<PAGE> 1
Registration No. 333-11495
As filed with the Securities and Exchange Commission on October 24, 1996
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-----------------------
PRE-EFFECTIVE AMENDMENT NO. 1
TO
FORM S-4
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
PINNACLE BANCSHARES, INC.
(Exact name of registrant as specified in charter)
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DELAWARE 6035 TO BE APPLIED FOR
- ------------------------------- ------------------------------ --------------------
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code No.) Identification Number)
</TABLE>
1811 SECOND AVENUE
JASPER, ALABAMA 35502-1388
(205) 221-4111
(Address, including zip code, and telephone number, including area code,
of registrant's principal executive offices)
EDWARD B. CROSLAND, JR., ESQUIRE
REINHART, BOERNER, VAN DEUREN, NORRIS & RIESELBACH, P.C.
601 PENNSYLVANIA AVENUE, N.W.
NORTH BUILDING - SUITE 750
WASHINGTON, D.C. 20004-2601
(202) 393-3636
(Name, address, including zip code,
and telephone number, including area code,
of agent for service)
Approximate date of commencement of proposed sale to the public:
AS SOON AS PRACTICABLE AFTER RECEIPT OF ALL REGULATORY APPROVALS.
If the securities being registered on this form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. / /
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE
OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
================================================================================
<PAGE> 2
PINNACLE BANCSHARES, INC.
CROSS-REFERENCE SHEET SHOWING THE LOCATION IN THE
PROSPECTUS OF THE ITEMS OF THE FORM S-4
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HEADINGS IN PROSPECTUS AND
ITEMS OF FORM S-4 PROXY STATEMENT
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Item 1 Forepart of Registration Statement -- Facing Page; Cross-Reference Sheet;
and Outside Front Cover Page of Outside Front Cover Page of
Prospectus Prospectus
Item 2 Inside Front and Outside Back Cover -- Outside Front Cover Page of Prospectus;
Pages of Prospectus Outside Back Cover Page of Prospectus
Item 3 Risk Factors, Ratio of Earnings to -- Summary Information on Proposed
Fixed Charges and Other Information Holding Company Formation; Proposal
III -- Proposed Conversion and
Reorganization
Item 4 Terms of the Transaction -- Proposal III - Proposed Conversion and
Reorganization
Item 5 Pro Forma Financial Information -- Not Applicable
Item 6 Material Contacts with the Company Being -- Proposal III - Proposed Conversion and
Acquired Reorganization
Item 7 Additional Information Required for -- Not Applicable
Reoffering by Persons and Parties
Deemed to be Underwriters
Item 8 Interests of Named Experts and Counsel -- Not Applicable
Item 9 Disclosure of Commission Position on -- Proposal III - Proposed Conversion and
Indemnification for Securities Act Reorganization
Liabilities
Item 10 Information With Respect to S-3 -- Not Applicable
Registrants
Item 11 Incorporation of Certain Information -- Not Applicable
By Reference
Item 12 Information With Respect to S-2 or S-3 -- Not Applicable
Registrants
Item 13 Incorporation of Certain Information -- Not Applicable
by Reference
</TABLE>
(Continued)
<PAGE> 3
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Item 14 Information with Respect to Registrants -- Market and Dividend Information;
Other Than S-3 or S-2 Registrants Proposal III - Proposed Conversion and
Reorganization
Item 15 Information With Respect to S-3 -- Not Applicable
Companies
Item 16 Information With Respect to S-2 or -- Not Applicable
S-3 Companies
Item 17 Information With Respect to Companies -- Proposal III - Proposed Conversion and
Other Than S-2 or S-3 Companies Reorganization
Item 18 Information if Proxies, Consents or
Authorizations Are to be Solicited
18(a)(1) -- Introduction
18(a)(2) -- Voting and Revocation of Proxies
18(a)(3) -- Proposal III - Proposed Conversion and
Reorganization
18(a)(4) -- Introduction; Proposal III - Proposed
Conversion and Reorganization;
Miscellaneous
18(a)(5) -- Voting Securities and Principal Holders
Thereof; Proposal I - Election of
Directors
18(a)(6) -- Voting and Revocation of Proxies;
Proposal I - Election of Directors;
Proposal II - Ratification of Appointment
of Independent Auditors; Proposal III -
Proposed Conversion and Reorganization;
Proposal IV - Approval of the Pinnacle
Bank 1996 Stock Option and Incentive
Plan; Proposal V - Adjournment of
Meeting
18(a)(7) -- Proposal I - Election of Directors;
Proposal III - Proposed Conversion and
Reorganization
Item 19 Information if Proxies, Consents or -- Not Applicable
Authorizations Are Not to be
Solicited or in an Exchange Offer
</TABLE>
<PAGE> 4
November 20, 1996
Dear Stockholder:
We invite you to attend the Annual Meeting of Stockholders (the
"Annual Meeting") of Pinnacle Bank (the "Bank") to be held at The Chamber of
Commerce of Walker County Auditorium, Jasper, Alabama on Friday, December 20,
1996 at 11:00 a.m., local time. This will be our first meeting of stockholders
since the adoption of "Pinnacle Bank" as our new corporate title.
The attached Notice of Annual Meeting and Proxy Statement/Prospectus
describe the formal business to be transacted at the Annual Meeting.
Stockholders will consider and vote upon the election of four directors and the
ratification of the Bank's independent auditors. In addition, stockholders
will be asked to consider and vote upon a proposal to both (a) convert the Bank
from a federal stock savings bank to an Alabama-chartered commercial bank (the
"Conversion") and (b) reorganize the Bank into the holding company form of
ownership by approving an Agreement and Plan of Conversion and Reorganization
under which (i) the converted Bank will become a wholly owned commercial bank
subsidiary of Pinnacle Bancshares, Inc., a Delaware corporation formed for the
purpose of becoming the holding company for the Bank (the "Holding Company"),
and (ii) each outstanding share of the common stock of the Bank will be
converted into one share of Holding Company common stock. Stockholders are
also being asked to vote upon a proposal to approve the Pinnacle Bank 1996
Stock Option and Incentive Plan (the "Option Plan").
The Board of Directors of the Bank believes that the Conversion and
Reorganization will permit diversification into a broader range of financial
and business activities and provide greater operating flexibility. The purpose
of the Option Plan is to attract, retain, and motivate the best available
personnel for positions of substantial responsibility and to provide additional
incentive to promote the success of the business of the Bank and Bancshares.
For these reasons, the Board of Directors of the Bank has unanimously approved
both proposals and recommends that you vote in favor of both proposals.
As an integral part of the Annual Meeting, we will report on the
Bank's operations. Directors and officers of the Bank will be present to
respond to any questions that our stockholders may have. Detailed information
concerning our activities and operating performance during the 1996 fiscal year
is contained in our Annual Report which also is enclosed.
YOUR VOTE IS IMPORTANT, REGARDLESS OF THE NUMBER OF SHARES YOU OWN.
Because the Plan of Conversion and Reorganization and the Option Plan require
the approval of a majority of the shares outstanding, the failure to vote or an
abstention is equivalent to a vote against both matters. On behalf of the
Board of Directors, we urge you to please sign, date and return the enclosed
proxy card in the enclosed postage-prepaid envelope as soon as possible even if
you currently plan to attend the Annual Meeting. This will not prevent you
from voting in person, but will assure that your vote is counted if you are
unable to attend the Annual Meeting.
Sincerely,
-------------------------- ----------------------------
Al H. Simmons Robert B. Nolen, Jr.
Chairman of the Board President and Director
<PAGE> 5
PINNACLE BANK
1811 SECOND AVENUE
JASPER, ALABAMA 35502-1388
(205) 221-4111
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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON DECEMBER 20, 1996
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NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders (the
"Annual Meeting") of Pinnacle Bank (the "Bank") will be held at The Chamber of
Commerce of Walker County Auditorium, Jasper, Alabama, on Friday, December 20,
1996 at 11:00 a.m., local time.
The Annual Meeting is for the following purposes, which are more
completely described in the accompanying Proxy Statement/Prospectus:
1. The election of four directors of the Bank for a term of three
years each.
2. The ratification of the appointment of Arthur Andersen LLP as
independent auditors of the Bank for the 1997 fiscal year.
3. The approval of both (a) the conversion of the Bank to an
Alabama-chartered commercial bank (the "Converted Bank") and
(b) the reorganization of the Converted Bank into the holding
company form of ownership by approving an Agreement and Plan
of Conversion and Reorganization, pursuant to which the
Converted Bank will become a wholly owned commercial bank
subsidiary of a holding company, Pinnacle Bancshares, Inc., a
Delaware corporation (the "Holding Company"), and each
outstanding share of common stock of the Bank will be
converted into one share of the common stock of the Holding
Company.
4. The approval of the Pinnacle Bank 1996 Stock Option and
Incentive Plan.
5. The adjournment of the Annual Meeting to a later date if an
insufficient number of shares is present in person or by proxy
at the Annual Meeting to approve Proposal 3 or 4 above.
6. Such other matters as may properly come before the Annual
Meeting or any adjournment thereof.
The Board of Directors is not aware of any other business to come before
the Annual Meeting.
Any action may be taken on any one of the foregoing proposals at the
Annual Meeting or any adjournments thereof. Stockholders of record at the
close of business on November 5, 1996, are the stockholders entitled to vote at
the Annual Meeting and any adjournment thereof.
You are requested to fill in and sign the enclosed proxy which is
solicited by the Board of Directors and to mail it promptly in the enclosed
envelope. The proxy will not be used if you attend and vote at the Annual
Meeting in person.
BY ORDER OF THE BOARD OF DIRECTORS
THOMAS L. SHERER
SECRETARY
Jasper, Alabama
November 20, 1996
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IMPORTANT: THE PROMPT RETURN OF PROXIES WILL SAVE THE BANK THE EXPENSE OF A
FURTHER REQUEST FOR PROXIES IN ORDER TO INSURE A QUORUM. A SELF-ADDRESSED
ENVELOPE IS ENCLOSED FOR YOUR CONVENIENCE. NO POSTAGE IS REQUIRED IF MAILED
WITHIN THE UNITED STATES.
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<PAGE> 6
PINNACLE BANK
PROXY STATEMENT FOR
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON DECEMBER 20, 1996
PINNACLE BANCSHARES, INC.
PROSPECTUS FOR
890,324 SHARES OF COMMON STOCK,
PAR VALUE $.01 PER SHARE
This Proxy Statement/Prospectus is being furnished to the holders of
common stock of Pinnacle Bank (the "Bank"), a federally chartered stock savings
bank, in connection with the solicitation of proxies by the Board of Directors
of the Bank for use at the Annual Meeting of Stockholders to be held at The
Chamber of Commerce of Walker County Auditorium, Jasper, Alabama, on Friday,
December 20, 1996, at 11:00 a.m., local time.
This Proxy Statement/Prospectus also serves as the prospectus of
Pinnacle Bancshares, Inc., a Delaware corporation (the "Holding Company"),
under the Securities Act of 1933, as amended (the "1933 Act"), with respect to
the issuance of up to a maximum of 890,324 shares of the Holding Company's
common stock, par value $.01 per share ("Holding Company Common Stock"), in the
Conversion and Reorganization described herein. The accompanying Notice of
Annual Meeting and this Proxy Statement/Prospectus are first being mailed to
stockholders on or about November 20, 1996.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION ("SEC"), THE OFFICE OF THRIFT SUPERVISION
("OTS") OR ANY STATE SECURITIES AUTHORITY NOR HAS ANY SUCH COMMISSION, OFFICE
OR AUTHORITY PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROXY
STATEMENT/PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
This Proxy Statement/Prospectus does not contain all the information
set forth in the Registration Statement which the Holding Company has filed
with the SEC under the 1933 Act. The Registration Statement, including
exhibits, may be inspected without charge or copied at prescribed rates at the
office of the SEC, Public Reference Section, 450 Fifth Street, N.W.,
Washington, D.C. 20549.
The Bank is subject to the informational reporting requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and, in
accordance therewith, files reports, proxy statements and other information
with the OTS of the United States Department of the Treasury. Copies may be
obtained at prescribed rates from the OTS, Information Services Division, 1776
G Street, N.W., Washington, D.C. 20552.
THE SECURITIES OFFERED HEREBY ARE NOT SAVINGS ACCOUNTS OR DEPOSITS AND
ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE SAVINGS
ASSOCIATION INSURANCE FUND OR ANY OTHER GOVERNMENT AGENCY.
THE DATE OF THIS PROXY STATEMENT/PROSPECTUS IS NOVEMBER ___, 1996.
<PAGE> 7
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SUMMARY INFORMATION
ON
PROPOSED CONVERSION AND REORGANIZATION
- --------------------------------------------------------------------------------
THE FOLLOWING SUMMARY DOES NOT PURPORT TO BE COMPLETE AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO THE MORE DETAILED INFORMATION APPEARING
ELSEWHERE IN THIS PROXY STATEMENT/PROSPECTUS UNDER "PROPOSAL III -- PROPOSED
HOLDING COMPANY FORMATION" AND EXHIBITS I, II, III AND IV ATTACHED HERETO.
GENERAL
The conversion (the "Conversion") to an Alabama-chartered commercial
bank (the "Converted Bank") and the holding company reorganization (the
"Reorganization") will be accomplished under an Agreement and Plan of
Conversion and Reorganization, dated October 9, 1996 (the "Plan"), pursuant to
which the Converted Bank will become a wholly owned commercial bank subsidiary
of the Holding Company, a Delaware corporation formed for the purpose of
becoming the holding company for the Converted Bank (collectively, the
"Conversion and Reorganization"). Under the terms of the proposed Conversion
and Reorganization, each outstanding share of the Bank's common stock, par
value $.01 per share ("Bank Common Stock"), will be converted into one share of
common stock, par value $.01 per share, of the Holding Company ("Holding
Company Common Stock"). As a result of the Conversion and Reorganization, the
former holders of Bank Common Stock will become the holders of all of the
outstanding Holding Company Common Stock, and the Holding Company will become
the sole stockholder of the Converted Bank, which will be an Alabama-chartered
commercial bank. The Holding Company was incorporated in August 1996 and has
no prior operating history. Following the Conversion and Reorganization, it is
intended that the Converted Bank will continue its operations at the same
locations, with the same management and subject to all the rights, obligations
and liabilities of the Bank existing immediately prior to the Reorganization.
The Board of Directors of the Bank intends that the Reorganization
will occur immediately after, and on the same day as, the Conversion. The Bank
will not complete the Conversion unless and until all conditions precedent to
the Reorganization except the Conversion have been met.
The Plan supersedes a Plan of Reorganization, dated August 28, 1996,
pursuant to which the Bank would have become a subsidiary of the Holding
Company, which would have been established as a unitary savings and loan
holding company. For the reasons set forth below, the Bank has concluded that
the holding company formation should be combined with a conversion to a
commercial bank charter.
REASONS FOR THE CONVERSION AND REORGANIZATION
THE CONVERSION. The Board of Directors of the Bank believes that both
the commercial bank conversion and the holding company structure will provide
greater flexibility than is currently enjoyed by the Bank, or would be enjoyed
by the Converted Bank. Present regulations applicable to federal savings banks
limit both the types of businesses in which a federal savings bank or a
state-chartered commercial bank, or the subsidiaries of either, may engage.
The Bank is also limited in its ability to engage in certain corporate
transactions, such as stock repurchases, by certain provisions of the Internal
Revenue Code of 1986, as amended (the "Code"), applicable to federal savings
banks.
The Conversion is intended to allow the Converted Bank to continue to
pursue its expanding lines of business. Commercial banks have expanded lending
and investment powers, which exceed those of federal savings institutions.
Historically, the Bank's line of business was the origination of residential
real estate mortgages. The Bank believes that it will be able to take
advantage of other powers available to commercial banks and operate more
efficiently as a result. In particular, the Bank believes that its increased
emphasis on construction and commercial lending can be more effectively
developed if the Converted Bank operates under regulatory requirements
applicable to an Alabama-chartered commercial bank rather than a
federally-chartered savings institution.
In addition, the Bank believes that the banking and thrift industries
are now in a transitional period before the likely merger of the savings
institution charter into the commercial bank charter. Several legislative
(i)
<PAGE> 8
proposals have been have or will be introduced that would have the effect of
requiring savings institutions to convert to banks, and the Clinton
Administration has announced that it will actively pursue passage of such
legislation in 1997. While the Bank cannot predict the timing of the thrift
industry's consolidation into the commercial banking industry, it believes that
the best interests of the Bank and its stockholders would be served if, by
converting to a commercial bank at this time, it adjusted to a new regulatory
structure and to operation as a commercial bank on its own terms rather than
being required to convert at a later date.
THE REORGANIZATION. The establishment of the Holding Company also
will permit diversification of operations and the acquisition and formation of
companies engaged in lines of business which should help to reduce the risks
inherent in an industry which is sensitive to interest rate changes. Moreover,
a holding company structure will help facilitate the acquisition of other
financial institutions. The Holding Company presently does not intend to
operate more than one commercial bank subsidiary. The Bank's Board of
Directors believes that acquisition or formation of such enterprises, which do
not have the degree of asset and liability interest rate sensitivity inherent
in the structure of a savings association, will provide a beneficial
stabilizing effect on operations. Upon consummation of the Reorganization, the
Holding Company will be in a position to take immediate advantage of any
acquisition opportunities which may arise, although no specific acquisition is
planned at this time. For further information, see "Proposal III -- Proposed
Conversion and Reorganization -- Reasons for the Holding Company
Reorganization."
MARKET FOR BANK COMMON STOCK
The Bank Common Stock is traded on the American Stock Exchange under
the symbol "PLE". The Holding Company and the Bank will apply to have the
Holding Company Common Stock traded on the American Stock Exchange in
substitution for the Bank Common Stock, under the same symbol. Although the
Holding Company and the Bank do not currently anticipate any difficulty in
obtaining approval of the listing, no assurance can be given that the Holding
Company Common Stock will be approved for American Stock Exchange listing. See
"Market and Dividend Information."
DIVIDENDS
The ability of the Bank to pay dividends on Bank Common Stock is
restricted by certain federal regulations and tax considerations. Although the
Holding Company would not be subject to these restrictions, the Holding
Company's principal source of income initially will consist of its equity in
the earnings of the Converted Bank. In addition, certain limitations generally
imposed on Delaware corporations may have an impact on the Holding Company's
ability to pay dividends. See "Proposal III -- Proposed Conversion and
Reorganization -- Comparison of Stockholders' Rights -- Payment of Dividends,"
"-- Regulation of the Converted Bank -- Dividend Restrictions" and "Market and
Dividend Information."
DISSENTERS' RIGHTS OF APPRAISAL
Pursuant to Alabama law, stockholders of the Bank will have
dissenters' rights in connection with the Reorganization. Such rights will
entitle stockholders who do not vote in favor of the Conversion and
Reorganization and who comply with certain other conditions to receive the fair
value or appraised value of their shares of Bank Common Stock rather than
having such shares converted into shares of Holding Company Common Stock. The
Plan states that it is a condition to consummation of the Conversion and
Reorganization that the holders of not more than 10% of the Bank Common Stock
exercise their dissenters' rights. Such condition to the Reorganization may be
waived by the parties in the discretion of the Board of Directors. See
"Proposal III -- Proposed Conversion and Reorganization -- Rights of Dissenting
Stockholders" and Exhibit I hereto.
MANAGEMENT OF THE HOLDING COMPANY
The Board of Directors of the Holding Company presently consists of 10
members, all of whom are currently members of the Board of Directors of the
Bank, and is expected to continue with 10 members upon completion of the
Reorganization. The Bank currently has 10 members on its Board of Directors.
The officers of the Holding Company will consist of persons now serving as
officers of the Bank. See "Proposal III -- Proposed Conversion and
Reorganization -- Management of Pinnacle Bancshares, Inc."
(ii)
<PAGE> 9
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The Conversion and Reorganization is intended to be treated as one or
more tax-free reorganizations within the meaning of Section 368(a) of the
Internal Revenue Code of 1986, as amended (the "Code"). Generally, no gain or
loss should be recognized for federal income tax purposes by holders of the
Bank Common Stock as a result of the Conversion and Reorganization, except a
gain or loss will be recognized with respect to cash received by dissenters, if
any. A non-waivable condition to consummation of the Conversion and
Reorganization is the receipt by the Bank of an opinion of Reinhart, Boerner,
Van Deuren, Norris and Rieselbach, P.C., Washington, D.C., as to the
qualification of the Conversion and Reorganization as one or more tax-free
reorganizations and certain other federal income tax consequences of the
Conversion and Reorganization. See "Proposed III -- Proposal Conversion and
Reorganization -- Certain Federal Income Tax Consequences."
BECAUSE CERTAIN TAX CONSEQUENCES OF THE CONVERSION AND REORGANIZATION
MAY VARY DEPENDING UPON THE PARTICULAR CIRCUMSTANCES OF EACH HOLDER OF BANK
COMMON STOCK AND OTHER FACTORS, EACH SUCH HOLDER IS URGED TO CONSULT HIS OR HER
OWN TAX ADVISOR TO DETERMINE THE PARTICULAR TAX CONSEQUENCES TO SUCH HOLDER OF
THE CONVERSION AND REORGANIZATION (INCLUDING THE APPLICATION AND EFFECT OF
STATE AND LOCAL INCOME AND OTHER TAX LAWS).
CONDITIONS TO THE CONVERSION AND REORGANIZATION
The Plan sets forth a number of conditions which must be met before
the Conversion and Reorganization will be consummated, including, among others:
(i) approval of the Plan by the holders of a majority of the outstanding shares
of Bank Common Stock; (ii) receipt of either a ruling from the IRS or an
opinion of legal counsel or independent auditors that the Conversion and
Reorganization will be treated as a non-taxable transaction for federal income
tax purposes; (iii) approval of the Conversion and Reorganization by any
federal or state agency having jurisdiction necessary for consummation of the
Conversion and Reorganization; (iv) registration of the shares of Holding
Company Common Stock to be issued in the Reorganization under the 1933 Act and
compliance by the Holding Company with all applicable state securities laws
relating to the issuance of the Holding Company Common Stock; and (v) the
holders of not more than 10% of the outstanding shares of Bank Common Stock
shall have elected to exercise dissenting stockholder rights under Alabama law.
Satisfaction of each of the first four of these conditions is required and not
waivable prior to consummation of the Conversion and Reorganization. See
"Proposal III -- Proposed Conversion and Reorganization -- Conditions to the
Conversion and Reorganization."
COMPARISON OF STOCKHOLDERS' RIGHTS
As a result of the Conversion and Reorganization, holders of Bank
Common Stock, whose rights are presently governed by federal law and
regulations and the Federal Stock Charter and Bylaws of the Bank, will become
stockholders of the Holding Company, a Delaware corporation. Accordingly,
their rights will be governed by the Delaware General Corporation Law and the
Certificate of Incorporation and Bylaws of the Holding Company. Certain
differences arise from this change of governing law, as well as from
distinctions between the Federal Stock Charter and Bylaws of the Bank and the
Certificate of Incorporation and Bylaws of the Holding Company. These
differences relate to the issuance of capital stock, payment of dividends,
special meetings of stockholders, the rights of stockholders to dissent,
vacancies on the Board of Directors, the number of directors, removal of
directors, approval of mergers, consolidations, sale of substantially all
assets and certain business combinations, advance notice requirements for
nominations of directors and presentation of new business at meetings of
stockholders and procedures for amendment of the Federal Stock Charter and
Bylaws of the Bank as compared to the Certificate of Incorporation and Bylaws
of the Holding Company. Further, the Holding Company, as a general business
corporation, will be able to enter into more lines of business than the Bank,
which, as a federal savings bank, is restricted in the businesses in which it
may engage. See "Proposal III -- Proposed Conversion and Reorganization --
Comparison of Stockholders' Rights."
(iii)
<PAGE> 10
CERTIFICATE OF INCORPORATION, BYLAWS AND STATUTORY PROVISIONS THAT COULD
DISCOURAGE ACQUISITIONS OF CONTROL
The Holding Company's Certificate of Incorporation and Bylaws contain
certain provisions that could discourage non-negotiated takeover attempts which
certain stockholders might deem to be in their interests or through which
stockholders might otherwise receive a premium for their shares over the
then-current market price and that may tend to perpetuate existing management.
These provisions include supermajority approval requirements for certain
business combinations and provisions allowing the Board of the Holding Company
to consider nonmonetary factors in evaluating a business combination or a
tender or exchange offer. The Certificate of Incorporation also authorizes the
issuance of additional shares of Holding Company Common Stock without
stockholder approval on terms or in circumstances that could deter a future
takeover attempt. In addition, the Delaware General Corporation Law provides
for certain restrictions on acquisition of the Holding Company. These charter,
bylaw and statutory provisions may have the effect of discouraging or
preventing a future takeover attempt in which stockholders of the Holding
Company otherwise might receive a substantial premium for their shares over
then-current market prices. See "Proposal III -- Proposed Conversion and
Reorganization -- Comparison of Stockholders' Rights" and "-- Certain
Anti-Takeover Provisions of the Certificate of Incorporation and Bylaws."
In addition to the provisions described above, the Holding Company's
Certificate of Incorporation contains provisions authorized by Delaware law,
and the Converted Bank's Articles of Incorporation contain provisions
authorized by Alabama law, that indemnify directors and officers of the
respective companies in certain proceedings against them and impose limitations
on directors' liability. There are no such provisions in the Bank's Federal
Stock Charter, although OTS regulations authorize indemnification of directors
and officers under certain circumstances. Directors and officers of the Bank
thus may be deemed to have a personal interest in the consummation of the
Reorganization. See "Proposal III -- Proposed Conversion and Reorganization --
Management of the Holding Company," and "-- Indemnification of Officers and
Directors and Limitation of Liability."
RECOMMENDATION OF THE BOARD OF DIRECTORS
The Board of Directors of the Bank believes that the ability to expand
and diversify through the Conversion and Reorganization will help the Converted
Bank remain competitive in the future. Approval of the Plan requires the
affirmative vote of a majority of the total votes eligible to be cast at the
Annual Meeting. As of November 5, 1996, directors and executive officers of
the Bank as a group beneficially owned 74,700 shares, or 8.4% of the
outstanding Bank Common Stock. The Bank anticipates that all such shares will
be voted for the Plan of Reorganization. THE BOARD OF DIRECTORS OF THE BANK
HAS UNANIMOUSLY APPROVED THE CONVERSION AND REORGANIZATION AND RECOMMENDS THAT
THE STOCKHOLDERS VOTE "FOR" THE PLAN.
SELECTED FINANCIAL DATA
The following table presents selected financial information for the
Bank. This information is derived from the financial statements of the Bank.
The information set forth below should be read in conjunction with such
financial statements and the notes thereto contained in the Annual Report to
Stockholders for the fiscal year ended June 30, 1996 (the "Annual Report")
which accompanies this Proxy Statement/Prospectus. All financial statements of
Pinnacle Bancshares, Inc. have been omitted because the Holding Company has no
assets and no liabilities and has not conducted any business other than of an
organizational nature. Conversion to a commercial bank charter will have no
effect on the Bank's financial condition.
(iv)
<PAGE> 11
FINANCIAL CONDITION AND
OTHER DATA:
<TABLE>
<CAPTION>
At June 30,
------------------------------------------------------------------
1992 1993 1994 1995 1996
---- ---- ---- ---- ----
(Dollars in thousands)
<S> <C> <C> <C> <C> <C>
Total amount of:
Assets . . . . . . . . . . $176,327 $171,759 $176,486 $196,399 $186,475
Loans and mortgage-
backed securities . . . . 142,797 134,538 137,410 150,596 147,468
Interest-bearing deposits
in other banks . . . . . 1,976 828 108 5,536 2,824
Securities . . . . . . . . 18,728 23,686 29,859 28,026 26,847
Loans held for sale . . . . 1,580 3,495 61 2,091 326
Deposits . . . . . . . . . 157,793 149,362 149,566 161,212 165,234
Borrowed funds . . . . . . 2,180 6,227 11,055 18,850 3,750
Stockholders' equity . . . 13,856 13,321 13,473 14,363 15,165
Number of:
Real estate loans
outstanding . . . . . . . 4,905 4,324 4,503 4,283 4,173
Savings accounts . . . . . 21,669 20,485 19,748 19,387 19,114
Full service offices open . 5 5 5 5 5
Regulatory Capital Ratios:
Tangible . . . . . . . . . 7.46% 7.38% 7.29% 7.07% 8.0%
Core . . . . . . . . . . . 7.85 7.77 7.64 7.07 8.0
Risk-based . . . . . . . . 17.34 17.20 16.74 13.83 14.2
</TABLE>
<TABLE>
<CAPTION>
OPERATING DATA:
Year Ended June 30,
------------------------------------------------------------------
1992 1993 1994 1995 1996
---- ---- ---- ---- ----
(In thousands)
<S> <C> <C> <C> <C> <C>
Interest revenue . . . . . . $15,503 $12,956 $11,554 $13,108 $14,650
Interest expense . . . . . . 10,085 7,347 6,167 7,541 8,599
------- ------- ------- ------- -------
Net interest income before
provisions for losses on
loans . . . . . . . . . . . 5,418 5,609 5,387 5,567 6,051
Provision for losses on loans 280 320 285 235 240
------- ------- ------- ------- -------
Net interest income after
provision for losses
on loans . . . . . . . . . 5,138 5,289 5,102 5,332 5,811
Noninterest income . . . . . 1,553 1,524 1,564 1,012 1,275
Noninterest expense . . . . . 4,570 4,418 4,469 4,323 4,456
Unusual items . . . . . . . . -- (2,150) (363) -- --
Income tax expense . . . . . (758) (189) (653) (780) (993)
------- ------- ------- ------- -------
Net earnings . . . . . . . . $ 1,363 $ 56 $ 1,181 $ 1,241 $ 1,637
======= ======= ======= ======= =======
</TABLE>
<TABLE>
<CAPTION>
PER SHARE DATA:
At or For Year Ended June 30,
------------------------------------------------------------------
1992 1993 1994 1995 1996
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Net earnings . . . . . . . . $ 1.55 $ 0.06 $ 1.33 $ 1.39 $ 1.84
Dividends . . . . . . . . . . 0.60 0.69 0.72 0.72 0.72
Book value . . . . . . . . . 15.74 15.07 15.20 16.14 17.04
</TABLE>
(v)
<PAGE> 12
PROXY STATEMENT/PROSPECTUS
PINNACLE BANK
PINNACLE BANCSHARES, INC.
1811 SECOND AVENUE
P.O. BOX 1388
JASPER, ALABAMA 35502-1388
(205) 221-4111
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD
DECEMBER 20, 1996
INTRODUCTION
This Proxy Statement/Prospectus is furnished in connection with the
solicitation of proxies by the Board of Directors of Pinnacle Bank (the "Bank")
for the Annual Meeting of Stockholders (the "Annual Meeting") to be held at The
Chamber of Commerce of Walker County Auditorium, Jasper, Alabama on Friday,
December 20, 1996, at 11:00 a.m., local time. The Bank has extended the date
of the Annual Meeting in order to prepare the various regulatory filings
related to the proposed commercial bank conversion and holding company
reorganization which will be considered and voted on at the Annual Meeting. To
facilitate such an extension, the Board of Directors of the Bank has adopted,
and the Office of Thrift Supervision ("OTS") has approved, a one-time amendment
to the Bank's Bylaws to provide for the Annual Meeting to be held within 180
days after the end of the fiscal year ended June 30, 1996, rather than the
normal 120 days (i.e., on or before December 27, 1996).
The Bank was formerly known as "First Federal of Alabama, F.S.B." and
adopted its current name in January 1996. The accompanying Notice of Annual
Meeting and this Proxy Statement/Prospectus, together with the enclosed form of
proxy, are first being mailed to stockholders on or about November 20, 1996.
VOTING AND REVOCATION OF PROXIES
Proxies solicited by the Board of Directors of the Bank, will be voted
in accordance with the directions given therein. WHERE NO INSTRUCTIONS ARE
GIVEN, PROPERLY EXECUTED PROXIES WHICH HAVE NOT BEEN REVOKED WILL BE VOTED FOR
THE NOMINEES FOR DIRECTOR SET FORTH BELOW AND IN FAVOR OF EACH OF THE OTHER
PROPOSALS SET FORTH IN THIS PROXY STATEMENT/PROSPECTUS FOR CONSIDERATION AT THE
ANNUAL MEETING. The proxy confers discretionary authority on the persons named
therein to vote with respect to the election of any person as a director where
the nominee is unable to serve or for good cause will not serve, and with
respect to matters incident to the conduct of the Annual Meeting. If any other
business is presented at the Annual Meeting, proxies will be voted by those
named therein in accordance with the determination of a majority of the Board
of Directors. Proxies marked as abstentions will not be counted as votes cast.
In addition, shares held in street name which have been designated by brokers
on proxy cards as not voted ("broker no votes") will not be counted as votes
cast. Proxies marked as abstentions or as broker no votes, however, will be
treated as shares present for purposes of determining whether a quorum is
present.
Stockholders who execute the form of proxy enclosed herewith retain
the right to revoke such proxies at any time prior to exercise. Unless so
revoked, the shares represented by properly executed proxies will be voted at
the Annual Meeting and all adjournments thereof. Proxies may be revoked at any
time prior to exercise by written notice to the Secretary of the Bank or by the
filing of a properly executed, later-dated proxy. A proxy will not be voted if
a stockholder attends the Annual Meeting and votes in person. The presence of
a stockholder at the Annual Meeting alone will not revoke such stockholder's
proxy.
1
<PAGE> 13
VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF
The securities which can be voted at the Annual Meeting consist of
shares of the Bank's common stock, $.01 par value per share ("Bank Common
Stock"). Stockholders of record as of the close of business on November 5,
1996 (the "Record Date") are entitled to one vote for each share of Bank Common
Stock then held on all matters. As of the Record Date, 889,824 shares of the
Bank Common Stock were issued and outstanding. In addition, 42,176 shares of
Bank Common Stock were held as treasury stock. The presence, in person or by
proxy, of at least a majority of the total number of shares of Bank Common
Stock outstanding and entitled to vote will be necessary to constitute a quorum
at the Annual Meeting. Pursuant to OTS regulations and the Bank's Bylaws,
treasury shares shall not be voted at any meeting or counted in determining the
total number of outstanding shares at any given time for purposes of any
meeting.
The following table sets forth, as of the Record Date, certain
information as to the persons believed by management to be the beneficial
owners of more than 5% of the outstanding shares of Bank Common Stock and as to
the shares of Bank Common Stock beneficially owned by all executive officers
and directors of the Bank as a group. Persons and groups owning in excess of
5% of Bank Common Stock are required to file certain reports regarding such
ownership with the Bank and the OTS pursuant to the Securities Exchange Act of
1934, as amended (the "Exchange Act"). This information is based on the most
recent reports filed by such persons with the OTS or information provided to
the Bank by such persons.
<TABLE>
<CAPTION>
Percent of Shares
Name and Address of Amount and Nature of of Common Stock
Beneficial Owners Beneficial Ownership(1) Outstanding
- ------------------------ ----------------------- --------------------
<S> <C> <C>
All Executive Officers and 74,700 (2) 8.4%
Directors as a Group
(11 persons)
Heartland Advisors, Inc. 87,551 (3) 9.8%
790 N. Milwaukee Street
Milwaukee, Wisconsin
</TABLE>
- -------------------------
(1) In accordance with Rule 13d-3 under the Exchange Act, a person is
considered to "beneficially own" any shares of Bank Common Stock (a)
over which he has or shares voting or investment power, or (b) of
which he has the right to acquire beneficial ownership at any time
within 60 days of the Record Date. As used herein, "voting power" is
the power to vote or direct the vote of shares, and "investment power"
is the power to dispose or direct the disposition of shares.
(2) Includes shares owned directly by directors and officers of the Bank
as well as shares held by their spouses and minor children and trusts
of which certain directors are trustees, but does not include shares
held or beneficially owned by other relatives as to which they
disclaim beneficial ownership. Excludes shares of Bank Common Stock
underlying options granted under the Pinnacle Bank 1996 Stock Option
and Incentive Plan (the "Option Plan") which are subject to
stockholder approval of the Option Plan.
(3) Heartland Advisors, Inc., a registered investment advisor, reported
sole dispositive power of 87,551 shares and sole voting power of
15,600 shares as of December 31, 1995. Included in such 87,551 shares
are 67,800 shares which are beneficially owned by Heartland Group,
Inc., a series investment company for which Heartland Advisors, Inc.
serves as investment advisor.
Section 16(a) of the Exchange Act requires the Bank's officers and
directors, and persons who own more than 10% of a registered class of the
Bank's equity securities, to file reports of ownership and changes in ownership
with the OTS. Officers, directors and greater than 10% stockholders are
required to furnish the Bank with copies of all such reports. Based solely on
its review of copies of such reports received by it, or written representations
from certain reporting persons that no annual report of change in beneficial
ownership is required, the Bank believes that, during the year ended June 30,
1996, all such filing requirements were complied with.
2
<PAGE> 14
PROPOSAL I -- ELECTION OF DIRECTORS
The Bylaws of the Bank require that directors be divided into three
classes, as nearly equal in number as possible, the members of each class to
serve for a term of three years and until their successors are elected and
qualified. As a result of the recent death of John D. Baird, the Board of
Directors amended the Bylaws to reduce the size of the Board from 11 members to
10 members. The Board of Directors has nominated O. H. Brown, Sam W. Murphy
and J. T. Waggoner, to serve for three-year terms or until their successors are
elected and qualified. To equalize the classes, the Board has also nominated
James W. Cannon to serve for a two-year term or until his successor is elected
and qualified.
It is intended that the persons named in the proxies solicited by the
Board of Directors will vote for the election of the named nominees.
Stockholders are not entitled to cumulate their votes for the election of
directors. .If any nominee is unable to serve, the shares represented by all
valid proxies will be voted for the election of such substitute director as the
Board of Directors may recommend or the Board of Directors may reduce the
number of directors to eliminate the vacancy.
Neither the Bank's Federal Stock Charter or Bylaws nor applicable
federal regulations specify the vote required to elect a director of a federal
savings bank. Alabama law provides that directors shall be elected by a
majority of the votes cast by the shares entitled to vote in the election at a
meeting at which a quorum is present when the vote is taken. Such a vote will
be required in the election of directors at the Annual Meeting.
The following table sets forth for each nominee and for each director
continuing in office, such person's name, age, the year he first became a
director and the number of shares and percentage of Bank Common Stock
beneficially owned.
3
<PAGE> 15
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE NOMINEES NAMED
BELOW AS DIRECTORS OF THE BANK.
<TABLE>
<CAPTION>
YEAR FIRST
ELECTED PRESENT SHARES OF
OR TERM COMMON STOCK PERCENT
APPOINTED TO BENEFICIALLY, OF
NAME AGE(1) DIRECTOR EXPIRE OWNED (2) CLASS
---- ------ -------- ------ -------------- -----
<S> <C> <C> <C>
BOARD NOMINEES FOR TERMS TO EXPIRE IN 1999
O. H. Brown 51 1989 1996 3,600 *
Sam W. Murphy 49 1981 1996 9,430 1.06%
J. T. Waggoner 59 1996 1996 44 *
BOARD NOMINEE FOR TERM TO EXPIRE IN 1998
James W. Cannon 52 1990 1996 7,749 *
DIRECTORS CONTINUING IN OFFICE
Carlton Mayhall, Jr. 57 1983 1997 2,999 *
Robert B. Nolen, Jr. 37 1994 1997 834 *
Max W. Perdue 62 1991 1997 2,528 *
Al H. Simmons 49 1979 1997 40,356 4.54%
Greg Batchelor 40 1983 1998 3,010 *
Melvin R. Kacharos 69 1989 1998 2,150 *
</TABLE>
- ----------------
* Less than 1% of shares outstanding.
- ------------------------
(1) At June 30, 1996.
(2) At the Record Date. In accordance with Rule 13d-3 under the Exchange
Act, a person is considered to "beneficially own" any shares of Bank
Common Stock (a) over which he has or shares voting or investment
power, or (b) of which he has the right to acquire beneficial
ownership at any time within 60 days of the Record Date. As used
herein, "voting power" is the power to vote or direct the vote of
shares, and "investment power" is the power to dispose or direct the
disposition of shares. Includes shares owned directly by the named
individuals as well as shares held by their spouses and minor children
and trusts of which certain of such persons are trustees, but does not
include shares held or beneficially owned by other relatives as to
which they disclaim beneficial ownership. See "Voting Securities and
Principal Holders Thereof."
4
<PAGE> 16
Listed below is certain information about the principal occupations of
the Board nominees and the other directors of the Bank. Unless otherwise
noted, all such persons have held these positions for at least five years.
O. H. BROWN, is a certified public accountant, presently with the
accounting firm of Lapidus, Tuck, Raymond & Fowler, P.C., Jasper, Alabama.
From 1976 to June 1991, Mr. Brown had his own accounting practice also in
Jasper, Alabama.
SAM W. MURPHY is Chairman of the Board, Chief Executive Officer and
Sales Manager of Murphy Furniture Manufacturing Co., Inc., a furniture
manufacturer located in Jasper.
J. T. WAGGONER is Vice President, Community and Public Affairs,
HealthSouth Corporation, Birmingham, Alabama. He also serves as an Alabama
State Senator.
JAMES W. CANNON is Senior Vice President - Operations of Burton
Manufacturing Company, a manufacturer of golf bags.
CARLTON MAYHALL, JR. has been a circuit judge with the State of
Alabama Judicial Department since 1971. Judge Mayhall is also a director of
First National Bank of Hamilton, Alabama. Judge Mayhall resides in Hamilton,
Alabama.
ROBERT B. NOLEN, JR. joined the Bank in 1987 as First Vice President,
Chief Financial Officer and Treasurer. In 1990, Mr. Nolen was appointed
Executive Vice President of the Bank, and in 1994, Mr. Nolen was appointed
President and Chief Executive Officer of the Bank.
MAX W. PERDUE retired in 1991 as Jasper, Alabama District Manager of
the Alabama Power Company having served with the company for thirty years in
various engineering and management positions. Mr. Perdue is past-president of
the Jasper Area Chamber of Commerce.
AL H. SIMMONS joined the Bank in 1973 and served as President of the
Bank from 1979 until 1994. In October 1989, Mr. Simmons was elected Chairman
of the Board of Directors. Mr. Simmons is the son of Chairman of the Board
Emeritus A. R. Simmons.
GREG BATCHELOR has been President of Dependable True Value Hardware,
Inc. in Russellville, Alabama since 1992. Prior to that, he was Manager.
MELVIN R. KACHAROS was Executive Vice President of Vulcan Asphalt,
Inc., Cordova, Alabama, from which position he retired in 1988. Mr. Kacharos
is a Lieutenant Colonel, Retired, of the U.S. Army Reserve.
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors conducts it business through meetings of the
Board and through its committees. During the fiscal year ended June 30, 1996
the Board of Directors held 12 meetings. No director of the Bank attended
fewer than 75% of the total meetings of the Board of Directors and committee
meetings for committees on which such Board member served during this period.
The Executive Committee, currently composed of Directors Perdue,
Kacharos, Murphy, Brown, Simmons and Nolen, meets when deemed necessary by the
President of the Bank to discuss and approve any business coming before the
Board between monthly Board meetings. During the year ended June 30, 1996 the
Executive Committee held 12 meetings.
The Audit Committee, composed of Directors Perdue, Murphy and Brown,
is responsible for the review and evaluation of the Bank's annual audit reports
with the Bank's independent auditors and reports all findings and
recommendations to the Board of Directors. The audit committee also directs
the activities of the Bank's internal auditor. During the year ended June 30,
1996 the Audit Committee held four meetings.
5
<PAGE> 17
The Compensation Committee, currently composed of Directors Perdue and
Cannon, meets annually or at the direction of the Bank's President to review
and adjust employee salaries. During the year ended June 30, 1996 the
Compensation Committee held four meetings. Members of the Compensation
Committee also serve as the Stock Option Committee of the Bank. During the
year ended June 30, 1996, the Stock Option Committee did not meet.
The Board of Directors also serves as a Nominating Committee for
selecting the management nominees for election as directors. While the Board
of Directors will consider nominees recommended by stockholders, it has not
actively solicited recommendations from the Bank's stockholders for nominees,
nor has it established any procedures for this purpose. The Board of Directors
held one meeting in its capacity as the Nominating Committee to nominate the
individuals named herein for election as directors at the Annual Meeting.
Nominations for election as directors shall be made in accordance with
the Bank's Bylaws. Copies of such Bylaws may be requested by a stockholder of
record, by writing to the Secretary of the Bank at the Bank's main office.
Nominations by stockholders are required to be received by the Secretary of the
Bank on or before November 20, 1996.
EXECUTIVE COMPENSATION
The following table sets forth the cash and noncash compensation for
the fiscal year ended June 30, 1996 awarded to or earned by the Chief Executive
Officer. No other executive officer of the Bank earned in excess of $100,000
in salary and bonus during the fiscal year.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long-Term Compensation
--------------------------------------------
Annual Compensation Awards Payouts
------------------------------------ ------------------------------------ -------
Restricted Securities All Other
Name and Fiscal Other Annual Stock Underlying LTIP Compen-
Principal Position Year Salary Bonus Compensation(1) Award(s) Options(2) Payouts sation(3)
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Robert B. Nolen, Jr. 1996 $80,696 $25,000 $ $ $ $2,424
President, Chief 1995 72,782 22,000 -- -- -- -- 1,929
Executive Officer 1994 72,782 10,000 -- -- -- -- 2,069
</TABLE>
- -------------
(1) Executive officers of the Bank receive indirect compensation in the
form of certain perquisites and other personal benefits. The amount
of such benefits in the fiscal year by the named executive officer did
not exceed 10% of the executive's annual salary and bonus.
(2) No options were granted or exercised during the year ended June 30,
1996.
(3) Represents contributions under the Bank's 401(k) plan.
DIRECTORS' COMPENSATION
Directors currently each receive a monthly fee of $600. Members of
the Executive Committee also receive a fee of $200 per month. In addition,
directors receive a fee of $200 for each Executive Committee attended, $200 for
each Building Committee meeting attended and $100 for each other committee
meeting attended. Directors Emeritus receive $200 for each Board meeting
attended. Officers of the Bank do not receive fees for committee or advisory
board meetings attended.
