Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934.
(Amendment No. )
Filed by the Registrant x Filed by a Party other than the Registrant Check the
appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2)
[x] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to ss. 240.14a-11(c) or ss. 240.14a-12
M & M FINANCIAL CORPORATION
(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)(4) 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:
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>
M & M FINANCIAL CORPORATION
307 North Main Street
Marion, South Carolina 29571
(803) 431-1000
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To be held April 16, 1998
TO THE SHAREHOLDERS:
Notice is hereby given that the Annual Meeting of the Shareholders (the
"Annual Meeting") of M & M Financial Corporation, a South Carolina corporation
(the "Company"), will be held at the Opera House, West Godbold Street, Marion,
South Carolina, at 5:30 p.m., on Thursday, April 16, 1998, for the following
purposes:
(1) To elect five directors to serve one-year terms;
(2) To ratify the appointment of Tourville, Simpson and Henderson as
independent auditors for the Company for the fiscal year ending
December 31, 1998; and
(3) To transact such other business as may properly come before the Annual
Meeting or any adjournment thereof.
Only record holders of Common Stock of the Company at the close of business
on April 2, 1998, are entitled to notice of and to vote at the Annual Meeting or
any adjournment thereof.
The Company's Proxy Statement, form of Proxy and 1997 Annual Report to
stockholders are enclosed with this notice.
You are cordially invited and urged to attend the Annual Meeting in person.
WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING IN PERSON, YOU ARE
REQUESTED TO COMPLETE, DATE, SIGN AND PROMPTLY RETURN THE ENCLOSED PROXY IN THE
ENCLOSED, SELF- ADDRESSED, STAMPED ENVELOPE. If you need assistance in
completing your proxy, please call the company at (803) 431-1000. If you are the
record owner of your shares and attend the annual meeting and desire to revoke
your proxy and vote in person you may do so. In any event, a proxy may be
revoked by the record owner of shares at any time before it is exercised.
THE COMPANY'S BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR APPROVAL
OF ALL THE PROPOSALS PRESENTED.
By Order of the Board of Directors
Chester A. Duke
Chairman and President
Marion, South Carolina
April 2, 1998
<PAGE>
M & M Financial Corporation
307 North Main Street
Marion, South Carolina 29571
PROXY STATEMENT
FOR THE ANNUAL MEETING OF SHAREHOLDERS
to be Held April 16, 1998
-------------------------------------------------
This Proxy Statement is furnished to shareholders of M & M Financial
Corporation, a South Carolina corporation (herein, unless the context otherwise
requires, together with its subsidiaries, the "Company"), in connection with the
solicitation of proxies by the Company's Board of Directors for use at the
Annual Meeting of Shareholders to be held at the Opera House, West Godbold
Street, Marion, South Carolina, at 5:30 p.m., on Thursday, April 16, 1998, or
any adjournment thereof (the "Annual Meeting"), for the purposes set forth in
the accompanying Notice of Annual Meeting of Shareholders.
Solicitation of proxies may be made in person or by mail, telephone or
telegraph by directors, officers and regular employees of the Company. The
Company may also request banking institutions, brokerage firms, custodians,
nominees and fiduciaries to forward solicitation materials to the beneficial
owners of Common Stock of the Company held of record by such persons, and the
Company will reimburse the reasonable forwarding expenses. The cost of
solicitation of proxies will be paid by the Company. This Proxy Statement was
first mailed to shareholders on or about April 2, 1998.
The Company's principal executive offices are located at 307 North Main
Street, Marion, South Carolina 29571. The Company's telephone number is (803)
431-1000.
ANNUAL REPORT
The Annual Report to Shareholders covering the Company's fiscal year ended
December 31, 1997, including financial statements, is enclosed herewith. Such
Annual Report to Shareholders does not form any part of the material for the
solicitation of proxies.
REVOCATION OF PROXY
Any record shareholder returning the accompanying proxy may revoke such
proxy at any time prior to its exercise (a) by giving written notice to the
Company of such revocation, (b) by voting in person at the meeting, or (c) by
executing and delivering to the Company a later dated proxy. Attendance at the
Annual Meeting will not in itself constitute revocation of a proxy. Any written
notice or proxy revoking a proxy should be sent to M & M Financial Corporation,
307 North Main Street, Marion, South Carolina 29571, Attention: Chester A. Duke,
President. Written notice of revocation or delivery of a later dated proxy will
be effective upon receipt thereof by the Company.
