Pre-Effective Amendment to Registration of Securities by a Small-Business Issuer — Form SB-2
Filing Table of Contents
Document/Exhibit Description Pages Size
1: SB-2/A Pre-Effective Amendment to Registration of 80 355K
Securities by a Small-Business Issuer
2: EX-1.1 Underwriting Agreement 24 112K
3: EX-3.2 Articles of Incorporation/Organization or By-Laws 21 97K
4: EX-4.1 Instrument Defining the Rights of Security Holders 2 11K
5: EX-5.1 Opinion re: Legality 2 12K
8: EX-10.10 Material Contract 8 51K
9: EX-10.11 Material Contract 18 81K
10: EX-10.12 Material Contract 2 14K
11: EX-10.13 Material Contract 6 35K
12: EX-10.14 Material Contract 15 55K
13: EX-10.15 Material Contract 14 67K
6: EX-10.7 Material Contract 14 52K
7: EX-10.8 Material Contract 15 56K
14: EX-23.3 Consent of Experts or Counsel 1 7K
15: EX-27 Financial Data Schedule (Pre-XBRL) 2 9K
SB-2/A — Pre-Effective Amendment to Registration of Securities by a Small-Business Issuer
Document Table of Contents
| Page | (sequential) | | | | (alphabetic) | Top |
|---|
| | |
- Alternative Formats (Word, et al.)
- Additional Information
- Capitalization
- Caution Regarding Forward-Looking Statements
- Clay T. Jackson
- Colleen Conway-Welch
- Competition
- David B. Ingram
- Description of Our Capital Stock
- Dividends
- Employment Agreements
- Executive Compensation
- Exhibits
- Experts
- Hugh M. Queener
- Indemnification of Directors and Officers
- Index to Financial Statements
- James L. Shaub, II
- John E. Maupin, Jr
- Legal Matters
- Lending Limits
- Lending Services
- Limitation of Liability
- Linda E. Rebrovick
- Liquidity and Interest Rate Sensitivity
- Management
- Management's Discussion and Analysis of Financial Condition and Plan of Operations
- Market Opportunities
- M. Terry Turner
- Notes to Financial Statements
- Organizers' Shares and Warrants
- Other Expenses of Issuance and Distribution
- Our Proposed Business
- Payment of Dividends
- Philosophy and Strategy
- Pinnacle Financial
- Pinnacle National
- Prompt Corrective Action
- Recent Sales of Unregistered Securities
- Reese L. Smith, III
- Related Party Transactions
- Report of Independent Public Accountants
- Reports to Shareholders
- Risk Factors
- Robert A. McCabe, Jr
- Robert E. McNeilly, Jr
- Selected Provisions of Our Charter and Bylaws
- Shares Eligible for Future Sale
- Statement of Operations and Accumulated Deficit for the Period February 28, 2000 (inception) to March 31, 2000 and for the period February 28, 2000 (inception) to June 30, 2000 (unaudited)
- Stock Incentive Plan
- Sue R. Atkinson
- Summary
- Supervision and Regulation
- Undertakings
- Underwriting
- Use of Proceeds
- Use of Proceeds by Pinnacle Financial
- Use of Proceeds by Pinnacle National
|
| 1 | 1st Page - Filing Submission
|
| " | M. Terry Turner
|
| 5 | Summary
|
| 6 | Philosophy and Strategy
|
| 8 | Use of Proceeds
|
| " | Dividends
|
| 10 | Risk Factors
|
| 15 | Caution Regarding Forward-Looking Statements
|
| 16 | Use of Proceeds by Pinnacle Financial
|
| " | Use of Proceeds by Pinnacle National
|
| 18 | Capitalization
|
| 20 | Management's Discussion and Analysis of Financial Condition and Plan of Operations
|
| 21 | Liquidity and Interest Rate Sensitivity
|
| 23 | Our Proposed Business
|
| " | Pinnacle Financial
|
| " | Pinnacle National
|
| " | Market Opportunities
|
| 25 | Competition
|
| 28 | Lending Services
|
| 29 | Lending Limits
|
| 34 | Management
|
| " | John E. Maupin, Jr
|
| " | Robert A. McCabe, Jr
|
| " | Robert E. McNeilly, Jr
|
| 36 | Sue R. Atkinson
|
| " | Colleen Conway-Welch
|
| 37 | David B. Ingram
|
| " | Clay T. Jackson
|
| 39 | Hugh M. Queener
|
| " | Linda E. Rebrovick
|
| 40 | James L. Shaub, II
|
| " | Reese L. Smith, III
|
| 42 | Executive Compensation
|
| " | Employment Agreements
|
| 44 | Stock Incentive Plan
|
| 47 | Related Party Transactions
|
| 48 | Description of Our Capital Stock
|
| " | Organizers' Shares and Warrants
|
| 49 | Selected Provisions of Our Charter and Bylaws
|
| 52 | Limitation of Liability
|
| 53 | Shares Eligible for Future Sale
|
| 54 | Underwriting
|
| 56 | Supervision and Regulation
|
| 59 | Prompt Corrective Action
|
| 61 | Payment of Dividends
|
| 63 | Legal Matters
|
| " | Experts
|
| " | Reports to Shareholders
|
| " | Additional Information
|
| 65 | Index to Financial Statements
|
| 66 | Report of Independent Public Accountants
|
| 68 | Statement of Operations and Accumulated Deficit for the Period February 28, 2000 (inception) to March 31, 2000 and for the period February 28, 2000 (inception) to June 30, 2000 (unaudited)
|
| 71 | Notes to Financial Statements
|
| 75 | Item 24. Indemnification of Directors and Officers
|
| " | Item 25. Other Expenses of Issuance and Distribution
|
| " | Item 26. Recent Sales of Unregistered Securities
|
| 76 | Item 27. Exhibits
|
| 77 | Item 28. Undertakings
|
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 12, 2000
REGISTRATION NO. 333-38018
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 1
TO
FORM SB-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
PINNACLE FINANCIAL PARTNERS, INC.
(Name of Small Business Issuer in its Charter)
------------------------
[Download Table]
TENNESSEE 6021 62-182853
(State or other jurisdiction (Primary Standard (I.R.S. Employer
of Industrial Identification No.)
incorporation or organization) Classification Code Number)
------------------------
3401 WEST END AVENUE, SUITE 306, NASHVILLE, TENNESSEE 37203, (615) 250-1800
(Address, and Telephone Number of Principal Executive Offices)
------------------------------
THE COMMERCE CENTER, 211 COMMERCE STREET, NASHVILLE, TENNESSEE 37201
(Address of Principal Place of Business or Intended Principal Place of Business)
------------------------------
M. TERRY TURNER
PINNACLE FINANCIAL PARTNERS, INC.
