<PAGE> 1
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [x]
Filed by the Party other than the Registrant
Check the appropriate box:
[x] Preliminary Proxy Statement [ ] Confidential, for Use of the
Definitive Proxy Statement Commission Only (as permitted
Definitive Additional Materials by Rule 14a-6(e)(2))
Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
GREENE COUNTY BANCSHARES, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[x] No fee required.
Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
1. Title of each class of securities to which transaction applies:
---------------------------------------------------------------
2. Aggregate number of securities to which transaction applies:
---------------------------------------------------------------
3. Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (set forth the
amount on which the filing fee is calculated and state how it
was determined):
---------------------------------------------------------------
4. Proposed maximum aggregate value of transaction:
---------------------------------------------------------------
5. Total fee Paid:
---------------------------------------------------------------
Fee paid previously with preliminary materials:
Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
1. Amount previously paid:
---------------------------------------------
2. Form, Schedule or Registration Statement No.:
---------------------------------------------
3. Filing Party:
---------------------------------------------
4. Date Filed:
---------------------------------------------
<PAGE> 2
[LETTERHEAD OF GREENE COUNTY BANCSHARES GOES HERE]
April 13, 1998
Dear Shareholder:
We invite you to attend the Annual Meeting of Shareholders (the
"Annual Meeting") of Greene County Bancshares, Inc. (the "Company") to be held
at the General Morgan Inn, 111 North Main Street, Greeneville, Tennessee, on
Wednesday, May 13, 1998 at 11:00 a.m., local time.
The Annual Meeting has been called for the election of directors and
for consideration of adoption of various amendments to the Company's Amended
and Restated Charter as set forth herein. Enclosed is a proxy statement, a
proxy card and the Company's Annual Report to Shareholders for the 1997 fiscal
year. Directors and officers of the Company as well as representatives of
Coopers & Lybrand LLP, the Company's independent auditors for the 1997 fiscal
year, will be present to respond to any questions shareholders may have.
YOUR VOTE IS IMPORTANT REGARDLESS OF THE NUMBER OF SHARES YOU OWN. On
behalf of the Board of Directors, we urge you to sign, date and return the
enclosed proxy as soon as possible, even if you currently plan to attend the
Annual Meeting. This will not prevent you from voting in person, but will
assure that your vote is counted if you are unable to attend the Annual
Meeting.
Thank you for your cooperation and continuing support.
Sincerely,
[INSERT SIGNATURE HERE] [INSERT SIGNATURE HERE]
Terry Leonard R. Stan Puckett
Chairman of the Board President and
Chief Executive Officer
2
<PAGE> 3
GREENE COUNTY BANCSHARES, INC.
100 NORTH MAIN STREET
GREENEVILLE, TENNESSEE 37743
(423) 639-5111
- --------------------------------------------------------------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON MAY 13, 1998
- --------------------------------------------------------------------------------
NOTICE IS HEREBY GIVEN that the 1998 Annual Meeting of Shareholders
(the "Annual Meeting") of Greene County Bancshares, Inc. (the "Company") will
be held on Wednesday, May 13, 1998 at 11:00 a.m., local time, at the General
Morgan Inn, 111 North Main Street, Greeneville, Tennessee.
A Proxy Card and a Proxy Statement for the Annual Meeting are
enclosed.
The Annual Meeting is for the purpose of considering and acting upon
the following matters:
(1) to elect twelve directors to serve until the next Annual
Meeting of Shareholders and until their successors shall have
been duly elected and qualified, unless the Classified Board
Proposal is approved, in which case to elect such directors,
after an interim arrangement, to serve for staggered
three-year terms;
(2) to consider and vote upon a proposed amendment (the
"Classified Board Proposal") to the Company's Restated and
Amended Charter to provide for a classified Board of Directors
whose members will serve staggered terms;
(3) to consider and vote upon a proposed amendment to the
Company's Restated and Amended Charter to set forth the
allowable range of the number of directors;
(4) to consider and vote upon a proposed amendment to the
Company's Restated and Amended Charter to provide for the
removal of directors only for cause and only upon the
affirmative vote of at least two-thirds (66%) of the
outstanding stock;
(5) to consider and vote upon a proposed amendment to the
Company's Restated and Amended Charter to prohibit cumulative
voting;
(6) to consider and vote upon a proposed amendment to the
Company's Restated and Amended Charter to permit only the
Board of Directors to call a special meeting of stockholders;
(7) to consider and vote upon a proposed amendment to the
Company's Restated and Amended Charter to increase the number
of authorized shares to 5,000,000 shares of common stock;
(8) to consider and vote upon a proposed amendment to the
Company's Restated and Amended Charter to require advance
notice for nominations of directors or proposal of new
business by stockholders;
(9) to consider and vote upon a proposed amendment to the
Company's Restated and Amended Charter to eliminate voting of
excess shares acquired by a single stockholder without prior
approval;
(10) to adjourn the Annual Meeting if there are an insufficient
number of votes present in person or by proxy to approve any
of the proposed amendments to the Company's Restated and
Amended Charter; and
(11) to transact such other business as may properly come before
the Annual Meeting or any adjournments thereof.
NOTE: The Board of Directors is not aware of any other business to
come before the Annual Meeting.
Any action may be taken on any one of the foregoing proposals at the
Annual Meeting on the date specified above or on any date or dates to which, by
original or later adjournments, the Annual Meeting may be
1
<PAGE> 4
adjourned. Shareholders of record at the close of business on March 27, 1998
will be entitled to vote at the Annual Meeting and any adjournments thereof.
You are requested to fill in and sign the enclosed form of proxy which
is solicited by the Board of Directors and to mail it promptly in the enclosed
envelope. The proxy will not be used if you attend and choose to vote in
person at the Annual Meeting.
BY ORDER OF THE BOARD OF DIRECTORS
[INSERT SIGNATURE HERE]
Davis Stroud
Secretary
Greeneville, Tennessee
April 13, 1998
- --------------------------------------------------------------------------------
IT IS IMPORTANT THAT PROXIES BE RETURNED PROMPTLY. THEREFORE, WHETHER OR NOT
YOU PLAN TO BE PRESENT IN PERSON AT THE ANNUAL MEETING, PLEASE SIGN, DATE, AND
COMPLETE THE ENCLOSED PROXY AND RETURN IT IN THE ENCLOSED ENVELOPE. NO POSTAGE
IS REQUIRED IF MAILED IN THE UNITED STATES.
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2
<PAGE> 5
- --------------------------------------------------------------------------------
PROXY STATEMENT
OF
GREENE COUNTY BANCSHARES, INC.
100 NORTH MAIN STREET
GREENEVILLE, TENNESSEE 37743
(423) 639-5111
--------------------
ANNUAL MEETING OF SHAREHOLDERS
MAY 13, 1998
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GENERAL
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This Proxy Statement is furnished to shareholders of Greene County
Bancshares, Inc. (the "Company") in connection with the solicitation of proxies
by the Company's Board of Directors to be used at the 1998 Annual Meeting of
Shareholders of the Company (the "Annual Meeting"), to be held on Wednesday,
May 13, 1998 at 11:00 a.m., local time, at the General Morgan Inn, 111 North
Main Street, Greeneville, Tennessee. The accompanying Notice of Annual Meeting
and form of proxy and this Proxy Statement are being first mailed to
shareholders on or about April 13, 1998.
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VOTING AND REVOCABILITY OF PROXIES
- --------------------------------------------------------------------------------
If the enclosed form of proxy is properly executed and returned to the
Company in time to be voted at the Annual Meeting, the shares represented
thereby will be voted in accordance with the instructions marked thereon.
EXECUTED BUT UNMARKED PROXIES WILL BE VOTED FOR ELECTION OF TWELVE NOMINEES AS
DIRECTORS OF THE COMPANY AND FOR EACH OF THE REMAINING PROPOSALS. The proxy
confers discretionary authority on the persons named therein to vote with
respect to the election of any person or a director where the nominee is unable
to serve or for good cause will not serve, and with respect to matters incident
to the conduct of the Annual Meeting. If any other matters are properly
brought before the Annual Meeting, the persons named in the proxy will vote the
shares represented by such proxies on such matters as determined by a majority
of the Board of Directors. Except for procedural matters incident to the
conduct of the Annual Meeting, the Company does not know of any other matters
that are to come before the Annual Meeting. Proxies marked as abstentions and
shares held in street name which have been designated by brokers on proxies as
not voted will not be counted as votes cast. Such proxies will be counted for
purposes of determining a quorum at the Annual Meeting.
Shareholders who execute proxies may revoke them at any time prior to
their exercise by filing with the Secretary of the Company a written notice of
revocation, by delivering to the Company a duly executed proxy bearing a later
date, or by attending the Annual Meeting and voting in person. The mere
presence of a shareholder at the Annual Meeting will not, by itself,
automatically revoke such shareholder's proxy.
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VOTING SECURITIES
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The securities which can be voted at the Annual Meeting consist of
shares of common stock, par value $10.00 per share (the "Common Stock"), of the
Company. Each share entitles its owner to one vote on all matters. The close
of business on March 27, 1998 (the "Record Date") has been fixed by the Board
of Directors as the Record Date for determination of shareholders entitled to
vote at the Annual Meeting. The number of shares of Common Stock outstanding
as of the Record Date was 1,354,572.
1
<PAGE> 6
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
- --------------------------------------------------------------------------------
Persons and groups beneficially owning more than 5% of the Common
Stock are required under federal securities laws to file certain reports with
the Securities and Exchange Commission ("SEC") detailing such ownership. The
following table sets forth, as of the Record Date, certain information as to
the Common Stock beneficially owned by any person or group of persons who is
known to the Company to be the beneficial owners of more than 5% of the Common
Stock. Other than as disclosed below, management knows of no person who
beneficially owned more than 5% of the Common Stock at the Record Date.
<TABLE>
<CAPTION>
Name and Address of Amount and Nature of Percent of Common
Beneficial Owner Beneficial Ownership (a) Stock Outstanding
----------------------------------------------------------------------------
<S> <C> <C>
Phil M. Bachman
1330 E. Allen Bridge Road 135,474 (b) 10.00%
Greeneville, Tennessee 37743
</TABLE>
- ----------------
(a) For purposes of this table, an individual is considered to
"beneficially own" any share of Common Stock which he or she, directly
or indirectly, through any contract, arrangement, understanding,
relationship, or otherwise, has or shares: (1) voting power, which
includes the power to vote, or to direct the voting of, such security;
and/or (2) investment power, which includes the power to dispose, or
to direct the disposition of, such security. In addition, an
individual is deemed to be the beneficial owner of any share of Common
Stock of which he has the right to acquire voting or investment power
within 60 days of the Record Date.
(b) Includes 4,437 shares of Common Stock held directly or indirectly by
Mr. Bachman's wife as to which Mr. Bachman disclaims beneficial
ownership. Had such shares not been included, Mr. Bachman's ownership
percentage would have been 9.67%.
The following table sets forth, as of the Record Date, certain
information known to the Company as to Common Stock beneficially owned by each
director and nominee for director of the Company and by all directors and
executive officers of the Company as a group.
