SCHEDULE 14A INFORMATION
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. ___)
Filed by the Registrant [x]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ]Preliminary Proxy Statement [ ]Confidential, for Use of the
[x]Definitive Proxy Statement Commission Only (as permitted
[ ]Definitive Additional Materials by Rule 14a-6(e)(2))
[ ]Soliciting Material Under Rule 14a-12
CUMBERLAND MOUNTAIN BANCSHARES, INC.
--------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charger)
--------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[x] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
1. Title of each class of securities to which transaction applies:
-----------------------------------------------------------------------
2. Aggregate number of securities to which transaction applies:
-----------------------------------------------------------------------
3. Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (Set forth the
amount on which the filing fee is calculated and state how it
was determined):
-----------------------------------------------------------------------
4. Proposed maximum aggregate value of transaction:
-----------------------------------------------------------------------
5. Total fee paid:
-----------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials:
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
1. Amount Previously Paid:
-----------------------------------------------------------------------
2. Form, Schedule or Registration Statement No.:
-----------------------------------------------------------------------
3. Filing Party:
-----------------------------------------------------------------------
4. Date Filed:
-----------------------------------------------------------------------
<PAGE>
[LETTERHEAD OF CUMBERLAND MOUNTAIN BANCSHARES, INC.]
September 15, 2000
Dear Stockholder:
We invite you to attend the 2000 Annual Meeting of the Stockholders of
Cumberland Mountain Bancshares, Inc. to be held at the Fountain City Park Bank,
5320 N. Broadway, Fountain City, Tennessee on Wednesday, October 18, 2000 at
3:30 p.m., Eastern Time.
The accompanying notice and proxy statement describe the formal business to
be transacted Enclosed with this proxy statement are a proxy card and an Annual
Report to Stockholders for the 2000 fiscal year. Directors and officers of the
Company, as well as representatives of Marr, Miller & Myers, PSC, the Company's
independent auditors, will be present at the Annual Meeting to respond to any
questions the stockholders may have.
You are cordially invited to attend the Annual Meeting. REGARDLESS OF
WHETHER YOU PLAN TO ATTEND, WE URGE YOU TO SIGN, DATE AND RETURN THE ENCLOSED
PROXY CARD 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 meeting.
To help us with our planning, please check the box on the proxy card if you
plan to attend the meeting in person.
Sincerely,
/s/ James J. Shoffner
James J. Shoffner
President
<PAGE>
--------------------------------------------------------------------------------
CUMBERLAND MOUNTAIN BANCSHARES, INC.
1431 CUMBERLAND AVENUE
MIDDLESBORO, KENTUCKY 40965
(606) 248-4584
--------------------------------------------------------------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON OCTOBER 18, 2000
--------------------------------------------------------------------------------
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders (the "Annual
Meeting") of Cumberland Mountain Bancshares, Inc. (the "Company"), will be held
at the Fountain City Park Bank, 5320 N. Broadway, Fountain City, Tennessee at
3:30 p. m., Eastern Time, on Wednesday, October 18, 2000.
The Annual Meeting is for the purpose of considering and acting upon:
1. The election of one director for a three-year term;
2. The transaction of such other matters as may properly come before the
Annual Meeting or any adjournments thereof.
Any action may be taken on any one of the foregoing proposals at the Annual
Meeting on the date specified above or on any date or dates to which, by
original or later adjournment, the Annual Meeting may be adjourned. Stockholders
of record at the close of business on September 5, 2000 are the stockholders
entitled to notice of and to vote at the Annual Meeting and any adjournments
thereof.
The Company's Proxy Statement for the Annual Meeting accompanies this
Notice and a form of proxy is enclosed herewith. You are requested to fill in
and sign the enclosed proxy card 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
/s/ J. D. Howard
J. D. HOWARD
SECRETARY
Middlesboro, Kentucky
September 15, 2000
--------------------------------------------------------------------------------
IMPORTANT: THE PROMPT RETURN OF PROXIES WILL SAVE YOUR COMPANY THE EXPENSE OF
FURTHER REQUESTS FOR PROXIES IN ORDER TO ENSURE A QUORUM. A SELF-ADDRESSED
ENVELOPE IS ENCLOSED FOR YOUR CONVENIENCE. NO POSTAGE IS REQUIRED IF MAILED IN
THE UNITED STATES.
