<PAGE> 1
424(b)(3)
333-11495
December 27, 1996
Dear Stockholder:
We invite you to attend a Special Meeting of Stockholders (the
"Special Meeting") of Pinnacle Bank (the "Bank") to be held at The Chamber of
Commerce of Walker County Auditorium, Jasper, Alabama on Wednesday, January 29,
1997 at 11:00 a.m., local time.
The attached Notice of Special Meeting and Proxy Statement/Prospectus
describe the formal business to be transacted at the Special Meeting.
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.
Directors and officers of the Bank will be present to respond to any questions
that our stockholders may have.
The Bank recently solicited proxies in connection with the Annual
Meeting of Stockholders, which was held on December 18, 1996 (the "Annual
Meeting"). At the Annual Meeting, stockholders elected four directors of the
Bank and ratified the appointment of the Bank's independent auditors. The
enclosed proxy materials, including the enclosed blue proxy card, relate to the
Special Meeting which will be held on January 29, 1996.
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
blue proxy card in the enclosed postage-prepaid envelope as soon as possible
even if you currently plan to attend the Special 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 Special Meeting.
Sincerely,
---------------------------- ----------------------------
Al H. Simmons Robert B. Nolen, Jr.
Chairman of the Board President and Director
<PAGE> 2
PINNACLE BANK
1811 SECOND AVENUE
JASPER, ALABAMA 35502-1388
(205) 221-4111
- -------------------------------------------------------------------------------
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON JANUARY 29, 1997
- -------------------------------------------------------------------------------
NOTICE IS HEREBY GIVEN that a Special Meeting of Stockholders (the
"Special Meeting") of Pinnacle Bank (the "Bank") will be held at The Chamber of
Commerce of Walker County Auditorium, Jasper, Alabama, on Wednesday, January
29, 1997 at 11:00 a.m., local time.
The Special Meeting is for the following purposes, which are more
completely described in the accompanying Proxy Statement/Prospectus:
1. 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.
2. The approval of the Pinnacle Bank 1996 Stock Option and
Incentive Plan.
3. The adjournment of the Special Meeting to a later date if an
insufficient number of shares is present in person or by proxy
at the Special Meeting to approve Proposal 1 or 2 above.
4. Such other matters as may properly come before the Special
Meeting or any adjournment thereof.
The Board of Directors is not aware of any other business to come before
the Special Meeting.
Any action may be taken on any one of the foregoing proposals at the
Special Meeting or any adjournments thereof. Stockholders of record at the
close of business on December 12, 1996, are the stockholders entitled to vote
at the Special 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 Special
Meeting in person.
BY ORDER OF THE BOARD OF DIRECTORS
THOMAS L. SHERER
SECRETARY
Jasper, Alabama
December 27, 1996
- -------------------------------------------------------------------------------
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.
- -------------------------------------------------------------------------------
<PAGE> 3
PINNACLE BANK
PROXY STATEMENT FOR
SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON JANUARY 22, 1997
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 Special Meeting of Stockholders to be held at The
Chamber of Commerce of Walker County Auditorium, Jasper, Alabama, on Wednesday,
January 29, 1997, 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
Special Meeting and this Proxy Statement/Prospectus are first being mailed to
stockholders on or about December 27, 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 DECEMBER 27, 1996.
<PAGE> 4
- -------------------------------------------------------------------------------
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 I -- 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> 5
proposals have been have or will be introduced in Congress 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 outcome or 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 I -- 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 have applied 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 I -- 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 I -- 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 I -- Proposed Conversion and
Reorganization -- Management of Pinnacle Bancshares, Inc."
(ii)
<PAGE> 6
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 I -- 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 I -- 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 I -- Proposed Conversion and Reorganization --
Comparison of Stockholders' Rights."
