<PAGE>
As filed with the Securities and Exchange Registration No. 333-__________
Commission on January 8, 1997
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------
FORM S-4
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
---------------------
PONTOTOC BANCSHARES CORP.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
MISSISSIPPI 6712 64-0885622
(State or other (Primary Standard Industrial (I.R.S. Employer
jurisdiction of incorporation Classification Code Number) Identification
or organization) Number)
19 South Main Street
Pontotoc, Mississippi 38863
(601) 489-1631
(Address, including zip code and telephone number,
including area code, of
registrant's principal executive offices)
---------------------
Buddy R. Montgomery Copy to:
President Virginia Boulet, Esq.
Pontotoc BancShares Corp. Phelps Dunbar, L.L.P.
19 South Main Street 400 Poydras Street, 30th Floor
Pontotoc, Mississippi 38863 New Orleans, Louisiana 70130-3245
(601) 489-1631 (504) 584-9286
(Name, address, including zip code,
and telephone number, including area code,
of agent for service)
---------------------
Approximate date of commencement of proposed sale of the securities to the
public: Upon the Effective Date of the reorganization and merger described in
this Registration Statement.
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: [ ]
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
=============================================================================================
PROPOSED PROPOSED
MAXIMUM MAXIMUM
AMOUNT OFFERING AGGREGATE
TITLE OF EACH CLASS OF SECURITIES TO BE PRICE PER OFFERING AMOUNT OF
TO BE REGISTERED REGISTERED UNIT/(1)/ PRICE REGISTRATION FEE
<S> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------
Common Stock, no par value......... 330,000 shares $82.34 $27,172,200 $5,435.00
=============================================================================================
</TABLE>
/(1)/ Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(f)(2) based on the book value per share of common stock of
First National Bank of Pontotoc as of September 30, 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>
FIRST NATIONAL BANK OF PONTOTOC
19 SOUTH MAIN STREET
PONTOTOC, MISSISSIPPI 38863
January ___, 1997
Dear Shareholder:
On November 27, 1996, I wrote all shareholders a letter stating that the
Board of Directors was implementing a plan to maximize the value of your
investment in First National Bank of Pontotoc. The attached proxy statement
describes the first step in the implementation of the Board's plan, the
formation of a holding company (the "Reorganization"). I urge you to read the
proxy statement carefully.
The Reorganization will be considered at a special meeting of the
shareholders (the "Special Meeting") of First National Bank of Pontotoc to be
held on ______, February __, 1997 at 10:00 a.m., local time, at the offices of
the Bank, located at 19 South Main Street, Pontotoc, Mississippi. At the
Special Meeting you will be asked to consider and vote upon the Reorganization,
pursuant to which the Bank will become a wholly-owned subsidiary of Pontotoc
BancShares Corp., a newly-formed Mississippi corporation (the "Company"), and
each outstanding share of common stock of the Bank will be converted into and
exchanged for ten shares of common stock of the Company.
In addition to a description of the holding company structure, the
accompanying Proxy Statement includes a description of the business and
condition of the Bank and the Company, and certain other significant
information, including the rights of any shareholders wishing to dissent from
the Reorganization. The Proxy Statement also describes the rights you will have
as a shareholder of the Company upon consummation of the Reorganization, which
will be different in certain respects from the rights you currently have as a
shareholder of the Bank.
THE BOARD OF DIRECTORS BELIEVES THAT THE FORMATION OF A HOLDING COMPANY IS
IN THE BEST INTERESTS OF ALL THE SHAREHOLDERS AND IS NECESSARY TO MAXIMIZE THE
VALUE OF THE BANK TO ALL OF ITS SHAREHOLDERS. ACCORDINGLY, AS MORE FULLY
DESCRIBED IN THE PROXY STATEMENT, THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR
APPROVAL OF THE REORGANIZATION.
The affirmative vote of holders of at least two-thirds of the outstanding
shares of common stock of the Bank is required in order to approve the
Reorganization. It is, therefore, extremely important that your shares be
represented at the Special Meeting. You are urged to complete, sign and return
the accompanying form of proxy in the enclosed envelope as soon as possible,
whether or not you are personally able to attend the Special Meeting.
Sincerely,
_____________________________
Buddy R. Montgomery
<PAGE>
FIRST NATIONAL BANK OF PONTOTOC
19 SOUTH MAIN STREET
PONTOTOC, MISSISSIPPI 38863
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON FEBRUARY __, 1997
January ___, 1997
A special meeting of shareholders (the "Special Meeting") of First National
Bank of Pontotoc (the "Bank") will be held on ______, February __, 1997 at 10:00
a.m., local time, at the offices of the Bank, 19 South Main Street, Pontotoc,
Mississippi 38863, for the following purposes:
(1) To consider and vote upon a proposed plan to reorganize the Bank as a
wholly-owned subsidiary of Pontotoc BancShares Corp., a newly-formed Mississippi
corporation (the "Company"), as more fully described in the proxy statement that
accompanies this notice (the "Reorganization"). Upon consummation of the
Reorganization, each outstanding share of common stock of the Bank will be
converted into and exchanged for ten shares of common stock of the Company and
the shareholders of the Bank will become the shareholders of the Company; and
(2) To consider such other business as may properly come before the Special
Meeting or any adjournments thereof.
The affirmative vote of holders of at least two-thirds of the outstanding
shares of common stock of the Bank is required to approve the Reorganization.
IF THE REORGANIZATION IS APPROVED, DISSENTING SHAREHOLDERS WHO COMPLY WITH THE
PROCEDURAL REQUIREMENTS OF THE FEDERAL BANKING LAWS WILL BE ENTITLED TO RECEIVE
PAYMENT IN CASH FOR THEIR SHARES.
The Board of Directors has set January 6, 1997 as the record date for the
Special Meeting. Only shareholders of record at the close of business on the
record date will be entitled to receive notice of, and to vote at, the Special
Meeting.
REGARDLESS OF WHETHER A SHAREHOLDER EXPECTS TO BE PRESENT AT THE SPECIAL
MEETING IN PERSON, PLEASE VOTE, SIGN AND MAIL THE ACCOMPANYING FORM OF PROXY IN
THE ENCLOSED ENVELOPE, WHICH REQUIRES NO POSTAGE. A PROXY MAY BE REVOKED AT ANY
TIME PRIOR TO ITS EXERCISE AT THE SPECIAL MEETING.
BY ORDER OF THE BOARD OF DIRECTORS
_____________________________________
Larry Russell, Secretary to the Board
<PAGE>
PONTOTOC BANCSHARES CORP.
Prospectus
---------------------
FIRST NATIONAL BANK OF PONTOTOC
Proxy Statement
For A Special Meeting of Shareholders
To Be Held ______, February __, 1997
This Proxy Statement and Prospectus (the "Proxy Statement") constitutes the
Proxy Statement of First National Bank of Pontotoc, a national banking
association (the "Bank"), in connection with the solicitation by the Board of
Directors of the Bank of proxies for use at a special meeting of shareholders of
the Bank (the "Special Meeting") to be held on ______, February __, 1997, and
any adjournments thereof. This Proxy Statement is being mailed to the Bank's
shareholders of record on the close of business on January 6, 1997 who are
entitled to receive notice of, and to vote at, the Special Meeting. The Special
Meeting has been called by the Board of Directors of the Bank in order for the
Bank's shareholders to consider and vote upon a plan of reorganization, pursuant
to which the Bank will become a wholly-owned subsidiary of Pontotoc BancShares
Corp., a newly-formed Mississippi corporation (the "Company"), and each
outstanding share of common stock of the Bank will be converted into and
exchanged for ten shares of common stock of the Company (the "Reorganization").
This Proxy Statement also constitutes the Prospectus of the Company relating to
330,000 shares of its common stock, no par value per share (the "Company Common
Stock"), to be issued in connection with the Reorganization. A Reorganization
plan (the "Reorganization Plan") setting forth the terms and the mechanism by
which the Company will become the holding company of the Bank has been filed as
Exhibit 2.1 to the Registration Statement on Form S-4 filed by the Company with
the United States Securities and Exchange Commission (the "Commission") on
January 8, 1997, and is incorporated by reference herein. For a description of
the Reorganization see "The Proposed Reorganization" herein. SEE "COMPARATIVE
RIGHTS OF SHAREHOLDERS OF THE BANK AND THE COMPANY" AND "TRADING MARKET;
DIVIDENDS" FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED BY
SHAREHOLDERS OF THE BANK BEFORE VOTING ON THE REORGANIZATION.
The principal executive offices of the Bank and the Company are located at
19 South Main Street, Pontotoc, Mississippi 38863.
This Proxy Statement and the accompanying proxy cards are first being
mailed to shareholders of the Bank on or about January __, 1997.
---------------------
THE COMMON STOCK OF THE COMPANY ISSUABLE IN CONNECTION WITH THE
PROPOSED REORGANIZATION HAS NOT BEEN APPROVED OR DISAPPROVED
BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION NOR HAS THE COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROXY STATE-
MENT AND PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
---------------------
No person has been authorized to give any information or make any
representations other than those contained in this Proxy Statement, and, if
given or made, such information or representations must not be relied upon as
having been authorized. This Proxy Statement does not constitute an offer to
sell or a solicitation of an offer to purchase, the securities offered hereby,
nor does it constitute the solicitation of a proxy, by any one in any
jurisdiction in which such offer or solicitation is not authorized, or in which
the person making such offer or solicitation is not qualified to do so, or to
any person to whom it is unlawful to make such offer or solicitation.
---------------------
The date of this Proxy Statement and Prospectus is January 1997.
<PAGE>
AVAILABLE INFORMATION; REPORTS TO SECURITY HOLDERS
The Company is not currently subject to the informational requirements of
Section 13 of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and as such, does not file reports, proxy statements or other information
with the Commission. As of the date on which the Commission declares the
Company's Registration Statement effective, however, the Company will become
subject to such informational requirements. The Company intends, however, to
file a certification on Form 15 with the Commission as soon as practicable after
the issuance of the Company Common Stock so as to suspend its duty to file the
reports required by Section 13(a) of the Exchange Act. Thereafter, the Company
intends to deliver an annual report at the end of each fiscal year to holders of
Company Common Stock.
ADDITIONAL INFORMATION
This Proxy Statement does not contain all the information set forth in the
Registration Statement on Form S-4 and the exhibits relating thereto which the
Company has filed with the Securities and Exchange Commission (the
"Commission"), 450 5th Street, N.W., Washington, D.C. 20549 pursuant to the
Securities Act of 1933. For further information pertaining to the Company or
the securities offered hereby, reference is made to the Registration Statement,
including exhibits.
The Registration Statement and other information filed by the Company may
be inspected and copied at the public reference facilities maintained by the
Commission at Room 1024, 450 Fifth Street, N.W., Judiciary Plaza, Washington,
D.C. 20549, and at the regional offices of the Commission at Citicorp Center,
500 West Madison Street, 14th Floor, Chicago, Illinois 60661 and Seven World
Trade Center, 13th Floor, New York, New York 10048. Copies of the Registration
Statement can be obtained from the Public Reference Section of the Commission at
Room 1024, 450 Fifth Street, N.W., Judiciary Plaza, Washington, D.C. 20549, at
prescribed rates.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
SUMMARY................................................................... i
THE SPECIAL MEETING....................................................... 1
Purpose of the Special Meeting....................................... 1
Shares Outstanding and Entitled to Vote; Record Date................. 1
Quorum; Shareholder Vote Required and Other Matters.................. 1
Solicitation, Voting and Revocation of Proxies....................... 2
THE PROPOSED REORGANIZATION............................................... 2
General.............................................................. 2
Effect of the Proposed Reorganization................................ 3
Reasons for the Proposed Reorganization.............................. 3
Conditions to Consummation of the Reorganization..................... 3
Termination and Abandonment of the Reorganization.................... 4
Stock Certificates................................................... 4
Accounting Treatment................................................. 5
DESCRIPTION OF CAPITAL STOCK.............................................. 5
Stock of the Bank.................................................... 5
Stock of the Company................................................. 5
COMPARATIVE RIGHTS OF
SHAREHOLDERS OF THE BANK AND THE COMPANY.................................. 7
General.............................................................. 7
Shareholder Meetings................................................. 7
Shareholder Proposals................................................ 7
Approval of Certain Business Combinations............................ 8
Directors............................................................ 8
Amendment of Articles of Incorporation and Bylaws.................... 9
Assessability of Stock............................................... 10
Certain Corporate Protective Devices................................. 10
Effects of Shareholder Rights Provisions............................. 11
RIGHTS OF DISSENTING SHAREHOLDERS......................................... 12
CERTAIN FEDERAL INCOME TAX CONSEQUENCES................................... 13
TRADING MARKET; DIVIDENDS................................................. 14
No Trading Market.................................................... 14
Dividends............................................................ 14
BUSINESS OF THE BANK...................................................... 16
General.............................................................. 16
</TABLE>
<PAGE>
<TABLE>
<S> <C>
Competition.......................................................... 16
Employees............................................................ 16
Legal Proceedings.................................................... 16
BUSINESS OF THE COMPANY................................................... 17
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS FOR THE TWO YEARS ENDED
DECEMBER 31, 1995......................................................... 18
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 1996 AND 1995............................................... 30
SUPERVISION AND REGULATION................................................ 33
Supervision and Regulation of the Company............................ 33
Supervision and Regulation of the Bank............................... 34
Interstate Banking and Branching Legislation......................... 35
MANAGEMENT................................................................ 36
Directors and Executive Officers..................................... 36
SUMMARY COMPENSATION TABLE................................................ 38
Employment Agreements................................................ 38
Compensation of Directors............................................ 38
Limitation on Directors' Liability................................... 39
Indemnification...................................................... 39
BENEFICIAL OWNERSHIP OF DIRECTORS, EXECUTIVE OFFICERS
AND PRINCIPAL SHAREHOLDERS OF THE BANK.................................... 41
RECENT DEVELOPMENTS....................................................... 42
LEGAL MATTERS............................................................. 43
SHAREHOLDER PROPOSALS..................................................... 43
OTHER MATTERS............................................................. 43
FINANCIAL STATEMENTS OF THE BANK.......................................... F-1
Appendix A - Articles of Incorporation of Pontotoc BancShares Corp... A-1
Appendix B - Bylaws of Pontotoc BancShares Corp...................... B-1
Appendix C - Excerpts from the Federal Banking Law
Relating to Dissenters' Rights....................................... C-1
</TABLE>
<PAGE>
SUMMARY
The following is a summary of certain information contained elsewhere in
this Proxy Statement. This summary does not purport to be complete and is
qualified in its entirety by the more detailed information contained elsewhere
in this Proxy Statement, including the appendices hereto, to which reference is
made for a complete statement of the matters discussed below. Shareholders are
urged to read carefully all such materials.
THE SPECIAL MEETING
The Special Meeting will be held on ______, February __, 1997 at 10:00
a.m., local time, at the offices of the Bank, 19 South Main Street, Pontotoc,
Mississippi. Shareholders of record at the close of business on January 6,
1997 are entitled to receive notice of, and to vote at, the Special Meeting.
See "The Special Meeting."
PURPOSE OF THE SPECIAL MEETING
The purpose of the Special Meeting is to consider and vote upon the
Reorganization. See "The Special Meeting - Purpose of the Special Meeting."
FIRST NATIONAL BANK OF PONTOTOC
The Bank is a national banking association headquartered in Pontotoc,
Mississippi. As of September 30, 1996, the Bank had total assets of
approximately $151 million, total deposits of approximately $123 million, and
shareholders' equity of approximately $27 million. The Bank's principal
executive and main banking office is located at 19 South Main Street, Pontotoc,
Mississippi 38863, and its telephone number is (601) 489-1631. See "Business of
the Bank."
PONTOTOC BANCSHARES CORP.
The Company is a Mississippi corporation that was organized in December
1996 for the purpose of becoming the parent company of the Bank. The Company
has not engaged in any active business operations and has no business or
financial history. The principal executive office of the Company is located at
19 South Main Street, Pontotoc, Mississippi 38863, and its telephone number is
(601) 489-1631. See "Business of the Company."
EFFECT OF THE PROPOSED REORGANIZATION
Upon consummation of the Reorganization, each outstanding share of the
Bank's common stock, $10.00 par value per share (the "Bank Common Stock"), will
be converted into ten shares of Company Common Stock and the shareholders of the
Bank will become the shareholders of the Company. The ten-to-one exchange rate
will not affect any shareholder's percentage ownership.
As a result of the Reorganization, the Bank will become a wholly-owned
subsidiary of the Company and will continue to engage in the same business and
activities in which it is presently engaged. The consolidated assets,
liabilities, stockholders' equity and income of the
-i-
<PAGE>
Company immediately following consummation of the Reorganization will be the
same as those of the Bank immediately prior to the consummation of the
Reorganization. The Reorganization will not change the management of the Bank
or its officers. Each current director of the Bank has been invited to serve on
the board of directors of the Company. The first annual meeting of the
Company's shareholders at which directors are to be elected will be held in
1998. See "The Proposed Reorganization - Effect of the Proposed
Reorganization."
REASONS FOR THE PROPOSED REORGANIZATION
The Board believes that the proposed Reorganization is in the best
interests of the Bank and its shareholders because the holding company structure
will better facilitate the Bank's ability to serve its customers' needs for
financial services and is a first step in the implementation of the Board's plan
to maximize the value of the Bank to all of its shareholders. The Company will
be operated as a bank holding company under the federal Bank Holding Company Act
of 1956. Accordingly, the Bank, through the Company, will be able to expand
and diversify its business into other permitted banking and non-banking
activities, either through newly-formed subsidiaries or through acquisitions.
The holding company structure also will enable the Company to provide banking
related services in addition to the traditional services a commercial bank may
provide under current law. The Company, as a bank holding company, will also be
permitted to acquire other bank holding companies or, subject to certain
restrictions, other financial institutions. See "The Proposed Reorganization -
Reasons for the Proposed Reorganization."
CONDITIONS TO CONSUMMATION OF THE REORGANIZATION
Consummation of the Reorganization is subject to a number of conditions
including the following: (i) the Reorganization has been approved by holders of
at least two-thirds of the outstanding shares of Bank Common Stock; (ii) the
Reorganization has been approved by the Office of the Comptroller of the
Currency (the "Comptroller"); (iii) the formation of the Company has been
approved by the Board of Governors of the Federal Reserve System (the "Federal
Reserve Board"); (iv) the Bank has received an opinion from legal counsel
passing upon the federal income tax consequences of the Reorganization to the
Bank's shareholders; and (v) it has been determined to the satisfaction of the
Company and the Bank that the Reorganization will be treated for accounting
purposes similar to a "pooling of interests." See "The Proposed Reorganization
- - Conditions to Consummation of the Reorganization."
TERMINATION AND ABANDONMENT OF THE REORGANIZATION PLAN
The Reorganization Plan may be terminated and the Reorganization abandoned
at any time, either before or after a vote of the Bank's shareholders, if (i)
any of the conditions to its consummation have not been met, or (ii) the Board
of Directors of the Bank determines that the Reorganization is inadvisable. See
"The Proposed Reorganization - Termination and Abandonment of the Reorganization
Plan."
-ii-
<PAGE>
COMPARATIVE RIGHTS OF SHAREHOLDERS OF THE BANK AND THE COMPANY
As a result of the Reorganization, the Bank's shareholders will become
shareholders of the Company. There are substantial differences between the
Bank's Articles of Association and Bylaws and the Company's Articles of
Incorporation and Bylaws, which have an effect on shareholder rights. In
addition, there are certain differences in shareholder rights arising from
distinctions between laws governing national banking associations and the
Mississippi Business Corporation Act ("MBCA"). See "Comparative Rights of
Shareholders of the Bank and the Company."
RIGHTS OF DISSENTING SHAREHOLDERS
Under certain conditions, shareholders dissenting from the Reorganization
will be entitled to receive cash for their shares of Bank Common Stock. See
"Rights of Dissenting Shareholders."
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
Consummation of the Reorganization is subject to, among other things,
receipt of an opinion from Phelps Dunbar, L.L.P., counsel to the Company and the
Bank, to the effect that (i) neither the Bank nor the Company will recognize any
gain or loss as a result of the Reorganization; (ii) no gain or loss will be
recognized to the shareholders of the Bank upon conversion of their shares; the
tax basis of shares of Company Common Stock received in the Reorganization will
be the same as the tax basis of the shares of Bank Common Stock previously
owned; and if the shares of Bank Common Stock were held as capital assets, the
holding period of the shares of Company Common Stock received will include the
holding period of the shares of such Bank Common Stock exchanged therefor; and
(iii) a shareholder of the Bank who exercises his or her rights as a dissenter
and thereby receives cash for his or her shares will recognize income, gain or
loss measured by the difference between the amount of cash received and the tax
basis of his or her shares of Bank Common Stock, subject to the provisions of
Section 302 of the Internal Revenue Code of 1986, as amended (the "Code"), and
that such distributions generally will be treated as capital gain or loss if the
shares were held as capital assets. See "Certain Federal Income Tax
Consequences."
NO TRADING MARKET
Prior to the Reorganization, there was no public trading market for Bank
Common Stock and it is not anticipated that an active trading market will
develop in Company Common Stock following consummation of the Reorganization.
Because neither Bank Common Stock nor Company Common Stock is traded on an
established public market, no information is presented concerning the price of
Bank Common Stock or Company Common Stock. See "Trading Market; Dividends - No
Trading Market."
-iii-
<PAGE>
SHAREHOLDER VOTE REQUIRED TO APPROVE THE REORGANIZATION
The affirmative vote of the holders of at least two-thirds of the
outstanding shares of Bank Common Stock is required in order to approve the
Reorganization. As of January 6, 1997, the directors and executive officers of
the Bank and their affiliates, as a group (9 persons), beneficially owned 13,199
shares of Bank Common Stock, which represented 39.99% of the aggregate number of
votes entitled to be cast at the Special Meeting. ALL SUCH PERSONS, OTHER THAN
MR. RICHARD DOTY WHO BENEFICIALLY OWNED 4,936 SHARES ON JANUARY __, 1997, HAVE
INDICATED THAT THEY INTEND TO VOTE ALL SHARES BENEFICIALLY OWNED BY THEM FOR THE
REORGANIZATION. See "The Special Meeting -- Quorum; Shareholder Vote Required
and Other Matters" and "Recent Developments."
RECENT DEVELOPMENTS
On or about October 17, 1996, Mr. Doty and certain of the Bank's other
shareholders collectively owning 6,557 shares (or 19.87%) of the Bank Common
Stock (the "Selling Shareholders") entered into an agreement with Union Planters
Corporation, a bank holding company ("Union Planters"), to sell their Bank
Common Stock to Union Planters and not to vote in favor of any actions that
would adversely affect Union Planters' efforts to acquire control of the Bank.
This agreement is expected to terminate on March 31, 1997 if Federal Reserve
Board approval is not received by such date.
On or about December 12, 1996, Union Planters submitted to the Board of
Directors a conditional offer to purchase all of the outstanding Bank Common
Stock for $875 per share.
On or about December 31, 1996, 140 shareholders beneficially owning
approximately 68.47% of the Bank Common Stock entered into an agreement pursuant
to which each shareholder agreed not to sell his or her Bank Common Stock and
not to vote to approve a merger of the Bank with another bank, without giving
the Bank a right of first refusal to acquire such shareholder's Bank Common
Stock for the same consideration as is offered by the third party. See "Recent
Developments."
RECOMMENDATION OF BOARD OF DIRECTORS
The Board of Directors believes that the proposed Reorganization is in the
best interests of the Bank and its shareholders. Accordingly, the Board of
Directors recommends that the shareholders vote FOR the Reorganization.
-iv-
<PAGE>
THE SPECIAL MEETING
This Proxy Statement is being furnished to the shareholders of the
Bank in connection with the solicitation of proxies by the Board of Directors of
the Bank for use at the Special Meeting, to be held on ______, February __, 1997
at 10:00 a.m., local time, at the offices of the Bank, 19 South Main Street,
Pontotoc, Mississippi, and at any adjournments thereof.
PURPOSE OF THE SPECIAL MEETING
The purpose of the Special Meeting is to consider and vote upon (i)
the Reorganization and (ii) such other business as may properly come before the
Special Meeting or any adjournments thereof.
SHARES OUTSTANDING AND ENTITLED TO VOTE; RECORD DATE
Only the holders of record of the outstanding shares of Bank Common
Stock at the close of business on January 6, 1997 (the "Record Date") will be
entitled to notice of, and to vote at, the Special Meeting. At January __,
1997, there were 33,000 shares of Bank Common Stock issued and outstanding.
Holders of record of Bank Common Stock at the close of business on the Record
Date will be entitled to one vote per share on any matter that may properly come
before the Special Meeting.
QUORUM; SHAREHOLDER VOTE REQUIRED AND OTHER MATTERS
A quorum, consisting of a majority of the aggregate voting power of
the outstanding Bank Common Stock, must be present in person or by proxy before
any action may be taken at the Special Meeting. The affirmative vote of the
holders of two-thirds of the outstanding shares of Bank Common Stock is required
to approve the Reorganization.
The Reorganization is considered a "non-discretionary item" whereby
brokerage firms may not vote in their discretion on behalf of their clients if
such clients have not furnished voting instructions. Broker non-votes will not
be treated as present for purposes of determining a quorum or for any other
purposes. Abstentions will be considered in determining the presence of a
quorum at the Special Meeting but will not be counted as a vote cast for the
Reorganization. Because the Reorganization must be approved by the affirmative
vote of the holders of at least two-thirds of the shares eligible to vote,
abstentions and broker non-votes will have the same effect as a vote against the
Reorganization.
As of January __, 1997, the directors and executive officers of the
Bank and their affiliates, as a group (9 persons), beneficially owned 13,199
shares of Bank Common Stock, which represented 39.99% of the aggregate number of
votes entitled to be cast at the Special Meeting. ALL SUCH PERSONS, OTHER THAN
MR. RICHARD DOTY WHO BENEFICIALLY OWNED 4,936 SHARES AS OF JANUARY __, 1997,
HAVE INDICATED THAT THEY INTEND TO VOTE ALL SHARES BENEFICIALLY OWNED BY THEM
FOR THE REORGANIZATION. See "Recent Developments."
-1-
<PAGE>
SOLICITATION, VOTING AND REVOCATION OF PROXIES
A proxy for use at the Special Meeting accompanies this Proxy
Statement and is solicited by, or on behalf of, the Board of Directors of the
Bank. Any shareholder who has submitted a proxy may revoke it at any time prior
to its exercise at the Special Meeting by (i) giving written notice of
revocation to the Secretary of the Board, (ii) properly submitting to the
Secretary of the Board, at any time prior to the exercise of the earlier proxy,
a duly-executed proxy bearing a later date, or (iii) attending the Special
Meeting and voting in person. All written notices of revocation and other
communications with respect to the revocation of proxies should be addressed to:
Secretary to the Board, First National Bank of Pontotoc, 19 South Main Street,
Pontotoc, Mississippi 38863. Attendance at the Special Meeting will not, in and
of itself, constitute revocation of a proxy.
Shares of Bank Common Stock represented by properly executed proxies,
if such proxies are received before the Special Meeting and not revoked, will be
voted in accordance with the instructions indicated on the proxies. If no
instructions are indicated, the proxies will be voted FOR approval of the
Reorganization and in the discretion of the proxy holder as to any other matter
that may properly come before the Special Meeting. If necessary, the proxy
holder may vote in favor of a proposal to adjourn the Special Meeting in order
to permit further solicitation of proxies if there are not sufficient votes to
approve the Reorganization at the Special Meeting.
The Bank will bear the cost of printing and mailing this Proxy
Statement and all other costs incurred in connection with the solicitation of
proxies from Bank shareholders on behalf of the Board of Directors. Proxies may
be solicited by mail, personal interview, or telephone by directors, officers or
employees of the Bank without additional compensation therefor. Arrangements
also will be made with brokerage houses, voting trustees, banks, associations
and other custodians, nominees and fiduciaries, who are record holders of Bank
Common Stock not beneficially owned by them, for forwarding such solicitation
materials to and obtaining proxies from the beneficial owners of such stock
entitled to vote at the Special Meeting and the Bank will reimburse such persons
for their reasonable expenses incurred in doing so.
THE PROPOSED REORGANIZATION
GENERAL
The Board of Directors of the Bank has approved and authorized the
Reorganization, with Mr. Doty being the only director to vote against the
Reorganization. See "Recent Developments". The Reorganization Plan sets forth
the terms and the mechanism by which the Company will become the holding company
of the Bank, if all conditions precedent to the Reorganization are satisfied.
See "The Proposed Reorganization - Conditions to Consummation of the Proposed
Reorganization." The discussion below is qualified in its entirety by reference
to the full text of the Reorganization Plan, which has been filed as Exhibit 2.1
to the Company's Registration Statement on Form S-4 filed with the Commission on
January 8, 1997, and is
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incorporated by reference herein. Copies of the Reorganization Plan will be
mailed to shareholders of the Bank upon request.
EFFECT OF THE PROPOSED REORGANIZATION
Upon consummation of the Reorganization, each outstanding share of
Bank Common Stock will be converted into and exchanged for ten shares of Company
Common Stock, and the shareholders of the Bank will become the shareholders of
the Company. The ten-to-one exchange rate will not affect any shareholders'
percentage ownership.
As a result of the Reorganization, the Bank will be a wholly-owned
subsidiary of the Company and will continue to engage in the same business and
activities in which it is presently engaged. The consolidated assets,
liabilities, stockholders' equity and income of the Company immediately
following consummation of the Reorganization will be the same as those of the
Bank immediately prior to the consummation of the Reorganization. The
Reorganization will not change the management of the Bank or its officers. Each
current director of the Bank has been invited to serve on the board of directors
of the Company. The first annual meeting of the Company's shareholders at which
directors are to be elected will be held in 1998.
REASONS FOR THE PROPOSED REORGANIZATION
The Board believes that the proposed Reorganization is in the best
interests of the Bank and its shareholders because the holding company structure
will better facilitate the Bank's ability to serve its customers' needs for
financial services and is a necessary first step in the implementation of the
Board's plan to maximize the value of the Bank to all of its shareholders. The
holding company structure will also provide greater flexibility than the Bank
without a holding company would otherwise possess. The Company will be operated
as a bank holding company within the meaning of the federal Bank Holding Company
Act of 1956 (the "Act"). Accordingly, the Bank, through the Company, will be
able to expand and to diversify its business into other permitted banking and
non-banking activities, either through newly-formed subsidiaries or through
acquisitions. The holding company structure also will enable the Company to
provide banking related services in addition to the traditional services that a
commercial bank may provide under current law. While management has no present
plans to engage actively in any other business activities, management will study
the feasibility of establishing and acquiring subsidiaries to engage in other
banking and non-banking business activities to the extent permitted by law. The
Company, as a bank holding company, will also be permitted to acquire other bank
holding companies or, subject to certain restrictions, other financial
institutions, although management, at present, has no such intentions.
CONDITIONS TO CONSUMMATION OF THE REORGANIZATION
Consummation of the Reorganization is subject to a number of
conditions, including the following: (i) the Reorganization has been approved by
holders of at least two-thirds of the outstanding shares of Bank Common Stock;
(ii) the Reorganization has been approved by the
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Comptroller; (iii) the formation of the Company has been approved by the Federal
Reserve Board; (iv) the Bank has received an opinion from legal counsel passing
upon the federal income tax consequences of the Reorganization to the Bank's
shareholders; and (v) it has been determined to the satisfaction of the Company
and the Bank that the Reorganization will be treated for accounting purposes
similar to a "pooling of interests."
Additionally, it is a condition to consummation of the Reorganization
that no action, suit or proceeding shall have been instituted or shall have been
threatened before any court or other governmental body or by any public
authority to restrain, enjoin or prohibit the Reorganization, or which might
restrict the operation of the business of the Bank or the ownership of Bank
Common Stock or the exercise of any rights with respect thereto by the Company.
Applications have been filed with the Comptroller and the Federal
Reserve Board seeking the requisite approvals, and the Bank expects to receive
such approvals by February __, 1997. There can be no assurances, however, that
the required approval of the Comptroller or the Federal Reserve Board will be
obtained or will be obtained without the imposition by the Comptroller or the
Federal Reserve Board of material conditions, which must be satisfied prior to
consummation of the Reorganization. The Reorganization, if approved by the
Bank's shareholders, will be consummated as soon as practical after all
conditions have been satisfied.
TERMINATION AND ABANDONMENT OF THE REORGANIZATION PLAN
The Reorganization Plan may be terminated and the Reorganization
abandoned at any time, either before or after a vote of the Bank's shareholders,
if (i) any of the conditions to its consummation have not been met, or (ii) the
Board of Directors of the Bank determines for any reason that the Reorganization
is inadvisable.
STOCK CERTIFICATES
At the effective date of the Reorganization, each shareholder of the
Bank will cease to have any rights as a shareholder of the Bank, and his or her
sole rights will pertain to the shares of Company Common Stock into which his or
her shares of Bank Common Stock have been converted pursuant to the
Reorganization, except for any such shareholder who exercises statutory
dissenters' rights. See "Comparative Rights of Shareholders of the Bank and the
Company" and "Rights of Dissenting Shareholders".
Upon consummation of the Reorganization, instructions on how to
exchange certificates representing shares of Bank Common Stock for certificates
representing shares of Company Common Stock will be sent to each person who was
a shareholder of record of the Bank on the effective date of the Reorganization.
On the effective date of the Reorganization and until surrendered,
certificates representing Bank Common Stock will be deemed for all purposes to
evidence ownership of and to represent the number of shares of Company Common
Stock into which such shares of Bank Common
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Stock have been converted. However, no dividends or other distribution declared
on or after the effective date of the Reorganization with respect to the Company
Common Stock or the Bank Common Stock will be distributed to the holder of any
unsurrendered stock certificate until such certificate is surrendered.
Shareholders of the Bank who cannot locate their certificates are
urged to promptly contact Mr. Buddy R. Montgomery at (601) 489-1631. A new
certificate will be issued to replace the lost certificate(s) only upon
execution by the shareholder of an affidavit certifying that his or her
certificate(s) cannot be located and an agreement to indemnify the Bank against
any claim that may be made against it by the holder of the certificate(s)
alleged to have been lost or destroyed. The Bank may also require the
shareholder to post a bond in such sum as is sufficient to support the
shareholder's agreement to indemnify the Bank.
ACCOUNTING TREATMENT
The Company and the Bank intend that the Reorganization will be
treated similar to a pooling of interests for financial accounting purposes.
DESCRIPTION OF CAPITAL STOCK
STOCK OF THE BANK
GENERAL. Shareholders of the Bank have certain rights under the
Bank's Articles of Association and Bylaws and under federal law. See
"Comparative Rights of Shareholders of the Bank and the Company." The Bank has
33,000 shares of Bank Common Stock issued and outstanding, and no more share are
authorized.
CUMULATIVE VOTING RIGHTS. Shareholders of the Bank have the right to
cumulate their votes in any election of directors. Cumulative voting allows
shareholders to multiply the number of votes they are entitled to cast by the
number of directors for whom they are entitled to vote and cast the entire
product for a single candidate, or to distribute the product, in any manner,
among two or more candidates.
PREEMPTIVE RIGHTS. Shareholders of the Bank have preemptive rights to
purchase newly issued shares of Bank Common Stock so as to maintain their
proportionate voting power.
STOCK OF THE COMPANY
GENERAL. Shareholders of the Company will have certain rights under
the Company's Articles of Incorporation and Bylaws, and under the MBCA. The
Company's Articles authorize the issuance of 3,000,000 shares of Company Common
Stock and 1,000,000 shares of preferred stock, no par value (the "Company
Preferred Stock"). Currently, one share of Company Common Stock is issued and
outstanding to Mr. Buddy R. Montgomery, in his capacity as
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President of the Bank, for the purpose of organizing the Company and taking
certain actions on behalf of the Company relating to the Reorganization.
Immediately prior to the effective date of the Reorganization, if it is
approved, the Company will repurchase, at the original selling price, and cancel
such share.
Assuming that no shareholder of the Bank exercises his or her
dissenter's rights, there will be 330,000 shares of Company Common Stock issued
and outstanding upon consummation of the Reorganization. See "Rights of
Dissenting Shareholders."
COMPANY COMMON STOCK. Each share of Company Common Stock has the same
relative rights, and is identical in all respects with, each other share of
Company Common Stock. Until such time as Company Preferred Stock is issued, if
ever, the holders of shares of Company Common Stock will possess all rights,
including exclusive voting rights, pertaining to the capital stock of the
Company. Each share of Company Common Stock will entitle the holder thereof to
one vote on all matters upon which shareholders have the right to vote.
Shareholders of the Company will not be entitled to cumulate their votes for the
election of directors. See "Comparative Rights of Shareholders of the Bank and
the Company." Subject to all of the rights of holders of Company Preferred
Stock, the holders of Company Common Stock will be entitled to dividends when,
as, and if declared by the Company's Board of Directors out of funds legally
available therefor. Upon consummation of the Reorganization, the only source of
funds from which the Company could pay dividends would be from amounts received
as dividends from the Bank. See "Trading Market; Dividends."
Holders of Company Common Stock will not be entitled to preemptive
rights. Upon receipt by the Company of the full purchase price therefor, each
share of Company Common Stock will be fully paid and non-assessable.
In the event of any liquidation or dissolution of the Company, the
holders of Company Common Stock will be entitled to receive, after payment or
provision for payment of all debts and liabilities of the Company, all assets of
the Company available for distribution, in cash or in kind. If Company
Preferred Stock should ever be issued, the holders thereof may have a priority
over the holders of Company Common Stock in the event of liquidation or
dissolution.
COMPANY PREFERRED STOCK. The Board of Directors of the Company is
authorized to issue Company Preferred Stock in one or more series, and to
determine, in whole or in part, the preferences, limitations and relative rights
of any such shares. Company Preferred Stock may rank prior to Company Common
Stock as to dividend rights, liquidation preferences, or both, may have full or
limited voting rights, and may be convertible into Company Common Stock. The
holders of any class or series of Company Preferred Stock also may have the
right to vote separately as a class or series under the terms of such class or
series or as may be otherwise provided by Mississippi law. No shares of Company
Preferred Stock will be issued in connection with the Reorganization and the
Company does not have any current plans to issue any such shares.
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COMPARATIVE RIGHTS OF
SHAREHOLDERS OF THE BANK AND THE COMPANY
GENERAL
As a result of the Reorganization, the Bank's shareholders will become
shareholders of the Company. As discussed below, there are substantial
differenes between the Bank's Articles of Association and Bylaws and the
Company's Articles of Incorporation and Bylaws, which have an effect on
shareholder rights. In addition, there are certain differences in shareholder
rights arising from distinctions between laws governing national banking
associations and the MBCA.
Before voting on the Reorganization, Bank shareholders are urged to
read carefully the following sections of this Proxy Statement describing more
fully the specific differences between their rights as a Bank and a Company
shareholder. The discussion herein is not intended to be a complete statement
of the differences affecting the rights of shareholders, but rather summarizes
the more significant differences and certain important similarities. The
discussion herein is qualified in its entirety by reference to the Articles of
Incorporation and Bylaws of the Company, which are attached hereto as Appendices
A and B respectively, and to the applicable provisions of the MBCA.
SHAREHOLDER MEETINGS
The Company's Bylaws provide that upon the written request of holders
of not less than a majority of all issued and outstanding shares of stock
entitled to vote on any issue proposed to be considered at a special meeting,
submitted to the Company's secretary no less than forty-five days prior to the
date requested for such special meeting, the secretary shall call a special
meeting of shareholders.
The Bank's Articles provide that any three shareholders of the Bank
may call a shareholder meeting for any purpose by publishing notice of such
meeting for ten days in the Pontotoc Progress or by mailing notice of such
meeting to each shareholder ten days before the date fixed for such meeting.
SHAREHOLDER PROPOSALS
The Company's Articles provide that any shareholder may submit a
proposal for action at any meeting of shareholders, including the nomination of
directors, if such shareholder (the "Proponent") satisfies certain conditions,
including the following:
(a) The Proponent must be the record or beneficial owner of shares having
voting power on the proposal and have held such shares for at least
one year; and
(b) The proposal must be received by the Company not less than 120 days in
advance of the date that corresponds with the date of the Company's
proxy statement sent
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to shareholders in connection with the previous year's annual meeting
of shareholders, or not less than forty-five days in advance of the
date on which the meeting is scheduled to be held or within ten days
after notice of the meeting is first given to shareholders, whichever
is later.
The Board of Directors of the Company may exclude from consideration at a
shareholders meeting any proposal permitted or required to be so excluded by
applicable law, rule or regulation.
Neither the Bank's Articles nor its Bylaws contain provisions regarding
shareholder proposals.
APPROVAL OF CERTAIN BUSINESS COMBINATIONS
The Company's Articles provide that any merger or consolidation with a
Tender Offeror (as described in the Company's Articles) or the sale, lease or
exchange of substantially all of the assets of the Company or the Tender Offeror
to the other, must be approved by an affirmative vote of the holders of Company
Common Stock representing not less than 80% of the shares entitled to vote
thereon.
Neither the Bank's Articles nor its Bylaws provide for a supermajority vote
of shareholders to approve a merger. Pursuant to the National Bank Act,
however, a merger involving the Bank must be approved by at least two-thirds of
the outstanding shares of Bank Common Stock.
DIRECTORS
GENERAL. The Company's Bylaws provide for a Board of Directors of between
six and twelve directors, with the exact number of directors to be determined
from time to time by resolution of the Company's Board of Directors. It is
expected that, upon consummation of the Reorganization, the Board of Directors
of the Company will consist of seven members, with each current director of the
Bank serving until the first annual meeting of the shareholders, or until his or
her successor is elected and qualified. The first annual meeting of
shareholders of the Company at which directors are to be elected will be held in
1998. Unless and until the Board of Directors consists of nine or more members
as described below, directors who are elected at the 1998 meeting shall serve a
one-year term or until his or her successor is elected and qualified.
