<PAGE>
As filed with the Securities and Exchange Commission on April 24, 1997.
Registration No. 333-19409
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
AMENDMENT NO. 1
TO
FORM S-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
PONTOTOC BANCSHARES CORP.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<CAPTION>
<S> <C> <C>
MISSISSIPPI 6712 64-0885622
(State or other (Primary Standard Industrial (I.R.S. Employer
jurisdiction of incorporation Classification Code Number) Identification Number)
or organization)
</TABLE>
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
President
Pontotoc BancShares Corp.
19 South Main Street
Pontotoc, Mississippi 38863
(601) 489-1631
(Address, including zip code, and telephone number,
including area code, of agent for service)
Copy to:
VIRGINIA BOULET
Phelps Dunbar, L.L.P.
30th Floor, 400 Poydras Street
New Orleans, Louisiana 70130-3245
(504) 566-1311
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
Upon the Effective Date of the reorganization and merger described in this
Registration Statement
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>
PONTOTOC BANCSHARES CORP.
Cross Reference Sheet
Location in Proxy
Form S-4 Item Statement
A. INFORMATION ABOUT THE TRANSACTION.
Item 1. Forepart of Registration Cover of Registration Statement;
Statement and Outside Front Cross Reference Sheet; Outside
Cover Page of Prospectus. Front Cover Page of Proxy
Statement
Item 2. Inside Front and Outside Back Table of Contents; Available
Cover Pages of Prospectus. Information; Reports to Security
Holders; Additional Information
Item 3. Risk Factors, Ratio of Earnings Summary of the Proxy
to Fixed Charges, and Other Statement; Comparative Rights of
Information. Shareholders of the Bank and the
Company; Trading Market;
Dividends
Item 4. Terms of the Transaction. Outside Front Cover Page of
Proxy Statement; Summary of
the Proxy Statement; Recent
Developments; The Proposed
Reorganization; Description of
Capital Stock; Comparative
Rights of Shareholders of the
Bank and the Company; Certain
Federal Income Tax Consequences
Item 5. Pro Forma Financial Pro Forma Financial Statements
Information.
Item 6. Material Contacts with the Not Applicable
Company Being Acquired.
<PAGE>
Item 7. Additional Information Required Not Applicable
For Reoffering by Persons and
Parties Deemed to be
Underwriters.
Item 8. Interests of Named Experts and Not Applicable
Counsel.
Item 9. Disclosure of Commission Limitation of Directors'
Position on Indemnification For Liabilities; Indemnification;
Securities Act Liabilities. Undertakings
B. INFORMATION ABOUT THE REGISTRANT.
Item 10. Information With Respect to S-3 Not Applicable
Registrants.
Item 11. Incorporation of Certain Not Applicable
Information by Reference.
Item 12. Information With Respect to S-2 Not Applicable
or S-3 Registrants.
Item 13. Incorporation of Certain Not Applicable
Information by Reference.
Item 14. Information With Respect to Summary of the Proxy
Registrants Other Than S-2 or Statement; Recent Developments;
S-3 Registrants. Description of Capital Stock;
Trading Market; Dividends;
Business of the Company;
Management's Discussion and
Analysis of Financial Condition
and Results of Operations;
Supervision and Regulation
C. INFORMATION ABOUT THE COMPANY BEING ACQUIRED.
Item 15. Information With Respect to S-3 Not Applicable
Companies.
Item 16. Information With Respect to S-2 Not Applicable
or S-3 Companies.
<PAGE>
Item 17. Information With Respect to Summary of the Proxy
Companies Other Than S-2 or Statement; Recent Developments;
S-3 Companies. Description of Capital Stock;
Trading Market; Business of the
Bank; Supervision and Regulation
D. VOTING AND MANAGEMENT INFORMATION.
Item 18. Information if Proxies, Consents Summary of the Proxy
or Authorizations Are to be Statement; The Proposed
Solicited. Reorganization; Recommenda-
tion of Board of Directors;
Rights of Dissenting
Shareholders; Management;
Certain Transactions; Beneficial
Ownership of Directors,
Executive Officers and Principal
Shareholders of the Bank
Item 19. Information if Proxies, Not Applicable
Consents or Authorizations
Are Not to be Solicited,
or in an Exchange Offer.
<PAGE>
FIRST NATIONAL BANK OF PONTOTOC
19 SOUTH MAIN STREET
PONTOTOC, MISSISSIPPI 38863
April __, 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 ____________, ____________, 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 (other than
shares of common stock of the Bank already owned by the Company) 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 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 ____________, 1997
April __, 1997
A special meeting of shareholders (the "Special Meeting") of First National
Bank of Pontotoc (the "Bank") will be held on ____________, ____________, 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 (other than
shares of common stock of the Bank already owned by the Company) will be
converted into and exchanged for ten shares of common stock of the Company, and
the shareholders of the Bank (other than the Company) 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 ____________, 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 ____________, ____________, 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 ____________, ____________, 1997,
and any adjournments thereof. This Proxy Statement is being mailed to the
Bank's shareholders of record on the close of business on ____________, 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 (other than shares of common
stock of the Bank already owned by the Company) will be converted into and
exchanged for ten shares of common stock of the Company (the "Reorganization").
See "Recent Developments." This Proxy Statement also constitutes the Prospectus
of the Company relating to 264,430 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"), Registration No. 333-19409, and is incorporated
by reference herein. For a description of the Reorganization, see "The Proposed
Reorganization" herein. SEE "RECENT DEVELOPMENTS," "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.
---------------------
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.
---------------------
This Proxy Statement and the accompanying proxy cards are first being
mailed to shareholders of the Bank on or about ____________, 1997. The date of
this Prospectus is ____________, 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 the Company will become subject to
such informational requirements. However, the Company intends 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 such information
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. The Commission maintains a Web site that can be accessed at
http://www.sec.gov, containing reports, proxy and information statements and
other information regarding registrants that file electronically with the
Commission.
<PAGE>
TABLE OF CONTENTS
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
RECENT DEVELOPMENTS....................................................... 2
THE PROPOSED REORGANIZATION............................................... 5
General.............................................................. 5
Effect of the Proposed Reorganization................................ 5
Reasons for the Proposed Reorganization.............................. 6
Conditions to Consummation of the Reorganization..................... 6
Termination and Abandonment of the Reorganization.................... 6
Stock Certificates................................................... 7
Accounting Treatment................................................. 7
DESCRIPTION OF CAPITAL STOCK.............................................. 8
Stock of the Bank.................................................... 8
Stock of the Company................................................. 8
COMPARATIVE RIGHTS OF
SHAREHOLDERS OF THE BANK AND THE COMPANY.................................. 9
General.............................................................. 9
Shareholder Meetings................................................. 10
Shareholder Proposals................................................ 10
Approval of Certain Business Combinations............................ 10
Directors............................................................ 11
Amendment of Articles of Incorporation and Bylaws.................... 12
Assessability of Stock............................................... 13
Certain Corporate Protective Devices................................. 13
RIGHTS OF DISSENTING SHAREHOLDERS......................................... 15
CERTAIN FEDERAL INCOME TAX CONSEQUENCES................................... 16
TRADING MARKET; DIVIDENDS................................................. 17
No Trading Market.................................................... 17
Dividends............................................................ 17
BUSINESS OF THE BANK...................................................... 18
<PAGE>
General.............................................................. 18
Competition.......................................................... 19
Employees............................................................ 19
Legal Proceedings.................................................... 19
BUSINESS OF THE COMPANY................................................... 19
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS FOR THE TWO YEARS ENDED
DECEMBER 31, 1996......................................................... 20
SUPERVISION AND REGULATION................................................ 30
Supervision and Regulation of the Company............................ 30
Supervision and Regulation of the Bank............................... 31
Interstate Banking and Branching Legislation......................... 32
MANAGEMENT................................................................ 33
Directors and Executive Officers..................................... 33
SUMMARY COMPENSATION TABLE................................................ 35
Employment Agreements................................................ 35
Compensation of Directors............................................ 36
Limitation on Directors' Liability................................... 36
Indemnification...................................................... 36
BENEFICIAL OWNERSHIP OF DIRECTORS, EXECUTIVE OFFICERS
AND PRINCIPAL SHAREHOLDERS OF THE BANK.................................... 37
LEGAL MATTERS............................................................. 38
SHAREHOLDER PROPOSALS..................................................... 38
OTHER MATTERS............................................................. 39
FINANCIAL STATEMENTS...................................................... 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
<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 ____________, ____________, 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
____________, 1997 (the "Record Date") 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 March 31, 1997, the Bank had total assets of approximately
$158 million, total deposits of approximately $130 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" and
"Financial Statements."
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 was approved by the Federal Reserve Board as a bank holding company in
March 1997 and subsequently incurred $6,360,000 in debt for the purpose of
purchasing 6,557 shares of Bank Common Stock. Except for this transaction, the
Company has not engaged in any business operations. 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 "Recent Developments,"
"Business of the Company" and "Financial Statements."
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"),
(other than shares of Bank Common Stock already owned by the Company) will be
converted into ten shares of Company Common Stock and the shareholders of the
Bank (other than the Company) will become the shareholders of the Company. The
Reorganization will increase each shareholder's percentage
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ownership in the Company as compared to that shareholder's percentage ownership
in the Bank because the Bank Common Stock already owned by the Company will not
be exchanged for Company Common Stock. For example, a shareholder of the Bank
who owns 1,320 shares of Bank Common Stock, owns 4.0% of the outstanding stock
of the Bank. After the Reorganization, such shareholder will own 13,200 shares
of Company Common Stock, which will represent approximately 5% of the
outstanding Company Common Stock.
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 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" and "Financial Statements."
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 enable the Company to offer to its shareholders the opportunity to have the
Company repurchase their stock, thus providing shareholders of the Company with
additional liquidity in their investments, without the necessity of securing
regulatory and shareholder approval, as is currently required for redemptions of
Bank Common Stock. Thus, it will be much easier for the Company to redeem
shareholders' investments out of available capital surplus than is currently the
case with the Bank. The Company will be operated as a bank holding company
under the federal Bank Holding Company Act of 1956. See "Recent Developments,"
"The Proposed Reorganization - Reasons for the Proposed Reorganization" and
"Supervision and Regulation."
CONDITIONS TO CONSUMMATION OF THE REORGANIZATION
Consummation of the Reorganization is subject to a number of conditions
including the following: (i) the Reorganization must be approved by holders of
at least two-thirds of the outstanding shares of Bank Common Stock; (ii) the
Reorganization must be approved by the Office of the Comptroller of the Currency
(the "Comptroller"); and (iii) the formation of the Company must be approved by
the Board of Governors of the Federal Reserve System (the "Federal Reserve
Board"). Approval of the Reorganization from the Comptroller and the Federal
Reserve Board has already been obtained conditioned upon filing certain
organizational documents and compliance with commitments made in connection with
the applications for approval. See "The Proposed Reorganization - Conditions to
Consummation of the Reorganization."
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. A number
of these differences may be viewed as "anti-takeover" provisions
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<PAGE>
which, taken together, may have the effect of discouraging third parties from
attempting to obtain an equity ownership position in the Company despite the
fact that some or even a majority of the Company's shareholders believe that
such an acquisition would be in their best interests. 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 "Recent Developments" and "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
The Company and the Bank have received 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 trading
price of Bank Common Stock or Company Common Stock. See "Recent Developments"
and "Trading Market; Dividends - No Trading Market."
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 the Record Date, the directors and executive officers of
the Bank and their affiliates, as a group (8 persons), beneficially owned 14,880
shares of Bank Common Stock, which represented 45.09% of the
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aggregate number of votes entitled to be cast at the Special Meeting. ALL SUCH
PERSONS 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."
RECENT DEVELOPMENTS
Union Planters Corporation recently made an unsuccessful, unsolicited bid
to acquire control of the Bank. 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.
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<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 ____________,
____________, 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 ____________, 1997 (the "Record Date") will be
entitled to notice of, and to vote at, the Special Meeting. On the Record Date,
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 the Record Date, the directors and executive officers of the
Bank and their affiliates, as a group (8 persons), beneficially owned 14,880
shares of Bank Common Stock, which represented 45.09% of the aggregate number of
votes entitled to be cast at the Special Meeting. ALL SUCH PERSONS HAVE
INDICATED THAT THEY INTEND TO VOTE ALL SHARES BENEFICIALLY OWNED BY THEM FOR THE
REORGANIZATION.
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<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, proxies voted
FOR approval of the Reorganization may be voted 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.
RECENT DEVELOPMENTS
GENERAL
In September 1995, the Board of Directors of the Bank (the "Board of
Directors") was advised by Richard Doty, Ann Doty, Martha Doty, Gerry G. Jones
and All Saints Episcopal Church of Memphis, Tennessee (collectively, the
"Sellers"), as a group one of the largest shareholders of the Bank (owning
approximately 19.8% of the outstanding Bank Common Stock), of their desire to
sell their stock in the Bank. At that time, Richard Doty was a member of the
Board of Directors. Over a period of time, the Board of Directors had
discussions with Richard Doty in an effort to arrive at what the Bank considered
to be a fair purchase price. In
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that connection, the Bank contacted its regular accounting firm, Nail McKinney,
P.A., and asked them to advise the Bank with respect to the value of the Bank
Common Stock.
The Bank also contacted the law firm of Phelps Dunbar, L.L.P. for
legal advice concerning the formation of a bank holding company because
formation of a bank holding company would facilitate the repurchase of
shareholders' investments. On March 26, 1996, the Board of Directors authorized
an offer to repurchase all of the Seller's stock at $800 a share. That offer
was rejected. The Board of Directors approved the formation of a bank holding
company on May 21, 1996. On October 17, 1996, the Sellers entered into an
agreement with Union Planters Corporation, a Memphis, Tennessee bank holding
company ("Union Planters"), that, subject to certain conditions, obligated Union
Planters to purchase and the Sellers to sell their stock in the Bank for $848
per share. The Union Planters agreement also provided the Sellers with "best
price protection" if Union Planters acquired their stock and subsequently sold
it at a higher price.
In November 1996, Union Planters requested a meeting with the Board of
Directors of the Bank concerning possible acquisition of the entire Bank. Later
in November 1996, the Board of Directors voted to approve (i) employment
agreements for the two most senior officers of the Bank (see "Management-
Employment Agreements"), (ii) documentation and the associated filings with
regulatory agencies for the formation of a bank holding company, and (iii) the
solicitation of a right of first refusal by Bank management from all of the
Bank's shareholders, which was intended to give the Board of Directors the
necessary authority to allow it to decide whether a sale of the Bank was in the
best interests of shareholders, and, if a sale was considered appropriate, to
negotiate the terms and conditions of any proposed sale of the Bank on behalf of
all of the Bank's shareholders. The Bank obtained rights of first refusal from
shareholders owning approximately 70% of the Bank's outstanding common stock.
The rights of first refusal will expire upon consummation of the Reorganization.
The Board of Directors' decision to form a holding company as proposed herein
was the result of deliberate analysis and consideration by Bank management over
a period of time beginning with requests for legal advice on these matters in
1995 and was not the result of Union Planters attempt to acquire control of the
Bank.
On December 12, 1996, Union Planters submitted a written offer to the
Board of Directors to purchase the Bank for $875 per share. The Board of
Directors requested Chaffe & Associates, Inc., an investment banking firm
located in New Orleans, Louisiana ("Chaffe & Associates"), to determine the
fairness of Union Planters' offer. On January 2, 1997, Union Planters purchased
264 shares (less than 1%) of the Bank Common Stock from one of the Sellers,
which level of ownership was below the level of stock ownership requiring Union
Planters to obtain prior approval from the Federal Reserve Board. Management of
the Bank believes that this purchase was concluded in an effort by Union
Planters to gain access to the Bank's shareholder list. On January 21, 1997,
Chaffe & Associates advised the Board of Directors that the Union Planters offer
was "not fair, from a financial point of view, to the holders of the Bank Common
Stock." See "Opinion of Chaffe & Associates," below.
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On March 3, 1997, the Bank received notification of the Federal
Reserve Board's approval of formation of Pontotoc Bancshares Corp. (the
"Company") as a bank holding company for the purpose of acquiring all of the
outstanding stock of the Bank.
On the basis of its financial advisor's opinion, Union Planters was
notified of the Bank's rejection of its offer as inadequate. Immediately
thereafter, and for the next two months, negotiations were conducted between the
Bank, Union Planters and the Sellers to terminate Union Planters' and Sellers'
investments in and/or their contractual rights to acquire common stock of the
Bank. In March of 1997, Union Planters sold to the Company on behalf of the
Bank an assignment of its right to purchase the shares of the Bank Common Stock
with respect to which it had an option to purchase and the Sellers and Union
Planters sold their stock in the Bank (6,557 shares) to the Company for
approximately $880 per share. The Company purchased the 6,557 shares of Bank
Common Stock from Union Planters and the Sellers and Union Planters' right to
acquire the Sellers' stock for a total purchase price of $6,360,000. The
Company financed this purchase price with a loan from National Bank of Commerce,
Memphis, Tennessee ("NBC"), which is secured by the Bank Common Stock that was
purchased and is payable in five equal annual principal payments, with interest
at NBC's prime rate. See "Financial Statements."
OPINION OF CHAFFE & ASSOCIATES
Pursuant to an engagement letter dated December 17, 1996 (the
"Engagement Letter"), the Bank engaged Chaffe & Associates to determine whether
the consideration offered to the shareholders of the Bank by Union Planters was
fair to the Bank's shareholders from a financial point of view. Chaffe &
Associates has extensive experience in investment analysis and the valuation of
bank and bank holding company securities in connection with acquisitions and
mergers, and valuations for various other purposes. The Bank selected Chaffe &
Associates as its financial advisor on the basis of its experience and expertise
in merger and acquisition transactions, and its reputation in the commercial
banking and investment banking communities.
No limitations were imposed by the Bank on Chaffe & Associates with
respect to the investigations made or the procedures followed in rendering its
opinion.
In connection with rendering its opinion, Chaffe & Associates, among
other things: (i) reviewed this Proxy Statement, in the form that it was filed
with the Securities and Exchange Commission on January 8, 1997; (ii) reviewed
and analyzed certain publicly-available financial statements and other
information of the Bank; (iii) reviewed and analyzed certain internal financial
statements and other financial and operating data concerning the Bank, prepared
by the management of the Bank, including financial projections; (iv) discussed
the past and current operations and financial condition, and the prospects of
the Bank with senior executives of the Bank; (v) reviewed the historical prices
and trading volumes of the shares of the Bank Common Stock; (vi) compared the
financial performance of the Bank, and the prices and trading activity of the
Bank Common Stock, with that of certain other comparable publicly-traded
companies and their securities; (vii) reviewed the financial terms of business
combinations in the commercial
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banking industry specifically and other industries generally, which Chaffe &
Associates deemed generally comparable to the transaction proposed by Union
Planters; (viii) considered a number of valuation methodologies, including among
others, those that incorporate book value, deposit base premium and
capitalization of earnings; and (ix) performed such other studies and analyses
as it deemed appropriate to its opinion. On the basis of its review, Chaffe &
Associates concluded that the Union Planters offer was "not fair, from a
financial point of view, to the holders of the Bank Common Stock."
For rendering its opinion, Chaffe & Associates was paid approximately
$15,000, plus reasonable out-of-pocket expenses. Neither Chaffe & Associates nor
its principals owns an interest in the securities of the Bank or the Company.
THE PROPOSED REORGANIZATION
GENERAL
The Board of Directors of the Bank has approved and authorized the
Reorganization. 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 , Registration No. 333-19409, and is
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 (other than shares of Bank Common Stock already owned by the
Company) will be converted into and exchanged for ten shares of Company Common
Stock, and the shareholders of the Bank (other than the Company) will become the
shareholders of the Company. As a result, each shareholder's percentage
ownership interest in the Company will increase relative to his or her
percentage ownership interest in the Bank. For example, a shareholder of the
Bank who owns 1,320 shares of Bank Common Stock, owns 4.0% of the outstanding
stock of the Bank. After the Reorganization, such shareholder will own 13,200
shares of Company Common Stock, which will represent approximately 5% of the
outstanding Company Common Stock. See "Recent Developments."
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 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.
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The first annual meeting of the Company's shareholders at which directors are to
be elected will be held in 1998. See "Financial Statements."
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 enable the Company to offer to its shareholders the opportunity to have the
Company repurchase their stock, thus providing shareholders of the Company with
additional liquidity in their investments, without the necessity of securing
regulatory and shareholder approval, as is currently required for redemptions of
Bank Common Stock. Thus, it will be much easier for the Company to redeem
shareholders' investments out of available capital surplus than is currently the
case with the Bank. The Company will be operated as a bank holding company
within the meaning of the federal Bank Holding Company Act of 1956 (the "Act").
The recent efforts by Union Planters to acquire control of the Bank had no
effect on the Board of Directors' decision to recommend formation of a holding
company to the shareholders. See "Recent Developments," "Comparative Rights of
Shareholders of the Bank and the Company - Effects of Shareholder Rights
Provisions" and "Supervision and Regulation."
CONDITIONS TO CONSUMMATION OF THE REORGANIZATION
Consummation of the Reorganization is subject to a number of
conditions, including the following: (i) the Reorganization must be approved by
holders of at least two-thirds of the outstanding shares of Bank Common Stock;
(ii) the Reorganization must be approved by the Comptroller; and (iii) the
formation of the Company must be approved by the Federal Reserve Board.