<TABLE>
<CAPTION>
Amount and Nature of Percent of Common
Name and Position Beneficial Ownership (a)(b) Stock Outstanding
-----------------------------------------------------------------------------------------------
<S> <C> <C>
Terry Leonard, Chairman of the Board 10,287 *
R. Stan Puckett, President, Chief
Executive Officer and Director 16,500(c) 1.21
Davis Stroud, Executive Vice President
and Secretary 2,590(d) *
Phil M. Bachman, Director 135,474(e) 10.0
Harrison Lamons, Director 6,000 *
Ralph T. Brown, Director 17,760 1.31
James A. Emory, Director 12,720 *
W.T. Daniels, Director 1,500 *
Charles S. Brooks, Director 90 *
J.W. Douthat, Director 5,259 *
Helen Horner, Director 57,582 4.25
Jerald K. Jaynes, Director 1,650 *
All directors and executive officers as
a group (13 persons) 267,570 19.68
</TABLE>
(Footnotes on following page)
2
<PAGE> 7
- ----------------
* Less than 1% of the outstanding Common Stock.
(a) For the definition of "beneficial ownership," see Note (a) to the
above table.
(b) Includes shares owned directly by directors and executive officers of
the Company as well as shares held by their spouses and children,
trusts of which certain directors are trustees and corporations in
which certain directors own a controlling interest. Includes shares
of Common Stock subject to outstanding options which are exercisable
within 60 days of the Record Date.
(c) Includes options to acquire 3,600 shares of Common Stock which Mr.
Puckett has the right to exercise at any time at an exercise price
equal to 150% of the book value of the Common Stock at the date of
grant (a weighted average price of approximately $53.07 per share).
(d) Includes options to acquire 1,428 shares of Common Stock which Mr.
Stroud has the right to exercise at any time at an exercise price
equal to the estimated fair market value of the Common Stock at date
of grant with a weighted average exercise price of approximately
$54.10.
(e) Includes 4,437 shares of Common Stock held directly or indirectly by
Mr. Bachman's wife as to which Mr. Bachman disclaims beneficial
ownership. Had such shares not been included, Mr. Bachman's ownership
percentage would have been 9.67.
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PROPOSAL 1 -- ELECTION OF DIRECTORS
- --------------------------------------------------------------------------------
The Company's Board of Directors is currently composed of thirteen
members, twelve of whom are listed in the table below, and Patrick A. Norris,
who will retire at the Annual Meeting. The Board of Directors has unanimously
approved a reduction in the size of the Board of Directors from thirteen
members to twelve members effective upon the retirement of Mr. Norris. If the
Classified Board Proposal, set forth as Proposal 2 below, is approved, the
directors will be organized into three classes and will serve for the terms set
forth next to their names or until their successors have been duly qualified
and elected. Thereafter, directors will be elected to serve for three-year
terms and until their successors are elected and qualified. If the Classified
Board Proposal is not approved, each director will serve until the next annual
meeting of shareholders or until his successor has been duly elected and
qualified. Unless otherwise instructed, proxy holders will vote the proxies
received by them for the election of the nominees named below. Under Tennessee
law, directors are elected by a plurality of the votes cast at an election.
All of the nominees for director are currently directors of the Company.
<TABLE>
<CAPTION>
Nominees Expiration of Initial Term*
-------- ---------------------------
<S> <C>
Class I:
Harrison Lamons 1999
J.W. Douthat 1999
Helen Horner 1999
Jerald Jaynes 1999
Class II:
W. T. Daniels 2000
R. Stan Puckett 2000
Davis Stroud 2000
Charles S. Brooks 2000
Class III:
Philip M. Bachman 2001
Terry Leonard 2001
Ralph T. Brown 2001
James A. Emory 2001
</TABLE>
- ----------------
* Assuming approval of the Classified Board Proposal.
It is the intention of the persons named in the proxy to vote the
shares represented by each properly executed proxy for election as directors of
each of the nominees listed above, unless otherwise directed by the
shareholder. The Board of Directors believes that each of such nominees will
stand for election and will serve if elected as a director. However, if any
3
<PAGE> 8
person nominated by the Board of Directors fails to stand for election or is
unable to accept election, the proxies will be voted for the election of such
other person or persons as the Board of Directors may recommend. At this time,
the Board knows of no reason why any nominee might be unable to serve.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" ELECTION AS DIRECTORS
OF ALL THE NOMINEES LISTED ABOVE.
The following table sets forth certain information with respect to
each of the Company's current directors. Each of the Company's directors, with
the exception of Mr. Norris, also currently serves as a director of Greene
County Bank ("GCB"), a wholly-owned subsidiary of the Company. Mr. Norris will
retire from the Board of Directors effective upon the date of the Annual
Meeting. There are no arrangements or understandings between the Company and
any director pursuant to which such person has been selected as a director or
nominee for director of the Company, and no director or nominee is related to
any other director, nominee or executive officer by blood, marriage or
adoption.
<TABLE>
<CAPTION>
Name Age(a) Director Since (b) Previous Five-Years Business Experience
--------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Phil M. Bachman 60 1968 President, Bachman-Bernard Motors (automobile
dealer)
Charles S. Brooks 59 1990 Chairman of the Board, McInturff, Milligan &
Brooks (insurance agency)
Ralph T. Brown 65 1979 Dentist; retired 1996
W.T. Daniels 53 1987 Property management
J.W. Douthat 67 1990 President, Tri State Tractor & Turf
James A. Emory 64 1983 President, J.A.E. Foods, Inc. (restaurant
management)
Helen Horner 69 1992 Director of Tourism, Greene County
Partnership
Jerald K. Jaynes 60 1992 Retired; former President & CEO, Unaka Co.
Inc. (manufacturing)
Harrison Lamons 69 1971 President, Lamons Sales (manufacturers'
representative)
Terry Leonard 59 1975 Owner/Operator, Leonard & Associates
(manufacturing)
Patrick A. Norris 70 1992 Retired President, Mountain Life Insurance
R. Stan Puckett 41 1989 President & Chief Executive Officer of the
Company and GCB
Davis Stroud 64 1989 Executive Vice President and Secretary of the
Company and GCB
</TABLE>
- ----------------
(a) As of December 31, 1997.
(b) Indicates year that director first served as a director of either the
Company or GCB.
- --------------------------------------------------------------------------------
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
- --------------------------------------------------------------------------------
The Company conducts its business through meetings of the Board of
Directors. There are no standing committees of the Board of Directors of the
Company. During the year ended December 31, 1997, the Board of Directors held
18 meetings. Each member of the Board of Directors attended 75% or more of the
aggregate of (a) the total number of meetings of the boards of directors and
(b) the total number of meetings held by all committees on which they served.
The Board of Directors of the Company acts as a nominating committee
for selecting management's nominees for election as directors. Nominations may
also be made by shareholders, provided such nominations are made in writing and
submitted to the Secretary or the President of the Company at any time prior to
the date of the Annual Meeting. No further nominations shall be accepted
unless the shareholders, by majority vote, determine that additional
nominations are to be accepted, in which event further nominations as so
determined by the shareholders may be made at the Annual Meeting. During 1997,
the Board of Directors met once in its capacity as a nominating committee.
The Audit Committee of GCB also serves as the audit committee for the
Company. The Audit Committee of GCB consists of Messrs. Leonard (Chairman),
Brown, Lamons and Jaynes. For 1998, Mr. Jaynes will serve as Chairman of the
4
<PAGE> 9
Audit Committee. This committee meets quarterly to (1) monitor the accounting
and financial reporting practices of the Company, (2) determine whether the
Company has adequate administrative, operating and internal accounting
controls, and (3) review the Company's financial information. This committee
met four times during 1997 in its capacity as the audit committee for the
Company.
The Company's Compensation Committee, which consists of Messrs.
Leonard, Brown, Bachman, Brooks, Daniels and Douthat and Ms. Horner, meets
periodically to evaluate the compensation and fringe benefits of the directors,
officers and employees and recommend changes to the Board of Directors. The
Compensation Committee met twice during 1997.
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DIRECTORS' COMPENSATION
- --------------------------------------------------------------------------------
Except for Mr. Norris, directors of the Company are also directors of
GCB and are compensated by GCB. Mr. Norris is compensated by the Company. In
each case, during 1997, directors received $400 for each meeting held,
including special and telephonic meetings, provided that a member was not paid
for more than two meetings not attended. Each director also received an annual
retainer fee of $5,200, paid in equal quarterly amounts. Members of the
Executive Committee of GCB's Board of Directors received $200 for each weekly
meeting of the Committee and also received an annual retainer of $1,500.
Members of GCB's Audit Committee received $200 for each quarterly meeting.
Beginning in 1998, the annual retainer paid to GCB's directors was
increased to $6,000. In addition, the Company established a $400 fee for each
quarterly meeting of the Company's Board of Directors. Fees paid to members of
the Executive Committee of GCB's Board of Directors were changed to $435 per
meeting and the frequency of the meetings was changed from weekly to twice a
month, with the annual retainer remaining unchanged at $1,500.
Certain directors have elected to defer receipt of a portion of their
fees by entering into deferred fee agreements with an unrelated insurance
company.
- --------------------------------------------------------------------------------
EXECUTIVE COMPENSATION AND OTHER BENEFITS
- --------------------------------------------------------------------------------
SUMMARY COMPENSATION TABLE. The following table sets forth cash and
noncash compensation for each of the last three fiscal years awarded to or
earned by the Chief Executive Officer and certain named executive officers of
the Company.
<TABLE>
<CAPTION>
Long-Term Compensation
---------------------------
Annual Compensation Awards Payouts
-------------------------------------- --------------------------- -------
Restricted Securities
Name and Principal Other Annual Stock Underlying LTIP All Other
Position(a) Year Salary Bonus Compensation(b) Award(s) Options/SARs(#) Payouts Compensation (c)
------------------ ---- ------ ----- --------------- ---------- --------------- ------- ----------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
R. Stan Puckett 1997 $168,000 $47,000 -- -- 1,800(d)(g) -- $35,650
President and 1996 160,000 52,300 281,804(f) -- 1,800(d)(g) -- 33,275
Chief Executive 1995 160,000 68,266 -- -- 1,800(d)(g) -- 32,085
Officer of the
Company and
GCB
Davis Stroud 1997 $128,100 $23,700 -- -- 611(e)(g) -- $33,264
Executive Vice 1996 122,000 16,467 -- -- 618(e)(g) -- 32,843
President, 1995 116,000 30,440 -- -- 612(e)(g) -- 29,920
Secretary of
the Company
and GCB
</TABLE>
(Footnotes on following page)
5
<PAGE> 10
(a) No other executive officer earned in excess of $100,000 in salary and
bonus in 1997.
(b) Executive officers of the Company receive indirect compensation in the
form of certain perquisites and other personal benefits. The amount of
such benefits in 1997, 1996 and 1995 received by the named executive
officers did not exceed 10% of the respective executive's annual salary
and bonus.