If the number of directors fixed by the Board of Directors should ever be
nine or more, the Company's Articles provide that the Company will have a
classified board of directors consisting of three classes of directors, each
class to be as nearly equal in number as possible, the term of office of
directors of the first class to expire at the first annual meeting of the
shareholders after their election, that of the second class to expire at the
second annual meeting after their election, and that of the third class to
expire at the third annual meeting after their
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election. At each annual meeting after such classification, the number of
directors equal to the number of the class whose term expires at the time of
such meeting shall be elected to hold office and the directors so elected shall
serve a term of three years to succeed those whose terms expire.
The Bank's Articles provide for a Board of Directors of between five and
fifteen members, who shall serve a term of one year, until the next annual
meeting at which directors are elected or until their successors are chosen and
qualified. Currently, the Bank's Board of Directors consists of seven members.
Neither the Bank's Articles nor its Bylaws provide for a classified Board of
Directors.
REMOVAL OF DIRECTORS. The Company's Articles provide that no member of the
Board of Directors may be removed during his or her term without cause. The
Company's Articles also provide that shareholders may remove a director with
cause, but only at a meeting called for that purpose and upon the affirmative
vote of the holders of at least 80% of the voting power of all shares of stock
entitled to vote generally in the election of directors; and in the event that
less than the entire Board is to be removed, no one director may be removed if
the votes cast against his or her removal would be sufficient to elect him or
her if such votes were cumulatively voted at an election of the class of
directors of which he or she is a member.
Neither the Articles nor the Bylaws of the Bank contain provisions
regarding the removal of directors.
VACANCIES IN THE BOARD OF DIRECTORS. The Company's Articles provide that
any vacancy in the Board of Directors, however it is created, shall be filled
only at the next annual meeting of the shareholders.
The Articles and the Bylaws of the Bank do not contain provisions on the
filling of vacancies in the Board of Directors. The National Bank Act provides,
however, that any vacancy in a national bank's Board of Directors shall be
filled by appointment by the remaining directors, and any director so appointed
shall hold his or her place until the next election.
AMENDMENT OF ARTICLES OF INCORPORATION AND BYLAWS
The Company's Articles provide that an amendment to the Articles relating
to the composition of the Board of Directors and removal of directors therefrom
must be approved by the affirmative vote of at least 80% of the shareholders
entitled to vote in the election of directors (the same percentage required for
the removal of a director). The affirmative vote of at least 80% of the
shareholders is also required to amend the provisions of the Company's Articles
regarding the following: (i) the requirement that a supermajority of the
shareholders approve of certain business combinations; (ii) indemnification of
officers and directors; (iii) shareholder proposals; (iv) Board considerations
when evaluating an attempted takeover; and (v) the election to be governed by
the Mississippi Control Share Act. Otherwise, the Company's Articles may be
amended if the number of shares cast for the amendment at a meeting when a
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quorum is present exceeds the number of votes cast against said proposed
amendment; unless the proposed amendment would result in dissenters' rights, in
which case the amendment must be approved by the affirmative vote of the
majority of the outstanding shares entitled to vote on the amendment.
The Bank's Articles may be amended by the holders of a majority of the
stock of the Bank, unless a greater percentage is required by law, in which case
the amendment must be adopted by such greater percentage.
The Company's Bylaws may be amended or repealed by majority vote of the
Company's Board at a meeting of the Board at which a quorum is present. The
Board may not, however, amend or repeal a particular bylaw if the shareholders,
in amending or repealing such bylaw, expressly provide that the Board may not
amend or repeal that bylaw.
The Bank's Bylaws may be amended by the vote of two-thirds of the entire
Board of Directors.
ASSESSABILITY OF STOCK
Under the National Bank Act, a national bank may assess the holders of its
common stock in limited circumstances in which the bank has been found by
regulatory authorities to have a capital deficiency. The bank may seize the
stock of shareholders who do not contribute to an assessment, and the stock can
be sold to raise capital. Common stock of corporations organized under the
MBCA, such as the Company, is not assessable.
CERTAIN CORPORATE PROTECTIVE DEVICES
BOARD CONSIDERATIONS IN EVALUATING AN ATTEMPTED TAKEOVER. The Articles of
Incorporation of the Company allow the Board of Directors of the Company, in
connection with the exercise of its judgment in determining what is in the best
interests of the Company and its shareholders, when evaluating any proposed
Major Business Transaction (as defined in the Articles of Incorporation), in
addition to considering the adequacy of the amount of consideration to be paid
in connection with such transaction, to consider, among other things, the
following:
(i) the social and economic effects of the proposed transaction on the
Company, its subsidiaries, depositors, loan and other customers,
creditors and employees of the Company and its subsidiaries and other
elements of the community in which the Company and its subsidiaries
operate or are located;
(ii) the business, financial condition and earnings prospects of the
acquiring person and the possible effect of such conditions upon the
Company, its subsidiaries and the other elements of the community in
which the Company and its subsidiaries operate or are located; and
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(iii) the competence, experience and integrity of the acquiring person and
its management.
Neither the Bank's Articles nor its Bylaws contain provisions similar to
those described above.
MISSISSIPPI CONTROL SHARE ACT. The Company's Articles of Incorporation
state that the Company shall be governed by the Mississippi Control Share Act,
which does not apply to banks or bank holding companies unless they elect to be
governed by such statute. The effect of the statute is to deprive a person
acquiring "control shares" (as defined in the Mississippi Control Share Act) in
an issuing public corporation from voting such shares unless approved by the
holders of a majority of the shares that are not "interested shares" (as defined
in the Mississippi Control Share Act).
The Bank has not elected to be governed by the Mississippi Control Share
Act.
EFFECTS OF SHAREHOLDER RIGHTS PROVISIONS
When the Bank's Board determined to propose the holding company structure
to the shareholders, it determined that the newly-formed holding corporation's
articles of incorporation should contain certain measures that would protect the
interests of all shareholders and discourage abusive takeover practices as
described herein (the "Shareholder Rights Provisions").
The Shareholder Rights Provisions found in the Company's Articles have both
advantages and disadvantages to the shareholders. The Shareholder Rights
Provisions cannot, and are not intended to, prevent a purchase of all or a
majority of the equity securities of the Company, nor are they intended to deter
bids or other efforts to acquire such securities. Rather, the Board believes
that the Shareholder Rights Provisions are intended to discourage disruptive
tactics and takeovers at unfair prices or on terms that do not provide all
---
shareholders with the opportunity to sell their stock at a fair price. The
Shareholder Rights Provisions are intended to encourage third-parties who may
seek to acquire control of the Company, to initiate such an acquisition through
negotiations directly with the Board of Directors. The Board of Directors
believes that it will be in the best position to protect the interests of all of
the shareholders and negotiate a fair price.
Although these Shareholder Rights Provisions are intended to encourage
persons seeking to acquire control of the Company to initiate such an
acquisition through arm's length negotiations with the Board of Directors, the
effect of these provisions may be to discourage a third-party from making a
tender offer, or otherwise attempting to obtain a substantial position in the
equity securities of the Company, even though some or a majority of the
Company's shareholders might believe such actions to be beneficial.
Moreover, to the extent that any potential third-party acquirors are
deterred by the Shareholder Rights Provisions, such provisions may have the
effect of preserving the incumbent
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management in office. The proposed Shareholder Rights Provisions may also serve
to benefit incumbent management by making it more difficult to remove
management, even when the only reason for the proposed change may be the
unsatisfactory performance of the present directors.
Takeovers or changes in the board of directors of a company that are
proposed and effected without prior consultation and negotiations with the
company are not necessarily detrimental to such company and its shareholders.
However, the Board of Directors believes that the benefits of seeking to protect
the ability of the Company to negotiate effectively through directors who have
previously been elected by the shareholders and who are familiar with the
Company outweigh any disadvantage of discouraging such unsolicited attempts to
acquire the Company.
The Board of Directors does not currently contemplate any other action
designed to affect the ability of third parties to take over or change control
of the Company.
RIGHTS OF DISSENTING SHAREHOLDERS
THE FOLLOWING IS A SUMMARY OF THE PROVISIONS OF THE FEDERAL BANKING LAW
RELATING TO DISSENTERS' RIGHTS AND IS NECESSARILY INCOMPLETE AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO THE EXCERPTS FROM THE FEDERAL BANKING LAW ATTACHED
HERETO AS APPENDIX C.
The federal banking laws allow a shareholder of the Bank who objects to the
Reorganization to dissent from the Reorganization and to receive cash for his or
her shares of Bank Common Stock as of the effective date of the Reorganization.
To exercise the right of dissent, a shareholder must either vote against
the Reorganization at the Special Meeting or give notice to the Bank in writing
of his or her dissent at or before the Special Meeting. In addition, within
thirty days after the consummation of the Reorganization, the shareholder must
file with the Bank a written demand for the payment for his or her shares at
their value as of the date the Reorganization is approved by the Comptroller,
along with the certificate(s) representing his or her shares of Bank Common
Stock. Notices of dissent and written demands for payment should be addressed
to Mr. Buddy R. Montgomery, 19 South Main Street, Pontotoc, Mississippi 38863.
The value of the shares of any dissenting shareholder shall be ascertained,
as of the effective date of the Reorganization, by an appraisal made by a
committee of three persons, composed of (1) one selected by the vote of the
holders of the majority of Bank Common Stock who perfect dissenters' rights; (2)
one selected by the directors of the Bank; and (3) one selected by the two
persons so selected. The valuation agreed upon by any two of the three
appraisers shall govern. If the value so fixed shall not be satisfactory to any
dissenting shareholder who has requested payment, that shareholder may, within
five days after being notified of the appraised value of his or her shares,
appeal to the Comptroller, who shall cause a reappraisal to be made which shall
be final and binding.
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If, within ninety days from the date of the consummation of the
Reorganization, for any reason one or more of the appraisers is not selected as
provided above, or the appraisers fail to determine the value of the shares of
Bank Common Stock, the Comptroller shall upon written request of any interested
party cause an appraisal to be made which shall be final and binding on all
parties. The expenses of the Comptroller in making the reappraisal or the
appraisal, as the case may be, must be paid by the Bank. The Bank will be
required promptly to pay the ascertained value of the shares to the dissenting
shareholders.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
In view of the complexity of the laws and interpretations thereof,
shareholders of the Bank should consult with and rely on the advice of their tax
advisors on matters relating to the conversion of Bank Common Stock for Company
Common Stock and should not consider this summary as a substitute for careful
individual tax planning.
The income tax treatment of the conversion of common stock pursuant to a
reorganization involves technical and not completely settled principles of
taxation. Consequently, it is impractical to present herein a detailed
explanation of the income tax treatment of shareholders as a result of the
Reorganization.
The following discussion is intended to be a summary of certain relevant
principles of federal income taxation and a statement of the material tax issues
associated with the Reorganization which should be carefully considered by
shareholders prior to voting on the Reorganization. The following discussion is
based upon counsel's analysis and interpretation of the Code, and Treasury
Regulations promulgated thereunder, Internal Revenue Service (the "Service")
procedures and rulings and court decisions published as of the date of this
Proxy Statement. No assurance can be given that such authorities will not be
modified by legislative action, administrative action or judicial review. Any
such changes may be retroactive so as to apply to transactions prior to the date
of such changes and could modify such discussion and adversely affect the tax
aspects described herein.
The Reorganization has been structured to qualify as a tax-free
reorganization under Section 368(a) of the Code. The consummation of the
Reorganization is subject to, among other matters, receipt of an opinion from
Phelps Dunbar, L.L.P., special counsel to the Company and the Bank, to the
effect that the Reorganization will be treated as a tax-free transaction, with
the following federal income tax consequences:
(i) Neither the Bank nor the Company will recognize any gain or loss as a
result of the Reorganization;
(ii) No gain or loss will be recognized to the shareholders of the Bank
upon conversion of their shares; the tax basis of shares of Company Common
Stock received in the Reorganization will be the same as the tax basis of
the shares of Bank Common stock
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previously owned; and if the shares of Bank Common Stock were held as
capital assets, the holding period of the shares of Company Common Stock
received will include the holding period of the shares of such Bank Common
Stock exchanged therefor; and
(iii) A shareholder of the Bank who exercises his or her rights as a
dissenter and thereby receives cash for his or her shares will recognize
income, gain or loss measured by the difference between the amount of cash
received and the tax basis of his or her shares of Bank Common Stock,
subject to the provisions of Code Section 302 and that such distributions
will generally be treated as capital gain or loss if the shares were held
as capital assets. The opinion notes, however, that a dissenting
shareholder must take into account the effect that Sections 302 and 318 of
the Code may have in determining consequences of the Reorganization which
could cause the distributions to be treated as ordinary income or,
possibly, as a dividend to the dissenter.
The shareholders of the Bank should also be aware that state and local
income taxes may affect their tax situation. While many state and local income
tax statutes correspond with the federal income tax laws, no attempt is made
herein to describe any state or local income tax consequences resulting from the
Reorganization. Shareholders are urged to consult their personal tax advisors
with respect to any effects of state and local tax laws.
In the case of a corporate shareholder of the Bank, the tax consequences
described herein are generally applicable, although no attempt is made herein to
discuss the tax ramifications with respect to a corporate shareholder. The
foregoing discussion assumes that each shareholder of the Bank is a natural
person, except as otherwise noted. All corporations, trusts, or other entities,
are urged to consult their own tax advisors.
TRADING MARKET; DIVIDENDS
NO TRADING MARKET
Prior to the Reorganization, there was no public trading market for Bank
Common Stock and it is not anticipated that an active trading market will
develop in Company Common Stock following consummation of the Reorganization.
Because neither Bank Common Stock nor Company Common Stock is traded on an
established public market, no information is presented concerning the price of
either Bank Common Stock or Company Common Stock. At December 31, 1996, there
were approximately 200 holders of Bank Common Stock.
DIVIDENDS
Pursuant to Mississippi law, the Company's Board of Directors may authorize
the Company to pay cash dividends to its shareholders. The only limitation on
such a dividend is that no distribution may be made if, after giving effect to
the distribution (a) the Company would not be able to pay its debts as they come
due in the usual course of business, or (b) the Company's total assets would be
less than the sum of its total liabilities plus the amount that
-14-
<PAGE>
would be needed, if the Company were to be dissolved at the time of the
distribution, to satisfy the preferential rights upon dissolution of any
shareholders whose preferential rights are superior to those receiving the
distribution.
The principal source of the Company's cash revenues will be dividends from
the Bank. There are certain limitations under federal law on the payment of
dividends by national banks. Under federal law, the directors of a national
bank, after making proper deduction for all expenses and other deductions
required by the Comptroller, may credit net profits to the Bank's undivided
profits account, and may declare a dividend from that account of so much of the
net profits as they judge expedient.
The prior approval of the Comptroller is required, however, if the total of
all dividends declared by a national bank in any calendar year will exceed the
sum of such bank's net profits for that year and its retained net profits for
the preceding two calendar years, less any required transfers to surplus.
Federal banking law also prohibits national banks from paying dividends which
would be greater than the bank's undivided profits after deducting statutory bad
debts in excess of the bank's allowance for loan losses. Finally, FDICIA (as
hereinafter defined) generally prohibits a depository institution from making
any capital distribution to its holding company if the depository institution
would thereafter be "undercapitalized."
In addition, both the Company and the Bank are subject to various
regulatory policies and requirements relating to the payment of dividends,
including requirements to maintain adequate capital above regulatory minimums.
The appropriate federal regulatory authority is authorized to determine under
certain circumstances relating to the financial condition of a national bank or
bank holding company that the payment of dividends would be an unsafe or unsound
practice and to prohibit payment thereof. The Comptroller has indicated that
paying dividends that deplete a national bank's capital base to an inadequate
level would be an unsound and unsafe banking practice. The Comptroller and the
Federal Reserve Board have each indicated that banking organizations should
generally pay dividends only out of current operating earnings. The Bank's
ability to pay dividends is also limited by prudence, statutory and regulatory
guidelines, and a variety of other factors.
The Bank has traditionally declared dividends in December and paid
dividends on such declarations in January of the following year. Dividends paid
in January of 1995 and 1996 were $15.00 and $16.00 per share, respectively. On
January 2, 1997, the Board of Directors paid an $18.00 per share, regular, and
$12.00 per share, special, dividend.
The Company was formed in December 1996 and has never paid any dividends.
If the Reorganization is approved, the declaration of future dividends will be
at the discretion of the Board of Directors of the Company and generally will be
dependent upon the earnings of the Bank, the assessment of capital requirements,
considerations of safety and soundness, applicable laws and regulations and
other factors.
-15-
<PAGE>
BUSINESS OF THE BANK
GENERAL
The Bank is a national banking association headquartered in Pontotoc,
Mississippi. The primary business of the Bank is attracting deposits from the
public and using such deposits and other sources of funds to make real estate,
business, consumer and other loans. The services provided by the Bank include
the offering of saving and checking accounts, certificates of deposit and other
time deposits and safe deposit facilities. As of September 30, 1996, the Bank
had total assets of approximately $151 million, total deposits of approximately
$123 million, and shareholders' equity of approximately $27 million. The Bank's
business is conducted at its principal executive and main banking office, which
is located at 19 South Main Street, Pontotoc, Mississippi 38863 and its
telephone number is (601) 489-1631. The Bank also operates one branch office
located at 158 Highway 15 North, Pontotoc, Mississippi 38863. The Bank has also
obtained approval for an additional branch office also located on Highway 15
North in Pontotoc. The Bank is currently constructing and intends for this
branch to be operational by the summer of 1997.
COMPETITION
The Bank experiences competition in attracting deposits and in making
loans in its primary service area. Bank management believes that the primary
factors in competing for deposits are interest rates, the range of financial
services offered and convenience of office locations and hours of operation.
Direct competition for such deposits comes from other commercial banks, savings
institutions, credit unions, brokerage firms and money market funds. Bank
management believes that the primary factors in competing for loans are interest
rates, loan origination fees and the range of lending services offered.
Competition for loans comes from other commercial banks, savings institutions,
credit unions and mortgage banking firms. Such entities may have competitive
advantages as a result of greater resources and higher lending limits (by virtue
of their greater capitalization). The Bank, however, seeks to pay interest on
its accounts and certificates competitive with other financial institutions in
its primary service area.
EMPLOYEES
At December 15, 1996, the Bank had 53 full-time and 4 part-time
employees. The Bank considers its relationship with its employees to be good.
LEGAL PROCEEDINGS
The Bank is not a party to any pending legal proceedings other than
routine litigation that is incidental to its business.
-16-
<PAGE>
BUSINESS OF THE COMPANY
The Company is a Mississippi corporation that was organized in
December 1996 for the purpose of becoming the parent company of the Bank. Upon
consummation of the Reorganization, the Company's primary asset will be 100% of
the Bank Common Stock. The Company was organized at the direction of the Bank's
Board of Directors solely for the purpose of effecting the proposed
Reorganization. Accordingly, the Company has not engaged in any active business
operations to this date and has no business or financial history. The Company
is not presently subject to the informational requirements of the Securities
Exchange Act of 1934, as amended. See "Available Information; Reports to
Security Holders."
The Company's principal executive office is located at the Bank's main
banking office at 19 South Main Street, Pontotoc, Mississippi 38863 and its
telephone number is (601) 489-1631.
-17-
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS FOR THE TWO YEARS ENDED DECEMBER 31, 1995
The following discussion provides certain information concerning the
financial condition and results of operations of the Bank for the two years
ended December 31, 1995 and 1994. This discussion should be read in conjunction
with the compiled financial statements and accompanying notes presented
elsewhere in this Proxy Statement.
OVERVIEW
The Bank reported net income for 1995 of $2,440,000, or $73.94 per share,
compared to $2,191,000, or $66.39 per share, in 1994. This represented an 11.4%
increase in 1995 compared to 1994. The increase in earnings from 1994 to 1995
was due to a 24% increase in deposit service fees, particularly NSF charges, and
a 4% increase in net increase income, which itself was caused by growth in
assets, particularly loans. Both of these factors indicate an improved local
economy and increased demand for financial services. Return on average assets
was 1.7% and return on average equity was 10.01% for 1995, compared to the prior
year's returns of 1.66% and 9.58% respectively.
Average assets increased 10.81% in 1995 from the 1994 level. At year end
1995, total assets were $147,106,000. Total stockholders' equity of the Bank was
$25,123,000 at December 31, 1995, compared to $21,366,000 at December 31, 1994.
RESULTS OF OPERATIONS
Net Interest Income. The Bank's primary source of revenue is net interest
income. Net interest income is the excess of interest income and fees on earning
assets over interest expense on interest-bearing liabilities. The level of net
interest income is determined primarily by the volume of interest earning
assets, and the spread between the yields on earning assets and the costs of
their funding sources. Net interest income increased from $5,885,000 in 1994 to
$6,101,000 in 1995.
Average earning assets increased from $123,954,000 in 1994 to $132,714,000
in 1995. Interest income increased from $9,213,000 in 1994 to $10,650,000 in
1995, due primarily to an increase in loans. This growth in higher yielding
assets was funded almost entirely by an increase in time deposits. The average
cost of the Bank's time deposits increased in 1995 to 5.32% from 3.95% in 1994,
because of both volume and rate increases. The end result was a decrease in the
Bank's net interest margin, defined as the ratio of net income to average
earning assets, from 4.65% in 1994 to 4.60% in 1995. The yield on tax exempt
securities is not on a tax equivalent basis for these figures.
The Bank's net interest spread, the difference between the yield on earning
assets and the rate paid on interest-bearing liabilities, was 3.54% for 1995, a
.37 basis point decrease from the
-18-
<PAGE>
1994 level of 3.91%. The spread decreased as a result of an increase in the
rates paid on interest-bearing liabilities, as well as an increase in the volume
of time deposits relative to total interest-bearing deposits.
Interest Rate/Volume Analysis. The following table sets forth for the
periods indicated a summary of the changes in interest earned and interest paid
resulting from changes in volume and changes in rates:
<TABLE>
<CAPTION>
1995/1994
-----------------------------------
CHANGE DUE TO
-----------------------------------
RATE VOLUME CHANGE
--------- ----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Interest income:
Loans $ 464 $ 754 $ 1,218
Investment securities - taxable (220) 373 153
Investment securities - nontaxable 4 (27) (23)
Federal funds sold and
resale agreements 39 51 90
-------- -------- --------
Total interest income 287 1,151 1,438
-------- -------- --------
Interest expense:
Deposits other than time (32) (65) (97)
Time deposits 771 550 1,321
Other interest-bearing liabilities (2) (1) (3)
-------- -------- --------
Total interest expense 737 484 1,221
-------- -------- --------
Net interest income $ (450) $ 667 $ 217
======== ======== ========
</TABLE>
NOTE: The changes in interest due to both volume and rate have been allocated
proportionally between rate and volume.
-19-
<PAGE>
AVERAGE BALANCES, YIELDS AND RATES PAID
The table below summarizes average assets, liabilities and stockholders' equity,
interest earned and paid and average yields and rates for the two years ended
December 31, 1995:
<TABLE>
<CAPTION>
1995 1994
---------------------------------- -------------------------------
AVERAGE INCOME/ YIELDS/ AVERAGE INCOME/ YIELDS/
BALANCES EXPENSE RATES BALANCES EXPENSE RATES
-------- ------- ------ -------- ------- ------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Loans(1) $ 76,610 $ 7,289 9.51% $ 68,177 $6,071 8.90%
Investment securities-taxable 34,316 2,187 6.37% 34,126 2,034 5.96%
Investment securities-nontaxable(2) 18,472 995 5.39% 18,996 1,018 6.31%
Federal funds sold 3,316 179 5.40% 2,655 90 3.28%
Total earning assets 132,714 10,650 8.02% 123,954 9,213 7.43%
Other assets 8,509 7,925
Total assets $141,223 $131,879
LIABILITIES AND STOCKHOLDERS' EQUITY
Interest-bearing deposits:
Deposits other than time $ 34,307 975 2.84% $ 37,321 1,072 2.87%
Time deposits 66,977 3,563 5.32% 56,797 2,242 3.95%
Total interest-bearing deposits 101,284 4,538 4.48% 94,118 3,314 3.52%
Other interest-bearing liabilities 192 11 5.73% 248 14 5.65%
Total interest bearing liabilities 101,476 4,549 4.48% 94,366 3,328 3.53%
Other interest bearing liabilities 15,205 15,011
Other liabilities 840 479
Minority interest 0 0
Stockholders' equity 23,702 22,022
Total liabilities and stockholders' equity 141,223 131,878
Net interest spread 3.54% 3.91%
Net interest income/margin $ 6,101 4.60% $5,885 4.75%
</TABLE>
- ----------------------
(1) The yield on tax exempt securities is not on a tax equivalent basis for this
schedule.
(2) Nonaccrual loans are included in average balances and interest on such loans
is recognized on a cash basis.
-20-
<PAGE>
Interest Rate Sensitivity. The interest rate sensitivity gap is the
difference between the amount of interest-bearing assets and interest-bearing
liabilities maturing in any given time period. A primary objective of
asset/liability management is to minimize the effect of changing interest rates
on net interest income. Management reviews interest rate exposure on a monthly
basis to analyze the impact of changes in market interest rates on net income.
At December 31, 1995, the Bank's one year repricing gap, defined as repricing
assets minus repricing liabilities as a percentage of total assets, was -2.98%,
i.e. more of the Bank's liabilities than assets reprice within a one-year time
frame. In periods of increasing rates, the Bank should experience a negative
effect on net interest income because its interest income on earnings-assets
will increase less quickly than its cost of funds. Conversely, in periods of
decreasing interest rates, based on its current interest sensitivity gap, the
Bank should experience increased net interest income, since the interest on its
earning-assets will decline less quickly than its cost of funds. However, the
degree of interest rate sensitivity is not equal for all types of assets and
liabilities. The Bank's experience has indicated that the repricing of
interest-bearing demand, savings and money market accounts does not move with
the same magnitude as general market rates. These deposit categories, along
with non-interest bearing deposits, have historically been stable sources of
funds for the Bank, which indicates a much longer implicit maturity than their
contractual maturities. Therefore, in the opinion of management, it is unlikely
that an increase or decrease in market interest rates would result in an
immediate repricing of all assets and liabilities, thereby reducing the effect
on interest income of an increase or a decrease in interest rates.
Provision for Possible Loan Losses. The provision for possible loan losses
charged to operating expense is a result of a continuing review of the loan
portfolio, taking into consideration the impact of economic conditions on the
borrower's ability to repay, past collection experience, the risk
characteristics of the loan portfolio and other factors deemed appropriate by
management. Management calculates the appropriate level of reserve for loan loss
according to OCC guidelines on a quarterly basis and makes monthly allocations
to keep the provision for loan loss at the appropriate level. The total amount
allocated for loan loss provision for 1994 was $600,000. The provision made in
1995 was $714,000.
The Bank identified net charge-offs of $937,000 in 1995 and $374,000 in
1994, to be written off as uncollectable against the reserve for possible loan
losses. The increase in net charge-offs from 1994 to 1995 was due to the
resolution of certain loans previously provided for in the allowance for
possible loan losses.
The allowance for possible loan losses is maintained at a level believed by
management to be adequate to absorb potential losses in the loan portfolio. The
allowance for possible loan losses as a percentage of average loans outstanding
was 1.24% for 1995 and 1.69% for 1994.
Non-interest Income. Other income for 1995 totaled $1,080,000, compared to
$1,011,000 in 1994. This increase was due to a 24% increase in deposit service
charges, including fees for checks written on non-sufficient funds and for the
maintenance and administration of checking and deposit accounts, offset against
a decrease in other revenue. This decrease reflects one-time
-21-
<PAGE>
income in 1994 relating to the reversal of a loss reserve associated with
certain municipal bonds. The net increase in non-interest income was 6.8%.
Non-interest Expenses. In 1995, other expenses totaled $3,042,000,
compared to $2,989,000 in 1994. This was an increase of $54,000, or 1.77% from
the 1994 level. Higher salaries and employee benefits caused the increase, and
were partially offset by decreases in occupancy and other expenses.
ANALYSIS OF FINANCIAL CONDITION
Investment Securities. In 1995, average investment securities decreased
minimally by $335,000 to $52,788,000, compared to $53,123,000 for 1994, as
investment securities were redeployed to loans. Investment securities totaled
$51,864,000 at the end of 1995. Investment securities comprised 39.78% of
average earning assets at December 31, 1995 compared to 42.86% at December 31,
1994.
Securities classified as available for sale constituted approximately 36%
of the total investment portfolio at year-end 1995, compared to approximately
57% at year-end 1994. These securities, which are largely mortgage-backed
securities, are reported at their estimated fair values in the balance sheets.
The unrealized net losses on these securities of $477,000 in 1995 and $3,421,000
in 1994 are reported, net of tax, as a separate component of shareholders'
equity for each period.
The remaining portfolio securities are classified as held to maturity and
are reported in the balance sheets at amortized cost. The unrealized net gain on
these securities in 1995 was $83,000, and the unrealized net loss in 1994 was
$695,000.
The Bank maintains no trading portfolio.
Proceeds from sales and maturities of securities were $28,034,000 during
1995. Gross realized gains were $171,000 and gross realized losses were
$283,000. The investment securities portfolio serves as a source of income and
liquidity and as collateral to secure public deposits.
Securities Portfolio. The carrying amount of securities at the dates
indicated is set forth in the table below:
-22-
<PAGE>
<TABLE>
<CAPTION>
DECEMBER 31
-------------------
1995 1994
-------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
U.S. Treasury $ 3,003 $ 473
Obligations of U.S. Gov't:
U.S. Agencies 2,698 6,525
Mortgage-backed 32,392 25,360
State and political subdivisions 12,812 19,441
Other securities 959 550
Total $51,864 $52,349
======= =======
</TABLE>
Maturity Distribution and Investment Securities Portfolio Yields. The
maturities, based on contractual maturities, of investment securities at
December 31, 1995 and the weighted yields of such securities are shown in the
table below. Expected maturities may differ from contractual maturities because
borrowers may have the right to repay obligations with or without penalties.
<TABLE>
<CAPTION>
AFTER ONE AFTER FIVE
WITHIN BUT WITHIN BUT WITHIN AFTER
ONE YEAR FIVE YEARS TEN YEARS TEN YEARS TOTAL
---------------- ----------------- ----------------- ----------------- -----------------
AMOUNT YIELD AMOUNT YIELD AMOUNT YIELD AMOUNT YIELD AMOUNT YIELD
------ ----- ------ ----- ------ ----- ------ ----- ------ -----
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
U.S. Treasury $1,745 5.106 $ 1,257 5.253 $ - - $ - -% $ 3,002 5.180
Mortgage-backed - - 7,863 8.910 10,424 6.923 14,075 6.120 32,362 7.318
State and political
subdivisions 200 6.674 5,187 6.863 6,622 4.051 841 5.319 12,849 5.925
Other securities 959 959
------- ----- ------- ----- ------- ----- ------- -----
Total $1,945 5.890 $15,753 6.382 $17,291 5.986 $16,875 6.319 $51,864 6.121
====== ===== ======= ===== ======= ===== ======= ===== ======= =====
</TABLE>
The yields on tax exempt securities are not on tax equivalent bases for
this schedule.
Loans. The loan portfolio is one of the largest components of the Bank's
earning assets. Average loans outstanding in 1995 increased $8,433,000 or
12.37%, from the 1994 level of $68,177,000. Average loans in 1995 were
$76,610,000. The increase in 1995 can be attributed to a strong local economy
and the Bank's large share of the market.
The largest segments of the Bank's loan portfolio are residential real
estate and commercial real estate loans, which represent approximately 57% and
18%, respectively, of the
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<PAGE>
total portfolio as of December 31, 1995. Consumer loans represented
approximately 17.29% of total loans at the end of 1995. No single loan
relationship exceeds 5% of total loans.
Nonperforming Assets. Total nonperforming assets at December 31, 1995 were
$1,714,000, compared to $1,725,000 at December 31, 1994. Nonperforming assets
include nonaccrual loans, restructured loans not on nonaccrual status and other
real estate owned. The slight decrease in nonperforming assets resulted from a
$201,000 decrease in nonperforming loans offset by an increase in other real
estate owned. Other real estate owned increased to $302,000 at December 31,
1995, compared to $112,000 as of the end of 1994, as loans were foreclosed.
Nonaccrual loans are loans on which the accrual of interest income has been
discontinued and previously accrued interest has been reversed, because the
borrower's financial condition has deteriorated to the extent that the
collection of principal and interest is doubtful. Until the loan is returned to
performing status, generally as the result of the full payment of all past due
principal and interest, interest income is recorded on a cash basis. Interest
income that would have been recognized on nonaccrual loans had those loans been
on accrual status at contractual terms throughout 1995 was approximately
$162,000. No interest income was recognized on nonaccrual loans for 1995.
Nonaccrual, restructured and 90 days past due loans and other real estate
are summarized in the table below. Also, several ratios that measure the Bank's
level of nonperforming assets are included in this table.
-24-
<PAGE>
<TABLE>
<CAPTION>
DECEMBER 31
---------------------------
1995 1994
---------------------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Nonperforming loans
Nonaccrual loans $ 967 $1,179
Restructured loans 445 434
------ ------
Total nonperforming loans 1,412 1,613
Other real estate 302 112
------ ------
Total nonperforming assets 1,714 1,725
====== ======
Loans 90 days or more past due and still
accruing interest 798 168
====== ======
Nonperforming loans as a % of total loans 1.78% 2.29%
Nonperforming assets as a % of total loans and
other real estate 2.15% 2.44%
Allowance for possible loan losses as a % of
nonperforming loans 70.40% 75.45%
Allowance for possible loan losses as a % of
nonperforming assets 57.99% 70.55%
</TABLE>
In addition to the nonaccrual loans included in nonperforming assets,
the Bank had approximately $3,883,000 of performing loans that were classified
as of December 31, 1995. Classified loans are credits, identified internally by
management or through the regulatory examination process, where, although they
are performing, doubt exists as to the ability of the borrower to comply with
present interest and principal repayment terms. These credits receive closer
management review.
Loan Portfolio Distribution and Allocation of Allowance for Possible
Loan Losses. The following table shows the amounts of loans outstanding and the
allowance for possible loan losses according to type of loan for each of the
periods indicated:
-25-
<PAGE>
<TABLE>
<CAPTION>
DECEMBER 31
--------------------------------------
1995 1994
------------------ -----------------
AMOUNT PERCENT AMOUNT PERCENT
------ ------- ------ -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Loans:
Commercial $14,806 18.40% $14,336 20.01%
Agricultural 5,516 6.86% 1,410 7.24%
Real estate-residential 24,603 30.58% 20,637 28.79%
Real estate-commercial 21,615 26.87% 19,476 27.17%
Consumer 13,907 17.29% 15,822 16.79%
Total $80,447 100.00% $71,681 100.00%
======= ====== ======= ======
Allowance for possible loan losses:
Commercial $ 288 29.00% $ 280 23.00%
Agricultural 70 7.00% 134 11.00%
Real estate-residential 109 11.00% 207 17.00%
Real estate-commercial 308 31.00% 365 30.00%
Consumer 139 14.00% 146 12.00%
General Reserve 80 8.00% 85 7.00%
Total $ 994 100.00% $ 1,217 100.00%
======= ====== ======= ======
</TABLE>
The allowance for possible loan losses as a percent of loans outstanding was
1.24% at December 31, 1995 and 1.70% at December 31, 1994.
Loan Maturity Data. The table below shows the amounts due on loans,
classified according to the sensitivity to the changes in fixed and floating
interest rates.
<TABLE>
<CAPTION>
DECEMBER 31, 1995
-----------------------------------------
DUE DUE AFTER 1
WITHIN BUT WITHIN DUE AFTER
1 YEAR 5 YEARS 5 YEARS TOTAL
------ ----------- --------- -----
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Sensitivity of loans to changes
in interest rates:
Fixed Interest rate $61,054 $15,733 $1,150 $77,937
Floating or adjustable interest
rate 1,542 1,542
------- ------- ------ -------
Total $62,596 $15,733 $1,150 $79,479
======= ======= ====== =======
</TABLE>
-26-
<PAGE>
Summary of Loan Loss Experience. The loan loss experience for the two
years ended December 31, 1995 is summarized in the following table:
1995 1994
---- ----
(DOLLARS IN THOUSANDS)
Balance at beginning of year $ 1,217 $ 991
Loans charged off
Commercial (895) (142)
Agricultural - -
Real estate-residential (55) -
Real estate-commercial (68) (189)
Consumer (106) (191)
Total charge-offs (1,124) (526)
Recoveries on loans previously charged off
Commercial 86 44
Agricultural 0 7
Real estate-residential 19 4
Real estate-commercial 39 26
Consumer 43 71
Total recoveries 187 152
Net loans charged-off (937) (374)
Additions charged to operations 714 600
Balance at end of year $ 994 $ 1,217
Ration of net charge-offs (recoveries) during
period to outstanding average loans 1.22% 0.55%
Deposits. Total deposits at December 31, 1995 were $120,984,000, up 8.8%
from the level of $111,191,000 posted at December 31, 1994. While
non-interest-bearing deposits, savings and NOW accounts decreased by 10.1% year
end to year end, time deposits increased by 26.0%. This change in mix was part
of the reason for the decrease in the Bank's net interest margin, as previously
discussed.
Time certificates of deposits of $100,000 or more were $25,866,000 at
December 31, 1995. The source of these deposits is public funds that are fully
secured, and local customers with which the Bank has other significant banking
relationships. Although time deposits of $100,000 or more sometimes can exhibit
greater sensitivity to changes in interest rates and other factors than do core
deposits, management considers these funding sources to present a low risk of
volatility. Any liquidity concerns which might occur could, in the opinion of
management,
-27-
<PAGE>
be adequately met with alternate funding sources. The Bank had no brokered
deposits at December 31, 1995.
Deposit Average Balances and Rates. The following table indicates the
average daily amount of deposits and rates paid on categories of deposits for
the periods indicated:
<TABLE>
<CAPTION>
1993 1992
--------------------- --------------------
AMOUNT RATE AMOUNT RATE
---------- ------- --------- -------
<S> <C> <C> <C> <C>
Noninterest-bearing demand $ 15,205 $ 15,011
Savings deposits 5,245 2.92% 5,641 2.87%
Interest-bearing demand deposits 29,062 2.72% 31,679 2.87%
Time deposits 66,977 5.32% 56,797 3.935%
---------- ---------
Total deposits $ 116,489 $ 109,128
========== =========
</TABLE>
Maturities of Time Deposits of $100,000 or More. The maturities of time
deposits of $100,000 or more are summarized for December 31, 1995 in the table
below:
<TABLE>
<CAPTION>
DECEMBER 31, 1995
----------------------
(DOLLARS IN THOUSANDS)
<S> <C>
3 months or less $ 12,049
Over 3 months to 12 months 6,609
12 months to 5 years 3,001
Over 5 years 4,207
---------
Total $ 25,866
=========
</TABLE>
Capital of the Bank and Dividends. The Bank is required to comply with the
risk-based capital guidelines adopted by the Board of Governors of the Federal
Reserve System. Those guidelines apply weighting factors that vary according to
the level of risk associated with each asset category. The information below
summarizes the Bank's risk-based capital and leverage ratios for December 31,
1995 and 1994, as well as the minimum for an institution to qualify as
well-capitalized under federal regulatory guidelines. The Bank exceeds all
capital requirements to be considered well-capitalized, as defined by
regulators.
-28-
<PAGE>
RATIO
DECEMBER 31 REQUIREMENTS
---------------------- TO BE CONSIDERED
1995 1994 WELL CAPITALIZED
--------- --------- ----------------
(DOLLARS IN THOUSANDS)
Tier 1 Capital 28.55% 28.93% 6.00%
Total Capital 29.69% 30.18% 10.00%
Leverage Ratio 16.98% 17.56% 5.00%
The Bank paid a dividend of $16.00 per share in 1995, compared to $15.00 per
share in 1994. This was an increase of 6.67%.
Liquidity. Liquidity is a measure of a bank's ability to fund loan
commitments and meet deposit maturities and withdrawals in a timely and cost
effective manner. The Bank's liquidity needs can be met by generating profits,
converting assets to cash and attracting new deposits. Management considers the
Bank's liquidity sources to be adequate to meet liquidity needs for normal
operations.
As shown in the accompanying 1995 statement of cashflow, cash and cash
equivalents decreased by $167,000 during 1995 to $3,978,000 at December 31,
1995. Cash and cash equivalents were generated primarily by proceeds from sales
and maturities of investments securities totaling $28,034,000 and net increase
in deposits of $9,793,000. In addition, operating activities provided net cash
of $2,781,000. Offsetting these increases were purchases of investment
securities in the amount of $24,685,000, and net increases in loans and federal
funds of $9,547,000 and $5,750,000, respectively.
Other Matters. In May, 1993, the Financial Accounting Standards Board
issued Statement No. 114, "Accounting by Creditors for Impairment of a Loan"
("Standard 114"), which requires that impaired loans that are within the scope
of this statement be measured based on the present value of expected future cash
flows discounted at the loan's effective interest rate or at the loan's market
price or the fair value of the collateral if the loan is collateral dependent.
Adoption of Standard 114 is required for fiscal years beginning after
December 15, 1994. Management feels that this statement will not have a
significant economic impact since the current allowance for possible loan losses
should be adequate to accommodate the change in method for calculating loss
accruals.
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<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
The following discussion provides certain information concerning the
financial condition and results of operations of the Bank for the nine months
ended September 30, 1996 and 1995. This discussion should be read in conjunction
with the compiled financial statements and notes thereto presented elsewhere in
this Prospectus, Management's Discussion and Analysis of the Financial Condition
and Results of Operations for the Two Years Ended December 31, 1995 and 1994,
and the compiled financial statements for the two years ended December 31, 1995
and 1994, both presented elsewhere in the Proxy Statement.