Approval for the Reorganization from the Comptroller and the Federal Reserve
Board has been obtained conditioned upon filing certain organizational documents
and compliance with commitments made in connection with the applications for
approval.
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.
The Reorganization, if approved by the Bank's shareholders, will be consummated
as soon as practicable 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. Examples of situations in which the Board of Directors might
conclude that consummation of the Reorganization is inadvisable include a large
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number of shareholders dissenting or otherwise disapproving of the
Reorganization, an unexpected change in federal or state tax law, or the
happening of any other unexpected event the effect of which is to make
consummation of the Reorganization inadvisable in the judgment of the Board of
Directors.
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 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 be treated as
a purchase for financial accounting purposes. It is not anticipated that
purchase accounting treatment will have a material adverse effect on the
Company's reported income for tax or financial accounting purposes. See
"Financial Statements."
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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 additional
shares are authorized for issuance.
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 Mississippi
Business Corporation Act ("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 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 264,430 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
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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 have 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.
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
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 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.
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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 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 not meeting the foregoing requirements
and any other 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 defined 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.
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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 six 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 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 six 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.
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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 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.
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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
(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.
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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 are not being proposed as a result of Union
Planters' recent efforts to acquire control of the Bank, but because of the
Board of Directors' belief that they serve to protect and promote the interests
of all of the Company's shareholders. See "Recent Developments."
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 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.
-14-
<PAGE>
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 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.
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.
-15-
<PAGE>
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
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. 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 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 the following 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. Phelps Dunbar, L.L.P., special
counsel to the Company and the Bank, has provided its written opinion 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 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
-16-
<PAGE>
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 trading
price of either Bank Common Stock or Company Common Stock. For information
concerning recent repurchase activity in the Bank Common Stock, see "Recent
Developments." At March 31, 1997, there were approximately 197 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 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
-17-
<PAGE>
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. See "Financial Statements."
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
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<PAGE>
deposit and other time deposits and safe deposit facilities. As of
March 31, 1997, the Bank had total assets of approximately $158 million, total
deposits of approximately $130 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 to be 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. All of the Bank's facilities are owned rather than leased.
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 March 31, 1997, the Bank had 52 full-time and 3 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.
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. 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."
-19-
<PAGE>
On March 18, 1997, the Company acquired 6,557 shares of Bank Common
Stock and certain rights to acquire Bank Common Stock for an aggregate purchase
price of $6,360,000. The purchase price was financed with the proceeds of a loan
from an unaffiliated third party. See "Recent Developments" and "Financial
Statements."
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.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS FOR THE TWO YEARS ENDED
DECEMBER 31, 1996
The following discussion provides certain information concerning the
financial condition and results of operations of the Bank compiled for the two
years ended December 31, 1996 and 1995. Management's discussion should be read
in conjunction with the financial statements and accompanying notes presented
elsewhere in this Proxy Statement.
OVERVIEW
The Bank reported net income for 1996 of $2,679,000, or $81.18 per
share, compared to $2,440,000, or $73.94 per share, in 1995. This represented a
9.8% increase in 1996 compared to 1995. The increase in earnings from 1995 to
1996 was due to a 10.1% increase in net interest income, which itself was caused
by growth in assets, particularly loans. This growth in loans indicates a
continued improvement in the Bank's local economy. Return on average assets was
1.76% and return on average equity was 10.67% for 1996, compared to the prior
year's returns of 1.73% and 10.3%, respectively.
Average assets increased 7.94% in 1996 from the 1995 level. At year
end 1996, total assets were $153,289,000. Total stockholders' equity was
$26,811,000 at December 31, 1996, compared to $25,123,000 at December 31, 1995.
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
rates paid on their funding sources, as well as the relative effect of
noninterest bearing sources of funds. Net interest income increased from
$6,101,000 in 1995 to $6,719,000 in 1996.
Average earning assets increased from $132,714,000 in 1995 to
$145,125,000 in 1996. Interest income increased from $10,650,00 in 1995 to
$11,681,000 in 1996, due primarily to
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<PAGE>
an increase in loans. This growth in higher yielding assets was funded almost
entirely by an increase in time deposits, the average cost of which increased
slightly in 1996 to 5.37% from 5.32% in 1995. The end result of growth in
earning assets and relatively stable interest rates on time deposits was a
slight increase in the Bank's net interest margin (defined as the ratio of net
income to average earning assets) from 4.60% in 1995 to 4.63% in 1996.
The Bank's net interest spread, the difference between the yield on
earning assets and the rate paid on interest-bearing liabilities, was 3.50% for
1996, a 4 basis point decrease from the 1995 level of 3.54%. This slight
decrease in the Bank's net interest spread resulted from an increase in the
percentage of earning assets that was funded by relatively higher yielding time
deposits, as the Bank's demand deposits decreased as a percentage of total
deposits from 13.03% in 1995 to 12.37% in 1996.
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:
1996/1995
-------------------------------
Change due to
-------------------------------
(Dollars in thousands)
Rate Volume Change
--------- -------- --------
Interest income:
Loans $ 334 $ 544 $ 878
Investment securities - taxable (299) 454 155
Investment securities - nontaxable (53) (226) (279)
Federal funds sold and
resale agreements (5) 282 277
Total interest income (23) 1,054 1,031
--------- -------- --------
Interest expense:
Deposits other than time (36) 26 (10)
Time deposits 960 (526) 434
Other interest-bearing liabilities (9) (2) (11)
Total interest expense 915 (502) 413
Net interest income $ (938) $ 1,556 $ 618
========== ======== ========
NOTE: The changes in interest due to both volume and rate have been allocated
proportionally between rate and volume.
-21-
<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, 1996:
<TABLE>
<CAPTION>
1996 1995
---------------------------- --------------------------
Average Income/ Yields/ Average Income/ Yields/
(Dollars in thousands) Balances Expense Rates Balances Expense Rates
--------- -------- -------- -------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Loans/1/ $ 83,031 $ 8,167 9.84% $ 76,610 $ 7,289 9.51%
Investment securities-taxable 39,822 2,342 5.88% 34,316 2,187 6.37%
Investment securities-nontaxable/2/ 13,660 716 5.24% 18,472 995 5.39%
Federal funds sold 8,612 456 5.29% 3,316 179 5.40%
Total earning assets 145,125 11,681 8.05% 132,714 10,650 8.02%
Other assets 7,314 8,509
Total assets $152,439 $141,223
LIABILITIES AND STOCKHOLDERS' EQUITY
Interest-bearing deposits:
Deposits other than time $ 34,779 965 2.77% $ 34,307 975 2.84%
Time deposits 74,379 3,997 5.37% 66,977 3,563 5.32%
Total interest-bearing deposits 109,158 4,962 4.55% 101,284 4,538 4.48%
Other interest-bearing liabilities 0 0 192 11 5.73%
Total interest bearing liabilities 109,158 4,962 4.55% 101,476 4,549 4.48%
Non-interest bearing liabilities 15,409 15,205
Other liabilities 2,759 840
Minority interest 0 0
Stockholders' equity 25,113 23,702
Total liabilities and stockholders'
equity 152,439 141,223
Net interest spread 3.50% 3.54%
Net interest income/margin $ 6,719 4.63% $ 6,101 4.60%
</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.
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<PAGE>
INTEREST RATE SENSITIVITY. The interest rate sensitivity gap is the
difference between the amount of interest-bearing assets and the amount of
interest-bearing liabilities maturing in any given time period. A primary
objective of asset/liability management is to achieve reasonable stability in
net interest income throughout interest rate cycles. 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, 1996 the Bank's one-year
repricing gap, defined as repricing assets minus repricing liabilities, as a
percentage of total assets, was -5.91%, that is, 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 income because its
interest income on earnings-assets will decrease more quickly than its cost of
funds. Conversely, in periods of declining rates, based on its current interest
sensitivity gap, the Bank should experience increased net income, since the
interest on its earning-assets will increase more 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 noninterest 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
volatility 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 1995 was $714,000. The provision made in
1996 was $420,000.
The Bank identified net charge-offs of $348,000 in 1996 and $937,000
in 1995, to be written off as uncollectible against the reserve for possible
loan losses. The decrease in net charge-offs from 1995 to 1996 was the effect of
a continued good local economy and the efforts of management in past years to
improve the quality of the Bank's loan portfolio.
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 1.28% for 1996 and 1.30% for 1995.
NONINTEREST INCOME. Other income for 1996 totaled $1,100,000, compared
to $1,080,000 in 1995, as service charges and other sources of income remained
relatively flat.
NONINTEREST EXPENSES. In 1996, other expenses totalled $3,394,000,
compared to $3,042,000 in 1995. This was an increase of $352,000, or 11.6% from
the 1995 level. Higher
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<PAGE>
salaries and employee benefits caused the increase, along with legal and
consulting fees related to the formation of the Company.
ANALYSIS OF FINANCIAL CONDITION
INVESTMENT SECURITIES. In 1996, average investment securities
increased minimally by $694,000 from $52,788,000 in 1995, to $53,482,000 in
1996. Investment securities totaled $51,066,000 at the end of 1996. Investment
securities comprised 36.85% of average earning assets at December 31, 1996
compared to 39.78% at December 31, 1995, as a relatively higher percentage of
the Bank's earning assets was deployed to loans.
Securities classified as available for sale constituted approximately
33% of the total investment portfolio at year-end 1996, compared to
approximately 36% at year-end 1995. 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 $481,000 in
1996 and $477,000 in 1995 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 1996 was $111,000, compared to an unrealized net
gain in 1995 of $83,000.
The Bank maintains no trading portfolio.
Proceeds from sales and maturities of securities were $13,993,000
during 1996. Gross realized losses were $2,000, and there were no gross realized
gains. 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:
December 31
-----------------
(Dollars in thousands) 1996 1995
-------- --------
U. S. Treasury $ 2,257 $ 3,003
Obligations of U.S. Government:
U. S. Agencies 741 2,698
Mortgage-backed 32,882 32,391
State and political subdivisions 14,056 12,812
Other securities 1,130 960
Total $ 51,066 $ 51,864
======== ========
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<PAGE>
MATURITY DISTRIBUTION AND INVESTMENT SECURITIES PORTFOLIO YIELDS. The
maturities, based on contractual maturities, of debt securities at December 31,
1996 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
- ------------------------ ------------------ ----------------- ----------------- ----------------- ------------------
(Dollars in thousands) Amount % Yield Amount % Yield Amount % Yield Amount % Yield Amount % Yield
--------- -------- -------- -------- -------- -------- -------- -------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
U. S. Treasury $ 753 5.75 $ 1,988 5.88 $ 250 6.16 2,991 5.93
Mortgage-backed 1,943 9.50 21,081 7.15 1,805 4.23 9,190 5.97 34,019 6.71
State and political
subdivisions 1,034 6.82 7,088 5.17 4,754 5.17 1,000 5.00 13,876 5.54
Other securities 50 9.15 130 9.22 180 9.19
------ ------ ------- -------
Total $3,780 7.81 $30,287 6.86 $6,809 5.19 $10,190 10.97 $51,066 6.84
====== ==== ======= ====== ====== ===== ======= ===== ======= =======
</TABLE>
The yield on tax exempt securities are not on a tax equivalent basis for this
schedule.
LOANS AND NONPERFORMING ASSETS. The loan portfolio is one of the largest
components of the Bank's earning assets. Average loans outstanding in 1996
increased $6,421,000 or 8.38%, from the 1995 level of $76,610,000. Average loans
in 1996 were $83,031,000. The increase in 1996 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 and
commercial real estate, which represent approximately 30.4% and 26.3%,
respectively, of the total portfolio as of December 31, 1996. Commercial loans
represented approximately 21.5% of total loans at the end of 1996. No single
loan relationship exceeds 5% of total loans.
Total nonperforming assets at December 31, 1996 were $2,587,000, compared to
$1,714,000 at December 31, 1995. Other real estate owned increased to $854,000
at December 31, 1996, compared to $302,000 as of the end of 1995, as loans were
foreclosed and moved to other real estate owned.
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 1996 was approximately
$56,653. No interest income was recognized on nonaccrual loans for 1996.
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<PAGE>
SUMMARY OF NONPERFORMING ASSETS. 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.
<TABLE>
<CAPTION>
December 31
----------------
(Dollars in thousands) 1996 1995
------- -------
<S> <C> <C>
Nonperforming loans
Nonaccrual loans $ 381 $ 967
Restructured loans 1,352 445
------ ------
Total nonperforming loans 1,733 1,412
Other real estate 854 302
------ ------
Total nonperforming assets 2,587 1,714
====== ======
Loans 90 days or more past due and still
accruing interest 339 798
====== ======
Nonperforming loans as a % of total loans 2.05% 1.78%
Nonperforming assets as a % of total loans and
other real estate 3.02% 2.15%
Allowance for possible loan losses as a % of
nonperforming loans 61.51% 70.40%
Allowance for possible loan losses as a % of
nonperforming assets 41.21% 57.99%
</TABLE>
In addition to the nonaccrual loans included in nonperforming assets, the
Bank had approximately $5,712,000 of performing loans that were classified as of
December 31, 1996. Classified loans are credits, identified internally by
management or through the regulatory examination process, which have a higher
degree of risk than other performing loans in the portfolio.
-26-
<PAGE>
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:
<TABLE>
<CAPTION>
December 31
------------------------------------
1996 1995
----------------- -----------------
(Dollars in thousands) Amount Percent Amount Percent
------- -------- ------- --------
<S> <C> <C> <C> <C>
Loans:
Commercial $18,184 21.46% $14,806 18.40%
Agricultural 4,134 4.88% 5,516 6.86%
Real estate-residential 25,786 30.43% 24,602 30.58%
Real estate-commercial 22,275 26.29% 21,615 26.87%
Consumer 14,355 16.94% 13,907 17.29%
Loans net of unearned income 84,734 100.00% 80,446 100.00%
Total $84,734 100.00% $80,446 100.00%
======= ====== ======= ======
Allowance for possible loan losses:
Commercial $ 309 8.99% $ 288 28.97%
Agricultural 75 7.03% 70 7.04%
Real estate-residential 117 10.97% 109 10.97%
Real estate-commercial 330 30.96% 308 30.99%
Consumer 149 13.98% 139 13.98%
General Reserve 86 8.07% 80 8.05%
Total $ 1,066 100.00% $ 994 100.00%
======= ====== ======= ======
</TABLE>
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, 1996
-------------------------------
Due Due After 1
Within But Within Due After
(Dollars in thousands) 1 Year 5 Years 5 Years Total
------- ----------- --------- -------
<S> <C> <C> <C> <C>
Sensitivity of loans to changes in
interest rates:
Fixed Interest rate $64,230 $17,431 $1,269 $82,930
Floating or adjustable interest rate 1,804 - - 1,804
------- ----------- --------- -------
Total $66,034 $17,431 $1,269 $84,734
======= =========== ========= =======
</TABLE>
-27-
<PAGE>
SUMMARY OF LOAN LOSS EXPERIENCE. The loan loss experience for the two years
ended December 31, 1996 is summarized in the following table:
<TABLE>
<CAPTION>
(Dollars in thousands) 1996 1995
------- --------
<S> <C> <C>
Balance at beginning of year $ 994 $ 1,217
Loans charged off
Commercial (143) (950)
Agricultural (18) -
Real estate-residential (54) -
Real estate-commercial (78) ( 68)
Consumer (159) (106)
Total charge-offs (452) (1,124)
Recoveries on loans previously charged off
Commercial 30 95
Agricultural 0 0
Real estate-residential 1 19
Real estate-commercial 38 30
Consumer 35 43
Total recoveries 104 187
Net loans charged-off (348) (937)
Additions charged to operations 420 714
Balance at end of year $1,066 $ 994
Ratio of net charge-offs (recoveries) during period
to outstanding average loans 0.42% 1.22%
</TABLE>
DEPOSITS. Total deposits at December 31, 1996 were $124,485,000, up 2.9%
from the level of $120,984,000 posted at December 31, 1995.
Time certificates of deposits of $100,000 or more were $24,764,000 at
December 31, 1996. These deposits consist primarily of public fund time
deposits that are fully secured and deposits from local customers with which the
Bank has other banking relationships. Although time deposits of $100,000 or
more can exhibit greater volatility to changes in interest rates and other
factors than do core deposits, management believes that due to the nature of the
deposits of this type, any volatility experienced could be adequately met with
alternate funding sources. The Bank had no brokered deposits at December 31,
1996.
-28-
<PAGE>
DEPOSIT AVERAGE BALANCES AND RATES. The following table indicates the
average daily amount of deposits and rates paid on such deposits for the periods
indicated:
<TABLE>
<CAPTION>
1996 1995
--------------- ---------------
(Dollars in thousands) Amount Rate Amount Rate
-------- ----- -------- -----
<S> <C> <C> <C> <C>
Noninterest-bearing demand $ 15,409 $ 15,205
Savings deposits 5,137 2.98% 5,246 2.92%
Interest-bearing demand 29,642 2.74% 29,061 2.72%
Time deposits 74,379 5.37% 66,977 5.29%
-------- --------
Total deposits $124,567 $116,489
======== ========
</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, 1996 in the table
below:
<TABLE>
<CAPTION>
(Dollars in thousands) December 31, 1996
-----------------
<S> <C>
3 months or less $11,159
Over 3 months to 12 months 10,677
12 months to 5 years 2,928
Over 5 years -
-------
Total $24,764
=======
</TABLE>
CAPITAL RESOURCES OF THE BANK. 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,
1996 and 1995. The Bank exceeds all minimum capital ratios.
<TABLE>
<CAPTION>
Bank's
Specific
December 31 Minimum
---------------------- Ratio
(Dollars in thousands) 1996 1995 Requirements
------------ --------- -------------
<S> <C> <C> <C>
Tier 1 Capital 28.97% 28.55% 10.00%
Total Capital 30.12% 29.69% 10.00%
Leverage Ratio 17.57% 16.98% None
</TABLE>
LIQUIDITY. Liquidity is the ability of the Bank to fund the needs of its
borrowers, depositors and creditors. The Bank's liquidity sources, including
cash flows from sales, maturities, and paydowns of loans and investment
securities, federal funds purchased, and a base
-29-
<PAGE>
of core deposits, are considered by management to be adequate to meet liquidity
needs for normal operations.
As shown in the accompanying 1996 statement of cash flow, cash and cash
equivalents increased by $872,000 during 1996 to $4,683,000 at December 31,
1996. Cash and cash equivalents were generated primarily by proceeds from sales
and maturities of investments securities totaling $13,993,000, and a net
increase in deposits of $3,501,000. In addition, operating activities provided
net cash of $3,378,000. Offsetting these increases were purchases of investment
securities in the amount of $13,190,000 and a net increase in loans of
$4,635,000.
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.
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.
-30-
<PAGE>
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. See
"Financial Statements."
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
-31-
<PAGE>
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 of
March 31, 1997, 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."
The banking industry is affected by the policies of the FRB. An important
function of the FRB is to regulate the national supply of bank credit to
moderate recessions and to curb inflation. Among the instruments of monetary
policy used by the FRB to implement its objectives are: open-market operations
in U.S. Government securities, changes in the discount rate on bank borrowings
and changes in reserve requirements on bank deposits.
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 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
-32-
<PAGE>
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 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.
CONSEQUENCE OF INCREASED INTERSTATE ACTIVITY. Because of the increasing
liberalization of the laws and regulations affecting the conduct of interstate
banking activities, it is anticipated that competition in the Bank's
geographical market area will increase. If large, regional bank holding
companies acquire branches in the Bank's market area, they may offer a wider
range of services than are currently offered by the Bank. In addition, some of
these competitors may be more highly capitalized than the Bank and the Company.
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 March 31, 1997 and (ii) the
proposed directors and executive officers of the Company upon consummation of
the Reorganization:
-33-
<PAGE>
<TABLE>
<CAPTION>
Position(s) with the Company
Name Age and the Bank
- ------------------------------ --- ----------------------------
<S> <C> <C>
William W. Anderson 50 Vice President
Anna M. Berryhill 67 Director
Richard Frazier 47 Vice President
Buddy R. Montgomery 55 Director and President
Larry Russell 54 Director, Executive Vice
President and Secretary
Michael Simon 49 Director
Charles D. Thomas 60 Director
J. Lowell Whitworth 82 Director
</TABLE>
It is expected that the individuals listed above as directors of the
Bank 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.
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 Company is set forth below.
William W. 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.
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 for 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.
-34-
<PAGE>
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 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
currently serves on three Board Committees, the Executive Committee, the Loan
Review Committee and the Audit Committee. He is Chairman of the Audit
Committee. 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 $112,400.00 $9,016.00 0 N/A 0 0 $10,672.00
President & CEO 1995 105,200.00 600.00 0 N/A 0 0 10,614.00
1994 98,856.00 600.00 0 N/A 0 0 11,426.00
Larry Russell, 1996 $105,016.00 $8,462.40 0 N/A 0 0 $ 9,974.00
Executive Vice 1995 98,280.00 600.00 0 N/A 0 0 9,919.00
President 1994 92,484.00 600.00 0 N/A 0 0 11,062.00
</TABLE>
- -------------------------
/(1)/ These amounts represent the Bank's estimated annual contribution on
behalf of 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 agreements with
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
-35-
<PAGE>
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. See
"Recent Developments."