(iii)
<PAGE> 7
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 I -- 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 I -- 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 December 12, 1996, directors and executive officers of
the Bank as a group beneficially owned 74,881 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 which is available upon
request. See "Financial Statements." 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> 8
<TABLE>
<CAPTION>
FINANCIAL CONDITION AND
OTHER DATA:
At June 30,
------------------------------------------------------------- At September 30,
1992 1993 1994 1995 1996 1996
---- ---- ---- ---- ---- ----
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Total amount of:
Assets . . . . . . . . . . $176,327 $171,759 $176,486 $196,399 $186,475 $191,659
Loans and mortgage-
backed securities . . . . 142,797 134,538 137,410 150,596 147,468 152,397
Interest-bearing deposits
in other banks . . . . . 1,976 828 108 5,536 2,824 205
Securities . . . . . . . . 18,728 23,686 29,859 28,026 53,671 27,894
Loans held for sale . . . . 1,580 3,495 61 2,091 326 813
Deposits . . . . . . . . . 157,793 149,362 149,566 161,212 165,234 166,384
Borrowed funds . . . . . . 2,180 6,227 11,055 18,850 3,750 6,750
Stockholders' equity . . . 13,856 13,321 13,473 14,363 15,165 14,819
Number of:
Real estate loans
outstanding . . . . . . . 4,905 4,324 4,503 4,283 4,173 4,154
Savings accounts . . . . . 21,669 20,485 19,748 19,387 19,114 18,518
Full service offices open . 5 5 5 5 5 5
Regulatory Capital Ratios:
Tangible . . . . . . . . . 7.5% 7.4% 7.3% 7.1% 8.0% 7.6%
Core . . . . . . . . . . . 7.9 7.8 7.6 7.1 8.0 7.6
Risk-based . . . . . . . . 17.3 17.2 16.7 13.8 14.2 13.4
</TABLE>
<TABLE>
<CAPTION>
OPERATING DATA:
Three Months Ended
Year Ended June 30, September 30,
---------------------------------------------------------- ------------------
1992 1993 1994 1995 1996 1995 1996
---- ---- ---- ---- ---- ---- ----
(In thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Interest revenue . . . . . . . $15,503 $12,956 $11,554 $13,108 $14,650 $3,696 $3,669
Interest expense . . . . . . . 10,085 7,347 6,167 7,541 8,599 2,209 2,106
------- ------- ------- ------- ------- ------ ------
Net interest income before
provisions for losses on
loans . . . . . . . . . . . . 5,418 5,609 5,387 5,567 6,051 1,487 1,563
Provision for losses on loans . 280 320 285 235 240 60 70
------- ------- ------- ------- ------- ------ ------
Net interest income after
provision for losses
on loans . . . . . . . . . . 5,138 5,289 5,102 5,332 5,811 1,427 1,493
Noninterest income . . . . . . 1,553 1,524 1,564 1,012 1,275 300 319
Noninterest expense . . . . . . 4,570 4,418 4,469 4,323 4,456 1,057 2,213
Unusual items . . . . . . . . . -- (2,150) (363) -- -- -- --
Income tax expense . . . . . . (758) (189) (653) (780) (993) (251) 142
------- ------- ------- ------- ------- ------ ------
Net earnings . . . . . . . . . $ 1,363 $ 56 $ 1,181 $ 1,241 $ 1,637 $ 419 ($ 259)
======= ======= ======= ======= ======= ====== ======
</TABLE>
<TABLE>
<CAPTION>
PER SHARE DATA:
At or For Three
Months Ended
At or For Year Ended June 30, September 30,
----------------------------------------------------------- -----------------
1992 1993 1994 1995 1996 1995 1996
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Net earnings . . . . . $ 1.55 $ 0.06 $ 1.33 $ 1.39 $ 1 .84 $0.47 ($0.29)
Dividends . . . . . . . 0.60 0.69 0.72 0.72 0 .72 0.18 0.18
Book value . . . . . . 15.74 15.07 15.20 16.14 17.04 14.04 16.65
</TABLE>
(v)
<PAGE> 9
PROXY STATEMENT/PROSPECTUS
PINNACLE BANK
PINNACLE BANCSHARES, INC.
1811 SECOND AVENUE
P.O. BOX 1388
JASPER, ALABAMA 35502-1388
(205) 221-4111
SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD
JANUARY 29, 1997
- -------------------------------------------------------------------------------
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 a Special Meeting of Stockholders (the "Special Meeting") to be held at The
Chamber of Commerce of Walker County Auditorium, Jasper, Alabama on Wednesday,
January 29, 1997, at 11:00 a.m., local time.
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 Special
Meeting and this Proxy Statement/Prospectus, together with the enclosed form of
proxy, are first being mailed to stockholders on or about December 27, 1996.