OVERVIEW
Net income for the nine-month period ended September 30, 1996 was
$2,121,000, or $64.28 per share, compared to $1,936,000, or $58.67 per share,
for the same nine months in 1995. Annualized return on average assets was 1.86%
for both nine-month periods. Annualized return on equity was 11.28% and 10.01%
in 1996 and 1995, respectively. Total assets at September 30, 1996 were
$151,215,000, up 2.79% from total assets of $147,105,000 at December 31, 1995.
The Bank's total shareholder's equity improved to $27,172,000 at September 30,
1996, compared to $25,123,000 at December 31, 1995.
RESULTS OF OPERATIONS
Net Interest Income. Net interest income increased from $4,558,000 for the
first nine months of 1995 to $5,019,000 for the nine months ended September 30,
1996. The Bank's net interest margin was 4.65% for the nine-month period ended
September 30, 1996, compared to 4.52% for the same period of 1995. The yield on
tax exempt securities is not on a tax equivalent basis for these figures. The
increase in net interest margin is primarily due to an increase in the volume of
loans. A summary of the Bank's earning asset mix is depicted in the chart below:
<TABLE>
<CAPTION>
PERCENT OF
SEPTEMBER 30, PERCENT OF SEPTEMBER 30, EARNING
1996 EARNING ASSETS 1995 ASSETS
------------- -------------- ------------- -----------
<S> <C> <C> <C> <C>
Loans 84,214 60.03% 80,208 58.74%
Investment Securities 53,184 37.91% 53,034 38.83%
Federal Funds Sold 2,900 2.07% 3,300 2.42%
------- ------ ------- ------
Total 140,298 100.00% 136,542 100.00%
</TABLE>
-30-
<PAGE>
Interest Rate Sensitivity. At September 30, 1996, the Bank's one-year
repricing gap, as previously defined, was -8.7%, i.e. more of the Bank's
liabilities than assets reprice over a one year time frame.
Provision for Possible Loan Losses. A provision for possible loan losses of
$330,000 was charged to operating expenses during the nine-month period ended
September 30, 1996, compared to $465,000 allocated for the same nine-month
period in 1995. The allowance for possible loan losses as a percent of loans
outstanding was 1.33% at September 30, 1996 and 1.35% at September 30, 1995. Net
charge-offs were $186,000 for the nine months ended September 30, 1996, and
$587,000 for the nine months ended September 30, 1995. The chart below
summarizes the Bank's asset quality ratios:
<TABLE>
<CAPTION>
SEPTEMBER 30, 1996
------------------
<S> <C>
Allowance for Possible Loan Losses to Nonaccrual Loans 178.65%
Annualized Net Charge-Offs to Total Average Loans 0.30%
Allowance for Possible Loan Losses to Total Loans 1.35%
Nonperforming Loans to Total Loans 0.75%
</TABLE>
Non-interest Income. For the nine months ended September 30, 1996, other
income totaled $820,000, compared to $807,000 for the same period of 1995. The
increase was primarily a result of increased deposit levels.
Non-interest Expenses. For the nine months ended September 30, 1996, other
expenses increased by $253,000 or 11.59% from the level of other expenses
reported for the same nine months of 1995. The change in other expenses
primarily resulted from losses taken on the sale of repossessed assets and other
real estate owned, and small increases in salaries and occupancy expense in
1996.
ANALYSIS OF FINANCIAL CONDITION
Loans. Loans outstanding at September 30, 1996 were $84,214,000, compared
to $79,462,000 as of December 31, 1995. The increase in the loan portfolio
occurred primarily in real estate loans.
Nonperforming Assets. Nonperforming assets increased from $1,704,000 at
September 30, 1995 to $2,870,000 at September 30, 1996. The increase was
attributable to an additional $800,000 in other real estate owned, which
increased from $127,000 as of September 30, 1995 to $927,000 at September 30,
1996, and an $859,000 addition to restructured loans during the twelve month
period.
Investment Securities. Investment securities increased to $53,184,000 at
September 30, 1996 compared to $51,864,000 at December 31, 1995. Investment
securities comprised 37.91% of earning assets at September 30, 1996 compared to
37.47% at December 31, 1995. Investment securities designated held-to-maturity
had an unrealized loss of $196,000 at September 30, 1996.
-31-
<PAGE>
Investment securities designated available-for-sale had an unrealized loss of
$593,000 at that date, which is reported, net of tax, as a separate component of
shareholders' equity.
Deposits. Total deposits increased to $123,176,000 at September 30, 1996
from $120,984,000 at December 31, 1995. The change was attributable to an
increase of interest-bearing deposits of $2,200,000, offset by a decrease in
non-interest bearing deposits of $800,000.
Capital Resources of the Bank. At September 30, 1996, the Bank's Tier I
capital ratio was 29.39%, its total risk based capital ratio was 30.62% and its
leverage ratio was 17.94%.
Liquidity. The Bank's liquidity sources are considered adequate by
management to meet liquidity needs for normal operations.
-32-
<PAGE>
SUPERVISION AND REGULATION
The Company will be subject to substantial regulation as a bank
holding company, and the Bank is currently subject to substantial regulation.
The following summaries of statutes and regulations affecting bank holding
companies and banks do not purport to be complete. Such summaries are qualified
in their entirety by reference to such statutes and regulations.
SUPERVISION AND REGULATION OF THE COMPANY
The Company will be a bank holding company within the meaning of the
Bank Holding Company Act of 1956 (the "Act"). As a bank holding company, the
Company will be subject to supervision and regulation by the Federal Reserve
Board under the Act. The Federal Reserve Board may make examinations of the
Company and each of its subsidiaries. Bank holding companies are required by
the Act to obtain approval from the Federal Reserve Board prior to acquiring,
directly or indirectly, ownership or control of more than 5% of the voting
shares of a bank.
The Act also prohibits bank holding companies, with certain
exceptions, from acquiring more than 5% of the voting securities of any company
that is not a bank, or, without approval from the Federal Reserve Board, from
engaging in any activity other than an activity closely related to banking (as
determined by the Federal Reserve Board) or managing or controlling banks and
other subsidiaries. The Federal Reserve Board may differentiate between
activities that are initiated de novo by a bank holding company or a subsidiary
and activities commenced by acquisition of a going concern. The Company has no
present intention to engage in non-banking activities.
As a bank holding company, the Company will be subject to capital
adequacy guidelines as established by the Federal Reserve Board to assist it in
the assessment of a bank holding company's capital adequacy. The Federal
Reserve Board established risk based capital guidelines for bank holding
companies effective March 15, 1989. Beginning on December 31, 1992, the minimum
required ratio for qualifying total capital to risk weighted assets became 8
percent (of which at least 4 percent must consist of Tier 1 capital). Tier 1
capital (as defined in regulations of the Board) consists of common
shareholders' equity and qualifying preferred stock and minority interests in
equity accounts of consolidated subsidiaries, less goodwill and other intangible
assets required to be deducted under the Federal Reserve Board's guidelines.
The Federal Reserve Board's guidelines apply on a consolidated basis to bank
holding companies with total consolidated assets of $150 million or more. These
guidelines will apply to the Company if the Reorganization is consummated. The
Federal Reserve Board has stated that these risk based capital guidelines merely
establish minimum supervisory standards and that bank holding companies
generally are expected to operate with capital positions well above the minimum
standards commensurate with the level and nature of all the risks to which they
are exposed.
-33-
<PAGE>
Bank holding companies may be compelled by bank regulatory authorities
to invest additional capital into a subsidiary bank if the subsidiary bank
experiences either significant loan losses or rapid growth of loans or deposits.
In addition, the Company may be required to provide additional capital to any
additional banks it acquires as a condition to obtaining the approvals and
consents of regulatory authorities in connection with such acquisitions.
Upon consummation of the Reorganization, the Company will be an
"affiliate" of the Bank within the meaning of the Federal Reserve Act, which
imposes certain restrictions on transactions between the Company and the Bank,
including restrictions on loans to the Company by the Bank, investments by the
Bank in securities of the Company and on the use of such securities as
collateral security for loans by the Bank to any borrower. The Federal Reserve
Act will limit the transfer of funds by the Bank to the Company and its non-
banking subsidiaries, whether in the form of loans, extensions of credit,
investments or asset purchases. Such transfers by the Bank to the Company or
any non-banking subsidiary of the Company are limited in amount to 10% of the
Bank's capital and surplus and, with respect to the Company and all such non-
banking subsidiaries, to an aggregate of 20% of the Bank's capital and surplus.
The Company is a legal entity separate and distinct from the Bank. In
contrast to Bank Common Stock, the offer and sale of Company Common Stock may be
subject to the registration requirements of the Securities Act of 1933.
SUPERVISION AND REGULATION OF THE BANK
As a national bank, the Bank is subject to supervision and regular
examination by the Comptroller. Such examinations, however, are for the
protection of the Bank Insurance Fund ("BIF") and, indirectly to a degree, for
depositors, and not for the protection of investors and shareholders. Pursuant
to the terms of the Federal Deposit Insurance Act (the "FDIA"), the deposits of
the Bank are insured through the BIF of the FDIC. Accordingly, the Bank is
subject to regulation by the FDIC and is also subject to the Federal Reserve
Board's requirements to maintain reserves against deposits, restrictions on the
types and amounts of loans that may be granted and the interest that may be
charged thereon, and limitations on the types of investments that may be made
and the types of services that may be offered.
In 1991, Congress enacted the Federal Deposit Insurance Corporation
Improvement Act ("FDICIA"), which, among other things, substantially revised the
depository institution regulatory and funding provisions of the FDIA. FDICIA
also expanded the regulatory and enforcement powers of bank regulatory agencies.
Most significantly, FDICIA mandates annual examinations of banks by their
primary regulators and requires the federal banking agencies to take prompt
"corrective action" whenever financial institutions do not meet minimum capital
requirements. FDICIA establishes five capital tiers: "well capitalized,"
"adequately capitalized," "undercapitalized," "significantly undercapitalized"
and "critically undercapitalized." A depository institution's capitalization
status will depend on how well its capital levels compare to various relevant
capital measures and certain other factors, as established by regulation. As
-34-
<PAGE>
of September 30, 1996, the Bank maintained a capital level which qualified it as
being "well capitalized" under such regulations.
FDICIA also prohibits a depository institution from making any capital
distribution (including payment of a dividend) or paying any management fee to
its holding company if the depository institution would thereafter be
"undercapitalized."
INTERSTATE BANKING AND BRANCHING LEGISLATION
FEDERAL LAW. In 1994, Congress passed the Riegle-Neal Interstate
Banking and Branching Efficiency Act of 1994 ("Riegle-Neal"), which affected the
interstate banking and branching abilities of bank holding companies and banks.
Beginning June 1, 1997, Riegle-Neal authorizes a national bank
domiciled in one state to establish branches in any other state as long as
neither state has opted out of interstate branching between the date of
enactment of Riegle-Neal and May 31, 1997. Riegle-Neal, however, does allow
states to preserve certain restrictions on the entry of out-of-state banks.
Under Riegle-Neal, once a bank has established a branch in another state, it may
exercise the same rights in that state as national and state banks enjoy in that
state, including the ability to branch intra-state. Riegle-Neal provides that
states may opt in early to interstate branching prior to June 1, 1997.
Riegle-Neal also permits states to allow banks to enter the state by
establishing a de novo branch in that state. In order to allow de novo entry
into a state, that state must expressly provide for de novo branching. Once a
bank has established a branch in a host state through de novo branching, it may
exercise the same rights in that state as national and state banks enjoy,
including the ability to branch intra-state. If a state opts out of interstate
branching, no bank domiciled in that state may establish branches in other
states, and no bank domiciled in another state may establish branches in that
state.
MISSISSIPPI LAW. On March 29, 1996, the Governor of Mississippi
signed into law a bill in which Mississippi elected to opt in early to
interstate branching, effective May 1, 1997. As enacted, the bill (1) allows
all Mississippi banks to establish branches in other states pursuant to the
entry rules in the potential host states, and (2) allows out-of-state banks to
establish branches in Mississippi pursuant to Mississippi's entry rules. The
bill as enacted, however, does not authorize de novo branching into Mississippi.
An out-of-state bank can establish branches in Mississippi only by (1) merging
with a Mississippi domiciled bank, (2) buying all of the assets of a Mississippi
domiciled bank, or (3) buying all of the assets in Mississippi of an out-of-
state bank which has branches in Mississippi. All interstate branching
transactions require appropriate regulatory approval.
MISSISSIPPI BANK HOLDING COMPANIES. Prior to September 29, 1995 (the
date on which this portion of Riegle-Neal was effective), and pursuant to
Mississippi law, a Mississippi bank or bank holding company could be acquired
only by a bank holding company from one of
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<PAGE>
fourteen contiguous states. Effective September 30, 1995, however, Mississippi
law was amended in conformance with Riegle-Neal to provide that a bank holding
company from any state may acquire a bank or bank holding company in
Mississippi, and that a Mississippi bank holding company may acquire a bank or
bank holding company in any other state, with appropriate regulatory approval.
FURTHER CHANGES IN REGULATORY REQUIREMENTS. The United States
Congress and the Mississippi legislature have periodically considered and
adopted legislation that has resulted in deregulation of, among other matters,
banks and other financial institutions, or adversely affected the profitability
of the banking industry. Future legislation could further modify or eliminate
geographic restrictions on banks and bank holding companies and current
prohibitions with other financial institutions, including mutual funds,
securities brokerage firms, insurance companies, banks from other states and
investment banking firms. The effect of any such legislation on the business of
the Company or the Bank cannot be accurately predicted. The Company also cannot
predict what legislation might be enacted or what other implementing regulations
might be adopted, and if enacted or adopted, the effect thereof.
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth certain information with respect to (i)
the directors and executive officers of the Bank as of December 31, 1996 and
(ii) the proposed directors and executive officers of the Company upon
consummation of the Reorganization:
<TABLE>
<CAPTION>
Name Age Position(s) with the Company Position(s) with the Bank
- ---- --- ---------------------------- -------------------------
<S> <C> <C> <C>
William Anderson 50 Vice President Vice President
Anna M. Berryhill 67 Director Director
J. Richard Doty 40 Director Director
Richard Frazier 47 Vice President Vice President
Buddy R. Montgomery 55 Director and President Director and President
Larry Russell 54 Director, Executive Vice Director, Executive
President and Secretary Vice President and Secretary
to the Board
Michael Simon 49 Director Director
Charles D. Thomas 60 Director Director
J. Lowell Whitworth 82 Director Director
</TABLE>
It is expected that the individuals listed above as directors of the Company
will be the directors of the Company upon consummation of the Reorganization.
The Board of Directors of the Company upon consummation of the Reorganization
shall serve until the first annual meeting of the shareholders of the Company in
1998, or until their successors are elected and qualified.
-36-
<PAGE>
If the Reorganization is completed, the members of the Board of Directors of
the Bank will be elected annually by the Company as the sole shareholder of the
Bank.
The business experience of each of the proposed directors and executive
officers of the Bank is set forth below.
William Anderson is a Vice President of the Bank, specializing in consumer
lending. Mr. Anderson has worked at the Bank since 1989, initially serving as a
loan collector and then as a loan officer, before being promoted to his current
position.
Anna M. Berryhill is retired. Previously she was a schoolteacher in Pontotoc
County for more than twelve years. Ms. Berryhill is a director and the
treasurer of the Tombigbee River Valley Water Management District. She has
served as a director of the Bank since 1994.
J. Richard Doty is a real estate developer. He owns Oxford Investments,
L.L.C., Doty and Tatum Ent., Oil & Gas Properties L.L.C. and Doty Properties,
L.L.C. and is a partner in Doty Investments, L.P. Previously, Mr. Doty worked
in both the banking and mortgage businesses. Mr. Doty has served as a director
of the Bank since 1983.
Richard Frazier has been Vice President and Assistant Loan Administrator of
the Bank since 1992. Mr. Frazier has worked in the banking industry since 1973.
Mr. Frazier was a Senior Vice President and Executive Officer at Peoples Bank &
Trust Company in Pontotoc, Mississippi from 1979 until 1992, when he came to
work at the Bank in his present capacities.
Buddy R. Montgomery has been the President of the Bank since 1993. Mr.
Montgomery has worked in various capacities for the Bank since 1963, including
as its Senior Vice President and Cashier from 1977 to 1993. Mr. Montgomery has
served on the Board of the Directors of the Bank since 1969 and was its
Secretary from 1977 to 1995. Mr. Montgomery also serves as a Member of the
Economic and Community Development Committee of the Pontotoc County Chamber of
Commerce.
Larry Russell currently serves as the Bank's Executive Vice President and
Loan Administrator, positions he has held since 1993. He has also served as
Secretary to the Bank's Board of Directors since 1995. Mr. Russell has been
employed by the Bank since 1964 and has served it in many capacities including
loan teller, loan officer and Senior Vice President. Mr. Russell has served on
the Board of Directors of the Bank since 1972.
Michael Simon is the President and majority shareholder of Simon, Inc., which
is Pontotoc, Mississippi's largest department store. Mr. Simon has served on
the Board of Directors of the Bank since 1975.
Charles D. Thomas is a judge for the First Chancery Court District in
Pontotoc, Mississippi. Prior to his judicial appointment, Chancellor Thomas was
in the private practice
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<PAGE>
of law for over twenty years. Chancellor Thomas has served on the Board of
Directors of the Bank since 1983.
J. Lowell Whitworth is retired. Previously, Mr. Whitworth was the owner and
operator of a local pharmacy in Pontotoc, Mississippi. Mr. Whitworth has served
as a director of the Bank since 1972.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG TERM COMPENSATION
-------------------------------------------- -----------------------------------
AWARDS PAYOUTS
---------- -------------
RESTRICTED SECURITIES LTIP ALL OTHER
NAME AND PRINCIPAL OTHER ANNUAL STOCK UNDERLYING PAYOUT COMPENSATION
POSITION YEAR SALARY ($) BONUS ($) COMPENSATION AWARD(S) ($) OPTIONS ($) ($)/(1)/
- -------------------- ---- ------------ ---------- ------------ ------------ ---------- -------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Buddy Montgomery, 1996 $113,640.00 $9,016.00 0 N/A 0 0 $10,614.00
President & CEO 1995 105,800.00 600.00 0 N/A 0 0 11,792.00
1994 99,456.00 600.00 0 N/A 0 0 8,426.00
Larry Russell, 1996 $106,176.00 $8,462.40 0 N/A 0 0 $ 9,919.00
Executive Vice 1995 98,880.00 600.00 0 N/A 0 0 11,062.00
President 1994 93,084.00 600.00 0 N/A 0 0 8,004.00
</TABLE>
- ---------------------------
(1) These amounts represent the Bank's estimated annual contribution to the
named executives pursuant to the First National Bank of Pontotoc Employees'
Profit Sharing Plan.
EMPLOYMENT AGREEMENTS
Effective November 20, 1996, the Bank entered into an agreement with each of
Buddy R. Montgomery and Larry Russell. Pursuant to the terms of their
individual agreements, Messrs. Montgomery and Russell are entitled to, among
other things, 300% of their "annual salaries" (as defined in the agreements) if,
during the "covered period" (as defined in the agreements to be the one-year
period preceding through the five-year period following a change-in-control),
either is terminated without cause or resigns following a change in his duties
in connection with a change in control of the Bank.
COMPENSATION OF DIRECTORS
All directors, other than Messrs. Montgomery and Russell, receive a monthly
fee of $400. Mr. Whitworth receives an additional $300 per month for serving on
the Executive Committee. During 1996, each director attended at least 75% of
the meetings of the Board and of the committees on which he or she served.
-38-
<PAGE>
LIMITATION ON DIRECTORS' LIABILITY
The Company's Articles of Incorporation and Bylaws provide that, pursuant to
section 2.02(b)(4) of the MBCA, the directors of the Company shall not be liable
to the Company or to the shareholders of the Company for money damages for any
action taken, or any failure to take action, as a director, except liability
for: (a) the amount of a financial benefit received by a director to which he is
not entitled; (b) an intentional infliction of harm on the Company or its
shareholders; (c) a violation of section 8.33 of the MBCA (dealing with
liability of a director who votes for or assents to an excessive distribution
made in violation of the Company's Articles or provisions of Section 6.40 of the
MBCA); or (d) an intentional violation of criminal law by the director.
INDEMNIFICATION
The Company's Articles of Incorporation and Bylaws authorize the Company to
purchase insurance to cover any liability asserted against a person serving as a
director, officer, employee or agent of the Company when such liability is
incurred by such person in any such capacity, or arising out of such person's
status as such, whether or not the Company would have the power to indemnify
such person against such liability under the provisions of the Company's
Articles of Incorporation, Bylaws or Mississippi law. If the insurance
purchased by the Company does not fully cover the liabilities and reasonable
expenses of such person, then the Articles of Incorporation and Bylaws provide
that such person shall be indemnified against such liabilities and reasonable
expenses, including attorney's fees, incurred, by such person; provided, no such
indemnification is allowed if such person is found: (a) to have received a
financial benefit to which he or she is not entitled; (b) to have intentionally
inflicted harm on the Company or its shareholders; (c) to have violated Section
8.33 of the MBCA by voting for or assenting to the making of an excessive
distribution to shareholders in violation of the MBCA; or (d) to have
intentionally violated criminal law.
Unless otherwise ordered by a court, no indemnification shall be made to any
such person in respect to any claim, judgments, amounts paid in settlement,
issue, fine, matter, or attorneys' fees in connection with: (a) a proceeding by
or in the right of the Company, except for reasonable expenses incurred in
connection with the proceeding if it is determined that such person has met the
standard of conduct described in the Bylaws allowing indemnification to be made;
or (b) any proceeding with respect to conduct for which such person was adjudged
liable on the basis that such person received a financial benefit to which he
was not entitled, whether or not involving action in such person's official
capacity. Notwithstanding anything to the contrary in the Articles of
Incorporation or Bylaws, the Company is required to indemnify any such person
seeking indemnification who was wholly successful, on the merits or otherwise,
in the defense of any proceeding to which such person was a party because such
person was a director, officer, employee or agent of the Company, against
reasonable expenses incurred by such person in connection with the proceeding.
-39-
<PAGE>
The Company is also required to advance funds to pay for or reimburse the
reasonable expenses incurred by a director, officer, employee or agent who is a
party to a proceeding if (a) such person furnishes the Company a written
affirmation of his good faith belief that he has met the standard of conduct
described in the Bylaws, or that the proceeding involves conduct for which
liability of directors to the Company or its shareholders has been eliminated by
a provision of the Articles of Incorporation or Bylaws of the Company pursuant
to section 2.02(b)(4) of the MBCA; and (b) such person furnishes the Company a
written undertaking to repay any funds advanced if he or she is not entitled to
mandatory indemnification or if there is a subsequent determination in the
proceeding that his or her conduct was not the type of conduct eliminated from
liability in the Articles of Incorporation under section 2.02(b)(4) of the MBCA.
The discussion herein with respect to indemnification of directors, officers,
employees or agents of the Company is qualified in its entirety by reference to
the Articles of Incorporation and Bylaws of the Company, which are attached
hereto as appendices A and B respectively, and to applicable provisions of the
MBCA.
-40-
<PAGE>
BENEFICIAL OWNERSHIP OF DIRECTORS, EXECUTIVE OFFICERS
AND PRINCIPAL SHAREHOLDERS OF THE BANK
The following table sets forth certain information regarding the shares of
the Bank Common Stock owned as of January ___, 1997 (i) by each person who
beneficially owns more than 5% of the shares of Bank Common Stock, (ii) by each
of the Bank's directors, and (iii) by all directors and executive officers as a
group.
<TABLE>
<CAPTION>
Number of Shares
Beneficially Percentage
Name and Address Owned Ownership
- ---------------------------------- ---------------- -----------
<S> <C> <C>
William W. Anderson 100 *
1737 Clark Street
Pontotoc, Mississippi 38863
Anna M. Berryhill 5,145 15.59%
175 Cedar Creek Drive
Pontotoc, Mississippi 38863
J. Richard Doty(1) 4,936 14.96%
912 University Avenue
Oxford, Mississippi 38655
Richard Frazier 0 *
302 South Main Street
Pontotoc, Mississippi 38863
Buddy R. Montgomery 195 *
380 Northridge Drive
Pontotoc, Mississippi 38863
Larry Russell 210 *
9672 Highway 9 South
Pontotoc, Mississippi 38863
Michael Simon/2/ 1,511 4.58%
P. O. Box 239
Pontotoc, Mississippi 38863
Charles D. Thomas 368 *
2507 Highway 6 East
Pontotoc, Mississippi 38863
</TABLE>
(1)The shares shown are owned of record by Doty Investments, L.P., of which Mr.
Doty is a general partner. Doty Investments has entered into an agreement to
sell all of its shares to Union Planters Corporation. Consummation of this
agreement is subject to certain conditions. See "Recent Developments."
(2)Of the shares shown, 291 shares are held of record by Simon, Inc., of which
Mr. Simon is the President and majority shareholder.
-41-
<PAGE>
<TABLE>
<CAPTION>
Number of Shares
Beneficially Percentage
Name and Address Owned Ownership
- ---------------------------------- ---------------- -----------
<S> <C> <C>
J. Lowell Whitworth 734 *
108 West Oxford Street
Pontotoc, Mississippi 38863
Louise M. Wilson 2,145 6.50%
P. O. Box 1200, Suite 261
Humble, Texas 77347
Directors and executive officers _______ ______
as a group (9 persons) 13,199 39.99%
</TABLE>
RECENT DEVELOPMENTS
The Bank has substantial capital reserves that have been built up over the
years for the benefit of shareholders. In mid-1996, the Board of Directors
engaged the services of a prominent regional investment banking firm (the
"Financial Advisor") to assist it in devising a strategy to employ these
reserves for the maximum advantage of all of the Bank's shareholders. The
Financial Advisor has recommended the Reorganization as the first step in the
implementation of this strategy.
One of the members of the Bank's Board of Directors, Mr. J. Richard Doty,
previously discussed with representatives of the Board various possibilities for
liquidating his investment in the Bank. On or about October 17, 1996, Mr. Doty
and certain of the Bank's other shareholders collectively owning 6,557 shares
(or 19.87%) of the Bank Common Stock (the "Selling Shareholders") entered into
an agreement with Union Planters Corporation, a bank holding company ("Union
Planters"), to sell their Bank Common Stock to Union Planters and not to vote in
favor of any actions that would adversely affect Union Planters' efforts to
acquire control of the Bank. This agreement is expected to terminate on March
31, 1997 if Federal Reserve Board approval is not received by such date. In his
capacity as a director of the Bank, Mr. Doty voted against the Reorganization
and Mr. Doty has advised the Board of Directors that all 4,936 shares (14.96%)
of Bank Common Stock beneficially owned by him will be voted against the
Reorganization at the Special Meeting.
On November 25, 1996, Union Planters filed an application with the Federal
Reserve Board for approval of the acquisition of the Bank Common Stock owned by
the Selling Shareholders and, possibly, of all of the outstanding Bank Common
Stock and/or the Company Common Stock (if the Reorganization is consummated).
-42-
<PAGE>
On or about December 12, 1996, Union Planters submitted to the Board of
Directors a conditional offer to purchase all of the outstanding Bank Common
Stock for $875 per share. The Board of Directors of the Bank immediately
submitted the Union Planters' offer to the Financial Advisor for review.
On or about December 31, 1996, 140 shareholders beneficially owning
approximately 68.47% of the Bank Common Stock entered into an agreement pursuant
to which each shareholder agreed not to sell his or her Bank Common Stock and
not to vote to approve a merger of the Bank with another bank, without giving
the Bank a right of first refusal to acquire such shareholder's Bank Common
Stock for the same consideration as is offered by the third party.
It is anticipated that Union Planters will continue to pursue its efforts to
acquire control of the Bank. The Board of Directors intends to continue
implementation of its plan to maximize the value of the Bank for all of the
Bank's stockholders, and believes that approval of the Reorganization is a
necessary first step in the implementation of its Plan. See "The Proposed
Reorganization."
LEGAL MATTERS
The legality of the shares of common stock of the Company to be issued in the
Reorganization and certain other legal matters in connection with the
Reorganization will be passed upon by Phelps Dunbar, L.L.P., One Mississippi
Plaza, Tupelo, Mississippi 38801-1220.
SHAREHOLDER PROPOSALS
Shareholders of the Company may submit a proposal for action at any meeting
of Company shareholders, including the nomination of directors, if certain
conditions are met. See "Comparative Rights of Shareholders of the Bank and the
Company - Shareholder Proposals." The first annual meeting of the Company's
shareholders will be held in 1998. At this time, the date by which shareholder
proposals must be submitted for consideration at such meeting cannot be
determined.
OTHER MATTERS
Management knows of no other matters that may be brought before the meeting.
However, if any matter other than the proposed Reorganization or matters
incident thereto should come before the meeting, the persons named in the
enclosed proxy will vote such proxy in accordance with their judgment on such
matters.
-43-
<PAGE>
INDEX TO FINANCIAL STATEMENTS
Accountants' Compilation Report as of September 30, 1996 F-2
Balance Sheets of First National Bank as of September 30, 1996 and 1995 F-3
Statement of Income of First National Bank as of nine months ended
September 30, 1996 and 1995 F-4
Statement of Stockholders' Equity of First National Bank, nine months
ended September 30, 1996 and 1995 F-5
Statement of Cash Flows of First National Bank, nine months ended
September 30, 1996 and 1995 F-6
Notes to Financial Statements of First National Bank as of
September 30, 1996 F-7
Accountants' Compilation Report as of December 31, 1995 F-16
Balance Sheets of First National Bank as of December 31, 1995 and 1994 F-17
Statement of Income of First National Bank as of December 31, 1995
and 1994 F-18
Statement of Stockholders' Equity of First National Bank as of
December 31, 1995 and 1994 F-19
Statement of Cash Flows of First National Bank as of December 31, 1995
and 1994 F-20
Notes to Financial Statements of First National Bank as of
December 31, 1995 F-21
F-1
<PAGE>
[LOGO OF NAIL MCKINNEY APPEARS HERE]
ACCOUNTANTS' COMPILATION REPORT
To the Shareholders and Directors
First National Bank
Pontotoc, Mississippi
We have compiled the accompanying balance sheets of the First National
Bank as of September 30, 1996 and 1995 and the related statements of income,
stockholders' equity and cash flows for the nine months then ended, in
accordance with Statements on Standards for Accounting and Review Services
issued by the American Institute of Certified Public Accountants.
A compilation is limited to presenting in the form of financial
statements information that is the representation of management. We have not
audited or reviewed the accompanying financial statements and, accordingly, do
not express an opinion or any other form of assurance on them.
Nail McKinney PA
New Albany, Mississippi
December 11, 1996
F-2
<PAGE>
BALANCE SHEETS
FIRST NATIONAL BANK
September 30, 1996 and 1995
(SEE ACCOUNTANTS' COMPILATION REPORT)
<TABLE>
<CAPTION>
1996 1995
-------- --------
ASSETS (in thousands)
<S> <C> <C>
Cash and due from banks $ 5,141 $ 4,901
Investment securities - available for sale (at market value) 17,857 23,524
Investment securities - held to maturity (at cost) 35,327 29,510
Federal funds sold 2,900 3,300
Loans 86,970 82,835
Less: Unearned income (1,618) (1,532)
Allowance for loan losses (1,138) (1,095)
-------- --------
Net loans 84,214 80,208
Premises and equipment, net 1,559 1,198
Intangibles 440 475
Deferred tax asset 575 801
Other assets 3,202 2,503
-------- --------
Total assets $151,215 $146,420
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
Noninterest bearing $ 15,581 $ 14,786
Interest bearing 107,595 105,835
-------- --------
Total deposits 123,176 120,621
Accrued interest and other liabilities 867 834
-------- --------
Total liabilities 124,043 121,455
-------- --------
Stockholders' equity
Common stock $10 par value,
33,000 shares authorized and issued 330 330
Surplus 21,000 19,500
Undivided profits 6,214 5,617
Unrealized loss on securities available-for-sale (372) (482)
-------- --------
Total stockholders' equity 27,172 24,965
-------- --------
Total liabilities and stockholders' equity $151,215 $146,420
======== ========
</TABLE>
________________________________________
The Notes to Financial Statements are an
integral part of these statements.
F-3
<PAGE>
STATEMENTS OF INCOME
FIRST NATIONAL BANK
Nine months ended September 30, 1996 and 1995
(SEE ACCOUNTANTS' COMPILATION REPORT)
<TABLE>
<CAPTION>
1996 1995
------- --------
INTEREST REVENUE (in thousands)
<S> <C> <C>
Interest and fees on loans $6,098 $5,320
Interest on investment securities 2,302 2,426
Interest on federal funds sold 371 87
------ ------
Total interest revenue 8,771 7,833
------ ------
INTEREST EXPENSE
Interest on deposits 3,752 3,264
Other interest -- 11
------ ------
Total interest expense 3,752 3,275
------ ------
Net interest revenue 5,019 4,558
Provision for loan losses (330) (465)
------ ------
Net interest revenue after
provision for loan losses 4,689 4,093
------ ------
OTHER REVENUE
Service fees 813 791
Other 7 16
Loss from sale of investment securities (2) (115)
------ ------
818 692
------ ------
OTHER EXPENSE
Salaries and employee benefits 1,293 1,228
Occupancy expense, net of rental
income 251 229
Other expenses 892 726
------ ------
Total other expense 2,436 2,183
------ ------
Income before income taxes 3,071 2,602
Provision for income taxes 950 666
------ ------
Net income $2,121 $1,936
====== ======
</TABLE>
- -------------------------------------------
The Notes to Financial Statements are an
integral part of these statements.
F-4
<PAGE>
STATEMENTS OF STOCKHOLDERS' EQUITY
FIRST NATIONAL BANK
Nine months ended September 30, 1996 and 1995
(SEE ACCOUNTANTS' COMPILATION REPORT)
<TABLE>
<CAPTION>
UNREALIZED
GAIN (LOSS)
COMMON STOCK SECURITIES
----------------- UNDIVIDED AVAILABLE-
SHARES PAR VALUE SURPLUS PROFITS FOR-SALE TOTALS
------ --------- ------- --------- ---------- -------
(in thousands)
<S> <C> <C> <C> <C> <C> <C>
Balance, January 1,
1995 33 $330 $19,500 $3,681 $(2,145) $21,366
Net income 1,936 1,936
Unrealized loss
on marketable
equity securities 1,663 1,663
------- ------- ------- ------ ------- -------
Balance, September 30,
1995 33 $330 $19,500 $5,617 $ (482) $24,965
======= ======= ======= ====== ======= =======
Balance January 1,
1996 33 $330 $21,000 $4,093 $ (300) $25,123
Net income 2,121 2,121
Unrealized gain
on marketable
equity securities (72) (72)
------- ------- ------- ------ ------- -------
Balance, September 30,
1996 33 $330 $21,000 $6,214 $ (372) $27,172
======= ======= ======= ====== ======= =======
</TABLE>
- ---------------------------------------------
The Notes to Financial Statements are an
integral part of these statements.
F-5
<PAGE>
STATEMENTS OF CASH FLOWS
FIRST NATIONAL BANK
Nine months ended September 30, 1996 and 1995
(SEE ACCOUNTANTS' COMPILATION REPORT)
<TABLE>
<CAPTION>
OPERATING ACTIVITIES 1996 1995
------- --------
(in thousands)
<S> <C> <C>
Net income $ 2,121 $ 1,936
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 137 162
Provision for loan losses 330 465
Provision for deferred income taxes (42) 21
Loss on sale of securities 2 114
Increase in interest receivable and other assets 99 304
Increase in interest payable and other liabilities (131) (104)
------- ------
Net cash provided by operating
activities 2,516 2,898
------- ------
INVESTING ACTIVITIES
Purchases of held-to-maturity securities (8,209) (5,381)
Purchases of available-for-sale securities (3,903) --
Proceeds from dispositions of
held-to-maturity securities 5,298 1,316
Proceeds from dispositions of
available-for-sale securities 5,420 4,929
Net increase in loans (5,091) (10,209)
Net (increase) decrease in federal funds sold 4,200 (1,950)
Purchases of premises and equipment (468) (95)
Net (increase) decrease in other real estate (625) (15)
------- ------
Net cash used in investing activities (3,378) (11,405)
------- ------
FINANCING ACTIVITIES
Net increase in deposits 2,192 9,430
Cash dividends paid -- --
------- ------
Net cash provided by financing
activities 2,192 9,430
------- ------
Decrease in cash and due from banks 1,330 923
Cash and due from banks at beginning of year 3,811 3,978
------- ------
Cash and due from banks at end of year $ 5,141 $ 4,901
------- ------
SUPPLEMENTAL CASH FLOWS INFORMATION
Interest paid $ 4,137 $ 3,051
------- ------
Income taxes paid $ 802 $ 551
------- ------
</TABLE>
- -----------------------------------------
The Notes to Financial Statements are an
integral part of these statements.
F-6
<PAGE>
NOTES TO FINANCIAL STATEMENTS
FIRST NATIONAL BANK
SEPTEMBER 30, 1996
(SEE ACCOUNTANTS' COMPILATION REPORT)
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING AND REPORTING POLICIES
Operating Environment
---------------------
The Bank grants commercial, residential and consumer installment loans
to its customers. Although the Bank has a diversified loan portfolio,
the majority of its loan customers are located in Pontotoc County,
Mississippi.
Basis of Presentation
---------------------
The Bank recognizes substantially all income and expense on the accrual
method of accounting except certain minor sources of income which are
recorded as received. These exceptions do not have a material affect on
financial statement presentations.
Use of Estimates
----------------
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements. Actual results could significantly
differ from those estimates.
Material estimates that are particularly susceptible to
significant change relate to the determination of the allowance for
losses on loans and the valuation of real estate acquired in connection
with foreclosures or in satisfaction of loans. While management uses
available information to recognize losses on loans and foreclosed real
estate, future additions to the allowances may be necessary based on
changes in local economic conditions. In addition, regulatory agencies,
as an integral part of their examination process, periodically review the
Bank's allowances for losses on loans and foreclosed real estate. Such
agencies may require the Bank to recognize additional losses based on
their judgments about information available to them at the time of their
examination. Because of these factors, it is reasonably possible that
the estimated losses on loans and foreclosed real estate may change
materially in the near term. However, the amount of the change that is
reasonably possible cannot be estimated.
Cash Equivalents
----------------
For purpose of the Statements of Cash Flows, the Bank considers all
highly liquid debt instruments purchased with a maturity of three months
or less to be cash equivalents, which are included in the balance sheet
caption "Cash and due from banks."
F-7
<PAGE>
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
(SEE ACCOUNTANTS' COMPILATION REPORT)
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING AND REPORTING POLICIES - (CONTINUED)
Investment Securities
---------------------
Securities Held to Maturity: Debt securities that management has the
positive intent and ability to hold to maturity are reported at cost,
adjusted for premiums and discounts that are recognized in interest
income using methods approximating the interest method over the period to
maturity.
Securities Available for Sale: Other marketable securities are
carried at fair value. Unrealized gains and losses on securities
available-for-sale are excluded from earnings and reported net of tax in
a separate component of stockholders' equity. Gains and losses on
securities sold are determined using the specific identification method.
Declines in the fair value of individual held-to-maturity and
available-for-sale securities below their cost that are other than
temporary have resulted in write-downs of the individual securities to
their fair value.
Loans and Allowances for Loan Losses
------------------------------------
Loans are stated at the amount of unpaid principal, reduced by unearned
discount and an allowance for loan losses. Unearned discount on
installment loans is recognized as income over the terms of the loans by
the interest method. Interest on other loans is calculated by using
the simple interest method on daily balances of the principal amount
outstanding. The allowance for loan losses is established through a
provision for loan losses charged to expenses. Loans are charged against
the allowance for loan losses when management believes that the
collectibility of the principal is unlikely. The allowance is an amount
that management believes will be adequate to absorb possible losses on
existing loans that may become uncollectible, based on evaluations of the
collectibility of loans and prior loan loss experience. The evaluations
take into consideration such factors as changes in the nature and volume
of the loan portfolio, overall portfolio quality, review of specific
problem loans, and current economic conditions that may affect the
borrowers' ability to pay. Accrual of interest is discontinued on a loan
when management believes, after considering economic and business
conditions and collection efforts, that the borrowers' financial
condition is such that collection of interest is doubtful.
Foreclosed Real Estate
----------------------
Real estate properties acquired through, or in lieu of, loan
foreclosure are to be sold and are initially recorded at fair value at
the date of foreclosure establishing a new cost basis. After
foreclosure, valuations are periodically performed by management and the
real estate is carried at the lower of carrying amount or fair value less
cost to sell.
Bank Premises and Equipment
---------------------------
Premises and equipment are stated at cost less accumulated
depreciation. Provisions for depreciation are computed principally on
the straight-line method and charged to operating expense over the
estimated useful life of the assets. Costs of major additions and
improvements are capitalized. Expenditures for maintenance and repairs
are charged against income as incurred.
F-8
<PAGE>
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
(SEE ACCOUNTANTS' COMPILATION REPORT)
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING AND REPORTING POLICIES - (CONTINUED)
Other Assets
------------
In May 1994, the bank acquired certain deposits of a savings and loan
institution in the bank's market area. To assume the deposits, the bank
paid a premium of $525,000 which is being amortized over 15 years and is
carried net of accumulated amortization on the balance sheet.
Included in investments on the balance sheets for September 30, 1996
and 1995 is $475,900 and $402,100, respectively, in Federal Home Loan
Bank stock carried at cost. The stock is required to be held by the bank
to secure any advances that become necessary for liquidity management.