--------------------------------------------------------------------------------
<PAGE>
PROXY STATEMENT
OF
CUMBERLAND MOUNTAIN BANCSHARES, INC.
1431 CUMBERLAND AVENUE
MIDDLESBORO, KENTUCKY 40965
ANNUAL MEETING OF STOCKHOLDERS
OCTOBER 18, 2000
--------------------------------------------------------------------------------
GENERAL
--------------------------------------------------------------------------------
This Proxy Statement is furnished in connection with the solicitation
of proxies by the Board of Directors of Cumberland Mountain Bancshares, Inc.
(hereinafter called the "Company") to be used at the 2000 Annual Meeting of
Stockholders of the Company (hereinafter called the "Annual Meeting"), which
will be held at the Fountain City Park Bank, 5320 N. Broadway, Fountain City,
Tennessee on Wednesday, October 18, 2000, at 3:30 p.m., Eastern Time. The
accompanying Notice of Annual Meeting and form of proxy and this Proxy Statement
are being first mailed to stockholders on or about September 15, 2000.
--------------------------------------------------------------------------------
VOTING AND REVOCABILITY OF PROXIES
--------------------------------------------------------------------------------
Proxies solicited by the Board of Directors of the Company will be
voted in accordance with the directions given therein. WHERE NO INSTRUCTIONS ARE
INDICATED, PROXIES WILL BE VOTED FOR THE NOMINEE FOR DIRECTOR NAMED BELOW. 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
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 proxies retain the right to revoke them at any
time. 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 by written notice to the Secretary of the Company at the address above
or by the filing of a later dated proxy prior to a vote being taken on a
particular proposal at the Annual Meeting. 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 will not revoke such stockholder's proxy.
--------------------------------------------------------------------------------
VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF
--------------------------------------------------------------------------------
The securities entitled to vote at the Annual Meeting consist of the
Company's common stock, $.01 par value per share (the "Common Stock").
Stockholders of record as of the close of business on September 5, 2000 (the
"Record Date") are entitled to one vote for each share of Common Stock then
held. As of the Record Date, there were 680,159 shares of Common Stock issued
and outstanding.
<PAGE>
Persons and groups beneficially owning in excess of 5% of the Common
Stock are required to file certain reports with respect to such ownership
pursuant to the Securities Exchange Act of 1934 (the "Exchange Act"). The
following table sets forth, as of the Record Date, certain information as to the
Common Stock beneficially owned by all persons who have filed the reports
required of persons beneficially owning more than 5% of the Common Stock or who
were known to the Company to beneficially own more than 5% of the Common Stock
outstanding at the Record Date and the shares of Common Stock beneficially owned
by all executive officers and directors of the Company as a group.
<TABLE>
<CAPTION>
AMOUNT AND PERCENT OF
NATURE OF SHARES OF
NAME AND ADDRESS BENEFICIAL COMMON STOCK
OF BENEFICIAL OWNER OWNERSHIP (1) OUTSTANDING (2)
------------------- ------------- ---------------
<S> <C> <C>
James J. Shoffner 66,497 (3) 9.67%
1431 Cumberland Avenue
Middlesboro, Kentucky 40961
Cumberland Mountain Bancshares, Inc. 87,856 12.92%
Employee Stock Ownership Plan
1431 Cumberland Avenue
Middlesboro, Kentucky 40961
Jeffrey L. Gendell 67,116 9.87%
Tontine Management, L.L.C.
Tontine Financial Partners, L.P.
Tontine Overseas Associates, L.L.C.
200 Park Avenue, Suite 3900
New York, New York 10166
Sandler O'Neill Asset Management, LLC 65,000 9.56%
Malta Partners, L.P.
Malta Hedge Fund, L.P.
Malta Partners II, L.P.
Malta Hedge Fund II, L.P.