QUORUM AND VOTING
The Company's only voting security is its no par value Common Stock
("Common Stock"), each share of which entitles the holder thereof to one vote on
each matter to come before the Annual Meeting. At the close of business on April
2, 1998 (the "Record Date"), the Company had issued and outstanding 1,006,116
shares of Common Stock, which were held of record by approximately 708 persons.
Only shareholders of record at the close of business on the Record Date are
entitled to notice of and to vote on matters that come before the Annual
Meeting. Notwithstanding the Record Date specified above, the Company's stock
transfer books will not be closed and shares of the Common Stock may be
transferred subsequent to the Record Date. However, all votes must be cast in
the names of holders of record on the Record Date.
<PAGE>
The presence in person or by proxy of the holders of a majority of the
outstanding shares of Common Stock entitled to vote at the Annual Meeting is
necessary to constitute a quorum at the Annual Meeting. If a share is
represented for any purpose at the Annual Meeting by the presence of the
registered owner or a person holding a valid proxy for the registered owner, it
is deemed to be present for the purposes of establishing a quorum. Therefore,
valid proxies which are marked "Abstain" or "Withhold" or as to which no vote is
marked, including proxies submitted by brokers that are the record owners of
shares (so-called "broker non-votes"), will be included in determining the
number of votes present or represented at the Annual Meeting. If a quorum is not
present or represented at the meeting, the shareholders entitled to vote,
present in person or represented by proxy, have the power to adjourn the meeting
from time to time, without notice other than an announcement at the meeting,
until a quorum is present or represented. Directors, officers and regular
employees of the Company may solicit proxies for the reconvened meeting in
person or by mail, telephone or telegraph. At any such reconvened meeting at
which a quorum is present or represented, any business may be transacted that
might have been transacted at the meeting as originally noticed.
If a quorum is present at the meeting, directors will be elected by a
plurality of the votes cast by shares present and entitled to vote at the
meeting. Votes that are withheld or shares that are not voted in the election of
directors will have no effect on the outcome of election of directors.
Cumulative voting is permitted. See "CUMULATIVE VOTING RIGHTS."
If a quorum is present, all other matters which may be considered and acted
upon by the holders of Common Stock at the Annual Meeting, including
ratification of appointment of Tourville, Simpson and Henderson as accountants
for the fiscal year ending December 31, 1998, will be approved if the votes cast
in favor of the proposal at the Annual Meeting exceed the votes cast opposing
the proposal.
ACTIONS TO BE TAKEN BY THE PROXIES
Each proxy, unless the shareholder otherwise specifies therein, will be
voted "FOR" the election of the persons named in this Proxy Statement as the
Board of Directors' nominees for election to the Board of Directors, and "FOR"
the ratification of the appointment of Tourville, Simpson and Henderson as
accountants for the fiscal year ending December 31, 1998. In each case where the
shareholder has appropriately specified how the proxy is to be voted, it will be
voted in accordance with his specifications. As to any other matter of business
which may be brought before the Annual Meeting, a vote may be cast pursuant to
the accompanying proxy in accordance with the best judgment of the persons
voting the same, but the Board of Directors does not know of any such other
business.
CUMULATIVE VOTING RIGHTS
Each holder of shares is entitled to cumulate his votes for election of
directors. Votes may be cumulated in the following ways: (1) giving one nominee
as many votes as the number of directors to be elected, multiplied by the number
of shares owned, or (2) distributing votes on the same principle among any
number of nominees.
Conditions precedent to the exercise of cumulative voting are either: (1)
giving written notice of intention to vote cumulatively to the Chairman, CEO and
President of the Bank not less than forty-eight hours before the time of the
meeting; or (2) announcing intention to vote cumulatively at the meeting before
voting for directors begins. Once a shareholder gives notice of intention to
vote cumulatively, all shareholders entitled to vote at the meeting may cumulate
their votes. If notice is given at the meeting, the presiding officer may, or if
requested by any shareholder, shall recess the meeting for a period not to
exceed two hours.
If shares are voted cumulatively, shares represented by proxies will be
cumulated in such manner as necessary to elect the greatest possible number of
management nominees.
2
<PAGE>
STOCKHOLDER PROPOSALS
Any shareholder of the Company desiring to present a proposal for action at
the 1999 Annual Meeting of Shareholders must deliver the proposal to the
executive offices of the Company no later than December 4, 1998. Only proper
proposals that are timely received will be included in the Company's Proxy
Statement and Proxy.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of March 3, 1998, the number and
percentage of outstanding shares beneficially owned by (i) each director and
director nominee of the Company, (ii) the person named in the Summary
Compensation Table, and (iii) all executive officers and directors of the
Company as a group. To the Company's knowledge, no shareholder owned
beneficially more than 5% of the Company's outstanding voting stock as of such
date.