Income Taxes
------------
The objective of accounting for income taxes is to recognize the
amount of current and deferred taxes payable or refundable at the date of
the financial statements as a result of all events that have been
recognized in the financial statements and as measured by the provisions
of enacted laws. Income taxes currently payable are based on the taxable
income for the year. A deferred tax asset or liability is calculated for
tax consequences attributable to temporary differences between taxable
income and financial accounting income. Temporary differences relate
primarily to depreciation methods, accretion of discounts on investment
securities and provision for loan losses.
Fair Values of Financial Instruments
------------------------------------
The following methods and assumptions were used to estimate the fair
value of each class of financial instruments for which it is practicable
to estimate that value:
Cash and short-term investments:
For those short-term instruments, the carrying amount is a reasonable
estimate of fair value.
Investment securities:
For securities held as investments, fair values are based on quoted
market prices, if available. If quoted market prices are not available,
fair values are estimated using quoted market prices for similar
securities.
Loans receivable::
For variable rate loans and loans that reprice within a year that have
no significant change in credit risk, fair values are based on carrying
values. For the remaining loans in the portfolio that reprice or mature
after one year, it is not currently practicable to estimate the fair
value due to limitations of available information and cost benefit
analysis. Management believes the difference between the carrying value
and fair value of all other loans is not significant in comparison to the
loan portfolio.
Deposit liabilities:
The fair values of demand deposits, savings accounts, and certain
money market deposits are the amounts payable on demand at the reporting
date (that is, their carrying amounts). The fair values of fixed-
maturity certificates of deposit are estimated using a discounted cash
flow calculation that applies interest rates currently being offered on
certificates to a schedule of aggregated expected maturities .
F-9
<PAGE>
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
(SEE ACCOUNTANTS' COMPILATION REPORT)
NOTE 2. INVESTMENT SECURITIES
Securities available-for-sale consist of the following at September 30:
1996
---------------------------------------------
GROSS UNREALIZED
---------------------------------------------
AMORTIZED FAIR
COST GAINS LOSSES VALUE
--------- ----- ------ -------
U.S. Treasury Securities $ 2,241 $ 8 $ 2,233
Obligations of other U.S.
Government Agencies 1,499 16 1,483
Mortgage-backed securities 13,587 569 13,018
Other securities 1,123 1,123
------- ----- ---- -------
$18,450 $ -- $593 $17,857
======= ===== ==== =======
1995
---------------------------------------------
GROSS UNREALIZED
---------------------------------------------
AMORTIZED FAIR
COST GAINS LOSSES VALUE
--------- ----- ------ -------
U.S. Treasury Securities $ 499 $ 5 $ 494
Obligations of other U.S.
Government Agencies 5,097 115 4,982
Obligations of states and
political subdivisions -- --
Mortgage-backed securities 17,849 753 17,096
Other securities 952 952
------- ----- ---- -------
$24,397 $ -- $873 $23,524
======= ===== ==== =======
During 1995 the Financial Accounting Standards Board offered entities
a one-time opportunity, which ended December 31, 1995, to reclassify their
securities among the classes as required by FAS 115 "Accounting for Certain
Investments in Debt and Equity Securities". During this time, entities could
move securities out of the held-to-maturity portfolio without tainting their
other held-to-maturity securities. During December 1995, the Bank transferred
securities with amortized cost of $5,371,299 from held-to-maturity to available-
for-sale. The market value of the securities on that date was $5,478,512.
F-10
<PAGE>
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
(SEE ACCOUNTANTS' COMPILATION REPORT)
NOTE 2. INVESTMENT SECURITIES - (CONTINUED)
Securities held-to-maturity consist of the following at September 30:
1996
---------------------------------------------
GROSS UNREALIZED
---------------------------------------------
AMORTIZED FAIR
COST GAINS LOSSES VALUE
--------- ----- ------ -------
Obligations of states and
political subdivisions $14,512 $ 86 $14,598
Mortgage-backed securities 20,815 282 20,533
------- ----- ---- -------
$35,327 $ 86 $282 $35,131
======= ===== ==== =======
1995
---------------------------------------------
GROSS UNREALIZED
---------------------------------------------
AMORTIZED FAIR
COST GAINS LOSSES VALUE
--------- ----- ------ -------
Obligations of other U.S.
Government Agencies $ 4,151 $ 956 $ 3,195
Obligations of states and
political subdivisions 18,415 527 18,942
Mortgage-backed securities 6,944 62 6,882
------- ----- ------ -------
$29,510 $ 527 $1,018 $29,019
======= ===== ====== =======
Gross losses of approximately $2,000 were realized on securities sold
or called for the nine months ended September 30, 1996. Gross realized
gains and gross realized losses on sales of securities were approximately
$126,000 and $12,000, respectively, in 1996. All dispositions of held-
to-maturity securities were the result of calls or maturities of the
respective security.
F-11
<PAGE>
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
(SEE ACCOUNTANTS' COMPILATION REPORT)
NOTE 2. INVESTMENT SECURITIES - (CONTINUED)
The amortized cost and estimated market value of investment
securities at September 30, 1996 by contractual maturities, are shown
below. Expected maturities will differ from contractual maturities
because borrowers may have the right to call or prepay obligations.
HELD-TO-MATURITY AVAILABLE-FOR-SALE
---------------------- ----------------------
AMORTIZED FAIR AMORTIZED FAIR
COST VALUE COST VALUE
--------- ------- --------- -------
Amounts maturing in:
One year or less $ 5,343 $ 5,350 $ 8,211 $ 7,779
After one year through
five years 24,717 24,532 9,744 9,600
After five years through
ten years 5,082 5,065 465 478
After ten years 185 184 --
------- ------- ------- -------
$35,327 $35,131 $18,450 $17,857
======= ======= ======= =======
For purposes of the maturity table, mortgage-backed securities,
which are not due at a single maturity date, have been allocated over
maturity groupings based on the weighted-average contractural maturities
of underlying collateral. The mortgage-backed securities may mature
earlier than their weighted-average contractural maturities because of
principal prepayments.
Assets, principally securities, carried at approximately
$21,105,000 at September 30,1996 and $21,643,000 at September 30, 1995
were pledged to secure public deposits and for other purposes required or
permitted by law.
NOTE 3. LOANS
A breakdown of loans included in the balance sheet is as
follows as of September 30:
1996 1995
------ ------
(in thousands)
Commercial $17,417 $15,603
Agricultural 5,940 5,947
Real estate:
Residential 25,809 24,632
Commercial 22,133 21,174
Consumer Installment 14,053 13,947
------- -------
$85,352 $81,303
Allowance for loan losses (1,138) (1,095)
------- -------
Loans, net $84,214 $80,208
======= =======
F-12
<PAGE>
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
(SEE ACCOUNTANTS' COMPILATION REPORT)
NOTE 3. LOANS - (CONTINUED)
Changes in the allowance for loan losses were as follows for the nine
months ended September 30:
1996 1995
------ ------
(in thousands)
Balance, beginning of year $ 994 $1,217
Provision charged to operations 330 465
Loans charged off (257) (766)
Recoveries 71 179
------ ------
Balance, end of year $1,138 $1,095
====== ======
NOTE 4. BANK PREMISES AND EQUIPMENT
The following is a summary of bank premises and equipment stated at
cost as of September 30:
1996 1995
------ ------
(in thousands)
Bank premises $ 1,304 $ 1,210
Furniture, fixtures, and equipment 1,985 1,589
------- -------
3,289 2,799
Less: Accumulated depreciation
and amortization (1,730) (1,601)
------- -------
Loans, net $ 1,559 $ 1,198
======= =======
The Bank leases certain office equipment under terms of operating
leases. Total rental expenses and minimum future payments required under
the noncancellable leases are insignificant to the financial statements
for the nine months ended September 30, 1996 and 1995.
NOTE 5. DEPOSITS
Total deposits consisted of the following at September 30:
1996 1995
------ ------
(in thousands)
Demand $ 15,581 $ 14,786
Savings 18,713 18,543
NOW 14,776 14,626
Certificates of deposit less than $100,000 49,222 46,093
Certificates of deposit more than $100,000 24,884 26,573
-------- --------
Total $123,176 $120,621
======== ========
F-13
<PAGE>
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
(SEE ACCOUNTANTS' COMPILATION REPORT)
NOTE 6. INCOME TAXES
The provision for income taxes consisted of the following at
September 30:
1996 1995
------ ------
(in thousands)
Current $992 $645
Deferred (42) 21
---- ----
Total tax provision $950 $666
==== ====
The provision for income taxes differs from that computed by applying
statutory rates to income before income taxes, as indicated in the
following analysis for the nine months :
1996 1995
------ ------
(in thousands)
Expected tax provision at a 37.3% rate $1,145 $ 970
Effect of tax-exempt income (215) (216)
Other, net 20 (88)
------ -----
$ 950 $ 666
====== =====
The temporary differences which give rise to significant portions of
deferred tax assets and liabilities are as follows as of September 30:
1996 1995
------ ------
Deferred tax assets:
Allowance for loan losses $353 $409
Unrealized losses on securities 221 392
Other 12 3
---- ----
Total deferred tax assets 586 804
---- ----
Deferred tax liabilities:
Premises and equipment 11 3
---- ----
11 3
---- ----
Net deferred tax assets $575 $801
==== ====
The ultimate realization of deferred tax assets is dependent upon the
generation of sufficient taxable income in the future periods in which
the temporary differences become deductible for federal tax purposes.
Management believes that based on prior years performance and likelihood
of future taxable income, these assets are more likely than not to be
realized.
F-14
<PAGE>
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
(SEE ACCOUNTANTS' COMPILATION REPORT)
NOTE 7. RELATED PARTY TRANSACTIONS
The Bank makes loans to its officers and directors as well as other
related parties. Loans to related parties amounted to approximately
$200,000 and $256,000 at September 30, 1996 and 1995, respectively.
NOTE 8. PROFIT SHARING PLAN
The Bank has a contributory profit sharing plan. Employees with one
year of service are eligible to participate. Participating employees are
required to contribute 2% of their salaries each year. The Bank also
makes discretionary contributions each year. A provision for the
discretionary contribution of approximately $94,000 is included in the
statements of income for the nine months ended September 30, 1996 and
1995. The Bank contributed a total of $125,000 to the plan in 1995 and
has approved a contribution of $160,000 for 1996.
NOTE 9. COMMITMENTS AND CONTINGENCIES
In the normal course of business, the Bank has various outstanding
commitments to extend credit and standby letters of credit which are not
disclosed in the accompanying financial statements. In the opinion of
management, no significant credit losses will result from these
commitments. On September 30, 1996 the Bank had outstanding standby
letters of credit of approximately $638,000 and commitments to extend
credit under outstanding lines of credit of approximately $6,627,000.
NOTE 10. DUE FROM BANKS
The Company had funds on deposit with other Banks at September 30,
1996 totaling $2,463,052 which were in excess of federal deposit
insurance coverage.
NOTE 11. FAIR VALUE OF FINANCIAL INVESTMENTS
The estimated fair values of the Bank's financial instruments were as
follows:
1996 1995
-------------------- --------------------
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
-------- ----- -------- -----
(in thousands)
Financial assets:
Cash, due from banks,
and federal funds sold $ 8,041 $ 8,041 $ 8,201 $ 8,201
Securities available-
for-sale 17,857 17,857 23,524 23,524
Securities held-to-
maturity 35,327 35,131 29,510 29,019
Loans repricing in one
year or less 65,193 65,193 62,533 62,533
Loans repricing after
one year 19,021 19,021 17,675 17,675
Financial liabilities:
Deposits 123,176 123,176 121,455 121,455
F-15
<PAGE>
[LOGO OF NAIL MCKINNEY APPEARS HERE]
ACCOUNTANTS' COMPILATION REPORT
To the Shareholders and Directors
First National Bank
Pontotoc, Mississippi
We have compiled the accompanying balance sheets of the First National
Bank as of December 31, 1995 and 1994 and the related statements of income,
stockholders' equity and cash flows for the years then ended, in accordance with
Statements on Standards for Accounting and Review Services issued by the
American Institute of Certified Public Accountants.
A compilation is limited to presenting in the form of financial
statements information that is the representation of management. We have not
audited or reviewed the accompanying financial statements and, accordingly, do
not express an opinion or any other form of assurance on them.
Nail McKinney PA
New Albany, Mississippi
December 11, 1996
F-16
<PAGE>
BALANCE SHEETS
FIRST NATIONAL BANK
December 31, 1995 and 1994
(SEE ACCOUNTANTS' COMPILATION REPORT)
<TABLE>
<CAPTION>
1995 1994
----- ------
ASSETS (in thousands)
<S> <C> <C>
Cash and due from banks $ 3,811 $ 3,978
Investment securities - available for sale (at market value) 18,812 29,781
Investment securities - held to maturity (at cost) 33,052 22,568
Federal funds sold 7,100 1,350
Loans 81,596 72,643
Less: Unearned income (1,149) (962)
Allowance for loan losses (994) (1,217)
-------- --------
Net loans 79,453 70,464
Premises and equipment, net 1,202 1,238
Intangibles 467 502
Deferred tax asset 489 1,706
Other assets 2,720 1,908
-------- --------
Total assets $147,106 $133,495
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
Noninterest bearing $ 15,589 $ 16,151
Interest bearing 105,395 95,040
-------- --------
Total deposits 120,984 111,191
Accrued interest and other liabilities 999 938
-------- --------
Total liabilities 121,983 112,129
-------- --------
Stockholders' equity:
Common stock $10 par value,
33,000 shares authorized and issued 330 330
Surplus 21,000 19,500
Undivided profits 4,093 3,681
Unrealized loss on securities available-for-sale (300) (2,145)
-------- --------
Total stockholders' equity 25,123 21,366
-------- --------
Total liabilities and stockholders' equity $147,106 $133,495
======== ========
</TABLE>
________________________________________
The Notes to Financial Statements are an
integral part of these statements.
F-17
<PAGE>
STATEMENTS OF INCOME
FIRST NATIONAL BANK
Years ended December 31, 1995 and 1994
(SEE ACCOUNTANTS' COMPILATION REPORT)
<TABLE>
<CAPTION>
1995 1994
------- ------
INTEREST REVENUE (in thousands)
<S> <C> <C>
Interest and fees on loans $ 7,289 $6,071
Interest on investment securities 3,182 3,052
Interest on federal funds sold 179 90
------- ------
Total interest revenue 10,650 9,213
------- ------
INTEREST EXPENSE
Interest on deposits 4,538 3,314
Other interest 11 14
------- ------
Total interest expense 4,549 3,328
------- ------
Net interest revenue 6,101 5,885
Provision for loan losses (714) (600)
------- ------
Net interest revenue after
provision for loan losses 5,387 5,285
------- ------
OTHER REVENUE
Service fees 1,060 853
Other 20 158
Loss from sale of investment securities (112) (101)
------- ------
968 910
------- ------
OTHER EXPENSE
Salaries and employee benefits $ 1,667 $1,575
Occupancy expense, net of rental
income 308 324
Other expenses 1,067 1,090
------- ------
Total other expense 3,042 2,989
------- ------
Income before income taxes 3,313 3,206
Provision for income taxes 873 1,015
------- ------
Net income $ 2,440 $2,191
======= ======
</TABLE>
- -------------------------------------------
The Notes to Financial Statements are an
integral part of these statements.
F-18
<PAGE>
STATEMENTS OF STOCKHOLDERS' EQUITY
FIRST NATIONAL BANK
Years ended December 31, 1995 and 1994
(SEE ACCOUNTANTS' COMPILATION REPORT)
<TABLE>
<CAPTION>
UNREALIZED
GAIN (LOSS)
COMMON STOCK SECURITIES
----------------- UNDIVIDED AVAILABLE-
SHARES PAR VALUE SURPLUS PROFITS FOR-SALE TOTALS
------ --------- ------- --------- ----------- -------
(in thousands)
<S> <C> <C> <C> <C> <C> <C>
Balance, January 1,
1994 33 $330 $18,000 $ 3,485 $ -- $21,815
Net income 2,191 2,191
Cash dividend
$15 per share (495) (495)
Unrealized loss
on marketable
equity securities (2,145) (2,145)
Transfer to
surplus 1,500 (1,500)
----- ----- ------ ------- ------- ------
Balance, December 31,
1994 33 330 19,500 3,681 (2,145) 21,366
Net income 2,440 2,440
Cash dividend
$16 per share (528) (528)
Unrealized gain
on marketable
equity securities 1,845 1,845
Transfer to
surplus 1,500 (1,500)
----- ----- ------ ------- ------- -------
Balance, December 31,
1995 33 $330 $21,000 $ 4,093 $ (300) $25,123
===== ==== ======= ======= ====== =======
</TABLE>
- --------------------------------------------
The Notes to Financial Statements are an
integral part of these statements.
F-19
<PAGE>
STATEMENTS OF CASH FLOWS
FIRST NATIONAL BANK
Years ended December 31, 1995 and 1994
(SEE ACCOUNTANTS' COMPILATION REPORT)
<TABLE>
<CAPTION>
OPERATING ACTIVITIES 1995 1994
-------- --------
(in thousands)
<S> <C> <C>
Net income $ 2,440 $ 2,191
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 225 163
Provision for loan losses 714 628
Provision for deferred income taxes 119 53
Loss on sale of securities 112 101
Increase in interest receivable and other assets (889) (198)
Increase in interest payable and other liabilities 60 268
------- ------
Net cash provided by operating
activities 2,781 3,206
------- ------
INVESTING ACTIVITIES
Purchases of held-to-maturity securities (22,179) (4,273)
Purchases of available-for-sale securities (2,506) (15,237)
Proceeds from dispositions of
held-to-maturity securities 11,798 1,886
Proceeds from dispositions of
available-for-sale securities 16,236 10,779
Net increase in loans (9,547) (7,231)
Net (increase) decrease in federal funds sold (5,750) 2,450
Purchases of premises and equipment (75) (940)
Net (increase) decrease in other real estate (190) (34)
------- ------
Net cash used in investing activities (12,213) (12,600)
------- ------
FINANCING ACTIVITIES
Net increase in deposits 9,793 9,454
Cash dividends paid (528) (495)
------- ------
Net cash provided by financing
activities 9,265 8,959
------- ------
Decrease in cash and due from banks (167) (435)
Cash and due from banks at beginning of year 3,978 4,413
------- ------
Cash and due from banks at end of year $ 3,811 $ 3,978
------- ------
SUPPLEMENTAL CASH FLOWS INFORMATION
Interest paid $ 3,734 $ 3,421
------- ------
Income taxes paid $ 765 $ 813
------- ------
</TABLE>
- --------------------------------------------
The Notes to Financial Statements are an
integral part of these statements.
F-20
<PAGE>
NOTES TO FINANCIAL STATEMENTS
FIRST NATIONAL BANK
DECEMBER 31, 1995
(SEE ACCOUNTANTS' COMPILATION REPORT)
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING AND REPORTING POLICIES
Operating Environment
---------------------
The Bank grants commercial, residential and consumer installment loans
to its customers. Although the Bank has a diversified loan portfolio,
the majority of its loan customers are located in Pontotoc County,
Mississippi.
Basis of Presentation
---------------------
The Bank recognizes substantially all income and expense on the
accrual method of accounting except certain minor sources of income which
are recorded as received. These exceptions do not have a material affect
on financial statement presentations.
Use of Estimates
----------------
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities
and disclosure of contingent assets and liabilities at the date of the
financial statements. Actual results could significantly differ from
those estimates.
Material estimates that are particularly susceptible to significant
change relate to the determination of the allowance for losses on loans
and the valuation of real estate acquired in connection with foreclosures
or in satisfaction of loans. While management uses available information
to recognize losses on loans and foreclosed real estate, future additions
to the allowances may be necessary based on changes in local economic
conditions. In addition, regulatory agencies, as an integral part of
their examination process, periodically review the Bank's allowances for
losses on loans and foreclosed real estate. Such agencies may require
the Bank to recognize additional losses based on their judgments about
information available to them at the time of their examination. Because
of these factors, it is reasonably possible that the estimated losses on
loans and foreclosed real estate may change materially in the near term.
However, the amount of the change that is reasonably possible cannot be
estimated.
Cash Equivalents
----------------
For purpose of the Statements of Cash Flows, the Bank considers all
highly liquid debt instruments purchased with a maturity of three months
or less to be cash equivalents, which are included in the balance sheet
caption "Cash and due from banks."
F-21
<PAGE>
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
(SEE ACCOUNTANTS' COMPILATION REPORT)
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING AND REPORTING POLICIES - (CONTINUED)
Investment Securities
---------------------
Securities Held to Maturity: Debt securities that management has the
positive intent and ability to hold to maturity are reported at cost,
adjusted for premiums and discounts that are recognized in interest
income using methods approximating the interest method over the period to
maturity.
Securities Available for Sale: Other marketable securities are
carried at fair value. Unrealized gains and losses on securities
available-for-sale are excluded from earnings and reported net of tax in
a separate component of stockholders' equity. Gains and losses on
securities sold are determined using the specific identification method.
Declines in the fair value of individual held-to-maturity and
available-for-sale securities below their cost that are other than
temporary have resulted in write-downs of the individual securities to
their fair value.
Loans and Allowances for Loan Losses
------------------------------------
Loans are stated at the amount of unpaid principal, reduced by
unearned discount and an allowance for loan losses. Unearned discount on
installment loans is recognized as income over the terms of the loans by
the interest method. Interest on other loans is calculated by using
the simple interest method on daily balances of the principal amount
outstanding. The allowance for loan losses is established through a
provision for loan losses charged to expenses. Loans are charged against
the allowance for loan losses when management believes that the
collectibility of the principal is unlikely. The allowance is an amount
that management believes will be adequate to absorb possible losses on
existing loans that may become uncollectible, based on evaluations of the
collectibility of loans and prior loan loss experience. The evaluations
take into consideration such factors as changes in the nature and volume
of the loan portfolio, overall portfolio quality, review of specific
problem loans, and current economic conditions that may affect the
borrowers' ability to pay. Accrual of interest is discontinued on a loan
when management believes, after considering economic and business
conditions and collection efforts, that the borrowers' financial
condition is such that collection of interest is doubtful.
Foreclosed Real Estate
----------------------
Real estate properties acquired through, or in lieu of, loan
foreclosure are to be sold and are initially recorded at fair value at
the date of foreclosure establishing a new cost basis. After
foreclosure, valuations are periodically performed by management and the
real estate is carried at the lower of carrying amount or fair value less
cost to sell.
Bank Premises and Equipment
---------------------------
Premises and equipment are stated at cost less accumulated
depreciation. Provisions for depreciation are computed principally on the
straight-line method and charged to operating expense over the estimated
useful life of the assets. Costs of major additions and improvements are
capitalized. Expenditures for maintenance and repairs are charged against
income as incurred.
F-22
<PAGE>
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
(SEE ACCOUNTANTS' COMPILATION REPORT)
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING AND REPORTING POLICIES - (CONTINUED)
Other Assets
------------
In May 1994, the bank acquired certain deposits of a savings and loan
institution in the bank's market area. To assume the deposits, the bank
paid a premium of $525,000 which is being amortized over 15 years and is
carried net of accumulated amortization on the balance sheet.
Included in the investment securities for 1995 is $408,000 in Federal
Home Loan Bank stock carried at cost, which is required to be held by the
bank to secure any advances that become necessary for liquidity
management.
Income Taxes
------------
The objective of accounting for income taxes is to recognize the
amount of current and deferred taxes payable or refundable at the date of
the financial statements as a result of all events that have been
recognized in the financial statements and as measured by the provisions
of enacted laws. Income taxes currently payable are based on the taxable
income for the year. A deferred tax asset or liability is calculated for
tax consequences attributable to temporary differences between taxable
income and financial accounting income. Temporary differences relate
primarily to depreciation methods, accretion of discounts on investment
securities and provision for loan losses.
Fair Values of Financial Instruments
------------------------------------
The following methods and assumptions were used to estimate the fair
value of each class of financial instruments for which it is practicable
to estimate that value:
Cash and short-term investments:
For those short-term instruments, the carrying amount is a reasonable
estimate of fair value.
Investment securities:
For securities held as investments, fair values are based on quoted
market prices, if available. If quoted market prices are not available,
fair values are estimated using quoted market prices for similar
securities.
Loans receivable:
For variable rate loans and loans that reprice within a year that have
no significant change in credit risk, fair values are based on carrying
values. For the remaining loans in the portfolio that reprice or mature
after one year, it is not currently practicable to estimate the fair
value due to limitations of available information and cost benefit
analysis. At December 31, 1995 and 1994 $1,150 and $1,304 of total loans
had maturities over five years. Management believes the difference
between the carrying value and fair value of all other loans is not
significant in comparison to the loan portfolio.
Deposit liabilities:
The fair values of demand deposits, savings accounts, and certain
money market deposits are the amounts payable on demand at the reporting
date (that is, their carrying amounts). The fair values of fixed-
maturity certificates of deposit are estimated using a discounted cash
flow calculation that applies interest rates currently being offered on
certificates to a schedule of aggregated expected maturities .
F-23
<PAGE>
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
(SEE ACCOUNTANTS' COMPILATION REPORT)
NOTE 2. INVESTMENT SECURITIES
Securities available-for-sale consist of the following:
1995
---------------------------------------------
GROSS UNREALIZED
---------------------------------------------
AMORTIZED FAIR
COST GAINS LOSSES VALUE
--------- ----- ------ -------
U.S. Treasury Securities $ 3,006 $ -- $ 3 $ 3,003
Obligations of other U.S.
Government Agencies 1,699 7 1,692
Obligations of states and
political subdivisions -- --
Mortgage-backed securities 13,624 467 13,157
Other securities 960 960
------- ----- ---- -------
$19,289 $ -- $477 $18,812
======= ===== ==== =======
1994
---------------------------------------------
GROSS UNREALIZED
---------------------------------------------
AMORTIZED FAIR
COST GAINS LOSSES VALUE
--------- ----- ------ -------
U.S. Treasury Securities $ 497 $ -- $ 24 $ 473
Obligations of other U.S.
Government Agencies 3,654 256 3,398
Obligations of states and
political subdivisions -- --
Mortgage-backed securities 28,501 3,141 25,360
Other securities 550 550
------- ----- ------ -------
$33,202 $ -- $3,421 $29,781
======= ===== ====== =======
During 1995 the Financial Accounting Standards Board offered entities
a one-time opportunity, which ended December 31, 1995, to reclassify their
securities among the classes as required by FAS 115 "Accounting for Certain
Investments in Debt and Equity Securities". During this time, entities could
move securities out of the held-to-maturity portfolio without tainting their
other held-to-maturity securities. During December 1995, the Bank transferred
securities with amortized cost of $5,371,299 from held-to-maturity to available-
for-sale. The market value of the securities on that date was $5,478,512.
F-24
<PAGE>
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
(SEE ACCOUNTANTS' COMPILATION REPORT)
NOTE 2. INVESTMENT SECURITIES - (CONTINUED)
Securities held-to-maturity consist of the following:
1995
---------------------------------------------
GROSS UNREALIZED
---------------------------------------------
AMORTIZED FAIR
COST GAINS LOSSES VALUE
--------- ----- ------ -------
U.S. Treasury Securities $ 1,006 $ 12 $ -- $ 1,018
Obligations of states and
political subdivisions 12,812 122 12,934
Mortgage-backed securities 19,234 51 19,183
------- ----- ---- -------
$33,052 $ 134 $ 51 $33,135
======= ===== ==== =======
1994
---------------------------------------------
GROSS UNREALIZED
---------------------------------------------
AMORTIZED FAIR
COST GAINS LOSSES VALUE
--------- ----- ------ -------
Obligations of other U.S.
Government Agencies $ 3,127 $ -- $ 136 $ 2,991
Obligations of states and
political subdivisions 19,441 559 18,882
------- ----- ------ -------
$22,568 $ -- $ 695 $21,873
======= ===== ====== =======
Gross realized gains and gross realized losses on sales of
available-for-sale securities were approximately $171,000 and $283,000,
respectively, in 1995 an $25,000 and $127,000, respectively, in 1994. All
dispositions of held-to-maturity securities were the result of calls or
maturities of the respective securities.
F-25
<PAGE>
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
(SEE ACCOUNTANTS' COMPILATION REPORT)
NOTE 2. INVESTMENT SECURITIES - (CONTINUED)
The amortized cost and estimated market value of investment
securities at December 31, 1995 by contractual maturities, are shown
below. Expected maturities will differ from contractual maturities
because borrowers may have the right to call or prepay obligations.
HELD-TO-MATURITY AVAILABLE-FOR-SALE
---------------------- ----------------------
AMORTIZED FAIR AMORTIZED FAIR
COST VALUE COST VALUE
--------- ------- --------- -------
Amounts maturing in:
One year or less $ 6,850 $ 6,835 $ 3,839 $ 4,309
After one year through
five years 20,955 21,006 3,531 2,943
After five years through
ten years 5,173 5,218 9,346 8,987
After ten years 74 76 2,573 2,573
------- ------- ------- -------
$33,052 $33,135 $19,289 $18,812
======= ======= ======= =======
For purposes of the maturity table, mortgage-backed securities,
which are not due at a single maturity date, have been allocated over
maturity groupings based on the weighted-average contractural maturities
of underlying collateral. The mortgage-backed securities may mature
earlier than their weighted-average contractural maturities because of
principle prepayments.
Assets, principally securities, carried at approximately
$14,388,000 at December 31, 1995, and $15,052,000 at December 31, 1994,
were pledged to secure public deposits and for other purposes required or
permitted by law.
NOTE 3. LOANS
A breakdown of loans included in the balance sheet is as
follows:
1995 1994
------ ------
(in thousands)
Commercial $14,806 $14,336
Agricultural 5,516 1,410
Real estate:
Residential 24,603 20,637
Commerical 21,615 19,476
Consumer Installment 13,907 15,822
------- -------
80,447 71,681
Allowance for loan losses (994) (1,217)
------- -------
Loans, net $79,453 $70,464
======= =======
F-26
<PAGE>
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
(SEE ACCOUNTANTS' COMPILATION REPORT)
NOTE 3. LOANS - (CONTINUED)
Changes in the allowance for loan losses were as follows:
1995 1994
------ ------
(in thousands)
Balance, beginning of year $ 1,217 $ 991
Provision charged to operations 714 600
Loans charged off (1,124) (526)
Recoveries 187 152
------- ------
Balance, end of year $ 994 $1,217
======= ======
.
NOTE 4. BANK PREMISES AND EQUIPMENT
The following is a summary of bank premises and equipment stated at
cost:
1995 1994
------ ------
(in thousands)
Bank premises $ 1,203 $ 1,212
Furniture, fixtures, and equipment 1,620 1,543
------- -------
2,823 2,755
Less: Accumulated depreciation
and amortization (1,621) (1,517)
------- -------
$ 1,202 $ 1,238
======= =======
The Bank leases certain office equipment under terms of operating
leases. Total rental expenses and minimum future payments required under
the noncancellable leases are insignificant to the financial statements
for 1995 and 1994.
NOTE 5. DEPOSITS
Total deposits consisted of the following at December 31:
1995 1994
------ ------
(in thousands)
Demand $ 15,590 $ 16,151
Savings 19,335 22,303
NOW 12,774 14,574
Certificates of deposit less than $100,000 47,419 41,051
Certificates of deposit more than $100,000 25,866 17,112
-------- --------
Total tax provision $120,984 $111,191
======== ========
F-27
<PAGE>
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
(SEE ACCOUNTANTS' COMPILATION REPORT)
NOTE 6. INCOME TAXES
The provision for income taxes consisted of the following:
1995 1994
------ ------
(in thousands)
Current $754 $ 962
Deferred 119 53
---- ------
Total tax provision $873 $1,015
==== ======
The provision for income taxes differs from that computed by applying
statutory rates to income before income taxes, as indicated in the
following analysis:
1995 1994
------ ------
(in thousands)
Expected tax provision at a 37.3% rate $1,235 $1,195
Effect of tax-exempt income (406) (384)
Other, net 44 204
------ ------
$ 873 $1,015
====== ======
The temporary differences which give rise to significant
portions of deferred tax assets and liabilities are as follows:
1995 1994
------ ------
Deferred tax assets:
Allowance for loan losses $370 $ 453
Unrealized losses on securities 179 1,276
Other 3 16
---- ------
Total deferred tax assets 552 1,745
---- ------
Deferred tax liabilities:
Premises and equipment 63 39
---- ------
63 39
---- ------
Net deferred tax assets $489 $1,706
==== ======
The ultimate realization of deferred tax assets is dependent upon the
generation of sufficient taxable income in the future periods in which
the temporary differences become deductible for federal tax purposes.
Management believes that based on prior years performance and likelihood
of future taxable income, these assets are more likely than not to be
realized.
F-28
<PAGE>
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
(SEE ACCOUNTANTS' COMPILATION REPORT)
NOTE 7. RELATED PARTY TRANSACTIONS
The Bank makes loans to its officers and directors as well as other
related parties. Loans to related parties amounted to approximately
$244,000 and $258,000 at December 31, 1995 and 1994 respectively.
NOTE 8. PROFIT SHARING PLAN
The Bank has a contributory profit sharing plan. Employees with one
year of service are eligible to participate. Participating employees are
required to contribute 2% of their salaries each year. The Bank also
makes discretionary contributions each year. The Bank contributed
$125,000 in 1995 and 1994.
NOTE 9. COMMITMENTS AND CONTINGENCIES
In the normal course of business, the Bank has various outstanding
commitments to extend credit and standby letters of credit which are not
disclosed in the accompanying financial statements. In the opinion of
management, no significant credit losses will result from these
commitments. On December 31, 1995 the Bank had outstanding standby
letters of credit of approximately $608,000 and commitments to extend
credit under outstanding lines of credit of approximately $5,330,000.
NOTE 10. DUE FROM BANKS
The Company had funds on deposit with other Banks at December 31, 1995
totaling approximately $1,717,000 which were in excess of federal
deposit insurance coverage.
NOTE 11. FAIR VALUE OF FINANCIAL INVESTMENTS
The estimated fair values of the Bank's financial instruments were as
follows:
1995 1994
-------------------- --------------------
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
-------- ----- -------- -----
(in thousands)
Financial assets:
Cash, due from banks,
and federal funds sold $ 3,811 $ 3,811 $ 3,978 $ 3,978
Securities available-
for-sale 18,812 18,812 29,781 29,781
Securities held-to-
maturity 33,052 33,135 22,568 21,873
Loans repricing in one
year or less 62,570 62,570 55,221 55,221
Loans repricing after
one year 16,883 16,883 15,243 15,243
Financial liabilities:
Deposits 120,984 120,984 111,191 111,191
F-29
<PAGE>
ARTICLES OF INCORPORATION
OF
PONTOTOC BANCSHARES CORP.
-------------------------
ARTICLE I. NAME
The name of the Corporation is Pontotoc BancShares Corp.
ARTICLE II. CAPITAL STOCK
(a) The Corporation has authority to issue 3,000,000 shares of capital
stock which shall be designated as common stock, no par value, and 1,000,000
shares of capital stock which shall be designated as preferred stock, no par
value.
(b) The Board of Directors shall have the power, acting alone, to
determine, in whole or in part, the preferences, limitations and relative rights
of any shares of preferred stock before issuance of such shares, or any series
of preferred stock before the issuance of shares of such series.
ARTICLE III. INCORPORATORS
The name and address of the incorporator is:
F. M. Bush, III
Seventh Floor
One Mississippi Plaza
P. O. Box 1220
Tupelo, Mississippi 38802-1220
ARTICLE IV. REGISTERED AGENT AND REGISTERED OFFICE
The Corporation's original registered agent shall be F. M. Bush, III, and
its registered office shall be located at One Mississippi Plaza, Seventh Floor,
P. O. Box 1220, Tupelo, Mississippi, 38802-1220.
ARTICLE V. TENDER OFFERS
If any person, firm, or corporation, (herein referred to as the Tender
Offeror) or any person, firm, or corporation controlling the Tender Offeror,
controlled by the Tender Offeror, or under common control with the Tender
Offeror, or any group of which the Tender Offeror or any of the foregoing
persons, firms, or corporations are members, or any other group controlling the
Tender Offeror, controlled by the Tender Offeror, or under
<PAGE>
common control with the Tender Offeror owns of record, or owns beneficially,
directly or indirectly, more than 10% of any class of equity voting security of
this Corporation with the Tender Offeror, then any merger or consolidation of
this corporation with the Tender Offeror, or any sale, lease, or exchange of
substantially all of the assets of this Corporation or of the Tender Offeror to
the other may not be effected under the laws of Mississippi unless a meeting of
the shareholders of this Corporation is held to vote thereon and the votes of
the holders of voting securities of this Company representing not less than 80%
of the votes entitled to vote thereon, vote in favor thereof. As used herein,
the term group includes persons, firms, and corporations acting in concert,
whether or not as a formal group, and the term equity security means any share
or similar security; or any security convertible, with or without consideration,
into such a security, or carrying any warrant to subscribe to or purchase such a
security; or any such warrant or right. The foregoing provision is to require a
greater vote of shareholders than is required by Section 11.03 of the
Mississippi Business Corporation Act (dealing with mergers and share exchanges)
and Section 12.02 of the Mississippi Business Corporation Act (dealing with
sales, leases, exchanges and other dispositions of assets outside the usual and
regular course of business) and the provisions of this Article V shall not be
amended, changed or repealed without a similar 80% vote of the voting securities
in this Corporation, which is a greater vote than required by Section 10.03 of
the Mississippi Business Corporation Act (dealing with amendments to these
Articles of Incorporation).
ARTICLE VI. LIMITATION OF LIABILITY
Pursuant to the provisions of Section 2.02(b)(4) of the Mississippi
Business Corporation Act, the directors of the Corporation shall not be liable
to the Corporation or its shareholders for money damages for any action taken,
or any failure to take action, as a director, except liability for: (a) the
amount of a financial benefit received by a director to which he is not
entitled; (b) an intentional infliction of harm on the Corporation or the
shareholders; (c) a violation of Section 8.33 of the Mississippi Business
Corporation Act; or (d) an intentional violation of criminal law.
ARTICLE VII. BOARD OF DIRECTORS
If the number of directors, fixed by the Board of Directors in accordance
with the provisions of the Bylaws of the Corporation, is less than nine (9),
each of the directors shall be elected by the shareholders at each annual
meeting to serve a one-year term, continuing to serve, however, until his
successor is elected and qualifies or until there is a decrease in the number of
directors. If the number of directors fixed by the Board of Directors is nine
(9) or more, the Corporation shall have three classes of directors, each class
to be as nearly equal in number as possible, the term of office of directors of
the first class to expire at the first annual meeting of the shareholders after
their election, that of the second class to expire at the second annual meeting
after their election, and that of the third class to expire at the third annual
meeting after their election. At each annual meeting after such classification,
the number of directors equal to the number of the class whose term expires at
the time of
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such meeting shall be elected to hold office and the directors so elected shall
serve a term of three (3) years to succeed those whose terms expire.
Directors shall be elected only at annual meetings of shareholders, and any
vacancy in the Board of Directors, however created, shall be filled at the
annual meeting succeeding the creation of such vacancy. Shareholders shall not
be entitled to cumulative voting in electing directors of the Corporation. If
the number of directors is changed by the Board of Directors, and if there are
nine (9) or more directors, any increase or decrease shall be apportioned among
the classes so as to maintain the number of directors in each class as nearly
equal as possible, and any additional director of any class elected to fill a
vacancy resulting from an increase in such class shall hold office for a term
that shall coincide with the remaining term of that class, but in no case will a
decrease in the number of directors shorten the term of any incumbent director.
No member of the Board of Directors may be removed during his term without
cause. No member of the Board of Directors may be removed with cause except at
a meeting called in accordance with the Bylaws expressly for that purpose and
except upon a vote in favor of such removal of the holders of eighty percent
(80%) of the shares then entitled to vote at an election of directors; and in
the event that less than the entire Board is to be removed, no one of the
directors may be removed if the votes cast against his removal would be
sufficient to elect him if then cumulatively voted at an election of the class
of directors of which he is a part.
The vote of shareholders required to alter, amend or repeal this Article
VII, or to alter, amend or repeal any other Article of the Articles of
Incorporation in any respect which would or might have the effect, direct or
indirect, of modifying, permitting any action inconsistent with, or permitting
circumvention of this Article VII, shall be by the affirmative vote of at least
eighty percent (80%) of the total voting power of all shares of stock of the
Corporation entitled to vote in the election of directors, considered for
purposes of this Article as one class.
ARTICLE VIII. INDEMNIFICATION
Whenever any present or former director, officer, employee or agent of the
Corporation who, by reason of the fact that such party is or was serving at the
request of the Corporation in such capacity, is made a party to any suit, action
or proceeding, whether civil, criminal, administrative, or investigative,
including any action by or in the right of the Corporation ("Indemnitee"), the
Indemnitee shall be indemnified against liability and reasonable expenses,
including attorney's fees, incurred by the Indemnitee in connection with such
action, suit, or proceeding, if the Indemnitee meets the requisite Standard of
Conduct, as defined in the Bylaws of the Corporation and in Section 8.51(a)(2) &
(b) of the Mississippi Business Corporation Act; provided however, that no such
mandatory indemnification shall apply with respect to any Indemnitee found (a)
to have received a financial benefit to which such Indemnitee is not entitled;
(b) to have intentionally inflicted
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harm on the Corporation or its shareholders; (c) to have violated Section 8.33
of the Mississippi Business Corporation Act by voting for or assenting to the
making of an excessive distribution to shareholders in violation of Section 6.40
of the Mississippi Business Corporation Act or the Articles of Incorporation; or
(d) to have intentionally violated criminal law.
The vote of shareholders required to alter, amend or repeal this Article
VIII, or to alter, amend or repeal any other Article of the Articles of
Incorporation in any respect which would or might have the effect, direct or
indirect, of modifying, permitting any action inconsistent with, or permitting
circumvention of this Article VIII, shall be by the affirmative vote of at least
eighty percent (80%) of the total voting power of all shares of stock of the
Corporation entitled to vote in the election of directors, considered for
purposes of this Article as one class.
