<PAGE> 1
Registration No. 333-_____
As filed with the Securities and Exchange Commission on September 6, 1996
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------
FORM S-4
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
PINNACLE BANCSHARES, INC.
(Exact name of registrant as specified in charter)
<TABLE>
<S> <C> <C>
DELAWARE 6035 TO BE APPLIED FOR
- ------------------------------- ---------------------------- ----------------------
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code No.) Identification Number)
</TABLE>
1811 SECOND AVENUE
JASPER, ALABAMA 35502-1388
(205) 221-4111
(Address, including zip code, and telephone number, including area code,
of registrant's principal executive offices)
EDWARD B. CROSLAND, JR., ESQUIRE
REINHART, BOERNER, VAN DEUREN, NORRIS & RIESELBACH, P.C.
601 PENNSYLVANIA AVENUE, N.W.
NORTH BUILDING - SUITE 750
WASHINGTON, D.C. 20004-2601
(202) 393-3636
(Name, address, including zip code,
and telephone number, including area code,
of agent for service)
Approximate date of commencement of proposed sale to the public:
AS SOON AS PRACTICABLE AFTER RECEIPT OF ALL REGULATORY APPROVALS.
If the securities being registered on this form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. / /
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------
TITLE OF EACH PROPOSED PROPOSED
CLASS OF AMOUNT MAXIMUM MAXIMUM AMOUNT OF
SECURITIES TO BE TO BE OFFERING PRICE AGGREGATE REGISTRATION
REGISTERED REGISTERED (1) PER UNIT (2) OFFERING PRICE FEE
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, 890,324 shares $17.75 $15,803,251 $5,449.40
$.01 par value
- ---------------------------------------------------------------------------------------------------
</TABLE>
(1) Based on a maximum of approximately 889,824 shares of Pinnacle
Bancshares, Inc. common stock to be issued with respect to the same
number of sharesof Pinnacle Bank common stock outstanding and 500
shares of Pinnacle Bancshares, Inc. common stock reserved for issuance
upon the exercise of stock option
(2) Estimated solely for purposes of determining the registration fee
and based, in accordance with Rule 457(f)(1), upon the market value of
the outstanding shares of Pinnacle Bank common stock utilizing the
average of the high and low prices of such stock reported on the
American Stock Exchange on September 3, 1996.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE
OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
================================================================================
<PAGE> 2
PINNACLE BANCSHARES, INC.
CROSS-REFERENCE SHEET SHOWING THE LOCATION IN THE
PROSPECTUS OF THE ITEMS OF THE FORM S-4
<TABLE>
<CAPTION>
HEADINGS IN PROSPECTUS AND
ITEMS OF FORM S-4 PROXY STATEMENT
- ----------------- ---------------------------------
<S> <C> <C> <C>
Item 1 Forepart of Registration Statement -- Facing Page; Cross-Reference Sheet;
and Outside Front Cover Page of Outside Front Cover Page of Prospectus
Prospectus
Item 2 Inside Front and Outside Back Cover -- Outside Front Cover Page of Prospectus;
Pages of Prospectus Outside Back Cover Page of Prospectus
Item 3 Risk Factors, Ratio of Earnings to -- Summary Information on Proposed
Fixed Charges and Other Information Holding Company Formation; Proposal
III -- Proposed Holding Company
Formation
Item 4 Terms of the Transaction -- Proposal III - Proposed Holding Company
Formation
Item 5 Pro Forma Financial Information -- Not Applicable
Item 6 Material Contacts with the Company Being -- Proposal III - Proposed Holding Company
Acquired Formation
Item 7 Additional Information Required for -- Not Applicable
Reoffering by Persons and Parties
Deemed to be Underwriters
Item 8 Interests of Named Experts and Counsel -- Not Applicable
Item 9 Disclosure of Commission Position on -- Proposal III - Proposed Holding Company
Indemnification for Securities Act Formation
Liabilities
Item 10 Information With Respect to S-3 -- Not Applicable
Registrants
Item 11 Incorporation of Certain Information -- Not Applicable
By Reference
Item 12 Information With Respect to S-2 or S-3 -- Not Applicable
Registrants
Item 13 Incorporation of Certain Information -- Not Applicable
by Reference
</TABLE>
(Continued)
<PAGE> 3
<TABLE>
<S> <C> <C> <C>
Item 14 Information with Respect to Registrants -- Market and Dividend Information;
Other Than S-3 or S-2 Registrants Proposal III - Proposed Holding Company
Formation
Item 15 Information With Respect to S-3 -- Not Applicable
Companies
Item 16 Information With Respect to S-2 or -- Not Applicable
S-3 Companies
Item 17 Information With Respect to Companies -- Proposal III - Proposed Holding Company
Other Than S-2 or S-3 Companies Formation
Item 18 Information if Proxies, Consents or
Authorizations Are to be Solicited
18(a)(1) -- Introduction
18(a)(2) -- Voting and Revocation of Proxies
18(a)(3) -- Proposal III - Proposed Holding
Company Formation
18(a)(4) -- Introduction; Proposal III - Proposed
Holding Company Formation;
Miscellaneous
18(a)(5) -- Voting Securities and Principal Holders
Thereof; Proposal I - Election of
Directors
18(a)(6) -- Voting and Revocation of Proxies;
Proposal I - Election of Directors;
Proposal II - Ratification of Appointment
of Independent Auditors; Proposal III -
Proposed Holding Company Formation;
Proposal IV - Approval of the Pinnacle
Bank 1996 Stock Option and Incentive
Plan; Proposal V - Adjournment of
Meeting
18(a)(7) -- Proposal I - Election of Directors;
Proposal III - Proposed Holding Company
Formation
Item 19 Information if Proxies, Consents or -- Not Applicable
Authorizations Are Not to be
Solicited or in an Exchange Offer
</TABLE>
<PAGE> 4
October __, 1996
Dear Stockholder:
We invite you to attend the Annual Meeting of Stockholders (the
"Annual Meeting") of Pinnacle Bank (the "Bank") to be held at The Chamber of
Commerce of Walker County Auditorium, Jasper, Alabama on Wednesday, November
20, 1996 at 11:00 a.m., local time. This will be our first meeting of
stockholders since the adoption of "Pinnacle Bank" as our new corporate title.
The attached Notice of Annual Meeting and Proxy Statement/Prospectus
describe the formal business to be transacted at the Annual Meeting.
Stockholders will consider and vote upon the election of four directors and the
ratification of the Bank's independent auditors. In addition, stockholders
will be asked to consider and vote upon a proposal to reorganize the Bank into
the holding company form of ownership by approving an Agreement and Plan of
Reorganization under which (i) the Bank will become a wholly owned subsidiary
of Pinnacle Bancshares, Inc., a Delaware corporation formed for the purpose of
becoming the holding company for the Bank ("Bancshares"), and (ii) each
outstanding share of the common stock of the Bank will be converted into one
share of Bancshares common stock. Reorganization into the holding company form
of ownership will permit diversification into a broader range of financial and
business activities and create greater flexibility in operations. 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 formation of a
holding company will provide greater financial and operating flexibility. The
purpose of the Option Plan is to attract, retain, and motivate the best
available personnel for positions of substantial responsibility and to provide
additional incentive to promote the success of the business of the Bank and
Bancshares. For these reasons, the Board of Directors of the Bank has
unanimously approved both proposals and recommends that you vote in favor of
both proposals.
As an integral part of the Annual Meeting, we will report on the
Bank's operations. Directors and officers of the Bank will be present to
respond to any questions that our stockholders may have. Detailed information
concerning our activities and operating performance during the 1996 fiscal year
is contained in our Annual Report which also is enclosed.
YOUR VOTE IS IMPORTANT, REGARDLESS OF THE NUMBER OF SHARES YOU OWN.
Because the holding company reorganization and the Option Plan require the
approval of a majority of the shares outstanding, the failure to vote or an
abstention is equivalent to a vote against both matters. On behalf of the
Board of Directors, we urge you to please sign, date and return the enclosed
proxy card in the enclosed postage-prepaid envelope as soon as possible even if
you currently plan to attend the Annual Meeting. This will not prevent you
from voting in person, but will assure that your vote is counted if you are
unable to attend the Annual Meeting.
Sincerely,
--------------------- ----------------------
Al H. Simmons Robert B. Nolen, Jr.
Chairman of the Board President and Director
<PAGE> 5
PINNACLE BANK
1811 SECOND AVENUE
JASPER, ALABAMA 35502-1388
(205) 221-4111
- --------------------------------------------------------------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON NOVEMBER 20, 1996
- --------------------------------------------------------------------------------
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders (the
"Annual Meeting") of Pinnacle Bank (the "Bank") will be held at The Chamber of
Commerce of Walker County Auditorium, Jasper, Alabama, on Wednesday, November
20, 1996 at 11:00 a.m., local time.
The Annual Meeting is for the following purposes, which are more
completely described in the accompanying Proxy Statement/Prospectus:
1. The election of four directors of the Bank for a term of three
years each.
2. The ratification of the appointment of Arthur Andersen LLP as
independent auditors of the Bank for the fiscal year ending
June 30, 1997.
3. The approval of the reorganization of the Bank into the
holding company form of ownership by approving an Agreement
and Plan of Reorganization, pursuant to which the Bank will
become a wholly owned subsidiary of a holding company,
Pinnacle Bancshares, Inc., a Delaware corporation (the
"Holding Company"), and each outstanding share of common stock
of the Bank will be converted into one share of the common
stock of the Holding Company.
4. The approval of the Pinnacle Bank 1996 Stock Option and
Incentive Plan.
5. The adjournment of the Annual Meeting to a later date if an
insufficient number of shares is present in person or by proxy
at the Annual Meeting to approve any of the foregoing
proposals.
6. Such other matters as may properly come before the Annual
Meeting or any adjournment thereof.
The Board of Directors is not aware of any other business to come before
the Annual Meeting.
Any action may be taken on any one of the foregoing proposals at the
Annual Meeting or any adjournments thereof. Stockholders of record at the
close of business on September 27, 1996, are the stockholders entitled to vote
at the Annual Meeting and any adjournment thereof.
You are requested to fill in and sign the enclosed proxy which is
solicited by the Board of Directors and to mail it promptly in the enclosed
envelope. The proxy will not be used if you attend and vote at the Annual
Meeting in person.
BY ORDER OF THE BOARD OF DIRECTORS
THOMAS L. SHERER
SECRETARY
Jasper, Alabama
October __, 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> 6
PINNACLE BANK
PROXY STATEMENT FOR
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON NOVEMBER 20, 1996
PINNACLE BANCSHARES, INC.
PROSPECTUS FOR
890,324 SHARES OF COMMON STOCK,
PAR VALUE $.01 PER SHARE
This Proxy Statement/Prospectus is being furnished to the holders of
common stock of Pinnacle Bank (the "Bank"), a federally chartered stock savings
bank, in connection with the solicitation of proxies by the Board of Directors
of the Bank for use at the Annual Meeting of Stockholders to be held at The
Chamber of Commerce of Walker County Auditorium, Jasper, Alabama, on Wednesday,
November 20, 1996, at 11:00 a.m., local time.
This Proxy Statement/Prospectus also serves as the prospectus of
Pinnacle Bancshares, Inc., a Delaware corporation (the "Holding Company"),
under the Securities Act of 1933, as amended (the "1933 Act") with respect to
the issuance of up to a maximum of 890,324 shares of the Holding Company's
common stock, par value $.01 per share ("Holding Company Common Stock"), in the
Reorganization described herein. The accompanying Notice of Annual Meeting and
this Proxy Statement/Prospectus are first being mailed to stockholders on or
about October __, 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 OCTOBER __, 1996.
<PAGE> 7
- --------------------------------------------------------------------------------
SUMMARY INFORMATION
ON
PROPOSED HOLDING COMPANY FORMATION
- --------------------------------------------------------------------------------
THE FOLLOWING SUMMARY DOES NOT PURPORT TO BE COMPLETE AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO THE MORE DETAILED INFORMATION APPEARING
ELSEWHERE IN THIS PROXY STATEMENT/PROSPECTUS UNDER "PROPOSAL III -- PROPOSED
HOLDING COMPANY FORMATION" AND EXHIBITS A, B AND C ATTACHED HERETO.
GENERAL
The holding company formation will be accomplished under an Agreement
and Plan of Reorganization, dated August 28, 1996 ("Plan of Reorganization"),
pursuant to which the Bank will become a wholly owned subsidiary of the Holding
Company, a Delaware corporation formed for the purpose of becoming the holding
company for the Bank. Under the terms of the proposed reorganization (the
"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
Holding Company Common Stock. As a result of the 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 be the sole
stockholder of the Bank. The Holding Company was incorporated in August 1996
and has no prior operating history. Following the Reorganization, it is
intended that the 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.
REASONS FOR 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. Present regulations applicable to federal savings banks limit both the
types of businesses in which the Bank may engage and the amount which the Bank
may invest in subsidiaries. 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 but not to their holding companies.
The establishment of the Holding Company as a unitary savings and loan
holding company (i.e., a holding company with only one savings institution
subsidiary) also currently permits diversification of operations and the
acquisition and formation of companies engaged in lines of business which,
while complementary to the thrift business, 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 savings institution 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. In addition, a holding company structure may facilitate
conversion of the Bank's federal savings bank charter into a commercial bank or
other financial institution charter, although no such conversion is planned at
this time. For further information, see "Proposal III -- Proposed Holding
Company Formation -- Reasons for the Holding Company Reorganization." If,
however, the Bank ceases to be a "Qualified Thrift Lender" (generally defined
as a savings institution with at least 65% of its tangible assets, including
investments made by a subsidiary of such institution, invested in "qualified
thrift investments"), the Holding Company will not be permitted to take
advantage of certain diversification opportunities. At June 30, 1996, the
Bank's asset composition was in excess of that required to qualify the Bank as
a Qualified Thrift Lender. See "Proposal III -- Proposed Holding Company
Formation -- Regulation of the Holding Company."
(i)
<PAGE> 8
Proposed federal legislation could, if enacted, require conversion of
federal savings banks, like the Bank, into commercial banks and may affect the
diversification opportunities of converted savings banks and their holding
companies. See "Proposal III -- Proposed Holding Company Formation --
Regulation of the Holding Company."
MARKET FOR BANK COMMON STOCK
The Bank Common Stock is traded on the American Stock Exchange under
the symbol "PLE". The Holding Company will apply to have the Holding Company
Common Stock traded on the American Stock Exchange in substitution for the Bank
Common Stock, under the same symbol. See "Market and Dividend Information."
NO DISSENTERS' RIGHTS OF APPRAISAL
Pursuant to federal regulations, stockholders of the Bank will not
have dissenters' appraisal rights in connection with the Reorganization if the
Bank Common Stock continues to be listed on the American Stock Exchange. See
"Proposal III -- Proposed Holding Company Formation -- Rights of Dissenting
Stockholders."
MANAGEMENT OF THE HOLDING COMPANY
The Board of Directors of the Holding Company presently consists of 11
members, all of whom are currently members of the Board of Directors of the
Bank and is expected to continue with 11 members upon completion of the
Reorganization. The Bank currently has 11 members on its Board of Directors.
The officers of the Holding Company will consist of persons now serving as
officers of the Bank. See "Proposal III -- Proposed Holding Company Formation
- -- Management of Pinnacle Bancshares, Inc."
TAX CONSEQUENCES
The Reorganization is intended to be treated as a non-taxable
transaction at the corporate and stockholder levels. Generally, no gain or
loss will be recognized by stockholders of the Bank who exchange their Bank
Common Stock solely for Holding Company Common Stock in the Reorganization. A
condition to consummation of the Reorganization is the receipt by the Bank of
an opinion of Reinhart, Boerner, Van Deuren, Norris & Rieselbach, P.C., that
the Reorganization will be treated as a non-taxable transaction under
applicable provisions of the Code. Each Bank stockholder should consult his or
her own tax advisor as to specific federal, state and local tax consequences of
the Reorganization, if any, to such stockholder. See "Proposal III -- Proposed
Holding Company Formation -- Tax Consequences."
CONDITIONS TO THE REORGANIZATION
The Plan of Reorganization sets forth a number of conditions which
must be met before the Reorganization will be consummated, including, among
others: (i) approval of the Plan of Reorganization 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
Reorganization will be treated as a non-taxable transaction for federal income
tax purposes; (iii) approval of the Reorganization by the OTS, the Federal
Deposit Insurance Corporation ("FDIC"), and any other federal or state agency
having jurisdiction necessary for consummation of the Reorganization; and (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. See "Proposal III -- Proposed Holding Company Formation
- -- Conditions to the Reorganization."
COMPARISON OF STOCKHOLDERS' RIGHTS
As a result of the 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 (the
"Certificate of Incorporation") and Bylaws (the "Bylaws") of the Holding
Company. Certain differences arise from this change of governing law, as well
as from
(ii)
<PAGE> 9
distinctions between the Federal Stock Charter and Bylaws of the Bank and the
Certificate of Incorporation and Bylaws of the Holding Company. These
differences relate to the issuance of capital stock, payment of dividends,
special meetings of stockholders, the rights of stockholders to dissent,
vacancies on the Board of Directors, the number of directors, removal of
directors, approval of mergers, consolidations, sale of substantially all
assets and certain business combinations, advance notice requirements for
nominations of directors and presentation of new business at meetings of
stockholders and procedures for amendment of the Federal Stock Charter and
Bylaws of the Bank as compared to the Certificate of Incorporation and Bylaws
of the Holding Company. Further, the Holding Company, as a general business
corporation, will be able to enter into more lines of business than the Bank,
which, as a federal savings bank, is restricted in the businesses in which it
may engage. See "Proposal III -- Proposed Holding Company Formation --
Comparison of Stockholders' Rights."
CERTIFICATE OF INCORPORATION, BYLAWS AND STATUTORY PROVISIONS THAT COULD
DISCOURAGE ACQUISITIONS OF CONTROL
The Holding Company's Certificate of Incorporation and Bylaws contain
certain provisions that could discourage non-negotiated takeover attempts which
certain stockholders might deem to be in their interests or through which
stockholders might otherwise receive a premium for their shares over the
then-current market price and that may tend to perpetuate existing management.
These provisions include supermajority approval requirements for certain
business combinations and provisions allowing the Board of the Holding Company
to consider nonmonetary factors in evaluating a business combination or a
tender or exchange offer. The Certificate of Incorporation also authorizes the
issuance of additional shares of Holding Company Common Stock without
stockholder approval on terms or in circumstances that could deter a future
takeover attempt. In addition, the Delaware General Corporation Law provides
for certain restrictions on acquisition of the Holding Company. These charter,
bylaw and statutory provisions may have the effect of discouraging or
preventing a future takeover attempt in which stockholders of the Holding
Company otherwise might receive a substantial premium for their shares over
then-current market prices. See "Proposal III -- Proposed Holding Company
Formation -- 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
that indemnify directors and officers in certain proceedings against them and
impose limitations on directors' liability. There are no such provisions in
the Bank's Federal Stock Charter, although OTS regulations authorize
indemnification of directors and officers under certain circumstances.
Directors and officers of the Bank thus may be deemed to have a personal
interest in the consummation of the Reorganization. See "Proposal III --
Proposed Holding Company Formation -- 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
diversify through a holding company formation will help the Bank remain
competitive in the future. Approval of the Plan of Reorganization requires the
affirmative vote of a majority of the total votes eligible to be cast at the
Annual Meeting. As of September 27, 1996, directors and executive officers of
the Bank as a group beneficially owned 76,700 shares, or 8.6% 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 REORGANIZATION AND RECOMMENDS THAT THE
STOCKHOLDERS VOTE "FOR" THE PLAN OF REORGANIZATION.
SELECTED FINANCIAL DATA
The following table presents selected financial information for the
Bank. This information is derived from the financial statements of the Bank.
The information set forth below should be read in conjunction with such
financial statements and the notes thereto contained in the Annual Report to
Stockholders for the fiscal year ended June 30, 1996 (the "Annual Report")
which accompanies this Proxy Statement/Prospectus. All financial statements of
Pinnacle Bancshares, Inc. have been omitted because the Holding Company has no
assets and no liabilities and has not conducted any business other than of an
organizational nature.
(iii)
<PAGE> 10
FINANCIAL CONDITION AND
OTHER DATA:
<TABLE>
<CAPTION>
At June 30,
------------------------------------------------------------------
1992 1993 1994 1995 1996
---- ---- ---- ---- ----
(Dollars in thousands)
<S> <C> <C> <C> <C> <C>
Total amount of:
Assets . . . . . . . . . . $176,327 $171,759 $176,486 $196,399 $186,475
Loans and mortgage-
backed securities . . . . 142,797 134,538 137,410 150,596 147,468
Interest-bearing deposits
in other banks . . . . . 1,976 828 108 5,536 2,824
Securities . . . . . . . . 18,728 23,686 29,859 28,026 26,847
Loans held for sale . . . . 1,580 3,495 61 2,091 326
Deposits . . . . . . . . . 157,793 149,362 149,566 161,212 165,234
Borrowed funds . . . . . . 2,180 6,227 11,055 18,850 3,750
Stockholders' equity . . . 13,856 13,321 13,473 14,363 15,165
Number of:
Real estate loans
outstanding . . . . . . . 4,905 4,324 4,503 4,283 4,173
Savings accounts . . . . . 21,669 20,485 19,748 19,387 19,114
Full service offices open . 5 5 5 5 5
Regulatory Capital Ratios(1):
Tangible . . . . . . . . . 7.46% 7.38% 7.29% 7.07% 8.0%
Core . . . . . . . . . . . 7.85 7.77 7.64 7.07 8.0
Risk-based . . . . . . . . 17.34 17.20 16.74 13.83 14.2
</TABLE>
OPERATING DATA:
<TABLE>
<CAPTION>
Year Ended June 30,
------------------------------------------------------------------
1992 1993 1994 1995 1996
---- ---- ---- ---- ----
(In thousands)
<S> <C> <C> <C> <C> <C>
Interest revenue . . . . . . $15,503 $12,956 $11,554 $13,108 $14,650
Interest expense . . . . . . 10,085 7,347 6,167 7,541 8,599
------- ------- ------- ------- -------
Net interest income before
provisions for losses on
loans . . . . . . . . . . . 5,418 5,609 5,387 5,567 6,051
Provision for losses on loans 280 320 285 235 240
------- ------- ------- ------- -------
Net interest income after
provision for losses
on loans . . . . . . . . . 5,138 5,289 5,102 5,332 5,811
Noninterest income . . . . . 1,553 1,524 1,564 1,012 1,275
Noninterest expense . . . . . 4,570 4,418 4,469 4,323 4,456
Unusual items . . . . . . . . -- (2,150) (363) -- --
Income tax expense . . . . . (758) (189) (653) (780) (993)
------- ------- ------- ------- -------
Net earnings . . . . . . . . $ 1,363 $ 56 $ 1,181 $ 1,241 $ 1,637
======= ======= ======= ======= =======
</TABLE>
PER SHARE DATA:
<TABLE>
<CAPTION>
At or For Year Ended June 30,
------------------------------------------------------------------
1992 1993 1994 1995 1996
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Net earnings . . . . . . . . $ 1.55 $ 0.06 $ 1.33 $ 1.39 $ 1.84
Dividends . . . . . . . . . . 0.60 0.69 0.72 0.72 0.72
Book value . . . . . . . . . 15.74 15.07 15.20 16.14 17.04
</TABLE>
(iv)
<PAGE> 11
PROXY STATEMENT/PROSPECTUS
PINNACLE BANK
PINNACLE BANCSHARES, INC.
1811 SECOND AVENUE
JASPER, ALABAMA 35502-1388
(205) 221-4111
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD
NOVEMBER 20, 1996
- --------------------------------------------------------------------------------
INTRODUCTION
- --------------------------------------------------------------------------------
This Proxy Statement/Prospectus is furnished in connection with the
solicitation of proxies by the Board of Directors of Pinnacle Bank (the "Bank")
for the Annual Meeting of Stockholders (the "Annual Meeting") to be held at The
Chamber of Commerce of Walker County Auditorium, Jasper, Alabama on Wednesday,
November 20, 1996, at 11:00 a.m., local time. The Bank has extended the date
of the Annual Meeting in order to prepare the various regulatory filings
related to the proposed holding company formation which will be considered and
voted on at the Annual Meeting. The Bank was formerly known as "First Federal
of Alabama, F.S.B." and adopted its current name in January 1996. The
accompanying Notice of Annual Meeting and this Proxy Statement/Prospectus,
together with the enclosed form of proxy, are first being mailed to
stockholders on or about October __, 1996.
- --------------------------------------------------------------------------------
VOTING AND REVOCATION OF PROXIES
- --------------------------------------------------------------------------------
Proxies solicited by the Board of Directors of the Bank, will be voted
in accordance with the directions given therein. WHERE NO INSTRUCTIONS ARE
GIVEN, PROPERLY EXECUTED PROXIES WHICH HAVE NOT BEEN REVOKED WILL BE VOTED FOR
THE NOMINEES FOR DIRECTOR SET FORTH BELOW AND IN FAVOR OF EACH OF THE OTHER
PROPOSALS SET FORTH IN THIS PROXY STATEMENT/PROSPECTUS FOR CONSIDERATION AT THE
ANNUAL MEETING. The proxy confers discretionary authority on the persons named
therein to vote with respect to the election of any person as a director where
the nominee is unable to serve or for good cause will not serve, and with
respect to matters incident to the conduct of the Annual Meeting. If any other
business is presented at the Annual Meeting, proxies will be voted by those
named therein in accordance with the determination of a majority of the Board
of Directors. Proxies marked as abstentions will not be counted as votes cast.
In addition, shares held in street name which have been designated by brokers
on proxy cards as not voted ("broker no votes") will not be counted as votes
cast. Proxies marked as abstentions or as broker no votes, however, will be
treated as shares present for purposes of determining whether a quorum is
present.
Stockholders who execute the form of proxy enclosed herewith retain
the right to revoke such proxies at any time prior to exercise. Unless so
revoked, the shares represented by properly executed proxies will be voted at
the Annual Meeting and all adjournments thereof. Proxies may be revoked at any
time prior to exercise by written notice to the Secretary of the Bank or by the
filing of a properly executed, later-dated proxy. A proxy will not be voted if
a stockholder attends the Annual Meeting and votes in person. The presence of
a stockholder at the Annual Meeting alone will not revoke such stockholder's
proxy.
- --------------------------------------------------------------------------------
VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF
- --------------------------------------------------------------------------------
The securities which can be voted at the Annual Meeting consist of
shares of the Bank's common stock, $.01 par value per share ("Bank Common
Stock"). Stockholders of record as of the close of business on September 27,
1996 (the "Record Date") are entitled to one vote for each share of Bank Common
Stock then held on all matters. As of the Record Date, 889,824 shares of the
Bank Common Stock were issued and outstanding. In addition, 42,176 shares of
Bank Common Stock were held as treasury stock. The presence, in person or by
proxy, of at least a majority of the total number of shares of Bank Common
Stock outstanding and entitled to vote will be necessary to constitute a quorum
at the Annual Meeting.
(1)
<PAGE> 12
The following table sets forth, as of the Record Date, certain
information as to the persons believed by management to be the beneficial
owners of more than 5% of the outstanding shares of Bank Common Stock and as to
the shares of Bank Common Stock beneficially owned by all executive officers
and directors of the Bank as a group. Persons and groups owning in excess of
5% of Bank Common Stock are required to file certain reports regarding such
ownership with the Bank and the Office of Thrift Supervision ("OTS") pursuant
to the Securities Exchange Act of 1934, as amended (the "Exchange Act"). This
information is based on the most recent reports filed by such persons with the
OTS or information provided to the Bank by such persons.
<TABLE>
<CAPTION>
Percent of Shares
Name and Address of Amount and Nature of of Common Stock
Beneficial Owners Beneficial Ownership(1) Outstanding
- ------------------------ ----------------------- --------------------
<S> <C> <C> <C>
All Executive Officers and 76,700 (2) 8.6%
Directors as a Group
(12 persons)
Heartland Advisors, Inc. 87,551 (3) 9.8%
790 N. Milwaukee Street
Milwaukee, Wisconsin
</TABLE>
- ------------------------
(1) In accordance with Rule 13d-3 under the Exchange Act, a person is
considered to "beneficially own" any shares of Bank Common Stock (a)
over which he has or shares voting or investment power, or (b) of
which he has the right to acquire beneficial ownership at any time
within 60 days of the Record Date. As used herein, "voting power" is
the power to vote or direct the vote of shares, and "investment power"
is the power to dispose or direct the disposition of shares.
(2) Includes shares owned directly by directors and officers of the Bank
as well as shares held by their spouses and minor children and trusts
of which certain directors are trustees, but does not include shares
held or beneficially owned by other relatives as to which they
disclaim beneficial ownership. Excludes shares of Bank Common Stock
underlying options granted under the Pinnacle Bank 1996 Stock Option
and Incentive Plan (the "Option Plan") which are subject to
stockholder approval of the Option Plan.
(3) Heartland Advisors, Inc., a registered investment advisor, reported
sole dispositive power of 87,551 shares and sole voting power of
15,600 shares as of December 31, 1995. Included in such 87,551 shares
are 67,800 shares which are beneficially owned by Heartland Group,
Inc., a series investment company for which Heartland Advisors, Inc.
serves as investment advisor.
- --------------------------------------------------------------------------------
PROPOSAL I -- ELECTION OF DIRECTORS
- --------------------------------------------------------------------------------
The Board of Directors of the Bank is currently composed of 11 members
elected for terms of three years, approximately one-third of whom are to be
elected annually in accordance with the Bylaws. The Board of Directors has
nominated O. H. Brown, James W. Cannon, Sam W. Murphy and J. T. Waggoner, each
to serve for a three-year term or until their successors have been elected and
shall qualify.
It is intended that the persons named in the proxies solicited by the
Board of Directors will vote for the election of the named nominees.
Stockholders are not entitled to cumulate their votes for the election of
directors. If any nominee is unable to serve, the shares represented by all
valid proxies will be voted for the election of such substitute director as the
Board of Directors may recommend or the Board of Directors may reduce the
number of directors to eliminate the vacancy.
Neither the Bank's Federal Stock Charter or Bylaws nor applicable
federal regulations specify the vote required to elect a director of a federal
savings bank. State corporation laws customarily provide that the vote of the
majority of the shares represented at a meeting at which a quorum is present is
considered an act of the stockholders except when a greater vote is required by
law or by the corporation's charter or bylaws. State corporate codes may also
specify that directors may be elected by a plurality of the votes cast, i.e.,
the nominees receiving the highest number of votes are elected regardless of
whether such votes constitute a majority of the
(2)
<PAGE> 13
shares represented at the meeting. Management's nominees have received well in
excess of a majority of the votes represented at past annual meetings.
The following table sets forth for each nominee and for each director
continuing in office, such person's name, age, the year he first became a
director and the number of shares and percentage of Bank Common Stock
beneficially owned.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE NOMINEES NAMED
BELOW AS DIRECTORS OF THE BANK.