SOAM Holdings, LLC
Terry Maltese
712 Fifth Avenue
22nd Floor
New York, New York 10019
All Executive Officers and 128,101 (4) 18.15%
Directors as a group (8 persons)
<FN>
______
(1) For purposes of this table, a person is deemed to be the beneficial owner
of any shares of Common Stock if he or she has or shares voting or
investment power with respect to such Common Stock or has a right to
acquire beneficial ownership at any time within 60 days from the Record
Date. As used herein, "voting power" is the power to vote or direct the
voting of shares and "investment power" is the power to dispose or direct
the disposition of shares. Except as otherwise noted, ownership is direct,
and the named persons exercise sole voting and investment power over the
shares of the Common Stock.
(2) In calculating percentage ownership for a named individual or group, the
number of shares outstanding is deemed to include shares which the named
individual or group has the right to acquire pursuant to the exercise of
options exercisable within 60 days of the Record Date.
(3) Includes 7,852 shares which Mr. Shoffner has the right to acquire pursuant
to the exercise of options.
(4) Includes 25,552 shares which directors and officers have the right to
acquire pursuant to the exercise of options.
</FN>
</TABLE>
2
<PAGE>
--------------------------------------------------------------------------------
PROPOSAL I -- ELECTION OF DIRECTORS
--------------------------------------------------------------------------------
The Company's Board of Directors is currently composed of five members.
Under the Company's Charter, directors are divided into three classes and
elected for terms of three years each and until their successors are elected and
qualified. At the Annual Meeting one director will be elected for a term
expiring at the Annual Meeting to be held in the year 2003. The Board of
Directors has nominated J. Roy Shoffner, to serve for an additional term of
three years and until his successor is elected and qualified. Under Tennessee
law, directors are elected by a plurality of the votes present in person or
represented by proxy at the Annual Meeting and entitled to vote in the election
of directors.
Unless contrary instruction is given, the persons named in the proxies
solicited by the Board of Directors will vote each such proxy for the election
of the named nominee. If the nominee is unable to serve, the shares represented
by all properly executed proxies which have not been revoked will be voted for
the election of such substitute as the Board of Directors may recommend. At this
time, the Board knows of no reason why the nominee might be unavailable to
serve.
The following table sets forth, for the nominee and each continuing
director, his name, age as of the Record Date, the year he first became a
director of the Bank, the expiration of his current term as a director of the
Company and the number and percentage of shares of Common Stock beneficially
owned. All of the Company's current directors were initially appointed as
directors in 1996 in connection with the incorporation and organization of the
Company, except for Barry Litton who was appointed to the Board of Directors in
November 1997. Each director of the Company also is a member of the Board of
Directors of the Bank. There are no arrangements or understandings between the
Company and any director or nominee pursuant to which such person has been
selected as a director or nominee for director of the Company, and, except for
J. Roy Shoffner and James J. Shoffner who are father and son, no director,
nominee or executive officer is related to any other director, nominee or
executive officer by blood, marriage or adoption.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE NOMINEE LISTED
BELOW.
<TABLE>
<CAPTION>
SHARES OF
YEAR FIRST COMMON STOCK
ELECTED AS CURRENT BENEFICIALLY
AGE AS OF THE DIRECTOR TERM OWNED AS OF THE PERCENT
NAME RECORD DATE OF THE BANK TO EXPIRE RECORD DATE (1) OF CLASS
---- ----------- ----------- --------- --------------- --------
BOARD NOMINEE FOR TERMS TO EXPIRE
AT THE 2003 ANNUAL MEETING
<S> <C> <C> <C> <C> <C>
J. Roy Shoffner (2) 72 1961 2000 13,161 (3) 1.92%
DIRECTORS CONTINUING IN OFFICE
Reecie Stagnolia, Jr. 64 1993 2001 16,616 (4) 2.44%
Raymond C. Walker 70 1985 2001 14,935 (5) 2.19%
Barry Litton 49 1997 2002 2,932 (6) 0.43%
James J. Shoffner (2) 39 1988 2002 66,497 (7) 9.67%
<FN>
________________
(1) In calculating percentage ownership for a named individual or group, the
number of shares outstanding is deemed to include shares which the named
individual or group has the right to acquire pursuant to the exercise of
options.