The Bank recently solicited proxies in connection with the Annual
Meeting of Stockholders, which was held on December 18, 1996 (the "Annual
Meeting"). At the Annual Meeting, stockholders elected four directors of the
Bank and ratified the appointment of the Bank's independent auditors. The
enclosed proxy materials, including the enclosed blue proxy card, relate to the
Special Meeting which will be held on January 29, 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 IN
FAVOR OF EACH OF THE PROPOSALS SET FORTH IN THIS PROXY STATEMENT/PROSPECTUS FOR
CONSIDERATION AT THE SPECIAL MEETING. If any other business is presented at
the Special 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 Special 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 Special Meeting and votes in person. The
presence of a stockholder at the Special Meeting alone will not revoke such
stockholder's proxy.
- -------------------------------------------------------------------------------
VOTING SECURITIES
- -------------------------------------------------------------------------------
The securities which can be voted at the Special 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 December 12,
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.
1
<PAGE> 10
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 Special 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.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
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. 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>
Name and Address of Amount and Nature of
Beneficial Owners Beneficial Ownership(1) Percent of Class
- ------------------------ ----------------------- ----------------
<S> <C> <C>
Heartland Advisors, Inc. 87,551 (2) 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) 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.
The following table sets forth, as of the Record Date, certain
information regarding shares of Bank Common Stock beneficially owned by each
director (including the chief executive officer) of the Bank and by all
directors and executive officers as a group.
<TABLE>
<CAPTION>
Amount and Nature of Percent of
Name Beneficial Ownership (1) Class
---- ------------------------ -----
<S> <C> <C>
Greg Batchelor 3,010 *
O. H. Brown 3,600 *
James W. Cannon 7,749 *
Melvin R. Kacharos 2,150 *
Carlton Mayhall, Jr. 2,999 *
Sam W. Murphy 9,430 1.1%
Robert B. Nolen, Jr. 834 *
Max W. Perdue 2,528 *
Al H. Simmons 40,356 4.5%
J. T. Waggoner 225 *
All directors and executive
officers as a group (11 persons) 74,881 8.4%
</TABLE>
[Footnote on following page]
2
<PAGE> 11
- ------------------------
(1) For the definition of "beneficial ownership" see footnote 1 to the
table above. 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.
- -------------------------------------------------------------------------------
EXECUTIVE COMPENSATION
- -------------------------------------------------------------------------------
The following table sets forth the cash and noncash compensation for
the fiscal years ended June 30, 1996, 1995 and 1994 awarded to or earned by the
Chief Executive Officer. No other current executive officer of the Bank earned
in excess of $100,000 in salary and bonus during any such 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. 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.
3
<PAGE> 12
In connection with the Conversion and Reorganization, the Holding
Company and the Converted Bank may enter into new employment agreements with
Mr. Nolen to serve as President and Chief Executive Officer of the Holding
Company and the Bank. Although such agreements have not been negotiated, it is
expected that they generally would provide for three-year terms and may be
extended for an additional year so that the remaining term would be three
years. In addition, the employment agreements would provide for, among other
things, a base salary approximating Mr. Nolen's current salary, a discretionary
cash bonus, participation in employee benefit plans, death benefits and a
severance payment (subject to the limits under his current agreement) to be
paid upon a change in control of the Holding Company or the Converted Bank
subsequent to the Conversion and Reorganization.
- -------------------------------------------------------------------------------
PROPOSAL I -- 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
state 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 institution. The
additional powers of a commercial bank could, however, result in the assumption
of additional risk in the Converted Bank.
4
<PAGE> 13
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 in Congress 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 outcome or 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 extent to which the Bank can engage in certain
corporate transactions is limited by federal regulation and/or tax
consequences. For example, savings institutions such as the Bank (and
commercial banks such as the Converted Bank that result from conversions from
savings institutions), but not their holding companies, are required under
provisions of the Internal Revenue Code of 1986, as amended (the "Code"), to
recapture into taxable income a portion of their tax bad debt reserves under
certain circumstances, including stock repurchases or redemptions. See "--
Recent Legislation -- Repeal of Tax Bad Debt Reserve Method for Savings
Institutions." The Board of Directors believes that stock repurchases could
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 Special
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
5
<PAGE> 14
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
6
<PAGE> 15
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.