(c) Reflects contributions by the Company to its profit-sharing plan for the
benefit of the named officer and payments of directors' fees to such
officer. Directors' fees paid to Messrs. Puckett and Stroud were,
respectively, $11,650 and $11,450 for 1997, $10,775 and $10,775 for 1996
and $9,585 and $9,285 for 1995. Contributions to profit-sharing plans
made by the Company on behalf of Messrs. Puckett and Stroud were,
respectively, $24,000 and $19,215 for 1997, $22,500 and $18,300 for 1996
and $22,500 and $17,400 for 1995. A portion of such directors' fees are
deferred pursuant to agreements entered into individually with an
insurance company. In addition, includes $2,599, $3,768 and $3,235 paid
to Mr. Stroud in 1997, 1996 and 1995, respectively, as commissions on
insurance policy sales.
(d) Mr. Puckett is granted options each year to purchase 1,800 shares of
Common Stock with an exercise price equal to 150% of the Common Stock's
book value at the time of grant and with a term of 10 years. Such options
are granted pursuant to a 1989 stock option plan adopted by the Company
and as to which Mr. Puckett is the sole participant.
(e) Granted pursuant to the Company's 1995 Stock Option Plan as to which
options are granted with an exercise price equal to fair market value at
date of grant and are exercisable for ten years from date of grant.
(f) Reflects exercise of non-incentive stock options.
(g) Adjusted to reflect the 3-for-1 stock split effected in October 1997.
OPTION GRANTS IN FISCAL YEAR 1997. The following table contains
information concerning the grant of stock options to Mr. Puckett under a 1989
stock option plan and to Mr. Stroud under the 1995 Stock Option Plan. Neither
plan provides for the grant of stock appreciation rights.
<TABLE>
<CAPTION>
Number of Securities Percent of Total Grant Date Value
Underlying Options Granted to Exercise of ----------------
Options Granted Employees in Base Price Grant Date
Name Number of Shares Fiscal Year ($ per share) Expiration Date Present Value
---- -------------------- ------------------ ------------- --------------- -------------
<S> <C> <C> <C> <C> <C>
R. Stan Puckett 1,800(a) 24.52% $ 55.50 12/07 $ 84,582(b)
Davis Stroud 611 8.32% $100.00 12/07 $ 11,731(b)
</TABLE>
- ----------------
(a) Options are granted with an exercise price equal to 150% of the book
value of the underlying stock on the date of grant.
(b) Represents the present value of the option at the date of grant as
determined using the Black-Scholes option pricing model.
In calculating the present value of the option grant, the following
assumptions were utilized: (i) the current market price of the
underlying Common Stock at the date of grant was $100; (ii) the
continuously compounded risk-free rate of return expressed on an
annual basis was 5.5%; (iii) the risk of the underlying Common Stock,
measured by the standard deviation of the continuously compounded
annual rate of return of the Common Stock, was 10.38%; and (iv)
dividends on the underlying Common Stock increased at an annual rate
of 12%. These assumptions are used for illustrative purposes only.
No assurance can be given that actual experience will correspond to
the assumptions utilized.
AGGREGATED OPTION EXERCISES IN 1997 AND YEAR-END OPTION VALUES. The
following table sets forth information concerning the value of options held by
the named executive officers at the end of the fiscal year.
<TABLE>
<CAPTION>
Number of Securities
Underlying Unexercised Value of Unexercised
Options at Fiscal Year End In-the-Money Options at
Shares Acquired on Value Exercisable/Unexercisable Fiscal Year End (a)
Name Exercise (#) Realized ($) (Number of Shares) Exercisable/Unexercisable
---- ------------ ------------ ------------------ -------------------------
<S> <C> <C> <C> <C>
R. Stan Puckett -- -- 3,600/ -- $168,948/$ --
Davis Stroud -- -- 1,428/861 $ 65,541/$28,675
</TABLE>
(Footnote on following page)
6
<PAGE> 11
- ----------------
(a) Represents the difference between fair market value of underlying
Common Stock at fiscal year-end (based on the most recent sales price
known to management) and the exercise price. Options are in-the-money
if the fair market value of the underlying securities exceeds the
exercise price of the Option and out-of-the-money if the exercise
price of unexercisable options exceeds current fair market value.
PROFIT SHARING PLAN. The Company, through its subsidiary banks, has
a contributory Profit Sharing Plan (the "Plan") covering certain employees with
more than one year of service. Participating employees may contribute up to 7%
of their monthly salary and the Company contributes 15% of participating
employee's salary (not to exceed 10% of profit before taxes) to fund the Plan.
Effective January 1, 1998, employee contributions could be made for up to 10%
of monthly salary. The Plan has a vesting schedule that fully vests each
employee after two years of employment.
Contributions in the amount of $24,000 and $19,215 were made for the
accounts of Mr. Puckett and Mr. Stroud under the Plan in 1997. Mr. Puckett and
Mr. Stroud are fully vested under the Plan.
EMPLOYMENT CONTRACTS. The Company entered into an employment
agreement with Mr. Puckett effective January 23, 1996, without any specified
term, to serve as President and Chief Executive Officer of the Company. The
agreement, which is terminable by either party at any time, provides for a base
salary plus directors' fees, life insurance, participation in benefit plans and
other fringe benefits. If Mr. Puckett's employment is not continued by mutual
agreement following a merger or acquisition involving the Company, Mr. Puckett
shall be entitled to a payment equal to two years' compensation (defined to
include his base salary plus fringe benefits and the value of his stock
options). The payment that would be made to Mr. Puckett assuming his
termination of employment under the foregoing circumstances at December 31,
1997 would have been approximately $674,000. This provision may have an
anti-takeover effect by making it more expensive for a potential acquiror to
obtain control of the Company.
GCB has contracted with Davis Stroud, Executive Vice President of GCB,
to provide for his employment by GCB until he reaches the age of 65. Pursuant
to such agreement, Mr. Stroud has agreed not to compete with GCB after leaving
the employment of GCB. In consideration of this agreement, GCB has agreed to
pay Mr. Stroud the sum of $16,600 per year for 10 years after his retirement at
age 65. In the event Mr. Stroud dies prior to reaching the retirement age of
65, the same amounts will be paid to his beneficiaries over a 10 year period.
In the event Mr. Stroud dies after retirement but prior to the expiration of
the full 10 year term, the remainder of such benefits will be paid to his
beneficiaries on the same terms for the remainder of the ten-year term. A life
insurance policy on Mr. Stroud's life of which GCB is the beneficiary is
coordinated to pay or reimburse GCB for these benefits.
- --------------------------------------------------------------------------------
REPORT OF THE COMPENSATION COMMITTEE
- --------------------------------------------------------------------------------
Decisions on compensation of the Company's executives generally are
made by a seven-member Compensation Committee of the Board of Directors. Each
member of the Compensation Committee is a non-employee director and is
appointed annually.
The Committee is responsible for developing and making recommendations
to the Board of Directors concerning compensation paid to the Chief Executive
Officer and Executive Vice President and, based upon the recommendation of the
Chief Executive Officer, all other employees. The Committee is further
responsible for administering all aspects of the Company's executive
compensation program. Executive compensation is intended to be set at levels
that the Compensation Committee believes is consistent with others in the
Company's industry, and the Committee also considers general economic
conditions and other external factors.
Base salaries for executive officers are determined initially by
evaluating the responsibilities of the position held, and by reference to the
competitive marketplace for management talent, including a comparison of base
salaries for comparable positions at comparable companies within the financial
services industry. Annual salary adjustments are determined by evaluating the
competitive marketplace, the performance of the Company and the performance of
the executive. Compensation paid during 1997 to executive officers consisted of
base salary, bonus, stock options and contributions paid with respect to the
Company's Profit Sharing Plan. For 1997, based on the factors discussed above
and a review by the Committee, Mr. Puckett and Mr. Stroud each received a 5.0%
increase in base pay. Payments to the Company's Profit Sharing Plan are made
to certain employees on a non-discriminatory basis.
Messrs. Puckett and Stroud have a performance goal with the Company
whereby bonus awards are issued. The performance goal is based on the return on
average assets ("ROAA") of GCB, the Company's largest subsidiary. The bonus
awarded in 1997 totaled 27.97% and 18.50%, respectively, of their base salaries
for 1997. For 1998, the performance goals
7
<PAGE> 12
include increases in the per-share price of the Common Stock, the ROAA of GCB,
return on average equity of GCB and overall performance reviews.
It is the philosophy of the Compensation Committee that stock options
should be awarded only to the key employees of the Company to promote long-term
interests between such employees and the Company's shareholders and to assist
in the retention of such employees.
COMPENSATION COMMITTEE
Terry Leonard (Chairman) Philip M. Bachman, Jr.
Ralph Brown Charles Brooks
Helen Horner W.T. Daniels
J.W. Douthat
April 13, 1998
- --------------------------------------------------------------------------------
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
- --------------------------------------------------------------------------------
The Compensation Committee of the Company consists of Messrs. Leonard,
Brown, Bachman, Brooks, Daniels and Douthat and Ms. Horner.
Except for Directors Bachman and Brooks, no member of the Board of
Directors of the Company was (a) an officer or employee of the Company or any
of its subsidiaries during the fiscal year ended December 31, 1997, (b) a
former officer of the Company or any of its subsidiaries, or (c) an insider
(i.e., director, officer, director or officer nominee, greater than 5%
shareholder, or immediate family member of the foregoing) of the Company or any
of its subsidiaries and engaged in transactions with the Company or any
subsidiary involving more than $60,000 during the fiscal year ended December
31, 1997 (except for the transactions described below).
The Company purchases insurance coverage from McInturff, Milligan and
Brooks of which Mr. Brooks is Chairman of the Board. During 1997, premiums
totaling $115,747 were paid by the Company to McInturff, Milligan and Brooks.
Management believes the fees paid are fair and reasonable and do not exceed
those premiums that would be paid to a third party firm.
The Company purchases vehicles from Bachman-Bernard Motors, as to
which Mr. Bachman serves as President. Payments for vehicles purchased by the
Company during 1997 totaled $87,803. Management believes the price paid was
fair and reasonable and does not exceed what would have been paid to a third
party. The Company also paid premiums during 1997 of $27,403 to Greeneville
Insurance Agency, as to which Mr. Bachman is part owner.
8
<PAGE> 13
- --------------------------------------------------------------------------------
CUMULATIVE STOCK PERFORMANCE GRAPH
- --------------------------------------------------------------------------------
The following graph shows the cumulative total return on the Common
Stock of the Company over the last five years, compared with (1) the Standard &
Poor's Bank Composite Index and (2) the Standard & Poor's Major Regional Bank
Index. Cumulative total return on the stock or the index equals the total
increase in value since December 31, 1992 assuming reinvestment of all
dividends paid into the stock or the index, respectively. The graph was
prepared assuming that $100 was invested on December 31, 1992 in the Common
Stock, and in the securities included in the indices used for comparison
purposes. There is no established public trading market in which shares of the
Common Stock are regularly traded, nor are there any uniformly quoted prices
for the shares of Common Stock.