SUITE 306
3401 WEST END AVENUE
NASHVILLE, TENNESSEE 37203
(615) 250-1800
(Name, Address, and Telephone Number, of Agent for Service)
------------------------------
COPIES TO:
[Download Table]
KATHRYN L. KNUDSON, ESQ. RALPH W. DAVIS, ESQ.
POWELL, GOLDSTEIN, FRAZER & MURPHY LLP WALLER LANSDEN DORTCH & DAVIS, PLLC
191 PEACHTREE STREET, N.E., 16(TH) FLOOR NASHVILLE CITY CENTER
ATLANTA, GEORGIA 30303 511 UNION STREET, SUITE 2100
(404) 572-6952 NASHVILLE, TENNESSEE 37219-1760
(615) 252-2481
------------------------
Approximate date of proposed sale to the public: as soon as practicable
after this Registration Statement has become effective.
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If the delivery of the prospectus is expected to be made pursuant to
Rule 434, please check the following box. / /
------------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
THE INFORMATION CONTAINED IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED.
WE MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER
TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY THESE
SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
PRELIMINARY PROSPECTUS DATED JULY 12, 2000; SUBJECT TO COMPLETION
2,500,000 SHARES
[LOGO]
A PROPOSED BANK HOLDING COMPANY FOR
PINNACLE NATIONAL BANK (PROPOSED)
COMMON STOCK
$10.00 PER SHARE
---------------------
We are offering shares of Pinnacle Financial Partners, Inc. common stock to
raise the money required to start Pinnacle National Bank, a proposed national
bank. Pinnacle Financial will be the holding company and sole shareholder of
Pinnacle National after it is organized. Pinnacle National will be headquartered
in Nashville, Tennessee, and upon receipt of final regulatory approval, we
expect to open Pinnacle National in the third or fourth quarter of 2000. This is
our first offering of common stock to the public, and currently no public market
exists for our shares. This is a firm commitment underwriting. Unless otherwise
waived by Pinnacle Financial, any one investor may purchase up to a maximum of
25,000 shares. We will request that quotations for our common stock be reported
on the Nasdaq OTC Bulletin Board under the symbol "PINN."
Our organizers are being offered warrants to purchase one share of our
common stock for every two shares they purchase in the offering. Once vested,
our organizers may exercise their warrants and purchase additional shares of our
common stock at an exercise price of $10.00 per share. See "Description of Our
Capital Stock--Organizers' Shares and Warrants" on page 44.
OUR COMMON STOCK IS NOT A DEPOSIT OR A BANK ACCOUNT AND IS NOT INSURED BY
THE FDIC OR ANY OTHER GOVERNMENTAL AGENCY.
AN INVESTMENT IN OUR COMMON STOCK INVOLVES SIGNIFICANT RISKS. YOU SHOULD NOT
INVEST IN THIS OFFERING UNLESS YOU CAN AFFORD TO LOSE ALL OF YOUR INVESTMENT. WE
HAVE DESCRIBED WHAT WE BELIEVE ARE THE MATERIAL RISKS OF THIS INVESTMENT UNDER
THE HEADING "RISK FACTORS" BEGINNING ON PAGE 6.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
------------------------
[Download Table]
PER SHARE TOTAL
--------- -----------
Public offering price...................................... $10.00 $25,000,000
Underwriting discount...................................... $ .53 $ 1,313,000
Proceeds to the company, before expenses................... $ 9.47 $23,687,000
We will not pay an underwriting discount for shares purchased in the
offering by our organizers, and the underwriting discount that will apply to
shares purchased in the offering by individuals referred to the underwriters by
our organizers, up to 410,000 shares, will equal 3.0% of the public offering
price, or $.30 per share. The underwriting discount that will apply to all other
shares purchased in the offering will equal 7.0% of the public offering price,
or $.70 per share. The underwriters' discount shown in the foregoing table
reflects a blended rate based on the assumption that 800,000 of the shares will
have either no discount or the 3.0% discount. The underwriters have the right to
purchase up to an additional 316,500 shares at $10.00 per share, less the
underwriters' discount of $.70 per share, within 30 days after the date of this
prospectus to cover over-allotments.
The underwriters expect to deliver the shares of common stock on ,
2000.
[Download Table]
PaineWebber Incorporated J.C. Bradford & Co.
, 2000
PINNACLE FINANCIAL PARTNERS, INC.
AND
PINNACLE NATIONAL BANK (PROPOSED)
MARKET AREA
[LOGO]
SUMMARY
THIS SUMMARY DOES NOT CONTAIN ALL THE INFORMATION YOU SHOULD CONSIDER BEFORE
INVESTING IN THE COMMON STOCK. WE ENCOURAGE YOU TO READ CAREFULLY THE ENTIRE
PROSPECTUS BEFORE INVESTING. UNLESS OTHERWISE STATED, ALL INFORMATION IN THIS
PROSPECTUS ASSUMES THE UNDERWRITERS DO NOT EXERCISE THE OVER-ALLOTMENT OPTION.
PINNACLE FINANCIAL AND PINNACLE NATIONAL
Pinnacle Financial Partners, Inc. is a Tennessee corporation that was
incorporated on February 28, 2000 to organize and serve as the holding company
for Pinnacle National Bank, a proposed national bank. Pinnacle National will
operate as a community bank emphasizing personalized banking relationships with
individuals and businesses located within its primary service area, which is
comprised of metropolitan Nashville-Davidson County and the surrounding counties
of Cheatham, Dickson, Robertson, Rutherford, Sumner, Williamson and Wilson.
On March 29, 2000 we applied for approval from the Office of the Comptroller
of the Currency to organize Pinnacle National as a national bank in Nashville,
Tennessee. In our application, we indicated to the OCC that we anticipate
raising $25.0 million in capital and investing approximately $22.6 million in
Pinnacle National. Accordingly, in order to receive final approval of our
application to organize Pinnacle National, we anticipate that we will be
required to invest a minimum of $22.6 million in Pinnacle National, receive FDIC
approval of our application for deposit insurance and implement appropriate
banking policies and procedures. We filed an application with the FDIC for
Pinnacle National to obtain deposit insurance on March 29, 2000, and plan to
file an application with the Federal Reserve for Pinnacle Financial to become a
bank holding company and to acquire all of the capital stock of Pinnacle
National. After receiving all necessary regulatory approvals, we plan to begin
operations in our permanent facility in the third or fourth quarter of 2000.