<TABLE>
<CAPTION>
YEAR FIRST
ELECTED PRESENT SHARES OF
OR TERM COMMON STOCK PERCENT
APPOINTED TO BENEFICIALLY, OF
NAME AGE(1) DIRECTOR EXPIRE OWNED (2) CLASS
---- ------ -------- ------ -------------- -----
BOARD NOMINEES FOR TERMS TO EXPIRE IN 1999
<S> <C> <C> <C> <C> <C>
O. H. Brown 51 1989 1996 3,600 *
James W. Cannon 52 1990 1996 7,749 *
Sam W. Murphy 49 1981 1996 9,430 1.06%
J. T. Waggoner 59 1996 1996 44 *
</TABLE>
<TABLE>
<CAPTION>
DIRECTORS CONTINUING IN OFFICE
<S> <C> <C> <C> <C> <C>
Al H. Simmons 49 1979 1997 40,356 4.54%
Robert B. Nolen, Jr. 37 1994 1997 834 *
Max W. Perdue 62 1991 1997 2,528 *
Carlton Mayhall, Jr. 57 1983 1997 2,999 *
Melvin R. Kacharos 69 1989 1998 2,150 *
John D. Baird 71 1992 1998 2,000 *
Greg Batchelor 40 1983 1998 3,010 *
</TABLE>
- ---------
* Less than 1% of shares outstanding.
- ------------------------
(1) At June 30, 1996.
(2) At the Record Date. In accordance with Rule 13d-3 under the Exchange
Act, a person is considered to "beneficially own" any shares of Bank
Common Stock (a) over which he has or shares voting or investment
power, or (b) of which he has the right to acquire beneficial
ownership at any time within 60 days of the Record Date. As used
herein, "voting power" is the power to vote or direct the vote of
shares, and "investment power" is the power to dispose or direct the
disposition of shares. Includes shares owned directly by the named
individuals as well as shares held by their spouses and minor children
and trusts of which certain of such persons are trustees, but does not
include shares held or beneficially owned by other relatives as to
which they disclaim beneficial ownership. See "Voting Securities and
Principal Holders Thereof."
(3)
<PAGE> 14
Listed below is certain information about the principal occupations of
the Board nominees and the other directors of the Bank. Unless otherwise
noted, all such persons have held these positions for at least five years.
O. H. BROWN, is a certified public accountant, presently with the
accounting firm of Lapidus, Tuck, Raymond & Fowler, P.C., Jasper, Alabama.
From 1976 to June 1991, Mr. Brown had his own accounting practice also in
Jasper, Alabama.
JAMES W. CANNON is Senior Vice President - Operations of Burton
Manufacturing Company, a manufacturer of golf bags.
SAM W. MURPHY is Chairman of the Board, Chief Executive Officer and
Sales Manager of Murphy Furniture Manufacturing Co., Inc., a furniture
manufacturer located in Jasper.
J. T. WAGGONER is Vice President, Community and Public Affairs,
HealthSouth Corporation, Birmingham, Alabama. He also serves as an Alabama
State Senator.
AL H. SIMMONS joined the Bank in 1973 and served as President of the
Bank from 1979 until 1994. In October 1989, Mr. Simmons was elected Chairman
of the Board of Directors. Mr. Simmons is the son of Chairman of the Board
Emeritus A. R. Simmons.
ROBERT B. NOLEN, JR. joined the Bank in 1987 as First Vice President,
Chief Financial Officer and Treasurer. In 1990, Mr. Nolen was appointed
Executive Vice President of the Bank, and in 1994, Mr. Nolen was appointed
President and Chief Executive Officer of the Bank.
MAX W. PERDUE retired in 1991 as Jasper, Alabama District Manager of
the Alabama Power Company having served with the company for thirty years in
various engineering and management positions. Mr. Perdue is past-president of
the Jasper Area Chamber of Commerce.
CARLTON MAYHALL, JR. has been a circuit judge with the State of
Alabama Judicial Department since 1971. Judge Mayhall is also a director of
First National Bank of Hamilton, Alabama. Judge Mayhall resides in Hamilton,
Alabama.
MELVIN R. KACHAROS was Executive Vice President of Vulcan Asphalt,
Inc., Cordova, Alabama, from which position he retired in 1988. Mr. Kacharos
is a Lieutenant Colonel, Retired, of the U.S. Army Reserve.
JOHN D. BAIRD was President and Chief Executive Officer of Master
Craftsleep Products, a Jasper-based bedding manufacturer until his retirement
in 1989.
GREG BATCHELOR has been the Manager of Dependable Service Center, a
hardware and auto supply store located in Russellville, Alabama, since 1979.
Mr. Batchelor resides in Russellville, Alabama.
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors conducts it business through meetings of the
Board and through its committees. During the fiscal year ended June 30, 1996
the Board of Directors held 12 meetings. No director of the Bank attended
fewer than 75% of the total meetings of the Board of Directors and committee
meetings for committees on which such Board member served during this period.
The Executive Committee, composed of Directors Perdue, Baird,
Kacharos, Murphy, Brown, Simmons and Nolen, meets when deemed necessary by the
President of the Bank to discuss and approve any business coming before the
Board between monthly Board meetings. During the year ended June 30, 1996 the
Executive Committee held 12 meetings.
The Audit Committee, composed of Directors Perdue, Murphy and Brown,
is responsible for the review and evaluation of the Bank's annual audit reports
with the Bank's independent auditors and reports all findings
(4)
<PAGE> 15
and recommendations to the Board of Directors. The audit committee also
directs the activities of the Bank's internal auditor. During the year ended
June 30, 1996 the Audit Committee held four meetings.
The Compensation Committee, composed of Directors Perdue, Baird and
Cannon, meets annually or at the direction of the Bank's President to review
and adjust employee salaries. During the year ended June 30, 1996 the
Compensation Committee held four meetings. Members of the Compensation
Committee, also serve as the Stock Option Committee of the Bank. During the
year ended June 30, 1996, the Stock Option Committee did not meet.
The Board of Directors also serves as a Nominating Committee for
selecting the management nominees for election as directors. While the Board
of Directors will consider nominees recommended by stockholders, it has not
actively solicited recommendations from the Bank's stockholders for nominees,
nor has it established any procedures for this purpose. The Board of Directors
held one meeting in its capacity as the Nominating Committee to nominate the
individuals named herein for election as directors at the Annual Meeting.
Nominations for election as directors shall be made in accordance with
the Bank's Bylaws. Copies of such Bylaws may be requested by a stockholder of
record, by writing to the Secretary of the Bank at the Bank's main office.
Nominations by stockholders are required to be received by the Secretary of the
Bank on or before September __, 1996.
EXECUTIVE COMPENSATION
The following table sets forth the cash and noncash compensation for
the fiscal year ended June 30, 1996 awarded to or earned by the Chief Executive
Officer. No other executive officer of the Bank earned in excess of $100,000
in salary and bonus during the fiscal year.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long-Term Compensation
----------------------------------
Annual Compensation Awards Payouts
------------------------------------------ ------------------------- -------
Restricted Securities All Other
Name and Fiscal Other Annual Stock Underlying LTIP Compen-
Principal Position Year Salary Bonus Compensation(1) Award(s) Options(2) Payouts sation(3)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Robert B. Nolen, Jr. 1996 $80,696 $25,000 $ $ $ $2,424
President, Chief 1995 72,782 22,000 -- -- -- -- 1,929
Executive Officer 1994 72,782 10,000 -- -- -- -- 2,069
</TABLE>
- -------------
(1) Executive officers of the Bank receive indirect compensation in the
form of certain perquisites and other personal benefits. The amount
of such benefits in the fiscal year by the named executive officer did
not exceed 10% of the executive's annual salary and bonus.
(2) No options were granted or exercised during the year ended June 30,
1996.
(3) Represents contributions under the Bank's 401(k) plan.
DIRECTORS' COMPENSATION
Directors currently each receive a monthly fee of $600. Members of
the Executive Committee also receive a fee of $200 per month. In addition,
directors receive a fee of $200 for each Executive Committee attended, $200 for
each Building Committee meeting attended and $100 for each other committee
meeting attended. Directors Emeritus receive $200 for each Board meeting
attended. Officers of the Bank do not receive fees for committee or advisory
board meetings attended.
EMPLOYMENT AGREEMENT
In 1991, the Bank entered into an employment agreement with Robert B.
Nolen, Jr. The agreement, as subsequently amended in 1993, provided for Mr.
Nolen to serve as Executive Vice President of the Bank for a
(5)
<PAGE> 16
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.
TRANSACTIONS WITH THE BANK
The Bank makes available loans to directors, officers and other
employees, including mortgage loans for the purchase or refinancing of their
residences. It is the belief of management that these loans neither involve
more than normal risk of collectability nor present other unfavorable features.
Such loans have been made in the ordinary course of business on substantially
the same terms, including interest rates, collateral and repayment terms, as
those prevailing for comparable transactions with non-affiliated persons.
Effective July 1, 1989, the Bank discontinued the policy of making mortgage
loans to its directors, officers and other employees at less than prevailing
rates of interest, and all currently outstanding loans to directors, officers
and other employees of the Bank provide for prevailing rates of interest.
Management believes that all loans made by the Bank to directors, officers and
other employees were in compliance with federal regulations in effect at the
time the loans were made.
The Bank's former main office building is owned by the Bank and is
situated on land leased from entities associated with the Simmons family and of
which Chairman Emeritus A. R. Simmons is a partner or trustee. Under the terms
of the lease for this office, a monthly payment of $1,050 is made for the
grounds and 36 parking spaces. The lease was renewed in December 1986 for 10
years with an option to renew for four additional terms of 5 years. The Bank
has been granted a right of first refusal to purchase the land. The Jasper
Mall Branch building is also owned by the Bank, and situated on land leased
from an entity associated with the Simmons family. A 35-year lease for the
land on which the Jasper Mall Branch is located currently provides annual
rental of $20,304 to the entity associated with the Simmons family. The lease
runs through 2017.
The Bank leases its Haleyville Branch Office facilities from Cecil
Batchelor, the father of Director Greg Batchelor. During the year ended June
30, 1996, the Bank paid $23,514 to Cecil Batchelor to lease the Haleyville
facilities.
In 1986, the Bank entered into an employment agreement with Al H.
Simmons. The agreement, as subsequently amended, provided for Mr. Simmons to
serve as President and Chief Executive Officer of the Bank for a term of three
years ending in 1996 and receive a base salary of $109,080 per annum, subject
to annual adjustments. In May 1994, the Bank and Mr. Simmons entered into a
termination agreement whereby the parties agreed to terminate Mr. Simmons'
employment agreement and to provide for a lump sum payment to Mr. Simmons of
certain severance benefits in satisfaction of Mr. Simmons' rights under the
employment agreement. In connection therewith, Mr. Simmons agreed to resign as
President and Chief Executive Officer of the Bank effective July 1, 1994, and
the Bank agreed to pay to Mr. Simmons a benefit having a present value equal to
$362,447. Such benefit is being paid in 60 payments of $7,000 per month that
began in July 1994. In the event of a "change of control" of the Bank, as
defined in the agreement, Mr. Simmons may direct the Bank to contribute to an
irrevocable trust assets having a present value equal to the total amount
payable to Mr. Simmons during the remaining term of the agreement. Under such
circumstances, payments due Mr. Simmons under the agreement would be made from
the trust; provided, however, that if the assets of the trust are insufficient
to satisfy the Bank's obligations under the agreement, the Bank would remain
obligated to make such payments directly to Mr. Simmons.
(6)
<PAGE> 17
- --------------------------------------------------------------------------------
II -- RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
- --------------------------------------------------------------------------------
Arthur Andersen LLP served as the Bank's independent auditors for the
fiscal year ended June 30, 1996. The Board of Directors has appointed Arthur
Andersen LLP to serve as the Bank's independent auditors for the fiscal year
ending June 30, 1997, subject to ratification by the Bank's stockholders. No
determination has been made as to what action the Board of Directors would take
if the stockholders do not ratify the appointment. A representative of Arthur
Andersen LLP is expected to be present at the Annual Meeting to respond to
appropriate questions and will have the opportunity to make a statement if he
so desires. Unless otherwise indicated, properly executed proxies will be
voted in favor of ratifying the appointment of Arthur Andersen LLP, as
independent auditors.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" THE
RATIFICATION OF THE APPOINTMENT OF ARTHUR ANDERSEN LLP AS THE BANK'S
INDEPENDENT AUDITORS.
- --------------------------------------------------------------------------------
III -- PROPOSED HOLDING COMPANY FORMATION
- --------------------------------------------------------------------------------
SUMMARY
The formation of a holding company will be accomplished under an
Agreement and Plan of Reorganization, dated August 28, 1996 (the "Plan of
Reorganization"), pursuant to which the Bank will become a wholly owned
subsidiary of the Holding Company, a Delaware corporation recently formed for
the purpose of becoming a holding company for the Bank. Under the terms of the
Plan of Reorganization, each outstanding share of Bank Common Stock will be
converted into one share of Holding Company Common Stock, and 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 Reorganization, it is
intended that the Bank will continue its operations at the same location, with
the same management, and subject to all the rights, obligations and liabilities
of the Bank existing immediately prior to the Reorganization.
REASONS FOR THE HOLDING COMPANY 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. Federal regulations limit the types of businesses in which the Bank may
engage and limit the amount which may be invested by the Bank in subsidiaries.
The Bank is also limited in its ability to engage in certain corporate
transactions, such as stock repurchases, by provisions of the Internal Revenue
Code of 1986, as amended (the "Code"), applicable to savings banks but not to
their holding companies. The Board of Directors believes that stock
repurchases could improve market liquidity and enhance stockholder value.
Because there are currently no material restrictions on the business
activities of a unitary savings and loan holding company (i.e., a holding
company with only one savings institution subsidiary), the establishment of
such a holding company also permits diversification of operations and the
acquisition and formation of companies engaged in lines of business which,
while complementary to the thrift business, should help to reduce the risks
inherent in an industry which is sensitive to interest rate changes. The
qualification of the Holding Company as a unitary savings and loan holding
company will, however, be subject to the Bank's continued maintenance of its
status as a Qualified Thrift Lender ("QTL"). See "-- Regulation of the Holding
Company -- Activities Restrictions." The Bank is currently, and expects to
remain, a QTL, although there can be no assurance of its ability to do so.
Upon consummation of the Reorganization, it is expected that the Holding
Company will be in a position to take immediate advantage of any acquisition or
conversion opportunities which may arise, though no specific acquisition or
conversion is planned at this time.
With respect to diversification, it should be noted that currently
there are numerous proposals under consideration by the Administration and the
Congress that could, if enacted as proposed, restrict the business
diversification opportunities available to the Holding Company. However, it is
impossible to predict which, if any, of these legislative changes may
eventually be enacted into law. The Bank does not believe that enactment of
any
(7)
<PAGE> 18
of these proposals would have a material effect upon the future plans or
operations of the Bank or the Holding Company, neither of which have any
diversification plans at this time. If the Holding Company should become
subject to business diversification limitations similar to those applicable to
bank holding companies under the Bank Holding Company Act of 1956, as amended,
its potential diversification outside the business of banking and related
fields would be materially affected.
The Board of Directors believes that the Bank's status as a
wholly-owned subsidiary of the Holding Company may also facilitate the
conversion of the Bank's charter into a commercial bank charter or other
financial institution charter. Should the Bank's business objectives change in
the future in a manner such that it would benefit from conversion to a
different form of financial institution charter, the Bank may consider such a
charter conversion at that time. However, the Bank has no present plans to
convert the Bank's charter.
Although the Board of Directors of the Bank presently intends to
operate the Holding Company as a unitary savings and loan holding company in
order to permit diversification, the Holding Company will have the ability to
become a multiple savings and loan holding company (a holding company which has
more than one savings institution subsidiary). The multiple holding company
structure can facilitate the acquisition of other savings institutions in
addition to other companies. If a multiple holding company structure is
utilized, the acquired savings institution would be able to operate on a more
autonomous basis as a wholly owned subsidiary of the holding company rather
than as a division of the Bank. For example, the acquired institution could
retain its own directors, officers and corporate name, as well as having
representation on the Holding Company's board of directors. This more
autonomous operation may be decisive in acquisition negotiations. Although
there are no pending plans, agreements or understandings for acquisitions, the
Holding Company will be in a position to immediately take advantage of any
acquisition opportunities as they arise. Any acquisition of another savings
institution would be subject to regulatory approval. See "-- Regulation of the
Holding Company -- Restrictions on Acquisitions."
If the Holding Company decides in the future to use a multiple savings
and loan holding company structure, the Holding Company would be able to
diversify its financial services and business activities through the Holding
Company or other subsidiaries of the Holding Company to a greater degree than
is currently possible through the Bank or its service corporation. In general,
however, the business activities of multiple savings and loan holding companies
are restricted to certain enumerated activities (except that such restrictions
do not apply in the case of multiple savings and loan holding companies where
each acquisition of an additional savings association was made pursuant to
authority to approve emergency thrift acquisitions and each subsidiary savings
association satisfies the QTL test). See "-- Regulation of the Holding Company
- -- Activities Restrictions." Despite such restrictions, the range of financial
services and business activities authorized for multiple savings and loan
holding companies is still broader than those authorized for service
corporations of federal savings institutions. This ability of a holding
company to diversify on a limited basis while acquiring other savings
associations through a multiple structure or to have complete authority to
diversify as a unitary savings and loan holding company is believed by the
Board of Directors of the Bank to be a substantial operating advantage to the
holding company structure.
THE BOARD OF DIRECTORS OF THE BANK HAS UNANIMOUSLY APPROVED THE PLAN
OF REORGANIZATION AND RECOMMENDS THAT THE STOCKHOLDERS VOTE "FOR" THE PLAN OF
REORGANIZATION.
PLAN OF REORGANIZATION
The Reorganization will be accomplished under the Plan of
Reorganization, which is attached as Exhibit A hereto. The following
discussion is qualified in its entirety by reference to the Plan of
Reorganization. The Plan of Reorganization was unanimously approved by the
Board of Directors on August 28, 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 of
Reorganization is by and between the Bank, Holding Company and Pinnacle Interim
Bank, a to-be-formed interim stock savings bank that will be a wholly-owned
subsidiary of the Holding Company ("Interim Savings").
(8)
<PAGE> 19
The Reorganization will 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 a newly formed interim savings
stock savings bank, and subsequently becoming the sole stockholder of the Bank;
(ii) the formation of an interim savings stock savings bank, Interim Savings,
which will be wholly owned by the Holding Company; and (iii) the merger of
Interim Savings into the Bank, with the Bank as the surviving corporation.
Pursuant to such merger: (i) all of the issued and outstanding shares of Bank
Common Stock 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 common stock of Interim Savings will automatically be converted by operation
of law on a one-for-one basis into an equal number of issued and outstanding
shares of Bank Common Stock, which will be all of the issued and outstanding
stock of the Bank.
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 million, subject to non-objection by the OTS.
Future capitalization of the Holding Company will be dependent upon dividends
declared by the 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 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 Bank; accordingly, the Bank is described herein as a "wholly
owned" subsidiary of the Holding Company following the Reorganization.
Further, the 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. The Federal Stock Charter and By-Laws of the Bank will
continue in effect and will not be affected in any manner by the
Reorganization, and the Bank will continue to operate under its current name.
The corporate existence of the Bank will continue unaffected and unimpaired by
the Reorganization.
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 Reorganization, the
assets of the Holding Company, on an unconsolidated basis, will consist of all
of the then-outstanding shares of Bank Common Stock. However, the Bank
anticipates that following the Reorganization, it will declare and pay a up to
$2 million cash dividend to the Holding Company, as the Bank's sole
stockholder. While the 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 Bank's future financial requirements and applicable
regulatory restrictions.
(9)
<PAGE> 20
Set forth below is the consolidated capitalization of the Holding
Company after giving effect to the Reorganization as of June 30, 1996. Except
for the elimination of treasury stock, the pro forma capitalization of the
Holding Company set forth below is identical to the capitalization of the Bank
at June 30, 1996.
<TABLE>
<CAPTION>
As of June 30, 1996
Consolidated Pro Forma
Capitalization of the Holding Company
-------------------------------------
(In thousands)
<S> <C>
Liabilities
-----------
Deposits . . . . . . . . . . . . . . . . . . $165,234
Borrowed funds . . . . . . . . . . . . . . . 3,750
Official checks outstanding . . . . . . . . 770
Advance payments by borrowers for
taxes and insurance . . . . . . . . . . 380
Deferred taxes . . . . . . . . . . . . . . . 168
Other liabilities . . . . . . . . . . . . . 1,007
--------
Total liabilities . . . . . . . . . $171,309
========
Stockholders' Equity
--------------------
Common stock, $.01 par value,
2,400,000 shares authorized,
889,824 shares outstanding . . . . . . . $ 9
Preferred stock, $.01 par value,
100,000 shares authorized,
no shares outstanding . . . . . . . . . --
Additional paid-in capital . . . . . . . . . 8,376
Retained earnings . . . . . . . . . . . . . 7,449
Net unrealized gain (loss) on securities
available for sale . . . . . . . . . . . (323)
--------
Total stockholders' equity . . . . $ 15,511
========
</TABLE>
The Bank estimates that the total expenses associated with the
Reorganization will be approximately $50,000. These expenses will be
capitalized and amortized by the Bank over a 60 month period.
Financial resources may be available to the Holding Company in the
future through borrowings, debt or equity financings or dividends from the Bank
or other acquired entities or new businesses. Any loans from the 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 Bank to the Holding Company
will be subject to tax considerations and regulatory limitations and will
result in taxable income to the Bank to the extent that they are deemed to be
from the Bank's loan loss reserves.
The capital of the Holding Company may be used by the Holding Company
for various corporate purposes, including acquisitions of other financial
institutions or companies engaged in related activities in the financial
services industry, subject to the requirements of applicable federal and state
law, or for repurchases of outstanding shares of Holding Company Common Stock.
At the present time, however, the Holding Company has no agreements,
understandings or plans regarding any such acquisitions or repurchases. The
capital of the Holding Company will also be available for general corporate
purposes, including the payment of dividends to the Holding Company's
stockholders and providing loans to the Bank.
(10)
<PAGE> 21
EFFECTIVE DATE
The "Effective Date" of the Reorganization will be the date upon which
the Articles of Combination pertaining to the Reorganization are endorsed by
the OTS. Although management of the Bank does not anticipate any significant
delays in obtaining the OTS' endorsement of the Articles, the effects of any
such delays on holders of the Bank Common Stock would depend upon the facts and
circumstances surrounding the specific delay. The Bank currently expects that
the Effective Date will be immediately following the satisfaction of all
conditions to the Plan of Reorganization, including the receipt of stockholder
approval, approval of the Holding Company's application to the OTS to serve as
the holding company for the Bank, and endorsement of the Articles of
Combination by the OTS.
OPTIONAL EXCHANGE OF STOCK CERTIFICATES
After the Effective Date of the Reorganization, certificates
evidencing shares of Bank Common Stock will automatically represent, by
operation of law, the same number of shares of the Holding Company Common
Stock. Former holders of the Bank Common Stock will not be required to
exchange their Bank Common Stock certificates for Holding Company Common Stock
certificates, but will have the option to do so. Any stockholder desiring more
information about such exchange may request additional information from the
Bank by writing Robert B. Nolen, Jr., President of the Bank, at P.O. Box 1388,
Jasper, Alabama 35502-1388.
NO DISSENTERS' RIGHTS OF APPRAISAL
Pursuant to federal regulations, stockholders of the Bank will not
have any dissenters' appraisal rights in connection with the Reorganization if
the Bank Common Stock continues to be listed on the American Stock Exchange.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
It is a condition to the obligation of the Bank, Holding Company and
Interim Savings to consummate the 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 Reorganization
will be treated as a non-taxable transaction under applicable provisions of the
Code, and (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
Holding Company Common Stock in the Reorganization.
Assuming that representations to be made by the Bank in connection
with the 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 Reorganization will be a non-taxable
transaction 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.
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 BANK
STOCKHOLDER 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 BANK
STOCKHOLDER IS URGED TO CONSULT HIS OR HER OWN TAX AND FINANCIAL ADVISOR AS TO
THE EFFECT OF SUCH FEDERAL INCOME TAX CONSEQUENCES ON HIS OR HER OWN FACTS AND
CIRCUMSTANCES AND ALSO AS TO ANY STATE, LOCAL, FOREIGN OR OTHER TAX
CONSEQUENCES ARISING OUT OF THE REORGANIZATION.
(11)
<PAGE> 22
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 of Reorganization. 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 or the Bank.
Pursuant to Rule 145 under the 1933 Act, shares of Holding Company Common Stock
acquired by persons who are "affiliates" of the Holding Company or the Bank
will be subject to the resale restriction contained in paragraphs (c), (e), (f)
and (g) of Rule 144 under the 1933 Act. Affiliates are generally defined as
persons who control, are controlled by, or are under common control with the
Holding Company at the time of the Annual Meeting (generally, executive
officers and directors of the Holding Company or the 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 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 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
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 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 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 of Reorganization, stockholders of the Bank will be approving the
adoption by the Holding Company of the option plans of the Bank outstanding as
of the Effective Date as the option plans of the Holding Company, including the
Pinnacle Bank 1996 Stock Option and Incentive Plan if approved by stockholders
at the Annual Meeting. See "Proposal IV -- Approval of The Pinnacle Bank 1996
Stock Option and Incentive Plan."
EFFECT ON CURRENT MARKET VALUE OF OUTSTANDING BANK COMMON STOCK AND HOLDING
COMPANY COMMON STOCK
The Board of Directors does not know of any reason why implementation
of the Plan of Reorganization 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 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.
(12)
<PAGE> 23
CONDITIONS TO THE REORGANIZATION
The Plan of Reorganization sets forth a number of conditions which
must be met before the Reorganization will be consummated, including, among
others, (i) the approval of the Plan of Reorganization by the holders of a
majority of the outstanding shares of Bank Common Stock, (ii) the receipt of
either a ruling from the IRS or an opinion of counsel or independent auditors
that the Reorganization will be treated as a nontaxable transaction under the
Code (see "-- Tax Consequences"), (iii) the approval of the Reorganization by
the OTS and the receipt of all approvals from any other governmental agencies
which may be required for the consummation of the Reorganization; and (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. Additionally, the Plan of Reorganization may be
terminated at any time prior to the Effective Date of the Reorganization by the
mutual consent of the Board of Directors of the Bank, Holding Company, and
Interim Savings.
AMENDMENT, TERMINATION OR WAIVER
The Board of Directors of the Bank may cause the Plan of
Reorganization 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 filing of Articles of
Combination with the OTS, whether before or after receipt of stockholder
approval of the Plan of Reorganization, provided that no such amendment may be
made to the Plan of Reorganization after stockholder approval if such amendment
is deemed to be materially adverse to the Bank, Holding Company or their
stockholders. Additionally, any of the terms or conditions of the Plan of
Reorganization may be waived by the party which is entitled to the benefit
thereof.
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 December 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
Reorganization, the 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 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 Bank without the direct payment of any rental
fees to the Bank.
(13)
<PAGE> 24
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 Bank from time to time and reimburse the 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 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 11
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
Robert B. Nolen, Jr. . . . . . . 1997
Max W. Perdue . . . . . . . . . . 1997
Carlton Mayhall, Jr. . . . . . . 1997
Melvin R. Kacharos . . . . . . . 1998
John D. Baird . . . . . . . . . . 1998
Greg Batchelor . . . . . . . . . 1998
O. H. Brown . . . . . . . . . . . 1999
Sam W. Murphy . . . . . . . . . . 1999
Al H. Simmons . . . . . . . . . . 1999
J. T. Waggoner . . . . . . . . . 1999
</TABLE>
See "Proposal I -- Election of Directors."
EXECUTIVE OFFICERS. The executive 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>
(14)
<PAGE> 25
The age at June 30, 1996, principal occupation and business experience
for the past five years of the executive officers of the Holding Company are
set forth below.
Robert B. Nolen, Jr., 37, joined the Bank in 1987 as First Vice
President, Chief Financial Officer and Treasurer. In 1990, Mr. Nolen was
appointed Executive Vice President of the Bank, and in 1994, Mr. Nolen was
appointed President and Chief Executive Officer of the Bank.
Mary Jo Gunter, 42, joined the Bank in 1976. She served positions
within the Loan Department, President of First General Service(s) Corporation,
a subsidiary, and currently is Senior Vice President-Banking Services.
Thomas L. Sherer, 59, joined the Bank in 1960 where he has served in
various positions in the Savings, Marketing and Operations areas. He currently
serves as the Bank's Secretary.
EXECUTIVE COMPENSATION. Since the formation of the Holding Company,
none of its executive 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 directors and officers in addition to compensation paid to
them by the Bank. However, the Holding Company may determine that such
separate compensation is appropriate in the future. At the present time, the
Holding Company does not intend to employ any persons other than its present
management. If the Holding Company acquires other businesses, it may at such
time hire additional employees.
INDEMNIFICATION OF DIRECTORS AND OFFICERS AND LIMITATION OF LIABILITY.
The Bank is required by OTS regulations to indemnify its directors, officers
and employees against legal and other expenses incurred in defending lawsuits
brought against them by reason of the performance of their official duties.
Indemnification may be made to such person only if final judgment on the merits
is in his favor or, in case of (i) settlement, (ii) final judgment against him
or (iii) final judgment in his favor, other than on the merits, if a majority
of the directors of the Bank determines that he was acting in good faith within
the scope of his employment or authority as he could reasonably have perceived
it under the circumstances and for a purpose he could have reasonably believed
under the circumstances was in the best interest of the Bank or its
stockholders. If a majority of the directors of the Bank concludes that in
connection with an action any person ultimately may become entitled to
indemnification, the directors may authorize payment of reasonable costs and
expenses arising from defense or settlement of such action.
The Holding Company's Certificate of Incorporation provides for
indemnification of any individual who is or was a director, officer, employee
or agent of the Holding Company in any proceeding in which the individual is
made a party as a result of his service in such capacity, if the individual
acted in good faith and in a manner he reasonably believed to be in, or not
opposed to, the best interests of the Holding Company and, with respect to any
criminal proceeding, he had no reasonable cause to believe his conduct was
unlawful, unless such indemnification would be prohibited by law. This
provision does not apply to conduct prior to the incorporation of the Holding
Company or to conduct not as a director, officer, employee or agent of the
Holding Company. In accordance with Delaware law, an individual may not be
indemnified (i) in connection with a proceeding by or in the right of the
Holding Company in which the individual was adjudged liable to the Holding
Company or (ii) in connection with any other proceeding charging improper
personal benefit to him in which he was adjudged liable on the basis that
personal benefit was improperly received by him, unless a court of competent
jurisdiction determines he is fairly and reasonably entitled to indemnification
in view of all the relevant circumstances. Management does not have any plans
to provide for indemnification rights beyond those provided in the Holding
Company's Certificate of Incorporation.