<TABLE>
<CAPTION>
Number of % of
Shares Common
Name and Address Position in the Company Beneficially Stock
of 5% Shareholders and First National South Owned Ownership
- - ------------------ ------------------------ ------------ ---------
<S> <C> <C> <C>
Chester A. Duke Chairman, President 11,178(1) 1.11
and Chief Executive
Officer
Charles McElveen Director 8,400(2) .84
J. M. McLendon Director 9,600 .95
Bruce Siegal Director 2,001(3) .19
Nancy B. Williams Director 18,050(4) 1.79
All executive officers and Directors 59,188(5) 5.88
as a group (9 persons)
</TABLE>
(1) Includes 270 shares owned by Mr. Duke's wife, as to which Mr. Duke
disclaims beneficial ownership; 1,575 shares held in a self-directed
Individual Retirement Account; 1,992 shares held by First National South
f/b/o Mr. Duke; 1,200 shares owned by the W. H. Bryant Charitable Trust of
which Mr. Duke is one of three Trustees; and 2,700 shares subject to
currently exercisable options or options that first become exercisable
within 90 days of March 3, 1998.
(2) Includes 2,700 shares owned by Mr. McElveen's wife and 900 shares owned by
his children, as to which Mr. McElveen disclaims beneficial ownership.
(3) Includes 150 shares owned by Mr. Siegal's wife, as to which Mr. Siegal
disclaims beneficial ownership.
(4) Includes 750 shares owned by Mrs. Williams' husband and 7,800 shares owned
by her children, as to which Mrs. Williams disclaims beneficial ownership.
(5) Includes 4,715 shares subject to currently exercisable options or options
that become exercisable within 90 days of March 3, 1998.
ELECTION OF DIRECTORS
The Bylaws of the Company provide for a Board of Directors consisting of
not less than five nor more than twenty-five directors. The number of directors
is currently fixed by the Board at five, and five directors have been nominated
for re-election by the shareholders at the 1998 Annual Meeting to serve for
one-year terms. All directors serve until their successors are elected and
qualified to serve. All of the nominees are presently directors of the Company
and have served continuously since first becoming directors.
3
<PAGE>
Should any of the nominees become unable or unwilling to accept nomination
or election, it is intended that the persons acting under the proxy will vote
for the election, in his stead, of such other person or persons as the Board of
Directors of the Company may recommend. The Board of Directors has no reason to
believe that any of the proposed directors will be unable or unwilling to serve
if elected.
MANAGEMENT
The table below sets forth the age, business experience for the past five
years, and term in office for each of the directors and executive officers of
the Company. Each of the directors of the Company, except Mrs. Williams, is also
a director of First National South.
<TABLE>
<CAPTION>
Director Business experience
Name, Address (and age) Since(1) during the past 5 years
- - ----------------------- --------- -----------------------
<S> <C> <C>
Chester A. Duke (58) 1981 Chairman, President and Chief Executive Officer of the
Company and First National South
Marion E. Freeman (74) - Assistant President of the Company and First National South
since January, 1995; Chief Financial Officer of the
Company and First National South until December, 1997;
Executive Vice President of the Company and First National
South from 1988 to 1995; Secretary of the Company and
First National South
George H. Hardwick (55) - Executive Vice President of the Company and First National
South since 1995; Senior Vice President from 1994 to 1995;
Vice President and Cashier of Davis National Bank, Mullins,
South Carolina, from 1981 to 1994
Charles B. McElveen (50) 1985 President, Swamp Fox Timber Co., Inc. (timber dealer)
J. M. McLendon (88) 1954 Attorney, McLendon & Sloan
Richard C. Mathis (47) - Executive Vice President and Chief Financial Officer of the
Company and First National South since December, 1997;
registered investment broker - Stern, Agee & Lynch, Inc.
from October, 1996 to December, 1997; Vice President,
Bear Stearns & Co. from March, 1996 to October, 1996;
various positions with Wachovia Bank, N.A. from 1983 to
March, 1996 (final position - Senior Investment Portfolio
Manager)
Bruce Siegal (56) 1986 President, Supreme Corporation (light bulb manufacturer)
Curtis A. Tyner (49) - Executive Vice President of the Company and First National
South since 1994; Executive Vice President of Palmetto
Bank, Laurens, South Carolina, from 1976 to 1994
Nancy B. Williams (49) 1991 Owner - Barringers Jewelers of Palmetto Bank from 1993
to 1994
</TABLE>
(1) Includes service as a director of First National South or Davis National
Bank, which merged with First National South in 1994.