LIQUIDATION ACCOUNT. Pursuant to the requirements of OTS regulations
regarding mutual-to-stock conversions, the Converted Bank shall maintain a
liquidation account for the benefit of savings account holders of the Bank as
of December 31, 1985 ("eligible savers"). In the event of a complete
liquidation of the Converted Bank, it will comply with such regulations with
respect to the amount and priorities on liquidation of the inchoate interest of
each of the Bank'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 Converted Bank's stockholders.
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. Despite the recent
liberalization of federal savings institution commercial lending authority by
the Economic Growth and Paperwork Reduction Act of 1996 (the "1996 Act"), the
Bank is subject as a federal savings institution to the following lending
limits, among others: (a) a limit of 20% of assets on the aggregate amount of
commercial loans, of which the excess over 10% must consist of loans to small
business; (b) a limit of 400% of capital on the aggregate amount of loans
secured by non-residential real property; and (c) a limit of 35% of assets on
the aggregate of the institution's consumer loans and investment in corporate
debt securities. The Bank is also required by the qualified thrift lender
("QTL") provisions of the Home Owners' Loan Act to maintain at least 65% of its
portfolio assets in specified "Qualified Thrift Investments," generally
consisting of loans and other assets related to housing finance. The 1996 Act
liberalized the statutory QTL test (a) by permitting loans to small businesses,
student loans and credit card loans to be counted as Qualified Thrift
Investments without percentage limits and allowing a savings institution to be
deemed a QTL by meeting, in the alternative, the Internal Revenue
7
<PAGE> 16
Code's definition of "domestic building and loan association," which requires
an institution to hold at least 60% of its assets in housing-related loans and
other specified assets. Despite these liberalizing changes, however, the
statutory QTL test continues to impose significant restrictions on the lending
and investment powers of savings institutions.
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 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 $2.0 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.
8
<PAGE> 17
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 September 30, 1996.
<TABLE>
<CAPTION>
As of September 30, 1996
Consolidated Pro Forma
Capitalization of the Holding Company
-------------------------------------
(In thousands)
<S> <C>
Liabilities
-----------
Deposits . . . . . . . . . . . . . . . . . . $166,384
Borrowed funds . . . . . . . . . . . . . . . 6,750
Official checks outstanding . . . . . . . . 527
Advance payments by borrowers for
taxes and insurance . . . . . . . . . . 429
Deferred taxes . . . . . . . . . . . . . . . 205
Other liabilities . . . . . . . . . . . . . 2,545
--------
Total liabilities . . . . . . . . . $176,840
========
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 . . . . . . . . . . . . . 7,030
Net unrealized gain (loss) on securities
available for sale . . . . . . . . . . . (251)
---------
Total stockholders' equity . . . . $ 15,164
=========
</TABLE>
The Bank estimates that the total expenses associated with the
Conversion and Reorganization will be approximately $85,000. 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.
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
9
<PAGE> 18
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. The Holding
Company does not currently expect to require former holders of the Bank Common
Stock to exchange their Bank Common Stock certificates for Holding Company
Common Stock certificates. However, former holders of Bank Common Stock 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
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 is expected to 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 under Alabama law on a
one time basis.
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 I. 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 I, 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 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.
10
<PAGE> 19
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.
A copy of the applicable Alabama law is attached hereto as Exhibit II
and incorporated herein by reference.
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<PAGE> 20
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 Special 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
12
<PAGE> 21
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 Special Meeting. See "Proposal II --
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> 22
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 Holding Company's application to the Federal Reserve Board
is pending 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
14
<PAGE> 23
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>
Listed below is the age at June 30, 1996, principal occupation and
business experience of the directors of the Bank and the Holding Company.
Unless otherwise noted, all such persons have held these positions for at least
five years.
JAMES W. CANNON, 52, is Senior Vice President - Operations of Burton
Manufacturing Company, a manufacturer of golf bags headquartered in Jasper,
Alabama.
CARLTON MAYHALL, JR., 57, has been a circuit judge with the State of
Alabama Judicial Department since 1971 in Hamilton, Alabama. Judge Mayhall is
also a director of First National Bank of Hamilton, Alabama.
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.
15
<PAGE> 24
MAX W. PERDUE, 62, 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 and resides in Jasper, Alabama.
GREG BATCHELOR, 40, has been President of Dependable True Value
Hardware, Inc. in Russellville, Alabama since 1992. Prior to that, he was
Manager.
MELVIN R. KACHAROS, 69, 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 and resides
in Cordova, Alabama.
