bancorp to make an informal presentation regarding their
company, its philosophy and the proposed transaction. At this
meeting, the Community Bancshares board of directors indicated
various changes that they desired to the Superior Bancorp
proposal and instructed management and FIG to continue
discussions with Superior Bancorp to resolve any outstanding
items regarding the transaction as reported to them on that day.
While these conversations continued, representatives of Superior
Bancorp began, on April 10, 2006, conducting
on-site due
diligence of Community Bancshares. On April 18, 2006,
representatives of Community Bancshares began
on-site due
diligence of Superior Bancorp. On April 27, 2006, both
companies completed their due diligence and continued to
negotiate and finalize the terms and conditions of the merger
agreement.
On April 20, 2006, the board of directors of Superior
Bancorp reviewed the status of the discussions with Community
Bancshares, including the due diligence results to date and the
preliminary fairness opinions delivered by Sandler ONeill
and Burke Capital, at its board meeting. The board of directors
of Superior Bancorp approved management to continue negotiations
and to report on a final merger agreement and agreed to
reconvene the meeting at a later date to consider
managements final recommendation with respect to the
proposed merger.
The board of directors of Community Bancshares met again on
April 25, 2006 to review the merger agreement with its
outside counsel and FIGs representatives. The board of
Community Bancshares identified certain items that needed
further discussions and additional negotiations.
On April 28, 2006, the board of directors of Superior
Bancorp reconvened its board meeting by telephone conference
call to further review the due diligence results, to receive the
reconfirmation of the fairness opinions of Sandler ONeil
and Burke Capital and to review the final proposed terms and
conditions of the merger agreement with Community Bancshares.
Sandler ONeill and Burke Capital reaffirmed their fairness
opinions. The board of directors of Superior Bancorp approved
the merger and authorized the execution of the merger agreement.
On April 29, 2006, the board of directors of Community
Bancshares held a meeting to receive presentations from counsel
regarding the merger agreement and FIGs presentation
regarding the fairness of the merger consideration to the
stockholders of Community Bancshares. After due deliberation and
further negotiation, the merger agreement was approved.
Mr. Bailey and Mr. Frawley executed the merger
agreement on behalf of their respective companies on
April 29, 2006. Finally, before the market opened on
May 1, 2006, Superior Bancorp and Community Bancshares
issued a joint press release announcing the merger.
Superior
Bancorps Reasons for the Merger
On April 28, 2006, the board of directors of Superior
Bancorp unanimously approved and adopted the merger agreement.
The board of directors of Superior Bancorp believes that the
merger and the terms and provisions of the merger agreement are
in the best interests of Superior Bancorp.
In approving the merger, the board of directors of Superior
Bancorp considered a number of factors as generally supporting
its decision to enter into the merger agreement. The following
factors considered by the board of directors of Superior Bancorp
in evaluating the merger agreement are not intended to be
exhaustive, but include the material factors considered by the
board. Without assigning any relative or specific weights to the
factors, the board of directors of Superior Bancorp considered
the following material factors:
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the opportunity to consolidate Superior Bancorps Alabama
market presence and to rationalize its current branch system;
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the addition of branches in the Huntsville market without the
expense and time needed for establishing de novo branches in the
Huntsville market;
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the numerous customer relationships Community Bank has in the
North Alabama market;
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the expected impact on future earnings of the combined companies;
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the expected impact on stockholder value of the combined
companies;
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the financial terms of recent business combinations in the
financial services industry and a comparison of the multiples of
selected combinations with the terms of the proposed transaction
with Community Bancshares;
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the opinions of Sandler ONeill and Burke Capital that the
consideration to be received by Community Bancshares
stockholders pursuant to the merger agreement is fair from a
financial point of view to Superior Bancorp; and
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the likelihood of the merger being approved by applicable
regulatory authorities without undue condition or delay.
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The foregoing discussion of the information and factors
considered by the Superior Bancorp board is not intended to be
exhaustive, but includes the material factors considered. In
view of the variety of factors considered in connection with its
evaluation of the merger and the offer price, the board of
directors did not find it practicable to, and did not, quantify
or otherwise assign relative weights to the specific factors
considered in reaching its determinations and recommendations,
and individual directors may have given differing weights to
different factors.
The terms of the merger were the result of arms-length
negotiations between representatives of Superior Bancorp and
representatives of Community Bancshares. Based upon the
consideration of the foregoing factors, the board of directors
of Superior Bancorp unanimously approved the merger as being in
the best interest of Superior Bancorp, its stockholders and its
other constituencies.
Community
Bancshares Reasons for the Merger
On April 29, 2006, the board of directors of Community
Bancshares unanimously approved and adopted the merger
agreement. The board of directors of Community Bancshares
believes that the merger and the terms and provisions of the
merger agreement are in the best interests of Community
Bancshares stockholders.
In reaching its decision to approve and adopt the merger
agreement, the board of directors of Community Bancshares
considered a number of factors as generally supporting its
decision including the following:
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the financial terms of the merger, including the relationship of
the merger consideration to be received by the stockholders of
Community Bancshares to the earnings per share, assets,
deposits, and the tangible and total book values of Community
Bancshares common stock, and to the contribution analyses of the
respective institutions in the merger compared to their
percentage ownership, in total assets, net loans, total deposits
and total equity in the combined company;
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the estimated discounted cash flow values of Community
Bancshares common stock;
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comparable transactions;
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the fact that stockholders of Community Bancshares will receive
the merger consideration in shares of Superior Bancorp common
stock, which is publicly traded with greater average daily
volume than Community Bancshares common stock;
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the potentially significant costs of protecting the
stockholders interests generally against the proxy contest
initiated by a New York based hedge fund;
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the opinion rendered by FIG that from a financial standpoint the
exchange of Community Bancshares common stock for Superior
Bancorp common stock on the terms and conditions set forth in
the merger agreement is fair to the stockholders of Community
Bancshares from a financial point of view;
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the likelihood that the growth of Community Bancshares without
the affiliation with a larger holding company would be limited
because of Community Bancshares need for increased
capital, personnel and other resources to support growth, the
costs of rationalizing its branches, including the likelihood of
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recouping substantial existing investments in slow-growing
markets located long distances from Community Bancshares
principal operations and the costs of complying with
Section 404 of the Sarbanes-Oxley Act of 2002;
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the treatment of the merger as a tax-free exchange for federal
income tax purposes with respect to the Community Bancshares
common stock exchanged for Superior Bancorp common stock;
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trends in the markets for financial services and increased
competition;
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the likelihood that affiliation with a larger holding company
would provide the opportunity to realize economies of scale,
increase efficiencies of operations, and enhance the development
of new products and services to better serve Community
Bancshares customers;
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the potential benefits and opportunities for employees of
Community Bancshares, as a result of both employment
opportunities and benefit plans in a larger
organization; and
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the likelihood of the mergers being approved by applicable
regulatory authorities without adverse conditions or delay.
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The foregoing discussion of the information and factors
considered by the Community Bancshares board is not intended to
be exhaustive, but includes the material factors considered. In
view of the variety of factors considered in connection with its
evaluation of the merger and the offer price, the board of
directors did not find it practicable to, and did not, quantify
or otherwise assign relative weights to the specific factors
considered in reaching its determinations and recommendations,
and individual directors may have given differing weights to
different factors.
Each member of the Community Bancshares board of directors has
agreed, subject to his or her fiduciary duties, to vote his
shares of common stock in favor of the merger.
The terms of the merger were the result of arms-length
negotiations between representatives of Community Bancshares and
representatives of Superior Bancorp. Based upon the
consideration of the foregoing factors, the board of directors
of Community Bancshares unanimously approved the merger as being
in the best interest of Community Bancshares, its stockholders
and its other constituencies.
Recommendation
of Superior Bancorps Board of Directors
Superior Bancorps board of directors has unanimously
approved the merger agreement and the merger and believes that
the proposed merger is in the best interest of Superior Bancorp
and its stockholders. Accordingly, Superior Bancorps
board of directors unanimously recommends that its stockholders
vote FOR approval of the merger agreement and the
merger.
Recommendation
of Community Bancshares Board of Directors
Community Bancshares board of directors has unanimously
approved the merger agreement and the merger and believes that
the proposed merger is in the best interest of Community
Bancshares and its stockholders. Accordingly, Community
Bancshares board of directors unanimously recommends that
its stockholders vote FOR approval of the merger
agreement and the merger.
Opinion
of Sandler ONeill
By letter dated January 31, 2006, Superior Bancorp retained
Sandler ONeill to act as its financial advisor in
connection with a possible business combination with Community
Bancshares. Sandler ONeill is a nationally recognized
investment banking firm whose principal business specialty is
financial institutions. In the ordinary course of its investment
banking business, Sandler ONeill is regularly engaged in
the valuation of financial institutions and their securities in
connection with mergers and acquisitions and other corporate
transactions.
Sandler ONeill acted as financial advisor to Superior
Bancorp in connection with the proposed transaction and
participated in certain of the negotiations leading to the
execution of a definitive merger agreement on April 29,
2006. At the April 28, 2006 meeting at which Superior
Bancorps board of directors considered and approved the
48
merger agreement, and authorized Superior Bancorps
officers to resolve the remaining outstanding issues, Sandler
ONeill delivered to the board its oral opinion, that, as
of such date, the merger consideration was fair to Superior
Bancorp from a financial point of view. The full text of
Sandler ONeills opinion is attached as Annex B
to this joint proxy statement/prospectus. The opinion outlines
the procedures followed, assumptions made, matters considered
and qualifications and limitations on the review undertaken by
Sandler ONeill in rendering its opinion. The description
of the opinion set forth below is qualified in its entirety by
reference to the opinion. Sandler ONeill urges Superior
Bancorps stockholders to read the entire opinion carefully
in connection with their consideration of the proposed
merger.
Sandler ONeills opinion speaks only as of the
date of the opinion. The opinion was directed to the Superior
Bancorp board and is directed only to the fairness of the merger
consideration to Superior Bancorp from a financial point of
view. It does not address the underlying business decision of
Superior Bancorp to engage in the merger or any other aspect of
the merger and is not a recommendation to any Superior Bancorp
stockholder as to how such stockholder should vote at the
special meeting with respect to the merger or any other
matter.
In connection with rendering its April 29, 2006 opinion,
Sandler ONeill reviewed and considered, among other things:
(1) the merger agreement;
(2) certain publicly available financial statements and
other historical financial information of Superior Bancorp that
Sandler ONeill deemed relevant;
(3) certain available financial statements and other
historical financial information of Community Bancshares that
Sandler ONeill deemed relevant;
(4) earnings per share estimates for Superior Bancorp for
the years ending December 31, 2006 and 2007 as provided by,
and reviewed with, senior management of Superior Bancorp;
(5) earnings per share estimates for Community Bancshares
for the years ending December 31, 2006 and 2007 provided by
and reviewed with senior management of Community Bancshares;
(6) the pro forma financial impact of the merger on
Superior Bancorp, based on assumptions relating to transaction
expenses, purchase accounting adjustments and cost savings
determined by the senior management of Superior Bancorp;
(7) the publicly reported historical price and trading
activity for Superior Bancorps and Community
Bancshares common stock, including a comparison of certain
financial and stock market information for Superior Bancorp and
Community Bancshares and similar publicly available information
for certain other companies the securities of which are publicly
traded;
(8) the financial terms of certain recent business
combinations in the commercial banking industry, to the extent
publicly available;
(9) the current market environment generally and the
banking environment in particular; and
(10) such other information, financial studies, analyses
and investigations and financial, economic and market criteria
as Sandler ONeill considered relevant.
Sandler ONeill also discussed with certain members of
senior management of Superior Bancorp, the business, financial
condition, results of operations and prospects of Superior
Bancorp and held similar discussions with certain members of
senior management of Community Bancshares regarding the
business, financial condition, results of operations and
prospects of Community Bancshares.
In performing its reviews and analyses and in rendering its
opinion, Sandler ONeill assumed and relied upon the
accuracy and completeness of all the financial and other
information that was available to them from public sources, that
was provided to Sandler ONeill by Superior Bancorp or
Community Bancshares or their respective representatives or that
was otherwise reviewed by Sandler ONeill and have assumed
such accuracy and completeness for purposes of rendering this
opinion. Sandler ONeill has not been asked to undertake,
and has not
49
undertaken, an independent verification of any of such
information and Sandler ONeill does not assume any
responsibility or liability for the accuracy or completeness
thereof. Sandler ONeill did not make an independent
evaluation or appraisal of the specific assets, the collateral
securing the assets or the liabilities (contingent or otherwise)
of Superior Bancorp or Community Bancshares or any of their
subsidiaries, or the collectibility of any such assets, nor has
Sandler ONeill been furnished with any such evaluations or
appraisals. Sandler ONeill did not make an independent
evaluation of the adequacy of the allowance for loan losses of
Superior Bancorp or Community Bancshares nor has Sandler
ONeill reviewed any individual credit files relating to
Superior Bancorp or Community Bancshares. Sandler ONeill
assumed, with Superior Bancorps consent, that the
respective allowances for loan losses for both Superior Bancorp
and Community Bancshares were adequate to cover such losses.
The internal budgets and estimates for growth used and relied
upon by Sandler ONeill in its analyses for Superior
Bancorp were provided by Superior Bancorp senior management who
confirmed to Sandler ONeill that those budgets and
estimates reflected the best currently available estimates and
judgments of the future financial performance of Superior
Bancorp. With respect to the internal budgets and growth
estimates for Community Bancshares, with Superior Bancorps
consent, Sandler ONeill used and relied on the budgets
provided by the senior management of Community Bancshares to
Superior Bancorp, as adjusted by and discussed with Superior
Bancorps senior management and those budgets and estimates
reflected best currently available estimates and judgments of
the future financial performance of Community Bancshares by
Superior Bancorps senior management. All projections of
transaction costs, purchase accounting adjustments and expected
cost savings related to the merger were provided by or reviewed
with senior management of Superior Bancorp who confirmed to
Sandler ONeill that those projections reflected to best
currently available estimates and judgments of management.
Sandler ONeill assumed that the financial performances
reflected in all budgets, estimates and projections used by
Sandler ONeill in its analyses would be achieved. Sandler
ONeill expressed no opinion as to such budgets, estimates
or projections or the assumptions on which they were based.
Sandler ONeill also assumed that there has been no
material change in the assets, financial condition, results of
operations, business or prospects of Superior Bancorp or
Community Bancshares since the date of the last financial
statements made available to them and that Superior Bancorp and
Community Bancshares will remain as going concerns for all
periods relevant to the analyses.
With respect to the merger agreement, Sandler ONeill
assumed that all of the representations and warranties contained
in the merger agreement and all related agreements are true and
correct, that each party to such agreement will perform all of
the covenants required to be performed by such party under the
agreements, that the conditions precedent in the merger
agreement are not waived and that the merger will be a tax-free
reorganization for federal income tax purposes. Finally, with
Superior Bancorps consent, Sandler ONeill relied
upon the advice received from Superior Bancorps legal,
accounting and tax advisors as to all legal, accounting and tax
matters relating to the merger agreement and the other
transactions contemplated by the merger agreement.
Sandler ONeills opinion was necessarily based upon
market, economic and other conditions as they existed on, and
could be evaluated as of, the date of its opinion. Events
occurring after the date hereof could materially affect this
opinion. Sandler ONeill has not undertaken to update,
revise, reaffirm or withdraw its opinion or otherwise comment
upon events occurring after the date of this joint proxy
statement/prospectus. Sandler ONeill expressed no opinion
as to what the value of Superior Bancorps common stock
will be when issued to Community Bancshares stockholders
pursuant to the merger agreement or the prices at which the
common stock of Superior Bancorp may trade at any time.
In rendering its April 29, 2006 opinion, Sandler
ONeill performed a variety of financial analyses. The
following is a summary of the material analyses performed by
Sandler ONeill, but is not a complete description of all
the analyses underlying Sandler ONeills opinion. The
summary includes information presented in tabular format. In
order to fully understand the financial analyses, these tables
must be read together with the accompanying text. The tables
alone do not constitute a complete description of the financial
analyses. The preparation of a fairness opinion is a complex
process involving subjective judgments as to the most
appropriate and relevant methods of financial analysis and the
application of those methods to the particular circumstances.
The process, therefore, is not necessarily susceptible to a
partial analysis or summary description. Sandler ONeill
believes that its analyses must be considered as a whole and
that selecting portions of the factors and analyses to be
considered without considering all factors and analyses, or
attempting to ascribe relative weights to some or all such
50
factors and analyses, could create an incomplete view of the
evaluation process underlying its opinion. Also, no company
included in Sandler ONeills comparative analyses
described below is identical to Superior Bancorp or Community
Bancshares and no transaction is identical to the merger.
Accordingly, an analysis of comparable companies or transactions
involves complex considerations and judgments concerning
differences in financial and operating characteristics of the
companies and other factors that could affect the public trading
values or merger transaction values, as the case may be, of
Superior Bancorp and Community Bancshares and the companies to
which they are being compared.
In performing its analyses, Sandler ONeill also made
numerous assumptions with respect to industry performance,
business and economic conditions and various other matters, many
of which cannot be predicted and are beyond the control of
Superior Bancorp, Community Bancshares and Sandler ONeill.
The analysis performed by Sandler ONeill is not
necessarily indicative of actual values or future results, both
of which may be significantly more or less favorable than
suggested by such analyses. Sandler ONeill prepared its
analyses solely for purposes of rendering its opinion and
provided such analyses to the Superior Bancorp board of
directors at the boards April 28, 2006 meeting.
Estimates on the values of companies do not purport to be
appraisals or necessarily reflect the prices at which companies
or their securities may actually be sold. Such estimates are
inherently subject to uncertainty and actual values may be
materially different. Accordingly, Sandler ONeills
analyses do not necessarily reflect the value of Superior
Bancorps common stock or Community Bancshares common
stock or the prices at which Superior Bancorps or
Community Bancshares common stock may be sold at any time.
The analysis of Sandler ONeill and the opinion it provided
were among a number of factors taken into consideration by
Superior Bancorps board in making its determination to
adopt the plan of merger contained in the merger agreement and
the analyses described below should not be viewed as
determinative of the decision of Superior Bancorps board
or management with respect to the fairness of the merger.
The summary below is not a complete description of the analyses
underlying the opinions of Sandler ONeill or the
presentation made by Sandler ONeill to Superior
Bancorps board of directors on April 28, 2006, but is
instead a summary of the material analyses performed and
presented in connection with the opinion. The preparation of a
fairness opinion is a complex analytic process involving various
determinations as to the most appropriate and relevant methods
of a financial analysis and the applications of those methods to
the particular circumstances. Therefore, a fairness opinion is
not readily susceptible to partial analysis or summary
description.
In arriving at its opinion, Sandler ONeill did not
attribute any particular weight to any analysis or factor that
it considered. Rather Sandler ONeill made qualitative
judgments as to the significance and relevance of each analysis
and factor. The financial analyses summarized below include
information presented in tabular format. Sandler ONeill
did not form an opinion as to whether any individual analysis or
factor (positive or negative) considered in isolation supported
or failed to support their respective opinions; rather Sandler
ONeill made its determination as to the fairness of the
per share consideration on the basis of its experience and
professional judgment after considering the results of all its
analyses taken as a whole. Accordingly, Sandler ONeill
believes that the analysis and the summary of the analysis must
be considered as a whole and that selecting portions of the
analysis and factors or focusing on the information presented
below in tabular format, without considering all analyses and
factors or the full narrative description of the financial
analyses, including methodologies and assumptions underlying the
analyses, could create a misleading or incomplete view of the
process underlying their analyses and opinions. The tables alone
do not constitute complete descriptions of the financial
analyses presented in such tables.
Summary of Proposed Transaction. Sandler
ONeill reviewed the financial terms of the proposed
transaction. Using the fixed exchange ratio of
0.8974 shares of Superior Bancorp common stock for each
share of Community Bancshares common stock, based upon Superior
Bancorps average stock price for 30 days as of
March 22, 2006 of $11.48, Sandler ONeill calculated a
transaction value of $10.37 per share, or an aggregate
51
transaction value of $97.946 million. Based upon financial
information for Community Bancshares as or for the twelve month
period ended December 31, 2005, Sandler ONeill
calculated the following transaction ratios:
Transaction
Ratios
|
|
|
|
|
Transaction value/Last twelve
months net income
|
|
|
59.4
|
x
|
Transaction value/Tangible book
value
|
|
|
220.9
|
%
|
Transaction value/Stated book
value per share
|
|
|
236.9
|
%
|
Tangible book premium/ Core
deposits(1)
|
|
|
14.5
|
%
|
Current market premium(2)
|
|
|
4.5
|
%
|
|
|
|
(1) |
|
Core deposits exclude time deposits with account balances
greater than $100,000 and brokered CDs. Tangible book
premium/core deposits calculated by dividing the excess of the
aggregate transaction value of $97.9 million over tangible
book value by core deposits. |
|
(2) |
|
Based upon Community Bancshares stock price of $9.93 as of
April 26, 2006. |
The aggregate transaction value was approximately
$97.9 million, based upon the $10.37 price per share
offered, 8,792,641 Community Bancshares common shares
outstanding and the offer value for Community Bancshares stock
options of $10.50 in cash for 1,641,500 options of Community
Bancshares common stock at a weighted-average exercise price of
$6.79.
Comparable Company Analysis. Sandler
ONeill used publicly available information to perform a
comparison of selected financial and market trading information
for Superior Bancorp and Community Bancshares.
Sandler ONeill also used publicly available information to
compare selected financial and market trading information for
Community Bancshares and a group of financial institutions
selected by Sandler ONeill as peers. The
Community Bancshares peer group consisted of the following
publicly traded commercial banks headquartered in Alabama,
Arkansas, Louisiana, Mississippi or Tennessee with total assets
between $300 million and $800 million:
|
|
|
Nexity Financial Corporation
|
|
Jeff Davis Bancshares Inc.
|
CIVITAS BankGroup
|
|
CapitalSouth Bancorp
|
MidSouth Bancorp Inc.
|
|
Tennessee Commerce Bancorp Inc
|
United Security Bancshares
|
|
Britton & Koontz Capital
Corp.
|
Auburn National Bancorp.
|
|
United Bancorp. of Alabama
|
Citizens Holding Co.
|
|
Bankshares of Fayetteville Inc
|
Capital Bancorp Inc.
|
|
Mountain National Bancshares
|
The analysis compared publicly available financial information
for Community Bancshares and the high, low, mean, and median
financial and market trading data for the Community Bancshares
peer group as of and for the twelve months ended
December 31, 2005. The table below sets forth the data for
Community Bancshares and the median data for the Community
Bancshares peer group as of and for the twelve months ended
December 31, 2005, with pricing data as of April 26,
2006.
52
Comparable
Group Analysis
|
|
|
|
|
|
|
|
|
|
|
Community
|
|
|
Comparable Group
|
|
|
|
Bancshares
|
|
|
Median Result
|
|
|
Total Assets (In thousands)
|
|
$
|
572,468
|
|
|
$
|
462,153
|
|
Tangible Equity/Tangible Assets
|
|
|
7.26
|
%
|
|
|
7.29
|
%
|
Intangible Assets/Total Equity
|
|
|
6.75
|
%
|
|
|
2.07
|
%
|
Net Loans/Total Assets
|
|
|
58.12
|
%
|
|
|
64.16
|
%
|
Gross Loans/Total Deposits
|
|
|
76.89
|
%
|
|
|
87.15
|
%
|
Total Borrowings/Total Assets
|
|
|
12.50
|
%
|
|
|
10.56
|
%
|
Non-performing Assets/Assets
|
|
|
2.36
|
%
|
|
|
0.18
|
%
|
Loan Loss Reserve/Gross Loans
|
|
|
1.40
|
%
|
|
|
1.19
|
%
|
Loan Loss Reserve/Non-performing
Assets
|
|
|
35.09
|
%
|
|
|
238.23
|
%
|
Net Interest Margin
|
|
|
3.84
|
%
|
|
|
4.03
|
%
|
Non-interest Income/Average Assets
|
|
|
1.10
|
%
|
|
|
0.89
|
%
|
Fees/Revenues
|
|
|
24.66
|
%
|
|
|
19.21
|
%
|
Non-interest Expense/Average Assets
|
|
|
4.08
|
%
|
|
|
2.94
|
%
|
Efficiency Ratio
|
|
|
91.42
|
%
|
|
|
67.48
|
%
|
Return on Average Assets
|
|
|
0.30
|
%
|
|
|
0.93
|
%
|
Return on Average Equity
|
|
|
3.80
|
%
|
|
|
12.80
|
%
|
Price/Book Value
|
|
|
196.94
|
%
|
|
|
184.22
|
%
|
Price/Tangible Book Value
|
|
|
211.19
|
%
|
|
|
193.78
|
%
|
Price/LTM Earnings per Share
|
|
|
52.26
|
x
|
|
|
15.18
|
x
|
Price/2006 Estimated Earnings per
Share(1)
|
|
|
29.21
|
x
|
|
|
16.12
|
x
|
Dividend Payout Ratio
|
|
|
0.00
|
%
|
|
|
19.30
|
%
|
Dividend Yield
|
|
|
0.00
|
%
|
|
|
1.16
|
%
|
Market Capitalization (in
thousands)
|
|
$
|
87,311
|
|
|
$
|
70,614
|
|
|
|
|
(1) |
|
Based on Managements estimates. |
The Superior Bancorp peer group consisted of the following
publicly traded commercial banks headquartered in Alabama,
Florida, Georgia, Mississippi, North Carolina, South Carolina,
Tennessee, Virginia or West Virginia with total assets between
$1.0 billion and $2.0 billion:
|
|
|
|
|
Security Bank Corp.
|
|
Cardinal Financial Corp.
|
|
Colony Bankcorp Inc.
|
Greene County Bancshares Inc.
|
|
NBC Capital Corp.
|
|
Bank of Granite Corp.
|
GB&T Bancshares Inc.
|
|
Fidelity Southern Corp.
|
|
FNB Corp.
|
Coastal Financial Corp.
|
|
BancTrust Financial Group Inc.
|
|
TIB Financial Corp.
|
Virginia Commerce Bancorp Inc.
|
|
Southern Community Financial
|
|
First Security Group Inc.
|
Virginia Financial Group
|
|
First M & F Corp.
|
|
Commercial Bankshares Inc.
|
FNB Corp.
|
|
Summit Financial Group Inc.
|
|
|
The analysis compared publicly available financial and market
trading information for Superior Bancorp and the high, low,
mean, and median data for the Superior Bancorp peer group as of
and for the twelve months ended December 31, 2005. The
table below sets forth the data for Superior Bancorp and the
median data for the Superior Bancorp peer group as of and for
the twelve months ended December 31, 2005, with pricing
data as of April 26, 2006.
53
Comparable
Group Analysis
|
|
|
|
|
|
|
|
|
|
|
Superior
|
|
|
Comparable Group
|
|
|
|
Bancorp
|
|
|
Median Result
|
|
|
Total Assets (in millions)
|
|
$
|
1,415.5
|
|
|
$
|
1,446.7
|
|
Tangible Equity/Tangible Assets
|
|
|
6.63
|
%
|
|
|
7.09
|
%
|
Intangible Assets/Total Equity
|
|
|
11.51
|
%
|
|
|
18.33
|
%
|
Net Loans/Total Assets
|
|
|
68.71
|
%
|
|
|
74.69
|
%
|
Gross Loans/Total Deposits
|
|
|
94.34
|
%
|
|
|
95.06
|
%
|
Total Borrowings/Total Assets
|
|
|
15.42
|
%
|
|
|
7.15
|
%
|
Non-performing Assets/Assets
|
|
|
0.56
|
%
|
|
|
0.36
|
%
|
Loan Loss Reserve/Gross Loans
|
|
|
1.22
|
%
|
|
|
1.21
|
%
|
Net Interest Margin
|
|
|
3.14
|
%
|
|
|
4.15
|
%
|
Non-interest Income/Average Assets
|
|
|
0.75
|
%
|
|
|
1.05
|
%
|
Fees/Revenues
|
|
|
21.25
|
%
|
|
|
20.68
|
%
|
Non-interest Expense/Average Assets
|
|
|
3.19
|
%
|
|
|
2.98
|
%
|
Efficiency Ratio
|
|
|
90.40
|
%
|
|
|
64.80
|
%
|
Return on Average Assets
|
|
|
(0.41
|
)%
|
|
|
1.15
|
%
|
Return on Average Equity
|
|
|
(5.68
|
)%
|
|
|
11.90
|
%
|
Price/Book Value
|
|
|
217.72
|
%
|
|
|
181.21
|
%
|
Price/Tangible Book Value
|
|
|
246.03
|
%
|
|
|
220.35
|
%
|
Price/Last Twelve Months
Earnings per Share
|
|
|
NM
|
|
|
|
15.55
|
x
|
Price/2006 Estimated Earnings per
Share (1)
|
|
|
37.80
|
x
|
|
|
14.91
|
x
|
Dividend Payout Ratio
|
|
|
0.00
|
%
|
|
|
29.38
|
%
|
Dividend Yield
|
|
|
0.00
|
%
|
|
|
1.60
|
%
|
Market Capitalization (in
thousands)
|
|
$
|
228,746
|
|
|
$
|
225,543
|
|
|
|
|
(1) |
|
Based on Managements estimates. |
Stock Trading History. Sandler ONeill
reviewed the history of the publicly reported trading prices of
Community Bancshares common stock for the one-year period ended
April 26, 2006 and period since November 21, 2003, and
ended April 26, 2006. Sandler ONeill also reviewed
the relationship between the movements in the price of Community
Bancshares common stock and the movements in the prices of
the Standard & Poors 500 Index, the NASDAQ Bank
Index, the Standard & Poors Bank Index and the
median performance of a composite peer group of publicly traded
commercial banks selected by Sandler ONeill for Community
Bancshares. The composition of the respective peer groups for
Community Bancshares is discussed under the relevant section
under Comparable Group Analysis above.
During the one-year period ended April 26, 2006, Community
Bancshares common stock outperformed the various indices and the
peer group to which it was compared.
Community
Bancshares One-Year Stock Performance
|
|
|
|
|
|
|
|
|
|
|
Beginning Index Value
|
|
|
Ending Index Value
|
|
|
|
April 26, 2005
|
|
|
April 26, 2006
|
|
|
Community Bancshares
|
|
|
100.00
|
%
|
|
|
124.28
|
%
|
Selected Peer Group(1)
|
|
|
100.00
|
|
|
|
109.37
|
|
NASDAQ Bank Index
|
|
|
100.00
|
|
|
|
113.01
|
|
S&P Bank Index
|
|
|
100.00
|
|
|
|
109.04
|
|
S&P 500 Index
|
|
|
100.00
|
|
|
|
113.34
|
|
|
|
|
(1) |
|
Refers to the peer group outlined in the Comparable Group
Analysis section above. |
In the period since November 21, 2003, and ended
April 26, 2006, Community Bancshares common stock
outperformed the various indices and the peer group to which it
was compared.
54
Community
Bancshares Stock Performance Since November 21,
2003
|
|
|
|
|
|
|
|
|
|
|
Beginning Index Value
|
|
|
Ending Index Value
|
|
|
|
November 21, 2003
|
|
|
April 26, 2006
|
|
|
Community Bancshares
|
|
|
100.00
|
%
|
|
|
180.18
|
%
|
Selected Peer Group(1)
|
|
|
100.00
|
|
|
|
119.56
|
|
NASDAQ Bank Index
|
|
|
100.00
|
|
|
|
114.76
|
|
S&P Bank Index
|
|
|
100.00
|
|
|
|
118.89
|
|
S&P 500 Index
|
|
|
100.00
|
|
|
|
126.35
|
|
|
|
|
(1) |
|
Refers to the peer group outlined in the Comparable Group
Analysis section above. |
Sandler ONeill also reviewed the history of the publicly
reported trading prices of Superior Bancorps common stock
for the one-year period ended April 26, 2006 and the
three-year period ended April 26, 2006. Sandler
ONeill also reviewed the relationship between the
movements in the price of Superior Bancorps common stock
and the movements in the prices of the Standard &
Poors 500 Index, the NASDAQ Bank Index, the
Standard & Poors Bank Index and the median
performance of a composite peer group of publicly traded
commercial banks selected by Sandler ONeill for Superior
Bancorp. The composition of the respective peer groups for
Superior Bancorp is discussed under the relevant section under
Comparable Group Analysis above.
During the one-year period ended April 26, 2006, Superior
Bancorps common stock performed in line with the
Comparable Group and outperformed all of the indices to which it
was compared, except the selected peer group.
Superior
Bancorps One-Year Stock Performance
|
|
|
|
|
|
|
|
|
|
|
Beginning Index Value
|
|
|
Ending Index Value
|
|
|
|
April 26, 2005
|
|
|
April 26, 2006
|
|
|
Superior Bancorp
|
|
|
100.00
|
%
|
|
|
115.40
|
%
|
Selected Peer Group(1)
|
|
|
100.00
|
|
|
|
115.61
|
|
NASDAQ Bank Index
|
|
|
100.00
|
|
|
|
113.01
|
|
S&P Bank Index
|
|
|
100.00
|
|
|
|
109.04
|
|
S&P 500 Index
|
|
|
100.00
|
|
|
|
113.34
|
|
|
|
|
(1) |
|
Refers to the peer group outlined in the Comparable Group
Analysis section above. |
During the three-year period ended April 26, 2006, Superior
Bancorps common stock outperformed the various indices and
the peer group to which it was compared.
Superior
Bancorps Three-Year Stock Performance
|
|
|
|
|
|
|
|
|
|
|
Beginning Index Value
|
|
|
Ending Index Value
|
|
|
|
April 25, 2003
|
|
|
April 26, 2006
|
|
|
Superior Bancorp
|
|
|
100.00
|
%
|
|
|
230.82
|
%
|
Selected Peer Group(1)
|
|
|
100.00
|
|
|
|
139.08
|
|
NASDAQ Bank Index
|
|
|
100.00
|
|
|
|
140.94
|
|
S&P Bank Index
|
|
|
100.00
|
|
|
|
139.94
|
|
S&P 500 Index
|
|
|
100.00
|
|
|
|
144.83
|
|
|
|
|
(1) |
|
Refers to the peer group outlined in the Comparable Group
Analysis section above. |
Discounted Dividend Stream and Terminal Value
Analysis. Sandler ONeill performed two sets
of analyses that estimated the future stream of after-tax
dividend flows of Community Bancshares through December 31,
2008 under various circumstances. In the first analysis
(Unadjusted Case), Sandler ONeill assumed
Community Bancshares projected dividend stream and that
Community Bancshares performed in accordance with the
2006 net
55
income projection and earnings per share growth rate projections
for 2007 through 2008 provided by management. In the second
analysis (Adjusted Case), Sandler ONeill
assumed Community Bancshares s projected dividend stream
and that Community Bancshares performed in accordance with the
2006 net income projection, however Sandler ONeill
adjusted 2007 net income to include $2.8 million of
after-tax cost savings and $1.1 million of after-tax
mark-to-market
adjustments and adjusted 2008 net income to include
$3.8 million of after-tax cost savings and
$1.1 million of after-tax
mark-to-market
adjustments projected by Superior Bancorp. In both cases to
approximate the terminal value of Community Bancshares common
stock at December 31, 2008, Sandler ONeill applied
price to LTM earnings multiples of 12.0x to 22.0x and multiples
of tangible book value ranging from 150% to 275%. The dividend
income streams and terminal values were then discounted to
present values using different discount rates ranging from 9.0%
to 13.0% chosen to reflect different assumptions regarding
required rates of return of holders or prospective buyers of
Community Bancshares common stock. In addition, the terminal
value of Community Bancshares common stock at December 31,
2008 was calculated using the same range of price to LTM
earnings multiples (12.0x 22.0x) applied to a range
of discounts and premiums to managements budget
projections. The range applied to the budgeted net income was
25% under budget to 25% over budget, using a discount rate of
11.0% for the analysis.
As illustrated in the following tables, the Unadjusted Case
indicated an imputed range of values per share for Community
Bancshares common stock of $3.98 to $8.12 when applying the
price/earnings multiples to the budget, $6.48 to $13.23 when
applying multiples of tangible book value to the budget, and
$3.15 to $9.61 when applying the price/earnings multiples to the
25%/+25% budget range.
Earnings
Per Share Multiples
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Discount Rate
|
|
12.0x
|
|
|
14.0x
|
|
|
16.0x
|
|
|
18.0x
|
|
|
20.0x
|
|
|
22.0x
|
|
|
9.00%
|
|
$
|
4.43
|
|
|
$
|
5.17
|
|
|
$
|
5.91
|
|
|
$
|
6.65
|
|
|
$
|
7.38
|
|
|
$
|
8.12
|
|
10.00%
|
|
|
4.31
|
|
|
|
5.03
|
|
|
|
5.75
|
|
|
|
6.47
|
|
|
|
7.18
|
|
|
|
7.90
|
|
11.00%
|
|
|
4.20
|
|
|
|
4.89
|
|
|
|
5.59
|
|
|
|
6.29
|
|
|
|
6.99
|
|
|
|
7.69
|
|
12.00%
|
|
|
4.08
|
|
|
|
4.76
|
|
|
|
5.45
|
|
|
|
6.13
|
|
|
|
6.81
|
|
|
|
7.49
|
|
13.00%
|
|
|
3.98
|
|
|
|
4.64
|
|
|
|
5.30
|
|
|
|
5.96
|
|
|
|
6.63
|
|
|
|
7.29
|
|
Earnings
Per Share Multiples
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Budget Variance
|
|
12.0x
|
|
|
14.0x
|
|
|
16.0x
|
|
|
18.0x
|
|
|
20.0x
|
|
|
22.0x
|
|
|
(25.0)%
|
|
$
|
3.15
|
|
|
$
|
3.67
|
|
|
$
|
4.20
|
|
|
$
|
4.72
|
|
|
$
|
5.24
|
|
|
$
|
5.77
|
|
(20.0)%
|
|
|
3.36
|
|
|
|
3.92
|
|
|
|
4.48
|
|
|
|
5.03
|
|
|
|
5.59
|
|
|
|
6.15
|
|
(15.0)%
|
|
|
3.57
|
|
|
|
4.16
|
|
|
|
4.75
|
|
|
|
5.35
|
|
|
|
5.94
|
|
|
|
6.54
|
|
(10.0)%
|
|
|
3.78
|
|
|
|
4.41
|
|
|
|
5.03
|
|
|
|
5.66
|
|
|
|
6.29
|
|
|
|
6.92
|
|
(5.0)%
|
|
|
3.99
|
|
|
|
4.65
|
|
|
|
5.31
|
|
|
|
5.98
|
|
|
|
6.64
|
|
|
|
7.31
|
|
0.0%
|
|
|
4.20
|
|
|
|
4.89
|
|
|
|
5.59
|
|
|
|
6.29
|
|
|
|
6.99
|
|
|
|
7.69
|
|
5.0%
|
|
|
4.41
|
|
|
|
5.14
|
|
|
|
5.87
|
|
|
|
6.61
|
|
|
|
7.34
|
|
|
|
8.08
|
|
10.0%
|
|
|
4.61
|
|
|
|
5.38
|
|
|
|
6.15
|
|
|
|
6.92
|
|
|
|
7.69
|
|
|
|
8.46
|
|
15.0%
|
|
|
4.82
|
|
|
|
5.63
|
|
|
|
6.43
|
|
|
|
7.24
|
|
|
|
8.04
|
|
|
|
8.85
|
|
20.0%
|
|
|
5.03
|
|
|
|
5.87
|
|
|
|
6.71
|
|
|
|
7.55
|
|
|
|
8.39
|
|
|
|
9.23
|
|
25.0%
|
|
|
5.24
|
|
|
|
6.12
|
|
|
|
6.99
|
|
|
|
7.87
|
|
|
|
8.74
|
|
|
|
9.61
|
|
56
Tangible
Book Value Per Share Multiples
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Discount Rate
|
|
150%
|
|
|
175%
|
|
|
200%
|
|
|
225%
|
|
|
250%
|
|
|
275%
|
|
|
9.00%
|
|
$
|
7.22
|
|
|
$
|
8.42
|
|
|
$
|
9.62
|
|
|
$
|
10.83
|
|
|
$
|
12.03
|
|
|
$
|
13.23
|
|
10.00%
|
|
|
7.02
|
|
|
|
8.19
|
|
|
|
9.36
|
|
|
|
10.53
|
|
|
|
11.70
|
|
|
|
12.87
|
|
11.00%
|
|
|
6.83
|
|
|
|
7.97
|
|
|
|
9.11
|
|
|
|
10.25
|
|
|
|
11.39
|
|
|
|
12.53
|
|
12.00%
|
|
|
6.65
|
|
|
|
7.76
|
|
|
|
8.87
|
|
|
|
9.98
|
|
|
|
11.09
|
|
|
|
12.20
|
|
13.00%
|
|
|
6.48
|
|
|
|
7.56
|
|
|
|
8.64
|
|
|
|
9.72
|
|
|
|
10.80
|
|
|
|
11.88
|
|
As illustrated in the following tables, the Adjusted Case
indicated an imputed range of values per share for Community
Bancshares common stock of $8.16 to $16.67 when applying the
price/earnings multiples to the budget, $7.53 to $15.38 when
applying multiples of tangible book value to the budget, and
$6.46 to $19.73 when applying the price/earnings multiples to
the -25%/+25% budget range.
Earnings
Per Share Multiples
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Discount Rate
|
|
12.0x
|
|
|
14.0x
|
|
|
16.0x
|
|
|
18.0x
|
|
|
20.0x
|
|
|
22.0x
|
|
|
9.00%
|
|
$
|
9.09
|
|
|
$
|
10.61
|
|
|
$
|
12.12
|
|
|
$
|
13.64
|
|
|
$
|
15.15
|
|
|
$
|
16.67
|
|
10.00%
|
|
|
8.85
|
|
|
|
10.32
|
|
|
|
11.79
|
|
|
|
13.27
|
|
|
|
14.74
|
|
|
|
16.22
|
|
11.00%
|
|
|
8.61
|
|
|
|
10.04
|
|
|
|
11.48
|
|
|
|
12.91
|
|
|
|
14.35
|
|
|
|
15.78
|
|
12.00%
|
|
|
8.38
|
|
|
|
9.78
|
|
|
|
11.17
|
|
|
|
12.57
|
|
|
|
13.97
|
|
|
|
15.36
|
|
13.00%
|
|
|
8.16
|
|
|
|
9.52
|
|
|
|
10.88
|
|
|
|
12.24
|
|
|
|
13.60
|
|
|
|
14.96
|
|
Earnings
Per Share Multiples
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Budget Variance
|
|
12.0x
|
|
|
14.0x
|
|
|
16.0x
|
|
|
18.0x
|
|
|
20.0x
|
|
|
22.0x
|
|
|
(25.0)%
|
|
$
|
6.46
|
|
|
$
|
7.53
|
|
|
$
|
8.61
|
|
|
$
|
9.69
|
|
|
$
|
10.76
|
|
|
$
|
11.84
|
|
(20.0)%
|
|
|
6.89
|
|
|
|
8.04
|
|
|
|
9.18
|
|
|
|
10.33
|
|
|
|
11.48
|
|
|
|
12.63
|
|
(15.0)%
|
|
|
7.32
|
|
|
|
8.54
|
|
|
|
9.76
|
|
|
|
10.98
|
|
|
|
12.20
|
|
|
|
13.42
|
|
(10.0)%
|
|
|
7.75
|
|
|
|
9.04
|
|
|
|
10.33
|
|
|
|
11.62
|
|
|
|
12.91
|
|
|
|
14.21
|
|
(5.0)%
|
|
|
8.18
|
|
|
|
9.54
|
|
|
|
10.90
|
|
|
|
12.27
|
|
|
|
13.63
|
|
|
|
14.99
|
|
0.0%
|
|
|
8.61
|
|
|
|
10.04
|
|
|
|
11.48
|
|
|
|
12.91
|
|
|
|
14.35
|
|
|
|
15.78
|
|
5.0%
|
|
|
9.04
|
|
|
|
10.55
|
|
|
|
12.05
|
|
|
|
13.56
|
|
|
|
15.07
|
|
|
|
16.57
|
|
10.0%
|
|
|
9.47
|
|
|
|
11.05
|
|
|
|
12.63
|
|
|
|
14.21
|
|
|
|
15.78
|
|
|
|
17.36
|
|
15.0%
|
|
|
9.90
|
|
|
|
11.55
|
|
|
|
13.20
|
|
|
|
14.85
|
|
|
|
16.50
|
|
|
|
18.15
|
|
20.0%
|
|
|
10.33
|
|
|
|
12.05
|
|
|
|
13.77
|
|
|
|
15.50
|
|
|
|
17.22
|
|
|
|
18.94
|
|
25.0%
|
|
|
10.76
|
|
|
|
12.56
|
|
|
|
14.35
|
|
|
|
16.14
|
|
|
|
17.94
|
|
|
|
19.73
|
|
Tangible
Book Value Per Share Multiples
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Discount Rate
|
|
150%
|
|
|
175%
|
|
|
200%
|
|
|
225%
|
|
|
250%
|
|
|
275%
|
|
|
9.00%
|
|
$
|
8.39
|
|
|
$
|
9.78
|
|
|
$
|
11.18
|
|
|
$
|
12.58
|
|
|
$
|
13.98
|
|
|
$
|
15.38
|
|
10.00%
|
|
|
8.16
|
|
|
|
9.52
|
|
|
|
10.88
|
|
|
|
12.24
|
|
|
|
13.60
|
|
|
|
14.96
|
|
11.00%
|
|
|
7.94
|
|
|
|
9.26
|
|
|
|
10.59
|
|
|
|
11.91
|
|
|
|
13.24
|
|
|
|
14.56
|
|
12.00%
|
|
|
7.73
|
|
|
|
9.02
|
|
|
|
10.31
|
|
|
|
11.60
|
|
|
|
12.88
|
|
|
|
14.17
|
|
13.00%
|
|
|
7.53
|
|
|
|
8.78
|
|
|
|
10.04
|
|
|
|
11.29
|
|
|
|
12.55
|
|
|
|
13.80
|
|
Sandler ONeill performed an analysis that estimated the
future stream of after-tax dividend flows of Superior Bancorp
through December 31, 2010 under various circumstances,
assuming Superior Bancorps projected dividend stream and
that Superior Bancorp performed in accordance with the
2006 net income projection and earnings per share growth
rate projections for 2006 through 2008 provided by management.
To approximate the terminal value of Superior Bancorps
common stock at December 31, 2008, Sandler ONeill
applied price to LTM
57
earnings multiples of 12.0x to 22.0x and multiples of tangible
book value ranging from 150% to 275%. The dividend income
streams and terminal values were then discounted to present
values using different discount rates ranging from 9.0% to 13.0%
chosen to reflect different assumptions regarding required rates
of return of holders or prospective buyers of Superior Bancorp
common stock. In addition, the terminal value of Superior
Bancorps common stock at December 31, 2005 was
calculated using the same range of price to LTM earnings
multiples (12.0x 22.0x) applied to a range of
discounts and premiums to managements budget projections.
The range applied to the budgeted net income was 25% under
budget to 25% over budget, using a discount rate of 11.0% for
the tabular analysis. As illustrated in the following tables,
this analysis indicated an imputed range of values per share for
Superior Bancorps common stock of $5.60 to $11.45 when
applying the price/earnings multiples to the budget, $6.31 to
$12.90 when applying multiples of tangible book value to the
budget, and $4.43 to $13.55 when applying the price/earnings
multiples to the -25%/+25% budget range.
Earnings
Per Share Multiples
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Discount Rate
|
|
12.0x
|
|
|
14.0x
|
|
|
16.0x
|
|
|
18.0x
|
|
|
20.0x
|
|
|
22.0x
|
|
|
9.00%
|
|
$
|
6.24
|
|
|
$
|
7.29
|
|
|
$
|
8.33
|
|
|
$
|
9.37
|
|
|
$
|
10.41
|
|
|
$
|
11.45
|
|
10.00%
|
|
|
6.08
|
|
|
|
7.09
|
|
|
|
8.10
|
|
|
|
9.11
|
|
|
|
10.13
|
|
|
|
11.14
|
|
11.00%
|
|
|
5.91
|
|
|
|
6.90
|
|
|
|
7.88
|
|
|
|
8.87
|
|
|
|
9.86
|
|
|
|
10.84
|
|
12.00%
|
|
|
5.76
|
|
|
|
6.72
|
|
|
|
7.67
|
|
|
|
8.63
|
|
|
|
9.59
|
|
|
|
10.55
|
|
13.00%
|
|
|
5.60
|
|
|
|
6.54
|
|
|
|
7.47
|
|
|
|
8.41
|
|
|
|
9.34
|
|
|
|
10.28
|
|
Earnings
Per Share Multiples
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Budget Variance
|
|
12.0x
|
|
|
e14.0x
|
|
|
16.0x
|
|
|
18.0x
|
|
|
20.0x
|
|
|
22.0x
|
|
|
(25.0)%
|
|
$
|
4.43
|
|
|
$
|
5.17
|
|
|
$
|
5.91
|
|
|
$
|
6.65
|
|
|
$
|
7.39
|
|
|
$
|
8.13
|
|
(20.0)%
|
|
|
4.73
|
|
|
|
5.52
|
|
|
|
6.31
|
|
|
|
7.10
|
|
|
|
7.88
|
|
|
|
8.67
|
|
(15.0)%
|
|
|
5.03
|
|
|
|
5.86
|
|
|
|
6.70
|
|
|
|
7.54
|
|
|
|
8.38
|
|
|
|
9.21
|
|
(10.0)%
|
|
|
5.32
|
|
|
|
6.21
|
|
|
|
7.10
|
|
|
|
7.98
|
|
|
|
8.87
|
|
|
|
9.76
|
|
(5.0)%
|
|
|
5.62
|
|
|
|
6.55
|
|
|
|
7.49
|
|
|
|
8.43
|
|
|
|
9.36
|
|
|
|
10.30
|
|
0.0%
|
|
|
5.91
|
|
|
|
6.90
|
|
|
|
7.88
|
|
|
|
8.87
|
|
|
|
9.86
|
|
|
|
10.84
|
|
5.0%
|
|
|
6.21
|
|
|
|
7.24
|
|
|
|
8.28
|
|
|
|
9.31
|
|
|
|
10.35
|
|
|
|
11.38
|
|
10.0%
|
|
|
6.50
|
|
|
|
7.59
|
|
|
|
8.67
|
|
|
|
9.76
|
|
|
|
10.84
|
|
|
|
11.92
|
|
15.0%
|
|
|
6.80
|
|
|
|
7.93
|
|
|
|
9.07
|
|
|
|
10.20
|
|
|
|
11.33
|
|
|
|
12.47
|
|
20.0%
|
|
|
7.10
|
|
|
|
8.28
|
|
|
|
9.46
|
|
|
|
10.64
|
|
|
|
11.83
|
|
|
|
13.01
|
|
25.0%
|
|
|
7.39
|
|
|
|
8.62
|
|
|
|
9.86
|
|
|
|
11.09
|
|
|
|
12.32
|
|
|
|
13.55
|
|
Tangible
Book Value Per Share Multiples
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Discount Rate
|
|
150%
|
|
|
175%
|
|
|
200%
|
|
|
225%
|
|
|
250%
|
|
|
275%
|
|
|
9.00%
|
|
$
|
7.03
|
|
|
$
|
8.21
|
|
|
$
|
9.38
|
|
|
$
|
10.55
|
|
|
$
|
11.72
|
|
|
$
|
12.90
|
|
10.00%
|
|
|
6.84
|
|
|
|
7.99
|
|
|
|
9.13
|
|
|
|
10.27
|
|
|
|
11.41
|
|
|
|
12.55
|
|
11.00%
|
|
|
6.66
|
|
|
|
7.77
|
|
|
|
8.88
|
|
|
|
9.99
|
|
|
|
11.10
|
|
|
|
12.21
|
|
12.00%
|
|
|
6.48
|
|
|
|
7.57
|
|
|
|
8.65
|
|
|
|
9.73
|
|
|
|
10.81
|
|
|
|
11.89
|
|
13.00%
|
|
|
6.31
|
|
|
|
7.37
|
|
|
|
8.42
|
|
|
|
9.47
|
|
|
|
10.52
|
|
|
|
11.58
|
|
In connection with its analyses, Sandler ONeill considered
and discussed with Superior Bancorp board how the present value
analyses would be affected by changes in the underlying
assumptions, including variations with respect to net income.
Sandler ONeill noted that the discounted dividend stream
and terminal value analysis is a widely used valuation
methodology, but the results of such methodology are highly
dependent upon the numerous assumptions that must be made, and
the results thereof are not necessarily indicative of actual
values or future results.
58
Analysis of Selected Merger
Transactions. Sandler ONeill reviewed 52
merger transactions announced from January 1, 2004 through
April 26, 2006 involving commercial banks in the Southeast
United States with announced transaction values greater than
$15.0 million and transaction values less than
$1.0 billion. Sandler ONeill reviewed the following
multiples: transaction price at announcement to last twelve
months net income, transaction price to estimated net
income, transaction price to stated book value, transaction
price to stated tangible book value, tangible book premium to
core deposits, and current market price premium. As illustrated
in the following table, Sandler ONeill compared the
proposed merger multiples to the median multiples of comparable
transactions.
Comparable
Transaction Multiples
|
|
|
|
|
|
|
|
|
|
|
Community Bancshares/
|
|
|
Median Southeast
|
|
|
|
Superior Bancorp
|
|
|
Group Multiple
|
|
|
Transaction price/LTM Net Income
|
|
|
59.4
|
x
|
|
|
25.55
|
x
|
Transaction price/Est. Net
Income(1)
|
|
|
32.04
|
x
|
|
|
24.97
|
x
|
Transaction price/Book value
|
|
|
220.9
|
%
|
|
|
233.25
|
%
|
Transaction price/Tangible book
value
|
|
|
236.9
|
%
|
|
|
255.07
|
%
|
Tangible book premium/Core
deposits(2)
|
|
|
14.5
|
%
|
|
|
22.81
|
%
|
Premium to current market(3)
|
|
|
4.5
|
%
|
|
|
29.24
|
%
|
|
|
|
(1) |
|
Based upon managements estimates for 2006. |
|
(2) |
|
Core deposits exclude time deposits with account balances
greater than $100,000. Tangible book premium/core deposits
calculated by dividing the excess of the aggregate transaction
value of $97.9 million over tangible book value by core
deposits. |
|
(3) |
|
Based on Community Bancshares closing price of
$9.93 per share as of April 26, 2006. |
Pro Forma Merger Analysis. Sandler
ONeill analyzed certain potential proforma effects of the
merger, assuming the following: (1) the merger closes on
December 31, 2006; (2) 100.0% of Community
Bancshares shares are exchanged for Superior Bancorp common
stock at a fixed exchange ratio of
0.8974x; (3) options and warrants for Community
Bancshares common stock will be converted into
cash; (4) Community Bancshares 2006 and
2007 net income projections and earnings per share growth
rates for 2007 through 2008 provided by and reviewed with
Superior Bancorps management; (5) Superior
Bancorps 2006 budgeted net income and earnings per share
growth rate projections for 2007 through 2008 provided by and
reviewed with Superior Bancorps
management; (6) purchase accounting adjustments,
charges and transaction costs associated with the merger and
cost savings determined by the senior managements of Superior
Bancorp and Community Bancshares.
For each of the years 2007 and 2008, Sandler ONeill
compared the earnings per share (EPS) of Superior Bancorp common
stock to the EPS, on a GAAP basis, of the combined
companys common stock using the foregoing assumptions. The
following table sets forth the results of the analysis:
|
|
|
|
|
|
|
GAAP Basis
|
|
|
Accretion/(Dilution)
|
|
2007 Estimated EPS
|
|
|
6.02
|
%
|
2008 Estimated EPS
|
|
|
6.85
|
%
|
The analyses indicated that the merger would be accretive to
Superior Bancorps projected 2007 EPS, and accretive to
Superior Bancorps projected 2008 EPS. The actual results
achieved by the combined company may vary from projected results
and the variations may be material.
Superior Bancorp has agreed to pay Sandler ONeill a
transaction fee in connection with the merger of approximately
$489,730, of which $75,000 has been paid and the balance of
which is contingent, and payable, upon closing of the merger.
Superior Bancorp has also agreed to reimburse certain of Sandler
ONeill reasonable
out-of-pocket
expenses incurred in connection with its engagement and to
indemnify Sandler ONeill and its affiliates and their
respective partners, directors, officers, employees, agents, and
controlling persons against certain expenses and liabilities,
including liabilities under the securities laws.
59
Miscellaneous. Sandler ONeill has
provided certain other investment banking services to Superior
Bancorp in the past and has received compensation for such
services.
In the ordinary course of its respective broker and dealer
businesses, Sandler ONeill may purchase securities from
and sell securities to Superior Bancorp and Community Bancshares
and their affiliates. Sandler ONeill may also actively
trade the debt
and/or
equity securities of Superior Bancorp or Community Bancshares or
their affiliates for their own accounts and for the accounts of
their customers and, accordingly, may at any time hold a long or
short position in such securities.
Opinion
of Burke Capital
Superior Bancorp retained Burke Capital on February 14,
2006 to act as a financial advisor in connection a possible
business combination with Community Bancshares. Burke Capital is
a nationally recognized investment banking firm whose principal
business specialty is financial institutions. In the ordinary
course of its investment banking business, Burke Capital is
regularly engaged in the valuation of financial institutions and
their securities in connection with mergers and acquisitions and
other corporate transactions.
Burke Capital acted as a financial advisor to Superior Bancorp
in connection with the proposed merger with Community Bancshares
and participated in certain of the negotiations leading to the
merger agreement. In connection with Burke Capitals
engagement, Superior Bancorp asked Burke Capital to evaluate the
fairness of the merger consideration to Superior Bancorps
stockholders from a financial point of view. At the
April 20, 2006 meeting of Superior Bancorps board of
directors held to evaluate the terms of the merger and the
merger agreement, Burke Capital delivered to the board its oral
opinion that, based upon and subject to the factors,
assumptions, procedures, limitations, qualifications and other
matters set forth in its opinion, the merger consideration was
fair to Superior Bancorps stockholders from a financial
point of view. At the April 28, 2006 meeting of Superior
Bancorps board of directors, Burke Capital was asked to
reaffirm its opinion, and the Superior Bancorps board
voted to approve the merger and subsequently executed a
definitive agreement on April 29, 2006. Burke Capital
subsequently submitted its written opinion letter to the board
of directors on April 29, 2006.
THE FULL TEXT OF BURKE CAPITALS WRITTEN OPINION IS
ATTACHED AS ANNEX C TO THIS JOINT PROXY
STATEMENT/PROSPECTUS. THE OPINION OUTLINES THE MATTERS BURKE
CAPITAL CONSIDERED, AND THE QUALIFICATIONS AND LIMITATIONS ON
THE REVIEW UNDERTAKEN BY BURKE CAPITAL IN RENDERING ITS OPINION.
THE DESCRIPTION OF THE OPINION SET FORTH BELOW IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO THE OPINION. WE URGE YOU TO READ
THE ENTIRE OPINION CAREFULLY IN CONNECTION WITH YOUR
CONSIDERATION OF THE PROPOSED MERGER.
BURKE CAPITALS OPINION SPEAKS ONLY AS OF THE DATE OF THE
OPINION. THE OPINION WAS DIRECTED TO THE SUPERIOR BANCORP BOARD
OF DIRECTORS AND IS DIRECTED ONLY TO THE FAIRNESS OF THE MERGER
CONSIDERATION TO SUPERIOR BANCORP STOCKHOLDERS FROM A FINANCIAL
POINT OF VIEW. IT DOES NOT ADDRESS THE UNDERLYING BUSINESS
DECISION OF SUPERIOR BANCORP TO ENGAGE IN THE MERGER OR ANY
OTHER ASPECT OF THE MERGER, THE MERGER AGREEMENT OR ANY RELATED
AGREEMENTS, AND IS NOT A RECOMMENDATION TO ANY SUPERIOR BANCORP
STOCKHOLDER AS TO HOW SUCH STOCKHOLDER SHOULD VOTE AT THE
STOCKHOLDER MEETING WITH RESPECT TO THE MERGER, OR ANY OTHER
MATTER.