There are no family relationships among any of the directors and executive
officers of the Company.
4
<PAGE>
Meetings of the Board of Directors and Committees
The Board of Directors of the Company held 12 meetings during 1997. The
Company maintains no standing committees. The Board of Directors of First
National South (the "Bank"), which met 12 times in 1997, has standing Executive,
Funds Management, Loan, Audit, Facilities and Planning, and Pension Committees.
All directors attended at least 75% of the meetings of the Board of Directors of
the Company and of the Committees of the Board of the Bank on which they served
during 1997.
Nominating Committee - The Board of Directors acts as nominating committee, but
any Shareholder of any outstanding class of capital stock of the Company
entitled to vote for the election of Directors may also present nominations for
directors. Nominations, other than those made by or on behalf of the existing
management of the Company, shall be made in writing and shall be delivered or
mailed to the President of the Company, not less than 14 days nor more than 50
days prior to any meeting of Shareholders called for the election of Directors;
provided, however, that if less than 21 days' notice of the meeting is given to
Shareholders, such nomination shall be mailed or delivered to the President of
the Company not later than the close of business on the seventh day following
the date on which the notice of meeting was mailed. Such notification shall
contain the following information to the extent known to the notifying
Shareholder: (a) the name and address of each proposed nominee; (b) the
principal occupation of each proposed nominee; (c) the total number of shares of
capital stock of the Company that will be voted for each proposed nominee; (d)
the name and residence address of the notifying Shareholder; and (e) the number
of shares of capital stock of the Company owned by the notifying shareholder.
Nominations not made in accordance with these requirements may be disregarded by
the Chairman of the meeting, and upon his instructions, the vote tellers may
disregard all votes cast for each such nominee.
MANAGEMENT COMPENSATION
Executive Officer Compensation
The following table summarizes for the years ended December 31, 1997, 1996
and 1995 the executive compensation paid to the Chairman and Chief Executive
Officer of the Company, the only executive officer of the Company or the Bank
who received compensation greater than $100,000 in 1997.
<TABLE>
<CAPTION>
Summary Compensation Table
Long-Term
Compensation
Number of
Securities
Underlying
Annual Compensation(1) Options All Other
Name and Principal Position Year Salary Bonus Awarded Compensation(2)
- - --------------------------- ---- ------ ----- ------- ---------------
<S> <C> <C> <C> <C> <C>
Chester A. Duke 1997 $140,000 $ - 13,500 $37,043
Chairman of the Board 1996 132,300 3,000 - 28,754
and Chief Executive Officer 1995 126,000 - - 21,464
- - ---------------------
</TABLE>
(1) The aggregate amount of perquisites and other personal benefits paid during
1997 to Mr. Duke or on his behalf did not exceed the lesser of either
$50,000 or 10% of his total annual salary and bonus.
(2) The amounts disclosed in this column include for 1997, 1996 and 1995,
respectively, $,4,846, $4,750 and $3,990 of contributions by the Bank to
the 401(k) Plan on Mr. Duke's behalf, $9,800, $21,098 and $14,568 of
contributions by the Bank on Mr. Duke's behalf to the noncontributory
defined benefit pension plan, which was replaced in 1997 by the Money
Purchase Pension Plan, and $2,907, $2,907 and $2,907 of premiums on life
insurance paid by the Bank for the benefit of Mr. Duke.
Amounts disclosed also include $19,490 accrued by the Bank for the benefit
of Mr. Duke pursuant to the Salary Continuation Plan entered into between
the Bank and Mr. Duke in December, 1997. See "Employee
5
<PAGE>
Benefit Plans -- Salary Continuation Agreements." Accruals and benefits
payable to Mr. Duke under this plan are set forth below.
Early Termination Disability
Plan Accrual Benefit Benefit
Year* Balance Payable at 65 Payable Immediately
----- --------- --------------- -------------------
1 $ 44,247 $ 7,928 $ 4,537
2 93,751 15,511 9,613
3 149,353 22,816 15,315
4 212,135 29,924 21,752
5 283,574 36,936 29,078
6 365,877 44,003 37,517
7 462,954 51,411 47,471
8 585,131 59,999 59,999
*Plan Year 1 commenced in August, 1997.