EMPLOYMENT AGREEMENT
In 1991, the Bank entered into an employment agreement with Robert B.
Nolen, Jr. The agreement, as subsequently amended in 1993, provided for Mr.
Nolen to serve as Executive Vice President of the Bank for a term of three
years ending in 1996 and receive a base salary of $72,782 per annum, subject to
annual adjustments.
6
<PAGE> 18
Effective July 1, 1994, the agreement was amended to provide for Mr. Nolen to
serve as President and Chief Executive Officer of the Bank and receive a base
salary of $72,782 per annum, subject to annual adjustments. The agreement
provides for a salary review by the Board of Directors not less often than
annually, as well as for an extension for an additional one-year period beyond
the then effective expiration date. The agreement provides for a severance
payment in the event employment is terminated following a "change in control"
of the Bank, as defined in the agreement. These payments would be equal to the
amount of 2.99 times the average annual compensation to Mr. Nolen during the
five years immediately prior to the change of control. Based on Mr. Nolen's
annual compensation as of June 30, 1996, if the severance payment provisions
discussed above were to be effective, it would result in a payment to Mr. Nolen
of up to $238,626. The agreement also provides for the inclusion of Mr. Nolen
in any present or future employee benefit plans or programs of the Bank for
which executives are or will become eligible, customary fringe benefits,
vacation and sick leave.
TRANSACTIONS WITH THE BANK
The Bank makes available loans to directors, officers and other
employees, including mortgage loans for the purchase or refinancing of their
residences. It is the belief of management that these loans neither involve
more than normal risk of collectability nor present other unfavorable features.
Such loans have been made in the ordinary course of business on substantially
the same terms, including interest rates, collateral and repayment terms, as
those prevailing for comparable transactions with non-affiliated persons.
Effective July 1, 1989, the Bank discontinued the policy of making mortgage
loans to its directors, officers and other employees at less than prevailing
rates of interest, and all currently outstanding loans to directors, officers
and other employees of the Bank provide for prevailing rates of interest.
Management believes that all loans made by the Bank to directors, officers and
other employees were in compliance with federal regulations in effect at the
time the loans were made.
The Bank's former main office building is owned by the Bank and is
situated on land leased from entities associated with the Simmons family and of
which Chairman Emeritus A. R. Simmons is a partner or trustee. Under the terms
of the lease for this office, a monthly payment of $1,050 is made for the
grounds and 36 parking spaces. The lease was renewed in December 1986 for 10
years with an option to renew for four additional terms of 5 years. The Bank
has been granted a right of first refusal to purchase the land. The Jasper
Mall Branch building is also owned by the Bank, and situated on land leased
from an entity associated with the Simmons family. A 35-year lease for the
land on which the Jasper Mall Branch is located currently provides annual
rental of $20,304 to the entity associated with the Simmons family. The lease
runs through 2017.
The Bank leases its Haleyville Branch Office facilities from Cecil
Batchelor, the father of Director Greg Batchelor. During the year ended June
30, 1996, the Bank paid $23,514 to Cecil Batchelor to lease the Haleyville
facilities.
In 1986, the Bank entered into an employment agreement with Al H.
Simmons. The agreement, as subsequently amended, provided for Mr. Simmons to
serve as President and Chief Executive Officer of the Bank for a term of three
years ending in 1996 and receive a base salary of $109,080 per annum, subject
to annual adjustments. In May 1994, the Bank and Mr. Simmons entered into a
termination agreement whereby the parties agreed to terminate Mr. Simmons'
employment agreement and to provide for a lump sum payment to Mr. Simmons of
certain severance benefits in satisfaction of Mr. Simmons' rights under the
employment agreement. In connection therewith, Mr. Simmons agreed to resign as
President and Chief Executive Officer of the Bank effective July 1, 1994, and
the Bank agreed to pay to Mr. Simmons a benefit having a present value equal to
$362,447. Such benefit is being paid in 60 payments of $7,000 per month that
began in July 1994. In the event of a "change of control" of the Bank, as
defined in the agreement, Mr. Simmons may direct the Bank to contribute to an
irrevocable trust assets having a present value equal to the total amount
payable to Mr. Simmons during the remaining term of the agreement. Under such
circumstances, payments due Mr. Simmons under the agreement would be made from
the trust; provided, however, that if the assets of the trust are insufficient
to satisfy the Bank's obligations under the agreement, the Bank would remain
obligated to make such payments directly to Mr. Simmons.
7
<PAGE> 19
PROPOSAL II -- RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
Arthur Andersen LLP served as the Bank's independent auditors for the
1996 fiscal year. The Board of Directors has appointed Arthur Andersen LLP to
serve as the Bank's independent auditors for the 1997 fiscal year, subject to
ratification by the Bank's stockholders. No determination has been made as to
what action the Board of Directors would take if the stockholders do not ratify
the appointment. A representative of Arthur Andersen LLP is expected to be
present at the Annual Meeting to respond to appropriate questions and will have
the opportunity to make a statement if he so desires. Unless otherwise
indicated, properly executed proxies will be voted in favor of ratifying the
appointment of Arthur Andersen LLP as independent auditors.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" THE
RATIFICATION OF THE APPOINTMENT OF ARTHUR ANDERSEN LLP AS THE BANK'S
INDEPENDENT AUDITORS.
PROPOSAL III -- PROPOSED CONVERSION AND REORGANIZATION
SUMMARY
The conversion (the "Conversion") to an Alabama-chartered commercial
bank (the "Converted Bank") and holding company reorganization (the
"Reorganization") will be accomplished under an Agreement and Plan of
Conversion and Reorganization, dated October 9, 1996 (the "Plan"), pursuant to
which the Converted Bank will become a wholly owned commercial bank subsidiary
of the Holding Company, a Delaware corporation recently formed for the purpose
of becoming a holding company for the Converted Bank (collectively, the
"Conversion and Reorganization"). Under the terms of the Plan, each
outstanding share of Bank Common Stock will be converted into one share of
common stock, par value $.01 per share, of the Converted Bank ("Converted Bank
Common Stock") and immediately afterward into one share of Holding Company
Common Stock. As a result of the Conversion and Reorganization, the former
holders of Bank Common Stock will become the holders of all of the outstanding
Holding Company Common Stock. The Holding Company was incorporated in August
1996, and has no prior operating history. Following the Conversion and
Reorganization, it is intended that the Converted Bank will continue its
operations at the same locations, with the same management, and subject to all
the rights, obligations and liabilities of the Bank existing immediately prior
to the Reorganization. The Converted Bank will continue to operate under the
name "Pinnacle Bank."
The Plan supersedes a Plan of Reorganization, dated August 28, 1996,
pursuant to which the Bank would have become a subsidiary of the Holding
Company, which would have been established as a unitary savings and loan
holding company. For the reasons set forth below, the Bank has concluded that
a holding company formation should be combined with a conversion to commercial
bank charter.
REASONS FOR THE CONVERSION AND REORGANIZATION
THE CONVERSION. The Conversion is intended to allow the Converted
Bank to continue to pursue its expanding lines of business. Historically, the
Bank's line of business was the origination of residential real estate
mortgages. The Bank believes that its increased emphasis on construction and
commercial lending can be more effectively developed if the Converted Bank
operates under regulatory requirements applicable to an Alabama-chartered
commercial bank rather than a federally-chartered savings institution.
The Board of Directors believes that operating as an Alabama-chartered
commercial bank will offer the Converted Bank greater opportunities for
expansion and growth. Commercial banks have expanded lending and investment
powers, which exceed those of federal savings institutions. Historically, the
Bank's line of business was the origination of residential real estate
mortgages. The Bank believes that, subsequent to the Conversion and
Reorganization, it will be able to take advantage of various other powers
available to commercial banks and operate more efficiently as a result. In
particular, the Bank believes that its increased emphasis on construction and
commercial lending can be more effectively developed if the Converted Bank
operates under regulatory requirements applicable to an Alabama-chartered
commercial bank rather than a federally-chartered savings
8
<PAGE> 20
institution. The additional powers of a commercial bank could, however, result
in the assumption of additional risk in the Converted Bank.
In addition, the Bank believes that the banking and thrift industries
are now in a transitional period before the likely merger of the savings
institution charter into the commercial bank charter. Several legislative
proposals have been have or will be introduced that would have the effect of
requiring savings institutions to convert to banks, and the Clinton
Administration has announced that it will actively pursue passage of such
legislation in 1997. While the Bank cannot predict the timing of the thrift
industry's consolidation into the commercial banking industry, it believes that
the best interests of the Bank and its stockholders would be served if, by
converting to a commercial bank at this time, it adjusted to a new regulatory
structure and to operation as a commercial bank on its own terms rather than
being required to convert at a later date.
THE REORGANIZATION. The Board of Directors of the Bank believes that
a holding company structure will provide greater flexibility than is currently
enjoyed by the Bank, or would be enjoyed by the Converted Bank, and its
subsidiaries, including flexibility in management structure and acquisition
activities. Federal regulations limit the types of businesses in which a
federal savings bank or a state-chartered commercial bank, or the subsidiaries
of either, may engage. The Bank is also limited in its ability to engage in
certain corporate transactions, such as stock repurchases, by provisions of the
Internal Revenue Code of 1986, as amended (the "Code"), applicable to savings
institutions (and to commercial banks that result from conversions from savings
institutions) but not to their holding companies. The Board of Directors
believes that stock repurchases could improve market liquidity and enhance
stockholder value.
THE BOARD OF DIRECTORS OF THE BANK HAS UNANIMOUSLY APPROVED THE PLAN
AND RECOMMENDS THAT THE STOCKHOLDERS VOTE "FOR" THE PLAN.
PLAN OF CONVERSION AND REORGANIZATION
The Conversion and Reorganization will be accomplished under the Plan,
which is attached as Exhibit I hereto. The following discussion is qualified
in its entirety by reference to the Plan. The Plan was unanimously approved by
the Board of Directors on October 9, 1996.
The Holding Company is a newly organized Delaware corporation which
was formed by the Bank solely for the purpose of effecting the Reorganization.
Therefore, the Holding Company has no prior operating history. The Plan is by
and between the Bank, Holding Company and Pinnacle Interim Bank, an interim
Alabama commercial bank that will be organized as a wholly owned subsidiary of
the Holding Company ("Interim Bank") if the Merger procedure (described below)
is utilized.
The initial transaction contemplated by the Plan is the Bank's charter
conversion from a federal stock savings bank to the Converted Bank, a
commercial bank organized and existing under the laws of the State of Alabama,
with the corporate title "Pinnacle Bank." Pursuant to the terms of the Plan
and in accordance with the procedures set forth in Section 5-7A-62 of the
Alabama Banking Code and other applicable law, the Bank will convert directly
to the Converted Bank. As a result of the Conversion, each of the issued and
outstanding shares of Bank Common Stock will be converted into one issued and
outstanding share of Converted Bank Common Stock. Subject to the satisfaction
of all requirements of the terms and conditions set forth in the Plan and to
compliance with all applicable laws and regulations, the Conversion will be
effective on the date on which the Articles of Incorporation of the Converted
Bank are filed in the Probate Court of Walker County as required by the laws of
the State of Alabama (the "Conversion Effective Date"). Consummation of the
Conversion is subject to stockholder approval of the Plan at the Annual Meeting
and receipt of all necessary approvals and permits from the Superintendent of
Banks of the State of Alabama and all other applicable regulatory authorities,
and all such approvals and permits shall be in effect on the Conversion
Effective Date. The insurance of deposit accounts in the Bank by the Savings
Association Insurance Fund ("SAIF") of the Federal Deposit Insurance
Corporation ("FDIC") will be unaffected by the Conversion, and the deposits of
the Converted Bank will continue to be insured by the SAIF to the maximum
extent provided by law.
The Board of Directors of the Bank intends that the Reorganization
occur immediately after, and on the same day as, the Conversion. The
Reorganization will be accomplished under one of two alternative procedures, a
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<PAGE> 21
merger with an interim commercial bank (the "Merger") or a share exchange (the
"Share Exchange"). The terms and conditions of the Merger are set forth in
Section A of Article II of the Plan, and the terms and conditions of the Share
Exchange are set forth in Section B of Article II of the Plan.
If the interim bank merger procedure is used, the Merger would be
accomplished by the following steps: (i) the formation by the Bank of a
wholly-owned operating subsidiary, the Holding Company, incorporated under the
laws of the State of Delaware for the primary purpose of becoming the sole
stockholder of newly formed Interim Bank, and subsequently becoming the sole
stockholder of the Converted Bank; (ii) the formation of Interim Bank, which
will be a wholly owned commercial bank subsidiary of the Holding Company; and
(iii) the Merger of Interim Bank into the Converted Bank, with the Converted
Bank as the surviving corporation. Pursuant to the Merger: (i) all of the
issued and outstanding shares of Converted Bank Common Stock (except for shares
held by a stockholder who exercises dissenters' rights under Alabama law, as
discussed below) will automatically be converted by operation of law on a
one-for-one basis into an equal number of issued and outstanding shares of
Holding Company Common Stock, and (ii) all of the issued and outstanding shares
of Converted Bank Common Stock will be held by the Holding Company.
Pursuant to the Share Exchange, on the Reorganization Effective Date
(defined below), each share of Converted Bank Common Stock (other than shares
held by a stockholder who exercises dissenters' rights under Alabama law) will
automatically, by operation of law and without any action on the part of the
holder thereof, be converted into and exchanged for one share of Holding
Company Common Stock.
Upon consummation of the Merger or the Share Exchange, on the
Reorganization Effective Date the holders of certificates formerly representing
Bank Common Stock (except for any such holder who exercises dissenters' rights)
shall cease to have any rights with respect to the Bank or the Converted Bank,
and their sole rights shall be with respect to the Holding Company Common Stock
into which their shares will have been converted by the Merger or the Share
Exchange.
The Bank currently expects to utilize the Share Exchange procedure to
effect the Reorganization, since such method is significantly simpler and less
time-consuming than the procedure required in connection with the Merger. The
Plan provides for the alternative structure of an interim bank merger, however,
in light of the current uncertainty under Alabama precedent regarding the
procedure for an Alabama bank to utilize the share exchange method. The Bank
believes that, except for the additional costs and time involved in connection
with the Merger, the effects of both alternative structures would be identical
to the Bank and its stockholders.
The Board of Directors of the Bank presently intends to cause the
Holding Company to be initially capitalized through a cash dividend to the
Holding Company of up to $2.0 million. Future capitalization of the Holding
Company will be dependent upon dividends declared by the Converted Bank or the
raising of additional capital by the Holding Company through a future issuance
of securities or debt or through other means. The Board of Directors of the
Holding Company has no present plans or intentions with respect to any future
issuance of securities or debt at this time. After the Conversion and
Reorganization, the former holders of Bank Common Stock will be the holders of
all of the outstanding Holding Company Common Stock. Further, the Holding
Company will hold all of the issued and outstanding voting stock of the
Converted Bank; accordingly, the Converted Bank is described herein as a
"wholly owned" subsidiary of the Holding Company following the Conversion and
Reorganization.
Further, the Converted Bank will continue its existing business and
operations as a wholly owned subsidiary of the Holding Company, and the
consolidated capitalization, assets, liabilities, income and financial
statements of the Holding Company immediately following the Reorganization will
be substantially the same as those of the Bank immediately prior to
consummation of the Reorganization.
EFFECTS OF THE CONVERSION
EFFECT ON BUSINESS. Following the Conversion, the Converted Bank will
continue the operations in the same locations, and will initially operate in
substantially the same manner as the Bank currently operates. Management
expects, however, that the Converted Bank will continue the Bank's recent
expansion of its
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<PAGE> 22
commercial and construction lending. Furthermore, following the Conversion,
the Converted Bank will consider the introduction of additional services and
products typically offered by commercial banks.
EFFECTS ON PROPERTY AND OBLIGATIONS OF THE BANK. All of the Bank's
rights and interest in and to all of its property will become the property of
the Converted Bank upon the Conversion. The Converted Bank will be responsible
for all of the liabilities and obligations of the Bank.
MANAGEMENT OF THE CONVERTED BANK. The officers and directors of the
Bank will hold the same positions in the Converted Bank as they currently hold
in the Bank. There will be no change in the management structure of the Bank
as a result of the Conversion.
INSURANCE OF ACCOUNTS. Upon the Conversion, there will not be any
change in FDIC insurance of deposits in the Bank. Following the Conversion,
the deposit accounts of the Converted Bank will continue to be insured up to
applicable limits by the Savings Association Insurance Fund ("SAIF") of the
FDIC.
CHANGE IN APPLICABLE LAW AND REGULATORY AUTHORITY. The Bank currently
operates as a federal savings bank under the regulation and supervision of the
Office of Thrift Supervision (the "OTS"). The Bank is subject to periodic OTS
examination to test safety and soundness and compliance with various regulatory
requirements, and must file periodic reports to the OTS about its financial
condition and other matters. The Bank must also obtain the approval of the OTS
prior to certain transactions, such as the establishment of branches and
mergers with other depository institutions. The Bank is a member of the
Federal Home Loan Bank of Atlanta (the "FHLB"). The Bank is also subject to
the FDIC's backup examination authority in connection with activities and
practices that might pose a risk to the federal deposit insurance fund.
Upon the Conversion, the Converted Bank will be a commercial bank
chartered by the State of Alabama. As such, it will be subject to
comprehensive regulation and supervision by the Superintendent of Banks of the
State of Alabama (the "Superintendent") and by the FDIC. The Converted Bank
will remain a member of the FHLB. The Converted Bank will be subject to
periodic examination by both the Superintendent and the FDIC. The Converted
Bank will be required to submit regular periodic reports regarding its
financial condition and other matters to the Superintendent and the FDIC and
will be required to obtain the regulatory approval of both agencies before
certain transactions, including the establishment of branches and mergers with
other depository institutions. For additional information regarding the
regulatory requirements to which the Converted Bank will be subject, see
"Regulation of the Converted Bank."
EFFECT ON BANK CORPORATE POWERS. As a federal savings institution,
the Bank is subject to various statutory lending restrictions that limit its
commercial, commercial real estate and consumer lending to specified
percentages of its total assets. The Bank is also required by the qualified
thrift lender provisions of the Home Owners' Loan Act to maintain a specified
percentage of its portfolio assets in loans and other assets related to housing
finance. As an Alabama commercial bank, the Converted Bank will not be subject
either to any percentage limits on its loans or to a qualified thrift lender
test. As a result, the Converted Bank will have a materially greater ability
to diversify its loan portfolio than does the Bank.
As a federal savings institution, the Bank has the power to establish
operating subsidiaries to engage in any activity that it is authorized to
conduct directly, and also to establish "service corporations," which are
authorized under OTS regulation to engage in a wide variety of business
activities, including real estate development and management and insurance
agency activities. The subsidiaries of Alabama banks generally are limited in
their activities to those activities that the banks may perform directly, which
do not include real estate development or management. A subsidiary of an
Alabama bank may, however, engage in insurance agency activities, which are not
authorized for Alabama banks to conduct directly.
EFFECT ON BRANCHING AND MERGER AUTHORITY. Federal savings
institutions have the general authority under OTS regulation to establish
branches in any state, or to merge with institutions in any state, without
regard to state branching laws. The branching and merger authority of the
Converted Bank, as an Alabama commercial bank, will be subject to applicable
state law. As a result of the lack of authority in Alabama law for
out-of-state banks to establish de novo branches in Alabama, the Converted Bank
generally will not be able to establish new
11
<PAGE> 23
branch offices in other states. However, legislation recently enacted by
Alabama and the great majority of the other states in response to the federal
Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994 would
permit the Converted Bank, effective May 31, 1997, to merge with banks in most
other states.
FINANCIAL RESOURCES OF THE HOLDING COMPANY
The Bank does not currently intend to transfer any material amount of
funds as a capital contribution to the Holding Company prior to the effective
date of the Reorganization. Immediately following the Conversion and
Reorganization, the assets of the Holding Company, on an unconsolidated basis,
will consist of all of the then-outstanding shares of Converted Bank Common
Stock. However, the Bank anticipates that following the Conversion and
Reorganization, the Converted Bank will declare and pay a up to $2 million cash
dividend to the Holding Company, as the Converted Bank's sole stockholder.
While the Converted Bank may in the future transfer funds to the Holding
Company, such transfer would be subject to a number of factors, including the
Holding Company's and the Converted Bank's future financial requirements and
applicable regulatory restrictions.
Set forth below is the consolidated capitalization of the Holding
Company after giving effect to the Conversion and Reorganization as of June 30,
1996. Except for the elimination of treasury stock, the pro forma
capitalization of the Holding Company set forth below is identical to the
capitalization of the Bank at June 30, 1996.
<TABLE>
<CAPTION>
As of June 30, 1996
Consolidated Pro Forma
Capitalization of the Holding Company
-------------------------------------
(In thousands)
<S> <C>
Liabilities
-----------
Deposits . . . . . . . . . . . . . . . . . . $165,234
Borrowed funds . . . . . . . . . . . . . . . 3,750
Official checks outstanding . . . . . . . . 770
Advance payments by borrowers for
taxes and insurance . . . . . . . . . . 380
Deferred taxes . . . . . . . . . . . . . . . 168
Other liabilities . . . . . . . . . . . . . 1,007
--------
Total liabilities . . . . . . . . . $171,309
========
Stockholders' Equity
--------------------
Common stock, $.01 par value,
2,400,000 shares authorized,
889,824 shares outstanding . . . . . . . $ 9
Preferred stock, $.01 par value,
100,000 shares authorized,
no shares outstanding . . . . . . . . . --
Additional paid-in capital . . . . . . . . . 8,376
Retained earnings . . . . . . . . . . . . . 7,449
Net unrealized gain (loss) on securities
available for sale . . . . . . . . . . . (323)
-------
Total stockholders' equity . . . . $ 15,511
========
</TABLE>
The Bank estimates that the total expenses associated with the
Conversion and Reorganization will be approximately $75,000. Although these
expenses may be capitalized and amortized by the Converted Bank over a 60 month
period, it is expected that they will be expensed currently.
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<PAGE> 24
Financial resources may be available to the Holding Company in the
future through borrowings, debt or equity financings or dividends from the
Converted Bank or other acquired entities or new businesses. Any loans from
the Converted Bank to the Holding Company would be subject to certain
collateralization, amount and other restrictions on covered transactions
between FDIC-insured banks and their affiliates under Section 23A of the
Federal Reserve Act. There can be no assurance as to the amount of financial
resources that may be available to the Holding Company. In particular,
dividends from the Converted Bank to the Holding Company will be subject to tax
considerations and regulatory limitations and will result in taxable income to
the Converted Bank to the extent that they are deemed to be from the Converted
Bank's loan loss reserves.
The capital of the Holding Company may be used by the Holding Company
for various corporate purposes, including acquisitions of other financial
institutions or companies engaged in related activities in the financial
services industry, subject to the requirements of applicable federal and state
law, or for repurchases of outstanding shares of Holding Company Common Stock.
At the present time, however, the Holding Company has no agreements,
understandings or plans regarding any such acquisitions or repurchases. The
capital of the Holding Company will also be available for general corporate
purposes, including the payment of dividends to the Holding Company's
stockholders and providing loans to the Converted Bank.
REORGANIZATION EFFECTIVE DATE
The effective date of the Conversion and Reorganization will be the
"Reorganization Effective Date" as defined in the Plan -- i.e., the date
specified in the Articles of Share Exchange or the Articles of Merger to be
filed with the Secretary of State of Alabama. The Bank currently expects that
the Reorganization Effective Date will be immediately following the
satisfaction of all conditions to the Plan, including the receipt of
stockholder approval, receipt of all regulatory approvals, and completion of
the Conversion. The Reorganization Effective Date and the Conversion Effective
Date will be the same day.
OPTIONAL EXCHANGE OF STOCK CERTIFICATES
After the Reorganization Effective Date, certificates evidencing
shares of Bank Common Stock will automatically represent, by operation of law,
the same number of shares of the Holding Company Common Stock. Former holders
of the Bank Common Stock will not be required to exchange their Bank Common
Stock certificates for Holding Company Common Stock certificates, but will have
the option to do so. Any stockholder desiring more information about such
exchange may request additional information from the Bank by writing Robert B.
Nolen, Jr., President of the Bank, at 1811 Second Avenue, P.O. Box 1388,
Jasper, Alabama 35502-1388.
DISSENTERS' RIGHTS OF APPRAISAL
Alabama law entitles a stockholder who votes against the Conversion
and Reorganization, including both the Merger and the Share Exchange, to demand
payment by the Converted Bank of the fair or appraised value for his or her
shares. A dissenting stockholder must deliver to Robert B. Nolen, Jr.,
President, Pinnacle Bank, 1811 Second Avenue, Jasper, Alabama 35502-1388,
written notice identifying himself and stating his intention thereby to demand
appraisal of and payment for his shares if the Conversion and Reorganization is
effectuated. Such written notice must be separate from and in addition to any
proxy or vote against Proposal III. Under the Plan, the obligations of the
Holding Company, the Bank and Interim Bank (if applicable) to consummate the
Conversion and Reorganization are conditioned upon the holders of not more than
10% of the Bank Common Stock electing to exercise their rights as dissenting
stockholders. Although the parties to the Plan could waive this condition,
none of them presently intends to do so.
Provided that such stockholder does not thereafter vote in favor of
the Conversion and Reorganization, and assuming the holders of the requisite
number of shares approve Proposal III, then, within 10 days after the effective
date of the Conversion and Reorganization, the Converted Bank shall deliver a
written dissenters' notice to all eligible stockholders which shall state where
the payment demand must be sent, inform stockholders to what extent transfers
of the shares will be restricted after the payment demand is received, supply a
form for demanding payment, set a date by which the Converted Bank must receive
the payment demand, which date may not be fewer than 30 nor more than 60 days
after the date the notice is delivered, and be accompanied by a copy of the
Alabama statute, a copy of which is attached hereto as Exhibit II and
incorporated herein by reference. A
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<PAGE> 25
stockholder sent a dissenters' notice must demand payment in accordance with
the terms of such notice. A stockholder who does not demand payment by the
date set in the dissenters' notice will not be entitled to payment for his or
her shares. A stockholder who demands payment may not thereafter withdraw that
demand and accept the terms offered under the Conversion and Reorganization
unless the Converted Bank shall consent thereto.
Within 20 days after making a formal payment demand, each stockholder
demanding payment shall submit the certificate(s) representing his other shares
to the Converted Bank for (a) notation thereon by the Converted Bank that such
demand has been made and (b) return to the stockholder by the Converted Bank.
The failure to submit shares for notation shall, at the option of the Converted
Bank, terminate the stockholders' rights of appraisal unless a court of
competent jurisdiction, for good and sufficient cause, shall otherwise direct.
If shares represented by a certificate(s) on which notation has been made are
transferred, each new certificate issued therefore shall bear similar notation
together with the name of the original dissenting holder of such shares. A
transferee of such shares shall acquire by such transfer no rights in the
Converted Bank other than those which the original dissenting stockholder had
after making demand for payment of the fair value thereof.
As soon as the Conversion and Reorganization is consummated, or upon
receipt of a payment demand, the Converted Bank shall offer to pay each
dissenter who has demanded payment the amount the Converted Bank estimates to
be the fair value of his or her shares, plus accrued interest. The offer of
payment must be accompanied by: (1) the Converted Bank's balance sheet, income
statement and latest available interim financial statements; (2) a statement of
the Converted Bank's estimate of the fair value of the shares; (3) an
explanation of how the interest was calculated; (4) a statement of the
dissenter's rights if dissatisfied with the offer of payment; and (5) a copy of
the Alabama statute. Each dissenter who agrees to accept the Converted Bank's
offer of payment must surrender to the Converted Bank the certificate(s)
representing his or her shares in accordance with terms of the dissenters'
notice. Upon receiving the certificate(s), the Converted Bank shall pay each
dissenter the fair value of his or her shares, plus accrued interest. Upon
receiving payment, a dissenting stockholder ceases to have any interest in the
shares.
If the Converted Bank does not take the proposed action within 60 days
after the date set for demanding payment, the Converted Bank shall release the
transfer restrictions imposed on shares. If after releasing transfer
restrictions, the Converted Bank takes the proposed action, it must send a new
dissenters' notice and repeat the payment demand procedure.
A dissenter may notify the Converted Bank in writing of his or her own
estimate of the fair value of his or her shares and amount of interest due, and
demand payment of his or her estimate, or reject the Converted Bank's offer and
demand payment of the fair value of his or her shares and interest due, if:
(1) the dissenter believes that the amount offered is less than the fair value
of his or her shares or that the interest due is incorrectly calculated; (2)
the Converted Bank fails to make an offer within 60 days after the date set for
demanding payment; or (3) the Converted Bank, having failed to take the
proposed action, does not release the transfer restrictions imposed on shares
within 60 days after the date set for demanding payment. A dissenter waives
his or her right to demand payment unless he or she notifies the Converted Bank
of his or her demand in writing within 30 days after the Converted Bank offers
payment.
If a demand for payment remains unsettled, the Converted Bank shall
commence a proceeding within 60 days after receiving the payment demand and
petition the court to determine the fair value of the shares and accrued
interest. If the Converted Bank does not commence the proceeding within the
60-day period, it shall pay each dissenter whose demand remains unsettled the
amount demanded. Each dissenter made a party to the proceeding is entitled to
judgment for the amount the court finds to be the fair value of his or her
shares, plus accrued interest. Upon payment of the judgment, and surrender to
the Converted Bank of the certificate(s) representing the appraised shares, a
dissenting stockholder ceases to have any interest in the shares.
The court shall determine all costs of the proceeding and shall assess
the costs against the Converted Bank, except that the court may assess costs
against all or some of the dissenters, in amounts the court finds equitable, to
the extent the court finds the dissenter acted arbitrarily, vexatiously, a not
in good faith in demanding payment.
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<PAGE> 26
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
It is a non-waivable condition to the obligation of the Bank, Holding
Company and Interim Bank to consummate the Conversion and Reorganization that
the Bank receive either a ruling from the Internal Revenue Service ("IRS") or
an opinion from its legal counsel or independent accountants to the effect that
(i) the Conversion and Reorganization will be treated for federal income tax
consequences as one or more reorganizations within the meaning of Section
368(a) of the Code, (ii) no gain or loss will be recognized by the holders of
Bank Common Stock upon the exchange of their shares of Bank Common Stock for
shares of Converted Bank Common Stock in the Conversion, and (iii) no gain or
loss will be recognized by the holders of Converted Bank Common Stock for
Holding Company Common Stock in the Reorganization.
Assuming that representations to be made by the Bank in connection
with the Conversion and Reorganization are true as of the Effective Date, and
based upon certain representations and qualifications, the law firm of
Reinhart, Boerner, Van Deuren, Norris and Rieselbach, P.C., Washington, D.C.,
special counsel to the Bank, will render an opinion that the Conversion and
Reorganization will qualify as one or more reorganizations with the
consequences described above. Unlike private letter rulings received from the
IRS, an opinion of counsel is not binding upon the IRS and there can be no
assurance that the IRS will not take a position contrary to that of the
opinion, or that such opinion will be upheld by the courts if challenged by the
IRS.
Each holder of Bank Common Stock who properly dissents to the
Conversion and Reorganization and thereby receives cash in exchange for such
stockholder's shares of Bank Common Stock will generally recognize gain or loss
for federal income tax purposes to the extent of the difference between the
aggregate amount of cash received and the aggregate amount of such
stockholder's adjusted tax basis in the shares of Bank Common Stock surrendered
in exchange therefor, and such gain or loss will be treated as a capital gain
or loss if the stock was a capital asset in the hands of such stockholder at
the Effective Date, or ordinary income otherwise.
THE FEDERAL INCOME TAX DISCUSSION SET FORTH ABOVE DOES NOT PURPORT TO
CONSIDER ALL ASPECTS OF FEDERAL INCOME TAXATION WHICH MAY BE RELEVANT TO A
HOLDER OF BANK COMMON STOCK ENTITLED TO SPECIAL TREATMENT UNDER THE INTERNAL
REVENUE CODE, SUCH AS TRUSTS, INDIVIDUAL RETIREMENT ACCOUNTS, OTHER EMPLOYEE
BENEFIT PLANS, INSURANCE COMPANIES, AND STOCKHOLDERS WHO ARE NOT CITIZENS OR
RESIDENTS OF THE UNITED STATES. DUE TO THE INDIVIDUAL NATURE OF TAX
CONSEQUENCES, EACH HOLDER OF BANK COMMON STOCK IS URGED TO CONSULT SUCH
STOCKHOLDER'S TAX AND FINANCIAL ADVISOR AS TO THE EFFECT OF SUCH FEDERAL INCOME
TAX CONSEQUENCES ON THE STOCKHOLDER'S PARTICULAR FACTS AND CIRCUMSTANCES AND
ALSO AS TO ANY STATE, LOCAL, FOREIGN OR OTHER TAX CONSEQUENCES ARISING OUT OF
THE CONVERSION AND REORGANIZATION.
CONSEQUENCES UNDER FEDERAL SECURITIES LAWS
The Holding Company has filed with the SEC a registration statement
under the Securities Act of 1933, as amended (the "1933 Act"), for the
registration of the Holding Company Common Stock to be issued and exchanged
pursuant to the Plan. Shares of the Holding Company Common Stock received by
Bank stockholders upon consummation of the Reorganization are expected to be
freely transferable under the 1933 Act by those stockholders of the Bank not
deemed to be "affiliates" of the Holding Company. Pursuant to Rule 145 under
the 1933 Act, shares of Holding Company Common Stock acquired by persons who
are "affiliates" of the Holding Company will be subject to the resale
restriction contained in paragraphs (c), (e), (f) and (g) of Rule 144 under the
1933 Act. Affiliates are generally defined as persons who control, are
controlled by, or are under common control with the Holding Company at the time
of the Annual Meeting (generally, executive officers and directors of the
Holding Company or the Converted Bank).
Under paragraph (e) of Rule 144, each affiliate of the Holding
Company, together with any other person whose sales are required to be
aggregated with those of the affiliate under Rule 144, would be able to sell in
the public market, without registration, a number of shares not to exceed, in
any three-month period, the greater of (i) 1% of the outstanding shares of
Holding Company Common Stock or (ii) the average weekly trading volume in such
shares during the preceding four calendar week. Pursuant to paragraph (f) of
Rule 144, the shares are
15
<PAGE> 27
required to be sold in "brokers' transactions" as defined in paragraph (g) of
Rule 144, or in transactions directly with a "market maker," as defined in
Section 3(a)(38) of the Exchange Act, as well as comply with certain other
manner of sale requirements set forth in paragraph (f). Pursuant to paragraph
(c) of Rule 144, the ability of affiliates to resell shares of Holding Company
Common Stock received in the Reorganization under Rule 144 will be subject to
the Holding Company's having satisfied certain Exchange Act reporting
requirements for specified periods prior to the time of sale. Affiliates also
would be permitted to resell the Holding Company Common Stock received in the
Conversion and Reorganization pursuant to an effective registration statement
under the 1933 Act or an available exemption from the 1933 Act registration
requirements. This Proxy Statement/Prospectus does not cover any resales of
Holding Company Common Stock received by persons who may be deemed to be
affiliates of the Holding Company upon consummation of the Conversion and
Reorganization.
Upon consummation of the Reorganization, the Holding Company will
register the Holding Company Common Stock under the Exchange Act and will be
required to comply with the insider trading, reporting and proxy requirements
under the Exchange Act. In addition, the Holding Company will be required to
file periodic reports with the SEC. The Holding Company will also be subject
to the general anti-fraud provisions of the federal securities laws after the
Reorganization.
EFFECT ON OPTION PLANS
Upon consummation of the Conversion and Reorganization, the option
plans of the Bank will be continued as and automatically become the option
plans of the Holding Company. Stock options with respect to shares of Bank
Common Stock granted under such option plans and outstanding prior to
consummation of the Reorganization will automatically become options to
purchase shares of Holding Company Common Stock upon consummation of the
Conversion and Reorganization, and the Holding Company will assume all of the
Bank's obligations with respect to such outstanding options, with identical
terms and conditions. By voting in favor of the Plan, stockholders of the Bank
will be approving the adoption by the Holding Company of the option plans of
the Bank outstanding as of the Effective Date as the option plans of the
Holding Company, including the Pinnacle Bank 1996 Stock Option and Incentive
Plan if approved by stockholders at the Annual Meeting. See "Proposal IV --
Approval of The Pinnacle Bank 1996 Stock Option and Incentive Plan."
EFFECT ON CURRENT MARKET VALUE OF OUTSTANDING BANK COMMON STOCK AND HOLDING
COMPANY COMMON STOCK
The Board of Directors does not know of any reason why implementation
of the Plan would cause the per share or aggregate market value of the Holding
Company Common Stock to be different from the per share or aggregate market
value of the Bank Common Stock immediately prior to consummation of the
Conversion and Reorganization. However, it is possible that the public trading
market could attribute an additional or a lesser per share or aggregate value
to the Holding Company Common Stock than it would attribute to the Bank Common
Stock.
CONDITIONS TO THE CONVERSION AND REORGANIZATION
The Plan sets forth a number of conditions which must be met before
the Reorganization will be consummated, including, among others, (i) approval
of the Plan by the holders of a majority of the outstanding shares of Bank
Common Stock, (ii) receipt of either a ruling from the IRS or an opinion of
counsel or independent auditors that the Conversion and Reorganization will be
treated as a nontaxable transaction under the Code (see "-- Tax Consequences"),
(iii) approval of the Reorganization by any governmental agency which may be
required for the consummation of the Reorganization; (iv) registration of the
shares of Holding Company Common Stock to be issued in the Reorganization under
the 1933 Act and compliance by the Holding Company with all applicable state
securities laws relating to the issuance of Holding Company Common Stock; and
(v) the exercise of dissenters rights of appraisal by the holders of not more
than 10% of the outstanding shares of Bank Common Stock. Satisfaction of the
first four of these conditions is required and not waivable prior to
consummation of the Conversion and Reorganization. Additionally, the Plan may
be terminated at any time prior to the Reorganization Effective Date by the
mutual consent of the Board of Directors of the Bank, Holding Company, and
Interim Bank (if applicable).
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<PAGE> 28
Consummation of the Conversion is subject to the approval of the
Conversion by the Superintendent of Banks of the State of Alabama (the
"Superintendent") and to non-objection to the Conversion by the OTS. The Bank
has received the Superintendent's approval of the Conversion and has applied
for, but not yet received, the non-objection of the OTS.
Consummation of the Reorganization is subject to receipt of all
regulatory approvals required for the Reorganization, including approval by the
Federal Reserve Board of the Holding Company's application to become a bank
holding company through the acquisition of all the outstanding shares of
Converted Bank Common Stock and (in the event that the Merger with the Interim
Bank is utilized in the Reorganization) the Superintendent's and the FDIC's
approval of related applications to establish and merge Interim Bank with the
Converted Bank. The applications with respect to the Reorganization have not
been filed as of the date of this Proxy Statement/Prospectus.
AMENDMENT, TERMINATION OR WAIVER
The Board of Directors of the Bank may cause the Plan to be amended or
terminated if the Board determines for any reason that such amendment or
termination would be advisable. Such amendment or termination may occur at any
time prior to the Reorganization Effective Date, whether before or after
receipt of stockholder approval of the Plan, provided that no such amendment
may be made to the Plan after stockholder approval if such amendment is deemed
to be materially adverse to the Bank, Holding Company or their stockholders.
Additionally, certain of the terms or conditions of the Plan may be waived by
the party which is entitled to the benefit thereof. See "-- Conditions to the
Conversion and Reorganization" above regarding conditions which are not
waivable prior to consummation of the Conversion and Reorganization.
BUSINESS OF THE BANK
The Bank is a federally chartered stock savings bank with five offices
located in central and northwest Alabama. The Bank was originally chartered as
First Federal Savings and Loan Association of Jasper in 1935, and since that
time its accounts have been federally insured. The Bank has its main office at
1811 Second Avenue, Jasper, Alabama, and also has a branch office in Jasper,
Alabama, with other branch offices in Sumiton, Haleyville, and Birmingham,
Alabama. In 1986, the Bank became a federal stock savings bank when the Bank
converted to the stock form of organization through the sale and issuance of
920,000 shares of common stock and changed its name at that time to First
Federal of Alabama, F.S.B. In 1995, the Bank adopted its current name. At
June 30, 1996, the Bank had 889,824 shares of Bank Common Stock outstanding and
47,176 shares of Bank Common Stock held as treasury stock.
The Bank is primarily engaged in the business of obtaining funds in
the form of savings deposits and investing such funds in mortgage loans on
single-family residential real estate. To a lesser extent, the Bank is engaged
in making consumer loans, commercial real estate loans, and other commercial
loans.
BUSINESS OF THE HOLDING COMPANY
GENERAL. The Holding Company is currently a nonoperating corporation
that was incorporated by the Bank in August 1996. Upon the completion of the
Conversion and Reorganization, the Converted Bank will become a wholly-owned
subsidiary of the Holding Company, and each stockholder of the Bank will become
a stockholder of the Holding Company with the same respective ownership
interest therein as presently held in the Bank.
Immediately after consummation of the Reorganization, it is expected
that the Holding Company will not engage in any business activity other than to
hold all of the stock of the Converted Bank. The Holding Company does not
presently have any arrangements or understandings regarding any acquisition or
merger opportunities. It is anticipated, however, that the Holding Company in
the future may pursue other investment opportunities, including possible
diversification through acquisitions and mergers, although none is contemplated
at this time.
PROPERTY. The Holding Company is not expected to own or lease real or
personal property initially. Instead, it intends to utilize the premises,
equipment and furniture of the Converted Bank without the direct
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<PAGE> 29
payment of any rental fees to the Converted Bank. The Holding Company,
however, will agree to reimburse the Converted Bank for its portion of
allocable expenses attributable to the Holding Company.
LEGAL PROCEEDINGS. The Holding Company has not, since its
organization, been a party to any legal proceedings.
EMPLOYEES. At the present time, the Holding Company does not intend
to employ any persons other than its management. It will utilize the support
staff of the Converted Bank from time to time and reimburse the Converted Bank
for the time of its employees. If the Holding Company acquires other savings
associations or pursues other lines of business, at such time it may hire
additional employees.
COMPETITION. It is expected that for the immediate future the primary
business of the Holding Company will be the ownership of the Converted Bank's
common stock. Therefore, the competitive conditions to be faced by the Holding
Company will be the same as those faced by the Bank.
MANAGEMENT OF THE HOLDING COMPANY
DIRECTORS. The Holding Company's Certificate of Incorporation
provides that the Board of Directors shall consist of not less than five nor
more than 15 members. The Board of Directors will initially consist of 10
members who will be divided into three classes as nearly equal as possible.
Directors shall be elected for staggered terms of three years so that
approximately one-third of the directors are elected each year. The directors
of the Holding Company are, and upon completion of Reorganization will continue
to be, the same persons who are at present the directors of the Bank.
The following table sets forth the name of each director and the year
the term of office of each director expires as a director of the Holding
Company.
<TABLE>
<CAPTION>
TERM OF OFFICE EXPIRES
AS DIRECTOR OF THE HOLDING
NAME COMPANY
---- -------
<S> <C>
James W. Cannon . . . . . . . . . 1997
Carlton Mayhall, Jr. . . . . . . 1997
Robert B. Nolen, Jr. . . . . . . 1997
Max W. Perdue . . . . . . . . . . 1997
Greg Batchelor . . . . . . . . . 1998
Melvin R. Kacharos . . . . . . . 1998
O. H. Brown . . . . . . . . . . . 1999
Sam W. Murphy . . . . . . . . . . 1999
Al H. Simmons . . . . . . . . . . 1999
J. T. Waggoner . . . . . . . . . 1999
</TABLE>
See "Proposal I -- Election of Directors."
OFFICERS. The officers of the Holding Company are, and upon
completion of the Reorganization will be, the following persons, each of whom
is an officer with the Bank:
<TABLE>
<CAPTION>
NAME POSITION
---- --------
<S> <C>
Robert B. Nolen, Jr. President and Treasurer
Mary Jo Gunter Vice President
Thomas L. Sherer Secretary
</TABLE>
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<PAGE> 30
The age at June 30, 1996, principal occupation and business experience
for the past five years of the executive officers of the Holding Company are
set forth below.
Robert B. Nolen, Jr., 37, joined the Bank in 1987 as First Vice
President, Chief Financial Officer and Treasurer. In 1990, Mr. Nolen was
appointed Executive Vice President of the Bank, and in 1994, Mr. Nolen was
appointed President and Chief Executive Officer of the Bank.
Mary Jo Gunter, 42, joined the Bank in 1976. She served positions
within the Loan Department, President of First General Service(s) Corporation,
a subsidiary, and currently is Senior Vice President-Banking Services.
Thomas L. Sherer, 59, joined the Bank in 1960 where he has served in
various positions in the Savings, Marketing and Operations areas. He currently
serves as the Bank's Secretary.
EXECUTIVE COMPENSATION. Since the formation of the Holding Company,
none of its officers or directors have received any remuneration from the
Holding Company. It is expected that unless and until the Holding Company
becomes actively involved in additional businesses, no separate compensation
will be paid to its officers and directors in addition to compensation paid to
them by the Converted Bank. However, the Holding Company may determine that
such separate compensation is appropriate in the future. At the present time,
the Holding Company does not intend to employ any persons other than its
present management. If the Holding Company acquires other businesses, it may
at such time hire additional employees.
INDEMNIFICATION OF DIRECTORS AND OFFICERS AND LIMITATION OF LIABILITY.
The Bank is required by OTS regulations to indemnify its directors, officers
and employees against legal and other expenses incurred in defending lawsuits
brought against them by reason of the performance of their official duties.
Indemnification may be made to such person only if final judgment on the merits
is in his favor or, in case of (i) settlement, (ii) final judgment against him
or (iii) final judgment in his favor, other than on the merits, if a majority
of the directors of the Bank determines that he was acting in good faith within
the scope of his employment or authority as he could reasonably have perceived
it under the circumstances and for a purpose he could have reasonably believed
under the circumstances was in the best interest of the Bank or its
stockholders. If a majority of the directors of the Bank concludes that in
connection with an action any person ultimately may become entitled to
indemnification, the directors may authorize payment of reasonable costs and
expenses arising from defense or settlement of such action.