O. H. BROWN, 51, 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, 49, is Chairman of the Board, Chief Executive Officer
and Sales Manager of Murphy Furniture Manufacturing Co., Inc., a furniture
manufacturer located in Jasper, Alabama.
AL H. SIMMONS, 49, 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. Mr. Simmons is self-employed in Birmingham,
Alabama.
J. T. WAGGONER, 59, is Vice President, Community and Public Affairs,
HealthSouth Corporation, Birmingham, Alabama. He also serves as an Alabama
State Senator.
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>
The age at June 30, 1996, principal occupation and business experience
for the past five years of the executive officers of the Holding Company (other
than Mr. Nolen) are set forth below.
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
16
<PAGE> 25
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
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.
17
<PAGE> 26
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 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
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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 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."
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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.
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 is expected to 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 under
Alabama law 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
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<PAGE> 29
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 Federal Stock Charter requires 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 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 Federal Stock Charter 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
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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.
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, or consolidation
of the Holding Company with or into any Related Person; (ii) any sale, lease,
exchange, 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.
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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 include 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 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%
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<PAGE> 32
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 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.
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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 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.
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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.
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
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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.
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 have been paid by affected institutions on November 27, 1996. As a member
of the SAIF, the Bank paid 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
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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 savings
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 savings 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 savings institution (and commercial banks that result from conversions from
savings institutions) or if the savings institution 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 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 Special 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.
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THIS DESCRIPTION OF THE PROPOSED CONVERSION AND REORGANIZATION DOES
NOT PURPORT TO BE COMPLETE, BUT IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
THE FOLLOWING DOCUMENTS WHICH ARE ATTACHED AS EXHIBITS TO THIS PROXY
STATEMENT/PROSPECTUS:
EXHIBIT I - AGREEMENT AND PLAN OF CONVERSION AND REORGANIZATION,
INCLUDING ARTICLES OF INCORPORATION AND BYLAWS OF THE
CONVERTED BANK (EXHIBITS A AND B, RESPECTIVELY, TO
THE PLAN)
EXHIBIT II - DISSENTERS' RIGHTS
EXHIBIT III - CERTIFICATE OF INCORPORATION OF THE HOLDING COMPANY
EXHIBIT IV - BYLAWS OF THE HOLDING COMPANY
- -------------------------------------------------------------------------------
PROPOSAL II -- 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.
See "Proposal I -- Proposed Conversion and Reorganization -- Effect on
Option Plans" regarding adoption of the Bank's option plans, including the
Option Plan, by the Holding Company. In such event, key employees and
directors of the Converted Bank and the Holding Company would be eligible to
participate in the Option Plan. If Proposal II is approved, but the Conversion
and Reorganization is not consummated, the Option Plan will be a benefit plan
of the Bank.
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
Special 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 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, Murphy and Cannon.
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<PAGE> 38
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 Special
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, subject to the foregoing ISO limitations.
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, 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
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<PAGE> 39
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 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
31
<PAGE> 40
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.
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).
32
<PAGE> 41
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
Plan Effective Date ($17.625 per share). As of the date hereof, the Option
grants disclosed below were the only Awards that had been made under the Option
Plan, although future Awards are anticipated.
<TABLE>
<CAPTION>
Value of Shares Number of Shares
Participant (or Group) Underlying Options ($)(1) Subject to Options (2)
---------------------- ------------------------- ----------------------
<S> <C> <C>
All executive officers, as a group $ 0 10,000
(1 person)
All directors who are not executive $ 0 25,000
officers, as a group
(10 persons)
</TABLE>
[Footnotes continued on following page]
33
<PAGE> 42
- -------------
(1) Represents the extent to which the fair market value of the Bank
Common Stock underlying each Option ($17.125 per share, based upon the
closing sale price on the Record Date) exceeds the exercise price for
such shares ($17.625 per share, which equaled its fair market value on
August 28, 1996, the date of the grant).
(2) Represents the right to purchase the number of shares of the Bank
Common Stock that is listed opposite the name of each optionee. As of
the date hereof, no other employees have been granted Options under
the Option Plan.