The Company does not presently pay bonuses to its executive officers and
offers no perquisites to its executive officers that are not available to all
employees.
The following table sets forth information about stock options granted to
the Chairman and Chief Executive Officer in 1997. See "Employee Benefit Plans --
1997 Incentive Stock Option Plan" for information about the plan pursuant to
which these options were granted.
<TABLE>
<CAPTION>
Option Grants in Last Fiscal Year
- - --------------------------------------------------------------------------------------
Individual Grants
- - --------------------------------------------------------------------------------------
--------------------------------
Number of % of Total Potential Realizable Value at
Securities Options Assumed Annual Rates of Stock
Underlying Granted to Exercise Price Appreciation for 10-Year
Options Employees Price Expiration Option Term(2)
Name Granted(1) in 1997 (per share) Date -------------------------------
- - ---- ---------- ------- ----------- ----
5% 10%
---- ----
<S> <C> <C> <C> <C> <C> <C>
Chester A. Duke 13,500 25% $13.33 5/6/07 $113,130 $286,740
</TABLE>
- - --------------------
(1) These options were granted on May 6, 1997 and become exercisable according
to the right column of following schedule. Such options were granted for a
period of ten years, subject to earlier expiration in certain events
related to termination of employment.
Vesting for Participants After Grant of Options Determined on Years
of Service at the Time Options Granted:
Years of Service 5 Years or Less 6 to 10 Years 11 to 20 Years
After Grant of Option of Service of Service of Service
--------------------- ------------ ------------ -----------
Immediate 5% 10% 20%
1 15% 20% 30%
2 25% 30% 40%
3 35% 40% 50%
4 45% 50% 60%
5 55% 60% 70%
6 65% 70% 80%
7 75% 80% 90%
8 85% 90% 100%
9 95% 100% 100%
10 100% 100% 100%
(2) The amounts in these columns are the result of calculations based on the
assumption that the market price of the Common Stock will appreciate in
value from the date of grant to the end of the ten-year option term at the
rates of 5% and 10% per year. The 5% and 10% annual appreciation
assumptions are required by the Securities and Exchange Commission; they
are not intended to forecast possible future appreciation, if any, of the
Company's stock price.
6
<PAGE>
The following table sets forth information about stock options held at
December 31, 1997 by the Chairman and Chief Executive Officer.
<TABLE>
<CAPTION>
Aggregated Option Exercises in 1997 and 1997 Year End Option Values
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money
Shares Acquired Value Options at 12/31/97 Options at 12/31/97
Name on Exercise Realized Exercisable Unexercisable Exercisable* Unexercisable
- - ---- --------------- -------- ----------- ------------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
Chester A. Duke - - 2,700 10,800 $40,500 $162,000
</TABLE>
*The fair value of the stock has been estimated at $15.00 per share. The
exercise price of the options is $13.33 per share and they expire on May 6,
2007.
Employment Contracts
The Company and the Bank have entered into employment contracts with four
of the executive officers of the Company, including Mr. Duke. The agreement with
Mr. Duke is for a term of four years and is automatically extended for an
additional year on each anniversary of the agreement until Mr. Duke reaches age
61, unless notice is given by either party that the term of the agreement will
not be extended. The agreement provides that Mr. Duke shall serve as President
and Chief Executive Officer of the Company and sets forth his responsibilities
in such positions. The agreement further provides that Mr. Duke shall be paid an
annual salary commensurate with the salary for comparable positions within the
banking industry. The agreement provides for disability benefits equal to (a)
Mr. Duke's regular salary, less disability income benefits, for the first 90
days of disability; and (b) 50% of Mr. Duke's regular salary, less disability
income benefits, for a period not to exceed six months from the beginning of the
injury or illness that caused him to be unable to work. After such six month
period, if Mr. Duke is no longer able to work, the agreement will terminate and
all duties and obligations of the parties to each other will cease.