(2) On February 24, 1999, without admitting or denying any of the claims
therein, J. Roy Shoffner and James J. Shoffner consented to the issuance by
the Office of Thrift Supervision of a Cease and Desist Order for an alleged
violation of the Change in Bank Control Act. The Order required the
Shoffners to pay restitution to the Company in the amount of
3
<PAGE>
$51,612. James J. Shoffner was also required to pay to the Office of Thrift
Supervision a civil money penalty in the amount of $10,000.
(3) Includes 4,291 shares of Common Stock which Mr. Shoffner has the right to
acquire pursuant to the exercise of options exercisable within 60 days of
the Record Date. Does not include 66,497 shares beneficially owned by Mr.
Shoffner's adult children as to which he disclaims beneficial ownership.
(4) Includes 9,154 shares held jointly with Mr. Stagnolia's wife, 2,266 shares
held in Mr. Stagnolia's IRA and 3,065 shares held in his wife's IRA.
Includes 2,131 shares which Mr. Stagnolia has the right to acquire pursuant
to the exercise of options.
(5) Includes 10,664 shares held jointly with Mr. Walker's wife. Includes 2,465
shares which Mr. Walker has the right to acquire pursuant to the exercise
of options exercisable within 60 days of the Record Date.
(6) Includes 1,465 shares which Mr. Litton has the right to acquire pursuant to
the exercise of options exercisable within 60 days of the Record Date.
(7) Includes 7,852 shares which Mr. Shoffner has the right to acquire pursuant
to the exercise of options exercisable within 60 days of the Record Date.
Mr. Shoffner disclaims beneficial ownership of any shares held by his
father.
</FN>
</TABLE>
Presented below is certain information concerning the nominee and directors
continuing office. Unless otherwise stated, all directors and the nominee have
held the positions indicated for at least the past five years.
J. ROY SHOFFNER is currently Chairman of the Board and Chief Executive
Officer of the Company and of Middlesboro Federal, a position he has held since
1994. He is a graduate of Lincoln Memorial University and a veteran USAF pilot
of four years. Mr. Shoffner owns and operates Shoffner Realty, a real estate
development company and also owns JRS Restaurant Corporation. Mr. Shoffner is
the past owner of a local plastic pipe manufacturing company and is active in
real estate and business properties. Mr. Shoffner is the father of James J.
Shoffner.
REECIE STAGNOLIA, JR. is currently Vice President and the Branch Manager
and Loan Officer at the Cumberland Branch (Tri-City Office), of the Bank, a
position he has held since 1989. He previously worked for the Harlan County
Board of Education as a teacher, Assistant Principal and Principal, Assistant
Superintendent and Superintendent from 1962 to 1988. Mr. Stagnolia is currently
a member of the Board of Directors of the Center for Rural Development, Harlan
County Airport, Kentucky Coal Mine Museum, Tri-City Chamber of Commerce,
Cumberland Lions Club, Sleepy Hollow Country Club, Inc., and Chairman of
Cumberland Tourism Board.
RAYMOND C. WALKER served as president of the Mutual Holding Company's
subsidiary, Home Loan Mortgage Corporation from October, 1991 to October, 1996.
He worked for the Middlesboro Daily News as Advertising Director for 24 years,
worked at National Bank as Business Development Director for seven years and
served five years as manager of 120 units of the Section 8 Federally Funded
Housing. Mr. Walker served as mayor of the city of Middlesboro and served as
Vice President and Treasurer of the Bank.
BARRY LITTON is currently Vice Chairman of the Board. Mr. Litton owns and
manages Litton's Market, a restaurant located in Knoxville, Tennessee.
JAMES J. SHOFFNER joined Middlesboro Federal in 1994 as Vice President and
Chief Operating Officer and became President and Chief Managing Officer in March
1996. He also serves as President of the Company. He also has served as
President of Home Mortgage Loan Corporation since 1996. Prior to joining the
Bank as a full-time officer, Mr. Shoffner is the President of JRS Restaurant
Corporation. He graduated from Middlesboro High School and attended the
University of Kentucky. He is a Deacon in the First Baptist Church of
Middlesboro. Mr. Shoffner is a member of the Middlesboro Kiwanis Club and a
member of the Bell County Industrial Commission. He has served on the Board of
Directors of Middlesboro Federal since June 6, 1988. Mr. Shoffner is the son of
J. Roy Shoffner.
4
<PAGE>
EXECUTIVE OFFICERS WHO ARE NOT DIRECTORS
The following sets forth information including their ages as of the Record
Date with respect to executive officers of the Company who do not serve on the
Board of Directors. Executive officers are appointed annually by the Board of
Directors.