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.
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, judgment, amount paid in settlement,
issue, fine, matter, or attorneys' fee 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
-36-
<PAGE>
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.
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.
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 March 31, 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 executive officers and 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>
Pontotoc Bancshares Corp./(1)/ 6,557 19.87%
William W. Anderson
1737 Clark Street 100 *
Pontotoc, Mississippi 38863
Anna M. Berryhill 5,145 15.59%
175 Cedar Creek Drive
Pontotoc, Mississippi 38863
Richard Frazier 0 *
302 South Main Street
Pontotoc, Mississippi 38863
</TABLE>
-37-
<PAGE>
<TABLE>
<CAPTION>
Number of Shares
Beneficially Percentage
Name and Address Owned Ownership
- ---------------- ----- ---------
<S> <C> <C>
Buddy R. Montgomery/(2)/ 195 *
380 Northridge Drive
Pontotoc, Mississippi 38863
Larry Russell 210 *
9672 Highway 9 South
Pontotoc, Mississippi 38863
Michael Simon/(3)/ 1,553 4.71%
P. O. Box 239
Pontotoc, Mississippi 38863
Charles D. Thomas 386 1.17%
2507 Highway 6 East
Pontotoc, Mississippi 38863
J. Lowell Whitworth 734 2.22%
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 (8 persons) 14,880 45.09%
</TABLE>
_________________________
/*/ Less than one (1%) percent.
/(1)/ See "Recent Developments."
/(2)/ Does not include 6,557 shares owned by the Company which are
beneficially owned by Mr. Montgomery as the sole shareholder of the Company.
/(3)/ Of the shares shown, 291 shares are held of record by Simon, Inc., of
which Mr. Simon is the President and majority shareholder, and 112 shares are
held of record by members of Mr. Simon's immediate family.
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
-38-
<PAGE>
"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.
-39-
<PAGE>
FIRST NATIONAL BANK
Pontotoc, Mississippi
December 31, 1996
<PAGE>
-ooOoo-
CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
INDEPENDENT AUDITOR'S REPORT........................... F-3
FINANCIAL STATEMENTS OF FIRST NATIONAL BANK:
BALANCE SHEETS..................................... F-4
STATEMENTS OF INCOME............................... F-5
STATEMENTS OF STOCKHOLDERS' EQUITY................. F-6
STATEMENTS OF CASH FLOWS........................... F-7
NOTES TO FINANCIAL STATEMENTS...................... F-8
REPORT ON ADDITIONAL INFORMATION....................... F-19
PRO FORMA FINANCIAL STATEMENTS OF PONTOTOC BANCSHARES
CORP:
PRO FORMA CONSOLIDATING BALANCE SHEET............... F-20
PRO FORMA CONSOLIDATING INCOME STATEMENT............ F-21
NOTES TO PRO FORMA FINANCIAL STATEMENTS............. F-22
</TABLE>
-ooOoo-
<PAGE>
[LETTERHEAD OF NAIL MCKINNEY PROFESSIONAL ASSOCIATION APPEARS HERE]
INDEPENDENT AUDITOR'S REPORT
To the Shareholders and Directors
First National Bank
Pontotoc, Mississippi
We have audited the accompanying balance sheet of the First National Bank
as of December 31, 1996 and the related statement of income for the year then
ended. These statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit of the financial statements provide a reasonable basis
for our opinion.
In our opinion the financial statements referred to above present fairly,
in all material respects, the financial position of the First National Bank as
of December 31, 1996, and the results of operations for the year then ended, in
conformity with generally accepted accounting principles.
The 1995 financial statements were compiled by us, and our report thereon,
dated December 11, 1996, stated we did not audit or review those financial
statements and, accordingly, expressed no opinion or other form of assurance on
them.
/s/ NAIL MCKINNEY PA
New Albany, Mississippi
April 9, 1997
F-3
<PAGE>
BALANCE SHEETS
FIRST NATIONAL BANK
December 31, 1996 and 1995
<TABLE>
<CAPTION>
UNAUDITED
1996 1995
---------- ---------
ASSETS (in thousands)
<S> <C> <C>
Cash and due from banks $ 4,683 $ 3,811
Investment securities - available-for-sale (at market value) 17,053 18,812
Investment securities - held-to-maturity (at cost) 34,013 33,052
Federal funds sold 8,000 7,100
Loans receivable, net of allowance for loan losses
of $1,066 in 1996 and $994 in 1995 83,668 79,453
Premises and equipment, net 1,675 1,202
Intangibles 432 467
Deferred tax asset 552 489
Other assets 3,213 2,720
-------- --------
Total assets $153,289 $147,106
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
Noninterest bearing $ 16,691 $ 15,589
Interest bearing 107,794 105,395
-------- --------
Total deposits 124,485 120,984
Accrued interest and other liabilities 1,993 999
-------- --------
Total liabilities 126,478 121,983
-------- --------
Stockholders' equity:
Common stock $10 par value,
33,000 shares authorized and issued 330 330
Surplus 21,000 21,000
Undivided profits 5,783 4,093
Unrealized loss on securities available-for-sale (302) (300)
-------- --------
Total stockholders' equity 26,811 25,123
-------- --------
Total liabilities and stockholders' equity $153,289 $147,106
======== ========
</TABLE>
________________________________________
The Notes to Financial Statements are an
integral part of these statements.
F-4
<PAGE>
STATEMENTS OF INCOME
FIRST NATIONAL BANK
Years ended December 31, 1996 and 1995
<TABLE>
<CAPTION>
UNAUDITED
1996 1995
---------- -----------
<S> <C> <C>
INTEREST INCOME (in thousands)
Interest and fees on loans $ 8,167 $ 7,289
Interest on investment securities 3,058 3,182
Interest on federal funds sold 456 179
------- -------
Total interest income 11,681 10,650
------- -------
INTEREST EXPENSE
Interest on deposits 4,962 4,538
Other interest 0 11
------- -------
Total interest expense 4,962 4,549
------- -------
Net interest income 6,719 6,101
Provision for loan losses (420) (714)
------- -------
Net interest income after
provision for loan losses 6,299 5,387
------- -------
OTHER INCOME
Service fees 1,005 1,060
Other 95 20
Loss from sale of investment securities, other real
estate, and other foreclosed assets (180) (112)
------- -------
920 968
------- -------
OTHER EXPENSE
Salaries and employee benefits 1,782 1,667
Occupancy expense, net of rental
income 316 308
Other expenses 1,296 1,067
------- -------
Total other expense 3,394 3,042
------- -------
Income before income taxes 3,825 3,313
Provision for income taxes 1,146 873
------- -------
Net income $ 2,679 $ 2,440
======= =======
</TABLE>
- -------------------------------------------
The Notes to Financial Statements are an
integral part of these statements.
F-5
<PAGE>
STATEMENTS OF STOCKHOLDERS' EQUITY
FIRST NATIONAL BANK
Years ended December 31, 1996 and 1995
<TABLE>
<CAPTION>
UNREALIZED
COMMON GAIN (LOSS)
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 (unaudited) 33 $ 330 $19,500 $3,681 $(2,145) $21,366
Net income (unaudited) 2,440 2,440
Cash dividend
$16 per share (unaudited) (528) (528)
Unrealized gain (loss)
on marketable
equity securities (unaudited) 1,845 1,845
Transfer to
surplus (unaudited) 1,500 (1,500)
----- ------ ------- ------ ------- -------
Balance, December 31,
1995 (unaudited) 33 330 21,000 4,093 (300) 25,123
Net income 2,679 2,679
Cash dividend declared
$30 per share (989) (989)
Unrealized gain (loss)
on marketable
equity securities (2) (2)
----- ------ ------- ------ ------- -------
Balance, December 31,
1996 33 $ 330 $21,000 $5,783 $ (302) $26,811
===== ====== ======= ====== ======= =======
</TABLE>
- ---------------------------------------------
The Notes to Financial Statements are an
integral part of these statements.
F-6
<PAGE>
STATEMENTS OF CASH FLOWS
FIRST NATIONAL BANK
Years ended December 31, 1996 and 1995
<TABLE>
<CAPTION>
UNAUDITED
1996 1995
----------- -----------
<S> <C> <C>
OPERATING ACTIVITIES (in thousands)
Net income $ 2,679 $ 2,440
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 188 225
Provision for loan losses 420 714
Provision for deferred income taxes (27) 119
Loss on sale of securities, other real
estate, and other foreclosed assets 180 112
Increase in interest receivable and other assets (26) (889)
Increase in interest payable and other liabilities (36) 60
------- --------
Net cash provided by operating
activities 3,378 2,781
------- --------
INVESTING ACTIVITIES
Purchases of held-to-maturity securities (8,208) (22,179)
Purchases of available-for-sale securities (4,982) (2,506)
Proceeds from maturities and calls of
held-to-maturity securities 7,247 11,798
Proceeds from dispositions of
available-for-sale securities 6,746 16,236
Net increase in loans (4,635) (9,547)
Net (increase) decrease in federal funds sold (900) (5,750)
Purchases of premises and equipment (626) (75)
Net (increase) decrease in other real estate (649) (190)
------- --------
Net cash used in investing activities (6,007) (12,213)
------- --------
FINANCING ACTIVITIES
Net increase in deposits 3,501 9,793
Cash dividends paid - (528)
------- --------
Net cash provided by financing
activities 3,501 9,265
------- --------
Increase (decrease) in cash and due from banks 872 (167)
Cash and due from banks at beginning of year 3,811 3,978
------- --------
Cash and due from banks at end of year $ 4,683 $ 3,811
======= ========
SUPPLEMENTAL CASH FLOWS INFORMATION
Interest paid $ 5,013 $ 3,734
------- --------
Income taxes paid $ 1,203 $ 765
======= ========
</TABLE>
- ----------------------------------------------
The Notes to Financial Statements are an
integral part of these statements.
F-7
<PAGE>
NOTES TO FINANCIAL STATEMENTS
FIRST NATIONAL BANK
DECEMBER 31, 1996
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-8
<PAGE>
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING AND REPORTING POLICIES - (CONTINUED)
Investment Securities
Securities Held to Maturity: Bonds, notes, and debentures for which
the Bank 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: Available-for-sale securities consist
of bonds, notes, debentures, and certain equity securities not
classified as trading securities nor as held-to-maturity securities.
Unrealized holding gains and losses, net of tax, on available-for-sale
securities are reported as a net amount in a separate component of
shareholders' equity until realized. Gains and losses on the sale of
available-for-sale securities 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. The related write-downs
have been included in earnings as realized losses. Premiums and
discounts are recognized in interest income using methods
approximating the interest method over the period to maturity.
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. Management's periodic
evaluation of the adequacy of the allowance is based on the Bank's past
loan experience, known and inherent risks in the portfolio, adverse
situations that may effect the borrower's ability to repay, the estimated
value of any underlying collateral, and current economic conditions.
Accrual of interest is discontinued on a loan when management believes,
after considering economic and business conditions and collection
efforts, that the borrower's 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
estimated 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-9
<PAGE>
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
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 sheet for 1996 is $490,000 and
$640,000 of Federal Home Loan Bank and Federal Reserve, respectively,
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 these 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:
Fair values of loans in the portfolio are estimated by discounting the
future cash flows, using current rates at which similar loans would be
made to borrowers with similar credit ratings and for the same remaining
maturities. Fair values for impaired loans are estimated using
underlying collateral values, where applicable.
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 .
Accrued interest:
The carrying amounts of accrued interest approximates their fair
values.
F-10
<PAGE>
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
NOTE 2. INVESTMENT SECURITIES
Amortized cost and approximate market values of investment securities
are summarized as follows:
Securities available-for-sale consist of the following:
<TABLE>
<CAPTION>
1996
-----------------------------------
GROSS UNREALIZED
-----------------------------------
AMORTIZED (IN THOUSANDS)
COST GAINS LOSSES VALUE
--------- ----- ------ --------
<S> <C> <C> <C> <C>
U. S. Treasury Securities $ 2,240 $20 $ 3 $ 2,257
Obligations of other U. S.
Government Agencies 750 1 10 741
Obligations of states and
political subdivisions - - - -
Mortgage-backed securities 13,414 - 489 12,925
Other securities 1,130 - - 1,130
------- --- ---- -------
$17,534 $21 $502 $17,053
======= === ==== =======
UNAUDITED
1995
------------------------------------
GROSS UNREALIZED
------------------------------------
AMORTIZED (IN THOUSANDS)
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 subdivisons - - - -
Mortgage-backed securities 13,624 467 13,157
Other securities 960 - - 960
------- --- ---- -------
$19,289 $ - $477 $18,812
======= === ==== =======
</TABLE>
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-11
<PAGE>
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
NOTE 2. INVESTMENT SECURITIES - (CONTINUED)
Securities held-to-maturity consist of the following:
<TABLE>
<CAPTION>
1996
----------------------------------
GROSS UNREALIZED
----------------------------------
AMORTIZED (IN THOUSANDS) FAIR
COST GAINS LOSSES VALUE
--------- ----- ------ --------
<S> <C> <C> <C> <C>
Obligations of states and
political subdivisions $14,056 $ 216 $ 69 $14,203
Mortgage-backed
securities 19,957 24 60 19,921
------- ----- ---- -------
$34,013 $ 240 $129 $34,124
======= ===== ==== =======
UNAUDITED
1995
----------------------------------
GROSS UNREALIZED
----------------------------------
AMORTIZED (IN THOUSANDS) FAIR
COST GAINS LOSSES VALUE
--------- ----- ------ --------
Obligations of other U.S.
Government Agencies $ 1,006 $ 12 $ - $ 1,018
Obligations of state and
political subdivision 12,812 122 - 12,934
Mortgage-backed
securities 19,234 - 51 19,183
------- ----- ---- -------
$33,052 $ 134 $ 51 $33,135
======= ===== ==== =======
</TABLE>
Gross realized gains and gross realized losses on sales of available-
for-sale securities were approximately $0 and $2,000, respectively, in
1996 and $171,000 and $283,000, respectively, in 1995. All dispositions
of held-to-maturity securities were the result of calls or maturities of
the respective securities.
The amortized cost and estimated market value of investment securities
at December 31, 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.
F-12
<PAGE>
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
NOTE 2. INVESTMENT SECURITIES - (CONTINUED)
<TABLE>
<CAPTION>
(in thousands)
---------------------------------------------
HELD-TO-MATURITY AVAILABLE-FOR-SALE
--------------------- ----------------------
AMORTIZED FAIR AMORTIZED FAIR
Amounts maturing in: COST VALUE COST VALUE
----------- -------- --------- -----------
<S> <C> <C> <C> <C>
One year or less $ 3,020 $ 3,027 $ 1,883 $ 1,883
After one year through
five years 25,386 25,454 4,408 4,405
After five years through
ten years 4,607 4,653 250 240
After ten years 1,000 990 10,993 10,525
------- ------- ------- -------
$34,013 $34,124 $17,534 $17,053
======= ======= ======= =======
</TABLE>
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 contractual maturities of
underlying collateral. The mortgage-backed securities may mature earlier
than their weighted-average contractual maturities because of principal
prepayments.
Assets, principally securities, carried at approximately $19,627,000
at December 31, 1996 and $14,388,000 at December 31, 1995, were pledged
to secure public deposits and for other purposes required or permitted by
law.
NOTE 3. LOANS
The components of loans included in the balance sheet are as follows:
<TABLE>
<CAPTION>
UNAUDITED
1996 1995
--------- ---------
(in thousands)
<S> <C> <C>
Commercial $ 18,184 $ 14,806
Agricultural 4,134 5,516
Real estate:
Residential 36,561 24,603
Commercial 11,500 21,615
Consumer Installment 15,241 15,056
--------- --------
85,620 81,596
Less: unearned income (886) (1,149)
Allowance for loan losses (1,066) (994)
--------- --------
Loans, net $ 83,668 $ 79,453
========= ========
</TABLE>
F-13
<PAGE>
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
NOTE 3. LOANS - (CONTINUED)
Changes in the allowance for loan losses were as follows:
<TABLE>
<CAPTION>
UNAUDITED
1996 1995
--------- ----------
(in thousands)
<S> <C> <C>
Balance, beginning of year $ 994 $ 1,217
Provision charged to operations 420 714
Loans charged off (452) (1,124)
Recoveries 104 187
------ -------
Balance, end of year $1,066 $ 994
====== =======
</TABLE>
Impairment of loans having recorded investments of $700,000 at
December 31, 1996, has been recognized in conformity with FASB Statement
114, as amended by FASB Statement 118. The total allowance for loan
losses related to these loans was $203,000 on December 31, 1996.
Loans having carrying values of $800,000 were transferred to
foreclosed real estate in 1996.
NOTE 4. BANK PREMISES AND EQUIPMENT
The following is a summary of bank premises and equipment stated at
cost:
<TABLE>
<CAPTION>
UNAUDITED
1996 1995
--------- ---------
(in thousands)
<S> <C> <C>
Bank premises $1,203 $1,203
Furniture, fixtures, and equipment 2,021 1,620
------ ------
3,224 2,823
Less: Accumulated depreciation
and amortization 1,774 1,621
------ ------
1,450 1,202
Add: Construction in progress 225 -
------ ------
$1,675 $1,202
====== ======
</TABLE>
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 1996 and 1995.
F-14
<PAGE>
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
NOTE 5. DEPOSITS
Total deposits consisted of the following at December 31:
<TABLE>
<CAPTION>
UNAUDITED
1996 1995
---------- ---------
(in thousands)
<S> <C> <C>
Demand $ 16,982 $ 15,590
Savings 19,515 19,335
NOW 13,772 12,774
Certificates of deposit less than $100,000 49,452 47,419
Certificates of deposit more than $100,000 24,764 25,866
-------- --------
Total deposits $124,485 $120,984
======== ========
At December 31, 1996, the scheduled maturities of CDs are as follows:
Year ending December 31,
1997 $66,732
1998 5,953
1999 933
2000 360
2001 238
-------
$74,216
=======
NOTE 6. INCOME TAXES
The provision for income taxes consisted of the following:
UNAUDITED
1996 1995
--------- ---------
(in thousands)
Current $1,172 $ 754
Deferred (26) 119
------ -------
Total tax provision $1,146 $ 873
====== =======
</TABLE>
F-15
<PAGE>
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
NOTE 6. INCOME TAXES-(CONTINUED)
The provision for income taxes differs from that computed by applying
statutory rates to income before income taxes, as indicated in the
following analysis:
<TABLE>
<CAPTION>
UNAUDITED
1996 1995
--------- ----------
(in thousands)
<S> <C> <C>
Expected tax provision at a 37.3% rate $1,427 $1,235
Effect of tax-exempt income (300) (406)
Other, net 19 44
------ ------
$1,146 $ 873
====== ======
</TABLE>
The temporary differences which give rise to significant portions of
deferred tax assets and liabilities are as follows:
<TABLE>
<CAPTION>
UNAUDITED
1996 1995
------- ---------
<S> <C> <C>
Deferred tax assets: (in thousands)
Allowance for loan losses $ 398 $ 370
Unrealized losses on securities 180 179
Other 47 3
----- -----
Total deferred tax assets 625 552
----- -----
Deferred tax liabilities:
Premises and equipment 73 63
----- -----
73 63
----- -----
Net deferred tax assets $ 552 $ 489
===== =====
</TABLE>
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 performance in prior years and the
likelihood of future taxable income, these assets are more likely than
not to be realized.
NOTE 7. RELATED PARTY TRANSACTIONS
The Bank makes loans to its officers and directors as well as other
related parties. Loans to directors require the approval of the Board of
Directors with the interested party abstaining from voting. Loans to
related parties amounted to approximately $185,000 and $244,000 at
December 31, 1996 and 1995, respectively. During 1996, new loans to such
related parties amounted to $31,000 and repayments amounted to $90,000.
F-16
<PAGE>
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
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
$160,000 in 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 December 31, 1996 the Bank had outstanding standby
letters of credit of approximately $1,258,000 and commitments to extend
credit under outstanding lines of credit of approximately $6,742,000.
NOTE 10. DUE FROM BANKS
The Company had funds on deposit with other Banks at December 31, 1996
totaling $2,385,000 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:
<TABLE>
<CAPTION>
UNAUDITED
1996 1995
------------------ ------------------
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
-------- -------- -------- --------
(in thousands)
<S> <C> <C> <C> <C>
Financial assets:
Cash, due from banks $ 4,684 $ 4,684 $ 3,811 $ 3,811
Securities available-for-sale 17,053 17,053 18,812 18,812
Securities held-to-maturity 34,013 34,124 33,052 33,135
Federal funds sold 8,000 8,000 7,100 7,100
Net loans 83,668 84,098 79,453 79,453
Financial liabilities:
Deposits 124,485 125,220 120,984 120,984
Accrued interest and
other liabilies 1,993 1,993 999 999
</TABLE>
F-17
<PAGE>
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
NOTE 12. REGULATORY MATTERS
The Bank is subject to various regulatory capital requirements imposed
by the federal banking agencies. Failure to meet minimum capital
requirements can initiate certain mandatory - and possibly additional
discretionary - actions by regulators that, if undertaken, could have a
direct material effect on the Bank's financial statements. Under capital
adequacy guidelines and the regulatory framework for prompt corrective
action, the Bank must meet specific capital guidelines that involve
quantitative measures of the Bank's assets, liabilities, and certain off-
balance-sheet items as calculated under regulatory accounting practices.