In the event of a merger or acquisition of the Company, Mr. Duke's salary
is required to be maintained at a level equal to or greater than his salary at
the time of such transaction, regardless of the duties performed, if any, for a
minimum period of four years; provided, however, that the agreement will
terminate after such a merger or acquisition at the end of the agreement year in
which Mr. Duke reaches age 65. Furthermore, if Mr. Duke voluntarily resigns and
obtains any other employment or receives compensation as an advisor or
consultant from any other entity, then all further salary obligations of the
Company to Mr. Duke will cease. The agreement also entitles Mr. Duke to fringe
benefits, including group hospitalization insurance, major medical insurance,
group life insurance, and group disability insurance. Mr. Duke agrees in the
agreement not to compete with the Company by taking a similar position with
another banking institution in Marion County, South Carolina for a period of two
years upon his voluntary retirement or his breach of the agreement.
Director Compensation
The Company pays no directors fees, but the Bank pays directors fees of
$450 per meeting attended for service as a director of the Bank and $50 per Bank
committee meeting attended. Fees paid in 1997 to directors of the Company who
are also directors of the Bank totalled $83,207.00.
7
<PAGE>
Employee Benefit Plans
401(K) Plan and Money Purchase Pension Plan
The Bank has a pre-tax savings plan ("401(k) Plan") which covers
substantially all employees. Eligible employees may elect to defer up to 10% of
their gross compensation in the 401(k) Plan. The 401(k) Plan provides for the
Bank to contribute an amount equal to 50% of a participant's deferred
contribution, and the 401(k) Plan allows for discretionary employer
contributions out of its net profits. For 1997 the Board of Directors approved a
discretionary employer contribution of $68,834.
The Bank also has a Money Purchase Pension Plan (the "MPP Plan") which
covers substantially all employees. The MPP was adopted in 1997 and replaced the
noncontributory defined benefit pension plan, which is no longer in effect. The
MPP Plan provides for the Bank to contribute annually 7% of the eligible
employee's gross compensation (up to a maximum compensation of $150,000 or such
higher amount as allowed by federal law).
Participation in the MPP Plan is not optional for eligible employees.
Expenses and amounts contributed for the 401(k) Plan and the Money Purchase
Pension Plan which are included as employee benefits expense were $208,834,
$144,528 and $184,244, for the years ended December 31, 1997, 1996 and 1995,
respectively.
1997 Incentive Stock Option Plan
At the 1997 Annual Meeting of Shareholders, the shareholders approved the
1997 Incentive Stock Option Plan, which reserved 26,000 shares of Common Stock
for issuance pursuant to the exercise of incentive stock options granted
pursuant to the plan. Options may be granted pursuant to the plan to persons who
are employees of the Company or any subsidiary (including officers and directors
who are employees) at the time of grant. All incentive stock options must have
an exercise price not less than the fair market value of the Common Stock at the
date of grant, as determined by the Board of Directors. The Board of Directors
may set other terms for the exercise of the options but may not grant to any one
holder more than $100,000 of incentive stock options (based on the fair market
value of the optioned shares on the date of the grant of the option) which first
become exercisable in any calendar year. The Board of Directors also selects the
employees to receive grants under the plan and determines the number of shares
covered by options granted under the plan. Options awarded under the Plan become
exercisable pursuant to a vesting schedule set forth in the Plan, which is based
on years of service (a copy of the schedule appears in note 1 to the "Option
Grants in Last Fiscal Year" table). In the event of a change of control of the
Company (as defined in the Plan), all options become immediately exercisable. No
options may be exercised after ten years from the date of grant, options may not
be transferred except by will or the laws of descent and distribution, and
options may be exercised only while the optionee is an employee of the Company,
within three months after the date of termination of employment, or within
twelve months of death or disability. The plan will terminate on May 6, 2007,
and no options will be granted thereunder after that date.
Deferred Compensation Agreements
The Company and the Bank have entered into an agreement relating to
deferred compensation with four of the executive officers of the Company,
including the Chairman and Chief Executive Officer. Although the agreement is
called a "Phantom Stock Agreement," it is not a true phantom stock arrangement.
Pursuant to the Agreement, the Board of Directors of the Bank determines
annually the executive's "Phantom Stock Award Percentage" based on annual
performance objectives. A "Phantom Stock Award Amount" is then calculated
annually by multiplying the Executive's base salary by the Phantom Stock Award
Percentage. The Phantom Stock Award Amount for the Executive is then deferred
into a Phantom Stock Account. Amounts held in the Phantom Stock Account earn
interest at an annual rate, compounded annually, equal to the percentage change
in the fair market value of the Company's common stock over a one year period,
measured on December 31 of each year plus an amount equal to the total dividends
paid during the fiscal year divided by total stockholders' equity less preferred
stock, measured as of the beginning of the fiscal year. Upon normal or early
retirement or in the event of termination of employment due to
8
<PAGE>
disability or death, the Bank will pay to the employee the balance of his
Phantom Stock Account at the date of retirement or termination of employment.