CUMULATIVE TOTAL SHAREHOLDER RETURN
COMPARED WITH PERFORMANCE OF SELECTED INDEXES
AT DECEMBER 31, 1992 THROUGH 1997
[GRAPH]
<TABLE>
<CAPTION>
PERIOD ENDING
-------------------------------------------------------------
INDEX 1992 1993 1994 1995 1996 1997
-------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Greene County
Bancshares, Inc. 100.00 119.17 134.92 155.80 190.88 272.44
Standard & Poor's
Bank Composite Index 100.00 107.08 98.01 150.67 206.88 291.83
Standard & Poor's
Major Regional Bank Index 100.00 102.81 93.73 142.14 188.21 276.21
</TABLE>
- --------------------------------------------------------------------------------
CERTAIN TRANSACTIONS
- --------------------------------------------------------------------------------
The Company and its subsidiaries have had, and expect to have in the
future, transactions in the ordinary course of business with directors and
executive officers and members of their immediate families, as well as with
principal shareholders. All loans included in such transactions were made in
the ordinary course of business on substantially the same terms, including
interest rates and collateral, as those prevailing for comparable transactions
with non-affiliated persons. It is the belief of management that such loans
neither involved more than the normal risk of collectability nor presented
other unfavorable features.
ANTI-TAKEOVER AMENDMENTS
The Board of Directors has approved, and recommends that the
shareholders adopt, various amendments to the Company's Amended and Restated
Charter (the "Charter"). The proposed amendments separately involve the
following matters: classifying the Board of Directors into three classes
serving staggered terms; providing for a range of the number of directors;
9
<PAGE> 14
preventing the removal of directors without cause or a supermajority vote;
prohibiting cumulative voting; allowing special meetings of stockholders to be
called only by the Board of Directors; increasing the number of authorized
shares of Common Stock; requiring advance written notice for shareholder
nominations or proposals; and restricting the voting of shares held above
certain levels by a single stockholder or group of stockholders.
The amendments are designed to promote conditions of continuity and
stability in the Company's management and policies. Although the amendments
have certain anti-takeover effects, they are not in response to any active
effort to accumulate the Company's Common Stock or to obtain control of the
Company. However, the Board of Directors has observed an increase in corporate
takeover activity in recent years and the use of certain takeover tactics,
including proxy fights, hostile takeover attempts, and partial tender offers,
that have become relatively common in corporate takeover practice. The Board
believes that these tactics can place undue pressure on boards of directors and
shareholders to act hastily and on incomplete information, and therefore can be
highly disruptive to a company and can result in unfair differences in
treatment of some shareholders who act immediately in response to announcement
of takeover activity and those who choose to act later, if at all.
In considering the proposals, shareholders should be aware that the
overall effect of certain of the proposed provisions is to make it more
difficult for holders of a majority of the outstanding shares of Common Stock
to change the composition of the Board of Directors and to remove existing
management in circumstances where a majority of the shareholders may be
dissatisfied with the performance of the incumbent directors or otherwise
desire to make changes. These provisions, if included in the Company's
Charter, could make a proxy contest a less effective means of removing or
replacing existing directors or could make it more difficult to make a change
in control of the Company which is opposed by the Board of Directors. This
strengthened tenure and authority of the Board of Directors could enable the
Board of Directors to resist change and otherwise thwart the desires of a
majority of the shareholders. Because these provisions may have the effect of
continuing the tenure of the current Board of Directors, the Board has
recognized that the individual directors have a personal interest in this
provision that may differ from those of the shareholders. However, the Board
believes that these provisions' primary purpose is to ensure that the Board
will have sufficient time to consider fully any proposed takeover attempt in
light of the short and long-term benefits and other opportunities available to
the Company and, to the extent the Board determines to proceed with the
takeover, to effectively negotiate terms that would maximize the benefits to
the Company and its shareholders.
A hostile takeover attempt may have a positive or a negative effect on
the Company and its shareholders, depending on the circumstances surrounding a
particular takeover attempt. Takeover attempts that have not been negotiated
or approved by the board of directors of a corporation can seriously disrupt
the business and management of a corporation and generally present to the
shareholders the risk of terms which may be less than favorable to all of the
shareholders than would be available in a Board-approved transaction.
Board-approved transactions may be carefully planned and undertaken at an
opportune time in order to obtain maximum value for the corporation and all of
its shareholders with due consideration to matters such as the recognition or
postponement of gain or loss for tax purposes, the management and business of
the acquiring corporation and maximum strategic deployment of corporate assets.
In addition, in the case of a proposal which is presented to the Board of
Directors, there is a greater opportunity for the Board to analyze the proposal
thoroughly, to develop and evaluate alternatives, to negotiate for improved
terms and to present its recommendations to the shareholders in the most
effective manner.
The Board of Directors recognizes that hostile takeover attempts do
not always have the unfavorable consequences or effects described above and may
frequently be beneficial to shareholders, providing all shareholders with
considerable value for their shares. However, the Board of Directors believes
that the potential disadvantages of unapproved takeover attempts are
sufficiently great such that prudent steps to reduce the likelihood of such
takeover attempts are in the best interests of the Company and its
shareholders. Accordingly, the Board has separately proposed certain measures
for inclusion in the Company's Charter that may have the effect of discouraging
or deterring hostile takeover attempts.
Notwithstanding the belief of the Board as to the benefits to
shareholders of the changes, shareholders should recognize that one of the
effects of such changes may be to discourage a future attempt to acquire
control of the Company which is not presented to and approved by the Board of
Directors, but which a substantial number, and perhaps even a majority, of the
Company's shareholders might believe to be in their best interests or in which
shareholders might receive a substantial premium for their shares over the
current market price. As a result, shareholders who might desire to
participate in such a transaction may not have an opportunity to do so.
In addition, by increasing the probability that any person or group
seeking control of the Company would be forced to negotiate directly with the
Board of Directors, the proposed takeover defenses could discourage takeover
bids by means of a hostile tender offer, proxy contest or otherwise without the
approval of the Board. Thus, the principal disadvantages to the shareholders
which result from discouraging such hostile takeover bids would be to (i)
reduce the likelihood that any acquiror would make a hostile tender offer for
the outstanding shares of stock of the Company at a premium over the market
rate and (ii) increase the difficulty of removing the existing Board of
Directors and management even if, in a particular case, removal would be
beneficial to shareholders generally.
10
<PAGE> 15
It should be noted, however, that the Board of Directors has a
fiduciary duty to the shareholders to negotiate for the best interests of the
shareholders and not for its own interests. Further, while the proposed
takeover defenses may discourage hostile takeover attempts, these provisions
could not actually prevent a hostile acquisition of the Company.
The Board of Directors has considered the potential disadvantages and
believes that the potential benefits of the provisions described below outweigh
the possible disadvantages. In particular, the Board believes that the
benefits associated with enabling the Board to fully consider and negotiate
proposed takeover attempts make these proposals beneficial to the Company and
its shareholders.
The submission by the Board of Directors for shareholder approval of
these proposed anti-takeover amendments does not reflect knowledge on the part
of the Board of Directors or management of any proposed takeover or other
attempt to acquire control of the Company. Management may in the future
propose or adopt other measures designed to discourage takeovers apart from
those proposed in this Proxy Statement, if warranted from time to time in the
judgment of the Board of Directors, although the Board has no such intention at
the present time.
- --------------------------------------------------------------------------------
PROPOSAL 2 - ADOPTION OF A CLASSIFIED BOARD
- --------------------------------------------------------------------------------
GENERAL
The Company's Charter and Bylaws currently provide that members of its
Board of Directors are elected each year for one-year terms that expire at the
next annual meeting of shareholders. As a result, the entire Board of
Directors could be replaced by shareholders at a single annual meeting of
shareholders. Tennessee law permits a corporation to provide, in its charter,
for a classified board of directors under which directors have staggered
three-year terms so that not more than one-third of the directors stand for
election each year.
PROPOSED AMENDMENT
The Board recommends that shareholders consider and approve a proposal
(the "Classified Board Proposal") to amend the Company's Amended and Restated
Charter to provide for the classification of the Board of Directors into three
classes, each class of directors to be as nearly equal in number to the others
as possible. Under the Classified Board Proposal, each class of the Board of
Directors will serve a three year term, with one class elected each year.
Assuming that the Classified Board Proposal is adopted, the twelve
directors nominated for re-election under Proposal 1 and elected for one-year
terms under the Company's current charter will be deemed to have been elected
instead to interim terms as specified in Proposal 1. The purpose of the
interim terms is to establish the staggered terms of the Board of Directors so
that not more than one-third of the directors will stand for election each year
thereafter. Following the expiration of the respective interim terms,
directors of the Company will serve three-year terms.
CONSIDERATIONS IN SUPPORT OF THE PROPOSAL
The purpose of the Classified Board Proposal is to help assure the
continuity and stability of the Company's policies by creating a structure in
which at least two-thirds of the Board will have experience serving as
directors of the Company following any election of directors. In addition, the
Board believes that: (i) ensuring continuity of service among the Board members
and three-year commitments for Board service is desirable; (ii) the proposed
amendments would facilitate the Company's ability to attract and retain
qualified members of the Board of Directors; and (iii) the proposed amendments
would also facilitate hiring and retaining competent management personnel by
increasing the likelihood of a stable employment environment.
The Board anticipates that a classified Board of Directors, as
described under the Classified Board Proposal, would encourage potential
acquirors of the Company to engage in good faith, arm's-length negotiations
with the Board of Directors. However, the Board of Directors is not currently
aware of any efforts to obtain control of the Company, and the Classified Board
Proposal is not in response to any such efforts.
OTHER CONSIDERATIONS
The Classified Board Proposal, if adopted, would make the removal of
current management and the Board of Directors more difficult. Classification
of the Board of Directors into three classes, with staggered terms so that only
one class must stand for election each year, affects every election of
directors. Further, unlike certain other anti-takeover provisions, it would
not be triggered by the occurrence of a particular event such as a hostile
merger. Thus, a classified Board of Directors would make it
11
<PAGE> 16
more difficult for shareholders of the Company to change the majority of
directors, even if the only reason for such change were the performance of the
present directors. For instance, at least two annual meetings of stockholders
necessary to change the majority of directors on the Board of Directors of the
Classified Board Proposal is adopted, as compared to a single annual meeting
under the Company's current Charter.
The Classified Board Proposal could also have the effect of deterring
potential acquirors from initiating proxy contests or from acquiring
substantial blocks of the Common Stock. Such proxy contests and acquisitions
of substantial blocks of Common Stock tend to increase, at least temporarily,
market prices for the Common Stock. Consequently, if the Classified Board
Proposal is approved, shareholders of the Company could be deprived of
temporary opportunities to sell their shares at higher market prices.
Moreover, by possibly deterring proxy contests or acquisitions of substantial
blocks of Common Stock, the Classified Board Proposal might have the incidental
effect of inhibiting certain changes in incumbent management, some or all of
whom may be replaced in the course of a change in control of the Company.
Because directors of the Company will be directly affected by the
Classified Board Proposal, they may be deemed to have an interest in its
outcome.
VOTE REQUIRED
THE BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED ADOPTION OF THE
CLASSIFIED BOARD PROPOSAL AND UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE APPROVAL
OF THE CLASSIFIED BOARD PROPOSAL. APPROVAL OF THE CLASSIFIED BOARD PROPOSAL
REQUIRES THE AFFIRMATIVE VOTE OF A MAJORITY OF THE TOTAL VOTES REPRESENTED AND
ENTITLED TO BE CAST AT THE ANNUAL MEETING AT WHICH A QUORUM IS PRESENT.