Insofar as indemnification for liabilities arising under the 1933 Act
may be permitted to directors, officers or persons controlling the Holding
Company pursuant to the foregoing provisions, the Holding Company has been
informed that in the opinion of the SEC 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
(15)
<PAGE> 26
director, except (i) for breach of the director's duty of loyalty to the
Holding Company or its stockholders, (ii) for acts or omissions that are not in
good faith or that involve gross negligence, intentional misconduct or a
knowing violation of law, (iii) for certain unlawful distributions, or (iv) for
any transaction from which the director derived an improper personal benefit.
This provision eliminates the potential liability of the Holding
Company's directors for failure, through ordinary negligence, to satisfy their
duty of care, which requires directors to exercise informed business judgment
in discharging their duties. It may thus reduce the likelihood of derivative
litigation against directors and discourage or deter stockholders or management
from bringing a lawsuit against directors for breach of their duty of care,
even though such an action, if successful, might otherwise have been beneficial
to the Holding Company and its stockholders. Stockholders may thus be
surrendering a cause of action based upon negligent business decisions,
including those relating to attempts to change control of the Holding Company.
The provision will not, however, affect the right to pursue equitable remedies
for breach of the duty of care, although such remedies might not be available
as a practical matter, and the provision does not apply to breaches of duty
prior to the incorporation of the Holding Company or to breaches not committed
as a director, officer, employee or agent of the Holding Company.
To the best of management's knowledge, there is currently no pending
or threatened litigation for which indemnification may be sought or any recent
litigation involving directors of the Bank that might have been affected by the
limited liability provision in the Holding Company's Certificate of
Incorporation had it been in effect at the time of the litigation.
Federal regulations applicable to the Bank contain no provisions for
limitation of directors' liability.
The above provisions of the Holding Company's Certificate of
Incorporation seek to ensure that the ability of the Holding Company's
directors to exercise their best business judgment in managing the Holding
Company's affairs, subject to their continuing fiduciary duties of loyalty to
the Holding Company and its stockholders, is not unreasonably impeded by
exposure to the potentially high personal costs or other uncertainties of
litigation. The nature of the tasks and responsibilities undertaken by
directors and officers often requires such persons to make difficult judgments
of great importance which can expose such persons to personal liability, but
from which they will acquire no personal benefit (other than as stockholders).
In recent years, litigation against corporations and their directors and
officers, often amounting to mere "second guessing" of good-faith judgments and
involving no allegations of personal wrongdoing, has become common. Such
litigation often claims damages in large amounts which bear no relationship to
the amount of compensation received by the directors or officers, particularly
in the case of directors who are not officers of the corporation. The expense
of defending such litigation, regardless of whether it is well founded, can be
enormous. Individual directors and officers can seldom bear either the legal
defense costs involved or the risk of a large judgment.
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 will be able to
obtain such coverage for its 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 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 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, the individual members of which will benefit from
the inclusion of the indemnification and limitation of liability provisions,
has a personal interest in including these provisions in the Holding Company's
Certificate of Incorporation at the potential expense of stockholders.
(16)
<PAGE> 27
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 B and C and should be reviewed for more detailed
information. The discussion below is qualified in its entirety by reference to
such documents.
ISSUANCE OF CAPITAL STOCK. The Bank's Federal Stock Charter
authorizes the issuance of 20,000,000 shares of capital stock, of which
10,000,000 shares are common stock, par value $.01 per share, and 10,000,000
shares are preferred stock. The Certificate of Incorporation of the Holding
Company authorizes the issuance of 2,500,000 shares of capital stock, of which
2,400,000 shares are common stock, par value $.01 per share, and 100,000 shares
are preferred stock, par value $.01 per share. At June 30, 1996, there were
889,824 shares of Bank Common Stock outstanding and 42,176 shares of Bank
Common Stock held as treasury stock. Following the Reorganization, there will
be the same number of shares of Holding Company Common Stock outstanding.
Under the Bank's Federal Stock Charter, shares of capital stock may not be
issued directly or indirectly to officers, directors or controlling persons of
the Bank (other than as part of a general public offering or as qualifying
shares to a director) unless the issuance or the plan under which they would be
issued is approved by a majority of the votes eligible to be cast. This
restriction on issuing stock to officers, directors or controlling persons is
not contained in the Holding Company's Certificate of Incorporation. The
Holding Company's Certificate of Incorporation authorizes the issuance of
additional shares of stock up to the amount authorized as approved by the Board
of Directors without the approval of the stockholders.
The Holding Company has no present intention to issue additional
shares of stock at this time. 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%.
(17)
<PAGE> 28
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 Bank. Although
the Holding Company will not be subject to the above dividend restrictions
regarding dividend payments to its stockholders, the restrictions on the Bank's
ability to pay dividends to the Holding Company may affect the Holding
Company's ability to pay dividends.
The payment of future cash dividends by the Bank, and thus by the
Holding Company, will continue to depend upon the 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 the Bank's profitability, maintenance of adequate capital,
the Bank's 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. If the Reorganization takes place, federal regulations will require
the Bank to give the OTS 30 days' advance notice of any proposed declaration of
dividends to the Holding Company.
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.
NO RIGHTS OF APPRAISAL. Pursuant to OTS regulations, stockholders of
the Bank do not have dissenters' appraisal rights in connection with a plan of
merger or consolidation to which the Bank is a party because the Bank Common
Stock is listed on the American Stock Exchange. Similarly, because the Holding
Company Common Stock will be listed on the American Stock Exchange following
the Reorganization, stockholders of the Holding Company generally will not have
dissenters' appraisal rights in connection with a business combination as to
which the Holding Company is a party.
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
(18)
<PAGE> 29
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 fifteen. The Bank's Bylaws provide
that its Board of Directors shall consist of 11 members and shall be divided
into three equal classes which shall each be elected for three-year terms. The
Holding Company's Certificate of Incorporation provides that its Board of
Directors shall consist of not less than five nor more than fifteen members, as
set forth in its Bylaws. The Holding Company's Certificate of Incorporation
sets the initial number of directors at eleven persons, who are divided into
three classes, and thereafter the Board of Directors shall consist of such
number of members as determined by the board in accordance with the Certificate
of Incorporation. 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
such as Interim Savings, which requires only a majority vote), except that no
stockholder approval is required if the Bank is the acquiring institution and
the transaction involves, among other things, the issuance of shares of Bank
Common Stock amounting to 15% or fewer of the shares of Bank Common Stock
outstanding immediately prior to the transaction. The Bank may effect a
dissolution pursuant to a plan adopted and approved by the Bank's Board of
Directors, by the OTS, and by the holders of a majority of the Bank's
outstanding shares of common stock.
The Bank's Bylaws require the approval of the holders of (i) at least
two-thirds of the Bank's outstanding shares entitled to vote (and a separate
two-thirds vote of different classes of voting stock outstanding) and (ii) at
least a majority of the Bank's outstanding shares of voting stock, not
including shares held by a "Related Person", to approve certain "Business
Combinations" and related transactions unless the transaction is approved by a
majority of the Bank's "Continuing Directors." A "Business Combination"
includes (i) any merger or consolidation of the Bank with or into a Related
Person; (ii) any sale, lease, exchange, transfer or other disposition of all or
a substantial part of the assets of the Bank or of a subsidiary, to a Related
Person; (iii) any merger or consolidation of a Related Person with or into the
Bank or a subsidiary of the Bank; (iv) any sale, lease, exchange, transfer or
other disposition of all or any Substantial Part of the assets of a Related
Person to the Bank or a subsidiary of the Bank; (v) the issuance of any
securities of the Bank or a subsidiary of the Bank to a Related Person; (vi)
the acquisition by the Bank or a subsidiary of the Bank of any securities of a
Related Person; (vii) any reclassification of the Bank Common Stock, the Bank,
or any recapitalization involving the Bank Common Stock; and (viii) any
agreement, contract or other arrangement providing for any of the transactions
described above. Such affirmative vote is required notwithstanding any other
provision of the Federal Stock Charter, any provision of law, or any agreement
with any regulatory agency or national securities exchange which might
otherwise permit a lesser vote or no vote.
The two-thirds super-majority voting requirement required under the
Bank's Bylaws is not applicable to any transaction approved by a majority of
the Continuing Directors of the Bank at a meeting at which a quorum of
(19)
<PAGE> 30
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 Common Stock of the Bank, and any
"affiliate" of any such individual, corporation, partnership or other person or
entity. The term "Continuing Director" means any member of the Board of
Directors of the Bank who is unaffiliated with the Related Person and was a
member of the Board prior to the time that the Related Person became a Related
Person, and any successor of a Continuing Director who is unaffiliated with the
Related Person and is recommended to succeed a Continuing Director by a
majority of Continuing Directors then on the Board.
Under the Delaware General Corporation Law, mergers, consolidations
and sales of substantially all of the assets of a Delaware corporation must
generally be approved by the vote of the holders of a majority of the
outstanding shares of stock entitled to vote thereon. Section 203 of the
Delaware General Corporation Law, however, restricts certain transactions
between a Delaware corporation (or its majority owned subsidiaries), and a
holder of 15% or more of the corporation's outstanding voting stock, together
with affiliates or associates thereof (excluding persons who became 15%
stockholders by action of the corporation alone) (an "Interested Stockholder").
For a period of three years following the date that a stockholder becomes an
Interested Stockholder, Section 203 prohibits the following types of
transactions between the corporation and the Interested Stockholder (unless
certain conditions, described below, are met): (i) mergers or consolidations;
(ii) sales, leases, exchanges or other transfers of 10% or more of the
aggregate assets of the corporation; (iii) issuances or transfers by the
corporation of any stock of the corporation that would have the effect of
increasing the Interested Stockholder's proportionate share of the stock of any
class or series of the corporation; (iv) receipt by 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 (3)
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, reorganization, or
consolidation of the Holding Company with or into any Related Person; (ii) any
sale, lease, exchange, mortgage, transfer, or other disposition of all or a
substantial part of the assets of the Holding Company or of a subsidiary to any
Related Person (the term "substantial part" is defined to include more than 25%
of the Holding Company's total assets); (iii) any merger or consolidation of a
Related Person with or into the Holding Company or a subsidiary of the Holding
Company; (iv) any sale, lease, exchange, transfer or other disposition of all
or any substantial part of the assets of a Related Person to the Holding
Company or a subsidiary of the Holding Company; (v) the issuance of any
securities of the Holding Company or a subsidiary of the Holding Company to a
Related
(20)
<PAGE> 31
Person; (vi) the acquisition by the Holding Company of any securities of the
Related Person; (vii) any reclassification of the Holding Company Common Stock,
or any recapitalization involving the Holding Company Common Stock; and (viii)
any agreement, contract or other arrangement providing for any of the above
transactions.
ADVANCE NOTICE REQUIREMENTS FOR NOMINATIONS OF DIRECTORS AND
PRESENTATION OF NEW BUSINESS AT MEETINGS OF STOCKHOLDERS. The Bank's Bylaws
generally provide that any stockholder desiring to make a nomination for the
election of directors or a proposal for new business at a meeting of
stockholders must submit written notice to the Bank at least 30 days in advance
of the meeting. Failure to comply with these advance notice requirements will
preclude such nominations or new business from being considered at the meeting.
The Holding Company's Certificate of Incorporation provides that a
stockholder wishing to make nominations or proposals generally must give
written notice to the Secretary of the Holding Company not less than 30 nor
more than 60 days before the meeting, together with certain information
relating to the nomination or new business.
AMENDMENT OF FEDERAL STOCK CHARTER, CERTIFICATE OF INCORPORATION AND
BYLAWS. The Bank's Federal Stock Charter provides that it may be amended only
if the amendment is first proposed by the Bank's Board of Directors, then
preliminarily approved by the OTS, and thereafter approved by the holders of a
majority of the Bank's outstanding shares of common stock. The Bylaws of the
Bank may be amended by the vote of either a majority of the Board of Directors
or the holders of a majority of the outstanding shares of Bank Common Stock.
The Holding Company's Certificate of Incorporation provides that
specified provisions contained in the Certificate of Incorporation may not be
repealed or amended except upon the affirmative vote of not less than 80% of
the outstanding shares of the Holding Company's stock entitled to vote
generally in the election of directors, after giving effect to any limits on
voting rights. This requirement exceeds the majority vote of the outstanding
stock that would otherwise be required by Delaware law for the repeal or
amendment of a certificate provision. The specific provisions are those (i)
governing the calling of special meetings, the absence of cumulative voting
rights and the requirement that stockholder action be taken only at annual or
special meetings, (ii) requiring written notice to the Holding Company of
nominations for the election of directors and new business proposals, (iii)
governing the number of the Holding Company's Board of Directors, the filling
of vacancies on the Board of Directors and classification of the Board of
Directors, (iv) providing the mechanism for removing directors, (v) governing
the requirement for the approval of certain Business Combinations involving a
"Related Person," (vi) regarding the consideration of certain nonmonetary
factors in the event of an offer by another party, (vii) providing for the
indemnification of directors, officers, employees and agents of the Holding
Company, (viii) eliminating the liability of the directors to the Holding
Company and its stockholders for monetary damages, with certain exceptions, for
breach of fiduciary duty, and (ix) governing the required stockholder vote for
amending the Certificate of Incorporation or Bylaws of the Holding Company.
This provision is intended to prevent the holders 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 acquiror.
(21)
<PAGE> 32
CERTAIN ANTI-TAKEOVER PROVISIONS OF THE CERTIFICATE OF INCORPORATION AND BYLAWS
The Board of Directors believes that certain of the provisions
described above reduce the Holding Company's vulnerability to takeover attempts
and certain other transactions which have not been negotiated with and approved
by its Board of Directors. These provisions include: the requirement of the
affirmative vote of 80% of the shares outstanding for the approval of Business
Combinations with Related Persons; the elimination of cumulative voting; the
prohibition against the call of special meetings by stockholders; the
requirement of advance notice of stockholder nominations and new business; the
authorization of additional shares of Holding Company Common Stock; and the
classification of the Board of Directors. The Board of Directors believes
these provisions are in the best interests of the Bank and of the Holding
Company and its stockholders. In the judgment of the Board of Directors, the
Board of Directors is in the best position to consider all relevant factors and
to negotiate for what is in the best interests of the stockholders and the
Holding Company's other constituents. Accordingly, the Board of Directors of
the Holding Company and the Bank believe that it is in the best interests of
the Holding Company and its stockholders to encourage potential acquirors 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 prices reflective of the true value of the Holding Company and
which is in the best interests of all shareholders.
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, shareholders 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 shareholders.
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 become
a savings and loan holding company within the meaning of the Home Owners' Loan
Act, as amended. As such, it will be registered with the OTS and will be
subject to OTS regulations, examinations and reporting requirements. As a
subsidiary of a savings and loan holding company, the Bank will be subject to
certain restrictions in its dealings with the Holding Company and with other
companies affiliated with the Holding Company, and will continue to be subject
to regulatory requirements as a federal savings association.
(22)
<PAGE> 33
ACTIVITIES RESTRICTIONS. The Board of Directors presently intends to
operate the Holding Company as a unitary savings and loan holding company.
There are generally no restrictions on the activities of a unitary savings and
loan holding company. However, if the Director of the OTS determines that
there is reasonable cause to believe that the continuation by a savings and
loan holding company of an activity constitutes a serious risk to the financial
safety, soundness or stability of its subsidiary savings association, the
Director of the OTS may impose such restrictions as deemed necessary to address
such risk including limiting: (i) payment of dividends by the savings
association; (ii) transactions between the savings association and its
affiliates; and (iii) any activities of the savings association that might
create a serious risk that the liabilities of the holding company and its
affiliates may be imposed on the savings association.
If the Holding Company were to acquire control of another savings
association, other than through merger or other business combination with the
Bank, the Holding Company would thereupon become a multiple savings and loan
holding company. Except where such acquisition is pursuant to the authority to
approve emergency thrift acquisitions and where each subsidiary savings
association meets the QTL test, the activities of the Holding Company and any
of its subsidiaries (other than the Bank or other subsidiary savings
institutions) would thereafter be subject to further restrictions. Among other
things, no multiple savings and loan holding company or subsidiary thereof
which is not a savings association shall commence or continue for a limited
period of time after becoming a multiple savings and loan holding company or
subsidiary thereof, any business activity, upon prior notice to, and no
objection by, the OTS, other than: (i) furnishing or performing management
services for a subsidiary savings association; (ii) conducting an insurance
agency or escrow business; (iii) holding, managing, or liquidating assets owned
by or acquired from a subsidiary savings institution; (iv) holding or managing
properties used or occupied by a subsidiary savings institution; (v) acting as
trustee under deeds of trust; (vi) those activities authorized by regulation as
of March 5, 1987 to be engaged in by multiple holding companies; or (vii)
unless the Director of the OTS by regulation prohibits or limits such
activities for savings and loan holding companies, those activities authorized
by the Board of Governors of the Federal Reserve System (the "Federal Reserve
Board") as permissible for bank holding companies. Those activities described
in (vii) above must also be approved by the Director of the OTS prior to being
engaged in by a multiple holding company.
Notwithstanding the above rules as to permissible business activities
of unitary savings and loan holding companies, if the savings association
subsidiary of such a holding company fails to meet the QTL test, then such
unitary holding company will become subject to the activities restrictions
applicable to multiple holding companies. To meet its QTL test, an
institution's "Qualified Thrift Investments" must represent 65% of "portfolio
assets." A savings association that was not subject to penalties for failure
to maintain QTL status as of June 30, 1991 shall be deemed a QTL as long as its
percentage of Qualified Thrift Investments continues to equal or exceed 65% in
at least nine out of each twelve months. A savings association will cease to
be a QTL when its percentage of Qualified Thrift Investments as measured by
monthly averages over the immediately preceding 12-month period falls below 65%
for four or more months. A savings association that fails to maintain QTL
status will be permitted to requalify once, and if it fails the QTL test a
second time, it will become immediately subject to all penalties as if all time
limits on such penalties had expired. Since the Bank was not subject to
sanctions for failure to comply with the QTL test as of June 30, 1991, it will
remain in compliance until its monthly average percentage of Qualified Thrift
Investments to portfolio assets falls below 65% for four or more months as
measured by monthly averages over the preceding 12-month period.
RESTRICTIONS ON ACQUISITIONS. Savings and loan holding companies are
prohibited from acquiring, without prior approval of the Director of OTS, (i)
control of any other savings association or savings and loan holding company or
substantially all the assets thereof or (ii) more than 5% of the voting shares
of a savings association or holding company thereof which is not a subsidiary.
Under certain circumstances, a registered savings and loan holding company is
permitted to acquire, with the approval of the Director of the OTS, up to 15%
of the voting shares of an under-capitalized savings association pursuant to a
''qualified stock issuance" without that savings association being deemed
controlled by the holding company. In order for the shares acquired to
constitute a "qualified stock issuance," the shares must consist of previously
unissued stock or treasury shares, the shares must be acquired for cash, the
savings and loan holding company's other subsidiaries must have tangible
capital of at least 6-1/2% of total assets, there must not be more than one
common director or officer between the savings and loan holding company and the
issuing savings association and transactions between the savings association
and the savings and loan holding company and any of its affiliates must conform
to Sections 23A and 23B of the Federal Reserve Act. Except with the prior
approval of the Director of the OTS, no director or officer of
(23)
<PAGE> 34
a savings and loan holding company or person owning or controlling by proxy or
otherwise more than 25% of such company's stock, may also acquire control of
any savings association, other than a subsidiary savings association, or of any
other savings and loan holding company.
The Director of the OTS may only approve acquisitions resulting in the
formation of a multiple savings and loan holding company which controls savings
associations in more than one state if: (i) the multiple savings and loan
holding company involved controls a savings institution which operated a home
or branch office in the state of the association to be acquired as of March 5,
1987; (ii) the acquiror is authorized to acquire control of the savings
association pursuant to the emergency acquisition provisions of the Federal
Deposit Insurance Act; or (iii) the statutes of the state in which the bank to
be acquired is located specifically permit institutions to be acquired by
state-chartered banks or savings and loan holding companies located in the
state where the acquiring entity is located (or by a holding company that
controls such state-chartered savings institutions).
The Bank Holding Company Act of 1956 authorizes the Federal Reserve
Board to approve an application by a bank holding company to acquire control of
any savings association. Pursuant to rules promulgated by the Federal Reserve
Board, owning, controlling or operating a savings association is a permissible
activity for bank holding companies, if the savings association engages only in
deposit-taking activities and lending and other activities that are permissible
for bank holding companies. In approving such an application, the Federal
Reserve Board may not impose any restriction on transactions between the
savings association and its holding company affiliates except as required by
Sections 23A and 23B of the Federal Reserve Act.
A bank holding company that controls a savings association may merge
or consolidate the assets and liabilities of the savings association with, or
transfer assets and liabilities to, any subsidiary bank which is a member of
the Bank Insurance Fund ("BIF") with the approval of the appropriate federal
banking agency and the Federal Reserve Board. The resulting bank will be
required to continue to pay assessments to the SAIF at the rates prescribed for
SAIF members on the deposits attributable to the merged savings association
plus an annual growth increment. In addition, the total assets of all
depository institution subsidiaries of the bank holding company must be at
least equal to twice the total assets of the savings association and the bank
holding company and all its bank subsidiaries must meet all applicable capital
standards upon consummation of the acquisition. Finally, the transaction must
comply with the restrictions on interstate acquisitions of commercial banks
under the Bank Holding Company Act.
TRANSACTIONS WITH AFFILIATES. Transactions between savings
associations and any affiliate are governed by Sections 23A and 23B of the
Federal Reserve Act, as amended. An affiliate of a savings association is any
company or entity which controls, is controlled by or is under common control
with the savings association. In a holding company context, the parent holding
company of a savings association (such as the Holding Company) and any
companies which are controlled by such parent holding company are affiliates of
the savings association. Generally, Sections 23A and 23B (i) limit the extent
to which the savings association or its subsidiaries may engage in "covered
transactions" with any one affiliate to an amount equal to 10% of such savings
association's capital stock and surplus, and contain an aggregate limit on all
such transactions with all affiliates to an amount equal to 20% of such capital
stock and surplus and (ii) require that all such transactions be on terms
substantially the same, or at least as favorable to the institution or
subsidiary, as those provided to a nonaffiliate. The term "covered
transaction" includes the making of loans, purchase of assets, issuance of a
guarantee and similar other types of transactions. Additionally, in addition to
the restrictions imposed by Sections 23A and 23B, no savings association may
(i) loan or otherwise extend credit to an affiliate, except for any affiliate
which engages only in activities which are permissible for bank holding
companies, or (ii) purchase or invest in any stocks, bonds, debentures, notes
or similar obligations of any affiliate, except for affiliates which are
subsidiaries of the savings association.
The restrictions contained in Section 22(h) of the Federal Reserve
Act, as amended, apply to loans by savings associations to executive officers,
directors and principal stockholders (such as the Holding Company). Section
22(h) requires that loans to directors, executive officers and greater than 10%
stockholders be made on terms substantially the same as offered in comparable
transactions to other persons. Under Section 22(h), loans to an executive
officer and to a greater than 10% stockholder of a savings association (18% in
the case of institutions located in an area with less than 30,000 in
population), and certain affiliated entities of either, may not exceed together
with all other outstanding loans to such person and affiliated entities the
bank's loan-to-one borrower limit
(24)
<PAGE> 35
(generally equal to 15% of the institution's unimpaired capital and surplus and
an additional 10% of such capital and surplus for loans fully secured by
certain readily marketable collateral). Section 22(h) also prohibits loans,
above amounts prescribed by the appropriate federal banking agency, to
directors, executive officers and greater than 10% stockholders of a savings
association, and their respective affiliates, unless such loan is approved in
advance by a majority of the board of directors of the bank with any
"interested" director not participating in the voting. The Federal Reserve
Board has prescribed the loan amount (which includes all other outstanding
loans to such person), as to which such prior board of director approval is
required, to be the greater of $25,000 or 5% of capital and surplus (up to
$500,000).
ACCOUNTING TREATMENT
The 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
Reorganization will be substantially the same as those of the Bank immediately
prior to consummation of the Reorganization, and after the Reorganization, will
be shown in the Holding Company's consolidated financial statements at the
Bank's historical recorded values. Because the 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 of Reorganization requires the affirmative vote
of a majority of the total votes eligible to be cast at the Annual Meeting.
Since the required vote is based on the number of shares outstanding, an
abstention or failure to vote, including a broker no vote, is equivalent to
voting against the Plan of Reorganization. THE BOARD OF DIRECTORS RECOMMENDS A
VOTE "FOR" THE APPROVAL OF THE PLAN OF REORGANIZATION.
THIS DESCRIPTION OF THE PROPOSED HOLDING COMPANY FOR THE BANK DOES NOT
PURPORT TO BE COMPLETE, BUT IS QUALIFIED IN ITS ENTIRETY BY THE PLAN OF
REORGANIZATION AND THE CERTIFICATE OF INCORPORATION AND BYLAWS OF THE HOLDING
COMPANY ATTACHED AS EXHIBITS A, B AND C, RESPECTIVELY, TO THIS PROXY
STATEMENT/PROSPECTUS.
- --------------------------------------------------------------------------------
PROPOSAL IV -- APPROVAL OF
THE PINNACLE BANK 1996 STOCK OPTION AND INCENTIVE PLAN
- --------------------------------------------------------------------------------
GENERAL
The Board of Directors of the Bank has adopted the Pinnacle Bank 1996
Stock Option and Incentive Plan (the "Option Plan"), subject to its approval by
the Bank's stockholders. The Option Plan is attached hereto as Exhibit D 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.
(25)
<PAGE> 36
PURPOSE OF THE OPTION PLAN
The purpose of the Option Plan is to advance the interests of the Bank
by providing directors and selected employees of the Bank with the opportunity
to acquire shares of Bank Common Stock. By encouraging such stock ownership,
the Bank seeks to attract, retain, and motivate the best available personnel
for positions of substantial responsibility and to provide additional incentive
to directors and employees of the Bank and its affiliates to promote the
success of the business of the Bank.
DESCRIPTION OF THE OPTION PLAN
Effective Date. The Option Plan became effective on August 28, 1996,
the date of its approval by the Bank's Board of Directors (the "Plan Effective
Date"). However, the effectiveness of the Option Plan and awards granted
thereunder are subject to stockholder approval of the Option Plan at the Annual
Meeting.
Administration. The Option Plan is administered by a committee (the
"Stock Option Committee") appointed by the Board of Directors, consisting of at
least two directors of the Bank who are non-employee directors within the
meaning of the federal securities laws. The Stock Option Committee has
discretionary authority to select participants and grant awards, to determine
the form and content of any awards made under the Option Plan, to interpret the
Option Plan, to prescribe, amend, and rescind rules and regulations relating to
the Option Plan, and to make other decisions necessary or advisable in
connection with administering the Option Plan, except to the extent that the
Stock Option Committee seeks ratification of its decision by the Board. All
decisions, determinations, and interpretations of the Stock Option Committee
are final and conclusive on all persons affected thereby. Members of the Stock
Option Committee will be indemnified to the full extent permissible under the
Bank's governing instruments in connection with any claims or other actions
relating to any action taken under the Option Plan. The Stock Option Committee
currently consists of Directors Perdue, Baird and Cannon.
Eligible Persons; Types of Awards. Under the Option Plan, the Stock
Option Committee may grant stock options ("Options") and stock appreciation
rights ("SARs") (collectively, "Awards") to such employees as the Stock Option
Committee shall designate. Directors who are not employees, and Robert B.
Nolen, Jr., President and Chief Executive Officer of the Bank, received the
automatic grants described below (see "Automatic Grants"), and will also be
eligible to receive Awards under the Option Plan. As of the Record Date, the
Bank had 67 employees and 10 directors who are not employees who were eligible
to participate in the Option Plan.
Shares Available for Grants. The Option Plan reserves 85,000 shares
of Bank Common Stock for issuance upon the exercise of Options or SARs. Such
shares may be authorized but unissued shares, shares held in treasury, or
shares held in a grantor trust created by the Bank. In the event of any
merger, consolidation, recapitalization, reorganization, reclassification,
stock dividend, split-up, combination of shares, or similar event in which the
number or kind of shares is changed without receipt or payment of consideration
by the Bank, the Plan provides for a proportionate adjustment in the number and
kind of shares reserved for issuance under the Option Plan, the number and kind
of shares subject to outstanding Awards, and the exercise prices of such
Awards. Generally, the number of shares as to which SARs are granted are
charged against the aggregate number of shares available for grant under the
Option Plan, provided that, in the case of an SAR granted in conjunction with
an Option, under circumstances in which the exercise of the SAR results in
termination of the Option and vice versa, only the number of shares of Bank
Common Stock subject to the Option shall be charged against the aggregate
number of shares of Bank Common Stock remaining available under the Option
Plan. If Awards should expire, become unexercisable or be forfeited for any
reason without having been exercised, the shares of Bank Common Stock subject
to such Awards shall, unless the Option Plan shall have been terminated, be
available for the grant of additional Awards under the Option Plan.
Options. Options may be either incentive stock options ("ISOs") as
defined in Section 422 of the Internal Revenue Code, or options that are not
ISOs ("Non-ISOs"). The exercise price of an ISO may not be less than the fair
market value (determined under the Option Plan) of the optioned shares on the
date of grant. In the case of a participant who owns more than 10% of the
outstanding Bank Common Stock on the date of grant, such exercise price of an
ISO may not be less than 110% of fair market value of the shares. The exercise
price of a Non-ISO may not be less than 50% of the fair market value of the
underlying shares. As required by federal tax laws, to the extent that the
aggregate fair market value (determined when an ISO is granted) of the Common
Stock with
(26)
<PAGE> 37
respect to which ISOs are exercisable by an optionee for the first time during
any calendar year (under all plans of the Bank and of any subsidiary) exceeds
$100,000, the Options granted in excess of $100,000 will be treated as
Non-ISOs.
Automatic Grants. On the Plan Effective Date, each of the directors
who are not also employees of Bank received a grant of an Option to purchase
2,500 shares of Bank Common Stock at an exercise price per share equal to its
fair market value on the Plan Effective Date. Directors' Options vest as
follows: 625 shares upon receipt of stockholder approval at the Annual Meeting
and 625 shares upon completion of each of the three years subsequent to the
Plan Effective Date; provided, however, that directors shall receive credit for
years of service prior to the Plan Effective Date. In addition, vesting of
directors' Options shall be accelerated in the event of death, retirement after
age 65 or a change in control of the Bank other than the Reorganization.
Options granted to such directors have a term of 10 years, and expire one year
after a director terminates service on the Board for any reason (two years in
the event of the director's death during the term of his directorship), but in
no event later than the date on which such Options would otherwise expire.
Also on the Plan Effective Date, Robert B. Nolen, Jr., President and Chief
Executive Officer of the Bank, received a grant of ISOs to purchase 10,000
shares of Bank Common Stock.