The Holding Company's Certificate of Incorporation provides for
indemnification of any individual who is or was a director, officer, employee
or agent of the Holding Company in any proceeding in which the individual is
made a party as a result of his service in such capacity, if the individual
acted in good faith and in a manner he reasonably believed to be in, or not
opposed to, the best interests of the Holding Company and, with respect to any
criminal proceeding, he had no reasonable cause to believe his conduct was
unlawful, unless such indemnification would be prohibited by law. This
provision does not apply to conduct prior to the incorporation of the Holding
Company or to conduct not as a director, officer, employee or agent of the
Holding Company. In accordance with Delaware law, an individual may not be
indemnified (i) in connection with a proceeding by or in the right of the
Holding Company in which the individual was adjudged liable to the Holding
Company or (ii) in connection with any other proceeding charging improper
personal benefit to him in which he was adjudged liable on the basis that
personal benefit was improperly received by him, unless a court of competent
jurisdiction determines he is fairly and reasonably entitled to indemnification
in view of all the relevant circumstances. Management does not have any plans
to provide for indemnification rights beyond those provided in the Holding
Company's Certificate of Incorporation.
Insofar as indemnification for liabilities arising under the 1933 Act
may be permitted to directors, officers or persons controlling the Holding
Company pursuant to the foregoing provisions, the Holding Company has been
informed that in the opinion of both the SEC and the OTS such indemnification
is against public policy as expressed in the 1933 Act and is therefore
unenforceable.
The Holding Company's Certificate of Incorporation also provides that
a director shall not be personally liable to the Holding Company or its
stockholders for monetary damages for breach of his fiduciary duty as a
19
<PAGE> 31
director, except (i) for breach of the director's duty of loyalty to the
Holding Company or its stockholders, (ii) for acts or omissions that are not in
good faith or that involve gross negligence, intentional misconduct or a
knowing violation of law, (iii) for certain unlawful distributions, or (iv) for
any transaction from which the director derived an improper personal benefit.
This provision eliminates the potential liability of the Holding
Company's directors for failure, through ordinary negligence, to satisfy their
duty of care, which requires directors to exercise informed business judgment
in discharging their duties. It may thus reduce the likelihood of derivative
litigation against directors and discourage or deter stockholders or management
from bringing a lawsuit against directors for breach of their duty of care,
even though such an action, if successful, might otherwise have been beneficial
to the Holding Company and its stockholders. Stockholders may thus be
surrendering a cause of action based upon negligent business decisions,
including those relating to attempts to change control of the Holding Company.
The provision will not, however, affect the right to pursue equitable remedies
for breach of the duty of care, although such remedies might not be available
as a practical matter, and the provision does not apply to breaches of duty
prior to the incorporation of the Holding Company or to breaches not committed
as a director, officer, employee or agent of the Holding Company.
To the best of management's knowledge, there is currently no pending
or threatened litigation for which indemnification may be sought or any recent
litigation involving directors of the Bank that might have been affected by the
limited liability provision in the Holding Company's Certificate of
Incorporation had it been in effect at the time of the litigation.
Federal regulations applicable to the Bank contain no provisions for
limitation of directors' liability.
The above provisions of the Holding Company's Certificate of
Incorporation seek to ensure that the ability of the Holding Company's
directors to exercise their best business judgment in managing the Holding
Company's affairs, subject to their continuing fiduciary duties of loyalty to
the Holding Company and its stockholders, is not unreasonably impeded by
exposure to the potentially high personal costs or other uncertainties of
litigation. The nature of the tasks and responsibilities undertaken by
directors and officers often requires such persons to make difficult judgments
of great importance which can expose such persons to personal liability, but
from which they will acquire no personal benefit (other than as stockholders).
In recent years, litigation against corporations and their directors and
officers, often amounting to mere "second guessing" of good-faith judgments and
involving no allegations of personal wrongdoing, has become common. Such
litigation often claims damages in large amounts which bear no relationship to
the amount of compensation received by the directors or officers, particularly
in the case of directors who are not officers of the corporation. The expense
of defending such litigation, regardless of whether it is well founded, can be
enormous. Individual directors and officers can seldom bear either the legal
defense costs involved or the risk of a large judgment.
The Converted Bank's Articles of Incorporation contain substantially
the same provisions as the Holding Company's Certificate of Incorporation with
respect to indemnification and limitation of directors' liability.
In order to attract and retain competent and conscientious directors
and officers in the face of these potentially serious risks, corporations have
historically provided for corporate indemnification in their by-laws and have
obtained liability insurance protecting the company and its directors and
officers against the cost of litigation and related expenses. The Bank
currently has insurance coverage for its directors and officers, and the Bank's
management currently anticipates that the Holding Company and the Converted
Bank will be able to obtain such coverage for their directors and officers.
Based upon the publicized trends in the insurance industry and the reported
experience of other companies, the Bank's management has no reason to believe
that these problems will be alleviated in the near future. While, in the
opinion of the Bank's management, current conditions have not to date impaired
the Bank's ability to secure qualified directors and officers, management of
the Bank believes that these trends may result in individuals being unwilling,
in many instances, to serve as directors of the Holding Company and the
Converted Bank without at least a partial supplement to the protection which
such insurance has historically provided. The provisions of the Holding
Company's Certificate of Incorporation relating to director liability and the
Delaware law, and the provisions of the Converted Bank's Articles of
Incorporation relating to director liability under Alabama law, authorizing
such provisions are intended to reduce, in appropriate cases, the risks
incident to serving as a director which otherwise could be covered by liability
insurance. The Holding
20
<PAGE> 32
Company's Board of Directors and the Converted Bank's Board of Directors, the
individual members of which will benefit from the inclusion of the
indemnification and limitation of liability provisions, have a personal
interest in including these provisions in the Holding Company's Certificate of
Incorporation and the Converted Bank's Articles of Incorporation at the
potential expense of stockholders.
COMPARISON OF STOCKHOLDERS' RIGHTS
INTRODUCTION. As a result of the Reorganization, holders of Bank
Common Stock, whose rights are presently governed by federal law and the
Federal Stock Charter and Bylaws of the Bank, will become stockholders of the
Holding Company, a Delaware corporation. Accordingly, their rights will be
governed by the Delaware General Corporation Law and by the Certificate of
Incorporation and Bylaws of the Holding Company. Certain differences arise
from this change of governing law as well as from distinctions between the
Federal Stock Charter and Bylaws of the Bank and the Certificate of
Incorporation and Bylaws of the Holding Company. The following discussion is
not intended to be a complete statement of the differences affecting the rights
of stockholders, but summarizes certain significant differences. The
Certificate of Incorporation and Bylaws of the Holding Company are attached
hereto as Exhibits III and IV should be reviewed for more detailed information.
The discussion below is qualified in its entirety by reference to such
documents.
ISSUANCE OF CAPITAL STOCK. The Bank's Federal Stock Charter
authorizes the issuance of 20,000,000 shares of capital stock, of which
10,000,000 shares are common stock, par value $.01 per share, and 10,000,000
shares are preferred stock. The Certificate of Incorporation of the Holding
Company authorizes the issuance of 2,500,000 shares of capital stock, of which
2,400,000 shares are common stock, par value $.01 per share, and 100,000 shares
are preferred stock, par value $.01 per share. At June 30, 1996, there were
889,824 shares of Bank Common Stock outstanding and 42,176 shares of Bank
Common Stock held as treasury stock. Following the Reorganization, there will
be the same number of shares of Holding Company Common Stock outstanding.
Under the Bank's Federal Stock Charter, shares of capital stock may not be
issued directly or indirectly to officers, directors or controlling persons of
the Bank (other than as part of a general public offering or as qualifying
shares to a director) unless the issuance or the plan under which they would be
issued is approved by a majority of the votes eligible to be cast. This
restriction on issuing stock to officers, directors or controlling persons is
not contained in the Holding Company's Certificate of Incorporation. The
Holding Company's Certificate of Incorporation authorizes the issuance of
additional shares of stock up to the amount authorized as approved by the Board
of Directors without the approval of the stockholders.
The Holding Company has no present intention to issue additional
shares of stock at this time, other than upon the exercise of stock options.
If additional shares were issued, the percentage ownership interests of
existing stockholders would be reduced, and, depending on the terms pursuant to
which new shares were issued, the book value of outstanding stock would be
diluted. Moreover, such additional share issuance could be construed as having
an anti-takeover effect. The ability to issue additional shares, which exists
under both the Federal Stock Charter of the Bank and the Certificate of
Incorporation of the Holding Company, gives management greater flexibility in
financing corporate operations.
PAYMENT OF DIVIDENDS. Federal regulations impose certain limitations
on the payment of dividends and other capital distributions (including stock
repurchases and cash mergers) by the Bank. Under these regulations, a savings
institution that, immediately prior to, and on a pro forma basis after giving
effect to, a proposed capital distribution, has total capital (as defined by
OTS regulation) that is equal to or greater than the amount of its fully
phased-in capital requirements (a "Tier 1 Association") is generally permitted,
after notice, to make capital distributions during a calendar year in the
amount equal to the greater of: (i) 75% of its net income for the previous
four quarters; or (ii) up to 100% of its net income to date during the calendar
year plus an amount that would reduce by one-half the amount by which its ratio
of total capital to assets exceeded its fully phased-in risk-based capital
ratio requirement at the beginning of the calendar year. Savings associations
with total capital in excess of the fully phased-in capital requirement that
have been notified by the OTS that they are in need of more than normal
supervision will be subject to restriction on dividends. A savings institution
with total capital in excess of current minimum capital ratio requirements but
not in excess of the fully phased-in requirements (a "Tier 2 Association") is
permitted, after notice, to make capital distributions without OTS approval of
up to 75% of its net income for the previous four quarters, less dividends
already paid for such period, depending on the savings institution's level of
risk-based capital. A savings institution that fails to meet current minimum
capital
21
<PAGE> 33
requirements (a "Tier 3 Association") is prohibited from making any capital
distributions without the prior approval of the OTS. Tier 1 Associations that
have been notified by the OTS that they are in need of more than normal
supervision will be treated as either a Tier 2 or Tier 3 Association. The Bank
is a Tier 1 Association. Furthermore, the Bank would be prohibited under
federal regulations from making any capital distributions, including dividends,
if after making the distribution, the Bank would have: (i) a total risk-based
capital ratio of less than 8.0%; (ii) a Tier 1 risk-based capital ratio of less
than 4.0%; or (iii) a leverage ratio of less than 4.0%.
In addition to the foregoing, earnings of the Bank appropriated to bad
debt reserves and deducted for federal income tax purposes are not available
for payment of cash dividends or other distributions to the Holding Company
without payment of taxes at the then current tax rate by the Bank on the amount
of earnings removed from the reserves for such distributions. Finally, the
Bank is not permitted to pay dividends on its capital stock if its regulatory
capital would thereby be reduced below the remaining balance of the liquidation
account which was established for the benefit of certain depositors of the Bank
at the time of its conversion from mutual to stock form.
Unlike the Bank, the Holding Company is not subject to regulatory
restrictions on the payment of dividends to stockholders. Under the Delaware
General Corporation Law, dividends may be paid either out of surplus or, if
there is no surplus, out of net profits for the fiscal year in which the
dividend is declared and/or the preceding fiscal year. After the
Reorganization, however, the Holding Company's principal source of income will
initially consist of its equity in the earnings, if any, of the Converted Bank.
Although the Holding Company will not be subject to the above dividend
restrictions regarding dividend payments to its stockholders, applicable
restrictions on the Converted Bank's ability to pay dividends to the Holding
Company may affect the Holding Company's ability to pay dividends. See "--
Regulation of the Converted Bank -- Dividend Restrictions."
The payment of future cash dividends by the Converted Bank, and thus
by the Holding Company, will continue to depend upon the Converted Bank's
earnings, financial condition and capital requirements, as well as the tax and
regulatory considerations discussed herein. The Bank's Board of Directors
considers many factors, including profitability, maintenance of adequate
capital, current and anticipated future income, outstanding loan commitments,
adequacy of loan loss reserves, cash flow requirements and economic conditions.
Before declaring a dividend, the Board of Directors must determine that the
Bank will exceed its regulatory capital requirements after the payment of the
dividend. The Board of Directors of the Converted Bank will consider the same
factors following the Conversion.
FISCAL YEAR; ANNUAL MEETING OF STOCKHOLDERS. The fiscal year of the
Holding Company and the Converted Bank will end on December 31 of each year.
Pursuant to the Holding Company's Bylaws, annual meetings of stockholders for
the election of directors and transaction of any other business shall be held
at such date and time as the Board of Directors may determine. It is expected
that the first annual meeting of the Holding Company's stockholders will be
held in May 1997. See "Stockholder Proposals."
SPECIAL MEETINGS OF STOCKHOLDERS. Special meetings of the holders of
Bank Common Stock generally may be called by the chairman of the board, the
president, a majority of the Board of Directors or upon the written request of
the holders of not less than one-tenth of all the outstanding capital stock
entitled to vote at the meeting. The Holding Company's Certificate of
Incorporation provides that special meetings of stockholders may only be called
by the Holding Company's Board of Directors or an appropriate committee
appointed by the Board of Directors. Stockholders are not authorized to call a
special meeting, and stockholder action may be taken only at a special or
annual meeting of stockholders and not by written consent.
CUMULATIVE VOTING. Cumulative voting entitles each stockholder to
cast a number of votes in the election of directors equal to the number of such
stockholders' shares of common stock multiplied by the number of directors to
be elected, and to distribute such votes among one or more of the nominees to
be elected. The Bank's Federal Stock Charter and Bylaws do not allow
cumulative voting rights with respect to the election of directors. The
Holding Company's Certificate of Incorporation similarly provides that there
shall be no cumulative voting by stockholders in the election of the Holding
Company's directors. The absence of cumulative voting rights effectively means
that the holders of a majority of the shares voted at a meeting of stockholders
may, if they so choose, elect all directors of the Holding Company to be
selected at that meeting, thus precluding minority stockholder representation
on the Holding Company's Board of Directors.
22
<PAGE> 34
NO RIGHTS OF APPRAISAL. Pursuant to OTS regulations, stockholders of
the Bank do not have dissenters' appraisal rights in connection with a plan of
merger or consolidation to which the Bank is a party because the Bank Common
Stock is listed on the American Stock Exchange. Similarly, because the Holding
Company Common Stock will be listed on the American Stock Exchange following
the Reorganization, stockholders of the Holding Company generally will not have
dissenters' appraisal rights in connection with a business combination as to
which the Holding Company is a party. However, because of the Conversion, as
stockholders of the Converted Bank immediately prior to the Reorganization,
stockholders will have dissenters' rights of appraisal on a one time basis.
See "-- Dissenters' Rights of Appraisal."
VACANCIES ON THE BOARD OF DIRECTORS. Any vacancy on the Board of
Directors of the Bank may be filled by the affirmative votes of a majority of
the remaining directors although less than a quorum, and any director so
appointed is to serve until the next election of directors by stockholders.
Additionally, any directorship of the Bank to be filled by reason of an
increase in the number of directors may be filled by election by the Board of
Directors for a term of office only until the next election of directors by the
stockholders. The Certificate of Incorporation of the Holding Company provides
that vacancies on the board and newly created directorships may be filled by a
two-thirds vote of the directors then in office whether or not a quorum.
Directors appointed to fill a vacancy on the Holding Company's board shall hold
office for the remainder of the term for that vacancy rather than only until
the next election of directors by stockholders.
NUMBER AND TERM OF DIRECTORS. The Bank's Federal Stock Charter
provides that the number of directors, as stated in the Bylaws, shall not be
less than seven. OTS regulations provide that the number of directors of a
federal savings association may not exceed 15. The Bank's Bylaws provide that
its Board of Directors shall consist of 10 members and shall be divided into
three equal classes which shall each be elected for three-year terms. The
Holding Company's Certificate of Incorporation provides that its Board of
Directors shall consist of not less than five nor more than 15 members, as set
forth from time to time by action of the Board of Directors. The Holding
Company's Certificate of Incorporation sets the initial number of directors at
11 persons, who are divided into three classes, and provides that the Board of
Directors shall thereafter consist of such number of members as determined by
the Board in accordance with the Certificate of Incorporation. Following the
death of John D. Baird, the Board of Directors resolved that the number of
directors shall be 10. The directors of the Holding Company will be elected
for three-year terms.
REMOVAL OF DIRECTORS. OTS regulations provide that at a meeting of
stockholders called expressly for that purpose, any director may be removed for
cause by a vote of the holders of a majority of the shares then entitled to
vote at an election of directors. The regulation states that if less than the
entire board is to be removed, no one of the directors may be removed if the
votes cast against the removal would be sufficient to elect a director if then
cumulatively voted at an election of the class of directors of which such
director is a part. Whenever the holders of the shares of any class are
entitled to elect one or more directors pursuant to the provisions of the
Bank's Federal Stock Charter or supplemental sections thereto, the provisions
shall apply, with respect to the removal of a director or directors so elected,
by the vote of the holders of the outstanding shares of that class and not to
the vote of the outstanding shares as a whole. The Certificate of
Incorporation of the Holding Company provides that any director or the entire
Board of Directors may be removed for cause by the affirmative vote of the
holders of at least 80% of the outstanding shares of capital stock entitled to
vote generally in the election of directors at a meeting of the stockholders
called for that purpose.
APPROVAL OF MERGERS, CONSOLIDATIONS, SALE OF SUBSTANTIALLY ALL ASSETS
AND CERTAIN BUSINESS COMBINATIONS. Under present federal regulations, the
approval of the holders of at least two-thirds of the Bank Common Stock is
required for a merger, consolidation or sale of assets not in the ordinary
course of business (except for a merger with an interim savings institution,
which requires only a majority vote), except that no stockholder approval is
required if the Bank is the acquiring institution and the transaction involves,
among other things, the issuance of shares of Bank Common Stock amounting to
15% or fewer of the shares of Bank Common Stock outstanding immediately prior
to the transaction. The Bank may effect a dissolution pursuant to a plan
adopted and approved by the Bank's Board of Directors, by the OTS, and by the
holders of a majority of the Bank's outstanding shares of common stock.
The Bank's Bylaws require the approval of the holders of (i) at least
two-thirds of the Bank's outstanding shares entitled to vote (and a separate
two-thirds vote of different classes of voting stock outstanding) and (ii) at
23
<PAGE> 35
least a majority of the Bank's outstanding shares of voting stock, not
including shares held by a "Related Person", to approve certain "Business
Combinations" and related transactions unless the transaction is approved by a
majority of the Bank's "Continuing Directors." A "Business Combination"
includes (i) any merger or consolidation of the Bank with or into a Related
Person; (ii) any sale, lease, exchange, transfer or other disposition of all or
a substantial part of the assets of the Bank or of a subsidiary, to a Related
Person; (iii) any merger or consolidation of a Related Person with or into the
Bank or a subsidiary of the Bank; (iv) any sale, lease, exchange, transfer or
other disposition of all or any Substantial Part of the assets of a Related
Person to the Bank or a subsidiary of the Bank; (v) the issuance of any
securities of the Bank or a subsidiary of the Bank to a Related Person; (vi)
the acquisition by the Bank or a subsidiary of the Bank of any securities of a
Related Person; (vii) any reclassification of the Bank Common Stock, the Bank,
or any recapitalization involving the Bank Common Stock; and (viii) any
agreement, contract or other arrangement providing for any of the transactions
described above. Such affirmative vote is required notwithstanding any other
provision of the Federal Stock Charter, any provision of law, or any agreement
with any regulatory agency or national securities exchange which might
otherwise permit a lesser vote or no vote.
The two-thirds super-majority voting requirement required under the
Bank's Bylaws is not applicable to any transaction approved by a majority of
the Continuing Directors of the Bank at a meeting at which a quorum of
Continuing Directors is present, in which case the transaction then requires
only such affirmative vote of stockholders as is required by any other
provision of the Federal Stock Charter, any provision of law, or any agreement
with any regulatory agency or national securities exchange. The term "Related
Person" means any individual, corporation, partnership or other person or
entity which together with its "affiliates" beneficially owns in the aggregate
10% or more of the outstanding shares of the Bank Common Stock, and any
"affiliate" of any such individual, corporation, partnership or other person or
entity. The term "Continuing Director" means any member of the Board of
Directors of the Bank who is unaffiliated with the Related Person and was a
member of the Board prior to the time that the Related Person became a Related
Person, and any successor of a Continuing Director who is unaffiliated with the
Related Person and is recommended to succeed a Continuing Director by a
majority of Continuing Directors then on the Board.
Under the Delaware General Corporation Law, mergers, consolidations
and sales of substantially all of the assets of a Delaware corporation must
generally be approved by the vote of the holders of a majority of the
outstanding shares of stock entitled to vote thereon. Section 203 of the
Delaware General Corporation Law, however, restricts certain transactions
between a Delaware corporation (or its majority owned subsidiaries), and a
holder of 15% or more of the corporation's outstanding voting stock, together
with affiliates or associates thereof (excluding persons who became 15%
stockholders by action of the corporation alone) (an "Interested Stockholder").
For a period of three years following the date that a stockholder becomes an
Interested Stockholder, Section 203 prohibits the following types of
transactions between the corporation and the Interested Stockholder (unless
certain conditions, described below, are met): (i) mergers or consolidations;
(ii) sales, leases, exchanges or other transfers of 10% or more of the
aggregate assets of the corporation; (iii) issuances or transfers by the
corporation of any stock of the corporation that would have the effect of
increasing the Interested Stockholder's proportionate share of the stock of any
class or series of the corporation; (iv) receipt by the Interested Stockholder
of pledges or other financial benefits provided by the corporation; and (v) any
other transaction which has the effect of increasing the proportionate share of
the stock of any class or series of the corporation that is owned by the
Interested Stockholder. This restriction does not apply if: (1) before such
person becomes an Interested Stockholder, the Board of Directors approves the
transaction in which the Interested Stockholder becomes an Interested
Stockholder or approves the business combination; or (2) upon consummation of
the transaction which results in the stockholder's becoming an Interested
Stockholder, the Interested Stockholder owns at least 85% of the voting stock
of the company outstanding at the time the transaction commenced, excluding for
purposes of determining the number of shares outstanding, those shares owned by
(i) persons who are directors and also officers and (ii) 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 (iii) on or subsequent to 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 66-2/3% of the outstanding voting stock which is
not owned by the Interested Stockholder. A Delaware corporation may exempt
itself from the requirements of the statute by adopting an amendment to its
Certificate of Incorporation. At the present time, the Board of Directors does
not intend to propose any such amendment.
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The Holding Company's Certificate of Incorporation requires the
approval of the holders of (i) at least 80% of the Holding Company's
outstanding shares of voting stock and (ii) at least a majority of the Holding
Company's outstanding shares of voting stock, not including shares held by a
"Related Person," to approve certain "Business Combinations" as defined
therein, and related transactions. The increased voting requirements in the
Holding Company's Certificate of Incorporation apply in connection with
business combinations involving a "Related Person," except in cases where the
proposed transaction has been approved in advance by two-thirds of those
members of the Holding Company's Board of Directors who are unaffiliated with
the Related Person and who were directors prior to the time when the Related
Person became a Related Person (the "Continuing Directors"). The term "Related
Person" is defined to include any individual, corporation, partnership or other
entity which owns beneficially or controls, directly or indirectly, more than
10% of the outstanding shares of voting stock of the Holding Company. A
"Business Combination" is defined to include (i) any merger, reorganization, or
consolidation of the Holding Company with or into any Related Person; (ii) any
sale, lease, exchange, mortgage, transfer, or other disposition of all or a
substantial part of the assets of the Holding Company or of a subsidiary to any
Related Person (the term "substantial part" is defined to include more than 25%
of the Holding Company's total assets); (iii) any merger or consolidation of a
Related Person with or into the Holding Company or a subsidiary of the Holding
Company; (iv) any sale, lease, exchange, transfer or other disposition of all
or any substantial part of the assets of a Related Person to the Holding
Company or a subsidiary of the Holding Company; (v) the issuance of any
securities of the Holding Company or a subsidiary of the Holding Company to a
Related Person; (vi) the acquisition by the Holding Company of any securities
of the Related Person; (vii) any reclassification of the Holding Company Common
Stock, or any recapitalization involving the Holding Company Common Stock; and
(viii) any agreement, contract or other arrangement providing for any of the
above transactions.
ADVANCE NOTICE REQUIREMENTS FOR NOMINATIONS OF DIRECTORS AND
PRESENTATION OF NEW BUSINESS AT MEETINGS OF STOCKHOLDERS. The Bank's Bylaws
generally provide that any stockholder desiring to make a nomination for the
election of directors or a proposal for new business at a meeting of
stockholders must submit written notice to the Bank at least 30 days in advance
of the meeting. Failure to comply with these advance notice requirements will
preclude such nominations or new business from being considered at the meeting.
The Holding Company's Certificate of Incorporation provides that a
stockholder wishing to make nominations or proposals generally must give
written notice to the Secretary of the Holding Company not less than 30 nor
more than 60 days before the meeting, together with certain information
relating to the nomination or new business.
AMENDMENT OF FEDERAL STOCK CHARTER, CERTIFICATE OF INCORPORATION AND
BYLAWS. The Bank's Federal Stock Charter provides that it may be amended only
if the amendment is first proposed by the Bank's Board of Directors, then
preliminarily approved by the OTS, and thereafter approved by the holders of a
majority of the Bank's outstanding shares of common stock. The Bylaws of the
Bank may be amended by the vote of either a majority of the Board of Directors
or the holders of a majority of the outstanding shares of Bank Common Stock.
The Holding Company's Certificate of Incorporation provides that
specified provisions contained in the Certificate of Incorporation may not be
repealed or amended except upon the affirmative vote of not less than 80% of
the outstanding shares of the Holding Company's stock entitled to vote
generally in the election of directors, after giving effect to any limits on
voting rights. This requirement exceeds the majority vote of the outstanding
stock that would otherwise be required by Delaware law for the repeal or
amendment of a certificate provision. The specific provisions are those (i)
governing the calling of special meetings, the absence of cumulative voting
rights and the requirement that stockholder action be taken only at annual or
special meetings, (ii) requiring written notice to the Holding Company of
nominations for the election of directors and new business proposals, (iii)
governing the number of the Holding Company's Board of Directors, the filling
of vacancies on the Board of Directors and classification of the Board of
Directors, (iv) providing the mechanism for removing directors, (v) governing
the requirement for the approval of certain Business Combinations involving a
"Related Person," (vi) regarding the consideration of certain nonmonetary
factors in the event of an offer by another party, (vii) providing for the
indemnification of directors, officers, employees and agents of the Holding
Company, (viii) eliminating the liability of the directors to the Holding
Company and its stockholders for monetary damages, with certain exceptions, for
breach of fiduciary duty, and (ix) governing the required stockholder vote for
amending the Certificate of Incorporation or Bylaws of the Holding Company.
This provision is intended to prevent the holders
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<PAGE> 37
of less than 80% of the outstanding stock of the Holding Company from
circumventing any of the foregoing provisions by amending the Certificate of
Incorporation to delete or modify one of such provisions. This provision would
enable the holders of more than 20% of the Holding Company's voting stock to
prevent amendments to the Holding Company's Certificate of Incorporation or
Bylaws, even if such amendments were favored by the holders of a majority of
the voting stock.
The Holding Company's Certificate of Incorporation provides that the
Holding Company's Bylaws may be amended either by a two-thirds vote of the
Holding Company's Board of Directors or by the affirmative vote of the holders
of not less than 80% of the outstanding shares of the Holding Company's stock
entitled to vote generally in the election of directors, after giving effect to
any limits on voting rights. Absent this provision, Delaware law provides that
a corporation's bylaws may be amended by the holders of a majority of a
corporation's outstanding capital stock. The Holding Company's Bylaws contain
numerous provisions concerning the Holding Company's governance, such as fixing
the number of directors and determining the number of directors constituting a
quorum. By reducing the ability of a potential corporate raider to make
changes in the Holding Company's Bylaws and to reduce the authority of the
Board of Directors or impede its ability to manage the Holding Company, this
provision could have the effect of discouraging a tender offer or other
takeover attempt where the ability to make fundamental changes through bylaw
amendments is an important element of the takeover strategy of the acquirer.
CERTAIN ANTI-TAKEOVER PROVISIONS OF THE CERTIFICATE OF INCORPORATION AND BYLAWS
The Board of Directors believes that certain of the provisions
described above reduce the Holding Company's vulnerability to takeover attempts
and certain other transactions which have not been negotiated with and approved
by its Board of Directors. These provisions include: the requirement of the
affirmative vote of 80% of the shares outstanding for the approval of Business
Combinations with Related Persons; the elimination of cumulative voting; the
prohibition against the call of special meetings by stockholders; the
requirement of advance notice of stockholder nominations and new business; the
authorization of additional shares of Holding Company Common Stock; and the
classification of the Board of Directors. The Board of Directors believes
these provisions are in the best interests of the Bank and of the Holding
Company and its stockholders. In the judgment of the Board of Directors, the
Board of Directors is in the best position to consider all relevant factors and
to negotiate for what is in the best interests of the stockholders and the
Holding Company's other constituents. Accordingly, the Board of Directors of
the Holding Company and the Bank believe that it is in the best interests of
the Holding Company and its stockholders to encourage potential acquirers to
negotiate directly with the Holding Company's Board of Directors and that these
provisions will encourage such negotiations and discourage nonnegotiated
takeover attempts. It is also the view of the Board of Directors that these
provisions should not discourage persons from proposing a merger or other
transaction at a price reflective of the true value of the Holding Company.
Certain corporate takeover practices could be highly disruptive to a
company and could result in inequitable treatment among the company's
stockholders. These practices typically involve a purchaser's acquisition of a
substantial portion of a company's capital stock and attempt to replace
incumbent management and the board of directors. Takeover attempts which have
not been negotiated with and approved by the board of directors present to
stockholders the risk of a takeover on terms which may be less favorable than
might otherwise be available. A transaction which is negotiated and approved
by the board of directors, on the other hand, can be carefully planned and
undertaken at an opportune time in order to obtain maximum value for the
company and its stockholders, with due consideration given to matters such as
the management and business of the acquiring corporation and maximum strategic
development of the target company's assets.
An unsolicited takeover proposal can seriously disrupt the business
and management of a corporation and cause great expense. Although a tender
offer or other takeover attempt may be made at a price substantially above the
current market prices, such offers are sometimes made for less than all the
outstanding shares of a target company. As a result, stockholders may be
presented with the alternative of partially liquidating their investment at a
time that may be disadvantageous, or retaining their investment in an
enterprise which is under different management and whose objectives may not be
similar to those of the remaining stockholders.
While the Boards of Directors of the Bank and the Holding Company are
not aware of any effort that might be made to obtain control of the Holding
Company after the Reorganization, the Board of Directors, as discussed above,
believes that it is appropriate to include certain provisions as part of the
Holding Company's
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Certificate of Incorporation to protect the interests of the Holding Company
and its stockholders from hostile takeovers which the Board of Directors might
conclude are not in the best interests of the Bank, the Holding Company or the
Holding Company's stockholders. These provisions may have the effect of
discouraging a future takeover attempt which is not approved by the Board of
Directors but which individual stockholders may deem to be in their best
interests or in which stockholders may receive a substantial premium for their
shares over then current market prices. As a result, stockholders who might
desire to participate in such a transaction may not have an opportunity to do
so. Such provisions will also render the removal of the current Board of
Directors or management of the Holding Company more difficult.
REGULATION OF THE HOLDING COMPANY
Upon completion of the Reorganization, the Holding Company will be
registered as a bank holding company under the Bank Holding Company Act of
1956, as amended (the "Holding Company Act") and, as such, will be subject to
supervision and regulation by the Federal Reserve Board (the "FRB"). The
Holding Company will be required to file annual and periodic reports with the
FRB and to furnish such additional information as the FRB may require pursuant
to the Holding Company Act. The Holding Company will also be subject to
periodic examination by the FRB.
RESTRICTIONS ON ACQUISITIONS. Under the Holding Company Act, a bank
holding company must obtain the prior approval of the FRB before (i) acquiring
direct or indirect ownership or control of any voting shares of any bank or
bank holding company if, after such acquisition, the bank holding company would
directly or indirectly own or control more than 5% of such shares; (2)
acquiring all or substantially all of the assets of another bank or bank
holding company; or (3) merging or consolidating with another bank holding
company.
Under the Holding Company Act, any company must obtain approval of the
FRB prior to acquiring control of the Holding Company or the Converted Bank.
For purposes of the Holding Company Act, "control" is defined as ownership of
more than 25% of any class of voting securities of the Holding Company or the
Converted Bank, the ability to control the election of a majority of the
directors, or the exercise of a controlling influence over management or
policies of the Holding Company or the Converted Bank.
The Holding Company Act, as amended by the Riegle-Neal Interstate
Banking and Branching Efficiency Act of 1994 (the "Riegle-Neal Act"), generally
permits the FRB to approve interstate bank acquisitions by bank holding
companies without regard to any prohibitions of state law. As a result, Alabama
banks and their holding companies may be acquired by out-of-state banks or
their holding companies, and Alabama banks and their holding companies may
acquire out-of-state banks without regard to whether the transaction is
prohibited by the laws of any state. Under the Riegle-Neal Act and Alabama
law, the FRB may not approve the acquisition of a bank in Alabama if such bank
has not been in existence for at least five years or, if following the
acquisition, the acquiring bank holding company and its depository institution
affiliates would control 30% or more of the deposits in depository institutions
in Alabama. In addition, the Riegle-Neal Act authorizes the federal banking
agencies, effective June 1, 1997, to approve interstate merger transactions
without regard to whether such transactions are prohibited by the law of any
state, unless the home state of one of the banks opts out of the Riegle-Neal
Act by adopting a law that applies equally to all out-of-state banks and
expressly prohibits merger transactions involving out-of-state banks. Alabama
has enacted legislation that expressly authorizes, effective May 31, 1997,
Alabama banks to participate in interstate mergers in accordance with the
Riegle-Neal Act. The effect of the Riegle-Neal Act and the Alabama legislation
may be to increase competition within the State of Alabama among banking
institutions located in Alabama and from banking companies located anywhere in
the country.
The Change in Bank Control Act and the regulations of the FRB
thereunder require any person or persons acting in concert (except for
companies required to make application under the Holding Company Act), to file
a written notice with the FRB before such person or persons may acquire control
of the Holding Company or the Converted Bank. The Change in Bank Control Act
defines "control" as the power, directly or indirectly, to vote 25% or more of
any voting securities or to direct the management or policies of a bank holding
company or an insured bank.
ACTIVITIES RESTRICTIONS. The Holding Company Act also prohibits, with
certain exceptions, a bank holding company from acquiring direct or indirect
ownership or control of more than 5% of the voting shares of a company
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that is not a bank or a bank holding company, or from engaging directly or
indirectly in activities other than those of banking, managing or controlling
banks, or providing services for its subsidiaries. The principal exceptions to
these prohibitions involve certain non-bank activities which, by statute or by
FRB regulation or order, have been identified as activities closely related to
the business of banking or managing or controlling banks. The activities of
the Holding Company and of its non-bank subsidiaries are subject to these legal
and regulatory limitations under the Holding Company Act and the FRB's
regulations thereunder. Notwithstanding the FRB's prior approval of specific
nonbanking activities, the FRB has the power to order a holding company or its
subsidiaries to terminate any activity, or to terminate its ownership or
control of any subsidiary, when it has reasonable cause to believe that the
continuation of such activity or such ownership or control constitutes a
serious risk to the financial safety, soundness or stability of any bank
subsidiary of that holding company.
CAPITAL REQUIREMENTS. The federal bank regulatory agencies use
capital adequacy guidelines in their examination and regulation of bank holding
companies and banks. If the capital of an organization falls below the minimum
levels established by these guidelines, a bank holding company or bank may be
denied approval to acquire of establish additional banks or non-bank
businesses, open facilities, and may be subject to enforcement actions. The
FDIC (which will be the primary federal regulator of the Converted Bank) and
the FRB have adopted substantially similar rules with respect to the
maintenance of appropriate levels of capital by state nonmember banks and bank
holding companies, respectively. Such rules impose two sets of capital
adequacy requirements: minimum leverage rules, which require banks and bank
holding companies to maintain a specified minimum ratio of capital to total
assets, and risk-based capital rules, which require the maintenance of
specified minimum ratios of capital to "risk-weighted" assets.
The regulations of the FDIC and the FRB require state nonmember banks
and bank holding companies to maintain a minimum leverage ratio of "Tier 1
capital" (as defined in the risk-based capital guidelines discussed in the
following paragraphs) to total assets of 3.0%. Although setting a minimum 3.0%
leverage ratio, the regulations state that only the strongest bank holding
companies and banks, with composite examination ratings of 1 under the rating
system used by the federal bank regulators, would be permitted to operate at or
near such minimum level of capital. All other bank holding companies and banks
are expected to maintain a leverage ratio of at least 1% to 2% above the
minimum ratio, depending on the assessment of an individual organization's
capital adequacy by its primary regulator. Any bank or bank holding company
experiencing or anticipating significant growth would be expected to maintain
capital well above the minimum levels. In addition, the FRB has indicated that
whenever appropriate, and in particular when a bank holding company is
undertaking expansion, seeking to engage in new activities or otherwise facing
unusual or abnormal risks, it will consider, on a case-by-case basis, the level
of an organization's ratio of tangible Tier 1 capital (after deducting all
intangibles) to total assets in making an overall assessment of capital.
The risk-based capital rules of the FDIC and the FRB require banks and
bank holding companies to maintain minimum regulatory capital levels based upon
a weighing of their assets and off-balance sheet obligations according to risk.
The risk-based capital rules have two basic components: a core capital (Tier 1)
requirement and a supplementary capital (Tier 2) requirement. Core capital
consists primarily of common stockholders' equity, certain perpetual preferred
stock (which must be noncumulative with respect to banks), and minority
interests in the equity accounts of consolidated subsidiaries; less intangible
assets, primarily goodwill. Supplementary capital elements include, subject to
certain limitations, the allowance for losses on loans and leases; perpetual
preferred stock that does not qualify for Tier 1 and long-term preferred stock
with an original maturity of at least 20 years from issuance; hybrid capital
instruments, including perpetual debt and mandatory convertible securities; and
subordinated debt and intermediate-term preferred stock. The risk-based
capital regulations assign balance sheet assets and credit equivalent amounts
of off-balance sheet obligations to one of four broad risk categories based
principally on the degree of credit risk associated with the obligor. The
assets and off-balance sheet items in the four risk categories are weighted at
0%, 20%, 50% and 100%. These computations result in the total risk-weighted
assets.
The risk-based capital regulations require all banks and bank holding
companies to maintain a minimum ratio of total capital to total risk-weighted
assets of 8%, with at least 4% as core capital. For the purpose of calculating
these ratios: (i) supplementary capital will be limited to no more than 100% of
core capital; and (ii) the aggregate amount of certain types of supplementary
capital will be limited. In addition, the risk-based capital regulations limit
the allowance for loan losses includable as capital to 1.25% of total
risk-weighted assets.
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DIVIDEND RESTRICTIONS. The FRB has the power to prohibit dividends by
bank holding companies if their actions constitute unsafe or unsound practices.
The FRB has issued a policy statement on the payment of cash dividends by bank
holding companies, which expresses the FRB's view that a bank holding company
should pay cash dividends only to the extent that the company's net income for
the past year is sufficient to cover both the cash dividends and a rate of
earning retention that is consistent with the company's capital needs, asset
quality, and overall financial condition.
TRANSACTIONS WITH AFFILIATES. The Converted Bank will be subject to
restrictions imposed by Section 23A of the Federal Reserve Act on extensions of
credit to, and certain other transactions with, the Holding Company and other
affiliates, and on investments in the stock or other securities thereof.
These regulations and restrictions may limit the Holding Company's ability to
obtain funds from the Converted Bank for its cash needs, including funds for
acquisitions and for payment of dividends, interest and operating expenses.
Further, under the Holding Company Act and the regulations of the FRB, a bank
holding company and its subsidiaries are prohibited from engaging in certain
tie-in arrangements in connection with any extension of credit, lease or sale
of property or furnishing of services. For example, in general, the Converted
Bank will not be able to require a customer to obtain other services from
itself or the Holding Company as a condition to an extension of credit to the
customer.
REGULATION OF THE CONVERTED BANK
GENERAL. As an Alabama commercial bank, the Converted Bank will be
subject to regulation, supervision and regular examination by the
Superintendent of Banks of the State of Alabama (the "Superintendent"). The
Converted Bank will also be subject to supervision and regular examination by
the FDIC under the applicable provisions of federal law and regulation.
Alabama and federal banking laws and regulations govern, among other things,
the Converted Bank's investments, loans, mergers and consolidations, issuance
of securities, payment of dividends, required reserves, establishment of
branches and other aspects of the Converted Bank's operations.
Supervision, regulation and examination of the Converted Bank by the
bank regulatory agencies are intended primarily for the protection of
depositors rather than for holders of stock of the Holding Company or of the
Holding Company as the holder of the stock of the Converted Bank.
CAPITAL REQUIREMENTS. The Converted Bank, as a state nonmember bank,
will be subject the regulatory capital requirements of the FDIC, which require
such banks to maintain specified minimum ratios of capital to total assets and
capital to risk-weighted assets. See "Regulation of the Holding Company --
Capital Requirements." The FDIC's capital requirements are substantially
similar to the capital requirements of the OTS, to which Pinnacle is now
subject.
DIVIDEND RESTRICTIONS. Dividends from the Converted Bank will
constitute the major source of funds for the payment of dividends by the
Holding Company. The amount of dividends payable by the Converted Bank to the
Holding Company will depend upon the Converted Bank's earnings and capital
position, and is limited by federal and Alabama statute and regulation.
Federal law provides that no insured depository institution may make any
capital distribution (including a cash dividend) if the institution would not
satisfy one or more of its minimum capital requirements after the distribution.
Furthermore, the federal bank regulatory agencies have the general authority to
limit dividend payments by insured depository institutions if such payments are
deemed an unsafe and unsound practice. The Bank is currently subject to these
general provisions of federal law to the same extent as the Converted Bank will
be following the Conversion.
In addition, as an Alabama bank, the Converted Bank will be subject to
dividend restrictions under the Alabama Banking Code, which provides that an
Alabama bank must obtain the approval of the Superintendent to declare
dividends in any calendar year in excess of the total of its net income for
that year combined with its retained net income for the preceding two calendar
years, less any required transfers to surplus. Currently, the Bank, as a
federal savings bank, has the authority to pay dividends without OTS approval
in the amount the greater of (i) up to 100% of net income to date during the
current calendar year plus one-half of its surplus capital ratio at the
beginning of the calendar year or (ii) 75% of its net income for the previous
four quarters. The Bank does not believe that the Conversion will have any
effect on its ability to pay regular dividends.
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FEDERAL DEPOSIT INSURANCE. Upon the Conversion, the deposits of the
Converted Bank will continue to be insured by the Savings Association Insurance
Fund ("SAIF") of the FDIC to the maximum extent provided by law (a maximum of
$100,000 for each insured depositor). Accordingly, the FDIC deposit insurance
premiums payable by the Bank will not change as a result of the Conversion.
However, as a result of recently enacted legislation that recapitalized the
SAIF, the insurance assessments payable by the Bank and the Converted Bank will
decrease significantly beginning with the first calendar quarter of 1997. See
"-- Recent Legislation."
RECENT LEGISLATION
SAIF RECAPITALIZATION. On September 30, 1996, the President signed
into law the Economic Growth and Regulatory Paperwork Reduction Act of 1996
(the "Act"), which provides for the recapitalization of the SAIF and calls for
the members of the Bank Insurance Fund (the "BIF") to share the obligation,
currently owed entirely by SAIF member institutions, to pay interest on the
bonds issued by the Financing Corporation ("FICO") to recapitalize the
predecessor to the SAIF. The Act requires the FDIC to impose a special
assessment on the SAIF-insured deposits of all depository institutions in an
amount sufficient to cause the SAIF to achieve the statutory reserve ratio of
1.25% of total insured deposits. The special assessment equals approximately
65.7 cents per $100 of an institution's SAIF deposits as of March 31, 1995, and
must be paid by affected institutions on November 27, 1996. As a member of the
SAIF, the Bank must pay an after tax special assessment of approximately
$625,000.
Under the Act, BIF member banks will begin participating in the
payment of interest on the FICO bonds on January 1, 1997. From that date
through December 31, 1999, BIF members will pay an assessment to service the
FICO debt at a rate equal to one-fifth of the SAIF rate, and from January 1,
2000 through 2017, the repayment of the FICO obligation will be shared pro rata
by BIF and SAIF members.
As a result of (i) the recapitalization of the SAIF through the
special assessment and (ii) the sharing of the FICO debt, the deposit insurance
assessments of most SAIF member institutions, like the Bank and the Converted
Bank, will be materially reduced. SAIF member institutions currently pay FDIC
premiums at rates ranging from .23% for well-capitalized, financially sound
institutions with few weaknesses to .31% for undercapitalized institutions that
pose a substantial risk of loss to the SAIF. After January 1, 1997, it is
expected that SAIF premiums will range from 0% to .27%, plus approximately
.0645% to cover payment of the FICO debt. Following January 1, 2000, a SAIF
member institution's annual assessment related to the FICO debt will decline
further, to approximately .0243%.
REPEAL OF TAX BAD DEBT RESERVE METHOD FOR SAVINGS INSTITUTIONS. On
August 2, 1996, the President signed into law the Small Business Job Protection
that, among other things repeal the tax bad debt reserve method for thrift
institutions effective for taxable years beginning after December 31, 1995. As
a result, savings institutions like the Bank are required to recapture into
taxable income the amount of their post-1987 tax bad debt reserves over a
six-year period beginning after 1995. This recapture can be deferred for up to
two years if the institution satisfies a residential loan portfolio test. The
Bank will recapture approximately $100,000 of its tax effected tax bad debt
reserves over six years as a result of this new law. The recapture will not
have any effect on the Bank's financial statements because the related tax
expense has already been accrued.