WHY WE ARE ORGANIZING A NEW BANK IN NASHVILLE, TENNESSEE
The economic stability and growth of the Nashville-Davidson County area are
important to the economic stability and growth of our entire primary service
area. Our primary service area's economic strength comes from its large employer
base, which includes the national, state or corporate headquarters of a number
of large corporations such as Nissan Motor Manufacturing Corporation U.S.A.,
BellSouth, the Kroger Company, and Columbia/HCA Healthcare Corporation.
Additionally, according to the Nashville Area Chamber of Commerce, the regional
economy continues to benefit from low unemployment, consistent job growth,
substantial outside investment, and expansion and broadening of its labor force.
We anticipate that these factors will cause more businesses to relocate to, or
start operations in, the Nashville-Davidson County area and, in turn, will
increase the demand for depository and lending services within our market.
We believe that our primary service area will sustain continued growth.
According to estimates compiled by CACI Marketing Systems, Inc., a marketing
research firm retained by Pinnacle Financial, the 1999 population for our
primary service area exceeded 1.1 million, representing a 19.4% increase over
the area's 1990 population. Additionally, CACI projects that by 2004 the
population for our primary service area will increase by over 100,000, with the
number of households rising by 9.3% to approximately 496,000 during the same
period. As a result, we anticipate that the area's expanding population and
expected growth in total households will enlarge Pinnacle National's potential
customer base.
With the competitive dynamics of today's financial industry, we believe that
positioning ourselves as solely a community bank will not be enough. In the wake
of modern technology and the prosperity of the United States' financial markets
over the past decade, banking clients have generally become more sophisticated
in their approach to selecting financial services providers. We believe that the
most important criteria to our targeted clients when selecting a bank is their
desire to receive exceptional
1
customer service while being able to enjoy convenient access to a broad array of
sophisticated financial products. Additionally, if presented with a choice, we
believe that many of these individuals and businesses would prefer to deal with
a locally-owned and headquartered institution. Although there are currently
three Nashville-Davidson County based community banks, we believe we can
distinguish ourselves by providing the level of personal service often
associated with a community bank while also offering the requisite technology
and skilled advisors to deliver more sophisticated financial products and
services than a typical community bank.
DIRECTORS AND OFFICERS
Our directors, who are also the proposed directors of Pinnacle National,
consists of 10 of our 14 organizers and include:
- Sue G. Atkinson
- Colleen Conway-Welch
- Clay T. Jackson
- John E. Maupin, Jr.
- Robert A. McCabe, Jr.
- Robert E. McNeilly, Jr.
- Dale W. Polley
- James L. Shaub, II
- Reese L. Smith, III
- M. Terry Turner
All of our directors are residents of Nashville's metropolitan area and are
active in their local communities. As a result, our directors intend to utilize
their diverse backgrounds and their extensive local business relationships to
attract clients from all segments of Pinnacle National's primary service area.
See "Management" on page 30.
Additionally, we have retained the following experienced individuals to
serve on our senior management team:
- M. Terry Turner is the president and chief executive officer of Pinnacle
Financial and the proposed president and chief executive officer of
Pinnacle National. Mr. Turner has over 20 years of experience in the
banking industry and has served in various management positions throughout
his career with both Park National Bank in Knoxville and First American
National Bank in Nashville, including serving as the president of First
American's general banking and investment services group divisions.
- Robert A. McCabe, Jr. is the chairman of the board of Pinnacle Financial
and the proposed chairman of the Board of Pinnacle National. Mr. McCabe
has over 24 years of experience in the banking industry, including serving
as vice chairman of the board of First American Corporation in Nashville.
- Hugh M. Queener is the executive vice president and chief administrative
officer of Pinnacle Financial and the proposed executive vice president
and chief administrative officer of Pinnacle National. Mr. Queener has
over 17 years of experience in banking, including serving as executive
vice president of retail lending for First American in Nashville.
We believe that our executive officers' extensive banking experience is very
strong for a community bank's management team; therefore, we anticipate that our
ability to compete effectively will be enhanced because of the experience of our
management team and their familiarity of the banking industry within our primary
service area.
PHILOSOPHY AND STRATEGY
Our philosophy is based on three major trends that we see in today's
financial services industry:
- client usage of more sophisticated financial products;
- client perception of decreasing service levels at banking institutions;
and
- client demand for more convenient access to financial services.
2
In light of these trends, our management philosophy will be centered on
delivering to individuals and small- to medium-sized businesses exceptional
client service and effective financial advice through highly trained personnel
who understand and care about the broad financial needs and objectives of our
clients. In order to implement our philosophy, our specific business strategies
will involve:
- capitalizing on our directors' and officers' diverse community
involvement, professional expertise, and personal and business contacts;
- hiring and retaining highly experienced and qualified banking and
financial personnel with established client relationships within our
primary market area;
- providing individualized attention with consistent, local decision-making
authority;
- offering a full line of financial services to include traditional
depository and credit products, as well as investment and insurance
products;
- capitalizing on customer dissatisfaction with financial institutions that
are not meeting the sophisticated financial needs of consumers and small-
to medium-sized businesses;
- establishing a distribution strategy designed to prudently expand our
physical and virtual market presence;
- positioning our main office in downtown Nashville to establish our
connection with Nashville's prominent commercial and private banking
markets;
- utilizing technology and strategic outsourcers to provide a broad array of
sophisticated and convenient products and services; and
- implementing an aggressive marketing program to promote Pinnacle
National's philosophy and market presence.
PRODUCTS AND SERVICES
In general, Pinnacle National's target market will be consumers and small-
to medium-sized businesses with annual revenues of less than $25,000,000.
However, many of our products and services will be targeted at the financial
needs of smaller business clients with annual revenues of less than $10,000,000
and individual clients who have significant borrowing and investment requests.
We plan to offer directly, or through a strategic third party selected by
us, products and services that will provide our clients with access to an array
of sophisticated financial products typically offered only by larger banks. As a
result, our sales process will be driven by the individual needs of our clients,
and with the assistance of highly developed financial planning tools, we will
focus on providing specific advice tailored to meet the financial goals of our
individual clients. For the consumer, this will result in a case-by-case
assessment of an individual's investment, insurance and debt financing needs;
for the small- to medium-sized business, this will entail various cash
management information systems that will permit timely and accurate management
of cash resources. Additionally, we anticipate that our professional staff will
often work in partnership with our client's financial advisory team, which may
include the client's attorney, accountant, or other financial advisor.