In connection with rendering its opinion, Burke Capital reviewed
and considered, among other things:
|
|
|
|
|
the merger agreement;
|
|
|
|
certain publicly available financial statements and other
historical financial information of Superior Bancorp and
Community Bancshares that it deemed relevant;
|
|
|
|
projected earnings estimates for Superior Bancorp and Community
Bancshares prepared by senior management of Superior Bancorp and
Community Bancshares and discussions with senior management of
Superior Bancorp and Community Bancorp regarding their
respective business, financial condition, results of operations
and future prospects;
|
60
|
|
|
|
|
internal financial and operating information with respect to the
business, operations and prospects of Superior Bancorp and
Community Bancshares furnished to Burke Capital by Superior
Bancorp and Community Bancshares that is not publicly available;
|
|
|
|
the reported prices and trading activity of Superior Bancorp and
Community Bancshares common stock, and compared those prices and
activity and dividends with other publicly-traded companies that
Burke Capital deemed relevant;
|
|
|
|
the pro forma financial impact of the merger on Superior
Bancorps ability to complete a transaction from a
regulatory standpoint, based on assumptions determined by senior
management of Superior Bancorp and Burke Capital;
|
|
|
|
the financial terms of other recent business combinations in the
commercial banking industry, to the extent publicly available
and deemed relevant by Burke Capital;
|
|
|
|
the current market environment generally and the banking
environment in particular; and
|
|
|
|
such other information, financial studies, analyses and
investigations and financial, economic and market criteria as it
considered relevant.
|
Burke Capital held discussions with certain members of senior
management of Superior Bancorp and Community Bancshares
regarding their assessment of the strategic rationale for, and
the potential benefits of, the merger and the past and current
business operations, financial condition and future prospects of
their respective companies. In connection with Burke
Capitals review, it relied upon the accuracy and
completeness of all of the financial, accounting, legal, tax and
other information discussed with or reviewed by it.
SUPERIOR BANCORPS BOARD OF DIRECTORS DID NOT LIMIT THE
INVESTIGATIONS MADE OR THE PROCEDURES FOLLOWED BY BURKE CAPITAL
IN GIVING ITS OPINION.
In performing its reviews and analyses and in rendering its
opinion, Burke Capital assumed and relied, without assuming any
responsibility for independent verification, upon the accuracy
and completeness of all the financial information, analyses,
financial forecasts, and other information that was publicly
available or otherwise furnished to, reviewed by or discussed
with management of Superior Bancorp or Community Bancshares.
With respect to financial forecasts and other information and
data relating to Superior Bancorp and Community Bancshares,
reviewed by or discussed with it, Burke Capital was advised by
the respective management of Superior Bancorp and Community
Bancshares that such forecasts and other information and data
were reasonably prepared on bases reflecting the best currently
available estimates and judgments of the managements of Superior
Bancorp and Community Bancshares as to the future financial
performance of their respective organization, the potential
strategic implications and operational benefits anticipated to
result from the proposed transaction and the other matters
covered thereby. Burke Capital assumed that the financial
results (including the potential strategic implications and
operational benefits anticipated to result from the merger)
reflected in such forecasts and other information and data will
be realized in the amounts and at the times projected. Burke
Capital was not asked to and did not independently verify the
accuracy or completeness of such information and it did not
assume responsibility or liability for the accuracy or
completeness of any of such information. Burke Capital did not
make an independent evaluation or appraisal of the assets, the
collateral securing assets or the liabilities, contingent or
otherwise, of Superior Bancorp or Community Bancshares or any of
their respective subsidiaries, or the ability to collect any
such assets, nor was it furnished with any such evaluations or
appraisals. Burke Capital is not an expert in the evaluation of
allowances for loan losses and it did not make an independent
evaluation of the adequacy of the allowance for loan losses of
Superior Bancorp or Community Bancshares, nor did it review any
individual credit files relating to Superior Bancorp or
Community Bancshares. With Superior Bancorps consent,
Burke Capital assumed that the respective allowances for loan
losses for both Superior Bancorp and Community Bancshares were
adequate to cover such losses and will be adequate on a pro
forma basis for the combined entity. In addition, Burke Capital
did not conduct any physical inspection of the properties or
facilities of Superior Bancorp or Community Bancshares. Burke
Capital is not an accounting firm and it relied on the reports
of the independent accountants of Superior Bancorp and Community
Bancshares as to the audited financial statements furnished to
it.
61
Burke Capitals opinion was necessarily based upon
financial information, and market, economic and other
conditions, as these existed on, and could be evaluated as of,
the date of its opinion. Burke Capital assumed, in all respects
material to its analysis, that all of the representations and
warranties contained in the merger agreement and all related
agreements are true and correct, that each party to such
agreements will perform all of the covenants required to be
performed by such party under such agreements and that the
conditions precedent in the merger agreement are not waived.
Burke Capital also assumed that there has been no material
change in Superior Bancorps and Community Bancshares
financial condition, results of operations, business or
prospects since the date of the last financial statements made
available to them, that Superior Bancorp and Community
Bancshares will remain as going concerns for all periods
relevant to its analyses. Burke Capital further assumed that, in
the course of obtaining the necessary regulatory and third party
approvals, consents and releases for the merger and the related
transactions, no delay, limitation, restriction or condition
will be imposed that would have a material adverse effect on
Superior Bancorp or Community Bancshares or the contemplated
benefits of the proposed transaction in any way meaningful to
its analysis.
In rendering its opinion, Burke Capital performed a variety of
financial analyses. The following is a summary of the material
analyses performed by Burke Capital, but is not a complete
description of all the analyses underlying Burke Capitals
opinion. The summary includes information presented in tabular
format. In order to fully understand the financial analyses,
these tables must be read together with the accompanying text.
The tables alone do not constitute a complete description of the
financial analyses. The preparation of a fairness opinion is a
complex process involving subjective judgments as to the most
appropriate and relevant methods of financial analysis and the
application of those methods to the particular circumstances.
The process, therefore, is not necessarily susceptible to a
partial analysis or summary description. Burke Capital believes
that its analyses must be considered as a whole and that
selecting portions of the factors and analyses considered
without considering all factors and analyses, or attempting to
ascribe relative weights to some or all such factors and
analyses, could create an incomplete view of the evaluation
process underlying its opinion. Also, no company included in
Burke Capitals comparative analyses described below is
identical to Superior Bancorp or Community Bancshares and no
transaction is identical to the merger. Accordingly, an analysis
of comparable companies or transactions involves complex
considerations and judgments concerning differences in financial
and operating characteristics of the companies and other factors
that could affect the public trading values or merger
transaction values, as the case may be, of Superior Bancorp or
Community Bancshares and the companies to which they are being
compared.
The internal earnings projections provided by Superior Bancorp
were relied upon by Burke Capital in its analyses. Burke Capital
assumed that such projected performance would be achieved, and
expressed no opinion as to such financial projections or the
assumptions on which they were based. The financial projections
furnished to Burke Capital by Superior Bancorp were prepared for
internal purposes only and not with a view towards public
disclosure. These projections, as well as the other estimates
used by Burke Capital in its analyses, were based on numerous
variables and assumptions which are inherently uncertain and,
accordingly, actual results could vary materially from those set
forth in such projections.
In performing its analyses, Burke Capital also made numerous
assumptions with respect to industry performance, business and
economic conditions and various other matters, many of which
cannot be predicted and are beyond the control of Superior
Bancorp, Community Bancshares and Burke Capital. The analyses
performed by Burke Capital are not necessarily indicative of
actual values or future results, which may be significantly more
or less favorable than suggested by such analyses. Burke Capital
prepared its analyses solely for purposes of rendering its
opinion and provided such analyses to the Superior Bancorp board
at the April 20, 2006 meeting. Estimates on the values of
companies are not appraisals and do not necessarily reflect the
prices at which companies or their securities may actually be
sold. Such estimates are inherently subject to uncertainty and
actual values may be materially different. Accordingly, Burke
Capitals analyses do not necessarily reflect the value of
Superior Bancorp common stock or Community Bancshares common
stock or the prices at which Superior Bancorp or Community
Bancshares common stock may be sold at any time. Analyses based
upon forecasts of future results are not necessarily indicative
of actual future results, which may be significantly more or
less favorable than suggested by these analyses. Because these
analyses are inherently subject to uncertainty, being based upon
numerous factors or events beyond the control of the parties or
their respective advisors, none of Superior Bancorp, Community
62
Bancshares or Burke Capital or any other person assumes
responsibility if future results are materially different from
those forecast.
Summary of Proposed Merger. Burke Capital
reviewed the financial terms of the proposed merger whereby the
holders of Community Bancshares common stock shall be entitled
to receive 0.8974 shares of Superior Bancorp common stock
in exchange for their shares of Community Bancshares common
stock. Holders of Community Bancshares options and warrants will
receive cash in the amount of the difference between $10.50 and
the strike price. Based upon the terms of the merger agreement
and Superior Bancorps closing price of $11.48 on
April 13, 2006, Burke Capital calculated a transaction
value of $97,319,351 or $10.34 per Community Bancshares share.
In addition, all Community Bancshares record stockholders at
closing shall receive up to a $0.50 cash dividend per share as
additional consideration subject to limitations further
described in the definitive agreement. Utilizing Community
Bancshares publicly available financial information on the
date of announcement, which was the December 31, 2005
audited financial information, Burke Capital calculated the
following ratios:
|
|
|
|
|
Deal Value
Considerations:
|
|
|
|
|
Offer Price / Fully Diluted Share
|
|
$
|
10.34
|
|
Aggregate Value for Common Shares
|
|
$
|
90,876,233
|
|
Aggregate Value for Outstanding
Options/Warrants
|
|
$
|
6,443,118
|
|
|
|
|
|
|
Total Transaction Value
|
|
$
|
97,319,351
|
|
|
|
|
|
|
Deal Multiples:
|
|
|
|
|
Price/LTM EPS
|
|
|
59.02
|
x
|
Price/2006E EPS
|
|
|
32.44
|
x
|
Price/Book Value
|
|
|
2.20
|
x
|
Price/Tangible Book Value
|
|
|
2.35
|
x
|
Core Deposit Premium
|
|
|
14.32
|
%
|
The fully diluted share count is based upon Community
Bancshares 8,792,641 outstanding common shares and
1,781,687 outstanding options and warrants to purchase common
shares at a weighted average strike price of $6.72 outstanding
as of the date of the announcement.
Analysis
of Superior Bancorp.
Peer Group Performance. Burke Capital used
publicly available information to compare selected operating and
trading statistics for Superior Bancorp with similar statistics
for selected publicly traded companies with operating profiles
reasonably comparable to that of Superior Bancorp. The group
consisted of 34 publicly traded banks, which are referred to as
the Superior Bancorp Peer Group. The Superior
Bancorp Peer Group consisted of Southeastern banks with assets
between $1 billion and $5 billion.
The analysis calculated the median performance of the Superior
Bancorps Peer Group, based upon the latest publicly
available financial data, to Superior Bancorps
December 31, 2005 unaudited financial results. The table
below sets forth the comparative data.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital
|
|
Balance
|
|
Asset
|
|
Employee
|
|
|
Revenues
|
|
Earnings
|
|
Implications
|
|
Sheet
|
|
Quality
|
|
Productivity
|
|
|
|
|
Noninterest
|
|
|
|
|
|
|
|
Pre-
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
|
|
Income/
|
|
|
|
|
|
|
|
Provision,
|
|
|
|
|
|
|
|
NPAs/
|
|
|
|
|
Interest
|
|
Average
|
|
Efficiency
|
|
|
|
|
|
Pre-Tax
|
|
Equity /
|
|
Asset
|
|
Loans/
|
|
Total
|
|
Total Assets/
|
|
|
Margin
|
|
Assets
|
|
Ratio
|
|
ROAA
|
|
ROAE
|
|
Margin
|
|
Assets
|
|
Utilization
|
|
Assets
|
|
Assets
|
|
Employees
|
|
Peer Group Median
|
|
|
4.19%
|
|
|
|
1.05%
|
|
|
|
59.66%
|
|
|
|
1.07
|
%
|
|
|
11.30
|
%
|
|
|
2.03
|
%
|
|
|
9.72
|
%
|
|
|
92.31%
|
|
|
|
73.83
|
%
|
|
|
0.40
|
%
|
|
|
3,333
|
|
Superior Bancorp
|
|
|
3.14%
|
|
|
|
0.75%
|
|
|
|
87.99%
|
|
|
|
(0.41
|
)%
|
|
|
(5.68
|
)%
|
|
|
(0.55
|
)%
|
|
|
7.42
|
%
|
|
|
88.86%
|
|
|
|
68.98
|
%
|
|
|
0.46
|
%
|
|
|
4,067
|
|
Superior Bancorps performance was found to be generally in
the low end compared with the Superior Bancorp peer group.
63
Burke Capital is also compared Superior Bancorps trading
characteristics with the Superior Bancorp Peer Group as
illustrated below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Superior
|
|
|
|
Superior
|
|
|
Peer Group
|
|
|
Bancorp
|
|
|
|
Bancorp
|
|
|
Medians
|
|
|
Quartile
|
|
|
Pricing
Multiples:
|
|
|
|
|
|
|
|
|
|
|
|
|
Price/Book
|
|
|
2.15
|
x
|
|
|
1.91
|
x
|
|
|
2
|
|
Price/Tangible Book
|
|
|
2.43
|
x
|
|
|
2.48
|
x
|
|
|
3
|
|
Price/LTM EPS
|
|
|
NM
|
|
|
|
16.70
|
x
|
|
|
NM
|
|
Trading
Information:
|
|
|
|
|
|
|
|
|
|
|
|
|
Market Capitalization ($M)
|
|
$
|
230.2
|
|
|
$
|
267.2
|
|
|
|
3
|
|
Current Dividend Yield
|
|
|
0.00
|
%
|
|
|
2.04
|
%
|
|
|
4
|
|
3 Mo. Avg. Trading Vol
|
|
|
32,962
|
|
|
|
14,450
|
|
|
|
1
|
|
Weekly Trading
Vol./Shares Outstanding
|
|
|
0.82
|
%
|
|
|
0.58
|
%
|
|
|
1
|
|
Burke Capital noted that Superior Bancorps pricing
multiples and trading metrics were in line with the Superior
Bancorp Peer Group.
Burke Capital then compared Superior Bancorps stock price
performance over one month, three month and six month time
periods to various industry benchmarks. The results of this
relative stock price performance analysis are shown in the
following table.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock Price Performance
|
|
|
|
One
|
|
|
Three
|
|
|
Six
|
|
|
|
Month
|
|
|
Month
|
|
|
Month
|
|
|
S&P 500
|
|
|
0.37
|
%
|
|
|
1.94
|
%
|
|
|
9.55
|
%
|
SNL Bank Index
|
|
|
0.33
|
%
|
|
|
4.17
|
%
|
|
|
10.54
|
%
|
Superior Bancorp
|
|
|
(3.23
|
)%
|
|
|
0.44
|
%
|
|
|
3.26
|
%
|
Burke Capital noted that Superior Bancorps stock price
generally underperformed the selected indexes over the one,
three month and six month time frames leading up to the date
when Burke Capital delivered its oral opinion to the Board on
April 20, 2006.
Analysis
of Community Bancshares.
Peer Group Performance. Burke Capital used
publicly available information to compare selected financial
performance and trading statistics for Community Bancshares with
similar statistics for selected publicly traded companies with
operating profiles reasonably comparable to that of Community
Bancshares. The peer group included 126 bank holding companies,
which are referred to as the Community Bancshares Peer
Group. This Community Bancshares Peer Group consisted of
all publicly traded banks in the southeast, excluding Florida,
with assets between $250 million and $750 million.
The analysis calculated the median performance of the Community
Bancshares Peer Group, based upon the latest publicly available
financial data, to Community Bancshares December 31,
2005 unaudited financial results. The table below sets forth the
comparative data.
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|
|
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|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital
|
|
Balance
|
|
Asset
|
|
Employee
|
|
|
Revenues
|
|
Earnings
|
|
Implications
|
|
Sheet
|
|
Quality
|
|
Productivity
|
|
|
|
|
Noninterest
|
|
|
|
|
|
|
|
Pre-
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
|
|
Income/
|
|
|
|
|
|
|
|
Provision,
|
|
|
|
|
|
|
|
NPAs/
|
|
Total
|
|
|
Interest
|
|
Average
|
|
Efficiency
|
|
|
|
|
|
Pre-Tax
|
|
Equity /
|
|
Asset
|
|
Loans/
|
|
Total
|
|
Assets/
|
|
|
Margin
|
|
Assets
|
|
Ratio
|
|
ROAA
|
|
ROAE
|
|
Margin
|
|
Assets
|
|
Utilization
|
|
Assets
|
|
Assets
|
|
Employees
|
|
Peer Group Median
|
|
|
4.11
|
%
|
|
|
0.75
|
%
|
|
|
63.16
|
%
|
|
|
0.99
|
%
|
|
|
11.74
|
%
|
|
|
1.78
|
%
|
|
|
8.25
|
%
|
|
|
93.37
|
%
|
|
|
72.50
|
%
|
|
|
0.27
|
%
|
|
|
3,417
|
|
Community Bancshares
|
|
|
3.84
|
%
|
|
|
1.10
|
%
|
|
|
89.50
|
%
|
|
|
0.30
|
%
|
|
|
3.80
|
%
|
|
|
0.60
|
%
|
|
|
7.74
|
%
|
|
|
87.52
|
%
|
|
|
58.47
|
%
|
|
|
2.36
|
%
|
|
|
2,066
|
|
Community Bancshares performance was found to be generally
in the low end compared with the Community Bancshares Peer Group.
64
Burke Capital is also compared Community Bancshares
trading characteristics with the Community Bancshares Peer Group
as illustrated below:
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Community
|
|
|
|
Community
|
|
|
Peer Group
|
|
|
Bancshares
|
|
|
|
Bancshares
|
|
|
Medians
|
|
|
Quartile
|
|
|
Pricing
Multiples:
|
|
|
|
|
|
|
|
|
|
|
|
|
Price/Book
|
|
|
1.70
|
x
|
|
|
1.82
|
x
|
|
|
3
|
|
Price/Tangible Book
|
|
|
1.83
|
x
|
|
|
1.91
|
x
|
|
|
3
|
|
Price/LTM EPS
|
|
|
65.30
|
x
|
|
|
17.85
|
x
|
|
|
1
|
|
Trading
Information:
|
|
|
|
|
|
|
|
|
|
|
|
|
Market Capitalization ($M)
|
|
$
|
72.8
|
|
|
$
|
62.2
|
|
|
|
2
|
|
Current Dividend Yield
|
|
|
0.00
|
%
|
|
|
1.30
|
%
|
|
|
3
|
|
3 Mo. Avg. Trading Vol
|
|
|
3,193
|
|
|
|
829
|
|
|
|
1
|
|
Weekly Vol./Shares Outstanding
|
|
|
0.18
|
%
|
|
|
0.16
|
%
|
|
|
2
|
|
Burke Capital noted that Community Bancshares pricing
multiples and trading metrics were generally in line with the
Community Bancshares Peer Group.
Burke Capital then compared Community Bancshares stock
price performance over one month, three month and six month time
periods to various industry benchmarks. The results of this
relative stock price performance analysis are shown below.
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|
|
|
|
|
|
|
|
|
|
|
Stock Price Performance
|
|
|
|
One
|
|
|
Three
|
|
|
Six
|
|
|
|
Month
|
|
|
Month
|
|
|
Month
|
|
|
S&P 500
|
|
|
0.37
|
%
|
|
|
1.94
|
%
|
|
|
9.55
|
%
|
SNL Bank Index
|
|
|
0.33
|
%
|
|
|
4.17
|
%
|
|
|
10.54
|
%
|
Community Bancshares
|
|
|
2.41
|
%
|
|
|
1.55
|
%
|
|
|
4.17
|
%
|
Burke Capital noted that Community Bancshares stock price
outperformed the selected indexes over the one month time frame
leading up the date when Burke Capital delivered its oral
opinion to the Superior Bancorp board on April 20, 2006 and
underperformed the selected indexes over the three month and six
month time frames leading up to the date when Burke Capital
delivered its oral opinion to the Superior Bancorp board on
April 20, 2006.
65
Contribution Analysis. Burke Capital computed
the contribution of Community Bancshares and Superior Bancorp to
various elements of the pro forma entitys income
statement, balance sheet and market capitalization, excluding
estimated cost savings and operating synergies. The following
table compares the pro forma ownership in the combined company,
based upon the exchange ratio, to each companys respective
contribution to each element of the analysis.
|
|
|
|
|
|
|
|
|
|
|
Contribution
|
|
|
|
Superior
|
|
|
Community
|
|
|
|
Bancorp
|
|
|
Bancshares
|
|
|
Pro Forma Common Ownership
|
|
|
76.99%
|
|
|
|
23.01%
|
|
Pro Forma Diluted Ownership(1)
|
|
|
75.67%
|
|
|
|
24.33%
|
|
Earnings
(000s):
|
|
|
|
|
|
|
|
|
2006E Earnings
|
|
|
70.40%
|
|
|
|
29.60%
|
|
2007E Earnings
|
|
|
78.93%
|
|
|
|
21.07%
|
|
Balance Sheet (2006E)
(000s):
|
|
|
|
|
|
|
|
|
Loans
|
|
|
77.90%
|
|
|
|
22.10%
|
|
Assets
|
|
|
78.18%
|
|
|
|
21.82%
|
|
Deposits
|
|
|
76.88%
|
|
|
|
23.12%
|
|
Equity
|
|
|
80.52%
|
|
|
|
19.48%
|
|
Tangible Equity
|
|
|
75.34%
|
|
|
|
24.66%
|
|
|
|
|
(1) |
|
Assumes Superior Bancorp total diluted shares as well as a 100%
stock transaction (option/warrant spread exchanged for stock) |
The contribution analysis indicated that the pro forma ownership
of Superior Bancorp common stock issuable to Community
Bancshares stockholders in the merger was slightly greater than
projected earnings contribution in 2007 and generally in line
with 2006 projected balance sheet projections.
Analysis of Selected Merger
Transactions. In order to address the
specific valuation considerations within the market that
Community Bancshares serves, Burke Capital selected a group of
comparable merger and acquisition transactions and compared the
pricing multiples to the multiples implied by the merger
consideration. Specifically, Burke Capital selected bank merger
and acquisition transactions according to the following criteria:
|
|
|
|
|
merger and acquisition transactions announced after
January 1, 2004;
|
|
|
|
deal value between $15 million and $1 billion; and
|
|
|
|
sellers located in the Southeast (excluding Florida).
|
Burke Capital selected 52 transactions fitting the criteria
listed above as being comparable to the proposed merger.
66
Burke Capital reviewed the multiples of transaction value at
announcement to last twelve months earnings, transaction
value to book value, transaction value to tangible book value,
and book premium to core deposits and computed high, low, mean,
median, and quartile multiples and premiums for the
transactions. These median multiples and premiums were applied
to Community Bancshares financial information as of and
for the period ended December 31, 2005 and were used to
impute transaction values. As illustrated in the following
table, Burke Capital derived an imputed range of values per
share of Community Bancshares common stock of $5.10 to
$13.44 based upon the mean and median multiples of the selected
Southeastern transactions.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Implied
|
|
|
|
Implied
|
|
|
|
|
|
|
Value/
|
|
|
|
Value/
|
|
Community
|
|
|
|
|
Community
|
|
|
|
Community
|
|
Bancshares
|
|
|
Median
|
|
Bancshares
|
|
Mean
|
|
Bancshares
|
|
Merger
|
|
|
Multiple
|
|
Share
|
|
Multiple
|
|
Share
|
|
Consideration
|
|
Price/LTM E.P.S
|
|
25.55x
|
|
$
|
5.10
|
|
|
|
27.82x
|
|
|
$
|
5.45
|
|
|
|
59.02x
|
|
Price/Book per Share
|
|
2.33x
|
|
$
|
10.88
|
|
|
|
2.45x
|
|
|
$
|
11.35
|
|
|
|
2.20x
|
|
Price/Tangible Book Per Share
|
|
2.55x
|
|
$
|
11.07
|
|
|
|
2.52
|
x
|
|
$
|
10.94
|
|
|
|
2.33x
|
|
Book Premium/Core Deposits
|
|
22.81%
|
|
$
|
13.44
|
|
|
|
22.05
|
%
|
|
$
|
13.44
|
|
|
|
14.32
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Median Value
|
|
$
|
10.98
|
|
|
|
|
|
|
$
|
11.15
|
|
|
$
|
10.34
|
|
|
|
Mean Value
|
|
$
|
10.12
|
|
|
|
|
|
|
$
|
10.30
|
|
|
|
|
|
|
|
Implied Range
|
|
$
|
5.10
|
|
|
|
< = >
|
|
|
$
|
13.44
|
|
|
|
|
|
The analysis showed that the merger consideration per share of
$10.34 is within the range of values imputed by the median
multiples of the comparable transactions.
Market Premium Analysis. Burke Capital
compared Superior Bancorps offer price to Community
Bancshares recent stock price activity. Burke Capital
analyzed Community Bancshares stock price 1 day prior
to announcement, as well as Community Bancshares
5 day, one month, and three month average trading prices
prior to announcement. The following chart illustrates Superior
Bancorps offer compared with Community Bancshares
stock price performance for various periods.
Burke Capital noted that the implied market premiums Community
Bancshares trading for 1 day, 5 day,
1 month and 3 months prior to the April 20 board
meeting were slightly less than market premiums of the precedent
transactions.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Superior
|
|
|
|
|
|
|
|
|
|
|
|
|
Bancorp
|
|
|
Stock
|
|
|
|
|
|
Precedent
|
|
|
|
Offer
|
|
|
Price
|
|
|
Premium
|
|
|
Transactions
|
|
|
1-Day
|
|
$
|
10.34
|
|
|
$
|
8.65
|
|
|
|
19.49
|
%
|
|
|
24.38%
|
|
5-Day
(average)
|
|
$
|
10.34
|
|
|
$
|
8.54
|
|
|
|
21.02
|
%
|
|
|
24.94%
|
|
1-Month
(average)
|
|
$
|
10.34
|
|
|
$
|
8.55
|
|
|
|
20.95
|
%
|
|
|
29.24%
|
|
3-Month
(average)
|
|
$
|
10.34
|
|
|
$
|
8.48
|
|
|
|
21.82
|
%
|
|
|
25.60%
|
|
Discounted Cash Flow Analysis. Using a
discounted cash flow analysis, Burke Capital estimated the
present value of the future stream of earnings and dividends
that Community Bancshares could produce over the next five years
based upon an internal earnings and balance sheet forecast for
2006 2009. Burke Capital performed discounted cash
flow analyses based upon terminal values to trailing earnings.
In order to derive the terminal value of Community
Bancshares earnings stream beyond 2009, Burke Capital
assumed terminal value multiples ranging from 14.0x to 22.0x of
fiscal year 2009 net income. 2009E earnings included the
impact of $5.8 million in pretax synergies. The estimated
dividend streams and terminal values were then discounted to
present values using different estimated discount rates (ranging
from 10.0% to 14.0%) chosen to reflect different assumptions
regarding the required rates of return to holders or prospective
buyers of Community Bancshares common stock. This discounted
cash flow analysis indicated a value range between $7.91 and
$13.28 per share of Community Bancshares common stock.
67
The value of the consideration offered by Superior Bancorp to
Community Bancshares in the merger is $10.34 per share of
Community Bancshares common stock, which is within the range of
values imputed from the discounted cash flow analysis.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LTM Earnings
|
|
Discount Rates
|
|
Multiple
|
|
10.0%
|
|
12.0%
|
|
|
|
|
|
14.0%
|
|
|
14.0x
|
|
$ 9.10
|
|
|
$
|
8.47
|
|
|
|
|
|
|
$
|
7.91
|
|
16.0x
|
|
$10.14
|
|
|
$
|
9.43
|
|
|
|
|
|
|
$
|
8.79
|
|
18.0x
|
|
$11.19
|
|
|
$
|
10.39
|
|
|
|
|
|
|
$
|
9.67
|
|
20.0x
|
|
$12.23
|
|
|
$
|
11.35
|
|
|
|
|
|
|
$
|
10.56
|
|
22.0x
|
|
$13.28
|
|
|
$
|
12.31
|
|
|
|
|
|
|
$
|
11.44
|
|
|
|
Implied Value/Share
|
|
|
$
|
7.91
|
|
|
|
< >
|
|
|
$
|
13.28
|
|
|
|
Superior Bancorp
Offer
|
|
|
|
|
|
|
$
|
10.34
|
|
|
|
|
|
Other Analyses and Factors. Burke Capital took
into consideration various other factors and analyses,
including: historical market prices and trading volumes for
Superior Bancorps and Community Bancshares common
stock; movements in the common stock of selected publicly-traded
companies and movements in the S&P Bank Index.
Information Regarding Burke Capital. The
engagement letter between Burke Capital and Superior Bancorp
provides that Superior Bancorp will pay Burke Capital a
transaction fee equal to 0.50% of the transaction value payable
upon the completion of the merger. In addition, Superior Bancorp
has agreed to reimburse Burke Capital for its reasonable
expenses incurred in connection with its engagement, including
reasonable attorneys fees and disbursements, and to
indemnify Burke Capital against specific liabilities and
expenses relating to or arising out of its engagement, including
liabilities under the federal securities laws.
Opinion
of Community Bancshares Financial Advisor
FIG has delivered to the board of directors of Community
Bancshares its opinion that, based upon and subject to the
various considerations set forth in its written opinion dated
April 29, 2006, the total transaction consideration to be
paid to the stockholders of Community Bancshares is fair from a
financial point of view as of such date. In requesting
FIGs advice and opinion, Community Bancshares imposed no
limitations upon FIG with respect to the investigations made or
procedures followed by it in rendering its opinion. The full
text of the opinion of FIG, dated April 29, 2006, which
describes the procedures followed, assumptions made, matters
considered and limitations on the review undertaken, is attached
hereto as Annex D. Community Bancshares stockholders should
read this opinion in its entirety.
FIG is a nationally recognized investment banking firm and, as
part of its investment banking business, is regularly engaged in
the valuation of financial institutions in connection with
mergers and acquisitions, private placements of securities and
valuations for other purposes. As a specialist in securities of
financial institutions, FIG has experience in, and knowledge of,
banks, thrifts and bank and thrift holding companies. Community
Bancshares board of directors selected FIG to act as its
financial advisor in connection with the merger on the basis of
the firms reputation and expertise in transactions such as
the merger and its knowledge of Community Bancshares in placing
approximately $20 million of Community Bancshares
common stock in the fourth quarter of 2003 and the first quarter
of 2004.
FIG will receive a fee equal to 0.75% of the value of the
transaction plus $25,000 from Community Bancshares for
performing its financial advisory services in connection with
the merger and rendering a written opinion to the board of
directors of Community Bancshares as to the fairness, from a
financial point of view, of the merger to Community
Bancshares stockholders, and all but $25,000 of this fee
is contingent upon the consummation of the merger. Further,
Community Bancshares has agreed to indemnify FIG against certain
claims or liabilities arising out of FIGs engagement by
Community Bancshares.
FIGs opinion is directed only to the fairness, from a
financial point of view, of the total transaction consideration,
and, as such, does not constitute a recommendation to any
Community Bancshares stockholder as to
68
how the stockholder should vote at the Community Bancshares
annual meeting. The summary of the opinion of FIG set forth in
this joint statement/prospectus is qualified in its entirety by
reference to the full text of the opinion.
The following is a summary of the analyses performed by FIG in
connection with its fairness opinion and discussed in a
presentation to the board of directors of Community Bancshares
by FIG. The summary set forth below does not purport to be a
complete description of either the analyses performed by FIG in
rendering its opinion or the presentation delivered by FIG to
the board of directors of Community Bancshares, but it does
summarize all of the material analyses performed and presented
by FIG.
The preparation of a fairness opinion involves various
determinations as to the most appropriate and relevant methods
of financial analyses and the application of those methods to
the particular circumstances. In arriving at its opinion, FIG
did not attribute any particular weight to any analysis and
factor considered by it, but rather made qualitative judgments
as to the significance and relevance of each analysis and
factor. FIG may have given various analyses more or less weight
than other analyses. Accordingly, FIG believes that its analyses
and the following summary must be considered as a whole and that
selecting portions of its analyses, without considering all
factors and analyses, could create an incomplete view of the
process underlying the analyses set forth in its report to the
board of directors of Community Bancshares and its fairness
opinion.
In performing its analyses, FIG made numerous assumptions with
respect to industry performance, general business and economic
conditions and other matters, many of which are beyond the
control of Community Bancshares and Superior Bancorp. The
analyses performed by FIG are not necessarily indicative of
actual value or actual future results, which may be
significantly more or less favorable than suggested by such
analyses. Such analyses were prepared solely as part of
FIGs analysis of the fairness of the transaction
consideration, from a financial point of view, to Community
Bancshares stockholders. The analyses do not purport to be an
appraisal or to reflect the prices at which a company might
actually be sold or the prices at which any securities may trade
at the present time or at any time in the future. FIGs
opinion does not address the relative merits of the merger as
compared to any other business combination in which Community
Bancshares might engage.
During the course of its engagement, and as a basis for arriving
at its opinion, FIG reviewed and analyzed material bearing upon
the financial and operating conditions of Community Bancshares
and Superior Bancorp and material prepared in connection with
the merger, including, among other things, the following:
|
|
|
|
|
the merger agreement;
|
|
|
|
certain historical publicly available information concerning
Community Bancshares and Superior Bancorp;
|
|
|
|
certain internal financial statements and other financial and
operating data concerning Community Bancshares and Superior
Bancorp;
|
|
|
|
certain financial projections prepared by the managements of
Community Bancshares and Superior Bancorp;
|
|
|
|
historical market prices and trading volumes for Superior
Bancorp common stock;
|
|
|
|
the nature and terms of recent merger and acquisition
transactions, to the extent publicly available, involving banks
and bank holding companies that FIG considered relevant and
comparable;
|
|
|
|
the pro forma ownership of Superior Bancorp common stock by
Community Bancshares stockholders relative to the pro forma
contribution of Community Bancshares assets, liabilities,
equity and earnings to the combined company;
|
|
|
|
the pro forma impact of the merger on the combined
companys earnings per share, consolidated capitalization
and financial ratios; and
|
|
|
|
such other factors as FIG deemed appropriate.
|
69
FIG conducted meetings and had discussions with members of
senior management of Community Bancshares and Superior Bancorp
for purposes of reviewing the future prospects of Community
Bancshares and Superior Bancorp, including the financial
forecasts related to their respective businesses, earnings,
assets, liabilities and the amount and timing of cost savings
and revenue enhancements expected to be achieved as a result of
the merger. FIG also took into account its experience in other
transactions, as well as its knowledge of the commercial banking
and thrift industries and its general experience in securities
valuations for such institutions.
In rendering its opinion, FIG assumed, without independent
verification, the accuracy and completeness of the publicly and
non-publicly available financial and other information furnished
to FIG by Community Bancshares and Superior Bancorp and relied
upon the accuracy of the representations and warranties of the
parties contained in the merger agreement. FIG also assumed that
the financial forecasts furnished to or discussed with FIG by
Community Bancshares and Superior Bancorp were reasonably
prepared and reflected the best currently available estimates
and judgments of senior management of Community Bancshares and
Superior Bancorp as to the future financial performance of
Community Bancshares and Superior Bancorp. FIG has not made any
independent evaluation or appraisal of any properties, assets or
liabilities of Community Bancshares or Superior Bancorp.
70
Comparable Transaction Analysis. As part of
its analysis, FIG reviewed three groups of comparable merger
transactions. The first peer group included transactions that
have occurred since January 1, 2004, and that involved
target banks nationwide (excluding transactions in California
and Florida), that had total assets between $250 million
and $750 million and a return on average assets
(ROAA) of less than 1.00% (the National Merger
Group). This National Merger Group consisted of the
following 33 transactions:
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|
|
|
|
|
|
Buyer
|
|
State
|
|
Seller
|
|
State
|
|
Mercantile Bankshares Corp.
|
|
MD
|
|
James Monroe Bancorp Inc.
|
|
VA
|
National Bancshares Inc.
|
|
IA
|
|
Metrocorp Inc.
|
|
IL
|
Cathay General Bancorp Inc.
|
|
CA
|
|
Great Eastern Bank
|
|
NY
|
F.N.B. Corp.
|
|
PA
|
|
Legacy Bank
|
|
PA
|
National City Corp.
|
|
OH
|
|
Forbes First Financial Corp.
|
|
MO
|
Castle Creek Capital Partners
|
|
CA
|
|
LDF Incorporated
|
|
IL
|
FNB Corp.
|
|
NC
|
|
Integrity Financial Corp
|
|
NC
|
BancorpSouth Inc.
|
|
MS
|
|
American State Bank Corp.
|
|
AR
|
North American Bcshs Inc.
|
|
TX
|
|
State B&T of Seguin TX
|
|
TX
|
New York Community Bancorp
|
|
NY
|
|
Long Island Financial Corp.
|
|
NY
|
ABC Bancorp
|
|
GA
|
|
First National Banc Inc.
|
|
GA
|
Capital Bank Corp.
|
|
NC
|
|
1st State Bancorp Inc.
|
|
NC
|
Western Illinois Bancshares
|
|
IL
|
|
Midwest Bank of Western IL
|
|
IL
|
FLAG Financial Corp.
|
|
GA
|
|
First Capital Bancorp, Inc.
|
|
GA
|
Cullen/Frost Bankers Inc.
|
|
TX
|
|
Horizon Capital Bank
|
|
TX
|
Willow Grove Bancorp Inc.
|
|
PA
|
|
Chester Valley Bancorp Inc.
|
|
PA
|
Fulton Financial Corp.
|
|
PA
|
|
SVB Financial Services Inc.
|
|
NJ
|
Sky Financial Group Inc.
|
|
OH
|
|
Belmont Bancorp.
|
|
OH
|
Centennial Bank Holdings Inc.
|
|
CO
|
|
First Mainstreet Financial
|
|
CO
|
Home Bancshares Inc.
|
|
AR
|
|
TCBancorp Inc.
|
|
AR
|
Valley National Bancorp
|
|
NJ
|
|
NorCrown Bank
|
|
NJ
|
Wintrust Financial Corp.
|
|
IL
|
|
Antioch Holding Company
|
|
IL
|
F.N.B. Corp.
|
|
PA
|
|
NSD Bancorp Inc.
|
|
PA
|
IBERIABANK Corp.
|
|
LA
|
|
American Horizons Bancorp Inc
|
|
LA
|
Wells Fargo & Co.
|
|
CA
|
|
First Community Capital Corp.
|
|
TX
|
Peoples Holding Co.
|
|
MS
|
|
Heritage Financial Hldg Corp
|
|
AL
|
Wintrust Financial Corp.
|
|
IL
|
|
Northview Financial Corp.
|
|
IL
|
F.N.B. Corp.
|
|
PA
|
|
Slippery Rock Financial Corp.
|
|
PA
|
TierOne Corp.
|
|
NE
|
|
United Nebraska Financial Co.
|
|
NE
|
Centennial C Corp
|
|
CO
|
|
Centennial Bank Holdings Inc.
|
|
CO
|
Eurobancshares Inc
|
|
PR
|
|
Bank & Trust of Puerto
Rico
|
|
PR
|
Sun Bancorp Inc.
|
|
NJ
|
|
Community Bancorp of NJ
|
|
NJ
|
Heartland Financial USA Inc.
|
|
IA
|
|
Rocky Mountain Bancorp. Inc.
|
|
MT
|
71
FIG also reviewed comparable mergers involving banks
headquartered in the Southeast that were announced since
January 1, 2004, and in which the total assets of the
seller were between $250 million and $750 million (the
Southeast Merger Group). The Southeast Merger Group
consisted of the following 12 transactions:
|
|
|
|
|
|
|
Buyer
|
|
State
|
|
Seller
|
|
State
|
|
BB&T Corp.
|
|
NC
|
|
First Citizens Bancorp
|
|
TN
|
Pinnacle Financial Partners
|
|
TN
|
|
Cavalry Bancorp Inc.
|
|
TN
|
FNB Corp.
|
|
NC
|
|
Integrity Financial Corp
|
|
NC
|
Liberty Bancshares Inc.
|
|
AR
|
|
Russellville Bancshares Inc
|
|
AR
|
BancorpSouth Inc.
|
|
MS
|
|
American State Bank Corp.
|
|
AR
|
ABC Bancorp
|
|
GA
|
|
First National Banc Inc.
|
|
GA
|
Capital Bank Corp.
|
|
NC
|
|
1st State Bancorp Inc.
|
|
NC
|
First Citizens Bancorp
|
|
SC
|
|
Summit Financial Corp.
|
|
SC
|
First National Security Co.
|
|
AR
|
|
First Community Banking Corp.
|
|
AR
|
Home Bancshares Inc.
|
|
AR
|
|
TCBancorp Inc.
|
|
AR
|
Peoples Holding Co.
|
|
MS
|
|
Heritage Financial Hldg Corp
|
|
AL
|
Capital City Bank Group Inc.
|
|
FL
|
|
Farmers & Merchants Bank
|
|
GA
|
In addition, FIG also reviewed comparable mergers involving
banks headquartered in Alabama that were announced since
January 1, 2002 (the Alabama Merger Group). The
Alabama Merger Group consisted of the following 11 transactions:
|
|
|
|
|
|
|
Buyer
|
|
State
|
|
Seller
|
|
State
|
|
First M & F Corp.
|
|
MS
|
|
Columbiana Bancshares Inc.
|
|
AL
|
West Alabama Capital Corp.
|
|
AL
|
|
West Alabama Bancshares Inc.
|
|
AL
|
Heritage First Bancshares Inc
|
|
GA
|
|
Dekalb Bancshares Inc.
|
|
AL
|
Tombigbee Bancshares Inc.
|
|
AL
|
|
Sweet Water State Bank
|
|
AL
|
Peoples Holding Co.
|
|
MS
|
|
Heritage Financial Hldg Corp
|
|
AL
|
Wachovia Corp.
|
|
NC
|
|
SouthTrust Corp.
|
|
AL
|
Community Capital Bancshares
|
|
GA
|
|
First Bank of Dothan
|
|
AL
|
BancTrust Financial Group
Inc.
|
|
AL
|
|
CommerceSouth Inc.
|
|
AL
|
Charter Financial Corp. (MHC)
|
|
GA
|
|
EBA Bancshares, Inc.
|
|
AL
|
Bancorp of Lucedale Inc.
|
|
MS
|
|
Grand Bancorp Inc.
|
|
AL
|
Marion County Bancshares,
Inc.
|
|
AL
|
|
Triangle Bancorporation
|
|
AL
|
FIG calculated the medians and averages of the following
relevant transaction ratios in the Nationwide Merger Group, the
Southeast Merger Group and the Alabama Merger Group: the
percentage of the offer value to the acquired companys
total assets, the multiple of the offer value to the acquired
companys earnings for the 12 months preceding the
announcement date of the transaction; the multiple of the offer
value to the acquired companys tangible book value; and
the tangible book value premium to core deposits. FIG compared
these multiples with the corresponding multiples for the
Community Bancshares merger, valuing the total consideration
that would be received pursuant to the Plan of Merger at
approximately $99.2 million (excluding the potential
special dividend payment), or $10.38 per Community
Bancshares diluted share, based on Superior Bancorps
20-day
average trading price of $11.57 as of April 27, 2006. In
calculating the multiples for the merger, FIG used Community
Bancshares
72
earnings for the 12 months ended December 31, 2005,
and Community Bancshares tangible book value per share,
total assets, and total deposits as of December 31, 2005.
The results of this analysis are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Offer Value to
|
|
|
|
|
|
|
|
|
|
|
|
|
12 Months
|
|
|
Ratio of Tangible
|
|
|
|
Total
|
|
|
Tangible
|
|
|
Preceding
|
|
|
Book Value
|
|
|
|
Assets
|
|
|
Book Value
|
|
|
Earnings
|
|
|
Premium to Core
|
|
|
|
(%)
|
|
|
(x)
|
|
|
(x)
|
|
|
Deposits (%)
|
|
|
Community Bancshares, Inc.
|
|
|
16.3
|
|
|
|
2.42
|
|
|
|
56.6
|
|
|
|
14.6
|
|
National Merger Group median
|
|
|
19.2
|
|
|
|
2.42
|
|
|
|
24.8
|
|
|
|
18.6
|
|
National Merger Group average
|
|
|
18.4
|
|
|
|
2.54
|
|
|
|
24.9
|
|
|
|
18.0
|
|
Southeast Merger Group median
|
|
|
18.2
|
|
|
|
2.37
|
|
|
|
19.7
|
|
|
|
19.9
|
|
Southeast Merger Group average
|
|
|
20.4
|
|
|
|
2.39
|
|
|
|
19.7
|
|
|
|
19.7
|
|
Alabama Merger Group median
|
|
|
16.2
|
|
|
|
1.85
|
|
|
|
19.2
|
|
|
|
10.1
|
|
Alabama Merger Group average
|
|
|
17.7
|
|
|
|
2.02
|
|
|
|
20.4
|
|
|
|
14.3
|
|
Discounted Cash Flow Analysis. FIG estimated
the present value of all shares of Community Bancshares common
stock by estimating the value of Community Bancshares
estimated future earnings stream beginning in 2006. Reflecting
Community Bancshares internal projections and FIG
estimates, FIG assumed net income in 2006, 2007, 2008, 2009, and
2010 of $3.075 million, $4.365 million,
$5.028 million, $5.765 million, and
$6.973 million, respectively. The present value of these
earnings was calculated based on a range of discount rates of
11.0%, 12.0%, and 13.0%, respectively. In order to derive the
terminal value of Community Bancshares earnings stream
beyond 2010, FIG performed three separate analyses:
1) annual growth into perpetuity of five percent (5%),
2) an acquisition in 2010 at 21.8 times estimated earnings
in that year and 3) an acquisition in 2010 at 2.35 times
estimated book value in that year. The present value of these
terminal amounts was then calculated based on the range of
discount rates mentioned above. These rates and values were
chosen to reflect different assumptions regarding the required
rates of return of holders or prospective buyers of Community
Bancshares common stock. The three analyses and the underlying
assumptions yielded a range of value for all the shares of
Community Bancshares stock of approximately 1) $7.27 to
$9.86 per diluted share; 2) $8.91 to $9.74 per
diluted share and 3) $9.41 to $10.92 per diluted
share, compared to the merger consideration of $10.38 per
diluted share (excluding any payment of the special dividend).
Contribution Analysis. FIG prepared a
contribution analysis showing percentages of total assets, total
net loans, total deposits, and total common equity and tangible
equity at December 31, 2005 for Community Bancshares and
for Superior Bancorp, and actual 12 months preceding
earnings and estimated fiscal year 2005 earnings that would be
contributed to the combined company on a pro-forma basis by
Community Bancshares and Superior Bancorp. This analysis
indicated that holders of Community Bancshares common stock
would own approximately 22.4% of the pro forma common shares
outstanding of Superior Bancorp, assuming an exchange ratio of
0.8974, while contributing a median of 22.6% of the financial
components listed above. This pro forma ownership is for only
the consideration to be paid in stock and does not take into
consideration the cash consideration to be paid to the holders
of options and warrants to purchase Community Bancshares common
stock, or any potential special dividend provided by the merger
agreement.
|
|
|
|
|
|
|
Community Bancshares
|
|
|
|
Contribution
|
|
|
|
to Superior Bancorp
|
|
|
Total assets
|
|
|
22.6%
|
|
Total net loans
|
|
|
20.8%
|
|
Total deposits
|
|
|
22.8%
|
|
Total equity
|
|
|
18.9%
|
|
Total Tangible Equity
|
|
|
24.0%
|
|
Net income estimated
fiscal year 2006
|
|
|
26.3%
|
|
Average Community Contribution
Percentage
|
|
|
22.6%
|
|
Actual Community Pro Forma
Ownership
|
|
|
22.4%
|
|
73
Peer Comparable Analysis. Using publicly
available information, FIG compared the financial performance
and stock market valuation of Superior Bancorp with the
following publicly traded banking institutions with assets
between $1 billion and $2.5 billion as of
December 31, 2005:
|
|
|
|
|
Company Name
|
|
Total Assets ($)
|
|
|
Ameris Bancorp
|
|
|
1,697,209
|
|
BancTrust Financial Group,
Inc.
|
|
|
1,305,497
|
|
Bank of Granite Corporation
|
|
|
1,106,724
|
|
Bank of the Ozarks, Inc.
|
|
|
2,134,882
|
|
Coastal Financial Corporation
|
|
|
1,581,054
|
|
Colony Bankcorp, Inc.
|
|
|
1,108,338
|
|
Commercial Bankshares, Inc.
|
|
|
1,032,720
|
|
Fidelity Southern Corporation
|
|
|
1,405,703
|
|
First Bancorp
|
|
|
1,801,050
|
|
First M & F Corporation
|
|
|
1,267,118
|
|
First Security Group, Inc.
|
|
|
1,040,692
|
|
FLAG Financial Corporation
|
|
|
1,702,861
|
|
FNB Corp.
|
|
|
1,102,085
|
|
FNB Financial Services Corporation
|
|
|
1,007,406
|
|
GB&T Bancshares, Inc.
|
|
|
1,584,094
|
|
Greene County Bancshares,
Inc.
|
|
|
1,619,989
|
|
NBC Capital Corporation
|
|
|
1,446,117
|
|
PAB Bankshares, Inc.
|
|
|
1,017,326
|
|
Pinnacle Financial Partners,
Inc.
|
|
|
1,016,772
|
|
Renasant Corporation
|
|
|
2,397,702
|
|
SCBT Financial Corporation
|
|
|
1,925,856
|
|
Seacoast Banking Corporation of
Florida
|
|
|
2,132,174
|
|
Security Bank Corporation
|
|
|
1,662,413
|
|
Southern Community Financial
Corp.
|
|
|
1,285,524
|
|
Summit Financial Group, Inc.
|
|
|
1,109,532
|
|
TIB Financial Corp.
|
|
|
1,076,070
|
|
Yadkin Valley Bank and Trust
Company
|
|
|
1,024,295
|
|
Indications of such financial performance and stock market
valuation included profitability measures, earnings composition,
operating and performance metrics, loan portfolio compositions,
deposit compositions, yield and cost analysis, capital adequacy,
asset quality, and reserve adequacy, all based on financial
information as of December 31, 2005 and, where relevant,
closing stock market information as of April 27, 2005.
Selected market information for Superior Bancorp and the group
of comparable companies that was analyzed is provided below.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Price/
|
|
Wkly Vol/
|
|
|
|
Inside
|
|
|
Stock
|
|
Price/
|
|
Price/
|
|
2006 Est.
|
|
Shares
|
|
Mkt. Cap
|
|
Ownership
|
|
|
Price
|
|
TBV (%)
|
|
Book (%)
|
|
EPS(x)
|
|
Out
|
|
($m)
|
|
(%)
|
|
Superior Bancorp
|
|
$
|
11.52
|
|
|
|
247.3
|
|
|
|
218.8
|
|
|
|
37.1
|
|
|
|
0.84
|
|
|
|
247.3
|
|
|
|
28.6
|
|
Comparable Company Average
|
|
|
NM
|
|
|
|
252.5
|
|
|
|
199.2
|
|
|
|
15.5
|
|
|
|
0.59
|
|
|
|
253.9
|
|
|
|
17.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NPAs/
|
|
Reserves/
|
|
|
|
|
|
|
Equity
|
|
Efficiency
|
|
Average
|
|
NPAs
|
|
|
ROAE (%)
|
|
ROAA (%)
|
|
Ratio (%)
|
|
Ratio (%)
|
|
Assets (%)
|
|
(%)
|
|
Superior Bancorp
|
|
|
NM
|
|
|
|
NM
|
|
|
|
6.63
|
|
|
|
87.99
|
|
|
|
0.47
|
|
|
|
182.2
|
|
Comparable Company Average
|
|
|
12.11
|
|
|
|
0.98
|
|
|
|
7.01
|
|
|
|
60.40
|
|
|
|
0.45
|
|
|
|
259.1
|
|
74
Based upon the foregoing analyses and other investigations
and assumptions set forth in its opinion, without giving
specific weightings to any one factor or comparison, FIG
determined that the transaction consideration was fair, from a
financial point of view, to Community Bancshares
stockholders.
The
Merger Agreement
The merger agreement has been included as Annex A to
this joint proxy statement/prospectus in order to provide you
with information regarding its terms. It is not intended to
provide any other factual information about the parties. The
merger agreement contains representations and warranties the
parties made to each other. The assertions contained in those
representations and warranties are qualified by information
contained in confidential disclosure schedules that the parties
have exchanged. These disclosure schedules contain information
that modifies, qualifies and creates exceptions to the
representations and warranties set forth in the merger
agreement. Accordingly, you should not rely on the
representations and warranties contained in the merger agreement
as characterizations of the actual state of facts, since they
are modified in important part by the underlying disclosure
schedules. In addition, information concerning the subject
matter of the representations and warranties may have changed
since the date of the merger agreement. You should rely only on
this joint proxy statement/prospectus, other filings made by the
parties with the SEC and other public announcements or
statements by the parties for factual information about the
parties.
Effect
of the Merger
Subject to the terms of the merger agreement, and in accordance
with Delaware law, Community Bancshares will merge with and into
Superior Bancorp and the separate legal existence of Community
Bancshares will cease. Superior Bancorp will be the surviving
corporation. All property, rights, powers, duties, obligations,
debts and liabilities of Community Bancshares will automatically
be deemed transferred to Superior Bancorp, as the surviving
corporation in the merger. The restated certificate of
incorporation and the bylaws of Superior Bancorp in effect at
the effective time of the merger will govern Superior Bancorp
until amended or repealed in accordance with applicable law.
Superior Bancorp will continue as the surviving corporation
under the same name after the merger is completed.
Community
Bank
Subject to the terms of the merger agreement, and in accordance
with applicable law, Community Bank will merge with and into
Superior Bank at the effective time of the merger. Superior Bank
will continue as the surviving corporation after the merger is
completed.
What
Community Bancshares Stockholders Will Receive
On the effective date of the merger, each share of Community
Bancshares common stock will be converted into the right to
receive 0.8974 shares of Superior Bancorp common stock,
subject to Community Bancshares price termination right
described in the next section below.
In the event that there is a shortfall between the required net
worth of Community Bancshares of $44,333,000 and the actual
amount of the net worth of Community Bancshares at the effective
time of the merger, then the exchange ratio shall be adjusted
downward by a reduction factor equal to the percentage obtained
by dividing the net worth shortfall amount by $44,333,000. The
net worth of Community Bancshares will be calculated pursuant to
the merger agreement as Community Bancshares
stockholders equity less adjustments for specified loans
and credits. Net worth will not be reduced as a result of any
expense incurred or losses realized as a result of the merger
agreement, changes in laws or generally accepted accounting
principals (GAAP), the transactions contemplated by
the merger agreement or any actions taken at the request or with
the consent of Superior Bancorp, any
mark-to-market
changes in securities, pension assets and derivative contracts
or any cost terminating or changing any employee benefit plans.
In addition, Superior Bancorp will not issue fractional shares
of Superior Bancorp common stock to Community Bancshares
stockholders. If, as a Community Bancshares stockholder, you are
otherwise entitled to receive a fractional share of Superior
Bancorp common stock under the exchange procedure described
below, you
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will instead have the right to receive cash, without interest,
in an amount equal to such fractional part of a share that would
otherwise be due to you and the closing price per share of
Superior Bancorp common stock on the effective date of the
merger.
Community
Bancshares Price Termination Right
Community Bancshares may, but is not required to, terminate the
merger agreement during the five day period after the date all
consents and regulatory approvals have been received (the
determination date) if (1) the ten-day average closing
price per share of Superior Bancorp common stock as reported on
the NASDAQ National Market System immediately preceding the
determination date is less than $9.94, and (2) the number
obtained by dividing the Superior Bancorp stock price on the
determination date by $11.70 is less than the Bank Index Ratio
minus 0.15. The Bank Index Ratio is equal to the quotient
obtained by dividing the average of the NASDAQ Bank Index for
ten consecutive trading days immediately preceding the
determination date by 3193.47, the value of the NASDAQ Bank
Index on the date of the merger agreement. If Community
Bancshares exercises its option to terminate, Community
Bancshares must give notice to Superior Bancorp. The merger
agreement will not be terminated if Superior Bancorp agrees
within five business days of receipt of such notice to increase
the consideration for the merger by paying additional
consideration in stock, cash or a combination of both so that
consideration will be valued at the lesser of (1) the
product of 0.85 and $11.70, multiplied by the exchange ratio and
(2) the product of the Bank Index Ratio by 11.70,
multiplied by the exchange ratio. No assurance can be given as
to whether Community Bancshares board of directors would
exercise such right to terminate the merger agreement if these
conditions occur or whether Superior Bancorp would agree to pay
additional consideration.
Superior
Bancorp Common Stock
Each share of Superior Bancorp common stock outstanding
immediately prior to completion of the merger will remain
outstanding and unchanged by the merger.
Treatment
of Community Bancshares Stock Options and Warrants
The merger agreement provides that, at the effective time of the
merger, each outstanding Community Bancshares option or warrant
will be cancelled and each holder of such options or warrants
will be entitled to receive cash equal to the amount resulting
when the number of Community Bancshares options or the number of
Community Bancshares warrants, as the case may be, held by such
holder is multiplied by the Per Option Value. The Per Option
Value equals (1) $10.50 less (2) the exercise price
for each share of Community Bancshares common stock subject to
an option or warrant.
Closing
and Effective Date of the Merger
The merger will be consummated only when all conditions,
including obtaining all stockholder and regulatory approvals and
consents, have been fulfilled or waived, or as soon as
practicable thereafter as Superior Bancorp and Community
Bancshares may mutually agree. The effective date of the merger
will be the date specified in the Certificate of Merger to be
issued by the Secretary of State of the State of Delaware. We
currently expect to close the merger by year-end 2006, although
we cannot guarantee when or if the merger will be completed. See
The Merger The Merger Agreement
Conditions to the Completion of the Merger and The
Merger The Merger Agreement Regulatory
Approvals, beginning at pages
and ,
respectively.
Representations
and Warranties
In the merger agreement, Superior Bancorp and Community
Bancshares have each made a number of customary representations
and warranties relating to the organization and capital
structures of the respective companies and their subsidiaries,
their operations, financial condition and other matters,
including their authority to enter into the merger agreement and
to consummate the merger.
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Covenants
with Respect to the Merger
The merger agreement provides that, during the period from the
date of the merger agreement to the effective time, except as
specifically provided for in the merger agreement, Superior
Bancorp and Community Bancshares will each do the following:
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use its best efforts promptly to take all actions and do all
things necessary, proper or advisable under applicable law to
consummate and make effective, as soon as practicable, the
transactions contemplated by the merger agreement;
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use its best efforts to cooperate with the other party and take
certain actions under the merger agreement in order to
consummate the merger;
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not make any public announcement, issue any press release or
other publicity or confirm any statements concerning the
transaction without the approval of the other party;
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furnish to the other party public and non-public filings not
precluded from disclosure by law, including call reports, SEC
filings, regulatory filings, tax returns and similar documents;
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provide the other party with access to its assets, books and
records during normal business hours to effect the parties
respective covenants under the merger agreement and hold such
information in confidence; and
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give written notice promptly to the other party upon becoming
aware of the occurrence or impending occurrence of any event or
circumstances relating to it or its subsidiaries which
(1) is likely to have, individually or in the aggregate, a
material adverse effect on it or (2) would cause or
constitute a material breach of any of its representations,
warranties or covenants, and to use its reasonable efforts to
prevent or promptly remedy the same.
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In addition, until the effective date of the merger, Community
Bancshares has agreed to do the following:
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conduct its business in the ordinary course of business and use
commercially reasonable efforts subject to the terms of the
merger agreement to maintain its relationship with its
depositors, customers and employees;
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not make any material change in its accounting or tax policies
or methods of operations, except as required by GAAP or by law;
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take no action which would prevent or impede the merger from
qualifying as a tax-free reorganization for federal income tax
purposes;
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cooperate with Superior Bancorp in the preparation of the
registration statement that includes this joint proxy
statement/prospectus and any regulatory filings and cause a
stockholders meeting to be held to approve the merger as
soon as practicable after the effective date of the registration
statement;
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take no action which would materially adversely affect the
ability of any party to obtain any consents required for the
transactions contemplated by the merger agreement without the
imposition of conditions or restrictions;
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take no action which would materially adversely affect the
ability of any party to perform its covenants and agreements
under the merger agreement;
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use its reasonable efforts to cause the merger to be closed at
the earliest practicable date and take no action or omit to take
any action which would cause the merger not to qualify as a
reorganization for federal income tax purposes;
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recommend that Community Bancshares stockholders vote in favor
of the merger agreement and the merger at the Community
Bancshares stockholders meeting, and not withdraw, qualify
or modify its recommendation unless its board of directors
determines in good faith after it has received a superior
proposal that the failure to do so would result in a breach of
fiduciary duties to the Community Bancshares stockholders;
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not solicit, initiate, encourage or induce the making,
submission or announcement of any competing request or proposal;
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maintain an allowance for possible loan, securities or credit
losses, including for loans made or securities purchased after
April 29, 2006, that is adequate within the meaning of GAAP
and applicable regulatory requirements or guidelines and its
current credit policies and loan loss methodologies;
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use its reasonable efforts to cause each non-officer director of
Community Bancshares to execute a support agreement;
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furnish to Superior Bancorp copies of all financial statements
and loan reports that it provides to its board of directors and
senior management and reports filed with the SEC or other
regulatory agency and any additional financial data as
reasonably requested;
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consult with Superior Bancorp in advance on any agreement to
make a loan in excess of $250,000 or any amendment of a loan
with an outstanding principal of $250,000, on any loan request
outside the normal course of business, on any agreement to make
or amendment or termination of any contract requiring a capital
expenditure of more than $100,000, and to coordinate various
business issues on a basis mutually satisfactory to both parties;
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purchase for and on behalf of its current and former officers
and directors extended coverage under the current
directors and officers liability insurance policy
maintained by Community Bancshares to provide continued coverage
for six years following the effective date of the merger;
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use reasonable efforts to cause at least four of its executive
officers who are not directors to execute agreements to agree to
refrain from exercising any Community Bancshares options after
April 29, 2006; and
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sell without recourse or otherwise cause to be prepaid in full
certain loans and write down to no more than $500,000 on
Community Bancshares balance sheet certain real property.