ARTICLE IX. SPECIAL MEETINGS OF SHAREHOLDERS
The Corporation shall hold a special meeting of the shareholders:
(a) On call of the Board of Directors or the president of the Corporation;
or
(b) If the holders of not less than a majority of all issued and
outstanding shares of stock entitled to vote on any issue proposed to
be considered at the special meeting so called shall deliver to the
secretary of the Corporation one or more written demands for the
special meeting. Such written demands shall be signed, dated and
delivered to the secretary of the Corporation no less than forty-five
(45) days prior to the special meeting date requested and shall
describe the purpose or purposes for which such special meeting is to
be held. Only business within the stated purpose or purposes
described in the demand may be conducted at the special meeting unless
the notice of the special meeting sent out to all shareholders by the
Corporation specifies other purposes for such special meeting.
ARTICLE X. SHAREHOLDER PROPOSALS
If any shareholder desires to submit a proposal for action at any meeting
of shareholders, including the nomination of one or more individuals for
election as a director, such shareholder (herein referred to as the "Proponent")
and proposal must satisfy and comply with all of the following conditions and
requirements:
(a) At the time of submitting the proposal, the Proponent must be the
record or beneficial owner of shares having voting power on the
proposal at the meeting and have held such shares for at least one
year, and the Proponent shall continue to own such shares through the
date on which the meeting is held;
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(b) The proposal must be submitted in writing and be accompanied by
written disclosure of the Proponent's name, address, number of shares
owned, the dates upon which such shares were acquired, and documentary
support of the Proponent's ownership of such shares;
(c) The proposal and other required material must be received by the
Corporation not less than 120 days in advance of the date that
corresponds with the date of the Corporation's proxy statement sent to
shareholders in connection with the previous year's annual meeting of
shareholders (in the case of a proposal submitted in connection with
an annual meeting) or not less than 45 days in advance of the date on
which the meeting is scheduled to be held or within 10 days after
notice of the meeting is first given to shareholders, whichever is
later (in the case of a proposal submitted in connection with a
special meeting of shareholders);
(d) If the proposal nominates one or more individuals for election as a
director, the proposal must include or be accompanied by a written
statement of each nominee's qualifications for election as a director
and the nominee's signed consent to being named as such a nominee and
to serve if elected; and
(e) The proposal must be presented at the meeting for which it is
submitted by the Proponent or a duly authorized and qualified
representative.
If the Proponent or proposal fails, in any respect, to satisfy and comply
with all of the foregoing conditions and requirements, the proposal shall be
deemed as not properly coming before the meeting and no votes cast in support of
the proposal shall be given effect, except for the purpose of determining the
presence of a quorum at the meeting.
Notwithstanding anything herein to the contrary, the Corporation may
exclude from consideration by shareholders at any meeting of shareholders any
proposal permitted or required to be excluded from consideration by applicable
law, rule or regulation, and this Article X shall not be applicable to proposals
placed before any meeting of shareholders by action of the Board of Directors.
The vote of shareholders required to alter, amend or repeal this Article X,
or to alter, amend or repeal any other Article of the Articles of Incorporation
in any respect which would or might have the effect, direct or indirect, of
modifying, permitting any action inconsistent with, or permitting circumvention
of this Article X, shall be by the affirmative vote of at least eighty percent
(80%) of the total voting power of all shares of stock of the Corporation
entitled to vote in the election of directors, considered for purposes of this
Article as one class.
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ARTICLE XI. OTHER CONSTITUENCIES
The Board of Directors of the Corporation, in connection with the
exercise of its judgment in determining what is in the best interest of the
Corporation and its shareholders when evaluating any proposed Major Business
Transaction (as defined below), in addition to considering the adequacy of the
amount of consideration to be paid in connection with such transaction, shall
consider all of the following factors and any other factors which it deems
relevant:
(a) the social and economic effects of the transaction on the Corporation,
any subsidiary, depositors, loan and other customers, creditors and
employees of the Corporation and its subsidiaries, and other elements
of the community in which the Corporation and its subsidiaries operate
or are located;
(b) the business, financial condition and earnings prospects of the
acquiring person, including, but not limited to, debt service and
other existing or likely financial obligations of the acquiring
person, and the possible effect of such conditions upon the
Corporation, its subsidiaries and the other elements of the community
in which the Corporation and its subsidiaries operate or are located;
and
(c) the competence, experience and integrity of the acquiring person and
its management.
For purposes of this Article, the term "Major Business Transaction" shall
mean (i) any merger or consolidation of the Corporation or any subsidiary, (ii)
any sale, exchange, transfer or other disposition of all or substantially all of
the Corporation's or any subsidiary's assets, (iii) any offer to purchase any or
all of the Corporation's securities, or (iv) any similar transaction or event.
The vote of shareholders required to alter, amend or repeal this Article
XI, or to alter, amend or repeal any other Article of the Articles of
Incorporation in any respect which would or might have the effect, direct or
indirect, of modifying, permitting any action inconsistent with, or permitting
circumvention of this Article XI, shall be by the affirmative vote of at least
eighty percent (80%) of the total voting power of all shares of stock of the
Corporation entitled to vote in the election of directors, considered for
purposes of this Article XI as one class.
ARTICLE XII. CONTROL SHARE ACQUISITIONS
The Corporation hereby elects to be governed by the provisions of the
Mississippi Control Share Act, (S)79-27-1 et. seq., and to be an "issuing public
corporation" for all purposes thereof.
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The vote of shareholders required to alter, amend or repeal this Article
XII, or to alter, amend or repeal any other Article of the Articles of
Incorporation in any respect which would or might have the effect, direct or
indirect, of modifying, permitting any action inconsistent with, or permitting
circumvention of this Article XII, shall be by the affirmative vote of at least
eighty percent (80%) of the total voting power of all shares of stock of the
Corporation entitled to vote in the election of directors, considered for
purposes of this Article as one class.
Dated this the 16th day of December, 1996.
/s/ F. M. BUSH, III
----------------------------------
F. M. Bush, III, Incorporator
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BYLAWS
OF
PONTOTOC BANCSHARES CORP.
-------------------------
Preamble: These Bylaws are subordinate to and governed by the provisions of (1)
the Articles of Incorporation of this Corporation; and (2) the Mississippi
Business Corporation Act, except to the extent that these Bylaws or the
Articles of Incorporation specifically provide to the contrary, to the extent
allowed by the Mississippi Business Corporation Act and Mississippi state law.
ARTICLE I. OFFICES
The principal office of the Corporation in the State of Mississippi shall
be located in the City of Pontotoc, County of Pontotoc. The Corporation may
have such other offices, either within or without the State of Mississippi, as
the Board of Directors may designate or as the business of the Corporation may
require from time to time.
ARTICLE II. SHAREHOLDERS
SECTION 1. Annual Meeting. The annual meeting of the shareholders shall
be held on the third Tuesday in the month of March at 2:00 p.m. each year, or if
that falls on a legal holiday, on the next following business day, for the
purpose of electing directors and for the transaction of such other business as
may come before the meeting. If the election of directors shall not be held on
the day designated, under Section 4 of this Article II for any annual meeting of
the shareholders, or at any adjournment thereof, the Board of Directors shall
cause the election to be held at a special meeting of the shareholders as soon
thereafter as may be convenient.
SECTION 2. Special Meetings. Special meetings of the shareholders, for
any purpose or purposes, unless otherwise prescribed by statute, may be called
by the president of the Corporation or by the Board of Directors, and shall be
called by the secretary when the holders of not less than a majority of all
issued and outstanding shares of stock entitled to vote on any issue proposed to
be considered at the special meeting sign and date a request for a special
meeting describing the purpose or purposes for which it is to be held, and
deliver the request to the secretary no less than forty-five (45) days prior to
the date requested for such special meeting. Only business within the purpose
or purposes described in the special meeting notice may be conducted at a
special meeting of the shareholders.
SECTION 3. Place of Meeting. The Board of Directors may designate any
place, either within or without the State of Mississippi, as the place of the
meeting for any annual meeting or for any special meeting. A waiver of notice
signed by all shareholders entitled to vote at a meeting may designate any
place, either within or without the State of Mississippi, as the place
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for a special meeting. Unless otherwise noticed, the place of the meeting shall
be the principal business office of the Corporation in the State of Mississippi.
SECTION 4. Notice of Meeting. Written notice stating the date, time and
place of the meeting and, in case of a special meeting, the purpose or purposes
for which the meeting is called, shall be delivered not less than ten (10) nor
more than sixty (60) days before the date of the meeting by or at the direction
of the person or entity calling the meeting. A shareholder may waive notice
before or after the date and time stated in the notice. The waiver must be in
writing, signed by the shareholder entitled to the notice, and delivered to the
corporation for inclusion in the minutes or filing with the corporate records.
SECTION 5. Closing of Transfer Books and Fixing of Record Date. For the
purpose of determining shareholders entitled to notice of or to vote at any
meeting of shareholders or any adjournment thereof, or shareholders entitled to
receive payment of any dividend, or in order to make a determination of
shareholders for any other proper purpose, the Board of Directors of the
Corporation may provide that the stock transfer books shall be closed for a
stated period, but not to exceed, in any case, seventy (70) days. If the stock
transfer books shall be closed for the purpose of determining shareholders
entitled to notice of or to vote at a meeting of shareholders, such books shall
be closed for at least ten (10) days immediately preceding such meeting. In
lieu of closing the stock transfer books, the Board of Directors may fix in
advance a date as the record date for any such determination of shareholders,
such date in any case to be no more than seventy (70) days, and in the case of a
meeting of the shareholders, not less than ten (10) days prior to the date on
which the particular action requiring such determination of shareholders is to
be taken. Only persons in whose names shares appear on the stock records of the
Corporation as of the record date shall be entitled to vote at such meeting. If
the stock transfer books are not closed and no record date is fixed for the
determination of shareholders entitled to notice of or to vote at an annual or
special shareholders' meeting, the last business day immediately preceding the
date on which the first notice of the meeting is delivered to shareholders shall
be the record date for such determination of shareholders. If the Board of
Directors does not fix the record date for determining shareholders entitled to
a distribution (other than one involving a repurchase or reacquisition of
shares), the record date is the date the Board of Directors authorizes the
distribution. When a determination of shareholders entitled to vote at any
meeting of shareholders has been made as provided in this section, such
determination shall apply to any adjournment thereof, unless the Board of
Directors fixes a new record date. A new record date must be fixed if the
meeting is adjourned for more than one hundred twenty (120) days after the date
fixed for the original meeting.
SECTION 6. Voting Lists. The officer or agent having charge of the stock
transfer books for shares of the Corporation shall make a complete list of the
shareholders entitled to vote at each meeting of shareholders or any adjournment
thereof, arranged by voting group, if applicable, and in alphabetical order,
with the address of the Shareholders and the number of shares held by each.
Beginning two (2) business days after notice of the meeting, the voting list
shall be kept on file at the principal office of the Corporation and shall be
subject to inspection by any shareholder at any time during usual business
hours. Such list shall be produced and
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kept open at the time and place of the meeting and shall be subject to the
inspection of any shareholder, and such shareholder's agent or attorney, during
the whole time of the meeting or any adjournment thereof.
SECTION 7. Quorum. Unless otherwise specifically required in the Articles
of Incorporation, a majority of the outstanding shares of the Corporation
entitled to vote, represented in person or by proxy, shall constitute a quorum
at a meeting of shareholders. If less than a majority of the outstanding shares
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
noticed. Once a share is represented for any purpose at a meeting, it is deemed
present for quorum purposes for the remainder of the meeting and for any
adjournment of that meeting unless a new record date is or must be set for that
adjourned meeting.
SECTION 8. Proxies. Every proxy must be dated and signed by the
shareholder or by his duly authorized attorney-in-fact. Such proxy shall be
filed with the secretary of the Corporation before or at the time of the
meeting. No proxy shall be valid after eleven months from the date of its
execution, unless otherwise provided in the proxy. A proxy is revocable by the
shareholder unless the proxy conspicuously states that it is irrevocable and is
coupled with an interest (as provided in Mississippi Business Corporation Act
Section 7.22).
SECTION 9. Voting of Shares. At each meeting of the shareholders, every
holder of shares then entitled to vote shall vote in person or by proxy and
shall have one vote for each share registered in his name upon each matter
submitted to a vote in the meeting of the shareholders. Unless otherwise
specifically required in the Articles of Incorporation, the vote of a majority
of the shares present at any meeting at which there is a quorum shall be the act
of the shareholders.
SECTION 10. Voting of Shares by Certain Holders. Shares of this
Corporation registered in the name of another corporation may be voted by such
officer, agent, or proxy as the bylaws of such other corporation may prescribe,
or, in the absence of such provision, as the board of directors of such other
corporation may determine. Provided, however, that shares are not entitled to
vote if they are owned, directly or indirectly, by another corporation in which
this Corporation owns, directly or indirectly, a majority of the shares entitled
to vote for directors of the other corporation.
Prior to any applicable reacquisition of shares under these Bylaws, shares
held by an administrator, executor, guardian, conservator, attorney-in-fact,
trustee, receiver, or trustee in bankruptcy, may be voted by an existing
shareholder of the Corporation by proxy issued by the administrator, executor,
guardian, conservator, attorney-in-fact, trustee, receiver, or trustee in
bankruptcy, without a transfer of such shares into such existing shareholder's
name. The Corporation may request evidence of the representative capacity of
the signatory to sign any vote, consent, waiver or proxy appointment. When two
or more persons are shareholders as
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cotenants or fiduciaries, one cotenant or fiduciary may vote the shares where it
appears the person is acting on behalf of all co-owners. The Corporation may
request evidence of the representative capacity of the signatory to sign any
vote, consent, waiver or proxy appointment.
A shareholder whose shares are pledged shall be entitled to vote such
shares until the shares have been transferred into the name of the pledgee, and
thereafter shares held by the pledgee may be voted by an existing shareholder of
the Corporation by proxy issued by the pledgee, without a transfer of such
shares into such existing shareholder's name.
Shares of its own stock belonging to the Corporation shall not be voted,
directly or indirectly, at any meeting, and shall not be counted in determining
the total number of outstanding shares at any given time.
SECTION 11. Voting for Directors. Directors are elected by a plurality of
the votes cast by the shares entitled to vote in the election at a meeting at
which a quorum is present. Shareholders shall not be entitled to cumulative
voting in electing directors of the Corporation.
SECTION 12. Shareholder Proposals. If any shareholder desires to submit a
proposal for action at any meeting of shareholders, including the nomination of
one or more individuals for election as a director, such shareholder
(hereinafter the "Proponent") and proposal must satisfy and comply with all of
the following conditions and requirements:
(i) At the time of submitting the proposal, the Proponent must be the
record or beneficial owner of shares having voting power on the
proposal at the meeting and have held such shares for at least
one year, and the Proponent shall continue to own such shares
through the date on which the meeting is held.
(ii) The proposal must be submitted in writing and be accompanied by
written disclosure of the Proponent's name, address, number of
shares owned, the dates upon which such shares were acquired, and
documentary support of the Proponent's ownership of such shares.
(iii) The proposal and other required material must be received by
the Corporation not less than 120 days in advance of the date
that corresponds with the date of the Corporation's proxy
statement sent to shareholders in connection with the previous
year's annual meeting of shareholders (in the case of a proposal
submitted in connection with an annual meeting) or not less than
45 days in advance of the date on which the meeting is scheduled
to be held or within 10 days after notice of the meeting is first
given to shareholders, whichever is later (in the case of a
proposal submitted in connection with a special meeting of
shareholders).
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(iv) If the proposal nominates one or more individuals for election as
a director, the proposal must include or be accompanied by a
written statement of each nominee's qualifications for election
as a director and the nominee's signed consent to being named as
such a nominee and to serve if elected.
(v) The proposal must be presented at the meeting for which it is
submitted by the Proponent or a duly authorized and qualified
representative.
If the Proponent or proposal fails, in any respect, to satisfy and comply
with all of the foregoing conditions and requirements, the proposal shall be
deemed as not properly coming before the meeting and no votes cast in support of
the proposal shall be given effect, except for the purpose of determining the
presence of a quorum in accordance with Section 7 of this Article II.
Notwithstanding any provision of these Bylaws to the contrary, the Corporation
may exclude from consideration by shareholders at any meeting of shareholders
any proposal permitted or required to be excluded from consideration by
applicable law, rule or regulation. This Section 12 shall not be applicable to
proposals placed before any meeting of shareholders by action of the Board of
Directors.
ARTICLE III. BOARD OF DIRECTORS
SECTION 1. General Powers. The business and affairs of the Corporation
shall be managed under the direction of its Board of Directors. All corporate
powers may be exercised by or under the authority of the Board of Directors.
SECTION 2. Number, Tenure and Qualification. The initial number of
directors for purposes of organizing the Corporation shall be one (1);
thereafter, the number of directors of the Corporation shall be not less than
six (6) nor more than twelve (12) and shall be determined, from time to time, by
resolution of the Board of Directors. Each director shall hold office until the
next annual meeting of shareholders or until such director's successor shall
have been elected and qualified. A director need not be a Mississippi resident.
A director, other than the initial director, must be a shareholder of the
Corporation and must own a number of shares of stock having a value at least
equal to a total book value of twenty-five thousand dollars ($25,000).
SECTION 3. Removal or Resignation of Directors. A director may not be
removed during his term without cause. The shareholders may remove one or more
directors with cause only at a meeting called in accordance with these Bylaws
expressly for that purpose and only upon a vote in favor of such removal of the
holders of eighty percent (80%) of the shares then entitled to vote at an
election of directors. In the event that less than the entire Board is to be
removed, no one of the directors may be removed if the votes cast against his
removal would be sufficient to elect him if then cumulatively voted at an
election of the class of directors of which he is a part. A director may be
removed by the shareholders only at a meeting called for the purpose of removing
such director and the notice for such meeting must state that the purpose, or
one of the purposes, of the meeting is removal of the director. Any director
may
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resign by giving written notice to the president of the Corporation or to the
Board of Directors or to the Corporation. Unless a later effective date is
specified in such notice, the resignation shall take effect upon delivery. A
resignation need not be accepted in order to become effective.
SECTION 4. Annual and Regular Meetings. An annual meeting of the Board of
Directors shall be held without other notice than this bylaw immediately after,
and at the same place as, the annual meeting of shareholders. The Board of
Directors may provide, by resolution, the time and place for the holding of
regular meetings without other notice than such resolution.
SECTION 5. Special Meetings. Special meetings of the Board of Directors
may be called by or at the request of the president or a majority of the number
of directors fixed by Section 2 of this Article III. Special meetings shall be
held at the place fixed by the Board of Directors for the holding of meetings,
or if no such place has been fixed, at the principal business office of the
Corporation. Notice of any special meeting shall be given at least two (2) days
prior thereto. Such notice shall state the date, time and place of the special
meeting of the Board of Directors, but need not describe the purpose or purposes
for the special meeting of the Board of Directors. Before or after the date
stated in the notice, any director may waive notice of any meeting in writing
signed by the director, and filed with the minutes or corporate records. 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, and the objecting director does not vote for or
assent to action taken at a meeting.
SECTION 6. Quorum and Voting. A majority of the number of directors fixed
by Section 2 of this Article III shall constitute a quorum for the transaction
of business at any meeting of the Board of Directors, but if less than such
majority is present at a meeting, a majority of the directors present may
adjourn the meeting from time to time without further notice. If a quorum is
present at the meeting, then the vote of a majority of the directors present at
the meeting shall be the act of the Board of Directors. At all meetings of the
Board of Directors, each director shall have one vote.
SECTION 7. Action Without a Meeting. Any action that may be taken by the
Board of Directors at a meeting may be taken without a meeting if one or more
written consents, setting forth the actions to be taken, shall be signed by all
of the directors, and filed in the corporate minutes. Action taken under this
section is effective when the last director signs the consent, unless the
consent specifies a different effective date. A consent signed under this
Section has the effect of a meeting vote and may be described as such in any
document.
SECTION 8. Vacancies. Any vacancy occurring on the Board of Directors,
including a vacancy resulting from an increase of the number of directors, shall
be filled at the annual meeting of the shareholders succeeding the creation of
such vacancy.
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SECTION 9. Compensation. By resolution of the Board of Directors, each
director may be paid such director's expenses, if any, of attendance at each
meeting of the Board of Directors, and may be paid a stated salary as a director
or a fixed sum for attendance at each meeting of the Board of Directors or both.
No such payment shall preclude any director from serving the Corporation in any
other capacity and receiving compensation therefor.
SECTION 10. Presumption of Assent. A director of the Corporation who is
present at a meeting of the Board of Directors at which action on any corporate
matter is taken shall be presumed to have assented to the action taken unless
(i) such director objects at the beginning of the meeting, or promptly upon such
director's arrival; (ii) such director's dissent or abstention from action taken
is entered in the minutes of the meeting; or (iii) such director delivers
written notice of dissent or abstention to such action to the presiding officer
of the meeting before the adjournment thereof or shall forward such dissent by
registered mail to the secretary of the Corporation immediately after the
adjournment of the meeting. Such right to dissent shall not apply to a director
who voted in favor of such action.
SECTION 11. Committee. The Board of Directors, by resolution adopted by
majority of the full Board of Directors, may designate from among its members an
executive committee and one or more other committees. Each such committee, to
the extent provided in such resolution, shall have and may exercise all of the
authority of the Board of Directors, but no such committee shall have the
authority of the Board of Directors in reference to: (i) amending the Articles
of Incorporation; (ii) authorizing distributions; (iii) adopting a plan of
merger or consolidation; (iv) recommending to the shareholders the sale, lease,
exchange, mortgage, pledge, or other disposition of all or substantially all of
the property and assets of the Corporation otherwise than in the usual and
regular course of its business; (v) recommending to the shareholders a voluntary
dissolution of the Corporation or a revocation thereof; or (vi) amending the
Bylaws of the Corporation. The designation of any such committee and the
delegation thereto of authority shall not operate to relieve the Board of
Directors, or any member thereof, of any responsibility imposed by law.
SECTION 12. Participation in Meetings by Communications Equipment. Any or
all directors may participate in any regular or special meeting of the Board of
Directors by means of conference telephone or similar communications equipment
that enables all directors to simultaneously hear each other during the meeting.
Such participation shall constitute presence in person at such meeting.
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SECTION 13. Limitation of Liability. Pursuant to the provisions of
Section 2.02(b)(4) of the Mississippi Business Corporation Act, the directors of
the Corporation shall not be liable to the Corporation or its shareholders for
money damages for any action taken, or any failure to take action, as a
director, except liability for: (i) the amount of a financial benefit received
by a director to which he is not entitled; (ii) an intentional infliction of
harm on the Corporation or the shareholders; (iii) a violation of Section 8.33
of the Mississippi Business Corporation Act; or (iv) an intentional violation of
criminal law.
ARTICLE IV. OFFICERS
SECTION 1. Number. The officers of the Corporation shall be a president
and a secretary, each of whom shall be elected by the Board of Directors. One
or more vice presidents, a treasurer and such other officers and assistant
officers as may be deemed necessary may be elected or appointed by the Board of
Directors. An individual may simultaneously hold more than one office in the
Corporation.
SECTION 2. Election and Term of Officers. The officers of the Corporation
shall be elected by the Board of Directors at each annual meeting of the Board
of Directors. If the election of officers shall not be held at such meeting,
such election shall be held as soon thereafter as may be convenient. Each
officer shall hold office until such officer's successor shall have been duly
elected and shall have qualified or until such officer's death or until such
officer shall resign or shall have been removed in the manner hereinafter
provided.
SECTION 3. Resignation and Removal. Any officer may resign at any time by
delivering notice to the Corporation. Such resignation is effective when the
notice is delivered unless the notice specifies a later date. Any officer or
agent may be removed by the Board of Directors at any time with or without
cause, but such removal shall be without prejudice to the contract rights, if
any, of the person so removed. Election or appointment of an officer or agent
shall not of itself create contract rights between the officer or agent and the
Corporation. The removal or resignation of an officer shall not affect any
contract rights between the officer and the Corporation.
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. President. The president shall be the principal executive
officer of the Corporation and, subject to the control of the Board of
Directors, shall have general supervision and control of the business and
affairs of the Corporation. The president shall, when present, preside at all
meetings of the shareholders and of the Board of Directors. The president may
sign, with the secretary or any other proper officer of the Corporation
thereunto authorized by the Board of Directors, certificates for shares of the
Corporation, any deeds, mortgages, bonds, contracts, or other instruments which
the Board of Directors has authorized to be executed, except in cases where the
signing and execution thereof shall be expressly delegated by the
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Board of Directors or by these Bylaws to some other officer or agent of the
Corporation, or shall be required by law to be otherwise signed or executed; and
in general shall perform all duties incident to the office of president and such
other duties as may be prescribed by the Board of Directors from time to time.
Unless otherwise directed by the Board of Directors, the president shall also
have the power to vote or otherwise act on behalf of the Corporation, in person
or by proxy, at any meeting of shareholders of or with respect to any action of
shareholders of any other Corporation in which this Corporation may hold
securities and otherwise to exercise any and all rights and powers which this
Corporation may possess by reason of its ownership of securities in such other
Corporation.
SECTION 6. Vice President. In the absence of the president or in the
event of his death, inability or refusal to act, the vice president, if any,
shall perform the duties of the president, and when so acting, shall have all
the powers of and be subject to all the restrictions upon the president. The
vice president shall perform such other duties as from time to time may be
assigned to him by the president or by the Board of Directors.
SECTION 7. Secretary. The secretary shall (i) keep the minutes of the
proceedings of the shareholders and of the Board of Directors in one or more
books provided for that purpose; (ii) see that all notices are duly given in
accordance with the provisions of these Bylaws or as required by law; (iii) be
custodian of the corporate records and of the seal of the Corporation and see
that the seal of the Corporation is affixed to all documents the execution of
which on behalf of the Corporation under its seal is duly authorized; (iv) keep
a register of the post office address of each shareholder which shall be
furnished to the secretary by each such shareholder; (v) sign with the president
certificates for shares of the Corporation the issuance of which shall have been
authorized by resolutions of the Board of Directors; (vi) have general charge of
the stock transfer books of the Corporation; (vii) in general perform all duties
incident to the office of secretary and such other duties as from time to time
may be assigned to the secretary by the president or by the Board of Directors.
SECTION 8. Treasurer. The treasurer, if any, shall: (i) have charge and
custody of and be responsible for all funds and securities of the Corporation;
(ii) receive and give receipts for monies due and payable to the Corporation
from any source whatsoever, and deposit all such monies in the name of the
Corporation in such banks, trust companies or other depositories as shall be
selected in accordance with the provisions of Article V of these Bylaws; and
(iii) in general perform all of the duties incident to the office of treasurer
and such other duties as from time to time may be assigned to the treasurer by
the president or by the Board of Directors. If required by the Board of
Directors, the treasurer shall give a bond for the faithful discharge of the
treasurer's duties in such sum and with such surety or sureties as the Board of
Directors shall determine.
SECTION 9. Salaries. The salaries of the officers shall be fixed from
time to time by the Board of Directors and no officer shall be prevented from
receiving such salary by reason of the fact that such officer is also a director
of the Corporation.
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ARTICLE V. CONTRACTS, LOANS, CHECKS AND DEPOSITS
SECTION 1. Contracts. The Board of Directors may authorize any officer or
officers, agent or agents, to enter into any contract or execute and deliver any
instrument in the name of and on behalf of the Corporation, and 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 evidences of indebtedness shall be issued in its name unless
authorized by a resolution of 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 such officer or officers, agent or
agents of the Corporation and in such manner 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 such
banks, companies or other depositories as the Board of Directors may select.
ARTICLE VI. CERTIFICATES FOR SHARES AND THEIR TRANSFER
SECTION 1. Capital Stock. The capital stock of this Corporation shall be
divided into three million (3,000,000) shares of common stock with no par value
and one million (1,000,000) shares of preferred stock with no par value. The
Board of Directors shall have the power, acting alone, to determine, in whole or
in part, the preferences, limitations and relative rights of any preferred stock
issued by the Corporation and such preferred stock shall have such rights,
preferences and limitations as designated by the Board of Directors in the
Articles of Incorporation prior to the issuance of such preferred shares. The
Board of Directors shall have the right to establish and, when necessary, to
change the sale price of said stock from time to time by proper action, subject
to the provisions of the Articles of Incorporation. This stock shall be issued
from time to time and in such amounts as the Board of Directors may determine.
SECTION 2. Certificates for Shares. Certificates representing shares of
the Corporation shall be in such form as shall be determined by the Board of
Directors. Such certificates shall be signed by the president and by the
secretary or by such other officers authorized by law and by the Board of
Directors so to do, and sealed with the corporate seal. All certificates for
shares shall be consecutively numbered or otherwise identified. The name and
address of the person to whom the shares represented thereby are issued, with
the number of shares and date of issue, shall be entered on the stock transfer
books of the Corporation. All certificates surrendered to the Corporation for
transfer shall be cancelled and no new certificate shall be issued until the
former certificate for a like number of shares shall have been surrendered and
cancelled, except that in case of a lost, destroyed, or mutilated certificate a
new one may be
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issued therefor upon such terms and indemnity to the Corporation as the Board of
Directors may prescribe.
SECTION 3. Transfer of Shares. Transfer of shares of the Corporation
shall be valid only upon the transfer of such shares on the stock transfer books
of the Corporation, after (i) a request by the holder of record thereof, or by
such holder's legal representative who shall furnish proper evidence of
authority to transfer, or by such holder's attorney thereunto authorized by
power of attorney duly executed and filed with the secretary of the Corporation,
and (ii) the surrender for cancellation of the certificate for such shares. The
person in whose name shares stand on the books of the Corporation shall be
deemed by the Corporation to be the owner thereof for all purposes.
SECTION 4. Restriction on Transfer of Shares. The Corporation shall
recognize and give full force and effect to any lawful agreement by and among
the shareholders that restrict transfer of their shares of stock or prescribes
the manner of such a transfer. Any such restriction on the transfer of shares
must be noted conspicuously on the certificate.
ARTICLE VII. FISCAL YEAR
The fiscal year of the Corporation shall begin on the 1st day of January
and end on the 31st day of December in each year.
ARTICLE VIII. DIVIDENDS
The Board of Directors may from time to time declare, and the Corporation
may pay, dividends on its outstanding shares in the manner and upon the terms
and conditions provided by law and its Articles of Incorporation.
ARTICLE IX. INDEMNIFICATION
SECTION 1. Right of Corporation to Insure. The Corporation may purchase
and maintain insurance on behalf of any person who is or was a director,
officer, employee or agent of the Corporation, against any liability asserted
against such person and incurred by such person in any such capacity, or arising
out of such person's status as such, whether or not the Corporation would have
the power to indemnify such person against such liability under the provisions
of this Article IX or under the provisions of Mississippi law.
SECTION 2. Right of Indemnity from Corporation. In the event that the
insurance purchased by the Corporation described in Section 1 of this Article IX
does not fully cover liabilities and reasonable expenses that any present or
former director, officer, employee or agent of the Corporation who, by reason of
the fact that such party is or was serving at the request of the Corporation in
such capacity, is made a party to any suit, action or proceeding, whether civil,
criminal, administrative, or investigative, including any action by or in the
right of the Corporation ("Indemnitee"), the Indemnitee shall be indemnified
against such liabilities
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and reasonable expenses, including attorney's fees, incurred by the Indemnitee
in connection with such action, suit, or proceeding, if the Indemnitee meets the
requisite Standard of Conduct as defined below and described in Section
8.51(a)(2) and (b) of the Mississippi Business Corporation Act. The right of
indemnity provided in this Article shall inure to the estate, executor,
administrator, heirs, legatees, or devisees of any person entitled to such
indemnification.
SECTION 3. Standard of Conduct. An Indemnitee meets the Standard of
Conduct for any action taken, or the failure to take any action, by the
Indemnitee; provided, however, that no such mandatory indemnification shall
apply with respect to any Indemnitee found (i) to have received a financial
benefit to which such Indemnitee is not entitled; (ii) to have intentionally
inflicted harm on the Corporation or its shareholders; (iii) to have violated
Section 8.33 of the Mississippi Business Corporation Act by voting for or
assenting to the making of an excessive distribution to shareholders in
violation of Section 6.40 of the Mississippi Business Corporation Act; or (iv)
to have intentionally violated criminal law. An Indemnitee's conduct with
respect to an employee benefit plan for a purpose the Indemnitee reasonably
believes to be in the best interest of the participants in and beneficiaries of
the plan is conduct that satisfies the Standard of Conduct.
The determination as to whether an Indemnitee has met the Standard of
Conduct set forth herein shall be made:
A. if there are two or more disinterested directors, by the Board of
Directors by a majority vote of all the disinterested directors (a
majority of whom shall for such purpose constitute a quorum), or by a
majority of the members of a committee of two (2) or more
disinterested directors appointed by such a vote,
B. by special legal counsel selected in the manner prescribed in
Subsection A of this Section 3, or, if there are fewer than two (2)
disinterested directors, selected by the Board of Directors (in which
selection directors who do not qualify as disinterested directors may
participate), or
C. by the shareholders, but shares owned by or voted under the control of
a director who at the time does not qualify as a disinterested
director may not be voted on the determination.
SECTION 4. Prohibited Indemnification. Unless ordered by a court pursuant
to Section 8.54(a)(3) of the Mississippi Business Corporation Act and Section 5
of this Article IX, no indemnification shall be made in respect to any claim,
judgments, amounts paid in settlement, issue, fine, matter, or attorney's fees
in connection with: (i) a proceeding by or in the right of the Corporation,
except for reasonable expenses incurred in connection with the proceeding if it
is determined that the Indemnitee has met the relevant Standard of Conduct set
out above and in Section 8.51(a)(2) and (b) of the Mississippi Business
Corporation Act; or (ii) any proceeding with respect to conduct for which the
Indemnitee was adjudged liable on the basis that the
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Indemnitee received a financial benefit to which the Indemnitee was not
entitled, whether or not involving action in the Indemnitee's official capacity.
SECTION 5. Court Ordered Indemnification. An Indemnitee may apply to the
court conducting a proceeding, or to another court of competent jurisdiction,
for indemnification or an advance for expenses. After receipt of such an
application, and after giving any notice it considers necessary, the court
shall:
(i) order indemnification if the court determines that the
Indemnitee is entitled to mandatory indemnification under
Section 79-4-8.52 of the Mississippi Code of 1972, as amended,
and Section 6 of this Article IX;
(ii) order indemnification or advance for expenses if the court
determines that the Indemnitee is entitled to indemnification
or advance for expenses pursuant to a provision in the Articles
of Incorporation or Section 2 of this Article IX;
(iii) order indemnification or advance for expenses, if the court
determines that, in view of all the relevant circumstances,
such Indemnitee is fairly and reasonably entitled to indemnity
for such expenses which the court shall deem proper, or to
advance for expenses despite the fact that such Indemnitee did
not meet the requirements of the laws of the State of
Mississippi and these Bylaws for an advance for expenses.
If the court determines that the Indemnitee is entitled to indemnification under
Subsection (i) of this Section 5, or to indemnification or advance for expenses
under Subsection (ii) of this Section 5, the court shall also order the
Corporation to pay the Indemnitee's reasonable expenses incurred in connection
with obtaining court-ordered indemnification or advance for expenses. If the
court determines that the Indemnitee is entitled to indemnification under
Subsection (iii) of this Section 5, the court may also order the Corporation to
pay the Indemnitee's reasonable expenses to obtain court-ordered indemnification
or advance for expenses.
SECTION 6. Mandatory Indemnification. Notwithstanding anything to the
contrary in this Article IX, the Corporation shall indemnify an Indemnitee who
was wholly successful, on the merits or otherwise, in the defense of any
proceeding to which the Indemnitee was a party because the Indemnitee is or was
a director, officer or agent of the Corporation, against reasonable expenses
incurred by the Indemnitee in connection with the proceeding.
SECTION 7. Advance for Expenses. The Corporation shall advance funds to
pay for or reimburse the reasonable expenses incurred by an Indemnitee who is a
party to a proceeding if (i) the Indemnitee furnishes the Corporation a written
affirmation of the Indemnitee's good faith belief that the Indemnitee has met
the relevant Standard of Conduct set out and in Section 8.51(a)(2) and (b) of
the Mississippi Business Corporation Act, or that the proceeding involves
conduct for which liability of directors to the Corporation or its shareholders
has been
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eliminated by a provision of the Articles of Incorporation under Section 13 of
Article III of these Bylaws and Section 2.02(b)(4) of the Mississippi Business
Corporation Act, and (ii) the Indemnitee furnishes the Corporation a written
undertaking to repay any funds advanced if the Indemnitee is not entitled to
mandatory indemnification or there is a subsequent determination in the
proceeding that the conduct of the Indemnitee was not the type of conduct
eliminated from liability in the Articles of Incorporation under Section
2.02(b)(4) of the Mississippi Business Corporation Act. The written undertaking
must be an unlimited general obligation of the Indemnitee.
Authorization of an advance for expenses under this Section 7 shall be made
within two (2) weeks of the Indemnitee's submission to the Corporation of the
written request and affirmation and undertaking described above and shall be
made:
A. if there are two or more disinterested directors, by the Board of
Directors by a majority vote of all the disinterested directors (a
majority of whom shall for such purpose constitute a quorum), or by a
majority of the members of a committee of two (2) or more
disinterested directors appointed by such a vote,
B. if there are fewer than two (2) disinterested directors, by the vote
necessary for action under Section 6 of Article III of these Bylaws,
in which case directors who do not qualify as disinterested directors
may participate, or
C. by the shareholders, but shares owned by or voted under the control of
a director who at the time does not qualify as a disinterested
director may not be voted on the determination.
ARTICLE X. CORPORATE SEAL
The Board of Directors shall provide a corporate seal which shall be
circular in form and shall have inscribed thereon the name of the Corporation
and the state of incorporation and the word, "Seal."
ARTICLE XI. NOTICE
SECTION 1. Notices. Whenever notice is required to be given by the
Articles of Incorporation, these Bylaws or the Mississippi Business Corporation
Act, such requirement shall not be construed to mean personal notice. Such
notice shall be in writing unless oral notice is reasonable under the
circumstances and may be communicated in person, by telephone, telegraph,
teletype or other form of wire or wireless communication, or by mail or private
carrier, addressed to any such person entitled to receive notice at such
person's address as appears on the books of the Corporation or by any other
method allowed under the Mississippi Business Corporation Act. The time when
such notice is mailed to a Shareholder shall be the time of the giving of the
Notice; otherwise, it is effective at the earliest of the following:
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(i) when received; (ii) five days after it is mailed; (iii) the date shown on
the return receipt if registered or certified mail.
SECTION 2. Waiver. Unless otherwise provided by law, whenever any notice
is required to be given by the Corporation under the provisions of these Bylaws,
the Articles of Incorporation, or the Mississippi Business Corporation Act, a
waiver thereof in writing, signed by the person or persons entitled to such
notice, whether before or after the time stated therein, and delivered to the
Corporation, shall be deemed equivalent to the giving of such notice. Neither
the business nor the purpose of any meeting need be specified in such a waiver.
Attendance at a meeting by the person entitled to notice waives objection to
lack of notice or defective notice of the meeting unless the person at the
beginning of the meeting objects to holding the meeting or transacting business
at the meeting. Also, attendance at a meeting waives objection to consideration
of a particular matter at the meeting that is not within the purposes described
in the notice unless the person objects to considering the matter when it is
presented.
ARTICLE XII. AMENDMENTS
These Bylaws may be altered, amended or repealed and new Bylaws may be
adopted by the Board of Directors at any regular or special meeting of the Board
of Directors. However, the Board of Directors may not amend or repeal a
particular bylaw if the shareholders, in amending or repealing such bylaw,
expressly provide that the Board of Directors may not amend or repeal that
bylaw.
Adopted by the Sole Director on December ____, 1996.
-----------------------------------
Larry Russell, Secretary
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APPENDIX C
SELECTED PROVISIONS OF FEDERAL LAW
RELATING TO THE RIGHTS OF DISSENTING SHAREHOLDERS
12 U.S.C. (S)215a-- MERGER OF NATIONAL BANKS OR STATE BANKS INTO NATIONAL BANKS
Sec. 215a (b) If a merger shall be voted for at the called meetings by the
necessary majorities of the shareholders of each association or State bank
participating in the plan of merger, and thereafter the merger shall be approved
by the Comptroller, any shareholder of any association or State bank to be
merged into the receiving association who has voted against such merger at the
meeting of the association or bank of which he is a stockholder, or has given
notice in writing at or prior to such meeting to the presiding officer that he
dissents from the plan of merger, shall be entitled to receive the value of the
shares so held by him when such merger shall be approved by the Comptroller upon
written request made to the receiving association at any time before thirty days
after the date of consummation of the merger, accompanied by the surrender of
his stock certificates.
Sec. 215a (c) The value of the shares of any dissenting shareholder shall
be ascertained, as of the effective date of the merger, by an appraisal made by
a committee of three persons, composed of (1) one selected by the vote of the
holders of the majority of the stock, the owners of which are entitled to
payment in cash; (2) one selected by the directors of the receiving association;
and (3) one selected by the two so selected. The valuation agreed upon by any
two of the three appraisers shall govern. If the value so fixed shall not be
satisfactory to any dissenting shareholder who has requested payment, that
shareholder may, within five days after being notified of the appraised value of
his shares, appeal to the Comptroller, who shall cause a reappraisal to be made
which shall be final and binding as to the value of the shares of the appellant.
Sec. 215a (d) If, within ninety days from the date of consummation of the
merger, for any reason one or more of the appraisers is not selected as herein
provided, or the appraisers fail to determine the value of such shares, the
Comptroller shall upon written request of any interested party cause an
appraisal to be made which shall be final and binding on all parties. The
expenses of the Comptroller in making the reappraisal or the appraisal, as the
case may be, shall be paid by the receiving association. The value of the
shares ascertained shall be promptly paid to the dissenting shareholders by the
receiving association . . . .