The portion of a thrift institution's tax bad debt reserve that is not
recaptured under this statute is only subject to recapture at a later date
under certain circumstances. These include stock repurchases or redemptions by
the thrift or if the thrift converts to a type of institution (such as a credit
union) that is not considered a "bank" for tax purposes. The Bank's conversion
to a commercial bank charter will not be the type of conversion that will
require recapture of its remaining tax bad debt reserves, and the Bank does not
anticipate engaging in any transactions at this time that would require such
recapture.
ACCOUNTING TREATMENT
The Conversion and Reorganization will be accounted for as a
reorganization under common control treated in a manner similar to a pooling of
interests. Therefore, the consolidated capitalization, assets, liabilities,
income and other financial data of the Holding Company immediately following
the Conversion and Reorganization will be substantially the same as those of
the Bank immediately prior to consummation of the Conversion and
Reorganization, and after the Conversion and Reorganization, will be shown in
the Holding
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Company's consolidated financial statements at the Bank's historical recorded
values. Because the Conversion and Reorganization will not result in a change
in such financial statements, this Proxy Statement/Prospectus does not include
financial statements of the Bank or the Holding Company.
LEGAL OPINION
The validity of the shares of the Holding Company Common Stock
issuable upon consummation of the Reorganization will be passed upon by
Reinhart, Boerner, Van Deuren, Norris & Rieselbach, P.C., Washington, D.C.
VOTE REQUIRED
Approval of the Plan requires the affirmative vote of a majority of
the total votes eligible to be cast at the Annual Meeting. Since the required
vote is based on the number of shares outstanding, an abstention or failure to
vote, including a broker no vote, is equivalent to voting against the Plan.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE APPROVAL OF THE PLAN.
THIS DESCRIPTION OF THE PROPOSED HOLDING COMPANY FOR THE BANK DOES NOT
PURPORT TO BE COMPLETE, BUT IS QUALIFIED IN ITS ENTIRETY BY THE PLAN OF
REORGANIZATION AND THE CERTIFICATE OF INCORPORATION AND BYLAWS OF THE HOLDING
COMPANY ATTACHED AS EXHIBITS I, III AND IV, RESPECTIVELY, TO THIS PROXY
STATEMENT/PROSPECTUS.
PROPOSAL IV -- APPROVAL OF
THE PINNACLE BANK 1996 STOCK OPTION AND INCENTIVE PLAN
GENERAL
The Board of Directors of the Bank has adopted the Pinnacle Bank 1996
Stock Option and Incentive Plan (the "Option Plan"), subject to its approval by
the Bank's stockholders. The Option Plan is attached hereto as Exhibit V and
should be consulted for additional information. All statements made herein
regarding the Option Plan, which are intended only to summarize the Option
Plan, are qualified in their entirety by reference to the Option Plan.
PURPOSE OF THE OPTION PLAN
The purpose of the Option Plan is to advance the interests of the Bank
by providing directors and selected employees of the Bank with the opportunity
to acquire shares of Bank Common Stock. By encouraging such stock ownership,
the Bank seeks to attract, retain, and motivate the best available personnel
for positions of substantial responsibility and to provide additional incentive
to directors and employees of the Bank and its affiliates to promote the
success of the business of the Bank.
DESCRIPTION OF THE OPTION PLAN
Effective Date. The Option Plan became effective on August 28, 1996,
the date of its approval by the Bank's Board of Directors (the "Plan Effective
Date"). However, the effectiveness of the Option Plan and awards granted
thereunder are subject to stockholder approval of the Option Plan at the Annual
Meeting.
Administration. The Option Plan is administered by a committee (the
"Stock Option Committee") appointed by the Board of Directors, consisting of at
least two directors of the Bank who are non-employee directors within the
meaning of the federal securities laws. The Stock Option Committee has
discretionary authority to select participants and grant awards, to determine
the form and content of any awards made under the Option Plan, to interpret the
Option Plan, to prescribe, amend, and rescind rules and regulations relating to
the Option Plan, and to make other decisions necessary or advisable in
connection with administering the Option Plan, except to the extent that the
Stock Option Committee seeks ratification of its decision by the Board. All
decisions, determinations, and interpretations of the Stock Option Committee
are final and conclusive on all persons affected thereby. Members of the Stock
Option Committee will be indemnified to the full extent
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permissible under the Bank's governing instruments in connection with any
claims or other actions relating to any action taken under the Option Plan.
The Stock Option Committee currently consists of Directors Perdue, Baird and
Cannon.
Eligible Persons; Types of Awards. Under the Option Plan, the Stock
Option Committee may grant stock options ("Options") and stock appreciation
rights ("SARs") (collectively, "Awards") to such employees as the Stock Option
Committee shall designate. Directors who are not employees, and Robert B.
Nolen, Jr., President and Chief Executive Officer of the Bank, received the
automatic grants described below (see "Automatic Grants"), and will also be
eligible to receive Awards under the Option Plan. As of the Record Date, the
Bank had 67 employees and 10 directors who are not employees who were eligible
to participate in the Option Plan.
Shares Available for Grants. The Option Plan reserves 85,000 shares
of Bank Common Stock for issuance upon the exercise of Options or SARs. Such
shares may be authorized but unissued shares, shares held in treasury, or
shares held in a grantor trust created by the Bank. In the event of any
merger, consolidation, recapitalization, reorganization, reclassification,
stock dividend, split-up, combination of shares, or similar event in which the
number or kind of shares is changed without receipt or payment of consideration
by the Bank, the Plan provides for a proportionate adjustment in the number and
kind of shares reserved for issuance under the Option Plan, the number and kind
of shares subject to outstanding Awards, and the exercise prices of such
Awards. Generally, the number of shares as to which SARs are granted are
charged against the aggregate number of shares available for grant under the
Option Plan, provided that, in the case of an SAR granted in conjunction with
an Option, under circumstances in which the exercise of the SAR results in
termination of the Option and vice versa, only the number of shares of Bank
Common Stock subject to the Option shall be charged against the aggregate
number of shares of Bank Common Stock remaining available under the Option
Plan. If Awards should expire, become unexercisable or be forfeited for any
reason without having been exercised, the shares of Bank Common Stock subject
to such Awards shall, unless the Option Plan shall have been terminated, be
available for the grant of additional Awards under the Option Plan.
Options. Options may be either incentive stock options ("ISOs") as
defined in Section 422 of the Internal Revenue Code, or options that are not
ISOs ("Non-ISOs"). The exercise price of an ISO may not be less than the fair
market value (determined under the Option Plan) of the optioned shares on the
date of grant. In the case of a participant who owns more than 10% of the
outstanding Bank Common Stock on the date of grant, such exercise price of an
ISO may not be less than 110% of fair market value of the shares. The exercise
price of a Non-ISO may not be less than 50% of the fair market value of the
underlying shares. As required by federal tax laws, to the extent that the
aggregate fair market value (determined when an ISO is granted) of the Common
Stock with respect to which ISOs are exercisable by an optionee for the first
time during any calendar year (under all plans of the Bank and of any
subsidiary) exceeds $100,000, the Options granted in excess of $100,000 will be
treated as Non-ISOs.
Automatic Grants. On the Plan Effective Date, each of the directors
who are not also employees of Bank received a grant of an Option to purchase
2,500 shares of Bank Common Stock at an exercise price per share equal to its
fair market value on the Plan Effective Date. Directors' Options vest as
follows: 625 shares upon receipt of stockholder approval at the Annual Meeting
and 625 shares upon completion of each of the three years subsequent to the
Plan Effective Date; provided, however, that directors shall receive credit for
years of service prior to the Plan Effective Date. In addition, vesting of
directors' Options shall be accelerated in the event of death, retirement after
age 65 or a change in control of the Bank other than the Reorganization.
Options granted to such directors have a term of 10 years, and expire one year
after a director terminates service on the Board for any reason (two years in
the event of the director's death during the term of his directorship), but in
no event later than the date on which such Options would otherwise expire.
Also on the Plan Effective Date, Robert B. Nolen, Jr., President and Chief
Executive Officer of the Bank, received a grant of ISOs to purchase 10,000
shares of Bank Common Stock.
SARs. An SAR may be granted in tandem with all or part of any Option
granted under the Option Plan, or without any relationship to any Option. An
SAR granted in tandem with an ISO must expire no later than the ISO, must have
the same exercise price as the ISO and may be exercised only when the ISO is
exercisable and when the fair market value of the shares subject to the ISO
exceeds the exercise price of the ISO. For SARs granted in tandem with
Options, the optionee's exercise of the SAR cancels his or her right to
exercise the Option,
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and vice versa. Regardless of whether an SAR is granted in tandem with an
Option, exercise of the SAR will entitle the optionee to receive, as the
Committee prescribes in the grant, all or a percentage of the difference
between (i) the fair market value of the shares of Common Stock subject to the
SAR at the time of its exercise, and (ii) the fair market value of such shares
at the time the SAR was granted (or, in the case of SARs granted in tandem with
Options, the exercise price). The exercise price as to any particular SAR may
not be less than the fair market value of the optioned shares on the date of
grant.
Exercise of Options and SARs. The exercise of Options and SARs will
be subject to such terms and conditions as are established by the Committee in
a written agreement between the Committee and the optionee, provided that each
Option is fully exercisable on the date of its grant, but not before the Option
Plan receives stockholder approval. In the absence of Committee action to the
contrary, an otherwise unexpired Option granted to an employee of the Bank
shall cease to be exercisable upon (i) an optionee's termination of employment
for just cause, (ii) the date one year after an optionee terminates service due
to disability, (iii) the date two years after an optionee terminates service
due to death, or (iv) the date three months after an optionee terminates
service for a reason other than just cause, death, or disability. An otherwise
unexpired Option granted to a Director shall, in the absence of Committee
action to the contrary, cease to be exercisable (i) the date one year after a
Director terminates service on the Board of Directors (including termination
due to disability) or (ii) the date two years after the Director terminates
service on the Board due to death.
An optionee may exercise Options or SARs, subject to provisions
relative to their termination and any limitations on their exercise, only by
(i) written notice of intent to exercise the Option or SAR with respect to a
specified number of shares of Common Stock, and (ii) in the case of Options,
payment to the Bank (contemporaneously with delivery of such notice) in cash,
in Common Stock, or a combination of cash and Common Stock, of the amount of
the exercise price for the number of shares with respect to which the Option is
then being exercised. Common Stock utilized in full or partial payment of the
exercise price for Options shall be valued at its market value at the date of
exercise and may consist of shares subject to the Option being exercised.
Restricted Stock. The Stock Option Committee has broad discretion at
the time of making a Restricted Stock grant to determine a period of five years
during which the shares granted will be subject to restrictions (the
"Restriction Period"), and the conditions that must be satisfied in order for
the shares of Restricted Stock to become unrestricted (i.e., vested and
nonforfeitable). For example, the Stock Option Committee may condition vesting
upon an optionee's continued employment or upon the optionee's attainment of
specific corporate, divisional or individual performance standards or goals.
The Stock Option Committee may impose special vesting rules applicable if the
optionee retires, becomes disabled or dies before the expiration of the
Restriction Period or satisfaction of the restrictions applicable to an award
of Restricted Stock.
Awards of Restricted Stock shall become 20% vested after one year of
service subsequent to the date of grant, with an additional 20% becoming vested
in each subsequent year of service with the Bank (subject to Stock Option
Committee discretion to impose different vesting requirements). If an
optionee's employment terminates due to his or her death, disability (as
defined in the Option Plan), retirement after age 65, or change in control of
the Bank, all restrictions expire and all shares of Restricted Stock become
fully (100%) vested and, consequently unrestricted.
Until a optionee's interest vests, his or her Restricted Stock is
nontransferable and forfeitable. Nevertheless, the optionee is entitled to
vote the Restricted Stock and to receive dividends and other distributions made
with respect to the Restricted Stock. To the extent that a optionee becomes
vested in his or her Restricted Stock at any time during the Restriction Period
and has satisfied applicable income tax withholding obligations, the Bank will
deliver unrestricted shares of Bank Common Stock to the optionee. At the end
of the Restriction Period, the optionee will forfeit to the Bank any shares of
Restricted Stock as to which he or she did not earn a vested interest during
the Restriction Period.
Change in Control. For purposes of the Option Plan, "change in
control" means any one of the following events: (i) the ownership, holding or
power to vote more than 25% of the Bank's voting stock; (ii) the control of the
election of a majority of the Bank's directors; (iii) the exercise of a
controlling influence over the management or policies of the Bank by any person
or by persons acting as a group within the meaning of Section 13(d) of the 1934
Act (except in the case of the foregoing, ownership or control of the Bank or
its directors by the
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Holding Company itself shall not constitute a "change in control"); or (iv)
during any period of two consecutive years, individuals who at the beginning of
such period constitute the Board of Directors of the Bank (the "Bank Board")
(the "Continuing Directors") cease for any reason to constitute at least
two-thirds thereof, provided that any individual whose election or nomination
for election as a member of the Bank Board was approved by a vote of at least
two-thirds of the Continuing Directors then in office shall be considered a
Continuing Director. For purposes of defining "change in control," the term
"person" refers to an individual or a corporation, partnership, trust,
association, joint venture, pool, syndicate, sole proprietorship,
unincorporated organization or any other form of entity not specifically
listed. The decision of the Stock Option Committee as to whether a change in
control has occurred shall be conclusive and binding.
Although these provisions are included in the Option Plan primarily
for the protection of an optionee in the event of a change in control of the
Bank, they may also be regarded as having a takeover defensive effect, which
may reduce the Bank's vulnerability to hostile takeover attempts and certain
other transactions which have not been negotiated with and approved by the
Board of Directors.
Conditions on Issuance of Shares. The Stock Option Committee will
have the discretionary authority to impose, in agreements, such restrictions on
shares of Common Stock issued pursuant to the Option Plan as it may deem
appropriate or desirable, including but not limited to the authority to impose
a right of first refusal or to establish repurchase rights or both of these
restrictions. In addition, the Committee may not issue shares unless the
issuance complies with applicable securities laws, and to that end may require
that a participant make certain representations or warranties.
Nontransferability. Awards may not be sold, pledged, assigned,
hypothecated, transferred or disposed of in any manner other than by will or by
the laws of descent and distribution, except that Non-ISO's may be transferred
in a limited manner.
Effect of Dissolution and Related Transactions. In the event of (i)
the liquidation or dissolution of the Bank, (ii) a merger or consolidation in
which the Bank is not the surviving entity, or (iii) the sale or disposition of
all or substantially all of the Bank's assets (any of the foregoing to be
referred to herein as a "Transaction"), all outstanding Awards, together with
the exercise prices thereof, will be equitably adjusted for any change or
exchange of shares for a different number or kind of shares which results from
the Transaction. However, any such adjustment will be made in such a manner as
to not constitute a modification, within the meaning of Section 424(h) of the
Internal Revenue Code, of outstanding ISOs.
Duration of the Option Plan and Grants. The Option Plan has a term of
10 years from the Plan Effective Date, after which date no Awards may be
granted. The maximum term for an Award is 10 years from the date of grant,
except that the maximum term of an ISO (and an SAR granted in tandem with an
ISO) may not exceed five years if the participant owns more than 10% of the
Common Stock on the date of grant. The expiration of the Option Plan, or its
termination by the Committee, will not affect any Award previously granted.
Amendment and Termination of the Option Plan. The Board of Directors
of the Bank may from time to time amend the terms of the Option Plan and, with
respect to any shares at the time not subject to Awards, suspend or terminate
the Option Plan. No amendment, suspension, or termination of the Option Plan
will, without the consent of any affected optionees, alter or impair any rights
or obligations under any Award previously granted.
Financial Effects of Awards. The Bank will receive no monetary
consideration for the granting of Awards under the Option Plan. It will
receive no monetary consideration, other than the exercise price, for shares of
Common Stock issued to optionees upon the exercise of their Options, and will
receive no monetary consideration upon the exercise of SARs. Under current
accounting standards, recognition of compensation expense is not required when
Options are granted at an exercise price equal to or exceeding the fair market
value of the Common Stock on the date the Option is granted.
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<PAGE> 46
After SARs are granted, the Bank must recognize compensation expense
to the extent of the appreciation, if any, in the market price of the Common
Stock to which the SARs relate over the exercise price of those shares for the
particular income period. If the market value of the Common Stock
subsequently declines, the Bank may recognize income or reverse the prior
expense (but not by more than the aggregate of such prior expenses).
FEDERAL INCOME TAX CONSEQUENCES
ISOs. An optionee recognizes no taxable income upon the grant of
ISOs. However, upon exercise of the ISO, the difference between the fair
market value of the Common Stock on the date of exercise and the exercise price
of the ISO must be treated by the optionee as an item of tax preference in the
year of exercise for purposes of determining whether the optionee is subject to
the alternative minimum tax.
If the optionee holds the shares purchased upon exercise of an ISO for
at least two years from the date the ISO is granted, and for at least one year
from the date the ISO is exercised, any gain realized on the sale of the shares
received upon exercise of the ISO is taxed as long-term capital gain. If an
optionee disposes of those shares before the expiration of either of these two
special holding periods (a "disqualifying disposition"), the optionee must
recognize ordinary income in an amount equal to the lesser of the gain realized
or the difference between the exercise price and the fair market value of the
Common Stock at the date of exercise, with the remainder of the gain, if any,
treated as capital gain.
The Bank will not be entitled to any deduction for federal income tax
purposes as the result of the grant or exercise of an ISO, regardless of
whether or not the exercise of the ISO results in liability to the optionee for
alternative minimum tax. However, if an optionee recognizes ordinary income
because of a disqualifying disposition, the Bank may deduct an equivalent
amount as compensation expense.
Non-ISOs. Generally, an optionee recognizes no income upon the grant
of a Non-ISO. An optionee must recognize ordinary income upon the exercise of
the Non-ISO in an amount equal to the difference between the fair market value
of the shares on the date of exercise and the option price. In the
alternative, the holder of a Non-ISO may elect, within 30 days after the
Non-ISO is granted, to recognize such income immediately upon the date of
grant. A director or officer is not required to recognize income upon exercise
of a non-ISO until such time as the recognition would no longer subject the
director or officer to a lawsuit under the short-swing profits rule of the
federal securities laws. Upon a subsequent disposition of such shares, any
amount received by the optionee in excess of the fair market value of the
shares as of the exercise will be taxed as capital gain. The Bank will be
entitled to a deduction for federal income tax purposes at the same time and in
the same amount as the ordinary income recognized by the optionee in connection
with the exercise of a Non-ISO.
SARs. The grant of an SAR has no tax effect on the optionee or the
Bank. Upon exercise of the SARs, however, any cash or Common Stock received by
the optionee in connection with the surrender of his or her SAR will be treated
as compensation income to the optionee, and the Bank will be entitled to a tax
deduction for the amounts treated as compensation income.
STOCK OPTIONS GRANTED
Set forth below is certain information relating to all Options that
would become effective upon stockholder approval of the Option Plan. All such
Options (i) are subject to the terms and conditions described above, and (ii)
will automatically expire 10 years after the date of their grant. The exercise
price for these Options equals the fair market value of the Common Stock on the
date of grant ($_____ per share). As of the date
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hereof, the Option grants disclosed below were the only Awards that had been
made under the Option Plan, although future Awards are anticipated.
<TABLE>
<CAPTION>
Value of Shares Number of Shares
Participant (or Group) Underlying Options ($)(1) Subject to Options (2)
---------------------- ------------------------- ----------------------
<S> <C> <C>
All executive officers, as a group $ _____ 10,000
(1 person)
All directors who are not executive $ _____ 25,000
officers, as a group
(10 persons)
</TABLE>
- -----------------
(1) Represents the extent to which the fair market value of the Common
Stock underlying each Option ($_____ per share, based upon the closing
sale price on the Record Date) exceeds the exercise price for such
shares ($17.625 per share, which equaled its fair market value on
August 28, 1996, the date of the grant).
(2) Represents the right to purchase the number of shares of the Common
Stock that is listed opposite the name of each optionee. As of the
date hereof, no other employees have been granted Options under the
Option Plan.
RECOMMENDATION AND VOTE REQUIRED
The Board of Directors has determined that the Option Plan is
desirable, cost effective, and produces incentives which will benefit the Bank
and its stockholders. The Board of Directors is seeking stockholder approval
of the Option Plan to satisfy the requirements of the Internal Revenue Code for
favorable tax treatment of ISOs, the requirements under the Bank's Federal
Stock Charter for issuances of stock of the Bank to directors and officers, and
the requirements of the American Stock Exchange upon which the Common Stock is
listed. Stockholder approval of the Option Plan by a favorable vote of a
majority of the votes eligible to be cast will satisfy all of the foregoing
requirements. THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" APPROVAL OF THE
OPTION PLAN.
NEW PLAN BENEFITS
The following table sets forth certain information regarding the
benefits to be received under the Option Plan.
<TABLE>
<CAPTION>
1996 Stock Option and Incentive Plan
------------------------------------
Dollar Number
Name and Position Value ($)(1) of Units (2)
- ----------------- ------------ ------------
<S> <C> <C>
Robert B. Nolen, Jr. $ 10,000
All executive officers, as a group (1 person) $ 10,000
All directors who are not executive officers,
as a group (10 persons) $ 25,000
</TABLE>
- --------------------
(1) Represents the extent to which the fair market value of the Common
Stock underlying each Option ($_____ per share, based upon the closing
sale price on the Record Date) exceeds the exercise price for such
shares ($17.625 per share, which equaled its fair market value on
August 28, 1996, the date of the grant).
(2) All Options listed herein have been granted subject to stockholder
approval of the Option Plan. In addition to the Option grants shown
herein, the Option Plan provides for future grants of Awards pursuant
to the terms of the Option Plan summarized above. See "Proposal IV --
Approval of 1996 Stock Option and Incentive Plan." As of the date
hereof, no Awards have been granted to employees who are not executive
officers.
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PROPOSAL V --- ADJOURNMENT OF MEETING
Approval of each of the Plan (Proposal III) and the Option Plan
(Proposal IV) requires the affirmative vote of a majority of the total votes
eligible to be cast at the Annual Meeting. In the event there is an
insufficient number of shares present in person or by proxy at the Annual
Meeting to approve either Proposal III or Proposal IV, and Proposal V is
approved at the Annual Meeting, the Board of Directors intends to adjourn the
Annual Meeting to a later date. The Board of Directors will utilize its
discretionary authority to adjourn the Annual Meeting for reasons other than to
solicit additional proxies for approval of Proposal III or Proposal IV, even if
Proposal V is not approved at the Annual Meeting. The place and date to which
the Annual Meeting would be reconvened would be announced at the Annual
Meeting, but, in order to avoid the necessity of setting a new record date or
providing formal written notice of the adjournment, would in no event be more
than 30 days after the date of the Annual Meeting.
The effect of approval of the adjournment under the circumstances
described herein would be to permit the Bank to solicit additional proxies for
approval of the Plan or the Option Plan, or both. While such an adjournment
would not invalidate any proxies previously filed, including those filed by
stockholders voting against the subject proposals, it would give the Bank the
opportunity to solicit additional proxies in favor of the Plan and the Option
Plan. As a result, such adjournment could be advantageous to stockholders who
favor the proposed Conversion and Reorganization and the Option Plan to the
potential disadvantage of those who would disfavor such proposals. However, in
the event of an adjournment, stockholders retain the right to revoke proxies at
any time prior to exercise. See "Voting and Revocation of Proxies."
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE APPROVAL OF THE
ADJOURNMENT UNDER THE CIRCUMSTANCES DESCRIBED HEREIN. APPROVAL OF THE
ADJOURNMENT REQUIRES THE AFFIRMATIVE VOTE OF THE HOLDERS OF A MAJORITY OF THE
VOTES CAST IN PERSON OR BY PROXY AT THE ANNUAL MEETING.
MARKET AND DIVIDEND INFORMATION
The Bank Common Stock is traded on the American Stock Exchange under
the symbol "PLE". The Holding Company and the Bank will apply to have the
Holding Company Common Stock traded on the American Stock Exchange in
substitution for the Bank Common Stock under the same symbol. Although the
Holding Company and the Bank do not currently anticipate any difficulty in
obtaining approval of the listing, no assurance can be given that the Holding
Company Common Stock will be approved for American Stock Exchange listing. As
of June 30, 1996, the Bank had 448 stockholders of record. This total does not
reflect the number of persons or entities who hold stock in nominee or "street
name" through various brokerage firms.
Following are the high and low sales prices of the Bank Common Stock
for the periods indicated:
<TABLE>
<CAPTION>
Price Range
Common Stock
<S> <C> <C>
Fiscal year 1995 High Low
- ----------------------------------------------------------------------------------------------------
First Quarter 15 5/8 15 1/4
Second Quarter 14 13 3/4
Third Quarter 14 5/8 13 3/4
Fourth Quarter 16 1/8 14 3/4
Fiscal year 1996
- ----------------------------------------------------------------------------------------------------
First Quarter 16 3/4 16
Second Quarter 19 17 1/2
Third Quarter 18 1/8 17 3/4
Fourth Quarter 16 3/8 15 7/8
</TABLE>
Dividends of $.72 ($.18 in each of the four quarters) were declared and paid
during each of the fiscal years 1995 and 1996.
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<PAGE> 49
The ability of the Bank to pay dividends on Bank Common Stock is
restricted by federal regulations and tax considerations and the Converted
Bank's ability to pay dividends will be restricted by the same tax
considerations as well as Alabama and federal law and regulation. Although the
Holding Company will not be subject to these restrictions, the Holding
Company's principal source of income initially will consist primarily of its
equity in the earnings of the Converted Bank. In addition, certain limitations
generally imposed on Delaware corporations may have an impact on the Holding
Company's ability to pay dividends. See "Proposal III -- Proposed Conversion
and Reorganization -- Comparison of Stockholders' Rights -- Payment of
Dividends" and "-- Regulation of the Converted Bank -- Dividend Restrictions."
OTHER MATTERS
The Board of Directors is not aware of any business to come before the
Annual Meeting other than those matters described above in this Proxy Statement
and matters incident to the conduct of the Annual Meeting. Properly executed
proxies in the accompanying form that have not been revoked confer
discretionary authority on the persons named therein to vote at the direction
of a majority of the Board of Directors on any other matters presented at the
Annual Meeting to the fullest extent permitted by applicable laws and
regulations.
MISCELLANEOUS
The cost of solicitation of proxies will be borne by the Bank. The
Bank will reimburse brokerage firms and other custodians, nominees and
fiduciaries for reasonable expenses incurred by them in sending proxy material
to the beneficial owners of Bank Common Stock. In addition to solicitations by
mail, directors, officers and regular employees of the Bank may solicit proxies
personally, by telegraph or telephone without additional compensation. The
Bank has retained Corporate Communications, Inc. to assist in the management of
the Bank's investor relations and other stockholder communications issues for a
fee of approximately $500 per month plus reimbursement of out-of-pocket
expenses. As part of its duties, Corporate Communications, Inc. may assist in
the solicitation of proxies.
The Bank's 1996 Annual Report to Stockholders, including financial
statements, is being mailed to all stockholders of record as of the close of
business on the Record Date. Any stockholder who has not received a copy of
such Annual Report may obtain a copy by writing to the Secretary of the Bank.
Such Annual Report is not to be treated as part of the proxy solicitation
material nor as having been incorporated herein by reference.
STOCKHOLDER PROPOSALS
If the Conversion and Reorganization is consummated, in order to be
eligible for inclusion in the proxy statement and proxy relating to the 1997
annual meeting of stockholders of the Holding Company, which will be held on or
about May 30, 1997, any stockholder proposal to take action at such meeting
must be received by the Secretary of the Holding Company at 1811 Second Avenue,
P.O. Box 1388, Jasper, Alabama 35502-1388, no later than January 2, 1997. If
the Conversion and Reorganization is not consummated, any such stockholder
proposal relating to the 1997 annual meeting of stockholders of the Bank, which
will be held on or about October 15, 1997, must be received by the Secretary of
the Bank at the above address no later than June 17, 1997. Nothing in this
paragraph shall be deemed to require the Bank or the Holding Company to include
in its proxy statement and proxy relating to the 1997 annual meeting any
stockholder proposal which does not meet all of the
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<PAGE> 50
requirements for inclusion established by the OTS (or, in the event the
Conversion and Reorganization has been completed, the SEC) in effect at the
time such proposal is received.
BY ORDER OF THE BOARD OF DIRECTORS
THOMAS L. SHERER
SECRETARY
Jasper, Alabama
November 20, 1996
ANNUAL REPORT ON FORM 10-K
A COPY OF THE BANK'S ANNUAL REPORT ON FORM 10-K FOR THE FISCAL YEAR ENDED JUNE
30, 1996, AS FILED WITH THE OTS, WILL BE FURNISHED WITHOUT CHARGE TO
STOCKHOLDERS AS OF THE RECORD DATE UPON WRITTEN REQUEST TO THE SECRETARY,
PINNACLE BANK, 1811 SECOND AVENUE, P.O. BOX 1388, JASPER, ALABAMA
35502-1388.
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EXHIBIT I
PINNACLE BANK
AGREEMENT AND PLAN OF CONVERSION
AND REORGANIZATION
THIS AGREEMENT AND PLAN OF CONVERSION AND REORGANIZATION, dated
October 9, 1996 (the "Plan"), by and among PINNACLE BANK, a federal stock
savings bank organized and existing under the laws of the United States
("Pinnacle"); PINNACLE BANCSHARES, INC., a Delaware corporation ("Holding
Company"); and PINNACLE INTERIM BANK, an interim commercial bank to be
organized under the laws of the State of Alabama ("Interim Bank") if the Merger
procedure (described below) is utilized.
PREAMBLE
The Board of Directors of Pinnacle has determined that the best
interests of Pinnacle and its stockholders would be served if (a) Pinnacle were
to convert from a federal stock savings bank to an Alabama state-chartered
commercial bank (the "Conversion") and (b) the corporate structure of Pinnacle
were to be reorganized into the holding company form of ownership (the
"Reorganization").
The initial transaction contemplated by this Plan is Pinnacle's
charter conversion from a federal stock savings bank to a commercial bank
organized and existing under the laws of the State of Alabama with the
corporate title "Pinnacle Bank" (the "Resulting Bank"). Pursuant to the terms
of this Plan and in accordance with the procedures set forth in Section 5-7A-62
of the Alabama Banking Code and other applicable law, Pinnacle shall convert
directly to an Alabama state-chartered bank. As a result of the Conversion,
each of the issued and outstanding shares of common stock, $.01 par value per
share, of Pinnacle ("Pinnacle Common Stock") will be converted into one issued
and outstanding share, $.01 par value per share, of common stock of the
Resulting Bank ("Resulting Bank Common Stock").
Following the Conversion Effective Date (as defined in Section H of
Article I), the Reorganization will be accomplished, in the alternative, by (1)
the merger of an interim commercial bank to be organized under the laws of the
State of Alabama (Interim Bank) with and into the Resulting Bank (the
"Merger"), with the Resulting Bank as the surviving corporation or (2) a share
exchange between the Resulting Bank and the Holding Company (the "Share
Exchange") pursuant to applicable provisions of the Alabama Business
Corporation Act (the "ABCA"). The terms and conditions of the Merger are set
forth in Section A of Article II, and the terms and conditions of the Share
Exchange are set forth in Section B of Article II. The effects of both
alternatives are believed to be identical to the Bank and its stockholders.
The parties hereto currently expect to utilize the Share Exchange procedure
unless such procedure is determined not to be available under the terms and
conditions of the Plan.
As a result of the Reorganization, on and after the Reorganization
Effective Date (as defined in Section E of Article II), all of the issued and
outstanding shares of Resulting Bank Common Stock will be held by the Holding
Company, and the holders of the issued and outstanding shares of Resulting Bank
Common Stock, except for those stockholders exercising dissenter's rights of
appraisal in accordance with applicable provisions of the ABCA, will become the
holders of the
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issued and outstanding shares of common stock, $.01 par value per share, of the
Holding Company ("Holding Company Common Stock").
NOW, THEREFORE, in order to consummate this Agreement and Plan of
Conversion and Reorganization, and in consideration of the mutual covenants
herein set forth, the parties agree as follows:
ARTICLE I
PROVISIONS APPLICABLE TO THE CONVERSION
A. METHOD AND SCHEDULE OF CONVERSION
A.1 Method of Conversion. Pinnacle shall convert directly from a
federally chartered stock savings bank to a commercial bank organized and
existing under the laws of the State of Alabama. The Conversion shall be
effected pursuant to the terms of this Plan, which has been approved and
adopted by a majority of the members of the Board of Directors of Pinnacle, and
in accordance with the procedures set forth in Section 5-7A-62 of the Alabama
Banking Code and other applicable law.
A.2 Approval of Plan of Conversion. This Plan shall be submitted
to the Superintendent of Banks of the State of Alabama (the "Superintendent")
for approval in connection with an Application for Permission to Convert from a
Savings Institution to a State Chartered Bank (the "Conversion Application").
Following the tentative approval of this Plan by the Superintendent, the Plan
shall be submitted to the stockholders of Pinnacle for a vote at the Annual
Meeting of Stockholders of Pinnacle. The Plan must be adopted by the
stockholders of Pinnacle by a favorable vote of a majority of the total number
of votes eligible to be cast. Finally, in order for the Conversion to take
effect, the Superintendent must issue to Pinnacle his final approval of the
Application and a permit authorizing the Resulting Bank to transact business as
a state-chartered bank pursuant to applicable law.
B. ORGANIZATION OF THE RESULTING BANK
B.1 Name of Resulting Bank. The name of the Resulting Bank at
and after the Conversion Effective Date shall be "Pinnacle Bank."
B.2 Organizational Documents. Subject to the approval of the
Superintendent, the Articles of Incorporation and Bylaws of the Resulting Bank
in effect immediately after the Conversion Effective Date shall be in the form
attached hereto as Exhibits A and B, respectively.
B.3 Organization. Pinnacle is currently a federal stock savings
bank chartered by and under the supervision of the Office of Thrift Supervision
of the United States Department of the Treasury (the "OTS"). Pinnacle, which
was formerly known as "First Federal of Alabama, F.S.B.", converted from mutual
to stock form in December 1986 and adopted its current name in January 1996.
B.4 Capital Stock. Pinnacle has authorized capital of 10,000,000
shares of Pinnacle Common Stock, of which 889,824 shares are issued and
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outstanding and 42,176 shares are held as treasury stock, and 10,000,000 shares
of serial preferred stock, of which no shares are issued and outstanding. The
authorized capital stock of the Resulting Bank shall be the same as the
authorized capital stock of Pinnacle and, on the Conversion Effective Date,
each share of Pinnacle Common Stock issued and outstanding on the Conversion
Effective Date shall automatically by operation of law be converted into and
become one share of common stock, $.01 par value per share, of the Resulting
Bank.
C. MANAGEMENT STRUCTURE OF THE RESULTING BANK
C.1 Management Officials. Each person serving as a director or
executive officer of Pinnacle immediately prior to the Conversion Effective
Date shall become a director or executive officer of the Resulting Bank with
the same title and responsibilities on and after the Conversion Effective Date.
A list of the current directors and executive officers of Pinnacle is attached
as Exhibit C.
C.2 Qualification of Directors. Each person serving on the
Conversion Effective Date as a director of Pinnacle shall meet, on and after
the Conversion Effective Date, all statutory and regulatory requirements
applicable to directors of Alabama state chartered banks, including any
provisions of Alabama law requiring directors of a bank to own stock in such
bank or in a parent holding company thereof.
D. METHOD AND SCHEDULE FOR TERMINATING ACTIVITIES AND
DISPOSING OF ASSETS IMPERMISSIBLE FOR ALABAMA BANKS
D.1 Treasury Shares. If required by the Superintendent, the
shares of Pinnacle Common Stock held by Pinnacle as treasury stock shall be
canceled upon the Conversion.
D.2 Noncomforming Real Estate Investments. The Resulting Bank
will divest all real estate investments that are not permissible direct or
indirect investments for Alabama banks within two years after the Conversion
Effective Date, unless it receives prior approval to retain such investments
for a longer period.
E. COMPETITIVE IMPACT OF CONVERSION
The Conversion will not have an adverse effect on competition among
banking institutions in any relevant market area and will not have a
substantially adverse effect on the financial condition of any commercial bank
already established in Pinnacle's primary market area. Pinnacle is only one of
numerous depository institutions, including savings institutions and commercial
banks, that provide a broad range of banking services within its market area.
F. CONTINUATION OF BUSINESS OF PINNACLE
F.1 Continued Corporate Existence. Upon the Conversion, the
corporate existence of Pinnacle shall not terminate, and the Resulting Bank
shall be deemed to be a continuation of Pinnacle. The business of the
Resulting Bank shall continue thereafter to be conducted from its main office
located at 1811 Second Avenue, Jasper, Alabama and at its legally established
branches and other facilities on the Conversion Effective Date.
F.2 Continuation of Federal Deposit Insurance. The insurance of
the deposit accounts in Pinnacle by the Savings Association Insurance Fund (the
"SAIF") of the Federal Deposit
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Insurance Corporation ("FDIC") shall be unaffected by the Conversion, and the
deposit accounts in the Resulting Bank shall continue to be insured by the SAIF
to the maximum extent provided by law. Pinnacle shall provide appropriate
evidence of the continuation of FDIC deposit insurance to the Superintendent.
F.3 Transfer of Rights. Upon the Conversion, all property of
Pinnacle including its rights, properties, franchises, and interests in and to
every type of property and asset (whether real, personal, or mixed) and things
in action and every right, privilege, interest and asset of any conceivable
value or benefit shall immediately by operation of law and without the
necessity of any conveyance or transfer and without the necessity any further
act or deed remain and be vested in and continue to be the property of the
Resulting Bank. Subject to the laws and regulations applicable to Alabama
banks, the rights, franchises and interests of Pinnacle shall continue to be
held or enjoyed by the Resulting Bank in the same manner and to the same
extent as such rights, franchises, and interests were held or enjoyed by
Pinnacle prior to the Conversion.
F.4 Transfer of Liabilities. Upon the Conversion, all
obligations, liabilities, charges liens, encumbrances, judgments and claims
then existing or pertaining to Pinnacle or that would inure to or against it,
shall immediately by operation of law and without the necessity of any further
act or deed remain and continue to be the obligation of the Resulting Bank.
Subject to the laws and regulations applicable to Alabama banks, the Resulting
Bank shall be liable for or bound by such obligations in the same manner and to
the same extent that Pinnacle was so liable or bound immediately prior to the
Conversion Effective Date. All savings accounts and deposits of Pinnacle shall
automatically be converted into savings accounts and deposits of the Resulting
Bank, in identical amounts as those issued by Pinnacle, and in the case of time
deposits, such deposits of the Resulting Bank shall bear the interest rates and
carry the maturity dates, respectively, of the time deposits issued by
Pinnacle.
F.5 Continuation of Actions. All pending actions, and other
judicial or administrative proceedings to which Pinnacle is a party shall not
be deemed to have abated or to have been discontinued by reason of the
Conversion, but may be prosecuted to final judgment or order in the same manner
as if the Conversion had not occurred, and the Resulting Bank may continue such
action in its corporate name as an Alabama bank, and any judgment or order may
be entered for or against it in such corporate name.
F.6 Continuation of Liquidation Account. Upon the Conversion, the
Resulting Bank shall assume all rights and obligations of Pinnacle under the
liquidation account established by Pinnacle in connection with its conversion
from mutual to stock form.
G. CONDITIONS TO THE CONVERSION
G.1 Stockholder Approval. This Plan shall have been adopted at a
meeting of the stockholders of Pinnacle by a favorable vote of a majority of
the total number of votes eligible to be cast.
G.2 Regulatory Approval. The Conversion shall have received all
necessary approvals and permits from the Superintendent and all other
applicable government authorities, and all such approvals and permits shall be
in effect on the Conversion Effective Date. Any conditions imposed by such
regulatory approvals shall have been complied with to the satisfaction of the
respective government authorities, and any applicable waiting period imposed by
statute or by order of any
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governmental authority shall have expired on the Conversion Effective Date.
The receipt of regulatory approval for the Reorganization is not a condition
precedent to the completion of the Conversion.
H. CONVERSION EFFECTIVE DATE
Subject to the satisfaction of all requirements of the terms and
conditions set forth herein and to compliance with all applicable laws and
regulations, the Conversion contemplated by this Plan shall be and become
effective on the date on which the Articles of Incorporation of the Resulting
Bank shall be filed in the Probate Court of Walker County as required by the
laws of the State of Alabama. The date of such filing is herein called the
"Conversion Effective Date."
ARTICLE II
PROVISIONS APPLICABLE TO THE REORGANIZATION
A. ALTERNATIVE A -- MERGER WITH INTERIM BANK
A.1. Merger of Interim Bank into the Resulting Bank.
A.1.1 The Merger. On the Reorganization Effective Date, Interim
Bank will be merged with and into the Resulting Bank (the "Merger") and the
separate existence of Interim Bank shall cease, and all assets and property
(real, personal and mixed, tangible and intangible, choses in action, rights
and credits) then owned by Interim Bank, or which would inure to it, shall
immediately and automatically, by operation of law and without any conveyance,
transfer, or further action, become the property of the Resulting Bank. The
Resulting Bank shall be deemed to be a continuation of Interim Bank and shall
succeed to the rights and obligations of Interim Bank.
A.1.2 Continued Existence of the Resulting Bank. Following the
Merger, the existence of the Resulting Bank shall continue unaffected and
unimpaired by the Merger, with all the rights, privileges, immunities and
powers, and subject to all the duties and liabilities, of a bank organized and
existing under the laws of the State of Alabama. The Articles of Incorporation
and Bylaws of the Resulting Bank, as in effect on the Reorganization Effective
Date, shall continue in full force and effect and shall not be changed in any
manner whatsoever by the Merger.
A.1.3 Continued Business of the Resulting Bank. From and after the
Reorganization Effective Date, and subject to the actions of the Board of
Directors of the Resulting Bank, the business conducted by the Resulting Bank
(whether directly or through a subsidiary) will continue to be conducted by it,
as a wholly owned subsidiary of Holding Company, and the current directors and
officers of Pinnacle will continue in their present positions.
A.1.4 Office Locations. The locations of the home and branch
offices of the Resulting Bank immediately prior to the Reorganization Effective
Date shall continue to be the locations of the home and branch offices,
respectively, of the Resulting Bank from and after the Reorganization Effective
Date.
A.1.5 Savings Accounts. The issuance of savings accounts and other
instruments and obligations by the Resulting Bank shall not be affected by the
Merger.
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A.1.6 Further Assurances. Pinnacle and Interim Bank each agree that
at any time, or from time to time, as and when requested by Pinnacle or by its
successors or assigns, Interim Bank will execute and deliver, or cause to be
executed and delivered, in its name by its last acting officers or by the
corresponding officers of Pinnacle (Interim Bank hereby authorizing such
officer so to act in its name), all such conveyances, assignments, transfers,
deeds and other instruments, and will take or cause to be taken such further or
other action as Pinnacle or its successors or assigns may deem necessary or
desirable in order to carry out the vesting, perfecting, confirming,
assignment, devolution or other transfer of the interests, property,
privileges, powers, immunities, franchises and other rights referred to in this
Section II.A, or otherwise to carry out the intents and purposes of this Plan.
A.2. Conversion of Stock.
The terms and conditions of the Merger, the mode of carrying the same
into effect, and the manner and basis of converting the respective shares of
common stock of the parties to this Plan shall be as follows:
A.2.1 Holding Company Common Stock. On the Reorganization Effective
Date, any shares of Holding Company Common Stock that may be held by the
Resulting Bank immediately prior to the Reorganization Effective Date shall be
canceled and shall no longer be deemed outstanding for any purpose.
A.2.2 Resulting Bank Common Stock. On the Reorganization Effective
Date, each share of Resulting Bank Common Stock issued and outstanding
immediately prior to the Reorganization Effective Date (other than any shares
of Resulting Bank Common Stock held by a stockholder who exercises dissenters'
rights under Sections 10-2B-13.01 through 10-2B-13.28 of the ABCA) shall
automatically, by operation of law and without any action on the part of the
holder thereof, be converted into and shall become one share of Holding Company
Common Stock.
A.2.3 Interim Bank Common Stock. Each share of common stock of
Interim Bank issued and outstanding immediately prior to the Reorganization
Effective Date shall, on the Reorganization Effective Date, automatically by
operation of law and without any action on the part of the holder thereof be
converted into and shall become one share of Resulting Bank Common Stock and
shall not be further converted into shares of Holding Company Common Stock, so
that from and after the Reorganization Effective Date, all of the issued and
outstanding shares of Resulting Bank Common Stock shall be held by the Holding
Company.
A.2.4 Exchange of Resulting Bank Common Stock. From and after the
Reorganization Effective Date, each holder of an outstanding certificate or
certificates that, prior thereto, represented shares of Resulting Bank Common
Stock, shall, upon surrender of the same to the designated agent of the
Resulting Bank ("Exchange Agent"), be entitled to receive, in exchange
therefore, a certificate or certificates representing the number of whole
shares of Holding Company Common Stock into which the shares theretofore
represented by the certificate or certificates so surrendered shall have been
converted, as provided in the foregoing provisions of this Section II.A. Until
so surrendered, each such outstanding certificate that, prior to the
Reorganization Effective Date, represented shares of Resulting Bank Common
Stock shall be deemed for all corporate purposes to evidence the ownership of
the number of whole shares of Holding Company Common Stock into which such
shares of Resulting Bank Common Stock shall have been so converted. Former
holders of shares of Resulting Bank Common Stock will not be required to
exchange their Resulting Bank Common
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Stock certificates for new certificates evidencing the same number of shares of
Holding Company Common Stock.
A.2.5 Full Satisfaction. All shares of Holding Company Common Stock
into which shares of Resulting Bank Common Stock shall have been converted
pursuant to this Section II.A shall be deemed to have been issued in full
satisfaction of all rights pertaining to such converted shares.
A.2.6 Sole Rights, Etc. On the Reorganization Effective Date, the
holders of certificates formerly representing Resulting Bank Common Stock
outstanding on the Reorganization Effective Date shall cease to have any rights
with respect to the Resulting Bank Common Stock, and their sole rights shall be
with respect to the Holding Company Common Stock into which their shares of
Resulting Bank Common Stock shall have been converted by the Merger.