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In addition, until the effective date of the merger, Superior
Bancorp has agreed to do the following:
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conduct its business in the ordinary course of business and use
commercially reasonable efforts subject to the terms of the
merger agreement to maintain its relationship with its
depositors, customers and employees;
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not make any material change in its accounting or tax policies
or methods of operations, except as required by GAAP or by law;
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take no action which would materially adversely affect the
ability of any party to obtain any consents required for the
transactions contemplated by the merger agreement without the
imposition of conditions or restrictions;
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materially adversely affect the ability of any party to perform
its covenants and agreements under the merger agreement;
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use its reasonable efforts to cause the merger to be effected at
the earliest practicable date and take no action or omit to take
any action which would cause the merger not to qualify as a
reorganization for federal income tax purposes;
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cooperate with Community Bancshares in the preparation of any
regulatory filings and the registration statement that includes
this joint proxy statement/prospectus, file all regulatory
applications for approvals and the registration statement as
soon as possible;
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call and hold a meeting of Superior Bancorps stockholders
for the purposes contemplated by the merger agreement;
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furnish to Community Bancshares copies of all financial
statements and loan reports that it provides to its board of
directors and senior management and reports filed with the SEC
or other regulatory agency and any additional financial data as
reasonably requested;
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cause the listing of the shares of Superior Bancorp common stock
to be issued in the merger on the NASDAQ National Market System
or other quotations system on which such shares are primarily
traded;
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provide to officers and employees of Community Bancshares at the
effective time employee benefits under employee benefit and
welfare plans of Superior Bancorp and honor all employment,
severance, consulting and other agreements disclosed by
Community Bancshares; and
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provide certain indemnification rights to each current and
former director
and/or
officer of Community Bancshares or any of its subsidiaries
arising out of or pertaining to matters existing or occurring at
or prior to the effective date of the merger for a period of six
years from the effective date of the merger.
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Conditions
to the Completion of the Merger
The completion of the merger is subject to a number of
conditions, some of which are mutual and others of which are
applicable to either Superior Bancorp or Community Bancshares.
Although most of the conditions will not be satisfied until
immediately before the effective time of the merger, the
companies believe that they each are currently in material
compliance with the conditions.
The obligation of Superior Bancorp to complete the merger is
subject to the following conditions:
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The representations and warranties of Community Bancshares
contained in the merger agreement will be true and correct in
all material respects at the effective time of the merger.
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Community Bancshares will have performed in all material
respects all covenants and agreements required by the merger
agreement to be performed by Community Bancshares.
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Community Bancshares will have a net worth, as defined in the
merger agreement, of not less than $44,333,000.
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Superior Bancorp will have received certain closing certificates
with respect to the merger and the financial and regulatory
condition of Community Bancshares and its subsidiaries.
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Superior Bancorp will have received an opinion of Jones Day,
counsel to Community Bancshares, as to certain legal matters.
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The opinions of Sandler ONeill and Burke Capital that the
terms of the merger agreement and the merger are fair to the
stockholders of Superior Bancorp from a financial point of view
will not have been withdrawn before the effective time of the
merger.
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Community Bancshares will have used its best efforts to cause
each director, executive officer and any other person who is an
affiliate of Community Bancshares to deliver to
Superior Bancorp as soon as practicable, but in no event later
than its stockholders meeting, a written agreement providing
that he or she will not sell, pledge or transfer or otherwise
dispose of the shares of Superior Bancorp common stock to be
received by him or her on the effective date of the merger,
except in compliance with the Securities Act, Rule 145(d),
and other applicable laws and regulations of the SEC.
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Community Bancshares will have paid off in full and terminated
the Line of Credit dated as of May 6, 2004, between
Community Bancshares and First Commercial Bank in the amount of
$3,000,000, and all liens and other collateral for such line of
credit, including without limitation all shares of capital stock
of Community Bancshares will have been released in full.
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Each of the officers and directors of Community Bancshares will
have delivered a letter to Superior Bancorp confirming that he
or she is not aware of any claims he or she may have against
Community Bancshares.
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The obligation of Community Bancshares to consummate the merger
is subject to, among others, the following conditions:
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The representations and warranties of Superior Bancorp contained
in the merger agreement will be true and correct in all material
respects on the effective date of the merger.
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Superior Bancorp will have performed in all material respects
all covenants and agreements required by the merger agreement to
be performed by Superior Bancorp.
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Community Bancshares will have received certain closing
certificates with respect to the merger and the financial and
regulatory condition of Superior Bancorp and its subsidiaries.
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Community Bancshares will have received an opinion of
Balch & Bingham LLP, counsel to Superior Bancorp, as to
certain legal matters.
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The opinion of FIG that the terms of the merger agreement and
the merger are fair to the stockholders of Community Bancshares
from a financial point of view will not have been withdrawn
before the effective time of the merger.
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The shares of Superior Bancorp common stock to be issued in
connection with the merger will have been approved for listing
on the NASDAQ Global Market.
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The board of directors will have made no determination that the
merger has become impractical because of any state of war,
declaration of a banking moratorium or a general suspension of
trading of Superior Bancorp common stock on the NASDAQ Global
Market.
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At the effective time, Superior Bancorp will have assumed all of
Community Bancshares obligations under the Indenture with
respect to the debentures issued by Community Bancshares and the
trust preferred securities issued by Community (AL) Capital
Statutory Trust I.
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The obligation of each of Superior Bancorp and Community
Bancshares to consummate the merger is subject to certain
additional conditions, including the following:
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The merger agreement will have been approved by holders of a
majority of the outstanding Community Bancshares common stock
and holders of a majority of the outstanding Superior Bancorp
common stock, in each case entitled to vote thereon.
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All required orders, consents and approvals will have been
obtained from the Office of Thrift Supervision, and other bank
regulatory authorities, the SEC and other governmental
authorities granting the authority necessary for the merger and
will be in full force and effect and all waiting periods
required by law will have expired.
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All other consents will have been obtained that are required for
consummation of the merger or for the prevention of any default
under any contract or permit which, if not obtained or made, is
reasonably likely to have, individually or in the aggregate, a
material adverse effect on the party subject to the contract or
permit.
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No federal, state, local, foreign or other court, board, body,
commission, agency, authority or instrumentality of competent
jurisdiction will have enacted, issued, promulgated, enforced or
entered any law or order or taken any other action which
prohibits, restricts or makes illegal consummation of the
merger, provided that Superior Bancorp and Community Bancshares
will use commercially reasonably efforts to seek the lifting or
change of any order or action, and to obtain an interpretation
of any law, so as to permit the completion of the transactions
contemplated by the merger agreement.
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The registration statement of which this joint proxy
statement/prospectus is a part will have been declared effective
by the SEC and will not be subject to a stop order, no
proceedings for such purposes or under any proxy rules of the
SEC or any bank regulatory authority will be pending or
threatened by the SEC or any bank regulatory authority. All
approvals or authorizations for the offer of Superior Bancorp
common stock will have been received pursuant to any other state
securities laws and no stop order or proceedings with respect to
the merger will be pending or threatened under any state law.
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Superior Bancorp and Community Bancshares will have each
received an opinion of Balch & Bingham LLP with respect
to certain tax consequences of the merger.
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No assurance can be given as to when or if all of the foregoing
conditions to the merger can or will be satisfied or waived by
the respective parties. As of the date of this joint proxy
statement/prospectus, neither Superior Bancorp nor Community
Bancshares has any reason to believe that any of these
conditions will not be satisfied.
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Amendment
and Waiver
Subject to applicable law, Superior Bancorp and Community
Bancshares may amend the merger agreement by mutual consent
before or after approval of the merger by the stockholders of
Community Bancshares. Before or at the effective time of the
merger, either Superior Bancorp or Community Bancshares may
waive in writing any inaccuracies in the representations and
warranties of the other party, or, subject to applicable law,
may waive compliance by the other party with any of the other
agreements or conditions contained in the merger agreement.
Termination
Events
The merger agreement may be terminated at any time prior to or
on the effective date of the merger in the following
circumstances:
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by the mutual consent of the respective boards of directors of
Superior Bancorp and Community Bancshares;
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by the board of directors of either Superior Bancorp and
Community Bancshares (provided that the terminating party is not
then in material breach of any representation, warranty,
covenant or other agreement contained in the merger agreement)
in the event of a material breach by the other party of any
representation, warranty, covenant or other agreement contained
in the merger agreement (determined without regard to any
qualifications regarding materiality which may be contained in
any applicable representation or warranty) which cannot be or
has not been cured within 30 days after the giving of
written notice to the breaching party and which breach would
provide the non-breaching party the ability to refuse to
consummate the merger;
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by the board of directors of either Superior Bancorp or
Community Bancshares (provided that the terminating party is not
then in material breach of any representation, warranty,
covenant, or other agreement contained in merger agreement) in
the event of a material breach by the other party of any
covenant or agreement contained in the merger agreement which
cannot be or has not been cured within 30 days after the
giving of written notice to the breaching party or if any of the
conditions to the obligations of such party will have not been
satisfied in full;
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by the board of directors of either Superior Bancorp or
Community Bancshares if all transactions contemplated by the
merger agreement will not have been consummated on or prior to
March 31, 2007, unless the failure to complete the merger
by that date is due to the terminating partys actions;
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by Community Bancshares, if its board of directors determines by
a vote of a majority of its entire board, at any time during the
five-business-day period commencing on the date on which all
orders, consents and approvals necessary for consummation of the
merger and the transactions contemplated by the merger agreement
have been received (the determination date), if on the
determination date, (1) the average of the daily closing
sales prices of Superior Bancorp common stock as reported on the
NASDAQ National Market System for the ten consecutive trading
days immediately preceding the determination date is less than
$9.94, and (2) the number obtained by dividing the average
of the daily closing sales prices of Superior Bancorp common
stock as reported on the NASDAQ National Market System for ten
consecutive trading days immediately preceding the determination
date by $11.70 is less than the Bank Index Ratio minus 0.15. The
Bank Index Ratio is the average of the NASDAQ Bank Index as
reported on the NASDAQ National Market System for ten
consecutive trading days immediately preceding the determination
date divided by 3193.47, the value of the NASDAQ Bank Index on
the date of the merger agreement. If Community Bancshares elects
to exercise its termination right, it will give prompt written
notice thereof to Superior Bancorp. During the five-business-day
period commencing with its receipt of such notice, Superior
Bancorp will have the option of paying additional consideration
in Superior Bancorp common stock, cash or a combination of
Superior Bancorp common stock and cash, so that the aggregate
consideration paid by Superior Bancorp per share of Community
Bancshares common stock for the merger will be valued at the
lesser of (1) the product of 0.85 and $11.70, multiplied by
the exchange ratio, and (2) the product of the Bank Index
Ratio by 11.70, multiplied by the exchange ratio. If Superior
Bancorp delivers written notice to Community Bancshares that it
intends to proceed with the merger by paying the additional
consideration within five business days of receipt of the
notice, then the merger agreement will not terminate and will
remain in full force and effect in accordance with its terms
(except that the consideration for the merger will have been so
modified);
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by Community Bancshares, if before the approval of the merger
agreement by the stockholders of Community Bancshares, the board
of directors of Community Bancshares has (1) withdrawn or
modified or changed its recommendation or approval of the merger
agreement and the merger consideration in a manner adverse to
Superior Bancorp to approve and permit Community Bancshares to
accept a superior proposal, and (2) determined after
consideration of written advice of Community Bancshares
legal counsel that the termination of the merger agreement is
necessary to comply with its fiduciary duties under applicable
laws; provided, however, that at least two business days before
any such termination Community Bancshares will negotiate with
Superior Bancorp to amend the merger agreement to enable
Community Bancshares to proceed with the merger (the
Fiduciary Duty Termination Rights);
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by Superior Bancorp, if the board of directors of Community
Bancshares fails to reaffirm its approval of the merger upon
Superior Bancorps request resolves not to reaffirm the
merger;
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by Superior Bancorp, if the board of directors of Community
Bancshares does not include in its proxy statement its
recommendation, without modification or qualification, that
Community Bancshares stockholders approve the merger or
withdraws, qualifies or modifies, or proposes publicly to
withdraw, qualify or modify, in any manner adverse to Superior
Bancorp, its recommendation to Community Bancshares stockholders
to approve the merger;
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by Superior Bancorp, if the board of directors of Community
Bancshares affirms, recommends or authorizes entering into any
acquisition transaction other than the merger or the board of
Community Bancshares does not recommend against any tender or
exchange offer or take no position with respect to any tender or
exchange offer within ten business days of commencement of a
tender or exchange offer; or
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by Superior Bancorp, if the board of directors of Community
Bancshares negotiates or authorizes any negotiations with a
third party regarding an acquisition proposal other than the
merger.
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Effect
of Termination; Termination Fee
If the merger agreement is terminated, it will become void, and
there will be no liability on the part of either Superior
Bancorp or Community Bancshares, except with respect to certain
provisions specified in the merger agreement.
If Community Bancshares terminates the merger agreement pursuant
to the Fiduciary Duty Termination Rights or if Superior Bancorp
terminates the merger agreement pursuant to the last four
bullets above and Community Bancshares thereafter enters into a
definitive agreement with respect to an acquisition proposal or
transaction, then Community Bancshares will pay Superior Bancorp
a termination fee in the amount of $4,000,000 upon its entry
into such contract.
Agreement
Not to Solicit Other Offers
Under the merger agreement, Community Bancshares is restricted
in its ability to participate in discussions and negotiate with
any person concerning any proposal to acquire Community
Bancshares upon a merger, purchase of assets, purchase of or
tender offer for Community Bancshares common stock or similar
acquisition transaction. Community Bancshares has agreed not to,
and has agreed not to authorize or permit its representatives
to, (A) solicit, initiate, encourage or induce the making,
submission or announcement of any acquisition proposal,
(B) participate in any discussions or negotiations or
furnish any nonpublic information which may reasonably lead to
an acquisition proposal, (C) approve, endorse or recommend
any acquisition proposal or (D) enter into any agreement
relating to an acquisition proposal. Community Bancshares is not
prohibited from furnishing nonpublic information or entering
into a discussions or negotiations in response to a bona fide
unsolicited acquisition proposal if (1) neither Community
Bancshares nor its representatives have violated any of the
prohibitions above, (2) the board of directors of Community
Bancshares determines in its good faith judgment that the
acquisition proposal constitutes a superior proposal,
(3) the board of directors of Community Bancshares
concludes in good faith, after consultation with outside legal
counsel, that the failure to take action would be inconsistent
with its fiduciary duties to the stockholders of Community
Bancshares, (4) Community Bancshares gives Superior Bancorp
at least five business days prior notice before entering into
discussions or providing nonpublic information and receives a
confidentiality
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agreement containing terms no less favorable to the disclosing
party than the terms of the confidentiality agreement with
Superior Bancorp and (5) Community Bancshares will provide
contemporaneously Superior Bancorp with any non-public
information provided to the other party. In addition, Community
Bancshares has agreed to provide Superior Bancorp with at least
five business days prior notice of any Community
Bancshares board meeting at which the board is expected to
recommend a superior proposal to its stockholders and a copy of
any proposed documentation. Community Bancshares has also agreed
to advise Superior Bancorp of any request it receives for
nonpublic information which Community Bancshares reasonably
believes could lead to an acquisition proposal or of any
acquisition proposal and the identify of the entity making any
such request or proposal.
Expenses
and Fees
In general, each of Superior Bancorp and Community Bancshares
will be responsible for all expenses it incurs in connection
with the negotiation and completion of the transactions
contemplated by the merger agreement. However, Superior Bancorp
has agreed to pay the filing fees payable in connection with the
filing of this joint proxy statement/prospectus with the SEC and
printing costs incurred in connection with the printing of this
document.
Regulatory
Approvals
Completion of the merger is subject to several federal and state
regulatory filings and approvals. The merger cannot be completed
unless the companies receive prior approvals, waivers or
exemptions from the Office of Thrift Supervision. Superior
Bancorp filed its application with the Office of Thrift
Supervision
on ,
2006.
The merger is subject to the approval of the Office of Thrift
Supervision under the Bank Merger Act. This approval requires
consideration by the Office of Thrift Supervision of various
factors, including assessments of the competitive effect of the
contemplated transactions, the managerial and financial
resources and future prospects of the resulting institutions and
the effect of the contemplated transactions on the convenience
and needs of the communities to be served.
The Community Reinvestment Act of 1977, as amended, also
requires that the Office of Thrift Supervision, in deciding
whether to approve the merger, assess the records of performance
of Superior Bank in meeting the credit needs of the communities
it serves, including low and moderate income neighborhoods. As
part of the review process under the Community Reinvestment Act,
it is not unusual for the Office of Thrift Supervision to
receive protests and other adverse comments from community
groups and others. Superior Bank, Superior Bancorps
primary depository institution subsidiary, currently maintains a
Community Reinvestment Act rating of Satisfactory
from its primary regulator, and Community Bank, Community
Bancshares primary depository institution subsidiary, also
currently maintains a Community Reinvestment Act rating of
Satisfactory from its primary regulator.
The regulations of the Office of Thrift Supervision require
publication of notice of, and an opportunity for public comment
with respect to, the application filed in connection with the
merger and authorize the Office of Thrift Supervision to conduct
a meeting if it finds that written submissions are insufficient
to address facts or issues raised in an application, or
otherwise determines that a meeting will benefit the Office of
Thrift Supervisions decision-making process in connection
with the application. Any such meeting or comments provided by
third parties could prolong the period during which the merger
is subject to review by the Office of Thrift Supervision.
Superior Bancorp has filed its application and related notices
seeking the requisite approval from the above agencies. Superior
Bancorp and Community Bancshares cannot be certain that such
approvals will be granted and, if granted, of the date of this
approval or as to what conditions to such grant of approval, if
any, may be imposed.
Superior Bancorp and Community Bancshares are not aware of any
other significant governmental approvals that are required for
consummation of the merger. If any other approval or action is
required, it is presently contemplated that Superior Bancorp and
Community Bancshares would seek to obtain such approval. There
can be no assurance that any other approvals, if required, will
be obtained.
The approval of any application merely implies the satisfaction
of regulatory criteria for approval, which do not include review
of the merger from the standpoint of the adequacy of the
consideration to be received by
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Community Bancshares stockholders. Further, regulatory approvals
do not constitute an endorsement or recommendation of the merger.
Management
and Operations After the Merger
After the effective time of the merger, the boards of directors
and the officers of Superior Bancorp and its subsidiaries,
including Superior Bank, will consist of those persons serving
in such capacities for Superior Bancorp before such date.
Superior Bancorp will elect two independent members of the
current Community Bancshares board of directors to the board of
directors of Superior Bancorp and Superior Bank at the first
board meeting of Superior Bancorp after the effective time of
the merger. See The Merger Interests of
Directors, Officers and Others in the Merger, and
The Merger The Merger Agreement
Community Bank, beginning on pages
and ,
respectively.
Trust Preferred
Securities
Community (AL) Capital Trust I, a statutory trust organized
under the laws of the State of Delaware, holds $10,000,000
principal amount of
107/8%
Junior Subordinated Deferred Interest Debentures (the
Debentures) issued by Community Bancshares pursuant
to an Indenture dated as of March 23, 2000, between
Community Bancshares and The Bank of New York, as trustee, and
has issued $10,000,000 in
107/8%
Fixed Rate Capital
Trust Pass-Through
Securities (the Trust Preferred Securities). On
the effective date of the merger, Superior Bancorp will assume
all of Community Bancshares obligations under the
Indenture, will execute any documents required by the Indenture,
the Debentures or the Trust Preferred Securities to assume
the obligations, and will, after the effective date, perform all
of Community Bancshares obligations with respect to the
Debentures and the Trust Preferred Securities. Community
Bancshares will use commercially reasonably efforts to obtain
the consent of the trustee to any supplemental indenture or
document required for the assumption of the Indenture.
Termination
of Community Bancshares Inc. Employee Stock Ownership
Plan
Community Bancshares sponsors the Community Bancshares, Inc.
Employee Stock Ownership Plan (ESOP). Community
Bancshares and Superior Bancorp will cooperate to terminate the
ESOP subject to the receipt of a favorable private letter ruling
from the Internal Revenue Service. Community Bancshares has
agreed to appoint independent legal counsel to advise the
ESOPs Administrative Committee with regard to the exercise
of their power and responsibility to vote unallocated shares of
Community Bancshares held by the trust associated with the ESOP
in connection with the merger.
In connection with the termination of the ESOP, Superior Bancorp
and Community Bancshares have agreed as follows:
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Following the termination of the ESOP and receipt of a favorable
determination letter from the Internal Revenue Service relating
to the termination, Superior Bancorp will take appropriate steps
as soon as administratively practicable after the effective date
to distribute the assets of the trust in accordance with the
terms of the ESOP and applicable law.
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As soon as practicable following the effective date of the
merger, any liability of the ESOP collateralized on the
effective date with Community Bancshares stock will be fully
paid off by the ESOP through the application of the proceeds
from the sale of a sufficient number of shares of Superior
Bancorp common stock issued to the ESOP in the merger and
substituted as collateral for the liabilities in compliance with
all applicable law and the terms of the ESOP.
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Subject to the requirements of applicable law and the terms of
the ESOP, any residual sales proceeds and any residual shares of
Superior Bancorp common stock pledged with respect to the
liabilities satisfied incident to a sale will be allocated after
payment of permissible administrative expense as earnings to the
account balance of ESOP participants, alternate payees and
beneficiaries.
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No termination of the ESOP will be required if it would have a
material adverse effect on Community Bancshares or on any
litigation to which the ESOP is a party.
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Employment;
Severance; Employee Benefit Plans
Superior Bancorp has agreed to honor the terms of all
employment, severance, consulting and other compensation
contracts disclosed by Community Bancshares and all provisions
for vesting earned and accrued under any contract or benefit
plan of Community Bancshares. If Superior Bancorp terminates any
officer or employee of Community Bancshares without cause within
12 months after the effective date of the merger, Superior
Bancorp will provide severance benefits under the severance
policy of either Community Bank or Superior Bank, whichever had
the greater benefits as of the date of the merger agreement, but
in no event more than one week of base pay for each year of
service, up to 26 weeks of pay. All employees of Community
Bancshares and its subsidiaries who become employees of Superior
Bancorp or its subsidiaries on the effective date of the merger
will be entitled, to the extent permitted by applicable law, to
participate as soon as administratively and financially
practicable in all benefit plans of Superior Bank to the same
extent as Superior Bank employees, except as otherwise provided
in the merger agreement. Superior Bancorp and Community
Bancshares will agree on bonuses for various key employees of
Community Bancshares and its subsidiaries in such amounts and
payable on such dates as the parties agree.
On the effective date of the merger, Superior Bancorp will
provide to officers and employees of Community Bancshares and
its subsidiaries employee benefits under employee benefit and
welfare plans which are substantially similar to those provided
by Superior Bancorp to its similarly situated officers and
employees.
With respect to employee benefits maintained by Superior Bancorp
or by Superior Bank in which employees of Community Bancshares
and its subsidiaries participate after the effective date of the
merger, Superior Bancorp has agreed to treat service by
employees of Community Bancshares and its subsidiaries prior to
the effective date of the merger as service with Superior
Bancorp, for purposes of determining eligibility to participate,
eligibility, entitlement to benefits and vesting purposes
including for vacation entitlement, severance benefits. Service
with Community Bancshares will also apply for purposes of
satisfying any waiting periods, evidence of insurability
requirements or the application of pre-existing condition
limitations with respect to any Superior Bancorp employee
benefit plan that is a group health plan. Each Superior Bancorp
employee benefit plan that is a group health plan will waive, or
cause the insurance carrier to waive, pre-existing condition
limitations to the same extent waived under the applicable
Community Bancshares employee benefit plan. Each such employee
of Community Bancshares and its subsidiaries will be given
credit for amounts paid under a corresponding group health plan
during the same period for purposes of applying deductibles,
co-payments and out of pocket maximums as though such amounts
had been paid under the Superior Bancorp group health plan.
Interests
of Directors, Officers and Others in the Merger
In considering the recommendations of the respective boards of
directors of Superior Bancorp and Community Bancshares that you
vote For the merger agreement and the merger, you
should be aware that some of Community Bancshares
executive officers and directors have interests in the merger
that are different from, or in addition to, your interests as
our stockholder. Our respective boards of directors were aware
of these interests and took them into account in our respective
decisions to approve the merger.
These interests relate to or arise from, among other things:
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the continued indemnification of Community Bancshares
current directors and executive officers under the merger
agreement and the obligation by Community Bancshares to provide
these individuals with extended directors and
officers insurance for a period of six years following the
effective date of the merger; and
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the fact that Patrick M. Frawley, Stacey W. Mann and other
executive officers of Community Bancshares have entered into
discussions regarding entering into consulting/employment
agreements with Superior Bancorp, which may be executed prior to
the effective time of the merger; and
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the fact that Superior Bancorp will select two independent
directors of Community Bancshares to be elected to the board of
directors of Superior Bancorp and Superior Bank at the first
board meeting of Superior Bancorp after the effective time of
the merger.
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Indemnification
and Directors and Officers Insurance
Superior Bancorps restated certificate of incorporation
and bylaws provide for the elimination of directors
liability for monetary damages arising from a breach of certain
fiduciary obligations and for the indemnification of directors,
officers and agents to the full extent permitted by Delaware
law. These provisions generally provide for indemnification in
the absence of gross negligence or willful misconduct and cannot
be amended without the affirmative vote of a majority of the
outstanding shares of Superior Bancorp common stock entitled to
vote thereon.
By operation of law under Delaware law, all rights to
indemnification for acts or omissions occurring prior to the
effective time now existing in favor of the current or former
directors or officers of Community Bancshares as provided in its
articles of incorporation or bylaws will survive the merger and
will continue in effect in accordance with their terms.
Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers or
persons controlling Superior Bancorp and Community Bancshares
pursuant to the foregoing provisions, the companies have been
informed that in the opinion of the SEC such indemnification is
against public policy as expressed in the Securities Act and is
therefore unenforceable.
Superior Bancorp has agreed in the merger agreement that, for
six years following the effective time of the merger, it will
indemnify and hold harmless each of Community Bancshares
present and former directors, officers and employees and those
of its subsidiaries against any costs or expenses including
reasonable attorneys fees, judgments, fines, losses,
claims, damages or liabilities incurred in connection with any
claim, action, suit, proceeding or investigation, whether civil,
criminal, administrative or investigative, arising out of
matters existing or occurring at or prior to the effective time
of the merger including the transactions contemplated by the
merger agreement, whether asserted or claimed prior to, at or
after the effective time of the merger, to the fullest extent
that the person would have been indemnified pursuant to
(1) Community Bancshares certificate of incorporation
and bylaws and (2) any agreement, arrangement or
understanding disclosed by Community Bancshares to Superior
Bancorp in each case as in effect on the date of the merger
agreement.
Community Bancshares has also agreed in the merger agreement
that it will purchase for, and on behalf of, its current and
former officers and directors, extended coverage under the
current directors and officers liability insurance
policy maintained by Community Bancshares to provide for
continued coverage of such insurance for a period of six years
following the effective date of the merger with respect to
matters occurring prior to such date.
Share
Ownership of Directors and Executive Officers
As
of ,
2006, the record date for the annual meeting of Community
Bancshares stockholders, the directors and executive officers of
Community Bancshares may be deemed to be the beneficial owners
of shares,
representing % of the outstanding
shares of Community Bancshares common stock. See
Information About Community Bancshares Stock
Ownership of Principal Stockholders and Management,
beginning on page .
As
of ,
2006, the record date for the special meeting of Superior
Bancorp stockholders, the directors and executive officers of
Superior Bancorp may be deemed to be the beneficial owners
of shares,
representing % of the outstanding
shares of Superior Bancorp common stock.
Existing
Employment Agreements
Community Bank is a party to an Employment Agreement with
Patrick M. Frawley, its Chairman and Chief Executive Officer.
The agreement has a term of three years and is automatically
renewed on each anniversary of the effective date for an
additional one-year period, unless Community Bank or
Mr. Frawley gives notice to the other party to terminate
the automatic renewals. The employment agreement contains the
following material terms: (1) a base salary at least equal
to his base salary on March 29, 2005, (2) the
opportunity to earn a bonus under such performance criteria as
may be established by the Compensation Committee of Community
Banks board of directors, (3) the ability to
participate in Community Banks employee benefit programs
on the same basis as other senior executives, and
(4) certain fringe benefits, including use of a company
automobile and country club memberships.
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In the event Mr. Frawleys employment is terminated by
Community Bank for any reason other than death, disability or
for cause, (as such terms are defined in the
employment agreement), Mr. Frawley shall be entitled to
receive (i) a lump sum payment equal to the sum of
(1) unpaid salary through the date of termination,
(2) pro rata earned or target bonus for the year of
termination, (3) any accrued vacation time, and
(4) any compensation previously deferred; (ii) a lump
sum payment equal to the present value of (1) his monthly
salary that would have been payable for the 36 months
following his termination of employment but for such
termination, and (2) a series of 36 monthly payments,
each of which is calculated by taking one-twelfth of the average
of the bonuses earned by Mr. Frawley for the two calendar
years immediately preceding the year in his termination of
employment occurred; (iii) continuation of health and life
insurance benefits for 36 months following termination of
employment at the same level and on the same terms as provided
to him immediately prior to his termination of employment;
(iv) full vesting and continued participation for a period
of 36 months following termination of employment in certain
retirement plans or, if such full vesting and continued
participation is not allowed, payment by Community Bank of a
lump sum supplemental benefit in lieu of full vesting and
continued participation in such plans; and (v) individual
career counseling and outplacement services for a reasonable
period of time following termination of employment, up to a
maximum cost to Community Bancshares of $5,000. Mr. Frawley
is also entitled to the above severance benefits if he
terminates his employment with Community Bank during the
30-day
period beginning on the first anniversary of a change in
control, or if he terminates his employment pursuant to an
involuntary termination (as such term is defined in the
employment agreement). If any payments pursuant to the agreement
or otherwise would be subject to any excise tax under
Section 4999 of the Internal Revenue Code, Community Bank
will provide an additional payment such that Mr. Frawley
retains a net amount equal to the payments he would have
retained if such excise tax had not applied.
If Mr. Frawleys employment is terminated in such a
way that he is entitled to the benefits described above, the
payment to Mr. Frawley pursuant to his employment agreement
is currently estimated to be approximately $1,261,358.
Community Bancshares is a party to Change in Control Agreements
with the following executive officers: Stacey W. Mann, William
H. Caughran, Kerri C. Kinney and John W. Brothers. In the event
of a change in control (as defined in the agreements) of
Community Bancshares, the executive officer is entitled to
receive certain severance benefits, provided the executive
officers employment is terminated by Community Bancshares
within 30 months following the change in control, unless
the termination is for cause or by reason of the
officers death, disability or retirement on or after
age 65. The executive officer is also entitled to severance
benefits if the officer terminates his or her employment with
Community Bancshares within 30 months following a change in
control if, among other reasons, the officers authority,
duties, compensation or benefits have been reduced or if the
officer is forced to relocate more than 50 miles from his
or her place of employment immediately prior to the change in
control. If, during the term of the agreement, a transaction is
proposed which, if consummated, would constitute a change in
control and (1) the officers employment is thereafter
terminated by Community Bancshares other than for cause or by
reason of the officers death, disability or retirement on
or after age 65 and (2) the proposed transaction is
consummated within one year following the officers
termination of employment, the change in control will be deemed
to have occurred during the term of the agreement and the
officer will be entitled to severance benefits. The officer is
also entitled to receive severance benefits if the officer
terminates employment for any reason during a
30-day
period beginning 12 months after the occurrence of a change
in control.
The severance benefits payable under each of these agreements
are as follows: (1) a lump sum payment equal to the present
value of the officers salary that would have been payable
by Community Bancshares for the 30 months following the
officers termination of employment but for such
termination; (2) a lump sum payment equal to the present
value of a series of 30 monthly payments, which monthly
payment is calculated by taking one-twelfth of the average of
the bonuses earned by the officer for the two calendar years
immediately preceding the year in which the officers
termination of employment occurs; (3) continuation of the
officers health and life insurance benefits for
30 months following the officers termination of
employment at the same level and on the same terms as provided
to the officer immediately prior to his or her termination of
employment; (4) full vesting and continued participation
for a period of 30 months following the officers
termination of employment in certain retirement plans or, if
such full vesting and continued participation is not allowed,
payment by Community Bancshares of a lump sum supplemental
benefit in lieu of full vesting and continued participation in
such plans; and
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(5) individual career counseling and outplacement services
for a reasonable period of time following the officers
termination of employment, up to a maximum cost to Community
Bancshares of $5,000 per officer. The change in control
agreements also provide that the total benefit payable to the
executive officer will be calculated in accordance with one of
three formulas set forth in the agreement, so as to provide the
greatest total benefit after taxes, including any excise tax
under Section 4999 of the Internal Revenue Code.
If the employment of Messrs. Mann, Caughran and Brothers
and Ms. Kinney is terminated in such a way that they are
entitled to the benefits described above, the payments to these
individuals pursuant to the change in control agreements is
currently estimated, in the aggregate, to be approximately
$1,892,991.
Support
Agreements
Community Bancshares has caused each non-officer director of
Community Bancshares to execute a Support Agreement, in which
each non-officer director agrees to vote all of his or her
shares of Community Bancshares common stock in favor of the
merger and the merger agreement.
A form of the Support Agreement is Exhibit A to the merger
agreement, which is attached to this joint proxy
statement/prospectus as Annex A. This agreement may have
the effect of discouraging third parties from making a proposal
for an acquisition transaction involving Community Bancshares.
The following is a brief summary of the material provisions of
this agreement:
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The director agrees to vote, or cause to be voted, in person or
by proxy, all of the Community Bancshares common stock as to
which the he or she has voting power, individually or jointly
with other persons.
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The director agrees, except for certain specific transfers set
forth in the agreement, not to directly or indirectly transfer
any of his or her Community Bancshares common stock until the
vote upon the merger agreement and the merger by Community
Bancshares stockholders has been taken or until the merger
agreement has been terminated.
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The director agrees not to exercise any outstanding stock
options.
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The director agrees that, for a period of one year following the
effective date of the merger, he or she will not serve as an
officer or director, or acquire 5% or more of the outstanding
equity securities, of any bank or savings and loan association
or bank holding company, or federal or state chartered bank,
savings bank, thrift, homestead association, savings
association, savings and loan association or cooperative bank,
that has its principal business location within any county in
Alabama in which Community Bank has a branch or office.
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Public
Trading Markets
Superior Bancorp common stock is listed on the NASDAQ Global
Market stock exchange under the ticker symbol SUPR.
Superior Bancorp was listed under the ticker symbol
TBNC through May 18, 2006, when The Banc
Corporation changed its name to Superior Bancorp following
approval at its annual stockholders meeting on
May 18, 2006. Community Bancshares common stock is listed
on the NASDAQ Capital Market under the symbol COMB.
From February 26, 2004 to September 20, 2005,
Community Bancshares common stock was traded in the
over-the-counter
market under the same symbol. Upon completion of the merger, all
shares of Community Bancshares common stock will be exchanged
for shares of common stock of Superior Bancorp. Superior Bancorp
common stock issuable pursuant to the merger agreement will be
listed on the NASDAQ Global Market.
The shares of Superior Bancorp common stock to be issued in
connection with the merger will be freely transferable under the
Securities Act, except for shares issued to any of our
stockholders that may be deemed either to be an affiliate of
(i) Community Bancshares at or after the effective time of
the merger or (ii) Superior Bancorp at the time of its
special meeting, as discussed in Resale of
Superior Bancorp Common Stock by Affiliates beginning on
page .
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Accounting
Treatment
We expect the merger to be treated for accounting and financial
reporting purposes as a purchase, meaning that the
assets and liabilities of Community Bancshares will be recorded
at their respective estimated fair values and combined with the
historical basis of Superior Bancorp, Therefore, the financial
statements of Superior Bancorp issued after the merger will
reflect these values from Community Bancshares and will not be
restated retroactively to reflect the historical financial
position or results of operations of Community Bancshares.
Goodwill
and/or other
intangible assets may be created by the excess of the purchase
price over the net fair value of Community Bancshares
assets and liabilities.
The unaudited pro forma financial information contained in this
joint proxy statement/prospectus has been prepared using the
purchase accounting method to account for the merger. See
Pro Forma Condensed Financial Information beginning
on page .
Certain
Federal Income Tax Consequences
The following discussion is a general summary of the anticipated
material United States federal income tax consequences of the
exchange of Community Bancshares common stock for Superior
Bancorp common stock pursuant to the merger. This summary does
not address any tax consequences arising under the laws of any
state, local or foreign jurisdiction. This discussion is based
upon the Internal Revenue Code of 1986, as amended (the
Code), regulations promulgated by the United States
Treasury Department, court cases and administrative rulings in
each case as in effect as of the date hereof and all of which
are subject to change at any time, possibly with retroactive
effect. This discussion assumes that you hold your Community
Bancshares common stock as a capital asset within the meaning of
Section 1221 of the Code. The federal income tax laws are
complex and the tax consequences of the merger may vary
depending upon each stockholders individual circumstances
or tax status. Accordingly, this description is not a complete
description of all of the consequences of the merger and, in
particular, may not address United States federal income tax
considerations that may affect the treatment of stockholders
subject to special treatment under United States federal income
tax law (including, for example, foreign persons, financial
institutions, dealers in securities, traders in securities who
elect to apply a
mark-to-market
method of accounting, insurance companies, tax-exempt entities,
pass-through entities or investors in such entities, holders who
acquired their shares of Community Bancshares common stock
pursuant to the exercise of an employee stock option or right,
pursuant to a tax qualified retirement plan or otherwise as
compensation and holders who hold Community Bancshares common
stock as part of a hedge, straddle or
conversion transaction). This discussion is based on
laws, regulations, rulings and judicial decisions as in effect
on the date of this document, without consideration of the
particular facts or circumstances of any holder of Community
Bancshares common stock. These authorities are all subject to
change and any such change may be made with retroactive effect.
No assurance can be given that, after any such change, this
discussion would not be different.
The obligations of the parties to complete the merger are
conditioned upon the receipt by each party of a tax opinion from
Balch & Bingham LLP that the merger will be treated as
a reorganization within the meaning of Section 368(a) of
the Code.
Balch & Bingham LLP will render its tax opinion to each
of Superior Bancorp and Community Bancshares, subject to the
limitations discussed above, on the basis of facts,
representations and assumptions set forth or referred to in such
opinion which are consistent with the state of facts existing at
the effective time of the merger. In rendering its tax opinion,
counsel will rely upon representations and covenants, including
those contained in certificates of officers of Superior Bancorp
and Community Bancshares, reasonably satisfactory in form and
substance to such counsel. The opinion represents counsels
best legal judgment, but has no binding effect or official
status of any kind, and no assurance can be given that contrary
positions will not be taken by the Internal Revenue Service or a
court considering the issues. Neither Superior Bancorp nor
Community Bancshares has requested, nor do either of them intend
to request, a ruling from the Internal Revenue Service as to the
tax consequences of the merger and as a result there can be no
assurances that the Internal Revenue Service will not disagree
with or challenge any of the conclusions herein.
Subject to the limitations and qualifications referred to in
this joint proxy statement/prospectus and assuming that the
merger will be completed as described in the merger agreement
and this joint proxy statement/prospectus
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and that the merger is treated as a reorganization within the
meaning of Section 368(a) of the Code, the following are
the material United States federal income tax consequences to
the Community Bancshares stockholders:
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the merger will constitute a reorganization within
the meaning of Section 368 of the Code;
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no gain or loss will be recognized by Superior Bancorp or
Community Bancshares;
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no gain or loss will be recognized by the stockholders of
Community Bancshares who receive shares of Superior
Bancorps common stock except to the extent of any taxable
boot received by stockholders from Superior Bancorp,
and except to the extent of any dividends received from
Community Bancshares prior to the effective date of the merger;
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the basis of Superior Bancorps common stock received in
the merger will be equal to the sum of the basis of the shares
of Community Bancshares common stock exchanged in the merger and
the amount of gain, if any, which was recognized by the
exchanging Community Bancshares stockholder, including any
portion treated as a dividend, less the value of taxable boot,
if any, received by the stockholder in the merger;
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the holding period of Superior Bancorps common stock will
include the holding period of the shares of Community Bancshares
common stock exchanged therefor if the shares of Community
Bancshares common stock were capital assets in the hands of the
exchanging Community Bancshares stockholder; and
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cash received by a Community Bancshares stockholder in lieu of a
fractional share interest of Superior Bancorp common stock will
be treated as having been received as a distribution in full
payment in exchange for the fractional share interest of
Superior Bancorp common stock which he or she would otherwise be
entitled to receive and will qualify as capital gain or loss,
assuming the Community Bancshares stock was a capital asset in
his or her hands as of the effective date of the merger.
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A stockholder who receives cash in lieu of a fractional share of
Superior Bancorp common stock in the merger will be treated for
United States federal income tax purposes as if the fractional
share of Superior Bancorp common stock had been received and
then redeemed for cash by Superior Bancorp. A stockholder will
recognize a capital gain or loss in an amount equal to the
difference between the cash received and the tax basis allocable
to the fractional share of Superior Bancorp common stock, unless
such payment, under each such stockholders particular
facts and circumstances, is deemed to have the effect of a
dividend distribution and not a redemption treated as an
exchange under the principles of Section 302 of the Code,
described above.
Unless an exemption applies under the backup withholding rules
of Section 3406 of the Code, the Exchange Agent (as
described in Exchange of Certificates) will be
required to withhold, and will withhold, 28% of any cash
payments to which a Community Bancshares stockholders is
entitled pursuant to the merger, unless the stockholder provides
the appropriate form. A stockholder should complete and sign the
substitute Internal Revenue Service
Form W-9
enclosed with the letter of transmittal sent by the exchange
agent. Unless an applicable exemption exists and is proved in a
manner satisfactory to the exchange agent, this completed form
provides the information, including the holders taxpayer
identification number, and certification necessary to avoid
backup withholding.
A stockholder of Community Bancshares who receives Superior
Bancorp common stock and cash as a result of the merger will
generally be required to retain records pertaining to the merger
and will be required to file with such stockholders United
States federal income tax return for the year in which the
merger takes place a statement setting forth certain facts
relating to the merger as provided in Treasury Regulations
Section 1.368-3(b).
The foregoing is a summary discussion of material federal income
tax consequences of the merger and is not a complete analysis or
listing of potential tax effects relevant to a decision whether
to vote in favor of approval of the merger agreement. You
are urged to consult your personal tax and financial advisors as
to the particular tax consequences to you of the merger,
including the application of state, local and foreign tax laws
and possible future changes in federal income tax laws and the
interpretation thereof, which can have retroactive
effects.
IRS
Circular 230 Notice
To ensure compliance with the requirements of the Internal
Revenue Service, we inform you that any federal tax information
provided herein may not be used to avoid any federal tax
penalty. Any such information provided
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herein is provided on the basis and with the intent that the
information may not be used to avoid any federal tax penalty.
Resale of
Superior Bancorp Common Stock by Affiliates
Superior Bancorp common stock to be issued to Community
Bancshares stockholders in connection with the merger will be
registered under the Securities Act. Superior Bancorp common
stock received by the Community Bancshares stockholders upon
consummation of the merger will be freely transferable under the
Securities Act, except for shares issued to any person who may
be deemed an affiliate of Community Bancshares or
Superior Bancorp within the meaning of Rule 145 under the
Securities Act. Affiliates are generally defined as
persons who control, are controlled by, or are under common
control with Community Bancshares or Superior Bancorp, as the
case may be. Affiliates generally include directors, certain
executive officers and major stockholders of Superior Bancorp
and Community Bancshares. In addition, affiliates of Community
Bancshares or Superior Bancorp must sell their shares of
Superior Bancorp common stock acquired in connection with the
merger in compliance with Rule 145 or another applicable
exemption from the registration requirements of the Securities
Act.
In general, under Rule 145, for one year following the
effective time of the merger, an affiliate (together with
certain related persons) would be entitled to sell shares of
Superior Bancorp common stock acquired in the merger only
through unsolicited broker transactions or in
transactions directly with a market maker, as such
terms are defined in Rule 144 under the Securities Act.
Additionally, during the one-year period, the number of shares
to be sold by an affiliate (together with certain related
persons and certain persons acting in concert) within any
three-month period for purposes of Rule 145 may not exceed
the greater of 1% of the outstanding shares of Superior Bancorp
common stock or the average weekly trading volume of the stock
during the four calendar weeks preceding such sale.
Rule 145 will remain available to affiliates only if
Superior Bancorp remains current with its information filings
with the SEC under the Securities Exchange Act of 1934. One year
after the effective time, an affiliate of Community Bancshares
would be able to sell its shares of Superior Bancorp common
stock without the manner of sale or volume limitations, provided
that Superior Bancorp was current with its Securities Exchange
Act information filings and such affiliate was no longer an
affiliate of Superior Bancorp. Two years after the effective
time, an affiliate of Community Bancshares would be able to sell
its shares of Superior Bancorp common stock without any
restrictions so long as the affiliate was not, and had not been
for at least three months before selling, an affiliate of
Superior Bancorp.
Community Bancshares has agreed in the merger agreement to use
its reasonable best efforts to identify each person who may be
deemed to be an affiliate for purposes of Rule 145 and to
cause such persons to deliver to Community Bancshares, prior to
the date of the Community Bancshares special meeting, a written
agreement intended to ensure compliance with the Securities Act
in connection with the sale or other transfer of Superior
Bancorp common stock received in the merger.
Exchange
of Certificates
As promptly as practicable, but in no case later than 15
business days after the effective date of the merger,
Computerserve (the Exchange Agent) will mail to each
Community Bancshares stockholder of record (1) the election
form, (2) a letter of transmittal and (3) instructions
for use in effecting the surrender of the certificates
representing shares of Community Bancshares common stock in
exchange for certificates representing shares of Superior
Bancorp common stock. The letter of transmittal will specify
that delivery will be effected, and risk of loss and title to
the certificates will pass, only upon delivery of the
certificates to Superior Bancorp. When a Community Bancshares
stockholder surrenders his or her certificate to the Exchange
Agent, together with a properly completed letter of transmittal,
and any other documents as may be necessary, that stockholder
will receive in exchange a certificate representing that number
of whole shares of Superior Bancorp common stock which that
stockholder is entitled, if any, and a check for the amount to
be paid instead of any fractional share of Superior Bancorp
common stock. The Exchange Agent will deliver the merger
consideration to Community Bancshares stockholders within
10 business days of receipt of their certificates of
Community Bancshares common stock, duly executed and in property
form for transfer.
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If a prior transfer of ownership of Community Bancshares common
stock is not registered in the transfer records of Community
Bancshares, a certificate representing the proper number of
shares of Superior Bancorp common stock may be issued to a
person other than the person in whose name the certificate so
surrendered is registered, if the certificate will be properly
endorsed or otherwise be in proper form for transfer and the
person requesting the issuance will pay any transfer or other
taxes required by reason of the issuance of shares of Superior
Bancorp common stock to a person other than the registered
holder of the certificate or establish to the satisfaction of
Superior Bancorp that such tax has been paid or is not
applicable.
Until surrendered as contemplated by the merger agreement, each
certificate will be deemed at any time after the effective time
to represent only the right to receive such stockholders
pro rata share of the merger consideration under the terms of
the merger agreement. No interest will be paid or will accrue on
any cash payable in lieu of any fractional shares of Superior
Bancorp common stock. After the merger is completed, to the
extent permitted by law, holders of record of Community
Bancshares common stock at the time we complete the merger will
be entitled to vote at any meeting of Superior Bancorp
stockholders the number of shares of Superior Bancorp common
stock into which their respective shares of Community Bancshares
common stock are converted after the effective time, regardless
of whether such holders have received their certificates
representing Superior Bancorp common stock in accordance with
the merger agreement.
No dividend or other distribution payable after the completion
of the merger with respect to Superior Bancorp common stock
will, however, be paid to the holder of any unsurrendered
Community Bancshares certificate until the holder properly
surrenders such certificate along with the properly completed
transmittal materials. Upon surrender, all undelivered dividends
and other distributions and, if applicable, a check for the
amount to be paid instead of any fractional share interest will
be delivered to such stockholder, in each case without interest.
No certificates or scrip representing fractional shares of
Superior Bancorp common stock will be issued upon conversion of
Community Bancshares common stock, and the fractional share
interests will not entitle the owner thereof to vote or to any
rights of a stockholder of Superior Bancorp. Notwithstanding any
other provision of the merger agreement, each holder of
Community Bancshares common stock exchanged pursuant to the
merger who would otherwise have been entitled to receive a
fraction of a share of Superior Bancorp common stock will
receive cash instead of fractional shares of Superior Bancorp
common stock.
At the effective time of the merger, Community Bancshares
stockholders will cease to be, and will have no rights as,
Community Bancshares stockholders other than:
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the right to receive the number of shares of Superior Bancorp
common stock into which the shares of Community Bancshares
common stock have been converted or, if elected, cash,
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the right to receive any fractional share payment, or
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the right to receive any dividends or other distributions to
which they may be entitled under the merger agreement.
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None of Superior Bancorp, Community Bancshares or the Exchange
Agent will be liable to any holder of Community Bancshares
common stock for any shares of Superior Bancorp common stock or
any related dividends or other distributions or cash in lieu of
fractional shares delivered to a public official pursuant to any
applicable abandoned property, escheat or similar law.
Payment
for Community Bancshares Options and Warrants
The merger agreement provides that, at the effective time of the
merger, each outstanding option or warrant to purchase Community
Bancshares common stock shall be cancelled, and each holder of
such options or warrants will be entitled to receive cash equal
to the amount resulting when the number of options or warrants
held by a holder is multiplied by the Per Option
Value (as calculated directly below). The term Per
Option Value means (1) $10.50 less (2) the
exercise price for each share of Community Bancshares common
stock subject to the option or warrant. As promptly as
practicable after the effective date of the merger, Superior
Bancorp will issue a check for the amount to be paid to each
holder of a Community Bancshares option or warrant who has
executed a termination agreement.
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Until cancelled as contemplated by the merger agreement, each
option or warrant will be deemed at any time after the effective
time to represent only the right to receive the merger
consideration described in the merger agreement.
INFORMATION
ABOUT SUPERIOR BANCORP
General
Superior Bancorp is a Delaware-chartered thrift holding company
headquartered in Birmingham, Alabama. Superior Bancorp was known
as The Banc Corporation until May 18, 2006, when its
stockholders voted to change its name to Superior Bancorp.
Superior Bancorp offers a broad range of banking and related
services in 26 locations in Alabama and the Florida panhandle
through Superior Bank (formerly The Bank), its principal
subsidiary. Superior Bancorp had assets of approximately
$1.432 billion, loans of approximately $977.6 million,
deposits of approximately $1.078 billion and
stockholders equity of approximately $105.8 million
at March 31, 2006. Its principal executive offices are
located at 17 North 20th Street, Birmingham, Alabama 35203,
and telephone number is
(205) 327-1400.
Superior Bancorp was founded in 1997 and completed its initial
public offering in December 1998. Beginning in the fall of 1998,
Superior Bancorp grew through the acquisition of various
financial institutions in Alabama and Florida. Superior
Bancorps growth activities have most recently focused on
increasing its market share in Alabama, especially in the
Birmingham- and Huntsville-area markets, and in the eastern
panhandle of Florida.
In January 2005, Superior Bancorp began the transition from its
founding management team to a new senior management team
composed of veteran bankers with a strong operational track
record and a history of enhancing stockholder value. During the
remainder of 2005, Superior Bancorp completed that management
transition. In addition, in November 2005 Superior Bancorp
converted its principal subsidiary, now known as Superior Bank,
from an Alabama state-chartered bank to a federally chartered
thrift under the regulation of the Office of Thrift Supervision.
Superior Bancorp believes that this conversion will allow
greater flexibility in its operations, as well as allowing
Superior Bank to operate efficiently under a single regulatory
system rather than the dual federal/state regulatory system that
had been applicable to it.
On March 6, 2006, Superior Bancorp announced that it had
signed a definitive agreement to merge with Kensington
Bankshares, Inc. Kensington Bankshares is the holding company
for First Kensington Bank, a Florida state bank with eight
branches in the Tampa Bay area. Under the terms of the merger
agreement, Superior Bancorp has agreed to issue 1.60 shares
of its common stock for each share of Kensington Bankshares
common stock. Based on closing prices per share for Superior
Bancorp common stock for a period shortly before the Kensington
Bankshares merger agreement was executed, the transaction was
valued at approximately $71.2 million. The actual value at
consummation will be based on Superior Bancorp share price at
that time. The Tampa Bay area would be Superior Bancorps
largest market if the transaction closes and has a higher
projected population growth than any of Superior Bancorps
current banking markets. The Kensington Bankshares merger is
currently scheduled to occur during the third quarter of 2006.
Completion of the merger is subject to approval by the
stockholders of both corporations, to the receipt of required
regulatory approvals and to the satisfaction of usual and
customary closing conditions.
Strategy
Operations. Superior Bancorp focuses on small-
to medium-sized businesses, as well as professionals and
individuals, emphasizing its local decision-making, effective
response time and personalized service. As a result, Superior
Bancorp conducts its business on a decentralized basis with
respect to deposit gathering and most credit decisions,
emphasizing local knowledge and authority to make these
decisions. Superior Bancorp supplements this decentralized
management approach with centralized loan administration, policy
oversight, credit review, audit, asset/liability management,
data processing, human resources and risk management systems.
Superior Bancorp implements these standardized administrative
and operational policies at each of its locations while
retaining local management and advisory directors to capitalize
on their knowledge of the local community.
Products and Services. Superior Bank provides
a wide range of retail and small business services, including
noninterest-bearing and interest-bearing checking, savings and
money market accounts, negotiable order of
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withdrawal (NOW) accounts, certificates of deposit
and individual retirement accounts. In addition, Superior Bank
offers an extensive array of real estate, consumer, small
business and commercial real estate loan products. Other
financial services include annuities, automated teller machines,
debit cards, credit-related life and disability insurance,
safety deposit boxes, internet banking, bill payment and
telephone banking. Superior Bank attracts primary banking
relationships through the customer-oriented service environment
created by Superior Banks personnel combined with
competitive financial products.
Market Areas. Currently, Superior
Bancorps primary markets are located in northern and
central Alabama and the panhandle of Florida. If its merger with
Kensington Bankshares is approved and completed, Superior
Bancorp will have established a presence in the Tampa Bay,
Florida area which will be larger than any of its current
markets. If its merger with Community Bancshares is approved and
completed, Superior Bancorp will have an expanded presence and
broadened its services in Alabama.
Superior Bancorp is headquartered in Birmingham, Alabama.
Superior Bancorp also currently has branches in:
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Alabama
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Florida
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Albertville
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Andalusia
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Altha
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Boaz
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Childersburg
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Apalachicola
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Decatur
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Frisco City
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Blountstown
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Gadsden
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Guntersville
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Bristol
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Huntsville
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Kinston
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Carrabelle
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Madison
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Monroeville
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Mexico Beach
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Mt. Olive
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Opp
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Port St. Joe
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Rainbow City
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Samson
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Sylacauga
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Warrior
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In addition to these branches, Superior Bancorp operates loan
production offices in Montgomery, Alabama, and Panama City and
Tallahassee, Florida.
Growth. Superior Bancorps future growth
depends primarily on the expansion of the business of its
primary wholly owned subsidiary, Superior Bank. That expansion
will depend on internal growth and the opening of new branch
offices in new and existing markets. Superior Bank also plans to
engage in the strategic acquisition of other financial
institutions and branches that have relatively high earnings and
low-cost deposits or that it believes to have growth potential,
such as the Kensington Bankshares and Community Bancshares
transactions described above. Superior Bancorps ability to
increase profitability and grow internally depends primarily on
its ability to attract and retain low-cost and core deposits
coupled with the continued opportunity to generate
high-yielding, quality loans. Superior Bancorps ability to
grow profitably through the opening or acquisition of new
branches will depend primarily on, among other things, its
ability to identify profitable, growing markets and branch
locations within such markets, attract necessary deposits to
operate such branches profitably and identify lending and
investment opportunities within such markets.
Superior Bancorp periodically evaluates business combination
opportunities and conduct discussions, due diligence activities
and negotiations in connection with those opportunities. As a
result, Superior Bancorp may pursue business combination
transactions involving cash, debt or equity securities from time
to time. Any future business combination or series of business
combinations that Superior Bancorp might undertake may be
material to its business, financial condition or results of
operations in terms of assets acquired or liabilities assumed.
Any future acquisition is subject to approval by the appropriate
regulatory agencies.
Available
Information
Superior Bancorp maintains an Internet website at
www.superiorbank.com. Superior Bancorp makes available free of
charge through its website various reports that it files with
the SEC, including its annual reports on
Form 10-K,
quarterly reports on
Form 10-Q,
current reports on
Form 8-K,
and amendments to these reports which are incorporated herein by
reference. These reports are made available as soon as
reasonably practicable after these reports are filed with, or
furnished to, the SEC. From its home page at
www.superiorbank.com, go to and click on
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Investor Relations and click on SEC
Filings to access these reports. See Where You Can
Find More Information and Incorporation of Certain
Documents by Reference beginning on page .
INFORMATION
ABOUT COMMUNITY BANCSHARES
General
Community Bancshares is a Delaware-chartered bank holding
company, headquartered in Blountsville, Alabama. Community
Bancshares conducts its banking operations through Community
Bank, an Alabama-chartered bank with 17 banking offices in
Alabama. Community Bancshares also operates a consumer finance
subsidiary, 1st Community Credit Corporation, and insurance
agency subsidiaries, Community Insurance Corp. and Southern
Select Insurance, Inc. At March 31, 2006, Community
Bancshares had assets of approximately $576.3 million,
loans of approximately $354.0 million, deposits of
approximately $441.3 million and stockholders equity
of approximately $43.2 million. Its principal executive
offices are located at 68149 Main Street, Blountsville, Alabama
35031, and its telephone number is
(205) 429-1000.
Community Bancshares was founded in 1983 and commenced business
in 1985.
Commercial
Banking Business
Community Bank conducts commercial banking operations through
Community Bank, an Alabama banking corporation founded in 1923.
Community Bank is a member of the FDIC and its deposits are
insured by the FDIC.
Community Bank operates through 17 locations in nine counties in
Alabama, most of which are situated in northern Alabama.
Community Bank serves customers in five counties in north
Alabama Blount, Lauderdale, Limestone, Madison and
Morgan Counties; two counties in northwest Alabama
Marion and Winston Counties; and one county in southwest
Alabama Perry County. Community Bank has focused on
those market areas between the Birmingham and Huntsville
metropolitan areas, where significant growth and economic change
have transpired over the last decade.
Community Bank offers a wide range of commercial and retail
banking services, which principally include checking transaction
accounts and personal and commercial loans to customers in its
target market area. Community Bank seeks to provide its
customers with outstanding service and to become a vital
component of each of the communities that it serves. The retail
nature of Community Banks commercial banking operations
allows for diversification of customers and its loans to
businesses are not concentrated in any one industry.
Community Banks lending activities include commercial,
real estate and consumer loans. The majority of Community
Banks loans are to individuals and small to mid-sized
businesses in Alabama. Its commercial loan services include term
loans, lines of credit and agricultural loans. It provides a
broad range of short to medium-term commercial loans, both
secured and unsecured, to various local businesses for working
capital, business expansion and the purchase of equipment and
machinery. Its real estate lending activities include fixed and
adjustable rate residential mortgage loans, construction loans,
second mortgages, home improvement loans and home equity lines
of credit. Its consumer lending services include loans for
automobiles, recreational vehicles and boats, as well as
unsecured personal loans and loans secured by deposit accounts.