SARs. An SAR may be granted in tandem with all or part of any Option
granted under the Option Plan, or without any relationship to any Option. An
SAR granted in tandem with an ISO must expire no later than the ISO, must have
the same exercise price as the ISO and may be exercised only when the ISO is
exercisable and when the fair market value of the shares subject to the ISO
exceeds the exercise price of the ISO. For SARs granted in tandem with
Options, the optionee's exercise of the SAR cancels his or her right to
exercise the Option, and vice versa. Regardless of whether an SAR is granted
in tandem with an Option, exercise of the SAR will entitle the optionee to
receive, as the Committee prescribes in the grant, all or a percentage of the
difference between (i) the fair market value of the shares of Common Stock
subject to the SAR at the time of its exercise, and (ii) the fair market value
of such shares at the time the SAR was granted (or, in the case of SARs granted
in tandem with Options, the exercise price). The exercise price as to any
particular SAR may not be less than the fair market value of the optioned
shares on the date of grant.
Exercise of Options and SARs. The exercise of Options and SARs will
be subject to such terms and conditions as are established by the Committee in
a written agreement between the Committee and the optionee, provided that each
Option is fully exercisable on the date of its grant, but not before the Option
Plan receives stockholder approval. In the absence of Committee action to the
contrary, an otherwise unexpired Option granted to an employee of the Bank
shall cease to be exercisable upon (i) an optionee's termination of employment
for just cause, (ii) the date one year after an optionee terminates service due
to disability, (iii) the date two years after an optionee terminates service
due to death, or (iv) the date three months after an optionee terminates
service for a reason other than just cause, death, or disability. An otherwise
unexpired Option granted to a Director shall, in the absence of Committee
action to the contrary, cease to be exercisable (i) the date one year after a
Director terminates service on the Board of Directors (including termination
due to disability) or (ii) the date two years after the Director terminates
service on the Board due to death.
An optionee may exercise Options or SARs, subject to provisions
relative to their termination and any limitations on their exercise, only by
(i) written notice of intent to exercise the Option or SAR with respect to a
specified number of shares of Common Stock, and (ii) in the case of Options,
payment to the Bank (contemporaneously with delivery of such notice) in cash,
in Common Stock, or a combination of cash and Common Stock, of the amount of
the exercise price for the number of shares with respect to which the Option is
then being exercised. Common Stock utilized in full or partial payment of the
exercise price for Options shall be valued at its market value at the date of
exercise and may consist of shares subject to the Option being exercised.
Restricted Stock. The Stock Option Committee has broad discretion at
the time of making a Restricted Stock grant to determine a period of five years
during which the shares granted will be subject to restrictions (the
"Restriction Period"), and the conditions that must be satisfied in order for
the shares of Restricted Stock to become unrestricted (i.e., vested and
nonforfeitable). For example, the Stock Option Committee may condition vesting
upon an optionee's continued employment or upon the optionee's attainment of
specific corporate, divisional or individual performance standards or goals.
The Stock Option Committee may impose special vesting rules applicable if the
optionee retires, becomes disabled or dies before the expiration of the
Restriction Period or satisfaction of the restrictions applicable to an award
of Restricted Stock.
(27)
<PAGE> 38
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 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
(28)
<PAGE> 39
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).
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.
(29)
<PAGE> 40
STOCK OPTIONS GRANTED
Set forth below is certain information relating to all Options that
would become effective upon stockholder approval of the Option Plan. All such
Options (i) are subject to the terms and conditions described above, and (ii)
will automatically expire 10 years after the date of their grant. The exercise
price for these Options equals the fair market value of the Common Stock on the
date of grant ($_____ per share). As of the date hereof, the Option grants
disclosed below were the only Awards that had been made under the Option Plan,
although future Awards are anticipated.
<TABLE>
<CAPTION>
Value of Shares Number of Shares
Participant (or Group) Underlying Options ($)(1) Subject to Options (2)
---------------------- ------------------------- ----------------------
<S> <C> <C>
All executive officers, as a group $ _____ 10,000
(1 person)
All directors who are not executive $ _____ 25,000
officers, as a group
(10 persons)
</TABLE>
- ---------------------
(1) Represents the extent to which the fair market value of the Common
Stock underlying each Option ($_____ per share, based upon the closing
sale price on the Record Date) exceeds the exercise price for such
shares ($17.625 per share, which equaled its fair market value on
August 28, 1996, the date of the grant).
(2) Represents the right to purchase the number of shares of the Common
Stock that is listed opposite the name of each optionee. As of the
date hereof, no other employees have been granted Options under the
Option Plan.
RECOMMENDATION AND VOTE REQUIRED
The Board of Directors has determined that the Option Plan is
desirable, cost effective, and produces incentives which will benefit the Bank
and its stockholders. The Board of Directors is seeking stockholder approval
of the Option Plan to satisfy the requirements of the Internal Revenue Code for
favorable tax treatment of ISOs, the requirements under the Bank's Federal
Stock Charter for issuances of stock of the Bank to directors and officers, and
the requirements of the American Stock Exchange upon which the Common Stock is
listed. Stockholder approval of the Option Plan by a favorable vote of a
majority of the votes eligible to be cast will satisfy all of the foregoing
requirements. THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" APPROVAL OF THE
OPTION PLAN.
(30)
<PAGE> 41
- --------------------------------------------------------------------------------
NEW PLAN BENEFITS
- --------------------------------------------------------------------------------
The following table sets forth certain information regarding the
benefits to be received under the Option Plan.
<TABLE>
<CAPTION>
1996 Stock Option and Incentive Plan
------------------------------------
Dollar Number
Name and Position Value ($)(1) of Units (2)
- ----------------- ------------ ------------
<S> <C> <C>
Robert B. Nolen, Jr. $ 10,000
All executive officers, as a group (1 $ 10,000
person)
All directors who are not executive $ 25,000
officers, as a group (10 persons)
</TABLE>
- ---------
(1) Represents the extent to which the fair market value of the Common
Stock underlying each Option ($_____ per share, based upon the closing
sale price on the Record Date) exceeds the exercise price for such
shares ($17.625 per share, which equaled its fair market value on
August 28, 1996, the date of the grant).
(2) All Options listed herein have been granted subject to stockholder
approval of the Option Plan. In addition to the Option grants shown
herein, the Option Plan provides for future grants of Awards pursuant
to the terms of the Option Plan summarized above. See "Proposal IV --
Approval of 1996 Stock Option and Incentive Plan." As of the date
hereof, no Awards have been granted to employees who are not executive
officers.
- --------------------------------------------------------------------------------
PROPOSAL V --- ADJOURNMENT OF MEETING
- --------------------------------------------------------------------------------
Approval of each of the Plan of Reorganization and the Option Plan
requires the affirmative vote of a majority of the total votes eligible to be
cast at the Annual Meeting. In the event there is an insufficient number of
shares present in person or by proxy at the Annual Meeting to approve either
the Plan of Reorganization or the Option Plan, the Board of Directors intends
to adjourn the Annual Meeting to a later date. The place and date to which the
Annual Meeting would be reconvened would be announced at the Annual Meeting,
but, in order to avoid the necessity of setting a new record date or providing
formal written notice of the adjournment, would in no event be more than 30
days after the date of the Annual Meeting.
The effect of any such adjournment would be to permit the Bank to
solicit additional proxies for approval of the Plan of Reorganization 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 of Reorganization and the Option Plan.
As a result, such adjournment could be advantageous to stockholders who favor
the proposed Reorganization and the Option Plan to the potential disadvantage
of those who would disfavor such proposals.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE APPROVAL OF THE
ADJOURNMENT UNDER THE CIRCUMSTANCES DESCRIBED HEREIN. APPROVAL OF THE
ADJOURNMENT REQUIRES THE AFFIRMATIVE VOTE OF THE HOLDERS OF A MAJORITY OF THE
VOTES CAST IN PERSON OR BY PROXY AT THE ANNUAL MEETING.
- --------------------------------------------------------------------------------
MARKET AND DIVIDEND INFORMATION
- --------------------------------------------------------------------------------
The Bank Common Stock is traded on the American Stock Exchange under
the symbol "PLE". The Holding Company will apply to have the Holding Company
Common Stock traded on the American Stock Exchange in substitution for the Bank
Common Stock under the same symbol. As of June 30, 1996, the Bank had 448
stockholders of record. This total does not reflect the number of persons or
entities who hold stock in nominee or "street name" through various brokerage
firms.
(31)
<PAGE> 42
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
</TABLE>
Dividends of $.72 ($.18 in each of the four quarters) were declared and paid
during each of the fiscal years 1995 and 1996.
The ability of the Bank to pay dividends on Bank Common Stock is
restricted by federal regulations and tax considerations. Although the Holding
Company will 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 Bank, and the aforementioned restrictions on the Bank's ability to pay
dividends will continue in effect. In addition, certain limitations generally
imposed on Delaware corporations may have an impact on the Holding Company's
ability to pay dividends. See "Proposal III -- Proposed Holding Company
Formation -- Comparison of Stockholders' Rights -- Payment of Dividends."
- --------------------------------------------------------------------------------
OTHER MATTERS
- --------------------------------------------------------------------------------
The Board of Directors is not aware of any business to come before the
Annual Meeting other than those matters described above in this Proxy Statement
and matters incident to the conduct of the Annual Meeting. Properly executed
proxies in the accompanying form that have not been revoked confer
discretionary authority on the persons named therein to vote at the direction
of a majority of the Board of Directors on any other matters presented at the
Annual Meeting to the fullest extent permitted by applicable laws and
regulations.
- --------------------------------------------------------------------------------
MISCELLANEOUS
- --------------------------------------------------------------------------------
The cost of solicitation of proxies will be borne by the Bank. The
Bank will reimburse brokerage firms and other custodians, nominees and
fiduciaries for reasonable expenses incurred by them in sending proxy material
to the beneficial owners of Common Stock. In addition to solicitations by
mail, directors, officers and regular employees of the Bank may solicit proxies
personally, by telegraph or telephone without additional compensation. The
Bank has retained Corporate Communications, Inc. to assist in the management of
the Bank's investor relations and other stockholder communications issues for a
fee of approximately $500 per month plus reimbursement of out-of-pocket
expenses. As part of its duties, Corporate Communications, Inc. may assist in
the solicitation of proxies.
The Bank's 1996 Annual Report to Stockholders, including financial
statements, is being mailed to all stockholders of record as of the close of
business on the Record Date. Any stockholder who has not received a copy of
such Annual Report may obtain a copy by writing to the Secretary of the Bank.
Such Annual Report is not to be treated as part of the proxy solicitation
material nor as having been incorporated herein by reference.
(32)
<PAGE> 43
- --------------------------------------------------------------------------------
STOCKHOLDER PROPOSALS
- --------------------------------------------------------------------------------
In order to be eligible for inclusion in the proxy statement and proxy
relating to the 1997 annual meeting of stockholders of the Bank, or of the
Holding Company if the Reorganization is consummated, any stockholder proposal
to take action at such meeting must be received by the Secretary of the Bank or
the Holding Company, as appropriate, at 1811 Second Avenue, Jasper, Alabama, no
later than ______ __, 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 Reorganization has been completed, the SEC) in effect at the time
such proposal is received.
BY ORDER OF THE BOARD OF DIRECTORS
THOMAS L. SHERER
SECRETARY
Jasper, Alabama
October __, 1996
- --------------------------------------------------------------------------------
ANNUAL REPORT ON FORM 10-K
- --------------------------------------------------------------------------------
A COPY OF THE BANK'S ANNUAL REPORT ON FORM 10-K FOR THE FISCAL YEAR ENDED JUNE
30, 1996, AS FILED WITH THE OTS, WILL BE FURNISHED WITHOUT CHARGE TO
STOCKHOLDERS AS OF THE RECORD DATE UPON WRITTEN REQUEST TO THE SECRETARY,
PINNACLE BANK, 1811 SECOND AVENUE, JASPER, ALABAMA 35502-1388.
- --------------------------------------------------------------------------------
(33)
<PAGE> 44
EXHIBIT A
PINNACLE BANK
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION, dated August 28, 1996, by
and among PINNACLE BANK, a federal stock savings bank ("Pinnacle"); PINNACLE
BANCSHARES, INC., a Delaware corporation ("Holding Company"), and PINNACLE
INTERIM SAVINGS BANK, FSB, a to-be-formed interim stock savings bank ("Interim
Savings").
The parties hereto desire to enter into an Agreement and Plan of
Reorganization whereby the corporate structure of Pinnacle will be reorganized
into the holding company form of ownership. The result of such reorganization
will be that, immediately after the Effective Date (as defined in Article V
below), all of the issued and outstanding shares of common stock, $.01 par
value per share, of Pinnacle ("Pinnacle Common Stock") will be held by Holding
Company, and the holders of the issued and outstanding shares of Pinnacle
Common Stock will become the holders of the issued and outstanding shares of
the common stock, $.01 par value per share, of Holding Company ("Holding
Company Common Stock").
The reorganization of Pinnacle will be accomplished by the following
steps: (1) the formation by Pinnacle of a wholly owned operating subsidiary,
Holding Company, incorporated under the laws of the State of Delaware for the
primary purpose of becoming the sole stockholder of a newly formed interim
federal stock savings bank, and subsequently becoming the sole holder of the
capital stock of Pinnacle; (2) the formation of an interim federal stock
savings bank, Interim Savings, which will be wholly owned by Holding Company;
and (3) the merger of Interim Savings into Pinnacle, with Pinnacle as the
surviving corporation. Pursuant to such merger: (i) all of the issued and
outstanding shares of Pinnacle Common Stock 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 common stock of Interim Savings will automatically be
converted by operation of law on a one-for-one basis into an equal number of
issued and outstanding shares of Pinnacle Common Stock, which will be all of
the issued and outstanding capital stock of Pinnacle.
NOW, THEREFORE, in order to consummate this Agreement and Plan of
Reorganization, and in consideration of the mutual covenants herein set forth,
the parties agree as follows:
ARTICLE I
MERGER OF INTERIM SAVINGS INTO
PINNACLE AND RELATED MATTERS
1.1 The Merger. On the Effective Date, Interim Savings will be
merged with and into Pinnacle (the "Merger") and the separate existence of
Interim Savings shall cease, and all assets and property (real, personal and
mixed, tangible and intangible, choses in action, rights and credits) then
owned by Interim Savings, 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 Pinnacle. Pinnacle shall be deemed to
be a continuation of Interim Savings, and Pinnacle shall succeed to the rights
and obligations of Interim Savings.
A-1
<PAGE> 45
1.2 Continued Existence of Pinnacle. Following the Merger, the
existence of Pinnacle 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 corporation organized under the laws of the United
States with a Federal Stock Charter and Bylaws in the form approved by the
Office of Thrift Supervision (the "OTS"). The Federal Stock Charter and Bylaws
of Pinnacle, as presently in effect, shall continue in full force and effect
and shall not be changed in any manner whatsoever by the Merger.
1.3 Continued Business of Pinnacle. From and after the Effective
Date, and subject to the actions of the Board of Directors of Pinnacle, the
business presently conducted by Pinnacle (whether directly or through its
subsidiary) will continue to be conducted by it, as a wholly owned subsidiary
of Holding Company, and the present directors and officers of Pinnacle will
continue in their present positions.
1.4 Office Locations. The locations of the home and branch
offices of Pinnacle immediately prior to the Effective Date shall continue to
be the locations of the home and branch offices, respectively, of Pinnacle from
and after the Effective Date.
1.5 Savings Accounts. The issuance of savings accounts and other
instruments and obligations by Pinnacle shall not be affected by the Merger.
1.6 Further Assurances. Pinnacle and Interim Savings each agree
that at any time, or from time to time, as and when requested by Pinnacle or by
its successors or assigns, Interim Savings 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 Savings 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
Article I, or otherwise to carry out the intents and purposes of this
Agreement.
ARTICLE II
CONVERSION OF STOCK
2.1 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
Agreement shall be as follows:
2.1.1 Holding Company Common Stock. On the Effective Date, any
shares of Holding Company Common Stock that may be held by Pinnacle immediately
prior to the Effective Date shall be canceled and shall no longer be deemed
outstanding for any purpose.
2.1.2 Pinnacle Common Stock. On the Effective Date, each share of
Pinnacle Common Stock issued and outstanding immediately prior to the Effective
Date 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
<PAGE> 46
2.1.3 Interim Savings Common Stock. Each share of common stock of
Interim Savings issued and outstanding immediately prior to the Effective Date
shall, on the 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 Pinnacle Common Stock and shall not be further converted into shares
of Holding Company Common Stock, so that from and after the Effective Date, all
of the issued and outstanding shares of Pinnacle Common Stock shall be held by
Holding Company.
2.1.4 Exchange of Pinnacle Common Stock. From and after the
Effective Date, each holder of an outstanding certificate or certificates that,
prior thereto, represented shares of Pinnacle Common Stock, shall, upon
surrender of the same to the designated agent of Pinnacle ("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 Article II. Until so surrendered, each such outstanding certificate
that, prior to the Effective Date, represented shares of Pinnacle 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 Pinnacle Common Stock shall have been so converted. Former holders of
shares of Pinnacle Common Stock will not be required to exchange their Pinnacle
Common Stock certificates for new certificates evidencing the same number of
shares of Holding Company Common Stock.
2.1.5 Full Satisfaction. All shares of Holding Company Common Stock
into which shares of Pinnacle Common Stock shall have been converted pursuant
to this Article II shall be deemed to have been issued in full satisfaction of
all rights pertaining to such converted shares.
2.1.6 Sole Rights, Etc. On the Effective Date, the holders of
certificates formerly representing Pinnacle Common Stock outstanding on the
Effective Date shall cease to have any rights with respect to the Pinnacle
Common Stock, and their sole rights shall be with respect to the Holding
Company Common Stock into which their shares of Pinnacle Common Stock shall
have been converted by the Merger.
2.2. Continued Effectiveness of Stock Option Plan. On the
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 of law, be continued as and become the stock option
plans of Holding Company. On the 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 Holding Company shall assume all of Pinnacle's obligations with
respect to the Option Plans. By approving this Agreement, stockholders of
Pinnacle will be approving the adoption by Holding Company of the Option Plans
as the stock option plans of Holding Company.
A-3
<PAGE> 47
ARTICLE III
CONDITIONS TO THE OBLIGATIONS
OF PINNACLE,
HOLDING COMPANY AND INTERIM SAVINGS
3.1 Conditions. The obligations of Pinnacle, Holding Company and
Interim Savings to effect the Merger and otherwise consummate the transactions
which are the subject matter hereof shall be subject to satisfaction of the
following conditions:
3.1.1 Stockholder Approvals. 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 Agreement by the affirmative vote of fifty percent of the
outstanding shares of Pinnacle Common Stock plus one affirmative vote.
3.1.2 Registration. The shares of Holding Company Common Stock to
be issued to holders of Pinnacle Common Stock pursuant to the Merger shall, if
required under applicable law, have been duly registered pursuant to Section 5
of the Securities Act of 1933, as amended, and Holding Company shall have
complied with all applicable state securities or "blue sky" laws relating to
the issuance of the Holding Company Common Stock.
3.1.3 Approvals, Consents. Any and all approvals from the OTS, the
Federal Deposit Insurance Corporation, the Securities and Exchange Commission
and any other governmental agency having jurisdiction necessary for the lawful
consummation of the Merger and the issuance and delivery of Holding Company
Common Stock as contemplated by this Agreement shall have been obtained.
3.1.4 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 Merger 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 Pinnacle Common Stock upon the exchange of Pinnacle Common Stock
held by them solely for Holding Company Common Stock.
ARTICLE IV
TERMINATION; EXPENSES
4.1 Termination. This Agreement may be terminated at any time
prior to the 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 Agreement may also be terminated at any time
prior to the Effective Date by the mutual consent of the respective Boards of
Directors of the parties.
4.2 No Further Obligation. In the event of the termination of
this Agreement pursuant to this Article IV, this Agreement 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 Agreement or the termination hereof
on the part of any of the parties hereto or their respective directors,
officers, employees, agents or stockholders.
A-4
<PAGE> 48
4.3 Costs and Expenses. Pinnacle shall pay all costs and expenses
incurred by it, Holding Company and Interim Savings in connection with this
Agreement and the transactions contemplated hereunder.
ARTICLE V
EFFECTIVE DATE OF MERGER
Upon satisfaction or waiver (in accordance with the provisions of this
Agreement) of each of the conditions set forth in Article III, the parties
hereto shall execute and cause to be filed Articles of Combination, and such
certificates or further documents as shall be required by the OTS, with the
Secretary of the OTS and shall cause to be filed with such other federal or
state regulatory agencies all such certificates and other documents as may be
required in the opinion of counsel to Pinnacle and Holding Company. Upon
approval by the OTS and endorsement of such Articles of Combination by the
Secretary of the OTS, the Merger and other transactions contemplated by this
Agreement shall become effective. The "Effective Date" for all purposes
hereunder shall be the date of such endorsement by the Secretary of the OTS.
ARTICLE VI
MISCELLANEOUS
6.1 Waiver. Any of the terms or conditions of this Agreement
which 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 Agreement.
6.2 Amendment. Any of the terms or conditions of this Agreement
may be amended or modified in whole or in part at any time, 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, 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
Agreement 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, Holding Company
or their stockholders.
6.3 Counterparts. This Agreement may be executed by the parties
hereto in any number of separate counterparts, each of which shall be an
original, but such counterparts together shall constitute but one and the same
instrument.
6.4 Headings. The section and other headings contained in this
Agreement are for reference purposes only and shall not be deemed to be part of
this Agreement.
6.5 Execution by Interim Savings. Pinnacle and Holding Company
acknowledge that, as of the date hereof, the charter of Interim Savings has not
been issued by the OTS and therefore Interim Savings does not have the legal
capacity to execute this Agreement. Holding Company, as the organizer and sole
shareholder of Interim Savings, agrees to cause Interim Savings to execute
A-5
<PAGE> 49
this Agreement promptly following the issuance of Interim Savings's charter by
the OTS. Pinnacle and Holding Company agree to be bound by this Agreement
prior to and following such execution by Interim Savings.
6.6 Offices. A list of the office locations of Pinnacle is
attached hereto as Schedule A and is incorporated herein by reference.
6.7 Directors. A list of the directors of Pinnacle, their
residence addresses and their terms of office is attached hereto as Schedule B
and is incorporated herein by reference.
6.8 Governing Law. This Agreement shall be governed by and
construed under 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.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement and Plan of Reorganization as of the date first above written.
PINNACLE BANK
By:
---------------------------------------
Robert B. Nolen, Jr.
President and Chief Executive Officer
PINNACLE INTERIM SAVINGS BANK, FSB
(in formation)
By:
---------------------------------------
Robert B. Nolen, Jr.
President and Chief Executive Officer
PINNACLE BANCSHARES, INC.
By:
---------------------------------------
Robert B. Nolen, Jr.
President and Chief Executive Officer
A-6
<PAGE> 50
Exhibit B
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.
B-1
<PAGE> 51
ARTICLE IV
Term
The Corporation is to have perpetual existence.
ARTICLE V
Incorporator
The name and mailing address of the incorporator are as follows:
<TABLE>
<CAPTION>
Name Mailing Address
---- ---------------
<S> <C>
Robert B. Nolen, Jr. 1811 Second Avenue
Jasper, Alabama 35502-1388
</TABLE>
ARTICLE VI
Initial Directors
The number of directors constituting the initial board of directors of
the Corporation is eleven (11), and the names and addresses of the persons who
are to serve as directors until their successors are elected and qualified,
together with the classes of directorships to which such persons have been
assigned, are:
<TABLE>
<CAPTION>
Name Address Class
---- ------- -----
<S> <C> <C>
James W. Cannon 1811 Second Avenue
Jasper, Alabama 35502-1388 I
Robert B. Nolen, Jr. 1811 Second Avenue
Jasper, Alabama 35502-1388 I
Max W. Perdue 1811 Second Avenue
Jasper, Alabama 35502-1388 I
Carlton Mayhall, Jr. 1811 Second Avenue
Jasper, Alabama 35502-1388 I
Melvin R. Kacharos 1811 Second Avenue
Jasper, Alabama 35502-1388 II
John D. Baird 1811 Second Avenue
Jasper, Alabama 35502-1388 II
Greg Batchelor 1811 Second Avenue
</TABLE>
B-2
<PAGE> 52
<TABLE>
<S> <C> <C>
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:
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
B-3
<PAGE> 53
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;
(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
B-4
<PAGE> 54
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.
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.
B-5
<PAGE> 55
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.
B-6
<PAGE> 56
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 stockholders. Each such notice
given by a stockholder with respect to nominations for the election of
directors shall
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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 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
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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 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
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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.
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:
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(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.
(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
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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.
(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.
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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
(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.
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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.
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
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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.
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
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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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Exhibit C
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 D
PINNACLE BANK
1996 STOCK OPTION AND INCENTIVE PLAN
1. PURPOSE OF THE PLAN.
The purpose of this Pinnacle Bank 1996 Stock Option and
Incentive Plan (the "Plan") is to advance the interests of the Bank
through providing select key Employees and Directors of the Bank and
its Affiliates with the opportunity to acquire Shares. By encouraging
such stock ownership, the Bank seeks to attract, retain and motivate
the best available personnel for positions of substantial
responsibility and to provide additional incentive to Directors and
key Employees of the Bank or any Affiliate to promote the success of
the business.
2. DEFINITIONS.
As used herein, the following definitions shall apply.
(a) "Affiliate" shall mean any "parent corporation" or "subsidiary
corporation" of the Bank, as such terms are defined in Section
424(e) and (f), respectively, of the Code.
(b) "Agreement" shall mean a written agreement entered into in
accordance with Paragraph 5(c).
(c) "Awards" shall mean, collectively, Options, SARs, and
Restricted Stock unless the context clearly indicates a
different meaning.
(d) "Bank" shall mean Pinnacle Bank.
(e) "Board" shall mean the Board of Directors of the Bank.
(f) "Change in Control" shall mean any one of the following
events: (1) the ownership, holding or power to vote more than
25% of the Bank's voting stock, (2) the control of the
election of a majority of the Bank's directors, (3) the
exercise of a controlling influence over the management or
policies of the Bank by any person or by persons acting as a
group within the meaning of Section 13(d) of the Securities
Exchange Act of 1934 (except in the case of (1), (2)
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and (3) hereof, ownership or control of the Bank or its
directors by a holding company formed by the Bank shall not
constitute a "Change in Control"), or (4) during any period of
two consecutive years, individuals who at the beginning of
such period constitute the Board of Directors of the Bank (the
"Bank Board") (the "Continuing Directors") cease for any
reason to constitute at least two-thirds thereof, provided
that any individual whose election or nomination for election
as a member of the Bank Board was approved by a vote of at
least two-thirds of the Continuing Directors then in office
shall be considered a Continuing Director. For purposes of
this subparagraph only, the term "person" refers to an
individual or a corporation, partnership, trust, association,
joint venture, pool, syndicate, sole proprietorship,
unincorporated organization or any other form of entity not
specifically listed herein. The decision of the Committee as
to whether a change in control has occurred shall be
conclusive and binding.
(g) "Code" shall mean the Internal Revenue Code of 1986, as
amended.
(h) "Committee" shall mean the Stock Option Committee appointed by
the Board in accordance with Paragraph 5(a) hereof.
(i) "Common Stock" shall mean the common stock, par value $.01 per
share, of the Bank.
(j) "Continuous Service" shall mean the absence of any
interruption or termination of service as an Employee or
Director of the Bank or an Affiliate. Continuous Service
shall not be considered interrupted in the case of sick leave,
military leave or any other leave of absence approved by the
Bank, in the case of transfers between payroll locations of
the Bank or between the Bank, an Affiliate or a successor, or
in the case of a Director's performance of services in an
emeritus or advisory capacity.
(k) "Director" shall mean any member of the Board, and any member
of the board of directors of any Affiliate that the Board has
by resolution designated as being eligible for participation
in this Plan.
(l) "Disability" shall mean a physical or mental condition, which
in the sole and absolute discretion of the Committee, is
reasonably expected to be of indefinite duration and to
substantially prevent a
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Participant from fulfilling his or her duties or
responsibilities to the Bank or an Affiliate.
(m) "Effective Date" shall mean the date specified in Paragraph 15
hereof.
(n) "Employee" shall mean any person employed by the Bank or an
Affiliate.
(o) "Exercise Price" shall mean the price per Optioned Share at
which an Option or SAR may be exercised.
(p) "ISO" means an option to purchase Common Stock which meets the
requirements set forth in the Plan, and which is intended to
be and is identified as an "incentive stock option" within the
meaning of Section 422 of the Code.
(q) "Market Value" shall mean the fair market value of the Common
Stock, as determined under Paragraph 7(b) hereof.
(r) "Non-Employee Director" shall mean any member of the Board who
is a Non-Employee Director within the meaning of Rule 16b-3.
(s) "Non-ISO" means an option to purchase Common Stock which meets
the requirements set forth in the Plan but which is not
intended to be and is not identified as an ISO.
(t) "Option" means an ISO and/or a Non-ISO.
(u) "Optioned Shares" shall mean Shares subject to an Award
granted pursuant to this Plan.
(v) "Participant" shall mean any person who receives an Award
pursuant to the Plan.
(w) "Plan" shall mean this Pinnacle Bank 1996 Stock Option and
Incentive Plan.
(x) "Restricted Stock" means Common Stock which is subject to
restrictions against transfer and forfeiture and such other
terms and conditions determined by the Committee, as provided
in Paragraph 11.
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(y) "Rule 16b-3" shall mean Rule 16b-3 of the General Rules and
Regulations under the Securities Exchange Act of 1934, as
amended.
(z) "Share" shall mean one share of Common Stock.
(aa) "SAR" (or "Stock Appreciation Right") means a right to receive
the appreciation in value, or a portion of the appreciation in
value, of a specified number of shares of Common Stock.
(bb) "Year of Service" shall mean a full 12-month period, measured
from the date of an Award and each annual anniversary of that
date, during which a Participant has continuously been an
Employee or Director of the Bank or an Affiliate.
3. TERM OF THE PLAN AND AWARDS.
(a) Term of the Plan. The Plan shall continue in effect for a
term of 10 years from the Effective Date, unless sooner
terminated pursuant to Paragraph 17 hereof. No Award shall be
granted under the Plan after 10 years from the Effective Date.
(b) Term of Awards. The term of each Award granted under the Plan
shall be established by the Committee, but shall not exceed 10
years; provided, however, that in the case of an Employee who
owns Shares representing more than 10% of the outstanding
Common Stock at the time an ISO is granted, the term of such
ISO shall not exceed five years.
4. SHARES SUBJECT TO THE PLAN.
(a) General Rule. The aggregate number of Shares deliverable
pursuant to Awards shall not exceed 85,000 Shares, as such
number may be adjusted on and after the Effective Date
pursuant to Paragraph 12 hereof. Such Shares may either be
authorized but unissued Shares, Shares held in treasury, or
Shares held in a grantor trust created by the Bank. If any
Awards should expire, become unexercisable, or be forfeited
for any reason without having been exercised, the Optioned
Shares shall, unless the Plan shall have been terminated, be
available for the grant of additional Awards under the Plan.