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PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 20. Indemnification of Directors and Officers.
Certain statutes, articles of incorporation, provisions and bylaws authorize
the purchase of insurance and/or the provision of indemnification for directors
and/or officers of the Company. See "Limitation of Liability" and
"Indemnification" in the Proxy Statement.
Item 21. Exhibits and Financial Statement Schedules.
The following exhibits are filed as part of this Registration Statement.
Exhibit Number Description
- -------------- -----------
2.1 Plan of Reorganization and Agreement
of Merger
3.1 The Company's Articles of Incorporation
(included as Appendix A to the Proxy Statement)
3.2 The Company's Bylaws
(included as Appendix B to the Proxy Statement)
5.1 Form of Opinion of Phelps Dunbar, L.L.P., as to the
legality of the securities being registered
8.1 Form of Opinion of Phelps Dunbar, L.L.P., as to tax
aspects of the Reorganization
10.1 Executive Agreement effective November 20, 1996,
by and between Buddy R. Montgomery and the Bank
10.2 Executive Agreement effective November 20, 1996,
by and between Larry Russell and the Bank
15.1 Letter from Nail McKinney Professional Association regarding
unaudited interim financial information
23.1* Consent of Phelps Dunbar, L.L.P.
24.1 Power of Attorney (included on signature page of Registration
Statement)
- ------------------------
* to be filed by Amendment
II-1
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99.1 Form of proxy
Item 22. Undertakings.
(1) The undersigned Registrant hereby undertakes to respond to requests
for information that is incorporated by reference into the prospectus
pursuant to Item 4, 10(b), 11 or 13 of this Form, within one business
day of receipt of such request, and to send the incorporated documents
by first class mail or other equally prompt means. This includes
information contained in documents filed subsequent to the effective
date of the Registration Statement through the date of responding to
the request.
(2) 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.
(3) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the Company pursuant to the foregoing
provisions, or otherwise, the Company has been advised that in the
opinion of the Securities and Exchange Commission such indemnification
is against public policy as expressed in the Securities Act of 1933
and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities
(other than the payment by the expenses incurred or paid by a
director, officer or controlling person of the Company in the
successful defense of any action, suit or proceeding) is asserted by
such director, officer or controlling person in connection with the
securities being registered, the Company will, unless in the opinion
of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in
the Securities Act of 1933 and will be governed by the final
adjudication of such issue.
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SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Pontotoc, State of
Mississippi, on this 19th day of December, 1996.
Pontotoc BancShares Corp.
By: /s/ Buddy R. Montgomery
-------------------------------
Buddy R. Montgomery, President
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
immediately below constitutes and appoints Buddy R. Montgomery and Larry
Russell, and each of them, his true and lawful attorney-in-fact and agent, with
full power of substitution, for him and in his name, place and stead, in any and
all capacities, to sign any and all amendments (including post-effective
amendments) to this Registration Statement, and to file the same with all
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorney-in-fact and
agent full power and authority to do and perform each and every act and thing
requisite and necessary to be done, as fully to all intents and purposes as he
might or could do in person, hereby ratifying and confirming all that said
attorney-in-fact and agent or his substitute or substitutes may lawfully do or
cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed by the following persons in the capacities and on the
dates indicated.
Signature Title Date
--------- ----- ----
/s/ Anna M. Berryhill Director December 19, 1996
- ---------------------------
Anna M. Berryhill
/s/ Buddy R. Montgomery Director and President December 19, 1996
- --------------------------- (Principal Executive
Buddy R. Montgomery Officer and Principal
Financial Officer)
S-1
<PAGE>
__________________________ Director , 1996
J. Richard Doty
/s/ Larry Russell
__________________________ Director and December 19, 1996
Larry Russell Executive Vice
President
/s/ Michael Simon
__________________________ Director December 19, 1996
Michael Simon
/s/ Charles D. Thomas
__________________________ Director December 19, 1996
Charles D. Thomas
/s/ James L. Whitworth Director December 19, 1996
__________________________
James L. Whitworth
/s/ Julie Henry Principal Accounting December 19, 1996
__________________________ Officer
Julie Henry
S-2
<PAGE>
EXHIBIT INDEX
Exhibit Number Exhibit Description Sequential Page
- -------------- ------------------- ---------------
2.1 Plan of Reorganization and Agreement
of Merger
5.1 Form of Opinion of Phelps Dunbar, L.L.P., as to the
legality of the securities being registered
8.1 Form of Opinion of Phelps Dunbar, L.L.P., as to tax
aspects of the Reorganization
10.1 Executive Agreement effective November 20, 1996,
by and between Buddy R. Montgomery and the Bank
10.2 Executive Agreement effective November 20, 1996,
by and between Larry Russell and the Bank
15.1 Letter from Nail McKinney Professional Associates
as to the unaudited interim financial information
99.1 Form of proxy
<PAGE>
EXHIBIT 2.1
PLAN OF
REORGANIZATION AND AGREEMENT OF MERGER
This Plan of Reorganization and Agreement of Merger ("Agreement")
dated as of the _____, day of _________________, 1996, by and among FIRST
NATIONAL BANK OF PONTOTOC, a banking association organized under the laws of the
United States of America ("First National"), FIRST INTERIM NATIONAL BANK OF
PONTOTOC, a banking association organized under the laws of the United State of
America ("Interim Bank") and PONTOTOC BANCSHARES CORP., a Mississippi
corporation ("Holding Company"):
W I T N E S S E T H:
-------------------
WHEREAS, First National and Interim Bank are duly organized and
existing under the laws of the United States of America with their principal
offices at 19 South Main Street, Pontotoc, County of Pontotoc, Mississippi; and
WHEREAS, Interim Bank has been organized and has authorized capital
stock of $330,000.00, divided into 33,000 shares of common stock of the par
value of $10.00 each; on the date hereof, there are no shares of common stock of
Interim Bank issued or outstanding; prior to the Effective Date (hereinafter
defined), Interim Bank will have 600 shares of common stock issued and
outstanding, and immediately prior to the Effective Date, all of such
outstanding shares of common stock will be owned by Holding Company; and
WHEREAS, First National has authorized capital stock of $330,000.00,
divided into 33,000 shares of common stock of the par value of $10.00 each, of
which 33,000 shares are issued and outstanding; and
WHEREAS, Holding Company is a business corporation, duly organized and
existing under the laws of the State of Mississippi, having its registered
office at 19 South Main Street, Pontotoc County, Pontotoc, Mississippi and
having its principal place of business at 19 South Main Street, Pontotoc,
Mississippi, with authorized stock consisting of 3,000,000 shares of common
stock of no par value, of which 1 share is issued and outstanding and 1,000,000
shares of preferred stock of no par value of which 0 shares are issued and
outstanding; and
WHEREAS, the Board of Directors of First National and the Board of
Directors of Interim Bank have approved this Agreement, each acting pursuant to
a resolution of its board of directors, adopted by the vote of a majority of its
directors, pursuant to the authority given by and in accordance with the
provisions of 12 USC (S) 215a under which First National shall be merged into
Interim Bank and have authorized the execution hereof; and the Board of
Directors of Holding Company has approved this Agreement, authorizing Holding
Company to join in and be bound by this Agreement
<PAGE>
and authorizing the undertakings and representations herein made by Holding
Company including the issuance of common stock after consummation of the
reorganization and merger contemplated in this Agreement;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements herein contained, and in order to prescribe the plan of
the proposed reorganization and merger, the terms and conditions of the
reorganization and merger, the mode of carrying the same into effect, the manner
and basis of exchanging the shares of stock of First National, and such other
details and provisions as are deemed necessary, desirable, or proper, the
parties hereby agree as follows:
ARTICLE 1.
REORGANIZATION AND MERGER
1.1. First National shall be merged into Interim Bank under the
Articles of Association and Charter of Interim Bank at the Effective Date.
Interim Bank will be the "receiving association" as that term is used in Section
215a of Title 12 of the United States Code and is herein called the "Surviving
Bank" whenever reference is made to it as of the Effective Date or thereafter.
The business of Interim Bank shall be that of a national banking association and
shall be conducted by Interim Bank at its main office which shall be located at
19 South Main Street, Pontotoc, Mississippi, and at its legally established
branches.
1.2. At the Effective Date, the name of Surviving Bank shall be
"First National Bank of Pontotoc." The Articles of Association and Bylaws of
the Surviving Bank shall be as set forth in Exhibits A and B, respectively,
attached hereto and made a part hereof. The office of First National
immediately prior to the reorganization and merger shall become the office of
the Surviving Bank.
1.3. At the Effective Date, the corporate existence of First National
and Interim Bank shall be merged into and continued in the Surviving Bank and
the Surviving Bank shall be deemed to be the same association as First National
and Interim Bank. All rights, franchises and interest of First National and
Interim Bank, respectively, in and to every type of property (real, personal and
mixed) and choses in action shall be transferred to and vested in the Surviving
Bank by virtue of the merger without any deed or other instrument of transfer,
and the Surviving Bank, without other action, shall hold and enjoy all rights of
property, franchises, and interests, and all rights and interests as trustee,
executor, administrator, registrar of stocks and bonds, guardian of estates,
assignee and receiver, and in every other fiduciary capacity, in the same manner
and to the same extent as such rights, franchises, and interests are held or
enjoyed by First National and Interim Bank, respectively, at the time the merger
becomes effective.
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1.4. At the Effective Date, the Surviving Bank shall be liable for
all liabilities of First National and Interim Bank; all deposits, debts,
liabilities, obligations and contracts of First National and of Interim Bank,
respectively, matured or unmatured, whether accrued, absolute, contingent or
otherwise, and whether or not reflected or reserved against on balance sheets,
books of account, or records of First National or Interim Bank, as the case may
be, shall be those of the Surviving Bank, and shall not be released or impaired
by the merger; and all rights of creditors and other obligees and all liens on
property of either First National or Interim Bank shall be preserved unimpaired.
1.5. The directors, advisory directors and officers of the Surviving
Bank at the Effective Date shall be those persons who are directors or advisory
directors and officers, respectively, of First National immediately before the
Effective Date. The committees of the Board of Directors of the Surviving Bank
at the Effective Date shall be the same as, and shall be composed of the same
persons who were serving on, committees appointed by the Board of Directors of
First National as they exist immediately before the Effective Date. The
committees of officers of the Surviving Bank at the Effective Date shall be the
same as, and shall be composed of the same officers who were serving on the
committees of officers of First National as they exist immediately before the
Effective Date.
1.6. Other than the Bylaws of First National, all corporate acts,
plans, policies, applications, agreements, orders, registrations, licenses,
approvals and authorizations of First National and Interim Bank, their
respective shareholders, Board of Directors, committees elected or appointed by
their Boards of Directors, officers and agents, which were valid and effective
immediately before the Effective Date shall be taken for all purposes at and
after the Effective Date as the acts, plans, policies, applications, agreements,
orders, registrations, licenses, approvals and authorizations of the Surviving
Bank and shall be effective and binding thereon as the same were with respect to
First National and Interim Bank immediately before the Effective Date.
ARTICLE 2.
CONVERSION, EXCHANGE, AND CANCELLATION OF SHARES
2.1. The manner of converting and exchanging the issued and
outstanding shares of common stock of First National into shares of common stock
of Holding Company shall be as hereafter provided in this Article 2.
2.2. At the Effective Date:
(a) Each issued and outstanding share of common stock of First
National shall, by virtue of the reorganization and merger and without any
action on the part of the holder thereof, be converted into and exchangeable for
10 shares of common stock of Holding Company. From and after the Effective
Date, each outstanding stock
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certificate theretofore representing shares of First National common stock shall
be deemed for all purposes to evidence ownership of and to represent the number
of shares of Holding Company common stock into which such shares of First
National common stock shall have been converted. First National stock
certificates shall be exchanged for Holding Company stock certificates in the
manner set forth in Section 2.3 below;
(b) Holding Company shall repurchase at the original selling price any
shares of Holding Company common stock owned by the Incorporators and Directors
of Holding Company immediately prior to the Effective Date and such shares of
common stock of Holding Company shall be cancelled;
(c) Surviving Bank shall issue to Holding Company 33,000 shares of its
common stock.
(d) All certificates which before the Effective Date evidenced the
share of Interim Bank common stock owned by the Holding Company immediately
before the Effective Date shall be cancelled on the Effective Date.
2.3. (a) As soon as practicable but in any event within six (6)
months after the Effective Date, First National shareholders will be issued the
number of shares of Holding Company common stock into which such shares of First
National common stock shall have been converted as described in Section 2.2(a)
above and Holding Company shall mail to each holder of record of a certificate
or certificates representing outstanding shares of First National common stock
("Certificates"), a form letter of transmittal (which shall specify that
delivery shall be effected and risk of loss and title to the Certificates shall
pass, only upon delivery of the Certificates to Holding Company) and
instructions for use in effecting the surrender of the Certificates in exchange
for certificates representing Holding Company common stock. Upon surrender of a
Certificate for exchange and cancellation to Holding Company together with such
letter of transmittal, duly executed, the holder of such Certificate shall be
entitled to receive in exchange therefor a certificate representing shares of
Holding Company common stock and the Certificate so surrendered shall forthwith
be cancelled.
(b) No dividends or other distributions declared after the Effective
Date with respect to Holding Company common stock or First National common stock
shall be distributed by Holding Company to the holder of any unsurrendered
Certificate until the holder thereof shall surrender such Certificate. Subject
to the effect, if any, of applicable law, after the subsequent surrender and
exchange of a Certificate, the record holder thereof shall be entitled to
receive any such dividends or other distributions, without any interest thereon,
which theretofore had become payable with respect to shares of Holding Company
common stock exchanged for such Certificate. No holder of an unsurrendered
Certificate shall be entitled, until the
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surrender of such Certificate, to vote the shares of Holding Company common
stock for which his or her First National common stock are exchanged.
(c) If any certificate representing shares of Holding Company common
stock is to be transferred in a name other than that in which the Certificate
surrendered in exchange therefor is registered, it shall be a condition of the
transfer thereof that the Certificate so surrendered shall be properly endorsed
and otherwise in proper form for transfer, and that the person requesting such
exchange shall pay to Holding Company in advance any transfer or other taxes
required by reason of the transfer of a certificate representing shares of
Holding Company common stock in any name other than that of the registered
holder of the Certificate surrendered, or required for any other reason, or
shall establish to the satisfaction of Holding Company that such tax has been
paid or is not payable.
(d) After the Effective Date there shall be no transfers on the stock
transfer books of First National of the shares of First National common stock
which were outstanding immediately prior to the Effective Date. If, after the
Effective Date, Certificates representing such shares are presented for transfer
to First National, they shall be cancelled and exchanged for certificates
representing shares of Holding Company common stock as provided in this Article
2.
(e) Replacements for any such Certificates which have been stolen or
lost may be obtained according to the usual procedures of First National in
order to permit the surrender of such replacement Certificates.
ARTICLE 3.
DISSENTERS' RIGHTS
Any shareholder of First National who has voted against the merger at
the meeting of the shareholders of the bank or has given notice in writing at or
prior to such meeting to the presiding officer that he dissents from the plan of
merger, shall be entitled to receive the value of the shares so held by him when
the merger shall be approved by the Comptroller of the Currency upon written
request made to the Surviving Bank at any time before 30 days after the
consummation of the merger, accompanied by the surrender of his stock
certificate. The value of the shares of any dissenting shareholder shall be
ascertained, as of the effective date of the merger, by an appraisal made by a
committee of three persons, composed of (1) one selected by the vote of the
holders of the majority of the stock, the owners of which are entitled to
payment in cash; (2) one selected by the directors of the Surviving Bank; and
(3) one selected by the two so selected. The valuation agreed upon by any two of
the three appraisers shall govern. If the value so fixed shall not be
satisfactory to any dissenting shareholder who has requested payment, that
shareholder may, within five days after being notified of the appraised value of
his shares, appeal to the Comptroller of the Currency, who shall cause a
reappraisal to be made which shall be
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final and binding as to the value of the shares of the appellant. If, within 90
days from the date of consummation of the merger, for any reason one or more of
the appraisers is not selected as hereafter provided, or the appraisers fail to
determine the value of such shares, the Comptroller of the Currency shall upon
written request of any interested party cause an appraisal to be made which
shall be final and binding on all parties. The expenses of the Comptroller of
the Currency in making the reappraisal or the appraisal, as the case may be,
shall be paid by the Surviving Bank. The value of the shares ascertained shall
be promptly paid in cash to the dissenting shareholders by the Surviving Bank.
The shares of stock of the Surviving Bank which would have been delivered to
such dissenting shareholders had they not requested payment shall be sold by the
Surviving Bank at an advertised public auction, and the Surviving Bank shall
have the right to purchase any of such shares at such public auction, if it is
the highest bidder therefor, for the purpose of reselling such shares within
thirty days thereafter to such person or persons and at such price not less than
par as the Board of Directors of the Surviving Bank by resolution shall
determine. If the shares are sold at public auction at a price greater than the
amount paid to the dissenting shareholders, the excess of such sale price shall
be paid to such dissenting shareholders.
ARTICLE 4.
REPRESENTATIONS AND WARRANTIES OF HOLDING COMPANY
Holding Company hereby represents and warrants as follows:
4.1. Holding Company is a corporation duly organized, validly
existing and in good standing under the laws of the State of Mississippi.
4.2. Holding Company has no subsidiaries at the date of this
Agreement other than Interim Bank. Between the date hereof and the Effective
Date, Holding Company will not create or acquire any additional subsidiaries,
without the consent of First National.
4.3. Holding Company has caused Interim Bank to be organized with an
aggregate of 33,000 shares of authorized common stock, and immediately prior to
the Effective Date, Holding Company will own 600 shares of the common stock of
Interim Bank. No other person or entity shall own any shares of the common
stock of Interim Bank immediately preceding the Effective Date.
4.4. The authorized capital stock of Holding Company consists, as of
the date hereof, of 3,000,000 shares of common stock, no par value and 1,000,000
shares of preferred stock, no par value. One share of common stock of Holding
Company has been issued to Buddy R. Montgomery, as President of First National,
for purposes of organizing the Holding Company. On the Effective Date, Holding
Company shall repurchase all shares outstanding before the Effective Date at the
issue price. Except
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for such shares issued to Mr. Montgomery, Holding Company does not have any
shares of its common stock or preferred stock issued or outstanding and does not
have any outstanding subscriptions, options or other agreements or commitments
obligating it to issue shares of its common or preferred stock.
4.5. Compliance with the terms and provisions of this Agreement by
Holding Company will not conflict with or result in a breach of any of the
terms, conditions or provisions of any judgment, order, injunction, decree or
ruling of any court or governmental authority, domestic or foreign, or of any
agreement or instrument to which Holding Company is a party, or constitute a
default thereunder.
4.6. The execution, delivery and performance of this Agreement has
been duly authorized by the Board of Directors of Holding Company.
4.7. Holding Company has complete and unrestricted power to enter
into and to consummate the transactions contemplated by this Agreement.
4.8. On or prior to the Effective Date, Holding Company will take
such action and execute and deliver all such agreements and other documents, and
duly reserve for issuance all such shares of common stock of Holding Company as
may be necessary to effectuate the provisions of this Agreement. All such
shares of common stock of Holding Company when delivered, will be duly
authorized, validly issued and outstanding, fully paid and nonassessable, and
will be voting stock of Holding Company.
ARTICLE 5.
REPRESENTATIONS AND WARRANTIES OF FIRST NATIONAL
First National hereby represents and warrants as follows:
5.1. First National is a national banking association duly organized,
validly existing and in good standing under the laws of the United States of
America and has corporate power and is duly authorized to carry on its business
as it is now being conducted.
5.2. The authorized capital stock of First National consists of the
date hereof of 33,000 shares of common stock, $10.00 par value per share, of
which 33,000 shares are issued and outstanding.
5.3. First National has no subsidiaries. First National will not
organize or acquire any subsidiaries prior to the Effective Date.
5.4. Compliance with the terms and provisions of this Agreement by
First National will not conflict with or result in a breach of any of the terms,
conditions or
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<PAGE>
provisions of any judgment, order, injunction, decree or ruling of any court or
governmental authority, domestic or foreign, or will not conflict with or result
in a breach of any of the terms, conditions or provisions of any agreement or
instrument to which First National is a party or constitute a default
thereunder.
5.5. The execution, delivery and performance of this Agreement has
been duly authorized by the Board of Directors of First National.
5.6. First National has complete and unrestricted power to enter into
and consummate the transactions contemplated by this Agreement.
ARTICLE 6.
REPRESENTATIONS AND WARRANTIES OF INTERIM BANK
Interim Bank hereby represents and warrants as follows:
6.1. Interim Bank is a national banking association, and immediately
before the Effective Date, will be duly organized, validly existing and in good
standing under the laws of the United States of America, and will have corporate
power and will be duly authorized to carry on its business as then being
conducted.
6.2. The authorized capital stock of Interim Bank consists of 33,000
shares of common stock, $10.00 par value per share, of which immediately prior
to the Effective Date 600 shares will be validly issued and outstanding. Except
as may be contemplated by this Agreement, Interim Bank does not have any
outstanding subscriptions, options, or other arrangements or commitments
obligating Interim Bank to issue any shares of its common stock.
6.3. Compliance with the terms and provisions of this Agreement by
Interim Bank will not conflict or result in a breach of any of the terms,
conditions or provisions of any judgment, order, injunction, decree or ruling of
any court or governmental authority, domestic or foreign, or of any agreement or
instrument to which Interim Bank is a party, or constitute a default thereunder.
6.4. The execution, delivery and performance of this Agreement has
been duly authorized by the Board of Directors of Interim Bank.
6.5. Interim Bank has complete and unrestricted power to enter into
and to consummate the transactions contemplated by this Agreement.
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ARTICLE 7.
OBLIGATIONS OF THE PARTIES PENDING THE EFFECTIVE DATE
7.1. As soon as practicable, this Agreement shall be duly submitted
to the shareholders of First National and Interim Bank for the purpose of
considering and acting upon this Agreement in the manner required by law and
their respective Articles of Association. Each such bank shall use its best
efforts to obtain the requisite approval by its shareholders of this Agreement
and the transactions contemplated herein and after obtaining such approval, such
banks, through their respective officers and directors, shall execute and file
with the appropriate regulatory authorities all documents and papers necessary,
and such banks shall take every reasonable and necessary step and action to
comply with and to secure each approval of this Agreement and the transactions
contemplated herein as may be required by all applicable statutes, rules and
regulations.
7.2. Holding Company will cause to be filed with the Securities and
Exchange Commission a Registration Statement under the Securities Act of 1933,
as amended, relating to the solicitation by First National of its shareholders'
proxies for approval of the reorganization and merger and the transactions
contemplated herein, and shall use its best efforts to cause such Registration
Statement or such other filings or documents as may be required to be qualified
or exempted under the Blue Sky Laws of Mississippi and of any other state in
which it deems such qualification or exemption required.
ARTICLE 8.
CONDITIONS PRECEDENT TO THE CONSUMMATION
OF THE REORGANIZATION AND MERGER
The obligations of the parties hereto to consummate the reorganization
and merger contemplated hereby shall be subject to the conditions that on or
before the Effective Date:
8.1. Interim Bank shall have issued and sold, for $10.00 per share,
an aggregate of 600 shares of its common stock all of which shares shall be
owned by the Holding Company.
8.2. Each of the parties hereto shall have performed and complied
with all of its obligations hereunder which are to be complied with or performed
on or before the Effective Date.
8.3. This Agreement and the reorganization and merger and related
transactions contemplated hereby shall have been duly and validly authorized,
approved, and adopted, at a meeting of shareholders by the holders of not less
than two-thirds of the shares of common stock of First National and shall have
been
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approved by the holders of not less than two-thirds of the shares of common
stock of Interim Bank.
8.4. All required orders, consents and approvals, in form and
substance reasonably satisfactory to all the parties hereto, shall have been
entered by the Board of Governors of the Federal Reserve System, and the
Comptroller of the Currency, granting the authority necessary for consummation
of the transactions contemplated by this Agreement and all other requirements
prescribed by law and the rules and regulations of any other regulatory
authority shall have been satisfied.
8.5. First National shall have received from its counsel an opinion,
to the effect that:
(a) Neither First National, Interim Bank nor the Holding Company will
recognize any gain or loss as a result of the reorganization;
(b) No gain or loss will be recognized to the shareholders of First
National upon conversion of their shares; the tax basis of shares of
the Holding Company's Common Stock received in the reorganization will
be the same as the tax basis of the shares of First National's Common
Stock previously owned; and if the shares of First National's Common
Stock were held as capital assets, the holding period of the shares of
Holding Company's Common Stock received will include the holding
period of the shares of First National's Common Stock exchanged
therefor; and
(c) A shareholder of First National who exercises his rights as a
dissenter and thereby receives cash for his shares will recognize
income, gain or loss measured by the difference between the amount of
cash received and the tax basis of his shares of First National's
Common Stock, subject to the provisions of Code Section 302. Such
distributions will generally be treated as capital gain or loss if the
shares were held as capital assets. However, a dissenting shareholder
must take into account the effect that Sections 302 and 318 of the
Code may have in determining consequences of the transaction if he
receives only cash, which could cause the distributions to be treated
as ordinary income or, possibly, as a dividend to the dissenter.
8.6. No action, suit or proceeding shall have been instituted or shall have
been threatened before any court or other governmental body or by any public
authority to restrain, enjoin or prohibit the reorganization and merger,
contemplated herein, or which might restrict the operation of the business of
the Surviving Bank or the ownership of the common stock of the Surviving Bank or
the exercise of any rights with respect thereto by Holding Company or to subject
any of the parties hereto or any of their directors or officers to any
liability, fine, forfeiture, or penalty on the
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ground that the transactions contemplated hereby, the parties hereto, or their
directors or officers have breached or will breach any applicable law or
regulation, or have otherwise acted improperly in connection with the
transactions contemplated hereby, and with respect to which the parties hereto
have ben advised by counsel that, in the opinion of counsel, such action, suit
or proceeding raises substantial questions of law or fact which could reasonably
be decided adversely to any party hereto or its directors or officers.
8.7. It shall have been determined to the satisfaction of First National
and Holding Company that the reorganization and merger will be treated for
accounting purposes similar to a "pooling of interests", whereby the assets,
liabilities and retained earnings of First National and Interim Bank will be
carried forward on the financial statements of the Surviving Bank and Holding
Company on a consolidated basis, at the amount carried on their respective books
at the Effective Date, by Interim Bank and by First National.
ARTICLE 9.
ADDITIONAL CONDITIONS PRECEDENT
9.1. Each obligation of Holding Company and Interim Bank to be performed on
or prior to the Effective Date shall be subject to the satisfaction, on or
before the Effective Date, of the following additional conditions:
(a) The representations and warranties made by First National and Interim
Bank in this Agreement shall be true as though such representations and
warranties had been made or given on and as of the Effective Date;
(b) Holding Company shall have received a favorable opinion of Phelps
Dunbar, L.L.P. in form and substance satisfactory to it that:
(i) First National is a duly organized, and validly existing national
banking association under the laws of the United States of America;
(ii) the execution and delivery of this Agreement did not, and the
consummation of the reorganization and merger contemplated hereby will
not, violate any provisions of the Articles of Association of First
National;
(iii) Interim Bank is a duly organized and validly existing national
banking association under the laws of the United States of America.
(iv) the execution and delivery of this Agreement did not, and the
consummation of the reorganization and merger contemplated hereby
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will not, violate any provisions of the Articles of Association or
Bylaws of Interim Bank; and
(v) The Board of Directors and shareholders of First National and Interim
Bank have taken all corporate action required by their respective
Articles of Association and Bylaws and by the applicable banking laws
to authorize the execution and delivery of this Agreement and to
approve the reorganization and merger in accordance with the terms of
this Agreement; First National and Interim Bank have obtained the
requisite approvals from the Board of Governors of the Federal Reserve
System and other regulatory bodies to whom First National and Interim
Bank are subject, to consummate the reorganization and merger
contemplated by this Agreement; and this Agreement is a legal, valid
and binding agreement of First National and Interim Bank in accordance
with its terms.
9.2. Each obligation of First National to be performed on or prior to the
Effective Date shall be subject to the satisfaction, on or before the Effective
Date, of the following additional conditions:
(a) The representations and warranties made by Holding Company and by
Interim Bank contained in this Agreement shall be true as though such
representations and warranties had been made or given at and as of the Effective
Date;
(b) This Agreement and the transactions contemplated herein shall have been
duly and validly authorized, approved and adopted by the Board of Directors of
Holding Company and the shareholders of Interim Bank;
(c) First National shall have received a favorable opinion of Phelps
Dunbar, L.L.P. in form and substance satisfactory to First National that:
(i) Holding Company is duly organized, validly existing and in good
standing under the laws of the State of Mississippi, and its
authorized and issued common stock and preferred stock as of the
Effective Date is as stated in this Agreement;
(ii) Holding Company has corporate power to execute and deliver this
Agreement; the Board of Directors of Holding Company has taken all
action required by its Articles of Incorporation and Bylaws to
authorize such execution and delivery, to approve the reorganization
and merger contemplated hereby, and to authorize the issuance of the
shares of Holding Company stock necessary to consummate the
reorganization and merger; and this Agreement is a legal, valid and
binding agreement of Holding Company in accordance with its terms;
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(iii) The shares of common stock of Holding Company to be issued pursuant
to this Agreement have been duly authorized and, when issued and
delivered as contemplated by this Agreement, will have been legally
and validly issued and will be fully paid and nonassessable;
(iv) Interim Bank is a national banking association duly organized, validly
existing and in good standing under the laws of the United States of
America and its authorized and issued common stock is as stated in
this Agreement; and
(v) Interim Bank has corporate power to execute and deliver this
Agreement; the Board of Directors and the shareholders of Interim Bank
have taken all action required by its Articles of Association and
Bylaws and by the applicable banking laws to authorize such execution
and delivery and to approve the reorganization and merger; and this
Agreement is a legal, valid and binding agreement of Interim Bank in
accordance with its terms.
ARTICLE 10.
AMENDMENTS
First National, Holding Company, and Interim Bank, by mutual consent of
their respective Boards of Directors, to the extent permitted by law, may amend,
modify, supplement and interpret this Agreement in such manner as may be
mutually agreed upon by them in writing at any time before or after adoption
hereof by shareholders of First National and Interim Bank, provided, however,
that no such amendment, modification or supplement shall change the number of
shares of common stock of Holding Company to be issued and exchanged for each
share of common stock of First National or the exchange rate, except by the
affirmative action of such shareholders as required by law and by the Articles
of Association of First National.
ARTICLE 11.
TERMINATION AND ABANDONMENT
11.1. Notwithstanding anything contained in this Agreement to the
contrary, this Agreement may be terminated and the reorganization and merger
abandoned at any time (whether before or after the approval and adoption thereof
by the shareholders of First National and Interim Bank) prior to the Effective
Date:
(a) By mutual consent of the parties hereto;
(b) By Holding Company or Interim Bank if any condition set forth in
paragraphs 8.1 and through 8.7 of Article 8 and paragraph 9.1 of Article 9
has not been met or has not been waived;
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(c) By First National if any condition set forth in paragraphs 8.1 through
8.7 of Article 8 and paragraph 9.2 of Article 9 has not been met or has not been
waived;
(d) By Holding Company or Interim Bank if it or they shall have discovered
any material error, misstatement or omission in the representations and
warranties of First National contained herein;
(e) By First National if it shall have discovered any material error,
misstatement or omission in the representations and warranties of Holding
Company or Interim Bank contained herein;
(f) For any other reason consummation of the merger is inadvisable in the
opinion of the Board of Directors of Holding Company, First National or Interim
Bank.
11.2. An election by a party hereto to terminate this Agreement and
abandon the reorganization and merger as provided in paragraph 11.1 shall be
exercised on behalf of such corporation or bank by its Board of Directors and
shall become effective when conveyed in writing and received by the other
parties hereto.
11.3. In the event of the termination of this Agreement pursuant to the
provisions of paragraph 11.1 hereof, the same shall become void and have no
effect and create no liability on the part of any of the parties hereto or their
respective directors, officers, or shareholders in respect of this Agreement.
11.4. Any of the terms or conditions of this Agreement may be waived at
any time by the party which is entitled to the benefit thereof, by action taken
only if, in the judgment of the Board of Directors or the officer taking the
action, such waiver will not have a materially adverse effect on the benefits
intended under this Agreement to the shareholders of First National.
ARTICLE 12.
EFFECTIVE DATE
Subject to the terms and upon satisfaction of all requirements of law and
the conditions specified in this Agreement, including receipt of the approval of
the Board of Governors of the Federal Reserve System, the reorganization and
merger shall become effective at the time specified in the "Certificate
Approving Merger" received from the Comptroller of the Currency, approving the
reorganization and merger (such time being herein called the "Effective Date")
and if no time be specified in said certificate, then the Effective Date shall
be the time of the opening of business on the day specified in said certificate.
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ARTICLE 13.
TERMINATION OF REPRESENTATIONS AND
WARRANTIES AND CERTAIN AGREEMENTS
The respective representations, warranties, covenants, and agreements of
the parties hereto shall expire with, and be terminated and extinguished by, the
reorganization and merger contemplated by and pursuant to this Agreement at the
time of the consummation thereof at the Effective Date. None of the parties
shall be under any liability whatsoever with respect to any such representation,
warranty, covenant or agreement, it being intended that the sole remedy of the
parties for a breach of any such representation, warranty, covenant, or
agreement shall be to elect not to proceed with the reorganization and merger if
such breach has resulted in failure to satisfy a condition precedent to such
party's obligation to consummate the transactions contemplated hereby.
ARTICLE 14.
OFFICE AND BRANCH LOCATIONS
The name and current location of the office and each branch of First
National is as follows:
First National Bank of Pontotoc
Administrative Office
19 South Main Street
Pontotoc, Mississippi 38863
Branch Office
158 Highway 15 North
Pontotoc, Mississippi 38863
Interim Bank has no offices. The office and branches of the Surviving Bank
will be at the same locations as set forth above as the office and branches of
First National.
ARTICLE 15.
DIRECTORS AND OFFICERS
The Board of Directors and officers of the Surviving Bank upon the
Effective Date shall consist of all persons who are directors and officers of
First National immediately before the Effective Date.
-15-
<PAGE>
ARTICLE 16.
MISCELLANEOUS
16.1. This Agreement embodies the entire agreement among the parties and
there have been no agreements, representations or warranties among the parties
other than those set forth herein or those provided for herein.
16.2. Any notice or waiver to be given to any party shall be in writing
and shall be deemed to have been duly given if delivered, mailed or sent by
prepaid telegram and addressed as follows:
If to First National Bank of Pontotoc:
First National Bank of Pontotoc
P. O. Box 29
19 South Main Street
Pontotoc, Mississippi 38863-0029
Attention: President
If to Interim Bank:
First Interim National Bank of Pontotoc
P. O. Box 29
19 South Main Street
Pontotoc, Mississippi 38863-0029
Attention: President
If to Holding Company:
Pontotoc BancShares Corp.
P. O. Box 29
19 South Main Street
Pontotoc, Mississippi 38863-0029
Attention: President
16.3. The captions contained in this Agreement are solely for convenient
reference and shall not be deemed to affect the meaning or interpretation of any
paragraph hereof.
16.4. Each of the parties hereto will pay its own fees and expenses
incurred in connection with the transactions contemplated by this Agreement.
-16-
<PAGE>
IN WITNESS WHEREOF, First National, Interim Bank and Holding Company have
caused this Agreement to be executed by their duly authorized officers and their
corporate seals affixed hereto, and directors constituting a majority of the
Board of Directors of each such bank have hereunto subscribed their names.
FIRST NATIONAL BANK OF PONTOTOC
By:_______________________________________
Buddy R. Montgomery, President
(SEAL)
ATTEST:
________________________________
Larry Russell, Secretary
__________________________ _____________________________
Anna Berryhill Buddy R. Montgomery
__________________________ _____________________________
Larry Russell Michael Simon
__________________________ _____________________________
Charles D. Thomas J. Lowell Whitworth
__________________________
J. Richard Doty
A majority of the directors of First National Bank of Pontotoc.
-17-
<PAGE>
FIRST INTERIM NATIONAL BANK
OF PONTOTOC
By:_____________________________________
Buddy R. Montgomery, President
(SEAL)
ATTEST:
__________________________
Larry Russell, Secretary
__________________________ _____________________________
Anna Berryhill Buddy R. Montgomery
__________________________ _____________________________
Larry Russell Michael Simon
__________________________ _____________________________
Charles D. Thomas J. Lowell Whitworth
__________________________
J. Richard Doty
A majority of the directors of First Interim National Bank of Pontotoc.
-18-
<PAGE>
PONTOTOC BANCSHARES CORP.
By:__________________________________
Buddy R. Montgomery, President
(SEAL)
ATTEST:
__________________________
Larry Russell, Secretary
__________________________ _____________________________
Anna Berryhill Buddy R. Montgomery
__________________________ _____________________________
Larry Russell Michael Simon
__________________________ _____________________________
Charles D. Thomas J. Lowell Whitworth
__________________________
J. Richard Doty
A majority of the directors of Pontotoc BancShares Corp.
-19-
<PAGE>
ARTICLES OF ASSOCIATION OF
FIRsT INTERIM NATIONAL BANK OF PONTOTOC
EXHIBIT A
<PAGE>
ARTICLES OF ASSOCIATION
OF
FIRST INTERIM NATIONAL BANK OF PONTOTOC
For the purpose of organizing an association to perform any lawful
activities of national banks, the undersigned do enter into the following
Articles of Association:
ARTICLE 1
NAME
The name of the association shall be FIRST INTERIM NATIONAL BANK OF
PONTOTOC, NATIONAL ASSOCIATION.
ARTICLE 2
OFFICES
The main office of the Association shall be in the City of Pontotoc, County
of Pontotoc, State of Mississippi. The general business of the Association
shall be conducted at its main office and its branches.
ARTICLE 3
BOARD OF DIRECTORS
SECTION 3.1. NUMBER. The Board of Directors of this Association shall
consist of not less than five nor more than 25 persons, the exact number to be
fixed and determined from time to time by resolution of a majority of the full
Board of Directors or by resolution of a majority of the shareholders at any
annual or special meeting thereof. Each director shall own common or preferred
stock of the Association or of a holding company owning the Association, with an
aggregate equity value of not less than $25,000 as of either (a) the date of
purchase, (b) the date the person became a director, or (c) the date of that
person's most recent election to the Board of Directors, whichever is more
recent. Any combination of common or preferred stock of the Association or
holding company may be used.
SECTION 3.2. VACANCIES. Any vacancy in the Board of Directors may be
filled by action of a majority of the remaining directors between meetings of
shareholders. The Board of Directors may not increase the number of directors
between meetings of shareholders to a number which: (a) exceeds by more than
two the number of directors last elected by shareholders where the number was 15
or less; or (b) exceeds by more than four the number of directors last elected
by shareholders where the number was 16 or more, but in no event shall the
number of directors exceed 25.
<PAGE>
SECTION 3.3. TERMS. Terms of directors, including directors selected to
fill vacancies, shall expire at the next regular meeting of shareholders at
which directors are elected, unless the directors resign or are removed from
office. Despite the expiration of a director's term, the director shall
continue to serve until his or her successor is elected and qualifies or until
there is a decrease in the number of directors and his or her position is
eliminated.
SECTION 3.4. HONORARY DIRECTORS. Honorary or advisory members of the
Board of Directors, without voting power or power of final decision in matters
concerning the business of the Association, may be appointed by resolution of a
majority of the full Board of Directors, or by resolution of shareholders at any
annual or special meeting. Honorary or advisory directors shall not be counted
to determine the number of directors of the Association or the presence of a
quorum in connection with any board action, and shall not be required to own
qualifying shares.
ARTICLE 4
MEETINGS OF SHAREHOLDERS
SECTION 4.1. ANNUAL MEETING. There shall be an annual meeting of the
shareholders to elect directors and transact whatever other business may be
brought before the meeting. It shall be held at the main office or any other
convenient place the Board of Directors may designate, on the day of each year
specified therefore in the Bylaws, or if that day falls on a legal holiday in
the state in which the Association is located, on the next following banking
day. If no election is held on the day fixed or in event of a legal holiday, on
the following banking day, an election may be held on any subsequent day within
60 days of the day fixed, to be designated by the Board of Directors, or, if the
directors fail to fix the day, by shareholders representing two-thirds of the
shares issued and outstanding. In all cases at least 10 days advance notice of
the meeting shall be given to the shareholders by first class mail.
SECTION 4.2. CUMULATIVE VOTING. In all elections of directors, the number
of votes each common shareholder may cast will be determined by multiplying the
number of shares he or she owns by the number of directors to be elected. Those
votes may be cumulated and cast for a single candidate or may be distributed
among two or more candidates in the manner selected by the shareholder. On all
other questions, each common shareholder shall be entitled to one vote for each
share of stock held by him or her.
SECTION 4.3. NOMINATIONS. Nominations for election to the Board of
Directors may be made by the Board of Directors or by any stockholder of any
outstanding class of capital stock of the Association entitled to vote for
election of directors. Nominations other than those made by or on behalf of the
existing management shall be made in writing and be delivered or mailed to the
president of the Association not less than 14 days nor more than 50 days prior
to any meeting of shareholders called for the election of directors; provided,
however, that if less than 21 days notice of the meeting is given to
shareholders, such
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<PAGE>
nominations shall be mailed or delivered to the president of the Association not
later than the close of business on the seventh day following the day on which
the notice of meeting was mailed. Such notification shall contain the following
information to the extent known to the notifying shareholder:
(a) The name and address of each proposed nominee.