Pinnacle National will also offer traditional banking products and services,
including checking, savings, interest-bearing checking, money market,
certificate of deposit, IRA and cash management accounts. Ancillary services
will also be offered, such as debit and credit card services and direct deposit.
THE OFFERING AND OWNERSHIP BY OUR ORGANIZERS AND DIRECTORS
We are offering 2,500,000 shares of our common stock for $10.00 per share.
Our organizers and directors intend to purchase 391,000 shares, which will
represent 15.6% of the shares outstanding after the offering. In recognition of
our organizers' financial risk and efforts in organizing Pinnacle Financial and
Pinnacle National, our organizers are being offered by this prospectus, at no
cost to them, warrants
3
to purchase one additional share of our common stock, at $10.00 per share, for
every two shares they purchase in the offering. Given the intent of our
organizers to purchase 391,000 shares in this offering, we expect to issue to
our organizers warrants to purchase up to an aggregate of 195,500 additional
shares of our common stock. We believe our organizers' financial interest in
Pinnacle Financial will encourage their active participation in growing our
business. We hope to sell the remaining shares to individuals and businesses
primarily within the Nashville metropolitan area who share our desire to support
a new community bank.
The 2,500,000 shares of common stock offered does not include the
over-allotment option granted to the underwriters to purchase up to 316,500
additional shares, 195,500 shares issuable upon the exercise of the warrants
issued to our organizers or 520,000 shares that we may issue from time to time
under our stock incentive plan.
USE OF PROCEEDS
We will use $22.6 million raised in this offering to capitalize Pinnacle
National. This is the amount of capital that we have indicated to the Office of
the Comptroller of the Currency that we anticipate investing in Pinnacle
National prior to its opening. We anticipate using the $827,000 in net proceeds
remaining after capitalizing Pinnacle National to repay the amount drawn on our
line of credit, to provide Pinnacle Financial with working capital and for other
general business purposes. See "Use of Proceeds--Use of Proceeds by Pinnacle
Financial" on page 13.
In turn, Pinnacle National will use the $22.6 million that it receives from
Pinnacle Financial to fund, over the next 12 months following the close of the
offering, approximately:
- $865,000 in pre-opening and organizational expenses;
- $251,000 in lease payments for its main office and temporary facilities;
- $1,650,000 in lease-hold improvements to its main office, including
furniture, fixtures and equipment; and
- $2,800,000 in expansion costs to open two additional branch locations,
including furniture, fixtures and equipment.
We estimate that after funding the above expenses/capital expenditures Pinnacle
National will have approximately $17.0 million in remaining proceeds available
to add to its expected deposit base and other funding sources to support its
lending and general operating activities. See "Use of Proceeds--Use of Proceeds
by Pinnacle National" on page 13.
DIVIDENDS
We do not plan to pay dividends until we recover the losses that we will
have incurred and become profitable. Our future dividend policy will depend on
our earnings, capital requirements, financial condition and other factors that
our board of directors consider relevant. See "Dividends" on page 16 and
"Supervision and Regulation--Payment of Dividends" on page 57.
LOCATION OF OFFICES
The address and phone number of our temporary executive office are:
Suite 306
3401 West End Avenue
Nashville, Tennessee 37203
(615) 250-1800
Our permanent main office and executive offices will be located at:
The Commerce Center
211 Commerce Street
Nashville, Tennessee 37201
4
Our main office will consist of approximately 12,135 square feet of leased
office space in The Commerce Center located on the corner of 3(rd) Street and
Commerce Street. We plan to begin tenant build-out of our main office in the
second quarter of 2000, which we anticipate will be completed by the end of the
third quarter of 2000. Once completed, we will begin banking operations out of
our main office facility. Accordingly, we anticipate that we will open for
business in our main office location in the third or fourth quarter of 2000.
We anticipate that the downtown location of our main office will provide us
with desired visibility in Nashville's prominent commercial and private banking
markets. However, as in most metropolitan markets, there is a growing demand for
more convenient access to banking and investment products and services by
banking clients. Consequently, as part of our strategy to provide convenient
access to our banking products and services and to expand our market visibility,
we expect to implement a distribution strategy that we believe will be a prudent
expansion of Pinnacle National's proposed operations. Under our distribution
strategy, we anticipate opening offices in the Brentwood area, the Belle
Meade/Green Hills area, the Rivergate Mall or Hendersonville area, and the
Bellevue area within the first two years of Pinnacle National's operations. Each
of these areas listed are currently within our primary service area and
represent, in the view of our management, important sub-markets of our overall
primary service area. As of the date of this prospectus, we have not selected or
procured any actual site locations, and there can be no assurance that we will
open these offices, or if opened, that they will be profitable.
5
RISK FACTORS
THE FOLLOWING PARAGRAPHS DESCRIBE WHAT WE BELIEVE ARE THE MATERIAL RISKS OF
AN INVESTMENT IN THE COMMON STOCK. WE MAY FACE OTHER RISKS AS WELL, WHICH WE
HAVE NOT ANTICIPATED. AN INVESTMENT IN THE COMMON STOCK INVOLVES A SIGNIFICANT
DEGREE OF RISK, AND YOU SHOULD NOT INVEST IN THE COMMON STOCK UNLESS YOU CAN
AFFORD TO LOSE YOUR ENTIRE INVESTMENT. BEFORE DECIDING TO INVEST IN THE COMMON
STOCK, PLEASE CAREFULLY READ THE ENTIRE PROSPECTUS, INCLUDING THE CAUTIONARY
STATEMENT FOLLOWING THE RISK FACTORS REGARDING THE USE OF FORWARD-LOOKING
STATEMENTS.
WE HAVE NO OPERATING HISTORY UPON WHICH TO BASE AN ESTIMATE OF OUR FUTURE
FINANCIAL PERFORMANCE.
We do not have any operating history on which to base any estimate of our
future earning prospects. Pinnacle Financial was only recently formed, and
Pinnacle National will not receive final approval from the Office of the
Comptroller of the Currency to begin operations until after this offering is
completed. Consequently, there is no historical operating or financial
information that would be helpful in deciding whether to invest in Pinnacle
Financial.
WE EXPECT TO INCUR LOSSES INITIALLY, AND YOU MAY NOT RECOVER ALL OR ANY PART OF
YOUR INVESTMENT IF WE DO NOT BECOME PROFITABLE.
Most new banks incur substantial start-up expenses, are not profitable in
the first year of operation and, in some cases, are not profitable for several
years. If we are ultimately unsuccessful, you stand to lose part or all of your
investment in the common stock. Additionally, Pinnacle National's loans will
initially be unseasoned--new loans to new borrowers. As a result, it will take
several years to establish the borrowers' payment histories, making it more
difficult to evaluate the quality of the loan portfolio. Our profitability will
depend on Pinnacle National's profitability, and we can give no assurance that
Pinnacle National will ever operate profitably. See "Management's Discussion and
Analysis of Financial Condition and Plan of Operations" on page 16.