The benefit will be payable in 180 equal monthly installments and the benefit
amount will be annuitized over 180 months, crediting interest on the unpaid
balance of the benefit amount at an annual rate of 8% during the installment
period. In the event of a change of control of the Company (as defined in the
Agreement) the Bank will pay the Executive the balance of his Phantom Stock
Account at the date of any termination of employment in a lump sum within 60
days after such change in control. In the event that the Executive suffers an
unforeseeable financial emergency, the Bank may, in its discretion distribute to
the Executive all or a portion of the balance in his Phantom Stock Account in an
amount not greater than necessary to relieve the financial hardship. No benefits
will be payable under the Agreement if the Executive's employment is terminated
for cause (as defined in the Agreement).
Salary Continuation Agreements
The Bank has entered into a Salary Continuation Agreement with three of its
executive officers, including the Chairman and Chief Executive Officer. The
Salary Continuation Agreement provides for cash payments to the covered
executive officers in the event of their retirement, disability, death, or a
change in control of the Company (as defined in the Agreement). The Chairman and
Chief Executive Officer's agreement requires that the Bank make salary payments
to him or his beneficiary for 19 years after his sixty-fifth birthday unless his
employment is terminated for cause. If the Chairman and Chief Executive Officer
remains employed by the Bank until age 65 his annual benefit will be at least
$60,000. If his employment terminates before age 65, his annual benefit is
reduced. If there is a change of control of the Company, he is entitled to
receive the present value of $585,131, payable at age 65, discounted at 8.0%
within 60 days after the change of control. The Bank has purchased life
insurance, the proceeds of which are expected to be used to fund some of the
Bank's obligations under this agreement.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Bank has loan and deposit relationships with some of the directors of
the Company and the Bank and with companies with which the directors are
associated as well as members of the immediate families of the directors
("Affiliated Persons"). (The term `members of the immediate families' for
purposes of this paragraph includes each person's spouse, parents, children,
siblings, mothers and fathers-in-law, sons and daughters-in-law, and brothers
and sisters-in-law.) The total loans outstanding to these parties at December
31, 1997, were $929,269. Loans to Affiliated Persons were made in the ordinary
course of business, were made on substantially the same terms, including
interest rates and collateral, as those prevailing at the time for comparable
transactions with other persons, and did not, at the time they were made involve
more than the normal risk of collectibility or present other unfavorable
features.
The law firm of McLendon & Sloan, in which J. M. McLendon, a director of
the Company, is a partner, provided legal services to the Company and the Bank
in 1997, and such firm is continuing to provide legal services to the Company
and the Bank in 1998.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING
COMPLIANCE
As required by Section 16(a) of the Securities Exchange Act of 1934 (the
"Exchange Act"), the Company's directors, its executive officers and certain
individuals are required to report periodically their ownership of the Company's
Common Stock and any changes in ownership to the Securities and Exchange
Commission (the "SEC").
The reporting requirements of Section 16(a) became applicable to executive
officers and directors of the Company on January 30, 1995, at the time the
Company registered its common stock with the SEC. However, executive officers
and directors of the Company were not advised of their reporting obligations
until March, 1998. Consequently, no reports were filed by executive officers or
directors from January, 1995 until March, 1998. Upon being advised of their
reporting obligations, the executive officers and directors immediately took
steps to ascertain transactions as to which reports should have been filed and
to make the necessary filings.
9
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The following information sets forth as to each executive officer and
director of the Company the number of forms not timely filed and the number of
transactions not timely reported. Mr. Duke failed to timely file an Initial
Statement of Beneficial Ownership of Securities on Form 3, six Forms 4 relating
to nine purchase transactions and one Form 5 relating to grant of stock options
and issuance of a stock dividend. Mr. Freeman failed to timely file an Initial
Statement of Beneficial Ownership of Securities on Form 3, four Forms 4 relating
to five purchase transactions and one Form 5 relating to issuance of a stock
dividend. Mr. Hardwick failed to timely file an Initial Statement of Beneficial
Ownership of Securities on Form 3, one Form 4 relating to three purchase
transactions and one Form 5 relating to the grant of stock options and issuance
of a stock dividend. Mr. Mathis failed to timely file an Initial Statement of
Beneficial Ownership of Securities on Form 3. Mr. McElveen failed to timely file
an Initial Statement of Beneficial Ownership of Securities on Form 3, one Form 5
relating to two gift transactions and one Form 5 relating to issuance of a stock
dividend. Mr. McLendon failed to timely file an Initial Statement of Beneficial
Ownership of Securities on Form 3, one Form 5 with respect to a bequest, and one
Form 5 relating to issuance of a stock dividend. Mr. Tyner failed to timely file
an Initial Statement of Beneficial Ownership of Securities on Form 3, one Form 4
with respect to one purchase transaction, and one Form 5 relating to issuance of
a stock dividend. Mr. Siegal failed to timely file an Initial Statement of
Beneficial Ownership of Securities on Form 3, one Form 4 with respect to one
purchase transaction, and one Form 5 relating to issuance of a stock dividend.