(b) The principal occupation of each proposed nominee.
(c) The total number of shares of capital stock of the Association that
will be voted for each proposed nominee.
(d) The name and residence address of the notifying shareholder.
(e) The number of shares of capital stock of the Association owned by the
notifying shareholder.
Nominations not made in accordance herewith may, in the discretion of the
chair of the meeting, be disregarded by the chair of the meeting, and the vote
tellers may disregard all votes cast for each such nominee. No bylaw may
unreasonably restrict the nomination of directors by shareholders.
SECTION 4.4. RESIGNATION. A director may resign at any time by delivering
written notice to the Board of Directors, its chairperson, or to the
Association, which resignation shall be effective when the notice is delivered
unless the notice specifies a later effective date.
SECTION 4.5. REMOVAL. A director may be removed by shareholders at a
meeting called to remove him or her, when notice of the meeting stating that the
purpose or one of the purposes is to remove him or her is provided, if there is
a failure to fulfill one of the affirmative requirements for qualification, or
for cause, provided, however, that a director may not be removed if the number
of votes sufficient to elect him or her under cumulative voting is voted against
his or her removal.
ARTICLE 5
CAPITAL STOCK
SECTION 5.1. AUTHORIZED CAPITAL STOCK. The authorized amount of capital
stock of this Association consists of 33,000 shares of common stock of the par
value of Ten Dollars ($10) per share. The capital stock may be increased or
decreased from time to time, in accordance with the provisions of the laws of
the United States.
SECTION 5.2. PREEMPTIVE RIGHTS. If the capital stock is increased by the
sale of additional shares of voting stock or interests convertible thereto, each
holder of any class of
3
<PAGE>
voting stock shall be entitled to subscribe for such additional shares of voting
stock or interests convertible thereto, in proportion to the percentage of
shares he or she owns. If the capital stock is increased by the sale of
additional shares of stock with preferential distribution rights or interests
convertible thereto, each holder of any class of stock with equal or inferior
preferential distribution rights, but not including holders of shares without
preferential distribution rights, shall be entitled to subscribe for such
additional shares of stock with preferential distribution rights or interests
convertible thereto, in proportion to the number of shares of stock owned at the
time the increase is authorized by the shareholders, unless another time is
specified in a resolution adopted by the shareholders at the time the increase
is authorized. Notwithstanding the foregoing, holders of stock shall not have
any preemptive rights to purchase or subscribe for (a) shares issued as
compensation to directors, officers, agents or employees of the Association, its
subsidiaries or affiliates; and (b) shares issued to satisfy conversion or
option rights created to provide compensation to directors, officers, agents or
employees of the Association, its subsidiaries or affiliates. Shares subject to
preemptive rights that are not acquired by shareholders may be issued to any
person for a period of one year after being offered to shareholders at a
consideration set by the Board of Directors that is not lower than the
consideration set for the exercise of preemptive rights. An offer at a lower
consideration or after the expiration of one year is subject to the
shareholders' preemptive rights.
SECTION 5.3. SHAREHOLDER APPROVAL. Unless otherwise specified in the
Articles of Association or required by law, (a) all matters requiring
shareholder action, including amendments to the Articles of Association must be
approved by shareholders owning a majority voting interest in the outstanding
voting stock, and (b) each shareholder shall be entitled to one vote per share.
SECTION 5.4. RECORD DATE. Unless otherwise provided in the Bylaws, the
record date for determining shareholders entitled to notice of and to vote at
any meeting is the close of business on the day before the first notice is
mailed or otherwise sent to the shareholders, provided that in no event may a
record date be more than 70 days before the meeting.
SECTION 5.5. FRACTIONAL SHARES. If a shareholder is entitled to
fractional shares pursuant to preemptive rights, a stock dividend, consolidation
or merger, reverse stock split or otherwise, the Association may: (a) issue
fractional shares or; (b) in lieu of the issuance of fractional shares, issue
script or warrants entitling the holder to receive a full share upon
surrendering enough script or warrants to equal a full share; (c) if there is an
established and active market in the Association's stock, make reasonable
arrangements to provide the shareholder with an opportunity to realize a fair
price through sale of the fraction, or purchase of the additional fraction
required for a full share; (d) remit the cash equivalent of the fraction to the
shareholder; or (e) sell full shares representing all the fractions at public
auction or to the highest bidder after having solicited and received sealed bids
from at least three licensed stock brokers; and distribute the proceeds pro rata
to shareholders who otherwise would be entitled to the fractional shares. The
holder of a fractional share is entitled to exercise the rights of a
shareholder, including the right to vote, to receive
4
<PAGE>
dividends, and to participate in the assets of the Association upon liquidation,
in proportion to the fractional interest. The holder of script or warrants is
not entitled to any of these rights unless the script or warrants explicitly
provide for such rights. The script or warrants may be subject to such
additional conditions as: (a) that the script or warrants will become void if
not exchanged for full shares before a specified date; and (b) that the shares
for which the script or warrants are exchangeable may be sold at the option of
the Association and the proceeds paid to scriptholders.
SECTION 5.6. ISSUANCE OF DEBT. The Association, at any time and from time
to time, may authorize and issue debt obligations, whether or not subordinated,
without the approval of the shareholders. Obligations classified as debt,
whether or not subordinated, which may be issued by the Association without the
approval of shareholders, do not carry voting rights on any issue, including an
increase or decrease in the aggregate number of the securities, or the exchange
or reclassification of all or part of the securities into securities of another
class or series.
ARTICLE 6
BOARD OF DIRECTORS' POWERS
SECTION 6.1. OFFICERS. The Board of Directors shall appoint one of its
members president of the Association and may appoint that member or another of
its members chairperson of the board and shall have the power to appoint one or
more vice presidents, a secretary who shall keep minutes of the directors' and
shareholders' meetings and be responsible for authenticating the records of the
Association, and such other officers and employees as may be required to
transact the business of this Association. A duly appointed officer may appoint
one or more officers or assistant officers if authorized by the Board of
Directors in accordance with the Bylaws.
SECTION 6.2. GENERAL POWERS. The Board of Directors shall have the power
to:
(a) Define the duties of the officers, employees, and agents of the
Association.
(b) Delegate the performance of its duties, but not the responsibility for
its duties, to the officers, employees, and agents of the Association.
(c) Fix the compensation and enter into employment contracts with its
officers and employees upon reasonable terms and conditions consistent
with applicable law.
(d) Dismiss officers and employees.
(e) Require bonds from officers and employees and to fix the penalty
thereof.
5
<PAGE>
(f) Ratify written policies authorized by the Association's management or
committees of the board.
(g) Regulate the manner in which any increase or decrease of the capital
of the Association shall be made, provided that nothing herein shall
restrict the power of shareholders to increase or decrease the capital
of the Association in accordance with law, and nothing shall raise or
lower from two-thirds the percentage required for shareholder approval
to increase or reduce the capital.
(h) Manage and administer the business and affairs of the Association.
(i) Adopt initial Bylaws, not inconsistent with law or the Articles of
Association, for managing the business and regulating the affairs of
the Association.
(j) Amend or repeal Bylaws, except to the extent that the Articles of
Association reserve this power in whole or in part to shareholders.
(k) Make contracts.
(l) Generally perform all acts that are legal for a Board of Directors to
perform.
(m) The Board of Directors shall have the power to change the location of
the main office to any other place within the limits of the City of
Pontotoc, Pontotoc County, Mississippi, without the approval of the
shareholders and to establish or change the location of any branch or
branches of the Association to any other location permitted under
applicable law, without the approval of the shareholders, subject to
the approval of the Office of the Comptroller of the Currency.
ARTICLE 7
DURATION
The corporate existence of this Association shall continue until
termination according to the laws of the United States.
ARTICLE 8
SPECIAL MEETING OF SHAREHOLDERS
The Board of Directors of this Association, or any one or more shareholders
owning, in the aggregate, not less than ten percent (10%) of the stock of this
Association, may call a special meeting of shareholders at any time. Unless
otherwise provided by the Bylaws or the laws of the United States, or waived by
shareholders, a notice of the time, place, and purpose of every annual and
special meeting of the shareholders shall be given by first-class mail, postage
prepaid, mailed at least 10, and no more than 60, days prior to the date of the
6
<PAGE>
meeting to each shareholder of record at his/her address as shown upon the books
of this Association. Unless otherwise provided by the Bylaws, any action
requiring approval of shareholders must be effected at a duly called annual or
special meeting.
ARTICLE 9
INDEMNIFICATION
SECTION 9.1. INSURANCE. The Association may purchase and maintain
insurance on behalf of any person who is or was a director, officer, employee or
agent of the Association, against any liability asserted against such person and
incurred by such person in any such capacity, or arising out of such person's
status as such, whether or not the Association would have the power to indemnify
such person against such liability under the provisions of this Article 9 or
under the provisions of Mississippi law; provided, however, that such insurance
coverage shall not include coverage for formal orders assessing civil money
penalties against a director or employee of the Association.
SECTION 9.2. RIGHT OF INDEMNITY FROM ASSOCIATION. In the event that
the insurance purchased by the Association described in Section 9.1 of this
Article 9 does not fully cover liabilities and reasonable expenses that any
present or former director, officer, employee or agent of the Association who,
by reason of the fact that such party is or was serving at the request of the
Association in such capacity, is made a party to any suit, action or proceeding,
whether civil, criminal, administrative, or investigative, including any action
by or in the right of the Association ("Indemnitee"), the Indemnitee shall be
indemnified against such liabilities and reasonable expenses, including
attorney's fees, incurred by the Indemnitee in connection with such action,
suit, or proceeding, if the Indemnitee meets the requisite Standard of Conduct
as defined below and described in Section 8.51(a)(2) and (b) of the Mississippi
Business Corporation Act. The right of indemnity provided in this Article shall
inure to the estate, executor, administrator, heirs, legatees, or devisees of
any person entitled to such indemnification.
SECTION 9.3. STANDARD OF CONDUCT. An Indemnitee meets the Standard of
Conduct for any action taken, or the failure to take any action, by the
Indemnitee; provided, however, that no such mandatory indemnification shall
apply with respect to any Indemnitee found (a) to have received a financial
benefit to which such Indemnitee is not entitled; (b) to have intentionally
inflicted harm on the Association or its shareholders; (c) to have violated
Section 8.33 of the Mississippi Business Corporation Act by voting for or
assenting to the making of an excessive distribution of shareholders in
violation of Section 6.40 of the Mississippi Business Corporation Act; or (d) to
have intentionally violated criminal law. An Indemnitee's conduct with respect
to an employee benefit plan for a purpose the Indemnitee reasonably believes to
be in the best interest of the participants in and beneficiaries of the plan is
conduct that satisfies the Standard of Conduct.
7
<PAGE>
The determination as to whether an Indemnitee has met the Standard of
Conduct set forth herein shall be made:
(a) if there are two or more disinterested directors, by the Board of
Directors by a majority vote of all the disinterested directors (a
majority of whom shall for such purpose constitute a quorum), or by a
majority of the members of a committee of two (2) or more
disinterested directors appointed by such a vote,
(b) by special legal counsel selected in the manner prescribed in
Subsection (a) of this Section 9.3, or, if there are fewer than two
(2) disinterested directors, selected by the Board of Directors (in
which selection directors who do not qualify as disinterested
directors may participate), or
(c) by the shareholders, but shares owned by or voted under the control of
a director who at the time does not qualify as a disinterested
director may not be voted on the determination.
SECTION 9.4. PROHIBITED INDEMNIFICATION. Unless ordered by a court
pursuant to Section 8.54(a)(3) of the Mississippi Business Corporation Act and
Section 9.5 of this Article 9, no indemnification shall be made in respect to
any claim, judgments, amounts paid in settlement, issue, fine, matter, or
attorney's fees in connection with: (a) a proceeding by or in the right of the
Association, except for reasonable expenses incurred in connection with the
proceeding if it is determined that the Indemnitee has met the relevant Standard
of Conduct set out above and in Section 8.51(a)(2) and (b) of the Mississippi
Business Corporation Act; (b) any proceeding with respect to conduct for which
the Indemnitee was adjudged liable on the basis that the Indemnitee received a
financial benefit to which the Indemnitee was not entitled, whether or not
involving action in the Indemnitee's official capacity; or (c) an administrative
proceeding or action instituted by an appropriate bank regulatory agency which
proceeding or action results in a final order assessing civil money penalties or
requiring affirmative action by a director, officer or employee in the form of
payments to the Association.
SECTION 9.5. COURT ORDERED INDEMNIFICATION. An Indemnitee may apply to
the court conducting a proceeding, or to another court of competent
jurisdiction, for indemnification or an advance for expenses. After receipt of
such an application, and after giving any notice it considers necessary, the
court shall:
(a) order indemnification if the court determines that the Indemnitee is
entitled to mandatory indemnification under Section 79-4-8.52 of the
Mississippi Code of 1972, as amended, and Section 9.6 of this
Article 9;
(b) order indemnification or advance for expenses if the court determines
that the Indemnitee is entitled to indemnification or advance for
expenses pursuant to a provision in Section 9.2 of this Article 9;
8
<PAGE>
(c) order indemnification or advance for expenses, if the court determines
that, in view of all the relevant circumstances, such Indemnitee is
fairly and reasonably entitled to indemnity for such expenses which the
court shall deem proper, or to advance for expenses despite the fact
that such Indemnitee did not meet the requirements of the laws of the
State of Mississippi and these Articles of Association for an advance
for expenses.
If the court determines that the Indemnitee is entitled to indemnification under
Subsection (i) of this Section 9.5, or to indemnification or advance for
expenses under Subsection (ii) of this Section 9.5, the court shall also order
the Association to pay the Indemnitee's reasonable expenses incurred in
connection with obtaining court-ordered indemnification or advance for expenses.
If the court determines that the Indemnitee is entitled to indemnification under
Subsection (c) of this Section 9.5, the court may also order the Association to
pay the Indemnitee's reasonable expenses to obtain court-ordered indemnification
or advance for expenses.
SECTION 9.6. MANDATORY INDEMNIFICATION. Notwithstanding anything to the
contrary in this Article 9, the Association shall indemnify an Indemnitee who
was wholly successful, on the merits or otherwise, in the defense of any
proceeding to which the Indemnitee was a party because the Indemnitee is or was
a director, officer or agent of the Association, against reasonable expenses
incurred by the Indemnitee in connection with the proceeding.
SECTION 9.7. ADVANCE FOR EXPENSES. The Association shall advance funds to
pay for or reimburse the reasonable expenses incurred by an Indemnitee who is a
party to a proceeding if (a) the Indemnitee furnishes the Association a written
affirmation of the Indemnitee's good faith belief that the Indemnitee has met
the relevant Standard of Conduct set out and in Section 8.51(a)(2) and (b) of
the Mississippi Business Corporation Act, or that the proceeding involves
conduct for which liability of directors to the Association or its shareholders
has been eliminated by a provision of these Articles of Association and Section
2.02(b)(4) of the Mississippi Business Corporation Act, and (b) the Indemnitee
furnishes the Association a written undertaking to repay any funds advanced if
the Indemnitee is not entitled to mandatory indemnification or if a final order
is entered by the Office of the Comptroller of the Currency in the action
assessing civil money penalties or requiring payments to the Association by the
Indemnitee or there is a subsequent determination in the proceeding that the
conduct of the Indemnitee was not the type of conduct eliminated from liability
in these Articles of Association under Section 2.02(b)(4) of the Mississippi
Business Corporation Act. The written undertaking must be an unlimited general
obligation of the Indemnitee.
Authorization of an advance for expenses under this Section 9.7 shall be
made within two (2) weeks of the Indemnitee's submission to the Association of
the written request and affirmation and undertaking described above and shall be
made:
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<PAGE>
(a) if there are two or more disinterested directors, by the Board of
Directors by a majority vote of all the disinterested directors (a
majority of whom shall for such purpose constitute a quorum), or by a
majority of the members of a committee of two (2) or more
disinterested directors appointed by such a vote,
(b) if there are fewer than two (2) disinterested directors, by the vote
necessary for action under Section 2.6 of Article 2 of the Bylaws, in
which case directors who do not qualify as disinterested directors may
participate, or
(c) by the shareholders, but shares owned by or voted under the control of
a director who at the time does not qualify as a disinterested
director may not be voted on the determination.
Before any advances of expenses are made pursuant to this Section 9.7 to an
Indemnitee, the Board of Directors, in good faith, must determine in writing,
that all of the following conditions are met:
(a) the officer, director or employee has a substantial likelihood of
prevailing on the merits;
(b) in the event the officer, director or employee does not prevail, he or
she will have the financial capability to reimburse the Association;
and
(c) payment of expenses by the Association will not adversely affect the
Association's safety and soundness. If at any time after an
advancement or reimbursement of expenses has been approved and begun
as described therein, the Board of Directors believes, or should
reasonably believe that any of these conditions are no longer met, the
Association shall cease paying such expenses and, if the Board of
Directors determines that the Indemnitee willfully misrepresented the
factors relevant to the Board's determination of these conditions, the
Board of Directors shall enter into a written agreement with the
Indemnitee specifying the terms and conditions under which he or she
will be required to reimburse the Association.
ARTICLE 10
AMENDMENT
These Articles of Association may be amended at any regular or special
meeting of the shareholders by the affirmative vote of the holders of a majority
of the stock of this Association, unless the vote of the holders of a greater
amount of stock is required by law, and in that case by the vote of the holders
of such greater amount. The Association's Board of Directors may propose one or
more amendments to the Articles of Association for submission to the
shareholders.
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<PAGE>
IN WITNESS WHEREOF, we have hereunto set our hands this _____ of December,
1996.
- ----------------------------- -----------------------------
Anna Berryhill Michael Simon
- ----------------------------- -----------------------------
Buddy R. Montgomery Charles D. Thomas
- ----------------------------- -----------------------------
Larry Russell J. Lowell Whitworth
- -----------------------------
J. Richard Doty
11
<PAGE>
BYLAWS OF
FIRST INTERIM NATIONAL BANK OF PONTOTOC
EXHIBIT B
<PAGE>
BYLAWS OF
FIRST INTERIM NATIONAL BANK OF PONTOTOC
---------------------------------------
ARTICLE 1
MEETINGS OF SHAREHOLDERS
SECTION 1.1. ANNUAL MEETING. The regular annual meeting of the
shareholders to elect directors and transact whatever other business may
properly come before the meeting, shall be held at the main office of the
Association, 19 South Main Street, City of Pontotoc, State of Mississippi or
such other place as the Board of Directors may designate, at 2:00 o'clock p.m.,
on the third Tuesday of March of each year, or if that date falls on a legal
holiday in the State in which the Association is located, on the next following
banking day. Unless otherwise provided by law, notice of the meeting shall be
mailed by first class mail, postage prepaid, at least 10 days and no more than
60 days prior to the date thereof, addressed to each shareholder at his/her
address appearing on the books of the Association. If, for any cause, an
election of directors is not made on that date, or in the event of a legal
holiday, on the next following banking day, an election may be held on any
subsequent day within 60 days of the date fixed, to be designated by the Board
of Directors, or, if the directors fail to fix the date, by shareholders
representing two-thirds of the shares.
SECTION 1.2. SPECIAL MEETINGS. Except as otherwise specifically provided
by statute, special meetings of the shareholders may be called for any purpose
at any time by the Board of Directors or by any one or more shareholders owning,
in the aggregate, not less than 10% percent of the stock of the Association.
Every such special meeting, unless otherwise provided by law, shall be called by
mailing, postage prepaid, not less than 10 days nor more than 60 days prior to
the date fixed for the meeting, to each shareholder at the address appearing on
the books of the Association a notice stating the purpose of the meeting.
SECTION 1.3. RECORD DATE. The Board of Directors may fix a record date
for determining shareholders entitled to notice and to vote at any meeting, in
reasonable proximity to the date of giving notice to the shareholders of such
meeting. The record date for determining shareholders entitled to demand a
special meeting is the date the first shareholder signs a demand for the meeting
describing the purpose or purposes for which it is to be held.
SECTION 1.4. SPECIAL MEETING TO AMEND ARTICLES OF ASSOCIATION OR BYLAWS.
A special meeting may be called by shareholders or the Board of Directors to
amend the Articles of Association or Bylaws, whether or not the Bylaws may be
amended by the Board in the absence of shareholder approval.
SECTION 1.5. ADJOURNMENT OF MEETING. If an annual or special
shareholders' meeting is adjourned to a different date, time, or place, notice
need not be given of the new
<PAGE>
date, time or place, if the new date, time or place is announced at the meeting
before adjournment, unless any additional items of business are to be
considered, or the Association becomes aware of an intervening event materially
affecting any matter to be voted on more than 10 days prior to the date to which
the meeting is adjourned. If a new record date for the adjourned meeting is
fixed, however, notice of the adjourned meeting must be given to persons who are
shareholders as of the new record date.
SECTION 1.6. NOMINATIONS OF DIRECTORS. Nominations for election to the
Board of Directors may be made by the Board of Directors or by any stockholder
of any outstanding class of capital stock of the Association entitled to vote
for the election of directors. Nominations, other than those made by or on
behalf of the existing management of the Association, shall be made in writing
and shall be delivered or mailed to the president of the Association and to the
Comptroller of the Currency, Washington, D.C., not less than 14 days nor more
than 50 days prior to any meeting of shareholders called for the election of
directors, provided, however, that if less than 21 days' notice of the meeting
is given to shareholders, such nomination shall be mailed or delivered to the
president of the Association and to the Comptroller of the Currency not later
than the close of business on the seventh day following the day on which the
notice of meeting was mailed. Such notification shall contain the following
information to the extent known to the notifying shareholder:
(1) The name and address of each proposed nominee.
(2) The principal occupation of each proposed nominee.
(3) The total number of shares of capital stock of the Association that
will be voted for each proposed nominee.
(4) The name and residence address of the notifying shareholder.
(5) The number of shares of capital stock of the Association owned by the
notifying shareholder.
Nominations not made in accordance herewith may, in his/her discretion, be
disregarded by the chairperson of the meeting, and upon his/her instructions,
the vote tellers may disregard all votes cast for each such nominee.
SECTION 1.7. JUDGES OF ELECTION. Every election of directors shall be
managed by two judges, who shall be appointed from among the shareholders by the
Board of Directors. The judges of election shall hold and conduct the election
at which they are appointed to serve. After the election, they shall file with
the cashier a certificate signed by them, certifying the result thereof and the
names of the directors elected. The judges of election, at the request of the
chairperson of the meeting, shall act as tellers of any other vote by ballot
taken at such meeting, and shall certify the result thereof.
2
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SECTION 1.8. PROXIES. Shareholders may vote at any meeting of the
shareholders by proxies duly authorized in writing, but no officer or employee
of this Association shall act as proxy. Proxies shall be valid only for one
meeting, to be specified therein, and any adjournments of such meeting. Proxies
shall be dated and filed with the records of the meeting. Proxies with rubber
stamped facsimile signatures may be used and unexecuted proxies may be counted
upon receipt of a confirming telegram from the shareholder. Proxies meeting the
above requirements submitted at any time during a meeting shall be accepted.
SECTION 1.9. QUORUM. A majority of the outstanding capital stock,
represented in person or by proxy, shall constitute a quorum at any meeting of
shareholders, unless otherwise provided by law, or by the shareholders or
directors pursuant to Section 9.2, but less than a quorum may adjourn any
meeting, from time to time, and the meeting may be held, as adjourned, without
further notice. A majority of the votes cast at a meeting wherein a quorum is
present shall decide every question or matter submitted to the shareholders at
any meeting, unless otherwise provided by law or by the Articles of Association,
or by the shareholders or directors pursuant to Section 9.2.
ARTICLE 2
DIRECTORS
SECTION 2.1. BOARD OF DIRECTORS. The Board of Directors (Board) shall
have the power to manage and administer the business and affairs of the
Association. Except as expressly limited by law, all corporate powers of the
Association shall be vested in and may be exercised by the Board.
SECTION 2.2. NUMBER. The Board shall consist of not less than five nor
more than 25 shareholders, the exact number within such minimum and maximum
limits to be fixed and determined from time to time by resolution of a majority
of the full Board or by resolution of a majority of the shareholders at any
meeting thereof.
SECTION 2.3. ORGANIZATION MEETING. The cashier, upon receiving the
certificate of the judges of the result of any election, shall notify the
directors-elect of their election and of the time at which they are required to
meet at the main office of the Association to organize the new Board and elect
and appoint officers of the Association for the succeeding year. Such meeting
shall be held on the day of the election or as soon thereafter as practicable,
and, in any event, within 30 days thereof. If, at the time fixed for such
meeting, there shall not be a quorum, the directors present may adjourn the
meeting, from time to time, until a quorum is obtained.
SECTION 2.4. REGULAR MEETINGS. The regular meetings of the Board of
Directors shall be held, without notice, on the third Tuesday of each month at
the main office or other such place as the Board may designate. When any
regular meeting of the Board falls upon a holiday, the meeting shall be held on
the next banking business day unless the Board shall designate another day.
3
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SECTION 2.5. SPECIAL MEETINGS. Special meetings of the Board of Directors
may be called by the president of the Association, or at the request of a
majority of the directors. Each member of the Board of Directors shall be given
notice stating the time and place by telegram, letter, or in person, of each
special meeting.
SECTION 2.6. QUORUM. A majority of the director positions on the Board
shall constitute a quorum at any meeting, except when otherwise provided by law,
or the Bylaws, but a lesser number may adjourn any meeting, from time to time,
and the meeting may be held, as adjourned, without further notice. If the
number of directors is reduced to below the number that would constitute a
quorum, no business may be transacted, except selecting directors to fill
vacancies in conformance with Section 2.7. If a quorum is present, the Board of
Directors may take action through the vote of a majority of the directors who
are in attendance.
SECTION 2.7. VACANCIES. When any vacancy occurs among the directors, a
majority of the remaining members of the Board, according to the laws of the
United States, may appoint a director to fill such vacancy at any regular
meeting of the Board, or at a special meeting called for that purpose at which a
quorum is present, or if the directors remaining in office constitute fewer than
a quorum of the Board, by the affirmative vote of a majority of all the
directors remaining in office, or by shareholders at a special meeting called
for that purpose, in conformance with Section 2.2. At any such shareholder
meeting, each shareholder entitled to vote shall have the right to multiply the
number of votes he or she is entitled to cast by the number of vacancies being
filled and cast the product for a single candidate or distribute the product
among two or more candidates. A vacancy that will occur at a specific later
date (by reason of a resignation effective at a later date) may be filled before
the vacancy occurs but the new director may not take office until the vacancy
occurs.
ARTICLE 3
COMMITTEES OF THE BOARD
(INSTRUCTION: THE BOARD OF DIRECTORS HAS POWER OVER AND IS SOLELY RESPONSIBLE
FOR THE MANAGEMENT, SUPERVISION AND ADMINISTRATION OF THE ASSOCIATION. THE
BOARD OF DIRECTORS MAY DELEGATE ITS POWER, BUT NOT ANY OF ITS RESPONSIBILITIES,
TO SUCH PERSONS OR COMMITTEES AS THE BOARD MAY DETERMINE.)
SECTION 3.1. GENERAL. The Board of Directors must formally ratify written
policies authorized by committees of the Board before such policies become
effective. Each committee must have one or more member(s), who serve at the
pleasure of the Board of Directors. Provisions of the Articles of Association
and the Bylaws governing place of meetings, notice of meeting, quorum and voting
requirements of the Board of Directors, apply to committees and their members as
well. The creation of a committee and appointment of members to it must be
approved by the Board of Directors.
4
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SECTION 3.2. LOAN COMMITTEE. The Board of Directors may appoint a loan
committee composed of two (2) directors, appointed by the Board annually or more
often. The loan committee shall have power to discount and purchase bills,
notes and other evidences of debt, to buy and sell bills of exchange, to examine
and approve loans and discounts, to exercise authority regarding loans and
discounts, and to exercise, when the Board is not in session, all other powers
of the Board that may lawfully be delegated. The loan committee shall keep
minutes of its meetings, and such minutes shall be submitted at the next regular
meeting of the Board of Directors at which a quorum is present, and any action
taken by the Board with respect thereto shall be entered in the minutes of the
Board.
SECTION 3.3. INVESTMENT COMMITTEE. The Board of Directors may appoint an
investment committee composed of (1) director, appointed by the Board annually
or more often. The investment committee shall have the power to ensure
adherence to the investment policy, to recommend amendments thereto, to purchase
and sell securities, to exercise authority regarding investments and to
exercise, when the Board is not in session, all other powers of the Board
regarding investment securities that may be lawfully delegated. The investment
committee shall keep minutes of its meetings, and such minutes shall be
submitted at the next regular meeting of the Board at which a quorum is present,
and any action taken by the Board with respect thereto shall be entered in the
minutes of the Board.
SECTION 3.4. EXAMINING COMMITTEE. The Board of Directors may appoint an
examining committee composed of not less than two (2) directors, exclusive of
any active officers, appointed by the Board annually or more often. The duty of
that committee shall be to examine at least once during each calendar year and
within 15 months of the last examination the affairs of the Association or cause
suitable examinations to be made by auditors responsible only to the Board of
Directors and to report the result of such examination in writing to the Board
at the next regular meeting thereafter. Such report shall state whether the
Association is in a sound condition, and whether adequate internal controls and
procedures are being maintained and shall recommend to the Board such changes in
the manner of conducting the affairs of the Association as shall be deemed
advisable.
SECTION 3.5 OTHER COMMITTEES. The Board of Directors may appoint, from
time to time, from its own members, compensation, special litigation and other
committees of one or more persons, for such purposes and with such powers as the
Board may determine.
SECTION 3.6. LIMITATION ON COMMITTEE ACTION. No committee may:
(1) Authorize distributions of assets or dividends.
(2) Approve action required to be approved by shareholders.
(3) Fill vacancies on the Board of Directors or any of its committees.
(4) Amend the Articles of Association.
5
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(5) Adopt, amend or repeal the Bylaws.
(6) Authorize or approve issuance or sale or contract for sale of shares,
or determine the designation and relative rights, preferences and
limitations of a class or series of shares.
ARTICLE 4
OFFICERS AND EMPLOYEES
SECTION 4.1. CHAIRPERSON OF THE BOARD. The Board of Directors may appoint
one of its members to be the chairperson of the Board to serve at its pleasure
who may also be the president of the Association. Such person shall preside at
all meetings of the Board of Directors. The chairperson of the Board shall
supervise the carrying out of the policies adopted or approved by the Board;
shall have general executive powers, as well as the specific powers conferred by
these Bylaws; and shall also have and may exercise such further powers and
duties as from time to time may be conferred upon, or assigned by the Board of
Directors.
SECTION 4.2. PRESIDENT. The Board of Directors shall appoint one of its
members to be the president of the Association. In the absence of the
chairperson, if any, the president shall preside at any meeting of the Board.
The president shall have general executive powers, and shall have and may
exercise any and all other powers and duties pertaining by law, regulation, or
practice, to the office of president, or imposed by these Bylaws. The president
shall also have and may exercise such further powers and duties as from time to
time may be conferred, or assigned by the Board of Directors.
SECTION 4.3. VICE PRESIDENT. The Board of Directors may appoint one or
more vice presidents. Each vice president shall have such powers and duties as
may be assigned by the Board of Directors. One vice president shall be
designated by the Board of Directors, in the absence of the president, to
perform all the duties of the president.
SECTION 4.4. SECRETARY. The Board of Directors shall appoint a secretary,
cashier, or other designated officer who shall be secretary of the Board and of
the Association, and shall keep accurate minutes of all meetings. The secretary
or cashier shall attend to the giving of all notices required by these Bylaws;
shall be custodian of the corporate seal, records, documents and papers of the
Association; shall provide for the keeping of proper records of all transactions
of the Association; shall have and may exercise any and all other powers and
duties pertaining by law, regulation or practice, to the office of secretary or
cashier, or imposed by these Bylaws; and shall also perform such other duties as
may be assigned from time to time by the Board of Directors.
SECTION 4.5. OTHER OFFICERS. The Board of Directors may appoint one or
more assistant vice presidents, one or more trust officers, one or more
assistant secretaries, one or more assistant cashiers, one or more managers and
assistant managers of branches and such
6
<PAGE>
other officers and attorneys in fact as from time to time may appear to the
Board of Directors to be required or desirable to transact the business of the
Association. Such officers shall respectively exercise such powers and perform
such duties as pertain to their several offices, or as may be conferred upon, or
assigned to, them by the Board of Directors, the chairperson of the Board, or
the president. The Board of Directors may authorize an officer to appoint one
or more officers or assistant officers.
SECTION 4.6. TENURE OF OFFICE. The president and all other officers shall
hold office for the current year for which the Board was elected, unless they
shall resign, become disqualified, or be removed; and any vacancy occurring in
the office of president shall be filled promptly by the Board of Directors.
SECTION 4.7. RESIGNATION. An officer may resign at any time by delivering
notice to the Association. A resignation is effective when the notice is given
unless the notice specifies a later effective date.
ARTICLE 5
FIDUCIARY ACTIVITIES
SECTION 5.1. TRUST OFFICER. The Board of Directors may appoint a trust
officer of the Association whose duties shall be to manage, supervise and direct
all fiduciary activities. Such persons shall do or cause to be done all things
necessary or proper in carrying on the fiduciary business of the Association
according to provisions of law and applicable regulations; and shall act
pursuant to opinion of counsel where such opinion is deemed necessary. Opinions
of counsel shall be retained on file in connection with all important matters
pertaining to fiduciary activities. The trust officer shall be responsible for
all assets and documents held by the Association in connection with fiduciary
matters. The Board of Directors may appoint other trust officers as it may deem
necessary, with such duties as may be assigned.
SECTION 5.2. TRUST INVESTMENT COMMITTEE. The Board of Directors may
appoint a trust investment committee of the Association composed of three (3)
members, who shall be capable and experienced officers or directors of the
Association. All investments of funds held in a fiduciary capacity shall be
made, retained or disposed of only with the approval of the trust investment
committee, and the committee shall keep minutes of all its meetings, showing the
disposition of all matters considered and passed upon by it. The committee
shall, promptly after the acceptance of an account for which the Association has
investment responsibilities, review the assets thereof, to determine the
advisability of retaining or disposing of such assets. The committee shall
conduct a similar review at least once during each calendar year thereafter and
within 15 months of the last such review. A report of all such reviews,
together with the action taken as a result thereof, shall be noted in the
minutes of the committee.
7
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SECTION 5.3. TRUST AUDIT COMMITTEE. The Board of Directors shall appoint
a trust audit committee consisting of three (3) directors, exclusive of any
active officer of the Association, which shall, at least once during each
calendar year and within 15 months of the last such audit make suitable audits
of the Association's fiduciary activities or cause suitable audits to be made by
auditors responsible only to the Board of Directors, and at such time shall
ascertain whether fiduciary powers have been administered according to law, Part
9 of the Regulations of the Comptroller of the Currency, and sound fiduciary
principles.
SECTION 5.4. FIDUCIARY FILES. There shall be maintained by the
Association all fiduciary records necessary to assure that its fiduciary
responsibilities have been properly undertaken and discharged.
SECTION 5.5. TRUST INVESTMENTS. Funds held in a fiduciary capacity shall
be invested according to the instrument establishing the fiduciary relationship
and local law. Where such instrument does not specify the character and class
of investments to be made and does not vest in the Association a discretion in
the matter, funds held pursuant to such instrument shall be invested in
investments in which corporate fiduciaries may invest under local law.
ARTICLE 6
STOCK AND STOCK CERTIFICATES
SECTION 6.1. TRANSFERS. Shares of stock shall be transferable on the
books of the Association, and a transfer book shall be kept in which all
transfers of stock shall be recorded. Every person becoming a shareholder by
such transfer shall in proportion to his or her shares, succeed to all rights of
the prior holder of such shares. The Board of Directors may impose conditions
upon the transfer of the stock reasonably calculated to simplify the work of the
Association with respect to stock transfers, voting at shareholder meetings, and
related matters and to protect it against fraudulent transfers.
SECTION 6.2. STOCK CERTIFICATES. Certificates of stock shall bear the
signature of the president (which may be engraved, printed or impressed), and
shall be signed manually or by facsimile process by the secretary, assistant
secretary, cashier, assistant cashier or any other officer appointed by the
Board of Directors for that purpose, to be known as an authorized officer, and
the seal of the Association shall be engraved thereon. Each certificate shall
recite on its face that the stock represented thereby is transferable only upon
the books of the Association properly endorsed. The Board of Directors may
adopt or use procedures for replacing lost, stolen, or destroyed stock
certificates as permitted by law.
SECTION 6.3. REGISTRATION OF STOCK OF NOMINEES. The Association may
establish a procedure through which the beneficial owner of shares that are
registered in the name of a nominee may be recognized by the Association as the
shareholder. The procedure may set forth:
(1) The types of nominees to which it applies.
8
<PAGE>
(2) The rights or privileges that the Association recognizes in a
beneficial owner.
(3) How the nominee may request the Association to recognize the
beneficial owner as the shareholder.
(4) The information that must be provided when the procedure is selected.
(5) The period over which the Association will continue to recognize the
beneficial owner as the shareholder.
(6) Other aspects of the rights and duties created.
ARTICLE 7
CORPORATE SEAL
The president, the secretary, the cashier, or any assistant secretary or
cashier, or other officer thereunto designated by the Board of Directors, shall
have authority to affix the corporate seal to any document requiring such seal,
and to attest the same. Such seal shall be substantially in the following form:
( Impression )
( of )
( Seal )
ARTICLE 8
MISCELLANEOUS PROVISIONS
SECTION 8.1. FISCAL YEAR. The fiscal year of the Association shall be the
calendar year.
SECTION 8.2. EXECUTION OF INSTRUMENTS. All agreements, indentures,
mortgages, deed, conveyances, transfers, certificates, declarations, receipts,
discharges, releases, satisfactions, settlements, petitions, schedules,
accounts, affidavits, bonds, undertakings, proxies and other instruments or
documents may be signed, executed, acknowledged, verified, delivered or accepted
on behalf of the Association by the chairperson of the Board, or the president,
or any vice president, or the secretary, or the cashier, or if in connection
with exercise of fiduciary powers of the Association, by any of those officers
or by any trust officer. Any such instruments may also be executed,
acknowledged, verified, delivered or accepted on behalf of the Association in
such other manner and by such other officers as the
9
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Board of Directors may from time to time direct. The provisions of this Section
8.2 are supplementary to any other provision of these Bylaws.
SECTION 8.3. RECORDS. The Articles of Association, the Bylaws and the
proceedings of all meetings of the shareholders, the Board of Directors, and
standing committees of the Board, shall be recorded in appropriate minute books
provided for that purpose. The minutes of each meeting shall be signed by the
secretary, the cashier, or other officer appointed to act as secretary of the
meeting.
ARTICLE 9
BYLAWS
SECTION 9.1. INSPECTION. A copy of the Bylaws, with all amendments, shall
at all times be kept in a convenient place at the main office of the
Association, and shall be open for inspection to all shareholders during banking
hours.
SECTION 9.2. AMENDMENTS. The Bylaws may be amended, altered or repealed,
at any regular meeting of the Board of Directors, by a vote of a majority of the
total number of the directors except as provided below. The Association's
shareholders may amend or repeal the Bylaws even though the Bylaws also may be
amended or repealed by its Board of Directors.
I, the undersigned, do hereby certify that I am the duly constituted
secretary (or cashier) of First Interim National Bank of Pontotoc and secretary
of its Board of Directors, and as such officer I am the official custodian of
its records; that the foregoing Bylaws are the Bylaws of the Association, and
all of them are now lawfully in force and effect.
I have hereunto affixed my official signature and the seal of the
Association, in the City of Pontotoc, Mississippi, on this _____ day of
December, 1996.
-----------------------------------
Larry Russell, Secretary
Seal
10
<PAGE>
[LETTERHEAD OF PHELPS DUNBAR, L.L.P. APPEARS HERE]
EXHIBIT 5.1
January __, 1997
6792-4
Pontotoc BancShares Corp.
19 South Main Street
Pontotoc, MS 38863
Re: Pontotoc BancShares Corp.
Registration Statement on Form S-4
------------------------------------
Ladies and Gentlemen:
We have acted as counsel to Pontotoc BancShares Corp., a Mississippi
corporation (the "Company"), in connection with the Company's filing of a
Registration Statement on Form S-4 (the "Registration Statement") with the
Securities and Exchange Commission (the "Commission"), pursuant to the
Securities Act of 1933, as amended (the "Act"). The Registration Statement
relates to the registration by the Company of an aggregate of 330,000 shares of
its common stock, no par value per share (the "Shares"), to be offered and sold
pursuant to the terms of a Plan of Reorganization and Agreement by and between
the Company, First National Bank of Pontotoc and First Interim National Bank of
Pontotoc (the "Reorganization Plan").
As counsel to the Company, we have examined original, photostatic or
certified copies of the following documents: (i) the Registration Statement,
(ii) the Articles of Incorporation of the Company, (iii) the By-laws of the
Company, (iv) the Reorganization Plan, (v) certificates of the Company's
officers and excerpts of minutes of meetings of the Board of Directors, and (vi)
such other instruments, agreements, and certificates as we have deemed necessary
or appropriate.
In performing our examination, we have assumed without inquiry the
genuineness of all signatures appearing on all documents, the legal capacity of
all persons signing such documents, the authenticity of all documents submitted
to us as originals, the conformity with originals of all documents submitted to
us as copies, the accuracy and completeness of all corporate records made
available to us by the Company, and the truth and accuracy of all facts set
forth in all
<PAGE>
Pontotoc BancShares Corp.
January __, 1997
Page 2
certificates provided to or examined by us. We have relied as to certain
factual matters on representations made to us by officers of the Company.
Based upon the foregoing and the further qualifications stated below, we
are of the opinion that the Shares have been duly authorized and, when issued
and sold pursuant to the terms and conditions of the Reorganization Plan, will
be validly issued, fully paid and nonassessable.