RECOMMENDATION AND VOTE REQUIRED
The Board of Directors has determined that the Option Plan is
desirable, cost effective, and produces incentives which will benefit the Bank
and its stockholders. The Board of Directors is seeking stockholder approval
of the Option Plan to satisfy the requirements of the Internal Revenue Code for
favorable tax treatment of ISOs, the requirements under the Bank's Federal
Stock Charter for issuances of stock of the Bank to directors and officers, and
the requirements of the American Stock Exchange upon which the Common Stock is
listed. Stockholder approval of the Option Plan by a favorable vote of a
majority of the votes eligible to be cast will satisfy all of the foregoing
requirements. THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" APPROVAL OF THE
OPTION PLAN.
- -------------------------------------------------------------------------------
NEW PLAN BENEFITS
- -------------------------------------------------------------------------------
The following table sets forth certain information regarding the
benefits to be received under the Option Plan.
<TABLE>
<CAPTION>
1996 Stock Option and Incentive Plan
------------------------------------
Dollar Number
Name and Position Value ($)(1) of Units (2)
- ----------------- ------------ ------------
<S> <C> <C>
Robert B. Nolen, Jr. $ 0 10,000
All executive officers, as a group (1 $ 0 10,000
person)
All directors who are not executive $ 0 22,500
officers, as a group (9 persons)
</TABLE>
- --------------------
(1) Represents the extent to which the fair market value of the Bank
Common Stock underlying each Option ($17.125 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 II --
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.
- -------------------------------------------------------------------------------
PROPOSAL III --- ADJOURNMENT OF MEETING
- -------------------------------------------------------------------------------
Approval of each of the Plan (Proposal I) and the Option Plan
(Proposal II) requires the affirmative vote of a majority of the total votes
eligible to be cast at the Special Meeting. In the event there is an
insufficient number of shares present in person or by proxy at the Special
Meeting to approve either Proposal I or Proposal II, and Proposal III is
approved at the Special Meeting, the Board of Directors intends to adjourn the
Special Meeting to a later date. The Board of Directors will utilize its
discretionary authority to adjourn the Special Meeting for reasons other than
to solicit additional proxies for approval of Proposal I or Proposal II, even
if Proposal III is not approved at the Special Meeting. The place and date to
which the Special Meeting would be reconvened would be announced at the Special
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 Special Meeting.
34
<PAGE> 43
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 SPECIAL 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 have applied 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 September 30, 1996, the Bank had approximately 440 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
Fiscal year 1995 High Low
- ----------------------------------------------------------------------------------------------------
<S> <C> <C>
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
Fiscal year 1997
- ----------------------------------------------------------------------------------------------------
First Quarter 18 3/8 16 3/8
</TABLE>
Dividends of $.72 per share ($.18 per share in each of the four
quarters) were declared and paid during each of the fiscal years 1995 and 1996.
A dividend of $.18 per share was declared and paid during the first quarter of
fiscal 1997.
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 I -- Proposed Conversion and
Reorganization -- Comparison of Stockholders' Rights -- Payment of Dividends"
and "-- Regulation of the Converted Bank -- Dividend Restrictions."
35
<PAGE> 44
- -------------------------------------------------------------------------------
OTHER MATTERS
- -------------------------------------------------------------------------------
The Board of Directors is not aware of any business to come before the
Special Meeting other than those matters described above in this Proxy
Statement/Prospectus and matters incident to the conduct of the Special
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 Special 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.
- -------------------------------------------------------------------------------
FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
The Bank's 1996 Annual Report to Stockholders, including financial
statements prepared in conformity with generally accepted accounting
principles, was previously mailed to all stockholders of record in connection
with the Annual Meeting of Stockholders held on December 18, 1996. An
additional copy of such Annual Report will be furnished promptly upon request
without charge to Bank stockholders upon request to the Secretary, Pinnacle
Bank, 1811 Second Avenue, P.O. Box 1388, Jasper, Alabama 35502-1388 (telephone:
205-221-4111). 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 February 28, 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 August 4, 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 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.
The Holding Company's Certificate of Incorporation provides that due
notice of nominations for the election of directors and proposals for any new
business to be taken up at any meeting of stockholders may be made by
stockholders in writing to the Secretary of the Holding Company not less than
30 days nor more than 60 days prior to the date of any such meeting; provided,
however, that if less than 40 days' notice of the meeting is given to
stockholders, such written notice shall be delivered or mailed to the Secretary
not later than the close of business on the tenth day following the day on
which notice of the meeting was mailed to stockholders. Each such notice with
respect to nominations must set forth certain information required by the
Certificate of Incorporation.