The Bank's capital amounts and classification are also subject to
qualitative judgments by the regulators about components, risk
weightings, and other factors.
Quantitative measures established by regulation to ensure capital
adequacy require the Bank to maintain minimum amounts and ratios (set
forth in the table below) of total and Tier I capital (as defined in the
regulations) to risk-weighted assets (as defined), and of Tier I capital
(as defined) to average assets (as defined). Management believes, as of
December 31, 1996, that the Bank meets all capital adequacy requirements
to which it is subject.
As of December 31, 1996, the most recent notification from the
Bank's primary regulator categorized the Bank as adequately capitalized
under the framework for prompt corrective action. To be categorized as
adequately capitalized the Bank must maintain minimum total risk-based,
Tier I risk- based, and Tier I leverage ratios set forth in the table.
There are no conditions or events since the notification that management
believes have changed the Bank's category.
<TABLE>
<CAPTION>
TO BE WELL
CAPITALIZED UNDER
FOR CAPITAL PROMPT CORRECTIVE
ACTUAL ADEQUCACY PURPOSES ACTION PROVISIONS
---------------- ------------------ -----------------
AMOUNT RATIO AMOUNT RATIO AMOUNT RATIO
-------- ------ --------- -------- --------- -------
<S> <C> <C> <C> <C> <C> <C>
As of December 31, 1996
Total Capital $27,747 30.1% $7,379 8.0% $9,211 >10%
(to Risk-Weighted Assets)
Tier I Capital
(to Risk-Weighted Assets) $26,681 29.0% $3,684 4.0% $5,527 >6.0%
Tier I Capital
(to Average Assets) $26,681 17.6% $6,073 4.0% $7,592 >5.0%
</TABLE>
NOTE 13. SUBSEQUENT EVENTS
Subsequent to December 31, 1996, a bank holding company, Pontotoc
BancShares Corp., was formed for the purpose of exchanging its common
shares for the outstanding common shares of the Bank.
Expected additional capital outlays related to the construction of a
branch bank amount to approximately $1,000,000 at December 31, 1996.
F-18
<PAGE>
[LETTERHEAD OF NAIL MCKINNEY PROFESSIONAL ASSOCIATION APPEARS HERE]
INDEPENDENT AUDITOR'S REPORT
ON ADDITIONAL INFORMATION
To the Shareholders and Directors
of Pontotoc BancShares Corp.
Pontotoc, Mississippi
Our report on our audit of the basic financial statements of First National
Bank for 1996 appears on page F-3. That audit was conducted for the purpose of
forming an opinion on the basic financial statements taken as a whole. The pro
forma balance sheet and pro forma income statement of Pontotoc BancShares Corp.
and accompanying notes on pages F-20 through F-23 are presented for purposes of
additional analysis and are not a required part of the basic financial
statements. Such information has not been subjected to the auditing procedures
applied in the audit of the basic financial statements and , accordingly, we
express no opinion on it.
/s/ NAIL MCKINNEY PA
New Albany, Mississippi
April 9, 1997
F-19
<PAGE>
PRO FORMA CONSOLIDATING BALANCE SHEET
PONTOTOC BANCSHARES CORP.
December 31, 1996
<TABLE>
<CAPTION>
UNAUDITED
-------------------------
Pro Forma
First * Consolidated
National Pro Forma Balance
Bank Adjustments Sheet
-------- ------------ -------------
<S> <C> <C> <C>
ASSETS (in thousands)
Cash and due from banks $ 4,683 $ - $ 4,683
Investment securities - available-for-sale (at market value) 17,053 - 17,053
Investment securities - held-to-maturity (at cost) 34,013 - 34,013
Federal funds sold 8,000 - 8,000
Loans receivable, net of allowance for loan losses
of $1,066 in 1996 83,668 - 83,668
Premises and equipment, net 1,675 - 1,675
Intangibles (Note A) 432 1,029 1,461
Deferred tax asset 552 - 552
Other assets 3,213 - 3,213
-------- -------- --------
Total assets $153,289 $ 1,029 $154,318
======== ======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
Noninterest bearing $ 16,691 $ - $ 16,691
Interest bearing 107,794 - 107,794
-------- -------- --------
Total deposits 124,485 - 124,485
Accrued interest and other liabilities 1,993 - 1,993
Long term debt (Note B) 0 6,356 6,356
-------- -------- --------
Total liabilities 126,478 6,356 132,834
-------- -------- --------
Stockholders' equity:
Common stock $10 par value,
33,000 shares authorized and issued (Note C) 330 (330) -
Common stock no par value ($1 stated value), 3,000,000
shares authorized, 264,430 shares issued (Note C) 264 264
Paid in capital (Note C) 21,522 21,522
Surplus (Note C) 21,000 (21,000) -
Undivided profits (Note C) 5,783 (5,783) -
Unrealized loss on securities available-for-sale (Note C) (302) - (302)
-------- -------- --------
Total stockholders' equity 26,811 (5,327) 21,484
-------- -------- --------
Total liabilities and stockholders' equity $153,289 $ 1,029 $154,318
======== ======== ========
</TABLE>
- ----------------------------------------------------
The Notes to Pro Forma Financial Statements are
an integral part of these statements.
* Due to the limited activity of Pontotoc BancShares Corp., separate financial
statements have not been presented.
F-20
<PAGE>
PRO FORMA CONSOLIDATING INCOME STATEMENT
PONTOTOC BANCSHARES CORP.
December 31, 1996
<TABLE>
<CAPTION>
UNAUDITED
-----------------------
Pro Forma
First * Consolidated
National Pro Forma Income
Bank Adjustments Statement
----------- ------------ ------------
<S> <C> <C> <C>
INTEREST INCOME (in thousands)
Interest and fees on loans $ 8,167 $ - $ 8,167
Interest on investment securities 3,058 - 3,058
Interest on federal funds sold 456 - 456
------- ------ -------
Total interest income 11,681 - 11,681
------- ------ -------
INTEREST EXPENSE
Interest on deposits 4,962 - 4,962
Other interest (Note B) - 525 525
------- ------ -------
Total interest expense 4,962 525 5,487
------- ------ -------
Net interest income 6,719 (525) 6,194
Provision for loan losses (420) - (420)
------- ------ -------
Net interest income after
provision for loan losses 6,299 (525) 5,774
------- ------ -------
OTHER INCOME
Service fees 1,005 - 1,005
Other 95 - 95
Loss from sale of investment securities, other real
estate, and other foreclosed assets (180) - (180)
------- ------ -------
920 - 920
------- ------ -------
OTHER EXPENSE
Salaries and employee benefits 1,782 - 1,782
Occupancy expense, net of rental
income 316 - 316
Other expenses (Note D) 1,296 69 1,365
------- ------ -------
Total other expense 3,394 69 3,463
------- ------ -------
Income before income taxes 3,825 (594) 3,231
Provision for income taxes (Note E) 1,146 (222) 924
------- ------ -------
Net income $ 2,679 $ (372) $ 2,307
======= ====== =======
</TABLE>
- ---------------------------------------------------
The Notes to Pro Forma Financial Statements are
an integral part of these statements.
* Due to the limited activity of Pontotoc BancShares Corp., separate financial
statements have not been presented.
F-21
<PAGE>
NOTES TO PRO FORMA FINANCIAL STATEMENTS
PONTOTOC BANCSHARES CORP.
12/31/96
The pro forma financial statements are presented to give effect to the
formation of Pontotoc BancShares Corp., a Mississippi bank holding company (the
"Company"), the resulting purchase of 6,557 shares of First National Bank stock
for approximately $6,356,000, and the exchange of its common shares for the
remaining outstanding common shares of the Bank. The pro forma balance sheet is
prepared as if the transactions occurred on December 31, 1996. The pro forma
income statement is prepared as if the transactions occurred on January 1, 1996
to reflect the impact these transactions would have on earnings of the Bank.
These transactions actually occurred on March 19 and 20, 1997.
Explanations to the pro forma adjustments are as follows:
NOTE A. GOODWILL
The price of the shares purchased in excess of the book value of the shares
represents goodwill which is recorded in the intangibles caption on the pro
forma balance sheet.
<TABLE>
<CAPTION>
<S> <C>
First National Bank Equity at 12/31/96 $26,811,000
Total number of bank shares 33,000
-----------
Book Value per share at 12/31/96 812.45
Total number of bank shares purchased 6,557
-----------
Book value of shares purchased 5,327,235
Less amount paid for purchased shares 6,356,580
-----------
Goodwill $ 1,029,345
===========
</TABLE>
NOTE B. LONG TERM DEBT AND RELATED INTEREST EXPENSE
In connection with the stock purchase described in Note A above, the
Company incurred approximately $6,356,000 of long-term debt which provides for
interest at the prime rate. This debt is collateralized by the shares purchased
and is payable in annual installments beginning in March 1998 through March
2002. Accrued interest expense of $525,000 on this debt is included in expense
for 1996 on the pro forma income statement.
NOTE C. STOCKHOLDERS' EQUITY
The pro forma adjustments in the stockholders' equity section of the pro
forma balance sheet are essentially the entries required in the consolidation of
the Company and the Bank to eliminate the equity of the Bank and allow common
stock, paid in capital and retained earnings of the Company to be reflected.
The calculation of the resulting common stock, paid in capital, and retained
earnings of the Company are reflected below:
<TABLE>
<CAPTION>
<S> <C>
COMMON STOCK:
Bank shares prior to acquisition 33,000
Less shares purchased 6,557
---------
26,443
Company shares exchanged for
Bank shares (10 to 1, $1 stated 10
value)
---------
264,430
=========
</TABLE>
F-22
<PAGE>
NOTES TO PRO FORMA FINANCIAL STATEMENTS
PONTOTOC BANCSHARES CORP. - (CONTINUED)
12/31/96
NOTE C. STOCKHOLDERS' EQUITY - (CONTINUED)
<TABLE>
<CAPTION>
PAID IN CAPITAL:
<S> <C>
Bank equity at 12/31/96 26,811,000
Less book value of shares purchased (5,327,235)
------------
Remaining book value of Bank 21,483,765
Add unrealized loss on available-for
sale securities, which is presented
as a separate component of equity 302,000
Less common stock issued (264,430)
------------
21,521,335
============
</TABLE>
NOTE D. AMORTIZATION OF GOODWILL
For purposes of the pro forma income statement, the goodwill described in
Note A is assumed to have a useful life of 15 years and has been amortized since
January 1, 1996.
NOTE E. INCOME TAX EFFECTS
The additional expenses relating to interest on debt service and
amortization of goodwill reflected on the pro forma income statement would
reduce income tax expense for the Company by approximately $222,000, calculated
at the Bank's total federal and state rate of 37.3%.
F-23
<PAGE>
APPENDIX A
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
2
<PAGE>
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
3
<PAGE>
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;
4
<PAGE>
(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.
5
<PAGE>
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.
6
<PAGE>
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.
------------------------------------
F. M. Bush, III, Incorporator
7
<PAGE>
APPENDIX B
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 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,
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as the place 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
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to inspection by any shareholder at any time during usual business hours. Such
list shall be produced and 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
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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 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
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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).
(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 .
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
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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 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 . 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 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.
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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.
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.
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
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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 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
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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 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 (either manually or by facsimile)
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
(or a facsimilie thereof). 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,
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except that in case of a lost, destroyed, or mutilated certificate a new one may
be 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 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
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
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or in the right of the Corporation ("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 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 , 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
-12-
<PAGE>
Corporation Act; or (ii) 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.
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;
(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 ;
(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 , 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.
-13-
<PAGE>
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 eliminated by a provision of the Articles of Incorporation under
Section 13 of Article 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 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
-14-
<PAGE>
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: (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 17, 1996.
----------------------------------
Buddy R. Montgomery, Sole Director
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<PAGE>
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.
C-1
<PAGE>
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 Directors'
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 Opinion of Phelps Dunbar, L.L.P., as to the legality of the
securities being registered
8.1 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*
10.3 Stock Purchase Agreement dated March 18, 1997 among Pontotoc
Bancshares Corp., First National Bank of Pontotoc, Union
Planters Corporation, Doty Investments, L.P., Martha W.
Doty, Gerry G. Jones and All Saints Episcopal Church of
Memphis, Tennessee
10.4 Note, Security Agreement and Loan Agreement dated March 18,
1997 between Pontotoc Bancshares Corp. and National Bank
of Commerce
23.1 Consent of Phelps Dunbar, L.L.P. (included in Exhibit 5.1)
____________________
* Previously filed.
II-1
<PAGE>
23.2 Consent of Nail McKinney Professional Association
23.3 Consent of Chaffe & Associates, Inc.
24.1 Power of Attorney (included on signature page of
Registration Statement)
99.1 Form of proxy
99.2 Opinion of Chaffe & Associates, Inc.
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.
II-2
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant has duly caused this Amendment No. 1 to Registration Statement on
Form S-4 to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Pontotoc, State of Mississippi, on this 24th day of
April, 1997.
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 Amendment
No. 1 to Registration Statement on Form S-4 has been signed by the following
persons in the capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
/s/ ANNA M. BERRYHILL Director April 24, 1997
- ----------------------------
Anna M. Berryhill
/s/ BUDDY R. MONTGOMERY Director, President April 24, 1997
- ---------------------------- (Principal Executive Officer and
Buddy R. Montgomery Principal Financial Officer)
S-1
<PAGE>
/s/ Larry Russell Director April 24, 1997
- ---------------------------- and Executive Vice President
Larry Russell
/s/ Michael Simon Director April 24, 1997
- ----------------------------
Michael Simon
/s/ Charles D. Thomas Director April 24, 1997
- ----------------------------
Charles D. Thomas
/s/ James L. Whitworth Director April 24, 1997
- ----------------------------
James L. Whitworth
/s/ Julie Henry Principal Accounting April 24, 1997
- ---------------------------- Officer
Julie Henry
S-2
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NUMBER EXHIBIT DESCRIPTION SEQUENTIAL PAGE
- -------------- ------------------- ---------------
<S> <C> <C>
2.1 Plan of Reorganization and Agreement of Merger
5.1 Opinion of Phelps Dunbar, L.L.P., as to
the legality of the securities being registered
8.1 Opinion of Phelps Dunbar, L.L.P., as to tax
aspects of the Reorganization
10.3 Stock Purchase Agreement dated March 18, 1997
among Pontotoc Bancshares Corp., First National
Bank of Pontotoc, Union Planters Corporation,
Doty Investments, L.P., Martha W. Doty, Gerry
G. Jones and All Saints Episcopal Church of
Memphis, Tennessee
10.4 Note, Security Agreement and Loan Agreement
dated March 18, 1997 between Pontotoc
Bancshares Corp. and National Bank of Commerce
23.1 Consent of Phelps Dunbar, L.L.P. (included in
Exhibit 5.1)
23.2 Consent of Nail McKinney Professional Association
23.3 Consent of Chaffe & Associates, Inc.
99.1 Form of proxy
99.2 Opinion of Chaffe & Associates, Inc.
</TABLE>
<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 _________________, 1997, 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
<PAGE>
Agreement, authorizing Holding Company to join in and be bound by this Agreement
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.
-2-
<PAGE>
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) Except as provided below, each issued and outstanding share of common
stock of First National shall, by virtue of the reorganization and merger and
-3-
<PAGE>
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 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 (other than Holding
Company) 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 (other than Holding Company) 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
-4-
<PAGE>
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 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.
2.4. On the Effective Date, all shares of First National common stock
owned by Holding Company shall be cancelled and such shares shall not be
converted into shares of Holding Company as provided above.
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
-5-
<PAGE>
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 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
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<PAGE>
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 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
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<PAGE>
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 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
-8-
<PAGE>
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.
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 an aggregate of 600 shares of
its common stock all of which shares shall be owned by the Holding Company.
-9-
<PAGE>
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 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,
-10-
<PAGE>
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 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.
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;
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<PAGE>
(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
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
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<PAGE>
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;
(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
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<PAGE>
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 8.6 of Article 8 and paragraph 9.1 of Article 9
has not been met or has not been waived;
(c) By First National if any condition set forth in paragraphs 8.1 through
8.6 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
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<PAGE>
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.
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.
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<PAGE>
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.
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
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<PAGE>
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.
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
A majority of the directors of First National Bank of Pontotoc.
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<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
A majority of the directors of First Interim National Bank of Pontotoc.
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<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
A majority of the directors of Pontotoc BancShares Corp.
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<PAGE>
ARTICLES OF ASSOCIATION OF
FIRST INTERIM NATIONAL BANK OF PONTOTOC
EXHIBIT A
<PAGE>
BYLAWS OF
FIRST INTERIM NATIONAL BANK OF PONTOTOC
EXHIBIT B
<PAGE>
[LETTERHEAD OF PHELPS DUNBAR, L.L.P. APPEARS HERE]
EXHIBIT 5.1
April 23, 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.
April 23, 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,
/s/ PHELPS DUNBAR, L.L.P.
___________________________
PHELPS DUNBAR, L.L.P.
<PAGE>
[LETTERHEAD OF PHELPS DUNBAR, L.L.P. APPEARS HERE]
April 24, 1997
EXHIBIT 8.1
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 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 Amendment No. 1 to the Registration Statement on
Form S-4 as filed with the Securities and Exchange Commission (the "Commission")
on the date hereof, (the "Proxy Statement"), under the caption entitled "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 included as an exhibit to the Proxy Statement (the "Plan"); (2) the
Application to Merge filed by Interim and Bank with the Office of the
Comptroller of the Currency (the "Application"); (3) the Proxy 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 Proxy Statement.
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
<PAGE>
Pontotoc BancShares Corp. and
First National Bank of Pontotoc
April 24, 1997
Page 2
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, other than shares already owned
by the Holding Company 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
<PAGE>
Pontotoc BancShares Corp. and
First National Bank of Pontotoc
April 24, 1997
Page 3
shares 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 assumption, 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 assumption.
(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 assumption, 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 if such reacquisition would reduce the Bank
shareholders' ownership of Holding Company stock to a number of shares
having a value, as of the date of the transaction, of less than 50% of the
value of all of the formerly outstanding stock of Bank as of the same date.
For purposes of this assumption, 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,
<PAGE>
Pontotoc BancShares Corp. and
First National Bank of Pontotoc
April 24, 1997
Page 4
or disposed of prior or subsequent to the transaction will be considered in
making this assumption.
(h) Holding Company has no plan or intention to reacquire any of its
stock issued in the transaction if such reacquisition would result in the
purchase of stock having a value (as of the date of the transaction), when
added to the value of all other assets of Bank that are deemed not to be
acquired by Interim in determining whether Interim has received
substantially all of Bank's assets for federal tax purposes, of more than
10 percent of the fair market value of the net assets or more than 30
percent of the fair market value of the gross assets held by Bank
immediately prior to the transaction. For purposes of this assumption,
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.
(i) 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.
(j) 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.
(k) Following the transaction, Interim will continue the historic
business of Bank or use a significant portion of Bank's business assets in
a business.
(l) Holding Company, Interim, Bank, and the shareholders of Bank will
pay their respective expenses, if any, incurred in connection with the
transaction.
(m) 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.
<PAGE>
Pontotoc BancShares Corp. and
First National Bank of Pontotoc
April 24, 1997
Page 5
(n) No two parties to the transaction are investment companies as
defined in Section 368(a)(2)(F)(iii) and (iv) of the Code.
(o) 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.
(p) Except for shares purchased in connection with this reorganization
or acquired 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.
(q) 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.
(r) 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.
(s) No stock of Interim will be issued in the transaction.
(t) 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.
(u) 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.
<PAGE>
Pontotoc BancShares Corp. and
First National Bank of Pontotoc
April 24, 1997
Page 6
(v) 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.
(w) No distributions will be made by Bank with respect to the stock
received in the proposed transaction, other than regular normal dividends
consistent in amount and effect with prior dividend policy.
(x) Holding Company intends to service the debt, the proceeds of which
Holding Company has used or plans to use to pay cash to certain selling
shareholders of Bank and to dissenters of Bank, if any, with amounts
derived from dividends paid by Interim in the ordinary course of business
out of post-acquisition earnings and profits. Holding Company has no plan
or intention to cause Interim to make loans to or pay dividends to Holding
Company out of any pre-acquisition earnings and profits of Bank for
purposes of servicing such debt.
(y) 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
<PAGE>
Pontotoc BancShares Corp. and
First National Bank of Pontotoc
April 24, 1997
Page 7
(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 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 or she receives 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.
<PAGE>
Pontotoc BancShares Corp. and
First National Bank of Pontotoc
April 24, 1997
Page 8
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,
/s/ Phelps Dunbar, L.L.P.
----------------------------
PHELPS DUNBAR, L.L.P.
<PAGE>
EXHIBIT 10.3
------------
STOCK PURCHASE AGREEMENT
--------------------------
THIS STOCK PURCHASE Agreement ("Agreement") dated as of the 18th day of
March, 1997 among PONTOTOC BANCSHARES CORP., a Mississippi corporation
("BancShares"), FIRST NATIONAL BANK OF PONTOTOC, a national banking association
(the "Bank"), UNION PLANTERS CORPORATION, a Tennessee corporation ("UPC"), DOTY
INVESTMENTS, L.P., a Mississippi limited partnership ("Doty Investments"),
MARTHA W. DOTY of Birmingham, Alabama ("Doty"), GERRY G. JONES of Jackson,
Mississippi ("Jones") and ALL SAINTS EPISCOPAL CHURCH OF MEMPHIS, TENNESSEE
("All Saints"). UPC, Doty Investments, Doty, Jones and All Saints are sometimes
referred to as Seller or collectively as Sellers.