J. D. HOWARD, age 39, joined the Bank in July 1996 as Vice President and
was appointed Chief Financial Officer in October 1996 and named Senior Vice
President in July 1999. He also serves as Secretary/Treasurer for the Company.
Prior to joining the Bank, Mr. Howard was an internal auditor and compliance
officer at Home Federal of Middlesboro for two years. Prior to that he was Chief
Financial Officer of First Federal Savings Bank, Pineville, Kentucky for 11
years.
DIANA J. MIRACLE, age 38, joined the Bank as a compliance officer in August
1995, was named Vice President and Chief Operating Officer in October 1996 and
was named Senior Vice President in July 1999. Prior to that time, she was
employed at Security First Network Bank in Pineville, Kentucky for 11 years. Ms.
Miracle currently serves a three-year term as a director of the Young Bankers
Division of the Kentucky Bankers Association.
BETTY HALSEY, age 50, has been Senior Vice President and Chief Lending
Officer of the Bank since July 1999, Prior to joining the Bank, Ms. Halsey was
Chief Executive Officer and President at Community Trust Bank's Middlesboro
office since June 1995. Prior to 1995, Ms. Halsey was Chief Executive Officer of
Commercial Bank, Middlesboro, since 1994. Prior to that she was Senior Lender at
Commercial Bank. Ms. Halsey is a member of the Middlesboro Kiwanis Club and
Financial Women International.
--------------------------------------------------------------------------------
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
--------------------------------------------------------------------------------
The business of the Company is conducted at regular and special meetings of
the full Board and its standing committees. The standing committees consist of
the Audit, Compensation, Finance, Insurance, Investment and Loan Committees.
During fiscal year 2000, the Board of Directors held 12 regular meetings
and one special meeting called in accordance with the bylaws. No director
attended less than 75% of said meetings and the meetings held by all committees
of the Board of Directors on which he served.
The Audit Committee consists of Directors Barry Litton and Raymond C.
Walker. This committee regularly meets on a quarterly basis with the internal
auditor to review audit programs and the results of audits of specific areas as
well as other regulatory compliance issues. In addition, the Audit Committee
meets with the independent certified public accountants to review the results of
the annual audit and other related matters. The Audit Committee met 13 times
during the fiscal year ended June 30, 2000.
The Compensation Committee is comprised of any three non-employee directors
and one senior officer who does not participate in deliberations regarding his
compensation. The Compensation Committee annually reviews the compensation of
the officers of the Bank and makes recommendations to the Board of Directors.
The Committee reports to the full Board of Directors at the regular meetings.
The Compensation Committee met three during the fiscal year ended June 30, 2000.
The Loan Committee is made up of any one director and two senior officers.
The committee meets weekly to review and ratify management's approval of loans
made within the scope of its authority since the last committee meeting and
approve all loans up to $250,000. The Loan Committee met 79 times during the
fiscal year ended June 30, 2000.
5
<PAGE>
Under the Company's Bylaws, the Board of Directors serves as a nominating
committee for selecting management's nominees for election as directors. While
the Board of Directors will consider nominees recommended by stockholders, it
has not established any procedures for this purpose. The Board of Directors met
six times in its capacity as the nominating committee during the fiscal year
ended June 30, 2000.
--------------------------------------------------------------------------------
DIRECTOR COMPENSATION
--------------------------------------------------------------------------------
DIRECTOR FEES. The members of the Board of Directors receive $1,100 for
regular monthly Board meetings and committee meetings attended. The Chairman
receives $1,500 monthly for regularly scheduled Board meetings and committee
meetings. The Vice Chairman receives $1,200 for regular monthly board meetings
attended.