FAILURE TO IMPLEMENT OUR BUSINESS STRATEGIES MAY ADVERSELY AFFECT OUR FINANCIAL
PERFORMANCE.
If we cannot implement our business strategies, we will be limited in our
ability to develop business and serve our clients, which will in turn have an
adverse effect on our financial performance. The organizers have developed a
business plan that details the strategies that we intend to implement in our
efforts to achieve profitable operations. However, even if the key elements of
our business strategy are successfully implemented, they may not have the
favorable impact on operations that we anticipate. See "Our Proposed
Business--Philosophy and Strategy" on page 22.
DEPARTURES OF OUR KEY PERSONNEL OR DIRECTORS MAY IMPAIR OUR OPERATIONS.
If any of our executive officers were to leave Pinnacle National, our
operations could suffer due to the costs associated with recruiting new
personnel and orienting them to our business. Particularly, we believe M. Terry
Turner, Robert A. McCabe, Jr. and Hugh M. Queener are important to our success,
and if they terminate their employment with us, our financial condition and
results of operations may be adversely affected. These executives have been
instrumental in our organization and will be the key management officials in
charge of our daily business operations. While we have entered into three-year
employment agreements with Mr. Turner and Mr. Queener and anticipate entering
into a three-year employment agreement with Mr. McCabe, Mr. Turner's and
Mr. Queener's current agreements and Mr. McCabe's proposed agreement do not
contain non-competition or non-solicitation provisions; therefore, we cannot be
assured of their continued service. See "Executive Compensation--Employment
Agreements" on page 38.
Additionally, our directors' community involvement, diverse backgrounds and
extensive local business relationships are important to our success. If any of
our directors discontinue his or her
6
relationship with us for whatever reason, or if the composition of our board of
directors changes materially, our growth could be adversely affected. See
"Management" on page 30.
A DELAY IN BEGINNING PINNACLE NATIONAL'S OPERATIONS WILL RESULT IN ADDITIONAL
LOSSES.
A delay in the start of Pinnacle National's operations will increase
pre-opening expenses and postpone Pinnacle National's realization of potential
revenues. This could cause our accumulated deficit to increase as a result of
continuing operating expenses, such as salaries and other administrative
expenses, coupled with our lack of revenue. Although we expect to receive all
final regulatory approvals and to begin business in the third or fourth quarter
of 2000, we can give no assurance as to when, if at all, these events will
occur.
IF REGULATORY CONDITIONS ARE NOT SATISFIED, WE MAY DISSOLVE AND LIQUIDATE AND
YOU MAY ONLY RECEIVE A PORTION, IF ANY, OF YOUR INVESTMENT.
If we do not receive final approval for Pinnacle National to start its
banking operations, we anticipate that we will dissolve Pinnacle Financial. If
we dissolve Pinnacle Financial after the close of the offering, shareholders
will recover only a portion, if any, of their original investment because we
will have used the proceeds of the offering to pay all organizational,
pre-opening and offering expenses, including any lease obligations and capital
costs, incurred through the time that Pinnacle Financial is finally dissolved.
Although we have applied for the requisite regulatory approvals to begin banking
operations, final approvals may not be granted in a timely manner, if at all.
The closing of this offering is not conditioned upon the receipt of final
regulatory approvals.
WE WILL FACE STRONG COMPETITION FOR CLIENTS, ESPECIALLY FROM LARGE AND MORE
ESTABLISHED FINANCIAL INSTITUTIONS, WHICH MAY HINDER US FROM OBTAINING CLIENTS
AND MAY CAUSE US TO PAY HIGHER INTEREST RATES ON OUR DEPOSITS OR CHARGE LOWER
INTEREST RATES ON OUR LOANS THAN OUR COMPETITORS' RATES FOR AN EXTENDED PERIOD.
We anticipate offering very competitive loan and deposit rates as we
establish ourselves in the market, but if excessive competition forces us to
offer more aggressive pricing indefinitely, our net interest margin will suffer
and our financial performance will be negatively impacted. Pinnacle National
will compete with numerous other lenders and deposit-takers. With multiple
financial institutions already doing business in the Nashville metropolitan area
and the possibility that additional competitors may enter the market in the
future, we will be faced continuously with significant competition. Moreover,
some of our competitors are not subject to the same degree of regulation as we
will be and may have greater resources than will be available to us. See "Our
Proposed Business--Market Opportunities--Competition" on page 21.
WE MAY NOT BE ABLE TO COMPETE WITH OUR LARGER COMPETITORS FOR LARGER CLIENTS
BECAUSE OUR LENDING LIMITS WILL BE SIGNIFICANTLY LOWER THAN THEIRS.
Our lending limit will be significantly less than the limits for most of our
competitors, and may hinder our ability to establish relationships with larger
businesses in our market area. When we begin our banking operations, our
internal lending limit to any single borrower will be $1.5 million, which is
below our initial legal lending limit of approximately $3.3 million for
unsecured loans and $5.5 million for various secured loans, as governed by
federal regulation. Based on either our internal lending limit or our legal
lending limit, Pinnacle National will need to sell participations in its loans
to other financial institutions in order to meet the lending needs of our
clients requiring extensions of credit above these limits. However, our strategy
to accommodate larger loans by selling participations in those loans to other
financial institutions may not be successful. See "Our Proposed
Business--Lending Services--Lending Limits" on page 25.
7
GOVERNMENT REGULATION MAY HAVE AN ADVERSE EFFECT ON OUR PROFITABILITY AND
GROWTH.
We are subject to extensive government supervision and regulation. Our
ability to achieve profitability and to grow could be adversely affected by
state and federal banking laws and regulations. These regulations are intended
primarily to protect depositors, not shareholders. In addition, the burden
imposed by federal and state regulations may place us at a competitive
disadvantage compared to competitors who are less regulated. Future legislation
or government policy may also adversely affect the banking industry or our
operations. In particular, with the enactment of the Gramm-Leach-Bliley Act,
many federal and state laws barring affiliations between banks, securities
firms, insurance companies and other financial services providers have been
eliminated. We believe the removal of these barriers may significantly increase
competition in our industry. See "Supervision and Regulation" on page 52.
CHANGES IN INTEREST RATES MAY DECREASE OUR NET INTEREST INCOME.