Other
Operations
Consumer
Finance Operations
1st Community Credit Corporation operates 15 finance
company offices in Limestone, Madison, Morgan, Blount, Cullman,
Marshall, Etowah, DeKalb, Walker, Talladega and St. Clair
Counties, Alabama, primarily in local communities where
Community Bank does not operate. 1st Community Credit
provides smaller loans to a market segment traditionally not
pursued by Community Bank. These loans typically involve greater
risk and generate higher yields than standard commercial bank
loans.
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Insurance
Agency Operations
Community Insurance Corp. serves as an agency in the sale of
title, property, casualty and life insurance products to
individuals and businesses in the Huntsville, Alabama
metropolitan area. Community Insurance owns 100% of Southern
Select Insurance, Inc., a managing general agency in Huntsville,
Alabama that brokers agricultural, commercial and personal
insurance products.
Available
Information
Community Bancshares maintains an Internet website at
www.communitybankal.com. Community Bancshares makes available
free of charge through its website various reports that it files
with the SEC, including its annual reports on
Form 10-K,
quarterly reports on
Form 10-Q,
current reports on
Form 8-K,
and amendments to these reports, which are incorporated herein
by reference. These reports are made available as soon as
reasonably practicable after these reports are filed with, or
furnished to, the SEC. From its home page at
www.communitybankal.com, go to and click on Community
Bancshares and click on SEC Filings to access
these reports. See Where You Can Find More
Information and Incorporation of Certain Documents
by Reference beginning on page .
SUMMARY
OF REGULATORY DIFFERENCES
There are a number of material differences between the
regulation of federal savings banks and thrift holding
companies, on the one hand, and Alabama state-chartered banks
and bank holding companies, on the other hand. Superior Bancorp
is a thrift holding company and Superior Bank is a federal
savings bank, also known as a thrift. Both entities are
regulated by the OTS. Community Bancshares is a bank holding
company and Community Bank is an Alabama state-chartered bank.
Community Bancshares is regulated by the Board of Governors of
the Federal Reserve System and Community Bank is regulated by
the Alabama State Banking Department. In addition, both Superior
Bank and Community Bank are regulated by the Federal Deposit
Insurance Corporation.
After the merger of Community Bancshares into Superior Bancorp,
and after the merger of Community Bank into Superior Bank, the
combined holding companies will be a thrift holding company and
the combined banks will be a federal savings bank. The primary
regulator of the combined organizations will be the OTS. In
addition, the FDIC will continue to regulate the combined banks.
The combined organizations will not be regulated by the Board of
Governors of the Federal Reserve System or by the Alabama State
Banking Department. Neither Superior Bancorp nor Community
Bancshares can give any assurance as to the effect that any
regulatory differences will have on the operations of the
combined organizations. The following is a summary of these
differences.
Single Regulator. Federal savings banks and
their holding companies have a single regulator, the OTS. Having
a single regulator can provide certain advantages to banks
operating on an interstate basis, by providing a single set of
regulatory rules and by providing certain preemption of state
and local laws that might otherwise be applicable. By contrast,
a state-chartered bank is subject to regulation by its home
state banking regulator, by its host state banking
regulators (regulators in states outside its home state in which
it operates), and by one or more federal regulators. For
example, a federal savings bank generally has greater power to
engage in interstate banking than does a state-chartered bank,
because of the single set of interstate branching rules enacted
by the OTS. By contrast, a state-chartered bank is subject to
the interstate banking rules of both its home state and all host
states, which might not be consistent or as advantageous as the
OTS rules.
In addition, a holding company of a state-chartered bank, such
as Community Bancshares, is subject to regulation by the Board
of Governors of the Federal Reserve System. This regulation is
in addition to the banks regulation by its state banking
authority. Such additional regulation of a holding company may
provide a benefit to depositors and shareholders that is not
present with a single regulator.
Limitations on Certain Loans. A federal
savings bank is restricted from holding non real estate-related
commercial and industrial loans, including agricultural loans,
in excess of 20% of the banks assets. Any such loans above
10% of assets must qualify as small business loans as defined by
the OTS. In addition, commercial real estate loans may not
exceed 400% of a federal savings banks capital.
Legislation has been introduced in Congress to relax
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these restrictions but there can be no assurance whether such
legislation will ever pass. By contrast, Alabama state-chartered
banks are not subject to such restrictions based on the real
estate nature of loans.
Federal savings banks are also subject to the so-called
Qualified Thrift Lender test. Under this test, at
least 65% of a federal savings banks assets must consist
of Qualified Assets, which generally consist of
cash, U.S. government or agency securities, or real estate
related loans, and consumer, credit card and small business
loans. Alabama state-chartered banks are not subject to such
test.
Neither Superior Bancorp nor Community Bancshares can give any
assurance that the above limitations on types of loans will not
in the future have an adverse effect on Superior Bank or
Superior Bancorp.
Lending Limits to One Borrower. Federal
savings banks may not have credit outstanding to a single
borrower in excess of 15% of their capital and surplus, with
certain exceptions for secured transactions and for the
development of domestic residential housing units. Alabama
state-chartered banks may not have credit outstanding to a
single borrower in excess of 10% of their capital and surplus,
with certain exceptions for secured transactions. Neither
Superior Bancorp nor Community Bancshares can give any assurance
that the differences in legal lending limits to a single
borrower will not in the future have an adverse effect on
Superior Bank or Superior Bancorp.
COMPARISON
OF RIGHTS OF COMMUNITY BANCSHARES
STOCKHOLDERS AND SUPERIOR BANKCORP STOCKHOLDERS
Both Community Bancshares and Superior Bancorp are incorporated
in Delaware. After the merger, the former Community Bancshares
stockholders will continue to have their rights and obligations
as stockholders of Superior Bancorp governed by Delaware law. A
summary comparison of the material rights of Superior Bancorp
stockholders under Superior Bancorps restated certificate
of incorporation and bylaws and the rights of a Community
Bancshares stockholder under the Community Bancshares
amended and restated certificate of incorporation and bylaws is
described below. The information set forth below is qualified in
its entirety by reference to Superior Bancorps restated
certificate of incorporation and its bylaws and to the amended
and restated certificate of incorporation and the bylaws of
Community Bancshares.
Classes
and Series of Capital Stock
Community Bancshares. Community Bancshares is
authorized by its amended and restated certificate of
incorporation to issue up to 20,200,000 shares of capital
stock, of which 20,000,000 are designated common stock, par
value $0.10 per share, and 200,000 are designated preferred
stock, par value $0.10 per share. As of March 31,
2006, there were 8,892,926 shares of Community Bancshares
common stock outstanding. In addition, 589,669 shares of
Community Bancshares common stock have been reserved for future
grants under the Community Bancshares, Inc. 2005 Incentive Plan.
The board of directors of Community Bancshares has the authority
to issue preferred stock in one or more series and fix the
rights, preferences, privileges and restrictions for each such
series, without any further vote or action by the stockholders.
As of March 31, 2006, there were no shares of preferred
stock of Community Bancshares issued and outstanding.
Superior Bancorp. Superior Bancorp is
authorized by its restated certificate of incorporation to issue
up to 55,000,000 shares of capital stock, of which
50,000,000 shares are designated common stock, par value
$.001 per share, and 5,000,000 shares are designated
preferred stock, par value $.001 per share. As of
March 31, 2006, there were 20,084,587 shares of
Superior Bancorp common stock outstanding. In addition,
2,500,000 shares of Superior Bancorp common stock have been
reserved for future option grants under Superior Bancorps
stock option plans. The board of directors of Superior Bancorp
has the authority to issue preferred stock in one or more series
and fix the rights, preferences, privileges and restrictions for
each such series, without any further vote or action by the
stockholders. As of March 31, 2006, there were no shares of
preferred stock of Superior Bancorp issued and outstanding.
Size and
Election of the Board of Directors
Community Bancshares. Community
Bancshares amended and restated certificate of
incorporation provides that the board of directors of Community
Bancshares will consist of not more than 18 directors and
not less
97
than nine directors. The board of directors of Community
Bancshares will fix the size of the board by resolution. There
are currently 12 directors. The directors are divided into
three classes of four directors each. At each annual meeting of
stockholders the members of one class of directors are elected
by a plurality of votes to three-year terms.
Superior Bancorp. Superior Bancorps
bylaws provide that the board of directors of Superior Bancorp
will consist of not more than 30 directors, nor less than
three directors. The board of directors of Superior Bancorp will
fix the size of the board by the resolution. There are currently
13 directors. Directors of Superior Bancorp are elected by
a plurality of votes cast at the annual meeting of stockholders
to one-year terms.
Removal
of Directors
Community Bancshares. Community
Bancshares amended and restated certificate of
incorporation provides that a director may only be removed for
cause by the affirmative vote of the holders of at least 80% of
the voting power of all the shares of stock that are present or
represented at a stockholder meeting. Cause is
defined to be the directors willful dishonesty towards,
fraud upon, or deliberate injury or attempted injury to
Community Bancshares.
Superior Bancorp. Superior Bancorps
bylaws provide that a director may be removed with or without
cause by the vote of the holders of a majority of the shares of
Superior Bancorp common stock entitled to vote at an election of
directors, except as otherwise provided by applicable law.
Dividends
Community Bancshares. Neither the amended and
restated certificate of incorporation nor the bylaws of
Community Bancshares addresses the declaration of dividends.
Pursuant to Delaware law, the board of directors of Community
Bancshares has the authority to declare and pay a dividend to
its stockholders out of its surplus or net profits for the year
in which the dividend is paid or the preceding year.
Superior Bancorp. The restated certificate of
incorporation of Superior Bancorp authorizes the board of
directors of Superior Bancorp to declare a dividend to
distribute to the stockholders, without a vote of the
stockholders, any portion of the assets of Superior Bancorp
which are available under Delaware law for distribution.
Conversion
and Dissolution
Community Bancshares. In connection with a
private placement of its common stock in 2003, Community
Bancshares granted an option to the holders of approximately
2,191,897 shares of its common stock to exchange those
shares for shares of its 2003 noncumulative preferred stock. The
option expires upon the earliest to occur of the following:
(1) December 31, 2008, (2) the attempted transfer
of the option, (3) the sale or transfer of the common
stock, or (4) the merger or consolidation of Community
Bancshares with another corporation where Community Bancshares
is not the continuing corporation. If the common stock were to
be exchanged for preferred stock, the preferred stock would be
entitled to preferential payments in the event of dissolution of
Community Bancshares.
Superior Bancorp. Superior Bancorp common
stock cannot be converted into any other type of stock of
Superior Bancorp. The restated certificate of incorporation of
Superior Bancorp authorizes the issuance of
5,000,000 shares of preferred stock, par value
$.001 per share, and provides that shares of preferred
stock may have the voting powers, preferences and other special
rights (including, without limitation, the right to convert the
shares of preferred stock into shares of Superior Bancorp common
stock) as described in Superior Bancorps restated
certificate of incorporation or resolutions providing for the
issuance of preferred stock. If the board of directors of
Superior Bancorp designated a series of preferred stock, such
preferred stock could be entitled to preferential payments in
the event of dissolution of Superior Bancorp.
Amendment
or Repeal of the Incorporation Documents and Bylaws
Community Bancshares. Community
Bancshares amended and restated certificate of
incorporation provides that the affirmative vote of the holders
of at least 80% of the voting power of all of the shares of
stock that are present and eligible to vote at a
stockholders meeting for which a quorum exists is required
to repeal or amend provisions in the amended and restated
certificate of incorporation pertaining to the board of
directors, limitation of
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liability of directors, indemnification of directors and
officers, action by stockholders and amendments to the amended
and restated certificate of incorporation. Other provisions of
Community Bancshares amended and restated certificate of
incorporation may be amended or repealed by the holders of a
majority of the outstanding stock entitled to vote thereon.
The amended and restated certificate of incorporation and bylaws
of Community Bancshares provide that the bylaws may be altered,
amended or repealed by a vote of a majority of the directors
then in office.
Superior Bancorp. Under Delaware law, unless
its certificate of incorporation or bylaws require a greater
vote, amendment of a corporations certificate of
incorporation generally requires the approval of the holders of
a majority of the outstanding stock entitled to vote thereon. If
the amendment would increase or decrease the number of
authorized shares of any class or series or the par value of
such shares or would adversely affect the shares of such class
or series, the approval of the holders of a majority of the
outstanding stock of such class or series is required to amend
the certificate of incorporation. The restated certificate of
incorporation and the bylaws of Superior Bancorp impose no
greater voting requirement.
The restated certificate of incorporation and bylaws of Superior
Bancorp provide that the bylaws may be altered, amended or
repealed by a vote of a majority of the entire board of
directors of Superior Bancorp, or by a majority of the
outstanding stock entitled to vote thereon.
Special
Meetings of Stockholders
Community Bancshares. Community
Bancshares bylaws provide that a special meeting of
Community Bancshares stockholders may, unless otherwise
prescribed by law, be called by the chairman of the board or the
president or a majority of the board of directors or upon the
written request of stockholders owning not less than 25% of all
shares of capital stock of Community Bancshares issued and
outstanding and entitled to vote at the meeting.
Superior Bancorp. Superior Bancorps
bylaws provide that a special meeting of Superior Bancorp
stockholders may, unless otherwise prescribed by law, be called
at any time by the chairman of the board or the president or by
order of the board of directors of Superior Bancorp. Special
meetings of stockholders prescribed by law for the election of
directors will be called by the board of directors of Superior
Bancorp, the chairman of the board, the president or the
secretary whenever they are required to do so by applicable law.
Liability
of Directors
Community Bancshares. Delaware law permits a
corporation to include a provision in its certificate of
incorporation eliminating or limiting the personal liability of
a director to a corporation or its stockholders for damages for
breach of the directors fiduciary duty, subject to certain
limitations. The amended and restated certificate of
incorporation of Community Bancshares includes such a provision
which, as described below, limits the liability to the fullest
extent permitted under applicable law.
The amended and restated certificate of incorporation of
Community Bancshares provides that a director will not be
personally liable to the corporation or its stockholders for
monetary damages for breach of fiduciary duty as a director,
except for liability:
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for any breach of the directors duty of loyalty to
Community Bancshares or its stockholders;
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for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law;
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under Section 174 of the Delaware General Corporation Law,
which concerns unlawful payments of dividends or expenditures of
funds for unlawful stock purchases or redemptions; or
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for any transaction from which the director derived an improper
personal benefit.
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While these provisions provide directors with protection from
awards of monetary damages for breaches of their duty of care,
they do not eliminate such duty. Accordingly, these provisions
will have no effect on the availability of equitable remedies
such as an injunction or rescission based on a directors
breach of his or her duty
99
of care. The provisions described above apply to an officer of
Community Bancshares only if he or she is a director of
Community Bancshares and is acting in his or her capacity as
director, and do not apply to officers of Community Bancshares
who are not directors.
Superior Bancorp. Delaware law permits a
corporation to include a provision in its certificate of
incorporation eliminating or limiting the personal liability of
a director to a corporation or its stockholders for damages for
breach of the directors fiduciary duty, subject to certain
limitations. The restated certificate of incorporation of
Superior Bancorp includes such a provision which, as described
below, limits the liability to the fullest extent permitted
under applicable law.
The restated certificate of incorporation of Superior Bancorp
provides that a director will not be personally liable to the
corporation or its stockholders for monetary damages for breach
of fiduciary duty as a director, except for liability:
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for any breach of the directors duty of loyalty to
Superior Bancorp or its stockholders;
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for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law;
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under Section 174 of the Delaware General Corporation Law,
which concerns unlawful payments of dividends or expenditures of
funds for unlawful stock purchases or redemptions; or
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for any transaction from which the director derived an improper
personal benefit.
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While these provisions provide directors with protection from
awards of monetary damages for breaches of their duty of care,
they do not eliminate such duty. Accordingly, these provisions
will have no effect on the availability of equitable remedies
such as an injunction or rescission based on a directors
breach of his or her duty of care. The provisions described
above apply to an officer of Superior Bancorp only if he or she
is a director of Superior Bancorp and is acting in his or her
capacity as director, and do not apply to officers of Superior
Bancorp who are not directors.
DESCRIPTION
OF CAPITAL STOCK OF SUPERIOR BANCORP
Authorized
Capital Stock
Superior Bancorps restated certificate of incorporation
provides that Superior Bancorp may issue 5,000,000 shares
of preferred stock, par value $.001 per share, and
50,000,000 shares of common stock, par value $.001 per
share.
Superior
Bancorp Common Stock
Holders of Superior Bancorp common stock are entitled to one
vote for each share held of record on all matters to be
submitted to a vote of the stockholders and do not have
pre-emptive rights. Cumulative voting is not permitted. This
means that the holders of shares entitled to exercise more than
50% of the voting rights in the election of directors, for
example, will be able to elect all Superior Bancorps
directors.
The holders of Superior Bancorp common stock are entitled to
dividends and other distributions as and if declared by the
board of directors of Superior Bancorp out of funds legally
available. See Market Price and Dividend
Information. All outstanding shares of Superior Bancorp
common stock are, and the shares to be issued in the merger will
be, when issued pursuant to the merger agreement, fully paid and
nonassessable. Upon the liquidation, dissolution or winding up
of Superior Bancorp, the holders of Superior Bancorp common
stock would be entitled to share pro rata in the distribution of
all assets, if any, of Superior Bancorp remaining after payment
or provision for payment of all Superior Bancorps debts
and obligations and preferred liquidation payments, if any, to
holders of any outstanding shares of preferred stock. Shares of
Superior Bancorp common stock are not subject to any redemption
provisions and are not convertible into any other security or
other property of Superior Bancorp. No share of Superior Bancorp
common stock is subject to any call or assessment.
100
Superior
Bancorp Preferred Stock
The board of directors of Superior Bancorp is authorized to
issue shares of preferred stock in one or more series. The board
of directors of Superior Bancorp will determine and fix the
rights, preferences and privileges of each series, including
dividend rights and preferences over dividends on Superior
Bancorp common stock and one or more series of preferred stock,
conversion rights, voting rights (in addition to those provided
by law), redemption rights and the terms of any sinking fund
therefor, and rights upon liquidation, dissolution or winding
up, including preferences over Superior Bancorp common stock and
one or more series of preferred stock. Although Superior Bancorp
has no present plans to issue any shares of preferred stock, the
issuance of shares of preferred stock, or the issuance of rights
to purchase such shares, may have the effect of delaying,
deferring or preventing a change in control of Superior Bancorp
or an unsolicited acquisition proposal.
Certain
Provisions of Superior Bancorps Restated Certificate of
Incorporation and Delaware Law
No Classified Board of Directors. Superior
Bancorps restated certificate of incorporation and bylaws
provide for the directors of Superior Bancorp to be annually
elected for a term of one year.
Advance Notice Provisions for Stockholder Proposals and
Stockholder Nominations of Directors. Superior
Bancorps restated certificate of incorporation provides
that at an annual meeting of stockholders, only such business
will be conducted as will have been properly brought before the
meeting. To be properly brought before an annual meeting,
business must be (a) specified in the notice of such
meeting (or any supplement thereto, given by or at the direction
of the board of directors of Superior Bancorp),
(b) otherwise properly brought before the meeting by or at
the direction of the board of directors of Superior Bancorp, or
(c) otherwise properly brought before the meeting by a
stockholder. For business to be properly brought before an
annual meeting by a stockholder, the stockholder must have given
timely notice thereof in writing to the Secretary of Superior
Bancorp.
Delaware Takeover Statute. Superior Bancorp is
subject to Section 203 of the Delaware General Corporation
Law which, subject to certain exceptions, prohibits a Delaware
corporation from engaging in any of a broad range of business
combinations with any interested stockholder for a
period of three years following the date that such stockholder
became an interested stockholder, unless:
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before that date, the board of directors of the corporation
approved either the business combination or the transaction
which resulted in the stockholder becoming an interested
stockholder;
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upon consummation of the transaction which resulted in the
stockholders becoming an interested stockholder, the
interested stockholder owned at least 85% of the voting stock of
the corporation outstanding at the time the transaction
commenced, excluding for purposes of determining the number of
shares outstanding those shares owned:
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by persons who are directors and also officers; and
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by employee stock plans in which employee participants do not
have the right to determine confidentially whether shares held
subject to the plan will be tendered in a tender or exchange
offer; or
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on or after such date, the business combination is approved by
the board of directors and authorized at an annual or special
meeting of stockholders, and not by written consent, by the
affirmative vote of at least
662/3%
of the outstanding voting stock which is not owned by the
interested stockholder.
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An interested stockholder is defined as any person
that is (a) the owner of 15% or more of the outstanding
voting stock of the corporation or (b) an affiliate or
associate of the corporation and was the owner of 15% or more of
the outstanding voting stock of the corporation at any time
within the three-year period immediately prior to the date on
which it is sought to be determined whether such person is an
interested stockholder.
Limitations
on Liability of Officers and Directors
Superior Bancorps restated certificate of incorporation
contains a provision eliminating or limiting a directors
liability to Superior Bancorp and its stockholders for monetary
damages arising from acts or omissions
101
in the directors capacity as a director, as described
above under Comparison of Rights of Community Bancshares
Stockholders and Superior Bancorp Stockholders
Liability of Directors.
This provision offers persons who serve on the board of
directors of Superior Bancorp protection against awards of
monetary damages resulting from breaches of their duty of care
except as indicated above. As a result of this provision, the
ability of Superior Bancorp or a stockholder of Superior Bancorp
to successfully prosecute an action against a director for a
breach of his duty of care is limited. However, the provision
does not affect the availability of equitable remedies such as
an injunction or rescission based upon a directors breach
of his duty of care. The SEC has taken the position that the
provision will have no effect on claims arising under the
federal securities laws.
In addition, Superior Bancorps restated certificate of
incorporation and bylaws provide for mandatory indemnification
rights, subject to limited exceptions, to any director, officer,
employee or agent of Superior Bancorp who by reason of the fact
that he or she is a director, officer, employee or agent of
Superior Bancorp, is involved in a legal proceeding of any
nature. These indemnification rights include reimbursement for
expenses incurred by such director, officer, employee or agent
in advance of the final disposition of such proceeding in
accordance with the applicable provisions of Delaware law.
Transfer
Agent and Registrar
The transfer agent and registrar for Superior Bancorp common
stock is Computerserve, 250 Royall Street, Canton, Massachusetts
02021, Telephone 877-282-1168.
EXPERTS
The consolidated financial statements of Superior Bancorp
incorporated by reference in this joint proxy
statement/prospectus have been audited by Carr, Riggs &
Ingram, LLC, independent registered public accountants, to the
extent indicated in their report thereon, and as to the year
2003, by Ernst & Young, LLP, independent registered
public accountants, to the extent indicated in their report
thereon. Such consolidated financial statements have been
included in reliance upon such reports given on the authority of
such firms as experts in accounting and auditing.
The consolidated financial statements of Community Bancshares
appearing in this joint proxy statement/prospectus have been
audited by Carr, Riggs & Ingram, LLC, independent
registered public accountants. Such consolidated financial
statements have been included in reliance upon such report given
on the authority of such firm as an expert in accounting and
auditing.
LEGAL
MATTERS
The validity of the shares of Superior Bancorp common stock to
be issued to the stockholders of Community Bancshares pursuant
to the merger will be passed upon by Haskell Slaughter
Young & Rediker, LLC, Birmingham, Alabama. Certain
United States federal income tax consequences relating to the
merger will be passed upon for Superior Bancorp and Community
Bancshares by Balch & Bingham LLP.
OTHER
MATTERS TO BE CONSIDERED AT THE
COMMUNITY BANCSHARES ANNUAL MEETING
The stockholder meeting at which the merger is considered will
also be the Community Bancshares annual meeting of stockholders
for 2006. Therefore, Community Bancshares stockholders will be
asked to vote on the election of directors to serve until the
earlier of the consummation of the merger with Superior Bancorp
or the 2009 annual meeting of stockholders.
102
PROPOSAL 2
ELECTION OF DIRECTORS
General
The amended and restated certificate of incorporation and bylaws
of Community Bancshares provide for a classified board of
directors consisting of three classes, with the three-year term
of office of each class expiring in successive years, and for
the number of directors to be fixed from time to time by the
vote of the directors. The current number of directors has been
fixed at 12, but will be reduced to 11 contemporaneously
with the annual meeting of stockholders.
The terms of Community Bancshares Class I directors
expire at the 2006 annual meeting of stockholders. There are
currently four Class I directors. The terms of the
Class II and Class III directors will expire in 2007
and 2008, respectively. Each of the Class I directors
elected at the annual meeting will serve a three-year term
expiring at the 2009 annual meeting of stockholders and until
his respective successor is elected and qualified; provided,
however, that the terms of all Community Bancshares directors
will end upon the consummation of the merger with Superior
Bancorp. A director of Community Bancshares is elected by the
affirmative vote of the holders of a plurality of the shares of
Community Bancshares common stock present, in person or by
proxy, at the annual meeting and entitled to vote.
Election
of Directors
The board of directors has nominated Messrs. Stacey W.
Mann, Philip J. Timyan and Jimmie A. Trotter for election as
Class I directors, based upon the recommendation of the
Nominating Committee. Messrs. Mann, Timyan and Trotter are
currently serving as Class I directors whose terms will
expire at the annual meeting. Mr. Roy B. Jackson, a current
Class I director, has reached the mandatory retirement age
under Community Bancshares Directors Policy and has not
been nominated for re-election for that reason.
103
Information
Relating to Directors, Executive Officers and Nominees
The following table sets forth, as to each director or nominee,
(i) his or her name; (ii) his or her age at
August 1, 2006; (iii) the date he or she was first
elected as a director; (iv) a description of the positions
he or she holds with Community Bancshares and each of its
subsidiaries; and (v) his or her principal occupation
during the past five years. Additional information relating to
the directors, executive officers and nominees may be found
below under the captions Security Ownership of Certain
Beneficial Owners and Management, Executive
Compensation, Certain Relationships and Related
Transactions and Legal Proceedings.
Nominees
for Class I Directors with Terms Expiring in 2009
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Name, Age and Positions Held
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with Community Bancshares and
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Principal Occupation
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Subsidiaries
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Director
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During Past Five Years
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Since
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Stacey W. Mann
(53)
Director of Community Bancshares (1); Director and
President of Community Bank; Director of
1st Community
Credit Corporation, Community Appraisals, Inc., Community
Insurance Corp., Southern Select Insurance Inc., and Community
Funding Corporation; Vice President of Community Funding
Corporation
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2003
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President of Community Bank
(2003 Present); Executive Vice President and Chief
Operating Officer of Community Bank (2001 2003);
Area Executive Vice President of Community Bank
(1997 2001)
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Philip J. Timyan
(48)
Director of Community Bancshares
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2005
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Managing Member of Riggs Qualified
Partners, LLC (investment partnership), Western Springs, Illinois
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Jimmie Trotter
(68)
Director of Community Bancshares, Community Bank,
1st Community
Credit Corporation, Community Appraisals, Inc., Community
Insurance Corp. and Southern Select Insurance, Inc.
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2000
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(Retired) Principal of Mortimer
Jordan High School, Morris, Alabama
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Mr. Mann previously was a director of Community Bancshares
during 1997 and 1998 and again from June 2001 through February
2002. |
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Current
Class II Directors with Terms Expiring in 2007
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Name, Age and Positions
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Held with Community
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Principal Occupation
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Bancshares and Subsidiaries
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Director Since
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During Past Five Years
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Jeffrey K. Cornelius
(59)
Director of Community Bancshares, Community Bank,
1st Community
Credit Corporation, Community Insurance Corp. and Southern
Select Insurance, Inc.
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2006
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Owner-operator of Cornelius Cattle
and Quarter Horses (cattle and horse breeding), Blountsville,
Alabama
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Glynn Debter
(71)
Director of Community Bancshares, Community Bank,
1st Community
Credit Corporation, Community Appraisals, Inc., Community
Insurance Corp. and Southern Select Insurance, Inc.
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1996
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Owner-operator of Debter Farms
(cattle breeding), Horton, Alabama
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John J.
Lewis, Jr. (59)
Director of Community Bancshares, Community Bank,
1st Community
Credit Corporation, Community Appraisals, Inc., Community
Insurance Corp. and Southern Select Insurance, Inc.
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1997
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Production Planning Manager for
Tyson Foods, Inc. (food processing), Blountsville, Alabama
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Terry G. Sanderson
(46)
Director of Community Bancshares, Community Bank,
1st Community
Credit Corporation, Community Appraisals, Inc., Community
Insurance Corp. and Southern Select Insurance, Inc.
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2004
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Certified Public Accountant d/b/a
Terry G. Sanderson, C.P.A. and Sanderson & Associates,
C.P.A., Huntsville, Alabama (1994 present); Chief
Financial Officer of Bentley Pontiac-Cadillac (automobile
sales), Huntsville, Alabama (1994-present)
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Current
Class III Directors with Terms Expiring in 2008
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Name, Age and Positions Held with
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Principal Occupation
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Community Bancshares and Subsidiaries
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Director Since
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During Past Five Years
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Kenneth K. Campbell
(61)
Director of Community Bancshares, Community Bank,
1st Community
Credit Corporation, Community Appraisals, Inc., Community
Insurance Corp. and Southern Select Insurance, Inc.
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2003
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President of K&B Properties,
Inc. (real estate rental and development), Locust Fork, Alabama;
Partner in Hinds & Campbell Properties (cell tower,
communications systems and real estate rental), Locust Fork,
Alabama; (Retired) President of Birmingham Communications and
Electronics, Inc. (wireless telephone), Birmingham, Alabama
(1980-1998)
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Patrick M. Frawley
(55)
Chairman, President and Chief Executive Officer of Community
Bancshares; Chairman and Chief Executive Officer of Community
Bank; Chairman of
1st Community
Credit Corporation, Community Appraisals, Inc., Community
Insurance Corp., and Southern Select Insurance, Inc.; Vice
President of Community Funding Corporation
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2003
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Chairman, President and Chief
Executive Officer of Community Bancshares (2003
Present); Chairman and Chief Executive Officer of Community Bank
(2003 Present); Senior Vice President of Community
Bank (2002 2003); Director of Regulatory Relations
for Bank of America (1991 2002)
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Scott Head
(43)
Director of Community Bancshares, Community Bank,
1st Community
Credit Corporation, Community Insurance Corp. and Southern
Select Insurance, Inc.
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2006
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Benefits Consultant for Weston
Agency, Inc. (employee benefits consulting), Huntsville, Alabama
(2006 Present); Vice Chairman of Community Insurance
Corp. (retail insurance agency), Huntsville, Alabama
(2006 Present); District Manager of Blue Cross Blue
Shield of Alabama (insurance), Huntsville, Alabama (2000-2006)
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Michael A. Tarpley
(50)
Director of Community Bancshares, Community Bank,
1st Community
Credit Corporation, Community Appraisals, Inc., Community
Insurance Corp. and Southern Select Insurance, Inc.
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2004
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Realtor and real estate developer,
Hartselle, Alabama; Partner in Faithway Feed Company (farm
supplies), Guntersville, Alabama (2003-2004); Territory Manager
for Pennington Seed Inc. (lawn and garden supplies), Cullman,
Alabama (1997-2003)
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The chief executive officer and each of the next four most
highly compensated executive officers of Community Bancshares
are collectively referred to as the named executive
officers. The following table sets forth, as to each named
executive officer who is not a director of Community Bancshares,
(i) his or her name; (ii) his or her age at
May 31, 2006; (iii) the date he or she was first
elected as an officer; (iv) a description of the positions
he or she holds with Community Bancshares and each of its
subsidiaries; and (v) his or her principal occupation
during the past five years.
Named
Executive Officers of Community Bancshares Who are Not
Directors
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Name, Age and Positions Held with Community
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Principal Occupation
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Bancshares and Subsidiaries
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Officer Since
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During Past Five Years
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John W. Brothers
(55)
Chief Operating Officer of Community Bank; Director of
1st Community Credit Corporation, Community Insurance Corp.
and Southern Select Insurance, Inc.
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2003
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Chief Operating Officer of
Community Bank (2004 present); Director of Strategic
Planning and Growth of Community Bank (2003 2004);
Director of Financial Planning, Mergers and Acquisitions of
Acosta Marketing, Jacksonville, Florida (2000 2003);
Chief Financial Officer and Controller of Auto Group of Bank of
America, Charlotte, North Carolina (1993 2000)
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William H. Caughran
(49)
General Counsel and Corporate Secretary of Community Bancshares
and Community Bank
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1998
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General Counsel and Corporate
Secretary of Community Bancshares (2002, 2003
Present); General Counsel of Community Bank (1998
2002, 2003 Present); Corporate Secretary of
Community Bank (2002, 2003 Present); Associate
Counsel of AmSouth Bank, Birmingham, Alabama (1986-1998)
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Kerri C. Kinney
(37)
Chief Financial Officer of Community Bancshares and Community
Bank
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2001
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Chief Financial Officer of
Community Bancshares and Community Bank (2001
Present); Senior Risk Consultant for Compass Bank, Birmingham,
Alabama (2001); Chief Accounting Officer of Frontier National
Corporation, Sylacauga, Alabama (1998 2000); Chief
Financial Officer of Frontier National Bank, Lanett, Alabama
(1997 2000); Vice President and Controller of The
County Bank, Greenwood, South Carolina (1993 1997)
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Community Bancshares bylaws provide that the term of
office of an executive officer of Community Bancshares is to be
as provided in the officers employment agreement or, if
the officer is not a party to an employment agreement or if the
officers employment agreement does not specify a term of
office, as determined by Community Bancshares board of
directors and until the officers successor is elected and
qualified or until the officers earlier resignation or
removal. Community Bancshares is a party to one employment
agreement with Patrick M. Frawley, its chairman and chief
executive officer. This agreement, effective March 29,
2005, provides for a three-year term of office for
Mr. Frawley. Upon each anniversary date of the agreement,
Mr. Frawleys term of office is extended by one year
unless Community Bancshares provides notice to Mr. Frawley
that such extensions will cease.
Recommendation
and Required Vote
Approval of the proposal relating to the election of nominees as
directors requires the affirmative vote of the holders of shares
of common stock representing a plurality of the votes cast at
the annual meeting at which a quorum is present to be approved.
This means that the three director nominees receiving the most
votes will be elected. Shares not voted, and properly voted
proxies to withhold authority, will result in a
nominee receiving fewer votes, but will not be treated as votes
against a nominee. The persons named in the enclosed proxy card
will vote for the election of the nominees unless authority to
vote for one or more nominees is withheld. Each nominee has
consented to serve as a director if elected. However, if prior
to the annual meeting, any person proposed for election as a
director is unavailable to serve or for good cause cannot serve,
the shares of all valid proxies may be voted for the election of
such substitute as the members of the Community Bancshares board
of directors may recommend.
107
THE BOARD OF DIRECTORS OF COMMUNITY BANCSHARES RECOMMENDS
THAT STOCKHOLDERS VOTE FOR THE ELECTION OF
THE NOMINEES LISTED ABOVE AS DIRECTORS OF COMMUNITY
BANCSHARES.
ADDITIONAL
INFORMATION CONCERNING THE
COMMUNITY BANCSHARES
BOARD OF DIRECTORS AND COMMITTEES
Board
Meetings and Director Attendance
The board of directors of Community Bancshares held 11 meetings
during 2005. During 2005, all incumbent directors of Community
Bancshares attended at least 75% of the total number of meetings
of the board of directors and meetings of the committees of
which they were members. All of Community Bancshares
directors who were directors at the time attended the 2005
annual meeting of stockholders. Community Bancshares does not
have a formal policy on director attendance at its annual
meetings of stockholders, but strongly encourages its directors
to attend the annual meetings of stockholders and all meetings
of the board and committees on which the directors serve.
Committees
To assist it in its work, the Community Bancshares board of
directors has the following standing committees: Executive
Committee, Nominating Committee, Executive Compensation/Benefits
Committee, Employee Benefits Administration Committee and Audit
Committee.
Audit Committee. The members of the Audit
Committee are Messrs. Terry G. Sanderson (Chairman), John
J. Lewis, Jr. (Vice Chairman), Glynn C. Debter, and Jimmie
A. Trotter, all of whom are independent directors as defined in
The NASDAQ Stock Markets (NASDAQ) and the
SECs rules and regulations. The Audit Committee has the
responsibilities set forth in the Audit Committee Charter, which
is available on Community Bancshares website at
www.communitybankal.com. These responsibilities include
reviewing Community Bancshares financial statements,
evaluating internal accounting controls, reviewing reports of
regulatory authorities and determining that all audits and
examinations required by law are properly performed. The Audit
Committee appoints the independent auditors, reviews and
approves their audit plan and reviews with the independent
auditors the results of the audit and managements
responses thereto. The Audit Committee also reviews the adequacy
of the outsourced internal audit budget and personnel, the
outsourced internal audit plan and schedule and the results of
audits performed by the internal audit staff. The Audit
Committee is responsible for overseeing the entire audit
function and appraising the effectiveness of outsourced internal
and external audit efforts. The Audit Committee reports its
findings to the board of directors. This committee met five
times during 2005.
Executive Compensation/Benefits Committee. The
members of the Executive Compensation/Benefits Committee are
Messrs. Glynn C. Debter (Chairman), Roy B. Jackson (Vice
Chairman), Kenneth K. Campbell, John J. Lewis, Jr., Terry
G. Sanderson, Philip J. Timyan and Jimmie Trotter, all of whom
are independent directors as defined in NASDAQs and the
SECs rules and regulations. The Executive
Compensation/Benefits Committee has not adopted a written
charter. The Executive Compensation/Benefits Committee reviews
the compensation and employee benefits of all officers of
Community Bancshares and its subsidiaries, administers the
Community Bancshares executive compensation program and
recommends to the Board the compensation for the Chief Executive
Officer and the other named executive officers. For additional
information, see the material contained in this joint proxy
statement/prospectus under the captions Executive
Compensation and Executive Compensation/Benefits
Committee Report. The Executive Compensation/Benefits
Committee met once during 2005.
Nominating Committee. The members of the
Nominating Committee are Messrs. Glynn C. Debter
(Chairman), Roy B. Jackson and Philip J. Timyan. Each of the
members is an independent director as defined in NASDAQs
and the SECs rules and regulations. The Nominating
Committee has adopted a Nominating Committee Charter, which is
available on Community Bancshares website at
www.communitybankal.com. The purpose of this committee is to
identify individuals who are qualified to become members of the
board of directors of Community Bancshares and recommend the
nominees to the board of directors for consideration at the next
annual
108
meeting of stockholders. Procedures whereby individual
stockholders can submit recommendations of persons to be
considered for nomination as a director of Community Bancshares
and Community Bancshares process for nominating directors
are described below under the caption Director Nomination
Process. The Nominating Committee met two times during
2005.
Executive Committee. The members of the
Executive Committee are Messrs. Patrick M. Frawley
(Chairman), Stacey W. Mann (Vice Chairman), Glynn C. Debter,
John J. Lewis, Jr., Terry G. Sanderson and Philip J.
Timyan. This committee has the authority, to the extent
permitted by law and Community Bancshares amended and
restated certificate of incorporation and bylaws, to exercise
all the powers of the board of directors in the management of
the business and affairs of Community Bancshares. This committee
did not meet during 2005.
Employee Benefits Administration
Committee. The members of the Employee Benefits
Administration Committee are Messrs. Patrick M. Frawley
(Chairman), John J. Lewis, Jr. (Vice Chairman), Scott Head,
Michael A. Tarpley and Philip J. Timyan. This Committee
administers Community Bancshares qualified pension and
welfare benefit plans for employees. This committee held three
meetings in 2005.
Independent
Directors; Executive Sessions
Community Bancshares board of directors has affirmatively
determined that each of Messrs. Kenneth K. Campbell, Glynn
C. Debter, Roy B. Jackson, John J. Lewis, Jr., Terry G.
Sanderson, Philip J. Timyan and Jimmie A. Trotter are
independent directors within the meaning of
NASDAQs and the SECs rules and regulations. In
addition to the meetings of Community Bancshares board of
directors, and the committees thereof, Community
Bancshares independent directors regularly meet in
executive session meaning that none of
Community Bancshares officers or other directors are
present to discuss Community Bancshares business.
Any independent director may call an executive session of the
independent directors at any time.
Director
Nomination Process
The Nominating Committee reviews and makes recommendations to
the board of directors regarding the composition, size and
organization of the board so that the board consists of members
with the proper expertise, skills, attributes and professional
and personal backgrounds needed by Community Bancshares. The
Nominating Committee has not adopted any specific minimum
qualifications that must be met by a nominee or any specific
qualities or skills that are necessary for one or more of the
directors to possess. However, the Directors Policy adopted by
the board of directors contains a number of provisions limiting
service as a director. The Nominating Committee would not
nominate an individual whose service as a director would violate
any of the following provisions of the Directors Policy:
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the director must not be older than the mandatory retirement age
of 72;
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the directors health, business or conflicts of interest
must not prevent the director from performing the normal, usual
and customary responsibilities of a director;
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the directors personal financial situation must not erode
public confidence in the directors ability to effectively
manage a financial institution;
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extensions of credit by Community Bank to the director or the
directors affiliates must not be classified substandard or
lower for more than 90 days;
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the director must not be engaged in litigation adverse to
Community Bancshares or its affiliates; and
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transactions between the director and Community Bancshares must
be on an arms-length basis and on terms no more favorable
to the director than a similar transaction with an independent
third party.
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The Nominating Committee has no specifically defined process for
identifying and evaluating nominees. Historically, candidates
for board membership have been identified and recommended by
current board members and have usually served as advisory
directors of Community Bank in the communities in which
Community Bank has offices. Community Bancshares may from time
to time engage a third party to identify or evaluate, or assist
in identifying or evaluating, potential nominees. During 2005,
Community Bancshares did not pay a fee to any third
109
party for such service. The Nominating Committee will consider
candidates suggested by current directors and executive
officers, stockholders and third party search firms, if employed.
A stockholder may recommend a director nominee if the
stockholder has continuously held for at least one year prior to
the submission of a recommendation at least $2,000 in market
value or one percent of Community Bancshares stock
entitled to vote for the election of directors. A stockholder
must submit the name and qualifications of the candidate that
the stockholder wishes to recommend to Community
Bancshares Nominating Committee at the following address:
Community Bancshares, Inc., 68149 Highway 231 South, Post Office
Box 1000, Blountsville, Alabama, 35031, Attention:
Mr. William H. Caughran. The Nominating Committee will
consider candidates recommended by a stockholder only if the
stockholder follows the procedures set forth in Community
Bancshares bylaws and applicable rules and regulations of
the SEC. Stockholder recommendations for nomination must be
submitted in writing to Community Bancshares Secretary not
earlier
than
and not later
than .
Recommendations submitted by a stockholder must provide the
name, age, business address, residence address, principal
occupation and number of shares of Community Bancshares
common stock beneficially owned by each proposed nominee as well
as any other information relating to the proposed nominee that
is required to be disclosed in solicitations for proxies for
election of directors pursuant to Schedule 14A of
Regulation 14A promulgated by the SEC under
Section 14(a) of the Securities Exchange Act of 1934. The
stockholder must also submit with respect to each proposed
nominee a fully completed Federal Reserve Form FR 2081 and
a fingerprint card together with such information as Community
Bancshares regulators may require. The notice must also
contain the name, record address and number of shares of the
Community Bancshares common stock beneficially owned by
the stockholder delivering the recommendation.
All recommendations will be brought to the attention of
Community Bancshares Nominating Committee, which may
solicit additional information from the recommending stockholder
or the candidate. Candidates for director recommended by
stockholders are afforded the same consideration as candidates
for director that are identified by the Community Bancshares
directors or executive officers or by third party search firms.
Communications
Between Stockholders and the Board of Directors
Community Bancshares board of directors is accountable to
stockholders and wishes to provide a means for stockholders to
communicate with directors. Stockholders desiring to communicate
with the board of directors, a board committee, the independent
directors, any other group of directors or any individual
director may do so by sending written communications addressed
to the board of directors, a board committee, the independent
directors, any other group of directors or any individual
director at the following address: Community Bancshares, Inc.,
P.O. Box 1000, Blountsville, Alabama 35031, Attention:
Mr. William H. Caughran. All communications will be
compiled by Community Bancshares Secretary and submitted
to the board of directors at the next regular board meeting.
Certain
Relationships and Related Transactions
Community Bank has from time to time made loans to certain of
Community Bancshares and Community Banks directors
and executive officers, and members of their immediate families.
Except as noted below, all such loans are made in the ordinary
course of business on substantially the same credit terms,
including interest rates, repayment terms and collateral, as
those prevailing at the time for comparable transactions with
other persons, and do not represent more than a normal risk of
collection or present other features unfavorable to Community
Bank or Community Bancshares. In addition, two directors have
purchased foreclosed property from Community Bank. In both cases
Community Bank solicited bids for the properties in the ordinary
course of business and the directors bids were the highest.
Community Bank maintains a program whereby each of its full-time
employees is eligible for a discount of up to 1% in the rate of
interest charged on a loan from Community Bank. Federal banking
regulations permit executive officers of Community Bank to
participate in this program. In addition, Community Bank
maintains a program for executive officers and other of its
employees who are required by Community Bank to relocate within
its market
110
area in connection with their employment with Community Bank.
Under this program, each of these employees is eligible for a 5%
annual interest rate on first mortgage real estate loans from
Community Bank.
Executive officers John W. Brothers and Kerri C. Kinney each
have one first mortgage real estate loan under the relocation
program. The highest balances of loans to Mr. Brothers and
Ms. Kinney outstanding at any time during 2005 under this
program were approximately $244,981 and $245,390, respectively.
As of March 31, 2006, the outstanding balances of loans by
Community Bank to Mr. Brothers and Ms. Kinney under
this program were approximately $239,889 and $239,221,
respectively.
At December 31, 2005, the total outstanding balance of
indebtedness incurred by the Community Bancshares Employee Stock
Ownership Plan (the ESOP) to purchase shares of
common stock was approximately $1,344,505. This indebtedness,
which was owed to Community Bancshares, and was secured by a
pledge of 89,954 shares of Community Bancshares common
stock that have not been allocated by the ESOP, was guaranteed
by Community Bancshares.
Compensation
of Directors
During 2005, non-employee directors of Community Bancshares were
paid a fee of $500 for each quarterly meeting of the board of
directors. Non-employee members of Community Bancshares
Executive Committee, Nominating Committee, Executive
Compensation Committee, Audit Committee and Employee Benefits
Administration Committee received a fee of $250 per
meeting. Non-employee directors of Community Bancshares who are
also directors of Community Bank received a monthly fee of
$1,500, plus $500 per meeting held in excess of one per
month. Non-employee directors of 1st Community Credit,
Community Appraisals and Community Insurance received a
quarterly fee of $500. Non-employee members of Community
Banks Executive Committee, Audit Committee and Asset
Quality Committee received $250 per meeting. Non-employee
members of Community Banks Directors Credit Committee
received a monthly fee of $500.
111
SECURITY
OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT OF
COMMUNITY BANCSHARES
The following table sets forth certain information, as of
May 26, 2006, with respect to ownership of Community
Bancshares common stock by (i) each of Community
Bancshares directors and executive officers, (ii) all
directors and executive officers as a group, and (iii) each
other person or group that is known by Community Bancshares,
based solely upon a review of filings made with the SEC, to be
the beneficial owner of more than 5% of the outstanding shares
of Community Bancshares common stock.
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Percentage of
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Shares of Common Stock Beneficially Owned(1)
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Total Shares
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Person, Group or Entity
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Sole Power(2)
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Shared Power(3)
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Total
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Outstanding
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I. Directors, Nominees and
Executive Officers
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Kenneth K. Campbell
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122,178
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(4)
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2,700
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124,878
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1.40
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%
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Jeffrey K. Cornelius
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200
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200
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*
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Glynn Debter
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100,400
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(5)
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13,361
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113,761
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1.28
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%
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Patrick M. Frawley
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256,381
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(6)
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89,954
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346,335
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3.89
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%
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Scott Head
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90,254
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90,254
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1.01
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%
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Roy B. Jackson
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100,600
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(7)
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4,500
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105,100
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1.18
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%
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John J. Lewis, Jr.
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143,390
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(8)
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91,654
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235,044
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2.64
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%
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Stacey W. Mann
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171,099
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(9)
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4,155
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175,254
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1.97
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%
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Terry G. Sanderson
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28,175
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(10)
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405
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28,580
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*
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Michael A. Tarpley
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29,024
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(11)
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90,454
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119,478
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1.34
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%
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Philip J. Timyan
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688,755
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181,704
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870,459
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9.79
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%
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Jimmie Trotter
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102,000
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(12)
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4,014
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106,014
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1.19
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%
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Kerri C. Kinney
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51,393
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(13)
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51,393
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*
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John W. Brothers
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56,671
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(14)
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2,000
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58,671
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*
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William H. Caughran
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72,844
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(15)
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3,274
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76,118
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*
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All Community Bancshares
directors, nominees for directors and executive officers as a
group (15 persons)
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1,923,110
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218,613
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2,141,723
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24.08
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%
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II. Five Percent or Greater
Stockholders
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North Star Trust Corporation, as
Trustee of the Community Bancshares, Inc. Employee Stock
Ownership Plan (16)
500 West Madison Street, Suite 3800
Chicago, Illinois 60661
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491,820
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491,820
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5.54
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%
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Riggs Qualified Partners, LLC
(17)
4324 Central Avenue
Western Springs, Illinois 60558
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688,755
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688,755
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7.74
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%
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Spence Limited, L.P.,
Financial Junk, LLC,
John Wilson Spence, III and
Gerald J. Bruner (17)
115 West Liberty Street
Blakely, Georgia 39823
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747,570
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747,570
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8.41
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%
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Jeffrey A. Miller and Eric D.
Jacobs (17)
P.O. Box 26039
Gallows Bay Station Christiansted,
St. Croix, USVI 00824
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647,355
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647,355
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7.28
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%
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112
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Percentage of
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Shares of Common Stock Beneficially Owned(1)
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Total Shares
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Person, Group or Entity
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Sole Power(2)
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Shared Power(3)
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Total
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Outstanding
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Ewing & Partners (17)
4514 Cole Avenue, Suite 808
Dallas, Texas 75205
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764,662
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764,662
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8.60
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%
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Timothy G. Ewing (17)
4514 Cole Avenue, Suite 808
Dallas, Texas 75205
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53,372
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764,662
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818,034
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9.20
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%
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(1) |
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The number of shares reflected includes shares which, under
applicable SEC regulations, are deemed to be beneficially owned,
including shares as to which, directly or indirectly, through
any contract, arrangement, understanding, relationship or
otherwise, either voting power or investment power is held or
shared. In addition, in computing the number of shares
beneficially owned by a person and the percentage ownership of
that person, shares of common stock subject to options held by
that person which are currently exercisable, or which will
become exercisable within 60 days following May 26,
2006, are deemed to be outstanding. Such shares, however, are
not deemed outstanding for the purposes of computing the
percentage ownership of any other person. The total number of
shares beneficially owned is divided, where applicable, into two
categories: (i) shares as to which voting/investment power
is held solely, and (ii) shares as to which
voting/investment power is shared. |
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(2) |
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Unless otherwise specified in the following footnotes, if a
beneficial owner is shown as having sole power, the owner has
sole voting as well as sole investment power, and if a
beneficial owner is shown as having shared power, the owner has
shared voting power as well as shared investment power. Some
individuals are shown as beneficial owners of shares held by the
Community Bancshares ESOP. The individual has sole power to
direct the ESOP trustee as to the manner in which shares
allocated to the individuals account under the ESOP are to
be voted. The individual has no direct power of disposition with
respect to shares allocated to the individuals account,
except to request a distribution under the terms of the ESOP.
The number of shares shown as allocated to an individuals
account is as of December 31, 2005. |
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(3) |
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This column may include shares held in the name of, among
others, a spouse, minor children or certain other relatives
sharing the same home as the director, nominee, executive
officer or 5% stockholder. In the cases of Messrs, Frawley,
Head, Lewis, Tarpley and Timyan, this column includes
89,954 shares which are held by the ESOP and which have not
been allocated to any participant account. These individuals
serve as members of the Administrative Committee of the ESOP and
have investment authority over the unallocated shares, but each
individual disclaims any beneficial ownership with respect to
such unallocated shares. |
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(4) |
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Includes 75,000 shares which could be acquired within
60 days following May 26, 2006 pursuant to stock
options. |
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(5) |
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Includes 100,000 shares which could be acquired within
60 days following May 26, 2006 pursuant to stock
options. |
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(6) |
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Includes 250,000 shares which could be acquired within
60 days following May 26, 2006 pursuant to stock
options and 5,381 shares allocated to
Mr. Frawleys ESOP account as of December 31,
2005. |
|
(7) |
|
Includes 100,000 shares which could be acquired within
60 days following May 26, 2006 pursuant to stock
options. |
|
(8) |
|
Includes 100,000 shares which could be acquired within
60 days following May 26, 2006 pursuant to stock
options and 19,868 shares held by an estate of which
Mr. Lewis is the executor and a beneficiary. |
|
(9) |
|
Includes 142,500 shares which could be acquired within
60 days following May 26, 2006 pursuant to stock
options and 21,953 shares allocated to Mr. Manns
ESOP account as of December 31, 2005. |
|
(10) |
|
Includes 25,000 shares which could be acquired within
60 days following May 26, 2006 pursuant to stock
options. |
|
(11) |
|
Includes 25,000 shares which could be acquired within
60 days following May 26, 2006 pursuant to stock
options. |
113
|
|
|
(12) |
|
Includes 100,000 shares which could be acquired within
60 days following May 26, 2006 pursuant to stock
options. |
|
(13) |
|
Includes 46,000 shares which could be acquired within
60 days following May 26, 2006 pursuant to stock
options and 4,893 shares allocated to
Ms. Kinneys ESOP account as of December 31, 2005. |
|
(14) |
|
Includes 55,000 shares which could be acquired within
60 days following May 26, 2006 pursuant to stock
options and 1,671 shares allocated to
Mr. Brothers ESOP account as of December 31,
2005. |
|
(15) |
|
Includes 67,500 shares which could be acquired within
60 days following May 26, 2006 pursuant to stock
options and 4,810 shares allocated to
Mr. Caughrans ESOP account as of December 31,
2005. |
|
(16) |
|
Participants in the ESOP have the power to direct the ESOP
trustee how to vote shares allocated to their individual
accounts. Any unallocated shares, and any allocated shares with
respect to which voting instructions are not received from a
participant, will be voted by the appropriate ESOP fiduciary in
its discretion. |
|
(17) |
|
Information about this individual or group was obtained from a
Schedule 13D or 13G, filed by such individual or group with the
SEC. |
SECTION 16(a)
BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as
amended, requires Community Bancshares directors and
executive officers and persons who beneficially own more than
10% of Community Bancshares common stock to file with the
SEC on a timely basis initial reports of ownership and reports
of changes in ownership of common stock and other equity
securities of Community Bancshares. These officers, directors
and stockholders are also required by SEC rules to furnish
Community Bancshares with copies of all Section 16(a)
reports they file. There are specific dates by which these
reports are to be filed and Community Bancshares is required to
disclose any failure to file on a timely basis reports that were
required for 2005 or prior fiscal years.
Mr. John J. Lewis, Jr. filed a Form 5 on
February 9, 2006 reporting one transaction which should
have been reported on the prior years Form 5.
Community Bancshares has relied on written representations of
its directors and executive officers and copies of the reports
that have been filed in making required disclosures concerning
beneficial ownership reporting.
COMMUNITY
BANCSHARES AUDIT COMMITTEE REPORT
The Audit Committee monitors Community Bancshares
financial reporting process on behalf of the board of directors.
The Audit Committee operates under a written charter adopted by
the board of directors and the Audit Committee during the fourth
quarter of 2003 that complies with the requirements of the
Sarbanes-Oxley Act of 2002 and the SEC rules promulgated
thereunder, as well as certain of the NASDAQ governance
standards applicable to Community Bancshares. A copy of the
Audit Committee Charter is available on Community
Bancshares website at www.communitybankal.com.
The Audit Committee consists of four directors, each of whom is
independent as defined in the NASDAQ and SEC rules. None of the
Audit Committee members is or has been an officer or employee of
Community Bancshares or any of its subsidiaries, has engaged in
any nonexempt business transaction or has any nonexempt business
or family relationship with the Company or any of its
subsidiaries or affiliates, other than in the ordinary course of
business. Community Bancshares board of directors has
determined that Community Bancshares presently has one Audit
Committee financial expert serving on its Audit Committee. Terry
G. Sanderson, a certified public accountant, is the Audit
Committee financial expert under Item 401(h) of
Regulation S-K.
Community Bancshares management has the primary
responsibility for Community Bancshares financial
statements and reporting process, including the systems of
internal controls. Community Bancshares independent
auditors are responsible for performing an independent audit of
Community Bancshares consolidated financial statements in
accordance with generally accepted auditing standards and
issuing a report thereon. The Audit Committee monitors the
integrity of Community Bancshares financial reporting
process and system of internal controls as well as the
independence and performance of Community Bancshares
independent auditors and outsourced internal auditors. The Audit
Committee also appoints or recommends annually to the board of
directors
114
the accountants to serve as Community Bancshares
independent auditors for the coming year. The Audit Committee
pre-approves all of the professional services that are provided
by Community Bancshares independent auditors.
The Audit Committee believes that it has taken the actions
necessary or appropriate to fulfill its oversight
responsibilities. To carry out its responsibilities, the Audit
Committee met five times in 2005. In fulfilling its
responsibilities, the Audit Committee:
|
|
|
|
|
Reviewed and discussed with management Community
Bancshares audited financial statements for the year ended
December 31, 2005 and determined that Community
Bancshares internal controls were adequate for preparation
of the financial statements;
|
|
|
|
Discussed with Community Bancshares independent auditors
the matters required to be discussed under Statement on Auditing
Standards No. 61, Communication with Audit
Committees; and
|
|
|
|
Received the written disclosures and the letter from Community
Bancshares independent auditors regarding the
auditors independence as required by Independence
Standards Board Standard No. 1, and discussed with
Community Bancshares independent auditors their
independence.
|
Based on the Audit Committees review of Community
Bancshares audited financial statements for the year ended
December 31, 2005 and its discussions with management and
Community Bancshares independent auditors as described
above and in reliance thereon, the Audit Committee recommended
to Community Bancshares board of directors that Community
Bancshares audited financial statements for the year ended
December 31, 2005 be included in Community Bancshares
Annual Report on
Form 10-K
for the year ended December 31, 2005 for filing with the
SEC.
By the
Audit Committee:
Terry G.
Sanderson (Chairman)
John J. Lewis, Jr. (Vice Chairman)
Glynn C. Debter
Jimmie A. Trotter
COMMUNITY
BANCSHARES EXECUTIVE COMPENSATION
General
Executive officers are appointed annually by the respective
boards of directors of Community Bancshares and Community Bank
following the annual meetings of stockholders, to serve until
the next annual meeting of stockholders and until their
successors are chosen and qualified.
Under rules established by the SEC, Community Bancshares is
required to provide certain data and information in regard to
the compensation and benefits provided to Community
Bancshares chief executive officer and other executive
officers who make in excess of $100,000 per year. The
disclosure requirements for these named executive officers
include the use of tables and a report explaining the rationale
and considerations that led to fundamental executive
compensation decisions affecting these individuals.
The report below reflects Community Bancshares
compensation philosophy, as endorsed by the board of directors
of each of Community Bancshares, Community Bank and the other
subsidiaries of Community Bancshares, as well as the Executive
Compensation/Benefits Committee, and resulting actions taken by
Community Bancshares for the reporting periods shown in the
various compensation tables supporting the report. The Executive
Compensation/Benefits Committee either approves or recommends to
the board of directors payment amounts and award levels for
executive officers of Community Bancshares and its subsidiaries.
Compensation
Committee Interlocks and Insider Participation
Messrs. Glynn C. Debter, Chairman, Roy B. Jackson, Vice
Chairman, Kenneth K. Campbell, John J. Lewis, Jr., Terry G.
Sanderson, Philip J. Timyan and Jimmie A. Trotter currently
serve as members of the Executive
115
Compensation/Benefits Committee of Community Bancshares board of
directors. None of Messrs. Debter, Jackson, Campbell,
Lewis, Sanderson, Timyan or Trotter are, or were previously,
officers or employees of Community Bancshares or any of its
subsidiaries.
COMMUNITY
BANCSHARES EXECUTIVE COMPENSATION/
BENEFITS COMMITTEE REPORT ON EXECUTIVE COMPENSATION
Overview
Community Bancshares Executive Compensation/Benefits
Committee (the Compensation Committee) is
responsible for establishing and administering Community
Bancshares executive compensation program. The
Compensation Committee also makes recommendations regarding
executive compensation to the board of directors, which has
responsibility for the final approval of the compensation of
each executive officer, including the named executive officers
identified in the Summary Compensation Table below. The named
executive officers do not participate in the board of
directors review and determination of their compensation
or in the Compensation Committees review and
recommendation of their compensation.