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(b) Special Rule for SARs. The number of Shares with respect to
which an SAR is granted, but not the number of Shares which
the Bank delivers or could deliver to an Employee or
individual upon exercise of an SAR, shall be charged against
the aggregate number of Shares remaining available under the
Plan; provided, however, that in the case of an SAR granted in
conjunction with an Option, under circumstances in which the
exercise of the SAR results in termination of the Option and
vice versa, only the number of Shares subject to the Option
shall be charged against the aggregate number of Shares
remaining available under the Plan. The Shares involved in an
Option as to which option rights have terminated by reason of
the exercise of a related SAR, as provided in Paragraph 10
hereof, shall not be available for the grant of further
Options under the Plan.
5. ADMINISTRATION OF THE PLAN.
(a) Composition of the Committee. The Plan shall be administered
by the Committee, which shall consist of not less than two
members of the Board who are Non-Employee Directors. Members
of the Committee shall serve at the pleasure of the Board. In
the absence at any time of a duly appointed Committee, the
Plan shall be administered by those members of the Board who
are Non-Employee Directors.
(b) Powers of the Committee. Except as limited by the express
provisions of the Plan or by resolutions adopted by the Board,
the Committee shall have sole and complete authority and
discretion (i) to select Participants and grant Awards, (ii)
to determine the form and content of Awards to be issued in
the form of Agreements under the Plan, (iii) to interpret the
Plan, (iv) to prescribe, amend and rescind rules and
regulations relating to the Plan, and (v) to make other
determinations necessary or advisable for the administration
of the Plan. The Committee shall have and may exercise such
other power and authority as may be delegated to it by the
Board from time to time. A majority of the entire Committee
shall constitute a quorum and the action of a majority of the
members present at any meeting at which a quorum is present,
or acts approved in writing by a majority of the Committee
without a meeting, shall be deemed the action of the
Committee.
(c) Agreement. Each Award shall be evidenced by a written
agreement containing such provisions as may be approved by the
Committee.
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Each such Agreement shall constitute a binding contract
between the Bank and the Participant, and every Participant,
upon acceptance of such Agreement, shall be bound by the terms
and restrictions of the Plan and of such Agreement. The
terms of each such Agreement shall be in accordance with the
Plan, but each Agreement may include such additional
provisions and restrictions determined by the Committee, in
its discretion, provided that such additional provisions and
restrictions are not inconsistent with the terms of the Plan.
In particular, the Committee shall set forth in each Agreement
(i) the Exercise Price of an Option or SAR, (ii) the number of
Shares subject to, and the expiration date of, the Award,
(iii) the manner, time and rate (cumulative or otherwise) of
exercise or vesting of such Award, and (iv) the restrictions,
if any, to be placed upon such Award, or upon Shares which may
be issued upon exercise of such Award.
The Chairman of the Committee and such other
Directors and officers as shall be designated by the Committee
are hereby authorized to execute Agreements on behalf of the
Bank and to cause them to be delivered to the recipients of
Awards.
(d) Effect of the Committee's Decisions. All decisions,
determinations and interpretations of the Committee shall be
final and conclusive on all persons affected thereby.
(e) Indemnification. In addition to such other rights of
indemnification as they may have, the members of the Committee
shall be indemnified by the Bank in connection with any claim,
action, suit or proceeding relating to any action taken or
failure to act under or in connection with the Plan or any
Award, granted hereunder to the full extent provided for under
the Bank's governing instruments with respect to the
indemnification of Directors.
6. GRANT OF OPTIONS.
(a) General Rule. In its sole discretion, the Committee may grant
Awards to Directors and select key Employees. In selecting
those Directors and Employees to whom Awards will be granted
and the number of shares covered by such Awards, the Committee
shall consider their respective positions, duties and
responsibilities, the value of their services to the Bank and
its Affiliates, and any other factors the Committee may deem
relevant. Notwithstanding the
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foregoing, the Committee shall automatically make the Awards
specified in Sections 6(b) and 6(d) hereof.
(b) Automatic Grants to Employees. On the Effective Date, each of
the following Employees shall receive an Option (in the form
of an ISO, to the extent permissible under the Code) to
purchase the number of Shares listed below, at an Exercise
Price per Share equal to the Market Value of a Share on the
Effective Date; provided that such grant shall not be made to
an Employee whose Continuous Service terminates on or before
the Effective Date: Robert B. Nolen, Jr. - 10,000 shares.
With respect to each of the above-named Employees,
the Option granted to the Employee hereunder (i) shall vest in
accordance with the general rule set forth in Paragraph 8(a)
of the Plan, (ii) shall have a term of ten years from the
Effective Date, except as limited by Paragraph 3(b), and (iii)
shall be subject to the general rule set forth in Paragraph
8(c) with respect to the effect of a Employee's termination of
Continuous Service on the Employee's right to exercise his
Options.
(c) Special Rules for ISOs. The aggregate Market Value, as of the
date the Option is granted, of the Shares with respect to
which ISOs are exercisable for the first time by an Employee
during any calendar year (under all incentive stock option
plans, as defined in Section 422 of the Code, of the Bank or
any present or future Affiliate of the Bank) shall not exceed
$100,000. Notwithstanding the foregoing, the Committee may
grant Options in excess of the foregoing limitations, in which
case such Options granted in excess of such limitation shall
be Options which are Non-ISOs.
(d) Automatic Grants to Directors. Notwithstanding any other
provisions of this Plan, each Director who is not an Employee
but is a Director on the Effective Date shall receive, on said
date, Non-ISOs to purchase 2,500 of the Shares reserved under
Paragraph 4(a) hereof. Such Non-ISOs shall have an Exercise
Price per Share equal to the Market Value of a Share on the
date of grant.
7. EXERCISE PRICE FOR OPTIONS.
(a) Limits on Committee Discretion. The Exercise Price as to any
particular Option shall not be less than 50% of the Market
Value of
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the Optioned Shares on the date of grant (100% in the case of
ISOs). In the case of an Employee who owns Shares
representing more than 10% of the Bank's outstanding Shares of
Common Stock at the time an ISO is granted, the Exercise Price
shall not be less than 110% of the Market Value of the
Optioned Shares at the time the ISO is granted.
(b) Standards for Determining Exercise Price. If the Common Stock
is listed on a national securities exchange (including the
Nasdaq National Market) on the date in question, then the
Market Value per Share shall be the average of the highest and
lowest selling price on such exchange on such date, or if
there were no sales on such date, then the Market Value per
Share shall be the average of the highest and lowest selling
price on such exchange on the trading day immediately
preceding such date on which sales were effected. If the
Common Stock is traded otherwise than on a national securities
exchange on the date in question, then the Market Value per
Share shall be the mean between the bid and asked price on
such date, or, if there is no bid and asked price on such
date, then on the next prior business day on which there was a
bid and asked price. If no price is available, then the
Market Value per Share shall be its fair market value as
determined by the Committee, in its sole and absolute
discretion. Notwithstanding the foregoing, in the event that
either (i) the Committee exercises its discretion to impose
transfer (or other) restrictions on the Shares subject to an
Option, or (ii) the Plan requires specified transfer
restrictions, the Committee shall make an appropriate
adjustment in determining the Market Value of the Shares
subject to such an Option (in order to take into account that
their fair market value may be less than the fair market value
of unrestricted Shares).
8. EXERCISE OF OPTIONS BY EMPLOYEES.
(a) Generally. Unless otherwise provided by the Committee
pursuant to an applicable Agreement, each Option shall be
fully (100%) exercisable after the six-month period following
the date of its grant, subject to Paragraph 14 hereof. An
Option may not be exercised for a fractional Share.
(b) Procedure for Exercise. An Employee may exercise Options,
subject to provisions relative to its termination and any
limitations on its exercise, only by (1) written notice of
intent to exercise the Option
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with respect to a specified number of Shares, and (2) payment
to the Bank (contemporaneously with delivery of such notice)
in cash, in Common Stock, or a combination of cash and Common
Stock, of the amount of the Exercise Price for the number of
Shares with respect to which the Option is then being
exercised. Each such notice (and payment where required) shall
be delivered, or mailed by prepaid registered or certified
mail, addressed to the Treasurer of the Bank at the Bank's
executive offices. Common Stock utilized in full or partial
payment of the Exercise Price for Options shall be valued at
its Market Value at the date of exercise, and may consist of
Shares subject to the Option being exercised. An Employee who
exercises Non-ISOs pursuant to this Paragraph may satisfy all
applicable federal, state and local income and employment tax
withholding obligations, in whole or in part, by irrevocably
electing to have the Bank withhold shares of Common Stock, or
to deliver to the Bank shares of Common Stock that the
Employee already owns, having a value equal to the amount
required to be withheld; provided that to the extent not
inconsistent herewith, such election otherwise complies with
those requirements of Paragraphs 8 and 20 hereof.
(c) Period of Exercisability. Except to the extent otherwise
provided in the terms of an Agreement, an Option may be
exercised hereunder only while the Employee is employed by the
Bank and has maintained Continuous Service from the date of
the grant of the Option, or within three months after
termination of such Continuous Service (but not later than the
date on which the Option would otherwise expire), except if
the Employee's Continuous Service terminates by reason of --
(1) "Just Cause" which for purposes hereof shall have the
meaning set forth in any unexpired employment or
severance agreement between the Employee and the Bank
(and, in the absence of any such agreement, shall
mean termination because of the Employee's personal
dishonesty, incompetence, willful misconduct, breach
of fiduciary duty involving personal profit,
intentional failure to perform stated duties, willful
violation of any law, rule or regulation (other than
traffic violations or similar offenses) or final
cease-and-desist order), then the Employee's rights
to exercise such Option shall expire on the date of
such termination;
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(2) Death, then to the extent that the Employee would
have been entitled to exercise the Option immediately
prior to his death, such Option of the deceased
Employee may be exercised within two years from the
date of his death (but not later than the date on
which the Option would otherwise expire) by the
personal representatives of his estate or person or
persons to whom his rights under such Option shall
have passed by will or by laws of descent and
distribution;
(3) Disability, then to the extent that the Employee
would have been entitled to exercise the Option
immediately prior to his or her Disability, such
Option may be exercised within one year from the date
of termination of employment due to Disability, but
not later than the date on which the Option would
otherwise expire.
(d) Effect of the Committee's Decisions. The Committee's
determination whether an Employee's Continuous Service has
ceased, and the effective date thereof, shall be final and
conclusive on all persons affected thereby.
(e) Acceleration of Vesting. Notwithstanding the six-month period
set forth in Paragraph 8(a) hereof and except to the extent
otherwise provided in the terms of an Agreement, all Options
held by an Employee whose service with the Bank terminates due
to death, Disability, retirement after age 65, or a Change in
Control shall be deemed fully exercisable and non-forfeitable
as of the Employee's last day of service with the Bank,
subject to the provisions of Paragraph 8(c) hereof.
9. EXERCISE OF OPTIONS BY NON-EMPLOYEE DIRECTORS.
(a) Generally. Unless otherwise provided by the Committee
pursuant to an applicable Agreement, each Option shall be
fully (100%) exercisable after six months following the date
of its grant, subject to paragraph 14 hereof. An Option may
not be exercised for a fractional share.
(b) Terms of Exercise.
(i) Options received by Directors who are not Employees
will become exercisable in accordance with the
general rule set
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forth in Paragraph 8(a) hereof, and may be exercised
from time to time by (a) written notice of intent to
exercise the Option with respect to all or a
specified number of the Optioned Shares, and (b)
payment to the Bank (contemporaneously with the
delivery of such notice), in cash, in Common Stock,
or a combination of cash and Common Stock, of the
amount of the Exercise Price for the number of the
Optioned Shares with respect to which the Option is
then being exercised. Each such notice and payment
shall be delivered, or mailed by prepaid registered
or certified mail, addressed to the Treasurer of the
Bank at the Bank's executive offices. A Director who
exercises Options may satisfy all applicable federal,
state and local income and employment tax withholding
obligations, in whole or in part, by irrevocably
electing to have the Bank withhold shares of Common
Stock, or to deliver to the Bank shares of Common
Stock that the Participant already owns, having a
value equal to the amount required to be withheld;
provided that to the extent not inconsistent
herewith, such election otherwise complies with those
requirements of Paragraphs 8 and 20 hereof.
(ii) Options granted to Directors who are not Employees
shall have a term of 10 years; provided that Options
so granted shall expire one year after the date on
which a Director terminates Continuous Service on the
Board, but in no event later than the date on which
such Options would otherwise expire. In the event of
such Director's death during the term of his
directorship, such Options shall become immediately
exercisable, and may be exercised within two years
from the date of his death by the personal
representatives of his estate or person or persons to
whom his rights under such Option shall have passed
by will or by laws of descent and distribution, but
in no event later than the date on which such Options
would otherwise expire. In the event of such
Director's Disability during his or her directorship,
the Director's Option shall become immediately
exercisable, and such Option may be exercised within
one year of the termination of directorship due to
Disability, but not later than the date that the
Option would otherwise expire. Unless otherwise
inapplicable or inconsistent with the provisions of
this Paragraph, the Options to be granted to
Directors hereunder shall be subject to all other
provisions of this Plan.
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(c) Effect of the Committee's Decisions. The Committee's
determination whether a Director's Continuous Service has
ceased, and the effective date thereof, shall be final and
conclusive on all persons affected thereby.
(d) Acceleration of Vesting. Notwithstanding the six-month period
set forth in Paragraph 9(a) hereof and except to the extent
otherwise provided in the terms of an Agreement, all Options
held by a Director whose service with the Bank terminates due
to death, Disability, retirement after age 65, or a Change in
Control shall be deemed fully exercisable and non-forfeitable
as of the Director's last day of service with the Bank,
subject to the provisions of Paragraph 9(b) hereof.
10. SARS (STOCK APPRECIATION RIGHTS).
(a) Granting of SARs. In its sole discretion, the Committee may
from time to time grant SARs to Employees either in
conjunction with, or independently of, any Options granted
under the Plan. An SAR granted in conjunction with an Option
may be an alternative right wherein the exercise of the Option
terminates the SAR to the extent of the number of shares
purchased upon exercise of the Option and, correspondingly,
the exercise of the SAR terminates the Option to the extent of
the number of Shares with respect to which the SAR is
exercised. Alternatively, an SAR granted in conjunction with
an Option may be an additional right wherein both the SAR and
the Option may be exercised. An SAR may not be granted in
conjunction with an ISO under circumstances in which the
exercise of the SAR affects the right to exercise the ISO or
vice versa, unless the SAR, by its terms, meets all of the
following requirements:
(1) The SAR will expire no later than the ISO;
(2) The SAR may be for no more than the difference
between the Exercise Price of the ISO and the Market
Value of the Shares subject to the ISO at the time
the SAR is exercised;
(3) The SAR is transferable only when the ISO is
transferable, and under the same conditions;
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(4) The SAR may be exercised only when the ISO may be
exercised; and
(5) The SAR may be exercised only when the Market Value
of the Shares subject to the ISO exceeds the Exercise
Price of the ISO.
(b) Exercise Price. The Exercise Price as to any particular SAR
shall not be less than the Market Value of the Optioned Shares
on the date of grant.
(c) Timing of Exercise. Unless otherwise provided by the
Committee pursuant to an applicable Agreement, an SAR be
exercised at any time following the six-month period following
the date of its grant, subject to the provisions of Paragraph
8(c) regarding the period of exercisability and the provisions
of Paragraph 8(e) regarding the acceleration of vesting.
(d) Exercise of SARs. An SAR granted hereunder shall be
exercisable at such times and under such conditions as shall
be permissible under the terms of the Plan and of the
Agreement granted to a Participant, provided that an SAR may
not be exercised for a fractional Share. Upon exercise of an
SAR, the Participant shall be entitled to receive, without
payment to the Bank except for applicable withholding taxes,
an amount equal to the excess of (or, in the discretion of the
Committee if provided in the Agreement, a portion of) the
excess of the then aggregate Market Value of the number of
Optioned Shares with respect to which the Participant
exercises the SAR, over the aggregate Exercise Price of such
number of Optioned Shares. This amount shall be payable by the
Bank, in the discretion of the Committee, in cash or in Shares
valued at the then Market Value thereof, or any combination
thereof.
(e) Procedure for Exercising SARs. To the extent not inconsistent
herewith, the provisions of Paragraph 8(b) as to the procedure
for exercising Options are incorporated by reference, and
shall determine the procedure for exercising SARs.
11. RESTRICTED STOCK AWARDS.
Any Share of Restricted Stock which the Committee may grant to key
Employees shall be subject to the following terms and conditions, and to such
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other terms and conditions as are either applicable generally to Awards, or
prescribed by the Committee in the applicable Agreement:
(a) Restriction Period. At the time of each award of Restricted
Stock, there shall be established for the Restricted Stock a
restriction period, which shall be no greater than 5 years
(the "Restriction Period"). The length of such Restriction
Period may differ among Participants and may have different
expiration dates with respect to portions of Shares of
Restricted Stock covered by the same award.
(b) Vesting Restrictions. The Committee shall determine the
restrictions applicable to the award of Restricted Stock,
including, but not limited to, requirements of Continuous
Service for a specified term, or the attainment of specific
corporate, divisional or individual performance standards or
goals, which restrictions may differ with respect to each
Participant. The Agreement shall provide for forfeiture of
Shares covered thereby if the specified restrictions are not
met during the Restriction Period, and may provide for early
termination of any Restriction Period in the event of
satisfaction of the specified restrictions prior to expiration
of the Restricted Period.
(c) Vesting. An amount equal to 20% of the Shares of Restricted
Stock subject to a Restricted Stock award shall be earned and
become non-forfeitable by a Participant upon his completion of
each of five Years of Service (subject to Committee discretion
to impose different vesting requirements but in no case may
such vesting requirement be for a period less than six months
following the grant of the SAR). For purposes of this
paragraph, with respect to each vesting event, "Year of
Service" means a full 12-month period, measured from the date
of a Restricted Stock award and each annual anniversary of
that date, during which the Participant has continuously been
a Participant.
(d) Acceleration of Vesting. Notwithstanding the vesting schedule
contained in Paragraph 11(c) above, all Shares of Restricted
Stock held by a Participant whose service with the Bank
terminates due to death, Disability, retirement after age 65,
or a Change in Control, shall be deemed 100% earned and
non-forfeitable as of the Participant's last day of service
with the Bank and shall be distributed as soon as practicable
thereafter.
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(e) Ownership; Voting. Stock certificates shall be issued in
respect of Restricted Stock awarded hereunder and shall be
registered in the name of the Participant, whereupon the
Participant shall become a stockholder of the Bank with
respect to such Restricted Stock and shall, to the extent not
inconsistent with express provisions of the Plan, have all the
rights of a stockholder, including but not limited to the
right to receive all dividends paid on such Shares and the
right to vote such Shares. Said stock certificates shall be
deposited with the Bank or its designee, together with a stock
power endorsed in blank, and the following legend shall be
placed upon such certificates reflecting that the Shares
represented thereby are subject to restrictions against
transfer and forfeiture:
"The transferability of this certificate and
the shares of stock represented thereby are subject
to the terms and conditions (including forfeiture)
contained in the Pinnacle Bank 1996 Stock Option and
Incentive Plan, and an agreement entered into between
the registered owner and Pinnacle Bank. Copies of
such Plan and Agreement are on file in the offices of
the Secretary of Pinnacle Bank."
(f) Lapse of Restrictions. At the expiration of the Restricted
Period applicable to the Restricted Stock, the Bank shall
deliver to the Participant, or the legal representative of the
Participant's estate, or if the personal representative of the
Participant's estate shall have assigned the estate's interest
in the Restricted Stock, to the person or persons to whom his
rights under such stock shall have passed by assignment
pursuant to his will or to the laws of descent and
distribution, the stock certificates deposited with it or its
designee and as to which the Restricted Period has expired and
the requirements of the restrictions have been met. If a
legend has been placed on such certificates, the Bank shall
cause such certificates to be reissued without the legend.
(g) Forfeiture of Restricted Stock. The Agreement shall provide
for forfeiture of any Restricted Stock which is not vested in
the Participant or for which the restrictions have not been
satisfied during the Restriction Period.
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12. EFFECT OF CHANGES IN COMMON STOCK SUBJECT TO THE PLAN.
(a) Recapitalizations; Stock Splits, Etc. The number and kind of
shares reserved for issuance under the Plan, and the number
and kind of shares subject to outstanding Awards, and the
Exercise Price thereof, shall be proportionately adjusted for
any increase, decrease, change or exchange of Shares for a
different number or kind of shares or other securities of the
Bank which results from a merger, consolidation,
recapitalization, reorganization, reclassification, stock
dividend, split-up, combination of shares, or similar event in
which the number or kind of shares is changed without the
receipt or payment of consideration by the Bank.
(b) Transactions in which the Bank is Not the Surviving Entity.
In the event of (i) the liquidation or dissolution of the
Bank, (ii) a merger or consolidation in which the Bank is not
the surviving entity, or (iii) the sale or disposition of all
or substantially all of the Bank's assets (any of the
foregoing to be referred to herein as a "Transaction"), all
outstanding Awards, together with the Exercise Prices thereof,
shall be equitably adjusted for any change or exchange of
Shares for a different number or kind of shares or other
securities which results from the Transaction.
(c) Special Rule for ISOs. Any adjustment made pursuant to
subparagraphs (a) or (b)(1) hereof shall be made in such a
manner as not to constitute a modification, within the meaning
of Section 424(h) of the Code, of outstanding ISOs.
(d) Conditions and Restrictions on New, Additional, or Different
Shares or Securities. If, by reason of any adjustment made
pursuant to this Paragraph, a Participant becomes entitled to
new, additional, or different shares of stock or securities,
such new, additional, or different shares of stock or
securities shall thereupon be subject to all of the conditions
and restrictions which were applicable to the Shares pursuant
to the Award before the adjustment was made.
(e) Other Issuances. Except as expressly provided in this
Paragraph, the issuance by the Bank or an Affiliate of shares
of stock of any class, or of securities convertible into
Shares or stock of another class, for cash or property or for
labor or services either upon direct sale or upon the exercise
of rights or warrants to subscribe therefor, shall not affect,
and no adjustment shall be made with respect to, the
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number, class, or Exercise Price of Shares then subject to
Awards or reserved for issuance under the Plan.
13. NON-TRANSFERABILITY OF AWARDS.
Awards may not be sold, pledged, assigned, hypothecated,
transferred or disposed of in any manner other than by will or by the
laws of descent and distribution. Notwithstanding any other provision
of this Plan to the contrary, to the extent permissible under Rule
16b-3, and except to the extent otherwise provided in the terms of an
Agreement, a Participant who is granted Non-ISOs pursuant to this Plan
may transfer such Non-ISOs to his or her spouse, lineal ascendants,
lineal descendants, or to a duly established trust, provided that
Non-ISOs so transferred may not again be transferred other than (i) to
the Participant originally receiving the grant of Non-ISOs, or (ii) to
an individual or trust to whom such Participant could have transferred
Non-ISOs pursuant to this Paragraph 13. Non-ISOs which are
transferred pursuant to this Paragraph 13 shall be exercisable by the
transferee subject to the same terms and conditions as would have
applied to such Non-ISOs in the hands of the Participant originally
receiving the grant of such Non-ISOs.
14. TIME OF GRANTING AWARDS.
The date of grant of an Award shall, for all purposes, be the
later of the date on which the Committee makes the determination of
granting such Award, and the Effective Date. Notice of the
determination shall be given to each Participant to whom an Award is
so granted within a reasonable time after the date of such grant.
15. EFFECTIVE DATE.
The Plan shall become effective immediately upon its approval
by the Board, subject to stockholder approval as may be required.
16. MODIFICATION OF AWARDS.
At any time, and from time to time, the Board may authorize
the Committee to direct execution of an instrument providing for the
modification of any outstanding Award, provided no such modification
shall confer on the holder of said Award any right or benefit which
could not be conferred on him by the grant of a new Award at such
time, or impair the Award without the consent of the holder of the
Award.
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17. AMENDMENT AND TERMINATION OF THE PLAN.
The Board may from time to time amend the terms of the Plan
and, with respect to any Shares at the time not subject to Awards,
suspend or terminate the Plans. No amendment, suspension or
termination of the Plan shall, without the consent of any affected
holders of an Award, alter or impair any rights or obligations under
any Award theretofore granted.
18. CONDITIONS UPON ISSUANCE OF SHARES.
(a) Compliance with Securities Laws. Shares of Common Stock shall
not be issued with respect to any Award unless the issuance
and delivery of such Shares shall comply with all relevant
provisions of law, including, without limitation, the
Securities Act of 1933, as amended, the rules and regulations
promulgated thereunder, any applicable state securities law,
and the requirements of any stock exchange upon which the
Shares may then be listed.
(b) Special Circumstances. The inability of the Bank to obtain
approval from any regulatory body or authority deemed by the
Bank's counsel to be necessary to the lawful issuance and sale
of any Shares hereunder shall relieve the Bank of any
liability in respect of the non-issuance or sale of such
Shares. As a condition to the exercise of an Option or SAR,
the Bank may require the person exercising the Option or SAR
to make such representations and warranties as may be
necessary to assure the availability of an exemption from the
registration requirements of federal or state securities law.
(c) Committee Discretion. The Committee shall have the
discretionary authority to impose in Agreements such
restrictions on Shares as it may deem appropriate or
desirable, including but not limited to the authority to
impose a right of first refusal or to establish repurchase
rights or both of these restrictions.
19. RESERVATION OF SHARES.
The Bank, during the term of the Plan, will reserve and keep
available a number of Shares sufficient to satisfy the requirements of
the Plan.
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20. WITHHOLDING TAX.
The Bank's obligation to deliver Shares upon exercise of
Options and/or SARs shall be subject to the Participant's satisfaction
of all applicable federal, state and local income and employment tax
withholding obligations.
21. NO EMPLOYMENT OR OTHER RIGHTS.
In no event shall an Employee's or Director's eligibility to
participate or participation in the Plan create or be deemed to create
any legal or equitable right of the Employee, Director, or any other
party to continue service with the Bank or any Affiliate of such
corporations. Except to the extent provided in Paragraphs 6(b) and
6(d), no Employee or Director shall have a right to be granted an
Award or, having received an Award, the right to again be granted an
Award. However, an Employee or Director who has been granted an Award
may, if otherwise eligible, be granted an additional Award or Awards.
22. GOVERNING LAW.
The Plan shall be governed by and construed in accordance with
the laws of the State of Alabama, except to the extent that federal
law shall be deemed to apply.
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<TABLE>
<S> <C>
============================================================ ===================================================
NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION NOT
CONTAINED IN THIS PROXY STATEMENT/PROSPECTUS, AND, IF
GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION SHOULD PINNACLE BANK
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.
PINNACLE BANCSHARES, INC.
TABLE OF CONTENTS
Page
----
Summary Information on Proposed
Holding Company Formation . . . . . . . . . . . i
Introduction . . . . . . . . . . . . . . . . . . 1
Voting and Revocation of Proxies . . . . . . . . 1
Voting Securities and Principal Holders Thereof . 1
Proposal I - Election of Directors . . . . . . . 2
Proposal II - Ratification of
Appointment of Independent
Auditors . . . . . . . . . . . . . . . . . . . 7
Proposal III - Proposed Holding Company ----------------
Formation . . . . . . . . . . . . . . . . . . . 7
Proposal IV - Approval of the Pinnacle Bank Proxy Statement/
1996 Stock Option and Incentive Plan . . . . . 25
New Plan Benefits . . . . . . . . . . . . . . . . 31 Prospectus
Proposal V - Adjournment of Meeting . . . . . . . 31
Market and Dividend Information . . . . . . . . . 31 ----------------
Other Matters . . . . . . . . . . . . . . . . . . 32
Miscellaneous . . . . . . . . . . . . . . . . . . 32
Stockholder Proposals . . . . . . . . . . . . . . 33
Annual Report on Form 10-K . . . . . . . . . . . 33
Exhibit A - Agreement and Plan of Reorganization A-1
Exhibit B - Certificate of Incorporation . . . . B-1 ________ __, 1996
Exhibit C - Bylaws . . . . . . . . . . . . . . . C-1
Exhibit D - 1996 Stock Option and
Incentive Plan . . . . . . . . . . . . . . . . D-1
============================================================ ===================================================
</TABLE>
<PAGE> 100
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the Delaware General Corporation Law sets forth
circumstances under which directors, officers, employees and agents may be
insured or indemnified against liability which they may incur in their
capacities.
Section 145. INDEMNIFICATION OF OFFICERS, DIRECTORS, EMPLOYEES AND
AGENTS; INSURANCE. (a) A corporation may indemnify any person who was
or is a party or is threatened to be made a party to any threatened,
pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative (other than an action by or
in the right of the corporation) by reason of the fact that he is or
was a director, officer, employee or agent of the corporation, or is
or was serving at the request of the corporation as a director,
officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including
attorneys' fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by him in connection with such
action, suit or proceeding if he acted in good faith and in a manner
he reasonably believed to be in or not opposed to the best interests
of the corporation, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his conduct was
unlawful. The termination of any action, suit or proceeding by
judgment, order, settlement, conviction, or upon a plea of nolo
contendere or its equivalent, shall not, of itself, create a
presumption that the person did not act in good faith and in a manner
which he reasonably believed to be in or not opposed to the best
interests of the corporation, and, with respect to any criminal action
or proceeding, had reasonable cause to believe that his conduct was
unlawful.
(b) A corporation may indemnify any person who was or is a
party or is threatened to be made a party to any threatened, pending
or completed action or suit by or in the right of the corporation to
procure a judgment in its favor by reason of the fact that he is or
was a director, officer, employee or agent of the corporation, or is
or was serving at the request of the corporation as a director,
officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against expenses (including
attorneys' fees) actually and reasonably incurred by him in connection
with the defense or settlement of such action or suit if he acted in
good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of the corporation and except that no
indemnification shall be made in respect of any claim, issue or matter
as to which such person shall have been adjudged to be liable to the
corporation unless and only to the extent that the Court of Chancery
or the court in which such action or suit was brought shall determine
upon application that, despite the adjudication of liability but in
view of all the circumstances of the case, such person is fairly and
reasonably entitled to indemnity for such expenses which the Court of
Chancery or such other court shall deem proper.
(c) To the extent that a director, officer, employee or agent
of a corporation has been successful on the merits or otherwise in
defense of any action, suit or proceeding referred to in subsections
(a) and (b) of this section, or in defense of any claim, issue or
matter therein, he shall be indemnified against expenses (including
attorneys' fees) actually and reasonably incurred by him in connection
therewith.