R E C I T A L S
WHEREAS, UPC entered into a certain Stock Purchase Agreement with Doty
Investments, Doty, Jones and All Saints dated as of October 17, 1996 (the
"UP/Doty Agreement") in which, subject to certain conditions, UPC agreed to
purchase and the other parties agreed to sell certain shares of common stock in
the Bank (the "Bank Stock");
WHEREAS, on December 31, 1997, pursuant to the UP/Doty Agreement, UPC
purchased two hundred sixty-four (264) shares of the Bank Stock from All Saints
(the "All Saints Stock") and entered into an agreement with All Saints that day
regarding certain continuing obligations from UPC to All Saints (the "All Saints
Agreement");
WHEREAS, the UP/Doty Agreement was modified and extended by letter
agreements dated December 13, 1996, December 31, 1996 and January 13, 1997,
respectively (collectively, the "UP/Doty Extension");
WHEREAS, the Bank entered into Stock Purchase Agreements with Doty
Investments, Doty and Jones, each dated as of January 31, 1997 (collectively,
the "Bank/Doty Agreements"), in which the Bank agreed, subject to certain
conditions, to purchase (or cause to be purchased) and the other parties agreed
to sell the Bank Stock (not including the All Saints Stock);
WHEREAS, UPC, Doty Investments, Doty, Jones and All Saints wish to
terminate the UP/Doty Agreement (as extended by the UP/Doty Extension) pursuant
to Section 9.1(a) of the UP/Doty Agreement and the All Saints Agreement and to
fully and unconditionally release one another from any further obligations or
liability of any nature whatsoever with respect to the Doty Agreement (as
extended by the UP/Doty Extension) and the All Saints Agreement (subject,
however, to the exceptions specifically set forth in this Agreement), and Doty
Investments, Doty, Jones, BancShares and the Bank wish to make certain
modifications to the Bank/Doty Agreements, and all parties wish to enter into
certain other agreements;
<PAGE>
NOW, THEREFORE, the parties agree as follows:
ARTICLE 1.
CANCELLATION OF UP/DOTY AGREEMENT
AND ALL SAINTS AGREEMENT
UPC, Doty Investments, Doty, Jones and All Saints agree that the UP/Doty
Agreement, the UP/Doty Extension and the All Saints Agreement will each be
terminated by mutual consent effective at the time of the UPC Closing, as
defined below. Thereafter, no party to the UP/Doty Agreement, the UP/Doty
Extension or the All Saints Agreement will have any further rights or
obligations under the respective agreements except as set for in Paragraph 10.11
of the UP/Doty Agreement which shall survive the UPC Closing and except that the
representations and warranties of All Saints in Article 5 of the UP/Doty
Agreement shall survive the UPC Closing.
ARTICLE 2.
AMENDMENTS TO BANK/DOTY AGREEMENTS
The Bank, Doty Investments, Doty and Jones, respectively, agree that the
Bank/Doty Agreements are amended as follows effective upon the UPC Closing:
2.1. Paragraph 2.2, Closing, of the Bank/Doty Agreement with Doty
Investments is amended by deleting the words "not prior to April 1, 1997 and in
any event" from Paragraph 2.2 so that Paragraph 2.2 of the agreement reads as
follows:
2.2. Closing. A closing (the "Closing") shall be held at the
offices of the Company on a date (the "Closing Date") and at the time
of day to be agreed upon by the parties, no later than May 31, 1997.
At the Closing, the Shareholder shall deliver to the Company stock
certificates evidencing and representing the FNB Stock duly endorsed
in blank for transfer or accompanied by appropriate stock powers duly
executed in blank.
2.2. Paragraph 2.2, Closing, of the Bank/Doty Agreement with Martha W. Doty
and Gerry G. Jones is amended by deleting the words "not prior to April 1, 1997
and in any event" from Paragraph 2.2 so that Paragraph 2.2 of the agreements
reads as follows:
2.2. Closing. A closing (the "Closing") shall be held at the
offices of the Company on a date (the "Closing Date") and at the time
of day to be agreed upon by the parties, no later than April 11,
1997. At the Closing, the Shareholder shall deliver to the Company
stock certificates evidencing and representing the FNB Stock duly
endorsed in blank for transfer or accompanied by appropriate stock
powers duly executed in blank.
2
<PAGE>
2.3. Paragraph 5.1, Ownership: No Liens or Impediments to Transfer, of
the Bank/Doty Agreement with Doty Investments is amended by deleting the
reference to the UPC Agreement in Paragraph 5.1 so that Paragraph 5.1 of the
agreement with Doty Investments reads as follows:
5.1. Ownership: No Liens or Impediments to Transfer. The
Shareholder beneficially owns 4,936 shares of stock in the Company.
All such shares of FNB Stock are owned free and clear of any liens or
encumbrances of any nature, and when transferred by the Shareholder
to the Company in accordance with this Agreement, such shares will be
transferred free and clear of any liens or encumbrances, and the
Shareholder has not directly or indirectly, entered into any
agreement or arrangement of any nature to sell, transfer, assign,
pledge, lend, hypothecate or alienate in any manner the stock, or
entered into a voting trust or similar arrangement with respect to
the voting of such shares other than this Agreement.
2.4. Paragraph 5.1, Ownership: No Liens or Impediments to Transfer, of
the Bank/Doty Agreement with Doty is amended by deleting the reference to the
UPC Agreement in Paragraph 5.1 so that Paragraph 5.1 of the agreement with Doty
reads as follows:
5.1. Ownership: No Liens or Impediments to Transfer. The
Shareholder beneficially owns 250 shares of stock in the Company. All
such shares of FNB Stock are owned free and clear of any liens or
encumbrances of any nature, and when transferred by the Shareholder
to the Company in accordance with this Agreement, such shares will be
transferred free and clear of any liens or encumbrances, and the
Shareholder has not directly or indirectly, entered into any
agreement or arrangement of any nature to sell, transfer, assign,
pledge, lend, hypothecate or alienate in any manner the stock, or
entered into a voting trust or similar arrangement with respect to
the voting of such shares other than this Agreement.
2.5. Paragraph 5.1, Ownership: No Liens or Impediments to Transfer, of
the Bank/Doty Agreement with Jones is amended by deleting the reference to the
UPC Agreement in Paragraph 5.1 so that Paragraph 5.1 of the agreement with Jones
is amended to read as follows:
5.1. Ownership: No Liens or Impediments to Transfer. The
Shareholder beneficially owns 1,107 shares of stock in the Company.
All such shares of FNB Stock are owned free and clear of any liens or
encumbrances of any nature, and when transferred by the Shareholder
to the Company in accordance with this Agreement, such shares will be
transferred free and clear of any liens or encumbrances, and the
Shareholder has not directly or indirectly, entered into any
agreement or arrangement of any nature to sell, transfer, assign,
pledge, lend, hypothecate or alienate in any manner the stock, or
entered into a voting trust or
3
<PAGE>
similar arrangement with respect to the voting of such shares other
than this Agreement.
2.6. Paragraph 9.1, Termination, is amended by deleting subparagraph (d)
of Paragraph 9.1 so that Paragraph 9.1 of each Bank/Doty Agreement reads as
follows:
9.1. Termination. This Agreement may be terminated at any time
prior to the Closing, as follows:
(a) By mutual consent in writing of the Company and the
Shareholder;
(b) By the Company if the conditions set forth in Sections
8.2 or 8.3 shall not have been satisfied in all
material respects as of the Closing Date, or by the
Shareholder if the conditions set forth in Section 8.1
or 8.3 shall not have been satisfied in all material
respects as of the Closing Date, and such failures
shall not have been waived prior to the Closing;
(c) At its option, by the Company or by the Shareholder if
there shall have been a material breach of any
obligation of the other party and such breach shall
not have been remedied within thirty (30) days after
receipt by the breaching party of written notice from
the other party specifying the nature of such breach
and requesting that it be remedied.
If a party should elect to terminate this Agreement pursuant to subsections
(b) or (c) of this Section 9.1, it shall give notice to the other party, in
writing, of its election in the manner prescribed in Section 10.1.
ARTICLE 3.
PURCHASE OF ALL SAINTS STOCK/
CANCELLATION OF UP/DOTY AGREEMENT
AND ALL SAINTS AGREEMENT
3.1. UPC and BancShares agree as follows:
(a) UPC agrees to sell and BancShares agrees to purchase the All
Saints Stock. UPC, Doty Investments, Doty, Jones and All Saints agree to
terminate the UP/Doty Agreement (as modified by the UP/Doty Extension), and UPC
and All Saints agree to terminate the All Saints
4
<PAGE>
Agreement, as of the effective time of the UPC Closing (as defined below), in
accordance with the provisions of Article 1 of this Agreement and Section 9.1(a)
of the UP/Doty Agreement.
(b) BancShares agrees to pay to UPC, by wire transfer of same day
funds to an account designated by UPC, Two Hundred Thirty-Four Thousand Three
Hundred Dollars ($234,300.00) in consideration for the purchase of the All
Saints Stock and Five Hundred Seventy-Five Thousand Dollars ($575,000.00) in
consideration for UPC's agreement to terminate the UP/Doty Agreement (and the
UP/Doty Extension). At the time of the UPC Closing, UPC will pay to All Saints
the sum of Ten Thousand Four Hundred Twenty-Eight Dollars ($10,428.00) as
additional purchase price for the All Saints Stock so that the total purchase
price per share paid by UPC to All Saints for the All Saints Stock (when added
to that already paid to All Saints) will be Eight Hundred Eighty-Seven Dollars
and Fifty Cents ($887.50) per share.
(c) A Closing (the "UPC Closing") shall take place at a mutually
agreeable time and place no later than March 18, 1997. All payments being made
pursuant to this Article 3 shall be made at the UPC Closing.
(d) Except as provided in the last sentence of this subparagraph,
effective as of the time of the UPC Closing, Doty Investments, Doty, Jones and
All Saints, for themselves, their heirs, successors and assigns, do release and
forever discharge UPC from any and all liability or obligation of any nature
arising from the UP/Doty Agreement, the UP/Doty Extension and the All Saints
Agreement, respectively, and from any and all liability of any nature arising
from the transactions contemplated in the foregoing agreements. Likewise,
effective as of the time of the UPC Closing, UPC, for itself, its successors and
assigns, does release and forever discharge Doty Investments, Doty, Jones and
All Saints from any and all liability or obligation of any nature arising from
the UP/Doty Agreement, the UP/Doty Extension and the All Saints Agreement,
respectively, and from any and all liability of any nature arising from the
transactions contemplated in the foregoing agreements. This release shall not
affect the parties' obligations under Paragraph 10.11 of the UP/Doty Agreement,
nor shall it affect the warranties of All Saints in Article 5 of the UP/Doty
Agreement.
ARTICLE 4.
PURCHASE OF STOCK OF
DOTY INVESTMENTS, DOTY AND JONES
Doty Investments, Doty and Jones agree to sell their shares of Bank Stock
(being 4,936, 250 and 1,107 shares, respectively) to BancShares and BancShares
agrees to purchase such shares for the purchase price of Eight Hundred Eighty-
One Dollars and Fifty Cents ($881.50) per share payable in readily available
funds at Closing. A Closing (the "Doty Closing") shall be held at a time and
place mutually agreeable to the parties, but in no event later than April 11,
1997 in the case of the purchase from Doty and Jones, or later than May 31, 1997
in the case of the purchase from Doty Investments.
5
<PAGE>
ARTICLE 5.
PURCHASE PRICE ADJUSTMENT
5.1. General. The purchase price of the shares of the Bank Stock
(including the All Saints Stock) shall be adjusted in the case of any
reclassification, reorganization, recapitalization, stock split, reverse stock
split, stock dividend or distribution, subdivision, combination or exchange of
the outstanding shares of the Bank, or reorganization of the Bank as a wholly
owned subsidiary of a bank holding company, so that BancShares shall be entitled
to acquire all of the shares of Bank common stock and other capital stock of the
Bank or capital stock issued in any combination or exchange for the former Bank
stock, beneficially owned or controlled by the selling party for the same
aggregate consideration as if such transaction had not occurred. This provision
shall similarly apply to successive reclassifications, reorganizations, stock
dividends or distributions, subdivisions, combinations or exchanges,
consolidations, mergers, sales or transfers.
5.2. Doty Investments Stock. If the Bank Stock has not been purchased
from Doty Investments on or before April 11, 1997, the purchase price (for any
Bank Stock not purchased on or before April 11, 1997) shall be increased by Nine
Dollars ($9.00) per share. If the closing has not occurred by May 1, 1997, the
purchase price (for any Bank Stock not purchased on or before May 1, 1997) shall
be increased by an additional Ten Dollars ($10.00) per share. If the closing
has not occurred on or before April 11, 1997, BancShares shall pay to Doty
Investments a non-refundable earnest money payment of ten percent (10%) of the
purchase price.
ARTICLE 6.
REPRESENTATIONS AND WARRANTIES OF BANCSHARES
Both on the date hereof and as of each Closing, BancShares represents and
warrants to UPC, Doty Investments, Doty and Jones as follows:
6.1. Organization and Corporate Authority. BancShares is a Mississippi
corporation duly organized, validly existing and in good standing under the laws
of the State of Mississippi.
6.2. Authorization, Execution and Delivery; No Breach.
(a) BancShares has all requisite corporate power and authority to
execute and deliver this Agreement and to consummate the transactions
contemplated in this Agreement; provided, however, that approval from the
applicable regulatory authorities will be necessary for BancShares to actually
purchase more than five percent (5%) of the outstanding Bank Stock. This
Agreement has been duly executed and delivered by BancShares; has been
effectively authorized by all necessary corporate action; and, upon execution
and delivery, will constitute the legal, valid and enforceable obligation of
BancShares, subject, as to enforceability, to applicable bankruptcy,
6
<PAGE>
insolvency, reorganization, moratorium or similar laws affecting the enforcement
of creditors' rights generally, and to the application of equitable principles
and judicial discretion.
(b) The execution and delivery of this Agreement, the payments being
made to UPC, the purchase of the Bank Stock and the fulfillment of the terms
hereof will not result in a violation or breach of any of the terms or
provisions of, or constitute a default under (or an event which, with the
passage of time or the giving of notice or both, would constitute a default
under), or conflict with, or permit the acceleration of any obligation under,
any material mortgage, lease, covenant, agreement, indenture or other instrument
to which BancShares is a party or by which BancShares or any of its material
assets are bound; the corporate charter and bylaws of BancShares; or any
material judgment, decree, order or award of any court, governmental body or
arbitrator by which BancShares is bound; or any material permit, concession,
grant, franchise, license, law, statute, ordinance, rule or regulation
applicable to BancShares; or result in the creation of any lien, claim, security
interest, encumbrance, charge, restriction or right of any third party of any
kind whatsoever upon the property or assets of BancShares.
6.3. No Legal Bar. BancShares is not a party to, subject to or bound by
any agreement, judgment, order, letter of understanding, writ, prohibition,
injunction or decree of any court or other governmental body of competent
jurisdiction, or any law which would prevent the execution and delivery of this
Agreement, the payments to be made to UPC or the purchase of the Bank Stock, and
no action or proceeding is pending or, to the best of the knowledge of
BancShares, threatened against BancShares in which the validity of this
Agreement, the payments to be made to UPC, the purchase by BancShares of the
Bank Stock or any action which has been taken by any of such parties in
connection herewith or in connection with any of the transactions contemplated
hereby is at issue.
6.4. Government and Other Approvals. No consent, approval, order or
authorization of, or registration, declaration or filing with, any federal,
state or local governmental authority is required to be made or obtained by
BancShares in connection with the execution and delivery of this Agreement, the
consummation of the transactions contemplated in Article 3 of this Agreement, or
purchase of the Bank Stock from the Sellers contemplated hereby, except the
prior approval of the Board of Governors of the Federal Reserve System is
required for BancShares to actually purchase five percent (5%) or more of the
outstanding Bank Stock. Other than receipt of such bank regulatory approval,
which is not applicable to the transactions contemplated by Article 3 of this
Agreement, or to the purchase of the Bank Stock from Doty and Jones, BancShares
is not aware of any other fact that would lead it to believe that any other
approval is required or necessary for it to consummate each of the transactions
contemplated by this Agreement.
7
<PAGE>
ARTICLE 7.
REPRESENTATIONS AND WARRANTIES OF SELLERS
Both as of the date hereof and as of each applicable Closing, Sellers
severally represent and warrant (as to themselves, but not for any others) to
BancShares as follows:
7.1. Ownership: No Liens or Impediments to Transfer. Seller (other
than All Saints) beneficially owns the number of shares of Bank Stock set forth
in this Agreement. All such shares are owned free and clear of any liens or
encumbrances of any nature, and when transferred by Seller in accordance with
this Agreement, such shares will be transferred free and clear of any liens or
encumbrances, and each party has not directly or indirectly, entered into any
agreement or arrangement of any nature to sell, transfer, assign, pledge, lend,
hypothecate or alienate in any manner the stock or entered into a voting trust
or similar arrangement with respect to the voting of such shares other than this
Agreement, the UP/Doty Agreement and, in the case of Doty Investments, Doty and
Jones, the Bank/Doty Agreements. All Saints owns no shares of Bank Stock.
7.2. Authority.
(a) Seller has all requisite power and authority to execute and
deliver this Agreement, to abide by the covenants made hereunder, and to
consummate the transactions contemplated hereby. This Agreement has been duly
executed and delivered by or on behalf of Seller and constitutes the legal,
valid and enforceable obligations of Seller, subject, as to enforceability, to
applicable bankruptcy, insolvency, receivership, conservatorship,
reorganization, moratorium or similar laws affecting the enforcement of
creditors' rights generally and to the application of equitable principles and
judicial discretion.
(b) The execution and delivery of this Agreement, the
consummation of the transactions contemplated hereby, and the fulfillment of the
terms hereof, will not result in a violation or breach of any of the terms or
provisions of, or constitute a default under (or an event which, with the
passage of time or the giving of notice, or both, would constitute a default
under) or conflict with, or permit the acceleration of, a material obligation
under any material mortgage, lease, covenant, agreement, indenture or other
instrument to which Seller is a party or by which Seller is bound, directly or
indirectly; or any material judgment, decree, order, regulatory letter of
understanding or award of any court, governmental body, authority or arbitrator
by which Seller is directly or indirectly bound; or any material permit,
concession, grant, franchise, license, law, statute, ordinance, rule or
regulation, applicable to Seller or Seller's properties or any of them; or
result in the creation of any lien, claim, security interest, encumbrance,
charge, restriction or right of any third party of any kind whatsoever upon the
Bank Stock or upon any rights of Seller to receive the purchase price to be paid
pursuant to this Agreement.
8
<PAGE>
7.3. No Legal Bar. At the UPC Closing or the Doty Closing, as
applicable, Seller will not be bound by any agreement, judgment, order, letter
of understanding, writ, prohibition, injunction or decree of any court or other
governmental authority or body, or any law which would prevent the execution and
delivery of this Agreement or the fulfillment of the terms hereof by Seller. No
action or proceeding is pending against Seller which questions the validity of
this Agreement or the transactions contemplated hereby.
7.4. Government and Other Approvals. No consent, approval, order or
authorization of, or registration, declaration or filing with any federal, state
or local governmental authority, landlord, licensor, shareholder, court,
administrative agency, co-owner, spouse, trustee, co-trustee, beneficiary or
other party is required to be made or obtained by Seller in connection with the
execution and delivery of this Agreement, the fulfillment of the terms hereof by
Seller, which have not already been obtained and which are in full force and
effect.
ARTICLE 8.
COVENANTS OF BANCSHARES
8.1. Regulatory Approvals. BancShares shall obtain the necessary
government approvals to acquire the Bank Stock from Doty Investments, Doty and
Jones. BancShares shall pay all fees and expenses arising in connection with
such applications for regulatory approval applicable to it. BancShares agrees to
obtain such regulatory approvals and any other approvals and consents as may be
required as promptly as practicable.
8.2. Failure to Obtain Regulatory Approvals. If BancShares cannot
obtain the required regulatory approvals to purchase the Bank Stock from Doty
Investments by May 10, 1997, it may assign its rights under this Agreement to a
person or persons not subject to such regulatory approvals and take such other
action as is necessary in order that the transaction can be closed on or before
May 31, 1997. BancShares shall advise Doty Investments in writing by May 15,
1997 of such assignment and the details of the assignees' obligations. Such
assignment shall not relieve BancShares from its obligations to Doty Investments
as set forth in this Agreement.
ARTICLE 9.
COVENANTS OF SELLERS
Sellers severally agree as follows:
9.1. Dissenter's Rights. Seller shall not exercise dissenter's
rights in connection with the merger of the Bank into an interim bank in
connection with the formation by BancShares of a holding company under the Bank
Holding Company Act; provided however, in the event that BancShares has not
purchased (or caused to be purchased) the Bank Stock from Doty and Jones by
April 11, 1997, or from Doty Investments by June 1, 1997, any Seller from whom
stock has
9
<PAGE>
not been purchased may demand dissenter's rights from the Bank, and in such
event, for purposes of such a dissent proceeding, Sellers and Bank agree that
the value of the Bank Stock shall be Nine Hundred Ten Dollars ($910.00) per
share. Each party will vote its shares in favor of the merger of the Bank into
an interim bank as a part of the formation of a bank holding company if
recommended by the Board of Directors of the Bank.