Our profitability will depend substantially on Pinnacle National's net
interest income, which is the difference between the interest income earned on
its loans and other assets and the interest expense paid on its deposits and
other liabilities. A large change in interest rates may significantly decrease
or eliminate our profitability. While we intend to take measures to minimize the
effect that changes in interest rates will have on Pinnacle National's net
interest income and profitability, these measures may not be effective. See
"Management's Discussion and Analysis of Financial Condition and Plan of
Operations--Liquidity and Interest Rate Sensitivity" on page 17.
AN ECONOMIC DOWNTURN, ESPECIALLY ONE AFFECTING OUR PRIMARY SERVICE AREA, MAY
REDUCE OUR DEPOSIT BASE AND THE DEMAND FOR OUR LOANS AND OTHER PRODUCTS AND MAY
DECREASE OUR EARNINGS.
As a holding company for a community bank, our success will depend on the
general economic condition of the region in which we operate, which we cannot
forecast with certainty. Unlike many of our larger competitors, the majority of
Pinnacle National's borrowers and depositors will be individuals and small- to
medium-sized businesses located or doing business in our primary service area.
Consequently, an adverse change in the local economy could decrease our earnings
by making it more difficult for borrowers to repay their loans, reducing our
deposit base and significantly impacting the demand for our products and
services. See "Our Proposed Business" on page 19.
WE DETERMINED THE PUBLIC OFFERING PRICE ARBITRARILY, AND OUR FUTURE STOCK PRICE
MAY FLUCTUATE BELOW THE INITIAL PUBLIC OFFERING PRICE ONCE THE SHARES BECOME
FREELY TRADABLE.
Pinnacle Financial and the underwriters arbitrarily set the public offering
price after considering capital needs, prevailing market conditions and the
price of comparable publicly traded companies. Because we have no operating
history, the public offering price could not be based on historical measures of
our financial performance and does not bear any relationship to Pinnacle
Financial's assets, book value, net worth or any other recognized criteria of
value. Therefore, the public offering price may not reflect the market price for
the common stock after the offering. Several factors will cause the market price
to fluctuate after the offering, some of which are beyond our control, and the
price for the common stock may drop below its initial public offering price.
These factors include our results of operations, financial analysts' future
estimates of our earning potential, economic conditions in our market area and
trends in the banking industry. See "Underwriting" on page 50.
8
AN ACTIVE TRADING MARKET FOR OUR COMMON STOCK MAY NOT DEVELOP, POTENTIALLY
LIMITING YOUR ABILITY TO SELL YOUR SHARES, AND A SALE OF A LARGE BLOCK OF SHARES
MAY AFFECT YOUR ABILITY TO SELL YOUR SHARES AT OR ABOVE THE INITIAL PUBLIC
OFFERING PRICE.
Although the underwriters intend to apply to have quotations for our common
stock posted on the OTC Bulletin Board, an active trading market may not develop
or continue after the offering. If an active trading market does not develop or
continue after the offering, you may not be able to sell your shares at or above
the price at which these shares are being offered to the public. Additionally,
the sale of a large block of shares outstanding after the close of the offering
could adversely affect the market price of the common stock.
We anticipate that our directors and executive officers will purchase
391,000 shares or 15.6% of our common stock in the offering, which will be
subject to resale limitations after the close of the offering and may hinder the
development of an active trading market. Specifically, our directors and
executive officers have agreed with the underwriters not to sell the shares they
purchase in the offering for a period of 180 days after the date of this
prospectus without the underwriters' consent. After the 180-day period, the
shares held by our organizers and executive officers will be eligible for sale
subject to the resale limitations of Rule 144 of the Securities Act. You should
consider carefully the limited liquidity of your investment before purchasing
any shares of the common stock. See "Underwriting" on page 50 and "Shares
Eligible for Future Sale" on page 49.
EXERCISE OF WARRANTS AND STOCK OPTIONS WILL CAUSE DILUTION OF YOUR OWNERSHIP IN
PINNACLE FINANCIAL.
Our organizers and executive officers and other individuals employed by us
may exercise their warrants or options to purchase common stock, which would
result in the dilution of your proportionate interest in Pinnacle Financial. At
the close of the offering, we expect that shareholders who are not organizers,
directors or executive officers of Pinnacle Financial will own 2,109,000 shares,
or approximately 84.4%, of our outstanding common stock. Upon completion of this
offering, however, we will issue to our organizers warrants to purchase a total
of up to 195,500 shares of common stock, and will issue to our executive
officers, under our stock incentive plan, options to purchase up to a total of
120,000 shares of common stock. If these warrants and options granted to our
organizers and executive officers were exercised in full, the ownership
percentage of our shareholders who are not directors or executive officers would
drop from 84.4% to 74.9% of our outstanding common stock.
WE MAY NOT BE ABLE TO RAISE ADDITIONAL CAPITAL ON TERMS FAVORABLE TO US, IF AT
ALL.
In the future, should we need additional capital to support our business,
expand our operations or maintain our minimum capital requirements, we may not
be able to raise additional funds through the issuance of additional shares of
common stock or other securities. Even if we are able to obtain capital through
the issuance of additional shares of common stock or other securities on terms
acceptable to us, the sale of these additional shares could significantly dilute
your ownership interest and may be made at prices lower than the price at which
we are selling shares in this offering.
OUR BOARD OF DIRECTORS IS AUTHORIZED TO ISSUE ADDITIONAL SHARES OF COMMON STOCK
AND SHARES OF PREFERRED STOCK WHICH, IF ISSUED, MAY DILUTE YOUR OWNERSHIP
INTEREST, REDUCE THE MARKET PRICE OF OUR COMMON STOCK AND ADVERSELY AFFECT YOUR
VOTING RIGHTS.
Our board of directors is authorized by our charter to issue additional
shares of common stock and shares of preferred stock without the consent of our
shareholders. If we issue additional shares of common stock after the close of
the offering, your percentage interest in Pinnacle Financial would be diluted.
Additionally, preferred stock, when issued, may rank senior to common stock with
respect to voting rights, payment of dividends, and amounts received by
shareholders upon liquidation, dissolution or winding up. The existence of
rights that are senior to common stock may reduce the price of our
9
shares of common stock. Other than the issuance of common stock subject to
warrants and options granted to our organizers and executive officers, we do not
have any current plans to issue any shares of common stock or preferred stock
after the close of the offering.
OUR DIRECTORS AND OFFICERS COULD HAVE THE ABILITY TO INFLUENCE SHAREHOLDER
ACTIONS IN A MANNER THAT MAY BE ADVERSE TO YOUR PERSONAL INVESTMENT OBJECTIVES.