Community Bancshares executive compensation program is
designed to attract, reward, retain and motivate executive
officers who will provide strong leadership necessary for
Community Bancshares to achieve superior financial performance
and stockholder return, and who will be an integral part of the
communities that Community Bancshares serves. During 2005,
Community Bancshares executive compensation program
consisted of base salary, short-term incentives (cash bonuses)
and long-term incentives (stock options). Executive officers
also receive various perquisites comparable to those made
available to executive officers of other financial institutions,
as well as retirement and other employee benefits that are
generally available to employees of Community Bancshares and its
subsidiaries.
Executive
Compensation Program
Base
Compensation
Base salary provides the foundation for Community
Bancshares executive compensation program. The purpose of
the base salary paid to executives is to compensate the
executive for performing the basic duties that he or she is
expected to perform. Salaries are typically reviewed and
adjusted yearly.
In determining the base salary for a particular executive
officer, the Compensation Committee performs a subjective
evaluation focusing on two factors: (i) the officers
individual performance and (ii) performance of Community
Bancshares and business unit or units of Community Bancshares
for which the officer is responsible. The Compensation Committee
does not assign any relative or specific weights to these
factors, and individual members of the Compensation Committee
may weigh each factor differently.
Individual Performance. In determining its
recommended compensation for each executive officer of Community
Bancshares, the Compensation Committee considers the
officers individual performance during the prior year.
Individual performance is generally evaluated by reference to
the executive officers annual performance review, in which
the officer is subjectively graded by his or her superiors on
various specified criteria, including leadership skills and
management ability.
Company Performance. The Compensation
Committee also considers the performance during the prior year
of Community Bancshares and the branch, branches or other
business unit or units of Community Bancshares for which the
executive officer is responsible. For example, in determining
the compensation for the chief executive officer of Community
Bancshares, the Compensation Committee reviews the performance
of the entire company, on a consolidated basis, and in
determining the compensation for the president of Community
Bank, the Compensation Committee reviews the performance of
Community Bank as a whole. The Compensation Committee
subjectively evaluates the performance by the business units
with respect to those criteria that the Compensation Committee
believes to be relevant in assessing the units
performance. The Compensation Committee generally focuses on the
following four criteria, to the extent applicable, in assessing
each units performance: (i) growth in loan portfolio;
(ii) growth in deposits; (iii) net profit; and
(iv) charge-offs and loan losses.
116
Based on these and other factors that the Compensation Committee
and its members may deem to be relevant, the Compensation
Committee determines the base compensation of each executive
officer and makes its recommendations to the board of directors.
The board of directors then considers the Compensation
Committees recommendations, and may elect to decrease,
increase or approve the compensation recommended by the
Compensation Committee. During 2005, the annual base salary of
executive officers generally increased in recognition of the
significant improvement in Community Bancshares financial
condition and the fact that these officers salaries had
been frozen since 2003. Consequently, the annual base salaries
of the following executive officers were increased for the 2005
fiscal year as follows: Patrick M. Frawley from $300,000 to
$325,000; Stacey W. Mann from $220,000 to $228,000 and William
H. Caughran from $155,000 to $165,000. The annual base salaries
of Kerri C. Kinney and John W. Brothers were unchanged during
2005.
Annual
Bonuses
Community Bancshares has, to a limited extent, provided
short-term incentives to executive officers in the form of a
cash bonus in recognition of outstanding individual performance
and/or
business unit performance. In December 2005, the board of
directors authorized payments to certain senior officers,
including the named executive officers, of Community Bancshares
of amounts equivalent of up to one weeks pay in
recognition of the significant amounts of unused vacation which
these officers forfeited on December 31, 2005 due to a
change in Community Bancshares vacation policy. The
amounts of these payments for the named executive officers, who
collectively forfeited more than 109 vacation days, are as
follows: Mr. Frawley $6,250; Mr. Mann $4,385;
Mr. Caughran $3,173; Mrs. Kinney $2,885; and
Mr. Brothers $2,764. In January 2006, the board of
directors authorized the payment of performance bonuses to
certain senior officers, including the named executive officers,
due to Community Bancshares improved performance during
2005 and the sale of Community Bancshares largest piece of
foreclosed property in early 2006. The amounts of these bonuses
for the named executive officers are as follows: Patrick M.
Frawley $35,000; Stacey W. Mann $20,000; and each of William H.
Caughran, Kerri C. Kinney and John W. Brothers $15,000.
Long-Term
Incentives
The purpose of long-term incentives is to recognize the
performance of Community Bancshares over time and to motivate
long-term, strategic thinking among executives. The grant of
stock options is a common method of incentive compensation for
financial institutions and other publicly held companies and
allows Community Bancshares to be competitive with other
employers. During 2005, Community Bancshares granted stock
options to its directors and certain officers because, among
other reasons, the Compensation Committee believes stock options
properly align executive pay with stockholders interests.
The number of options granted to a particular executive officer
generally reflects the officers position within Community
Bancshares, the Compensation Committees subjective
evaluation of the officers performance and contribution to
the company, and the Compensation Committees analysis of
the value of the options awarded (using a standard methodology
for valuing options). During 2005, Community Bancshares granted
options to each of Patrick M. Frawley, Stacey W. Mann, Kerri C.
Kinney, William Caughran, John W. Brothers and certain other
senior officers of Community Bancshares, with an exercise price
equal to 100% of the fair market value of Community Bancshares
common stock on the date that the options were granted, as
determined by the board of directors.
Chief
Executive Officer Compensation
Due to the improvements in Community Bancshares condition
during 2004, particularly with respect to its regulatory
environment, the Compensation Committee determined that the 2005
base salary of Mr. Frawley, would be increased to $325,000
from his 2004 base salary of $300,000. In December 2005, the
board of directors authorized a payment of $6,250 (the
equivalent of one weeks vacation pay) to Mr. Frawley
in recognition of the more than 26 days of unused vacation
which Mr. Frawley forfeited on December 31, 2005 due
to a change in Community Bancshares vacation policy. In
January 2006, the board of directors authorized the payment of a
$35,000 bonus to Mr. Frawley due to Community
Bancshares improved financial performance during 2005 and
the sale of the companys largest piece of foreclosed
property in early 2006.
117
Section 162(m) of the Internal Revenue Code of 1986, as
amended, disallows the deduction for certain compensation in
excess of $1 million paid to certain executive officers of
Community Bancshares, unless the compensation qualifies as
performance-based as defined in the Code and
applicable regulations. Compensation during 2005 to the named
executive officers is fully deductible because such compensation
is not in excess of $1 million.
By the
Executive Compensation/Benefits Committee:
Glynn C.
Debter (Chairman)
Roy B. Jackson (Vice Chairman)
Kenneth K. Campbell
John J. Lewis, Jr.
Terry G. Sanderson
Philip J. Timyan
Jimmie A. Trotter
Summary
of Cash and Certain Other Compensation
The following table provides information concerning compensation
paid or accrued by Community Bancshares for services rendered in
all capacities during 2005, 2004 and 2003 for its named
executive officers during 2005.
|
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|
|
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|
|
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-Term
|
|
|
|
|
|
|
|
|
Compensation
|
|
|
|
|
|
|
Annual Compensation
|
|
Awards
|
|
|
|
|
|
|
|
|
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|
Other
|
|
Securities
|
|
|
|
|
|
|
|
|
|
|
Annual
|
|
Underlying
|
|
All Other
|
Name and Principal Position
|
|
Year
|
|
Salary
|
|
Bonus
|
|
Compensation
|
|
Options
|
|
Compensation(1)
|
|
Patrick M. Frawley
|
|
|
2005
|
|
|
$
|
324,038
|
|
|
|
41,250
|
(2)
|
|
|
75,974
|
(3)
|
|
|
75,000
|
|
|
|
11,929
|
|
Chairman, Chief
|
|
|
2004
|
|
|
|
300,000
|
|
|
|
5,124
|
|
|
|
59,905
|
(3)
|
|
|
75,000
|
|
|
|
15,231
|
|
Executive
|
|
|
2003
|
|
|
|
297,577
|
|
|
|
|
|
|
|
35,451
|
(3)
|
|
|
150,000
|
|
|
|
16,993
|
|
Officer and President
|
|
|
|
|
|
|
|
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
Stacey W. Mann
|
|
|
2005
|
|
|
$
|
228,000
|
|
|
|
24,385
|
(2)
|
|
|
|
|
|
|
40,000
|
|
|
|
11,929
|
|
President of
|
|
|
2004
|
|
|
|
220,000
|
|
|
|
3,757
|
|
|
|
|
|
|
|
40,000
|
|
|
|
15,231
|
|
Community Bank
|
|
|
2003
|
|
|
|
213,386
|
|
|
|
|
|
|
|
|
|
|
|
40,000
|
|
|
|
18,793
|
|
William H. Caughran
|
|
|
2005
|
|
|
$
|
155,096
|
|
|
|
18,173
|
(2)
|
|
|
|
|
|
|
20,000
|
|
|
|
8,864
|
|
General Counsel
|
|
|
2004
|
|
|
|
155,000
|
|
|
|
2,647
|
|
|
|
|
|
|
|
20,000
|
|
|
|
11,713
|
|
|
|
|
2003
|
|
|
|
122,212
|
|
|
|
|
|
|
|
|
|
|
|
27,500
|
|
|
|
10,384
|
|
Kerri C. Kinney
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|
2005
|
|
|
$
|
150,000
|
|
|
|
17,885
|
(2)
|
|
|
|
|
|
|
5,000
|
|
|
|
9,083
|
|
Chief Financial Officer
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|
2004
|
|
|
|
150,000
|
|
|
|
2,562
|
|
|
|
|
|
|
|
20,000
|
|
|
|
11,335
|
|
|
|
|
2003
|
|
|
|
149,359
|
|
|
|
|
|
|
|
|
|
|
|
27,500
|
|
|
|
12,691
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|
John W. Brothers
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|
2005
|
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|
$
|
143,750
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|
|
|
17,764
|
(2)
|
|
|
|
|
|
|
20,000
|
|
|
|
8,212
|
|
Chief Operating Officer
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2004
|
|
|
|
134,375
|
|
|
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2,455
|
|
|
|
|
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20,000
|
|
|
|
10,166
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|
of Community Bank
|
|
|
2003
|
|
|
|
105,813
|
(4)
|
|
|
|
|
|
|
23,407
|
(3)
|
|
|
15,000
|
|
|
|
|
|
|
|
|
(1) |
|
Amounts shown in this column for the fiscal year ended
December 31, 2005 include contributions by Community
Bancshares to its ESOP and 401(k) plan, respectively, as
follows: Patrick M. Frawley $3,529 and $8,400; Stacey W. Mann
$3,529 and $8,400; William H. Caughran $2,660 and $6,204; Kerri
C. Kinney $3,083 and $6,000; and John W. Brothers $2,462 and
$5,750. Amounts shown in this column for the fiscal year ended
December 31, 2004 include contributions by Community
Bancshares to its ESOP and 401(k) plan, respectively, as
follows: Patrick M. Frawley $7,031 and $8,200; Stacey W. Mann
$7,031 and $8,200; William H. Caughran $5,407 and
$6,306; Kerri C. Kinney $5,233 and $6,102; and John W. Brothers
$4,693 and $5,473 Amounts shown in this column for the fiscal
year ended December 31, 2003 include life insurance
premiums paid by Community Bancshares and contributions by
Community Bancshares to its ESOP as follows: Patrick M. Frawley
$0 and $16,993; Stacey W. Mann $1,800 and $16,993; William H.
Caughran $0 and $10,384; Kerri C. Kinney $0 and $12,691; and
John W. Brothers $0 and $0. |
118
|
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(2) |
|
These amounts represent (a) payments equivalent to one week
of vacation pay made by Community Bancshares in recognition of
the more than 109 days of unused vacation forfeited by the
named executive officers in the aggregate on December 31,
2005 due to a change in Community Bancshares vacation
policy, and (b) bonuses paid in 2006 as a result of
improvements in Community Bancshares performance during
2005 and the sale of its largest piece of foreclosed property in
early 2006. |
|
(3) |
|
Includes for 2005, 2004 and 2003, respectively, for Patrick M.
Frawley $6,045, $3,423 and $3,383 with respect to social club
dues, $4,920, $7,359 and $6,821 with respect to usage of a
company-owned automobile, $0, $22,854 and $25,247 with respect
to expenses related to temporary housing and $65,009, $26,268
and $0 with respect to relocation expenses. Also includes for
2003 for John W. Brothers $1,938 with respect to usage of a
company-owned automobile, $11,103 with respect to expenses
related to temporary housing, $10,000 with respect to moving
expenses and $366 with respect to discounted interest rates
through participation in Community Banks employee loan
program. |
|
(4) |
|
Mr. Brothers worked at Community Bank as an independent
contractor from March 3, 2003 until April 28, 2003.
The amount shown in the table for 2003 includes $22,836 paid to
Mr. Brothers as an independent contractor and $82,977 paid
to him as a Community Bank employee. |
Stock
Options
The following table provides information concerning grants of
stock options by Community Bancshares to the named executive
officers during 2005:
Option
Grants in Last Fiscal Year
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Individual
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Grants
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Percent of
|
|
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Potential Realizable Value at
|
|
|
|
Number of
|
|
|
Total Options
|
|
|
Assumed Annual Rates of Stock
|
|
|
|
Securities
|
|
|
Granted to
|
|
|
Price Appreciation for Option Term(1)
|
|
|
|
Underlying
|
|
|
Employees in
|
|
|
Exercise
|
|
|
Expiration
|
|
|
|
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|
|
Name
|
|
Options Granted(2)
|
|
|
Fiscal Year
|
|
|
Price
|
|
|
Date
|
|
|
5%
|
|
|
10%
|
|
|
Patrick M. Frawley
|
|
|
75,000
|
|
|
|
12.20
|
%
|
|
$
|
6.81
|
|
|
|
1/11/2010
|
|
|
$
|
141,000
|
|
|
$
|
312,000
|
|
Stacey W. Mann
|
|
|
40,000
|
|
|
|
6.50
|
|
|
|
6.81
|
|
|
|
1/11/2010
|
|
|
|
75,200
|
|
|
|
166,400
|
|
William H. Caughran
|
|
|
20,000
|
|
|
|
3.25
|
|
|
|
6.81
|
|
|
|
1/11/2010
|
|
|
|
37,600
|
|
|
|
83,200
|
|
Kerri C. Kinney
|
|
|
5,000
|
|
|
|
0.81
|
|
|
|
6.81
|
|
|
|
1/11/2010
|
|
|
|
9,400
|
|
|
|
20,800
|
|
John W. Brothers
|
|
|
20,000
|
|
|
|
3.25
|
|
|
|
6.81
|
|
|
|
1/11/2010
|
|
|
|
37,600
|
|
|
|
83,200
|
|
|
|
|
(1) |
|
Amounts represent hypothetical gains that could be achieved for
the respective options at the end of the option term. The
assumed 5% and 10% rates of annual stock appreciation are
mandated by the rules of the SEC and may not accurately reflect
the appreciation of the price of the common stock from the grant
date until the end of the option term. These assumptions are not
intended to forecast future price appreciation of Community
Bancshares common stock. |
|
(2) |
|
The options were fully vested on the date of grant. |
119
Option
Exercises and Holdings
The following table provides information concerning the exercise
of stock options during 2005 by the named executive officers and
the number and value of unexercised stock options held by the
named executive officers at December 31, 2005.
Aggregated
Option Exercises in Last Fiscal Year and FY-End Option
Values
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of Securities
|
|
|
Value of Unexercised
|
|
|
|
Shares Acquired
|
|
|
Value
|
|
|
Underlying Unexercised
|
|
|
In-the-Money
|
|
Name
|
|
on Exercise
|
|
|
Realized(1)
|
|
|
Options at FY-End(3)
|
|
|
Options at FY-End(2)(3)
|
|
|
Patrick M. Frawley
|
|
|
|
|
|
|
|
|
|
|
250,000
|
|
|
$
|
418,000
|
|
Stacey W. Mann
|
|
|
|
|
|
|
|
|
|
|
142,500
|
|
|
$
|
222,000
|
|
William H. Caughran
|
|
|
|
|
|
|
|
|
|
|
67,500
|
|
|
$
|
112,400
|
|
Kerri C. Kinney
|
|
|
9,500
|
|
|
$
|
30,550
|
|
|
|
46,000
|
|
|
$
|
66,435
|
|
John W. Brothers
|
|
|
|
|
|
|
|
|
|
|
55,000
|
|
|
$
|
98,400
|
|
|
|
|
(1) |
|
Value Realized represents the amount equal to the
excess of the fair market value (as determined by the board of
directors) of the shares at the time of exercise over the
exercise price. |
|
(2) |
|
Represents the fair market value as of December 31, 2005
($8.12, as determined by the board of directors), of the
underlying shares of common stock less the exercise price of the
options. |
|
(3) |
|
All options are fully exercisable on the date of grant. |
Retirement
Plan
The following table shows the estimated annual benefits payable
at normal retirement age (age 65) under Community
Bancshares, Inc. Revised Pension Plan, a qualified defined
benefit retirement plan, as well as under Community Bancshares
Inc. Benefit Restoration Plan, a non-qualified supplemental
retirement plan. This supplemental plan provides benefits that
would otherwise be denied participants due to the limitations on
qualified plan benefits imposed by the Internal Revenue Code.
Mr. Mann is the only named executive officer who is a
participant in this supplemental plan.
Pension
Plan Table
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average Annual
|
|
|
Years of Credited Service
|
|
Compensation
|
|
|
10
|
|
|
20
|
|
|
30
|
|
|
40
|
|
|
$
|
25,000
|
|
|
$
|
3,750
|
|
|
$
|
7,500
|
|
|
$
|
11,250
|
|
|
$
|
15,000
|
|
|
50,000
|
|
|
|
7,500
|
|
|
|
15,000
|
|
|
|
22,500
|
|
|
|
30,000
|
|
|
75,000
|
|
|
|
11,250
|
|
|
|
22,500
|
|
|
|
33,750
|
|
|
|
45,000
|
|
|
100,000
|
|
|
|
15,000
|
|
|
|
30,000
|
|
|
|
45,000
|
|
|
|
60,000
|
|
|
250,000
|
|
|
|
37,500
|
|
|
|
75,000
|
|
|
|
112,500
|
|
|
|
150,000
|
|
|
500,000
|
|
|
|
75,000
|
|
|
|
150,000
|
|
|
|
225,000
|
|
|
|
300,000
|
|
|
750,000
|
|
|
|
112,500
|
|
|
|
225,000
|
|
|
|
337,500
|
|
|
|
450,000
|
|
|
1,000,000
|
|
|
|
150,000
|
|
|
|
300,000
|
|
|
|
450,000
|
|
|
|
600,000
|
|
|
1,250,000
|
|
|
|
187,500
|
|
|
|
375,000
|
|
|
|
562,500
|
|
|
|
750,000
|
|
The benefits shown in the table above are not subject to any
deduction for Social Security benefits or other offset amounts.
Benefits are computed as a straight-line annuity beginning at
age 65. Benefits under both plans were frozen as of
December 31, 2003.
The amount of compensation covered by the combination of plans
covering the named executive officers is total compensation,
including bonuses, overtime or other forms of extraordinary
compensation, as disclosed in the Summary Compensation Table
above for years ending prior to January 1, 2004. The amount
of the retirement
120
benefit is determined by the length of the retirees
credited service under the plans and his average monthly
earnings for the five highest compensated, consecutive calendar
years of the retirees final ten consecutive calendar years
of employment with Community Bancshares and its subsidiaries.
The full years of credited service under the plans for the named
executive officers as of December 31, 2003 are as follows:
Patrick M. Frawley: 2 years, Stacey W. Mann: 20 years,
William H. Caughran: 5 years, Kerri C. Kinney:
2 years, and John W. Brothers: 1 year.
Employment
Agreements and Change in Control Arrangements
Employment
Agreement
On March 29, 2005 Community Bank entered into an Employment
Agreement with Patrick M. Frawley, its Chairman and Chief
Executive Officer. The agreement has a term of three years and
is automatically renewed on each anniversary of the effective
date for an additional one-year period, unless Community Bank or
Mr. Frawley gives notice to the other party to terminate
the automatic renewals. The employment agreement contains the
following material terms: (i) a base salary at least equal
to his base salary on March 29, 2005, (ii) the
opportunity to earn a bonus under such performance criteria as
may be established by the Compensation Committee, (iii) the
ability to participate in Community Banks employee benefit
programs on the same basis as other senior executives, and
(iv) certain fringe benefits, including use of a company
automobile and country club memberships.
In the event Mr. Frawleys employment is terminated by
Community Bank for any reason other than death, disability, or
for cause, (as such terms are defined in the
employment agreement), Mr. Frawley shall be entitled to
receive (i) a lump sum payment equal to the sum of
(1) unpaid salary through the date of termination,
(2) pro-rata earned or target bonus for the year of
termination, (3) any accrued vacation time, and
(4) any compensation previously deferred; (ii) a lump
sum payment equal to the present value of (1) his monthly
salary that would have been payable for the 36 months
following his termination of employment but for such
termination, and (2) a series of 36 monthly payments,
each of which is calculated by taking one-twelfth of the average
of the bonuses earned by Mr. Frawley for the two calendar
years immediately preceding the year in his termination of
employment occurred; (iii) continuation of health and life
insurance benefits for 36 months following termination of
employment at the same level and on the same terms as provided
to him immediately prior to his termination of employment;
(iv) full vesting and continued participation for a period
of 36 months following termination of employment in certain
retirement plans or, if such full vesting and continued
participation is not allowed, payment by Community Bank of a
lump sum supplemental benefit in lieu of full vesting and
continued participation in such plans; and (v) individual
career counseling and outplacement services for a reasonable
period of time following termination of employment, up to a
maximum cost of $5,000. Mr. Frawley is also entitled to the
above severance benefits if he terminates his employment with
Community Bank during the
30-day
period beginning on the first anniversary of a change in
control, or if he terminates his employment pursuant to an
involuntary termination (as such term is defined in the
employment agreement).
If any payments pursuant to the agreement or otherwise would be
subject to any excise tax under Section 4999 of the Code,
Community Bank will provide an additional payment such that
Mr. Frawley retains a net amount equal to the payments he
would have retained if such excise tax had not applied.
The Change in Control Agreement which Community Bank entered
into with Mr. Frawley on December 12, 2003 was
terminated simultaneously with the execution of
Mr. Frawleys Employment Agreement.
Change
in Control Agreements
Community Bancshares or Community Bank entered into Change in
Control Agreements with each of the named executive officers on
the following dates: Stacey W. Mann and William H. Caughran,
December 4, 1999, and Kerri C. Kinney, September 18,
2001, and John W. Brothers, November 10, 2005. The change
in control agreement with Patrick M. Frawley, dated
December 12, 2003, was terminated simultaneously with the
execution of Mr. Frawleys employment agreement.
These agreements have terms of three years and are automatically
renewed unless terminated by Community Bancshares at the end of
any three year term. In the event of a change in control (as
defined in the agreements) of Community Bancshares, the named
executive officer is entitled to receive certain severance
benefits, provided the
121
executive officers employment is terminated by Community
Bancshares within 30 months following the change in
control, unless the termination is for cause or by
reason of the officers death, disability or retirement on
or after age 65. The executive officer is also entitled to
severance benefits if the officer terminates his or her
employment with Community Bancshares within 30 months
following a change in control if, among other reasons, the
officers authority, duties, compensation or benefits have
been reduced or if the officer is forced to relocate more than
50 miles from his or her place of employment immediately
prior to the change in control. If, during the term of the
agreement, a transaction is proposed which, if consummated,
would constitute a change in control and (i) the
officers employment is thereafter terminated by Community
Bancshares other than for cause or by reason of the
officers death, disability or retirement on or after
age 65 and (ii) the proposed transaction is
consummated within one year following the officers
termination of employment, the change in control will be deemed
to have occurred during the term of the agreement and the
officer will be entitled to severance benefits. The officer is
also entitled to receive severance benefits if the officer
terminates employment for any reason during a
30-day
period beginning 12 months after the occurrence of a change
in control.
The severance benefits payable under each of these agreements
are as follows: (i) a lump sum payment equal to the present
value of the officers salary that would have been payable
by Community Bancshares for the 30 months following the
officers termination of employment but for such
termination; (ii) a lump sum payment equal to the present
value of a series of 30 monthly payments, which monthly
payment is calculated by taking one-twelfth of the average of
the bonuses earned by the officer for the two calendar years
immediately preceding the year in which the officers
termination of employment occurs; (iii) continuation of the
officers health and life insurance benefits for
30 months following the officers termination of
employment at the same level and on the same terms as provided
to the officer immediately prior to his or her termination of
employment; (iv) full vesting and continued participation
for a period of 30 months following the officers
termination of employment in certain retirement plans or, if
such full vesting and continued participation is not allowed,
payment by Community Bancshares of a lump sum supplemental
benefit in lieu of full vesting and continued participation in
such plans; and (v) individual career counseling and
outplacement services for a reasonable period of time following
the officers termination of employment, up to a maximum
cost of $5,000 per officer.
The change in control agreements also provide that the total
benefit payable to the executive officer will be calculated in
accordance with one of three formulas set forth in the
agreement, so as to provide the greatest total benefit after
taxes, including any excise tax under Section 4999 of the
Internal Revenue Code.
122
COMMUNITY
BANCSHARES STOCK PERFORMANCE GRAPH
Set forth below is a graph comparing the yearly percentage
change for the last five years in the cumulative total return of
Community Bancshares common stock against the cumulative total
return of the American Stock Exchange Major Market Index and the
SNL Banking Index for financial institutions with total assets
of greater than $500 million whose stocks are traded in
over-the-counter
bulletin board exchanges or through the pink sheets.
It assumes that the value of the investment in Community
Bancshares common stock and in each index was $100.00 and that
dividends, if any, were reinvested.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Period Ending
|
Index
|
|
12/31/00
|
|
12/31/01
|
|
12/31/02
|
|
12/31/03
|
|
12/31/04
|
|
12/31/05
|
Community Bancshares, Inc.
|
|
|
100.00
|
|
|
|
75.00
|
|
|
|
75.00
|
|
|
|
27.50
|
|
|
|
35.50
|
|
|
|
41.25
|
|
AMEX Major Market Index
|
|
|
100.00
|
|
|
|
97.48
|
|
|
|
85.56
|
|
|
|
106.13
|
|
|
|
116.78
|
|
|
|
112.86
|
|
SNL >$500M OTC-BB and Pink
Banks
|
|
|
100.00
|
|
|
|
93.78
|
|
|
|
121.20
|
|
|
|
168.92
|
|
|
|
197.58
|
|
|
|
210.28
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Source: SNL
Financial LC, Charlottesville, VA
©
2006
|
(434) 977-1600
|
The information provided under the headings Community
Bancshares Executive Compensation/Benefits Committee Report on
Executive Compensation and Community Bancshares
Stock Performance Graph shall not be deemed to be
soliciting material or to be filed with
the SEC, or subject to Regulation 14A or 14C, other than as
provided in Item 402 of
Regulation S-K,
or to liabilities of Section 18 of the Securities Exchange
Act of 1934 and, unless specific reference is made therein to
such headings, shall not be incorporated by reference to any
filings under the Securities Act of 1933 or the Securities
Exchange Act of 1934.
COMMUNITY
BANCSHARES RELATIONSHIP
WITH INDEPENDENT PUBLIC ACCOUNTANTS
General
Community Bancshares independent public accounting firm for the
calendar years ended December 31, 2004 and 2005 was Carr,
Riggs & Ingram, LLC (CRI). Although the
Audit Committee presently intends to recommend to the board of
directors that the board appoint CRI as the independent auditors
for Community Bancshares and its subsidiaries for the current
fiscal year ending December 31, 2006, the Audit Committee
has not yet made such a recommendation to the board. A
representative from CRI is expected to attend the Community
Bancshares 2006
123
annual meeting of stockholders, have an opportunity to make a
statement and be available to respond to appropriate questions.
CRI has advised Community Bancshares that neither the firm nor
any of its partners has any direct or material interest in
Community Bancshares and its subsidiaries, except as auditors
and independent certified public accountants of Community
Bancshares and its subsidiaries.
The following table shows the aggregate fees billed to Community
Bancshares for professional services by CRI for fiscal years
2004 and 2005.
|
|
|
|
|
|
|
|
|
|
|
Fiscal 2005
|
|
|
Fiscal 2004
|
|
|
Audit Fees(1)
|
|
$
|
196,123
|
|
|
$
|
286,639
|
|
Audit-Related Fees(2)
|
|
|
48,414
|
|
|
|
47,480
|
|
Tax Fees(3)
|
|
|
33,347
|
|
|
|
32,639
|
|
All Other Fees(4)
|
|
|
|
|
|
|
1,400
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
277,884
|
|
|
$
|
366,758
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Audit Fees consist of fees billed for professional services
rendered for the audit of Community Bancshares
consolidated annual financial statements and review of the
quarterly interim consolidated financial statements and services
that are normally provided by the independent auditor in
connection with statutory and regulatory filings or engagements,
as well as consents and assistance with, and review of,
documents filed with the SEC. |
|
(2) |
|
Audit-Related Fees consist of fees billed for assurance and
related services that are reasonably related to the performance
of the audit or review of Community Bancshares
consolidated financial statements and are not reported under
Audit Fees and include employee benefit plan audits,
internal control reviews and attestation services under
professional standards. |
|
(3) |
|
Tax Fees consist of fees billed for professional services
rendered for tax preparation and filing, tax compliance, tax
advisory services. |
|
(4) |
|
All Other Fees consist of fees for products and services other
than the services reported above. In 2004, Other Fees related
primarily to agreed upon procedures for collateral verification
for the Federal Home Loan Bank of Atlanta. |
Based upon Community Bancshares relationship with CRI,
including the services and fees set forth above, the Community
Bancshares board of directors believes that the provision
of services by CRI to Community Bancshares is compatible with
maintaining the independence of CRI from Community Bancshares.
Pre-Approval
Policies and Procedures
Pursuant to Community Bancshares Audit Committee Charter
and policy, all audit and permitted non-audit services must be
pre-approved by the Audit Committee. All of the services
described above for 2004 and 2005 were pre-approved by the Audit
Committee.
COMMUNITY
BANCSHARES LEGAL PROCEEDINGS
Background
At a June 20, 2000, meeting of the board of directors of
Community Bank, one of Community Banks directors brought
to the attention of the board of directors the total amount of
money that Community Bank had paid to subcontractors in
connection with the construction of a new Community Bank branch
office in Guntersville, Alabama. Questions were subsequently
raised about a number of Community Bank construction projects. A
joint committee of the boards of directors of Community
Bancshares and Community Bank conducted an investigation, as did
law enforcement and bank regulatory authorities. Following these
investigations, the boards of directors terminated the
employment of Kennon R. Patterson, Sr., former Chairman,
President and Chief Executive Officer of Community Bancshares
and Chairman and Chief Executive Officer of Community Bank, and
Larry Bishop, former Vice President of Community Bank, and the
FDIC commenced administrative proceedings against
Mr. Patterson
124
and Mr. Bishop which are still pending. On March 10,
2005, Mr. Patterson and Mr. Bishop were convicted in
the United States District Court for the Northern District of
Alabama of conspiracy, bank fraud and causing false entries to
be made in bank records. Mr. Patterson was also convicted
of filing false income tax returns. On December 13, 2005,
Mr. Patterson was sentenced to five years in federal
prison, and on January 26, 2006, Mr. Bishop was
sentenced to four years in federal prison. On January 30,
2006, Mr. Patterson and Mr. Bishop were ordered,
jointly and severally, to pay restitution of approximately
$1.8 million, of which approximately $1.3 million is
payable to Community Bank.
Patterson
Employment Litigation
Plaintiffs: Community Bancshares, Inc.
and Community Bank
Defendants: Kennon R.
Patterson, Sr., Community Bancshares former Chairman,
President and Chief Executive Officer
On September 14, 2004, Community Bancshares and Community
Bank filed suit against Mr. Patterson in the Circuit Court
of Blount County, Alabama. The complaint alleges that:
|
|
|
|
|
Mr. Patterson breached his employment agreement with
Community Bancshares by failing to faithfully perform the duties
assigned to him;
|
|
|
|
Mr. Patterson made fraudulent misrepresentations to, or
suppressed material information from, Community Bancshares and
Community Bank
and/or their
officers, directors and agents concerning his bankruptcy, the
release of mortgages which Community Bank held on his house, and
payments made by Community Bancshares and Community Bank to
companies owned by Mr. Patterson and members of his family;
|
|
|
|
Mr. Patterson removed property belonging to Community
Bancshares and Community Bank following the termination of his
employment; and
|
|
|
|
Mr. Patterson breached a duty of loyalty and other
fiduciary duties owed to Community Bancshares and Community Bank.
|
On October 18, 2004, Mr. Patterson filed an answer and
counterclaim against Community Bancshares and Community Bank.
Mr. Pattersons counterclaim alleges that:
|
|
|
|
|
Community Bancshares breached its employment agreement with
Mr. Patterson by terminating his employment;
|
|
|
|
Community Bancshares failed to pay to Mr. Patterson
compensation and benefits of $2.4 million which had
allegedly accrued prior to the termination of his employment;
|
|
|
|
Community Bank intentionally interfered with the employment
contract between Mr. Patterson and Community Bancshares by
instigating, promoting, assisting in and participating in the
termination of Mr. Pattersons employment
agreement; and
|
|
|
|
Community Bancshares falsely represented to Mr. Patterson
that his employment would not be terminated until March 31,
2008.
|
On January 25, 2005, Mr. Patterson filed a third-party
complaint in this lawsuit against R.B. Jackson, Jimmie Trotter,
Glynn Debter, John J. Lewis, Jr., Patrick M. Frawley and
Powell, Goldstein, Frazer & Murphy, LLP (now Powell
Goldstein, LLP). The third-party complaint alleges that
Messrs. Jackson, Trotter, Debter and Lewis, as members of
Community Banks Audit Committee, Powell, Goldstein,
Frazer & Murphy, LLP, as the independent counsel for
Community Banks Audit Committee, and Mr. Frawley,
acting individually and in concert with one another, interfered
with Mr. Pattersons employment agreement with
Community Bancshares. On April 19, 2005, Powell Goldstein,
LLP was dismissed from the lawsuit. On July 15, 2005,
Messrs. Jackson, Trotter, Debter, Lewis and Frawley filed a
motion for summary judgment, which has not been decided. On
March 15, 2006, the court effectively unstayed the case by
placing it in the administrative docket.
125
Patterson
ESOP Litigation
Plaintiffs: Community Bancshares, Inc.
Employee Stock Ownership Plan (the ESOP) and North
Star Trust Company, as Trustee of the ESOP
Defendants: Kennon R.
Patterson, Sr., Community Bancshares former Chairman,
President and Chief Executive Officer
On March 15, 2004, the ESOP, together with the ESOP
trustee, North Star Trust Company, filed suit against
Mr. Patterson in the United States District Court for the
Northern District of Alabama. The ESOPs complaint:
|
|
|
|
|
alleges that Mr. Patterson breached his fiduciary duty to
the ESOP by engaging in activities which adversely affected the
value of the Community Bancshares stock held by the ESOP and
concealing information with respect to those activities from
other ESOP fiduciaries; and
|
|
|
|
seeks a declaratory judgment that Mr. Patterson is not
entitled to a distribution of his accrued benefits in the ESOP
and that such benefits may be held and used to offset the
damages which the ESOP suffered as a result of
Mr. Pattersons alleged breach of fiduciary duty.
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On July 7, 2004, the Court denied Mr. Pattersons
motion to dismiss the case. On or about July 23, 2004,
Mr. Patterson filed a counterclaim seeking a judgment that
he is entitled to benefits from the ESOP and declaratory and
injunctive relief compelling the payment of such benefits. On
July 26, 2004, the Court, at Mr. Pattersons
request, stayed discovery in the case pending the disposition of
the criminal charges against Mr. Patterson. On
December 14, 2005, the stay was lifted and the parties are
currently proceeding with discovery.
Patterson
Benefit Restoration Plan Litigation
Plaintiff: Kennon R. Patterson, Sr.
Defendant: Community Bancshares, Inc.
Benefit Restoration Plan
On February 17, 2005, Mr. Patterson filed suit in the
United States District Court for the Northern District of
Alabama to compel payment of his accrued benefits under the
Community Bancshares, Inc. Benefit Restoration Plan, a
nonqualified supplemental retirement plan. The complaint seeks a
judgment against the plan and an order compelling the payment of
benefits.
Patterson
Pension Plan Litigation
Plaintiff: Kennon R. Patterson, Sr.
Defendant: Community Bancshares, Inc.
Revised Pension Plan
On December 16, 2005, Mr. Patterson filed suit in the
United States District Court for the Northern District of
Alabama to compel payment of his accrued benefits under the
Community Bancshares, Inc. Revised Pension Plan. The complaint
seeks a judgment against the plan and an order compelling the
payment of benefits. On March 23, 2006, the Pension Plan
filed a motion for summary judgment seeking dismissal of the
lawsuit on the grounds that the retroactive payments sought by
Mr. Patterson are not permitted under the terms of the
Pension Plan and Mr. Patterson both failed to exhaust his
administrative remedies before filing the lawsuit and failed to
complete the forms required to receive a distribution. On
April 28, 2006, Mr. Patterson filed a cross-motion for
summary judgment based on the same issues addressed in the
Pension Plans motion for summary judgment. On July 3,
2006, the court granted the Pension Plans motion for
summary judgment and denied Mr. Pattersons
cross-motion for summary judgment.
Employee
Litigation
Plaintiffs: Bishop K. Walker, Jr.,
former Senior Executive Vice President and General Counsel of
Community Bancshares, and his wife, Wanda Walker, and Denny G.
Kelly, former President of Community Bank, and his wife, Arlene
Kelly
126
Defendants: Community Bancshares,
Community Bank, Kennon R. Patterson, Sr., and a number of
unidentified defendants
On May 5, 2003, the plaintiffs filed separate suits in the
Circuit Court of Blount County, Alabama, against the defendants
alleging that the plaintiffs were induced to retire based upon
misrepresentations made by Mr. Patterson, who at the time
was Community Bancshares Chairman, President and Chief
Executive Officer. The plaintiffs claim that
Mr. Pattersons actions constituted fraud, promissory
fraud, fraudulent suppression, fraud in the inducement, deceit,
fraudulent deceit, negligence, recklessness, wantonness and
breach of contract. The complaints seek an unspecified amount of
compensatory and punitive damages.
On October 23, 2003, Community Bancshares and Community
Bank filed counterclaims against Mr. Walker and
Mr. Kelly seeking repayment of amounts paid to them as part
of a severance arrangement and, in the case of Mr. Kelly,
amounts owed to Community Bank in connection with the two loans
from Community Bank to Mr. Kelly.
Mr. Kelly and Mr. Walker each filed an amended
complaint on or about April 20, 2004. The amended
complaints add Mrs. Kelly and Mrs. Walker as parties
plaintiff and allege that representations were made by the
defendants to Mrs. Kelly and Mrs. Walker that the
defendants would purchase their personal and jointly owned stock
of the Company. The complaints assert that the defendants
failure to purchase such stock constitutes promissory fraud,
fraudulent misrepresentation, fraudulent suppression, negligence
and/or
wantonness. Mr. Walkers amended complaint also seeks
damages based on Community Banks refusal to accept a deed
in lieu of foreclosure on Mr. Walkers home. On
June 15, 2004, Community Bank amended its counterclaim
against Mr. Walker to recover a loan deficiency balance
following Community Banks foreclosure on
Mr. Walkers home.
Other
Litigation
In addition to the foregoing, Community Bancshares and its
affiliates also are from time to time parties to other legal
proceedings arising in the ordinary course of Community
Bancshares business. Community Bancshares presently
believes that, other than the litigation discussed above, there
is no other litigation to which Community Bancshares or its
affiliates presently are party that, if such litigation were to
result in an outcome unfavorable to Community Bancshares, would,
individually or in the aggregate, have a material adverse effect
on our financial condition or results of operations.
Community Bancshares amended and restated certificate of
incorporation and bylaws provide that, in certain circumstances,
Community Bancshares will indemnify its directors and officers,
and, provided such persons acted in accordance with the
standards set forth in the Delaware General Corporation Law and
Community Bancshares organizational documents, advance
expenses to its directors and officers in connection with
investigations and proceedings in connection with their service
as officers and directors.
STOCKHOLDER
PROPOSALS FOR THE
COMMUNITY BANCSHARES
2007 ANNUAL MEETING OF STOCKHOLDERS
If the merger of Community Bancshares and Superior Bancorp
occurs, there will be no meeting of Community Bancshares
stockholders in 2007. In that case, stockholder proposals must
be submitted to Superior Bancorp in accordance with the
procedures described in Superior Bancorps proxy statement
for its annual meeting of stockholders filed with the SEC on
April 17, 2006. In case the merger is not completed, the
following information relevant to a regularly scheduled 2007
annual meeting of Community Bancshares stockholders is included.
In order to be included in Community Bancshares proxy
materials for its 2007 Annual Meeting of Stockholders,
stockholder proposals must be received in written form at the
Companys executive offices on or
before ,
which is 120 days before the one-year anniversary of the
date that Community Bancshares mailed this joint proxy
statement/prospectus to its stockholders, and must otherwise be
in compliance with
Rule 14a-8
(which concerns stockholder proposals that are requested to be
included in a companys proxy statement) under the Exchange
Act and other applicable legal requirements. Pursuant to
Rules 14a-4
and 14a-5
(which concern the exercise of discretionary voting authority
when a stockholder commences his or her own proxy solicitation
outside of the processes of
Rule 14a-8)
under the Exchange Act, stockholders are advised that under the
advance notice provisions
127
of Community Bancshares bylaws a stockholder proposal will
not be considered at the 2007 annual meeting if received by
Community Bancshares
after .
Community Bancshares bylaws require that a stockholder
proposing business to be considered at an annual meeting of
Community Bancshares stockholders include in the written
notification to Community Bancshares the following information:
(i) a brief description of the business desired to be
brought before the annual meeting of stockholders and the
reasons for conducting such business at the meeting;
(ii) the name and address, as they appear on Community
Bancshares books, of the stockholder proposing such
business; (iii) the class and number of shares of Community
Bancshares that are beneficially owned, as such term is defined
in
Rule 13d-3
under the Exchange Act, by the stockholder; (iv) any
substantial interest of the stockholder in such business; and
(v) any other information required pursuant to the rules
and regulations promulgated under the Exchange Act relating to
stockholder proposals. A stockholder has a substantial interest
in the business if such interest would be reportable pursuant to
Item 5 of Schedule 14A promulgated under the Exchange
Act, assuming that the stockholders business was in fact
considered at the annual meeting of stockholders.
OTHER
MATTERS
Superior Bancorp and Community Bancshares know of no other
matters which may be brought before the meetings. If any matter
other than the merger, the election of Community
Bancshares directors (with respect to Community
Bancshares stockholders) or related matters should
properly come before the meetings, however, the persons named in
the enclosed proxies will vote proxies in accordance with their
judgment on those matters.
WHERE YOU
CAN FIND MORE INFORMATION
Both Superior Bancorp and Community Bancshares are subject to
the informational requirements of the Securities and Exchange
Act of 1934, which means that each company is required to file
reports, proxy statements and other information, all of which
are available at the Public Reference Room of the SEC at 100 F
Street, N.E., Washington, D.C. 20549. You may also obtain
copies of the reports, proxy statements and other information
from the Public Reference Section of the SEC, at prescribed
rates, by calling
1-800-SEC-0330.
The SEC maintains a World Wide Web site on the Internet at
http://www.sec.gov where you can access reports, proxy,
information and registration statements and other information
regarding registrants that file electronically with the SEC
through the EDGAR system. Superior Bancorp has filed a
registration statement on
Form S-4
to register Superior Bancorp common stock to be issued to the
Community Bancshares stockholders in the merger. This joint
proxy statement/prospectus is a part of that registration
statement and constitutes a prospectus of Superior Bancorp in
addition to being a proxy statement of both Superior Bancorp and
Community Bancshares for the meetings of their stockholders to
be held
on ,
2006, as described in this joint proxy statement/prospectus. As
allowed by SEC rules, this joint proxy statement/prospectus does
not contain all of the information you can find in the
registration statement or the exhibits to the registration
statement. This joint proxy statement/prospectus summarizes some
of the documents that are exhibits to the registration
statement, and you should refer to the exhibits for a more
complete description of the matters covered by these documents.
INCORPORATION
OF CERTAIN DOCUMENTS BY REFERENCE
The SEC allows Superior Bancorp to incorporate by reference
certain information into this document, which means that
Superior Bancorp can disclose important information to you by
referring you to another document filed separately with the SEC.
The information incorporated by reference is considered part of
this document, except for any information superseded by
information contained directly in this document or in later
filed documents incorporated by reference in this document.
128
This document incorporates by reference the documents set forth
below that Superior Bancorp has previously filed with the SEC.
These documents contain important information about Superior
Bancorp and its businesses:
Superior
Bancorp Filings (File
No. 0-25033)
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Superior Bancorps Annual Report on
Form 10-K
for the year ended December 31, 2005;
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Superior Bancorps quarterly report on
Form 10-Q
for the three months ended March 31, 2006;
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Superior Bancorps Proxy Statement for its 2006 Annual
Meeting of Stockholders filed April 17, 2006; and
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Superior Bancorps Current Reports on
Form 8-K
filed January 4, 2006, January 26, 2006,
April 29, 2006, April 18, 2006, April 28, 2006,
May 1, 2006, May 22, 2006, July 25, 2006, and
July 31, 2006.
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Superior Bancorp also incorporates by reference additional
documents that may be filed with the SEC under
sections 13(a), 13(c), 14 or 15(d) of the Securities
Exchange Act between the date of this joint proxy
statement/prospectus and prior to the special meetings.
This document incorporates by reference the documents set forth
below that Community Bancshares has previously filed with the
SEC. These documents contain important information about
Community Bancshares and its businesses:
Community
Bancshares Filings (File
No. 0-16461)
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Community Bancshares Annual Report on
Form 10-K
for the year ended December 31, 2005;
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Community Bancshares quarterly report on
Form 10-Q
for the three months ended March 31, 2006; and
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Community Bancshares Current Reports on
Form 8-K
filed January 17, 2006, February 1, 2006,
February 9, 2006, February 16, 2006, February 17,
2006, February 27, 2006, March 29, 2006, April 3,
2006, May 1, 2006, May 16, 2006, June 1, 2006,
August 3, 2006, and August 7, 2006.
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Community Bancshares also incorporates by reference additional
documents that may be filed with the SEC under
sections 13(a), 13(c), 14 or 15(d) of the Securities
Exchange Act of 1934 between the date of this joint proxy
statement/prospectus and prior to the special meetings.
Notwithstanding any other provision of this joint proxy
statement/prospectus, no portion of any document which is
furnished to, but not filed with, the SEC shall be deemed to be
incorporated by reference herein unless such furnished portion
is expressly so incorporated. Any statements in a document
incorporated by reference herein shall be deemed to be modified
or superseded for purposes hereof to the extent that a statement
contained herein (or in any subsequently filed document which is
also incorporated by reference herein) modifies or supersedes
any such statement. Any statement so modified or superseded
shall not be deemed to be a part of this joint proxy
statement/prospectus except as so modified or superseded.
All information concerning Superior Bancorp and its subsidiaries
has been furnished by Superior Bancorp, and all information
concerning Community Bancshares has been furnished by Community
Bancshares. You should rely only on the information contained or
incorporated by reference in this joint proxy
statement/prospectus in making your decision to vote on the
merger agreement and the merger. We have not authorized anyone
to provide you with information that is different from that
contained in this joint proxy statement/prospectus.
This joint proxy statement/prospectus is
dated ,
2006. You should not assume that the information contained in
this joint proxy statement/prospectus is accurate as of any date
other than such date, and neither the mailing of this joint
proxy statement/prospectus to stockholders nor the issuance of
Superior Bancorp common stock in the merger will create any
implication to the contrary.
This joint proxy statement/prospectus does not constitute an
offer to sell, or a solicitation of any offer to buy, any
securities, or the solicitation of a proxy, in any jurisdiction
to or from any person to whom it is not lawful to make any such
offer or solicitation in such jurisdiction. Neither the delivery
of this joint proxy statement/prospectus nor any distribution of
securities made hereunder will, under any circumstances, create
an implication that there has been no change in information set
forth or incorporated in this document by reference or in the
affairs of Superior Bancorp or Community Bancshares since the
date of this joint proxy statement/prospectus.
129
AGREEMENT
AND PLAN OF MERGER
by and between
COMMUNITY BANCSHARES, INC.
and
THE BANC CORPORATION
dated as of
April 29, 2006
TABLE OF
CONTENTS
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Caption
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Page
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ARTICLE 1 NAME
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A-1
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1.1
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Name
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A-1
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ARTICLE 2 MERGER
TERMS AND CONDITIONS
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A-1
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2.1
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Applicable Law
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A-1
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2.2
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Corporate Existence
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A-1
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2.3
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Certificate of Incorporation and
Bylaws
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A-1
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2.4
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Resulting Corporations
Officers and Board
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A-2
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2.5
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Stockholder Approvals
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A-2
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2.6
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Further Acts
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A-2
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2.7
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Effective Date and Closing
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A-2
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2.8
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Subsidiary Bank
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A-2
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ARTICLE 3 CONVERSION
OF ACQUIRED CORPORATION STOCK
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A-2
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3.1
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Conversion of Acquired Corporation
Stock
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A-2
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3.2
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Surrender of Acquired Corporation
Stock
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A-3
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3.3
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Fractional Shares
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A-3
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3.4
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Adjustments
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A-3
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3.5
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Buyer Stock
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A-3
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ARTICLE 4 REPRESENTATIONS,
WARRANTIES AND COVENANTS OF BUYER
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A-4
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4.1
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Organization
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A-4
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4.2
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Capital Stock
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A-4
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4.3
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Taxes
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A-4
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4.4
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No Conflict with Other Instrument
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A-4
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4.5
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Absence of Material Adverse Change
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A-5
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4.6
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Approval of Agreement
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A-5
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4.7
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Tax Treatment
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A-5
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4.8
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Title and Related Matters
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A-5
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4.9
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Subsidiaries
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A-5
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4.10
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Contracts
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A-5
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4.11
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Litigation
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A-5
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4.12
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Compliance
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A-6
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4.13
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Registration Statement
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A-6
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4.14
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SEC Filings and Financial
Statements; NASDAQ
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A-6
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4.15
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Form S-4
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A-6
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4.16
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Brokers
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A-6
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4.17
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Government Authorization
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A-7
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4.18
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Absence of Regulatory
Communications
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A-7
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4.19
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Disclosure
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A-7
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4.20
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Absence of Certain Changes or
Events
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A-7
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4.21
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Commitments
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A-8
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4.22
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Charter and Bylaws
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A-8
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4.23
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Material Contract Defaults
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A-8
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4.24
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Insurance
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A-8
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A-i
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Caption
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Page
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4.25
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Governmental Authorization
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A-8
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4.26
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[Reserved]
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A-8
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4.27
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Regulatory Approvals
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A-8
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4.28
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Loans; Adequacy of Allowance for
Loan Losses
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A-9
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4.29
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Environmental Matters
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A-9
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4.30
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Labor Disputes
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A-9
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4.31
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Derivative Contracts
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A-9
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4.32
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Accounting, Tax and Regulatory
Matters
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A-9
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4.33
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Opinion of Counsel
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A-9
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4.34
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Transactions with Management
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A-10
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4.35
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Accounting Controls
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A-10
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4.36
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Deposit Insurance
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A-10
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4.37
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Collective Bargaining
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A-10
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4.38
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Opinion of Counsel
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A-10
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ARTICLE 5 REPRESENTATIONS,
WARRANTIES AND COVENANTS OF ACQUIRED
CORPORATION
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A-10
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5.1
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Organization
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A-10
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5.2
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Capital Stock
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A-10
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5.3
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Subsidiaries
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A-11
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5.4
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SEC Filings and Financial
Statements
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A-11
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5.5
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Absence of Certain Changes or
Events
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A-11
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5.6
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Title and Related Matters
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A-12
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5.7
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Commitments
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A-13
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5.8
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Charter and Bylaws
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A-13
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5.9
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Litigation; Compliance with Laws
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A-13
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5.10
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Material Contract Defaults
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A-13
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5.11
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No Conflict with Other Instrument
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A-14
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5.12
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Governmental Authorization
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A-14
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5.13
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Absence of Regulatory
Communications
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A-14
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5.14
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Absence of Material Adverse Change
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A-14
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5.15
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Insurance
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A-14
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5.16
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Pension and Employee Benefit
Plans; Employees
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A-14
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5.17
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Buy-Sell Agreement
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A-17
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5.18
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Brokers
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A-17
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5.19
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Approval of Agreements
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A-17
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5.20
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Disclosure
|
|
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A-17
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5.21
|
|
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Registration Statement
|
|
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A-17
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5.22
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Loans; Allowance for Possible Loan
Losses
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A-18
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5.23
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Environmental Matters
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A-18
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5.24
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Taxes
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A-18
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5.25
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Collective Bargaining
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A-19
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5.26
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Labor Disputes
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A-19
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5.27
|
|
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Derivative Contracts
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|
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A-19
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5.28
|
|
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Accounting, Tax and Regulatory
Matters
|
|
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A-19
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A-ii
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Caption
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Page
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5.29
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Offices
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A-19
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5.30
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Data Processing Systems
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A-20
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5.31
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Intellectual Property
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A-20
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5.32
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No Trust Powers
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A-20
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5.33
|
|
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Regulatory Approvals
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|
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A-20
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5.34
|
|
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Opinion of Counsel
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A-20
|
|
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5.35
|
|
|
Anti-takeover Provisions
|
|
|
A-20
|
|
|
5.36
|
|
|
Transactions with Management
|
|
|
A-20
|
|
|
5.37
|
|
|
[Reserved]
|
|
|
A-20
|
|
|
5.38
|
|
|
Accounting Controls
|
|
|
A-20
|
|
|
5.39
|
|
|
Deposit Insurance
|
|
|
A-20
|
|
|
5.40
|
|
|
Registration Obligations
|
|
|
A-20
|
|
ARTICLE 6 ADDITIONAL
COVENANTS
|
|
|
A-21
|
|
|
6.1
|
|
|
Additional Covenants of Buyer
|
|
|
A-21
|
|
|
6.2
|
|
|
Additional Covenants of Acquired
Corporation
|
|
|
A-23
|
|
|
6.3
|
|
|
Additional Obligations of Buyer
and Acquired Corporation Relating to Trust Preferred
Securities
|
|
|
A-26
|
|
|
6.4
|
|
|
Additional Obligations of Buyer
and Acquired Corporation Relating to the Community Bancshares,
Inc. Employee Stock Ownership Plan
|
|
|
A-26
|
|
ARTICLE 7 MUTUAL
COVENANTS AND AGREEMENTS
|
|
|
A-27
|
|
|
7.1
|
|
|
Best Efforts, Cooperation
|
|
|
A-27
|
|
|
7.2
|
|
|
Press Release
|
|
|
A-27
|
|
|
7.3
|
|
|
Mutual Disclosure
|
|
|
A-27
|
|
|
7.4
|
|
|
Access to Properties and Records;
Investigation
|
|
|
A-27
|
|
|
7.5
|
|
|
Notice of Adverse Changes
|
|
|
A-28
|
|
ARTICLE 8 CONDITIONS
TO OBLIGATIONS OF ALL PARTIES
|
|
|
A-28
|
|
|
8.1
|
|
|
Approval by Stockholders
|
|
|
A-28
|
|
|
8.2
|
|
|
Regulatory Authority Approval;
Other Consents
|
|
|
A-28
|
|
|
8.3
|
|
|
Legal Proceedings
|
|
|
A-28
|
|
|
8.4
|
|
|
Registration Statement
|
|
|
A-28
|
|
|
8.5
|
|
|
Tax Opinion
|
|
|
A-28
|
|
ARTICLE 9 CONDITIONS
TO OBLIGATIONS OF ACQUIRED CORPORATION
|
|
|
A-29
|
|
|
9.1
|
|
|
Representations, Warranties and
Covenants
|
|
|
A-29
|
|
|
9.2
|
|
|
[Reserved]
|
|
|
A-29
|
|
|
9.3
|
|
|
Closing Certificate
|
|
|
A-29
|
|
|
9.4
|
|
|
Opinion of Counsel
|
|
|
A-29
|
|
|
9.5
|
|
|
Fairness Opinion
|
|
|
A-30
|
|
|
9.6
|
|
|
NASDAQ Listing
|
|
|
A-30
|
|
|
9.7
|
|
|
Support for Legal Opinion
|
|
|
A-30
|
|
|
9.8
|
|
|
Material Events
|
|
|
A-30
|
|
|
9.9
|
|
|
Other Matters
|
|
|
A-30
|
|
ARTICLE 10 CONDITIONS
TO OBLIGATIONS OF BUYER
|
|
|
A-30
|
|
|
10.1
|
|
|
Representations, Warranties and
Covenants
|
|
|
A-30
|
|
|
10.2
|
|
|
Acquired Corporation Net Worth
|
|
|
A-30
|
|
A-iii
|
|
|
|
|
|
|
|
|
Caption
|
|
|
|
Page
|
|
10.3
|
|
|
Closing Certificate
|
|
|
A-31
|
|
|
10.4
|
|
|
Opinion of Counsel
|
|
|
A-31
|
|
|
10.5
|
|
|
Controlling Stockholders
|
|
|
A-31
|
|
|
10.6
|
|
|
Support for Legal Opinions
|
|
|
A-31
|
|
|
10.7
|
|
|
[Reserved]
|
|
|
A-32
|
|
|
10.8
|
|
|
[Reserved]
|
|
|
A-32
|
|
|
10.9
|
|
|
Fairness Opinion
|
|
|
A-32
|
|
|
10.10
|
|
|
Other Matters
|
|
|
A-32
|
|
ARTICLE 11 TERMINATION
OF REPRESENTATIONS AND WARRANTIES
|
|
|
A-32
|
|
ARTICLE 12 NOTICES
|
|
|
A-32
|
|
ARTICLE 13 AMENDMENT
OR TERMINATION
|
|
|
A-33
|
|
|
13.1
|
|
|
Amendment
|
|
|
A-33
|
|
|
13.2
|
|
|
Termination
|
|
|
A-33
|
|
|
13.3
|
|
|
Damages
|
|
|
A-35
|
|
|
13.4
|
|
|
Termination Fee
|
|
|
A-35
|
|
ARTICLE 14 DEFINITIONS
|
|
|
A-35
|
|
ARTICLE 15 MISCELLANEOUS
|
|
|
A-41
|
|
|
15.1
|
|
|
Expenses
|
|
|
A-41
|
|
|
15.2
|
|
|
Benefit and Assignment
|
|
|
A-41
|
|
|
15.3
|
|
|
Governing Law
|
|
|
A-41
|
|
|
15.4
|
|
|
Counterparts
|
|
|
A-41
|
|
|
15.5
|
|
|
Headings
|
|
|
A-41
|
|
|
15.6
|
|
|
Severability
|
|
|
A-41
|
|
|
15.7
|
|
|
Construction
|
|
|
A-42
|
|
|
15.8
|
|
|
Confidentiality; Return of
Information
|
|
|
A-42
|
|
|
15.9
|
|
|
Equitable Remedies
|
|
|
A-42
|
|
|
15.10
|
|
|
Attorneys Fees
|
|
|
A-42
|
|
|
15.11
|
|
|
No Waiver
|
|
|
A-42
|
|
|
15.12
|
|
|
Remedies Cumulative
|
|
|
A-42
|
|
|
15.13
|
|
|
Entire Contract
|
|
|
A-42
|
|
A-iv
AGREEMENT
AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER is made and entered
into as of this the 29th day of April, 2006, by and between
COMMUNITY BANCSHARES, INC. (Acquired
Corporation), a Delaware corporation, and THE BANC
CORPORATION (Buyer), a Delaware corporation.
WITNESSETH
WHEREAS, Acquired Corporation operates as a bank holding company
for its wholly owned subsidiary, Community Bank (the
Bank), with its principal office in Blountsville,
Alabama;
WHEREAS, Buyer is a thrift holding company with a Subsidiary
federal savings bank in Alabama and Florida;
WHEREAS, Acquired Corporation wishes to merge with Buyer; and
WHEREAS, it is the intention of Buyer and Acquired Corporation
that such Merger shall qualify for federal income tax purposes
as a reorganization within the meaning of
Section 368(a) of the Code, as defined herein;
NOW, THEREFORE, in consideration of the mutual covenants
contained herein, the Parties hereto agree as follows:
ARTICLE 1
NAME
1.1 Name. The name of the corporation
resulting from the Merger shall be The Banc
Corporation, or such other name as Buyer shall have
adopted as of the Effective Date.