Pursuant to the Cumberland Mountain Bancshares, Inc. Stock Option and
Incentive Plan (the "Option Plan"), non-employee directors of the Company
received automatic grants of stock options in fiscal year 1999. Each director
who was not an employee on the effective date of the Option Plan received
options to purchase 2,198 shares of Common Stock at an exercise price equal to
the fair market value of the Common Stock on the date of grant ($16.00). All
such options will expire on October 21, 2008. Directors who are also employees
are eligible for awards under the Option Plan as well. During fiscal 1999
Director James J. Shoffner received a grant of 10,993 options also at an
exercise of $16.00 and subject to a three year vesting schedule.
DIRECTOR RETIREMENT PLAN. The Bank has adopted the Middlesboro Federal
Bank, Federal Savings Bank Retirement Plan for Directors (the "Directors' Plan")
pursuant to which directors of the Bank are entitled to receive, upon
retirement, 60 monthly payments in the amount of 75% of the average monthly fees
that the respective director received for service on the Board during the
12-month period preceding termination of service on the Board, subject to a 20
year vesting schedule. In connection with the adoption of the Directors' Plan,
the Bank incurred an expense of $169,061 which was recognized during the fiscal
year 1997.
In fiscal year 1997, the Bank's Board converted the Directors' Plan from a
defined benefit type of plan to a defined contribution type. Under the
Directors' Plan, as amended, a bookkeeping account in each participants' name is
credited, on an annual basis with an amount equal to the sum of the accrual
attributable to the participant equal to the investment return which would have
resulted if such deferred amounts had been invested in either Common Stock or
the Bank's highest annual rate of interest on certificates of deposit having a
one-year term.
Each participant's account has been credited with an amount equal to the
present value of the benefits in which the participant has a fully vested
interest before its amendment. This amount was determined based on the
participant's years of service and 75% of average fees paid to directors in the
year prior to the participant's retirement. In addition, beginning July 1, 1996,
each participant's account is credited with $1,516 for each year of service
until a maximum of 20 years worth of credits is reached, including past service
credits. Benefits are payable from the Bank's general assets, although the Bank
may establish a grantor trust that will purchase Common Stock that will be held
to help the Bank meet its liabilities associated with the Directors' Plan.
Upon a "Change in Control" the present value of each participant's benefits
will become payable in one lump-sum payment within ten days. "Change in Control"
generally refers to (a) any "person" (as the term is used in Sections 13(d) and
14(d) of the Exchange Act) is or becomes the "beneficial owner" (as defined in
Rule 13d-3 promulgated under the Exchange Act), directly or indirectly, of
securities of the Bank or the Company representing twenty percent (20%) or more
of the combined voting power of the Bank's or the Company's outstanding
securities except for any securities of the Bank purchased by the Bank's
employee stock ownership plan and trust; or (b) individuals who constitute the
Board of the Bank or the board of directors of the Company on the date hereof
("Incumbent Board") cease for any reason to constitute at least a majority
thereof; provided that any person becoming a director subsequent to the date
--------
hereof whose election was approved by a vote of at least three-quarters of the
directors comprising the Incumbent Board, or whose nomination for election by
the Company's stockholders was approved by the same nominating committee serving
under an Incumbent Board, shall be, for purposes of this
6
<PAGE>
clause (b), considered as though he were a member of the Incumbent Board; or (c)
the occurrence of a plan of reorganization, merger, consolidation, sale of all
or substantially all the assets of the Bank or the Company or similar
transaction in which the Bank or the Company is not the resulting entity. A
Change in Control will not occur as the result of acquisitions of Common Stock
by Messrs. J. Roy Shoffner and James J. Shoffner.
--------------------------------------------------------------------------------
EXECUTIVE COMPENSATION AND OTHER BENEFITS
--------------------------------------------------------------------------------
SUMMARY COMPENSATION TABLE. The following table sets forth the cash and
noncash compensation for each of the last three fiscal years awarded to or
earned by the Chief Executive Officer. No other executive officer of the Company
earned a salary and bonus during fiscal year 2000 exceeding $100,000 for
services rendered in all capacities to the Bank.