Together, our directors and executive officers may be able to influence the
outcome of director elections or block a significant transaction, such as a
merger or acquisition, that might otherwise be approved by the shareholders. For
example, to be elected, a director nominee generally must receive more votes
than any other nominee for the same seat on the board of directors; a merger or
acquisition not adopted by two-thirds of our board of directors generally must
be approved by a two-thirds vote of the shareholders; and, most other matters
generally require that more shares be voted for rather than against the
proposal. We anticipate that our directors and executive officers will directly
or indirectly own 391,000 shares or 15.6% of our outstanding common stock after
the close of the offering. Additionally, we will be issuing warrants and options
to our directors and executive officers. Although these warrants and options
will vest over time, if our directors and executive officers exercised all of
their warrants and options, they could directly or indirectly own 706,500
shares, representing 25.1% of our outstanding common stock. Consequently, our
directors and executive officers, as a group, may hold enough shares to
effectively block a potential merger or acquisition, or any other important
matter requiring the affirmative vote of two-thirds of our outstanding common
stock, and may significantly influence the outcome of a vote on any other
matter. See "Selected Provisions of the Charter and Bylaws" on page 45.
YOU MAY BE DEPRIVED OF AN OPPORTUNITY TO SELL YOUR SHARES AT A PREMIUM OVER
MARKET PRICES BECAUSE TENNESSEE STATE LAW AND OUR CHARTER LIMIT THE ABILITY OF
OTHERS TO ACQUIRE US.
In many cases, shareholders receive a premium for their shares when a
company is purchased by another. Under Tennessee law, however, no bank holding
company may acquire control of Pinnacle Financial until Pinnacle National has
been incorporated for five years. In addition, state and federal law and our
charter make it difficult for anyone to purchase Pinnacle Financial without
approval of our board of directors. These provisions include the existence of
preferred stock, staggered terms for the directors, restrictions on the ability
to change the number of directors or to remove a director, supermajority voting
requirements and flexibility in considering acquisition proposals. See "Selected
Provisions of Our Charter and Bylaws" on page 45.
10
CAUTION REGARDING FORWARD-LOOKING STATEMENTS
This prospectus contains forward-looking statements concerning Pinnacle
Financial and Pinnacle National and their operations, performance, financial
conditions and likelihood of success. Forward-looking statements are based on
many assumptions and estimates, and include statements about the competitiveness
of the banking industry, potential regulatory obligations, our business
strategies and other statements that are not historical facts. When used in this
prospectus, the words "may," "would," "could," "will," "expect," "anticipate,"
"believe," "intend," "plan" and "estimate," and similar expressions generally
identify forward-looking statements. Because forward-looking statements involve
many risks and uncertainties, some of which are beyond our control, actual
results may differ materially from those expressed in the forward-looking
statements. The most significant of these risks, uncertainties and other factors
are discussed under the heading "Risk Factors" beginning on page 6 of this
prospectus. We urge you to carefully consider these factors prior to making an
investment in our common stock.
11
USE OF PROCEEDS
We estimate that we will receive net proceeds of $23,567,000 from the sale
of 2,500,000 shares of common stock in the offering, after deducting the
estimated underwriting discount of $1,313,000 and estimated offering expenses of
$120,000. If the underwriters exercise their over-allotment option in full, we
will receive $2,943,450 in additional net proceeds, after deducting an
additional underwriting discount of $221,550.
On June 28, 2000, we established a line of credit with SunTrust Bank,
Nashville, Tennessee in the amount of $1,500,000 at the prime rate, as published
in the Money Rates section of THE WALL STREET JOURNAL, which replaces our former
line of credit with The Bank of Nashville. This line of credit is for the
purpose of paying both Pinnacle Financial's organizational expenses and Pinnacle
National's organizational and pre-opening expenses incurred prior to the
completion of the offering. We intend to pay off this line of credit with
proceeds that we receive from this offering. The following two sections describe
our proposed use of proceeds based on our present plans and business conditions.
USE OF PROCEEDS BY PINNACLE FINANCIAL
The following table shows the anticipated use of the proceeds by Pinnacle
Financial. We describe Pinnacle National's anticipated use of proceeds in the
following section.
[Download Table]
PERCENTAGE
OF GROSS
AMOUNT PROCEEDS
----------- ----------
Gross proceeds from offering................................ $25,000,000 100.0%
Underwriters' discount...................................... $ 1,313,000 5.3%
Organizational expenses..................................... $ 140,000 0.6%
Offering expenses........................................... $ 120,000 0.5%
Investment in capital stock of Pinnacle National............ $22,600,000 90.4%
-----------
Remaining proceeds.......................................... $ 827,000 3.3%
===========
We will use $22.6 million to capitalize Pinnacle National. We will initially
invest the remaining net proceeds, and any proceeds received upon the exercise
of the over-allotment option granted to the underwriters, in United States
government securities or deposit them with Pinnacle National. In the long-term,
we will use these funds for operational expenses and other general corporate
purposes, including the provision of additional capital to Pinnacle National, if
necessary. Although we do not have any specific plans for future acquisitions,
we may also use the proceeds to establish or acquire other financial
institutions or financially related businesses if deemed appropriate.
USE OF PROCEEDS BY PINNACLE NATIONAL
The following table shows the anticipated use of the proceeds allocated to
Pinnacle National. These proceeds will be in the form of an investment in
Pinnacle National's common stock by Pinnacle Financial. The following table
shows the use of proceeds of Pinnacle National for a period of 12 months from
the completion of this offering. Leasehold improvements, furniture, fixtures and
equipment will be capitalized and amortized over the life of the lease or over
the estimated useful life of the asset. Subject to the discretion of its Board
of Directors, Pinnacle National will use the remaining proceeds to make loans,
purchase securities and otherwise conduct business operations, which would
include the payment of working capital expenses such as salaries and benefits,
advertising, data processing and other operational expenses that exceed initial
operating income. We believe that
12
the net proceeds of this offering will satisfy our capital requirements for at
least 12 months following the opening of Pinnacle National.
[Enlarge/Download Table]
PERCENTAGE OF
PINNACLE NATIONAL'S
AMOUNT INITIAL CAPITALIZATION
----------- ----------------------
Investment by Pinnacle Financial in Pinnacle National's
common stock.............................................. $22,600,000 100.0%
Pre-opening and organizational expenses..................... $ 865,000 3.8%
Tenant build-out of our main office, including furniture,
fixtures and equipment.................................... $ 1,650,000 7.3%
Branch expansion (two branches)............................. $ 2,800,000 12.4%
Rental payments for our main office (12 months)............. $ 246,000 1.1%
Rental payments for West End Lease (4 months)............... $ 5,000 --
-----------
Remaining proceeds.......................................... $17,034,000 75.4%
===========
The foregoing table is subject to change in response to any changes made to
Pinnacle National's underlying business plan. For example, if we decide to lease
rather than purchase our two branch expansion locations, as referenced above, we
will likely use less than the allocated $2.8 million for this activity.