ARTICLE 2
MERGER
TERMS AND CONDITIONS
2.1 Applicable Law. On the Effective
Date, Acquired Corporation shall be merged (the
Merger) with and into Buyer (herein referred to as
the Resulting Corporation whenever reference is made
to it as of the time of merger or thereafter). The Merger shall
be undertaken pursuant to the provisions of and with the effect
provided in the DGCL. The offices and facilities of Acquired
Corporation and of Buyer shall become the offices and facilities
of the Resulting Corporation.
2.2 Corporate Existence. On the Effective
Date, the corporate existence of Acquired Corporation and of
Buyer shall, as provided in the DGCL, be merged into and
continued in the Resulting Corporation, and the Resulting
Corporation shall be deemed to be the same corporation as
Acquired Corporation and Buyer. All property, rights,
privileges, powers, franchises and interests of Acquired
Corporation and Buyer, respectively, in and to every type of
property (real, personal and mixed) and choses in action shall
be transferred to and vested in the Resulting Corporation, and
all debts and other obligations shall be assumed by the
Resulting Corporation, by virtue of the Merger without any deed
or other transfer. The Resulting Corporation on the Effective
Date, and without any order or other action on the part of any
court or otherwise, shall hold and enjoy all rights of property,
franchises and interests, including appointments, designations
and nominations and all other rights and interests as trustee,
executor, administrator, transfer agent and registrar of stocks
and bonds, guardian of estates, assignee, and receiver and in
every other fiduciary capacity and in every agency, and
capacity, in the same manner and to the same extent as such
rights, franchises and interests were held or enjoyed by
Acquired Corporation and Buyer, respectively, on the Effective
Date, and shall be subject to all the restrictions, disabilities
and duties of Acquired Corporation and Buyer, respectively, on
the Effective Date.
2.3 Certificate of Incorporation and
Bylaws. On the Effective Date, the certificate of
incorporation and bylaws of the Resulting Corporation shall be
the restated certificate of incorporation and bylaws of Buyer as
they exist immediately before the Effective Date.
A-1
2.4 Resulting Corporations Officers and
Board. The board of directors and the officers of
the Resulting Corporation on the Effective Date shall consist of
those persons serving in such capacities of Buyer as of the
Effective Date. Buyer agrees that during the sixty days prior to
the Effective Date it will undertake its usual process for
identifying candidates for election to its board of directors,
and subject to approval of such individuals by any applicable
Agency, will utilize such process to recommend two individuals
for such election, at the first meeting of Buyers Board of
Directors following the Effective Date, who are independent
members of Acquired Corporations board of directors (as
determined by SEC and NASDAQ rules and regulations and by other
applicable Laws) as of the business day prior to the Effective
Date. Buyer is not aware of any prior regulatory approval that
is needed from any regulatory Agency for the election of such
two directors.
2.5 Stockholder Approvals. This Agreement
shall be submitted to the respective stockholders of Acquired
Corporation and of Buyer at the Stockholders Meetings to
be held as promptly as practicable consistent with the terms and
conditions set forth in this Agreement. Upon approval by the
requisite vote of the stockholders of Acquired Corporation and
of Buyer as required by applicable Law, the Merger shall become
effective as soon as practicable thereafter in the manner
provided in Section 2.7 hereof.
2.6 Further Acts. If, at any time after
the Effective Date, the Resulting Corporation shall consider or
be advised that any further assignments or assurances in law or
any other acts are necessary or desirable to vest, perfect,
confirm or record, in the Resulting Corporation, title to and
possession of any property or right of Acquired Corporation or
Buyer, acquired as a result of the Merger, Buyer and its
officers and directors shall execute and deliver all such proper
deeds, assignments and assurances in law and do all acts
necessary or proper to vest, perfect or confirm title to, and
possession of, such property or rights in the Resulting
Corporation.
2.7 Effective Date and Closing. Subject
to the terms of all requirements of Law and the conditions
specified in this Agreement the Merger shall become effective on
the date specified in the Certificate of Merger to be issued by
the Secretary of State of Delaware (such time being herein
called the Effective Date). Assuming all other
conditions stated in this Agreement have been or will be
satisfied as of the Closing, the Closing shall take place at the
offices of Buyer, in Birmingham, Alabama, at 5:00 p.m. on a
date specified by Buyer that shall be as soon as reasonably
practicable, but not later than 30 calendar days, after the
later to occur of the Stockholders Meetings or all
required regulatory approvals under Section 8.2, or at such
other place and time that the Parties may mutually agree.
2.8 Subsidiary Bank. Upon the Effective
Date, the Bank will merge with and into Buyers savings
bank Subsidiary, Superior Bank, a federal savings bank (the
Bank Merger). Acquired Corporation will cooperate
with Buyer, including the call of any special meetings of the
board of directors of the Bank and the filing of any regulatory
applications and the execution of appropriate documentation
relating to the Bank Merger.
ARTICLE 3
CONVERSION
OF ACQUIRED CORPORATION STOCK
3.1 Conversion of Acquired Corporation Stock.
(a) Subject to the potential adjustment provided for in
Section 3.1(c) and 3.4 below, on the Effective Date, each
share of common stock of Acquired Corporation outstanding and
held of record by the Acquired Corporations stockholders,
but excluding shares held by the Acquired Corporation or any of
its Subsidiaries, other than in a fiduciary capacity or as a
result of debts previously contracted (the Acquired
Corporation Stock), shall be converted by operation of law
and without any action by any holder thereof into and exchanged
for the right to receive 0.8974 shares of Buyers
Common Stock (the Exchange Ratio).
(b) On the Effective Date, all outstanding Acquired
Corporation Options and the outstanding Acquired Corporation
Warrants shall be cancelled and each holder of such options and
the holder of such warrants shall be entitled to receive in
exchange therefor the right to receive cash equal to the amount
resulting when the number of Acquired Corporation Options or the
number of Acquired Corporation Warrants, as the case may be,
held by a holder thereof is multiplied by the Per Unit Value. As
used herein, the term Per Unit Value shall mean
(i) $10.50 less (ii) the exercise price for each share
of Acquired Corporation Stock subject to such option or warrant.
A-2
Schedule 3.1 to the Acquired Corporations Disclosure
Supplement sets forth the names of all persons holding Acquired
Corporation Options and Acquired Corporation Warrants, the
number of shares of Acquired Corporation common stock subject to
such options and warrants, the exercise price and the expiration
date of such options and warrants.
(c) Notwithstanding anything to the contrary in this
Section 3.1 or otherwise in this Agreement, in the event
that there is a shortfall (the Net Worth Shortfall
Amount) between the Acquired Corporation Net Worth
specified in Section 10.2 hereof (the Required Net
Worth Amount), and the actual amount of such Net Worth,
then the Exchange Ratio shall be adjusted downward by the
Reduction Factor. As used herein, the Reduction
Factor shall mean the percentage obtained by dividing
(i) the Net Worth Shortfall Amount by (ii) the
Required Net Worth Amount.
3.2 Surrender of Acquired Corporation
Stock. As promptly as practicable, but in no case
later than fifteen (15) business days after the Effective
Date, an independent exchange agent (the Exchange
Agent) appointed by Buyer shall send to each holder of
record of shares of Acquired Company Stock outstanding on the
Effective Date transmittal materials for use in exchanging the
certificates for such shares for certificates for shares of
Buyers Common Stock into which such shares of Acquired
Company Stock have been converted pursuant hereto. Each holder
of an outstanding certificate or certificates which prior
thereto represented shares of Acquired Corporation Stock who is
entitled to receive Buyers Common Stock shall be entitled,
upon surrender to the Exchange Agent of their certificate or
certificates representing shares of Acquired Corporation Stock
(or an affidavit or affirmation by such holder of the loss,
theft, or destruction of such certificate or certificates in
such form as the Exchange Agent may reasonably require and, if
Buyer reasonably requires, a bond of indemnity in form and
amount, and issued by such sureties, as Buyer may reasonably
require), to receive in exchange therefor a certificate or
certificates representing the number of whole shares of
Buyers Common Stock into and for which the shares of
Acquired Corporation Stock so surrendered shall have been
converted, such certificates to be of such denominations and
registered in such names as such holder may reasonably request.
Until so surrendered and exchanged, each such outstanding
certificate which, prior to the Effective Date, represented
shares of Acquired Corporation Stock and which is to be
converted into Buyers Common Stock shall for all purposes
evidence ownership of the Buyers Common Stock into and for
which such shares shall have been so converted and holders
thereof shall have all rights as holders of Buyers Common
Stock , except that dividends or other distributions with
respect to such Buyers Common Stock, if any, shall be held
by Buyer until the certificates previously representing shares
of Acquired Corporation Stock shall have been properly tendered.
After the Effective Date, there shall be no transfers on the
stock transfer books of Acquired Corporation of shares of
Acquired Corporation Stock which were issued and outstanding on
the Effective Date and converted pursuant to the provisions
hereof. If after the Effective Date certificates are presented
for transfer to Acquired Corporation, they shall be canceled and
exchanged for the shares of Buyers Common Stock
deliverable in respect thereof as determined in accordance with
the provisions of this paragraph.
3.3 Fractional Shares. No fractional
shares of Buyers Common Stock shall be issued, and each
holder of shares of Acquired Corporation Stock having a
fractional interest arising upon the conversion of such shares
into shares of Buyers Common Stock shall, at the time of
surrender of the certificates previously representing Acquired
Corporation Stock, be paid by Buyer an amount in cash, without
interest, in an amount equal to such fractional part of a share
of Buyers Common Stock multiplied by the closing price per
share of Buyers Common Stock on NASDAQ on the Effective
Date.
3.4 Adjustments. In the event that prior
to the Effective Date Buyers Common Stock shall be changed
into a different number of shares or a different class of shares
by reason of any recapitalization or reclassification, stock
dividend, combination, stock split, or reverse stock split of
the Buyers Common Stock, an appropriate and proportionate
adjustment shall be made in the number of shares of Buyers
Common Stock into which the Acquired Corporation Stock shall be
converted.
3.5 Buyer Stock. The shares of Common
Stock of Buyer issued and outstanding immediately before the
Effective Date shall continue to be issued and outstanding
shares of the Resulting Corporation.
A-3
ARTICLE 4
REPRESENTATIONS,
WARRANTIES AND COVENANTS OF BUYER
Buyer represents, warrants and covenants to and with Acquired
Corporation as follows:
4.1 Organization. Buyer is a corporation
duly organized, validly existing and in good standing under the
Laws of the State of Delaware. Buyer has all requisite power and
authority to carry on its business as it is now being conducted
and is qualified to do business in every jurisdiction in which
the character and location of the Assets owned by it or the
nature of the business transacted by it requires qualification
or in which the failure to qualify could, individually, or in
the aggregate, have a Material Adverse Effect.
4.2 Capital Stock.
(a) The authorized capital stock of Buyer consists of
(A) 35,000,000 shares of Common Stock, $0.001 par
value per share, of which as of March 31, 2005,
20,351,736 shares were validly issued and
20,084,587 shares were outstanding, fully paid and
nonassessable under the DGCL and are not subject to preemptive
rights (not counting additional shares reserved for issuance
pursuant to stock option and other plans and outstanding options
issued under such plans or otherwise), and
(B) 5,000,000 shares of Convertible Preferred Stock,
$0.001 par value per share, none of which is issued and
outstanding. The shares of Buyers Common Stock to be
issued in the Merger are duly authorized and, when so issued,
will be validly issued and outstanding, fully paid and
nonassessable under the DGCL, will have been registered under
the 1933 Act and will have been registered or qualified
under the securities laws of all jurisdictions in which such
registration or qualification is required, based upon
information provided by Acquired Corporation and will be listed
and eligible for trading on NASDAQ.
(b) The authorized capital stock of each Subsidiary of
Buyer is validly issued and outstanding, fully paid and
nonassessable under the Laws of the jurisdiction in which such
Subsidiary is organized, and each Subsidiary is wholly owned,
directly or indirectly, by Buyer.
4.3 Taxes. All Tax returns required to be
filed by or on behalf of Buyer have been timely filed (or
requests for extensions therefor have been timely filed and
granted and have not expired), and all returns filed are
complete and accurate in all material respects. All Taxes due
and all additional assessments received have been paid. The
amounts recorded for Taxes on the balance sheets contained in
the reports described in Section 4.14 are, to the Knowledge
of Buyer, sufficient in all material respects for the payment of
all unpaid federal, state, county, local, foreign or other Taxes
(including any interest or penalties) of Buyer accrued for or
applicable to the period ended on the dates thereof, and all
years and periods prior thereto and for which Buyer may at such
dates have been liable in its own right or as transferee of the
Assets of, or as successor to, any other corporation or other
party. Except as disclosed on Schedule 4.3 to Buyers
Disclosure Supplement, no audit, examination or investigation is
presently being conducted or, to the Knowledge of Buyer,
threatened by any taxing authority which is likely to result in
a material Tax Liability, no material unpaid Tax deficiencies or
additional liabilities of any sort have been proposed by any
governmental representative and no agreements for extension of
time for the assessment of any material amount of Tax have been
entered into by or on behalf of Buyer. To the Knowledge of
Buyer, Buyer has withheld from its employees (and timely paid to
the appropriate governmental entity) proper and accurate amounts
for all periods in material compliance with all Tax withholding
provisions of applicable federal, state, foreign and local Laws
(including without limitation, income, Social Security and
employment Tax withholding for all types of compensation).
4.4 No Conflict with Other
Instrument. The consummation of the transactions
contemplated by this Agreement will not result in the breach of
any term or provision of or constitute a Default (without regard
to the giving of notice or the passage of time) under any
material Contract, indenture, mortgage, deed of trust or other
material agreement or instrument to which Buyer or any of its
Subsidiaries is a party or by which they or their Assets may be
bound; will not conflict with any provision of the certificate
of incorporation or bylaws of Buyer or the certificate or
articles of incorporation or bylaws of any of its Subsidiaries;
and will not violate any provision of any Law, regulation,
judgment or decree binding on them or any of their Assets.
A-4
4.5 Absence of Material Adverse
Change. Since December 31, 2005, there have
been no events, changes or occurrences which have had or are
reasonably likely to have, individually or in the aggregate, a
Material Adverse Effect on Buyer, except as disclosed in
Schedule 4.5 to Buyers Disclosure Supplement.
4.6 Approval of Agreement. The board of
directors of Buyer has approved this Agreement and the
transactions contemplated by it and has authorized the execution
and delivery by Buyer of this Agreement. This Agreement
constitutes the legal, valid and binding obligation of Buyer,
enforceable against it in accordance with its terms. Subject to
(a) the matters referred to in Section 8.2 and
(b) approval by the stockholders of Buyer of the Merger and
the transactions contemplated by this Agreement, Buyer has full
power, authority and legal right to enter into this Agreement
and to consummate the transactions contemplated by this
Agreement. Buyer has no Knowledge of any fact or circumstance
under which the appropriate regulatory approvals required by
Section 8.2 will not be granted without the imposition of
material conditions or material delays.
4.7 Tax Treatment. Buyer has no present
plan to sell or otherwise dispose of any material portion of the
Assets of Acquired Corporation, subsequent to the Merger, and
Buyer intends to continue the historic business of Acquired
Corporation.
4.8 Title and Related Matters. Buyer has
good and marketable title to all the properties, interests in
properties and Assets, real and personal, that are material to
the business of Buyer, reflected in the balance sheet dated as
of December 31, 2005 in the Buyer SEC Reports, or acquired
after the date of such balance sheet (except properties,
interests and Assets sold or otherwise disposed of since such
date, in the ordinary course of business, or, if other than in
the ordinary course of business, of a nature and amount not
material to the business of Buyer), free and clear of all
mortgages, Liens, pledges, charges or encumbrances except
(a) mortgages and other encumbrances referred to in the
notes of such balance sheet, (b) liens for current Taxes
not yet due and payable and (c) such imperfections of title
and easements as do not materially detract from or interfere
with the present use of the properties subject thereto or
affected thereby, or otherwise materially impair present
business operations at such properties. To the Knowledge of
Buyer, the material structures and equipment of Buyer comply in
all material respects with the requirements of all applicable
Laws.
4.9 Subsidiaries. Each Subsidiary of
Buyer has been duly incorporated and is validly existing as a
corporation in good standing under the Laws of the jurisdiction
of its incorporation and each Subsidiary has been duly qualified
as a foreign corporation to transact business and is in good
standing under the Laws of each other jurisdiction in which it
owns or leases properties, or conducts any business so as to
require such qualification and in which the failure to be duly
qualified could have a Material Adverse Effect upon Buyer and
its Subsidiaries considered as one enterprise; the federal
savings bank Subsidiary of Buyer has its deposits fully insured
by the Federal Deposit Insurance Corporation to the extent
provided by the Federal Deposit Insurance Act; and the
businesses of the non-bank Subsidiaries of Buyer are permitted
to subsidiaries of registered thrift holding companies.
4.10 Contracts. Neither Buyer nor any of
its Subsidiaries is in violation of its respective certificate
of incorporation or bylaws or in Default in the performance or
observance of any material obligation, agreement, covenant or
condition contained in any Contract, indenture, mortgage, loan
agreement, note, lease or other instrument to which it is a
party or by which it or its property may be bound, except for
such Defaults, if any, as would not, individually or in the
aggregate, have a Material Adverse Effect upon Buyer.
4.11 Litigation. Except as disclosed in
Schedule 4.11 to Buyers Disclosure Supplement, there
is no Litigation before or by any court or Agency, domestic or
foreign, now pending, or, to the Knowledge of Buyer, threatened
against or affecting Buyer or any of its Subsidiaries (nor does
Buyer have knowledge of any facts which could give rise to any
such Litigation) which is reasonably likely to have any Material
Adverse Effect or prospective Material Adverse Effect, or which
is reasonably likely to materially affect or delay the
consummation of the transactions contemplated by this Agreement;
and all pending legal or governmental proceedings to which Buyer
or any Subsidiary is a party or of which any of their properties
is the subject, including ordinary routine litigation incidental
to the business, are, considered in the aggregate not material.
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4.12 Compliance. Buyer and its
Subsidiaries, in the conduct of their businesses, are to the
Knowledge of Buyer, in material compliance with all material
federal, state or local Laws applicable to their or the conduct
of their businesses, including Laws imposing Taxes.
4.13 Registration Statement. None of the
information supplied or to be supplied by Buyer for inclusion in
the Registration Statement to be filed by Buyer with the SEC
will, when the Registration Statement becomes effective, be
false or misleading with respect to any material fact, or omit
to state any material fact necessary to make the statements
therein not misleading. None of the information supplied or to
be supplied by Buyer to Buyers or Acquired
Corporations stockholders in the proxy
statement/prospectus used in connection with the
Stockholders Meetings, and any other documents to be filed
by Buyer with the SEC, or any other Agency in connection with
the transactions contemplated hereby will, at the respective
time such documents are filed and with respect to the Acquired
Corporation Proxy Statement, when first mailed to the
stockholders of Acquired Corporation, and with respect to the
Buyer Proxy Statement when first mailed to the stockholders of
Buyer, be false or misleading with respect to any material fact,
or omit to state any material fact necessary to make the
statements therein, not misleading, or in the case of the
Acquired Corporation Proxy Statement or any amendment thereof or
supplement thereto, at the time of the Acquired Corporation
Stockholders Meetings, and in the case of the Buyer Proxy
Statement or any amendment thereof or supplement thereto, at the
time of the Buyer Stockholders Meeting, be false or
misleading with respect to any material fact, or omit to state
any material fact necessary to correct any statement in any
earlier communication with respect to the solicitation of
proxies for the respective Stockholders Meetings.
4.14 SEC Filings and Financial Statements;
NASDAQ. (a) Since December 31, 2003,
Buyer has filed all forms, reports and documents with the SEC
required to be filed by it pursuant to the federal securities
Laws and SEC rules and regulations thereunder (the Buyer
SEC Reports), each of which complied as to form, at the
time such form, report or document was filed (and subject to any
subsequent amendments thereto), in all material respects with
the applicable requirements of the 1933 Act, the
1934 Act and the applicable rules and regulations
thereunder. To the Knowledge of Buyer, each member of
Buyers board of directors has filed all forms, reports and
documents with the SEC required to be filed by him pursuant to
the federal securities Laws and SEC rules and regulations
thereunder. As of their respective dates, none of the Buyer SEC
Reports contained any untrue statement of a material fact or
omitted 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.
Each of the balance sheets in the Buyer SEC Reports (including
the related notes and schedules, and subject to any subsequent
amendments to such Buyer SEC Reports) fairly presents the
financial condition of the entity or entities to which it
relates for the periods set forth therein (subject, in the case
of unaudited interim statements, to normal year-end audit
adjustments that are not material in amount or effect), in each
case in accordance with generally accepted accounting principles
consistently applied during the periods involved, except as may
be noted therein. Buyer has no material obligations or
liabilities (contingent or otherwise) except as disclosed in the
Buyer SEC Reports. For purposes of this paragraph,
material shall have the meaning of such term as
defined under the 1933 Act, the 1934 Act and the rules
promulgated thereunder.
(b) Since December 31, 2003, Buyer has filed all
forms, reports and documents with NASDAQ required to be filed by
it pursuant to the requirements of NASDAQ (the NASDAQ
Reports), each of which complied as to form, at the time
such form, report or document was filed (and subject to any
subsequent amendments thereto), in all material respects with
the applicable requirements of NASDAQ. As of their respective
dates, none of the NASDAQ Reports contained any untrue statement
of a material fact or omitted 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. Buyer is in material compliance with all
rules and requirements of NASDAQ applicable to it.
4.15 Form S-4. The
conditions for use of a registration statement on SEC
Form S-4
set forth in the General Instructions on
Form S-4
will be satisfied with respect to Buyer and the Registration
Statement.
4.16 Brokers. Except for services
provided by Sandler ONeill & Partners, L.P. and
Burke Capital Group, L.L.C., which have been retained by Buyer
and the arrangements with which, including fees, have been
disclosed to Acquired Corporation prior to the date hereof, all
negotiations relative to this Agreement and the transactions
contemplated by this Agreement have been carried on by Buyer
directly with Acquired Corporation and without the
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intervention of any other person, either as a result of any act
of Buyer or otherwise in such manner as to give rights to any
valid claim against Buyer for finders fees, brokerage
commissions or other like payments.
4.17 Government Authorization. Buyer and
its Subsidiaries have all Permits that, to the Knowledge of
Buyer and its Subsidiaries, are or will be legally required to
enable Buyer or any of its Subsidiaries to conduct their
businesses in all material respects as now conducted by each of
them.
4.18 Absence of Regulatory
Communications. Except as disclosed in
Schedule 4.18 to Buyers Disclosure Supplement,
neither Buyer nor any of its Subsidiaries is subject to, or has
received during the past year, any written communication
directed specifically to it from any Agency to which it is or
has been subject or pursuant to which such Agency has imposed or
has indicated it is reasonably likely to impose any material
restrictions on the operations of it or the business conducted
by it or taken any other action with respect to Buyer or any of
its Subsidiaries which has had or is reasonably likely to have a
Material Adverse Effect upon Buyer and its Subsidiaries taken as
a whole.
4.19 Disclosure. No representation or
warranty, or any statement or certificate furnished or to be
furnished to Acquired Corporation by Buyer, contains or will
contain any untrue statement of a material fact, or omits or
will omit to state a material fact necessary to make the
statements contained in this Agreement or in any such statement
or certificate not misleading.
4.20 Absence of Certain Changes or
Events. Since December 31, 2005, neither
Buyer nor any of its Subsidiaries has
(a) issued, delivered or agreed to issue or deliver any
stock, bonds or other corporate securities (whether authorized
and unissued or held in the treasury) except shares of common
stock issued upon the exercise of existing options to purchase
shares of Buyers common stock under its Third Amended and
Restated 1998 Stock Option Plan;
(b) borrowed or agreed to borrow any funds or incurred, or
become subject to, any Liability (absolute or contingent) except
borrowings, obligations (including purchase of federal funds)
and Liabilities incurred in the ordinary course of business and
consistent with past practice;
(c) paid any material obligation or Liability (absolute or
contingent) other than current Liabilities shown on the
December 31, 2005 balance sheet in the Buyer SEC Reports
and current Liabilities incurred since that date in the ordinary
course of business and consistent with past practice;
(d) declared or made, or agreed to declare or make, any
payment of dividends or distributions of any Assets of any kind
whatsoever to stockholders, or purchased or redeemed, or agreed
to purchase or redeem, directly or indirectly, or otherwise
acquire, any of its outstanding securities;
(e) except in the ordinary course of business, sold or
transferred, or agreed to sell or transfer, any of its Assets,
or canceled, or agreed to cancel, any debts or claims;
(f) except in the ordinary course of business, entered or
agreed to enter into any agreement or arrangement granting any
preferential rights to purchase any of its Assets, or requiring
the consent of any party to the transfer and assignment of any
of its Assets;
(g) suffered any Losses or waived any rights of value which
in either event in the aggregate are material considering
Buyers business as a whole, except as are disclosed in
Schedule 4.20 of Buyers Disclosure Supplement;
(h) except in the ordinary course of business or as
disclosed in Schedule 4.20(h) to Buyers Disclosure
Supplement, made or permitted any amendment or termination of
any Contract, agreement or license to which it is a party if
such amendment or termination is material considering
Buyers business as a whole;
(i) except in accordance with Buyers normal and usual
practice, or as required by Law or by Contract, or as noted in
Schedule 4.20(i) to Buyers Disclosure Supplement,
made any accrual or arrangement for or payment of bonuses or
special compensation of any kind or any severance or termination
pay to any present or former officer or employee;
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(j) except in accordance with normal and usual practice,
increased the rate of compensation payable to or to become
payable to any of its officers or employees or made any material
increase in any profit sharing, bonus, deferred compensation,
savings, insurance, pension, retirement or other employee
benefit plan, payment or arrangement made to, for or with any of
its officers or employees;
(k) received notice that any of its substantial customers
has terminated or intends to terminate its relationship, which
termination would have a Material Adverse Effect;
(l) failed to operate its business in the ordinary course
(other than this Agreement and the transactions contemplated
hereby and other than Buyers Agreement and Plan of Merger
with Kensington Bankshares, Inc. dated as of March 6, 2006
and the transactions contemplated thereby) so as to preserve its
business intact and to preserve the goodwill of its customers
and others with whom it has business relations;
(m) entered into any other transaction other than in the
ordinary course of business; or
(n) agreed, in writing or otherwise, to take any action
described in clauses (a) through (m) above.
4.21 Commitments. Buyer has disclosed in
the Exhibits to its annual report on
Form 10-K
for the year ended December 31, 2005, or in the Exhibits to
any subsequently filed quarterly report on
Form 10-Q
or current report on
Form 8-K,
all material contracts required to be disclosed
pursuant to Item 601(b)(10) of
Regulation S-K
under the 1933 Act.
4.22 Charter and
Bylaws. Schedule 4.22 to Buyers
Disclosure Supplement contains true and correct copies of the
certificate of incorporation or articles of incorporation and
bylaws of Buyer and Superior Bank including all amendments
thereto, as currently in effect. There will be no changes in
such certificates or articles of incorporation or bylaws prior
to the Effective Date without the prior written consent of
Acquired Corporation.
4.23 Material Contract Defaults. Except
as disclosed on Schedule 4.23 to Buyers Disclosure
Supplement, neither Buyer nor any of its Subsidiaries is in
Default in any material respect under the terms of any material
Contract which has or is reasonably likely to have a Material
Adverse Effect on Buyer and its Subsidiaries taken as a whole,
and, to the Knowledge of Buyer, there is no event which, with
notice or lapse of time, or both, may be or become an event of
Default under any such material Contract that is reasonably
likely to have such a Material Adverse Effect in respect of
which adequate steps have not been taken to prevent such a
Default from occurring.
4.24 Insurance. Each of the Buyer and its
Subsidiaries has in effect insurance coverage and bonds with
reputable insurers which, in respect to amounts, types and risks
insured, management of Buyer reasonably believes to be adequate
for the type of business conducted by such company, and all of
which are identified on Schedule 4.24 to Buyers
Disclosure Supplement. Neither Buyer nor any of its Subsidiaries
is liable for any material retroactive premium adjustment. All
insurance policies and bonds are valid, enforceable and in full
force and effect, and neither Buyer nor any of its Subsidiaries
has received any notice of any material premium increase or
cancellation with respect to any of its insurance policies or
bonds. Within the last three years, neither Buyer nor any of its
Subsidiaries has been refused any insurance coverage which it
has sought or applied for, and it has no reason to believe that
existing insurance coverage cannot be renewed as and when the
same shall expire, upon terms and conditions as favorable as
those presently in effect, other than possible increases in
premiums that do not result from any extraordinary loss
experience. All policies of insurance presently held or policies
containing substantially equivalent coverage, to the extent
available generally in the market without material increase in
cost or change in coverage, will be outstanding and in full
force with respect to each of Buyer and its Subsidiaries at all
times from the date hereof to the Effective Date.
4.25 Governmental Authorization. Buyer
and its Subsidiaries have all Permits that, to the Knowledge of
Buyer, are or will be legally required to enable Buyer and its
Subsidiaries to conduct their respective businesses in all
material respects as now conducted by Buyer and each of its
Subsidiaries.
4.26 [Reserved].
4.27 Regulatory Approvals. Buyer has no
Knowledge of any reason why all requisite regulatory approvals
regarding the Merger should not or cannot be obtained.
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4.28 Loans; Adequacy of Allowance for Loan
Losses. All reserves for loan losses shown on the
December 31, 2005 financial statements of Buyer in the
Buyer SEC Reports are adequate (within the meaning of GAAP and
applicable regulatory guidelines) in all material respects. To
the Knowledge of Buyer, each loan reflected as an Asset on the
financial statements of Buyer is the legal, valid and binding
obligation of the obligor of each loan, enforceable in
accordance with its terms subject to the effect of bankruptcy,
insolvency, reorganization, moratorium, or other similar laws
relating to creditors rights generally and to general
equitable principles and complies with all Laws to which it is
subject. Buyer does not have in its portfolio any loan exceeding
its legal lending limit, and except as disclosed to Acquired
Corporation, to the Knowledge of Acquired Corporation, it has no
material loans that are delinquent in payment for more than
30 days, substandard, doubtful, loss, or nonperforming.
4.29 Environmental Matters. Buyer and
each of its Subsidiaries are in material compliance with all
Environmental Laws, and Buyer has no Knowledge that Buyer or any
of its Subsidiaries has not complied with all regulations and
requirements promulgated by the Occupational Safety and Health
Administration that are applicable to Buyer or any of its
Subsidiaries, except, in each case, where such noncompliance has
not had or is not reasonably likely to have a Material Adverse
Effect on Buyer and its Subsidiaries taken as a whole. To the
Knowledge of Buyer, there is no Litigation pending or threatened
with respect to any violation or alleged violation of the
Environmental Laws. To the Knowledge of Buyer, with respect to
Assets of Buyer or any of its Subsidiaries, including any Loan
Property of any material loan, (a) there has been no
spillage, leakage, contamination or release of any substances
for which the appropriate remedial action has not been
completed; (b) no owned or leased property is contaminated
with or contains any hazardous substance or waste; and
(c) there are no underground storage tanks on any premises
owned or leased by Buyer or any of its Subsidiaries, where in
the case of each of clause (a) and (b) any such
condition or occurrence has had or is reasonably likely to have
a Material Adverse Effect on Buyer and its Subsidiaries taken as
a whole.
4.30 Labor Disputes. To the Knowledge of
Buyer, Buyer and each of its Subsidiaries is in material
compliance with all federal and state laws respecting employment
and employment practices, terms and conditions of employment,
wages and hours. Neither Buyer nor any of its Subsidiaries is or
has been engaged in any unfair labor practice, and, to the
Knowledge of Buyer, no unfair labor practice complaint against
Buyer or any of its Subsidiaries is pending before the National
Labor Relations Board. Relations between management of Buyer and
its Subsidiaries and the employees are amicable and there have
not been, nor to the Knowledge of Buyer, are there presently,
any attempts to organize employees, nor to the Knowledge of
Buyer, are there plans for any such attempts.
4.31 Derivative Contracts. Except as
disclosed in Section 4.31 to Buyers Disclosure
Supplement or as entered into in the ordinary course of business
subsequent to the date hereof, neither Buyer nor any of its
Subsidiaries is a party to or has agreed to enter into a swap,
forward, future, option, cap, floor or collar financial
contract, or any other interest rate or foreign currency
protection contract or derivative security (Derivative
Contract) not included in Buyers December 31,
2005 financial statements in the Buyer SEC Reports (including
various combinations thereof). With respect to all agreements
currently outstanding pursuant to which Buyer or any of its
Subsidiaries has purchased securities subject to an agreement to
resell, Buyer or such Subsidiary has a security interest in the
securities or other collateral securing such agreement, and the
value of such collateral at the date such agreement was entered
into equals or exceeds the amount of the debt secured thereby.
Neither Buyer nor any of its Subsidiaries has pledged collateral
in excess of the amount required under any interest rate swap,
repurchase agreement, Derivative Contract or other similar
agreement currently outstanding.
4.32 Accounting, Tax and Regulatory
Matters. Neither Buyer nor any of its
Subsidiaries has taken any action or has any Knowledge of any
fact or circumstance that is reasonably likely to
(i) prevent the transactions provided for herein, including
the Merger, from qualifying as a reorganization within the
meaning of Section 368(a) of the Code, or
(ii) materially impede or delay receipt of any Consents of
Agencies referred to in subsection 8.2 of this Agreement.
4.33 Opinion of Counsel. Buyer has no
Knowledge of any facts that would preclude issuance of the
opinion of counsel referred to in Section 9.4.
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4.34 Transactions with Management. Buyer
has disclosed in Buyers proxy statement dated
April 17, 2006 with respect to its regular 2006 annual
meeting of stockholders all matters required to be disclosed
pursuant to Item 404 of
Regulation S-K
under the 1933 Act, Certain Relationships and Related
Transactions.
4.35 Accounting Controls. Buyer and its
Subsidiaries have devised and maintained systems of internal
accounting control sufficient to provide reasonable assurances
that: (i) all material transactions are executed in
accordance with general or specific authorization of the Board
of Directors of Buyer and the duly authorized executive officers
of Buyer or the applicable Subsidiary of Buyer; (ii) all
material transactions are recorded as necessary to permit the
preparation of financial statements in conformity with GAAP with
respect to Buyer or the applicable Subsidiary of Buyer or any
other criteria applicable to such financial statements, and to
maintain proper accountability for items therein;
(iii) access to the material Assets of Buyer and its
Subsidiaries is permitted only in accordance with general or
specific authorization of the Board of Directors of Buyer and
the duly authorized executive officers; and (iv) the
recorded accountability for items is compared with the actual
levels at reasonable intervals and appropriate actions taken
with respect to any differences.
4.36 Deposit Insurance. The deposit
accounts of Superior Bank are insured by the FDIC in accordance
with the provisions of the FDIC Act. Superior Bank has paid all
regular premiums and special assessments and filed all reports
required under the FDIC Act.
4.37 Collective Bargaining. There are no
labor contracts, collective bargaining agreements, letters of
undertakings or other arrangements, formal or informal, between
any Buyer or any of its Subsidiaries and any union or labor
organization covering the employees of Buyer or of any of its
Subsidiaries and none of said employees are represented by any
union or labor organization.
4.38 Opinion of Counsel. Buyer has no
Knowledge of any facts that would preclude issuance of the
opinion of counsel referred to in Section 9.4.
ARTICLE 5
REPRESENTATIONS,
WARRANTIES AND COVENANTS OF ACQUIRED CORPORATION
Acquired Corporation represents, warrants and covenants to and
with Buyer, as follows:
5.1 Organization. Acquired Corporation is
a Delaware corporation, and the Bank is an Alabama
state-chartered bank. Each is duly organized, validly existing
and in good standing under the respective Laws of its
jurisdiction of incorporation and has all requisite power and
authority to carry on its business as it is now being conducted
and is qualified to do business in every jurisdiction in which
the character and location of the Assets owned by it or the
nature of the business transacted by it requires qualification
or in which the failure to qualify could, individually, or in
the aggregate, have a Material Adverse Effect.
5.2 Capital Stock. As of April 28,
2006, the authorized capital stock of Acquired Corporation
consisted of (A) 20,000,000 shares of common stock,
$.10 par value per share, 8,892,926 shares of which were
issued and outstanding at such date, which amount excludes
104,955 shares held by Acquired Corporation as treasury
shares, and (B) 200,000 shares of Preferred Stock,
$0.001 par value per share, none of which was issued and
outstanding at such date. All of such shares which are
outstanding are validly issued, fully paid and nonassessable
under the DGCL and not subject to preemptive rights. As of
April 28, 2006, such 8,892,926 shares included
85,980 shares of $.01 par value Acquired Corporation
common stock that had been issued to the ESOP (as defined in
Section 6.4 hereof) and were outstanding, and which secured
a loan to the ESOP and had not been allocated to ESOP
participants and therefore are shown as unearned ESOP
common stock on Acquired Corporations balance sheet
in its annual report on
Form 10-K
as of December 31, 2005. As of March 31, 2006,
Acquired Corporation had 1,781,687 shares of its common
stock subject to exercise at any time pursuant to outstanding
stock options under its stock option plans or pursuant to
outstanding warrants. Except for the foregoing, Acquired
Corporation does not have any other arrangements or commitments
obligating it to issue shares of its capital stock or any
securities convertible into or having the right to purchase
shares of its capital stock, including the grant or issuance of
Acquired Corporation Options.
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5.3 Subsidiaries. Acquired Corporation
has no direct Subsidiaries other than the Bank and the
Subsidiaries shown on Schedule 5.3 to Acquired
Corporations Disclosure Supplement. Acquired Corporation
owns all of the issued and outstanding capital stock of the Bank
and its other Subsidiaries, including without limitation the
Trust, free and clear of any liens, claims or encumbrances of
any kind. All of the issued and outstanding shares of capital
stock of the Subsidiaries have been validly issued and are fully
paid and non-assessable. As of December 31, 2005, there
were 400,000 shares of the Class A common stock, par
value $1.00 per share, authorized of the Bank, 38,778 of
which were issued and outstanding and wholly owned by Acquired
Corporation, and 5,000 shares of the Class B common
stock, par value $1.00 per share, authorized of the Bank,
none of which was issued or outstanding. The Bank has no
arrangements or commitments obligating it to issue shares of its
capital stock or any securities convertible into or having the
right to purchase shares of its capital stock. Other than the
pledge of the Banks stock under the Line of Credit, there
are no arrangements or commitments by which any Acquired
Corporation Company is or may be bound to transfer any shares of
the capital stock of any Acquired Corporation Company. Other
than the Line of Credit, there are no arrangements or
commitments relating to the rights of any Acquired Corporation
Company to vote or dispose of any shares of the capital stock of
any Acquired Corporation Company.
5.4 SEC Filings and Financial
Statements. Since December 31, 2003,
Acquired Corporation has filed all forms, reports and documents
with the SEC required to be filed by it pursuant to the federal
securities Laws and SEC rules and regulations thereunder (the
Acquired Corporation SEC Reports), each of which
complied as to form, at the time such form, report or document
was filed (and subject to any subsequent amendments thereto), in
all material respects with the applicable requirements of the
1933 Act, the 1934 Act and the applicable rules and
regulations thereunder. To the Knowledge of the Acquired
Corporation, and except as disclosed in the Acquired Corporation
Disclosure Supplement each member of its board of directors has
filed all forms, reports and documents with the SEC required to
be filed by him pursuant to the federal securities Laws and SEC
rules and regulations thereunder. As of their respective dates,
none of the Acquired Corporation SEC Reports contained any
untrue statement of a material fact or omitted 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, except as disclosed in the
Acquired Corporation Disclosure Supplement. Except as disclosed
in the Acquired Corporation Disclosure Supplement, each of the
balance sheets in the Acquired Corporation SEC Reports
(including the related notes and schedules, and subject to any
subsequent amendments to such Acquired Corporation SEC Reports)
fairly presents the financial condition of the entity or
entities to which it relates for the periods set forth therein
(subject, in the case of unaudited interim statements, to normal
year-end audit adjustments that are not material in amount or
effect), in each case in accordance with generally accepted
accounting principles consistently applied during the periods
involved, except as may be noted therein. Acquired Corporation
has no material obligations or liabilities (contingent or
otherwise) except as disclosed in the Acquired Corporation
Disclosure Supplement. For purposes of this paragraph,
material shall have the meaning of such term as
defined under the 1933 Act, the 1934 Act and the rules
promulgated thereunder.
5.5 Absence of Certain Changes or
Events. Except as set forth on Schedule 5.5
to Acquired Corporations Disclosure Supplement, since
December 31, 2005, no Acquired Corporation Company has
(a) issued, delivered or agreed to issue or deliver any
stock, bonds or other corporate securities (whether authorized
and unissued or held in the treasury) except shares of common
stock issued upon the exercise of existing Acquired Corporation
Options and Acquired Corporation Warrants;
(b) borrowed or agreed to borrow any funds or incurred, or
become subject to, any Liability (absolute or contingent) except
borrowings, obligations (including purchase of federal funds)
and Liabilities incurred in the ordinary course of business and
consistent with past practice;
(c) paid any material obligation or Liability (absolute or
contingent) other than current Liabilities reflected in or shown
on the most recent balance sheet in the Acquired Corporation SEC
Reports and current Liabilities incurred since that date in the
ordinary course of business and consistent with past practice;
(d) except as necessary in order to enable Acquired
Corporation to pay the special dividend contemplated by
Section 6.2(k) hereof or for any Acquired Corporation
Company to pay dividends to enable Acquired Corporation to meet
its obligations as they come due, declared or made, or agreed to
declare or make, any payment of dividends
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or distributions of any Assets of any kind whatsoever to
stockholders, or purchased or redeemed, or agreed to purchase or
redeem, directly or indirectly, or otherwise acquire, any of its
outstanding securities;
(e) except in the ordinary course of business, sold or
transferred, or agreed to sell or transfer, any of its Assets,
or canceled, or agreed to cancel, any debts or claims;
(f) except in the ordinary course of business, entered or
agreed to enter into any agreement or arrangement granting any
preferential rights to purchase any of its Assets, or requiring
the consent of any party to the transfer and assignment of any
of its Assets;
(g) suffered any Losses or waived any rights of value which
in either event in the aggregate are material considering its
business as a whole and are disclosed in the Acquired
Corporation SEC Reports;
(h) except in the ordinary course of business, made or
permitted any amendment or termination of any Contract,
agreement or license to which it is a party if such amendment or
termination is material considering its business as a whole;
(i) except in accordance with normal and usual practice or
as required by Law or Contract, made any accrual or arrangement
for or payment of bonuses or special compensation of any kind or
any severance or termination pay to any present or former
officer or employee;
(j) except in accordance with normal and usual practice,
increased the rate of compensation payable to or to become
payable to any of its officers or employees or made any material
increase in any profit sharing, bonus, deferred compensation,
savings, insurance, pension, retirement or other employee
benefit plan, payment or arrangement made to, for or with any of
its officers or employees;
(k) as of April 28, 2006, received notice that any of
its substantial customers has terminated or intends to terminate
its relationship, which termination would have a Material
Adverse Effect;
(l) failed to operate its business in the ordinary course
(other than this Agreement and the transactions contemplated
hereby) so as to preserve its business intact and to preserve
the goodwill of its customers and others with whom it has
business relations;
(m) entered into any other transaction other than in the
ordinary course of business; or
(n) agreed, in writing or otherwise, to take any action
described in clauses (a) through (m) above.
Between the date hereof and the Effective Date, no Acquired
Corporation Company, without the express written approval of
Buyer, will do any of the things listed in clauses (a)
through (n) of this Section 5.5 except as permitted
therein or as contemplated in this Agreement, or disclosed in
the Acquired Corporation Disclosure Supplement and no Acquired
Corporation Company will enter into or amend any material
Contract wherein either the Acquired Corporation Company has an
obligation to pay or the other party thereto has an obligation
to provide goods or services, in either case in excess of
$100,000 during the term thereof, other than Loans or renewals
thereof entered into in the ordinary course of business, without
the express written consent of Buyer.
5.6 Title and Related Matters.
(a) Title. Each Acquired
Corporation Company has good and marketable title to all Assets
that are material to the business of the Acquired Corporation
Companies taken as a whole, reflected in the most recent
financial statement in the Acquired Corporation SEC Reports, or
acquired after the date of such financial statement (except
Assets sold or otherwise disposed of since such date, in the
ordinary course of business or as disclosed in the Acquired
Corporation Disclosure Supplement), free and clear of all
mortgages, Liens, pledges, charges or encumbrances except
(i) mortgages and other encumbrances referred to in the
notes to such balance sheet, (ii) Liens for current Taxes
not yet due and payable and (iii) such imperfections of
title and easements as do not materially interfere with the
present use of the properties subject thereto or affected
thereby, or otherwise materially impair present business
operations at such properties. To the Knowledge of Acquired
Corporation, the material structures and equipment of each
Acquired Corporation Company comply in all material respects
with the requirements of all applicable Laws.
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(b) Leases. Schedule 5.6(b)
to Acquired Corporations Disclosure Supplement sets forth
a list and description of all real and personal property owned
or leased by any Acquired Corporation Company, either as lessor
or lessee, all of which are in full force and effect and under
which no breach or Default on the part of such Acquired
Corporation Company or, to the Knowledge of Acquired
Corporation, any other party has occurred or is continuing.
(c) Depreciation
Schedule. Schedule 5.6(c) to Acquired
Corporations Disclosure Supplement sets forth a
depreciation schedule for financial reporting purposes of each
Acquired Corporation Companys fixed Assets as of
March 31, 2006.
(d) Computer Hardware and
Software. Schedule 5.6(d) to Acquired
Corporations Disclosure Supplement contains a description
of all material agreements relating to data processing computer
software and hardware now being used in the business operations
of any Acquired Corporation Company. Acquired Corporation has no
Knowledge of any defects, irregularities or problems with any of
its computer hardware or software which renders such hardware or
software unable to reasonably perform the tasks and functions to
be performed by them in the business of any Acquired Corporation
Company. Except as set forth in Schedule 5.6(d) to Acquired
Corporations Disclosure Supplement, each applicable
Acquired Corporation Company owns or has the uncontested right,
and after the Effective Date will continue to own or have the
uncontested right, to use all such computer software and
hardware.
5.7 Commitments. Acquired Corporation has
disclosed in the Exhibits to its annual report on
Form 10-K
for the year ended December 31, 2005, or in the Exhibits to
any subsequently filed quarterly report on
Form 10-Q
or current report on
Form 8-K,
all material contracts required to be disclosed
pursuant to Item 601(b)(10) of
Regulation S-K
under the 1933 Act.
5.8 Charter and Bylaws. Schedule 5.8
to Acquired Corporations Disclosure Supplement contains
true and correct copies of the certificate of incorporation or
articles of incorporation and bylaws of each Acquired
Corporation Company, including all amendments thereto, as
currently in effect. There will be no changes in such articles
of incorporation or bylaws prior to the Effective Date without
the prior written consent of Buyer.
5.9 Litigation; Compliance with
Laws. Except as described in Schedule 5.9 of
the Acquired Corporations Disclosure Supplement, there is
no Litigation (whether or not purportedly on behalf of Acquired
Corporation) pending or, to the Knowledge of Acquired
Corporation, threatened against or affecting any Acquired
Corporation Company (nor does Acquired Corporation have
Knowledge of any facts which are reasonably likely to give rise
to any such Litigation) at law or in equity, or before or by any
governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign, or before any arbitrator
of any kind, which is reasonably likely to result in any
judgment or Liability not fully covered by insurance in excess
of a reasonable deductible amount or which may have a Material
Adverse Effect on the Acquired Corporation Companies as a whole,
and no Acquired Corporation Company is in Default with respect
to any judgment, order, writ, injunction, decree, award, rule or
regulation of any court, arbitrator or governmental department,
commission, board, bureau, agency or instrumentality, which
Default would have a Material Adverse Effect on the Acquired
Corporation Companies as a whole. Except as disclosed in
Schedule 5.9 to Acquired Corporations Disclosure
Supplement, to the Knowledge of Acquired Corporation, each
Acquired Corporation Company has complied in all material
respects with all material applicable Laws and Regulations
including without limitation those imposing Taxes and those
related to consumer finance, commercial banking, and the sale of
non-deposit investment and insurance products, of any applicable
jurisdiction and of all states, municipalities, other political
subdivisions and Agencies, in respect of the ownership of its
Assets and the conduct of its business, except where such
noncompliance would not have a Material Adverse Effect on the
Acquired Corporation Companies as a whole.
5.10 Material Contract Defaults. Except
as disclosed on Schedule 5.10 to Acquired
Corporations Disclosure Supplement, no Acquired
Corporation Company is in Default in any material respect under
the terms of any material Contract which default has or is
reasonably likely to have a Material Adverse Effect on the
Acquired Corporation Companies as a whole and, to the Knowledge
of Acquired Corporation, there is no event which, with notice or
lapse of time, or both, which is reasonably likely to or will
become an event of Default under any such material Contract that
is reasonably likely to have such a Material Adverse Effect in
respect of which adequate steps have not been taken to prevent
such a Default from occurring.
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5.11 No Conflict with Other
Instrument. Upon the receipt of all required
Consents, the consummation of the transactions contemplated by
this Agreement will not result in the breach of any term or
provision of or constitute a Default under any material Contract
indenture, mortgage, deed of trust, lease identified on
Schedule 5.6(b) to Acquired Corporations Disclosure
Supplement or other material agreement or instrument to which
any Acquired Corporation Company is a party and will not
conflict with any provision of the charter or bylaws of any
Acquired Corporation Company.
5.12 Governmental Authorization. Each
Acquired Corporation Company has all Permits that, to the
Knowledge of Acquired Corporation, are required to enable any
Acquired Corporation Company to conduct its business in all
material respects as now conducted by each Acquired Corporation
Company.
5.13 Absence of Regulatory
Communications. Except as provided in
Schedule 5.13 to Acquired Corporations Disclosure
Supplement, no Acquired Corporation Company is subject to, nor
has any Acquired Corporation Company received during the past
two years, any written communication directed specifically to it
from any Agency to which it is or has been subject or pursuant
to which such Agency has imposed or has indicated it is
reasonably likely to impose any material restrictions on the
operations of it or the business conducted by it or taken any
other action with respect to any Acquired Corporation Company
which has had or is reasonably likely to have a Material Adverse
Effect upon the Acquired Corporation Companies taken as a whole.
5.14 Absence of Material Adverse
Change. Except as disclosed in Schedule 5.14
to Acquired Corporations Disclosure Supplement, since
December 31, 2005, there have been no events, changes or
occurrences which have had, or are reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on
the Acquired Corporation Companies taken as a whole. For
purposes of this Section 5.14, Material Adverse Effect
shall exclude any changes in results of operations, cash flows,
stockholders equity or financial condition resulting from
items excluded from the definition of Net Worth.
5.15 Insurance. Each Acquired Corporation
Company has in effect insurance coverage and bonds with
reputable insurers, which, in respect to amounts, types and
risks insured, management of Acquired Corporation reasonably
believes to be adequate for the type of business conducted by
such company, and all of which are identified on
Schedule 5.15 to Acquired Corporations Disclosure
Supplement. No Acquired Corporation Company is liable for any
material retroactive premium adjustment. All insurance policies
and bonds are valid, enforceable and in full force and effect,
and no Acquired Corporation Company has received any notice of
any material premium increase or cancellation with respect to
any of its insurance policies or bonds. Within the last three
years, no Acquired Corporation Company has been refused any
insurance coverage which it has sought or applied for. All
policies of insurance presently held or policies containing
substantially equivalent coverage, to the extent available
generally in the market without material increase in cost or
change in coverage, will be outstanding and in full force with
respect to each Acquired Corporation Company at all times from
the date hereof to the Effective Date.
5.16 Pension and Employee Benefit Plans; Employees.
(a) Schedule 5.16(a) to Acquired Corporations
Disclosure Supplement sets forth a true, complete and correct
list of all employee benefit plans as defined by
Section 3(3) of ERISA (whether or not such plans are
subject to ERISA), and all bonus, incentive compensation,
deferred compensation, profit sharing, stock option, restricted
stock, stock appreciation right, stock bonus, stock purchase,
supplemental retirement, life insurance, or any other employee
benefit plans, programs or arrangements (whether written or
oral, qualified or nonqualified), and all employment,
consulting, retention, termination, severance or other contracts
or arrangements, whether legally enforceable or not, and any
trust, escrow or other agreement related thereto, to which any
Acquired Corporation Company or any ERISA Affiliate thereof is a
party which (i) is now or was for the last six
(6) years maintained or contributed to by any Acquired
Corporation Company or an ERISA Affiliate thereof (as
hereinafter defined), or (ii) with respect to which any
Acquired Corporation Company or any ERISA Affiliate thereof has
any obligations to any current or former officer, employee,
consultant or independent contractor, leased employee or the
dependents of any thereof, regardless of whether funded, or
(iii) which could result in the imposition of any liability
or obligation of any kind or nature, and whether or not now due
or to become due to any Acquired Corporation Company or any
ERISA Affiliate thereof (all of the above shall be collectively
referred to as the Employee Plans).
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(b) For each Employee Plan, Acquired Corporation has
heretofore provided or made available to Buyer true and correct
copies of each of the following documents, as applicable:
(i) the Employee Plan document and where such Employee Plan
is unwritten, a written description of the material terms
thereof, (ii) the actuarial report or financial statements,
if any, for such Employee Plan for each of the last three
(3) years, (iii) the most recent determination letter
from the Internal Revenue Service (the IRS) for such
Employee Plan, (iv) the IRS Form 5500 annual reports
for such Employee Plan for the 2003 and 2004 plan years and
Acquired Corporation will provide Buyer with any 2005 plan year
IRS Form 5500 annual reports filed with respect to such
Employee Plan as soon as administratively practicable following
the filing of such annual report with the appropriate Agency,
(v) all personnel, payroll and employment manuals,
handbooks and policies, and (iv) the most recent summary
plan description and related summaries of material modifications.
(c) Except as set forth in Schedule 5.16(c) to the
Acquired Corporations Disclosure Supplement, neither the
Acquired Corporation, any Acquired Corporation Company nor any
ERISA Affiliate has been liable at any time for contributions to
(i) a plan or program that is, or has been at any time,
subject to Section 412 of the Code, Section 302 of
ERISA and/or
Title IV of ERISA or (ii) a multiemployer
plan (as defined in Section 3(39) of ERISA).
Schedule 5.16(c) to Acquired Corporations Disclosure
Supplement also indicates whether (i) any Employee Plan has
an accumulated funding deficiency (whether or not
waived) within the meaning of Section 412 of the Code or
Section 302 of ERISA, (ii) Acquired Corporation, any
Acquired Corporation Company or any ERISA Affiliate has an
outstanding funding waiver, (iii) Acquired Corporation, any
Acquired Corporation Company or any ERISA Affiliate is required
to provide security for any Employee Plan pursuant to
Section 401(a)(29) of the Code or (iv) if, and to the
extent, any unfunded liabilities (past, present or future) exist
with respect to any Employee Plan.
(d) Except as set forth in Schedule 5.16(d) to the
Acquired Corporations Disclosure Supplement, the form and
operation of all Employee Plans are in all material respects in
compliance with the applicable provisions of ERISA, the Code,
and any other applicable laws, including the Americans with
Disabilities Act of 1990, the Family Medical Leave Act of 1993
and the Health Insurance Portability and Accountability Act of
1996, and such Employee Plans have been operated in all material
respects in compliance with such laws and the written Employee
Plan documents. To the Knowledge of Acquired Corporation, no
Acquired Corporation Company or any fiduciary of an Employee
Plan has violated the requirements of Section 404 of ERISA
with respect to any Employee Plan. All required reports
(including IRS Form 5500 annual reports and summary annual
reports) have been (when required) timely filed with the IRS and
the United States Department of Labor (the DOL). To
the Knowledge of Acquired Corporation, all summary plan
descriptions and summaries of material modifications and other
notices required by ERISA or the Code with respect to the
Employee Plans have been timely distributed as required to all
participants, alternate payees and beneficiaries, and all such
summary plan descriptions, summaries of material modifications
and other notices have complied and currently comply with
applicable Law and are consistent with the terms and provisions
of the corresponding written Employee Plan documents. To the
Knowledge of Acquired Corporation, there have been no prohibited
transactions with respect to the Employee Plans that will or
could reasonably likely result in a Material Adverse Effect on
any Acquired Corporation Company. Any contributions, including
salary deferrals, required to be made under the terms of any of
the Employee Plans by Acquired Corporation as of the Effective
Date of the Merger have been timely made.
(e) Each Employee Plan that is intended to be qualified
under Section 401(a) of the Code has received a favorable
determination letter from the IRS, and Acquired Corporation is
not aware of any circumstances that will or could reasonably
result in revocation of any such favorable determination letter.
Each trust created under any Employee Plan has been determined
to be exempt from taxation under Section 501(a) of the
Code, and to the Knowledge of Acquired Corporation there are no
circumstances that will or could reasonably result in a
revocation of such exemption. Each Employee Plan that is an
employee welfare benefit plan (as defined in Section 3(1)
of ERISA) that utilizes a funding vehicle described in
Section 501(c)(9) of the Code or is subject to the
provisions of Section 505 of the Code has been the subject
of a notification by the IRS that such funding vehicle qualifies
for tax-exempt status under Section 501(c)(9) of the Code
or that the Employee Plan complies with Section 505 of the
Code, unless the IRS does not, as a matter of policy, issue such
notification with respect to the particular type of funding
vehicle. With respect to each Employee Plan, to the Knowledge of
Acquired Corporation no event has occurred or condition exists
that will or could give rise to a loss of any intended tax
consequence or to any tax under Section 511 of the Code.
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(f) Except as disclosed on Schedule 5.16(f) of
Acquired Corporations Disclosure Supplement, there are no
pending claims, lawsuits or actions relating to any Employee
Plan (other than ordinary course claims for benefits) and, to
the best knowledge of Acquired Corporation, none are threatened.
(g) No written or oral representations have been made, and
no Employee Plans provide, for the continuation of medical,
dental, life or disability insurance coverage for any period of
time beyond the earlier of (i) the end of the current plan
year, or (ii) the termination of employment (except to the
extent of coverage required under COBRA), except as provided in
any Contracts disclosed in the Acquired Corporation Disclosure
Supplement.
(h) Except as disclosed on Schedule 5.16(h) of
Acquired Corporations Disclosure Supplement and except for
the possibility of full vesting of plan account balances which
may be necessitated by Section 411(d)(3) of the Code in
order for tax-qualified status to be retained, the consummation
of the transactions contemplated by this Agreement will not
accelerate the time of vesting, of payment, or increase the
amount, of compensation to any employee, officer, former
employee or former officer of any Acquired Corporation Company
or any ERISA Affiliate. Except as disclosed in
Schedule 5.16(h) to Acquired Corporations Disclosure
Supplement, no wages, salaries, compensation, bonus, pension or
other payments to any employee, affiliate, officer, director or
broker of any Acquired Corporation Company or any ERISA
Affiliate will be triggered by or result from the consummation
of the transactions contemplated by this Agreement. Except as
disclosed in the Acquired Corporation Disclosure Supplement, no
Employee Plan or other Contracts, including those contemplated
in this Agreement, provide for payments or other benefits that
would be triggered by the consummation of the transactions
contemplated by this Agreement that would subject any person to
excise tax under Section 4999 of the Code (i.e.,
golden parachute taxes), and no action otherwise has
been taken to accelerate payments or vesting and no agreement
entered into by Acquired Corporation, any Acquired Corporation
Company or ERISA Affiliate within the prior 12 months that
would be treated as a parachute payment as defined in
Section 280G of the Code. All compensation amounts that
have been paid or are payable are or will become deductible by
Acquired Corporation or Buyer pursuant to Section 162(m) of
the Code.
(i) Acquired Corporation, any Acquired Corporation Company
and any ERISA Affiliate thereof have at all times complied and
currently comply in all material respects with the applicable
continuation requirements for their group health plans,
including (1) Section 4980B of the Code and
Sections 601 through 608, inclusive, of ERISA, which
provisions are referred to collectively as COBRA and
(2) any applicable state statutes mandating health
insurance continuation coverage for employees.
Schedule 5.16(i) to Acquired Corporations Disclosure
Supplement lists all of the former employees of Acquired
Corporation, any Acquired Corporation Company or any ERISA
Affiliate thereof and their beneficiaries who have elected or
are eligible to elect COBRA continuation of health insurance
coverage under any Employee Plan offering group health insurance
benefits.