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
--------------------------
AWARDS
ANNUAL COMPENSATION --------------------------
------------------------------------- RESTRICTED SECURITIES
FISCAL OTHER ANNUAL STOCK UNDERLYING ALL OTHER
NAME YEAR SALARY BONUS COMPENSATION AWARD(S) OPTIONS COMPENSATION(1)
---- ---- ------ ----- ------------ -------- ---------- ---------------
<S> <C> <C> <C> <C> <C> <C>
James J. Shoffner
President and Chief Executive 2000 $100,000 $ 1,500 $ -- $ -- $ -- $13,200
Officer 1999 100,000 1,500 -- 35,351 (2) 10,993 13,200
1998 87,500 4,369 -- -- -- 26,016
<FN>
___________
(1) Consists of director's fees and the value of stock awarded to Mr.
Shoffner's account in the ESOP.
(2) As of June 30, 2000, Mr. Shoffner held 4,221 shares of restricted Common
Stock awarded under the MRP. Such shares had an aggregate value of $25,326
based on the last known sale price of $6.00 per share.
</FN>
</TABLE>
OPTION YEAR-END VALUE TABLE. The following table sets forth information
concerning the value of options held by the Chief Executive Officer at June 30,
2000.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
OPTIONS AT FISCAL YEAR-END AT FISCAL YEAR-END (1)
---------------------------- ---------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
James J. Shoffner 7,852 3,664 $ -- $ --
<FN>
___________
(1) Based on aggregate fair market value of the shares of Common Stock
underlying the options at June 30, 2000 less aggregate exercise price.
For purposes of this calculation, the fair market value of the Common
Stock at June 30, 2000 is assumed to be equal to the last known sale
price of $6.00 per share. Of the11,516 options held by Mr. Shoffner,
523 options were granted at an adjusted exercise price of $7.50 per
share, and 10,993 options were granted at an exercise price of $16.00.
</FN>
</TABLE>
7
<PAGE>
--------------------------------------------------------------------------------
CERTAIN TRANSACTIONS
--------------------------------------------------------------------------------
During the fiscal year ended June 30, 2000, certain loans made by the
Bank were outstanding in an amount exceeding $60,000 to certain directors and
executive officers and associates of directors and executive officers. All of
such loans were made in the ordinary course of business, were made on
substantially the same terms, including interest rates and collateral, as those
prevailing at the time for comparable transactions with other persons, and did
not involve more than the normal risk of collectibility or present other
unfavorable features.
--------------------------------------------------------------------------------
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. If any other matters
should properly come before the Annual Meeting, it is intended that proxies in
the accompanying form will be voted in respect thereof in accordance with the
determination of a majority of the Board of Directors.
--------------------------------------------------------------------------------
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
--------------------------------------------------------------------------------
Pursuant to regulations promulgated under the Exchange Act, the
Company's officers, directors and persons who own more than ten percent of the
outstanding Common Stock are required to file reports detailing their ownership
and changes of ownership in such Common Stock, and to furnish the Company with
copies of all such reports. Based on the Company's review of such reports which
the Company received during the last fiscal year, or written representations
from such persons that no annual report of change in beneficial ownership was
required, the Company believes that, during the last fiscal year, all persons
subject to such reporting requirements have complied with the reporting
requirements.
--------------------------------------------------------------------------------
MISCELLANEOUS
--------------------------------------------------------------------------------
The cost of soliciting proxies will be borne by the Company. The
Company will reimburse brokerage firms and other custodians, nominees and
fiduciaries for reasonable expenses incurred by them in sending proxy materials
to the beneficial owners of Common Stock. In addition to solicitations by mail,
directors, officers and regular employees of the Company may solicit proxies
personally or by telegraph or telephone without additional compensation.
The Company's 2000 Annual Report to Stockholders, including financial
statements, has been 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 Company. Such
Annual Report is not to be treated as a part of the proxy solicitation material
or as having been incorporated herein by reference.
--------------------------------------------------------------------------------
STOCKHOLDER PROPOSALS
--------------------------------------------------------------------------------
In order to be eligible for inclusion in the Company's proxy materials
for next year's Annual Meeting of Stockholders, any stockholder proposal to take
action at such meeting must be received at the Company's executive office at
1431 Cumberland Avenue, Middlesboro, Kentucky 40961 no later than May 18, 2001.
Any such proposals shall be subject to the requirements of the proxy rules
adopted by the Securities and Exchange Commission under the Exchange Act.