B. ALTERNATIVE B -- SHARE EXCHANGE BETWEEN THE RESULTING BANK AND THE
HOLDING COMPANY
B.1 Names of Parties to Share Exchange.
The name of the corporation whose shares are to be acquired is
"Pinnacle Bank" (which will be an Alabama commercial bank on the date of the
Reorganization). The name of the acquiring corporation is "Pinnacle Bancshares,
Inc." (a Delaware corporation).
B.2 Terms and Conditions of Share Exchange
The terms and conditions of the Share Exchange, the mode of carrying
the same into effect, and the manner and basis of converting the respective
shares of common stock of the parties to this Plan shall be as follows:
B.2.1 Terms and Conditions of Exchange of Resulting Bank Common
Stock. On the Reorganization Effective Date, each share of Resulting Bank
Common Stock issued and outstanding immediately prior to the Reorganization
Effective Date (other than any shares of Resulting Bank Common Stock held by a
stockholder who exercises dissenter's rights under applicable provisions of the
ABCA, set forth below) shall automatically, by operation of law and without any
action on the part of the holder thereof, be converted into and exchanged for
one share of Holding Company Common Stock. Any stockholder who does not wish
to exchange his or her shares of Resulting Bank Common Stock for shares of
Holding Company Common Stock shall be entitled to dissenter's rights as
provided under Sections 10-2B-13.01 through 10-2B-13.28 of the ABCA.
B.2.2 Rights of Holders of Resulting Bank Common Stock upon the
Reorganization. On the Reorganization Effective Date, the holders of the
then-issued and outstanding shares of Resulting Bank Common Stock (except for
any such holder who exercises dissenter's rights) shall, without any further
action on their part or on the part of the Holding Company, automatically and
by operation of law cease to own such shares an shall instead become owners of
one share of Holding Company Common Stock for each share of Resulting Bank
Common Stock theretofore held by them. Thereafter, such persons shall have
full and exclusive power to vote such shares of Holding Company Common Stock,
to receive dividends thereon and to exercise all rights of an owner thereof.
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B.2.3 Rights of the Holding Company upon the Reorganization. On the
Reorganization Effective Date, the Holding Company shall, without any further
action on its part or on the part of the holders of Resulting Bank Common
Stock, automatically and by operation of law acquire and become the owner for
all purposes of all the then-issued and outstanding shares of Resulting Bank
Common Stock (except for any shares held by a stockholder who exercises
dissenter's rights) and shall be entitled to have issued to it by the Resulting
Bank a certificate representing such shares. Thereafter, the Holding Company
shall have full and exclusive power to vote such shares of Resulting Bank
Common Stock, to receive dividends thereon and to exercise all rights of an
owner thereof.
B.2.4.a Conversion of Stock Certificates. Certificates representing
shares of Resulting Bank Common Stock that are outstanding immediately before
the Reorganization Effective Date (the "Pinnacle Bank Certificates") shall, as
of the Reorganization Effective Date, automatically and by operation of law
cease to represent shares of Resulting Bank Common Stock or any interest
therein and each Pinnacle Bank Certificate shall instead represent the
ownership by the holder thereof of an equal number of share of Holding Company
Common Stock.
B.2.4.b Optional Exchange of Stock Certificates. On and after the
Reorganization Effective Date, the holders of Pinnacle Bank Certificates, upon
surrender of the same to the designated agent of the Resulting Bank ("Exchange
Agent"), shall be entitled to receive, in exchange therefore, a certificate or
certificates representing the number of whole shares of Holding Company Common
Stock into which the shares theretofore represented by the certificate or
certificates so surrendered shall have been converted, as provided in the
foregoing provisions of this Section II.B. Until so surrendered, each such
outstanding certificate that, prior to the Reorganization Effective Date,
represented shares of Resulting Bank Common Stock shall be deemed for all
corporate purposes to evidence the ownership of the number of whole shares of
Holding Company Common Stock into which such shares of Resulting Bank Common
Stock shall have been so converted. Former holders of shares of Resulting Bank
Common Stock will not be required to exchange their Pinnacle Bank Certificates
for new certificates evidencing the same number of shares of Holding Company
Common Stock.
B.2.5 Full Satisfaction. All shares of Holding Company Common Stock
into which shares of Resulting Bank Common Stock shall have been converted
pursuant to this Section II.B shall be deemed to have been issued in full
satisfaction of all rights pertaining to such converted shares.
B.2.6 Sole Rights, Etc. On the Reorganization Effective Date, the
holders of certificates formerly representing shares of Resulting Bank Common
Stock outstanding on the Reorganization Effective Date shall cease to have any
rights with respect to the Resulting Bank Common Stock other (i) with respect
to the Holding Company Common Stock into which their shares of Resulting Bank
Common Stock shall have been converted pursuant to this Section II.B and (ii)
the rights afforded to the Resulting Bank stockholders who chose to exercise
dissenter's rights under applicable provisions of the ABCA.
C. CONTINUED EFFECTIVENESS OF STOCK OPTION PLANS
On the Reorganization Effective Date, the First Federal of Alabama,
FSB 1986 Stock Option and Incentive Plan and, if approved by Pinnacle's
stockholders, the Pinnacle Bank 1996 Stock Option and Incentive Plan
(collectively, the "Option Plans") shall automatically, by operation
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of law, be continued as and become the stock option plans of the Holding
Company. On the Reorganization Effective Date, each unexercised option to
purchase shares of Pinnacle Common Stock under the Option Plans outstanding at
that time will be automatically converted into an unexercised option, with
identical price, terms and conditions, to purchase an identical number of
shares of Holding Company Common Stock in lieu of shares of Pinnacle Common
Stock, and the Holding Company shall assume all of Pinnacle's obligations with
respect to the Option Plans. By approving this Plan, the stockholders of
Pinnacle will be approving the adoption by the Holding Company of the Option
Plans as the stock option plans of the Holding Company.
D. CONDITIONS TO THE REORGANIZATION
D.1 Conditions. The obligations of Pinnacle, the Holding Company
and Interim Bank to effect the Reorganization and otherwise consummate the
transactions which are the subject matter hereof shall be subject to
satisfaction of the following conditions:
D.1.1 Stockholder Approval. To the extent required by applicable
law, rules, and regulations, the holders of the outstanding shares of Pinnacle
Common Stock shall, at a meeting of the stockholders of Pinnacle duly called,
have approved this Plan by the affirmative vote of a majority of the
outstanding shares of Pinnacle Common Stock.
D.1.2 Registration. The shares of Holding Company Common Stock to
be issued to holders of Pinnacle Common Stock in connection with the
Reorganization shall, if required under applicable law, have been duly
registered pursuant to Section 5 of the Securities Act of 1933, as amended, and
the Holding Company shall have complied with all applicable state securities or
"blue sky" laws relating to the issuance of the Holding Company Common Stock.
D.1.3 Approvals, Consents. Any and all approvals from the
Superintendent, the FDIC, the Board of Governors of the Federal Reserve System,
the Securities and Exchange Commission and any other governmental agency having
jurisdiction necessary for the lawful consummation of the Reorganization and
the issuance and delivery of Holding Company Common Stock as contemplated by
this Plan shall have been obtained.
D.1.4 Tax Status. Pinnacle shall have received either (i) a ruling
from the Internal Revenue Service or (ii) an opinion from its legal counsel or
independent auditors, to the effect that the Reorganization will be treated as
a non-taxable transaction under applicable provisions of the Internal Revenue
Code of 1986, as amended, and that no gain or loss will be recognized by the
holders of Resulting Bank Common Stock upon the exchange of Resulting Bank
Common Stock held by them solely for Holding Company Common Stock.
D.1.5 Dissenter and Appraisal Rights. The holders of not more than
ten percent (10%) of the outstanding shares of Pinnacle Common Stock shall have
elected to exercise dissenting shareholder rights under Sections 10-2B-13.20
through 10-2B-13.28 of the Alabama Business Corporation Act, unless such
limitation is waived by the parties hereto.
D.1.6 Completion of the Conversion. Pinnacle shall have completed
its conversion from a federal stock savings bank to an Alabama commercial bank.
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E. REORGANIZATION EFFECTIVE DATE
Subject to the terms of all applicable requirements of law and
satisfaction of the conditions specified in this Plan, including receipt of all
required regulatory approvals for the Merger or the Share Exchange (as
applicable), the parties hereto shall execute and cause to be filed with the
Secretary of State of the State of Alabama (the "Secretary of State") Articles
of Merger or Articles of Share Exchange with respect to the Merger or the Share
Exchange, respectively. The Reorganization shall become effective on the date
specified for the effectiveness of the Merger or Share Exchange (as applicable)
in the Articles of Merger or the Articles of Share Exchange, respectively,
filed with the Secretary of State (such date being herein called the
"Reorganization Effective Date").
ARTICLE III
PROVISIONS APPLICABLE TO BOTH THE CONVERSION
AND THE REORGANIZATION
A. AMENDMENTS
Any of the terms or conditions of this Plan may be amended or modified
in whole or in part at any time at the election of the Board of Directors of
Pinnacle, to the extent permitted by applicable law, rules, and regulations, by
an amendment in writing, provided that any such amendment or modification is
not materially adverse to Pinnacle, the Holding Company or their stockholders.
In the event that any governmental agency requests or requires that the
transactions contemplated herein be modified in any respect as a condition of
providing a necessary regulatory approval or favorable ruling, or that in the
opinion of counsel to Pinnacle such modification is necessary to obtain such
approval or ruling, this Plan may be modified, at any time before or after
adoption thereof by the stockholders of Pinnacle, by an instrument in writing,
provided that the effect of such amendment would not be materially adverse to
Pinnacle, the Holding Company or their stockholders.
B. TERMINATION; EXPENSES
B.1 Termination. This Plan may be terminated at any time prior to
the Conversion Effective Date by a majority vote of the Board of Directors of
Pinnacle. In addition, this Plan may be terminated at any time prior to the
Reorganization Effective Date at the election of any of the parties hereto, if
any one or more of the conditions to the obligations of any of them hereunder
shall not have been satisfied and shall have become incapable of fulfillment
and shall not be waived. This Plan may also be terminated at any time prior to
the Reorganization Effective Date by the mutual consent of the respective
Boards of Directors of the parties.
B.2 No Further Obligation. In the event of the termination of
this Plan pursuant to this Section III.B, this Plan shall be void and of no
further force or effect, and there shall be no further liability or obligation
of any nature by reason of this Plan or the termination hereof on the part of
any of the parties hereto or their respective directors, officers, employees,
agents or stockholders.
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B.3 Costs and Expenses. Pinnacle shall pay all costs and expenses
incurred by it, the Holding Company and Interim Bank in connection with this
Plan and the transactions contemplated hereunder.
C. WAIVER
Any of the terms or conditions of this Plan that may legally be waived
may be waived at any time by any party hereto which is entitled to the benefit
thereof, or any of such terms or conditions may be amended or modified in whole
or in part at any time, to the extent authorized by applicable law, by an
agreement in writing, executed in the same manner as this Plan.
D. EXECUTION BY INTERIM BANK
Pinnacle and the Holding Company acknowledge that, as of the date
hereof, the certificate of incorporation of Interim Bank has not been approved
by the Superintendent and therefore Interim Bank does not have the legal
capacity to execute this Plan. The Holding Company, as the organizer and sole
stockholder of Interim Bank, agrees to cause Interim Bank to execute this Plan
promptly following the incorporation of Interim Bank. Pinnacle and the Holding
Company agree to be bound by this Plan prior to and following such execution by
Interim Bank.
E. HEADINGS
The section and other headings contained in this Plan are for
reference purposes only and shall not be deemed to be part of this Plan.
F. GOVERNING LAW
This Plan shall be governed by and construed and enforced in
accordance with the laws of the State of Alabama, except insofar as the federal
law of the United States is deemed to preempt such law or otherwise apply.
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IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement and Plan of Conversion and Reorganization as of the date first above
written.
PINNACLE BANK
By:
----------------------------------------------
Robert B. Nolen, Jr.
President and Chief Executive Officer
PINNACLE BANCSHARES, INC.
By:
----------------------------------------------
Robert B. Nolen, Jr.
President and Chief Executive Officer
PINNACLE INTERIM BANK (in formation)
By:
----------------------------------------------
Robert B. Nolen, Jr.
President and Chief Executive Officer
- ------------------------------ ------------------------------
- ------------------------------ ------------------------------
- ------------------------------ ------------------------------
- ------------------------------ ------------------------------
- ------------------------------ ------------------------------
A Majority of the Directors of Pinnacle Bank
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EXHIBIT A
PINNACLE BANK
ARTICLES OF INCORPORATION
The undersigned, acting as incorporators under the provisions of
Section 10-2B-2.01 of the Alabama Business Corporation Act, as amended, and
under the provisions of Section 5-7A-62 of the Alabama Banking Code, as
amended, adopt the following Articles of Incorporation of Pinnacle Bank:
ARTICLE I
CORPORATE TITLE
The full corporate title of the bank is Pinnacle Bank (the "bank").
ARTICLE II
PRINCIPAL OFFICE
The principal office of the bank shall be located in the City of
Jasper, County of Walker, State of Alabama.
ARTICLE III
DURATION
The bank shall have perpetual duration and existence.
ARTICLE IV
PURPOSE AND POWERS
The objects and nature of the business and the purpose and powers of
the bank are to conduct a general banking business through such means and at
such places as the board of directors may deem proper and to engage in any
lawful activity and to exercise all powers permitted to it by the Alabama
Business Corporation Act and the Alabama Banking Code.
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ARTICLE V
CAPITAL STOCK
The total number of shares of all classes of the capital stock which
the bank has the authority to issue is 10,000,000, all of which shall be shares
of common stock of par value of $.01 per share. The shares may be issued from
time to time as authorized by the board of directors without the approval of
the shareholders except as otherwise provided in this Article 5 or to the
extent that such approval is required by governing law, rule or regulation.
The consideration for the issuance of the shares shall be paid in full before
their issuance and shall not be less than the par value. Neither promissory
notes nor future services shall constitute payment or part payment for the
issuance of shares of the bank. The consideration for the shares shall be
cash, tangible or intangible property (to the extent direct investment in such
property would be permitted), labor or services actually performed for the bank
or any combination of the foregoing. In the absence of actual fraud in the
transaction, the value of such property, labor or services, as determined by
the board of directors of the bank shall be conclusive. Upon payment of such
consideration such shares shall be deemed to be fully paid and nonassessable.
In the case of a stock dividend, that part of the surplus of the bank which is
transferred to stated capital upon the issuance of shares as a share dividend
shall be deemed to be the consideration for their issuance.
Nothing contained in this Article 5 (or in any supplementary sections
hereto) shall entitle the holders of any class of a series of capital stock to
vote as a separate class or series or to more than one vote per share, except
as to the cumulation of votes for the election of directors: Provided, that
this restriction on voting separately by class or series shall not apply:
(i) to any provision that would authorize the holders of preferred
stock, voting as a class or series, to elect some members of the board
of directors, less than a majority thereof, in the event of default in
the payment of dividends on any class or series of preferred stock;
(ii) to any provision that would require the holders of preferred
stock, voting as a class or series, to approve the merger or
consolidation of the bank with another corporation or the sale, lease,
or conveyance (other than by mortgage or pledge) of properties or
business in exchange for securities of a corporation other than the
bank if the preferred stock is exchanged for securities of such other
corporation; or
(iii) to any amendment that would adversely change the specific terms
of any class or series of capital stock as set forth in this Article 5
(or in Articles of Amendment hereto), including any amendment that
would create or enlarge any class or series ranking prior thereto in
rights and preferences. An amendment that increases the number of
authorized shares of any class or series of capital stock, or
substitutes the surviving bank in a merger or consolidation for the
bank, shall not be considered to be such an adverse change.
Except as provided in this Article 5 (or in Articles of Amendment
hereto) the holders of the common stock shall exclusively possess all voting
power. Each holder of shares of common stock shall be entitled to one vote for
each share held by such holder.
Whenever there shall have been paid, or declared and set aside for
payment, to the holders of the outstanding shares of any class of stock having
preference over the common stock as to the
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payment of dividends, the full amount of dividends and of sinking fund or
retirement fund or other retirement payments, if any, to which such holders are
respectively entitled, in preference to the common stock, then dividends may be
paid on the common stock and on any class or series of stock entitled to
participate therewith as to dividends, out of any assets legally available for
the payment of dividends; but only when and as declared by the board of
directors.
In the event of any liquidation, dissolution or winding up of the
bank, the holders of the common stock (and the holders of any class or series
of stock entitled to participate with the common stock in the distribution of
assets) shall be entitled to receive, in cash or in kind, the assets of the
bank available for distribution remaining after: (i) payment or provision for
payment of the bank's debts and liabilities; (ii) distributions or provision
for distributions in settlement of its liquidation account; and (iii)
distributions or provision for distributions to holders of any class or series
of stock having preference over the common stock in the liquidation,
dissolution, or winding up of the bank. Each share of common stock shall have
the same relative rights as and be identical in all respects with all the other
shares of common stock.
ARTICLE VI
PREEMPTIVE RIGHTS
Holders of the capital stock of the bank shall not be entitled to
preemptive rights with respect to any shares of the bank which may be issued.
ARTICLE VII
LIQUIDATION ACCOUNT
Pursuant to the requirements of the regulations of the Office of
Thrift Supervision regarding mutual-to-stock conversions (12 CFR Subchapter D),
the bank shall maintain a liquidation account for the benefit of the savings
account holders of its predecessor federal savings institution as of December
31, 1985 ("eligible savers"). In the event of a complete liquidation of the
bank, it shall comply with such regulations with respect to the amount and the
priorities on liquidation of the inchoate interest of each of the predecessor
savings institution's eligible savers in the liquidation account, to the extent
it is still in existence. An eligible saver's inchoate interest in the
liquidation account shall not entitle such eligible saver to any voting rights
at meetings of the bank's shareholders.
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ARTICLE VIII
DIRECTORS
The bank shall be under the direction of a board of directors.
Wherever there are nine or more directors, the directors of the bank shall be
divided into three classes, with one class to be elected annually in accordance
with the bylaws of the bank. The numbers of directors shall not be less than
five nor more than fifteen, as shall be set from time to time by action of the
board of directors. Vacancies in the board of directors, including a vacancy
resulting from an increase in the number of directors, may be filled either by
the board of directors or by the shareholders.
ARTICLE IX
LIMITATION OF DIRECTORS' LIABILITY
A director of the bank shall not be personally liable to the bank or
its shareholders for monetary damages for any action taken, or any failure to
take any action, as a director, except liability for (i) the amount of a
financial benefit received by a director to which he or she is not entitled;
(ii) an intentional infliction of harm on the bank or the shareholders; (iii)
a violation of Section 10-2B-8.33 of the Alabama Business Corporation Act;
(iv) an intentional violation of criminal law; or (v) a breach of the
director's duty of loyalty to the bank or its shareholders. If the Alabama
Business Corporation Act or other Alabama law is amended or enacted after the
date of filing of these Articles of Incorporation to further eliminate or limit
the personal liability of directors, then the liability of a director of the
bank shall be eliminated or limited to the fullest extent permitted by the
Alabama Business Corporation Act, as so amended, or such other Alabama law.
Any repeal or modification of this Article 9 by the shareholders of the bank
shall not adversely affect any right or protection of a director of the bank
existing at the time of such repeal or modification.
ARTICLE X
INDEMNIFICATION
(a) The bank, acting through its board of directors, shall have the
authority to indemnify any person who was or is a party or threatened to be
made a party to any threatened, pending or completed claim, action, suit or
proceeding, whether civil, criminal, administrative or investigative, including
appeals, including an action by or in the right of the bank, by reason of the
fact that he or she is or was a director, officer, employee or agent of the
bank, or is or was serving at the request of the bank as an officer, director,
partner, employee or agent of another corporation, partnership, joint venture,
trust or other enterprise, against expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement actually and reasonably
incurred by him or her in connection with such claim, action, suit or
proceeding, to the fullest extent authorized under Alabama law.
(b) The bank, acting through its board of directors, shall have the
authority to purchase and maintain insurance on behalf of any person who is or
was a director, officer, employee or agent of the bank, or is or was serving at
the request of the bank as a director, officer, partner, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise
against any liability
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asserted against him or her and incurred by him or her in any such capacity or
arising out of his or her status as such, whether or not the bank would have
the power to indemnify such person against such liability under the provisions
of the laws of Alabama.
ARTICLE XI
CUMULATIVE VOTING LIMITATION
Notwithstanding any other provision of these Articles of Incorporation
or the bylaws of the bank, shareholders will not be permitted to cumulate their
votes for election of directors.
ARTICLE XII
APPROVAL OF MERGER OR SHARE EXCHANGE
A plan of merger or plan of share exchange to which the bank is a
party must be approved by the shareholders of the bank by a majority of the
total votes eligible to be cast on such plan; provided that, if more than one
voting group is entitled to vote separately on a plan of merger or plan of
share exchange, the plan must be approved by a majority of the total votes
entitled to by cast on such plan by each voting group.
ARTICLE XIII
AMENDMENT OF ARTICLES OF INCORPORATION
These Articles of Incorporation may be amended at any regular or
special meeting of the shareholders by a majority of the total votes eligible
to be cast at such meeting. No proposed amendment of this Articles of
Incorporation shall be valid unless approved in writing by the Superintendent
of Banks of the State of Alabama (the "Superintendent").
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ARTICLE XIV
INITIAL DIRECTORS
The initial directors of the bank shall be those persons who are
elected or designated as the directors of the bank in connection with the
conversion of Pinnacle Bank from a federal stock savings bank to an Alabama
banking corporation. Such initial directors shall serve for staggered terms
ending in the years set forth below and until their successors are elected and
have qualified. The names and addresses of the initial board of directors are
as follows:
<TABLE>
<CAPTION>
NAME ADDRESS TERM EXPIRES
- ---- ------- ------------
<S> <C> <C>
1997
- ------------------------- -------------------------
1997
- ------------------------- -------------------------
1997
- ------------------------- -------------------------
1997
- ------------------------- -------------------------
1997
- ------------------------- -------------------------
1997
- ------------------------- -------------------------
1997
- ------------------------- -------------------------
1997
- ------------------------- -------------------------
1997
- ------------------------- -------------------------
1997
- ------------------------- -------------------------
</TABLE>
ARTICLE XV
REGISTERED OFFICE AND AGENT
The address of the bank's initial registered office is 1811 2nd
Avenue, Jasper, Alabama 35502, and its initial registered agent at such address
is Robert B. Nolen, Jr.
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ARTICLE XVI
INCORPORATORS
The persons designated as the directors of the bank in connection with
the conversion of Pinnacle Bank from a federal stock savings bank to an Alabama
banking corporation are the incorporators of the bank. The names and addresses
of such incorporators are as follows:
<TABLE>
<CAPTION>
NAME ADDRESS
- ---- -------
<S> <C>
- ------------------------------ ------------------------------
- ------------------------------ ------------------------------
- ------------------------------ ------------------------------
- ------------------------------ ------------------------------
- ------------------------------ ------------------------------
- ------------------------------ ------------------------------
- ------------------------------ ------------------------------
- ------------------------------ ------------------------------
- ------------------------------ ------------------------------
- ------------------------------ ------------------------------
</TABLE>
ARTICLE XVII
CONVERSION OF PINNACLE BANK
FROM A FEDERAL SAVING BANK
This bank is incorporated by plan of conversion of Pinnacle Bank from
a federal savings bank to an Alabama banking corporation (the "Conversion")
pursuant to the requirements of Section 5-7A-62, the Conversion has been
approved by the shareholders of Pinnacle Bank as a federal savings bank and by
the Superintendent. Pursuant to such statutory provision, upon the filing of
these Articles of Incorporation, the bank is incorporated as a bank the same as
if it had been incorporated, chartered and authorized to do business in
accordance with Section 5-5A-1, et seq., of the Alabama Banking Code. The
Corporation shall be deemed for all purposes to be a continuation of the
federal savings bank so converted.
Dated as of this _____ day of __________, 1997.
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EXHIBIT B
PINNACLE BANK
BYLAWS
ARTICLE I -- HOME OFFICE
The home office of Pinnacle Bank (the "bank") shall be located at 1811
2nd Avenue, in the City of Jasper, in the County of Walker, in the State of
Alabama.
ARTICLE II -- SHAREHOLDERS
SECTION 1. PLACE OF MEETINGS. All annual and special meetings of
shareholders shall be held at the home office of the bank or at such other
place in the State of Alabama as the board of directors may determine.
SECTION 2. ANNUAL MEETING. A meeting of the shareholders of the bank
for the election of directors and for the transaction of any other business of
the bank shall be held annually within 120 days after the end of the bank's
fiscal year on the third Wednesday of October, if not a legal holiday, and if a
legal holiday, then on the next day following which is not a legal holiday, at
1.00 P.M., or at such other date and time within such 120-day period as the
board of directors may determine.
SECTION 3. SPECIAL MEETINGS. Special meetings of the shareholders
for any purpose or purposes may be called at any time by the chairman of the
board, the president, or a majority of the board of directors, and shall be
called by the chairman of the board, the president, or the secretary upon the
written request of the holders of not less than ten percent (10%) of the shares
of the bank entitled to vote at the meeting. Such written request shall state
the purpose or purposes of the meeting and shall be delivered to the home
office of the bank addressed to the chairman of the board, the president, or
the secretary.
SECTION 4. CONDUCT OF MEETINGS. Annual and special meetings shall be
conducted in accordance with rules and procedures adopted by the board of
directors. The board of directors shall designate, when present, either the
chairman of the board or president to preside at such meetings.
SECTION 5. NOTICE OF MEETINGS. Written notice stating the place,
day, and hour of the meeting and the purpose(s) for which the meeting is called
shall be delivered not fewer than 10 nor more than 60 days before the date of
the meeting, either personally or by mail, by or at the direction of the
chairman of the board, the president, or the secretary, or the directors
calling the meeting, to each shareholder of record entitled to vote at such
meeting; provided, however, that the capital stock or bonded indebtedness of
the bank shall not be increased at a special meeting unless 30 days' written
notice has been given before the date of such meeting. If mailed, such notice
shall be deemed to be delivered when deposited in the mail, addressed to the
shareholder at the address as it appears on the stock transfer books or records
of the bank as of the record date prescribed in Section 6 of this Article II
with postage prepaid. When any shareholders' meeting, either annual or
special, is adjourned for 30 days or more, notice of the adjourned meeting
shall be given as in the case of an original meeting. It shall not be
necessary to give any notice of the time and place of any meeting adjourned for
less than 30 days or of the business to be transacted at the meeting other than
an announcement at the meeting at which such adjournment is taken.
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SECTION 6. FIXING OF RECORD DATE. For the purpose of determining
shareholders entitled to notice of or to vote at any meeting of shareholders or
any adjournment, or shareholders entitled to receive payment of any dividend,
or in order to make a determination of shareholders for any other proper
purpose, the board of directors shall fix in advance a date as the record date
for any such determination of shareholders. Such date in any case shall be not
more than 70 days and, in case of a meeting of shareholders, not fewer than 10
days prior to the date on which the particular action, requiring such
determination of shareholders, is to be taken. When a determination of
shareholders entitled to vote at any meeting of shareholders has been made as
provided in this section, such determination shall apply to any adjournment.
SECTION 7. VOTING LISTS. After the board of directors fixes a record
date for a meeting of the shareholders, the officer or agent having charge of
the stock transfer books for shares of the bank shall make a complete list of
the shareholders entitled to vote at such meeting, or any adjournment, arranged
in alphabetical order, with the address and the number of shares held by each.
This list of shareholders shall be kept on file at the principal office of the
bank and shall be available for inspection by any shareholder beginning two
days after notice of the meeting is given to shareholders, at any time during
usual business hours. Such list shall also be produced and kept open at the
time and place of the meeting and shall be subject to inspection by any
shareholder during the entire time of the meeting. The original stock transfer
book shall constitute prima facie evidence of the shareholders entitled to
examine such list or transfer books or to vote at any meeting of shareholders.
SECTION 8. QUORUM. One-third of the outstanding shares of the bank
entitled to vote, represented in person or by proxy, shall constitute a quorum
at a meeting of shareholders. If less than a majority of the outstanding
shares is represented at a meeting, a majority of the shares so represented may
adjourn the meeting from time to time without further notice. At such
adjourned meeting at which a quorum shall be present or represented, any
business may be transacted which might have been transacted at the meeting as
originally notified. The shareholders present at a duly organized meeting may
continue to transact business until adjournment, notwithstanding the withdrawal
of enough shareholders to constitute less than a quorum.
SECTION 9. PROXIES. At all meetings of shareholders, a shareholder
may vote by proxy executed in writing by the shareholder or by his duly
authorized attorney in fact. Proxies solicited on behalf of the management
shall be voted as directed by shareholder or, in the absence of such direction,
as determined by a majority of the board of directors. No proxy shall be valid
more than eleven months from the date of its execution unless a longer period
is expressly provided in the appointment form.
SECTION 10. VOTING OF SHARES IN THE NAME OF TWO OR MORE PERSONS.
When ownership stands in the names of two or more persons, in the absence of
written directions to the bank to the contrary, at any meeting of the
shareholders of the bank, any one or more of such shareholders may cast, in
person or by proxy, all votes to which such ownership is entitled. In the
event an attempt is made to cast conflicting votes, in person or by proxy, by
the several persons in whose names shares of stock stand, the vote or votes to
which those persons are entitled shall be cast as directed by a majority of
those holding such and present in person or by proxy at such meeting, but no
votes shall be cast for such stock if a majority cannot agree.
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SECTION 11. VOTING OF SHARES OF CERTAIN HOLDERS. Shares standing in
the name of another corporation may be voted by any officer, agent, or proxy as
the bylaws of such corporation may prescribe, or, in the absence of such
provision, as the board of directors of such corporation may determine. Shares
held by an administrator, executor, guardian, or conservator may be voted by
him, either in person or by proxy, without a transfer of such shares into his
name. Shares standing in the name of a trustee may be voted by him, either in
person or by proxy, but no trustee shall be entitled to vote shares held by him
without a transfer of such shares into his name. Shares standing in the name
of a receiver may be voted by such receiver, and shares held by or under the
control of a receiver may be voted by such receiver without the transfer into
his name if authority to do so is contained in an appropriate order of the
court or other public authority by which such receiver was appointed.
A shareholder whose shares are pledged shall be entitled to vote such
shares until the shares have been transferred into the name of the pledgee, and
thereafter the pledgee shall be entitled to vote the share so transferred.
Neither treasury shares of its own stock held by the bank nor shares
held by another corporation, if a majority of the shares entitled to vote for
the election of directors of such other corporation are held by the bank, shall
be voted at any meeting or counted in determining the total number of
outstanding shares at any given time for purposes of any meeting.
SECTION 12. VOTING. Unless otherwise provided in the bank's Articles
of Incorporation or by applicable law, each shareholder shall at every meeting
of the shareholders be entitled to one vote, in person or by proxy, for each
share of the capital stock of the bank then held by such shareholder.
SECTION 13. INSPECTORS OF ELECTION. In advance of any meeting of
shareholders, the board of directors may appoint any persons other than
nominees for office as inspectors of election to act at such meeting or any
adjournment. The number of inspectors shall be either one or three. Any such
appointment shall not be altered at the meeting. If inspectors of election are
not so appointed, the chairman of the board or the president may, or on the
request of not fewer than 10 percent of the votes represented at the meeting
shall, make such appointment at the meeting. If appointed at the meeting, the
majority of the votes present shall determine whether one or three inspectors
are to be appointed. In case any person appointed as inspector fails to appear
or fails or refuses to act, the vacancy may be filled by appointment by the
board of directors in advance of the meeting or at the meeting by the chairman
of the board or the president.
The duties of such inspectors shall include: determining the number of
shares and the voting power of each share, the shares represented at the
meeting, the existence of a quorum, and the authenticity, validity and effect
of proxies; receiving votes, ballots, or consents; hearing and determining all
challenges and questions in any way arising in connection with the rights to
vote; counting and tabulating all votes or consents; determining the result;
and such acts as may be proper to conduct the election or vote with fairness to
all shareholders.
SECTION 14. NOMINATING COMMITTEE. The board of directors shall act
as a nominating committee for selecting the management nominees for election as
directors. Except in the case of a nominee substituted as a result of the
death or other incapacity of a management nominee, the nominating committee
shall deliver written nominations to the secretary at least 20 days prior to
the date of the annual meeting. No nominations for directors except those made
by the nominating committee shall be voted upon at the annual meeting unless
other nominations by shareholders are
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made in writing and delivered to the secretary of the bank at least 30 days
prior to the date of the annual meeting. Ballots bearing the names of all the
persons nominated by the nominating committee and by shareholders shall be
provided for use at the annual meeting. However, if the nominating committee
shall fail or refuse to act at least 20 days prior to the annual meeting,
nominations for directors may be made at the annual meeting by any shareholder
entitled to vote and shall be voted upon.
SECTION 15. NEW BUSINESS. Any new business to be taken up at the
annual meeting shall be stated in writing and filed with the secretary of the
bank at least 30 days before the date of the annual meeting, and all business
so stated, proposed and filed shall be considered at the annual meeting, but no
other proposal shall be acted upon at the annual meeting. Any shareholder may
make any other proposal at the annual meeting and the same may be discussed and
considered, but unless stated in writing and filed with the secretary at least
30 days before the meeting, such proposal shall be laid over for action at an
adjourned, special or annual meeting of the shareholders taking place 30 days
or more thereafter. This provision shall not prevent the consideration and
approval or disapproval at the annual meeting of reports of officers, directors
and committees; but in connection with such reports, no new business shall be
acted upon at the annual meeting unless stated and filed as herein provided.
SECTION 16. INFORMAL ACTION BY SHAREHOLDERS. Any action required to
be taken at a meeting of the shareholders, or any other action which may be
taken at a meeting of shareholders, may be taken without a meeting if consent
in writing, setting forth the action so taken, shall be given by all of the
shareholders entitled to vote with respect to the subject matter.
ARTICLE III -- BOARD OF DIRECTORS
SECTION 1. GENERAL POWERS. The business and affairs of the bank
shall be under the direction of its board of directors. The board of directors
shall annually elect a chairman of the board and a president from among its
members and shall designate, when present, either the chairman of the board or
the president to preside at its meetings.
SECTION 2. NUMBER AND TERM. The board of directors shall consist of
such number of directors, between five and fifteen, as shall be determined by
resolution of the board of directors from time to time; provided that only the
shareholders of the bank may increase or decrease by more than 30% the number
of directors last approved by the shareholders. Whenever the number of
directors is nine or greater, the directors of the bank shall be divided into
three classes as nearly equal in number as possible, and the members of each
class shall be elected for a term of three years and until their successors are
elected and have qualified. One class shall be elected by ballot annually.
SECTION 3. REGULAR MEETINGS. An organizational meeting of the board
of directors shall be held without other notice than this bylaw immediately
after, and at the same place as, the annual meeting of shareholders. The board
of directors may provide, by resolution, the time and place, within the bank's
normal lending territory, for the holding of additional regular meetings
without other notice than such resolution.
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SECTION 4. QUALIFICATION. Each director shall be the beneficial
owner of shares of capital stock of the bank or its parent holding company in
an amount not less than that required by applicable law, regulation or
regulatory policy statement.
SECTION 5. SPECIAL MEETINGS. Special meetings of the board of
directors may be called by or at the request of the chairman of the board, the
president, or one-third of the directors. The persons authorized to call
special meetings of the board of directors may fix any place, within the bank's
normal lending territory, as the place for holding any special meeting of the
board of directors called by such persons.
Members of the board of directors may participate in special meetings
by means of conference telephone or similar communications equipment by which
all persons participating in the meeting can hear each other. Such
participation shall constitute presence in person.
SECTION 6. NOTICE OF SPECIAL MEETING. Written notice of at least 24
hours regarding any special meeting of the board of directors or of any
committee designated thereby shall be given to each director in accordance with
the bylaws, although such notice may be waived by the director. The attendance
of a director at a meeting shall constitute a waiver of notice of such meeting,
except where a director attends a meeting for the express purpose of objecting
to the transaction of any business because the meeting is not lawfully called
or convened. Neither the business to be transacted at, nor the purpose of, any
meeting need be specified in the notice of waiver of notice of such meeting.
The bylaws may provide for telephonic participation at a meeting.
SECTION 7. QUORUM. A majority of the number of directors fixed by the
board of directors in accordance with Section 2 of this Article III shall
constitute a quorum for the transaction of business at any meeting of the board
of directors; but if less than such majority is present at a meeting, a
majority of the directors present may adjourn the meeting from time to time.
Notice of any adjourned meeting shall be given in the same manner as prescribed
by Section 6 of this Article III.
SECTION 8. MANNER OF ACTING. The act of the majority of the
directors present at a meeting at which a quorum is present shall be the act of
the board of directors, unless a greater number is prescribed by applicable law
or these bylaws.
SECTION 9. ACTION WITHOUT A MEETING. Any action required or
permitted to be taken by the board of directors at a meeting may be taken
without a meeting if a consent in writing, setting forth the action so taken,
shall be signed by all of the directors.
SECTION 10. RESIGNATION. Any directory may resign at any time by
sending a written notice of such resignation to the home office of the bank
addressed to the chairman of the board or the president. Unless otherwise
specified, such resignation shall take effect upon receipt by the chairman of
the board or the president. More than three consecutive absences from regular
meetings of the board of directors, unless excused by resolution of the board
of directors, shall automatically constitute a resignation, effective when such
resignation is accepted by the board of directors.
SECTION 11. VACANCIES. Any vacancy occurring on the board of
directors, including a vacancy resulting from an increase in the number of
directors, may be filled by the affirmative vote of a majority of the remaining
directors although less than a quorum of the board of directors. A
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director elected to fill a vacancy shall be elected to serve until the next
election of directors by the shareholders.
SECTION 12. COMPENSATION. Directors, as such, may receive a stated
salary for their services. By resolution of the board of directors, a
reasonable fixed sum, and reasonable expenses of attendance, if any, may be
allowed for actual attendance at each regular or special meeting of the board
of directors. Members of either standing or special committees may be allowed
such compensation for actual attendance at committee meetings as the board of
directors may determine.
SECTION 13. PRESUMPTION OF ASSENT. A director of the bank who is
present at a meeting of the board of directors at which action on any bank
matter is taken shall be presumed to have assented to the action taken unless
his dissent or abstention shall be entered in the minutes of the meeting or
unless he shall file a written dissent to such action with the person acting as
the secretary of the meeting before the adjournment thereof or shall forward
such dissent by registered mail to the secretary of the bank within five days
after the date a copy of the minutes of the meeting is received. Such rights
to dissent shall not apply to a director who voted in favor of such action.
SECTION 14. REMOVAL OF DIRECTORS. At a meeting of shareholders
called expressly for that purpose, any or all of the directors may be removed,
with or without cause, by a vote of the holders of a majority of the shares
then entitled to vote at an election of directors. Whenever the holders of the
shares of any class are entitled to elect one or more directors by the
provisions of the Articles of Incorporation or supplemental sections thereto,
the provisions of this section shall apply, in respect to the removal of a
director or directors so elected, to the vote of the holders of the outstanding
shares of that class and not to the vote of the outstanding shares as a whole.
SECTION 15. AGE LIMITATION ON DIRECTORS. No person shall be eligible
for election, reelection, appointment or reappointment to the board of
directors if such person is then more than seventy-two (72) years of age. This
limitation shall not apply to the president of the bank, who shall be a
director of the bank, or to a person serving as an advisory director or
director emeritus of the bank.
ARTICLE IV -- EXECUTIVE AND OTHER COMMITTEES
SECTION 1. APPOINTMENT. The board of directors, by resolution
adopted by a majority and of the full board, may designate the chief executive
officer and two or more of the other directors to constitute an executive
committee. The designation of any committee pursuant to this Article IV and
the delegation of authority shall not operate to relieve the board of
directors, or director, of any responsibility imposed by law or regulation.
SECTION 2. AUTHORITY. The executive committee, when the board of
directors is not in session, shall have and may exercise all of the authority
of the board of directors except to the extent, if any, that such authority
shall be limited by the resolution appointing the executive committee; and
except also that neither the executive committee nor any other committee shall
have the authority of the board of directors with reference to: the declaration
of dividends or other capital distributions; the amendment of the Articles of
Incorporation or bylaws of the bank; adopting or recommending to the
shareholders a plan of merger or consolidation; the sale, lease, or other
disposition of all or substantially all of the property and assets of the bank
otherwise than in the
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<PAGE> 76
usual and regular course of its business; the voluntary dissolution of the
bank; the filling of a vacancy in the board of directors or any committee
thereof; the approval of a repurchase of shares of the bank; a revocation of
any of the foregoing; or the approval of a transaction in which any member of
the executive committee, directly or indirectly, has a material beneficial
interest.
SECTION 3. TENURE. Subject to the provisions of Section 8 of this
Article IV, each member of the executive committee shall hold office as
determined by the board of directors following his or her designation and until
a successor is designated as a member of the executive committee.
SECTION 4. MEETINGS. Regular meetings of the executive committee may
be held without notice at such times and places as the executive committee may
fix from time to time by resolution. Special meetings of the executive
committee may be called by any member thereof upon not less than one day's
notice stating the place, date, and hour of the meeting, which notice may be
written or oral. Any member of the executive committee may waive notice of any
meeting and no notice of any meeting need be given to any member thereof who
attends in person. The notice of a meeting of the executive committee need not
state the business proposed to be transacted at the meeting.
SECTION 5. QUORUM. A majority of the members of the executive
committee shall constitute a quorum for the transaction of business at any
meeting thereof, and action of the executive committee must be authorized by
the affirmative vote of a majority of the members present at a meeting at which
a quorum is present.
SECTION 6. ACTION WITHOUT A MEETING. Any action required or
permitted to be taken by the executive committee at a meeting may be taken
without a meeting if a consent in writing, setting forth the action so taken,
shall be signed by all of the members of the executive committee.
SECTION 7. VACANCIES. Any vacancy in the executive committee may be
filled by a resolution adopted by a majority of the full board of directors.
SECTION 8. RESIGNATION AND REMOVAL. Any member of the executive
committee may be removed at any time with or without cause by resolution
adopted by a majority of the full board of directors. Any member of the
executive committee may resign from the executive committee at any time by
giving written notice to the president or secretary of the bank. Unless
otherwise specified, such resignation shall take effect upon its receipt; the
acceptance of such resignation shall not be necessary to make it effective.
SECTION 9. PROCEDURE. The executive committee shall elect a
presiding officer from its members and may fix its own rules of procedure which
shall not be inconsistent with these bylaws. It shall keep regular minutes of
its proceedings and report the same to the board of directors for its
information at the meeting held next after the proceedings shall have occurred.
SECTION 10. OTHER COMMITTEES. The board of directors may by
resolution establish an audit, loan, or other committee composed of directors
as they may determine to be necessary or appropriate for the conduct of the
business of the bank and may prescribe the duties, constitution, and procedures
thereof.
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ARTICLE V -- OFFICERS
SECTION 1. POSITIONS. The officers of the bank shall be a president,
one or more vice presidents, a secretary, and a treasurer, each of whom shall
be elected by the board of directors. The board of directors may also
designate the chairman of the board as an officer. The president shall be a
director of the bank. The offices of the secretary and treasury may be held by
the same person and a vice president may also be either the secretary or
treasurer. The board of directors may designate one or more vice presidents as
executive vice president or senior vice president. The board of directors may
also elect to authorize the appointment of such other officers as the business
of the bank may require. The officers shall have such authority and perform
such duties as the board of directors may from time to time authorize or
determine. In the absence of action by the board of directors, the officers
shall have such powers and duties as generally pertain to their respective
offices.
SECTION 2. ELECTION AND TERM OF OFFICE. The officers of the bank
shall be elected annually at the first meeting of the board of directors held
after each annual meeting of the shareholders. If the election of the officers
is not held at such meeting, such election shall be held as soon thereafter as
possible. Each officer shall hold office until a successor has been duly
elected and qualified or until the officer's death, resignation, or removal in
the manner herein after provided. Election or appointment of an officer,
employee, or agent shall not of itself create contractual rights. The board of
directors may authorize the bank to enter into an employment contract, but no
such contract shall impair the right of the board of directors to remove any
officer at any time in accordance with Section 3 of this Article V.
SECTION 3. REMOVAL. Any officer may be removed by the board of
directors whenever in its judgment the best interests of the bank will be
served thereby, but such removal, other than for cause, shall be without
prejudice to any contractual rights of the person so removed.
SECTION 4. VACANCIES. A vacancy in an office because of death,
resignation, removal, disqualification, or otherwise may be filled by the board
of directors for the unexpired portion of the term.
SECTION 5. REMUNERATION. The remuneration of the officers shall be
fixed from time to time by the board of directors by employment contracts or
otherwise.
ARTICLE VI -- CONTRACTS, LOANS, CHECKS, AND DEPOSITS
SECTION 1. CONTRACTS. Except as otherwise prescribed by these bylaws
with respect to certificates for shares, the board of directors may authorize
any officer, employee, or agent of the bank to enter into any contract or
execute and deliver any instrument in the name of and on behalf of the bank.
Such authority may be general or confined to specific instances.
SECTION 2. LOANS. No loans shall be contracted on behalf of the bank
and no evidence of indebtedness shall be issued in its name unless authorized
by the board of directors. Such authority may be general or confined to
specific instances.
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<PAGE> 78
SECTION 3. CHECKS, DRAFTS, ETC. All checks, drafts, or other orders
for the payment of money, notes, or other evidences of indebtedness issued in
the name of the bank shall be signed by one or more officers, employees or
agents of the bank in such manner as shall from time to time be determined by
the board of directors.
SECTION 4. DEPOSITS. All funds of the bank not otherwise employed
shall be deposited from time to time to the credit of the bank in any duly
authorized depositories as the board of directors may select.
ARTICLE VII -- CERTIFICATES FOR SHARES AND THEIR TRANSFER
SECTION 1. CERTIFICATES FOR SHARES. Certificates representing shares
of capital stock of the bank shall contain all information required by
applicable provisions of the Alabama Business Corporation Act and shall be in
such form as shall be determined by the board of directors. Such certificates
shall be signed by the chief executive officer or by any other officer of the
bank authorized by the board of directors, attested by the secretary or an
assistant secretary and sealed with the corporate seal or a facsimile thereof.