(j) Except as disclosed in Schedule 5.16(j) to
Acquired Corporations Disclosure Supplement, neither
Acquired Corporation, any Acquired Corporation Company nor any
ERISA Affiliate has incurred any liability to the DOL, the
Pension Benefit Guaranty Corporation (the PBGC) or
the IRS in connection with any of the Employee Plans, and, to
the Knowledge of Acquired Corporation, except as disclosed in
Schedule 5.16(j) to Acquired Corporations Disclosure
Supplement, no condition exists that presents a risk to Acquired
Corporation, any Acquired Corporation Company or any ERISA
Affiliate of incurring any liability to the DOL, the PBGC or the
IRS.
(k) For the purpose of this Section 5.16, the term
ERISA Affiliate shall mean (i) any related
company or trade or business that is required to be aggregated
with Acquired Corporation or any Acquired Corporation Company
under Code Sections 414(b), (c), (m) or (o);
(ii) any other company, entity or trade or business that
has adopted or has ever participated in any Employee Plan; and
(iii) any predecessor or successor company or trade or
business of Acquired Corporation or any entity described in this
Section 5.16(k).
(l) Acquired Corporation, each Acquired Corporation Company
and any ERISA Affiliate have properly classified individuals
providing services to such entities as independent contractors
or employees, as the case may be for purposes of eligibility to
participate in the Employee Plans and such classifications have
not been challenged by the IRS.
(m) Except as disclosed in Schedule 5.16(m) to the
Acquired Corporation Disclosure Supplement, no lien, security
interests or other encumbrances exist with respect to any of the
assets of Acquired Corporation, any
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Acquired Corporation Company or any ERISA Affiliate that were
imposed pursuant to the terms of the Code or ERISA and, to the
Knowledge of Acquired Corporation, no condition exists or could
occur that would result in the imposition of such liens,
security interests or encumbrances arising from or relating to
the Employee Plans.
(n) Schedule 5.16(n) to Acquired Corporations
Disclosure Supplement contains a list of all of the employees of
Acquired Corporation, any Acquired Corporation Company and any
ERISA Affiliate, their current salary or wage rates, bonus and
other compensation, including stock options and stock grants,
benefit arrangements, accrued sick days, vacation days and
holidays, period of service, department and a job title or other
summary of the responsibilities of such employees.
Schedule 5.16(n) also indicates whether such employees are
part-time, full-time or on a leave of absence and the type of
leave. All employees are employees at-will, unless otherwise
specified in Schedule 5.16(n). Except as disclosed on
Schedule 5.16(n) to the Acquired Corporation Disclosure
Supplement, Acquired Corporation, any Acquired Corporation
Company and any ERISA Affiliate, is not a party to any oral
(express or implied) or written (i) employment agreement,
(ii) consulting agreement, or (iii) independent
contractor agreement with any individual or entity.
(o) To the Knowledge of Acquired Corporation, no Acquired
Corporation Company is delinquent in payments to any of its
employees for any wages, salaries, commissions, bonuses or other
direct compensation for any services performed for it or any
other amounts required to be reimbursed to such employees
(including accrued paid time off, accrued vacation, accrued sick
leave and other benefits) or in the payment to the appropriate
governmental authority of all required taxes, insurance, social
security and withholding thereon; and as of the Effective Date
of the Merger, no Acquired Corporation Company will have an
obligation or liability to any of its employees or to any
governmental authority for any such matters.
5.17 Buy-Sell Agreement. To the Knowledge
of Acquired Corporation, there are no agreements among any of
its stockholders granting to any person or persons a right of
first refusal in respect of the sale, transfer, or other
disposition of shares of outstanding securities by any
stockholder of Acquired Corporation, any similar agreement or
any voting agreement or voting trust in respect of any such
shares.
5.18 Brokers. Except for services
provided by FIG Partners, L.L.C., which has been retained by
Acquired Corporation and the arrangements with which, including
fees, have been disclosed to Buyer prior to the date hereof, all
negotiations relative to this Agreement and the transactions
contemplated by this Agreement have been carried on by Acquired
Corporation directly with Buyer and without the intervention of
any other person, either as a result of any act of Acquired
Corporation, or otherwise, in such manner as to give rise to any
valid claim against Acquired Corporation for a finders
fee, brokerage commission or other like payment.
5.19 Approval of Agreements. The board of
directors of Acquired Corporation has approved this Agreement
and the transactions contemplated by this Agreement and has
authorized the execution and delivery by Acquired Corporation of
this Agreement. As of the date of this Agreement, Acquired
Corporations Board of Directors has by the majority vote
of the members of Acquired Corporations Board of Directors
determined (a) that this Agreement and the transactions
contemplated hereby, including the Merger, are advisable to and
in the best interests of Acquired Corporation and its
stockholders, (b) to submit this Agreement for approval and
adoption by the stockholders of Acquired Corporation and to
declare the advisability of this Agreement, and (c) to
recommend that the stockholders of Acquired Corporation adopt
and approve this Agreement and the transactions contemplated
hereby, including the Merger (collectively, the Acquired
Corporations Board of Directors Recommendation).
5.20 Disclosure. No representation or
warranty, nor any written statement or certificate furnished or
to be furnished to Buyer by Acquired Corporation, contains or
will contain any untrue statement of a material fact or omits or
will omit to state a material fact necessary to make the
statements contained in this Agreement or in any such statement
or certificate not misleading.
5.21 Registration
Statement. (a) Acquired Corporation shall
furnish all information to Buyer with respect to any Acquired
Corporation Company including financial statements of Acquired
Corporation as Buyer may reasonably request for inclusion in the
Registration Statement, the Buyer Proxy Statement and the
Buyers application for listing on NASDAQ of Buyers
Common Stock to be registered by the Registration Statement, and
such information and financial statements shall satisfy the
requirements of SEC
Form S-4
and SEC
Regulation S-X
under the 1933 Act, as applicable.
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(b) None of the information supplied or to be supplied by
Acquired Corporation for inclusion in the Registration Statement
to be filed by Buyer with the SEC will, when the Registration
Statement becomes effective, be false or misleading with respect
to any material fact, or omit to state any material fact
necessary to make the statements therein not misleading. None of
the information supplied by Acquired Corporation or to be
supplied to Buyers or Acquired Corporations
stockholders in the proxy statement/prospectus used in
connection with the Stockholders Meetings, and any other
documents to be filed by Acquired Corporation with the SEC, or
any other Agency in connection with the transactions
contemplated hereby will, at the respective time such documents
are filed and with respect to the Acquired Corporation Proxy
Statement, when first mailed to the stockholders of Acquired
Corporation, and with respect to the Buyer Proxy Statement when
first mailed to the stockholders of Buyer, be false or
misleading with respect to any material fact, or omit to state
any material fact necessary to make the statements therein, not
misleading, or in the case of the Acquired Corporation Proxy
Statement or any amendment thereof or supplement thereto, at the
time of the Acquired Corporation Stockholders Meetings,
and in the case of the Buyer Proxy Statement or any amendment
thereof or supplement thereto, at the time of the Buyer
Stockholders Meeting, be false or misleading with respect
to any material fact, or omit to state any material fact
necessary to correct any statement in any earlier communication
with respect to the solicitation of proxies for the respective
Stockholders Meetings.
5.22 Loans; Allowance for Possible Loan
Losses. Except as disclosed in Schedule 5.22
to Acquired Corporations Disclosure Supplement, the
allowance for possible loan, securities or credit losses (the
Allowance) shown on the consolidated balance sheets
of Acquired Corporation in the Acquired Corporation SEC Reports
dated prior to the date of this Agreement was as of the dates
thereof, adequate (within the meaning of GAAP and applicable
regulatory requirements or guidelines) in all material respects.
To the Knowledge of Acquired Corporation, each loan reflected as
an Asset on the financial statements of Acquired Corporation in
the Acquired Corporation SEC Reports is the legal, valid and
binding obligation of the obligor of each loan, enforceable in
accordance with its terms subject to the effect of bankruptcy,
insolvency, reorganization, moratorium, or other similar laws
relating to creditors rights generally and to general
equitable principles and the absence of indemnity and
contribution and complies with all Laws to which it is subject.
Acquired Corporation does not have in its portfolio any loan
exceeding its legal lending limit, and except as disclosed on
Schedule 5.22 to Acquired Corporations Disclosure
Supplement, to the Knowledge of Acquired Corporation, it has no
material loans that are delinquent in payment for more than
30 days, substandard, doubtful, loss, or nonperforming.
5.23 Environmental Matters. Except as
provided in Schedule 5.23 to Acquired Corporations
Disclosure Supplement, to the Knowledge of Acquired Corporation,
each Acquired Corporation Company is in material compliance with
all Laws and other governmental requirements relating to the
generation, management, handling, transportation, treatment,
disposal, storage, delivery, discharge, release or emission of
any waste, pollution, or toxic or hazardous substance (the
Environmental Laws), and Acquired Corporation has no
Knowledge that any Acquired Corporation Company has not complied
in all material respects with all regulations and requirements
promulgated by the Occupational Safety and Health Administration
that are applicable to any Acquired Corporation Company, except,
in each case, where such noncompliance has not had or is not
reasonably likely to have a Material Adverse Effect on the
Acquired Corporation Companies taken as a whole. To the
Knowledge of Acquired Corporation, there is no Litigation
pending or threatened with respect to any violation or alleged
violation of the Environmental Laws. To the Knowledge of
Acquired Corporation, with respect to Assets of any Acquired
Corporation Company, including any Loan Property of any material
loan, (a) there has been no spillage, leakage,
contamination or release of any substances for which the
appropriate remedial action has not been completed; (b) no
owned or leased property is contaminated with or contains any
hazardous substance or waste; and (c) there are no
underground storage tanks on any premises owned or leased by any
Acquired Corporation Company, where, in the case of each of
clause (a) and (b) any such condition or occurrence
has had or is reasonably likely to have a Material Adverse
Effect on the Acquired Corporation Companies taken as a whole.
5.24 Taxes. All Tax returns required to
be filed by or on behalf of Acquired Corporation have been
timely filed (or requests for extensions therefor have been
timely filed and granted and have not expired), and all returns
filed are complete and accurate in all material respects, or
appropriate reserves established, except as may be disclosed in
the Acquired Corporation Disclosure Supplement. All Taxes shown
on these returns to be due and all
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additional assessments received have been paid or will be paid
before the date on which they would be delinquent. Except as
disclosed in the Acquired Corporation Disclosure Supplement, the
amounts recorded for Taxes on the Acquired Corporation SEC
Reports referred to in Section 5.4(a) are, to the Knowledge
of Acquired Corporation, sufficient in all material respects for
the payment of all unpaid federal, state, county, local, foreign
and other Taxes (including any interest or penalties) of
Acquired Corporation accrued for or applicable to the period
ended on the dates thereof, and all years and periods prior
thereto and for which Acquired Corporation may at such dates
have been liable in its own right or as a transferee of the
Assets of, or as successor to, any other corporation or other
party. No audit, examination or investigation is presently being
conducted or, to the Knowledge of Acquired Corporation,
threatened by any taxing authority which is likely to result in
a material Tax Liability, no material unpaid Tax deficiencies or
additional liability of any sort has been proposed by any
governmental representative and no agreements for extension of
time for the assessment of any material amount of Tax have been
entered into by or on behalf of Acquired Corporation. Acquired
Corporation has not executed an extension or waiver of any
statute of limitations on the assessment or collection of any
Tax due that is currently in effect. To the Knowledge of
Acquired Corporation, each Acquired Corporation Company has
withheld from its employees (and timely paid to the appropriate
governmental entity) proper and accurate amounts for all periods
in material compliance with all Tax withholding provisions of
applicable federal, state, foreign and local Laws (including
without limitation, income, Social Security and employment Tax
withholdings).
5.25 Collective Bargaining. There are no
labor contracts, collective bargaining agreements, letters of
undertakings or other arrangements, formal or informal, between
any Acquired Corporation Company and any union or labor
organization covering any Acquired Corporation Companys
employees and none of said employees are represented by any
union or labor organization.
5.26 Labor Disputes. To the Knowledge of
Acquired Corporation, each Acquired Corporation Company is in
material compliance with all federal and state laws respecting
employment and employment practices, terms and conditions of
employment, wages and hours. No Acquired Corporation Company is
or has been engaged in any unfair labor practice, and, to the
Knowledge of Acquired Corporation, no unfair labor practice
complaint against any Acquired Corporation Company is pending
before the National Labor Relations Board. Relations between
management of each Acquired Corporation Company and the
employees are amicable and there have not been, nor to the
Knowledge of Acquired Corporation, are there presently, any
attempts to organize employees, nor to the Knowledge of Acquired
Corporation, are there plans for any such attempts.
5.27 Derivative Contracts. Except as
disclosed in Section 5.27 of the Acquired Corporation
Disclosure Supplement or as entered into in the ordinary course
of business after the date hereof, no Acquired Corporation
Company is a party to or has agreed to enter into a swap,
forward, future, option, cap, floor or collar financial
contract, or any other interest rate or foreign currency
protection contract or derivative security (Derivative
Contract) not included in Acquired Corporations
December 31, 2005 financial statements in the Acquired
Corporation SEC Reports (including various combinations
thereof). With respect to all agreements currently outstanding
pursuant to which any Acquired Corporation Company has purchased
securities subject to an agreement to resell, such Acquired
Corporation Company has a security interest in the securities or
other collateral securing such agreement, and the value of such
collateral at the date such agreement was entered into equals or
exceeds the amount of the debt secured thereby. No Acquired
Corporation Company has pledged collateral in excess of the
amount required under any interest rate swap, repurchase
agreement, Derivative Contract or other similar agreement
currently outstanding.
5.28 Accounting, Tax and Regulatory
Matters. No Acquired Corporation Company has
taken any action or has any Knowledge of any fact or
circumstance that is reasonably likely to (i) prevent the
transactions provided for herein, including the Merger, from
qualifying as a reorganization within the meaning of
Section 368(a) of the Code, or (ii) materially impede
or delay receipt of any Consents of Agencies referred to in
subsection 8.2 of this Agreement.
5.29 Offices. The headquarters of
Acquired Corporation and each other office, branch or facility
maintained and operated by each Acquired Corporation Company
(including without limitation representative and loan production
offices and operations centers) and the locations thereof are
listed on Schedule 5.29 to Acquired Corporations
Disclosure Supplement. None of the Acquired Corporation
Companies maintains any other office or
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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.
5.30 Data Processing Systems. Except to
the extent indicated on Schedule 5.30 of Acquired
Corporations Disclosure Supplement, no action will be
necessary as a result of the transactions contemplated by this
Agreement to enable use by Buyer and its Subsidiaries of the
electronic data processing, information, record keeping,
communications, telecommunications, hardware, third party
software, networks, peripherals, and computer systems, including
any outsourced systems and processes, that are used by the
Acquired Corporation Companies to the same extent and in the
same manner that it has been used by the Acquired Corporation
Companies.
5.31 Intellectual Property. Each of the
Acquired Corporation Companies owns or possesses licenses or
other rights to use all material patents, copyrights, trade
secrets, trade names, service marks, trademarks, computer
software and other intellectual property used in its business;
and none of the Acquired Corporation Companies has received any
notice of any Litigation that is pending or threatened, which
challenge the right of any Acquired Corporation Company to the
ownership or use of such. Schedule 5.31 to Acquired
Corporations Disclosure Supplement lists all of the
trademarks, trade names, licenses and other intellectual
property used to conduct the businesses of the Acquired
Corporation Companies. Each of the Acquired Corporation
Companies has taken reasonable precautions to safeguard its
trade secrets from disclosure to third-parties.
5.32 No Trust Powers. The Bank does
not possess and does not exercise trust powers.
5.33 Regulatory Approvals. Acquired
Corporation has no Knowledge of any reason with respect to the
Acquired Corporation Companies why all requisite regulatory
approvals regarding the Merger should not or cannot be obtained.
5.34 Opinion of Counsel. Acquired
Corporation has no Knowledge of any facts that would preclude
issuance of the opinion of counsel referred to in
Section 10.4.
5.35 Anti-takeover Provisions. Except for
state and/or
federal bank Laws, no provisions of an anti-takeover nature
contained in their respective organizational documents or the
provisions of any federal or state anti-takeover,
fair price, control share acquisition or
similar Laws apply to Acquired Corporation, this Agreement or
the Merger. Section 203 of the DGCL will not be applicable
to the Merger.
5.36 Transactions with
Management. Disclosed on Schedule 5.36 of
the Acquired Corporations Disclosure Supplement are all
matters required to be disclosed pursuant to Item 404 of
Regulation S-K
under the 1933 Act, Certain Relationships and Related
Transactions.
5.37 [Reserved]
5.38 Accounting Controls. Each of the
Acquired Corporation Companies has devised and maintained
systems of internal accounting control sufficient to provide
reasonable assurances that: (i) all material transactions
are executed in accordance with general or specific
authorization of the Board of Directors and the duly authorized
executive officers of the applicable Acquired Corporation
Company; (ii) all material transactions are recorded as
necessary to permit the preparation of financial statements in
conformity with GAAP with respect to the applicable Acquired
Corporation Company or any other criteria applicable to such
financial statements, and to maintain proper accountability for
items therein; (iii) access to the material Assets of each
of the Acquired Corporation Companies is permitted only in
accordance with general or specific authorization of the Board
of Directors and the duly authorized executive officers; and
(iv) the recorded accountability for items is compared with
the actual levels at reasonable intervals and appropriate
actions taken with respect to any differences.
5.39 Deposit Insurance. The deposit
accounts of the Bank are insured by the FDIC in accordance with
the provisions of the FDIC Act. The Bank has paid all regular
premiums and special assessments and filed all reports required
under the FDIC Act.
5.40 Registration Obligations. Neither of
Acquired Corporation or the Bank is under any obligation,
contingent or otherwise, which will survive the Merger to
register its securities under the 1933 Act or any state
securities laws.
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ARTICLE 6
ADDITIONAL
COVENANTS
6.1 Additional Covenants of Buyer. Buyer
covenants to and with Acquired Corporation as follows:
(a) Operations. Buyer will conduct
its business and the business of each of its Subsidiaries in the
ordinary course of business and will use commercially reasonable
efforts subject to the terms of this Agreement to maintain its
relationships with its depositors, customers and employees.
Buyer will not make any material change in its accounting or tax
policies or methods of operation, except as required by GAAP or
by Law. Buyer will take no action which would
(i) materially adversely affect the ability of any Party to
obtain any Consents required for the transactions contemplated
hereby without imposition of a condition or restriction, or
(ii) materially adversely affect the ability of any Party
to perform its covenants and agreements under this Agreement;
provided, that the foregoing shall not prevent Buyer from
acquiring any Assets or other businesses or from discontinuing
or disposing of any of its Assets or business if such action is,
in the reasonable judgment of Buyer, desirable in the conduct of
the business of Buyer and its Subsidiaries, provided further
that such actions shall not materially delay the receipt of any
regulatory or governmental or third party approvals or Consents
or the Effective Date or materially hinder or delay consummation
of the Merger. Buyer will use its reasonable efforts to cause
the Merger to be effected at the earliest practicable date, and
to take no action or omit to take any action which would cause
the Merger not, to qualify as a reorganization
within the meaning of Section 368(a) of the Code for
federal income tax purposes.
(b) Regulatory Approvals and Stockholders
Meeting. Buyer will cooperate with the
Acquired Corporation in the preparation of any regulatory
filings and the Registration Statement. Buyer will file all
regulatory applications seeking all necessary regulatory
approvals of the transactions contemplated hereby as soon as
possible and shall file the Registration Statement as soon as
possible and shall actively seek the necessary regulatory
approvals and effectiveness of the Registration Statement and
will keep informed and copy the Acquired Corporation and its
counsel on all filings and correspondence with respect to the
regulatory applications and the Registration Statement. Buyer
will call as soon as possible and hold a meeting of Buyers
stockholders for the purpose of approving the Merger and the
transactions contemplated hereby, including the issuance and
listing on NASDAQ of the shares of Buyer Common Stock issuable
in the Merger, and Buyers Board of Directors shall
recommend that Buyers stockholders approve the Merger and
the transactions contemplated hereby, including the issuance and
listing on NASDAQ of the shares of Buyer Common Stock issuable
in the Merger. The only regulatory or governmental consent or
approval needed by Buyer and its Superior Bank subsidiary for
consummation of the transactions contemplated hereby is approval
of the Merger and the Bank Merger (as defined in
Section 2.8 hereof) by the Office of Thrift Supervision.
(c) Reports. Buyer shall furnish
to Acquired Corporation:
(i) As soon as practicable, copies of all such financial
statements and loan reports as it shall provide the members of
its board of directors or to its executive management and of
such regular and periodic reports as Buyer may file with the SEC
or any other Agency; and
(ii) With reasonable promptness, such additional financial
data as Acquired Corporation may reasonably request.
(d) No Control of Acquired Corporation by
Buyer. Notwithstanding any other provision
hereof, until the Effective Date, the authority to establish and
implement the business policies of Acquired Corporation shall
continue to reside solely in Acquired Corporations
officers and board of directors.
(e) Listing. Prior to the
Effective Date, Buyer shall cause the listing of the shares of
Buyers Common Stock to be issued in the Merger on the
NASDAQ or other quotations system on which such shares are
primarily traded.
(f) Employee Benefit
Matters. (i) Upon and following the
Effective Date, Buyer shall provide generally to officers and
employees of the Acquired Corporation Companies employee
benefits under employee benefit and welfare plans (other than
stock option or other plans involving the potential issuance of
Buyer Common Stock), on terms and conditions which when taken as
a whole are substantially similar to those currently
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provided by Buyer and its Subsidiaries to their similarly
situated officers and employees. Buyer and its Subsidiaries
shall also honor in accordance with their terms all employment,
severance, consulting and other compensation Contracts disclosed
in the Acquired Corporation Disclosure Supplement between any
Acquired Corporation Company and any current or former director,
officer or employee thereof, and all provisions for vested
amounts earned or accrued through the Effective Date or as a
result of the transactions contemplated herein under any
Contract and the Acquired Corporation benefit plans. In the
event that Buyer or any of its Subsidiaries terminates any
officer or employee of any Acquired Corporation Company without
cause within 12 months of the Effective Date, Buyer shall
provide such person with severance benefits under the severance
pay plan of either Buyer or Acquired Corporation, whichever
provides greater benefits, but in no event more than one week of
base pay for each year of service up to a maximum of
26 weeks of pay.
(ii) With respect to each Buyer employee benefit plan that
is an employee benefit plan, as defined in
Section 3(3) of ERISA, for purposes of determining
eligibility to participate, entitlement to benefits and vesting,
including for severance benefits and vacation entitlement,
service with Acquired Corporation or any Acquired Corporation
Company shall be treated as service with Buyer; provided,
however, that such service shall not be recognized to the extent
that such recognition would result in a duplication or increase
of any benefits. Service with Acquired Corporation or any
Acquired Corporation Company also shall apply for purposes of
satisfying any waiting periods, evidence of insurability
requirements, or the application of any preexisting condition
limitations with respect to any Buyer employee benefit plan that
is a group health plan. Each Buyer employee benefit plan that is
a group health plan shall waive, or cause its insurance carrier
to waive, pre-existing condition limitations to the same extent
waived under the applicable Acquired Corporation employee
benefit plan. Acquired Corporation Employees shall be given
credit for amounts paid under a corresponding group health plan
during the same period for purposes of applying deductibles,
copayments and
out-of-pocket
maximums as though such amounts had been paid in accordance with
the terms and conditions of the Buyer group health plan.
(iii) If requested by Buyer, prior to the Effective Date,
Acquired Corporation shall freeze, amend or take other action
with respect to any Employee Plan (including terminating such
plans immediately prior to the Effective Date) that Buyer, in
its sole discretion, deems advisable and not inconsistent with
this Agreement, and provide all required notices to participants
and appropriate governmental agencies. Notwithstanding the
foregoing, Buyer agrees that it shall not require that Acquired
Corporation take any such action if it is reasonably likely that
such action would have a material adverse effect on any
Litigation to which any such Employee Plan is a party.
(iv) Notwithstanding anything contained in this Agreement
to the contrary, subject to the prior review and consent of
Buyer (such consent not to be unreasonably withheld), with
respect to each Employee Plan set forth on Schedule 5.16(a)
to the Acquired Corporations Disclosure Supplement that is
subject to Section 409A of the Code (the Deferred
Compensation Plans), the Acquired Corporation shall have
the right prior to the Effective Date to amend the Deferred
Compensation Plans to the extent necessary to comply with
Section 409A of the Code and the regulations thereunder.
(g) Indemnification. (i) Subject
to the conditions set forth in subsection (ii) hereof,
for a period of six years from and after the Effective Time,
Buyer shall indemnify and hold harmless each present and former
director
and/or
officer of any Acquired Corporation Company (the
Indemnified Parties) against any costs or expenses
(including reasonable attorneys fees), judgments, fines
losses, claims, damages, settlements or liabilities incurred in
connection with any claim, action, suit, proceeding or
investigation, whether civil, criminal administrative or
investigative (each, a Claim), arising out of or
pertaining to matters existing or occurring at or prior to the
Effective Date, whether asserted or claimed prior to, at or
after the Effective Date, to the fullest extent that any
Acquired Corporation Company would have been permitted to
indemnify such person under the DGCL, the articles of
incorporation, certificate of incorporation or bylaws of any
such Acquired Corporation Company in effect on the date hereof.
(ii) Any Indemnified Party wishing to claim indemnification
under this Section 6.1(g) shall notify Buyer within
45 days after the Indemnified Partys receipt of a
notice of any Claim, but the failure to so notify shall not
relieve Buyer of any Liability it may have to such Indemnified
Party, unless such failure materially
A-22
prejudices Buyer in the defense of the Claim or otherwise. In
the event of any claim (whether arising before or after the
Effective Date), (A) Buyer shall have the right to assume
the defense thereof, and Buyer shall not be liable to such
Indemnified Parties for any legal expenses of other counsel or
any other expenses subsequently incurred by such Indemnified
Parties in connection with the defense thereof, except that if
Buyer elects not to assume such defense, or counsel for the
Indemnified Parties advises that there are issues which raise
conflicts of interest between Buyer and the Indemnified Parties,
the Indemnified Parties may retain counsel satisfactory to them,
and Buyer shall pay the reasonable fees and expenses of such
counsel for the Indemnified Parties promptly after statements
therefor are received; provided, however, that Buyer shall be
obligated pursuant to this Section 6.1(g)(ii)(A) to pay for
only one firm of counsel for all Indemnified Parties in any
jurisdiction, unless the interests of any Indemnified Party
conflict with the interests of another Indemnified Party, then,
in such event, Buyer shall pay for the counsel for each
Indemnified Party having a conflicting interest, (B) the
Indemnified Parties will cooperate in the defense of any such
matter and (C) Buyer shall not be liable for any settlement
effected without its prior written consent which shall not be
unreasonably withheld; and provided further that Buyer shall not
have any obligation hereunder to any Indemnified Party when and
if a court of competent jurisdiction shall determine, and such
determination shall have become final, that the indemnification
of such Indemnified Party in the manner contemplated hereby is
prohibited by applicable law.
6.2 Additional Covenants of Acquired
Corporation. Acquired Corporation covenants to
and with Buyer as follows:
(a) Operations. Acquired
Corporation will conduct its business and the business of each
Acquired Corporation Company in the ordinary course of business
and will use commercially reasonable efforts subject to the
terms of this Agreement to maintain its relationships with its
depositors, customers and employees. Acquired Corporation will
not make any material change in its accounting or tax policies
or methods of operation, except as disclosed in the Acquired
Corporation Disclosure Supplement. Acquired Corporation will
take no action that would prevent or impede the Merger from
qualifying as a tax-free reorganization within the meaning of
Section 368 of the Code.
(b) Stockholders Meeting;
Consents. Acquired Corporation will cooperate
with Buyer in the preparation of the Registration Statement and
any regulatory filings and will cause a stockholders
meeting of Acquired Companys stockholders to be held for
the purpose of approving the Merger as soon as practicable after
the effective date of the Registration Statement. Acquired
Corporation will take no action which would (i) materially
adversely affect the ability of any Party to obtain any Consents
required for the transactions contemplated hereby without
imposition of a condition or restriction, or
(ii) materially adversely affect the ability of any Party
to perform its covenants and agreements under this Agreement,
provided, that the foregoing shall not prevent Acquired
Corporation from acquiring any Assets or other businesses or
from discontinuing or disposing of any of its Assets or business
if such action is, in the reasonable judgment of Acquired
Corporation, desirable in the conduct of the business of the
Acquired Corporation Companies, provided further that such
actions shall not materially delay the receipt of any regulatory
or governmental or third party approvals or Consents or the
Effective Date or materially hinder or delay consummation of the
Merger. Acquired Corporation will use its reasonable efforts to
cause the Merger to be effected at the earliest practicable
date, and to take no action or omit to take any action which
would cause the Merger not, to qualify as a
reorganization within the meaning of
Section 368(a) of the Code for federal income tax purposes.
(c) Withdrawal of Board Recommendation; Other
Offers.
(i) Except as provided below, (A) Acquired
Corporations Board of Directors shall recommend that
Acquired Corporations stockholders vote in favor of and
adopt and approve this Agreement and the Merger at Acquired
Corporations Stockholders Meeting; (B) the
Acquired Corporation Proxy Statement shall include a statement
of the Acquired Corporations Board of Directors
Recommendation (as defined in Section 5.19 hereof); and
(C) neither the Board of Directors of Acquired Corporation
nor any committee thereof shall (x) except as expressly
permitted by this Section 6.2(c)(i), withdraw, qualify or
modify, or propose publicly to withdraw, qualify or modify, in a
manner adverse to Buyer, the approval or recommendation of such
Board of Directors or such committee of the Merger or this
Agreement, (y) approve or recommend, or propose publicly to
approve or recommend, any Acquisition Proposal, or
(z) cause Acquired Corporation to enter into any letter
A-23
of intent, agreement in principle, acquisition agreement or
other similar agreement related to any Acquisition Proposal.
Notwithstanding the foregoing, in the event that, prior to the
adoption of this Agreement by the holders of Acquired
Corporation Stock, the Board of Directors of Acquired
Corporation determines in good faith, after it has received a
Superior Proposal and after receipt of advice from outside
counsel, that the failure to do so would result in a reasonable
possibility that the Board of Directors of Acquired Corporation
would breach its fiduciary duties to Acquired Corporation
stockholders under applicable Law, the Board of Directors of
Acquired Corporation may (subject to this and the following
sentences) inform Acquired Corporation stockholders that it no
longer believes that the Merger is advisable and no longer
recommends approval and may (subject to this
Section 6.2(c)(i)) approve or recommend a Superior Proposal
(and in connection therewith withdraw or modify its approval or
recommendation of this Agreement and the Merger (a
Subsequent Determination), but only at a time that
is after the fifth business day following Buyers receipt
of written notice advising Buyer that the Board of Directors of
Acquired Corporation has received a Superior Proposal specifying
the material terms and conditions of such Superior Proposal (and
including a copy thereof with all accompanying documentation, if
in writing), identifying the person making such Superior
Proposal and stating that it intends to make a Subsequent
Determination. After providing such notice, Acquired Corporation
shall provide a reasonable opportunity to Buyer to make such
adjustments in the terms and conditions of this Agreement as
would enable Acquired Corporation to proceed with its
recommendation to its stockholders without a Subsequent
Determination; provided, however, that any such
adjustment shall be at the discretion of the Parties at the
time. Notwithstanding any other provision of this Agreement,
Acquired Corporation shall submit this Agreement to its
stockholders at its Stockholders Meeting even if the Board
of Directors of Acquired Corporation determines at any time
after the date hereof that it is no longer advisable or
recommends that Acquired Corporation stockholders reject it,
provided, however, that Acquired Corporation shall not be
required to submit this Agreement to its stockholders at its
Stockholders Meeting if this Agreement has been terminated
and Buyer has been paid the fee specified in Section 13.4
hereof.
(ii) Other Offers. No Acquired
Corporation Company shall, nor shall it authorize or permit any
of its Representatives to, directly or indirectly
(A) solicit, initiate, encourage or induce the making,
submission or announcement of any Acquisition Proposal,
(B) participate in any discussions or negotiations
regarding, or furnish to any Person or Group (as
such term is defined in Section 13(d) under the
1934 Act) any nonpublic information with respect to, or
take any other action to facilitate any inquiries or the making
of any proposal that constitutes or may reasonably be expected
to lead to, any Acquisition Proposal, (C) subject to
Section 6.2(c)(i), approve, endorse or recommend any
Acquisition Proposal, or (D) enter into any Contract
contemplating or otherwise relating to any Acquisition
Transaction; provided however, that this
Section 6.2(c)(ii) shall not prohibit an Acquired
Corporation Company from furnishing nonpublic information
regarding any Acquired Corporation Company to, or entering into
a confidentiality agreement or discussions or negotiations with,
any Person or Group in response to a bona fide unsolicited
written Acquisition Proposal submitted by such Person or Group
(and not withdrawn) if (I) no Acquired Corporation Company
or Representative thereof shall have violated any of the
restrictions set forth in this Section 6.2(c)(ii),
(II) the Board of Directors of Acquired Corporation
determines in its good faith judgment (based on, among other
things, the advice of Acquired Corporations financial
advisors that such Acquisition Proposal constitutes a Superior
Proposal, (III) the Board of Directors of Acquired
Corporation concludes in good faith, after consultation with its
outside legal counsel, that the failure to take such action
would be inconsistent with its fiduciary duties, as such duties
would exist in the absence of this Section 6.2(c)(ii), to
the stockholders of Acquired Corporation under applicable Law,
(IV) (x) at least five business days prior to
furnishing any such nonpublic information to, or entering into
discussions or negotiations with, such Person or Group, Acquired
Corporation gives Buyer written notice of the identity of such
Person or Group and of Acquired Corporations intention to
furnish nonpublic information to, or enter into discussions or
negotiations with, such Person or Group, and (y) Acquired
Corporation receives from such Person or Group an executed
confidentiality agreement containing terms no less favorable to
the disclosing Party than the terms of the confidentiality
agreement between Acquired Corporation and Buyer and
(V) contemporaneously with furnishing any such nonpublic
information to such Person or Group, Acquired Corporation
furnishes such nonpublic information to Buyer (to the extent
such nonpublic information has not been previously furnished by
Acquired Corporation to Buyer). In addition to the foregoing,
Acquired Corporation shall provide Buyer with at least five
business
A-24
days prior written notice of a meeting of the Board of
Directors of Acquired Corporation at which meeting the Board of
Directors of Acquired Corporation is reasonably expected to
resolve to recommend a Superior Proposal to its stockholders and
together with such notice a copy of the most recently proposed
documentation relating to such Superior Proposal; provided
further that Acquired Corporation hereby agrees promptly to
provide to Buyer any revised documentation and any Contract
entered into in connection with such Superior Proposal.
(iii) Requests for Nonpublic Information on Acquired
Corporation. In addition to the obligations
of Acquired Corporation set forth in Section 6.2(c)(ii), as
promptly as practicable, after any of the executive officers of
Acquired Corporation become aware thereof, Acquired Corporation
shall advise Buyer of any request received by Acquired
Corporation for nonpublic information which Acquired Corporation
reasonably believes could lead to an Acquisition Proposal or of
any Acquisition Proposal, the material terms and conditions of
such request or Acquisition Proposal, and the identity of the
Person or Group making any such request or Acquisition Proposal.
Acquired Corporation shall keep Buyer informed promptly of
material amendments or modifications to any such request or
Acquisition Proposal.
(iv) Cessation of Activities Regarding Prior
Acquisition Proposals. Each Acquired
Corporation Company shall immediately cease any and all existing
activities, discussions or negotiations with any Persons
conducted heretofore with respect to any Acquisition Proposal
and will use their respective reasonable best efforts to enforce
any confidentiality or similar or related agreement relating to
any Acquisition Proposal.
(v) Compliance with 1934 Act
Rules. Nothing contained in this Agreement
shall prevent a Party or its board of directors from complying
with
Rule 14d-9
and
Rule 14e-2
under the 1934 Act with respect to an Acquisition Proposal,
provided that such Rules will in no way eliminate or modify the
effect that any action pursuant to such Rules would otherwise
have under this Agreement.
(d) Loan Loss Reserve. Acquired
Corporation shall maintain an allowance for possible loan,
securities or credit losses, including for loans made or
securities purchased after the date hereof, that is adequate
within the meaning of GAAP and applicable regulatory
requirements or guidelines, and its current credit policies and
loan loss methodologies.
(e) Stockholder Voting. Acquired
Corporation shall as soon as practicable after the date hereof
use its reasonable efforts to cause each non-officer director of
Acquired Corporation to execute a Support Agreement in
substantially the form of Exhibit A hereto.
(f) Reports. Acquired Corporation
shall furnish to Buyer
(i) As soon as practicable, copies of all such financial
statements and loan reports as it shall provide the members of
its board of directors or to its executive management and of
such regular and periodic reports as Acquired Corporation may
file with the SEC or any other Agency; and
(ii) With reasonable promptness, such additional financial
data as Buyer may reasonably request.
(g) [Reserved]
(h) Certain Practices. Acquired
Corporation shall (i) consult with Buyer in advance on any
agreement to make a loan in excess of $250,000 or to permit any
material amendment to any agreement for a loan with an
outstanding principal amount owing of more than $250,000,
(ii) consult with Buyer and advise Buyer of any loan
request outside the normal course of business of the Bank,
(iii) consult with Buyer in advance on any agreement to
make or to permit any amendment or termination of any Contract
by or with any Acquired Corporation Company requiring capital
expenditures of more than $100,000; and (iv) consult with
Buyer to coordinate various business issues on a basis mutually
satisfactory to Acquired Corporation and Buyer. Acquired
Corporation and the Bank shall not be required to undertake any
of such activities, however, except as such activities may be in
compliance with existing Law and Regulations.
(i) [Reserved]
(j) Insurance. Prior to the
Effective Date, Acquired Corporation shall purchase for, and on
behalf of, its current and former officers and directors,
extended coverage under the current directors and
officers liability
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insurance policy maintained by Acquired Corporation to provide
for continued coverage of such insurance for a period of six
years following the Effective Date with respect to matters
occurring prior to the Effective Date.
(k) Special
Dividend. Notwithstanding anything in this
Agreement to the contrary, Acquired Corporation may establish
and declare ten business days prior to the anticipated Closing
Date, or such earlier date as may be required by NASDAQ rules or
by Acquired Corporations transfer agent, a special cash
dividend with respect to the Acquired Corporation Stock equal
to, in the aggregate, the amount, if any by which Acquired
Corporations Net Worth exceeds $44,333,000 as of such
payment date; provided that the aggregate amount of such
dividend shall not exceed $4,400,000. Acquired Corporation
agrees that it will use reasonable efforts to cause at least
four of its executive officers who are not directors to execute
other agreements by which in each case such officers and
directors will agree to refrain from exercising any such
Acquired Corporation Options after the date hereof.
(l) Certain Loans and
Property. Prior to the Effective Date,
Acquired Corporation shall sell without recourse or otherwise
cause to be repaid in full the loans described in
Schedule 6.2(l) to Acquired Corporations Disclosure
Supplement, and shall write down to no more than $500,000 on
Acquired Corporations balance sheet the real property
described in Section 6.2(l) to Acquired Corporations
Disclosure Statement. The parties acknowledge and agree that it
shall be a condition of closing under Section 10.2 hereof
that Acquired Corporation have the Acquired Corporation Net
Worth specified after giving effect to such sale or other
repayment, any such write-down and the special dividend
described in Section 6.2(k) hereof. In the event that
Acquired Corporation shall not have, as of the Effective Date,
so sold or otherwise caused to be repaid in full a particular
loan or item of other real estate owned disclosed in
such Schedule 6.2(l), then the value of such loan or
other real estate owned shall be written down by, or
an appropriate reserve established in an amount equal to, the
amount specified therefor in such Schedule 6.2(l) and the
amount of such write-down or reserve shall be deducted from the
Acquired Corporation Net Worth for purposes of Section 10.2
hereof, as provided in the definition of Acquired Corporation
Net Worth.
6.3 Additional Obligations of Buyer and Acquired
Corporation Relating to Trust Preferred
Securities. Buyer acknowledges that the Trust
holds $10,000,000 principal amount of
107/8%
Junior Subordinated Deferred Interest Debentures (the
Debentures) issued by Acquired Corporation pursuant
to an Indenture (the Indenture) between The Bank of
New York, as trustee (the Trustee), dated as of
March 23, 2000 and has issued $10,000,000 in
107/8%
Fixed Rate Capital
Trust Pass-through
Securities (the Trust Preferred Securities).
Subject to the provisions of this Agreement, and without
limiting the effects of the Merger and the Bank Merger, Buyer
shall, at the Effective Date, expressly assume all of Acquired
Corporations obligations under the Indenture (including,
without limitation, being substituted for Acquired Corporation)
and execute any and all documents, instruments and agreements,
including any supplemental indentures, required by the
Indenture, the Debentures or the Trust Preferred Securities
and thereafter shall perform all of Acquired Corporations
obligations with respect to the Debentures and the
Trust Preferred Securities. Acquired Corporation shall use
commercially reasonable best efforts to obtain the consent of
the Trustee to any supplemental indenture or other document,
instrument or agreement required to evidence such assumption by
Buyer, and Buyer shall cooperate in good faith with such efforts.
6.4 Additional Obligations of Buyer and Acquired
Corporation Relating to the Community Bancshares, Inc. Employee
Stock Ownership Plan. Buyer and Acquired
Corporation will cooperate to terminate the Community
Bancshares, Inc. Employee Stock Ownership Plan (the
ESOP), subject to receipt of a favorable private
letter ruling from the IRS. Acquired Corporation, as sponsor of
the ESOP, agrees that as soon as administratively feasible
following the execution of this Agreement, independent legal
counsel (ESOP Counsel) will be appointed to advise
the ESOPs Administrative Committee with regard to the
exercise, in connection with the proposed Merger, of their power
and responsibility to vote unallocated shares of Acquired
Corporation Stock held by the trust associated with the ESOP
(the ESOP Trust). The parties also agree that,
following the termination of the ESOP and receipt of a favorable
determination letter from the IRS relating to such termination,
Buyer shall take appropriate steps as soon as administratively
practicable to distribute the assets of the ESOP Trust in
accordance with the terms of the ESOP and applicable Law. The
parties further agree that as soon as practicable following the
Effective Date of the Merger, by means of a process conducted in
a manner consistent with the requirements of the Code, ERISA,
other applicable law and the terms of the ESOP, any existing
liability of the ESOP collateralized on the Effective Date of
the Merger with employer stock (currently Acquired Corporation
Stock) shall be fully paid off
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by the ESOP through the application of the proceeds from the
sale of a sufficient number of shares of Buyers Common
Stock which, incident to the Merger, is issued to the ESOP and
substituted as the collateral for such liabilities; the parties
further agree that subject to the requirements of the Code,
ERISA, other applicable law and the terms of the ESOP, that any
residual sale proceeds and any residual shares of Buyers
Common Stock pledged with respect to the liabilities satisfied
incident to such sale shall be allocated after the payment of
permissible administrative expenses (which shall include, but
not be limited to, the reasonable expenses associated with ESOP
Counsel) as earnings to the account balances of the ESOP
participants, alternate payees and beneficiaries.
Notwithstanding the foregoing, Buyer agrees that no such
termination will be required if and to the extent that it would
have a Material Adverse Effect on Acquired Corporation or on any
litigation to which the ESOP is a party.
ARTICLE 7
MUTUAL
COVENANTS AND AGREEMENTS
7.1 Best Efforts, Cooperation. Subject to
the terms and conditions herein provided, Buyer and Acquired
Corporation each agrees to use its best efforts promptly to
take, or cause to be taken, all actions and do, or cause to be
done, all things necessary, proper or advisable under applicable
Laws or otherwise, including, without limitation, promptly
making required deliveries of stockholder lists and stock
transfer reports and attempting to obtain all necessary Consents
and waivers and regulatory approvals, including the holding of
any regular or special board meetings, to consummate and make
effective, as soon as practicable, the transactions contemplated
by this Agreement. The officers of each Party to this Agreement
shall fully cooperate with officers and employees, accountants,
counsel and other representatives of the other Parties not only
in fulfilling the duties hereunder of the Party of which they
are officers but also in assisting, directly or through
direction of employees and other persons under their supervision
or control, such as stock transfer agents for the Party, the
other Parties requiring information which is reasonably
available from such Party. Buyer and Acquired Corporation will
agree on stay bonuses for various key employees of
the Acquired Corporation Companies in such amounts and payable
on such date or dates as they may agree.
7.2 Press Release. Each Party hereto
agrees that, unless approved by the other Parties in advance,
such Party will not make any public announcement, issue any
press release or other publicity or confirm any statements by
any person not a party to this Agreement concerning the
transactions contemplated hereby. Notwithstanding the foregoing,
each Party hereto reserves the right to make any disclosure if
such Party, in its reasonable discretion, deems such disclosure
required by Law. In that event, such Party shall provide to the
other Party the text of such disclosure sufficiently in advance
to enable the other Party to have a reasonable opportunity to
comment thereon.
7.3 Mutual Disclosure. Each Party hereto
agrees to promptly furnish to each other Party hereto its public
disclosures and filings not precluded from disclosure by Law
including but not limited to call reports,
Form 8-K,
Form 10-Q
and
Form 10-K
filings, Y-3 applications, reports on
Form Y-6,
quarterly or special reports to stockholders, Tax returns,
Form S-8
registration statements and similar documents.
7.4 Access to Properties and Records;
Investigation. Each Party hereto shall afford the
officers and authorized representatives of the other Party full
access to the Assets, books and records of such Party during
normal business hours in order to effect the Parties
respective covenants hereunder. All such information that may be
obtained by any such Party will be held in confidence by such
party, will not be disclosed by such Party or any of its
representatives except in accordance with this Agreement, and
will not be used by such Party for any purpose other than the
accomplishment of the Merger as provided herein. Each Party
shall keep the other Party advised of all material developments
relevant to its business and to consummation of the Merger and
shall permit the other Party to make or cause to be made such
investigation of its business and properties (including that of
its Subsidiaries) and of their respective financial and legal
conditions as the other Party reasonably requests, provided,
that such investigation shall be reasonably related to the
transactions contemplated hereby and shall not interfere
unnecessarily with normal operations. No investigation by a
Party shall affect the ability of such Party to rely on the
representations and warranties of the other Party. Between the
date hereof and the Effective Time, Acquired Corporation shall
permit Buyers senior officers and independent auditors to
meet with the senior officers of Acquired Corporation, including
officers responsible for Acquired Corporations financial
statements, the internal controls of Acquired Corporation and
the disclosure controls and procedures of Acquired Corporation,
to discuss
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such matters as Buyer may deem reasonably necessary or
appropriate for Buyer to satisfy its obligations under
Sections 302 and 906 of the Sarbanes-Oxley Act.
7.5 Notice of Adverse Changes. 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
which (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.
ARTICLE 8
CONDITIONS
TO OBLIGATIONS OF ALL PARTIES
The obligations of Buyer and Acquired Corporation to cause the
transactions contemplated by this Agreement to be consummated
shall be subject to the satisfaction, in the sole discretion of
the Party relying upon such conditions, on or before the
Effective Date of all the following conditions, except as such
Parties may waive such conditions in writing:
8.1 Approval by Stockholders. At the
Stockholders Meetings, this Agreement and the matters
contemplated by this Agreement shall have been duly approved by
the vote of the respective holders of not less than the
requisite number of the issued and outstanding voting securities
of Acquired Corporation and of Buyer as is required by
applicable Law and Acquired Corporations certificate of
incorporation and bylaws and Buyers certificate of
incorporation and bylaws.
8.2 Regulatory Authority Approval; Other
Consents. (a) Orders, Consents and
approvals, required for consummation of the Merger, shall have
been entered by the Office of Thrift Supervision granting the
authority necessary for the consummation of the transactions
contemplated by this Agreement, including the Bank Merger as
contemplated by Section 2.8 hereof and shall be in full
force and effect and all waiting periods required by law shall
have expired.
(b) Each Party shall have obtained any and all other
Consents required for consummation of the Merger (other than
those referred to in Section 8.2(a) of this Agreement) 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 obtained which is necessary to
consummate the transactions contemplated hereby shall be
conditioned or restricted in a manner which would have a
Material Adverse Effect on Buyer or Acquired Corporation taken
as a whole.
8.3 Legal Proceedings. No federal, state,
local, foreign or other court, board, body, commission, agency,
authority or instrumentality, including the Agencies, 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 which
prohibits, restricts or makes illegal consummation of the
transactions contemplated by this Agreement, provided that the
Buyer and the Acquired Corporation shall, and shall cause their
respective Subsidiaries to use commercially reasonable efforts
to seek the lifting or change of any Order or action, and to
obtain an interpretation of any Law, so as to permit the
completion of the transactions contemplated herein or the terms
hereof.
8.4 Registration Statement. The
Registration Statement shall be effective under the
1933 Act and no stop order suspending the effectiveness of
the Registration Statement shall be in effect; no proceedings
for such purpose, or under the proxy rules of the SEC or any
bank regulatory authority pursuant to the 1934 Act, with
respect to the transactions contemplated hereby, shall be
pending before or threatened by the SEC or any bank regulatory
authority; and all approvals or authorizations for the offer of
Buyers Common Stock shall have been received or obtained
pursuant to any applicable state securities Laws, and no stop
order or proceeding with respect to the transactions
contemplated hereby shall be pending or threatened under any
such state law.
8.5 Tax Opinion. Buyer and Acquired
Corporation shall have received an opinion of Balch &
Bingham LLP, addressed to each of them, in form and substance
reasonably satisfactory to Acquired Corporation and Buyer to the
effect that (i) the Merger will constitute a
reorganization within the meaning of
Section 368 of the Code; (ii) no
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gain or loss will be recognized by Buyer or Acquired
Corporation; (iii) no gain or loss will be recognized by
the stockholders of Acquired Corporation who receive shares of
Buyers Common Stock except to the extent of any taxable
boot received by such persons from Buyer, and except
to the extent of any dividends received from Acquired
Corporation prior to the Effective Date; (iv) the basis of
the Buyers Common Stock received in the Merger will be
equal to the sum of the basis of the shares of Acquired
Corporation common stock exchanged in the Merger and the amount
of gain, if any, which was recognized by the exchanging Acquired
Corporation stockholder, including any portion treated as a
dividend, less the value of taxable boot, if any, received by
such stockholder in the Merger; (v) the holding period of
the Buyers Common Stock will include the holding period of
the shares of Acquired Corporation common stock exchanged
therefor if such shares of Acquired Corporation common stock
were capital assets in the hands of the exchanging Acquired
Corporation stockholder; and (vi) cash received by an
Acquired Corporation stockholder in lieu of a fractional share
interest of Buyers Common Stock will be treated as having
been received as a distribution in full payment in exchange for
the fractional share interest of Buyers Common Stock which
he or she would otherwise be entitled to receive and will
qualify as capital gain or loss (assuming the Acquired
Corporation Stock was a capital asset in his or her hands as of
the Effective Date).
ARTICLE 9
CONDITIONS
TO OBLIGATIONS OF ACQUIRED CORPORATION
The obligations of Acquired Corporation to cause the
transactions contemplated by this Agreement to be consummated
shall be subject to the satisfaction on or before the Effective
Date of all the following conditions except as Acquired
Corporation may waive such conditions in writing:
9.1 Representations, Warranties and
Covenants. Notwithstanding any investigation made
by or on behalf of Acquired Corporation, all representations and
warranties of Buyer contained in this Agreement shall be true in
all material respects on and as of the Effective Date as if such
representations and warranties were made on and as of such
Effective Date (and without regard to any qualifications in such
representations and warranties relating to materiality),
provided that any representations and warranties that are as of
a specified date shall speak and be effective only as to such
date, and Buyer shall have performed in all material respects
all agreements and covenants required by this Agreement to be
performed by it on or prior to the Effective Date.
9.2 [Reserved]
9.3 Closing Certificate. In addition to
any other deliveries required to be delivered hereunder,
Acquired Corporation shall have received a certificate from the
President or a Vice President and from the Secretary or
Assistant Secretary of Buyer dated as of the Closing certifying
that:
(a) the Board of Directors of Buyer has duly adopted
resolutions approving the substantive terms of this Agreement
and authorizing the consummation of the transactions
contemplated by this Agreement and such resolutions have not
been amended or modified and remain in full force and effect;
(b) each person executing this Agreement on behalf of Buyer
is an officer of Buyer holding the office or offices specified
therein and the signature of each person set forth on such
certificate is his or her genuine signature;
(c) the certificate of incorporation and bylaws of Buyer
referenced in Section 4.4 hereof remain in full force and
effect;
(d) such persons have no knowledge of a basis for any
material claim, in any court or before any Agency or arbitration
or otherwise against, by or affecting Buyer or the business,
prospects, condition (financial or otherwise), or Assets of
Buyer which would prevent the performance of this Agreement or
the transactions contemplated by this Agreement or declare the
same unlawful or cause the rescission thereof; and
(e) the conditions set forth in Article 8 and this
Article 9 have been satisfied insofar as they relate to
Buyer.
9.4 Opinion of Counsel. Acquired
Corporation shall have received an opinion of Balch &
Bingham LLP, counsel to Buyer, dated as of the Closing, to the
effect that, on the basis of the facts, representations and
assumptions
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set forth in the opinion, (i) Buyer is a corporation duly
organized, validly existing and in good standing under the laws
of the State of Delaware, with full corporate power and
authority to carry on the business in which it is engaged,
(ii) the execution and compliance with the terms of this
Agreement do not and will not violate or conflict with any
provision of the Certificate of Incorporation or Bylaws, or
other binding contracts, agreements, orders, instruments, etc.
of the Buyer, (iii) the Agreement has been duly adopted and
approved by the board of directors and stockholders of Buyer in
accordance with its Certificate of Incorporation and Bylaws,
(iv) the Agreement has been duly and validly executed by
Buyer and is enforceable in accordance with its terms against
Buyer, and (v) the amount of authorized stock of Buyer
along with the number of shares of stock issued and outstanding
as of March 31, 2006, that the capital stock of Buyer
issued and outstanding were duly issued and fully paid and
nonassessable, and that shares of capital stock issued as
contemplated by this Agreement will be, upon issuance and
delivery under the Agreement, duly authorized, validly issued,
registered under the Securities Act of 1933, and fully paid and
nonassessable and listed for quotation on NASDAQ. Such counsel
may rely on representations and certificates of officers and
directors of Buyer and certificates of public officials. The
opinion of counsel for Buyer shall also be subject to reasonable
and customary qualifications.
9.5 Fairness Opinion. Acquired
Corporation shall have received prior to the Date of this
Agreement from FIG Partners, L.L.C. a letter (acceptable in form
to Acquired Corporation) confirming its opinion that the terms
of this Agreement and the Merger are fair to the stockholders of
Acquired Corporation from a financial point of view, and such
opinion shall not have been withdrawn prior to or as of the
Effective Date.
9.6 NASDAQ Listing. The shares of
Buyers Common Stock to be issued under this Agreement
shall have been approved for listing on the NASDAQ.
9.7 Support for Legal Opinion. There
shall have been furnished to counsel for Acquired Corporation
delivering the opinion under Section 10.4 certified copies
of such corporate records of Buyer and copies of such other
documents as such counsel may reasonably have requested for such
purpose and any officers certificates relied upon by such
counsel in rendering its opinion.
9.8 Material Events. There shall have
been no determination by the board of directors of Acquired
Corporation that the transactions contemplated by this Agreement
have become impractical because of any state of war, declaration
of a banking moratorium in the United States or a general
suspension of trading on the NASDAQ or any other exchange on
which Buyers Common Stock may be traded.
9.9 Other Matters. On the Effective Date
Buyer shall have assumed the Trust Preferred Securities as
contemplated by Section 6.3.
ARTICLE 10
CONDITIONS
TO OBLIGATIONS OF BUYER
The obligations of Buyer to cause the transactions contemplated
by this Agreement to be consummated shall be subject to the
satisfaction on or before the Effective Date of all of the
following conditions except as Buyer may waive such conditions
in writing:
10.1 Representations, Warranties and
Covenants. Notwithstanding any investigation made
by or on behalf of Buyer, all representations and warranties of
Acquired Corporation contained in this Agreement shall be true
in all material respects on and as of the Effective Date as if
such representations and warranties were made on and as of the
Effective Date (and without regard to any qualifications in such
representations and warranties relating to materiality),
provided that any representations and warranties that are as of
a specified date shall speak and be effective only as to such
date, and Acquired Corporation shall have performed in all
material respects all agreements and covenants required by this
Agreement to be performed by it on or prior to the Effective
Date.
10.2 Acquired Corporation Net
Worth. Acquired Corporation shall have a Net
Worth of not less than $44,333,000.
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10.3 Closing Certificate. In addition to
any other deliveries required to be delivered hereunder, Buyer
shall have received a certificate from Acquired Corporation
executed by the President or Vice President and from the
Secretary or Assistant Secretary of Acquired Corporation dated
as of the Closing certifying that:
(a) the Board of Directors of Acquired Corporation has duly
adopted resolutions approving the substantive terms of this
Agreement and authorizing the consummation of the transactions
contemplated by this Agreement and such resolutions have not
been amended or modified and remain in full force and effect;
(b) the stockholders of Acquired Corporation have duly
adopted resolutions approving the substantive terms of the
Merger and the transactions contemplated thereby and such
resolutions have not been amended or modified and remain in full
force and effect;
(c) each person executing this Agreement on behalf of
Acquired Corporation is an officer of Acquired Corporation
holding the office or offices specified therein and the
signature of each person set forth on such certificate is his or
her genuine signature;
(d) the articles of incorporation and bylaws of Acquired
Corporation and the Bank referenced in Section 5.8 hereof
remain in full force and effect and have not been amended or
modified since the date hereof; and
(e) the conditions set forth in Article 8 and this
Article 10 have been satisfied insofar as they relate to
Acquired Corporation.
10.4 Opinion of Counsel. Buyer shall have
received an opinion of Alston & Bird LLP, counsel to
Acquired Corporation, dated as of the Closing, to the effect
that, on the basis of the facts, representations and assumptions
set forth in the opinion, (i) Acquired Corporation is a
corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware, with full
corporate power and authority to carry on the business in which
it is engaged and that each of the Acquired Corporation
Companies is a corporation duly organized, validly existing and
in good standing under the laws of its state of organization,
with full corporate power and authority to carry on the business
in which it is engaged (ii) the execution and compliance
with the terms of this Agreement do not violate or conflict with
any provision of the Certificate of Incorporation or Bylaws of
Acquired Corporation, (iii) the Agreement has been duly
adopted and approved by the board of directors and stockholders
of Acquired Corporation in accordance with its Certificate of
Incorporation and Bylaws, (iv) the Agreement has been duly
and validly executed by the Acquired Corporation and is
enforceable in accordance with its terms against Buyer, and
(v) the amount of authorized stock of Acquired Corporation
along with the number of shares of stock issued and outstanding
as of March 31, 2006, that the capital stock of Acquired
Corporation issued and outstanding were duly issued and fully
paid and nonassessable, and that, except for the Acquired
Corporation Options and the Acquired Corporation Warrants
described in the Agreement, there are no options, subscriptions,
warrants calls, or other commitments obligating the Acquired
Corporation to issue or acquire any of its equity securities.
Such counsel may rely on representations and certificates of
officers and directors of Acquired Corporation and certificates
of public officials. The opinion of counsel to Acquired
Corporation shall also be subject to reasonable and customary
qualifications.
10.5 Controlling Stockholders. Acquired
Corporation shall use its reasonable best efforts to cause each
director, executive officer and other person who is an
affiliate of Acquired Corporation (for purposes of
Rule 145 under the 1933 Act) to deliver to Buyer as
soon as practicable after the date hereof, but in no event after
the date of the Acquired Corporations Stockholders
Meeting, a written agreement, providing that such person will
not sell, pledge, transfer or otherwise dispose of the shares of
the shares of Buyers Common Stock to be received by such
affiliate upon the Effective Date, except in
compliance with the applicable provisions of the 1933 Act,
SEC Rule 145(d) and other rules and regulations of the SEC
as may be applicable. Acquired Corporation acknowledges that the
certificates of Buyers Common Stock issued to all
affiliates of Acquired Corporation will bear an
appropriate legend reflecting the restrictions on resale
described above, regardless of whether such affiliate has
delivered such written agreement.
10.6 Support for Legal Opinions. There
shall have been furnished to counsel for Buyer delivering the
opinions under Section 8.5 and Section 9.4 certified
copies of such corporate records of Acquired Corporation and
copies of such other documents as such counsel may reasonably
have requested for such purpose.
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10.7 [Reserved]
10.8 [Reserved]
10.9 Fairness Opinion. Buyer shall have
received prior to the signing of this Agreement from Sandler
ONeill & Partners, L.P. and Burke Capital Group,
L.L.C. letters (acceptable in form to Buyer) confirming their
opinions that the terms of this Agreement and the Merger are
fair to the stockholders of Buyer from a financial point of
view, and such opinions shall not have been withdrawn prior to
or as of the Effective Date.