ALTHOUGH THE COMPANY BELIEVES THAT THE MATERIAL PROVISIONS OF THE
AMENDMENT TO THE COMPANY'S AMENDED AND RESTATED CHARTER ARE SET FORTH ABOVE,
REFERENCE SHOULD BE MADE TO THE TEXT OF THE AMENDMENT, A COPY OF WHICH IS
ATTACHED AS ANNEX A TO THIS PROXY STATEMENT.
- --------------------------------------------------------------------------------
PROPOSAL 3 - ALLOWABLE RANGE OF THE NUMBER OF DIRECTORS
- --------------------------------------------------------------------------------
GENERAL
Currently, the number of directors on the Company's Board of Directors
is governed exclusively by the Company's Bylaws. The Bylaws provide that the
Board of Directors shall consist of not less than three (3) or more than
fifteen (15) members, with the exact number to be determined by resolution of
the Board of Directors. The Bylaws may be revised by the Board of Directors or
by the stockholders upon a majority vote of those present at a meeting in which
a quorum is present. A quorum is present when at least a majority of the
outstanding shares are present or represented by proxy. Thus, the range of
members can be significantly changed with a simple majority vote of the
stockholders represented at a meeting, which could be as few as twenty-five
percent (25%) of the eligible votes. The Company's charter is silent as to the
range of the number of directors allowable on the Board of Directors.
PROPOSED AMENDMENT
The Board of Directors proposes an amendment to the Company's Charter
to provide for an allowable range of the number of members on the Company's
Board of Directors. Under the amendment, the exact number of members at any
one time would be set forth in the Bylaws. The provisions of the proposed
amendment are identical to such provisions currently in the Company's Bylaws
and therefore the amendment would provide for a range of from three (3) to
fifteen (15) directors. If the proposal is adopted and the Charter is amended,
the Board of Directors intends to repeal the identical provision in the Bylaws
because such provision would no longer be necessary. At the same time, the
Board of Directors would adopt a new provision in the Bylaws consistent with
the proposed charter amendment that sets the number of members of the Board of
Directors at twelve (12) persons.
CONSIDERATIONS IN SUPPORT OF THE PROPOSAL
The Board of Directors intends that the proposal will restrict the
ability of a small group of stockholders or a simple majority of the members of
the Board of Directors from increasing or decreasing the allowable number of
directors. If this proposal is adopted, any change in the allowable range of
the number of directors could only be effected through an amendment to the
Company's Charter, which would require the vote of stockholders at a meeting
called for that purpose. The Board of Directors believes that this process
would enhance the stability of the Board of Directors and the Company by
eliminating the potentially disruptive effect of increasing the number of
directors without prior stockholder notice and approval.
12
<PAGE> 17
OTHER CONSIDERATIONS
The proposal may have the effect of discouraging tender offers or
acquisitions of large blocks of stock. Because tender offers or such
acquisitions tend to increase, at least temporarily, market prices for the
Common Stock, shareholders of the Company could be deprived of temporary
opportunities to sell their shares at higher prices. Further, by restricting
the ability of stockholders or members of the Board of Directors to expand the
size of the Board and thereby accommodate current or potential stockholders,
the proposal may have the effect of inhibiting changes in the Board of
Directors and in incumbent management.
VOTE REQUIRED
THE BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED THIS PROPOSAL AND
UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" APPROVAL OF THIS PROPOSAL.
APPROVAL OF THIS PROPOSAL REQUIRES THE AFFIRMATIVE VOTE OF A MAJORITY OF THE
TOTAL VOTES REPRESENTED AND ENTITLED TO BE CAST AT THE ANNUAL MEETING AT WHICH
A QUORUM IS PRESENT.
ALTHOUGH THE COMPANY BELIEVES THAT THE MATERIAL PROVISIONS OF THE
AMENDMENT TO THE COMPANY'S CHARTER ARE SET FORTH ABOVE, REFERENCE SHOULD BE
MADE TO THE TEXT OF THE AMENDMENT, A COPY OF WHICH IS ATTACHED AS ANNEX B TO
THIS PROXY STATEMENT.
- --------------------------------------------------------------------------------
PROPOSAL 4 - REMOVAL OF DIRECTORS
- --------------------------------------------------------------------------------
GENERAL
The Company's Bylaws currently provide that directors may be removed
with or without cause by a simple majority of the shareholders or for cause by
a majority of the entire Board of Directors. Under Tennessee law, directors
may be removed with or without cause by shareholders unless the charter
provides that a director may only be removed for cause. Also, under Tennessee
law, a director may be removed for cause by a vote of a majority of the entire
board of directors if permitted by a company's charter. The Company's Charter
currently does not contain any provisions relating to the removal of directors.
PROPOSED AMENDMENT
The Board of Directors proposes an amendment to the Company's Charter
to provide that directors may only be removed for cause, and then only upon
approval of holders of at least 66 2/3% of the shares of Common Stock.
CONSIDERATIONS IN SUPPORT OF THE PROPOSAL
The primary purpose of this amendment is to preclude the removal of
any director or directors by a takeover bidder or otherwise, unless removal is
warranted for reasons other than the desire to obtain control of the Board.
For a takeover bidder to obtain effective control of the Company, it presently
would need to control at least a majority of the Board votes. One popular
method for a takeover bidder to obtain control is to acquire a majority of the
outstanding shares of a company through a tender offer or through open market
purchases and to use that voting power to remove the existing directors and
replace them with persons chosen by the takeover bidder. Requiring cause in
order to remove a director would defeat this strategy, thereby encouraging
potential takeover bidders to obtain the cooperation of the existing Board
before attempting a takeover. The Board believes that if a purchaser acquired
a significant or controlling interest in the Common Stock, the purchaser's
ability to remove the entire Board would severely curtail the Company's ability
to negotiate effectively with the purchaser. The threat of removal would
deprive the Board of the time and information necessary to evaluate any
takeover proposal, to study alternative proposals, and to help ensure that the
best price for all shareholders would be obtained in any transaction involving
the Company.
In addition, the Company is proposing a classified Board of Directors
structure under Proposal 2 above. Such a structure can be nullified without a
provision in the Charter that directors may only be removed for "cause." The
primary effect of a classified board is to delay the takeover of a majority of
the positions on the Board of Directors beyond the elapse of one year's time.
By eliminating the shareholder's right to remove directors "without cause," a
potential acquiror of a controlling interest of the Common Stock of the Company
could not gain control of the Board of Directors unless, with respect to a
majority of incumbent directors, there exist circumstances which constitute
"cause" as defined in the amendment. Accordingly, this amendment makes
classification of the Board of Directors an effective anti-takeover defense.
Otherwise, an acquiring shareholder could remove the entire board of directors
without "cause" and thereby gain total control of the Company by obtaining only
a majority of the ownership of the Company, notwithstanding the existence of a
classified board of directors.
13
<PAGE> 18
OTHER CONSIDERATIONS
The amendment will make the removal of any director more difficult,
even if such removal is believed by the shareholders to be in their best
interests, and will eliminate the shareholders' ability to remove a director at
will. By making the removal of directors more difficult, the amendment will
increase the directors' security in their positions. Further, because the
Board has the power to retain and discharge management, the amendment could
serve to perpetuate incumbent management. In addition, because the removal of
a director for cause could be costly and time-consuming, the proposed amendment
would render more difficult, and may discourage, an attempt to acquire control
of the Company without the approval of the Company's management.
VOTE REQUIRED
THE BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED THIS PROPOSAL AND
UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" APPROVAL OF THIS PROPOSAL.
APPROVAL OF THIS PROPOSAL REQUIRES THE AFFIRMATIVE VOTE OF 66 2/3% OF THE TOTAL
VOTES REPRESENTED AND ENTITLED TO BE CAST AT THE ANNUAL MEETING AT WHICH A
QUORUM IS PRESENT.
ALTHOUGH THE COMPANY BELIEVES THAT THE MATERIAL PROVISIONS OF THE
AMENDMENT TO THE COMPANY'S CHARTER ARE SET FORTH ABOVE, REFERENCE SHOULD BE
MADE TO THE TEXT OF THE AMENDMENT, A COPY OF WHICH IS ATTACHED AS ANNEX C TO
THIS PROXY STATEMENT.
- --------------------------------------------------------------------------------
PROPOSAL 5 - PROHIBITION ON CUMULATIVE VOTING
- --------------------------------------------------------------------------------
GENERAL
Cumulative voting is a type of voting in which a shareholder may cast
votes for election of directors in an amount equal to the number of shares held
by the shareholder multiplied by the number of directors to be elected. Under
this method, the shareholder may cast such total number of votes equally among
the nominees for director or, at such shareholder's discretion, cast all such
votes for one or more but fewer than all nominees. Because directors of the
Company are elected based upon the number of votes cast for a nominee in
relation to other nominees, a shareholder or group of shareholders holding a
minority interest in the Company could, through cumulative voting, ensure the
election of at least one director each election. Tennessee law permits, but
does not require, a cumulative voting provision in a company's charter or
bylaws. The Company's Charter currently does not have any provision that
addresses cumulative voting by its shareholders. The Company's Bylaws
currently provide that shareholders will not be permitted to have cumulative
voting rights unless specifically allowed in the Company's Charter.
PROPOSED AMENDMENT
The Board recommends that shareholders consider and approve a proposal
to amend the Company's Charter to include an express prohibition against
cumulative voting.
CONSIDERATIONS IN SUPPORT OF THE PROPOSAL
The Company's Charter currently does not provide any specific
direction for the Company in connection with cumulative voting. Instead, the
Company is relying upon the general prohibition under Tennessee law, which
prohibits cumulative voting unless specifically permitted in a corporation's
charter. Adoption of this proposal will establish the Company's position on
cumulative voting in case Tennessee law later changes to require cumulative
voting, although management of the Company is not aware of any pending or
proposed change under Tennessee law in this regard.
Additionally, the Company believes that cumulative voting would
provide shareholders representing less than a majority interest in the Company
with the means to circumvent standard majority voting requirements and obtain a
disproportionately large voice in the affairs of the Company. Consequently,
the Board recommends adoption of an express prohibition against cumulative
voting to avoid such results.
OTHER CONSIDERATIONS
The absence of cumulative voting could have the effect of deterring
potential acquirors from initiating proxy contests or from acquiring
substantial blocks of the Company's Common Stock. Such proxy contests and
acquisitions of substantial blocks of Common Stock tend to increase, at least
temporarily, market prices for the Common Stock. The actual effect that
adopting
14
<PAGE> 19
this proposal on the price of the Common Stock should be significantly
mitigated by the prohibition on cumulative voting already in place by action of
Tennessee law.
Because directors of the Company will be directly affected by any
cumulative voting, they may be deemed to have an interest in whether this
proposal is adopted.
VOTE REQUIRED
THE BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED ADOPTION OF THIS
PROPOSAL AND UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" ITS ADOPTION.
APPROVAL OF THE PROPOSAL REQUIRES THE AFFIRMATIVE VOTE OF A MAJORITY OF THE
TOTAL VOTES REPRESENTED AND ENTITLED TO BE CAST AT THE ANNUAL MEETING AT WHICH
A QUORUM IS PRESENT.