The signatures of such officers upon a certificate may be facsimiles if the
certificate is manually signed on behalf of a transfer agent or a registrar
other than the bank itself or one of its employees. Each certificate for
shares of capital stock shall be consecutively numbered or otherwise
identified. The name and address of the person to whom the shares are issued,
with the number of shares and date of issue shall be entered on the stock
transfer books of the bank. All certificates surrendered to the bank for
transfer shall be canceled and no new certificate shall be issued until the
former certificate for a like number of shares has been surrendered and
canceled, except that in the case of a lost or destroyed certificate, a new
certificate may be issued upon such terms and indemnity to the bank as the
board of directors may prescribe.
SECTION 2. TRANSFER OF SHARES. Transfer of shares of capital stock
of the bank shall be made only on its stock transfer books. Authority for such
transfer shall be given only by the holder of record or by his legal
representative, who shall furnish proper evidence of such authority, or by his
attorney authorized by a duly executed power of attorney and filed with the
bank. Such transfer shall be made only on surrender for cancellation of the
certificate for such shares. The person in whose name shares of capital stock
stand on the books of the bank shall be deemed by the bank to be the owner for
all purposes.
ARTICLE VIII -- FISCAL YEAR, ANNUAL AUDIT
The fiscal year of the bank shall end on the 31st day of December of
each year. The bank shall be subject to an annual audit as of the end of its
fiscal year by independent public accountants appointed by and responsible to
the board of directors. The appointment of such accountants shall be subject
to annual ratification by the shareholders.
ARTICLE IX -- DIVIDENDS
Except as otherwise provided by the Articles of Incorporation or
applicable law or regulation, the board of directors may, from time to time,
declare, and the bank may pay, dividends on its outstanding classes of capital
stock which are eligible for dividends.
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ARTICLE X -- CORPORATE SEAL
The board of directors shall provide a bank seal which shall be two
concentric circles between which shall be the name of the bank. The year of
incorporation or an emblem may appear in the center.
ARTICLE XI -- AMENDMENTS
These bylaws may be amended at any time by a majority vote of the full
board of directors or by a majority vote of the votes cast by the shareholders
of the bank at any legal meeting.
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<PAGE> 80
EXHIBIT II
ARTICLE 13. DISSENTERS' RIGHTS
DIVISION A. RIGHT TO DISSENT AND OBTAIN PAYMENT FOR SHARES
10-2B-13.01 DEFINITIONS.--(1) "Corporate action" means the
filing of articles of merger or share exchange by the probate Judge or
Secretary of State, or other action giving legal effect to a transaction that
is the subject of dissenters' rights.
(2) "Corporation" means the issuer of shares held by a dissenter
before the corporate action, or the surviving or acquiring corporation by
merger or share exchange of that issuer.
(3) "Dissenter" means a shareholder who is entitled to dissent
from corporate action under Section 13.02 and who exercises that right when and
in the manner required by Sections 13.20 through 13.28.
(4) "Fair Value," with respect to a dissenter's shares, means the
value of the shares immediately before the effectuation of the corporate action
to which the dissenter objects, excluding any appreciation or depreciation in
anticipation of the corporate action unless exclusion would be inequitable.
(5) "Interest" means interest from the effective date of the
corporate action until the date of payment, at the average rate currently paid
by the corporation on its principal bank loans, or, if none, at a rate that is
fair and equitable under all circumstances.
(6) "Record shareholder" means the person in whose name shares are
registered in the records of a corporation or the beneficial owner of shares to
the extent of the rights granted by a nominee certificate on file with a
corporation.
(7) "Beneficial shareholder" means the person who is a beneficial
owner of shares held in a voting trust or by a nominee as the record
shareholder.
(8) "Shareholder" means the record shareholder or the beneficial
shareholder.
10-2B-13.02 RIGHT TO DISSENT.--(a) A shareholder is entitled to
dissent from, and obtain payment of the fair value of his or her shares in the
event of, any of the following corporate actions:
(1) Consummation of a plan of merger to which the corporation is a
party (i) if shareholder approval is required for the merger by Section 11.03
or the articles of incorporation and the shareholder is entitled to vote on the
merger or (ii) if the corporation is a subsidiary that is merged with its
parent under Section 11.04;
(2) Consummation of a plan of share exchange to which the
corporation is a party as the corporation whose shares will be acquired, if the
shareholder is entitled to vote on the plan;
(3) Consummation of a sale or exchange by all, or substantially
all, of the property of the corporation other than in the usual and regular
course of business, if the shareholder is entitled to vote on the sale or
exchange, including a sale in dissolution, but not including a sale pursuant to
court order or a sale for cash pursuant to a plan by which all or substantially
all of the net proceeds of the sale will be distributed to the shareholders
within one year after the date of sale;
(4) To the extent that the articles of incorporation of the
corporation so provide, an amendment of the articles of incorporation that
materially and adversely affects rights in respect to a dissenter's shares
because it:
(i) Alters or abolishes a preferential right of the shares;
(ii) Creates, alters, or abolishes a right in respect of
redemption, including a provision respecting a sinking fund for the redemption
or repurchase of the shares;
(iii) Alters or abolishes a preemptive right of the holder of the
shares to acquire shares or other securities;
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(iv) Excludes or limits the right of the shares to vote on any
matter, or to cumulate votes, other than a limitation by dilution through
issuance of shares or other securities with similar voting rights; or
(v) Reduces the number of shares owned by the shareholder to a
fraction of a share if the fractional shares so created is to be acquired for
cash under Section 6.04; or
(5) Any corporate action taken pursuant to a shareholder vote to
the extent the articles of incorporation, bylaws, or a resolution of the board
of directors provides that voting or nonvoting shareholders are entitled to
dissent and obtain payment for their shares.
(b) A shareholder entitled to dissent and obtain payment for
shares under this chapter may not challenge the corporate action creating his
or her entitlement unless the action is unlawful or fraudulent with respect to
the shareholder or the corporation.
10-2B-13.03. DISSENT BY NOMINEES AND BENEFICIAL OWNERS.--(a) A
record shareholder may assert dissenters' rights as to fewer than all of the
shares registered in his or her name only if he or she dissents with respect to
all shares beneficially owned by any one person and notifies the corporation in
writing of the name and address of each person on whose behalf he or she
asserts dissenters' rights. The rights of a partial dissenter under this
subsection are determined as if the shares to which he or she dissents and his
or her other shares were registered in the names of different shareholders.
(b) A beneficial shareholder may assert dissenters' rights as to
shares held on his or her behalf only if:
(1) He or she submits to the corporation the record shareholder's
written consent to the dissent not later than the time the beneficial
shareholder asserts dissenters' rights; and
(2) He or she does so with respect to all shares of which he or
she is the beneficial shareholder or over which he or she has power to direct
the vote.
DIVISION B. PROCEDURE FOR EXERCISE OF DISSENTERS' RIGHTS
10-2B-13.20 NOTICE OF DISSENTERS' RIGHTS.--(a) If proposed
corporate action creating dissenters' rights under Section 13.02 is submitted
to a vote at a shareholders' meeting, the meeting notice must state that
shareholders are or may be entitled to assert dissenters' rights under this
article and be accompanied by a copy of this article.
(b) If corporate action creating dissenters' rights under Section
13.02 is taken without a vote of shareholders, the corporation shall (1) notify
in writing all shareholders entitled to assert dissenters' rights that the
action was taken; and (2) send them the dissenters' notice described in Section
13.22.
10-2B-13.21 NOTICE OF INTENT TO DEMAND PAYMENT.--(a) If proposed
corporate action creating dissenters' rights under Section 13.02 is submitted
to a vote at a shareholder's meeting, a shareholder who wishes to assert
dissenters' rights (1) must deliver to the corporation before the vote is taken
written notice of his or her intent to demand payment or his or her shares if
the proposed action is effectuated; and (2) must not vote his or her shares in
favor of the proposed action.
(b) A shareholder who does not satisfy the requirements of
subsection (a) is not entitled to payment for his or her shares under this
article.
10-2B-13.22 DISSENTERS' NOTICE.--(a) If proposed corporate action
creating dissenters' rights under Section 13.02 is authorized at a
shareholders' meeting, the corporation shall deliver a written dissenters'
notice to all shareholders who satisfied the requirements of Section 13.21.
(b) The dissenters' notice must be sent no later than 10 days after
the corporate action was taken, and must:
(1) State where the payment demand must be sent;
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(2) Inform holders of shares to what extent transfer of the shares
will be restricted after the payment demand is received;
(3) Supply a form for demanding payment;
(4) Set a date by which the corporation must receive the payment
demand, which date may not be fewer than 30 nor more than 60 days after the
date the subsection (a) notice is delivered; and
(5) Be accompanied by a copy of this article.
10-2B-13.23 DUTY TO DEMAND PAYMENT.--(a) A shareholder sent
a dissenters' notice described in Section 13.22 must demand payment in
accordance with the terms of the dissenters' notice.
(b) The shareholder who demands payment retains all other rights
of a shareholder until those rights are canceled or modified by the taking of
the proposed corporate action.
(c) A shareholder who does not demand payment by the date set in
the dissenters' notice is not entitled to payment for his or her shares under
this article.
(d) A shareholder who demands payment under subsection (a) may not
thereafter withdraw that demand and accept the terms offered under the proposed
corporate action unless the corporation shall consent thereto.
10-2B-13.24 SHARE RESTRICTIONS.--(a) Within 20 days after making
a formal payment demand, each shareholder demanding payment shall submit the
certificate or certificates representing his or her shares to the corporation
for (1) notation thereon by the corporation that such demand has been made and
(2) return to the shareholder by the corporation.
(b) The failure to submit his or her shares for notation shall, at
the option of the corporation, terminate the shareholders' rights under this
article unless a court of competent jurisdiction, for good and sufficient
cause, shall otherwise direct.
(c) If shares represented by a certificate on which notation has
been made shall be transferred, each new certificate issued therefor shall bear
similar notation, together with the name of the original dissenting holder of
such shares.
(d) A transferee of such shares shall acquire by such transfer no
rights in the corporation other than those which the original dissenting
shareholder had after making demand for payment of the fair value thereof.
10-2B-13.25 OFFER OF PAYMENT.--(a) As soon as the proposed
corporate action is taken, or upon receipt of a payment demand, the corporation
shall offer to pay each dissenter who complied with Section 13.23 the amount
the corporation estimates to be the fair value of his or her shares, plus
accrued interest.
(b) The offer of payment must be accompanied by:
(1) The corporation's balance sheet as of the end of a fiscal year
ending not more than 16 months before the date of the offer, an income
statement for that year, and the latest available interim financial statements,
if any;
(2) A statement of the corporation's estimate of the fair value of
the shares;
(3) An explanation of how the interest was calculated;
(4) A statement of the dissenter's right to demand payment under
Section 13.28; and
(5) A copy of this article.
(c) Each dissenter who agrees to accept the corporation's offer of
payment in full satisfaction of his or her demand must surrender to the
corporation the certificate or certificates representing his or her shares in
accordance with terms of the dissenters' notice. Upon receiving the
certificate or certificates, the corporation shall pay each dissenter the fair
value of his or her shares, plus accrued interest, as provided in subsection
(a). Upon receiving payment, a dissenting shareholder ceases to have any
interest in the shares.
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10-2B-13.26 FAILURE TO TAKE CORPORATION ACTION.--(a) If the
corporation does not take the proposed action within 60 days after the date set
for demanding payment, the corporation shall release the transfer restrictions
imposed on shares.
(b) If, after releasing transfer restrictions, the corporation
takes the proposed action, it must send a new dissenters' notice under Section
13.22 and repeat the payment demand procedure.
10-2B-13.28 PROCEDURE IF SHAREHOLDER DISSATISFIED WITH OFFER OF
PAYMENT.--(a) A dissenter may notify the corporation in writing of his or her
own estimate of the fair value of his or her shares and amount of interest due,
and demand payment of his or her estimate, or reject the corporation's offer
under Section 13.25 and demand payment of the fair value of his or her shares
and interest due, if:
(1) The dissenter believes that the amount offered under Section
13.25 is less than the fair value of his or her shares or that the interest due
is incorrectly calculated;
(2) The corporation fails to make an offer under Section 13.25
within 60 days after the date set for demanding payment; or
(3) The corporation, having failed to take the proposed action,
does not release the transfer restrictions imposed on shares within 60 days
after the date set for demanding payment.
(b) A dissenter waives his or her right to demand payment under
this section unless he or she notifies the corporation of his or her demand in
writing under subsection (a) within 30 days after the corporation offered
payment for his or her shares.
DIVISION C. JUDICIAL APPRAISAL OF SHARES
10-2B-13.30. COURT ACTION.--(a) If a demand for payment
under Section 13.28 remains unsettled, the corporation shall commence a
proceeding within 60 days after receiving the payment demand and petition the
court to determine the fair value of the shares and accrued interest. If the
corporation does not commence the proceeding within the 60-day period, it shall
pay each dissenter whose demand remains unsettled the amount demanded.
(b) The corporation shall commence the proceeding in the circuit
court of the county where the corporation's principal office (or, if none in
this state, its registered office) is located. If the corporation is a foreign
corporation without a registered office in this state, it shall commence the
proceeding in the county in this state where the registered office of the
domestic corporation merged with or whose shares were acquired by the foreign
corporation was located.
(c) The corporation shall make all dissenters (whether or not
residents of this state) whose demands remain unsettled parties to the
proceeding as in an action against their shares, and all parties must be served
with a copy of the petition. Nonresidents may be served by registered or
certified mail or by publication as provided under the Alabama Rules of Civil
Procedure.
(d) After service is completed, the corporation shall deposit with
the clerk of the court an amount sufficient to pay unsettled claims of all
dissenters party to the action in an amount per share equal to its prior
estimate of fair value, plus accrued interest, under Section 13.25.
(e) The jurisdiction of the court in which the proceeding is
commenced under subsection (b) is plenary and exclusive. The court may appoint
one or more persons as appraisers to receive evidence and recommend decision on
the question of fair value. The appraisers have the powers described in the
order appointing them, or in any amendment to it. The dissenters are entitled
to the same discovery rights as parties in other civil proceedings.
(f) Each dissenter made a party to the proceeding is entitled to
judgment for the amount the court finds to be the fair value of his or her
shares, plus accrued interest. If the court's determination as to the fair
value of a dissenter's shares, plus accrued interest, is higher than the amount
estimated by the corporation and deposited with the clerk of the court pursuant
to subsection (d), the corporation shall pay the excess to the dissenting
shareholder. If the court's determination as to fair value, plus accrued
interest, of a dissenter's shares is less than the amount estimated by the
corporation and deposited with the clerk of
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the court pursuant to subsection (d), then the clerk shall return the balance
of funds deposited, less any costs under Section 13.31, to the corporation.
(g) Upon payment of the judgment, and surrender to the corporation
of the certificate or certificates representing the appraised shares, a
dissenting shareholder ceases to have any interest in the shares.
10-2B-13.31 COURT COSTS AND COUNSEL FEES.--(a) The court
in an appraisal proceeding commenced under Section 13.30 shall determine all
costs of the proceeding, including compensation and expenses of appraisers
appointed by the court. The court shall assess the costs against the
corporation, except that the court may assess costs against all or some of the
dissenters, in amounts the court finds equitable, to the extent the court finds
the dissenters acted arbitrarily, vexatiously, or not in good faith in
demanding payment under Section 13.28.
(b) The court may also assess the reasonable fees and expenses of
counsel and experts for the respective parties, in amounts the court finds
equitable:
(1) Against the corporation and in favor of any or all dissenters
if the court finds the corporation did not substantially comply with the
requirements of Sections 13.20 through 13.28; or
(2) Against either the corporation or a dissenter, in favor of any
other party, if the court finds that the party against whom the fees and
expenses are assessed acted arbitrarily, vexatiously, or not in good faith with
respect to the rights provided by this chapter.
(c) If the court finds that the services of counsel for any
dissenter were of substantial benefit to other dissenters similarly situated,
and that the fees for those services should not be assessed against the
corporation, the court may award to these counsel reasonable fees to be paid
out of the amounts awarded the dissenters who were benefited.
10-2B-13.32 STATUS OF SHARES AFTER PAYMENT.--Shares acquired by a
corporation pursuant to payment of the agreed value therefor or to payment of
the judgment entered therefor, as in this chapter provided, may be held and
disposed of by such corporation as in the case of other treasury shares, except
that, in the case of a merger or share exchange, they may be held and disposed
of as the plan of merger or share exchange may otherwise provide.
7399
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EXHIBIT III
CERTIFICATE OF INCORPORATION
OF
PINNACLE BANCSHARES, INC.
ARTICLE I
Name
The name of the corporation is Pinnacle Bancshares, Inc. (herein the
"Corporation").
ARTICLE II
Registered Office
The address of the Corporation's registered office in the State of
Delaware is 1209 Orange Street, Corporation Trust Center, in the City of
Wilmington, County of New Castle. The name of the Corporation's registered
agent at such address is The Corporation Trust Company.
ARTICLE III
Powers
The purpose for which the Corporation is organized is to act as a
savings institution holding company and to transact all other lawful business
for which corporations may be incorporated pursuant to the laws of the State of
Delaware. The Corporation shall have all the powers of a corporation organized
under the General Corporation Law of the State of Delaware.
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ARTICLE IV
Term
The Corporation is to have perpetual existence.
ARTICLE V
Incorporator
The name and mailing address of the incorporator are as follows:
<TABLE>
<CAPTION>
Name Mailing Address
---- ---------------
<S> <C>
Robert B. Nolen, Jr. 1811 Second Avenue
Jasper, Alabama 35502-1388
</TABLE>
ARTICLE VI
Initial Directors
The number of directors constituting the initial board of directors of
the Corporation is eleven (11), and the names and addresses of the persons who
are to serve as directors until their successors are elected and qualified,
together with the classes of directorships to which such persons have been
assigned, are:
<TABLE>
<CAPTION>
Name Address Class
---- ------- -----
<S> <C> <C>
James W. Cannon 1811 Second Avenue
Jasper, Alabama 35502-1388 I
Robert B. Nolen, Jr. 1811 Second Avenue
Jasper, Alabama 35502-1388 I
Max W. Perdue 1811 Second Avenue
Jasper, Alabama 35502-1388 I
Carlton Mayhall, Jr. 1811 Second Avenue
Jasper, Alabama 35502-1388 I
Melvin R. Kacharos 1811 Second Avenue
Jasper, Alabama 35502-1388 II
John D. Baird 1811 Second Avenue
Jasper, Alabama 35502-1388 II
</TABLE>
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<TABLE>
<S> <C> <C>
Greg Batchelor 1811 Second Avenue
Jasper, Alabama 35502-1388 II
O. H. Brown 1811 Second Avenue
Jasper, Alabama 35502-1388 III
Sam W. Murphy 1811 Second Avenue
Jasper, Alabama 35502-1388 III
Al H. Simmons 1811 Second Avenue
Jasper, Alabama 35502-1388 III
J. T. Waggoner 1811 Second Avenue
Jasper, Alabama 35502-1388 III
</TABLE>
ARTICLE VII
Capital Stock
The aggregate number of shares of all classes of capital stock which
the Corporation has authority to issue is 2,500,000 of which 2,400,000 are to
be shares of common stock, $.01 par value per share, and of which 100,000 are
to be shares of serial preferred stock, $.01 par value per share. The shares
may be issued by the Corporation from time to time as approved by the board of
directors of the Corporation without the approval of the stockholders except as
otherwise provided in this Article VII or the rules of a national securities
exchange if applicable. The consideration for the issuance of the shares shall
be paid to or received by the Corporation in full before their issuance and
shall not be less than the par value per share. The consideration for the
issuance of the shares shall be cash, services rendered, personal property
(tangible or intangible), real property, leases of real property or any
combination of the foregoing. In the absence of actual fraud in the
transaction, the judgment of the board of directors as to the value of such
consideration shall be conclusive. Upon payment of such consideration such
shares shall be deemed to be fully paid and nonassessable. In the case of a
stock dividend, the part of the surplus of the Corporation which is transferred
to stated capital upon the issuance of shares as a stock dividend shall be
deemed to be the consideration for their issuance.
A description of the different classes and series (if any) of the
Corporation's capital stock, and a statement of the relative powers,
designations, preferences and rights of the shares of each class and series (if
any) of capital stock, and the qualifications, limitations or restrictions
thereof, are as follows:
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A. Common Stock. Except as provided in this Certificate, the
holders of the common stock shall exclusively possess all voting power. Each
holder of shares of common stock shall be entitled to one vote for each share
held by such holder, except as otherwise expressly set forth in this
Certificate.
Whenever there shall have been paid, or declared and set aside for
payment, to the holders of the outstanding shares of any class of stock having
preference over the common stock as to the payment of dividends, the full
amount of dividends and sinking fund or retirement fund or other retirement
payments, if any, to which such holders are respectively entitled in preference
to the common stock, then dividends may be paid on the common stock, and on any
class or series of stock entitled to participate therewith as to dividends, out
of any assets legally available for the payment of dividends, but only when and
as declared by the board of directors of the Corporation.
In the event of any liquidation, dissolution or winding up of the
Corporation, after there shall have been paid, or declared and set aside for
payment, to the holders of the outstanding shares of any class having
preference over the common stock in any such event, the full preferential
amounts to which they are respectively entitled, the holders of the common
stock and of any class or series of stock entitled to participate therewith, in
whole or in part, as to distribution of assets shall be entitled, after payment
or provision for payment of all debts and liabilities of the Corporation, to
receive the remaining assets of the Corporation available for distribution, in
cash or in kind.
Each share of common stock shall have the same relative powers,
preferences and rights as, and shall be identical in all respects with, all the
other shares of common stock of the Corporation, except as otherwise expressly
set forth in this Certificate.
B. Serial Preferred Stock. Except as provided in this
Certificate, the board of directors of the Corporation is authorized, by
resolution or resolutions from time to time adopted, to provide for the
issuance of serial preferred stock in series and to fix and state the powers,
designations, preferences and relative, participating, optional or other
special rights of the shares of each such series, and the qualifications,
limitations or restrictions thereof, including, but not limited to
determination of any of the following:
(1) the distinctive serial designation and the number of shares
constituting such series;
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(2) the dividend rates or the amount of dividends to be paid on
the shares of such series, whether dividends shall be
cumulative and, if so, from which date or dates, the payment
date or dates for dividends, and the participating or other
special rights, if any, with respect to dividends;
(3) the voting powers, full or limited, if any, of the shares of
such series;
(4) whether the shares of such series shall be redeemable and, if
so, the price or prices at which, and the terms and conditions
upon which such shares may be redeemed;
(5) the amount or amounts payable upon the shares of such series
in the event of voluntary or involuntary liquidation,
dissolution or winding up of the Corporation;
(6) whether the shares of such series shall be entitled to the
benefits of a sinking or retirement fund to be applied to the
purchase or redemption of such shares, and, if so entitled,
the amount of such fund and the manner of its application,
including the price or prices at which such shares may be
redeemed or purchased through the application of such funds;
(7) whether the shares of such series shall be convertible into,
or exchangeable for, shares of any other class or classes or
any other series of the same or any other class or classes of
stock of the Corporation and, if so convertible or
exchangeable, the conversion price or prices, or the rate or
rates of exchange, and the adjustments thereof, if any, at
which such conversion or exchange may be made, and any other
terms and conditions of such conversion or exchange;
(8) the subscription or purchase price and form of consideration
for which the shares of such series shall be issued; and
(9) whether the shares of such series which are redeemed or
converted shall have the status of authorized but unissued
shares of serial preferred stock and whether such shares may
be reissued as shares of the same or any other series of
serial preferred stock.
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Each share of each series of serial preferred stock shall have the
same relative powers, preferences and rights as, and shall be identical in all
respects with, all the other shares of the Corporation of the same series,
except as otherwise expressly set forth in this Certificate.
ARTICLE VIII
Preemptive Rights
No holder of any of the shares of any class or series of stock or of
options, warrants or other rights to purchase shares of any class or series of
stock or of other securities of the Corporation shall have any preemptive right
to purchase or subscribe for any unissued stock of any class or series, or any
unissued bonds, certificates of indebtedness, debentures or other securities
convertible into or exchangeable for stock of any class or series or carrying
any right to purchase stock of any class or series; but any such unissued
stock, bonds, certificates or indebtedness, debentures or other securities
convertible into or exchangeable for stock or carrying any right to purchase
stock may be issued pursuant to resolution of the board of directors of the
Corporation to such persons, firms, corporations or associations, whether or
not holders thereof, and upon such terms as may be deemed advisable by the
board of directors in the exercise of its sole discretion.
ARTICLE IX
Repurchase of Shares
The Corporation may from time to time, pursuant to authorization by
the board of directors of the Corporation and without action by the
stockholders, purchase or otherwise acquire shares of any class, bonds
debentures, notes, scrip, warrants, obligations, evidences of indebtedness, or
other securities of the Corporation in such manner, upon such terms, and in
such amounts as the board of directors shall determine; subject, however, to
such limitations or restrictions, if any, as are contained in the express terms
of any class of shares of the Corporation outstanding at the time of the
purchase or acquisition in question or as are imposed by law.
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ARTICLE X
Meetings of Stockholders; Cumulative Voting
A. Notwithstanding any other provision of this Certificate or the
bylaws of the Corporation, no action required to be taken or which may be taken
at any annual or special meeting of stockholders of the Corporation may be
taken without a meeting, and the power of stockholders to consent in writing,
without a meeting, to the taking of any action is specifically denied.
B. Special meetings of the stockholders of the Corporation for
any purpose or purposes may be called at any time by the board of directors of
the Corporation, or by a committee of the board of directors which has been
duly designated by the board of directors and whose powers and authorities, as
provided in a resolution of the board of directors or in the bylaws of the
Corporation, include the power and authority to call such meetings, but such
special meetings may not be called by any other person or persons.
C. There shall be no cumulative voting by stockholders of any
class or series in the election of directors of the Corporation.
D. Meetings of stockholders may be held at such place as the
bylaws may provide.
ARTICLE XI
Notice for Nominations and Proposals
A. Nominations for the election of directors and proposals for
any new business to be taken up at any annual or special meeting of
stockholders may be made by the board of directors of the Corporation or by any
stockholder of the Corporation entitled to vote generally in the election of
directors. In order for a stockholder of the Corporation to make any such
nominations and/or proposals, he or she shall give notice thereof in writing,
delivered or mailed by first class United States mail, postage prepaid, to the
Secretary of the Corporation not less than thirty days nor more than sixty days
prior to the date of any such meeting; provided, however, that if less than
forty days' notice of the meeting is given to stockholders, such written notice
shall be delivered or mailed, as prescribed, to the Secretary of the
Corporation not later than the close of business on the tenth day following the
day on which notice of the meeting was mailed to
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stockholders. Each such notice given by a stockholder with respect to
nominations for the election of directors shall set forth (i) the name, age,
business address and, if known, residence address of each nominee proposed in
such notice, (ii) the principal occupation or employment of each such nominee,
and (iii) the number of shares of stock of the Corporation which are
beneficially owned by each such nominee. In addition, the stockholder making
such nomination shall promptly provide any other information reasonably
requested by the Corporation.
B. Each such notice given by a stockholder to the Secretary with
respect to business proposals to be brought before a meeting shall set forth in
writing as to each matter: (i) a brief description of the business desired to
be brought before the meeting and the reasons for conducting such business at
the meeting; (ii) the name and address, as they appear on the Corporation's
books, of the stockholder proposing such business; (iii) the class and number
of shares of the Corporation which are beneficially owned by the stockholder;
and (iv) any material interest of the stockholder in such business.
Notwithstanding anything in this Certificate to the contrary, no new business
shall be conducted at the meeting except in accordance with the procedures set
forth in this Article.
C. The Chairman of the annual or special meeting of stockholders
may, if the facts warrant, determine and declare to such meeting that a
nomination or proposal was not made in accordance with the foregoing procedure,
and, if he should so determine, he shall so declare to the meeting and the
defective nomination or proposal shall be disregarded and laid over for action
at the next succeeding special or annual meeting of the stockholders taking
place thirty days or more thereafter. This provision shall not require the
holding of any adjourned or special meeting of stockholders for the purpose of
considering such defective nomination or proposal.
ARTICLE XII
Directors
A. Number; Vacancies. The number of directors of the Corporation
shall be such number, not less than five (5) nor more than fifteen (15)
(exclusive of directors, if any, to be elected by holders of preferred stock of
the Corporation, voting separately as a class), as shall be set forth from time
to time by action by the board of directors, provided that no action shall be
taken to decrease or increase the number of directors unless at least
two-thirds of the
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directors then in office shall concur in said action. Vacancies in the board of
directors of the Corporation, however caused, and newly created directorships
shall be filled by a vote of two-thirds of the directors then in office,
whether or not a quorum, and any director so chosen shall hold office for a
term expiring at the annual meeting of stockholders at which the term of the
class to which the director has been chosen expires and when the director's
successor is elected and qualified.
B. Classified Board. The board of directors of the Corporation
shall be divided into three classes of directors which shall be designated
Class I, Class II and Class III. The members of each class shall be elected for
a term of three years and until their successors are elected and qualified.
Such classes shall be as nearly equal in number as the then total number of
directors constituting the entire board of directors shall permit, with the
terms of office of all members of one class expiring each year. Subject to the
provisions of this Article XII, should the number of directors not be equally
divisible by three, the excess director or directors shall be assigned to
Classes I or II as follows: (i) if there shall be an excess of one directorship
over a number equally divisible by three, such extra directorship shall be
classified in Class I; and (ii) if there be an excess of two directorships over
a number equally divisible by three, one shall be classified in Class I and the
other in Class II. At the first annual meeting of stockholders, directors of
Class I shall be elected to hold office for a term expiring at the third
succeeding annual meeting thereafter. At the second annual meeting of
stockholders, directors of Class II shall be elected to hold office for a term
expiring at the third succeeding annual meeting thereafter. At the third annual
meeting of stockholders, directors of Class III shall be elected to hold office
for a term expiring at the third succeeding annual meeting thereafter.
Thereafter, at each succeeding annual meeting, directors of each class shall be
elected for three year terms. Notwithstanding the foregoing, the director whose
term shall expire at any annual meeting shall continue to serve until such time
as his successor shall have been duly elected and shall have qualified unless
his position on the board of directors shall have been abolished by action
taken to reduce the size of the board of directors prior to said meeting.
Should the number of directors of the Corporation be reduced, the
directorship(s) eliminated shall be allocated among classes as appropriate so
that the number of directors in each class is as specified in the immediately
preceding paragraph. The board of directors shall designate, by the name of the
incumbent(s), the position(s) to be abolished. Notwithstanding the foregoing,
no decrease in the number of directors shall have the effect of shortening the
term of any incumbent director. Should the number of directors of the
Corporation be
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increased, the additional directorships shall be allocated among classes as
appropriate so that the number of directors in each class is as specified in
the immediately preceding paragraph.
Whenever the holders of any one or more series of preferred stock of
the Corporation shall have the right, voting separately as a class, to elect
one or more directors of the Corporation, the board of directors shall consist
of said directors so elected in addition to the number of directors fixed as
provided in this Article XII. Notwithstanding the foregoing, and except as
otherwise may be required by law or by the terms and provisions of the
preferred stock of the Corporation, whenever the holders of any one or more
series of preferred stock of the Corporation shall have the right, voting
separately as a class, to elect one or more directors of the Corporation, the
terms of the director or directors elected by such holders shall expire at the
next succeeding annual meeting of stockholders.
ARTICLE XIII
Removal of Directors
Notwithstanding any other provision of this Certificate or the bylaws
of the Corporation, any director or the entire board of directors of the
Corporation may be removed, at any time, but only for cause and only by the
affirmative vote of the holders of at least 80% of the outstanding shares of
capital stock of the Corporation entitled to vote generally in the election of
directors (considered for this purpose as one class) cast at a meeting of the
stockholders called for that purpose. Notwithstanding the foregoing, whenever
the holders of any one or more series of preferred stock of the Corporation
shall have the right, voting separately as a class, to elect one or more
directors of the Corporation, the preceding provisions of this Article XIII
shall not apply with respect to the director or directors elected by such
holders of preferred stock.
ARTICLE XIV
Approval of Certain Business Combinations
The stockholder vote required to approve Business Combinations (as
hereinafter defined) shall be as set forth in this section.
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A. (1) Except as otherwise expressly provided in this
Article XIV, the affirmative vote of the holders of (i) at least 80%
of the outstanding shares entitled to vote thereon (and, if any class
or series of shares is entitled to vote thereon separately, the
affirmative vote of the holders of at least 80% of the outstanding
shares of each such class or series), and (ii) at least a majority of
the outstanding shares entitled to vote thereon, not including shares
deemed beneficially owned by a Related Person (as hereinafter
defined), shall be required in order to authorize any of the
following:
(a) any merger or consolidation of the
Corporation with or into a Related Person (as hereinafter
defined);
(b) any sale, lease, exchange, transfer or other
disposition, including without limitation, a mortgage, or any
other capital device, of all or any Substantial Part (as
hereinafter defined) of the assets of the Corporation
(including without limitation any voting securities of a
subsidiary) or of a subsidiary, to a Related Person;
(c) any merger or consolidation of a Related
Person with or into the Corporation or a subsidiary of the
Corporation;
(d) any sale, lease, exchange, transfer or other
disposition of all or any Substantial Part of the assets of a
Related Person to the Corporation or a subsidiary of the
Corporation;
(e) the issuance of any securities of the
Corporation or a subsidiary of the Corporation to a Related
Person;
(f) the acquisition by the Corporation or a
subsidiary of the Corporation of any securities of a Related
Person;
(g) any reclassification of the common stock of
the Corporation, or any recapitalization involving the common
stock of the Corporation; and
(h) any agreement, contract or other arrangement
providing for any of the transactions described in this
Article XIV.
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(2) Such affirmative vote shall be required
notwithstanding any other provision of this Certificate, any provision
of law, or any agreement with any regulatory agency or national
securities exchange which might otherwise permit a lesser vote or no
vote.
(3) The term "Business Combination" as used in this
Article XIV shall mean any transaction which is referred to in any one
or more of subparagraphs A(l)(a) through (h) above.
B. The provisions of paragraph A shall not be applicable to any
particular Business Combination, and such Business Combination shall require
only such affirmative vote as is required by any other provision of this
certificate, any provision of law, or any agreement with any regulatory agency
or national securities exchange, if the Business Combination shall have been
approved by a two-thirds vote of the Continuing Directors (as hereinafter
defined); provided, however, that such approval shall only be effective if
obtained at a meeting at which a Continuing Director Quorum (as hereinafter
defined) is present.
C. For the purposes of this Article XIV the following definitions
apply:
(1) The term "Related Person" shall mean and include (a)
any individual, corporation, partnership or other person or entity
which together with its "affiliates" (as that term is defined in Rule
12b-2 of the General Rules and Regulations under the Securities
Exchange Act of 1934, as amended), "beneficially owns" (as that term
is defined in Rule 13d-3 of the General Rules and Regulations under
the Securities Exchange Act of 1934, as amended) in the aggregate 10%
or more of the outstanding shares of the common stock of the
Corporation; and (b) any "affiliate" (as that term is defined in Rule
12b-2 under the Securities Exchange Act of 1934, as amended) of any
such individual, corporation, partnership or other person or entity.
Without limitation, any shares of the common stock of the Corporation
which any Related Person has the right to acquire pursuant to any
agreement, or upon exercise or conversion rights, warrants or options
or otherwise, shall be deemed "beneficially owned" by such Related
Person.
(2) The term "Substantial Part" shall mean more than 25%
of the total assets of the Corporation, as of the end of its most
recent fiscal year ending prior to the time the determination is made.
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(3) The term "Continuing Director" shall mean any member
of the board of directors of the Corporation who is unaffiliated with
the Related Person and was a member of the board prior to the time
that the Related Person became a Related Person, and any successor of
a Continuing Director who is unaffiliated with the Related Person and
is recommended to succeed a Continuing Director by a majority of
Continuing Directors then on the board.
(4) The term "Continuing Director Quorum" shall mean
two-thirds of the Continuing Directors capable of exercising the
powers conferred on them.
ARTICLE XV
Evaluation of Business Combinations
In connection with the exercise of its judgment in determining what is
in the best interests of the Corporation and of the shareholders, when
evaluating a Business Combination (as defined in Article XIV) or a tender or
exchange offer, the board of directors of the Corporation may, in addition to
considering the adequacy of the amount to be paid in connection with any such
transaction, consider all of the following factors and any other factors which
it deems relevant; (i) the social and economic effects of the transaction on
the Corporation and its subsidiaries, employees, depositors, loan and other
customers, creditors and other elements of the communities in which the
Corporation and its subsidiaries operate or are located; (ii) the business and
financial condition and earnings prospects of the acquiring person or entity,
including, but not limited to, debt service and other existing financial
obligations, financial obligations to be incurred in connection with the
acquisition and other likely financial obligations of the acquiring person or
entity and the possible effect of such conditions upon the Corporation and its
subsidiaries and the other elements of the communities in which the Corporation
and its subsidiaries operate or are located; and (iii) the competence,
experience, and integrity of the acquiring person or entity and its or their
management.
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ARTICLE XVI
Indemnification
A. Persons. The Corporation shall indemnify, to the extent
provided in paragraphs B, D or F:
(1) any person who is or was a director, officer,
employee, or agent of the Corporation; and
(2) any person who serves or served at the Corporation's
request as a director, officer, employee, agent, partner or trustee of
another corporation, partnership, joint venture, trust or other
enterprise.
B. Extent -- Derivative Suits. In case of a threatened, pending
or completed action or suit by or in the right of the Corporation against a
person named in paragraph A by reason of his holding a position named in
paragraph A, the Corporation shall indemnify him if he satisfies the standard
in paragraph C, for expenses (including attorneys' fees but excluding amounts
paid in settlement) actually and reasonably incurred by him in connection with
the defense or settlement of the action or suit.
C. Standard -- Derivative Suits. In case of a threatened, pending
or completed action or suit by or in the right of the Corporation, a person
named in paragraph A shall be indemnified only if:
(1) he is successful on the merits or otherwise; or
(2) he acted in good faith in the transaction which is
the subject of the suit or action, and in a manner he reasonably
believed to be in, or not opposed to, the best interests of the
Corporation, including, but not limited to, the taking of any and all
actions in connection with the Corporation's response to any tender
offer or any offer or proposal of another party to engage in a
Business Combination (as defined in Article XIV) not approved by the
board of directors. However, he shall not be indemnified in respect
of any claim, issue or matter as to which he has been adjudged liable
to the Corporation unless (and only to the extent that) the court in
which the suit was brought shall determine, upon application, that
despite the adjudication but in view of all the circumstances, he is
fairly and reasonably entitled to indemnity for such expenses as the
court shall deem proper.
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D. Extent -- Nonderivative Suits. In case of a threatened,
pending or completed suit, action or proceeding (whether civil, criminal,
administrative or investigative), other than a suit by or in the right of the
Corporation, together hereafter referred to as a nonderivative suit, against a
person named in paragraph A by reason of his holding a position named in
paragraph A, the Corporation shall indemnify him if he satisfies the standard
in paragraph E, for amounts actually and reasonably incurred by him in
connection with the defense or settlement of the nonderivative suit, including,
but not limited to (i) expenses (including attorneys' fees), (ii) amounts paid
in settlement, (iii) judgments, and (iv) fines.
E. Standard -- Nonderivative Suits. In case of a nonderivative
suit, a person named in paragraph A shall be indemnified only if:
(1) he is successful on the merits or otherwise; or
(2) he acted in good faith in the transaction which is
the subject of the nonderivative suit and in a manner he reasonably
believed to be in, or not opposed to, the best interests of the
Corporation, including, but not limited to, the taking of any and all
actions in connection with the Corporation's response to any tender
offer or any offer or proposal of another party to engage in a
Business Combination (as defined in Article XIV) not approved by the
board of directors and, with respect to any criminal action or
proceeding, he had no reasonable cause to believe his conduct was
unlawful. The termination of a nonderivative suit by judgment, order,
settlement, conviction, or upon a plea of nolo contendere or its
equivalent shall not, in itself, create a presumption that the person
failed to satisfy the standard of this subparagraph E(2).
F. Determination That Standard Has Been Met. A determination that
the standard of paragraph C or E has been satisfied may be made by a court, or,
except as stated in subparagraph C(2) (second sentence), the determination may
be made by:
(1) the board of directors by a majority vote of a quorum
consisting of directors of the Corporation who were not parties to the
action, suit or proceeding; or
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(2) independent legal counsel (appointed by a majority of
the disinterested directors of the Corporation, whether or not a
quorum) in a written opinion; or
(3) the stockholders of the Corporation.
G. Proration. Anyone making a determination under paragraph F may
determine that a person has met the standard as to some matters but not as to
others, and may reasonably prorate amounts to be indemnified.
H. Advance Payment. The Corporation shall pay in advance any
expenses (including attorneys' fees) which may become subject to
indemnification under paragraphs A through G if:
(1) the board of directors authorizes the specific
payment; and
(2) the person receiving the payment undertakes in
writing to repay the same if it is ultimately determined that he is
not entitled to indemnification by the Corporation under paragraphs A
through G.
I. Nonexclusive. The indemnification and advance payment of
expenses provided by paragraphs A through H shall not be exclusive of any other
rights to which a person may be entitled by law, bylaw, agreement, vote of
stockholders or disinterested directors, or otherwise.
J. Continuation. The indemnification provided by this Article XVI
shall be deemed to be a contract between the Corporation and the persons
entitled to indemnification thereunder, and any repeal or modification of this
Article XVI shall not affect any rights or obligations then existing with
respect to any state of facts then or theretofore existing or any action, suit
or proceeding theretofore or thereafter brought based in whole or in part upon
any such state of facts. The indemnification and advance payment provided by
paragraphs A through H shall continue as to a person who has ceased to hold a
position named in paragraph A and shall inure to his heirs, executors and
administrators.
K. Insurance. The Corporation may purchase and maintain
insurance on behalf of any person who holds or who has held any position named
in paragraph A, against any liability incurred by him in any such position, or
arising out of his status as such, whether or not the Corporation would have
power to indemnify him against such liability under paragraphs A through H.
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L. Intention and Savings Clause. It is the intention of this
Article XVI to provide for indemnification to the fullest extent permitted by
the General Corporation Law of the State of Delaware, and this Article XVI
shall be interpreted accordingly. If this Article XVI or any portion hereof
shall be invalidated on any ground by any court of competent jurisdiction, then
the Corporation shall nevertheless indemnify each director, officer, employee,
and agent of the Corporation as to costs, charges, and expenses (including
attorneys' fees), judgments, fines, and amounts paid in settlement with respect
to any action, suit, or proceeding, whether civil, criminal, administrative, or
investigative, including an action by or in the right of the Corporation to the
full extent permitted by any applicable portion of this Article XVI that shall
not have been invalidated and to the full extent permitted by applicable law.
If the General Corporation Law of the State of Delaware is amended, or other
Delaware law is enacted, to permit further or additional indemnification of the
persons defined in paragraph A of this Article XVI, then the indemnification of
such persons shall be to the fullest extent permitted by the General
Corporation Law of the State of Delaware, as so amended, or such other Delaware
law.
ARTICLE XVII
Limitations on Directors' Liability
A director of the Corporation shall not be personally liable to the
Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director, except: (i) for any breach of the director's duty of
loyalty to the Corporation or its stockholders, (ii) for acts or omissions that
are not in good faith or that involve intentional misconduct or a knowing
violation of law, (iii) under Section 174 of the General Corporation Law of the
State of Delaware, or (iv) for any transaction from which the director derived
any improper personal benefit. If the General Corporation Law of the State of
Delaware or other Delaware law is amended or enacted after the date of filing
of this Certificate to further eliminate or limit the personal liability of
directors, then the liability of a director of the Corporation shall be
eliminated or limited to the fullest extent permitted by the General
Corporation Law of the State of Delaware, as so amended, or such other Delaware
law. Any repeal or modification of the foregoing paragraph by the stockholders
of the Corporation shall not adversely affect any right or protection of a
director of the Corporation existing at the time of such repeal or
modification.
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ARTICLE XVIII
Amendment of Bylaws
In furtherance and not in limitation of the powers conferred by
statute, the board of directors of the Corporation is expressly authorized to
adopt, repeal, alter, amend and rescind the bylaws of the Corporation by a vote
of two-thirds of the board of directors. Notwithstanding any other provision of
this Certificate or the bylaws of the Corporation (and notwithstanding the fact
that some lesser percentage may be specified by law), the bylaws shall not be
adopted, repealed, altered, amended or rescinded by the stockholders of the
Corporation except by the vote of the holders of not less than 80% of the
outstanding shares of capital stock of the Corporation entitled to vote
generally in the election of directors (considered for this purpose as one
class) cast at a meeting of the stockholders called for that purpose (provided
that notice of such proposed adoption, repeal, alteration, amendment or
rescission is included in the notice of such meeting), or, as set forth above,
by the board of directors.
ARTICLE XIX
Amendment of Certificate of Incorporation
The Corporation reserves the right to repeal, alter, amend or rescind
any provision contained in this Certificate in the manner now or hereafter
prescribed by law, and all rights conferred on stockholders herein are granted
subject to this reservation. Notwithstanding the foregoing, the provisions set
forth in Articles X, XI, XII, XIII, XIV, XV, XVI, XVII, XVIII and this Article
XIX may not be repealed, altered, amended or rescinded in any respect unless
the same is approved by the affirmative vote of the holders of not less than
80% of the outstanding shares of capital stock of the Corporation entitled to
vote generally in the election of directors (considered for this purpose as a
single class) cast at a meeting of the stockholders called for that purpose
(provided that notice of such proposed repeal, alteration, amendment or
rescission is included in the notice of such meeting); except that such repeal,
alteration, amendment or rescission may be made by the affirmative vote of the
holders of a majority of the outstanding shares of capital stock of the
Corporation entitled to vote generally in the election of directors (considered
for this purpose as a single class) if the same is first approved by a majority
of the Continuing Directors, as defined in Article XIV of this Certificate.