II - 1
<PAGE> 101
(d) Any indemnification under subsections (a) and (b) of this
section (unless ordered by a court) shall be made by the corporation
only as authorized in the specific case upon a determination that
indemnification of the director, officer, employee or agent is proper
in the circumstances because he has met the applicable standard of
conduct set forth in subsections (a) and (b) of this section. Such
determination shall be made (1) by a majority vote of the directors
who are not parties to such action, suit or proceeding, even though
less than a quorum, or (2) if there are no such directors, or if such
directors so direct, by independent legal counsel in a written
opinion, or (3) by the stockholders.
(e) Expenses (including attorneys' fees) incurred by an
officer or director in defending any civil, criminal, administrative
or investigative action, suit or proceeding may be paid by the
corporation in advance of the final disposition of such action, suit
or proceeding upon receipt of an undertaking by or on behalf of such
director or officer to repay such amount if it shall ultimately be
determined that he is not entitled to be indemnified by the
corporation as authorized in this Section. Such expenses (including
attorneys' fees) incurred by other employees and agents may be so paid
upon such terms and conditions, if any, as the board of directors
deems appropriate.
(f) The indemnification and advancement of expenses provided
by, or granted pursuant to, the other subsections of this section
shall not be deemed exclusive of any other rights to which those
seeking indemnification or advancement of expenses may be entitled
under any bylaw, agreement, vote of stockholders or disinterested
directors or otherwise, both as to action in his official capacity and
as to action in another capacity while holding such office.
(g) A corporation shall have power to purchase and maintain
insurance on behalf of any person who is or was a director, officer,
employee or agent of the corporation, or is or was serving at the
request of the corporation as a director, officer, employee or agent
of another corporation, partnership, joint venture, trust or other
enterprise against any liability asserted against him and incurred by
him in any such capacity, or arising out of his status as such,
whether or not the corporation would have the power to indemnify him
against such liability under this section.
(h) For purposes of this section, references to "the
corporation" shall include, in addition to the resulting corporation,
any constituent corporation (including any constituent of a
constituent) absorbed in a consolidation or merger which, if its
separate existence had continued, would have had power and authority
to indemnify its directors, officers, and employees or agents, so that
any person who is or was a director, officer, employee or agent of
such constituent corporation, or is or was serving at the request of
such constituent corporation as a director, officer, employee or agent
of another corporation, partnership, joint venture, trust or other
enterprise, shall stand in the same position under this section with
respect to the resulting or surviving corporation as he would have
with respect to such constituent corporation if its separate existence
had continued.
(i) For purposes of this section, references to "other
enterprises" shall include employee benefit plans; references to
"fines" shall include any excise taxes assessed on a person with
respect to any employee benefit plan; and references to "serving at
the request of the corporation" shall include any service as a
director, officer, employee or agent of the corporation which imposes
duties on, or involves services by, such director, officer, employee,
or agent with respect to an employee benefit plan, its participants or
beneficiaries; and a person who acted in good faith and in a manner he
reasonably believed to be in the interest of the participants and
II - 2
<PAGE> 102
beneficiaries of an employee benefit plan shall be deemed to have
acted in a manner "not opposed to the best interests of the
corporation" as referred to in this section.
(j) The indemnification and advancement of expenses provided
by, or granted pursuant to, this section shall, unless otherwise
provided when authorized or ratified, continue as to a person who has
ceased to be a director, officer, employee or agent and shall inure to
the benefit of the heirs, executors and administrators of such a
person.
(k) The Court of Chancery is hereby vested with exclusive
jurisdiction to hear and determine all actions for advancement of
expenses or indemnification brought under this section or under any
bylaw, agreement, vote of stockholders or disinterested directors, or
otherwise. The Court of Chancery may summarily determine a
corporation's obligation to advance expenses (including attorneys'
fees).
The Company's Restated Certificate of Incorporation sets forth
circumstances under which directors, officers, employees and agents
may be insured or indemnified against liability which they may incur
in their capacities.
TENTH: A. Each person who was or is made a party or is
threatened to be made a party to or is otherwise involved in any
action, suit or proceeding, whether civil, criminal, administrative or
investigative (hereinafter a "proceeding"), by reason of the fact that
he or she is or was a Director or an Officer of the Corporation or is
or was serving at the request of the Corporation as a Director,
Officer, employee or agent of another corporation or of a partnership,
joint venture, trust or other enterprise, including service with
respect to an employee benefit plan (hereinafter an "indemnitee"),
whether the basis of such proceeding is alleged action in an official
capacity as a Director, Officer, employee or agent or in any other
capacity while serving as a Director, Officer, employee or agent,
shall be indemnified and held harmless by the Corporation to the
fullest extent authorized by the Delaware General Corporation Law, as
the same exists or may hereafter be amended (but, in the case of any
such amendment, only to the extent that such amendment permits the
Corporation to provide broader indemnification rights than such law
permitted the Corporation to provide prior to such amendment), against
all expense, liability and loss (including attorneys' fees, judgments,
fines, ERISA excise taxes or penalties and amounts paid in settlement)
reasonably incurred or suffered by such indemnitee in connection
therewith; provided, however, that, except as provided in Section C
hereof with respect to proceedings to enforce rights to
indemnification, the Corporation shall indemnify any such indemnitee
in connection with a proceeding (or part thereof) initiated by such
indemnitee only if such proceeding (or part thereof) was authorized by
the Board of Directors of the Corporation.
B. The right to indemnification conferred in
Section A of this Article TENTH shall include the right to be paid by
the Corporation the expenses incurred in defending any such proceeding
in advance of its final disposition (hereinafter an "advancement of
expenses"); provided, however, that, if the Delaware General
Corporation Law requires, an advancement of expenses incurred by an
indemnitee in his or her capacity as a Director or Officer (and not in
any other capacity in which service was or is rendered by such
indemnitee, including, without limitation, service to an employee
benefit plan) shall be made only upon delivery to the Corporation of
an undertaking (hereinafter an "undertaking"), by or on behalf of such
indemnitee, to repay all amounts so advanced if it shall ultimately be
determined by final judicial decision from which there is no further
right to appeal (hereinafter a "final adjudication") that such
indemnitee is not entitled to be indemnified for such expenses under
this Section or
II - 3
<PAGE> 103
otherwise. The rights to indemnification and to the advancement of
expenses conferred in Sections A and B of this Article TENTH shall be
contract rights and such rights shall continue as to an indemnitee who
has ceased to be a Director, Officer, employee or agent and shall
inure to the benefit of the indemnitee's heirs, executors and
administrators.
C. If a claim under Section A or B of this
Article TENTH is not paid in full by the Corporation within sixty days
after a written claim has been received by the Corporation, except in
the case of a claim for an advancement of expenses, in which case the
applicable period shall be twenty days, the indemnitee may at any time
thereafter bring suit against the Corporation to recover the unpaid
amount of the claim. If successful in whole or in part in any such
suit, or in a suit brought by the Corporation to recover an
advancement of expenses pursuant to the terms of an undertaking, the
indemnitee shall be entitled to be paid also the expense of
prosecuting or defending such suit. In (i) any suit brought by the
indemnitee to enforce a right to indemnification hereunder (but not in
a suit brought by the indemnitee to enforce a right to an advancement
of expenses) it shall be a defense that, and (ii) in any suit by the
Corporation to recover an advancement of expenses pursuant to the
terms of an undertaking the Corporation shall be entitled to recover
such expenses upon a final adjudication that, the indemnitee has not
met any applicable standard for indemnification set forth in the
Delaware General Corporation Law. Neither the failure of the
Corporation (including its Board of Directors, independent legal
counsel, or its stockholders) to have made a determination prior to
the commencement of such suit that indemnification of the indemnitee
is proper in the circumstances because the indemnitee has met the
applicable standard of conduct set forth in the Delaware General
Corporation Law, nor an actual determination by the Corporation
(including its Board of Directors, independent legal counsel, or its
stockholders) that the indemnitee has not met such applicable standard
of conduct, shall create a presumption that the indemnitee has not met
the applicable standard of conduct or, in the case of such a suit
brought by the indemnitee, be a defense to such suit. In any suit
brought by the indemnitee to enforce a right to indemnification or to
an advancement of expenses hereunder, or by the Corporation to recover
an advancement of expenses pursuant to the terms of an undertaking,
the burden of proving that the indemnitee is not entitled to be
indemnified, or to such advancement of expenses, under this Article
TENTH or otherwise shall be on the Corporation.
D. The rights to indemnification and to the
advancement of expenses conferred in this Article TENTH shall not be
exclusive of any other right which any person may have or hereafter
acquire under any statute, the Corporation's Certificate of
Incorporation, By-laws, agreement, vote of stockholders or
disinterested Directors or otherwise.
E. The Corporation may maintain insurance, at
its expense, to protect itself and any Director, Officer, employee or
agent of the Corporation or another corporation, partnership, joint
venture, trust or other enterprise against any expense, liability or
loss, whether or not the Corporation would have the power to indemnify
such person against such expense, liability or loss under the Delaware
General Corporation Law.
F. The Corporation may, to the extent authorized
from time to time by the Board of Directors, grant rights to
indemnification and to the advancement of expenses to any employee or
agent of the Corporation to the fullest extent of the provisions of
this Article TENTH with respect to the indemnification and advancement
of expenses of Directors and Officers of the Corporation.
II - 4
<PAGE> 104
ELEVENTH: A Director of this Corporation shall not be
personally liable to the Corporation or its stockholders for monetary
damages for breach of fiduciary duty as a Director, except for
liability (i) for any breach of the Director's duty of loyalty to the
Corporation or its stockholders, (ii) for acts or omissions not in
good faith or which involve intentional misconduct or a knowing
violation of law, (iii) under Section 174 of the Delaware General
Corporation Law, or (iv) for any transaction from which the Director
derived an improper personal benefit. If the Delaware General
Corporation Law is amended to authorized corporate action further
eliminating or limiting the personal liability of Directors, then the
liability of a Director of the Corporation shall be eliminated or
limited to the fullest extent permitted by the Delaware General
Corporation Law, as so amended.
Any repeal or modification of the foregoing paragraph
by the stockholders of the Corporation shall not adversely affect any
right or protection of a Director of the Corporation existing at the
time of such repeal or modification.
Article XVI of the Registrant's Certificate of Incorporation sets
forth circumstances under which directors, officers, employees and agents may
be insured or indemnified against liability which they may incur in their
capacities.
ARTICLE XVI
Indemnification
A. Persons. The Corporation shall indemnify, to the extent
provided in paragraphs B, D or F:
(1) any person who is or was a director, officer,
employee, or agent of the Corporation; and
(2) any person who serves or served at the Corporation's
request as a director, officer, employee, agent, partner or trustee of
another corporation, partnership, joint venture, trust or other
enterprise.
B. Extent -- Derivative Suits. In case of a threatened, pending
or completed action or suit by or in the right of the Corporation against a
person named in paragraph A by reason of his holding a position named in
paragraph A, the Corporation shall indemnify him if he satisfies the standard
in paragraph C, for expenses (including attorneys' fees but excluding amounts
paid in settlement) actually and reasonably incurred by him in connection with
the defense or settlement of the action or suit.
C. Standard -- Derivative Suits. In case of a threatened, pending
or completed action or suit by or in the right of the Corporation, a person
named in paragraph A shall be indemnified only if:
(1) he is successful on the merits or otherwise; or
(2) he acted in good faith in the transaction which is
the subject of the suit or action, and in a manner he reasonably
believed to be in, or not opposed to, the best interests of the
Corporation, including, but not limited to, the taking of any and all
actions in connection with the Corporation's response to any tender
offer or any offer or proposal of another party to engage in a
Business Combination (as defined in Article XIV) not approved by the
board of directors. However, he shall not be indemnified in respect
of any claim, issue or matter as to which he has been adjudged liable
to the Corporation unless (and only to the extent that) the court in
which the suit was brought shall determine, upon application,
II - 5
<PAGE> 105
that despite the adjudication but in view of all the circumstances, he
is fairly and reasonably entitled to indemnity for such expenses as
the court shall deem proper.
D. Extent -- Nonderivative Suits. In case of a threatened,
pending or completed suit, action or proceeding (whether civil, criminal,
administrative or investigative), other than a suit by or in the right of the
Corporation, together hereafter referred to as a nonderivative suit, against a
person named in paragraph A by reason of his holding a position named in
paragraph A, the Corporation shall indemnify him if he satisfies the standard
in paragraph E, for amounts actually and reasonably incurred by him in
connection with the defense or settlement of the nonderivative suit, including,
but not limited to (i) expenses (including attorneys' fees), (ii) amounts paid
in settlement, (iii) judgments, and (iv) fines.
E. Standard -- Nonderivative Suits. In case of a nonderivative
suit, a person named in paragraph A shall be indemnified only if:
(1) he is successful on the merits or otherwise; or
(2) he acted in good faith in the transaction which is
the subject of the nonderivative suit and in a manner he reasonably
believed to be in, or not opposed to, the best interests of the
Corporation, including, but not limited to, the taking of any and all
actions in connection with the Corporation's response to any tender
offer or any offer or proposal of another party to engage in a
Business Combination (as defined in Article XIV) not approved by the
board of directors and, with respect to any criminal action or
proceeding, he had no reasonable cause to believe his conduct was
unlawful. The termination of a nonderivative suit by judgment, order,
settlement, conviction, or upon a plea of nolo contendere or its
equivalent shall not, in itself, create a presumption that the person
failed to satisfy the standard of this subparagraph E(2).
F. Determination That Standard Has Been Met. A determination that
the standard of paragraph C or E has been satisfied may be made by a court, or,
except as stated in subparagraph C(2) (second sentence), the determination may
be made by:
(1) the board of directors by a majority vote of a quorum
consisting of directors of the Corporation who were not parties to the
action, suit or proceeding; or
(2) independent legal counsel (appointed by a majority of
the disinterested directors of the Corporation, whether or not a
quorum) in a written opinion; or
(3) the stockholders of the Corporation.
G. Proration. Anyone making a determination under paragraph F may
determine that a person has met the standard as to some matters but not as to
others, and may reasonably prorate amounts to be indemnified.
H. Advance Payment. The Corporation shall pay in advance any
expenses (including attorneys' fees) which may become subject to
indemnification under paragraphs A through G if:
(1) the board of directors authorizes the specific
payment; and
(2) the person receiving the payment undertakes in
writing to repay the same if it is ultimately determined that he is
not entitled to indemnification by the Corporation under paragraphs A
through G.
II - 6
<PAGE> 106
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.
L. Intention and Savings Clause. It is the intention of this
Article XVI to provide for indemnification to the fullest extent permitted by
the General Corporation Law of the State of Delaware, and this Article XVI
shall be interpreted accordingly. If this Article XVI or any portion hereof
shall be invalidated on any ground by any court of competent jurisdiction, then
the Corporation shall nevertheless indemnify each director, officer, employee,
and agent of the Corporation as to costs, charges, and expenses (including
attorneys' fees), judgments, fines, and amounts paid in settlement with respect
to any action, suit, or proceeding, whether civil, criminal, administrative, or
investigative, including an action by or in the right of the Corporation to the
full extent permitted by any applicable portion of this Article XVI that shall
not have been invalidated and to the full extent permitted by applicable law.
If the General Corporation Law of the State of Delaware is amended, or other
Delaware law is enacted, to permit further or additional indemnification of the
persons defined in this Article XVI A, then the indemnification of such persons
shall be to the fullest extent permitted by the General Corporation Law of the
State of Delaware, as so amended, or such other Delaware law.
The Registrant may purchase and maintain insurance on behalf of any
person who is or was a director, officer, employee, or agent of the Registrant
or is or was serving at the request of the Registrant as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise against any liability asserted against him and incurred by him
in any such capacity or arising out of his status as such, whether or not the
Registrant would have the power to indemnify him against such liability under
the provisions of its Restated Certificate of Incorporation. The Registrant
intends to purchase such insurance.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
The exhibits and financial statement schedules filed as part of this
Registration Statement are as follows:
(a) Exhibits
The Index of Exhibits immediately precedes the accompanying
exhibits.
(b) Financial Statement Schedules
Not applicable.
(c) Report or Appraisal
II - 7
<PAGE> 107
Not applicable.
ITEM 22. UNDERTAKINGS
(a) Rule 415 Offering. The undersigned registrant hereby undertakes:
(1) to file, during any period in which offers or sales are
being made, a post-effective amendment to this registration statement;
(i) to include any prospectus required by
Section 10(a)(3) of the Securities Act of 1933;
(ii) to reflect in the prospectus any facts or
events arising after the effective date of the registration statement
(or most recent post effective amendment thereof) which individually or
in the aggregate, represent a fundamental change in the information set
forth in the registration statement;
(iii) to include any material information with
respect to the plan of distribution not previously disclosed in the
registration statement or any material change to such information in the
registration statement.
(2) That, for purposes of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to
be a new registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be a bona fide
offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.
(b) Registration on Form S-4 of Securities Offered for Resale.
(1) The undersigned registrant hereby undertakes as follows:
that prior to any public reoffering of the securities registered hereunder
through use of a prospectus which is a part of this registration statement, by
any person or party who is deemed to be an underwriter within the meaning of
Rule 145(c), the issuer undertakes that such reoffering prospectus will contain
the information called for by the applicable registration form with respect to
reofferings by persons who may be deemed underwriters, in addition to the
information called for by the other items of the applicable form.
(2) The registrant undertakes that every prospectus (i) that is
filed pursuant to paragraph (1) immediately preceding, or (ii) that purports to
meet the requirements of section 10(a)(3) of the Act and is used in connection
with an offering of securities subject to Rule 415, will be filed as a part of
an amendment to the registration statement and will not be used until such
amendment is effective, and for the purpose of determining any liability under
the Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(c) The undersigned registrant hereby undertakes to supply by means of
a post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of, and
included in the registration statement when it became effective.
II - 8
<PAGE> 108
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
the registrant has duly caused this registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Jasper,
State of Alabama as of September 3, 1996.
PINNACLE BANCSHARES, INC.
Date: September 3, 1996 By: /s/ Robert B. Nolen, Jr.
----------------------------------
Robert B. Nolen, Jr.
President
(Duly Authorized Representative)
POWER OF ATTORNEY
We, the undersigned Directors of Pinnacle Bancshares, Inc., severally
constitute and appoint Robert B. Nolen, Jr., with full power of substitution,
our true and lawful attorney and agent, to do any and all things and acts in
our names in the capacities indicated below which said Robert B. Nolen, Jr. may
deem necessary or advisable to enable Pinnacle Bancshares, Inc. to comply with
the Securities Act of 1933, as amended, and any rules, regulations and
requirements of the Securities and Exchange Commission, in connection with the
registration statement on Form S-4 relating to the offering of common stock of
Community Bancorp, Inc., including specifically, but not limited to, power and
authority to sign for us or any of us in our names in the capacities indicated
below the registration statement and any and all amendments (including
post-effective amendments) thereto; and we hereby approve, ratify and confirm
all that said Robert B. Nolen, Jr. shall do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this registration statement has been signed below by the following persons in
the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ Al H. Simmons
- ---------------------------
Al H. Simmons Chairman of the Board September 3, 1996
/s/ Robert B. Nolen, Jr.
- ---------------------------
Robert B. Nolen, Jr. President, Treasurer and Director September 3, 1996
/s/ James W. Cannon
- ---------------------------
James W. Cannon Director September 3, 1996
/s/ Max W. Perdue
- ---------------------------
Max W. Perdue Director September 3, 1996
/s/ Carlton Mayhall, Jr.
- ---------------------------
Carlton Mayhall, Jr. Director September 3, 1996
/s/ Melvin R. Kacharos
- ---------------------------
Melvin R. Kacharos Director September 3, 1996
</TABLE>
<PAGE> 109
<TABLE>
<S> <C> <C>
/s/ John D. Baird
- ---------------------------
John D. Baird Director September 3, 1996
/s/ Greg Batchelor
- ---------------------------
Greg Batchelor Director September 3, 1996
/s/ O. H. Brown
- ---------------------------
O. H. Brown Director September 3, 1996
/s/ Sam W. Murphy
- ---------------------------
Sam W. Murphy Director September 3, 1996
- ---------------------------
J. T. Waggoner Director
</TABLE>
<PAGE> 110
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- ------- -----------------------
<S> <C>
2 Agreement and Plan of Reorganization (attached as Exhibit A to the
Proxy Statement/Prospectus filed as part of this registration statement)
3.1 Certificate of Incorporation of Pinnacle Bancshares, Inc. (attached
as Exhibit B to the Proxy Statement/Prospectus filed as part of this
registration statement)
3.2 Bylaws of Pinnacle Bancshares, Inc. (attached as Exhibit C to the
Proxy Statement/Prospectus filed as part of this registration statement)
5 Opinion of Reinhart, Boerner, Van Deuren, Norris & Rieselbach, P.C.
regarding legality of securities.
8 Form of tax opinion of Reinhart, Boerner, Van Deuren, Norris &
Rieselbach, P.C.
10.1 Termination Agreement between Pinnacle Bank and Al H. Simmons
10.2 Employment Agreement between Pinnacle Bank and Robert
B. Nolen, Jr.
10.3 First Federal of Alabama, F.S.B. 1986 Stock Option and Incentive Plan
10.4 Pinnacle Bank 1996 Stock Option and Incentive Plan (attached as
Exhibit D to the Proxy Statement/Prospectus filed as part of this registration
statement)
23.1 Consents of Reinhart, Boerner, Van Deuren, Norris & Rieselbach, P.C.
(contained in its opinions filed as Exhibits 5 and 8)
25 Power of attorney (reference is made to the Signature Page of the Form S-4)
99 Form of proxy to be mailed to stockholders of Pinnacle Bank
</TABLE>
<PAGE> 1
EXHIBIT 5
September 6, 1996
Board of Directors
Pinnacle Bancshares, Inc.
1811 Second Avenue
Jasper, Alabama 35502-1388
Re: Pinnacle Bancshares, Inc.
Registration Statement on Form S-4
Gentlemen:
You have requested our opinion as special counsel to Pinnacle
Bancshares, Inc., a Delaware corporation, in connection with a registration
statement on Form S-4 filed with the Securities and Exchange Commission under
the Securities Act of 1933, as amended. The registration statement relates to
shares to be issued in connection with the reorganization of Pinnacle Bank into
the holding company form of ownership as a wholly owned subsidiary of Pinnacle
Bancshares, Inc. (the "Holding Company Reorganization").
In rendering this opinion, we understand that the common stock of
Pinnacle Bancshares, Inc. will be offered and sold in the manner described in
the Proxy Statement/Prospectus which is a part of the registration statement.
We have examined such records and documents and made such investigation as we
have deemed relevant in connection with this opinion.
Based upon the foregoing, it is our opinion that the shares of common
stock of Pinnacle Bancshares, Inc. will, upon issuance pursuant to the Holding
Company Reorganization, be legally issued, fully paid and nonassessable.
This opinion is furnished for use as an exhibit to the registration
statement and should not be used for any other purpose nor relied upon by any
other person (except for the Securities and Exchange Commission in connection
with its review of the registration statement) without the prior written
consent of this firm. We hereby consent to the filing of this opinion as an
exhibit to the registration statement and to the reference to us in the
Offering Circular under the heading "PROPOSAL III -- PROPOSED HOLDING COMPANY
FORMATION -- Legal Opinion."
Reinhart, Boerner, Van Deuren, Norris & Rieselbach, P.C.
By: /s/ Edward B. Crosland, Jr.
-------------------------------------------------
Edward B. Crosland, Jr.
<PAGE> 1
EXHIBIT 8
__________ __, 1996
Board of Directors
Pinnacle Bank
1811 Second Avenue
Jasper, Alabama 35502-1388
Gentlemen: Re: Certain Federal Income
Tax Consequences Relating to
Proposed Reorganization into
Holding Company Format
In accordance with your request, set forth hereinbelow is the opinion
of this firm relating to certain federal income tax consequences of the
proposed reorganization (the "Reorganization") of Pinnacle Bank (the "Bank")
into the holding company form of ownership whereby the Bank will become a
wholly-owned subsidiary of Pinnacle Bancshares, Inc. (the "Holding Company")
and stockholders of the Bank will become the stockholders of the Holding
Company.
For purposes of this opinion, we have examined such documents and
questions of law as we have considered necessary or appropriate, including, but
not limited to the Agreement and Plan of Reorganization dated August 28, 1996
(the "Plan"); the federal stock charter and bylaws of the Bank; the certificate
of incorporation and bylaws of the Holding Company; the Affidavit of
Representations dated _______ __, 1996 provided to us by the Bank in connection
with this opinion (the "Affidavit"), and the Proxy Statement/Prospectus
included in the Registration Statement on Form S-4 ("Form S-4") filed by the
Holding Company with the Securities and Exchange Commission ("SEC") on ________
__, 1996 in connection with the Reorganization. In such examination, we have
assumed, and have not independently verified, the genuineness of all signatures
on original documents where due execution and delivery are requirements to the
effectiveness thereof. Terms used but not defined herein, whether capitalized
or not, shall have the same meanings as defined in the Plan.
<PAGE> 2
Board of Directors
Pinnacle Bank
_________ __, 1996
Page 2
BACKGROUND
The Bank is headquartered in Jasper, Alabama and was originally
chartered as First Federal Savings and Loan Association of Jasper, a federal
mutual savings and loan association, in 1935. In 1986, the Bank became a
federal stock savings bank when the Bank converted to the stock form of
organization and adopted the corporate title of First Federal of Alabama,
F.S.B. In January 1996, the Bank adopted its current name. The Bank is subject
to examination and comprehensive regulation by the Office of Thrift Supervision
("OTS"), and its savings deposits are insured up to applicable limits by the
Savings Association Insurance Fund administered by the Federal Deposit
Insurance Corporation. In addition, the Bank is a member of and owns capital
stock in the Federal Home Loan Bank (the "FHLB") of Atlanta, which is one of 12
regional banks in the FHLB System. The Bank is further subject to regulations
of the Board of Governors of the Federal Reserve System governing reserves to
be maintained and certain other matters. Currently, the Bank maintains a bad
debt reserve for federal income tax purposes pursuant to Section 593 of the
Internal Revenue Code of 1986, as amended (the "Code").
The capital stock of the Bank possesses the voting, dividend and
residual equity rights of the Bank. At June 30, 1996, the Bank had 10,000,000
shares of common stock, par value $.01 per share ("Bank Common Stock"), and
10,000,000 shares of preferred stock authorized, of which 889,824 shares of
Bank Common Stock and no shares of preferred stock were issued and outstanding.
At June 30, 1996, the Bank also had 42,176 shares of Bank Common Stock held as
treasury stock. The Bank Common Stock is currently listed for trading on the
American Stock Exchange ("AMEX") under the symbol "PLE."
The Bank's principal business consists of attracting deposits from the
general public and investing these funds, together with advances from the FHLB
of Atlanta, primarily in loans secured by first mortgages on residential real
estate and commercial real estate and, to a lesser extent, in construction,
consumer and commercial business loans. The Bank derives its income
principally from interest earned on loans and investment securities and, to a
lesser extent, gains from the sale of loans and mortgage backed securities.
The principal expenses of the Bank are interest expense on deposits and
borrowings of non-interest expense such as compensation and employee benefits,
office occupancy expenses and Federal
<PAGE> 3
Board of Directors
Pinnacle Bank
_________ __, 1996
Page 3
Deposit Insurance Corporation insurance premiums. Funds for these activities
are provided principally by deposits, principal repayments on loans and
mortgage backed securities, and FHLB advances.
The Holding Company is a Virginia corporation incorporated in August
1996 to become the sole stockholder of the Bank. The Holding Company has
2,500,000 shares of authorized stock, of which 2,400,000 shares are common
stock, par value $.01 per share ("Holding Company Common Stock"), and 100,000
shares are serial preferred stock, par value $.01 per share. No shares of the
Holding Company are issued and outstanding nor are any shares expected to be
issued prior to the Reorganization. Further, prior to the Reorganization, the
Holding Company has not engaged in, and is not expected to engage in, any
material operations.
PROPOSED TRANSACTION
The Board of Directors of the Bank believes that a holding company
structure will provide greater flexibility than is currently enjoyed by the
Bank. Present regulations applicable to savings associations limit both the
types of businesses in which the Bank may engage and the amount which the Bank
may invest in subsidiaries. The Bank is also limited in its ability to engage
in certain corporate transactions such as stock repurchases, by certain
provisions of the Code applicable to savings associations but not to their
holding companies. The Board of Directors believes that stock repurchases
could improve market liquidity and enhance stockholder value. The
establishment of the Holding Company as a unitary savings and loan holding
company (i.e., a holding company with only one savings association subsidiary)
also permits diversification of operations and the acquisition and formation of
companies engaged in lines of business which, while complementary to the thrift
business, 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 savings association
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
<PAGE> 4
Board of Directors
Pinnacle Bank
_________ __, 1996
Page 4
advantage of any acquisition opportunities which may arise, although no
specific acquisition is planned at this time.
Accordingly, the following transaction is proposed to effect the
Reorganization:
(1) The Bank has formed the Holding Company as a wholly owned
subsidiary incorporated under the laws of the State of
Delaware for the purpose of initially becoming the sole
stockholder of a newly formed interim federal stock savings
bank, and subsequently becoming the sole holder of the capital
stock of the Bank.
(2) The Holding Company will form an interim federal stock savings
bank ("Interim Federal"), which will be wholly owned by the
Holding Company.
(3) Interim Federal will merge with and into the Bank, with the
Bank as the surviving corporation.
(4) Pursuant to such merger:
(i) all of the issued and outstanding shares of Bank
Common Stock will automatically be converted by
operation of law on a one-for-one basis into issued
and outstanding shares of Holding Company Common
Stock; and
(ii) all of the issued and outstanding shares of common
stock of Interim Federal will automatically be
converted by operation of law on a one-for-one basis
into an equal number of issued and outstanding shares
of Bank Common Stock, which will be all of the issued
and outstanding capital stock of the Bank.
(5) As a result of the proposed transaction, the stockholders of
the Bank immediately prior to the proposed transaction will,
immediately after the proposed transaction, own all of the
issued and outstanding stock of the Holding Company, which
will in turn own all of the issued and outstanding stock of
the Bank. Pursuant to OTS regulations, stockholders of the
Bank will not have dissenters' appraisal rights in
<PAGE> 5
Board of Directors
Pinnacle Bank
_________ __, 1996
Page 5
connection with the Reorganization if the Bank Common Stock
continues to be listed on the AMEX.
The proposed transaction is to be executed in compliance with the laws
of the United States and applicable federal regulations. Consummation of the
Reorganization requires, among other things, that the Plan receive the approval
of at least a majority of the issued and outstanding shares of the Bank Common
Stock and appropriate regulatory approval.
Immediately after consummation of the Reorganization in the manner set
forth above, the Bank will continue to operate as a federally-chartered stock
savings bank and retain its present name and federal charter. Directors of the
Bank before the Reorganization will continue as Directors of the Bank after the
Reorganization.
OPINION
Based on the foregoing and in reliance thereon, and subject to the
conditions stated herein, it is our opinion that the following federal income
tax consequences will result from the proposed transaction.