10.10 Other Matters. On the Effective
Date, (a) Acquired Corporation shall have used its
reasonable efforts to cause each of the executive officers and
directors of the Acquired Corporation and the Bank to deliver a
letter to Buyer to the effect that such person is not aware of
any claims he or she might have against Buyer other than routine
compensation, benefits and the like as an employee, or ordinary
rights as a customer, or pursuant to Contracts with any Acquired
Corporation Company; and (b) without penalty or other cost
or expense to Buyer, Acquired Corporation shall have paid off in
full and terminated the Line of Credit, and all Liens and other
collateral for such Line of Credit, including without limitation
all shares of capital stock of the Bank, shall have been
released in full.
ARTICLE 11
TERMINATION
OF REPRESENTATIONS AND WARRANTIES
All representations and warranties provided in Articles 4
and 5 of this Agreement or in any closing certificate pursuant
to Articles 9 and 10 shall terminate and be extinguished at
and shall not survive the Effective Date. All covenants,
agreements and undertakings required by this Agreement to be
performed by any Party hereto following the Effective Date shall
survive such Effective Date and be binding upon such Party. If
the Merger is not consummated, all representations, warranties,
obligations, covenants, or agreements hereunder or in any
certificate delivered hereunder relating to the transaction
which is not consummated shall be deemed to be terminated or
extinguished, except that the last sentence of Section 7.4,
and Sections 7.2, 6.2(c)(ii), 13.3, Article 11,
Article 12, Article 15 and any applicable definitions
of Article 14, shall survive. Items disclosed in the
Schedules to a Disclosure Supplement attached hereto (including
any exhibits to such Schedules) are incorporated into this
Agreement and form a part of the representations, warranties,
covenants or agreements to which they relate.
ARTICLE 12
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 received:
(a) If to Acquired Corporation to: Patrick M. Frawley,
Chairman, President and Chief Executive Officer, Community
Bancshares, Inc., 68149 Highway 231 South, P.O. Box 1000,
Blountsville, AL 35031, facsimile 205-429-1216, with copies to
Ralph F. MacDonald, III, Alston & Bird LLP, One
Atlantic Center, 1201 West Peachtree Street, Atlanta, GA
30309-3424,
facsimile, 404-253-8272, or as may otherwise be specified by
Acquired Corporation in writing to Buyer.
(b) If to Buyer, to Marvin Scott, President, 17 North
20th Street,
Birmingham, AL 35203, facsimile
205-327-3611,
with copies to Stephen A. Yoder, Balch & Bingham LLP,
1901 Sixth Avenue North, Birmingham, AL 35203, facsimile
205-488-5645, or as may otherwise be specified in writing by
Buyer to Acquired Corporation.
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ARTICLE 13
AMENDMENT OR
TERMINATION
13.1 Amendment. This Agreement may be
amended by the mutual consent of Buyer and Acquired Corporation
before or after approval of the transactions contemplated herein
by the stockholders of Acquired Corporation.
13.2 Termination. This Agreement may be
terminated at any time prior to or on the Effective Date whether
before or after action thereon by the stockholders of Acquired
Corporation, as follows:
(a) by the mutual consent of the respective boards of
directors of Acquired Corporation and Buyer;
(b) by the board of directors of either Party (provided
that the terminating Party is not then in material breach of any
representation, warranty, covenant, or other agreement contained
in this Agreement) in the event of a material breach by the
other Party of any representation or warranty contained in this
Agreement (determined without regard to any qualifications
regarding materiality which may be contained in such
representation or warranty) which cannot be or has not been
cured within thirty (30) days after the giving of written
notice to the breaching Party of such breach and which breach
would provide the non-breaching Party the ability, to refuse to
consummate the Merger under the standard set forth in
Section 10.1 of this Agreement in the case of Buyer and
Section 9.1 of this Agreement in the case of Acquired
Corporation;
(c) by the board of directors of either Party (provided
that the terminating Party is not then in material breach of any
representation, warranty, covenant, or other agreement contained
in this Agreement) in the event of a material breach by the
other Party of any covenant or agreement 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;
(d) by the board of directors of either Party if all
transactions contemplated by this Agreement shall not have been
consummated on or prior to March 31, 2007, if the failure
to consummate the transactions provided for in this Agreement on
or before such date is not caused by any breach of this
Agreement by the Party electing to terminate pursuant to this
Section 13.2(d);
(e) by Acquired Corporation, if its board of directors so
determines by a majority vote of the members of its entire
board, at any time during the five business day period
commencing on the Determination Date, such termination to be
effective on the 30th day following such Determination
Date, if both of the following conditions are satisfied:
(i) the Buyer Stock Price on the Determination Date is less
than $9.94; and
(ii) the number obtained by dividing the Buyer Stock Price
on the Determination Date by the Initial Buyer Stock Price shall
be less than the quotient obtained by dividing the Final NASDAQ
Bank Index Value by the Initial NASDAQ Bank Index Value minus
0.15;
subject, however, to the next three sentences. If Acquired
Corporation elects to exercise its termination right pursuant to
this Section 13.2(e), it shall give prompt written notice
thereof to Buyer. During the five business day period commencing
with its receipt of such notice, Buyer shall have the option of
paying additional consideration for the Merger in the form of
Buyers Common Stock, cash or a combination of Buyers
Common Stock and cash, so that the aggregate consideration paid
by Buyer per share of Acquired Corporation Stock for the Merger
shall be valued at the lesser of (i) the product of 0.85
and the Initial Buyer Stock Price multiplied by the Exchange
Ratio or (ii) the product obtained by multiplying the Index
Ratio by the Initial Buyer Stock Price multiplied by the
Exchange Ratio. If within such five business day period, Buyer
delivers written notice to Acquired Corporation that it intends
to proceed with the Merger by paying such additional
consideration, as contemplated by the previous sentence, then no
termination shall have occurred pursuant to this
Section 13.2(e) and this Agreement shall remain in full
force and effect in accordance with its terms (except that the
consideration for the Merger shall have been so modified).
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For purposes of Section 13.2(e), the following terms shall
have the meanings assigned below:
Buyer Stock Price shall mean the average of
the daily closing sales prices of a share of Buyers Common
Stock as reported on the NASDAQ for the ten consecutive trading
days immediately preceding the Determination Date.
Determination Date shall mean the first date
on which all Orders, Consents and approvals (and waivers, if
applicable) necessary for consummation of the Merger and the
transactions contemplated by this Agreement have been received
as provided in Section 8.2(a) hereof.
Final NASDAQ Bank Index Value shall mean the
average of the NASDAQ Bank Index (Symbol: IXBK, or US:BANK)
values as reported on the NASDAQ for the ten consecutive trading
days immediately preceding the Determination Date.
Initial Buyer Stock Price shall mean
$11.70, adjusted as provided in the last sentence of this
Section 13.2(e).
Initial NASDAQ Bank Index Value shall mean
3193.47, adjusted as provided in the last sentence of this
Section 13.2(e).
Index Ratio shall mean the Final NASDAQ Bank
Index Value divided by the Initial NASDAQ Bank Index Value.
If Buyer or any company the stock of which is used in the NASDAQ
Bank Index declares or effects a stock dividend,
reclassification, recapitalization, split-up, combination,
exchange of shares or similar transaction between the date of
this Agreement and the Determination Date, the prices for the
stock of such company shall be appropriately adjusted for
purposes of applying this Section 13.2(e).
This Section 13.2(e) shall not apply to the consideration
received by holders of Acquired Corporation Options or by the
holder of the Acquired Corporation Warrants provided in
Section 3.1(b) hereof.
(f) By Buyer in the event that (i) the Board of
Directors of Acquired Corporation, shall have failed to reaffirm
its approval upon Buyers request for such reaffirmation of
the Merger and the transactions contemplated by this Agreement
(to the exclusion of any other Acquisition Proposal), or shall
have resolved not to reaffirm the Merger, or (ii) the Board
of Directors of Acquired Corporation shall have failed to
include in the Acquired Corporation Proxy Statement its
recommendation, without modification or qualification, that
Acquired Corporation stockholders approve the Merger or shall
have withdrawn, qualified or modified, or proposed publicly to
withdraw, qualify or modify, in a manner adverse to Buyer, the
recommendation of such Board of Directors to Acquired
Corporation stockholders that they approve the Merger, or
(iii) the Board of Directors of Acquired Corporation shall
have affirmed, recommended or authorized entering into any
Acquisition Transaction other than the Merger or, within 10
business days after commencement of any tender or exchange offer
for any shares of Acquired Corporation Stock, the Board of
Directors of Acquired Corporation shall have failed to recommend
against acceptance of such tender or exchange offer by its
stockholders or takes no position with respect to the acceptance
of such tender or exchange offer by its stockholders, or
(iv) the Board of Directors of Acquired Corporation
negotiates or authorizes the conduct of negotiations (and five
business days have elapsed without such negotiations being
discontinued) with a third party (it being understood and agreed
that negotiate shall not be deemed to include the
provision of information to, or the request and receipt of
information from, any Person that submits an Acquisition
Proposal or discussions regarding such information for the sole
purpose of ascertaining the terms of such Acquisition Proposal
and determining whether the board of directors will in fact
engage in, or authorize, negotiations) regarding an Acquisition
Proposal other than the Merger; or
(g) By Acquired Corporation (provided that Acquired
Corporation is not then in material breach of any
representation, warranty, covenant, or other agreement contained
in this Agreement), if prior to the adoption of this Agreement
by the affirmative vote of the holders of the requisite number
of the outstanding shares of Acquired Corporation Stock entitled
to vote thereon at the Acquired Corporation Stockholders
Meeting, the Board of Directors of Acquired Corporation has
(i) withdrawn or modified or changed its recommendation or
approval of this Agreement and the shares of Buyer Common Stock
issuable hereunder in a manner adverse to
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Buyer in order to approve and permit Acquired Corporation to
accept a Superior Proposal and (ii) determined, after
consideration of the written advice of outside legal counsel to
Acquired Corporation, that the failure to take such action as
set forth in the preceding clause (i) would be reasonably
likely to result in a breach of the Board of Directors
fiduciary duties under applicable Law, provided, however, that
(ii) at least 2 business days prior to any such
termination, Acquired Corporation shall, and shall cause its
advisors to, negotiate with Buyer to make such adjustments in
the terms and conditions of this Agreement as would enable
Acquired Corporation to proceed with the transactions
contemplated herein on such adjusted terms, or Buyers
Board of Directors has failed to recommend or has withdrawn or
modified its recommendation that Buyer.
13.3 Damages. In the event of termination
pursuant to Section 13.2, this Agreement shall become void
and have no effect, except as provided in Article 11, and
except that Acquired Corporation and Buyer shall be liable for
damages for any willful breach of warranty, representation,
covenant or other agreement contained in this Agreement.
13.4 Termination Fee. If Buyer terminates
this Agreement pursuant to Section 13.2(f) hereof or if
Acquired Corporation terminates this Agreement pursuant to
Section 13.2(g) of this Agreement, and a definitive
Contract with respect to an Acquisition Proposal or Acquisition
Transaction other than the Merger has been entered into with
respect to Acquired Corporation, then Acquired Corporation shall
pay to Buyer an amount equal to $4,000,000 (the
Termination Fee) upon the entry into such Contract.
Acquired Corporation hereby waives any right to set-off or
counterclaim against such amount. The Termination Fee shall be
paid in same-day funds at or prior to the date of execution of
such Contract.
ARTICLE 14
DEFINITIONS
(a) The following terms, which are capitalized in this
Agreement, shall have the meanings set forth below for the
purpose of this Agreement:
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Acquired Corporation |
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Community Bancshares, Inc., a Delaware corporation. |
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Acquired Corporation Company |
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Acquired Corporation, the Bank, any Subsidiary of Acquired
Corporation or the Bank, or any person or entity acquired as a
Subsidiary of Acquired Corporation or the Bank in the future and
owned by Acquired Corporation or the Bank at the Effective Date. |
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Acquired Corporation Options |
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Options respecting the issuance of a maximum of
1,641,500 shares of Acquired Corporation Stock pursuant to
Acquired Corporations stock option plans or agreements. |
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Acquired Corporation SEC Reports |
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The forms, reports and documents filed by Acquired Corporation
as described in Section 5.4. |
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Acquired Corporation Stock |
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Shares of common stock, par value $.10 per share, of
Acquired Corporation. |
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Acquired Corporation Proxy Statement |
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The proxy statement used by Acquired Corporation to solicit the
approval of its stockholders of the transactions contemplated by
this Agreement, which shall include the prospectus of Buyer
relating to the issuance of the Buyers Common Stock to the
stockholders of Acquired Corporation. |
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Acquired Corporation Warrants |
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The warrants for issuance of a maximum of 140,187 shares of
Acquired Corporation common stock pursuant to warrant agreements
dated February 20, 2004 in favor of certain employees or
former employees of FIG Partners, L.L.C. |
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Acquisition Proposal |
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Any tender offer or exchange offer or any proposal for a merger,
acquisition of all or substantially all of the stock or assets
of, or other business combination involving Acquired Corporation
or any other Acquired Corporation Company or the acquisition of
a substantial equity interest in, or a substantial portion of
the assets of, Acquired Corporation or any other Acquired
Corporation Company. |
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Acquisition Transaction |
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Any transaction or series of related transactions (other than
the transactions contemplated by this Agreement) involving:
(i) any acquisition or purchase from Acquired Corporation
by any Person or Group (other than Buyer or any of its
Affiliates) of 25% or more in interest of the total outstanding
voting securities of Acquired Corporation or any of its
Subsidiaries, or any tender offer or exchange offer that if
consummated would result in any Person or Group (other than
Buyer or any of its affiliates) beneficially owning 25% or more
in interest of the total outstanding voting securities of
Acquired Corporation or any of its Subsidiaries, or any merger,
consolidation, business combination or similar transaction
involving Acquired Corporation pursuant to which the
stockholders of Acquired Corporation immediately preceding such
transaction hold less than 90% of the equity interests in the
surviving or resulting entity (which includes the parent
corporation of any constituent corporation to any such
transaction) of such transaction; (ii) any sale or lease
(other than in the ordinary course of business), or exchange,
transfer, license (other than in the ordinary course of
business), acquisition or disposition of 5% or more of the
assets of Acquired Corporation; or (iii) any liquidation or
dissolution of Acquired Corporation. |
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Agencies |
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Shall mean, collectively, the Federal Trade Commission, the
United States Department of Justice, the Board of the Governors
of the Federal Reserve System, the Federal Deposit Insurance
Corporation, the Office of Thrift Supervision, all state
regulatory agencies having jurisdiction over the Parties and
their respective Subsidiaries, HUD, the VA, the FHA, the GNMA,
the FNMA, the FHLMC, the NASDAQ, and the SEC. |
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Agreement |
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This Agreement and Plan of Merger (including the exhibits
hereto, which are hereby incorporated by reference herein and
made a part hereof, and may be referred to in this Agreement an
any other related instrument or document without being attached
hereto) and the Schedules (including the exhibits thereto) to a
Disclosure Supplement delivered pursuant hereto and incorporated
herein by reference. |
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Assets |
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With respect to any 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 Persons
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. |
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Bank |
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Community Bank, an Alabama state bank. |
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Bank Merger |
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The merger of the Bank with Superior Bank as contemplated in
Section 2.8 of this Agreement. |
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Buyer |
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The Banc Corporation, a Delaware corporation with its principal
offices in Birmingham, Alabama. |
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Buyer Proxy Statement |
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The proxy statement used by Buyer to solicit the approval of its
stockholders of the transactions contemplated by this Agreement,
which shall include the prospectus of Buyer relating to the
issuance of the Buyers Common Stock to the stockholders of
Acquired Corporation. |
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Buyers Common Stock |
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Buyers Common Stock authorized and defined in the
certificate of incorporation of Buyer, as amended. |
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Buyer SEC Reports |
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The forms, reports and documents filed by Buyer as described in
Section 4.14. |
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Closing |
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The submission of the certificates of officers, legal opinions
and other actions required to be taken in order to consummate
the Merger in accordance with this Agreement. |
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Code |
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The Internal Revenue Code of 1986, as amended, and the
regulations thereunder. |
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Consent |
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Any consent, approval, authorization, clearance, exemption,
waiver, or similar affirmation by any Person pursuant to any
Contract, Law, Order, or Permit. |
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Contract |
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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. |
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Default |
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(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. |
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DGCL |
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The Delaware General Corporation Law, as amended. |
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Disclosure Supplement |
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The disclosure supplement delivered by Acquired Corporation to
Buyer or by Buyer to Acquired Corporation, as the case may be,
concurrently with the execution and delivery of this Agreement.
Each such Disclosure Supplement is hereby incorporated by
reference herein and made a part hereof, and may be referred to
in this Agreement and any other related instrument or document
without being attached hereto. |
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Effective Date |
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The date and time at which the Merger becomes effective as
defined in Section 2.7 hereof. |
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Environmental Laws |
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The laws, regulations and governmental requirements referred to
in Section 5.23 hereof. |
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ERISA |
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The Employee Retirement Income Security Act of 1974, as amended. |
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Exchange Ratio |
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0.8974 to 1.0, as provided in Section 3.1(a), and subject
to adjustment as provided in Section 3.1(c). |
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FDIC Act |
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The Federal Deposit Insurance Act, as amended. |
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GAAP |
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Generally accepted accounting principles applicable to banks and
bank holding companies consistently applied during the periods
involved. |
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Knowledge |
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The actual knowledge of the Chief Executive Officer, Chief
Financial Officer, Chief Accounting Officer, Chief Credit
Officer or any Senior or Executive Vice President of Buyer, in
the case of Knowledge of Buyer, or of such executive officers
with comparable responsibility of Acquired Corporation and the
Bank, in the case of knowledge of Acquired Corporation. |
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Law |
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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 Agency. |
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Liability |
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Any direct or indirect, primary or secondary, liability,
indebtedness, obligation, penalty, cost or expense (including,
without limitation, costs of investigation, collection and
defense), 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. |
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Lien |
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Any conditional sale agreement, defect 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, (iii) Liens in
the form of easements and restrictive covenants on real property
which do not materially adversely affect the use of such
property by the current owner thereof, and (iv) Liens which
are not reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on a Party. |
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Litigation |
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Any action, arbitration, complaint, criminal prosecution,
governmental or other examination or investigation, hearing,
inquiry, administrative or other proceeding relating to or
affecting a Party, its business, its Assets (including Contracts
related to it), or the transactions contemplated by this
Agreement relating to or affecting a Party, its business, its
Assets (including Contracts related to it), or the transactions
contemplated by this Agreement; provided that such term shall
not include regular, periodic examinations of depository
institutions and their affiliates by any Agency). |
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Line of Credit |
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The line of credit created by the Loan and Security Agreement
dated as of May 6, 2004 between Acquired Corporation and
First Commercial Bank, in the amount of $3,000,000. |
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Loan Property |
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Any property owned by the 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. |
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Loss |
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Any and all direct or indirect payments, obligations,
recoveries, deficiencies, fines, penalties, interest,
assessments, losses, diminution in the value of Assets, damages,
punitive, exemplary or consequential damages (including, but not
limited to, lost income and profits and interruptions of
business), liabilities, costs, expenses (including without
limitation, reasonable attorneys fees and expenses, and
consultants fees and other costs of defense or
investigation), and interest on any amount payable to a third
party as a result of the foregoing. |
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material |
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For purposes of this Agreement shall be determined in light of
the facts and circumstances of the matter in question; provided
that any specific monetary amount stated in this Agreement shall
determine materiality in that instance. |
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Material Adverse Effect |
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On a Party shall mean an event, change or occurrence which has a
material adverse impact on (i) the financial position,
Assets, business, or results of operations 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 contemplated by
this Agreement, provided that material adverse
effect shall not be deemed to include the impact of
(w) changes in banking and similar laws of general
applicability or interpretations thereof by courts or
governmental authorities, (x) changes in generally accepted
accounting principles or regulatory accounting principles
generally applicable to banks and their holding companies,
(y) actions and omissions of a Party (or any of its
Subsidiaries) taken with the prior written consent of the other
Party in contemplation of the transactions contemplated hereby,
and (z) the Merger and compliance with the provisions of
this Agreement on the operating performance of the Parties. |
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Merger |
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The merger of Acquired Corporation with Buyer as contemplated in
this Agreement. |
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NASDAQ |
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The National Market of the National Association of Securities
Dealers Automated Quotation System. |
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Net Worth |
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For purposes of this Agreement, including Sections 3.1(c),
6.2(k) and 10.2 hereof, the term Net Worth which
shall be calculated and used for determining whether a
Material Adverse Effect has occurred with respect to
the results of operations, cash flows, financial condition or
stockholders equity of the Acquired Corporation, based
upon the Acquired Corporations stockholders equity
less adjustments for certain loans and credits shown in
Section 6.2(l) of the Acquired Corporations
Disclosure Supplement, and also, Net Worth shall not be reduced
as a result of any expense incurred or losses realized as a
result of this Agreement, changes in Laws or GAAP, the
transactions contemplated hereby or any actions taken at the
request or with the consent of Buyer, any
mark-to-market
changes in securities, pension assets and Derivative Contracts
or any cost of terminating or changing |
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any employee benefit plans, pursuant to Section 6.1(f)(iii)
or 6.4 hereof. |
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Order |
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Any administrative decision or award, decree, 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 Agency. |
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Party |
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Acquired Corporation or Buyer, and Parties shall
mean both Acquired Corporation and Buyer. |
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Permit |
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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. |
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Person |
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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. |
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Registration Statement |
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The registration statement on
Form S-4,
or such other appropriate form, to be filed with the SEC by the
Buyer, and which has been agreed to by Acquired Corporation, to
register the shares of Buyers Common Stock offered to
stockholders of the Acquired Corporation pursuant to this
Agreement, including the Buyer Proxy Statement and the Acquired
Corporation Proxy Statement. |
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Resulting Corporation |
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Buyer, as the surviving corporation resulting from the Merger. |
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SEC |
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United States Securities and Exchange Commission. |
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Stockholders Meetings |
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The special meetings of stockholders of Acquired Corporation and
of Buyer called to approve the transactions contemplated by this
Agreement. |
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Subsidiaries |
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All those corporations, banks, associations, or other entities
of which the entity in question owns or controls 5% or more of
the outstanding equity securities either directly or through an
unbroken chain of entities as to each of which 5% 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. |
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Superior Proposal |
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Any Acquisition Proposal (on its most recently amended or
modified terms, if amended or modified) (i) involving the
acquisition of the entire equity interest in, or all or
substantially all of the assets and liabilities of, the Acquired
Corporation Companies and (ii) with respect to which the
Board of Directors of Acquired Corporation (A) determines
in good faith that such Acquisition Proposal, if accepted, is
reasonably likely to be consummated on a timely basis, taking
into account all legal, financial, regulatory and other aspects
of the Acquisition Proposal and the Person or Group making the
Acquisition Proposal, and (B) determines in its good faith
judgment (based on, among other things, the advice of its
financial advisors to be more |
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favorable to Acquired Corporations stockholders than the
Merger taking into account all relevant factors (including
whether, in the good faith judgment of the Board of Directors of
Acquired Corporation, after obtaining the advice of Acquired
Corporations financial advisors the Person or Group making
such Acquisition Proposal is reasonably able to finance the
transaction and close it timely, and any proposed changes to
this Agreement that may be proposed by Buyer in response to such
Acquisition Proposal.) |
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Tax or Taxes |
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Any federal, state, county, local, foreign, and other taxes,
assessments, charges, fares, and impositions, including interest
and penalties thereon or with respect thereto. |
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Trust |
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Community (AL) Capital Trust I, a statutory trust organized
under the laws of the State of Delaware. |
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1933 Act |
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The Securities Act of 1933, as amended, and the regulations
thereunder. |
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1934 Act |
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The Securities Exchange Act of 1934, as amended, and the
regulations thereunder. |
ARTICLE 15
MISCELLANEOUS
15.1 Expenses. (a) Except as
otherwise provided in this Section 15.1, each of the
Parties shall bear and pay all direct costs and expenses
incurred by it or on its behalf in connection with the
transactions contemplated hereunder, including filing,
registration and application fees, printing fees, and fees and
expenses of its own financial or other consultants, investment
bankers, accountants, and counsel, except that Buyer shall bear
and pay the filing fees payable in connection with the
Registration Statement and the Buyer Proxy Statement and
printing costs incurred in connection with the printing of the
Registration Statement and the Buyer Proxy Statement.
(b) Nothing contained in this Section 15.1 shall
constitute or shall be deemed to constitute liquidated damages
for the willful breach by a Party of the terms of this Agreement
or otherwise limit the rights of the nonbreaching Party.
15.2 Benefit and Assignment. Except as
expressly contemplated hereby, 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.
15.3 Governing Law. This Agreement shall
be governed by, and construed in accordance with the Laws of the
State of Delaware without regard to any conflict of Laws.
15.4 Counterparts. This Agreement may be
executed in counterparts, each of which shall be deemed to
constitute an original. Each such counterpart shall become
effective when one counterpart has been signed by each Party
thereto.
15.5 Headings. The headings of the
various articles and sections of this Agreement are for
convenience of reference only and shall not be deemed a part of
this Agreement or considered in construing the provisions
thereof.
15.6 Severability. Any term or provision
of this Agreement that is prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to
the extent of such prohibition or unenforceability without
invalidating the remaining terms and provisions thereof or
affecting the validity or enforceability of such provision in
any other jurisdiction, and if any term or provision of this
Agreement is held by any court of competent jurisdiction to be
void, voidable, invalid or unenforceable in any given
circumstance or situation, then all other
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terms and provisions, being severable, shall remain in full
force and effect in such circumstance or situation and the term
or provision shall remain valid and in effect in any other
circumstances or situation.
15.7 Construction. Use of the masculine
pronoun herein shall be deemed to refer to the feminine and
neuter genders and the use of singular references shall be
deemed to include the plural and vice versa, as appropriate. The
terms include, including and derivatives
thereof shall mean including without limitation by
reason of enumeration or otherwise. No inference in favor of or
against any Party shall be drawn from the fact that such Party
or such Partys counsel has drafted any portion of this
Agreement.
15.8 Confidentiality; Return of
Information. Between the date of this Agreement
and the Effective Date, Buyer and Acquired Company will maintain
in confidence, and will cause the directors, officers,
employees, agents and advisors of Buyer and Acquired Corporation
Companies to maintain in confidence any written, oral or other
information obtained in confidence from another Person or from
an Acquired Company in connection with this Agreement or the
Merger, including any such information obtained prior to the
date of this Agreement, unless (a) such information is
already known to such party or to others not bound by a duty of
confidentiality or such information becomes publicly available
through no fault of such Party, (b) the use of such
information is necessary or appropriate in making any filing or
obtaining any consent or approval required for the Merger to be
consummated, or (c) the furnishing or use of such
information is required by legal proceedings.
In the event of termination of this Agreement prior to the
Effective Date, each Party shall return to the other, without
retaining copies thereof, all confidential or non-public
documents, work papers and other materials obtained from the
other Party in connection with the transactions contemplated in
this Agreement and shall keep such information confidential, not
disclose such information to any other person or entity, and not
use such information in connection with its business.
15.9 Equitable Remedies. The parties
hereto agree that, in the event of a breach of this Agreement by
either Party, the other Party may be without an adequate remedy
at law owing to the unique nature of the contemplated
transactions. In recognition thereof, in addition to (and not in
lieu of) any remedies at law that may be available to the
nonbreaching Party, the non-breaching Party shall be entitled to
obtain equitable relief, including the remedies of specific
performance and injunction, in the event of a breach of this
Agreement by the other Party, and no attempt on the part of the
non-breaching Party to obtain such equitable relief shall be
deemed to constitute an election of remedies by the
non-breaching Party that would preclude the non-breaching Party
from obtaining any remedies at law to which it would otherwise
be entitled.
15.10 Attorneys Fees. If any Party
hereto shall bring an action at law or in equity to enforce its
rights under this Agreement (including an action based upon a
misrepresentation or the breach of any warranty, covenant,
agreement or obligation contained herein), the prevailing Party
in such action shall be entitled to recover from the other Party
its costs and expenses incurred in connection with such action
(including fees, disbursements and expenses of attorneys and
costs of investigation).
15.11 No Waiver. No failure, delay or
omission of or by any Party in exercising any right, power or
remedy upon any breach or Default of any other Party shall
impair any such rights, powers or remedies of the Party not in
breach or Default, nor shall it be construed to be a wavier of
any such right, power or remedy, or an acquiescence in any
similar breach or Default; nor shall any waiver of any single
breach or Default be deemed a waiver of any other breach or
default theretofore or thereafter occurring. Any waiver, permit,
consent or approval of any kind or character on the part of any
Party of any provisions of this Agreement must be in writing and
be executed by the Parties to this Agreement and shall be
effective only to the extent specifically set forth in such
writing.
15.12 Remedies Cumulative. All remedies
provided in this Agreement, by law or otherwise, shall be
cumulative and not alternative.
15.13 Entire Contract. This Agreement and
the documents and instruments referred to herein constitute the
entire contract between the parties to this Agreement and
supersede all other understandings with respect to the subject
matter of this Agreement.
A-42
IN WITNESS WHEREOF, Acquired Corporation and Buyer have caused
this Agreement to be signed by their respective duly authorized
officers as of the date first above written.
COMMUNITY BANCSHARES, INC.
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By:
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/s/ Patrick
M. Frawley
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ITS:
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Chairman, President and
Chief Executive Officer
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THE BANC CORPORATION
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By:
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/s/ C.
Stanley Bailey
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ITS: Chief Executive Officer
A-43
Exhibit A
Form of
Support Agreement
THIS SUPPORT AGREEMENT is made and entered into as of
this the 29th day of April, 2006, by and between THE
BANC CORPORATION (Buyer), a Delaware
corporation, and the undersigned non-employee director (the
Community Official) of Community Bancshares, Inc., a
Delaware corporation (Acquired Corporation), or of
Community Bank, an Alabama bank (the Bank) .
WITNESSETH
WHEREAS, Buyer and Acquired Corporation have entered into an
Agreement and Plan of Merger (the Plan of Merger),
pursuant to which the parties thereto agree that Acquired
Corporation will merge (the Merger) with and into
Buyer, and Buyer shall be the surviving entity of the Merger;
NOW, THEREFORE, in consideration of the expenses that Buyer will
incur in connection with the transactions contemplated by the
Plan of Merger, and in order to preserve the value of the
franchise to be purchased by Buyer and induce Buyer to proceed
to incur such expenses, the Community Official makes the
following agreements in favor of Buyer:
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1.
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Undertakings
of Community Official
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1.1 The Community Official agrees and undertakes, subject
to the exercise of his fiduciary duties, to vote or cause to be
voted in favor of the approval of the Plan of Merger all shares
of Acquired Corporation Stock (as defined in the Plan of
Merger), as to which he has voting power (other than shares held
in a fiduciary capacity), which amount of shares is shown on the
schedule attached hereto and made a part hereof, at any meeting
or meetings (including any and all adjournments thereof) held on
or before March 31, 2007. The parties hereto acknowledge
and agree that nothing in this Section or this Agreement is
intended to dictate or require that the Community Official vote
as a director in any manner.
1.2 The Community Official further agrees that he will not
transfer any of the shares of Acquired Corporation Stock over
which he has dispositive power, which number of shares is shown
on the schedule attached hereto and made a part hereof, until
the vote upon the Plan of Merger by Acquired Corporations
stockholders has been taken or until the Plan of Merger has been
terminated pursuant to the provisions thereof, except
(i) for transfers by operation of law, and (ii) for
transfers in connection with which Buyer has consented to the
transfer and the transferee shall agree in writing with Buyer to
be bound by this Agreement as fully as the undersigned.
1.3 The Community Official further agrees not to exercise
any Acquired Corporation Options owned by such individual.
1.4 This Section 1 shall terminate at such time as the
Plan of Merger terminates or on the Effective Date.
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2.
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Agreement
Not to Compete.
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The Community Official agrees that for a period of one year
following the Effective Date (as defined in the Plan of Merger),
the Community Official will not serve as an officer or director,
or acquire (other than by gift or inheritance) 5% or more of the
outstanding voting securities, of any bank or savings and loan
association or bank holding company, or federal or state
chartered bank, savings bank, thrift, homestead association,
savings association, savings and loan association or cooperative
bank, that has a business location within any county in Alabama
in which the Bank has a branch or its main office as of the date
hereof.
3.1 The provisions of this Agreement shall be enforceable
through an action for damages at law or a suit for specific
performance or other appropriate extraordinary relief, the
Community Official acknowledging that remedies at law for breach
or default might be or become inadequate.
A-44
3.2 The Community Official acknowledges and agrees that
this Agreement is executed in connection with the sale of all of
the business of Acquired Corporation.
3.3 To the extent permitted under applicable law, any
provision of this Agreement may be amended or modified at any
time, either before or after its approval by an agreement in
writing among the parties hereto.
3.4 This Agreement may be executed in counterparts, each of
which shall be deemed to constitute an original. Each such
counterpart shall become effective when one counterpart has been
signed by each party hereto.
3.5 This Agreement shall be governed by, and interpreted in
accordance with, the laws of the State of Alabama applicable to
agreements made and entirely to be performed within such State,
except as federal law may be applicable.
3.6 The Community Official may not assign any of his rights
or obligations under this Agreement to any other person.
3.7 This Agreement supersedes any and all oral or written
agreements and understandings heretofore made between the
parties hereto relating to the subject matter hereof and
contains the entire agreement of the parties relating to the
subject matter hereof; provided, however, that notwithstanding
the foregoing, this Agreement does not modify or amend any stock
option agreement, employment agreement, option or similar
employee benefit agreement between any Acquired Corporation
Company and the Community Official. The terms and conditions of
this Agreement shall inure to the benefit of and be binding upon
the parties hereto and their respective successors, heirs and
legatees.
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IN WITNESS WHEREOF, the parties have signed this
Agreement effective as of the date first set forth above.
THE BANC CORPORATION
COMMUNITY OFFICIAL
SCHEDULE TO
SUPPORT AGREEMENT
Number of shares of common stock,
$ par value, of Community
Bancshares, Inc. owned by the Community Official: shares.
A-46
ANNEX B
[Letterhead
of Sandler, ONeill & Partners, L.P.]
April 29,
2006
Board of Directors
The Banc Corporation
17 North 20th Street
Birmingham, AL 35203
Ladies and Gentlemen:
The Banc Corporation (TBNC) and Community
Bancshares, Inc. (Community) have entered into an
Agreement and Plan of Merger, dated as of April 29, 2006
(the Agreement), pursuant to which Community will be
merged with and into TBNC (the Merger), with TBNC as
the surviving entity. Under the terms of the Agreement, at the
Effective Time and as a result of the Merger, each outstanding
share of Community common stock (the Community Common
Stock), other then certain shares as specified in the
Agreement, will be converted into the right to receive
0.08974 shares of TBNC common stock (the Exchange
Ratio). Cash will be paid in lieu of fractional shares.
Capitalized terms used herein without definition shall have the
meanings assigned to them in the Agreement. The other terms and
conditions of the Merger are more fully set forth in the
Agreement. You have requested our opinion as to the fairness,
from a financial point of view, of the Exchange Ratio to TBNC.
Sandler ONeill & Partners, L.P., as part of its
investment banking business, is regularly engaged in the
valuation of financial institutions and their securities in
connection with mergers and acquisitions and other corporate
transactions. In connection with this opinion, we have reviewed,
among other things: (i) the Agreement; (ii) certain
publicly available financial statements and other historical
financial information of TBNC that we deemed relevant;
(iii) certain publicly available financial statements and
other historical financial information of Community that we
deemed relevant; (iv) earnings per share estimates for TBNC
for the years ending December 31, 2006 and 2007 as provided
by, and reviewed with, senior management of TBNC;
(v) earnings per share estimates for Community for the
years ending December 31, 2006 and 2007 provided by and
reviewed with senior management of Community; (vi) the pro
forma financial impact of the Merger on TBNC, based on
assumptions relating to transaction expenses, purchase
accounting adjustments and cost savings determined by the senior
management of TBNC; (vii) the publicly reported historical
price and trading activity for TBNCs and Communitys
common stock, including a comparison of certain financial and
stock market information for TBNC and Community and similar
publicly available information for certain other companies the
securities of which are publicly traded; (viii) the
financial terms of certain recent business combinations in the
commercial banking industry, to the extent publicly available;
(ix) the current market environment generally and the
banking environment in particular; and (x) such other
information, financial studies, analyses and investigations and
financial, economic and market criteria as we considered
relevant. We also discussed with certain members of senior
management of TBNC, the business, financial condition, results
of operations and prospects of TBNC and held similar discussions
with certain members of senior management of Community regarding
the business, financial condition, results of operations and
prospects of Community.
In performing our review, we have relied upon the accuracy and
completeness of all of the financial and other information that
was available to us from public sources or that was provided to
us by TBNC and Community or their respective representatives and
have assumed such accuracy and completeness for purposes of
rendering this opinion. We have further relied on the assurances
of management of TBNC and Community that they are not aware of
any facts or circumstances that would make any of such
information inaccurate or misleading. We have not been asked to
and have not undertaken an independent verification of any of
such information and we do not assume any responsibility or
liability for the accuracy or completeness thereof. We did not
make an independent evaluation or appraisal of the specific
assets, the collateral securing assets or the liabilities
(contingent or otherwise) of TBNC or Community or any of their
subsidiaries, or the collectibility of any such assets, nor have
we been furnished with any such evaluations or appraisals. We
did not make an independent evaluation of the adequacy of the
allowance for loan losses of TBNC and Community nor have we
reviewed any individual credit files relating to TBNC and
B-1
Community. We have assumed, with your consent, that the
respective allowances for loan losses for both TBNC and
Community are adequate to cover such losses.
With respect to the earnings estimates for TBNC and Community
reviewed with the managements of TBNC and Community and used by
us in our analyses, TBNCs and Communitys managements
confirmed to us that they reflected the best currently available
estimates and judgments of the respective managements of the
respective future financial performances of TBNC and Community,
respectively, and we assumed that such performances would be
achieved. With respect to the projections of transaction
expenses, purchase accounting adjustments, cost savings and
stock repurchases determined by and reviewed with the senior
management of TBNC, management confirmed to us that they
reflected the best currently available estimates and judgments
of such management and we assumed that such performances would
be achieved. We express no opinion as to such financial
projections or the assumptions on which they are based. We have
also assumed that there has been no material change in
TBNCs or Communitys assets, financial condition,
results of operations, business or prospects since the date of
the most recent financial statements made available to us. We
have assumed in all respects material to our analysis that TBNC
and Community will remain as going concerns for all periods
relevant to our analyses, that all of the representations and
warranties contained in the Agreement and all related agreements
are true and correct, that each party to the agreements will
perform all of the covenants required to be performed by such
party under the agreements, that the conditions precedent in the
agreements are not waived and that the Merger will be a tax-free
reorganization for federal income tax purposes. Finally, with
your consent, we have relied upon the advice TBNC has received
from its legal, accounting and tax advisors as to all legal,
accounting and tax matters relating to the Merger and the other
transactions contemplated by the Agreement.
Our opinion is necessarily based on financial, economic, market
and other conditions as in effect on, and the information made
available to us as of, the date hereof. Events occurring after
the date hereof could materially affect this opinion. We have
not undertaken to update, revise, reaffirm or withdraw this
opinion or otherwise comment upon events occurring after the
date hereof. We are expressing no opinion herein as to what the
value of TBNCs common stock will be when issued to
Communitys shareholders pursuant to the Agreement or the
prices at which TBNCs or Communitys common stock may
trade at any time.
We have acted as TBNCs financial advisor in connection
with the Merger and will receive a fee for our services, a
substantial portion of which is contingent upon consummation of
the Merger. We will also receive a fee for rendering this
opinion. TBNC has also agreed to indemnify us against certain
liabilities arising out of our engagement. As you are aware, we
have provided certain other investment banking services to TBNC
in the past and have received compensation for such services.
In the ordinary course of our business as a broker-dealer, we
may purchase securities from and sell securities to TBNC and
Community and their affiliates. We may also actively trade the
equity or debt securities of TBNC and Community or their
affiliates for our own account and for the accounts of our
customers and, accordingly, may at any time hold a long or short
position in such securities.
Our opinion is directed to the Board of Directors of TBNC in
connection with its consideration of the Merger and is directed
only to the fairness, from a financial point of view, of the
Exchange Ratio to TBNC and does not address the underlying
business decision of TBNC to engage in the Merger, the relative
merits of the Merger as compared to any other alternative
business strategies that might exist for TBNC or the effect of
any other transaction in which TBNC might engage. Our opinion is
not to be quoted or referred to, in whole or in part, in a
registration statement, prospectus, proxy statement or in any
other document, nor shall this opinion be used for any other
purposes, without our prior written consent.
Based upon and subject to the foregoing, it is our opinion, as
of the date hereof, that the Exchange Ratio is fair to TBNC from
a financial point of view.
Very truly yours,
/s/ Sandler ONeill & Partners, L.P.
B-2
ANNEX C
[Letterhead
of Burke Capital Group]
April 29,
2006
Board of Directors
The Banc Corporation
17 North 20th Street
Birmingham, Alabama 35203
Members of
the Board of Directors:
The Banc Corporation (TBNC) and Community
Bancshares, Inc. (COMB) have entered into an
Agreement and Plan of Merger (the Agreement), dated
as of the 29th day of April, 2006, whereby COMB will merge
with and into TBNC (the Merger), with TBNC being the
surviving corporation and with the issued and each outstanding
share of common stock of COMB (COMB Stock) being
converted into the right to receive 0.8974 shares of common
stock (Merger Consideration) of TBNC (TBNC
Stock). The COMB option / warrant holders will receive cash
consideration at closing for the spread value ($10.50 less the
option / warrant exercise price). The terms and conditions of
the Merger are more fully set forth in the Agreement. You have
requested our opinion as to the fairness, from a financial point
of view, as of the date hereof, of the Merger Consideration that
TBNC will render.
Burke Capital Group, L.L.C. (BCG) is an investment
banking firm which specializes in financial institutions in the
United States. TBNC has retained us to render our opinion to its
Board of Directors.
In connection with this opinion, we have reviewed, among other
things:
(i) the Agreement and certain of the exhibits thereto;
(ii) certain publicly available financial statements and
other historical financial information of COMB and TBNC that we
deemed relevant;
(iii) projected earnings, budgets and estimates for COMB
and TBNC, prepared by management of COMB and TBNC;
(iv) the views of senior management of TBNC, based on
discussions with members of senior management, regarding
TBNCs business, financial condition, results of operations
and future prospects;
(v) the pro forma financial impact of the Merger on TBNC
s ability to complete a transaction from a regulatory
standpoint, based on assumptions determined by senior management
of TBNC;
(vi) a comparison of certain financial information for COMB
with similar publicly available information for certain other
companies;
(vii) the financial terms of certain recent business
combinations in the commercial banking industry, to the extent
publicly available;
(viii) the current market environment generally and the
banking environment in particular; and
(ix) such other information, financial studies, analyses
and investigations, and financial, economic and market criteria
as we considered relevant.
In performing our review, we have relied upon the accuracy and
completeness of the financial and other information that was
available to us from public sources, that COMB and TBNC or their
respective representatives provided to us or that was otherwise
reviewed. We have further relied on the assurances of management
of COMB and TBNC that they are not aware of any facts or
circumstances that would make any of such information inaccurate
or misleading. We have not been asked to and have not undertaken
an independent verification of any of such information and we do
not assume any responsibility or liability for the accuracy or
completeness thereof. We did not make an independent evaluation
or appraisal of the specific assets, the collateral securing
assets or the liabilities (contingent or otherwise) of COMB,
TBNC or any of their subsidiaries, or the collectibility of any
such assets, nor
C-1
have we been furnished with any such evaluations or appraisals.
We did not make an independent evaluation of the adequacy of the
allowance for loan losses of COMB or TBNC, nor have we reviewed
any individual credit files relating to COMB or TBNC. We have
assumed that the respective allowances for loan losses for both
COMB and TBNC are adequate to cover such losses and will be
adequate on a pro forma basis for the combined entity. With
respect to the earnings estimates for COMB and TBNC and all
projections of transaction costs, purchase accounting
adjustments and expected cost savings that we reviewed, BCG
assumed, with your consent, that they reflected the best
currently available estimates and judgments of the respective
managements of the respective future financial performances of
COMB and TBNC and that such performances will be achieved. We
express no opinion as to such earnings estimates or financial
projections or the assumptions on which they are based. We have
also assumed that there has been no material change in
COMBs or TBNCs assets, financial condition, results
of operations, business or prospects since the date of the most
recent financial statements made available to us, which is
December 31, 2005. We have assumed in all respects material
to our analysis that COMB and TBNC will remain as going concerns
for all periods relevant to our analyses, that all of the
representations and warranties contained in the Agreement and
all related agreements are true and correct, that each party to
the Agreement and such other related agreements will perform all
of the covenants they are required to perform thereunder and
that the conditions precedent in the Agreement and such other
related agreements are not waived.
Our opinion is necessarily based on financial, economic, market
and other conditions, but does not address the underlying
business or strategic decision of the merger, as in effect on,
and the information made available to us as of, the date hereof.
Events occurring after the date hereof could materially affect
this opinion. We have not undertaken to update, revise, reaffirm
or withdraw this opinion or otherwise comment upon events
occurring after the date hereof. We are expressing no opinion
herein as to what the price at which TNBCs common stock
may trade at any time.
We will receive a fee for our services as financial advisor to
TBNC. During the first quarter of 2004, an affiliate of BCG
provided investment banking services to COMB and received
compensation in the form of cash and securities for such
services.
This opinion is directed to the Board of Directors of TBNC and
may not be reproduced, summarized, described or referred to or
given to any other person without our prior consent.
Based upon and subject to the foregoing, it is our opinion that,
as of the date hereof, the Merger Consideration is fair from a
financial point of view.
Very Truly Yours,
/s/ Burke Capital Group, L.L.C.
Burke Capital Group, L.L.C.
C-2
ANNEX D
[letterhead
of FIG Partners LLC]
April 29,
2006
Board of Directors
Community Bancshares, Inc.
68149 Main Street
Blountsville, AL 35013
Dear Members of the Board:
We understand that Community Bancshares, Inc., an Alabama
corporation (Acquired Corporation), and its wholly
owned subsidiary, Community Bank, an Alabama banking corporation
(the Bank), and The Banc Corporation, an Alabama
corporation (Buyer) are about to enter into a Plan
and Agreement of Merger (the Agreement) dated
April 29, 2006, pursuant to which on the Effective Date,
the corporate existence of Acquired Corporation and of Buyer
shall, as provided in the DGCL, be merged into and continued in
the Resulting Corporation, and the Resulting Corporation shall
be deemed to be the same corporation as Acquired Corporation and
Buyer (the Merger). As set forth in Section 3.1
of the Agreement, at the Effective Date (as defined in the
Agreement) each of the outstanding shares of Acquired
Corporation Common Stock will be converted into and have the
right to receive 0.8974 shares of Buyer common stock.
Furthermore, all outstanding Acquired Corporation Options and
the outstanding Acquired Corporation Warrants shall be cancelled
and each holder of such options and the holder of such warrants
shall be entitled to receive in exchange therefore the right to
receive cash equal to the amount resulting when the number of
Acquired Corporation Options or the number of Acquired
Corporation Warrants, as the case may be, held by a holder
thereof is multiplied by the Per Unit Value as defined in the
Agreement. Additionally, as provided in the Agreement, if the
Acquired Corporation exceeds the Required Net Worth as defined
in the Agreement, then this excess shall be paid out to the
holders of the Acquired Corporation Common Stock in the form of
a dividend not to exceed fifty ($0.50) cents per share. The
forgoing shall be referred to herein as the Merger
Consideration. In connection therewith, you have requested our
opinion as to the fairness, from a financial point of view, of
the Merger Consideration to the shareholders of Acquired
Corporation.
FIG Partners LLC (FIG), as part of its investment
banking business, is continually engaged in the valuation of
businesses and their securities in connection with mergers and
acquisitions, negotiated underwritings, competitive bidding,
secondary distributions of listed and unlisted securities,
private placements and valuations for estate, corporate and
other purposes. As you are aware, in the course of its daily
trading activities, investment funds controlled by an affiliate
(as such term is defined in
Regulation 12G-2
promulgated under the Securities Exchange Act of 1934, as
amended) of FIG and their affiliates may from time to time
effect transactions and hold securities of Acquired Corporation
and/or Buyer.
We were retained by Acquired Corporation to act as its financial
advisor in connection with the Merger. We will receive
compensation from Acquired Corporation in connection with our
services. Acquired Corporation has agreed to indemnify us for
certain liabilities arising out of our engagement.
During the course of our engagement and for the purposes of the
opinion set forth herein, we have:
(i) reviewed the Agreement;
(ii) reviewed certain historical publicly available
business and financial information concerning Acquired
Corporation and Buyer;
(iii) reviewed certain internal financial statements and
other financial and operating data concerning Acquired
Corporation and Buyer;
D-1
(iv) analyzed certain financial projections prepared by the
managements of Acquired Corporation and Buyer;
(v) held discussions with members of the senior managements
of Acquired Corporation and Buyer for the purpose of reviewing
the future prospects of Acquired Corporation and Buyer,
including financial forecasts related to the respective
businesses, earnings, assets, liabilities and the amount and
timing of cost savings (the Synergies) expected to
be achieved as a result of the Merger;
(vi) reviewed the terms of recent merger and acquisition
transactions, to the extent publicly available, involving banks,
thrifts and bank and thrift holding companies that we considered
relevant; and
(vii) performed such other analyses and considered such
other factors as we have deemed appropriate.
We also took into account our assessment of general economic,
market and financial conditions and our experience in other
transactions as well as our knowledge of the banking industry
and our general experience in securities valuations.
In rendering this opinion, we have assumed, without independent
verification, the accuracy and completeness of the financial and
other information and representations contained in the materials
provided to us by Acquired Corporation and Buyer and in the
discussions with Acquired Corporation and Buyer managements. In
that regard, we have assumed that the financial forecasts,
including, without limitation, the Synergies and projections
regarding under-performing and nonperforming assets and net
charge-offs have been reasonably prepared on a basis reflecting
the best currently available information and judgments and
estimates of Acquired Corporation and Buyer and that such
forecasts will be realized in the amounts and at the times
contemplated thereby. We are not experts in the evaluation of
loan and lease portfolios for purposes of assessing the adequacy
of the allowances for losses with respect thereto and have
assumed that such allowances for Acquired Corporation and Buyer
are in the aggregate adequate to cover such losses. We were not
retained to and did not conduct a physical inspection of any of
the properties or facilities of Acquired Corporation, Buyer or
their respective subsidiaries. In addition, we have not reviewed
individual credit files nor have we made an independent
evaluation or appraisal of the assets and liabilities of
Acquired Corporation, Buyer or any of their respective
subsidiaries and we were not furnished with any such evaluations
or appraisals.
We have assumed that the Merger will be consummated
substantially in accordance with the terms set forth in the
Agreement. We have further assumed that the Merger will be
accounted for as a purchase under generally accepted accounting
principles. We have assumed that the Merger is, and will be, in
compliance with all laws and regulations that are applicable to
Acquired Corporation, the Bank, and Buyer. In rendering this
opinion, we have been advised by Acquired Corporation and Buyer
and we have assumed that there are no factors that would impede
any necessary regulatory or governmental approval of the Merger
and we have further assumed that, in the course of obtaining the
necessary regulatory and governmental approvals, no restriction
will be imposed on Buyer or the surviving corporations that
would have a material adverse effect on the surviving
corporations or the contemplated benefits of the Merger. We have
also assumed that there would not occur any change in applicable
law or regulation that would cause a material adverse change in
the prospects or operations of Buyer or any of the surviving
corporations after the Merger.
Our opinion is based solely upon the information available to us
and the economic, market and other circumstances, as they exist
as of the date hereof. Events occurring and information that
becomes available after the date hereof could materially affect
the assumptions and analyses used in preparing this opinion. We
have not undertaken to reaffirm or revise this opinion or
otherwise comment upon any events occurring or information that
becomes available after the date hereof, except as otherwise
agreed in our engagement letter.
This letter is solely for the information of the Board of
Directors of Acquired Corporation and is not to be used,
circulated, quoted or otherwise referred to for any other
purpose, nor is it to be filed with, included in or referred to
in whole or in part in any registration statement, proxy
statement or any other document, except in each case in
accordance with our prior written consent which shall not be
unreasonably withheld; provided, however, that we
D-2
hereby consent to the inclusion and reference to this letter in
any registration statement, proxy statement, information
statement or tender offer document to be delivered to the
holders of Acquired Corporation Common Stock in connection with
the Merger if and only if this letter is quoted in full or
attached as an exhibit to such document and this letter has not
been withdrawn prior to the date of such document.
Subject to the foregoing and based on our experience as
investment bankers, our activities and assumptions as described
above, and other factors we have deemed relevant, we are of the
opinion as of the date hereof that the Merger Consideration to
be received by the holders of Acquired Corporation Common Stock
pursuant to the Agreement is fair, from a financial point of
view, to the shareholders of Acquired Corporation.
Sincerely,
FIG Partners LLC
D-3
PART II
INFORMATION
NOT REQUIRED IN PROSPECTUS
ITEM 20. Indemnification
of directors and officers.
Superior
Bancorp
Section 102(b)(7) of Delaware General Corporation Law
grants corporations the right to limit or eliminate the personal
liability of their directors in certain circumstances in
accordance with provisions therein set forth. Superior
Bancorps restated certificate of incorporation contains a
provision eliminating or limiting director liability to Superior
Bancorp and its stockholders for monetary damages arising from
acts or omissions in the directors capacity as a director.
The provision does not, however, eliminate or limit the personal
liability of a director
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for any breach of such directors duty of loyalty to
Superior Bancorp or its stockholders.
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for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law.
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under the Delaware statutory provision making directors
personally liable, under a negligence standard, for unlawful
dividends or unlawful stock purchases or redemptions.
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for any transaction from which the director derived an improper
personal benefit. This provision offers persons who serve on the
board of directors of Superior Bancorp protection against awards
of monetary damages resulting from breaches of their duty of
care (except as indicated above). As a result of this provision,
the ability of Superior Bancorp or a stockholder thereof to
successfully prosecute an action against a director for a breach
of his duty of care is limited. However, the provision does not
affect the availability of equitable remedies such as an
injunction or rescission based upon a directors breach of
his duty of care. The SEC has taken the position that the
provision will have no effect on claims arising under the
federal securities laws.
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Section 145 of the Delaware General Corporation Law grants
corporations the right to indemnify their directors, officers,
employees and agents in accordance with the provisions therein
set forth. Superior Bancorps bylaws provide for mandatory
indemnification rights, subject to limited exceptions, to any
director, officer, employee, or agent of Superior Bancorp who,
by reason of the fact that he or she is a director, officer,
employee, or agent of Superior Bancorp, is involved in a legal
proceeding of any nature. Such indemnification rights include
reimbursement for expenses incurred by such director, officer,
employee, or agent in advance of the final disposition of such
proceeding in accordance with the applicable provisions of
Delaware law.
Superior Bancorp has entered into agreements with all of its
directors and its executive officers pursuant to which Superior
Bancorp has agreed to indemnify such directors and executive
officers against liability incurred by them by reason of their
services of a director to the fullest extent allowable under
applicable law.
See Item 22 of this Registration Statement on
Form S-4.
Exhibits:
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(2)-1
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Agreement and Plan of Merger
between Community Bancshares, Inc. and The Banc Corporation,
dated April 29, 2006, filed as Exhibit 10 to The Banc
Corporations Current Report on
Form 8-K
dated May 1, 2006, is hereby incorporated herein by
reference.
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(2)-2
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Agreement and Plan of Merger
between Kensington Bancshares, Inc. and The Banc Corporation,
dated March 6, 2006, filed as Exhibit 10 to The Banc
Corporations Current
Form 8-K
dated March 6, 2006, is hereby incorporated herein by
reference.
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(5)
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Opinion of Haskell Slaughter
Young & Rediker, LLC, as to legality of shares issued.
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(8)
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Form of Opinion of
Balch & Bingham LLP, as to certain tax consequences of
the merger.*
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(23)-1
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Consent of Carr, Riggs &
Ingram, LLC, as to Superior Bancorp.
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(23)-2
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Consent of Ernst & Young
LLP, as to Superior Bancorp.
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(23)-3
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Consent of Carr, Riggs &
Ingram, LLC, as to Community Bancshares, Inc.
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II-1
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(23)-4
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Consent of Haskell Slaughter
Young & Rediker, LLC, included in Exhibit 5.
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(23)-5
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Consent of Balch &
Bingham, LLP, included in Exhibit 8.
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(24)
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Power of Attorney. See signature
pages to Form S-4.
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(99)-1
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Consent of Sandler
ONeill & Partners, L.P.
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(99)-2
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Consent of Burke Capital Group,
LLC.
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(99)-3
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Consent of FIG Partners LLC.
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(99)-4
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Form of Proxy for Superior Bancorp.
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(99)-5
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Form of Proxy for Community
Bancshares, Inc.
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* |
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To be filed by amendment. |
(1) Insofar as indemnification for liabilities arising
under the Securities Act of 1933 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.
(2) The undersigned Registrant hereby undertakes as
follows: that prior to any public re-offering of the securities
registered hereunder through use of a prospectus which is part
of the registration statement, by any person or party who is
deemed to be an underwriter within the meaning of
Rule 145(c), the issuer undertakes that such re-offering
prospectus will contain the information called for by the
applicable registration form with respect to re-offerings by
persons who may be deemed underwriters, in addition to the
information called for by the other items of the applicable form.
(3) The Registrant undertakes that every prospectus:
(i) that is filed pursuant to
paragraph (2) immediately preceding, or (ii) that
purports to meet the requirements of Section 10(a)(3) of
the Act and is used in connection with an offering of securities
subject to Rule 415, will be filed as a part of an
amendment to the registration statement and will not be used
until such amendment is effective, and that, for purposes of
determining any liability under the Securities Act of 1933, each
such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered
therein, and the offering of such securities at that time shall
be deemed to be the initial bona fide offering thereof.
(4) 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 subject of and included in the
Registration Statement when it became effective.
(5) 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.
II-2
SIGNATURES
Pursuant to the requirements of the Securities Act, the
Registrant has duly caused this Registration Statement to be
signed on its behalf by the undersigned, thereunto duly
authorized in the City of Birmingham, Alabama, on August 8,
2006.
SUPERIOR BANCORP
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By:
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/s/ C.
Stanley Bailey
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C. Stanley Bailey
Chief Executive Officer
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints C. Stanley Bailey and
Rick D. Gardner, and each of them, his
attorney-in-fact
with power of substitution for him in any and all capacities, to
sign any amendments, supplements, subsequent registration
statements relating to the offering to which this Registration
relates, or other instruments he deems necessary or appropriate,
and to file the same, with exhibits thereto, and other documents
in connection therewith, with the Securities and Exchange
Commission, hereby ratifying and confirming all that said
attorney-in-fact
or his substitute may do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following
persons in the capacities and on the dates indicated.
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Signature
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Title
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Date
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/s/ C.
Stanley Bailey
C.
Stanley Bailey
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Chief Executive Officer (Principal
Executive Officer) and Director
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August 8, 2006
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/s/ James
C. Gossett
James
C. Gossett
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Chief Accounting Officer
(Principal Financial and Accounting Officer)
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August 8, 2006
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/s/ James
A. Taylor
James
A. Taylor
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Chairman of the Board
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August 8, 2006
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/s/ Roger
Barker
Roger
Barker
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Director
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August 8, 2006
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/s/ K.
Earl Durden
K.
Earl Durden
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Director
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August 8, 2006
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/s/ Rick
D. Gardner
Rick
D. Gardner
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Chief Operating Officer and
Director
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August 8, 2006
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/s/ Thomas
E. Jernigan, Jr.
Thomas
E. Jernigan, Jr.
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Director
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August 8, 2006
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/s/ James
Mailon Kent, Jr.
James
Mailon Kent, Jr.
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Director
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August 8, 2006
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II-3
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Signature
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Title
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Date
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/s/ James
M. Link
James
M. Link
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Director
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August 8, 2006
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/s/ Barry
Morton
Barry
Morton
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Director
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August 8, 2006
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/s/ Robert
R. Parrish, Jr.
Robert
R. Parrish, Jr.
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Director
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August 8, 2006
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/s/ C.
Marvin Scott
C.
Marvin Scott
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President and Director
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August 8, 2006
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/s/ Michael
E. Stephens
Michael
E. Stephens
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Director
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August 8, 2006
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/s/ James
C. White, Sr.
James
C. White, Sr.
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Director
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August 8, 2006
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II-4