Ms. Williams failed to timely file an Initial Statement of Beneficial Ownership
of Securities on Form 3, and one Form 5 relating to issuance of a stock dividend
and one gift transaction.
All directors and executive officers are now current with their Section
16(a) reporting obligations.
INDEPENDENT ACCOUNTANTS
The Board of Directors, upon the recommendation of the Audit Committee
of the Bank, has appointed Tourville, Simpson and Henderson, independent
certified public accountants, as independent auditors for the Company and its
subsidiaries for the current fiscal year ending December 31, 1998, subject to
ratification by the shareholders. A representative of Tourville, Simpson and
Henderson is expected to be present at the 1998 Annual Meeting and will be given
the opportunity to make a statement on behalf of the firm if he so desires, and
will respond to appropriate questions from shareholders.
AVAILABILITY OF ANNUAL REPORT ON FORM 10-KSB
A copy of the Company's Annual Report on Form 10-KSB, including the
financial statements and schedules thereto, which is filed with the Securities
and Exchange Commission is available free of charge to each shareholder of
record upon written request to the Corporation Secretary, M & M Financial
Corporation, 307 North Main Street, Marion, South Carolina 29571.
OTHER BUSINESS
The Board of Directors of the Company does not know of any other
business to be presented at the Annual Meeting. If any other matters are
properly brought before the Annual Meeting, however, it is the intention of the
persons named in the accompanying proxy to vote such proxy in accordance with
their best judgment.
By Order of the Board of Directors
Chester A. Duke
Chairman and President
Marion, South Carolina
April 2, 1998
10
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PROXY
M & M FINANCIAL CORPORATION
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR ANNUAL MEETING OF SHAREHOLDERS - THURSDAY, APRIL 16, 1998
Marion E. Freeman and George H. Hardwick, or either of them, with full
power of substitution, are hereby appointed as agent(s) of the undersigned to
vote as proxies all of the shares of Common Stock of M & M Financial Corporation
held of record by the undersigned on the Record Date at the Annual Meeting of
Shareholders to be held on April 16, 1998, and at any adjournment thereof, as
follows:
1. [ ] ELECTION OF [ ] FOR all nominees listed [ ] WITHHOLD AUTHORITY
DIRECTORS. below to vote for all nominees
listed below
[ ] WITHHOLD AUTHORITY only on the following nominees:
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INSTRUCTIONS: TO WITHHOLD AUTHORITY TO VOTE FOR ANY
INDIVIDUAL(S), WRITE THE NOMINEE'S(S') NAME(S) ON THE
LINE ABOVE.
NOMINEES: Chester A. Duke, Charles McElveen, J. M. McLendon, Bruce Siegal, Nancy
B. Williams
2. PROPOSAL TO RATIFY APPOINTMENT OF TOURVILLE, SIMPSON AND HENDERSON,
CERTIFIED PUBLIC ACCOUNTANTS, AS THE COMPANY'S INDEPENDENT AUDITORS FOR THE
FISCAL YEAR ENDING DECEMBER 31, 1998.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. And, in the discretion of said agents, upon such other business as may
properly come before the meeting, and matters incidental to the conduct of
the meeting. (Management at present knows of no other business to be
brought before the meeting.)
THE PROXIES WILL BE VOTED AS INSTRUCTED. IF NO CHOICE IS INDICATED WITH RESPECT
TO A MATTER WHERE A CHOICE IS PROVIDED, THIS PROXY WILL BE VOTED "FOR" SUCH
MATTER.
Please sign exactly as name appears below. When signing as attorney, executor,
administrator, trustee, or guardian, please give full title. If more than one
trustee, all should sign. All joint owners must sign.
Dated: --------------, 1998 ----------------------------------------
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