9.2. No Additional Shares. After the date of this Agreement and
prior to the UPC Closing and the Doty Closing, Sellers shall not voluntarily
acquire, offer to acquire or solicit offers to sell, any additional shares of
common stock of the Bank or any capital stock of BancShares. Nothing herein
shall be deemed to prohibit a seller from acquiring additional shares of common
stock of the Bank or other capital stock of the Bank pursuant to a dividend or
other distribution undertaken by the Bank, or to acquire additional shares of
common stock of the Bank or other capital stock by operation of law or by
descent and distribution.
9.3. Further Assistance. Sellers shall give such further assistance
to BancShares and to UPC and shall execute, acknowledge and deliver all such
documents and instruments as BancShares or UPC (in respect of the UPC Closing)
may reasonably request, and take such further action as may be necessary or
appropriate effectively to consummate the transactions contemplated by this
Agreement.
ARTICLE 10.
CONDITIONS TO CLOSING
10.1. Conditions to the Obligations of Sellers to UPC Closing.
Unless waived in writing by a Seller, the obligation of each Seller to
consummate the transactions contemplated in Article 3 of this Agreement is
subject to the satisfaction at or prior to the UPC Closing of the following
conditions:
(a) Performance. Each of the material acts and undertakings of
BancShares to be performed on or prior to the UPC Closing shall
have been duly performed;
(b) Representations and Warranties. The representations and
warranties of BancShares contained in Article 6 of this Agreement
shall be true and complete, in all material respects, on and as of
the UPC Closing with the same effect as though made on and as of
the UPC Closing;
(c) Documents. Seller shall have received the following documents and
instruments:
(1) A certificate signed by an authorized officer of BancShares
dated as of the UPC Closing certifying that:
10
<PAGE>
a. BancShares' Board of Directors has duly adopted resolutions
(copies of which shall be attached to such certificate)
approving the substantive terms of this Agreement and
authorizing the consummation of the transactions contemplated by
this Agreement and certifying that such resolutions have not
been amended or modified and remain in full force and effect;
and
b. Each person executing this Agreement on behalf of BancShares
is an officer of BancShares holding the office or offices
specified therein, with full power and authority to execute this
Agreement and any and all other documents in connection
herewith, and that the signature of each person set forth on
such certificate is his or her genuine signature;
(2) A certificate signed respectively by an authorized officer of
BancShares stating that the conditions set forth in Section 10.2
of this Agreement have been fulfilled;
(3) A certificate signed by each other Seller certifying that the
person executing this Agreement has full power and authority to
execute and deliver this Agreement and a certification that the
warranties and representations of such Seller as set forth in this
Agreement are true and correct and, in the case of Doty
Investments and UPC, a certificate signed by an authorized officer
of each dated as of the UPC Closing certifying that:
a. The governing body of Doty Investments has duly adopted a
resolution (a copy of which shall be attached to such
certificate) approving the substantive terms of this Agreement
and authorizing the consummation of the transactions
contemplated in this Agreement and certifying that such
resolution has not been amended or modified and remains in
full force and effect; and
b. Each person executing this Agreement on its behalf is an
officer (or other authorized person) of the entity holding the
office (or offices) specified therein, with full power and
authority to execute this Agreement and any and all other
documents in connection herewith and that the signature of
each person set forth on such certificate is his or her
genuine signature.
11
<PAGE>
10.2. Conditions to Obligations of BancShares to UPC Closing. Unless
waived in writing by BancShares, the obligation of BancShares to consummate the
transactions contemplated in Article 3 of this Agreement is subject to the
satisfaction at or prior to the UPC Closing of the following conditions:
(a) Performance. Each of the material acts and undertakings of
Sellers to be performed at or before the UPC Closing shall have
been duly performed;
(b) Representations and Warranties. The representations and
warranties of the Sellers contained in Article 7 of this Agreement
shall be true and correct, in all material respects, on and as of
the UPC Closing with the same effect as though made on and as of
the UPC Closing; and
(c) Documents. In addition to the documents described elsewhere in
this Agreement, BancShares shall have received a certificate
signed by each Seller certifying that the person executing this
Agreement has full power and authority to execute and deliver this
Agreement and a certification that the warranties and
representations of the Seller as set forth in this Agreement are
true and correct and, in the case of Doty Investments and UPC:
(1) A certificate signed by an authorized officer of each dated as
of the UPC Closing certifying that:
a. Each person executing this Agreement on its behalf is an
officer (or other authorized person) of the entity holding
the office or offices specified therein, with full power
and authority to execute this Agreement and any and all
other documents in connection herewith, and that the
signature of each person set forth on such certificate is
his or her genuine signature; and
b. In the case of Doty Investments only, that the governing
body of Doty Investments has duly adopted resolutions (a
copy of which shall be attached to such certificate)
approving the substantive terms of this Agreement and
authorizing the consummation of the transactions
contemplated by this Agreement and certifying that such
resolution has not been amended or modified and remains in
full force and effect.
10.3. Conditions to the Obligations of Sellers to Doty Closing.
Unless waived in writing by a Seller, the obligation of each Seller (other than
UPC and All Saints who will have no
12
<PAGE>
participation in any of the transactions contemplated in Article 4) to
consummate the transactions contemplated in Article 4 of this Agreement is
subject to the satisfaction at or prior to the Doty Closing of the following
conditions:
(a) Performance. Each of the material acts and undertakings of
BancShares to be performed on or prior to the Doty Closing shall
have been duly performed;
(b) Representations and Warranties. The representations and
warranties of BancShares contained in Article 6 of this Agreement
shall be true and complete, in all material respects, on and as of
the Doty Closing with the same effect as though made on and as of
the Doty Closing;
(c) Documents. Seller (other than UPC and All Saints) shall have
received the following documents and instruments:
(1) A certificate signed by an authorized officer of BancShares
dated as of the Doty Closing certifying that:
a. BancShares' Board of Directors has duly adopted
resolutions (copies of which shall be attached to such
certificate) approving the substantive terms of this
Agreement and authorizing the consummation of the
transactions contemplated by this Agreement and certifying
that such resolutions have not been amended or modified
and remain in full force and effect; and
b. Each person executing this Agreement on behalf of
BancShares is an officer of BancShares holding the office
or offices specified therein, with full power and
authority to execute this Agreement and any and all other
documents in connection herewith, and that the signature
of each person set forth on such certificate is his or her
genuine signature;
(2) A certificate signed respectively by an authorized officer of
BancShares stating that the conditions set forth in Article 10
of this Agreement have been fulfilled; and
10.4. Conditions to Obligations of BancShares to Doty Closing.
Unless waived in writing by BancShares, the obligation of BancShares to
consummate the transactions contemplated in Article 4 of this Agreement is
subject to the satisfaction at or prior to the Doty Closing of the following
conditions:
13
<PAGE>
(a) Performance. Each of the material acts and undertakings of
Sellers (other than UPC and All Saints) to be performed at or
before the Doty Closing shall have been duly performed;
(b) Representations and Warranties. The representations and
warranties of the Sellers (other than UPC and All Saints)
contained in Article 7 of this Agreement shall be true and
correct, in all material respects, on and as of the Doty Closing
with the same effect as though made on and as of the Doty Closing;
and
(c) Documents. In addition to the documents described elsewhere in
this Agreement, BancShares shall have received a certificate
signed by each Seller (other than UPC and All Saints) certifying
that the person executing this Agreement has full power and
authority to execute and deliver this Agreement and a
certification that the warranties and representations of the
Seller as set forth in this Agreement are true and correct and, in
the case of Doty Investments:
(1) A certificate signed by an authorized officer of Doty
Investments dated as of the Doty Closing certifying that:
a. The governing body has duly adopted a resolution (a copy
of which shall be attached to such certificate) approving
the substantive terms of this Agreement and authorizing
the consummation of the transactions contemplated by this
Agreement and certifying that such resolution has not been
amended or modified and remains in full force and effect;
and
b. Each person executing this Agreement on its behalf is an
officer (or authorized person) of Doty Investments holding
the office (or offices) specified therein, with full power
and authority to execute this Agreement and any and all
other documents in connection herewith, and that the
signature of each person set forth on such certificate is
his or her genuine signature.
10.5. Conditions to Obligations of All Parties. The obligation of
each party to effect each closing contemplated in this Agreement (which is
applicable to such party) shall be subject to the condition that, at the time of
such closing, no claim, action, suit, investigation or other proceeding shall be
pending or threatened before any court or governmental agency which presents a
substantial risk of the restraint or prohibition of the transactions
contemplated by this Agreement or the obtaining of material damages or other
relief in connection therewith.
14
<PAGE>
ARTICLE 11.
TERMINATION
11.1. Termination. This Agreement may be terminated at any time
prior to either the UPC Closing or the Doty Closing, as follows:
(a) By consent in writing of all parties;
(b) By any party adversely affected if the applicable
conditions set forth in Article 10 shall not have been
satisfied in all material respects (or waived) as of the
applicable closing;
(c) By any party adversely affected if there shall have been a
material breach of any obligation of the other party and
such breach shall not have been remedied by the time of the
applicable closing after receipt by the breaching party of
written notice from another party specifying the nature of
such breach and requesting that it be remedied.
11.2. Effect of Termination. If this Agreement should be terminated
prior to the UPC Closing, the obligations of the parties to this Agreement shall
terminate. If this Agreement should be terminated after the UPC Closing, the
UPC Closing and the transactions contemplated in Article 3 shall not be
affected, but otherwise the obligations of the parties to this Agreement shall
terminate except the provisions of Section 12.1. A termination under this
Article 11 (whether before or after the UPC Closing) shall not relieve any party
of any liability for a breach of this Agreement or for any misstatement or
misrepresentation, or be deemed to constitute a waiver of any available remedy
for any such breach, misstatement or misrepresentation.
ARTICLE 12.
GENERAL PROVISIONS
12.1. Notices. Any notice, request, demand and other communication
which any party may desire or may be required to give shall be in writing and
shall be deemed to be duly given if delivered personally or mailed by certified
or registered mail (postage prepaid, return receipt requested), air courier or
facsimile transmission, addressed or transmitted to such other party as follows:
15
<PAGE>
If to BancShares: Pontotoc BancShares Corp.
19 South Main Street
Post Office Box 29
Pontotoc, Mississippi 38863-0029
Attention: Mr. Buddy R. Montgomery
If to Bank: First National Bank of Pontotoc
19 South Main Street
Post Office Box 29
Pontotoc, Mississippi 38863-0029
Attention: Mr. Buddy R. Montgomery
In each case,
with a copy to: Phelps Dunbar, L.L.P.
Seventh Floor
One Mississippi Plaza
Post Office Box 1220
Tupelo, Mississippi 38802-1220
Attention: F. M. Bush, III, Esquire
If to Doty Investments: Doty Investments, L.P.
912 University Avenue
Oxford, Mississippi 38655
Attention: J. Richard Doty
With a copy to: Robert Walker, Esquire
Baker, Donelson, Bearman & Caldwell
165 Madison Avenue
First Tennessee Building, 21st Floor
Memphis, Tennessee 38103
If to Doty: Martha W. Doty
2304 Colony Park Drive
Birmingham, Alabama 35234
With a copy to: Robert Walker, Esquire
Baker, Donelson, Bearman & Caldwell
165 Madison Avenue
First Tennessee Building, 21st Floor
Memphis, Tennessee 38103
16
<PAGE>
If to Jones: Gerry G. Jones
C/O Robert Jones, Esquire
1502 Mirror Lake Plaza
2829 Lakeland Drive
Jackson, Mississippi 39208
If to UPC: Union Planters Corporation
7130 Goodlett Farms Parkway
Post Office Box 387
Memphis, Tennessee 38147
Attention: Jackson W. Moore, President
With a copy to: Wyatt, Tarrant & Combs, P.L.C.
6075 Poplar Avenue, Suite 650
Post Office Box 775000
Memphis, Tennessee 38177-5000
Attention: R. Nash Neyland, Esquire
If to All Saints: ______________________________
______________________________
______________________________
Attention:______________________
With a copy to: Robert Walker, Esquire
Baker, Donelson, Bearman & Caldwell
165 Madison Avenue
First Tennessee Building, 21st Floor
Memphis, Tennessee 38103
or to such other address as any party may hereafter designate to the other
parties in writing. Notice shall be deemed to have been given on the date
reflected in the proof or evidence of delivery or, if none, on the date actually
received.
12.2. Assignability and Successors. This Agreement shall not be
assignable by any of the parties; provided however, BancShares may assign and
transfer all or any part of its rights and obligations under this Agreement to
any other entity or person, but such assignments shall not relieve BancShares of
its obligations under this Agreement. This Agreement shall inure to the benefit
of, and be binding upon, the parties and their respective successors and
permitted assigns.
12.3. Governing Law. This Agreement shall be governed by, and
construed and enforced in accordance with, the internal laws, and not the laws
pertaining to choice or conflicts of laws, of the State of Mississippi, unless
and to the extent that federal law controls.
17
<PAGE>
12.4. Counterparts. This Agreement may be executed simultaneously in
one or more counterparts, each of which shall be deemed an original, but all of
which shall constitute but one and the same instrument.
12.5. Severability. If any portion or provision of this Agreement
should be determined by a court of competent jurisdiction to be invalid, illegal
or unenforceable in any jurisdiction, such portion or provision shall be
ineffective as to that jurisdiction to the extent of such invalidity, illegality
or unenforceability, without affecting in any way the validity or enforceability
of the remaining portions or provisions of this Agreement.
12.6. Modifications, Amendments and Waivers. At any time prior to
the UPC Closing or the Doty Closing, as the case may be, or the termination of
this Agreement, the parties may, by written agreement:
(a) extend the time for performance of any of the obligations
or other acts of any other party;
(b) waive any inaccuracies in the representations and
warranties made to such party by any other party in this
Agreement or any other document delivered pursuant to
this Agreement;
(c) waive compliance with any of the covenants or agreements
in favor of such party by any other party in this
Agreement; and
(d) amend or add to any provision of this Agreement; provided,
however, that no provision of this Agreement may be amended
or added to except by an agreement in writing signed by
each party affected thereby and expressly stating that it
is an amendment to this Agreement.
12.7. Interpretation. The headings contained in this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
12.8. Payment of Expenses. Except as set forth herein, each party
shall pay its own fees and expenses (including, without limitation, legal fees
and expenses) incurred by each in connection with the transactions contemplated
hereunder.
12.9. Finders and Brokers. The parties represent and warrant to each
other that they have employed no broker, investment banker or finder in
connection with the transactions described in this Agreement under an
arrangement pursuant to which a fee is or may be due to such broker, investment
banker or finder as a result of the execution of this Agreement or the closing
of the transactions contemplated herein. This section shall survive the
termination of this Agreement.
18
<PAGE>
12.10. Equitable Remedies. The parties agree that in the event of a
breach of this Agreement, the parties will be without an adequate remedy at law
by reason of the unique nature of the transactions contemplated herein. In
recognition thereof, in addition to (and not in lieu of ) any remedies at law
which may be available to the parties, the parties shall be entitled to obtain
equitable relief, including the remedies of specific performance and injunction,
in the event of a breach of this Agreement by the other party, and no attempt on
the part of either party to obtain such equitable relief shall be deemed to
constitute an election of remedies by such party which would preclude such party
from obtaining any remedies at law to which it would otherwise be entitled.
Each party covenants that it shall not contend in any such proceeding that the
other party is not entitled to a decree of specific performance by reason of
having an adequate remedy at law.
12.11. Attorneys' Fees. If any party shall bring an action at law or in
equity to enforce its rights under this Agreement (including an action based
upon a misrepresentation or the breach of any warranty, covenant, agreement or
obligation, contained herein), the prevailing party in such action shall be
entitled to recover from the other party or parties its reasonable costs and
expenses necessarily incurred in connection with such action (including fees,
disbursements and expenses of attorneys and costs of investigation).
12.12. No Waiver. No failure, delay or omission of or by any party in
exercising any right, power or remedy upon any breach or default of any other
party shall impair any such rights, powers or remedies of the party not in
breach or default, nor shall it be construed to be a waiver of any such right,
power or remedy, or an acquiescence in any similar breach or default; nor shall
any waiver of any single breach or default be deemed a waiver of any other
breach or default theretofore or thereafter occurring. Any waiver, permit,
consent or approval of any kind or character on the part of any party of any
provisions of this Agreement must be in writing and must be executed by the
parties to this Agreement and shall be effective only to the extent specifically
set forth in such writing.
12.13. Remedies Cumulative. All remedies provided in this Agreement by
law or otherwise shall be cumulative and not alternative.
12.14. Bank/Doty Agreement. Nothing contained in this Agreement shall
affect the parties' obligations under the Bank/Doty Agreement except (i) as
expressly provided above in Article 2, and (ii) the purchase and sale of stock
by a party under this Agreement shall satisfy such parties' obligations under
the Bank/Doty Agreement applicable to such party.
12.15. Pledge of Agreement. The parties acknowledge that this Agreement
may be assigned to a commercial lending institution as security for a loan to
BancShares to enable BancShares to consummate the UPC Closing and/or the Doty
Closing. The parties consent to such assignment. Such assignment shall not
operate as a release of BancShares or in any way modify the obligations of
BancShares under this Agreement.
19
<PAGE>
12.16. Closing. It is the intention of all parties that the UPC Closing
and the Doty Closing take place simultaneously on March 18, 1997.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed and
delivered as of the date first written above.
PONTOTOC BANCSHARES CORP.
By: /S/ Buddy R. Montgomery
-----------------------------------
Title: President
--------------------------------
FIRST NATIONAL BANK OF PONTOTOC
By: /S/ Buddy R. Montgomery
-----------------------------------
Title: President
---------
UNION PLANTERS CORPORATION
By: /S/ Original Signed
-----------------------------------
Title: President
--------------------------------
Number of Shares: 264
---------------------
20
<PAGE>
DOTY INVESTMENTS, L.P.
By: /S/ J. Richard Doty
-----------------------------------
Title: General Partner
-------------------------------
By: /S/ Martha Anne Doty
------------------------------------
Title: General Partner
--------------------------------
Number of Shares: 4,936
----------------------
/S/ Martha W. Doty
---------------------------------------
MARTHA W. DOTY
Number of Shares: 250
---------------------
/S/ Gerry G. Jones
---------------------------------------
GERRY G. JONES
Number of Shares: 1,107
---------------------
ALL SAINTS EPISCOPAL CHURCH OF
MEMPHIS, TENNESSEE
By: /S/ Original Signed
-----------------------------------
Title: Treasurer
---------------------------------
21
<PAGE>
EXHIBIT 10.4
NOTE
$6,400,000.00 March 18, 1997
Memphis, Tennessee
FOR VALUE RECEIVED, the undersigned hereby promises to pay to the order of
NATIONAL BANK OF COMMERCE, Memphis, Tennessee, ("Bank") in current funds, the
principal sum of Six Million Four HundredThousand Dollars ($6,400,000.00),
together with interest from the date hereof to maturity and payable as
hereinafter provided:
The principal and interest on this Note are payable as follows:
(1) Interest Payments. Commencing on March 18, 1998, and on the same day
of each consecutive year thereafter through and including March 18, 2002,
interest shall be payable on the outstanding principal balance on this Note at a
variable rate equal to the Prime Rate. Interest shall be calculated on a 365
day year and the rate shall be adjusted on the day of any change in the Prime
Rate.
(2) Principal. The principal shall be payable over five (5) years
beginning on March 18, 1998, and on the same day of each consecutive year
thereafter through and including March 18, 2002
and equal installments of principal shall be due and payable on March 18, 2002.
Borrower may prepay this Note in whole or in part without premium or
penalty. Any prepayment shall not have the effect of suspending or deferring
the payments provided for herein, but same shall continue to be due and payable
on each due date subsequent to any such prepayment. Any payment (including any
prepayment) received hereunder may, at the option of Bank in its sole
discretion, be applied first to the payment of interest on the outstanding
principal balance and the remainder, if any, shall be applied to the principal
of this Note. All installments, prepayments and payments of principal and
interest due hereunder are payable at the main office of Bank in Memphis,
Tennessee, or such other place as the holder hereof may designate from time to
time.
No provision of this Note shall require the payment or permit the
collection of interest in excess of the maximum rate permitted by applicable
law. If any excess of interest in such respect is hereby provided for, or shall
be adjudicated to be so provided, in this Note or otherwise in connection with
this loan transaction, this provision of this Note shall govern and prevail, and
neither the undersigned nor any endorser, surety or guarantor shall be obligated
to pay the excess amount to such interest, or any other excess sum paid for the
use, forbearance, or detention of sums loaned pursuant hereto. If for any
reason interest in excess of the maximum rate of interest permitted by
applicable law shall be deemed charged, required or permitted or otherwise
should arise, any such excess shall be applied as a payment and reduction of the
principal of the Loan evidenced by this Note, and if the principal amount
thereof has been paid in full, any remaining excess shall forthwith be paid to
the undersigned. In the event of conflict between the terms of this
<PAGE>
Note and the Loan Agreement, the terms of this Note shall control.