36
<PAGE> 45
The Bank's Bylaws provide that nominations by stockholders must be in
writing and delivered to the Secretary of the Bank at least 30 days prior to
the date of an annual meeting. However, if the nominating committee of the
Bank's Board of Directors shall fail or refuse to act at lest 20 days prior to
an annual meeting, nominations for directors may be made at the annual meeting
by any stockholder entitled to vote.
The Bank's Bylaws also provide that any new business to be taken up at
an 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.
BY ORDER OF THE BOARD OF DIRECTORS
THOMAS L. SHERER
SECRETARY
Jasper, Alabama
December 27, 1996
37
<PAGE> 46
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
I-1
<PAGE> 47
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 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
I-2
<PAGE> 48
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
I-3
<PAGE> 49
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>
Carlton Mayhall, Jr. Route 6 Spring Valley Road 1997
Hamilton, Alabama 35570
Robert B. Nolen, Jr. 200 Marion Avenue 1997
Jasper, Alabama 35501
Max W. Perdue 303 Cherokee Circle 1997
Jasper, Alabama 35501
Albert H. Simmons 2111 Williamsburg Way 1997
Birmingham, Alabama 35223
Greg Batchelor 800 Underwood Road 1998
Russellville, Alabama 35653
James W. Cannon 1902 Pawnee Circle 1998
Jasper, Alabama 35501
Melvin R. Kacharos 2817 River Road 1998
Cordova, Alabama 35550
O. H. Brown 500 Park Avenue 1999
Jasper, Alabama 35501
Sam W. Murphy 507 Pinecrest Circle 1999
Jasper, Alabama 35501
James T. Waggoner, Jr. 1829 Mission Road 1999
Birmingham, Alabama 35216
</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>
Greg Batchelor 800 Underwood Road
Russellville, Alabama 35653
O. H. Brown 500 Park Avenue
Jasper, Alabama 35501
James W. Cannon 1902 Pawnee Circle
Jasper, Alabama 35501
Melvin R. Kacharos 2817 River Road
Cordova, Alabama 35550
Carlton Mayhall, Jr. Route 6 Spring Valley Road
Hamilton, Alabama 35570
Sam W. Murphy 507 Pinecrest Circle
Jasper, Alabama 35501
Robert B. Nolen, Jr. 200 Marion Avenue
Jasper, Alabama 35501
Max W. Perdue 303 Cherokee Circle
Jasper, Alabama 35501
Albert H. Simmons 2111 Williamsburg Way
Birmingham, Alabama 35223
James T. Waggoner, Jr. 1829 Mission Road
Birmingham, Alabama 35216
</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 Section 5-7A-62 of the Alabama Banking Code. In accordance with 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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<PAGE> 70
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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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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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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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.
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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:
Name Mailing Address
Robert B. Nolen, Jr. 1811 Second Avenue
Jasper, Alabama 35502-1388
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>
<CAPTION>
<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, trans
ferred 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
modifica tion of any outstanding Award, provided no such modification
shall confer on the holder of said Award any right or benefit which
could not be con ferred 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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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 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.
TABLE OF CONTENTS
Page
----
Summary Information on Proposed
Conversion and Reorganization . . . . . . . . . (i)
Introduction . . . . . . . . . . . . . . . . . . 1
Voting and Revocation of Proxies . . . . . . . . 1
Voting Securities . . . . . . . . . . . . . . . . 1
Voting Securities . . . . . . . . . . . . . . . . 1
Executive Compensation . . . . . . . . . . . . . 3
Proposal I - Proposed Holding Company
Formation . . . . . . . . . . . . . . . . . . . 4
Proposal II - Approval of the Pinnacle Bank
1996 Stock Option and Incentive Plan . . . . . 29
New Plan Benefits . . . . . . . . . . . . . . . . 34
Proposal III - Adjournment of Meeting . . . . . . 34
Market and Dividend Information . . . . . . . . . 35
Other Matters . . . . . . . . . . . . . . . . . . 36
Miscellaneous . . . . . . . . . . . . . . . . . . 36
Financial Statements . . . . . . . . . . . . . . 36
Stockholder Proposals . . . . . . . . . . . . . . 36
Exhibit I - Agreement and Plan
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
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PINNACLE BANK
PINNACLE BANCSHARES, INC.
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PROXY STATEMENT/PROSPECTUS
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December 27, 1996
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