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I, THE UNDERSIGNED, being the incorporator hereinbefore named, for the
purpose of forming a corporation pursuant to the General Corporation Law of the
State of Delaware, do make this Certificate, hereby declaring and certifying
that this is my act and deed and the facts herein stated are true and
accordingly have hereunto set my hand this 29th day of August, 1996.
/s/ Robert B. Nolen, Jr.
----------------------------
Robert B. Nolen, Jr.
Incorporator
Attest:
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EXHIBIT IV
BYLAWS
OF
PINNACLE BANCSHARES, INC.
ARTICLE I
Principal Executive Office
The principal executive office of PINNACLE BANCSHARES, INC. (the
"Corporation") shall be at 1811 2nd Avenue, in the County of Jasper, in the
County of Walker, in the State of Alabama. The Corporation may also have
offices at such other places within or without the State of Alabama as the
board of directors shall from time to time determine.
ARTICLE II
Stockholders
SECTION 1. Place of Meetings. All annual and special meetings of
stockholders shall be held at the principal executive office of the Corporation
or at such other place within or without the State of Delaware as the board of
directors may determine and as designated in the notice of such meeting.
SECTION 2. Annual Meeting. A meeting of the stockholders of the
Corporation for the election of directors and for the transaction of any other
business of the Corporation shall be held annually at such date and time as the
board of directors may determine.
SECTION 3. Special Meetings. Special meetings of the stockholders for
any purpose or purposes may be called at any time by the board of directors or
by a committee of the board of directors in accordance with the provisions of
the Corporation's Certificate of Incorporation.
SECTION 4. Conduct of Meetings. Annual and special meetings shall be
conducted in accordance with these Bylaws or as otherwise prescribed by the
board of directors. The chairman or the chief executive officer of the
Corporation shall preside at such meetings.
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SECTION 5. Notice of Meeting. Written notice stating the place, day
and hour of the meeting and the purpose or purposes for which the meeting is
called shall be mailed by the secretary or the officer performing his duties,
not less than ten days nor more than fifty days before the meeting to each
stockholder of record entitled to vote at such meeting. If mailed, such notice
shall be deemed to be delivered when deposited in the United States mail,
addressed to the stockholder at his address as it appears on the stock transfer
books or records of the Corporation as of the record date prescribed in Section
6, with postage thereon prepaid. If a stockholder is present at a meeting, or
in writing waives notice thereof before or after the meeting, notice of the
meeting to such stockholder shall be unnecessary. When any stockholders'
meeting, either annual or special, is adjourned for thirty days or more, notice
of the adjourned meeting shall be given as in the case of an original meeting.
It shall not be necessary to give any notice of the time and place of any
meeting adjourned for less than thirty days or of the business to be transacted
at such adjourned meeting, other than an announcement at the meeting at which
such adjournment is taken.
SECTION 6. Fixing of Record Date. For the purpose of determining
stockholders entitled to notice of or to vote at any meeting of stockholders,
or any adjournment thereof, or stockholders entitled to receive payment of any
dividend, or in order to make a determination of stockholders for any other
proper purpose, the board of directors shall fix in advance a date as the
record date for any such determination of stockholders. Such date in any case
shall be not more than sixty days, and in case of a meeting of stockholders not
less than ten days, prior to the date on which the particular action requiring
such determination of stockholders, is to be taken. When a determination of
stockholders entitled to vote at any meeting of stockholders has been made as
provided in this section, such determination shall apply to any adjournment
thereof.
SECTION 7. Voting Lists. The officer or agent having charge of the
stock transfer books for shares of the Corporation shall make, at least ten
days before each meeting of stockholders, a complete record of the stockholders
entitled to vote at such meeting or any adjournment thereof, with the address
of and the number of shares held by each. The record, for a period of ten days
before such meeting, shall be kept on file at the principal office of the
Corporation, whether within or outside the State of Florida, and shall be
subject to inspection by any stockholder for any purpose germane to the meeting
at any time during usual business hours. Such record shall also be produced
and kept open at the time and place of the meeting and shall be subject to the
inspection of any stockholder for any purpose germane to the meeting during the
whole time of the meeting. The original stock transfer books shall be prima
facie evidence as to who are the stockholders entitled to examine such record
or transfer books or to vote at any meeting of stockholders.
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SECTION 8. Quorum. One-third of the outstanding shares of the
Corporation entitled to vote, represented in person or by proxy, shall
constitute a quorum at a meeting of stockholders. If less than one-third of the
outstanding shares are represented at a meeting, a majority of the shares so
represented may adjourn the meeting from time to time without further notice.
At such adjourned meeting at which a quorum shall be present or represented,
any business may be transacted which might have been transacted at the meeting
as originally notified. The stockholders present at a duly organized meeting
may continue to transact business until adjournment, notwithstanding the
withdrawal of enough stockholders to leave less than a quorum.
SECTION 9. Proxies. At all meetings of stockholders, a stockholder may
vote by proxy executed in writing by the stockholder or by his duly authorized
attorney in fact. Proxies solicited on behalf of the management shall be voted
as directed by the stockholder or, in the absence of such direction, as
determined by a majority of the board of directors. No proxy shall be valid
after eleven months from the date of its execution unless otherwise provided in
the proxy.
SECTION 10. Voting. At each election for directors every stockholder
entitled to vote at such election shall be entitled to one vote for each share
of stock held. Unless otherwise provided by the Certificate of Incorporation,
by statute, or by these Bylaws, a majority of those votes cast by stockholders
at a lawful meeting shall be sufficient to pass on a transaction or matter,
except in the election of directors, which election shall be determined by a
plurality of the votes of the shares present in person or by proxy at the
meeting and entitled to vote on the election of directors.
SECTION 11. Voting of Shares in the Name of Two or More Persons. When
ownership of stock stands in the name of two or more persons, in the absence of
written directions to the Corporation to the contrary, at any meeting of the
stockholders of the Corporation any one or more of such stockholders may cast,
in person or by proxy, all votes to which such ownership is entitled. In the
event an attempt is made to cast conflicting votes, in person or by proxy, by
the several persons in whose name shares of stock stand, the vote or votes to
which these persons are entitled shall be cast as directed by a majority of
those holding such stock and present in person or by proxy at such meeting, but
no votes shall be cast for such stock if a majority cannot agree.
SECTION 12. Voting of Shares by Certain Holders. Shares standing in
the name of another corporation may be voted by any officer, agent or proxy as
the bylaws of such corporation may prescribe, or, in the absence of such
provision, as the board of directors of such corporation may determine. Shares
held by an
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administrator, executor, guardian or conservator may be voted by him, either in
person or by proxy, without a transfer of such shares into his name. Shares
standing in the name of a trustee may be voted by him, either in person or by
proxy, but no trustee shall be entitled to vote shares held by him without a
transfer of such shares into his name. Shares standing in the name of a
receiver may be voted by such receiver, and shares held by or under the control
of a receiver may be voted by such receiver without the transfer thereof into
his name if authority to do so is contained in an appropriate order of the
court or other public authority by which such receiver was appointed.
A stockholder whose shares are pledged shall be entitled to vote such
shares until the shares have been transferred into the name of the pledgee and
thereafter the pledgee shall be entitled to vote the shares so transferred.
Neither treasury shares of its own stock held by the Corporation, nor
shares held by another corporation, if a majority of the shares entitled to
vote for the election of directors of such other corporation are held by the
Corporation, shall be voted at any meeting or counted in determining the total
number of outstanding shares at any given time for purposes of any meeting.
SECTION 13. Inspectors of Election. In advance of any meeting of
stockholders, the chairman of the board or the board of directors may appoint
any persons, other than nominees for office, as inspectors of election to act
at such meeting or any adjournment thereof. The number of inspectors shall be
either one or three. If the board of directors so appoints either one or three
inspectors, that appointment shall not be altered at the meeting. If inspectors
of election are not so appointed, the chairman of the board may make such
appointment at the meeting. In case any person appointed as inspector fails to
appear or fails or refuses to act, the vacancy may be filled by appointment in
advance of the meeting or at the meeting by the chairman of the board or the
president.
Unless otherwise prescribed by applicable law, the duties of such
inspectors shall include: determining the number of shares of stock and the
voting power of each share, the shares of stock represented at the meeting, the
existence of a quorum, the authenticity, validity and effect of proxies;
receiving votes, ballots or consents; hearing and determining all challenges
and questions in any way arising in connection with the right to vote; counting
and tabulating all votes or consents; determining the result; and such acts as
may be proper to conduct the election or vote with fairness to all
stockholders.
SECTION 14. Nominating Committee. The board of directors or a
committee appointed by the board of directors shall act as a nominating
committee for selecting
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the management nominees for election as directors. Except in the case of a
nominee substituted as a result of the death or other incapacity of a
management nominee, the nominating committee shall deliver written nominations
to the secretary at least twenty days prior to the date of the annual meeting.
Provided such committee makes such nominations, no nominations for directors
except those made by the nominating committee shall be voted upon at the annual
meeting unless other nominations by stockholders are made in writing and
delivered to the secretary of the Corporation in accordance with the provisions
of the Corporation's Certificate of Incorporation.
SECTION 15. New Business. Any new business to be taken up at the
annual meeting shall be stated in writing and filed with the secretary of the
Corporation in accordance with the provisions of the Corporation's Certificate
of Incorporation. This provision shall not prevent the consideration and
approval or disapproval at the annual meeting of reports of officers, directors
and committees, but in connection with such reports no new business shall be
acted upon at such annual meeting unless stated and filed as provided in the
Corporation's Certificate of Incorporation.
ARTICLE III
Board of Directors
SECTION 1. General Powers. The business and affairs of the Corporation
shall be under the direction of its board of directors. The chairman shall
preside at all meetings of the board of directors.
SECTION 2. Term and Election. The board of directors shall be divided
into three classes as nearly equal in number as possible. The members of each
class shall be elected for a term of three years and until their successors are
elected or qualified. The board of directors shall be classified in accordance
with the provisions of the Corporation's Certificate of Incorporation.
SECTION 3. Regular Meetings. A regular meeting of the board of
directors shall be held at such time and place as shall be determined by
resolution of the board of directors without other notice than such resolution.
SECTION 4. Special Meetings. Special meetings of the board of
directors may be called by or at the request of the chairman, the chief
executive officer or one-third of the directors. The person calling the special
meetings of the board of directors may fix any place as the place for holding
any special meeting of the board of directors called by such persons.
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Members of the board of directors may participate in special meetings
by means of conference telephone or similar communications equipment by which
all persons participating in the meeting can hear each other. Such
participation shall constitute presence in person.
SECTION 5. Notice. Written notice of any special meeting shall be
given to each director at least two days previous thereto delivered personally
or by telegram or at least seven days previous thereto delivered by mail at the
address at which the director is most likely to be reached. Such notice shall
be deemed to be delivered when deposited in the United States mail so
addressed, with postage thereon prepaid if mailed or when delivered to the
telegraph company if sent by telegram. Any director may waive notice of any
meeting by a writing filed with the secretary. The attendance of a director at
a meeting shall constitute a waiver of notice of such meeting, except where a
director attends a meeting for the express purpose of objecting to the
transaction of any business because the meeting is not lawfully called or
convened. Neither the business to be transacted at, nor the purpose of, any
meeting of the board of directors need be specified in the notice or waiver of
notice of such meeting.
SECTION 6. Quorum. A majority of the number of directors fixed by
Section 2 shall constitute a quorum for the transaction of business at any
meeting of the board of directors, but if less than such majority is present at
a meeting, a majority of the directors present may adjourn the meeting from
time to time. Notice of any adjourned meeting shall be given in the same manner
as prescribed by Section 5 of this Article III.
SECTION 7. Manner of Acting. The act of the majority of the directors
present at a meeting at which a quorum is present shall be the act of the board
of directors, unless a greater number is prescribed by these Bylaws, the
Certificate of Incorporation, or the General Corporation Law of the State of
Delaware.
SECTION 8. Action Without a Meeting. Any action required or permitted
to be taken by the board of directors at a meeting may be taken without a
meeting if a consent in writing, setting forth the action so taken, shall be
signed by all of the directors.
SECTION 9. Resignation. Any director may resign at any time by sending
a written notice of such resignation to the home office of the Corporation
addressed to the chairman. Unless otherwise specified therein such resignation
shall take effect upon receipt thereof by the chairman.
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SECTION 10. Vacancies. Any vacancy occurring in the board of directors
shall be filled in accordance with the provisions of the Corporation's
Certificate of Incorporation. Any directorship to be filled by reason of an
increase in the number of directors may be filled by the affirmative vote of
two-thirds of the directors then in office or by election at an annual meeting
or at a special meeting of the stockholders held for that purpose. The term of
such director shall be in accordance with the provisions of the Corporation's
Certificate of Incorporation.
SECTION 11. Removal of Directors. Any director or the entire board of
directors may be removed only in accordance with the provisions of the
Corporation's Certificate of Incorporation.
SECTION 12. Compensation. Directors, as such, may receive compensation
for service on the board of directors. Members of either standing or special
committees may be allowed such compensation as the board of directors may
determine.
SECTION 13. Age Limitation of Directors. No person shall be eligible
for election, reelection, appointment or reappointment to the board of
directors if such person is then more than seventy-two (72) years of age.
ARTICLE IV
Committees of the Board of Directors
The board of directors may, by resolution passed by a majority of the
whole board, designate one or more committees, as they may determine to be
necessary or appropriate for the conduct of the business of the Corporation,
and may prescribe the duties, constitution and procedures thereof. Each
committee shall consist of one or more directors of the Corporation appointed
by a majority of the whole board. The board may designate one or more directors
as alternate members of any committee, who may replace any absent or
disqualified member at any meeting of the committee.
The board shall have power at any time to change the members of, to
fill vacancies in, and to discharge any committee of the board. Any member of
any such committee may resign at any time by giving notice to the Corporation;
provided, however, that notice to the board, the chairman of the board, the
chief executive officer, the chairman of such committee, or the secretary shall
be deemed to constitute notice to the Corporation. Such resignation shall take
effect upon receipt of such notice or at any later time specified therein; and,
unless otherwise specified therein, acceptance of such resignation shall not be
necessary to make it effective.
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Any member of any such committee may be removed at any time, either with or
without cause, by the affirmative vote of a majority of the authorized number
of directors at any meeting of the board called for that purpose.
ARTICLE V
Officers
SECTION 1. Positions. The officers of the Corporation shall be a
chairman, a president, one or more vice presidents, a secretary and a
treasurer, each of whom shall be elected by the board of directors. The board
of directors may designate one or more vice presidents as executive vice
president or senior vice president. The board of directors may also elect or
authorize the appointment of such other officers as the business of the
Corporation may require. The officers shall have such authority and perform
such duties as the board of directors may from time to time authorize or
determine. In the absence of action by the board of directors, the officers
shall have such powers and duties as generally pertain to their respective
offices.
SECTION 2. Election and Term of Office. The officers of the
Corporation shall be elected annually by the board of directors at the first
meeting of the board of directors held after each annual meeting of the
stockholders. If the election of officers is not held at such meeting, such
election shall be held as soon thereafter as possible. Each officer shall hold
office until his successor shall have been duly elected and qualified or until
his death or until he shall resign or shall have been removed in the manner
hereinafter provided. Election or appointment of an officer, employee or agent
shall not of itself create contract rights. The board of directors may
authorize the Corporation to enter into an employment contract with any officer
in accordance with state law; but no such contract shall impair the right of
the board of directors to remove any officer at any time in accordance with
Section 3 of this Article V.
SECTION 3. Removal. Any officer may be removed by vote of two-thirds
of the board of directors whenever, in its judgment, the best interests of the
Corporation will be served thereby, but such removal, other than for cause,
shall be without prejudice to the contract rights, if any, of the person so
removed.
SECTION 4. Vacancies. A vacancy in any office because of death,
resignation, removal, disqualification or otherwise, may be filled by the board
of directors for the unexpired portion of the term.
SECTION 5. Remuneration. The remuneration of the officers shall be
fixed from time to time by the board of directors, and no officer shall be
prevented from
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receiving such salary by reason of the fact that he is also a director of the
Corporation.
ARTICLE VI
Contracts, Loans, Checks and Deposits
SECTION 1. Contracts. To the extent permitted by applicable law, and
except as otherwise prescribed by the Corporation's Certificate of
Incorporation or these Bylaws with respect to certificates for shares, the
board of directors or the executive committee may authorize any officer,
employee, or agent of the Corporation to enter into any contract or execute and
deliver any instrument in the name of and on behalf of the Corporation. Such
authority may be general or confined to specific instances.
SECTION 2. Loans. No loans shall be contracted on behalf of the
Corporation and no evidence of indebtedness shall be issued in its name unless
authorized by the board of directors. Such authority may be general or confined
to specific instances.
SECTION 3. Checks, Drafts, Etc. All checks, drafts or other orders for
the payment of money, notes or other evidences of indebtedness issued in the
name of the Corporation shall be signed by one or more officers, employees or
agents of the Corporation in such manner, including in facsimile form, as shall
from time to time be determined by resolution of the board of directors.
SECTION 4. Deposits. All funds of the Corporation not otherwise
employed shall be deposited from time to time to the credit of the Corporation
in any of its duly authorized depositories as the board of directors may
select.
ARTICLE VII
Certificates for Shares and Their Transfer
SECTION 1. Certificates for Shares. The shares of the Corporation
shall be represented by certificates signed by the chairman of the board of
directors or the president or a vice president and by the treasurer or an
assistant treasurer or the secretary or an assistant secretary of the
Corporation, and may be sealed with the seal of the Corporation or a facsimile
thereof. Any or all of the signatures upon a certificate may be facsimiles if
the certificate is countersigned by a transfer agent, or registered by a
registrar, other than the Corporation itself or an employee of the Corporation.
If any officer who has signed or whose facsimile signature has been
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placed upon such certificate shall have ceased to be such officer before the
certificate is issued, it may be issued by the Corporation with the same effect
as if he were such officer at the date of its issue.
SECTION 2. Form of Share Certificates. All certificates representing
shares issued by the Corporation shall set forth upon the face or back that the
Corporation will furnish to any stockholder upon request and without charge a
full statement of the designations, preferences, limitations, and relative
rights of the shares of each class authorized to be issued, the variations in
the relative rights and preferences between the shares of each such series so
far as the same have been fixed and determined, and the authority of the board
of directors to fix and determine the relative rights and preferences of
subsequent series.
Each certificate representing shares shall state upon the face
thereof: That the Corporation is organized under the laws of the State of
Delaware; the name of the person to whom issued; the number and class of
shares, the designation of the series, if any, which such certificate
represents; the par value of each share represented by such certificate, or a
statement that the shares are without par value. Other matters in regard to the
form of the certificates shall be determined by the board of directors.
SECTION 3. Payment for Shares. No certificate shall be issued for any
share until such share is fully paid.
SECTION 4. Form of Payment for Shares. The consideration for the
issuance of shares shall be paid in accordance with the provisions of the
Corporation's Certificate of Incorporation.
SECTION 5. Transfer of Shares. Transfer of shares of capital stock of
the Corporation shall be made only on its stock transfer books. Authority for
such transfer shall be given only the holder of record thereof or by his legal
representative, who shall furnish proper evidence of such authority, or by his
attorney thereunto authorized by power of attorney duly executed and filed with
the Corporation. Such transfer shall be made only on surrender for cancellation
of the certificate for such shares. The person in whose name shares of capital
stock stand on the books of the Corporation shall be deemed by the Corporation
to be the owner thereof for all purposes.
SECTION 6. Lost Certificates. The board of directors may direct a new
certificate to be issued in place of any certificate theretofore issued by the
Corporation alleged to have been lost, stolen, or destroyed, upon the making of
an affidavit of that fact by the person claiming the certificate of stock to be
lost, stolen, or destroyed. When authorizing such issue of a new certificate,
the board of directors
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may, in its discretion and as a condition precedent to the issuance thereof,
require the owner of such lost, stolen, or destroyed certificate, or his legal
representative, to give the Corporation a bond in such sum as it may direct as
indemnity against any claim that may be made against the Corporation with
respect to the certificate alleged to have been lost, stolen, or destroyed.
ARTICLE VIII
Fiscal Year; Annual Audit
The fiscal year of the Corporation shall end on the last day of June
of each year. The Corporation shall be subject to an annual audit as of the end
of its fiscal year by independent public accountants appointed by and
responsible to the board of directors.
ARTICLE IX
Dividends
Dividends upon the stock of the Corporation, subject to the provisions
of the Certificate of Incorporation, if any, may be declared by the board of
directors at any regular or special meeting, pursuant to law. Dividends may be
paid in cash, in property or in the Corporation's own stock.
ARTICLE X
Corporation Seal
The corporate seal of the Corporation shall be in such form as the
board of directors shall prescribe.
ARTICLE XI
Amendments
In accordance with the Corporation's Certificate of Incorporation,
these Bylaws may be repealed, altered, amended or rescinded by the stockholders
of the Corporation only by vote of not less than 80% of the outstanding shares
of capital
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stock of the Corporation entitled to vote generally in the election of
directors (considered for this purpose as one class) cast at a meeting of the
stockholders called for that purpose (provided that notice of such proposed
repeal, alteration, amendment or rescission is included in the notice of such
meeting). In addition, the board of directors may repeal, alter, amend or
rescind these Bylaws by vote of two-thirds of the board of directors at a legal
meeting held in accordance with the provisions of these Bylaws.
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EXHIBIT V
PINNACLE BANK
1996 STOCK OPTION AND INCENTIVE PLAN
1. PURPOSE OF THE PLAN.
The purpose of this Pinnacle Bank 1996 Stock Option and
Incentive Plan (the "Plan") is to advance the interests of the Bank
through providing select key Employees and Directors of the Bank and
its Affiliates with the opportunity to acquire Shares. By encouraging
such stock ownership, the Bank seeks to attract, retain and motivate
the best available personnel for positions of substantial
responsibility and to provide additional incentive to Directors and
key Employees of the Bank or any Affiliate to promote the success of
the business.
2. DEFINITIONS.
As used herein, the following definitions shall apply.
(a) "Affiliate" shall mean any "parent corporation" or "subsidiary
corporation" of the Bank, as such terms are defined in Section
424(e) and (f), respectively, of the Code.
(b) "Agreement" shall mean a written agreement entered into in
accordance with Paragraph 5(c).
(c) "Awards" shall mean, collectively, Options, SARs, and
Restricted Stock unless the context clearly indicates a
different meaning.
(d) "Bank" shall mean Pinnacle Bank.
(e) "Board" shall mean the Board of Directors of the Bank.
(f) "Change in Control" shall mean any one of the following
events: (1) the ownership, holding or power to vote more than
25% of the Bank's voting stock, (2) the control of the
election of a majority of the Bank's directors, (3) the
exercise of a controlling influence over the management or
policies of the Bank by any person or by persons acting as a
group within the meaning of Section 13(d) of the Securities
Exchange Act of 1934 (except in the case of (1), (2)
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and (3) hereof, ownership or control of the Bank or its
directors by a holding company formed by the Bank shall not
constitute a "Change in Control"), or (4) during any period of
two consecutive years, individuals who at the beginning of
such period constitute the Board of Directors of the Bank (the
"Bank Board") (the "Continuing Directors") cease for any
reason to constitute at least two-thirds thereof, provided
that any individual whose election or nomination for election
as a member of the Bank Board was approved by a vote of at
least two-thirds of the Continuing Directors then in office
shall be considered a Continuing Director. For purposes of
this subparagraph only, the term "person" refers to an
individual or a corporation, partnership, trust, association,
joint venture, pool, syndicate, sole proprietorship,
unincorporated organization or any other form of entity not
specifically listed herein. The decision of the Committee as
to whether a change in control has occurred shall be
conclusive and binding.
(g) "Code" shall mean the Internal Revenue Code of 1986, as
amended.
(h) "Committee" shall mean the Stock Option Committee appointed by
the Board in accordance with Paragraph 5(a) hereof.
(i) "Common Stock" shall mean the common stock, par value $.01 per
share, of the Bank.
(j) "Continuous Service" shall mean the absence of any
interruption or termination of service as an Employee or
Director of the Bank or an Affiliate. Continuous Service
shall not be considered interrupted in the case of sick leave,
military leave or any other leave of absence approved by the
Bank, in the case of transfers between payroll locations of
the Bank or between the Bank, an Affiliate or a successor, or
in the case of a Director's performance of services in an
emeritus or advisory capacity.
(k) "Director" shall mean any member of the Board, and any member
of the board of directors of any Affiliate that the Board has
by resolution designated as being eligible for participation
in this Plan.
(l) "Disability" shall mean a physical or mental condition, which
in the sole and absolute discretion of the Committee, is
reasonably expected to be of indefinite duration and to
substantially prevent a
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Participant from fulfilling his or her duties or
responsibilities to the Bank or an Affiliate.
(m) "Effective Date" shall mean the date specified in Paragraph 15
hereof.
(n) "Employee" shall mean any person employed by the Bank or an
Affiliate.
(o) "Exercise Price" shall mean the price per Optioned Share at
which an Option or SAR may be exercised.
(p) "ISO" means an option to purchase Common Stock which meets the
requirements set forth in the Plan, and which is intended to
be and is identified as an "incentive stock option" within the
meaning of Section 422 of the Code.
(q) "Market Value" shall mean the fair market value of the Common
Stock, as determined under Paragraph 7(b) hereof.
(r) "Non-Employee Director" shall mean any member of the Board who
is a Non-Employee Director within the meaning of Rule 16b-3.
(s) "Non-ISO" means an option to purchase Common Stock which meets
the requirements set forth in the Plan but which is not
intended to be and is not identified as an ISO.
(t) "Option" means an ISO and/or a Non-ISO.
(u) "Optioned Shares" shall mean Shares subject to an Award
granted pursuant to this Plan.
(v) "Participant" shall mean any person who receives an Award
pursuant to the Plan.
(w) "Plan" shall mean this Pinnacle Bank 1996 Stock Option and
Incentive Plan.
(x) "Restricted Stock" means Common Stock which is subject to
restrictions against transfer and forfeiture and such other
terms and conditions determined by the Committee, as provided
in Paragraph 11.
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(y) "Rule 16b-3" shall mean Rule 16b-3 of the General Rules and
Regulations under the Securities Exchange Act of 1934, as
amended.
(z) "Share" shall mean one share of Common Stock.
(aa) "SAR" (or "Stock Appreciation Right") means a right to receive
the appreciation in value, or a portion of the appreciation in
value, of a specified number of shares of Common Stock.
(bb) "Year of Service" shall mean a full 12-month period, measured
from the date of an Award and each annual anniversary of that
date, during which a Participant has continuously been an
Employee or Director of the Bank or an Affiliate.
3. TERM OF THE PLAN AND AWARDS.
(a) Term of the Plan. The Plan shall continue in effect for a
term of 10 years from the Effective Date, unless sooner
terminated pursuant to Paragraph 17 hereof. No Award shall be
granted under the Plan after 10 years from the Effective Date.
(b) Term of Awards. The term of each Award granted under the Plan
shall be established by the Committee, but shall not exceed 10
years; provided, however, that in the case of an Employee who
owns Shares representing more than 10% of the outstanding
Common Stock at the time an ISO is granted, the term of such
ISO shall not exceed five years.
4. SHARES SUBJECT TO THE PLAN.
(a) General Rule. The aggregate number of Shares deliverable
pursuant to Awards shall not exceed 85,000 Shares, as such
number may be adjusted on and after the Effective Date
pursuant to Paragraph 12 hereof. Such Shares may either be
authorized but unissued Shares, Shares held in treasury, or
Shares held in a grantor trust created by the Bank. If any
Awards should expire, become unexercisable, or be forfeited
for any reason without having been exercised, the Optioned
Shares shall, unless the Plan shall have been terminated, be
available for the grant of additional Awards under the Plan.
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(b) Special Rule for SARs. The number of Shares with respect to
which an SAR is granted, but not the number of Shares which
the Bank delivers or could deliver to an Employee or
individual upon exercise of an SAR, shall be charged against
the aggregate number of Shares remaining available under the
Plan; provided, however, that in the case of an SAR granted in
conjunction with an Option, under circumstances in which the
exercise of the SAR results in termination of the Option and
vice versa, only the number of Shares subject to the Option
shall be charged against the aggregate number of Shares
remaining available under the Plan. The Shares involved in an
Option as to which option rights have terminated by reason of
the exercise of a related SAR, as provided in Paragraph 10
hereof, shall not be available for the grant of further
Options under the Plan.
5. ADMINISTRATION OF THE PLAN.
(a) Composition of the Committee. The Plan shall be administered
by the Committee, which shall consist of not less than two
members of the Board who are Non-Employee Directors. Members
of the Committee shall serve at the pleasure of the Board. In
the absence at any time of a duly appointed Committee, the
Plan shall be administered by those members of the Board who
are Non-Employee Directors.
(b) Powers of the Committee. Except as limited by the express
provisions of the Plan or by resolutions adopted by the Board,
the Committee shall have sole and complete authority and
discretion (i) to select Participants and grant Awards, (ii)
to determine the form and content of Awards to be issued in
the form of Agreements under the Plan, (iii) to interpret the
Plan, (iv) to prescribe, amend and rescind rules and
regulations relating to the Plan, and (v) to make other
determinations necessary or advisable for the administration
of the Plan. The Committee shall have and may exercise such
other power and authority as may be delegated to it by the
Board from time to time. A majority of the entire Committee
shall constitute a quorum and the action of a majority of the
members present at any meeting at which a quorum is present,
or acts approved in writing by a majority of the Committee
without a meeting, shall be deemed the action of the
Committee.
(c) Agreement. Each Award shall be evidenced by a written
agreement containing such provisions as may be approved by the
Committee.
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Each such Agreement shall constitute a binding contract
between the Bank and the Participant, and every Participant,
upon acceptance of such Agreement, shall be bound by the terms
and restrictions of the Plan and of such Agreement. The
terms of each such Agreement shall be in accordance with the
Plan, but each Agreement may include such additional
provisions and restrictions determined by the Committee, in
its discretion, provided that such additional provisions and
restrictions are not inconsistent with the terms of the Plan.
In particular, the Committee shall set forth in each Agreement
(i) the Exercise Price of an Option or SAR, (ii) the number of
Shares subject to, and the expiration date of, the Award,
(iii) the manner, time and rate (cumulative or otherwise) of
exercise or vesting of such Award, and (iv) the restrictions,
if any, to be placed upon such Award, or upon Shares which may
be issued upon exercise of such Award.
The Chairman of the Committee and such other
Directors and officers as shall be designated by the Committee
are hereby authorized to execute Agreements on behalf of the
Bank and to cause them to be delivered to the recipients of
Awards.
(d) Effect of the Committee's Decisions. All decisions,
determinations and interpretations of the Committee shall be
final and conclusive on all persons affected thereby.
(e) Indemnification. In addition to such other rights of
indemnification as they may have, the members of the Committee
shall be indemnified by the Bank in connection with any claim,
action, suit or proceeding relating to any action taken or
failure to act under or in connection with the Plan or any
Award, granted hereunder to the full extent provided for under
the Bank's governing instruments with respect to the
indemnification of Directors.
6. GRANT OF OPTIONS.
(a) General Rule. In its sole discretion, the Committee may grant
Awards to Directors and select key Employees. In selecting
those Directors and Employees to whom Awards will be granted
and the number of shares covered by such Awards, the Committee
shall consider their respective positions, duties and
responsibilities, the value of their services to the Bank and
its Affiliates, and any other factors the Committee may deem
relevant. Notwithstanding the
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foregoing, the Committee shall automatically make the Awards
specified in Sections 6(b) and 6(d) hereof.
(b) Automatic Grants to Employees. On the Effective Date, each of
the following Employees shall receive an Option (in the form
of an ISO, to the extent permissible under the Code) to
purchase the number of Shares listed below, at an Exercise
Price per Share equal to the Market Value of a Share on the
Effective Date; provided that such grant shall not be made to
an Employee whose Continuous Service terminates on or before
the Effective Date: Robert B. Nolen, Jr. - 10,000 shares.
With respect to each of the above-named Employees,
the Option granted to the Employee hereunder (i) shall vest in
accordance with the general rule set forth in Paragraph 8(a)
of the Plan, (ii) shall have a term of ten years from the
Effective Date, except as limited by Paragraph 3(b), and (iii)
shall be subject to the general rule set forth in Paragraph
8(c) with respect to the effect of a Employee's termination of
Continuous Service on the Employee's right to exercise his
Options.
(c) Special Rules for ISOs. The aggregate Market Value, as of the
date the Option is granted, of the Shares with respect to
which ISOs are exercisable for the first time by an Employee
during any calendar year (under all incentive stock option
plans, as defined in Section 422 of the Code, of the Bank or
any present or future Affiliate of the Bank) shall not exceed
$100,000. Notwithstanding the foregoing, the Committee may
grant Options in excess of the foregoing limitations, in which
case such Options granted in excess of such limitation shall
be Options which are Non-ISOs.
(d) Automatic Grants to Directors. Notwithstanding any other
provisions of this Plan, each Director who is not an Employee
but is a Director on the Effective Date shall receive, on said
date, Non-ISOs to purchase 2,500 of the Shares reserved under
Paragraph 4(a) hereof. Such Non-ISOs shall have an Exercise
Price per Share equal to the Market Value of a Share on the
date of grant.
7. EXERCISE PRICE FOR OPTIONS.
(a) Limits on Committee Discretion. The Exercise Price as to any
particular Option shall not be less than 50% of the Market
Value of
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the Optioned Shares on the date of grant (100% in the case of
ISOs). In the case of an Employee who owns Shares
representing more than 10% of the Bank's outstanding Shares of
Common Stock at the time an ISO is granted, the Exercise Price
shall not be less than 110% of the Market Value of the
Optioned Shares at the time the ISO is granted.
(b) Standards for Determining Exercise Price. If the Common Stock
is listed on a national securities exchange (including the
Nasdaq National Market) on the date in question, then the
Market Value per Share shall be the average of the highest and
lowest selling price on such exchange on such date, or if
there were no sales on such date, then the Market Value per
Share shall be the average of the highest and lowest selling
price on such exchange on the trading day immediately
preceding such date on which sales were effected. If the
Common Stock is traded otherwise than on a national securities
exchange on the date in question, then the Market Value per
Share shall be the mean between the bid and asked price on
such date, or, if there is no bid and asked price on such
date, then on the next prior business day on which there was a
bid and asked price. If no price is available, then the
Market Value per Share shall be its fair market value as
determined by the Committee, in its sole and absolute
discretion. Notwithstanding the foregoing, in the event that
either (i) the Committee exercises its discretion to impose
transfer (or other) restrictions on the Shares subject to an
Option, or (ii) the Plan requires specified transfer
restrictions, the Committee shall make an appropriate
adjustment in determining the Market Value of the Shares
subject to such an Option (in order to take into account that
their fair market value may be less than the fair market value
of unrestricted Shares).
8. EXERCISE OF OPTIONS BY EMPLOYEES.
(a) Generally. Unless otherwise provided by the Committee
pursuant to an applicable Agreement, each Option shall be
fully (100%) exercisable after the six-month period following
the date of its grant, subject to Paragraph 14 hereof. An
Option may not be exercised for a fractional Share.
(b) Procedure for Exercise. An Employee may exercise Options,
subject to provisions relative to its termination and any
limitations on its exercise, only by (1) written notice of
intent to exercise the Option
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with respect to a specified number of Shares, and (2) payment
to the Bank (contemporaneously with delivery of such notice)
in cash, in Common Stock, or a combination of cash and Common
Stock, of the amount of the Exercise Price for the number of
Shares with respect to which the Option is then being
exercised. Each such notice (and payment where required)
shall be delivered, or mailed by prepaid registered or
certified mail, addressed to the Treasurer of the Bank at the
Bank's executive offices. Common Stock utilized in full or
partial payment of the Exercise Price for Options shall be
valued at its Market Value at the date of exercise, and may
consist of Shares subject to the Option being exercised. An
Employee who exercises Non-ISOs pursuant to this Paragraph may
satisfy all applicable federal, state and local income and
employment tax withholding obligations, in whole or in part,
by irrevocably electing to have the Bank withhold shares of
Common Stock, or to deliver to the Bank shares of Common Stock
that the Employee already owns, having a value equal to the
amount required to be withheld; provided that to the extent
not inconsistent herewith, such election otherwise complies
with those requirements of Paragraphs 8 and 20 hereof.
(c) Period of Exercisability. Except to the extent otherwise
provided in the terms of an Agreement, an Option may be
exercised hereunder only while the Employee is employed by the
Bank and has maintained Continuous Service from the date of
the grant of the Option, or within three months after
termination of such Continuous Service (but not later than the
date on which the Option would otherwise expire), except if
the Employee's Continuous Service terminates by reason of --
(1) "Just Cause" which for purposes hereof shall have the
meaning set forth in any unexpired employment or
severance agreement between the Employee and the Bank
(and, in the absence of any such agreement, shall
mean termination because of the Employee's personal
dishonesty, incompetence, willful misconduct, breach
of fiduciary duty involving personal profit,
intentional failure to perform stated duties, willful
violation of any law, rule or regulation (other than
traffic violations or similar offenses) or final
cease-and-desist order), then the Employee's rights
to exercise such Option shall expire on the date of
such termination;
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(2) Death, then to the extent that the Employee would
have been entitled to exercise the Option immediately
prior to his death, such Option of the deceased
Employee may be exercised within two years from the
date of his death (but not later than the date on
which the Option would otherwise expire) by the
personal representatives of his estate or person or
persons to whom his rights under such Option shall
have passed by will or by laws of descent and
distribution;
(3) Disability, then to the extent that the Employee
would have been entitled to exercise the Option
immediately prior to his or her Disability, such
Option may be exercised within one year from the date
of termination of employment due to Disability, but
not later than the date on which the Option would
otherwise expire.
(d) Effect of the Committee's Decisions. The Committee's
determination whether an Employee's Continuous Service has
ceased, and the effective date thereof, shall be final and
conclusive on all persons affected thereby.
(e) Acceleration of Vesting. Notwithstanding the six-month period
set forth in Paragraph 8(a) hereof and except to the extent
otherwise provided in the terms of an Agreement, all Options
held by an Employee whose service with the Bank terminates due
to death, Disability, retirement after age 65, or a Change in
Control shall be deemed fully exercisable and non-forfeitable
as of the Employee's last day of service with the Bank,
subject to the provisions of Paragraph 8(c) hereof.
9. EXERCISE OF OPTIONS BY NON-EMPLOYEE DIRECTORS.
(a) Generally. Unless otherwise provided by the Committee
pursuant to an applicable Agreement, each Option shall be
fully (100%) exercisable after six months following the date
of its grant, subject to paragraph 14 hereof. An Option may
not be exercised for a fractional share.
(b) Terms of Exercise.
(i) Options received by Directors who are not Employees
will become exercisable in accordance with the
general rule set
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forth in Paragraph 8(a) hereof, and may be exercised
from time to time by (a) written notice of intent to
exercise the Option with respect to all or a
specified number of the Optioned Shares, and (b)
payment to the Bank (contemporaneously with the
delivery of such notice), in cash, in Common Stock,
or a combination of cash and Common Stock, of the
amount of the Exercise Price for the number of the
Optioned Shares with respect to which the Option is
then being exercised. Each such notice and payment
shall be delivered, or mailed by prepaid registered
or certified mail, addressed to the Treasurer of the
Bank at the Bank's executive offices. A Director who
exercises Options may satisfy all applicable federal,
state and local income and employment tax withholding
obligations, in whole or in part, by irrevocably
electing to have the Bank withhold shares of Common
Stock, or to deliver to the Bank shares of Common
Stock that the Participant already owns, having a
value equal to the amount required to be withheld;
provided that to the extent not inconsistent
herewith, such election otherwise complies with those
requirements of Paragraphs 8 and 20 hereof.
(ii) Options granted to Directors who are not Employees
shall have a term of 10 years; provided that Options
so granted shall expire one year after the date on
which a Director terminates Continuous Service on the
Board, but in no event later than the date on which
such Options would otherwise expire. In the event of
such Director's death during the term of his
directorship, such Options shall become immediately
exercisable, and may be exercised within two years
from the date of his death by the personal
representatives of his estate or person or persons to
whom his rights under such Option shall have passed
by will or by laws of descent and distribution, but
in no event later than the date on which such Options
would otherwise expire. In the event of such
Director's Disability during his or her directorship,
the Director's Option shall become immediately
exercisable, and such Option may be exercised within
one year of the termination of directorship due to
Disability, but not later than the date that the
Option would otherwise expire. Unless otherwise
inapplicable or inconsistent with the provisions of
this Paragraph, the Options to be granted to
Directors hereunder shall be subject to all other
provisions of this Plan.
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(c) Effect of the Committee's Decisions. The Committee's
determination whether a Director's Continuous Service has
ceased, and the effective date thereof, shall be final and
conclusive on all persons affected thereby.
(d) Acceleration of Vesting. Notwithstanding the six-month period
set forth in Paragraph 9(a) hereof and except to the extent
otherwise provided in the terms of an Agreement, all Options
held by a Director whose service with the Bank terminates due
to death, Disability, retirement after age 65, or a Change in
Control shall be deemed fully exercisable and non-forfeitable
as of the Director's last day of service with the Bank,
subject to the provisions of Paragraph 9(b) hereof.
10. SARS (STOCK APPRECIATION RIGHTS).
(a) Granting of SARs. In its sole discretion, the Committee may
from time to time grant SARs to Employees either in
conjunction with, or independently of, any Options granted
under the Plan. An SAR granted in conjunction with an Option
may be an alternative right wherein the exercise of the Option
terminates the SAR to the extent of the number of shares
purchased upon exercise of the Option and, correspondingly,
the exercise of the SAR terminates the Option to the extent of
the number of Shares with respect to which the SAR is
exercised. Alternatively, an SAR granted in conjunction with
an Option may be an additional right wherein both the SAR and
the Option may be exercised. An SAR may not be granted in
conjunction with an ISO under circumstances in which the
exercise of the SAR affects the right to exercise the ISO or
vice versa, unless the SAR, by its terms, meets all of the
following requirements:
(1) The SAR will expire no later than the ISO;
(2) The SAR may be for no more than the difference
between the Exercise Price of the ISO and the Market
Value of the Shares subject to the ISO at the time
the SAR is exercised;
(3) The SAR is transferable only when the ISO is
transferable, and under the same conditions;
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(4) The SAR may be exercised only when the ISO may be
exercised; and
(5) The SAR may be exercised only when the Market Value
of the Shares subject to the ISO exceeds the Exercise
Price of the ISO.
(b) Exercise Price. The Exercise Price as to any particular SAR
shall not be less than the Market Value of the Optioned Shares
on the date of grant.
(c) Timing of Exercise. Unless otherwise provided by the
Committee pursuant to an applicable Agreement, an SAR be
exercised at any time following the six-month period following
the date of its grant, subject to the provisions of Paragraph
8(c) regarding the period of exercisability and the provisions
of Paragraph 8(e) regarding the acceleration of vesting.
(d) Exercise of SARs. An SAR granted hereunder shall be
exercisable at such times and under such conditions as shall
be permissible under the terms of the Plan and of the
Agreement granted to a Participant, provided that an SAR may
not be exercised for a fractional Share. Upon exercise of an
SAR, the Participant shall be entitled to receive, without
payment to the Bank except for applicable withholding taxes,
an amount equal to the excess of (or, in the discretion of the
Committee if provided in the Agreement, a portion of) the
excess of the then aggregate Market Value of the number of
Optioned Shares with respect to which the Participant
exercises the SAR, over the aggregate Exercise Price of such
number of Optioned Shares. This amount shall be payable by
the Bank, in the discretion of the Committee, in cash or in
Shares valued at the then Market Value thereof, or any
combination thereof.
(e) Procedure for Exercising SARs. To the extent not inconsistent
herewith, the provisions of Paragraph 8(b) as to the procedure
for exercising Options are incorporated by reference, and
shall determine the procedure for exercising SARs.
11. RESTRICTED STOCK AWARDS.
Any Share of Restricted Stock which the Committee may grant to key
Employees shall be subject to the following terms and conditions, and to such
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other terms and conditions as are either applicable generally to Awards, or
prescribed by the Committee in the applicable Agreement:
(a) Restriction Period. At the time of each award of Restricted
Stock, there shall be established for the Restricted Stock a
restriction period, which shall be no greater than 5 years
(the "Restriction Period"). The length of such Restriction
Period may differ among Participants and may have different
expiration dates with respect to portions of Shares of
Restricted Stock covered by the same award.
(b) Vesting Restrictions. The Committee shall determine the
restrictions applicable to the award of Restricted Stock,
including, but not limited to, requirements of Continuous
Service for a specified term, or the attainment of specific
corporate, divisional or individual performance standards or
goals, which restrictions may differ with respect to each
Participant. The Agreement shall provide for forfeiture of
Shares covered thereby if the specified restrictions are not
met during the Restriction Period, and may provide for early
termination of any Restriction Period in the event of
satisfaction of the specified restrictions prior to expiration
of the Restricted Period.
(c) Vesting. An amount equal to 20% of the Shares of Restricted
Stock subject to a Restricted Stock award shall be earned and
become non-forfeitable by a Participant upon his completion of
each of five Years of Service (subject to Committee discretion
to impose different vesting requirements but in no case may
such vesting requirement be for a period less than six months
following the grant of the SAR). For purposes of this
paragraph, with respect to each vesting event, "Year of
Service" means a full 12-month period, measured from the date
of a Restricted Stock award and each annual anniversary of
that date, during which the Participant has continuously been
a Participant.
(d) Acceleration of Vesting. Notwithstanding the vesting schedule
contained in Paragraph 11(c) above, all Shares of Restricted
Stock held by a Participant whose service with the Bank
terminates due to death, Disability, retirement after age 65,
or a Change in Control, shall be deemed 100% earned and
non-forfeitable as of the Participant's last day of service
with the Bank and shall be distributed as soon as practicable
thereafter.