(1) The proposed transaction will constitute a reorganization
within the meaning of Section 368(a)(1)(A) of the Code. The
reorganization will not be disqualified by reason of the fact
that stock of the Holding Company is used in the transaction.
(Section 368(a)(2)(E) of the Code).
(2) Interim will not recognize any gain or loss on the transfer of
its assets to the Bank in exchange for Bank Common Stock and
the assumption by the Bank of the liabilities, if any, of
Interim (Sections 361(a) and 357(a) of the Code).
(3) The Bank will not recognize any gain or loss on the receipt of
the assets of Interim in exchange for the transfer to Interim
of Bank Common Stock (Section 1032(a) of the Code).
<PAGE> 6
Board of Directors
Pinnacle Bank
_________ __, 1996
Page 6
(4) The Bank's basis in the assets received from Interim in the
proposed transaction will, in each case, be the same as the
basis of such assets in the hands of Interim immediately prior
to the transaction (Section 362(b) of the Code).
(5) The Bank's holding period for the assets received from Interim
in the proposed transaction will, in each instance, include
the period during which such assets were held by Interim
(Section 1223(2) of the Code).
(6) The Holding Company will not recognize any gain or loss upon
its receipt of Bank Common Stock in exchange for Interim Stock
(Section 354(a) of the Code).
(7) Stockholders of the Bank will not recognize any gain or loss
upon their exchange of Bank Common Stock solely for shares of
Holding Company Stock (Section 354(a) of the Code).
(8) A stockholder's aggregate basis in his or her shares of
Holding Company Stock received in the proposed transaction
will be the same as the aggregate basis of his or her shares
of Bank Common Stock surrendered in exchange therefor (Section
358(a) of the Code).
(9) A stockholder's holding period in his or her Holding Company
Stock received in the proposed transaction will include the
period during which such Bank Common Stock surrendered in
exchange therefor was held by such stockholder, provided that
such Bank Common Stock is a capital asset in the hands of the
stockholder on the date of the exchange (Section 1223(1) of
the Code).
SCOPE OF OPINION
Our opinion is limited to the federal income tax matters described
above and does not address any other federal income tax considerations or any
federal, state, local, foreign or other tax considerations. If any of the
information upon which we have relied is incorrect, or if changes in the
relevant facts occur after the date hereof, our opinion could be affected
thereby. Moreover, our opinion is
<PAGE> 7
Board of Directors
Pinnacle Bank
_________ __, 1996
Page 7
based on the case law, Code, Treasury Regulations thereunder and Internal
Revenue Service rulings as they now exist. These authorities are all subject
to change, and such change may be made with retroactive effect. We can give no
assurance that, after such change, our opinion would not be different. We
undertake no responsibility to update or supplement our opinion subsequent to
consummation of the Reorganization. Prior to that time, we undertake to update
or supplement our opinion in the event of a material change in the federal
income tax consequences set forth above and to file such revised opinion as an
exhibit to the Registration Statement. This opinion is not binding on the
Internal Revenue Service and there can be no assurance, and none is hereby
given, that the Internal Revenue Service will not take a position contrary to
one or more of the positions reflected in the foregoing opinion, or that our
opinion will be upheld by the courts if challenged by the Internal Revenue
Service.
<PAGE> 8
Board of Directors
Pinnacle Bank
_________ __, 1996
Page 8
CONSENT
We hereby consent to the filing of this opinion as an exhibit to the
Form S-4 filed by the Holding Company with the SEC and as an exhibit to the
Application on Form H-(e)1-S ("Form H-(e)1-S") filed by the Holding Company
with the OTS with respect to the Reorganization, and to the references to this
firm in the Proxy Statement/Prospectus which is a part of both the Form S-4 and
the Form H-(e)1-S.
Very truly yours,
REINHART, BOERNER, VAN DEUREN,
NORRIS & RIESELBACH, P.C.
By:
-------------------------
Edward B. Crosland, Jr.
<PAGE> 1
EXHIBIT 10.1
TERMINATION AGREEMENT
THIS TERMINATION AGREEMENT is entered into this 25th day of May, 1994
by and between FIRST FEDERAL OF ALABAMA, F.S.B. (hereinafter referred to as
"First Federal" or the "Bank"), with its principal office at 1811 Second
Avenue, Jasper, Alabama, and Al H. Simmons, (hereinafter referred to as
"Executive"), an individual residing in the State of Alabama.
WHEREAS, the parties have previously entered into an employment
agreement effective as of September 17, 1986, as amended and restated effective
as of September 17, 1993 (the "Restated Agreement"), and pursuant thereto the
Bank has been employing the Executive as its President and Chief Executive
Officer; and
WHEREAS, the Executive desires to leave his position as President and
Chief Executive Officer of the Bank, but to continue to serve as Chairman of
the Bank's Board of Directors (the "Board"); and
WHEREAS, the parties desire by this writing to terminate the Restated
Agreement, and to provide for a lump sum payment to the Executive of certain
severance benefits in full satisfaction of Executive's rights thereunder.
NOW, THEREFORE, it is AGREED as follows:
1. Executive hereby resigns from his position as President and
Chief Executive Officer of the Bank, with said resignation having no effect on
his position as Chairman of the Bank's Board of Directors.
2. In full satisfaction of any rights that Executive may have
under the Restated Agreement, which shall be of no further force or effect, the
Bank shall pay, or cause to be paid, to the Executive, a severance benefit
equal to $362,447.41. Said benefit shall be payable in sixty (60) monthly
payments, with the amount of each monthly payment to be $7,000 (less any
applicable withholding amounts as may be required by law). The first such
monthly Payment shall be due on the thirtieth (30th) day following execution of
this Termination Agreement, and subsequent payments shall be due on the monthly
anniversary date of the first payment.
3. The Restated Agreement is hereby in all respects terminated
and of no further force and effect, and neither the Bank nor the Executive
shall be entitled or subject to any of the rights, obligations, duties or other
provisions thereunder.
Accordingly, the parties hereby release each other from any claims arising
from, or in any way related to, the Restated Agreement.
<PAGE> 2
Page 2
Termination Agreement
May, 1994
4. This Termination Agreement shall be governed in all respects,
whether as to validity, construction, capacity, performance or otherwise, by
the laws of the State of Alabama.
5. The provisions of this Termination Agreement shall be deemed
severable and the invalidity or unenforceability of any provision shall not
affect the validity or enforceability of the other provisions hereof.
6. This Termination Agreement together with any understanding or
modifications thereof as approved to in writing by the parties, shall
constitute the entire agreement between the parties hereto.
7. This Agreement, together with any understanding or
modifications thereof as approved to in writing by the parties, shall
constitute the entire agreement between the parties hereto, and shall be
binding upon the parties, and their heirs, successors and assigns (including in
the case of the Bank, any institution that acquires substantially all of the
Bank's assets whether through a merger, acquisition, or other transaction);
provided that in the event of the Executive's death, the rights of the
Executive under this Agreement shall pass to his surviving spouse (and if the
Executive is not survived by his spouse, to his designated beneficiary, and if
there is none surviving, to the Executive's estate).
IN WITNESS WHEREOF, the parties have executed this Termination
Agreement on the day and year first written above.
FIRST FEDERAL OF ALABAMA, F.S.B.
Attest:
/s/ M. J. Gunter By: /s/ Robert B. Nolen, Jr.
- ---------------------------------- ----------------------------------
Its Executive Vice President
(SEAL)
Witness:
/s/ Ann M. Davis /s/ Al H. Simmons
- ---------------------------------- ----------------------------------------
Al H. Simmons
<PAGE> 1
EXHIBIT 10.2
STATE OF ALABAMA )
WALKER COUNTY )
AMENDED AND RESTATED
EMPLOYMENT AGREEMENT
THIS AGREEMENT, made effective as of May 22, 1991, as amended and
restated effective as of September 17, 1993 and as of July 1, 1994, by and
between FIRST FEDERAL OF ALABAMA, F.S.B. (hereinafter referred to as "First
Federal" or the "Bank"), with its principal office at 1811 Second Avenue,
Jasper, Alabama, and Robert B. Nolen, Jr. (hereinafter referred to as
"Executive") an individual residing in the State of Alabama.
WHEREAS, the Bank wishes to assure itself of the services of Executive
for the period provided in this Agreement, and Executive is willing to serve in
the employ of the Bank on a full-time basis for said period; and
WHEREAS, the Board of Directors of the Bank has determined that the
best interests of the Bank would be served by providing Executive with
protection and special benefits following any change of control of the Bank;
and
WHEREAS, effective as of May 22, 1991, First Federal Savings and Loan
Association of Alabama (the "Association") entered into an Employment Agreement
(the "Agreement") with Executive; and
WHEREAS, the Bank subsequently assumed the rights and responsibilities
of the Association under the Agreement; and
WHEREAS, the Bank subsequently amended and restated the Agreement
effective as of September 17, 1993, in order to effectuate the recommendations
made in a memorandum dated October 13, 1992 from the Bank's Compensation
Committee to Executive and to comply with the requirements of Office of Thrift
Supervision Regulatory Bulletin 27a ("RB27a"); and
WHEREAS, the Board of Directors of the Bank and the Executive have
determined that it is in their respective best interests to amend and restate
the Agreement again in order to provide for the Executive to serve as President
and Chief Executive officer of the Bank;
<PAGE> 2
NOW, THEREFORE, the Agreement shall be amended and restated as
follows, with such amendments to be effective as of July 1, 1994:
I. Employment. The Bank agrees to continue Executive in its
employ, and Executive agrees to remain in the employ of the Bank, for the
period stated in paragraph III hereof and upon the other terms and conditions
herein provided.
II. Position and Responsibilities. The Bank employs Executive and
Executive agrees to serve as President and Chief Executive Officer of the Bank
for the term and on the conditions hereinafter set forth. Executive agrees to
perform such services not inconsistent with his position as shall from time to
time be assigned to him by the Bank's Board of Directors.
III. Term and Duties
(a) Term of Employment. The Bank hereby employs executive, and
Executive hereby accepts such employment under this Agreement, for the period
commencing on July 1, 1994 (the "Effective Date"), and ending on September 16,
1996 (or such earlier date as is determined in accordance with Paragraph VIII
hereof). Additionally, Executive's term of employment may be extended for an
additional one-year period beyond the then effective expiration date; provided,
however, that (i) the Board of Directors of the Bank determines in a duly
adopted resolution that the performance of Executive has met the Board's
requirements and standards, and that this Agreement shall be extended, and (ii)
the term of Executive's employment, as extended, does not exceed three years.
(b) Duties. During the period of his employment hereunder and
except for illnesses, reasonable vacation periods, and reasonable leaves of
absence, Executive shall devote his business time, attention, skill, and
efforts to the faithful performance of his duties hereunder; provided, however,
that with the approval of the Board of Directors of the Bank, from time to
time, Executive may serve, or continue to serve, on the boards of directors of,
and hold any other offices or positions in, companies or organizations, which,
in such Board's judgment, will not present any material conflict of interest
with the Bank or any of its subsidiaries or affiliates or divisions, or
unfavorably affect the performance of Executive's duties pursuant to this
Agreement, or will not violate any applicable statute or regulation.
IV. Compensation and Reimbursement of Expenses.
(a) Salary. The Bank agrees to pay Executive during the
term of this Agreement a salary at the rate of Seventy-two thousand seven
hundred eighty-one dollars and ninety-two cents ($72,781.92) per annum;
provided, however, that the rate of such
- 2 -
<PAGE> 3
salary shall be reviewed by the Board of Directors of the Bank not less often
than annually, and such salary rate may be changed from time to time in such
amounts as the Board, in its sole discretion, may decide. Notwithstanding the
above, in the event of a "change of control", said salary shall not be reduced
to less than Seventy-two thousand seven hundred eighty-one dollars and
ninety-two cents ($72,781.92) . However, if the Board reduces compensation
below the amount as set forth in paragraph IV (a) Executive may within 90 days
of said reduction unilaterally terminate the contract. It is intended that the
Board shall consider the average percentage increase, if any, granted to other
senior officers of the Bank. However, the Board shall not be obligated to
grant any increase. Such salary shall be payable in accordance with the
customary payroll practices of the Bank, but in no event less frequently than
monthly.
(b) Bonus. In addition, Executive may be entitled to
annual bonuses at the sole discretion of the Board of Directors.
(c) Reimbursement of Expenses. First Federal shall pay
or reimburse Executive for all reasonable travel and other expenses incurred by
Executive in the performance of his obligations under this Agreement.
V. Participation in Benefit Plans. The payments provided in
paragraphs IV, VII, and VIII hereof are in addition to any benefits to which
Executive may be, or may become, entitled under any group hospitalization,
health, dental care, or sick leave plan, life or other insurance or death
benefit plan, travel or accident insurance, or executive contingent
compensation plan, including, without limitation, capital accumulation and
termination pay programs, restricted or stock purchase plan, stock option plan,
retirement income, qualified pension plan, supplemental pension plan (excess
benefit plan), or other present or future group employee benefit plan or
program of the Bank for which executives are or shall become eligible, and
Executive shall be eligible to receive payments from the Bank under paragraph
VII or VIII, all benefits and emoluments for which executives are eligible
under every such plan or program to the extent permissible under the general
terms and provisions of such plans or programs and in accordance with the
provisions thereof.
VI. Vacation and Sick Leave. At such reasonable times as the
Board of Directors shall in its discretion permit, Executive shall be entitled,
without loss of pay, to absent himself voluntarily from the performance of his
employment under this Agreement, all such voluntary absences to count as
vacation time; provided that:
(a) Executive shall be entitled to an annual vacation in
accordance with the policies as periodically established by the Board of
Directors for senior management officials of the Bank.
- 3 -
<PAGE> 4
(b) The timing of vacations shall be scheduled in a
reasonable manner by the Board of Directors. Executive shall not be entitled
to receive any additional compensation from the Bank on account of his failure
to take a vacation; nor shall he be entitled to accumulate unused vacation from
one fiscal year to the next except to the extent authorized by the Board of
Directors for senior management officials of the Bank.
(c) In addition to the aforesaid paid vacations,
Executive shall be entitled, without loss of pay, to absent himself voluntarily
from the performance of his employment with the Bank for such additional
periods of time and for such valid and legitimate reasons as the Board of
Directors in its discretion may determine. Further, the Board of Directors
shall be entitled to grant to Executive a leave or leaves of absence with or
without pay at such time or times and upon such terms and conditions as the
Board in its discretion may determine.
(d) In addition, Executive shall be entitled to an annual
sick leave as established by the Board of Directors for senior management
officials of the Bank. In the event any sick leave shall not have been used
during any year, such leave shall accrue to subsequent years only to the extent
authorized by the Board of Directors. Upon termination of his employment,
Executive shall not be entitled to receive any additional compensation from the
Bank for unused sick leave.
VII. Benefits Payable Upon Disability.
(a) Primary Disability Benefits. In the event of the
Disability (as hereinafter defined) of Executive, the Bank shall continue to
pay Executive the monthly compensation provided in paragraph IV hereof during
the period of his disability; provided, however, that in the event Executive is
disabled for a continuous period exceeding eighteen (18) calendar months, the
Bank may, at its election, terminate the Agreement, in which event Executive
shall be entitled to receive the benefits described in paragraph VII (b).
As used in this Agreement, the term "disability" shall mean the
complete inability of Executive to perform his duties under this Agreement as
determined by an independent physician selected with the approval of the Bank
and Executive.
(b) Secondary Disability Benefits. The Bank shall pay to
Executive a monthly disability benefit equal to sixty (60) percent of his
monthly salary at the time he became disabled. Payment of such disability
benefit shall commence on the last day of the month following the month for
which the final payment under paragraph VII(a) was made and cease with the
earlier of (1) the payment for the month in which Executive dies or (2) the
payment for the month preceding the month in which occurs Executive's normal
retirement date under the Bank's pension plan.
- 4 -
<PAGE> 5
(c) Disability Benefit Offset. Any amounts payable under
paragraph VII(a) or VII(b) shall be reduced by any amounts paid to Executive
tinder any other disability program maintained by the Bank.
(d) Service During Disability. During the period
Executive is entitled to receive payments under paragraphs VII (a) and (b),
Executive shall, to the extent that he is physically and mentally able to do
so, furnish information and assistance to the Bank, and, in addition, upon
reasonable request in writing on behalf of the Board of Directors, or an
executive officer designated by such Board, from time to time, make himself
available to the Bank to undertake reasonable assignments consistent with the
dignity, importance, and scope of his prior position and his physical and
mental health. During such period of service, Executive shall be responsible
and report to, and be subject to the supervision of, the Board of Directors of
the Bank or an executive officer designated by the Board, as to the method and
manner in which he shall perform such assignments, subject always to the
provisions of this paragraph VII(d), and shall keep such Board, or such
executive officer, appropriately informed of his progress in each such
assignment.
(e) All benefits may be funded by insurance to the extent
economically available and the discretion of the Board of Directors and all
benefits to be offset by any Social Security Benefits received by Executive.
VIII. Payments to Executive Upon Termination of Employment.
(a) Event of Termination. Upon the occurrence of an
"Event of Termination" (as hereinafter defined) during the period of
Executive's employment under this Agreement, the provisions of this paragraph
VIII shall apply. As used in this Agreement, an "Event of Termination" shall
mean:
The termination by the Bank of Executive's employment hereunder for
any reason other than "cause" or retirement at or after the normal retirement
age under a qualified pension plan maintained by the Bank or termination
pursuant to Paragraph VII (a) . A termination for "cause" shall include
termination because of Executive'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, or material breach of any provision of this Agreement.
In the event of termination for cause, Executive shall have no right to receive
compensation or other benefits for any period after such termination. Other
than a termination where there has been a "Change of Control" (as hereinafter
defined), there shall be a conclusive presumption that a vote of two-thirds of
the Board of Directors to terminate Executive's employment, that this shall be
deemed "cause". Termination by a vote of less than two-
- 5 -
<PAGE> 6
thirds of the Board shall not be deemed a conclusive presumption of "cause".
The presumption shall have no application in the event of "Change of Control"
(as hereinafter defined) and in no event shall it be signable by the Bank to
any person or entity who acquires or may acquire control of said Bank.
Notwithstanding anything herein to the contrary, in no event shall payments be
made hereunder to Executive in an amount exceeding three (3) times his average
annual compensation based on the most recent five (5) taxable years.
(b) Event of Termination Without Change of Control. Upon
the occurrence of an Event of Termination other than after a "Change of
Control" (as hereinafter defined) , the Bank shall pay to Executive monthly, or
in the event of his subsequent death, to his designated beneficiary or
beneficiaries, or to his estate, as the case may be, as severance pay or
liquidated damages, or both, during the period below described a sum equal to
the highest monthly rate of salary paid to Executive at any time under this
Agreement. Such payments shall commence on the last day of the month following
the date of said event of termination and shall continue until the date this
Agreement would have expired but for said occurrence, with such occurrence
being viewed as provided for in paragraph III of this Agreement.
(c) Event of Termination After Change of Control. If,
after a "Change of Control" (as hereinafter defined) of the Bank, the Bank
shall terminate the employment of Executive during the period of employment
under this Agreement for any reason other than "cause" (as defined in paragraph
VIII(a)), retirement at or after the normal retirement age under a qualified
pension plan maintained by the Bank or a termination pursuant to paragraph
VII(a), or otherwise change the present capacity or circumstances in which
Executive is employed as set forth in paragraph II of this Agreement or cause a
significant change in duties as set forth in Exhibit "All or a reduction in
Executive's responsibilities or authority or compensation or other benefits
provided under this Agreement without Executive's written consent, then the
Bank shall pay to Executive and provide Executive, or to his beneficiaries,
dependents and estate, as the case may be, with the following:
(1) First Federal shall promptly pay to Executive a sum
equal to the total amount of the compensation payable by First Federal
and includible in Executive's gross income for federal income tax
purposes (hereinafter, "Income") for the one-year period immediately
prior to the date of termination of the term, including any renewal
term, of this Agreement, plus said Income for an additional 12-month
period, but in no event in excess of either (i) two and 99/100 (2.99)
times Executive's average annual Income for the most recent five (5)
taxable years ending before the date on which the ownership or control
of First Federal changed or the portion of this period during which
Executive was an employee of First Federal, or (ii) three times
Executive's average annual. "compensation" (as such term is defined
in RB 27a) based on the most recent five (5) taxable years.
- 6 -
<PAGE> 7
(2) During the period of three (3) calendar months
beginning with the Event of Termination, Executive, his dependents,
beneficiaries and estate shall continue to be covered under all
employee benefit plans of the Bank as if Executive was still employed
during such period under this Agreement. This election may be
exercised only in conjunction with paragraph (1) above.
(3) If and to the extent that benefits or service credit
for benefits provided by paragraph VIII(c)(2) shall not be payable or
provided under any such plans to Executive, his dependents,
beneficiaries and estate, by reason of his no longer being an employee
of the Bank as a result of termination of employment, the Bank shall
itself pay or provide for payment of such benefits and service credit
for benefits to Executive, his dependents, beneficiaries and estate.
Any such payment relating to retirement shall commence on a date
selected by Executive which must be a date on which payments under the
Bank's qualified pension plan or successor plan may commence.
(4) The Bank shall pay all legal fees and expenses which
Executive may incur as a result of the Bank's contest of the validity
or enforceability of this Agreement, and Executive shall be entitled
to receive interest thereon for the period of any delay in payment
from the date such payment was due at the rate determined by adding
two hundred (200) basis points to the six (6) month Treasury Bill
rate. Executive shall be responsible for all of Executive's legal
fees and expenses in the event of a successful contest by the Bank of
the validity or enforcement of this Agreement.
(5) Executive shall not be required to mitigate the
amount of any payment provided for in this Agreement by seeking other
employment or otherwise, but any amounts received from other
employment or otherwise by Executive shall offset the obligations of
the Bank hereunder.
(d) Change of Control. Paragraph VIII(c) shall become
operative upon the occurrence of a Change of Control of the Bank. A "Change of
Control" shall be deemed to have occurred, if at any time during the period of
employment of Executive set forth in paragraph III of the Agreement more than
twenty-five percent (25%) of the Bank's outstanding Common Stock, or equivalent
in voting power of any class or classes of outstanding securities of the Bank
ordinarily entitled to vote in elections of directors, shall be acquired by any
other corporation or other person or group. "Group" shall mean persons who act
in concert as described in Section 14 (d) (2) of the Securities Exchange Act of
1934, as amended. Upon a Change of Control of the Bank, these special
termination provisions shall become operative immediately.
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<PAGE> 8
(e) Termination or Supervision Under Federal Law.
(1) If Executive is removed and/or permanently prohibited
from participating in the conduct of the Bank's affairs by an order
issued under Sections 8(e)(4) or 8(g)(1) of the Federal Deposit
Insurance Act ("FDIA") (12 U.S.C. 1818 (e)(4) and (g)(1)), all
obligations of the Bank under this Agreement shall terminate, as of
the effective date of the order, but vested rights of the parties
shall not be affected.
(2) If the Bank is in default (as defined in Section
3(x)(1) of FDIA), all obligations under this Agreement shall terminate
as of the date of default; however, this paragraph shall not affect
the vested rights of the parties.
(3) All obligations under this Agreement shall terminate,
except to the extent that continuation of this Agreement is necessary
for the continued operation of the Bank: (i) by the Director of the
Office of Thrift Supervision ("Director of the OTS"), or his or her
designee, at the time that the Federal Deposit Insurance Corporation
("FDIC") or the Resolution Trust Corporation enters into an agreement
to provide assistance to or on behalf of the Bank under the authority
contained in Section 13(c) of FDIA; or (ii) by the Director of the
OTS, or his or her designee, at the time that the Director of the OTS,
or his or her designee approves a supervisory merger to resolve
problems related to operation of the Bank or when the Bank is
determined by the Director of the OTS to be in an unsafe or unsound
condition. Such action shall not affect any vested rights of the
parties.
(4) If a notice served under Section 8(e)(3) or (g)(1) of
FDIA (12 U.S.C. 1818(e)(3) and (g)(1)) suspends and/or temporarily
prohibits Executive from participating in the conduct of the Bank's
affairs, the Bank's obligations under this Agreement shall be
suspended as of the date of such service, unless stayed by appropriate
proceedings. If the charges in the notice are dismissed, the Bank
shall (i) pay Executive all or part of the compensation withheld while
its contract obligations were suspended, and (ii) reinstate (in whole
or in part) any of its obligations which were suspended.
(f) Power of the Board of Directors to Terminate
Executive. The Board of Directors of the Bank may terminate Executive at any
time; in the event of such termination, the provisions of this paragraph VIII
shall fully apply.
IX. Source of Payments. All payments provided in paragraphs IV,
VII, and VIII shall be paid in cash from the general funds of the Bank, except
to the extent that these payments may be funded by insurance or outside sources
which shall be determined
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<PAGE> 9
in the discretion of the Board of Directors and no special or separate fund
shall be established and no other segregation of assets shall be made to assure
payment. Executive shall have no right, title, or interest whatever in or to
any investments which the Bank may make to aid the Bank in meeting its
obligations hereunder.
X. Confidential Information. Executive shall not, to the
detriment of the Bank, knowingly disclose or reveal to any unauthorized person
any confidential information relating to the Bank, its subsidiaries or
affiliates, or to any of the businesses operated by them, and Executive
confirms that such information constitutes the exclusive property of the Bank.
Executive shall not otherwise knowingly act or conduct himself (a) to the
material detriment of the Bank, its subsidiaries, or affiliates, or (b) in a
manner which is inimical or contrary to the interests thereof.
XI. Federal Income Tax Withholding. The Bank may withhold from
any benefits payable under this Agreement all federal, state, city, or other
taxes as shall be required pursuant to any law or governmental regulation or
ruling.
XII. Effect of Prior Agreements. This Agreement contains the
entire understanding between the parties hereto and supersedes any prior
employment agreement between the Bank or any predecessor of the Bank and
Executive.
XIII. Consolidation, Merger, or Sale of Assets. Nothing in this
Agreement shall preclude the Bank from consolidating or merging into or with,
or transferring all or substantially all of its assets to another corporation
which assumes this Agreementand all obligations and undertakings of the Bank
hereunder. Upon such a consolidation, merger, or transfer of assets and
assumption, the term "the Bank" as used herein, shall mean such other
corporation and this Agreement shall continue in full force and effect.
XIV. General Provisions.
(a) Nonassignability. Neither this Agreement nor any
right or interest hereunder shall be assignable by Executive, his
beneficiaries, or legal representatives without the Bank's prior written
consent; provided, however, that nothing in this paragraph XIV (a) shall
preclude (1) Executive from designating a beneficiary to receive any benefits
payable hereunder upon his death, or (2) the executors, administrators, or
other legal representatives of Executive or his estate from assigning any
rights hereunder to the person or persons entitled thereto.
(b) No Attachment. Except as required by law, no right
to receive payments under this Agreement shall be subject to anticipation,
commutation, alienation, sale, assignment, encumbrance, charge, pledge, or
hypothecation or to execution,
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<PAGE> 10
attachment, levy, or similar process of assignment by operation of law, and any
attempt, voluntary or involuntary, to effect any such action shall be null,
void, and of no effect.
(c) Binding Agreement. This Agreement shall be binding
upon, and inure to the benefit of, Executive and the Bank and their respective
permitted successors and assigns.
XV. Modification and Waiver.
(a) Amendment of Agreement. This Agreement may not be
modified or amended except by an instrument in writing signed by the parties
hereto.
(b) Waiver. No term or condition of this Agreement shall
be deemed to have been waived, nor shall there be an estoppel against the
enforcement of any provision of this Agreement, except by written instrument of
the party charged with such waiver or estoppel. No such written waiver shall
be deemed a continuing waiver unless specifically stated therein, and each
waiver shall operate only as to the specific term or condition waived and shall
not constitute a waiver of such tern or condition for the future or as to any
act other than that specifically waived.
XVI. Severability. If, for any reason, any provision of this
Agreement is held invalid, such invalidity shall not affect any other provision
of this Agreement not held so invalid, and each such other provision shall to
the full extent consistent with law continue in full force and effect. if any
provision of this Agreement shall be held invalid in part, such invalidity
shall in no way affect the rest of such provision, and the rest of such
provision, together with all other provisions of this Agreement, shall to the
full extent consistent with law continue in full force and effect. If this
Agreement is held invalid or cannot be enforced, then to the full extent
permitted by law any prior agreement between the Bank (or any predecessor
thereof) and Executive shall be deemed reinstated as if this Agreement has not
been executed.
XVII. Headings. The headings of paragraph herein are included
solely for convenience of reference and shall not control the meaning or
interpretation of any of the provisions of this Agreement.
XVIII. Governing Law. This Agreement has been executed and delivered
in the State of Alabama, and its validity, interpretation, performance, and
enforcement shall be governed by the laws of said State, except to the extent
Federal law is governing.
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<PAGE> 11
IN WITNESS WHEREOF, the Bank has caused this amended and restated
Agreement to be executed and its seal to be affixed hereunto by its officers
thereunto duly authorized, and Executive has signed this Agreement, all as of
the day and year first above written.
FIRST FEDERAL OF ALABAMA, F.S.B.
By:
-------------------------------
ATTEST:
- --------------------------
----------------------------------
ROBERT B. NOLEN, JR.
WITNESS:
- --------------------------
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<PAGE> 1
EXHIBIT 10.3
STATE OF ALABAMA )
WALKER COUNTY )
FIRST FEDERAL OF ALABAMA, F.S.B.
1986 STOCK OPTION AND INCENTIVE PLAN
I. Purpose of the Plan. The Plan shall be known as the First
Federal of Alabama, F.S.B. 1986 Stock Option and Incentive Plan (hereinafter
referred to as the 'Plan'). The purpose of the Plan is to attract and retain
the best available personnel as officers and employees and to provide
additional incentive to employees of First Federal of Alabama, F.S.B.
(hereinafter referred to as "First Federal") or any present or future parent or
subsidiary of First Federal to promote the success of the business. The Plan
is intended to provide for the grant of both "Incentive Stock Options", within
the meaning of Section 422A of the Internal Revenue Code of 1954, as amended
(the "Code'), and Non-Incentive Stock Options. Each and every one of the
provisions of the Plan relating to Incentive Stock Options shall be interpreted
to conform to the requirements of Section 422A of the Code.
II. Definitions. As used herein, the following definitions shall
apply.
(a) "Award" means the grant by the Committee or the Board
of Directors of an Incentive Stock Option, a Non-Incentive Stock Option, or a
Stock Appreciation Right, or any combination thereof, as provided in the Plan.
(b) "Board" shall mean the Board of Directors of First
Federal.
(c) "Common Stock" shall mean common stock, par value
$.01 per share, of First Federal.
(d) "Code" shall mean the Internal Revenue Code, as
amended.
(e) "Committee" shall mean the Stock Option Committee
appointed by the Board in accordance with Section IV(a) of the Plan.