ALTHOUGH THE COMPANY BELIEVES THAT THE MATERIAL PROVISIONS OF THE
AMENDMENT TO THE COMPANY'S AMENDED AND RESTATED CHARTER ARE SET FORTH ABOVE,
REFERENCE SHOULD BE MADE TO THE TEXT OF THE AMENDMENT, ATTACHED TO THIS PROXY
STATEMENT AS ANNEX D.
- --------------------------------------------------------------------------------
PROPOSAL 6 - CALLING OF SPECIAL MEETINGS
- --------------------------------------------------------------------------------
GENERAL
Under Tennessee law, a special meeting of shareholders can be called
by the board of directors or by persons authorized to do so by the charter or
bylaws. Further, unless otherwise provided in a company's charter, a special
meeting may be called by holders of at least 10% of a company's voting shares.
The Company's Charter does not contain any provisions regarding special
meetings. However, the Company's Bylaws provide that special meetings may be
called by the Chairman of the Board of Directors, by the Company's President or
Secretary or upon written request of holders of at least 10% of the shares of
Common Stock. Accordingly, special meetings may be called by shareholders or
by the Company.
PROPOSED AMENDMENT
The Board of Directors has proposed an amendment to the Company's
Charter that would permit special meetings of shareholders to be called only by
the Board of Directors or a committee of the Board.
CONSIDERATIONS IN SUPPORT OF THE PROPOSAL
The Board of Directors believes that limiting the ability to call a
special meeting of shareholders to the Board of Directors will permit the
Company to act in a careful and deliberate fashion through its annual meeting
of shareholders. Allowing shareholders to call special meetings could have a
potentially disruptive effect on the Company's operations because the Board of
Directors and the Company's senior officers will be required to focus their
time and efforts towards preparation for each special meeting called.
In addition, the Board has considered the possibility that an
unsolicited tender offer for the Company might be coupled with a proxy contest
designed to undermine the effectiveness of the Board. If confronted with an
unsolicited tender offer, it is likely that the Company's Board of Directors
would seek to evaluate the terms of the tender offer while exploring other
strategic alternatives, including the possibility of negotiating a higher price
for the Company. In order to prevent the Company from pursuing other
alternatives and to undermine the Board's bargaining power, the person making
the tender offer or arbitragers might solicit consents to call a special
meeting of shareholders and then solicit proxies for the purpose of increasing
the number of directors and electing its own candidates as directors ("packing"
the Board) or taking other measures intended to force a sale of the Company.
The proposed amendment would make it more difficult for the person making the
tender offer to call a special meeting.
OTHER CONSIDERATIONS
By preventing shareholders from calling special meetings of
shareholders, the amendment to the Company's Charter precludes a shareholder
from mounting a proxy contest or taking action to amend charter documents until
the next annual meeting. Such a provision could have the effect of deterring
efforts to seek control of the Company on a basis that some shareholders may
deem favorable.
15
<PAGE> 20
VOTE REQUIRED
THE BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED THIS PROPOSAL AND
UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" APPROVAL OF THIS PROPOSAL.
APPROVAL OF THIS PROPOSAL REQUIRES THE AFFIRMATIVE VOTE OF A MAJORITY OF THE
TOTAL VOTES REPRESENTED AND ENTITLED TO BE CAST AT THE ANNUAL MEETING AT WHICH
A QUORUM IS PRESENT.
ALTHOUGH THE COMPANY BELIEVES THAT THE MATERIAL PROVISIONS OF THE
AMENDMENT TO THE COMPANY'S CHARTER ARE SET FORTH ABOVE, REFERENCE SHOULD BE
MADE TO THE TEXT OF THE AMENDMENT, A COPY OF WHICH IS ATTACHED AS ANNEX E TO
THIS PROXY STATEMENT.
- --------------------------------------------------------------------------------
PROPOSAL 7 - INCREASE IN NUMBER OF AUTHORIZED SHARES OF COMMON STOCK
- --------------------------------------------------------------------------------
GENERAL
The Company's Charter currently authorizes the issuance of a total of
3,000,000 shares of capital stock, all of which are Common Stock. As of the
Record Date, there were 1,354,572 shares of Common Stock issued and
outstanding. Under Tennessee law, the number of authorized shares may only be
increased by an amendment to the charter of the Company and, except for
increases to reflect stock dividends, the amendment must be approved by
shareholders.
PROPOSED AMENDMENT
The proposed amendment to the Company's Charter would increase the
number of shares of authorized capital stock from 3,000,000 shares to 5,000,000
shares, increasing the total number of shares of authorized Common Stock from
3,000,000 to 5,000,000.
CONSIDERATIONS IN SUPPORT OF THE AMENDMENT
Although the Company has no present intention of issuing additional
shares of Common Stock, the Board of Directors believes that the availability
of increased shares of Common Stock will provide the Company with needed
flexibility in structuring possible future financing and acquisitions and in
meeting other corporate needs that may arise. In the future, additional
authorized shares of Common Stock would be available for general corporate
purposes, including but not limited to possible issuances as stock dividends or
stock splits, in future mergers or acquisitions, in a future public offering or
private placement, or under a stock benefit plan. The Board of Directors does
not intend to issue any additional shares of capital stock except on terms that
the Board of Directors deems to be in the best interests of the Company and its
shareholders.
OTHER CONSIDERATIONS
The proposed increase in the number of shares of Common Stock
authorized for issuance will not affect the rights, such as voting and
liquidation rights, of the outstanding shares of Common Stock. If, however,
additional shares were issued, the percentage ownership interests of existing
shareholders would be reduced and, depending upon the terms pursuant to which
the new shares were issued, the book value of outstanding shares could be
diluted. Each share of the Common Stock will have the same rights and will be
identical in all respects with each other share of Common Stock. Holders of
Common Stock do not have any preemptive right to subscribe for or purchase any
additional securities issued by the company.
The additional authorized but unissued shares of Common Stock
authorized under this proposal could, consistent with the fiduciary
responsibility of the Company's directors, be issued without shareholder
approval in transactions that might dilute the percentage ownership of current
shareholders and/or render more difficult a change in control of the Company.
For example, such shares could be used to create a substantial voting block
favorable to the Board of Directors to effect an acquisition that would
preclude an acquiror's gaining control or to dilute an acquiror's voting power.
The Board of Directors, however, is not aware of any effort to obtain control
of the Company and does not currently contemplate the issuance of the
authorized shares for the foregoing purposes.
VOTE REQUIRED
THE BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED ADOPTION OF THIS
PROPOSAL AND UNANIMOUSLY RECOMMENDS A VOTE "FOR" APPROVAL OF THIS PROPOSAL.
APPROVAL OF THE PROPOSAL REQUIRES THE AFFIRMATIVE VOTE OF A MAJORITY OF THE
TOTAL VOTES REPRESENTED AND ENTITLED TO BE CAST AT THE ANNUAL MEETING AT WHICH
A QUORUM IS PRESENT.
16
<PAGE> 21
ALTHOUGH THE COMPANY BELIEVES THAT THE MATERIAL PROVISIONS OF THE
AMENDMENT TO THE COMPANY'S AMENDED AND RESTATED CHARTER AND BYLAWS ARE SET
FORTH ABOVE, REFERENCE SHOULD BE MADE TO THE TEXT OF THE AMENDMENT, A COPY OF
WHICH IS ATTACHED TO THIS PROXY STATEMENT AS ANNEX F.
- --------------------------------------------------------------------------------
PROPOSAL 8 - NOTICE OF NOMINATIONS AND NEW PROPOSALS
- --------------------------------------------------------------------------------
GENERAL
Under the Company's current Charter, a shareholder may nominate any
person for election as a director, or introduce any business, without prior
notice to the Board of Directors of the other shareholders, at any meeting of
the Company's shareholders. Neither the Company's Charter nor its Bylaws
currently provide any guidelines that must be followed by shareholders in
submitting a nomination or proposing new business to avoid disruption of
shareholder meetings or to ensure that nominations or proposals are accompanied
by sufficient information necessary to permit stockholders to make informed
decisions. Tennessee law provides that a corporation may set forth in its
charter any restrictions on shareholders' ability to submit nominations for
directors or propose new business.
PROPOSED AMENDMENT
The Board of Directors proposes an amendment to the Company's Charter
to provide for a 40-day advance notice requirement on shareholder proposals and
nominations. Such an amendment provides that with respect to an annual meeting
or a special meeting of shareholders, nominations of persons for election to
the Company's Board of Directors and the proposal of business to be considered
by shareholders may be made only (i) pursuant to the Company's notice of the
meeting, (ii) by the Company's Board of Directors or (iii) by a shareholder.
If a nomination or proposal for new business to be discussed at the
shareholders' meeting is submitted by a shareholder, then the shareholder
submitting the nomination or proposal must give timely notice to the Company's
Secretary of the nomination or proposal, the shareholder must be a holder of
record both when the notice is given and when the shareholders' meeting is held
at which the nomination or proposal is considered, and any proposal for
business must be a proper matter for action by shareholders. To be timely, a
shareholder's notice must be delivered to the Secretary of the Company at the
principal executive offices of the Company no less than 40 days prior to the
scheduled date of the annual meeting or special meeting in which it is to be
acted upon.
The determination as to whether the notice provisions have been
satisfied will be made by the presiding officer at the related annual meeting
or special meeting. This amendment does not give the Board of Directors any
power to approve or disapprove the business that shareholders desire to be
conducted at the meeting, nor will it affect the rights of shareholders to
nominate directors or propose business to be considered.
CONSIDERATIONS IN SUPPORT OF THE PROPOSAL
The advance notification requirement for shareholder nominations for
directors is intended to permit sufficient time requirement for information
about the qualifications of the nominees to be obtained by the Company and
included, if necessary, in the Company's proxy materials or otherwise
distributed to stockholders. Additionally, the advance notice will provide
time for the Board of Directors to ascertain whether the nominating shareholder
is permitted to make the nomination, whether the nominee will satisfy federal
banking regulatory requirements that apply to the Company because of its status
as a bank holding company, and whether it would be in the best interests of
stockholders to increase the size of the Board of Directors to accommodate the
nominee or instead to challenge such nominee in an election. This proposal may
discourage or deter a shareholder from conducting a solicitation of proxies in
order to elect its own directors, or otherwise attempting to obtain control of
the Company, if that shareholder does not desire to provide the advance notice
required.
Under the proposed amendment, shareholders would also be required to
provide advance notification for proposals of new business. This requirement
is intended to prevent shareholders from being surprised at a meeting and being
asked to decide upon new matters without sufficient information. With advance
notice, the Company can take steps necessary to obtain information about the
proposal and to determine whether it is a proper matter to be voted upon by
shareholders. Further, the notice period will allow the Board of Directors
time to evaluate the proposal and make a recommendation to the shareholders or
state its position on the proposal. In turn, shareholders will have sufficient
information to determine whether they should attend the shareholders' meeting
at which the proposal will be discussed or if, instead, they will grant the
Board of Directors a proxy as to the disposition of such business.
Additionally, the proposed notice procedure will discourage belated attempts by
third parties to begin ill-considered, disruptive discussions at shareholders'
meetings.