8
<PAGE>
Stockholder proposals, other than those submitted pursuant to the
Exchange Act, must be submitted in writing, delivered or mailed by first class
United States mail, postage prepaid, to the secretary of the Company not fewer
than 30 days nor more than 60 days prior to any such meeting; provided, however,
that if notice or public disclosure of the meeting is given fewer than 40 days
before the meeting, such written notice shall be delivered or mailed to the
secretary of the Company not later than the close of the 10th day following the
day on which notice of the meeting was mailed to shareholders.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ J. D. Howard
J. D. HOWARD
SECRETARY
Middlesboro, Kentucky
September 15, 2000
--------------------------------------------------------------------------------
FORM 10-KSB
--------------------------------------------------------------------------------
A COPY OF THE COMPANY'S FORM 10-KSB FOR THE FISCAL YEAR ENDED JUNE 30,
2000 AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION WILL BE FURNISHED
WITHOUT CHARGE TO STOCKHOLDERS AS OF THE RECORD DATE UPON WRITTEN REQUEST TO THE
STOCKHOLDER RELATIONS, CUMBERLAND MOUNTAIN BANCSHARES, INC., 1431 CUMBERLAND
AVENUE, MIDDLESBORO, KENTUCKY 40961.
--------------------------------------------------------------------------------
9
<PAGE>
CUMBERLAND MOUNTAIN BANCSHARES, INC.
1431 CUMBERLAND AVENUE
MIDDLESBORO, KENTUCKY 40965
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Reecie Stagnolia, Jr., Barry Litton and Raymond
C. Walker, with full powers of substitution, to act as attorneys and proxies for
the undersigned, to vote all shares of Common Stock of Cumberland Mountain
Bancshares, Inc. (the "Company") which the undersigned is entitled to vote at
the Annual Meeting of Stockholders (the "Annual Meeting"), to be held at the
Fountain City Park Bank, 5320 N. Broadway, Fountain City, Tennessee on
Wednesday, October 18, 2000, at 3:30 p.m., Eastern Time, and at any and all
adjournments thereof, as indicated below and in accordance with the
determination of a majority of the Board of Directors with respect to other
matters which come before the Annual Meeting.
A VOTE "FOR" THE NOMINEE IS RECOMMENDED BY THE BOARD OF DIRECTORS
1. Election of director
[ ] FOR the nominee listed below (except as marked to the contrary)
[ ] WITHHOLD AUTHORITY to vote for the nominee
J. Roy Shoffner
Instructions: To withhold authority to vote for any individual nominees, write
the nominee's name in the space provided.
THIS PROXY WILL BE VOTED AS DIRECTED, BUT IF NO INSTRUCTIONS ARE SPECIFIED, THIS
PROXY WILL BE VOTED FOR THE NOMINEE LISTED ABOVE. IF ANY OTHER BUSINESS IS
PRESENTED AT THE ANNUAL MEETING, THIS PROXY WILL BE VOTED BY THOSE NAMED IN THIS
PROXY IN ACCORDANCE WITH THE DETERMINATION OF A MAJORITY OF THE BOARD OF
DIRECTORS. THIS PROXY CONFERS DISCRETIONARY AUTHORITY ON THE HOLDERS THEREOF TO
VOTE WITH RESPECT TO THE ELECTION OF ANY PERSON AS DIRECTOR WHERE THE NOMINEE IS
UNABLE TO SERVE OR FOR GOOD CAUSE WILL NOT SERVE AND MATTERS INCIDENT TO THE
CONDUCT OF THE ANNUAL MEETING.
___________________________________, 2000
___________________________________
Signature
___________________________________
Signature if Held Jointly
Please sign exactly as your name appears above. For joint accounts, both owners
should sign. When signing as executor, administrator, attorney, trustee or
guardian, etc., please give your full title. If a corporation, please sign in
full corporate name by President or other authorized officer. If a partnership,
please sign in partnership name by authorized person.