"Prime Rate" is a fluctuating rate and is a reference or benchmark rate of
interest established from time to time by Bank as its "Prime Rate" to be in
effect from time to time, whether or not such rate is otherwise published.
The total debt evidenced hereby (principal and accrued interest) shall also
bear interest from and after date of maturity (whether by scheduled maturity,
acceleration or otherwise) at the maximum rate of interest which Bank, as a
national bank, is permitted to contract for and charge under applicable law in
effect on the date hereof or on the maturity date hereof, whichever is greater.
Whenever payment of any installment of interest or principal is received
more than ten (10) days after written notice from Bank that such payment is past
due, then Bank may assess a late charge of Two Hundred Fifty Dollars ($250.00).
It is agreed upon any extension or renewal of the indebtedness evidenced
hereby, Bank shall have the right to fix and charge the same or a different
(higher or lower) rate of interest per annum, provided such rate shall not
exceed the maximum rate of interest which Bank, as a national bank, is permitted
to contract for and charge under applicable law in effect on the date hereof or
in the date of such extension or renewal, whichever is greater.
The undersigned hereby agrees to pay all expenses directly related to the
loan evidenced hereby, incurred or to be incurred in its making, servicing or
collection, including court costs and reasonable attorneys' fees.
This Note is the Note referred to in, is entitled to the benefits of, and
is subject to all terms and conditions of the Loan Agreement, of even date
herewith, between the undersigned and Bank. The Loan Agreement, among other
things, contains provisions for acceleration of the maturity of this Note upon
the happening of certain stated events and upon the terms and conditions
specified in the Loan Agreement. This Note is secured by a Security Agreement
referred to in the Loan Agreement, reference to which is hereby made for
description of the collateral provided for under the Security Agreement and the
rights of the undersigned and Bank with respect to such collateral.
No delay or omission on the part of Bank in exercising any right hereunder
or related to the loan evidenced hereby shall operate as a waiver of such right
or of any other right. A waiver on any one occasion shall not be construed as a
bar to or waiver of any such right and/or remedy on any future occasion.
Every maker, endorser, surety and guarantor of this Note or the obligations
set forth herein hereby waives presentment, demand, notice of dishonor, protest
and all other demands and notices in connection with the delivery, acceptance,
performance, default or endorsement of this Note or their respective obligations
hereon, consents to any extensions, renewals or postponements of the due date or
time of payment hereof, or any other indulgence; agrees that the indebtedness
evidenced
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hereby may be extended or renewed in whole or in part without notice to the
undersigned and without limitation as to the number of such extensions or the
period or periods thereof; and consents to any substitution, exchange or release
of collateral and/or to the addition or release of any other party or Person,
whether primarily or secondarily liable.
All rights and powers of Bank hereunder shall inure to the benefit of any
subsequent holder or assignee of this Note and the owner of any part of the
indebtedness evidenced hereby.
This instrument shall be governed and construed in accordance with the laws
of the State of Tennessee except with respect to interest which shall be
governed by and construed in accordance with applicable Federal laws in effect
from time to time.
PONTOTOC BANCSHARES CORP.,
a Mississippi corporation
By: _________________________________
Title: President
3
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SECURITY AGREEMENT
This Security Agreement is made and entered as of the 18th day of
March, 1997, by and between PONTOTOC BANCSHARES CORP., Pontotoc, Mississippi
(hereinafter called "Debtor") and NATIONAL BANK OF COMMERCE, Memphis, Tennessee
(hereinafter called "Bank");
For good and valuable consideration, the receipt and sufficiency of which
is hereby acknowledged, the Debtor does hereby assign to Bank and grant to Bank
a security interest in:
(1) Six Thousand Five Hundred Fifty-seven (6,557) shares of stock of First
National Bank of Pontotoc standing in Debtor's name on the books of
said corporation. The stock is evidenced by the following
certificates:
No. of Shares Certificate Number
6,557 ___________
(2) All of Debtor's interest in any shares of capital stock of First
National Bank of Pontotoc hereafter acquired by Debtor.
Debtor represents that the shares described above are owned by Debtor on
the date hereof; that any additional shares hereafter acquired by Debtor shall
be subject to the security interest herein granted to Bank; that said shares are
unencumbered; and that Debtor has the right to grant the security interest.
Debtor herewith delivers to Bank the said stock certificates evidencing the
shares of stock described above.
The security interest granted to Bank hereunder shall secure the payment of
(1) all indebtedness, including principal and interest, now or hereafter
incurred by Debtor pursuant to that certain Loan Agreement and that certainNote
of even date herewith between Debtor and Bank; (2) any and all renewals,
modifications or extensions thereof, in whole or in part; (3) all covenants,
representations, warranties, obligations, liabilities and agreements of the
Debtor to Bank, contained in or arising out of said Loan Agreement or any Loan
Document as therein defined; (4) all other money heretofore or hereafter
advanced by Bank to or for the account of Debtor; and (5) all other, present or
future, direct or contingent, liabilities and indebtedness of Debtor to Bank of
any nature whatsoever, and any extensions or renewals thereof..
The rights, duties and obligations hereunder of Bank and the Debtor shall,
unless otherwise required by law, be governed by the provisions of the Uniform
Commercial Code in effect from time to time in the State of Tennessee and other
laws of the State of Tennessee.
Prior to an event of default under said Loan Agreement, any dividend on
said stock may be paid to Debtor, but, after an event of default, any dividend
on said stock shall be paid directly to Bank.
<PAGE>
This Security Agreement shall remain in full force and effect until all
debts and obligations set forth herein are paid in full.
WITNESS the signatures of the Debtor on the day and year first above
written.
PONTOTOC BANCSHARES CORP.,
a Mississippi corporation
By: ___________________________________
Title: _________________________________
ATTEST:
________________________________
Secretary
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LOAN AGREEMENT
--------------
THIS LOAN AGREEMENT is entered into as of the 18th day of March, 1997,
between PONTOTOC BANCSHARES CORP., Pontotoc, Mississippi, a Mississippi
corporation (the "Borrower"), and NATIONAL BANK OF COMMERCE, a national banking
association (the "Bank").
ARTICLE I
---------
DEFINITIONS AND ACCOUNTING TERMS
--------------------------------
Section 1.01. Defined Terms. As used in this Agreement, the following
terms have the following meanings (terms defined in the singular to have the
same meaning when used in the plural and vice versa):
"Agreement" means this Loan Agreement, as amended, supplemented or modified
from time to time.
"Capital Lease" means all leases which have been or should be capitalized
on the books of Borrower in accordance with GAAP.
"Collateral" means 6,557 shares of the capital stock of First National Bank
of Pontotoc, a national bank owned by Borrower.
"Debt" means (1) indebtedness or liability for borrowed money or for the
deferred purchase price of property or services (including trade obligations);
(2) obligations as lessee under Capital Lease; (3) current liabilities in
respect to unfunded vested benefits under any Plans; and (4) all guaranties,
endorsements (other than for collection or deposit in the ordinary course of
business) and other contingent obligations to purchase, to provide funds for
payment, to supply funds to invest in any Person, or otherwise to assure a
creditor against loss.
"Event of Default" means any of the events specified in Section 8.01,
whether or not any requirement for the giving of notice, the lapse or time, or
both, or any other condition, has been satisfied.
"GAAP" means generally accepted accounting principles in the United States.
"Lien" means any mortgage, deed of trust, pledge security interest,
hypothecation, assignment, deposit arrangement, encumbrance, lien (statutory or
other), or preference, priority, or other security agreement or preferential
arrangement, charge, or encumbrance of any kind.
"Loan" shall have the meaning assigned to such term in Section 2.01.
"Loan Documents" mean this Agreement, the Note, and the Security Agreement.
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"Note" shall have the meaning assigned to such term in Section 2.02.
"Person" means an individual, partnership, corporation, limited liability
company, or other entity of whatever nature.
"Plan" means any employee benefit or other plan established, maintained or
to which contributions have been made by Borrower or any ERISA affiliate.
"Prime Rate" means a variable reference or benchmark rate of interest that
is established by Bank as its Prime Rate to be in effect from time to time,
whether or not such rate is otherwise published.
"Security Agreement" means the Security Agreement in form and substance
acceptable to the Bank to be delivered by Borrower under the terms of this
Agreement.
"Subsidiary" means First National Bank of Pontotoc and any other bank in
which Borrower hereafter acquires a controlling interest either through the
direct ownership of bank stock or indirectly through the ownership of bank
holding company stock.
Section 1.02. Accounting Terms. All accounting terms not specifically
defined herein shall be construed in accordance with GAAP consistent with those
applied in the preparation of the financial statements referred to in Section
4.04, and all financial data submitted pursuant to this Agreement shall be
prepared in accordance with such principles.
ARTICLE II
----------
AMOUNT AND TERMS OF THE LOAN
----------------------------
Section 2.01. Loan. Bank agrees on the terms and conditions hereinafter
set forth, to make a loan to Borrower in the principal amount of $6,400,000.00
(the "Loan")to be funded in full at closing.
Section 2.02. Note. Borrower's obligation to repay the Loan shall be
evidenced by a promissory note (the "Note") in form and substance acceptable to
the Bank.
Section 2.03 Payment of Principal and Interest. The principal and
interest on the Note are payable as follows:
(1) Interest Payments. Commencing on March 18, 1998, and on the same day
of each consecutive year thereafter through and including March 18, 2002,
interest shall be payable on the outstanding principal balance on the Note at a
variable rate equal to the Prime Rate. Interest shall be calculated on a 365
day year and the rate shall be adjusted on the day of any change in the Prime
Rate.
7
<PAGE>
(2) Principal Payments. The principal shall be payable over five (5) years
beginning on March 18, 1998, and on the same day of each consecutive year
thereafter through and including March 18, 2002, equal installments of principal
shall be due and payable and on March 18, 2002 all outstanding principal and
accrued interest shall be due and payable.
Section 2.04. Prepayments. Borrower may prepay the Note in whole or in
part without premium or penalty. Any prepayment shall be applied first to
interest accrued on the outstanding principal balance and currently due and
payable and the remainder, if any, shall be applied to reduce the principal
balance of the Note.
Section 2.05. Use of Proceeds. The proceeds of the Loan hereunder shall
be used by Borrower to purchase the Collateral. Borrower will not, directly or
indirectly, use any part of such proceeds for the purpose of purchasing or
carrying any margin stock within the meaning of Regulation U of the Board of
Governors of the Federal Reserve System or to extend credit to others for the
purpose of purchasing or carrying any margin stock.
Section 2.06. Collateral. Borrower shall pledge as Collateral 6,557
shares of the capital stock of First National Bank of Pontotoc now owned by
Borrower in accordance with the Security Agreement as herein defined. Borrower
shall deliver to Bank physical possession of said securities together with stock
powers duly executed in blank. In the event of stock splits or stock dividends
or any other corporate action which may result in an increase of the 6,557
shares of capital stock of First National Bank of Pontotoc, Borrower agrees that
such additional shares are to be considered as pledged as security under this
Agreement and physical possession of the certificates representing such shares
shall be promptly delivered to Bank, along with stock powers duly executed in
blank.
ARTICLE III
-----------
CONDITIONS PRECEDENT
--------------------
Section 3.01. Condition Precedent to the Loan. The obligation of Bank to
make the Loan to Borrower is subject to the condition precedent that Bank shall
have received on or before the day of such Loan each of the following, in form
and substance satisfactory to Bank and its counsel:
(1) Note. The Note duly executed by Borrower.
(2) Security Agreement. The Security Agreement, duly executed by Borrower,
together with delivery of the stock of First National Bank of Pontotoc and with
stock powers attached duly executed in blank;
(3) Evidence of All Corporate Action by Borrower. Certified copies of all
corporate action taken by Borrower, including resolutions of its Board of
Directors, authorizing the execution, delivery and performance of the Loan
Documents to which it is a party and each other document to be delivered
pursuant to this Agreement.
8
<PAGE>
(4) Certificate of Secretary of Borrower and Each Subsidiary. A
certificate of the Secretary of Borrower and of its Subsidiary certifying the
names and true signatures of the officers of parties authorized to sign the Loan
Documents to which it is a party and each other document to be delivered by such
party under this Agreement and certifying the accuracy of the Articles of
Incorporation, Bylaws and Resolutions (as applicable) of such party;
(5) Opinion of Counsel for Borrower. A favorable opinion of counsel for
Borrower in form and substance reasonably acceptable to Bank and addressing such
matters as Bank may reasonably request;
(6) Officer's Certificate. The following statements shall be true and Bank
shall have received a certificate in form and substance acceptable to Bank (the
"Officer's Certificate") signed by a duly authorized officer of Borrower dated
the date of the closing, stating that:
(a) The representations and warranties contained in Article IV of this
Agreement and in the Security Agreement are correct on and as of such date, and
(b) No Events of Default have occurred and are continuing or would result
from the Loan.
(7) Additional Documentation. Bank shall have received such other
approvals, opinions or documents as Bank may reasonably request.
ARTICLE IV
----------
REPRESENTATIONS AND WARRANTIES
------------------------------
Borrower represents and warrants to Bank that:
Section 4.01. Incorporation, Good Standing and Due Qualification.
Borrower is a corporation duly incorporated, and each Subsidiary is a
corporation duly incorporated or a bank duly organized, and all entities are
validly existing, and in good standing under the laws of the jurisdiction of its
incorporation, has the corporate power and authority to own its assets and to
transact the business in which it is now engaged or proposed to be engaged in;
and is duly qualified as a foreign corporation and in good standing under the
laws of each other jurisdiction in which such qualification is required.
Section 4.02. Corporate Power and Authority. The execution, delivery and
performance by Borrower of the Loan Documents have been duly authorized by all
necessary corporate action and do not and will not (1) require any consent or
approval of the stockholders of such corporation; (2) contravene such
corporation's charter or bylaws; (3) violate any provision of any law, rule,
regulation (including, without limitation, Regulation U of the Board of
Governors of the Federal Reserve System), order, writ, judgment, injunction,
decree, determination or award presently in effect having applicability to such
corporation; (4) result in a breach of or constitute a default under
9
<PAGE>
any indenture or loan or credit agreement or any other agreement, lease or
instrument to which such corporation is a party or by which it or its properties
may be bound or affected; (5) result in, or require, the creation or imposition
of any Lien, upon or with respect to any of the properties now owned or
hereafter acquired by such corporation; and (6) cause such corporation to be in
default under any such law, rule, regulation, order, writ, judgment, injunction,
decree, determination or award or any such indenture, agreement, lease or
instrument.
Section 4.03. Legally Enforceable Agreement. This Agreement is, and each
of the other Loan Documents when delivered under this Agreement will be, legal,
valid and binding obligations of Borrower enforceable against Borrower in
accordance with their respective terms, except to the extent that such
enforcement may be limited by applicable bankruptcy, insolvency and other
similar laws affecting creditors' rights generally.
Section 4.04. Financial Statements. The financial statement of Subsidiary
of December 31, 1996, and the related statements of income and retained earnings
of Subsidiary for the fiscal year ended, and the accompanying footnotes, copies
of which have been furnished to Bank, are complete and correct and fairly
present the financial condition of Subsidiary as of such date and the results of
the operations of Subsidiary for the periods covered by such statement, all in
accordance with GAAP consistently applied, and since December 31, 1996, there
has been no material adverse change in the condition (financial or otherwise),
business or operations of Subsidiary. No information, exhibit or report
furnished by Borrower to Bank in connection with the negotiation of this
Agreement contained any material fact necessary to make the statement contained
therein not materially misleading.
Section 4.05. Litigation. There is no pending or threatened action or
proceeding against or affecting Borrower or any Subsidiary before any court,
governmental agency or arbitrator, which may, in any one case or in the
aggregate, materially adversely affect the financial condition, operations,
properties or business of Borrower or any Subsidiary.
Section 4.06. No Defaults on Outstanding Judgments or Orders. Borrower and
all Subsidiaries have satisfied all judgments, and, to the best of Borrower's
knowledge, neither Borrower nor any Subsidiary is in default with respect to any
judgment, writ, injunction, decree, rule or regulation of any court, arbitrator
or federal, state, municipal or other governmental authority.
ARTICLE V
---------
AFFIRMATIVE COVENANTS
---------------------
So long as the Note shall remain unpaid, Borrower will:
Section 5.01. Maintenance of Existence. Preserve and maintain, and cause
all Subsidiaries to preserve and maintain, its corporate existence and good
standing in the jurisdiction of its incorporation, and qualify and remain
qualified, as a foreign corporation in each jurisdiction in which such
qualification is required.
10
<PAGE>
Section 5.02. Maintenance of Records. Keep, and cause all Subsidiaries to
keep, adequate records and books of account, in which complete entries will be
made in accordance with GAAP consistently applied reflecting all financial
transactions of Borrower and all Subsidiaries.
Section 5.03. Compliance with Laws. Comply, and cause all Subsidiaries to
comply, in all respects with all applicable laws, rules, regulations and orders,
such compliance to include, without limitation, paying before the same become
delinquent, all taxes, assessments and governmental charges imposed upon it or
upon its property.
Section 5.04 Right of Inspection. At any reasonable time and from time to
time, permit Bank or any agent or representative thereof to examine and make
copies of and abstracts from the records and books of account of, and visit the
properties of, Borrower and all Subsidiaries, and to discuss the affairs,
finances and accounts of Borrower and all Subsidiaries with any of their
respective officers and directors and Borrower's independent accountants;
provided, however, that all information and records obtained by Bank shall be
treated and maintained in strict confidence.
Section 5.05. Reporting Requirements. Furnish to Bank:
(1) Quarterly Financial Statements. As soon as available and in any event
within forty-five (45) days after the end of each of the first three (3)
quarters of each fiscal year, a copy of the call reports filed with the
regulatory authority for Borrower and all Subsidiaries certified by the chief
financial officer of Borrower that such call reports are true and correct copies
of the call reports filed by Borrower and any Subsidiary with the regulatory
authority.
(2) Annual Financial Statements. As soon as available and in any event
within ninety (90) days after the end of each fiscal year of Borrower, a balance
sheet of Borrower and all Subsidiaries at the end of such fiscal year and a
statement of income and retained earnings of Borrower and all Subsidiaries for
such fiscal year and a statement of cash flow of Borrower and all Subsidiaries
for such fiscal year, all in figures for the corresponding date and period in
the prior fiscal year and all prepared in accordance with GAAP consistently
applied thereon.
(3) Reports. Promptly upon the filing thereon, copies of the Uniform Bank
Performance Report and copies of all Reports of Condition and Reports of Income
of all Subsidiaries filed with the Federal Deposit Insurance Corporation, or any
other reports filed with any other regulatory authority of Borrower or of any
Subsidiary.
(4) Notice of Litigation. Promptly after the commencement thereof, notice
of all actions, suits and proceedings before any court or governmental
department, commission, board, bureau, agency or instrumentality, affecting
Borrower or any Subsidiary which, if determined adversely to Borrower or such
Subsidiary, could have a material adverse effect on the financial condition,
properties or operation of Borrower or such Subsidiary.
11
<PAGE>
(5) Notice of Defaults and Events of Default. As soon as possible and in
any event within thirty (30) days after the occurrence of each Event of Default,
a written notice setting forth the details of such Event of Default and the
action which is proposed to be taken by Borrower with respect thereto.
(6) General Information. Such other information respecting the condition
or operations, financial or otherwise, of Borrower or any of its Subsidiaries as
Bank may from time to time reasonably request.
ARTICLE VI
----------
NEGATIVE COVENANTS
------------------
So long as the Note and/or any other indebtedness of Borrower to Bank shall
remain unpaid, Borrower, without the prior written consent of Bank, will not:
Section 6.01. Liens. Create, incur, assume, or suffer to exist, or permit
any Subsidiary to create, incur, assume, or suffer to exist, any Lien upon or
with respect to any of its properties, now owned or hereafter acquired, except:
(1) Liens in favor of Bank;
(2) Liens for taxes or assessments or other government charges or levies if
not yet due and payable or, if due and payable, if they are being contested in
good faith by appropriate proceedings and for which appropriate reserves are
maintained;
(3) Liens imposed by law, such as mechanics' materialmen's, landlords',
warehousemen's, and carriers' Liens, and other similar Liens, securing
obligations incurred in the ordinary course of business which are not past due
for more than thirty (30) days or which are being contested in good faith by
appropriate proceedings and for which appropriate reserves have been
established;
(4) Liens under workmen's compensation, unemployment insurance, social
security, or similar legislation;
(5) Liens, deposits, or pledges to secure the performance of bids, tenders,
contracts (other than contracts for the payment of money), leases (permitted
under the terms of this Agreement), or public or statutory obligations; surety,
stay, appeal, indemnity, performance, or other similar bonds; or other similar
obligations arising in the ordinary course of business;
(6) Judgment and other similar Liens arising in connection with court
proceedings, provided the execution or other enforcement of such Liens is
effectively stayed and the claims secured thereby are being actively contested
in good faith and by appropriate proceedings;
(7) Easements, rights-of-way, restrictions, and other similar encumbrances
which, in the
12
<PAGE>
aggregate, do not materially interfere with the occupation, use, and enjoyment
by Borrower or any Subsidiary of the property or assets encumbered thereby in
the normal course of its business or materially impair the value of the property
subject thereto;
(8) Liens securing obligations of a Subsidiary to Borrower or another
Subsidiary; and
(9) Purchase-money Liens on any property hereafter acquired or the
assumption of any Lien on property existing at the time of such acquisition, or
a Lien incurred in connection with any conditional sale or other title retention
agreement or a Capital Lease; provided that
(a) Any property subject to any of the foregoing is acquired by Borrower or
any Subsidiary in the ordinary course of its respective business and the Lien on
any such property is created contemporaneously with such acquisition;
(b) The obligation secured by any Lien so created, assumed, or existing
shall not exceed the lesser of cost or fair market value as of the time of
acquisition of the property covered thereby to Borrower or Subsidiary acquiring
the same;
(c) Each such Lien shall attach only to the property so acquired and fixed
improvements thereon;
Section 6.02. Debt. Create, incur, assume, or suffer to exist or permit
any Subsidiary to create, incur, assume , or suffer to exist, any Debt, except:
(1) Debt of Borrower under this Agreement or the Note;
(2) Debt of Borrower subordinated on terms satisfactory to Bank to
Borrower's obligations under this Agreement and the Note;
(3) Debt of Borrower to any Subsidiary or of any Subsidiary to Borrower or
another Subsidiary;
(4) Accounts payable to trade creditors for goods or services in each case
incurred in the ordinary course of business and paid within the specified time,
unless contested in good faith and by appropriate proceedings;
(5) Debt of Borrower or any Subsidiary secured by purchase-money Liens
permitted by Section 6.01(9);
(6) Debt of any Subsidiary to the Federal Home Loan Bank Board or to the
Federal Reserve Board.