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(e) Ownership; Voting. Stock certificates shall be issued in
respect of Restricted Stock awarded hereunder and shall be
registered in the name of the Participant, whereupon the
Participant shall become a stockholder of the Bank with
respect to such Restricted Stock and shall, to the extent not
inconsistent with express provisions of the Plan, have all the
rights of a stockholder, including but not limited to the
right to receive all dividends paid on such Shares and the
right to vote such Shares. Said stock certificates shall be
deposited with the Bank or its designee, together with a stock
power endorsed in blank, and the following legend shall be
placed upon such certificates reflecting that the Shares
represented thereby are subject to restrictions against
transfer and forfeiture:
"The transferability of this certificate and
the shares of stock represented thereby are subject
to the terms and conditions (including forfeiture)
contained in the Pinnacle Bank 1996 Stock Option and
Incentive Plan, and an agreement entered into between
the registered owner and Pinnacle Bank. Copies of
such Plan and Agreement are on file in the offices of
the Secretary of Pinnacle Bank."
(f) Lapse of Restrictions. At the expiration of the Restricted
Period applicable to the Restricted Stock, the Bank shall
deliver to the Participant, or the legal representative of the
Participant's estate, or if the personal representative of the
Participant's estate shall have assigned the estate's interest
in the Restricted Stock, to the person or persons to whom his
rights under such stock shall have passed by assignment
pursuant to his will or to the laws of descent and
distribution, the stock certificates deposited with it or its
designee and as to which the Restricted Period has expired and
the requirements of the restrictions have been met. If a
legend has been placed on such certificates, the Bank shall
cause such certificates to be reissued without the legend.
(g) Forfeiture of Restricted Stock. The Agreement shall provide
for forfeiture of any Restricted Stock which is not vested in
the Participant or for which the restrictions have not been
satisfied during the Restriction Period.
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12. EFFECT OF CHANGES IN COMMON STOCK SUBJECT TO THE PLAN.
(a) Recapitalizations; Stock Splits, Etc. The number and kind of
shares reserved for issuance under the Plan, and the number
and kind of shares subject to outstanding Awards, and the
Exercise Price thereof, shall be proportionately adjusted for
any increase, decrease, change or exchange of Shares for a
different number or kind of shares or other securities of the
Bank which results from a merger, consolidation,
recapitalization, reorganization, reclassification, stock
dividend, split-up, combination of shares, or similar event in
which the number or kind of shares is changed without the
receipt or payment of consideration by the Bank.
(b) Transactions in which the Bank is Not the Surviving Entity.
In the event of (i) the liquidation or dissolution of the
Bank, (ii) a merger or consolidation in which the Bank is not
the surviving entity, or (iii) the sale or disposition of all
or substantially all of the Bank's assets (any of the
foregoing to be referred to herein as a "Transaction"), all
outstanding Awards, together with the Exercise Prices thereof,
shall be equitably adjusted for any change or exchange of
Shares for a different number or kind of shares or other
securities which results from the Transaction.
(c) Special Rule for ISOs. Any adjustment made pursuant to
subparagraphs (a) or (b)(1) hereof shall be made in such a
manner as not to constitute a modification, within the meaning
of Section 424(h) of the Code, of outstanding ISOs.
(d) Conditions and Restrictions on New, Additional, or Different
Shares or Securities. If, by reason of any adjustment made
pursuant to this Paragraph, a Participant becomes entitled to
new, additional, or different shares of stock or securities,
such new, additional, or different shares of stock or
securities shall thereupon be subject to all of the conditions
and restrictions which were applicable to the Shares pursuant
to the Award before the adjustment was made.
(e) Other Issuances. Except as expressly provided in this
Paragraph, the issuance by the Bank or an Affiliate of shares
of stock of any class, or of securities convertible into
Shares or stock of another class, for cash or property or for
labor or services either upon direct sale or upon the exercise
of rights or warrants to subscribe therefor, shall not affect,
and no adjustment shall be made with respect to, the
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number, class, or Exercise Price of Shares then subject to
Awards or reserved for issuance under the Plan.
13. NON-TRANSFERABILITY OF AWARDS.
Awards may not be sold, pledged, assigned, hypothecated,
transferred or disposed of in any manner other than by will or by the
laws of descent and distribution. Notwithstanding any other provision
of this Plan to the contrary, to the extent permissible under Rule
16b-3, and except to the extent otherwise provided in the terms of an
Agreement, a Participant who is granted Non-ISOs pursuant to this Plan
may transfer such Non-ISOs to his or her spouse, lineal ascendants,
lineal descendants, or to a duly established trust, provided that
Non-ISOs so transferred may not again be transferred other than (i) to
the Participant originally receiving the grant of Non-ISOs, or (ii) to
an individual or trust to whom such Participant could have transferred
Non-ISOs pursuant to this Paragraph 13. Non-ISOs which are
transferred pursuant to this Paragraph 13 shall be exercisable by the
transferee subject to the same terms and conditions as would have
applied to such Non-ISOs in the hands of the Participant originally
receiving the grant of such Non-ISOs.
14. TIME OF GRANTING AWARDS.
The date of grant of an Award shall, for all purposes, be the
later of the date on which the Committee makes the determination of
granting such Award, and the Effective Date. Notice of the
determination shall be given to each Participant to whom an Award is
so granted within a reasonable time after the date of such grant.
15. EFFECTIVE DATE.
The Plan shall become effective immediately upon its approval
by the Board, subject to stockholder approval as may be required.
16. MODIFICATION OF AWARDS.
At any time, and from time to time, the Board may authorize
the Committee to direct execution of an instrument providing for the
modification of any outstanding Award, provided no such modification
shall confer on the holder of said Award any right or benefit which
could not be conferred on him by the grant of a new Award at such
time, or impair the Award without the consent of the holder of the
Award.
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17. AMENDMENT AND TERMINATION OF THE PLAN.
The Board may from time to time amend the terms of the Plan
and, with respect to any Shares at the time not subject to Awards,
suspend or terminate the Plans. No amendment, suspension or
termination of the Plan shall, without the consent of any affected
holders of an Award, alter or impair any rights or obligations under
any Award theretofore granted.
18. CONDITIONS UPON ISSUANCE OF SHARES.
(a) Compliance with Securities Laws. Shares of Common Stock shall
not be issued with respect to any Award unless the issuance
and delivery of such Shares shall comply with all relevant
provisions of law, including, without limitation, the
Securities Act of 1933, as amended, the rules and regulations
promulgated thereunder, any applicable state securities law,
and the requirements of any stock exchange upon which the
Shares may then be listed.
(b) Special Circumstances. The inability of the Bank to obtain
approval from any regulatory body or authority deemed by the
Bank's counsel to be necessary to the lawful issuance and sale
of any Shares hereunder shall relieve the Bank of any
liability in respect of the non-issuance or sale of such
Shares. As a condition to the exercise of an Option or SAR,
the Bank may require the person exercising the Option or SAR
to make such representations and warranties as may be
necessary to assure the availability of an exemption from the
registration requirements of federal or state securities law.
(c) Committee Discretion. The Committee shall have the
discretionary authority to impose in Agreements such
restrictions on Shares as it may deem appropriate or
desirable, including but not limited to the authority to
impose a right of first refusal or to establish repurchase
rights or both of these restrictions.
19. RESERVATION OF SHARES.
The Bank, during the term of the Plan, will reserve and keep
available a number of Shares sufficient to satisfy the requirements of
the Plan.
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20. WITHHOLDING TAX.
The Bank's obligation to deliver Shares upon exercise of
Options and/or SARs shall be subject to the Participant's satisfaction
of all applicable federal, state and local income and employment tax
withholding obligations.
21. NO EMPLOYMENT OR OTHER RIGHTS.
In no event shall an Employee's or Director's eligibility to
participate or participation in the Plan create or be deemed to create
any legal or equitable right of the Employee, Director, or any other
party to continue service with the Bank or any Affiliate of such
corporations. Except to the extent provided in Paragraphs 6(b) and
6(d), no Employee or Director shall have a right to be granted an
Award or, having received an Award, the right to again be granted an
Award. However, an Employee or Director who has been granted an Award
may, if otherwise eligible, be granted an additional Award or Awards.
22. GOVERNING LAW.
The Plan shall be governed by and construed in accordance with
the laws of the State of Alabama, except to the extent that federal
law shall be deemed to apply.
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<TABLE>
<S> <C>
============================================================ ===================================================
NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION NOT
CONTAINED IN THIS PROXY STATEMENT/PROSPECTUS, AND, IF GIVEN
OR MADE, SUCH INFORMATION OR REPRESENTATION SHOULD NOT BE PINNACLE BANK
RELIED UPON AS HAVING BEEN AUTHORIZED. THIS PROXY
STATEMENT/PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL A
SECURITY, OR A SOLICITATION OF A PROXY, IN ANY JURISDICTION
TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR
SOLICITATION IN SUCH JURISDICTION. NEITHER THE DELIVERY OF
THIS PROXY STATEMENT/PROSPECTUS NOR ANY DISTRIBUTION OF THE
SECURITIES MADE UNDER THIS PROXY STATEMENT/PROSPECTUS SHALL,
UNDER ANY CIRCUMSTANCES, CREATE IMPLICATION THAT THERE HAS
BEEN NO CHANGE IN THE AFFAIRS OF PINNACLE BANK OR PINNACLE
BANCSHARES, INC. SINCE THE DATE OF THIS PROXY
STATEMENT/PROSPECTUS.
PINNACLE BANCSHARES, INC.
TABLE OF CONTENTS
Page
----
Summary Information on Proposed
Conversion and Reorganization . . . . . . . . . (i)
Introduction . . . . . . . . . . . . . . . . . . 1
Voting and Revocation of Proxies . . . . . . . . 1
Voting Securities and Principal Holders Thereof . 2
Proposal I - Election of Directors . . . . . . . 3
Proposal II - Ratification of
Appointment of Independent
Auditors . . . . . . . . . . . . . . . . . . . 8
Proposal III - Proposed Holding Company -----------------
Formation . . . . . . . . . . . . . . . . . . . 8
Proposal IV - Approval of the Pinnacle Bank Proxy Statement/
1996 Stock Option and Incentive Plan . . . . . 31
New Plan Benefits . . . . . . . . . . . . . . . . 36 Prospectus
Proposal V - Adjournment of Meeting . . . . . . . 36
Market and Dividend Information . . . . . . . . . 37 -----------------
Other Matters . . . . . . . . . . . . . . . . . . 38
Miscellaneous . . . . . . . . . . . . . . . . . . 38
Stockholder Proposals . . . . . . . . . . . . . . 38
Annual Report on Form 10-K . . . . . . . . . . . 38
Exhibit I - Agreement and Plan ________ __, 1996
of Conversion and Reorganization . . . . . . . I-1
Exhibit II - Dissenters' Rights . . . . . . . . . II-1
Exhibit III - Certificate of Incorporation . . . III-1
Exhibit IV - Bylaws . . . . . . . . . . . . . . . IV-1
Exhibit V - 1996 Stock Option and
Incentive Plan . . . . . . . . . . . . . . . . V-1
============================================================ ===================================================
</TABLE>
<PAGE> 136
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the Delaware General Corporation Law sets forth
circumstances under which directors, officers, employees and agents may be
insured or indemnified against liability which they may incur in their
capacities.
SECTION 145. INDEMNIFICATION OF OFFICERS, DIRECTORS, EMPLOYEES AND
AGENTS; INSURANCE. (a) A corporation may indemnify any person who was
or is a party or is threatened to be made a party to any threatened,
pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative (other than an action by or
in the right of the corporation) by reason of the fact that he is or
was a director, officer, employee or agent of the corporation, or is
or was serving at the request of the corporation as a director,
officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including
attorneys' fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by him in connection with such
action, suit or proceeding if he acted in good faith and in a manner
he reasonably believed to be in or not opposed to the best interests
of the corporation, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his conduct was
unlawful. The termination of any action, suit or proceeding by
judgment, order, settlement, conviction, or upon a plea of nolo
contendere or its equivalent, shall not, of itself, create a
presumption that the person did not act in good faith and in a manner
which he reasonably believed to be in or not opposed to the best
interests of the corporation, and, with respect to any criminal action
or proceeding, had reasonable cause to believe that his conduct was
unlawful.
(b) A corporation may indemnify any person who was or is a
party or is threatened to be made a party to any threatened, pending
or completed action or suit by or in the right of the corporation to
procure a judgment in its favor by reason of the fact that he is or
was a director, officer, employee or agent of the corporation, or is
or was serving at the request of the corporation as a director,
officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against expenses (including
attorneys' fees) actually and reasonably incurred by him in connection
with the defense or settlement of such action or suit if he acted in
good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of the corporation and except that no
indemnification shall be made in respect of any claim, issue or matter
as to which such person shall have been adjudged to be liable to the
corporation unless and only to the extent that the Court of Chancery
or the court in which such action or suit was brought shall determine
upon application that, despite the adjudication of liability but in
view of all the circumstances of the case, such person is fairly and
reasonably entitled to indemnity for such expenses which the Court of
Chancery or such other court shall deem proper.
(c) To the extent that a director, officer, employee or agent
of a corporation has been successful on the merits or otherwise in
defense of any action, suit or proceeding referred to in subsections
(a) and (b) of this section, or in defense of any claim, issue or
matter therein, he shall be indemnified against expenses (including
attorneys' fees) actually and reasonably incurred by him in connection
therewith.
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(d) Any indemnification under subsections (a) and (b) of this
section (unless ordered by a court) shall be made by the corporation
only as authorized in the specific case upon a determination that
indemnification of the director, officer, employee or agent is proper
in the circumstances because he has met the applicable standard of
conduct set forth in subsections (a) and (b) of this section. Such
determination shall be made (1) by a majority vote of the directors
who are not parties to such action, suit or proceeding, even though
less than a quorum, or (2) if there are no such directors, or if such
directors so direct, by independent legal counsel in a written
opinion, or (3) by the stockholders.
(e) Expenses (including attorneys' fees) incurred by an
officer or director in defending any civil, criminal, administrative
or investigative action, suit or proceeding may be paid by the
corporation in advance of the final disposition of such action, suit
or proceeding upon receipt of an undertaking by or on behalf of such
director or officer to repay such amount if it shall ultimately be
determined that he is not entitled to be indemnified by the
corporation as authorized in this Section. Such expenses (including
attorneys' fees) incurred by other employees and agents may be so paid
upon such terms and conditions, if any, as the board of directors
deems appropriate.
(f) The indemnification and advancement of expenses provided
by, or granted pursuant to, the other subsections of this section
shall not be deemed exclusive of any other rights to which those
seeking indemnification or advancement of expenses may be entitled
under any bylaw, agreement, vote of stockholders or disinterested
directors or otherwise, both as to action in his official capacity and
as to action in another capacity while holding such office.
(g) A corporation shall have power to purchase and maintain
insurance on behalf of any person who is or was a director, officer,
employee or agent of the corporation, or is or was serving at the
request of the corporation as a director, officer, employee or agent
of another corporation, partnership, joint venture, trust or other
enterprise against any liability asserted against him and incurred by
him in any such capacity, or arising out of his status as such,
whether or not the corporation would have the power to indemnify him
against such liability under this section.
(h) For purposes of this section, references to "the
corporation" shall include, in addition to the resulting corporation,
any constituent corporation (including any constituent of a
constituent) absorbed in a consolidation or merger which, if its
separate existence had continued, would have had power and authority
to indemnify its directors, officers, and employees or agents, so that
any person who is or was a director, officer, employee or agent of
such constituent corporation, or is or was serving at the request of
such constituent corporation as a director, officer, employee or agent
of another corporation, partnership, joint venture, trust or other
enterprise, shall stand in the same position under this section with
respect to the resulting or surviving corporation as he would have
with respect to such constituent corporation if its separate existence
had continued.
(i) For purposes of this section, references to "other
enterprises" shall include employee benefit plans; references to
"fines" shall include any excise taxes assessed on a person with
respect to any employee benefit plan; and references to "serving at
the request of the corporation" shall include any service as a
director, officer, employee or agent of the corporation which imposes
duties on, or involves services by, such director, officer, employee,
or agent with respect to an employee benefit plan, its participants or
beneficiaries; and a person who acted in good faith and in a manner he
reasonably believed to be in the interest of the participants and
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beneficiaries of an employee benefit plan shall be deemed to have
acted in a manner "not opposed to the best interests of the
corporation" as referred to in this section.
(j) The indemnification and advancement of expenses provided
by, or granted pursuant to, this section shall, unless otherwise
provided when authorized or ratified, continue as to a person who has
ceased to be a director, officer, employee or agent and shall inure to
the benefit of the heirs, executors and administrators of such a
person.
(k) The Court of Chancery is hereby vested with exclusive
jurisdiction to hear and determine all actions for advancement of
expenses or indemnification brought under this section or under any
bylaw, agreement, vote of stockholders or disinterested directors, or
otherwise. The Court of Chancery may summarily determine a
corporation's obligation to advance expenses (including attorneys'
fees).
The Company's Restated Certificate of Incorporation sets forth
circumstances under which directors, officers, employees and agents
may be insured or indemnified against liability which they may incur
in their capacities.
TENTH: A. Each person who was or is made a party or is
threatened to be made a party to or is otherwise involved in any
action, suit or proceeding, whether civil, criminal, administrative or
investigative (hereinafter a "proceeding"), by reason of the fact that
he or she is or was a Director or an Officer of the Corporation or is
or was serving at the request of the Corporation as a Director,
Officer, employee or agent of another corporation or of a partnership,
joint venture, trust or other enterprise, including service with
respect to an employee benefit plan (hereinafter an "indemnitee"),
whether the basis of such proceeding is alleged action in an official
capacity as a Director, Officer, employee or agent or in any other
capacity while serving as a Director, Officer, employee or agent,
shall be indemnified and held harmless by the Corporation to the
fullest extent authorized by the Delaware General Corporation Law, as
the same exists or may hereafter be amended (but, in the case of any
such amendment, only to the extent that such amendment permits the
Corporation to provide broader indemnification rights than such law
permitted the Corporation to provide prior to such amendment), against
all expense, liability and loss (including attorneys' fees, judgments,
fines, ERISA excise taxes or penalties and amounts paid in settlement)
reasonably incurred or suffered by such indemnitee in connection
therewith; provided, however, that, except as provided in Section C
hereof with respect to proceedings to enforce rights to
indemnification, the Corporation shall indemnify any such indemnitee
in connection with a proceeding (or part thereof) initiated by such
indemnitee only if such proceeding (or part thereof) was authorized by
the Board of Directors of the Corporation.
B. The right to indemnification conferred in
Section A of this Article TENTH shall include the right to be paid by
the Corporation the expenses incurred in defending any such proceeding
in advance of its final disposition (hereinafter an "advancement of
expenses"); provided, however, that, if the Delaware General
Corporation Law requires, an advancement of expenses incurred by an
indemnitee in his or her capacity as a Director or Officer (and not in
any other capacity in which service was or is rendered by such
indemnitee, including, without limitation, service to an employee
benefit plan) shall be made only upon delivery to the Corporation of
an undertaking (hereinafter an "undertaking"), by or on behalf of such
indemnitee, to repay all amounts so advanced if it shall ultimately be
determined by final judicial decision from which there is no further
right to appeal (hereinafter a "final adjudication") that such
indemnitee is not entitled to be indemnified for such expenses under
this Section or otherwise. The rights to indemnification and to the
advancement of expenses conferred in
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Sections A and B of this Article TENTH shall be contract rights and
such rights shall continue as to an indemnitee who has ceased to be a
Director, Officer, employee or agent and shall inure to the benefit of
the indemnitee's heirs, executors and administrators.
C. If a claim under Section A or B of this
Article TENTH is not paid in full by the Corporation within sixty days
after a written claim has been received by the Corporation, except in
the case of a claim for an advancement of expenses, in which case the
applicable period shall be twenty days, the indemnitee may at any time
thereafter bring suit against the Corporation to recover the unpaid
amount of the claim. If successful in whole or in part in any such
suit, or in a suit brought by the Corporation to recover an
advancement of expenses pursuant to the terms of an undertaking, the
indemnitee shall be entitled to be paid also the expense of
prosecuting or defending such suit. In (i) any suit brought by the
indemnitee to enforce a right to indemnification hereunder (but not in
a suit brought by the indemnitee to enforce a right to an advancement
of expenses) it shall be a defense that, and (ii) in any suit by the
Corporation to recover an advancement of expenses pursuant to the
terms of an undertaking the Corporation shall be entitled to recover
such expenses upon a final adjudication that, the indemnitee has not
met any applicable standard for indemnification set forth in the
Delaware General Corporation Law. Neither the failure of the
Corporation (including its Board of Directors, independent legal
counsel, or its stockholders) to have made a determination prior to
the commencement of such suit that indemnification of the indemnitee
is proper in the circumstances because the indemnitee has met the
applicable standard of conduct set forth in the Delaware General
Corporation Law, nor an actual determination by the Corporation
(including its Board of Directors, independent legal counsel, or its
stockholders) that the indemnitee has not met such applicable standard
of conduct, shall create a presumption that the indemnitee has not met
the applicable standard of conduct or, in the case of such a suit
brought by the indemnitee, be a defense to such suit. In any suit
brought by the indemnitee to enforce a right to indemnification or to
an advancement of expenses hereunder, or by the Corporation to recover
an advancement of expenses pursuant to the terms of an undertaking,
the burden of proving that the indemnitee is not entitled to be
indemnified, or to such advancement of expenses, under this Article
TENTH or otherwise shall be on the Corporation.
D. The rights to indemnification and to the
advancement of expenses conferred in this Article TENTH shall not be
exclusive of any other right which any person may have or hereafter
acquire under any statute, the Corporation's Certificate of
Incorporation, By-laws, agreement, vote of stockholders or
disinterested Directors or otherwise.
E. The Corporation may maintain insurance, at
its expense, to protect itself and any Director, Officer, employee or
agent of the Corporation or another corporation, partnership, joint
venture, trust or other enterprise against any expense, liability or
loss, whether or not the Corporation would have the power to indemnify
such person against such expense, liability or loss under the Delaware
General Corporation Law.
F. The Corporation may, to the extent authorized
from time to time by the Board of Directors, grant rights to
indemnification and to the advancement of expenses to any employee or
agent of the Corporation to the fullest extent of the provisions of
this Article TENTH with respect to the indemnification and advancement
of expenses of Directors and Officers of the Corporation.
ELEVENTH: A Director of this Corporation shall not be
personally liable to the Corporation or its stockholders for monetary
damages for breach of fiduciary duty as a Director, except for
liability (i) for any breach of the Director's duty of loyalty to the
Corporation or its
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<PAGE> 140
stockholders, (ii) for acts or omissions not in good faith or which
involve intentional misconduct or a knowing violation of law, (iii)
under Section 174 of the Delaware General Corporation Law, or (iv) for
any transaction from which the Director derived an improper personal
benefit. If the Delaware General Corporation Law is amended to
authorized corporate action further eliminating or limiting the
personal liability of Directors, then the liability of a Director of
the Corporation shall be eliminated or limited to the fullest extent
permitted by the Delaware General Corporation Law, as so amended.
Any repeal or modification of the foregoing paragraph
by the stockholders of the Corporation shall not adversely affect any
right or protection of a Director of the Corporation existing at the
time of such repeal or modification.
Article XVI of the Registrant's Certificate of Incorporation sets
forth circumstances under which directors, officers, employees and agents may
be insured or indemnified against liability which they may incur in their
capacities.
ARTICLE XVI
Indemnification
A. Persons. The Corporation shall indemnify, to the extent
provided in paragraphs B, D or F:
(1) any person who is or was a director, officer,
employee, or agent of the Corporation; and
(2) any person who serves or served at the Corporation's
request as a director, officer, employee, agent, partner or trustee of
another corporation, partnership, joint venture, trust or other
enterprise.
B. Extent -- Derivative Suits. In case of a threatened, pending
or completed action or suit by or in the right of the Corporation against a
person named in paragraph A by reason of his holding a position named in
paragraph A, the Corporation shall indemnify him if he satisfies the standard
in paragraph C, for expenses (including attorneys' fees but excluding amounts
paid in settlement) actually and reasonably incurred by him in connection with
the defense or settlement of the action or suit.
C. Standard -- Derivative Suits. In case of a threatened, pending
or completed action or suit by or in the right of the Corporation, a person
named in paragraph A shall be indemnified only if:
(1) he is successful on the merits or otherwise; or
(2) he acted in good faith in the transaction which is
the subject of the suit or action, and in a manner he reasonably
believed to be in, or not opposed to, the best interests of the
Corporation, including, but not limited to, the taking of any and all
actions in connection with the Corporation's response to any tender
offer or any offer or proposal of another party to engage in a
Business Combination (as defined in Article XIV) not approved by the
board of directors. However, he shall not be indemnified in respect
of any claim, issue or matter as to which he has been adjudged liable
to the Corporation unless (and only to the extent that) the court in
which the suit was brought shall determine, upon application, that
despite the adjudication but in view of all the circumstances, he is
fairly and reasonably entitled to indemnity for such expenses as the
court shall deem proper.
D. Extent -- Nonderivative Suits. In case of a threatened,
pending or completed suit, action or proceeding (whether civil, criminal,
administrative or investigative), other than a suit by or in the right of the
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Corporation, together hereafter referred to as a nonderivative suit, against a
person named in paragraph A by reason of his holding a position named in
paragraph A, the Corporation shall indemnify him if he satisfies the standard
in paragraph E, for amounts actually and reasonably incurred by him in
connection with the defense or settlement of the nonderivative suit, including,
but not limited to (i) expenses (including attorneys' fees), (ii) amounts paid
in settlement, (iii) judgments, and (iv) fines.
E. Standard -- Nonderivative Suits. In case of a nonderivative
suit, a person named in paragraph A shall be indemnified only if:
(1) he is successful on the merits or otherwise; or
(2) he acted in good faith in the transaction which is
the subject of the nonderivative suit and in a manner he reasonably
believed to be in, or not opposed to, the best interests of the
Corporation, including, but not limited to, the taking of any and all
actions in connection with the Corporation's response to any tender
offer or any offer or proposal of another party to engage in a
Business Combination (as defined in Article XIV) not approved by the
board of directors and, with respect to any criminal action or
proceeding, he had no reasonable cause to believe his conduct was
unlawful. The termination of a nonderivative suit by judgment, order,
settlement, conviction, or upon a plea of nolo contendere or its
equivalent shall not, in itself, create a presumption that the person
failed to satisfy the standard of this subparagraph E(2).
F. Determination That Standard Has Been Met. A determination that
the standard of paragraph C or E has been satisfied may be made by a court, or,
except as stated in subparagraph C(2) (second sentence), the determination may
be made by:
(1) the board of directors by a majority vote of a quorum
consisting of directors of the Corporation who were not parties to the
action, suit or proceeding; or
(2) independent legal counsel (appointed by a majority of
the disinterested directors of the Corporation, whether or not a
quorum) in a written opinion; or
(3) the stockholders of the Corporation.
G. Proration. Anyone making a determination under paragraph F may
determine that a person has met the standard as to some matters but not as to
others, and may reasonably prorate amounts to be indemnified.
H. Advance Payment. The Corporation shall pay in advance any
expenses (including attorneys' fees) which may become subject to
indemnification under paragraphs A through G if:
(1) the board of directors authorizes the specific
payment; and
(2) the person receiving the payment undertakes in
writing to repay the same if it is ultimately determined that he is
not entitled to indemnification by the Corporation under paragraphs A
through G.
I. Nonexclusive. The indemnification and advance payment of
expenses provided by paragraphs A through H shall not be exclusive of any other
rights to which a person may be entitled by law, bylaw, agreement, vote of
stockholders or disinterested directors, or otherwise.
J. Continuation. The indemnification provided by this Article XVI
shall be deemed to be a contract between the Corporation and the persons
entitled to indemnification thereunder, and any repeal or modification of
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this Article XVI shall not affect any rights or obligations then existing with
respect to any state of facts then or theretofore existing or any action, suit
or proceeding theretofore or thereafter brought based in whole or in part upon
any such state of facts. The indemnification and advance payment provided by
paragraphs A through H shall continue as to a person who has ceased to hold a
position named in paragraph A and shall inure to his heirs, executors and
administrators.
K. Insurance. The Corporation may purchase and maintain
insurance on behalf of any person who holds or who has held any position named
in paragraph A, against any liability incurred by him in any such position, or
arising out of his status as such, whether or not the Corporation would have
power to indemnify him against such liability under paragraphs A through H.
L. Intention and Savings Clause. It is the intention of this
Article XVI to provide for indemnification to the fullest extent permitted by
the General Corporation Law of the State of Delaware, and this Article XVI
shall be interpreted accordingly. If this Article XVI or any portion hereof
shall be invalidated on any ground by any court of competent jurisdiction, then
the Corporation shall nevertheless indemnify each director, officer, employee,
and agent of the Corporation as to costs, charges, and expenses (including
attorneys' fees), judgments, fines, and amounts paid in settlement with respect
to any action, suit, or proceeding, whether civil, criminal, administrative, or
investigative, including an action by or in the right of the Corporation to the
full extent permitted by any applicable portion of this Article XVI that shall
not have been invalidated and to the full extent permitted by applicable law.
If the General Corporation Law of the State of Delaware is amended, or other
Delaware law is enacted, to permit further or additional indemnification of the
persons defined in this Article XVI A, then the indemnification of such persons
shall be to the fullest extent permitted by the General Corporation Law of the
State of Delaware, as so amended, or such other Delaware law.
The Registrant may purchase and maintain insurance on behalf of any
person who is or was a director, officer, employee, or agent of the Registrant
or is or was serving at the request of the Registrant as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise against any liability asserted against him and incurred by him
in any such capacity or arising out of his status as such, whether or not the
Registrant would have the power to indemnify him against such liability under
the provisions of its Restated Certificate of Incorporation. The Registrant
intends to purchase such insurance.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
The exhibits and financial statement schedules filed as part of this
Registration Statement are as follows:
(a) Exhibits
The Index of Exhibits immediately precedes the accompanying
exhibits.
(b) Financial Statement Schedules
Not applicable.
(c) Report or Appraisal
Not applicable.
ITEM 22. UNDERTAKINGS
(a) Rule 415 Offering. The undersigned registrant hereby undertakes:
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(1) to file, during any period in which offers or sales are
being made, a post-effective amendment to this registration statement;
(i) to include any prospectus required by Section
10(a)(3) of the Securities Act of 1933;
(ii) to reflect in the prospectus any facts or
events arising after the effective date of the registration statement
(or most recent post effective amendment thereof) which individually or
in the aggregate, represent a fundamental change in the information set
forth in the registration statement;
(iii) to include any material information with
respect to the plan of distribution not previously disclosed in the
registration statement or any material change to such information in the
registration statement.
(2) 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 a bona fide
offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.
(b) Registration on Form S-4 of Securities Offered for Resale.
(1) The undersigned registrant hereby undertakes as follows:
that prior to any public reoffering of the securities registered hereunder
through use of a prospectus which is a part of this 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 reoffering prospectus will contain
the information called for by the applicable registration form with respect to
reofferings by persons who may be deemed underwriters, in addition to the
information called for by the other items of the applicable form.
(2) The registrant undertakes that every prospectus (i) that is
filed pursuant to paragraph (1) 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 for the purpose 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.
(c) 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.
(d) The undersigned registrant hereby undertakes to supply by means of
a post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of, and
included in the registration statement when it became effective.
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SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
the registrant has duly caused this registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Jasper,
State of Alabama as of October 23, 1996.
PINNACLE BANCSHARES, INC.
Date: October 23, 1996 By: /s/ Robert B. Nolen, Jr.
-------------------------------------
Robert B. Nolen, Jr.
President
(Duly Authorized Representative)
POWER OF ATTORNEY
We, the undersigned Directors of Pinnacle Bancshares, Inc., severally
constitute and appoint Robert B. Nolen, Jr., with full power of substitution,
our true and lawful attorney and agent, to do any and all things and acts in
our names in the capacities indicated below which said Robert B. Nolen, Jr. may
deem necessary or advisable to enable Pinnacle Bancshares, Inc. to comply with
the Securities Act of 1933, as amended, and any rules, regulations and
requirements of the Securities and Exchange Commission, in connection with the
registration statement on Form S-4 relating to the offering of common stock of
Pinnacle Bancshares, Inc., including specifically, but not limited to, power
and authority to sign for us or any of us in our names in the capacities
indicated below the registration statement and any and all amendments
(including post-effective amendments) thereto; and we hereby approve, ratify
and confirm all that said Robert B. Nolen, Jr. shall do or cause to be done by
virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this registration statement has been signed below by the following persons in
the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ Al H. Simmons
- ---------------------------
Al H. Simmons Chairman of the Board October 23, 1996
/s/ Robert B. Nolen, Jr.
- ---------------------------
Robert B. Nolen, Jr. President, Treasurer and Director (Principal October 23, 1996
Executive Officer, Principal Financial Officer
and Principal Accounting Officer)
/s/ Greg Batchelor
- ---------------------------
Greg Batchelor Director October 23, 1996
/s/ O. H. Brown
- ---------------------------
O. H. Brown Director October 23, 1996
/s/ James W. Cannon
- ---------------------------
James W. Cannon Director October 23, 1996
/s/ Melvin R. Kacharos
- ---------------------------
Melvin R. Kacharos Director October 23, 1996
/s/ Carlton Mayhall, Jr.
- ---------------------------
Carlton Mayhall, Jr. Director October 23, 1996
/s/ Sam W. Murphy
- ---------------------------
Sam W. Murphy Director October 23, 1996
/s/ Max W. Perdue
- ---------------------------
Max W. Perdue Director October 23, 1996
/s/ J. T. Waggoner
- ---------------------------
J. T. Waggoner Director October 23, 1996
</TABLE>
<PAGE> 145
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- ------- -----------------------
<S> <C>
2 Agreement and Plan of Conversion and Reorganization (attached as
Exhibit I to the Proxy Statement/Prospectus filed as part of this
registration statement)
3.1 Certificate of Incorporation of Pinnacle Bancshares, Inc. (attached
as Exhibit III to the Proxy Statement/Prospectus filed as part of this
registration statement)
3.2 Bylaws of Pinnacle Bancshares, Inc. (attached as Exhibit IV to the
Proxy Statement/Prospectus filed as part of this registration statement)
5 Opinion of Reinhart, Boerner, Van Deuren, Norris & Rieselbach, P.C.
regarding legality of securities.
8 Form of tax opinion of Reinhart, Boerner, Van Deuren, Norris &
Rieselbach, P.C.
* 10.1 Termination Agreement between Pinnacle Bank and Al H. Simmons
* 10.2 Employment Agreement between Pinnacle Bank and Robert B. Nolen, Jr.
* 10.3 First Federal of Alabama, F.S.B. 1986 Stock Option and Incentive Plan
10.4 Pinnacle Bank 1996 Stock Option and Incentive Plan (attached as
Exhibit V to the Proxy Statement/Prospectus filed as part of this registration
statement)
23.1 Consents of Reinhart, Boerner, Van Deuren, Norris & Rieselbach, P.C.
(contained in its opinion filed as Exhibit 5)
25 Power of attorney (reference is made to the Signature Page of the Form S-4)
99 Form of proxy to be mailed to stockholders of Pinnacle Bank.
</TABLE>
- -------
* Previously filed
<PAGE> 1
EXHIBIT 5
<PAGE> 2
October 23, 1996
Board of Directors
Pinnacle Bancshares, Inc.
1811 Second Avenue
Jasper, Alabama 35502-1388
Re: Pinnacle Bancshares, Inc.
Registration Statement on Form S-4
Gentlemen:
You have requested our opinion as special counsel to Pinnacle
Bancshares, Inc., a Delaware corporation, in connection with a registration
statement on Form S-4 filed with the Securities and Exchange Commission under
the Securities Act of 1933, as amended. The registration statement relates to
shares to be issued in connection with the conversion and reorganization of
Pinnacle Bank as a wholly owned commercial bank subsidiary of Pinnacle
Bancshares, Inc. (the "Conversion and Reorganization").
In rendering this opinion, we understand that the common stock of
Pinnacle Bancshares, Inc. will be offered and sold in the manner described in
the Proxy Statement/Prospectus which is a part of the registration statement.
We have examined such records and documents and made such investigation as we
have deemed relevant in connection with this opinion.
Based upon the foregoing, it is our opinion that the shares of common
stock of Pinnacle Bancshares, Inc. will, upon issuance pursuant to the
Conversion and Reorganization, be legally issued, fully paid and nonassessable.
This opinion is furnished for use as an exhibit to the registration
statement and should not be used for any other purpose nor relied upon by any
other person (except for the Securities and Exchange Commission in connection
with its review of the registration statement) without the prior written
consent of this firm. We hereby consent to the filing of this opinion as an
exhibit to the registration statement and to the references to us in the Proxy
Statement/Prospectus under the headings "Proposal III -- Proposed Conversion
and Reorganization -- Certain Federal Income Tax Consequences" and "-- Legal
Opinion."
Reinhart, Boerner, Van Deuren, Norris & Rieselbach, P.C.
By: /s/ Edward B. Crosland, Jr.
------------------------------------------------------
Edward B. Crosland, Jr.
<PAGE> 1
EXHIBIT 8
<PAGE> 2
[Dated as of the Reorganization Effective Date]
Board of Directors
Pinnacle Bank
1811 Second Avenue
Jasper, Alabama 35502-1388
Gentlemen:
We have acted as special counsel to Pinnacle Bank (the "Bank"), a
federally chartered stock savings bank, in connection with (i) the conversion
(the "Conversion") of the Bank to an Alabama-chartered commercial bank (the
"Converted Bank") whereby the stockholders of the Bank will become the
stockholders of the Converted Bank, and, immediately thereafter, (ii) the
reorganization of the Converted Bank into the holding company form of ownership
(the "Reorganization") whereby the Converted Bank will become a wholly-owned
subsidiary of Pinnacle Bancshares, Inc. (the "Holding Company") and
stockholders of the Converted Bank will become the stockholders of the Holding
Company. Both the Conversion and the Reorganization (collectively, the
"Conversion and Reorganization") are pursuant to the Agreement and Plan of
Conversion and Reorganization dated as of October 9, 1996 (the "Plan"), which
is described and set forth in the Proxy Statement/Prospectus of the Bank and
the Holding Company dated November __, 1996 (the "Proxy Statement/Prospectus")
. Terms used but not defined herein, whether capitalized or not, shall have
the meanings given to them in the Proxy Statement/Prospectus.
For purposes of this opinion, we have examined and are familiar with
originals or copies, certified or otherwise identified to our satisfaction, of
(i) the Plan, (ii) the Registration Statement on Form S-4, including the Proxy
Statement/Prospectus, of the Bank and the Holding Company prepared in
connection with the Conversion and Reorganization, as filed on September 6,
1996 and thereafter amended (the "Registration Statement"), and (iii) such
other documents as we have deemed necessary or appropriate in order to enable
us to render the opinion below. In our examination, we have assumed the
genuineness of all signatures where due execution and delivery are requirements
to the
<PAGE> 3
Board of Directors
Pinnacle Bank
[Dated as of the Reorganization Effective Date]
Page 2
effectiveness thereof, the legal capacity of all natural persons, the
authenticity of documents submitted to us as originals, the conformity to
original documents of all documents submitted to us as certified, conformed or
photostatic copies and the authenticity of the originals of such copies. In
rendering our opinion, we have relied, with the consent of the Bank, upon the
accuracy and completeness of written statements and representations of the Bank
(which statements and representations we have neither investigated nor
verified) provided to us.
In rendering our opinion, we have considered the applicable provisions
of the Internal Revenue Code of 1986, as amended (the "Code"), the regulations
thereunder, pertinent judicial authorities, interpretive rulings of the
Internal Revenue Service ("IRS") and such other authorities as we have
considered relevant. We have also assumed that the transactions contemplated
by the Plan will be consummated strictly in accordance with the Plan and as
described in the Proxy Statement/Prospectus and that the transaction
contemplated by the Reorganization, if consummated as a merger, will qualify as
a statutory merger under the applicable laws of the State of Alabama.
Based solely upon and subject to the foregoing, it is our opinion
that, under presently applicable law, the following will be certain of the
federal income tax consequences of the Conversion and Reorganization to the
stockholders of the Bank:
(1) The Conversion and Reorganization will constitute one or more
reorganizations within the meaning of Section 368(a) of the
Code.
(2) Stockholders of the Bank will not recognize any gain or loss
upon their exchange of Bank Common Stock solely for shares of
Converted Bank Common Stock in the Conversion.
(3) Stockholders of the Converted Bank will not recognize any gain
or loss upon their exchange of Converted Bank Common Stock
solely
<PAGE> 4
Board of Directors
Pinnacle Bank
[Dated as of the Reorganization Effective Date]
Page 3
for shares of Holding Company Common Stock in the
Reorganization.
This opinion is being furnished only to you in connection with the
Conversion and Reorganization and solely for your benefit in connection
therewith and may not be used or relied upon for any other purpose and may not
be circulated, quoted or otherwise referred to for any other purpose without
our express written consent.
No opinion is expressed as to the tax treatment of the transactions
under the provisions of any other sections of the Code and regulations
thereunder which also may be applicable thereto, or to the tax treatment, any
conditions existing at the time of, or effects resulting from, the transactions
which are not specifically covered by the opinion set forth above.
This opinion is not binding on the IRS and there can be no assurance,
and none is hereby given, that the IRS will not take a position contrary to one
or more of the positions reflected in the foregoing opinion, or that our
opinion will be upheld by the courts if challenged by the IRS.
Yours very truly,
REINHART, BOERNER, VAN DEUREN,
NORRIS & RIESELBACH, P.C.
By:
----------------------------
Edward B. Crosland, Jr.
6945EBC:KSK
<PAGE> 1
EXHIBIT 99
<PAGE> 2
REVOCABLE PROXY
PINNACLE BANK
------------------------
1996 ANNUAL MEETING OF STOCKHOLDERS
DECEMBER 20, 1996
------------------------
The undersigned stockholder of Pinnacle Bank (the "Bank") hereby
appoints Max Perdue and Carlton Mayhall, Jr., or either of them, with full
powers of substitution, as attorneys and proxies for the undersigned, to vote
all shares of Common Stock of the Bank which the undersigned is entitled to
vote at the Annual Meeting of Stockholders, to be held at The Chamber of
Commerce of Walker County Auditorium, Jasper, Alabama on Friday, December 20,
1996 at 11:00 a.m., local time, and at any and all adjournments thereof, as
indicated below and as determined by a majority of the Board of Directors with
respect to such other matters as may come before the Annual Meeting.
<TABLE>
<CAPTION>
VOTE
FOR WITHHELD
--- --------
<S> <C> <C>
I. Election as directors of all nominees
listed below (except as marked to the
contrary). / / / /
O. H. Brown (three-year term)
James W. Cannon (two-year term)
Sam W. Murphy (three-year term)
J. T. Waggoner (three-year term)
INSTRUCTION: TO WITHHOLD YOUR VOTE FOR
ANY NOMINEE(S), WRITE THAT NOMINEE'S
NAME ON THE LINE BELOW.
-------------------------------------------------------
<CAPTION>
FOR AGAINST ABSTAIN
--- ------- -------
<S> <C> <C> <C>
II. Ratification of appointment of Arthur Andersen LLP as the
Bank's independent auditors for the 1997 fiscal year. / / / / / /
III. Approval of both (a) the conversion of the Bank to an
Alabama-chartered commercial bank (the "Converted Bank") and
(b) the reorganization of the Converted Bank into the
holding company form of ownership by approving an
Agreement and Plan of Conversion and Reorganization,
pursuant to which the Converted Bank will become a
wholly owned commercial bank subsidiary of a holding
company, Pinnacle Bancshares, Inc., a Delaware corporation
(the "Holding Company"), and each outstanding share of
common stock of the Bank will be converted into one share
of the common stock of the Holding Company. / / / / / /
IV. Approval of the Pinnacle Bank 1996 Stock Option and
Incentive Plan.
V. Adjournment of the Annual Meeting to a later date if
an insufficient number of shares is present in person
or by proxy at the Annual Meeting to approve any of
the foregoing proposals. / / / / / /
</TABLE>
VI. Such other matters as may properly come before the Annual Meeting or any
adjournment thereof.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" EACH OF THE LISTED
PROPOSITIONS.
<PAGE> 3
- --------------------------------------------------------------------------------
THIS PROXY WILL BE VOTED AS DIRECTED, BUT IF NO INSTRUCTIONS ARE SPECIFIED,
THIS PROXY WILL BE VOTED FOR EACH OF THE PROPOSITIONS STATED. IF ANY OTHER
BUSINESS IS PRESENTED AT THE ANNUAL MEETING, THIS PROXY WILL BE VOTED BY THOSE
NAMED IN THIS PROXY AS DETERMINED BY A MAJORITY OF THE BOARD OF DIRECTORS. AT
THE PRESENT TIME, THE BOARD OF DIRECTORS KNOWS OF NO OTHER BUSINESS TO BE
PRESENTED AT THE ANNUAL MEETING.
- --------------------------------------------------------------------------------
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
Should the undersigned be present and elect to vote at the Annual Meeting
or at any adjournment thereof and after notification to the Secretary of the
Bank at the Annual Meeting of the stockholder's decision to terminate this
proxy, then the power of said attorneys and proxies shall be deemed terminated
and of no further force and effect. The undersigned hereby revokes any and all
proxies heretofore given with respect to shares of Common Stock of the Bank
which the undersigned is entitled to vote at the Annual Meeting.
The undersigned stockholder acknowledges receipt from the Bank, prior to
the execution of this proxy, of Notice of the Annual Meeting, a Proxy
Statement, and the 1996 Annual Report to Stockholders.
Dated: _________________ _____, 1996
- -------------------------------------- --------------------------------
PRINT NAME OF STOCKHOLDER PRINT NAME OF STOCKHOLDER
- -------------------------------------- --------------------------------
SIGNATURE OF STOCKHOLDER SIGNATURE OF STOCKHOLDER
Please sign exactly as your name appears on the envelope in which this card was
mailed. When signing as attorney, executor, administrator, trustee or
guardian, please give your full title. If shares are held jointly, each holder
should sign.
- --------------------------------------------------------------------------------
PLEASE COMPLETE, DATE, SIGN AND MAIL THIS PROXY PROMPTLY IN THE ENCLOSED
POSTAGE-PREPAID ENVELOPE.
- --------------------------------------------------------------------------------