(f) "Continuous Employment" or "Continuous Status as an
Employee" shall mean the absence of any interruption or termination of
employment by First Federal or any present or future Parent or Subsidiary.
Employment shall not be considered interrupted in the case of sick leave,
military leave or any other leave of absence
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<PAGE> 2
approved by First Federal or in the case of transfers between payroll locations
of First Federal or between First Federal, its Parent, its Subsidiaries or a
successor.
(g) "Effective Date" shall mean the date specified in
Section 15 hereof.
(h) "Employee" shall mean any person employed on a
full-time basis by First Federal or any Parent or Subsidiary of First Federal.
(i) "First Federal" shall mean First Federal of Alabama,
F.S.B., formerly First Federal Savings and Loan Association of Alabama.
(j) "Incentive Stock Option" means an option to purchase
Shares granted by the Committee pursuant to Section VII hereof which is subject
to the limitations and restrictions of Section VII hereof and is intended to
qualify under Section 422A of the Code.
(k) "Non-incentive Stock Option" means an option to
purchase Shares granted by the Committee pursuant to Section VIII hereof, which
option is not intended to qualify under Section 422A of the Code.
(l) "Option" shall mean an Incentive or Non-Incentive
Stock Option granted pursuant to this Plan.
(m) "Optioned Stock" shall mean stock subject to an
Option granted pursuant to the Plan.
(n) "Optionee" shall mean any person who receives an
Option.
(o) "Parent" shall mean any present or future corporation
which would be a "parent corporation" of First Federal as defined in
Subsections 425(e) and (g) of the Code.
(p) "Participant" means any officer or key employee of
First Federal or any Parent or Subsidiary of the First Federal or any other
person providing a service to the First Federal who is selected by the
Committee to receive an Award.
(q) "Plan" shall mean First Federal of Alabama, F.S.B.
1986 Stock Option and Incentive Plan.
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<PAGE> 3
(r) "Related" means (1) in the case of a Stock
Appreciation Right, a Stock Appreciation Right which is granted in connection
with, and to the extent exercisable, in whole or in part, in lieu of, an option
and (2) in the case of an Option, an Option with respect to which and to the
extent a Stock Appreciation Right is exercisable, in whole or in part, in lieu
thereof has been granted.
(s) "Stock Appreciation Right" means a stock appreciation
right with respect to Shares granted by the Committee pursuant to Section XII
hereof.
(t) "Share" shall mean one share of the Common Stock.
(u) "Subsidiary" shall mean any present or future
corporation which would be a "subsidiary corporation" of First Federal as
defined in Subsections 425(f) and (g) of the Code.
III. Shares Subject to the Plan. Except as otherwise required by
the provisions of Section XIII hereof, the aggregate number of Shares with
respect to which Awards may be made pursuant to the Plan shall not exceed
Ninety Two Thousand (92,000) shares. Such Shares may either be authorized but
unissued or treasury shares.
Shares which are subject to Stock Appreciation Rights and related
Options shall be counted only once in determining whether the maximum number of
Shares with respect to which Awards may be granted under the Plan has been
exceeded. An Award shall not be considered to have been made under the Plan
with respect to any Option or Stock Appreciation Right which terminates and new
Awards may be granted under the Plan with respect to the number of Shares as to
which such termination has occurred.
IV. Administration of the Plan.
(a) Composition of the Committee. The Plan shall be
administered by the Committee consisting of three directors of First Federal
appointed by the Board. Officers, key employees and other persons who are
designated by the Committee shall be eligible to receive Awards under the Plan,
and all persons designated as members of the Committee shall be "disinterested
persons" within the meaning of Rule 16b-3 under the Securities Exchange Act of
1934. A "disinterested person" is an administrator who at the time he
exercises discretion in administering the Plan is not eligible and has not at
any time within one year prior thereto been eligible for selection as a person
to whom stock options or stock appreciation rights may be granted pursuant to
any Plan of First Federal or any of its affiliates.
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<PAGE> 4
(b) Powers of the Committee. The Committee is authorized
(but only to the extent not contrary to the express provisions of the Plan or
to resolutions adopted by the Board) to interpret the Plan to prescribe, amend
and rescind rules and regulations relating to the Plan, to determine the form
and content of Awards to be issued under the Plan and to make other
determinations necessary or advisable for the administration of the Plan, and
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 shall be deemed the action of the
Committee. Any action permitted to be taken at any meeting of the Committee
may be taken without a meeting if all the members consent to such action in
writing and such writing is filed with the minutes of the proceedings of the
Committee. In no event may the Committee revoke outstanding Awards without the
consent of the Participant.
The President of First Federal and such other officers as shall be
designated by the Committee are hereby authorized to execute instruments
evidencing Awards on behalf of First Federal and to cause them to be delivered
to the Participants.
(c) Effect of Committee's Decision. All decisions,
determinations and interpretations of the Committee shall be final and
conclusive on all persons affected thereby.
V. Eligibility. Awards may be granted to officers, key employees
and other persons. The Committee shall from time to time determine the
officers, key employees and other persons who shall be granted options or
Awards under the Plan, the number to be granted to each such officers, key
employees and other persons under the Plan, and whether Options granted to each
such Employee under the Plan shall be Incentive and/or Non-Incentive Stock
Options. In selecting Participants and in determining the number of shares of
Common Stock to be granted to each such Participant pursuant to each Award
granted under the Plan, the Committee may consider the nature of the services
rendered by each such Participant, each such Participant's current and
potential contribution to First Federal or any Parent or Subsidiary, and such
other factors as the Committee may, in its sole discretion, deem relevant.
Officers, key employees or other persons who have been granted an Award may, if
otherwise eligible, be granted additional Options or Awards.
VI. Term of Plan. The Plan shall continue in effect for a term of
ten (10) years from the Effective Date, unless sooner terminated pursuant to
Section XVIII. No Option shall be granted under the Plan after ten (10) years
from the Effective Date.
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<PAGE> 5
VII. Terms and Conditions of Incentive Stock Options. Incentive
Stock Options may be granted only to Participants are Employees. Each
Incentive Stock Option granted pursuant to the Plan shall be evidenced by an
instrument in such form as the Committee shall from time to time approve. Each
and every Incentive Stock Option granted pursuant to the Plan shall comply
with, and be subject to, the following terms and conditions:
(a) Option Price.
(1) The price per share at which each Incentive
Stock Option granted under the Plan may be exercised shall not, as to any
particular Incentive Stock Option, be less than the fair market value of the
Common Stock at the time such Incentive Stock Option is granted. For the
purposes of the initial Incentive Stock Options granted concurrent with the
conversion from a mutual savings and loan association to a stock savings bank
the price per share shall be Ten Dollars ($10.00), the subscription price of
the Shares. Thereafter, if the Common Stock is traded otherwise than on a
national securities exchange at the time of the granting of an Option, then the
price per share of the Optioned Stock shall be not less than the mean between
the bid and asked price on the date the incentive Stock Option is granted or,
if there be no bid and asked price on said date, then on the next prior
business day on which there was a bid and asked price. If no such bid and
asked price is available, then the price per share shall be determined by the
Committee. If the Common Stock is listed on a national securities exchange at
the time of the granting an Incentive Stock Option, then the price per share
shall be not less than the average of the highest and lowest selling price on
such exchange on the date such Incentive Stock Option is granted or, if there
were no sales on said date, then the price shall be not less than the mean
between the bid and asked price on such date.
(2) In the case of an Employee who owns Common
Stock representing more than ten percent (10%) of the outstanding Common Stock
at the time the Incentive Stock Option is granted, the Incentive Stock Option
price shall not be less than one hundred and ten percent (110%) of the fair
market value of the Common Stock at the time the Incentive Stock Option is
granted.
(b) Aggregate Fair Market Value. For Incentive Stock Options
granted prior to January 1, 1987, the aggregate fair market value of the
Shares, as of the date such Option is granted, for which any Participant may be
granted Incentive Stock Options in any calendar year (under all incentive stock
option plans, as defined in Section 422A of the Code, of First Federal and any
Parent or Subsidiary) shall not exceed One Hundred Thousand Dollars ($100,000),
plus any unused limit carryover to such year, as defined in Section 422A(c) of
the Code. For Incentive Stock Options granted subsequent to December 31, 1986,
the aggregate fair market value of the Shares, as of the date such
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<PAGE> 6
option is granted, with respect to which Incentive Stock Options are
exercisable for the first time by a Participant during any calendar year (under
all incentive stock option plans, as defined by Section 422A of the Code, of
First Federal and any Parent or Subsidiary) shall not exceed One Hundred
Thousand Dollars ($100,000). Notwithstanding the prior provisions of this
subsection, the Committee may grant Options in excess of the foregoing
limitations, provided said options shall be clearly and specifically designated
as not being Incentive Stock Options, as defined in Section 422A of the Code.
(c) Payment. Full payment for each share of Common Stock
purchased upon the exercise of any Incentive Stock Option granted under the
Plan shall be made at the time of exercise of each such Incentive Stock Option
and shall be paid in cash (in United States Dollars), Common Stock or a
combination of cash and Common Stock. Common Stock utilized in full or partial
payment of the exercise price shall be valued at its fair market value at the
date of exercise. First Federal shall accept full or partial payment in Common
Stock only to the extent permitted by applicable law. No shares of Common
Stock shall be issued until full payment therefor has been received by First
Federal, and no Optionee shall have any of the rights of a shareholder of First
Federal until shares of Common Stock are issued to him.
(d) Term of Incentive Stock Option. The term of each
Incentive Stock Option granted pursuant to the Plan shall be not more than ten
(10) years from the date each such Incentive Stock Option is granted, provided
that in the case of an Employee who owns stock representing more than ten
percent (10%) of the Common Stock outstanding at the time the Incentive Stock
Option is granted, the term of the Incentive Stock Option shall not exceed five
(5) years.
(e) Exercise Generally. Except as otherwise provided in
Section IX hereof, no Incentive Stock Option may be exercised unless the
Optionee shall have been in the employ of First Federal at all times during the
period beginning with the date of grant of any such Incentive Stock Option and
ending on the date three (3) months prior to the date of exercise of any such
Incentive Stock Option. The Committee, may impose additional conditions upon
the right of an Optionee to exercise any Incentive Stock Option granted
hereunder which are not inconsistent with the terms of the Plan or the
requirements for qualification as an Incentive Stock Option under Section 422A
of the Code.
(f) Serial Exercise. No Incentive Stock Option granted
pursuant to the Plan shall be exercised by any Optionee while there is
outstanding (as such term is defined in Section 422A of the Code) any Incentive
Stock Option which was granted
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<PAGE> 7
prior to the date of grant of such Incentive Stock Option to such Optionee,
whether pursuant to the Plan or any other plan of First Federal. In the event
that any additional incentive Stock Option is granted at a later date pursuant
to the Plan to any Optionee, the instrument evidencing any such additional
Incentive Stock Option shall include the following provisions:
"This incentive stock option is not exercisable
while there is outstanding (within the meaning of
Section 422A(c)(7) of the Internal Revenue Code
of 1954, as amended) any incentive stock option
which was granted prior to the date of the grant
hereof to the holder of this stock option to
purchase shares of common stock of First Federal
of Alabama, F.S.B. or any of its subsidiaries."
(g) Transferability. Any Incentive Stock Option granted
pursuant to the Plan shall be exercised during any Optionee's lifetime only by
the Optionee to whom it was granted and shall not be assignable or transferable
otherwise than by will or by the laws of descent and distribution.
VIII. Terms and Conditions of Non-Incentive Stock Options. Each
Non-Incentive Stock Option granted pursuant to the Plan shall be evidenced by
an instrument in such form as the Committee shall from time to time approve.
Each and every Non-Incentive Stock Option granted pursuant to the Plan shall
comply with and be subject to the following terms and conditions:
(a) Option Price. The exercise price per share of Common
Stock for each Non-Incentive Stock Option granted pursuant to the Plan shall be
such price as the Committee may determine in its sole discretion.
(b) Payment. Full payment for each share of Common Stock
purchased upon the exercise of any Non-Incentive Stock Option granted under the
Plan shall be made at the time of exercise of each such Non-Incentive Stock
Option and shall be paid in cash (in United States Dollars), Common Stock or a
combination of cash and Common Stock. Common Stock utilized in full or partial
payment of the exercise price shall be valued at its fair market value at the
date of exercise. First Federal shall accept full or partial payment in Common
Stock only to the extent permitted by applicable law. No shares of Common
Stock shall be issued until full payment therefor has been received by First
Federal and no Optionee shall have any of the rights of a shareholder of First
Federal until the shares of Common Stock are issued to him.
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<PAGE> 8
(c) Term. The term of each Non-Incentive Stock Option
granted pursuant to the Plan shall be not more than ten (10) years from the
date each such Non-Incentive Stock Option is granted, provided that, in the
case of an Employee who owns stock representing more than ten percent (1090) of
the Common Stock at the time the Incentive Stock Option is granted, the term of
the Non-Incentive Stock Option shall not exceed five (5) years.
(d) Exercise Generally. The Committee may impose
additional conditions upon the right of any participant to exercise any
Non-Incentive Stock Option granted hereunder which are not inconsistent with
the terms of the Plan.
(e) Transferability. Any Non-Incentive Stock Option
granted pursuant to the Plan shall be exercised during any Optionee's lifetime
only by the Optionee to whom it was granted and shall not be assignable or
transferable otherwise than by will or by the laws of descent and distribution.
IX. Effect of Termination of Employment, Disability or Death on
Incentive Stock Options.
(a) Termination of Employment. In the event that any
Optionee's employment by First Federal, or any Parent or Subsidiary, shall
terminate for any reason, other than Permanent and Total Disability (as such
term is defined in Section 105(d)(4) of the Code) or death, all of any such
Optionee's Incentive Stock Options, and all of any such Optionee's rights to
purchase or receive shares of Common Stock pursuant thereto, as the case may
be, shall automatically terminate on the date of such termination of
employment. However, no termination of an Optionee's incentive Stock Options
shall occur if, and to the extent that, the Committee authorizes the Optionee
to exercise any such Incentive Stock Options at any time prior to the earlier
of (1) the respective expiration dates of any such Incentive Stock Options or
(2) the expiration of not more than three (3) months after the date of such
termination of employment, but only if, and to the extent that, the Optionee
was entitled to exercise any such Incentive Stock Options at the date of such
termination of employment. In the event that a Subsidiary ceases to be a
Subsidiary of First Federal, the employment of all of its employees who are not
immediately thereafter employees of First Federal shall be deemed to terminate
upon the date such Subsidiary so ceases to be a Subsidiary of First Federal.
(b) Disability. In the event that any Optionee's
employment by the First Federal shall terminate as the result of the Permanent
and Total disability of such Optionee, such Optionee may exercise any Incentive
Stock Options granted to him pursuant to the Plan at any time prior to the
earlier of (1) the respective expiration dates
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<PAGE> 9
of any such Incentive Stock Options or (2) the date which is one (1) year after
the date of such termination of employment, but only if, and to the extent
that, the Optionee was entitled to exercise any such Incentive Stock Options at
the date of such termination of employment.
(c) Death. In the event of the death of any Optionee,
any incentive Stock Options granted to any such Optionee may be exercised by
the person or persons to whom the Optionee's rights under any such Incentive
Stock Options pass by will or by the laws of descent and distribution
(including the Optionee's estate during the period of administration) at any
time prior to the earlier of (1) the respective expiration dates of any such
incentive Stock Options or (2) the date which is six (6) months after the date
of death of such Optionee (or such later period not exceeding one (1) year to
which the Committee may, in its discretion, extend such period), but only if,
and to the extent that, the Optionee was entitled to exercise any such
incentive Stock Options at the date of death. For purposes of this Section
IX(c), any Incentive Stock Option held by an Optionee shall be considered
exercisable at the date of his death if the only unsatisfied condition
precedent to the exercisability of such incentive Stock Option at the date of
death is the passage of a specified period of time.
(d) Incentive Stock Options Deemed Exercisable. For
purposes of Sections IX(a), IX(b) and IX(c) above, any Incentive Stock Option
held by any Optionee shall be considered exercisable at the date of the
termination of his employment if, but for the requirement of serial exercise
set forth in Section VII(f) hereof, any such Incentive Stock Option would have
been exercisable at such date of termination of employment. Any exercise of
any Incentive Stock Option granted pursuant to the Plan which is considered
exercisable pursuant to this Section IX(d) shall nevertheless be subject to the
provisions and restrictions contained in Section VII(f) hereof.
(e) Termination of Incentive Stock Options. To the
extent that any Incentive Stock Option granted under the Plan to any Optionee
whose employment by First Federal terminates shall not have been exercised
within the applicable period set forth in this Section IX, any such Incentive
Stock Option, and all rights to purchase or receive shares of Common Stock
pursuant thereto, as the case may be, shall terminate on the last day of the
applicable period.
X. Effect of Termination of Employment, Disability or Death on
Non-Incentive Stock Options. The terms and conditions of Non-Incentive Stock
Options relating to the effect of the termination of an Optionee's employment,
disability of an Optionee or his death shall be such terms and conditions as
the Committee shall, in its sole discretion, determine at the time of
termination.
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<PAGE> 10
XI. Right of Repurchase and Restrictions on Disposition. The
Committee, in its sole discretion, may include, as a term of any Incentive
Stock Option or Non-Incentive Stock Option, the right (the "Repurchase Right"),
but not the obligation, to repurchase all or any amount of the Shares acquired
by an Optionee pursuant to the exercise of any such Options. The intent of the
Repurchase Right is to encourage the continued employment of the Optionee. The
Repurchase Right shall provide for, among other things, a specified duration of
the Repurchase Right, a specified price per Share to be paid upon the exercise
of the Repurchase Right and a restriction on the disposition of the Shares by
the Optionee during the period of the Repurchase Right. The Repurchase Right
may permit First Federal to transfer or assign such right to another party.
First Federal may exercise the Repurchase Right only to the extent permitted by
applicable law.
XII. Stock Appreciation Riqhts. A Stock Appreciation Right shall,
upon its exercise, entitle the Participant to whom such Stock Appreciation
Right was granted to receive a number of Shares or cash or combination thereof,
as the Committee in its discretion shall determine, the aggregate value of
which (i.e., the sum of the amount of cash and/or the fair market value of such
Shares on the date of exercise) shall equal (as nearly as possible, it being
understood that First Federal shall not issue any fractional shares) the amount
by which the fair market value per Share on the date of such exercise shall
exceed the exercise price of such Stock Appreciation Right, multiplied by the
number of Shares with respect to which such Stock Appreciation Right shall have
been exercised. A Stock Appreciation Right may be related to an Option or may
be granted independently of any Option as the Committee shall determine whether
and to what extent a Related Stock Appreciation Right shall be granted with
respect thereto; provided, however and notwithstanding any other provision of
the Plan, that if the Related Option is an Incentive Stock Option, the Related
Stock Appreciation Right shall satisfy all the restrictions and limitations of
Section VII hereof as if such Related Stock Appreciation Right were an
Incentive Stock Option. In the case of a Related Option, such Related Option
shall cease to be exercisable to the extent of the Shares with respect to which
the Related Stock Appreciation Right was exercised. Upon the exercise or
termination of a Related Option, any Related Stock Appreciation Right shall
terminate to the extent to the Shares with respect to which the Related Option
was exercised or terminated.
XIII. Recapitalization, Merger, Consolidation, Change in Control and
Similar Transactions.
(a) Adjustment. Subject to any required action by the
shareholders of First Federal, the aggregate number of shares of Common Stock
for which stock options may be granted hereunder, the number of shares of
Common Stock covered by each
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<PAGE> 11
outstanding stock option, and the exercise price per share of Common Stock of
each such stock option, shall all be proportionately adjusted for any increase
or decrease in the number of issued and outstanding shares of Common Stock
resulting from a subdivision or consolidation of shares or the payment of a
stock dividend (but only on the Common Stock) or any other increase or decrease
in the number of such shares of Common Stock effected without the receipt of
consideration by First Federal.
(b) Change in Control. All outstanding options shall
become immediately exercisable in the event of a change in control or imminent
change in control of First Federal, as determined by the Committee. For
purposes of this Section, "change in control" shall mean: (1) the execution of
an agreement for the sale of all, or a material portion, of the assets of First
Federal; (2) the execution of an agreement for a merger or recapitalization of
First Federal or any merger or recapitalization whereby First Federal is not
the surviving entity; (3) a change of control of First Federal, as otherwise
defined or determined by the Federal Home Loan Bank Board or regulations
promulgated by it; or (4) the acquisition, directly or indirectly, of the
beneficial ownership (within the meaning of that term as it is used in Section
13(d) of the Securities Exchange Act of 1934 and the rules promulgated
thereunder) of twenty-five percent (25%) or more of the outstanding voting
securities of First Federal by any person, trust, entity or group. For
purposes of this Section, "imminent change in control" shall refer to any offer
or announcement, oral or written, by any person or persons acting as a group,
to acquire control of First Federal.
(c) Extraordinary Corporate Action. Subject to any
required action by the shareholders of First Federal, in the event of any
Change in Control, recapitalization, merger, consolidation, exchange of shares,
spin-off, reorganization, tender offer, liquidation or other extraordinary
corporate action or event, the Committee, in its sole discretion, shall have
the power, prior or subsequent to such action or event to:
(1) appropriately increase the number of shares
of Common Stock subject to each stock option, decrease the exercise price per
share of Common Stock, and adjust the consideration to be given or received by
First Federal upon the exercise of any outstanding option;
(2) cancel any or all previously granted Options,
that appropriate consideration paid to the Optionee prove in connection
therewith; and/or
(3) make such other adjustments in connection
with the Plan as the Committee, in its sole discretion deems necessary,
desirable, appropriate or advisable; provided, however, that no action shall be
taken by the Committee which would cause
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<PAGE> 12
Incentive Stock Options granted pursuant to the Plan to fail to meet the
requirements of Section 422A of the Code.
Except as expressly provided in Section XIII(a) and
XIII(b) hereof, no Optionee shall have any rights by reason of the occurrence
of any of the events described in this Section XIII.
(d) Acceleration. The Committee shall at all times have
the power to accelerate the exercise date of options previously granted under
the Plan. In no event, however, will such action permit Participants to
exercise Incentive Stock Options in an order other than provided in Section
VII(f).
XIV. Time of Granting Options. The date of grant of an Option
under the Plan shall, for all purposes, be the date on which the Committee
makes the determination of granting such Option. Notice of the determination
shall be given to each Employee to whom an option is so granted within a
reasonable time after the date of such grant.
XV. Effective Date. The Plan shall become effective upon the
completion of First Federal's conversation from mutual to stock form. Options
may be granted prior to ratification of the Plan by the stockholders if the
exercise of such options is subject to such stockholder ratification.
XVI. Approval by Shareholders. The Plan shall be approved by
stockholders of First Federal within twelve (12) months before or after the
date it becomes effective.
XVII. Modification of Options. At any time and from time to time,
the Board may authorize the Committee to direct the execution of an instrument
providing for the modification of any outstanding Option, provided no such
modification, extension or renewal shall confer on the holder of said option
any right or benefit which could not be conferred on him by the grant of a new
Option at such time, or shall not materially decrease the Optionee's benefits
under the Option without the consent of the holder of the option, except as
otherwise permitted under Section XVIII hereof.
XVIII. Amendment and Termination of the Plan.
(a) Action by the Board. The Board may alter, suspend or
discontinue the Plan, except that no action of the Board may increase (other
than as provided in Section XIII) the maximum number of shares permitted to be
optioned under the Plan, materially increase the benefits accruing to
participants under the Plan or materially
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<PAGE> 13
modify the requirements for eligibility for participant in the Plan unless such
action of the Board shall be subject to approval or ratification by the
shareholders of First Federal.
(b) Change in Applicable Law. Notwithstanding any other
provision contained in the Plan, in the event of a change in any federal or
state law, rule or regulation which would make the exercise of a change in any
federal or state law, rule or regulation which would make the exercise of all
or part of any previously granted Incentive and/or Non-Incentive Stock Option
unlawful or subject First Federal to any penalty, the Committee may restrict
any such exercise without the consent of the Optionee or other holder thereof
in order to comply with any such law, rule or regulation or to avoid any such
penalty.
XIX. Conditions Upon Issuance of Shares. Shares shall not be
issued with respect to any Option granted under the Plan 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.
The inability of First Federal to obtain from any regulatory body or
authority deemed by First Federal's counsel to be necessary to the lawful
issuance and sale of any Shares hereunder shall relieve First Federal of any
liability in respect of the nonissuance or sale of such Shares.
As a condition to the exercise of an Option, First Federal may require
the person exercising the Option 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.
XX. Reservations of Shares. During the term of the Plan, First
Federal will reserve and keep available a number of Shares sufficient to
satisfy the requirements of the Plan.
XXI. Unsecured Obligation. No Participant under the Plan shall
have any interest in any fund or special asset of First Federal by reason of
the Plan or the grant of any Incentive or Non-Incentive Stock Option to him
under the Plan. No trust fund shall be created in connection with the Plan or
any grant of any Incentive or Non-Incentive Stock Option hereunder and there
shall be no required funding of amounts which may become payable to any
participant.
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<PAGE> 14
XXII. Withholding Tax. First Federal shall have the right to deduct
from all amounts paid in cash with respect to the exercise of a Stock
Appreciation Right under the Plan any taxes required by law to be withheld with
respect to such cash payments. Where a Participant or other person is entitled
to receive Shares pursuant to the exercise of an Option of Stock Appreciation
Right pursuant to the Plan, First Federal shall have the right to require the
Participant or such other person to pay First Federal the amount of any taxes
which First Federal is required to withhold with respect to such Shares, or, in
lieu thereof, to retain, or sell without notice, a number of such Shares
sufficient to cover the amount required to be withheld.
XXIII. 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.
IN WITNESS WHEREOF, First Federal of Alabama, F.S.B. has caused these
presents to be executed by its duly authorized officers, and its corporate seal
to be hereunto affixed, effective as of the 15th day of December, 1986.
FIRST FEDERAL OF ALABAMA, F.S.B
SEAL By /s/ Al H. Simmons
- ---- --------------------------
Its President
ATTEST:
By /s/ Thomas L. Sherer
--------------------------------
Its Secretary
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<PAGE> 1
EXHIBIT 99
REVOCABLE PROXY
PINNACLE BANK
-------------------------------------------------------
1996 ANNUAL MEETING OF STOCKHOLDERS
NOVEMBER 20, 1996
-------------------------------------------------------
The undersigned stockholder of Pinnacle Bank (the "Bank") hereby
appoints Max Perdue and Carlton Mayhall, Jr., or either of them, with full
powers of substitution, as attorneys and proxies for the undersigned, to vote
all shares of Common Stock of the Bank which the undersigned is entitled to
vote at the Annual Meeting of Stockholders, to be held at The Chamber of
Commerce of Walker County Auditorium, Jasper, Alabama on Wednesday, November
20, 1996 at 11:00 a.m., local time, and at any and all adjournments thereof, as
indicated below and as determined by a majority of the Board of Directors with
respect to such other matters as may come before the Annual Meeting.
<TABLE>
<CAPTION>
VOTE
FOR WITHHELD
--- --------
<S> <C> <C>
I. Election as directors of all nominees ----- -----
listed below for terms to expire in 1999
(except as marked to the contrary). ----- -----
O. H. Brown
James W. Cannon
Sam W. Murphy
J. T. Waggoner
INSTRUCTION: TO WITHHOLD YOUR VOTE FOR
ANY NOMINEE(S), WRITE THAT NOMINEE'S
NAME ON THE LINE BELOW.
----------------------------------------
</TABLE>
<TABLE>
<CAPTION>
FOR AGAINST ABSTAIN
--- ------- -------
<S> <C> <C> <C>
II. Ratification of appointment of Arthur Andersen LLP ----- ----- -----
as the Bank's independent auditors for the fiscal
year ending June 30, 1997. ----- ----- -----
III. Approval of the reorganization of the Bank into the
holding company form of ownership by approving an
Agreement and Plan of Reorganization, pursuant to
which the Bank will become a wholly owned subsidiary
of a holding company, Pinnacle Bancshares, Inc., a
Delaware corporation (the "Holding Company"), and
each outstanding share of common stock of the Bank ----- ----- -----
will be converted into one share of the common stock
of the Holding Company. ----- ----- -----
----- ----- -----
IV. Approval of the Pinnacle Bank 1996 Stock Option and
Incentive Plan. ----- ----- -----
V. Adjournment of the Annual Meeting to a later date if
an insufficient number of shares is present in person ----- ----- -----
or by proxy at the Annual Meeting to approve any of
the foregoing proposals. ----- ----- -----
VI. Such other matters as may properly come before the
Annual Meeting or any adjournment thereof.
</TABLE>
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" EACH OF THE LISTED
PROPOSITIONS.
<PAGE> 2
- --------------------------------------------------------------------------------
THIS PROXY WILL BE VOTED AS DIRECTED, BUT IF NO INSTRUCTIONS ARE SPECIFIED, THIS
PROXY WILL BE VOTED FOR EACH OF THE PROPOSITIONS STATED. IF ANY OTHER BUSINESS
IS PRESENTED AT THE ANNUAL MEETING, THIS PROXY WILL BE VOTED BY THOSE NAMED IN
THIS PROXY AS DETERMINED BY A MAJORITY OF THE BOARD OF DIRECTORS. AT THE PRESENT
TIME, THE BOARD OF DIRECTORS KNOWS OF NO OTHER BUSINESS TO BE PRESENTED AT THE
ANNUAL MEETING.
- --------------------------------------------------------------------------------
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
Should the undersigned be present and elect to vote at the Annual Meeting
or at any adjournment thereof and after notification to the Secretary of the
Bank at the Annual Meeting of the stockholder's decision to terminate this
proxy, then the power of said attorneys and proxies shall be deemed terminated
and of no further force and effect. The undersigned hereby revokes any and all
proxies heretofore given with respect to shares of Common Stock of the Bank
which the undersigned is entitled to vote at the Annual Meeting.
The undersigned stockholder acknowledges receipt from the Bank, prior to
the execution of this proxy, of Notice of the Annual Meeting, a Proxy
Statement, and the 1996 Annual Report to Stockholders.
<TABLE>
<S> <C>
Dated: , 1996
----------------- -----
- -------------------------------------- --------------------------------------
PRINT NAME OF STOCKHOLDER PRINT NAME OF STOCKHOLDER
- -------------------------------------- --------------------------------------
SIGNATURE OF STOCKHOLDER SIGNATURE OF STOCKHOLDER
</TABLE>
Please sign exactly as your name appears on the envelope in which this card was
mailed. When signing as attorney, executor, administrator, trustee or
guardian, please give your full title. If shares are held jointly, each holder
should sign.
- --------------------------------------------------------------------------------
PLEASE COMPLETE, DATE, SIGN AND MAIL THIS PROXY PROMPTLY IN THE ENCLOSED
POSTAGE-PREPAID ENVELOPE.
- --------------------------------------------------------------------------------