17
<PAGE> 22
OTHER CONSIDERATIONS
Although the proposed notice procedure will facilitate a more
efficient shareholders' meeting, it will also limit to some degree the ability
of shareholders to initiate discussions at a shareholders' meeting. It will
also preclude the conducting of business at a particular meeting if the proper
notice procedures have not been followed. Nothing in the proposed amendment
precludes discussion by any shareholder of any business properly brought before
a shareholder's meeting. This notice requirement may preclude the nomination
of a person for election to the Board of Directors at a particular meeting if
the proper procedures are not followed. Taken together, this proposal could
deter potential acquirors from seeking to acquire control of the Company by
offering their own nominees for directors. It could also prevent shareholders
who do not hold a controlling interest in the Company from bringing issues for
a shareholder vote if the Company determines that the issues are not
appropriate for such a vote.
VOTE REQUIRED
THE BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED ADOPTION OF THIS
PROPOSAL AND UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" ITS ADOPTION.
APPROVAL OF THIS PROPOSAL REQUIRES THE AFFIRMATIVE VOTE OF A MAJORITY OF THE
TOTAL VOTES REPRESENTED AND ENTITLED TO BE CAST AT THE ANNUAL MEETING AT WHICH
A QUORUM IS PRESENT.
ALTHOUGH THE COMPANY BELIEVES THAT THE MATERIAL PROVISIONS OF THIS
PROPOSED AMENDMENT TO THE COMPANY'S CHARTER ARE SET FORTH ABOVE, REFERENCE
SHOULD BE MADE TO THE TEXT OF THE AMENDMENT, A COPY OF WHICH IS ATTACHED TO
THIS PROXY STATEMENT AS ANNEX G.
- --------------------------------------------------------------------------------
PROPOSAL 9 - ELIMINATION OF VOTING OF EXCESS SHARES
- --------------------------------------------------------------------------------
GENERAL
Under Tennessee's "control share acquisition" statutes, a shareholder
who holds shares of stock in a Tennessee corporation may not vote shares held
in excess of specified percentage levels without the express approval of the
remaining shareholders. These specified percentages above which a shareholder
vote would be required are 20%, 33 1/3%, and 50%. Thus, a shareholder would
need to obtain approval of the remaining shareholders to vote those shares held
in excess of 20% but less than 33 1/3% and would require further approval to
vote shares held above 33 1/3% and then above 50%. The Company's charter does
not include any reference to such provisions of Tennessee law or otherwise
expressly require such a vote.
PROPOSED AMENDMENT
The proposed amendment would include within the Company's Charter
specific references to the current Tennessee state law provisions regarding
control share acquisitions. As a result of the proposed amendment, the Company
would apply the control share acquisition provisions to potential acquirors,
even if Tennessee subsequently repeals or revises these provisions.
CONSIDERATIONS IN SUPPORT OF THE AMENDMENT
The requirement for pre-approval before large blocks of stock may be
voted in their entirety is intended to provide existing shareholders with the
opportunity to directly indicate whether accumulation of large blocks of stock
by a single shareholder, or a group of shareholders acting together, is in the
best interests of the Company and its shareholders. Because Tennessee law
already provides such restriction, amending the Company's Charter to include a
specific reference to this limitation will result in no change of corporate
policy. Rather, this action will merely serve to clarify relevant and
important conditions that affect current and potential shareholders.
OTHER CONSIDERATIONS
This amendment may have the potential of discouraging an unsolicited
tender offer and acquisitions of substantial blocks of Common Stock. Because
proxy contests and large acquisitions tend to increase, at least temporarily,
market prices for the Common Stock, adoption of this proposal could deprive
shareholders of the Company of temporary opportunities to sell their shares at
higher market prices. Further, by deterring proxy contests or acquisitions of
substantial blocks of stock, this proposal could have the effect of inhibiting
certain changes in incumbent management, some or all of whom may be replaced
upon a change in control.
18
<PAGE> 23
VOTE REQUIRED
THE BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED THIS PROPOSAL AND
UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" THE APPROVAL OF THIS
PROPOSAL. APPROVAL OF THIS PROPOSAL REQUIRES THE AFFIRMATIVE VOTE OF A
MAJORITY OF THE TOTAL VOTES REPRESENTED AND ENTITLED TO BE CAST AT THE ANNUAL
MEETING AT WHICH A QUORUM IS PRESENT.
ALTHOUGH THE COMPANY BELIEVES THAT THE MATERIAL PROVISIONS OF THE
AMENDMENT TO THE COMPANY'S CHARTER ARE SET FORTH ABOVE, REFERENCE SHOULD BE
MADE TO THE TEXT OF THE AMENDMENT, A COPY OF WHICH IS ATTACHED TO THIS PROXY
STATEMENT AS ANNEX H.
- --------------------------------------------------------------------------------
PROPOSAL 10 - ADJOURNMENT OF THE ANNUAL MEETING
- --------------------------------------------------------------------------------
Approval of Proposals 2 through 9 require the affirmative vote of a
majority of the total votes represented and entitled to be cast at the Annual
Meeting at which quorum is present, except that Proposal 4 imposing a 66 2/3%
vote to remove directors must be approved by at least a 66 2/3% stockholder
vote. In the event there is an insufficient number of shares present in person
or by proxy at the Annual Meeting to approve any of these proposals, the Board
of Directors intends to adjourn the Annual Meeting to a later date. The place
and date to which the Annual Meeting is to be reconvened would be announced at
the Annual Meeting, but, in order to avoid the necessity of setting a new
record date or providing formal written notice of the adjournment, would in no
event be more than thirty (30) days after the date of the Annual Meeting.
The effect of any such adjournment would be to permit the Bank to
solicit additional proxies for approval of these proposals. While such an
adjournment would not invalidate any proxies previously filed, including those
filed by stockholders voting against the proposals, it would give the Company
the opportunity to solicit additional proxies in favor of the proposals. As a
result, such adjournment could be advantageous to stockholders who favor these
proposals and to the potential disadvantage of those who disfavor the
proposals.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" APPROVAL OF
THE ADJOURNMENT UNDER THE CIRCUMSTANCES DESCRIBED HEREIN. APPROVAL OF THE
ADJOURNMENT REQUIRES THE AFFIRMATIVE VOTE OF A MAJORITY OF THE TOTAL VOTES
REPRESENTED AND ENTITLED TO BE CAST AT THE ANNUAL MEETING AT WHICH A QUORUM IS
PRESENT.
- --------------------------------------------------------------------------------
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
- --------------------------------------------------------------------------------
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's officers and directors, and persons who own more than 10% of a
registered class of the Company's equity securities, to file reports of
ownership and changes in ownership with the SEC. Officers, directors and
greater-than-10% shareholders are required to furnish the Company with copies
of all such reports. Based solely on its review of copies of such reports
received by it, or written representations from certain reporting persons that
no annual report of change in beneficial ownership is required, the Company
believes that, during the year ended December 31, 1997, all such filing
requirements were complied with, except that Director J.W. Douthat did not
timely file his Form 5 for the 1997 fiscal year.
- --------------------------------------------------------------------------------
INDEPENDENT AUDITORS
- --------------------------------------------------------------------------------
The Board of Directors has appointed the public accounting firm of
Coopers & Lybrand L.L.P. to continue as independent auditors for the Company
for the fiscal year ending December 31, 1998. Coopers & Lybrand L.L.P. served
as the Company's independent auditors for the year ended December 31, 1997. A
representative of Coopers & Lybrand L.L.P. is expected to be present at the
Annual Meeting and available to respond to appropriate questions, and will have
the opportunity to make a statement if he so desires.
- --------------------------------------------------------------------------------
SHAREHOLDER PROPOSALS
- --------------------------------------------------------------------------------
Any shareholder who intends to present a proposal for action at next
year's annual meeting of the shareholders and would like a copy of the proposal
included in the Company's proxy materials for that meeting must forward a copy
of the proposal or proposals to the Company's principal executive office at 100
North Main Street, Greeneville, Tennessee 37743, and must be received by the
Company not later than December 5, 1998. Nothing in this paragraph shall be
deemed to require the Company to include in its proxy statement and proxy
relating to the 1999 annual meeting any shareholder
19
<PAGE> 24
proposal which does not meet all of the requirements for inclusion established
by the SEC in effect at the time such proposal is received.
- --------------------------------------------------------------------------------
OTHER MATTERS
- --------------------------------------------------------------------------------
The Board of Directors is not aware of any other business to be
presented for action by the shareholders at the Annual Meeting other than those
matters described in this Proxy Statement and matters incident to the conduct
of the Annual Meeting. If, however, any other matters known are properly
brought before the Annual Meeting, the persons named in the accompanying proxy
will vote such proxy on such matters as determined by a majority of the Board
of Directors.
- --------------------------------------------------------------------------------
MISCELLANEOUS
- --------------------------------------------------------------------------------
The cost of soliciting proxies will be borne by the Company. The
Company will reimburse brokerage firms and other custodians, nominees and
fiduciaries for reasonable expenses incurred by them in sending proxy materials
to the beneficial owners of Common Stock. In addition to solicitations by
mail, directors, officers and regular employees of the Company may solicit
proxies personally or by telegraph or telephone number without additional
compensation.
The Company's 1997 Annual Report to Shareholders (the "Annual
Report"), including financial statements, has been mailed to all persons who
were shareholders of record as of the close of business on the Record Date.
Any shareholder who has not received a copy of the Annual Report may obtain a
copy by writing to the Secretary of the Company. The Annual Report is not to
be treated as a part of this proxy solicitation material or as having been
incorporated herein by reference.
BY ORDER OF THE BOARD OF DIRECTORS
[INSERT SIGNATURE HERE]
Davis Stroud
Secretary
Greeneville, Tennessee
April 13, 1998
- --------------------------------------------------------------------------------
ANNUAL REPORT ON FORM 10-K
- --------------------------------------------------------------------------------
A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE FISCAL YEAR ENDED
DECEMBER 31, 1997, AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION, WILL
BE FURNISHED WITHOUT CHARGE TO PERSONS WHO WERE SHAREHOLDERS AS OF THE RECORD
DATE UPON WRITTEN REQUEST TO THE SECRETARY, GREENE COUNTY BANCSHARES, INC., 100
NORTH MAIN STREET, GREENEVILLE, TENNESSEE 37743.
- --------------------------------------------------------------------------------
20
<PAGE> 25
ANNEX A
CLASSIFIED BOARD AMENDMENT
It is proposed that the Company's Amended and Restated Charter be
amended to add a new Section 7B, which would read as follows:
The directors shall be divided into three classes designated as Class
I, Class II and Class III, each class to be as nearly equal in number
as possible. The term of office of the Class I directors shall expire
at the first annual meeting of the shareholders after the date on
which this provision of the Charter first becomes effective. The term
of office of the Class II directors shall expire at the second annual
meeting of shareholders after the date on which this provision of the
Charter first becomes effective. The term of office of the Class III
directors shall expire at the end of the third annual meeting after
this provision of the Charter first becomes effective. Thereafter, at
each annual meeting of shareholders of the Corporation, directors of
classes the terms of which expire at such annual meeting shall be
elected for terms of three years. Notwithstanding any of the
foregoing, a director whose term shall expire at any annual meeting
shall continue to serve until his or her successor is elected and has
qualified or until the director's death, retirement, resignation or
removal. Should a vacancy occur or be created, any director elected
or appointed to fill such vacancy shall serve for the full term of the
class in which the vacancy occurs or is created. If the number of
directors is changed, any increase or decrease in the number of
directors shall be apportioned among the classes so as to maintain the
number of directors in each class as nearly equal in number as
possible.