The foregoing opinion is limited to the laws of the State of Mississippi.
We express no opinion as to matters governed by the laws of any other
jurisdiction. Furthermore, no opinion is expressed herein as to the effect of
any future acts of the Company or changes in existing law. The opinions
expressed herein are rendered as of the date hereof, and we do not undertake to
advise you of any changes after the date hereof in the law or the facts
presently in effect that would alter the scope or substance of the opinion
herein expressed.
This letter expresses our legal opinion as to the foregoing matters based
on our professional judgment at this time; it is not, however, to be construed
as a guaranty, or a warranty that a court considering such matters would not
rule in a manner contrary to the opinion set forth above.
We hereby consent to the filing of this opinion with the Commission as an
exhibit to the Registration Statement. In giving this consent, we do not admit
that we are within the category of persons whose consent is required under
Section 7 of the Act or the General Rules and Regulations of the Commission
thereunder.
Very truly yours,
PHELPS DUNBAR, L.L.P.
<PAGE>
[LETTERHEAD OF PHELPS DUNBAR, L.L.P. APPEARS HERE]
EXHIBIT 8.1
January ___, 1997
Pontotoc BancShares Corp.
19 South Main Street
Pontotoc, Mississippi 38863
First National Bank of Pontotoc
19 South Main Street
Pontotoc, Mississippi 38863
Re: First Interim National Bank of Pontotoc -
Acquisition of First National Bank of Pontotoc
Ladies and Gentlemen:
We have acted as special tax counsel to Pontotoc BancShares Corp. ("Holding
Company") and First National Bank of Pontotoc ("Bank") in connection with the
transaction described below. In that regard, we have been requested to issue
our opinion as to certain matters included in the Registration Statement on Form
S-4 filed with the Securities and Exchange Commission (the "Commission") on
January ____, 1997, (the "Registration Statement"), under the caption entitled
"Certain Federal Income Tax Consequences."
In connection with the foregoing, we have examined and are relying upon the
following documents: (1) the Plan of Reorganization and Agreement of Merger
between Holding Company, First Interim National Bank of Pontotoc ("Interim") and
Bank dated as of December ____, 1996 (the "Plan"); (2) the Application to Merger
filed by Interim and Bank with the Office of the Comptroller of the Currency
(the "Application"); (3) the Registration Statement; (4) the Articles of
Incorporation of Holding Company; (5) the Bylaws of Holding Company; (6) the
Articles of Association of Interim; (7) the Bylaws of Interim; and (8) the
Articles of Association of Bank. All references to capitalized terms, unless
otherwise indicated, shall have the same meaning as such terms have in the
Registration Statement.
<PAGE>
Pontotoc BancShares Corp. and
First National Bank of Pontotoc
January __, 1997
Page 2
We have made such legal and factual examinations and inquiries as we have
deemed advisable and necessary for the purpose of rendering this opinion. We
have examined originals or copies of documents, corporate records and other
writings which we consider relevant for the purposes of this opinion. We also
have discussed such matters as we have deemed relevant to this opinion with
certain officers, directors and shareholders of Holding Company, Interim, and
Bank and, with respect to certain factual matters involving Bank and its
shareholders, we have relied on certificates of officers, directors and
shareholders of Bank.
The Boards of Directors of Holding Company and Bank have determined that it
is desirable and in the best interest of Holding Company and Bank that Bank
merge into Interim and become a wholly-owned subsidiary of Holding Company. The
Plan provides that i) Bank will merge into Interim in accordance with the laws
of the United States of America (the "Merger"), and ii) after the Merger,
Interim will remain a wholly-owned subsidiary of Holding Company.
On the effective date of the Merger, each outstanding share of common stock
of Bank ("Bank Common Stock"), $10.00 par value, will be converted into ten
shares of common stock, no par value per share, of Holding Company ("Holding
Company Common Stock").
The opinions contained herein are based upon the representations and
statements contained in the aforementioned documents and are limited in all
respects to matters of Federal income tax law. In rendering our opinion, we
have assumed, with the approval of the Boards of Directors of Holding Company
and Bank, the following:
(a) The due execution of the Plan, the due execution and proper filing
of the Application and the enforceability, in accordance with its terms, of
the Plan and the effectiveness, in accordance with its terms, of the
Application.
(b) The fair market value of the Holding Company Common Stock and
other consideration received by each Bank shareholder will be approximately
equal to the fair market value of the Bank Common Stock surrendered in the
exchange.
(c) There is no plan or intention by the shareholders of Bank who own
one percent or more of the Bank Common Stock, and to the best of the
knowledge of the management of Bank, there is no plan or intention on the
part of the remaining shareholders of Bank to sell, exchange or otherwise
dispose of a number of shares of Holding Company Common Stock received in
the transaction that would reduce the Bank shareholders' ownership of
Holding Company Common Stock to a number of shares
<PAGE>
Pontotoc BancShares Corp. and
First National Bank of Pontotoc
January __, 1997
Page 3
having a value, as of the date of the transaction of less than 50 percent
of the value of all of the formerly outstanding stock of Bank as of the
same date. For purposes of this representation, shares of Bank Common
Stock exchanged for cash or other property, surrendered by dissenters or
exchanged for cash in lieu of fractional shares of Holding Company Common
Stock will be treated as outstanding Bank Common Stock on the date of the
transaction. Moreover, shares of Bank Common Stock and shares of Holding
Company Common Stock held by Bank shareholders and otherwise sold,
redeemed, or disposed of prior or subsequent to the transaction will be
considered in making this representation.
(d) Interim will acquire at least 90 percent of the fair market value
of the net assets and at least 70 percent of the fair market value of the
gross assets held by Bank immediately prior to the transaction. For
purposes of this representation, amounts paid by Bank to dissenters,
amounts paid by Bank to shareholders who receive cash or other property,
Bank assets used to pay its reorganization expenses, and all redemptions
and distributions (except for regular, normal dividends) made by Bank
immediately preceding the transfer, will be included as assets of Bank held
immediately prior to the transaction.
(e) Prior to the transaction, Holding Company will be in control of
Interim within the meaning of Section 368(c) of the Internal Revenue Code
of 1986, as amended (the "Code").
(f) Following the transaction, Interim will not issue additional
shares of its stock that would result in Holding Company losing control of
Interim within the meaning of Section 368(c) of the Code.
(g) Holding Company has no plan or intention to reacquire any of its
stock issued in the transaction.
(h) Holding Company has no plan or intention to liquidate Interim; to
merge Interim with and into another corporation; to sell or otherwise
dispose of the stock of Interim; or to cause Interim to sell or otherwise
dispose of any of the assets of Bank acquired in the transaction, except
for dispositions made in the ordinary course of business or transfers
described in Section 368(a)(2)(C) of the Code.
(i) The liabilities of Bank assumed by Interim and the liabilities to
which the transferred assets of Bank are subject were incurred by Bank in
the ordinary course of its business.
<PAGE>
Pontotoc BancShares Corp. and
First National Bank of Pontotoc
January __, 1997
Page 4
(j) Following the transaction, Interim will continue the historic
business of Bank or use a significant portion of Bank's business assets in
a business.
(k) Holding Company, Interim, Bank, and the shareholders of Bank will
pay their respective expenses, if any, incurred in connection with the
transaction.
(l) There is no intercorporate indebtedness existing between Holding
Company and Bank or between Interim and Bank that was issued, acquired, or
will be settled at a discount.
(m) No two parties to the transaction are investment companies as
defined in Section 368(a)(2)(F)(iii) and (iv) of the Code.
(n) Bank will pay its dissenting shareholders the value of their stock
out of its own funds. No funds will be supplied for that purpose, directly
or indirectly, by Holding Company, nor will Holding Company directly or
indirectly reimburse Bank for any payments to dissenters.
(o) Except as a result of the Holding Company Merger, neither Holding
Company nor Interim owns directly or indirectly, nor have they owned during
the past five years, directly or indirectly, any stock of Bank.
(p) Bank is not under the jurisdiction of a court in a Title 11 or
similar case within the meaning of Section 368(a)(3)(A) of the Code.
(q) The fair market value of the assets of Bank transferred to Interim
will equal or exceed the sum of the liabilities assumed by Interim, plus
the amount of liabilities, if any, to which the transferred assets are
subject.
(r) No stock of Interim will be issued in the transaction.
(s) None of the compensation received by any shareholder-employee of
Bank will be separate consideration for, or allocable to, any of their
shares of Bank stock; none of the shares of Holding Company Common Stock
received by any shareholder-employee will be separate consideration for, or
allocable to, any employment agreement; and the compensation paid to any
shareholder-employee will be for services actually rendered and will be
commensurate with amounts paid to third parties bargaining at arm's length
for similar services.
<PAGE>
Pontotoc BancShares Corp. and
First National Bank of Pontotoc
January __, 1997
Page 5
(t) At the time of the exchange, Bank will not have outstanding any
warrants, options, convertible securities, or any other type of right
pursuant to which any person could acquire stock in Bank which, if
exercised or converted, would, prior to or after the exchange affect
Holding Company's acquisition or retention of control of Interim, as
defined in Section 368(c) of the Code.
(u) The compensation that will be paid by Interim to the officers and
key employees that it may employ after the exchange will not be part of the
consideration paid for any shares of Bank Common Stock held by any such
officers or key employees. The compensation that will be paid to such
officers and key employees will be commensurate with the duties to be
performed by the officers and key employees.
(v) There are no other facts, documents or agreements among Holding
Company, Bank and/or Interim which alter, modify or change in any manner
the validity and accuracy of the assumptions and information contained
herein.
On the basis of our examination of the aforementioned documents, the
representations contained therein and the assumptions set forth above, and
having considered the applicable Federal income tax law as it exists on the date
hereof, we are of the opinion that:
(i) Neither the Bank, Interim nor the Holding Company will
recognize any gain or loss as a result of the reorganization;
(ii) No gain or loss will be recognized to the shareholders of
the Bank upon conversion of their shares; the tax basis of shares of the
Holding Company's Common Stock received in the reorganization will be the
same as the tax basis of the shares of the Bank's Common Stock previously
owned; and if the shares of the Bank's Common Stock were held as capital
assets, the holding period of the shares of Holding Company's Common Stock
received will include the holding period of the shares of the Bank's Common
Stock exchanged therefor; and
(iii) A shareholder of the Bank who exercises his rights as a
dissenter and thereby receives cash for his shares will recognize income,
gain or loss measured by the difference between the amount of cash received
and the tax basis of his shares of the Bank's Common Stock, subject to the
provisions of Code Section 302. Such distributions will generally be
treated as capital gain or loss if the shares were held as capital assets.
However, a dissenting shareholder must take into account the effect that
Sections 302 and 318 of the Code may have in determining consequences of
the transaction if he receives
<PAGE>
Pontotoc BancShares Corp. and
First National Bank of Pontotoc
January __, 1997
Page 6
only cash, which could cause the distributions to be treated as ordinary
income or, possibly, as a dividend to the dissenter.
This opinion is expressly limited to the Federal income tax consequences of
the Merger that are enumerated above. We express no opinion as to any other
Federal income tax consequences of the Merger or to matters governed by the laws
of any state. Furthermore, no opinion is expressed herein as to the effect of
any future acts of the parties or future changes in existing law. We undertake
no responsibility to advise you of any changes after the date hereof in the law
or the facts presently in effect that would alter the scope or substance of the
opinions herein expressed.
This opinion is based on various statutory provisions, regulations
promulgated thereunder, and interpretations thereof by the Internal Revenue
Service and the courts having jurisdiction over such matters as of and effective
on the date hereof, any one or more of which are subject to change either
prospectively or retroactively. There can be no assurance that contrary
positions may not be successfully asserted by the Internal Revenue Service, or
that a court considering such matters would not hold otherwise. Moreover, no
opinion is rendered with respect to the effect, if any, which pending or
proposed legislation may have on any of the foregoing matters.
This letter expresses our legal opinion as to the foregoing matters based
on our professional judgment at this time; it is not, however, to be construed
as a guaranty, nor is it a warranty that a court considering such matters would
not rule in manner contrary to the opinions set forth above.
This opinion is solely for the benefit of Holding Company and Bank and may
not be otherwise used, quoted, relied upon or referred to, nor may copies be
delivered to any other person or entity without our prior written permission.
Sincerely,
PHELPS DUNBAR, L.L.P.
<PAGE>
EXHIBIT 10.1
FIRST NATIONAL BANK OF PONTOTOC
EXECUTIVE AGREEMENT
-------------------
THIS AGREEMENT (the "Agreement") is made and entered into by and between
FIRST NATIONAL BANK OF PONTOTOC, a financial institution organized and existing
under the laws of the United States (the "Bank"), and BUDDY ROSS MONTGOMERY (the
"Executive"), to be effective as of November 20, 1996;
WHEREAS, the Executive is presently employed by the Bank as President;
WHEREAS, the Bank now desires to retain the services of the Executive by
providing certain assurances if the Executive's employment with the Bank is
terminated under the circumstances set forth in this Agreement;
WHEREAS, the Board of Directors of the Bank has determined that it is in
the best interests of the Bank and its shareholders to reorganize the Bank as a
subsidiary of a corporation that will be registered as a bank holding company
under the Federal Bank Holding Company Act of 1956 (the "Holding Company");
NOW, THEREFORE, effective as of November 20, 1996, the Bank and the
Executive agree to the following terms and conditions:
SECTION I
---------
DEFINITIONS
-----------
1.1 "Change in Duties" means the occurrence of one of the following events
in connection with a Change in Control:
a. A diminution in the nature or scope of the Executive's authorities or
duties, a change in his reporting responsibilities or titles or the
assignment of the Executive to any duties or responsibilities that are
inconsistent with his position, duties, responsibilities or status
immediately preceding such assignment;
b. A reduction in the Executive's compensation during the Covered Period.
For this purpose, "compensation" means the fair market value of all
remuneration paid to the Executive by the Employer during the
immediately preceding calendar year, including, without limitation,
deferred compensation, stock options and other forms of incentive
compensation awards, coverage under any employee benefit plan (such as
a pension, thrift, medical, dental, life insurance or long-term
disability plan) and other perquisites;
<PAGE>
c. The transfer of the Executive to a location requiring a change in his
residence or a material increase in the amount of travel ordinarily
required of the Executive in the performance of his duties; or
d. A good faith determination by the Executive that his position, duties,
responsibilities or status has been affected, whether directly or
indirectly, in any manner which prohibits the effective discharge of
any such duties or responsibilities.
1.2 "Change in Control" means and shall be deemed to have occurred if:
a. Any "person," including any "group," determined in accordance with
Section 13(d)(3) of the Securities Exchange Act of 1934, as amended,
becomes the beneficial owner, directly or indirectly, of securities of
the Bank (or the Holding Company, as the case may be) representing 25%
or more of the combined voting power of the Bank's (or the Holding
Company's, as the case may be) then outstanding securities, without
the approval, recommendation, or support of the Board of Directors of
the Bank (or the Holding Company, as the case may be) as constituted
immediately prior to such acquisition;
b. Either of the Bank or the Holding Company is merged into another
corporate entity or consolidated with one or more corporations, other
than a wholly-owned subsidiary of the Holding Company, and other than
the transaction in which the Holding Company is formed;
c. A change in the members of the Board of Directors of the Bank (or the
Holding Company, as the case may be) which results in the exclusion of
a majority of the "continuing board." For this purpose, the term
"continuing board" means the members of the Board of Directors of the
Bank, determined as of the date on which this Agreement is executed
and subsequent members of such board who are elected by or on the
recommendation of a majority of such "continuing board"; or
d. The sale or other disposition of all or substantially all of the stock
or the assets of the Bank (or the Holding Company, as the case may
be), or any successor corporation thereto.
1.3 "Company" means the Bank and the Holding Company, once it becomes the
holding company of the Bank.
1.4 "Covered Period" means the one-year period immediately preceding and
the five-year period immediately following the occurrence of a Change in
Control.
2
<PAGE>
1.5 "Employer" means the Bank, the Holding Company or both, as the case
may be.
1.6 "Severance Amount" means 300% of the Executive's "annual salary." For
this purpose, "annual salary" means the average of all compensation paid to the
Executive by the Company which is includable in the Executive's gross income for
the highest 3 of the 5 calendar years immediately preceding the calendar year in
which a Change in Control occurs, including the amount of any compensation which
the Executive elected to defer under any plan or arrangement of the Company with
respect to such years. If the Executive has been employed less than 5 years
prior to the calendar year in which a Change in Control occurs, "annual salary"
shall be determined by averaging the compensation (as defined in the preceding
sentence) for the Executive's actual period of employment. Further, if the
Executive has been employed less than 12 months prior to the occurrence of a
Change in Control, the actual compensation of the Executive shall be annualized
for purposes of this Section 1.6. In the event of a dispute between the
Executive and the Company, the determination of the "annual salary" shall be
made by an independent public accounting firm agreed upon by the Executive and
the Company.
1.7 "Termination" or "Terminated" means (a) termination of the employment
of the Executive with the Employer for any reason, other than cause, or (b) the
resignation of the Executive following a Change in Duties. In no event,
however, shall the Executive's voluntary separation from service with the
Employer on account of death, disability, or resignation on or after the
attainment of the normal retirement age specified in any qualified employee
benefit plan maintained by the Employer constitute a Termination. For purposes
of determining whether a Termination has occurred, "cause" means fraud,
misappropriation of or intentional material damage to the property or business
of the Employer or the commission of a felony by the Executive.
SECTION II
----------
TERMINATION RIGHTS AND OBLIGATIONS
----------------------------------
2.1 Severance Awards. If the Executive's employment is Terminated during
the Covered Period, then no later than 30 days after the later of (a) the date
of such Termination, or (b) the occurrence of a Change in Control, the Company
shall:
a. Pay to the Executive the Severance Amount;
b. Transfer to the Executive the ownership of all club memberships,
automobiles and other perquisites which were assigned to the
Executive as of the day immediately preceeding such Termination;
c. In accordance with Section 2.2 hereof, provide for the benefit of the
Executive, his spouse, and his dependents, if any, coverage under the
plans, policies or programs (as the same may be amended from time to
time)
3
<PAGE>
maintained by the Company for the purpose of providing medical
benefits and life insurance to other executives of the Company with
comparable duties; provided, however, that in no event shall the
coverage provided under this paragraph be substantially less than the
coverage provided to the Executive as of the date immediately
preceding a Termination;
d. Pay to the Executive an amount equal to the contributions by the
Company to the First National Bank Employee Profit Sharing Plan, or a
successor arrangement, that would have been made for the lesser of (i)
3 years following the date of Termination, or (ii) the number of years
until the Executive's normal retirement age under such plan;
e. Pay to the Executive the amount to which the Executive would be
entitled under the annual First National Bank Performance Plan, or a
successor thereto, for the calendar year in which a Change in Control
occurs, determined as if all performance goals applicable to the
Company and the Executive were achieved.
2.2 Special Rules Governing Group Benefits. Coverage under Section 2.1c,
hereof, shall (a) commence as of the later of the date of Termination or the
occurrence of a Change in Control, and (b) end as of the earlier of the
Executive's coverage under Medicare Part B or the date on which the Executive is
covered under group plans providing substantially similar benefits maintained by
another employer. For this purpose, the Company shall provide coverage during
any period in which the payment of benefits is limited by any form of pre-
existing condition clause.
Coverage under Section 2.1c, hereof, may be provided under a group policy
or program maintained by the Company or the Company, in its sole discretion, may
acquire or adopt an individual plan, policy or program providing coverage solely
for the benefit of the Executive, his spouse, and his dependents, if any.
If coverage commences as of a Change in Control, the Company shall (a)
retroactively reinstate the Executive, his spouse, and dependents, if any, as of
the date of Termination, and (b) reimburse to the Executive his cost of
obtaining similar coverage for the period commencing on the date of Termination
and ending on the occurrence of a Change in Control. As to medical claims
incurred during such period, any coverage actually obtained by the Executive
shall be designated as the Executive's primary coverage, and the reinstated
coverage shall operate as secondary coverage.
2.3 Other Plans and Agreements. To the maximum extent permitted by law
and not withstanding any provision to the contrary contained in any plan, grant,
program, contract or other arrangement under which the Executive and the
Employer are parties, if the Executive's employment is Terminated during the
Covered Period, then any vesting schedule or other restriction on the ownership
of any benefits payable to the Executive under the terms
4
<PAGE>
of any such plan, grant, contract, or arrangement shall be accelerated or lapse,
as the case may be.
Notwithstanding any provision to the contrary contained in any plan, grant,
program, contract, or arrangement under which the Executive and the Employer are
parties, if the Executive has elected to defer the payment of any benefit under
any such plan, grant, contract, or arrangement, then the payment of such benefit
shall be accelerated and paid to the Executive in the form of a single-sum no
later than 30 days after the Executive's Termination during the Covered Period.
2.4 Taxes. The Executive shall be responsible for applicable income tax
and the Company shall have the right to withhold from any payment made under
this Agreement, or to collect as a condition of any payment, any income taxes
required by law to be withheld.
Notwithstanding the preceding paragraph, the Company shall pay any excise
tax or similar penalty imposed by Section 4999 of the Internal Revenue Code of
1986, as amended (the "Code") or any comparable successor provision, on the
Executive as a consequence of any "excess parachute payment" within the meaning
of Section 280(g) of the Code (or a comparable successor provision) payable
under this Agreement or any plan, grant, program, contract or other arrangement
under which the Executive and the Employer are parties, including any and all
income taxes due (1) on any such excise tax or similar penalty so paid by the
Company and (2) on any income taxes incurred by the Executive for any excise
tax, or similar penalty, or income taxes paid on his behalf by the Company. It
is the intention of the parties that the burden of any excise tax or similar
penalty will be borne entirely by the Company.
The Executive shall submit to the Company the amount to be paid under this
Section 2.4, together with supporting documentation. If the Executive and the
Company disagree as to such amount, an independent public accounting firm agreed
upon by the Executive and the Company shall make such determination.
SECTION III
-----------
MISCELLANEOUS
-------------
3.1 Notices. Notices and other communication required under this
Agreement shall be made to the Company at 19 South Main Street, Pontotoc,
Mississippi 38863, and to each Executive at his regular residence in Pontotoc,
Mississippi or, as to each party, at such other address as may be designated by
written notice to the other. All such notices and communications shall be
effective when deposited in the United States mail, postage prepaid, or
delivered to the affected party.
3.2 Employment Rights. The terms of this Agreement shall not be deemed to
confer on the Executive any right to continue in the employ of the Employer for
any period or any right to continue his present or any other rate of
compensation.
5
<PAGE>
3.3 Assignment. The Executive shall not sell, assign, pledge, transfer or
otherwise convey the right to receive any form of payment or benefit provided
under the Agreement, except by will or the laws of intestacy.
3.4 Inurement. This Agreement shall be binding upon and inure to the
benefit of the Holding Corporation, the Bank and the Executive and their
respective heirs, executors, administrators, successors and assigns.
3.5 Payment of Expenses. If it is necessary or desirable for the
Executive to retain legal counsel and/or incur other costs and expenses in
connection with the enforcement of the terms of the Agreement, then the Company
shall pay (or the Executive shall be entitled to reimbursement of) reasonable
attorneys' fees, costs, and expenses actually incurred, without regard to the
final outcome, unless there is no reasonable basis for the Executive's action.
3.6 Amendment and Termination. The Agreement shall not be amended or
terminated by any act of the Company, except as may be expressly agreed upon, in
writing, by the Company and the Executive.
3.7 Nature of Obligation. The Company intends that its obligations
hereunder be construed in the nature of severance pay. The Company's
obligations under Section 2 are absolute and unconditional and shall not be
affected by any circumstance, including, without limitation, any right of
offset, counterclaim, recoupment, defense, or other right which the Company may
have against the Executive or others. All amounts payable by the Company
hereunder shall be paid without notice or demand.
3.8 Choice of Law. The Agreement shall be governed and construed in
accordance with the laws of the State of Mississippi.
3.9 No Effect on Other Benefits. Any other compensation paid or benefits
provided to the Executive shall be in addition to and not in lieu of the
benefits provided to such Executive under this Agreement. Except as may be
expressly provided herein, nothing in this Agreement shall be construed as
limiting, varying or reducing the provision of any benefit available to the
Executive (or to such Executive's estate or other beneficiary) pursuant to any
employment agreement, group plan, including any qualified pension or
profit-sharing plan, health, disability or life insurance plan, or any other
form of agreement or arrangement between the Company and the Executive.
3.10 Entire Agreement. This Agreement constitutes the entire agreement
between the Executive and the Bank (or the Holding Company, as the case may be)
and is intended to supersede all prior written or oral understandings with
respect to the subject matter of this Agreement.
6
<PAGE>
3.11 Invalidity. If any one or more provisions of this Agreement shall,
for any reason, be held invalid, illegal or unenforceable in any manner, then
such invalidity, illegality or unenforceability shall not affect any other
provision of such Agreement.
3.12 Mitigation. Notwithstanding any provision of this Agreement to the
contrary and to the maximum extent permitted by law, the Executive shall not be
subject to any duty to mitigate the severance awards received hereunder by
seeking other employment. No severance award received under this Agreement
shall be offset by any compensation the Executive receives from future
employment, and the Executive shall not be required to perform any service as a
condition of this Agreement.
EXECUTED in multiple counterparts as of the dates set forth below, each of
which shall be deemed an original, and effective as of the date first set forth
above.
EXECUTIVE FIRST NATIONAL BANK OF
PONTOTOC
/s/ Buddy Ross Montgomery By: /s/ Larry Russell
- ------------------------- ------------------------------------
BUDDY ROSS MONTGOMERY LARRY RUSSELL
Date: November 20, 1996 Title: Executive Vice President
------------------ ---------------------------------
Date: November 20, 1996
----------------------------------
7
<PAGE>
EXHIBIT 10.2
FIRST NATIONAL BANK OF PONTOTOC
EXECUTIVE AGREEMENT
-------------------
THIS AGREEMENT (the "Agreement") is made and entered into by and between
FIRST NATIONAL BANK OF PONTOTOC, a financial institution organized and existing
under the laws of the United States (the "Bank"), and LARRY RUSSELL (the
"Executive"), to be effective as of November 20, 1996;
WHEREAS, the Executive is presently employed by the Bank as Executive Vice
President;
WHEREAS, the Bank now desires to retain the services of the Executive by
providing certain assurances if the Executive's employment with the Bank is
terminated under the circumstances set forth in this Agreement;
WHEREAS, the Board of Directors of the Bank has determined that it is in
the best interests of the Bank and its shareholders to reorganize the Bank as a
subsidiary of a corporation that will be registered as a bank holding company
under the Federal Bank Holding Company Act of 1956 (the "Holding Company");
NOW, THEREFORE, effective as of November 20, 1996, the Bank and the
Executive agree to the following terms and conditions:
SECTION I
---------
DEFINITIONS
-----------
1.1 "Change in Duties" means the occurrence of one of the following events
in connection with a Change in Control:
a. A diminution in the nature or scope of the Executive's authorities or
duties, a change in his reporting responsibilities or titles or the
assignment of the Executive to any duties or responsibilities that are
inconsistent with his position, duties, responsibilities or status
immediately preceding such assignment;
b. A reduction in the Executive's compensation during the Covered Period.
For this purpose, "compensation" means the fair market value of all
remuneration paid to the Executive by the Employer during the
immediately preceding calendar year, including, without limitation,
deferred compensation, stock options and other forms of incentive
compensation awards, coverage under any employee benefit plan (such as a
pension, thrift, medical, dental, life insurance or long-term disability
plan) and other perquisites;
<PAGE>
c. The transfer of the Executive to a location requiring a change in his
residence or a material increase in the amount of travel ordinarily
required of the Executive in the performance of his duties; or
d. A good faith determination by the Executive that his position, duties,
responsibilities or status has been affected, whether directly or
indirectly, in any manner which prohibits the effective discharge of
any such duties or responsibilities.
1.2 "Change in Control" means and shall be deemed to have occurred if:
a. Any "person," including any "group," determined in accordance with
Section 13(d)(3) of the Securities Exchange Act of 1934, as amended,
becomes the beneficial owner, directly or indirectly, of securities of
the Bank (or the Holding Company, as the case may be) representing 25%
or more of the combined voting power of the Bank's (or the Holding
Company's, as the case may be) then outstanding securities, without
the approval, recommendation, or support of the Board of Directors of
the Bank (or the Holding Company, as the case may be) as constituted
immediately prior to such acquisition;
b. Either of the Bank or the Holding Company is merged into another
corporate entity or consolidated with one or more corporations, other
than a wholly-owned subsidiary of the Holding Company, and other than
the transaction in which the Holding Company is formed;
c. A change in the members of the Board of Directors of the Bank (or the
Holding Company, as the case may be) which results in the exclusion of a
majority of the "continuing board." For this purpose, the term
"continuing board" means the members of the Board of Directors of the
Bank, determined as of the date on which this Agreement is executed and
subsequent members of such board who are elected by or on the
recommendation of a majority of such "continuing board"; or
d. The sale or other disposition of all or substantially all of the stock
or the assets of the Bank (or the Holding Company, as the case may be),
or any successor corporation thereto.
1.3 "Company" means the Bank and the Holding Company, once it becomes the
holding company of the Bank.
1.4 "Covered Period" means the one-year period immediately preceding
and the five-year period immediately following the occurrence of a Change in
Control.
2
<PAGE>
1.5 "Employer" means the Bank, the Holding Company or both, as the case
may be.
1.6 "Severance Amount" means 300% of the Executive's "annual salary." For
this purpose, "annual salary" means the average of all compensation paid to the
Executive by the Company which is includable in the Executive's gross income for
the highest 3 of the 5 calendar years immediately preceding the calendar year in
which a Change in Control occurs, including the amount of any compensation which
the Executive elected to defer under any plan or arrangement of the Company with
respect to such years. If the Executive has been employed less than 5 years
prior to the calendar year in which a Change in Control occurs, "annual salary"
shall be determined by averaging the compensation (as defined in the preceding
sentence) for the Executive's actual period of employment. Further, if the
Executive has been employed less than 12 months prior to the occurrence of a
Change in Control, the actual compensation of the Executive shall be annualized
for purposes of this Section 1.6. In the event of a dispute between the
Executive and the Company, the determination of the "annual salary" shall be
made by an independent public accounting firm agreed upon by the Executive and
the Company.
1.7 "Termination" or "Terminated" means (a) termination of the employment
of the Executive with the Employer for any reason, other than cause, or (b) the
resignation of the Executive following a Change in Duties. In no event,
however, shall the Executive's voluntary separation from service with the
Employer on account of death, disability, or resignation on or after the
attainment of the normal retirement age specified in any qualified employee
benefit plan maintained by the Employer constitute a Termination. For purposes
of determining whether a Termination has occurred, "cause" means fraud,
misappropriation of or intentional material damage to the property or business
of the Employer or the commission of a felony by the Executive.
SECTION II
----------
TERMINATION RIGHTS AND OBLIGATIONS
----------------------------------
2.1 Severance Awards. If the Executive's employment is Terminated during
the Covered Period, then no later than 30 days after the later of (a) the date
of such Termination, or (b) the occurrence of a Change in Control, the Company
shall:
a. Pay to the Executive the Severance Amount;
b. Transfer to the Executive the ownership of all club memberships,
automobiles and other perquisites which were assigned to the Executive
as of the day immediately preceding such Termination;
c. In accordance with Section 2.2 hereof, provide for the benefit of the
Executive, his spouse, and his dependents, if any, coverage under the
plans, policies or programs (as the same may be amended from time to
time)
3
<PAGE>
maintained by the Company for the purpose of providing medical
benefits and life insurance to other executives of the Company with
comparable duties; provided, however, that in no event shall the
coverage provided under this paragraph be substantially less than the
coverage provided to the Executive as of the date immediately
preceding a Termination;
d. Pay to the Executive an amount equal to the contributions by the
Company to the First National Bank Employee Profit Sharing Plan, or a
successor arrangement, that would have been made for the lesser of (i)
3 years following the date of Termination, or (ii) the number of years
until the Executive's normal retirement age under such plan;
e. Pay to the Executive the amount to which the Executive would be
entitled under the annual First National Bank Performance Plan, or a
successor thereto, for the calendar year in which a Change in Control
occurs, determined as if all performance goals applicable to the
Company and the Executive were achieved.
2.2 Special Rules Governing Group Benefits. Coverage under Section 2.1c,
hereof, shall (a) commence as of the later of the date of Termination or the
occurrence of a Change in Control, and (b) end as of the earlier of the
Executive's coverage under Medicare Part B or the date on which the Executive is
covered under group plans providing substantially similar benefits maintained by
another employer. For this purpose, the Company shall provide coverage during
any period in which the payment of benefits is limited by any form of pre-
existing condition clause.
Coverage under Section 2.1c, hereof, may be provided under a group policy
or program maintained by the Company or the Company, in its sole discretion, may
acquire or adopt an individual plan, policy or program providing coverage solely
for the benefit of the Executive, his spouse, and his dependents, if any.
If coverage commences as of a Change in Control, the Company shall (a)
retroactively reinstate the Executive, his spouse, and dependents, if any, as of
the date of Termination, and (b) reimburse to the Executive his cost of
obtaining similar coverage for the period commencing on the date of Termination
and ending on the occurrence of a Change in Control. As to medical claims
incurred during such period, any coverage actually obtained by the Executive
shall be designated as the Executive's primary coverage, and the reinstated
coverage shall operate as secondary coverage.
2.3 Other Plans and Agreements. To the maximum extent permitted by law
and not withstanding any provision to the contrary contained in any plan, grant,
program, contract or other arrangement under which the Executive and the
Employer are parties, if the Executive's employment is Terminated during the
Covered Period, then any vesting schedule or other restriction on the ownership
of any benefits payable to the Executive under the terms
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of any such plan, grant, contract, or arrangement shall be accelerated or lapse,
as the case may be.
Notwithstanding any provision to the contrary contained in any plan, grant,
program, contract, or arrangement under which the Executive and the Employer are
parties, if the Executive has elected to defer the payment of any benefit under
any such plan, grant, contract, or arrangement, then the payment of such benefit
shall be accelerated and paid to the Executive in the form of a single-sum no
later than 30 days after the Executive's Termination during the Covered Period.
2.4 Taxes. The Executive shall be responsible for applicable income tax
and the Company shall have the right to withhold from any payment made under
this Agreement, or to collect as a condition of any payment, any income taxes
required by law to be withheld.
Notwithstanding the preceding paragraph, the Company shall pay any excise
tax or similar penalty imposed by Section 4999 of the Internal Revenue Code of
1986, as amended (the "Code") or any comparable successor provision, on the
Executive as a consequence of any "excess parachute payment" within the meaning
of Section 280(g) of the Code (or a comparable successor provision) payable
under this Agreement or any plan, grant, program, contract or other arrangement
under which the Executive and the Employer are parties, including any and all
income taxes due (1) on any such excise tax or similar penalty so paid by the
Company and (2) on any income taxes incurred by the Executive for any excise
tax, or similar penalty, or income taxes paid on his behalf by the Company. It
is the intention of the parties that the burden of any excise tax or similar
penalty will be borne entirely by the Company.
The Executive shall submit to the Company the amount to be paid under this
Section 2.4, together with supporting documentation. If the Executive and the
Company disagree as to such amount, an independent public accounting firm agreed
upon by the Executive and the Company shall make such determination.
SECTION III
-----------
MISCELLANEOUS
-------------
3.1 Notices. Notices and other communication required under this
Agreement shall be made to the Company at 19 South Main Street, Pontotoc,
Mississippi 38863, and to each Executive at his regular residence in Pontotoc,
Mississippi or, as to each party, at such other address as may be designated by
written notice to the other. All such notices and communications shall be
effective when deposited in the United States mail, postage prepaid, or
delivered to the affected party.
3.2 Employment Rights. The terms of this Agreement shall not be deemed to
confer on the Executive any right to continue in the employ of the Employer for
any period or any right to continue his present or any other rate of
compensation.
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3.3 Assignment. The Executive shall not sell, assign, pledge, transfer or
otherwise convey the right to receive any form of payment or benefit provided
under the Agreement, except by will or the laws of intestacy.
3.4 Inurement. This Agreement shall be binding upon and inure to the
benefit of the Holding Corporation, the Bank and the Executive and their
respective heirs, executors, administrators, successors and assigns.
3.5 Payment of Expenses. If it is necessary or desirable for the
Executive to retain legal counsel and/or incur other costs and expenses in
connection with the enforcement of the terms of the Agreement, then the Company
shall pay (or the Executive shall be entitled to reimbursement of) reasonable
attorneys' fees, costs, and expenses actually incurred, without regard to the
final outcome, unless there is no reasonable basis for the Executive's action.
3.6 Amendment and Termination. The Agreement shall not be amended or
terminated by any act of the Company, except as may be expressly agreed upon, in
writing, by the Company and the Executive.
3.7 Nature of Obligation. The Company intends that its obligations
hereunder be construed in the nature of severance pay. The Company's
obligations under Section 2 are absolute and unconditional and shall not be
affected by any circumstance, including, without limitation, any right of
offset, counterclaim, recoupment, defense, or other right which the Company may
have against the Executive or others. All amounts payable by the Company
hereunder shall be paid without notice or demand.
3.8 Choice of Law. The Agreement shall be governed and construed in
accordance with the laws of the State of Mississippi.
3.9 No Effect on Other Benefits. Any other compensation paid or benefits
provided to the Executive shall be in addition to and not in lieu of the
benefits provided to such Executive under this Agreement. Except as may be
expressly provided herein, nothing in this Agreement shall be construed as
limiting, varying or reducing the provision of any benefit available to the
Executive (or to such Executive's estate or other beneficiary) pursuant to any
employment agreement, group plan, including any qualified pension or profit-
sharing plan, health, disability or life insurance plan, or any other form of
agreement or arrangement between the Company and the Executive.
3.10 Entire Agreement. This Agreement constitutes the entire agreement
between the Executive and the Bank (or the Holding Company, as the case may be)
and is intended to supersede all prior written or oral understandings with
respect to the subject matter of this Agreement.
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3.11 Invalidity. If any one or more provisions of this Agreement shall,
for any reason, be held invalid, illegal or unenforceable in any manner, then
such invalidity, illegality or unenforceability shall not affect any other
provision of such Agreement.
3.12 Mitigation. Notwithstanding any provision of this Agreement to the
contrary and to the maximum extent permitted by law, the Executive shall not be
subject to any duty to mitigate the severance awards received hereunder by
seeking other employment. No severance award received under this Agreement
shall be offset by any compensation the Executive receives from future
employment, and the Executive shall not be required to perform any service as a
condition of this Agreement.
EXECUTED in multiple counterparts as of the dates set forth below, each of
which shall be deemed an original, and effective as of the date first set forth
above.
EXECUTIVE FIRST NATIONAL BANK OF
PONTOTOC
/s/ Larry Russell By: /s/ Buddy Ross Montgomery
- ----------------------------- ----------------------------
LARRY RUSSELL BUDDY ROSS MONTGOMERY
Date: November 20, 1996 Title: President
------------------------ --------------------------
Date: November 20, 1996
--------------------------
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EXHIBIT 15.1
[FORM OF LETTER FROM NAIL MCKINNEY
PROFESSIONAL ASSOCIATES AS TO THE UNAUDITED
INTERIM FINANCIAL INFORMATION]
December 27, 1996
Pontotoc BancShares Corp.
P. O. Box 29
Pontotoc, MS 38863
Dear Gentlemen:
We consent to the use of the compiled financial statements we prepared December
11, 1996 for the First National Bank of Pontotoc for the two years ended
December 31, 1995 and 1994 and the nine-month periods ended September 30, 1996
and 1995 in the registration Statement of Form S-4 of Pontotoc BancShares Corp.
Very truly yours,
/s/ JAMES RAY DAVIS, JR.
James Ray Davis, Jr.
Certified Public Accountant
<PAGE>
EXHIBIT 99.1
PROXY
FIRST NATIONAL BANK OF PONTOTOC
____________, FEBRUARY __, 1997
SPECIAL MEETING OF SHAREHOLDERS
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
The undersigned hereby constitutes and appoints William W. Anderson and Julie
Henry, or either of them, the proxies of the undersigned, with full power of
substitution, to represent the undersigned and to vote all of the shares of
common stock of First National Bank of Pontotoc (the "Bank") that the
undersigned is entitled to vote at the special meeting of the shareholders of
the Bank to be held on __________, February __, 1997, and at any and all
adjournments thereof.
1. A proposal to approve a Plan of Reorganization and Agreement of Merger (the
"Plan") pursuant to which, among other things: (i) Pontotoc BancShares Corp.,
a Mississippi corporation (the "Company"), will become the holding company of
the Bank as further described in the accompanying proxy statement; and (ii)
on the effective date of the Plan, each outstanding share of common stock of
the Bank will be converted into the right to receive 10 shares of common
stock of the Company.
FOR ____ AGAINST ____ ABSTAIN ____
2. In their discretion, to vote upon such other business as may properly come
before the meeting or any adjournment thereof.
THIS PROXY WILL BE VOTED AS SPECIFIED.
IF NO SPECIFIC DIRECTIONS ARE GIVEN, THIS PROXY WILL BE VOTED FOR
APPROVAL OF THE PLAN.
Please date and sign exactly as name appears on the certificate or certificates
representing shares to be voted by this proxy. When signing as executor,
administrator, attorney, trustee or guardian, please give full title as such.
If a corporation, please sign in full corporate name by the president or other
authorized person. If a partnership, please sign in partnership name by the
authorized person(s).
Dated: ___________, 1997
______________________________
Signature of Shareholder
______________________________
(Capacity, if applicable)
___________________________ ______________________________
Please Print Name(s) Signature (if jointly owned)
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY TO THE
BANK PROMPTLY USING THE ENCLOSED ENVELOPE.