(7) Debt of any Subsidiary to purchase overnight funds from Bank.
13
<PAGE>
Section 6.03. Mergers, Etc. Merge or consolidate with, or sell, assign,
lease or otherwise dispose of (whether in one transaction or in a series of
transactions) all or substantially all of its assets (whether now owned or
hereafter acquired) to any Person or entity, or acquire all or substantially all
of the assets or the business of any Person or entity, or permit any Subsidiary
to do so without the prior written consent of Bank, which consent shall not be
unreasonably withheld.
Section 6.04. Leases. Create, incur, assume or suffer to exist, or permit
any Subsidiary to create, incur, assume or suffer to exist, any obligation as
lessee for the rental or hire of any real or personal property, except: (1)
Capital Leases permitted under Section 6.01; (2) leases existing on the date of
this Agreement and any extensions or renewals thereof; (3) leases (other than
Capital Leases) which do not in the aggregate require Borrower and any
Subsidiary on a consolidated basis to make payments (including taxes, insurance,
maintenance and similar expense which Borrower or any Subsidiary is required to
pay under the terms of any lease) in any fiscal year of Borrower in excess of
One Hundred Fifty Thousand Dollars ($150,000.00); and (4) leases between
Borrower and any Subsidiary.
Section 6.05. Sale and Leaseback. Sell, transfer or otherwise dispose of
any real or personal property to any Person or entity and thereafter directly or
indirectly lease back the same or similar property or permit any Subsidiary to
do so.
Section 6.06. Dividends. Declare or pay any dividends; or purchase,
redeem, retire or otherwise acquire for value any of its capital stock now or
hereafter outstanding; or make any distribution of assets to its stockholders as
such whether in cash, assets or obligations of Borrower; or allocate or
otherwise set apart any sum for the payment of any dividend or distribution on,
or for the purchase, redemption or retirement of, any shares of its capital
stock; or make any other distribution by reduction of capital or otherwise in
respect of any shares of its capital stock, except that any Subsidiary may
declare dividends to its shareholders, including Borrower, in amounts necessary
to pay the indebtedness of Borrower to Bank and Borrower's reasonable operating
expenses; provided, however, that if payments of principal and interest are
current, any Subsidiary shall be permitted to pay dividends to stockholders not
exceeding forty percent (40%) of net earnings.
Section 6.07. Sale of Assets. Sell, lease, assign, transfer or otherwise
dispose of, or permit any Subsidiary to sell, lease, assign, transfer or
otherwise dispose of, any of its now owned or hereafter acquired assets except
for the sale or other disposition of assets no longer used or useful in the
conduct of its business; provided, however, any Subsidiary other than First
National Bank of Pontotoc or any Subsidiary of a Subsidiary may be sold in the
ordinary course of business for a fair value.
Section 6.08. Stock of Subsidiary, Etc. Sell or otherwise dispose of any
shares of capital stock of any Subsidiary.
14
<PAGE>
Section 6.09. Management. Change or permit to be changed the management
position of Buddy R. Montgomery as President of First National Bank of Pontotoc.
ARTICLE VII
-----------
FINANCIAL COVENANTS
-------------------
So long as the Note shall remain unpaid:
Section 7.01. Minimum Primary Capital. Borrower will cause all
Subsidiaries each to maintain at all times their capital ratio in the "well
capitalized" category as defined by the Office of the Comptroller.
Section 7.02. Loan Losses. Borrower agrees that the loan loss reserve
shall at all times be in compliance with any requirements established by any of
its Subsidiaries' regulatory authorities.
Section 7.03. Classified Assets. Borrower will cause each Subsidiary not
to allow the ratio of classified assets to gross capital to exceed such ratios
required to be maintained by any of its Subsidiaries' regulatory authorities.
Section 7.04. Nonperforming Assets. Borrower will cause the loan loss
reserve of any Subsidiary at all times to be not less than the percent of the
nonperforming assets of such Subsidiary allowed by the Subsidiary's appropriate
regulatory authority. Nonperforming assets shall exclude those assets that are
well secured and in the process of collection pursuant to FFIEC Call Report
Instructions.
Section 7.05. Identified Losses. Borrower will not permit any Subsidiary
to have loans in its loan portfolio that would be classified as "losses" in
excess of such Subsidiary's loan loss reserve.
ARTICLE VIII
------------
EVENTS OF DEFAULT
-----------------
Section 8.01. Events of Default. If any of the following events ("Events
of Default") shall occur:
(1) Borrower should fail to pay the principal of, or interest on, the Note,
as and when due and payable, and such failure shall continue for ten (10) days
after written notice thereof from Bank;
(2) Any representation or warranty made or deemed made by Borrower in this
Agreement or the Security Agreement or which is contained in any certificate,
document, opinion or financial or other statement furnished at any time under or
in connection with any Loan Document shall prove to have been incorrect in any
material respect on or as of the date made or deemed made, and such
representation or warranty shall continue to be incorrect for thirty (30) days
after written notice thereof from Bank;
15
<PAGE>
(3) Borrower shall fail to perform or observe any term, covenant or
agreement contained in any Loan Document (other than payment of principal or
interest pursuant to the Note) to which it is a party on its part to be
performed or observed and such failure shall continue for thirty (30) days after
written notice thereof from Bank;
(4) Borrower or any Subsidiary shall (a) fail to pay any indebtedness for
borrowed money (other than the Note) of Borrower or such Subsidiary, as the case
may be, or any interest or premium thereon, when due (whether by scheduled
maturity, required prepayment, acceleration, demand or otherwise), or (b) fail
to perform or observe any term, covenant or condition on its part to be
performed or observed under any agreement or instrument relating to any such
indebtedness, when required to be performed or observed, if the effect of such
failure to perform or observe is to accelerate, or to permit the acceleration
after the giving of notice or passage of time, or both, of the maturity of such
indebtedness shall be declared to be due and payable, or required to be prepaid
(other than by a regularly scheduled required prepayment), prior to the stated
maturity thereof;
(5) Borrower or any Subsidiary (a) shall generally not, or shall be unable
to, or shall admit in writing its inability to pay its debts as such debts
become due; or (b) shall make an assignment for the benefit of creditors,
petition or apply to any tribunal for the appointment of a custodian, receiver
or trustee for it or a substantial part of its assets; or (c) shall commence any
proceeding under any bankruptcy, reorganization, arrangements, readjustment of
debt, dissolution or liquidation law or statute of any jurisdiction, whether now
or hereafter in effect; or (d) shall have any such petition or application filed
or any such proceeding commenced against it in which an order for relief is
entered or adjudication or appointment is made and which remains undismissed for
a period of thirty (30) days or more; or (e) by any act or omission shall
indicate its consent to, approval of, or acquiescence in any such petition,
application or proceeding or order for relief for the appointment of a
custodian, receiver of a custodian, receiver or trustee for all or any
substantial part of its properties; or (f) shall suffer any such custodianship,
receivership or trusteeship to continue undischarged for a period of thirty (30)
days or more;
(6) One or more judgments, decrees or orders for the payment of money in
excess of Twenty Five Thousand Dollars ($25,000.00) in the aggregate shall be
rendered against Borrower or any Subsidiary and such judgments, decrees or
orders shall continue unsatisfied and in effect for a period of thirty (30)
consecutive days without being vacated, discharged, satisfied or stayed or
bonded pending appeal;
(7) The Security Agreement shall at any time after its execution and
delivery and for any reason cease (a) except as a result of the actions of Bank,
to create a valid and perfected first priority security interest in and to the
property purported to be subject to such Security Agreement; or (b) to be in
full force and effect or shall be declared null and void, or the validity or
enforceability thereof shall be contested by Borrower, or Borrower shall deny it
has any further liability or obligation under the Security Agreement, or
Borrower shall fail to perform any of its obligations under the Security
Agreement;
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(8) Borrower or any Subsidiary shall be found guilty of an unsafe or
unsound banking practice by any regulatory agency having jurisdiction over the
Borrower or any Subsidiary; or
(9) Borrower or any Subsidiary shall fail to observe any term, covenant or
agreement contained in any loan to such entity by Bank, or otherwise be in
default of any agreement with Bank;
then, and in such event, Bank may, by notice to Borrower, declare the Note, all
interest thereon, and all other amounts payable under this Agreement to be
forthwith due and payable, whereupon the Note, all such interest, and all such
amounts shall become and be forthwith due and payable, without presentment,
demand, protest or further notice of any kind, all of which are hereby expressly
waived by Borrower.
ARTICLE IX
----------
MISCELLANEOUS
-------------
Section 9.01. Amendments, Etc. No amendment, modification, termination or
waiver of any provision of any Loan Document to which Borrower is a party, nor
consent to any departure by Borrower from any Loan Document to which it is a
party, shall in any event be effective unless the same shall be in writing and
signed by Bank, and then such waiver or consent shall be effective only in the
specific instance and for the specific purpose for which is given.
Section 9.02. Notices, Etc. All notices and other communications provided
for under this Agreement and under the other Loan Documents to which Borrower is
a party shall be in writing (including faxed communication) and mailed or faxed
or delivered, if to Borrower, at its address at 19 South Main Street, P. O. Box
29, Pontotoc, Mississippi 38863-0029, Attention: Buddy R. Montgomery, and if to
Bank, at its address at One Commerce Square, Memphis, Tennessee 38150,
Attention: Correspondent Banking Division; or, as to each in a written notice to
the other party complying as to delivery with the terms of this Section 9.02.
All such notices and communications shall, when mailed or faxed, be effective
when deposited in the mails or received by fax, respectively, addressed as
aforesaid, except that notices to Bank pursuant to the provision of Article II
shall not be effective until received by Bank.
Section 9.03. No Waiver; Remedies. No failure on the part of Bank to
exercise, and no delay in exercising, any right, power or remedy under any Loan
Documents shall operate as a waiver thereof; nor shall any single or partial
exercise of any right under any Loan Documents preclude any other or further
exercise thereof or the exercise of any other right. No waiver by Bank shall be
construed as a waiver of a subsequent similar right, power or remedy. The
remedies provided in the Loan Documents are cumulative and not exclusive of any
remedies provided by law.
Section 9.04. Successors and Assigns. This Agreement shall be binding
upon and inure to the benefit of Borrower and Bank and their respective
successors and assigns, except that Borrower may not assign or transfer any of
its rights under any Loan Document to which Borrower is a party
17
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without the prior written consent of Bank.
Section 9.05. Costs and Expenses. Borrower agrees to pay on demand all
costs and expenses incurred in connection with the preparation, execution,
delivery, filing, recording, and administration of any of the Loan Documents,
including, without limitation, the reasonable fees and out-of-pocket expenses of
counsel for Bank, and local counsel who may be retained by said counsel, with
respect thereto and with respect to advising Bank as to its rights and
responsibilities under any of the Loan Documents, and all costs and expenses, if
any, in connection with the enforcement of any of the Loan Documents. In
addition, Borrower shall pay any and all stamp and other taxes and fees payable
or determined to be payable in connection with the execution, delivery, filing
and recording of any of the Loan Documents and any other documents to be
delivered under any such Loan Documents, and agrees to save Bank harmless from
and against any and all liabilities with respect to or resulting from any delay
in paying or omission to pay such taxes and fees.
Section 9.06. Right of Setoff. Upon the occurrence and during the
continuance of any Event of Default, Bank is hereby authorized at any time and
from time to time, without notice to Borrower (any such notice being expressly
waived by Borrower) to set off and apply any and all deposits (general or
special, time or demand, provisional or final) at any time held and other
indebtedness at any time owing by Bank to or for the credit or the account of
Borrower against any and all of the obligations of Borrower now or hereafter
existing under this Agreement or the Note or any other Loan Document,
irrespective of whether or not Bank shall have made any demand under this
Agreement or the Note or such other Loan Document and although such obligations
may be unmatured. Bank agrees promptly to notify Borrower after any such setoff
and application, provided that the failure to give such notice shall not affect
the validity of such setoff and application. The rights of Bank under this
Section 9.06 are in addition to other rights and remedies (including, without
limitation, other rights of setoff) which Bank may have.
Section 9.07. Governing Law. This Agreement and the Note shall be
governed by, and construed in accordance with, the laws of the State of
Tennessee, except with respect to interest which shall be governed by and
construed in accordance with applicable Federal laws in effect from time to
time.
Section 9.08. Severability of Provisions. Any provision of any Loan
Document which is prohibited or unenforceable in any jurisdiction shall, as to
such jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions of such Loan
Document or affecting the validity or enforceability of such provision in any
other jurisdiction.
Section 9.09. Headings. Article and Section headings in the Loan
Documents are included in such Loan Documents for the convenience of reference
only and shall not constitute a part of the applicable Loan Documents for any
other purpose.
Section 9.10. Maximum Interest Rate. No provision of this Agreement or of
the Note shall require the payment or permit the collection of interest in
excess of the maximum rate permitted by
18
<PAGE>
applicable law. If any excess of interest in such respect is hereby provided
for, or shall be adjudicated to be so provided, in the Note or otherwise in
connection with this loan transaction, the provisions of this Section 9.10 shall
govern and prevail, and neither Borrower nor the successors or assigns of
Borrower shall be obligated to pay the excess amount of such interest, or any
other excess sum paid for the use, forbearance or detention of sums loaned
pursuant hereto. If for any reason interest in excess of the maximum rate
interest permitted or otherwise should arise, any such excess shall be applied
as a payment and reduction of the principal of the Loan evidenced by the Note,
and if the principal amount thereof has been paid in full, any remaining excess
shall forthwith be paid to Borrower. In the event of conflict between the terms
of this Agreement and the Note, the terms of the Note shall control.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers thereunto duly authorized, as of the date
first above written.
PONTOTOC BANCSHARES CORP.,
Pontotoc, Mississippi,
a Mississippi corporation
By:________________________________
Title:_____________________________
ATTEST:
___________________________
Secretary
NATIONAL BANK OF COMMERCE
By:________________________________
Title:_____________________________
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[LETTERHEAD FOR NAIL MCKINNEY PROFESSIONAL ASSOCIATION APPEARS HERE]
EXHIBIT 23.2
Pontotoc Bancshares Corp.
P.O. Box 29
Pontotoc, Mississippi 38863
April 23, 1996
We consent to the use of the audited financial statements for the year ended
December 31, 1996, the compiled financial statements for the year ended December
31, 1995, and the pro forma financial statements for the year ended December 31,
1996 together with our reports thereon dated April 9, 1997 in the registration
statement on Form S-4 of Pontotoc BancShares Corp.
Very truly yours,
/s/ JAMES RAY DAVIS, JR.
James Ray Davis, Jr.
Certified Public Accountant
<PAGE>
[LETTERHEAD FOR CHAFFE & ASSOCIATES, INC. INVESTMENT BANKERS APPEARS HERE]
EXHIBIT 23.3
CONSENT OF CHAFFE & ASSOCIATES, INC.
We hereby consent to the use of our opinion dated January 21, 1997, and
to all references to our firm included in the Registration Statement of Form S-4
of Pontotoc BancShares Corp. In giving such consent, we do not thereby admit
that we come within the category of persons whose consent is required under
Section 7 of the Securities Act of 1933 or the rules and regulations of the
Securities and Exchange Commission thereunder.
CHAFFE & ASSOCIATES, INC.
By: /s/ SHERWOOD G. BRIGGS
------------------------------
Sherwood G. Briggs
Vice President
New Orleans, Louisiana
April 24, 1997
220 CAMP STREET . NEW ORLEANS, LOUISIANA 70130. (504)524-1801 . FAX (504)
524-7194
<PAGE>
PROXY EXHIBIT 99.1
FIRST NATIONAL BANK OF PONTOTOC
____________, ____________, 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 ____________, ____________, 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 (other than shares of common stock of the Bank already owned by the
Company) 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.
<PAGE>
EXHIBIT 99.2
CHAFFE & ASSOCIATES, INC.
INVESTMENT BANKERS
January 21, 1997
The Board of Directors
First National Bank
19 South Main Street
P. O. Box 29
Pontotoc, Mississippi 38863-0029
Gentlemen and Mrs. Berryhill:
We understand that First National Bank (the "Bank") is evaluating an offer
by Union Planters Corporation ("Union Planters"), Memphis, Tennessee, to
purchase up to 100% of the outstanding Bank common stock for $875.00 per share
(the "Union Planters Offer"). The terms and conditions of the Union Planters
Offer are more fully described in the Union Planters letter to the Board of
Directors of the Bank dated December 12, 1996.
You have asked our opinion as to whether the Union Planters Offer is fair,
from a financial point of view, to the stockholders of the Bank.
Chaffe & Associates, Inc. ("Chaffe"), through its experience in the
securities industry, investment analysis and appraisal, and in related corporate
finance and investment banking activities, including mergers and acquisitions,
corporate recapitalization, and valuations for estate, corporate and other
purposes states that it is competent to provide an opinion as to the fairness of
the Union Planters Offer contemplated herein. Specifically, Chaffe has
extensive experience in the analysis and valuation of bank and bank holding
company securities in connection with acquisitions and mergers. Neither Chaffe
nor any of its officers or employees has an interest in the common stocks of the
Bank or of Union Planters. The fee received for the preparation and delivery of
this opinion is not dependent or contingent upon the consummation of any
transaction or the occurrence of any other event.
In connection with rendering its opinion, Chaffe, among other things: (i)
reviewed the Bank's Proxy Statement regarding the formation of a bank holding
company for the Bank, in the form that it was filed with the Securities and
Exchange Commission on January 8, 1997; (ii) reviewed and analyzed certain
publicly-available financial statements and other information of the Bank; (iii)
reviewed and analyzed certain internal financial statements and other financial
and operating data concerning the Bank, prepared by the management of the Bank,
including financial projections; (iv) discussed the past and current operations
and financial condition, and the prospects of the Bank with senior executives of
the Bank; (v) reviewed the historical prices and trading volumes of the shares
of the Bank common stock; (vi) compared the financial performance of the Bank,
and the prices and trading activity of the Bank common stock, with that of
certain other comparable publicly-traded companies and their securities; (vii)
reviewed the financial terms of business combinations in the commercial banking
industry specifically and other industries generally, which Chaffe deemed
generally comparable to the transaction proposed by Union Planters; (viii)
considered a number of valuation methodologies, including among others, those
that incorporate book
<PAGE>
CHAFFE & ASSOCIATES, INC.
The Board of Directors January 21, 1997
First National Bank of Pontotoc Page 2
value, deposit base premium and capitalization of earnings, and (ix) performed
such other studies and analyses as we deemed appropriate to this opinion.
In its review, Chaffe relied, without independent verification, upon the
accuracy and completeness of the historical and projected financial information,
and all other information reviewed by it for purposes of its opinion. Chaffe
did not make or obtain an independent review of the Bank's assets or
liabilities, nor was Chaffe furnished with any such appraisals. Chaffe relied
solely on the Bank for information as to the adequacy of its loan loss reserves
and values of other real estate owned. With respect to the Bank's projected
financial results, Chaffe has assumed that they were reasonably prepared on
bases reflecting the best currently available estimates and judgements of the
management of the Bank of future financial performances of the Bank. This
opinion was necessarily based upon market, economic and other conditions as they
existed on, and could be evaluated as of, the date hereof. Chaffe expresses no
opinion on the tax consequences of the Union Planters Offer or the effect of any
tax consequences on the value that might be received by the shareholders of the
Bank common stock.
Based upon and subject to the foregoing and based upon such other matters
as we considered relevant, it is our opinion on the date hereof that the Union
Planters Offer is not fair, from a financial point of view, to the holders of
the Bank common stock.
Very truly yours,
CHAFFE & ASSOCIATES, INC.
/s/ CHAFFE & ASSOCIATES, INC.
_____________________________
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