ANNEX B
SIZE OF THE BOARD
It is proposed that the Company's Amended and Restated Charter be
amended to add new Section 7A, which would read as follows:
Number of Directors. The Board of Directors shall consist of not less
than three (3) or more than fifteen (15) members, unless all of the
outstanding stock of the Corporation is owned of record by less than
three (3) shareholders, in which case the number of directors may be
less than three (3), but not less than the number of shareholders of
record. The exact number within such maximum and minimum numbers
shall be determined from time to time in accordance with the relevant
provisions of the Company's Bylaws.
ANNEX C
REMOVAL OF DIRECTORS
It is proposed that the Company's Amended and Restated Charter be
amended to add a new Section 7C, which would read as follows:
Notwithstanding any other provision of this Charter or the bylaws of
the Corporation, no director of the Corporation may be removed at any
time unless for cause and upon the affirmative vote of the holders of
at least 66 2/3% of the outstanding shares of capital stock of the
Corporation entitled to vote generally in the election of directors
(considered for this purpose as one class) cast at a meeting of the
shareholders called for that purpose, except as otherwise required by
law.
ANNEX D
PROHIBITION OF CUMULATIVE VOTING
It is proposed that the Company's Amended and Restated Charter be
amended to add a new Section 8(h), which would read as follows:
(h) There shall be no cumulative voting by shareholders of
any class or series in the election of directors of the
Corporation.
A-1
<PAGE> 26
ANNEX E
SPECIAL MEETINGS OF SHAREHOLDERS
It is proposed that the Company's Amended and Restated Charter be
amended to add a new Section 8(i), which would read as follows:
Special meetings of shareholders may be called at any time, but only
by the board of directors or a committee of the board of directors
that has been duly designated by the board of directors.
ANNEX F
INCREASED LEVEL OF AUTHORIZED SHARES
It is proposed that Section 6(b) of the Company's Amended and Restated
Charter be deleted in its entirety and substituted as follows:
(b) Five Million (5,000,000) shares of Common Stock, with a
par value of Ten Dollars ($10.00) per share.
ANNEX G
ADVANCE NOTICE AMENDMENT
It is proposed that the Company's Amended and Restated Charter be
amended to add a new Section 6A, which would read as follows:
(a) (1) Nominations of persons for election to the Board of Directors
and the proposal of business to be considered at any annual or special
meetings of shareholders may be made by the Board of Directors or by
any shareholder of the Corporation who was a shareholder of record
both at the time of giving of notice provided for in this Section and
at the time of the annual meeting, who is entitled to vote at the
meeting and who complied with the notice procedures set forth in this
Section.
(2) For nominations or other business to be properly brought
before an annual or special meeting by a shareholder pursuant to
paragraph (a) (1) of this Section, the shareholder must have given
timely notice thereof in writing to the Secretary of the corporation
and such other business must otherwise be a proper matter for action
by shareholders. To be timely, a shareholder's notice shall be
delivered to the Secretary at the principal executive offices of the
Corporation no less than 40 days nor more than 60 days prior to the
scheduled date of such meeting in which the matter is to be acted
upon; except that if notice or public disclosure of the meeting is
effected fewer than 50 days before the meeting, such written notice
must be delivered to the Secretary of the Corporation not later than
the close of the 10th day following the day on which notice of the
meeting was mailed to shareholders. In no event shall notice or
public announcement of a postponement or adjournment of such meeting
to a later date or time commence a new time period for the giving of a
shareholder's notice as described above. Such shareholder's notice
shall set forth (i) as to each person whom the shareholder proposes to
nominate for election or reelection as a corporation all information
relating to such person that is required to be disclosed in
solicitations of proxies for election of directors, or is otherwise
required, in each case pursuant to Regulation 14A under the Securities
Exchange Act of 1934, as amended (the "Exchange Act") (including such
person's written consent to being named in the proxy statement as a
nominee and to serving as a corporation if elected); (ii) as to any
other business that the shareholder proposes to bring before the
meeting, a brief description of the business desired to be brought
before the meeting, the reasons for conducting such business at the
meeting and any material interest in such business of such shareholder
and of the beneficial owner, if any, on whose behalf the proposal is
made; and (iii) as to the shareholder giving the notice and the
beneficial owner, if any, on whose behalf the nomination or proposal
is made, (x) the name and address of such shareholder, as they appear
on the corporation's books, and of such beneficial owner and (y) the
number of each class of shares of the corporation which are owned
beneficially and of record by such shareholder and such beneficial
owner.
(3) Notwithstanding anything in the second sentence of paragraph
(a) (2) of this Section to the contrary, in the event that the number
of directors to be elected to the Board of Directors is increased and
there is no public announcement by the corporation naming all of the
nominees for director or specifying the size of the increased Board
A-2
<PAGE> 27
of Directors at least 70 days prior to the first anniversary of the
preceding year's annual meeting, a shareholder's notice required by
this Section shall also be considered timely, but only with respect to
nominees for any new positions created by such increase, if it shall
be delivered to the Secretary at the principal executive offices of
the corporation not later than the close of business on the tenth day
following the day on which such public announcement is first made by
the corporation.
(b) (1) Only such persons who are nominated in accordance with the
procedures set forth in this Section shall be eligible to serve as
directors and only such business shall be conducted at a meeting of
shareholders as shall have been brought before the meeting in
accordance with the procedures set forth in this Section. The
presiding officer of the meeting shall have the power and duty to
determine whether a nomination or any business proposed to be brought
before the meeting was made in accordance with the procedures set
forth this Section and, if any proposed nomination or business is not
in compliance with this Section, to declare that such defective
nomination or proposal be disregarded.
(2) For purposes of this Section, "public announcement" shall mean
disclosure in a press release reported by the Dow Jones News Service,
Associated Press or comparable news service or in a document publicly
filed by the corporation with the Securities and Exchange Commission
pursuant to Section 13, 14 or 15(d) of the Exchange Act.
(3) Notwithstanding the foregoing provisions of this Section, a
shareholder shall also comply with all applicable requirements of
state law and of the Exchange Act and the rules and regulations
thereunder with respect to the matters set forth in this Section.
Nothing in this Section shall be deemed to affect any rights of
shareholders to request inclusion of proposals in the Corporation's
proxy statement pursuant to Rule 14a-8 under the Exchange Act.
ANNEX H
CONTROL SHARE ACQUISITIONS
It is proposed that the Company's Amended and Restated Charter be
amended to add new Section 8(j), which would read as follows:
(i) "Control share acquisitions," as defined in Section
48-35-302 of the Tennessee Code, respecting the shares of the
Company shall be governed by and subject to the provisions of
the Tennessee Control Share Acquisition Act, and Sections
48-35-308 and Sections 48-35-308 and 49-35-309 of the
Tennessee Control Share Acquisition Act shall apply to the
Corporation.
A-3
<PAGE> 28
GREENE COUNTY BANCSHARES, INC.
100 NORTH MAIN STREET
GREENEVILLE, TENNESSEE 37443
REVOCABLE PROXY FOR THE ANNUAL MEETING
OF SHAREHOLDERS
MAY 13, 1998
The undersigned hereby constitutes and appoints R. Stan Puckett and
Davis Stroud, and each of them, the proxies of the undersigned, with full power
of substitution, to attend the Annual Meeting of Shareholders of Greene County
Bancshares, Inc. (the "Company") to be held at the General Morgan Inn, 111
North Main Street, Greeneville, Tennessee on Wednesday, May 13, 1998 at 11:00
a.m., local time, and any adjournments thereof, and to vote all the shares of
stock of the Company which the undersigned may be entitled to vote, upon the
following matters.
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS OF THE COMPANY, WILL
BE VOTED IN ACCORDANCE WITH THE INSTRUCTIONS MARKED HEREIN, AND WILL BE VOTED
FOR THE ELECTION OF DIRECTORS AND AS DETERMINED BY A MAJORITY OF THE BOARD OF
DIRECTORS AS TO OTHER MATTERS, IF NO INSTRUCTIONS TO THE CONTRARY ARE MARKED
HEREIN.
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1. The Election of Directors: Harrison Lamons; R. Stan Puckett;
Philip M. Bachman, Jr.; Terry Leonard; Ralph T. Brown;
James A. Emory; W.T. Daniels; Davis Stroud; Charles S. Brooks;
J.W. Douthat; Helen Horner and Jerald Jaynes.
[ ] FOR all nominees listed above [ ] WITHHOLD AUTHORITY to
(except as marked to the contrary below). vote for all nominees listed above.
(INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, PRINT THAT NOMINEE'S NAME BELOW.)
- ------------------------------------------------------------------------------------------------------------
2. Amendment (the "Classified Board Proposal") to FOR AGAINST ABSTAIN
the Company's Restated and Amended Charter to
provide for a classified Board of Directors [ ] [ ] [ ]
whose members will serve staggered terms.
3. Amendment to the Company's Restated and Amended
Charter to set forth the allowable range of the
number of directors. [ ] [ ] [ ]
4. Amendment to the Company's Restated and Amended
Charter to provide for the removal of directors
only for cause and only upon the affirmative [ ] [ ] [ ]
vote of at least two-thirds (66%) of the
outstanding stock.
5. Amendment to the Company's Restated and
Amended Charter to prohibit cumulative voting. [ ] [ ] [ ]
6. Amendment to the Company's Restated and
Amended Charter to permit only the Board of [ ] [ ] [ ]
Directors to call a special meeting of
stockholders.
7. Amendment to the Company's Restated and
Amended Charter to increase the number of [ ] [ ] [ ]
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authorized shares to 5,000,000 shares of common
stock.
8. Amendment to the Company's Restated and
Amended Charter to require advance notice for
nominations of directors or proposal of new [ ] [ ] [ ]
business by stockholders.
9. Amendment to the Company's Restated and
Amended Charter to eliminate voting of excess [ ] [ ] [ ]
shares acquired by a single stockholder without
prior approval.
10. Adjournment of the Annual Meeting if there are
an insufficient number of votes present in
person or by proxy to approve any of the [ ] [ ] [ ]
proposed amendments to the Company's Restated
and Amended Charter.
11. The transaction of such other business as may
properly come before the Annual Meeting or any
adjournments thereof.
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The undersigned hereby acknowledges receipt of a copy of the
accompanying Notice of Annual Meeting of the Shareholders and Proxy Statement
and the Annual Report to Shareholders for the fiscal year ended December 31,
1997, and hereby revokes any proxy heretofore given. THIS PROXY MAY BE REVOKED
AT ANY TIME BEFORE ITS EXERCISE.
Date:
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Signature:
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Signature:
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PLEASE MARK, DATE AND SIGN AS YOUR NAME APPEARS HEREIN AND RETURN IN THE
ENCLOSED ENVELOPE. If acting as executor, administrator, trustee, guardian,
etc. you should so indicate when signing. If the signor is a corporation,
please sign the full name by duly appointed officer. If a partnership, please
sign in partnership name by authorized person. If shares are held jointly,
each shareholder named should sign.