Consequently, any savings gained by such a change would likely be reallocated to
general working capital for Pinnacle National.
13
CAPITALIZATION
The following table shows Pinnacle Financial's capitalization as of
June 30, 2000 and its pro forma consolidated capitalization, as adjusted to give
effect to the receipt of the net proceeds from the sale of 2,500,000 shares of
common stock in the offering.
M. Terry Turner, president and chief executive officer of Pinnacle
Financial, has purchased one share of Pinnacle Financial's common stock at a
price of $10.00. Pinnacle Financial will redeem this share for $10.00 upon the
issuance of shares in this offering. The number of shares shown as outstanding
after giving effect to the offering, and the book value of those shares, do not
include shares of common stock issuable upon the exercise of the warrants held
by the organizers or stock options issuable under our stock incentive plan. For
additional information regarding the number and terms of these warrants and
options, see "Description of Our Capital Stock--Organizers' Shares and Warrants"
on page 44 and "Executive Compensation--Stock Incentive Plan" on page 40.
[Enlarge/Download Table]
JUNE 30, 2000
SHAREHOLDERS' EQUITY ACTUAL AS ADJUSTED
-------------------- ------------- -----------
Preferred stock, no par value, 10,000,000 shares authorized;
no shares issued or outstanding........................... -- --
Common stock, $1.00 par value, 10,000,000 shares authorized;
1 share issued and outstanding; 2,500,000 shares issued
and outstanding as adjusted............................... $ 1 $ 2,500,000
Additional paid-in capital(1)............................... $ 9 $21,067,000
Deficit accumulated during the development stage............ (384,629)(2) (1,005,000)(3)
--------- -----------
Total shareholders' equity............................ $(384,619) $22,562,000
========= ===========
Book value per share(4)..................................... N/A $ 9.02
===========
------------------------
(1) The expenses of the offering will be charged against this account. We
estimate that the offering expenses will be $1,433,000, which includes
$1,313,000 in underwriting discounts and $120,000 in other offering
expenses, including legal, accounting and printing expenses, and
registration fees.
(2) This deficit reflects organizational and pre-opening expenses incurred
through June 30, 2000, consisting primarily of salaries, legal and
consulting fees.
(3) The "As Adjusted" accumulated deficit results from estimated organizational
and pre-opening expenses of $1,005,000 incurred through Pinnacle National's
target opening date of September 30, 2000. Actual organizational and
pre-opening expenses may be higher and may therefore increase the deficit
accumulated during the pre-opening stage and further reduce shareholders'
equity.
(4) After giving effect to the receipt of the net proceeds from this offering,
there is an immediate dilution in the book value per share of $.98,
resulting from recognition of organizational and pre-opening expenses and
charging the offering expenses against paid-in capital.
14
DIVIDENDS
Initially, we intend to retain all of our earnings to support our operations
and to expand our business. Additionally, we are subject to significant
regulatory restrictions on the payment of cash dividends. See "Supervision and
Regulation--Payment of Dividends" on page 57. In light of these restrictions and
our need to retain and build capital, we do not plan to pay dividends at least
until such time as we become profitable and recover any losses incurred during
our initial operations. Our payment of future dividends and our dividend policy
will depend on our earnings, capital requirements and our financial condition,
as well as other factors that our board of directors considers relevant.
15
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
PLAN OF OPERATIONS
Pinnacle Financial's financial statements and related notes, which are
included in this prospectus, provide additional information relating to the
following discussion of our financial condition. See "Index to Financial
Statements."
Pinnacle Financial was incorporated on February 28, 2000 to serve as a
holding company for Pinnacle National Bank, a proposed national bank. Since
February 28, 2000, our main activities have been:
- seeking, interviewing and selecting our directors and officers;
- preparing our business plan;
- securing a line of credit;
- applying for a national bank charter;
- applying for FDIC deposit insurance;
- applying to become a bank holding company; and
- raising equity capital through this offering.
From our inception on February 28, 2000 to the close of the offering,
Pinnacle Financial's operations have been and will continue to be funded through
a line of credit. Currently, our line of credit is with SunTrust Bank,
Nashville, Tennessee in the amount of $1,500,000, of which $522,660 was
outstanding as of July 10, 2000. This line of credit with SunTrust Bank replaces
our former line of credit with The Bank of Nashville. The line of credit bears
interest at the prime rate, as published in the Money Rates section of THE WALL
STREET JOURNAL, is due on December 31, 2000 and is guaranteed by 13 of our 14
organizers. See "Related Party Transactions" on page 43. We anticipate that the
line of credit amount will increase as working capital needs of Pinnacle
Financial and Pinnacle National grow through the organizational phase. We plan
to repay the line of credit in full after the close of the offering.
FINANCIAL RESULTS
From February 28, 2000 through March 31, 2000, our net loss amounted to
$87,098. From February 28, 2000 through June 30, 2000, our net loss amounted to
$384,629. The estimated net loss for the period from February 28, 2000 through
September 30, 2000, the anticipated opening date of Pinnacle National, is
$1,005,000, which is attributable to the following estimated expenses:
[Download Table]
Salaries and benefits....................................... $ 690,000
Legal, consulting and professional fees..................... 225,000
Other pre-opening expenses.................................. 90,000
----------
Total....................................................... $1,005,000
==========
OFFICES
On March 16, 2000, Pinnacle Financial entered into an agreement with
Commerce Street Associates to lease 12,135 square feet of office space in an
office building known as The Commerce Center located on the corner of 3(rd)
Street and Commerce Street, Nashville, Tennessee. The leased property will be
the site for our main office. The planned tenant build-out of our main office is
expected to begin in the second quarter of 2000 with total costs, including
furniture, fixtures and equipment, estimated at $1.66 million. After Pinnacle
National is capitalized, it will assume our lease
16
with Commerce Street Associates and will pay the remaining balance of the
renovation costs incurred. The term of our main office lease is 10 years with
initial monthly rent being $20,471.21.
The tenant build-out of our main office is expected to be completed by the
end of the third quarter 2000. Consequently, we anticipate opening for business
in the third or fourth quarter of 2000, soon after these lease-hold improvements
are completed. However, until our main office is ready for us to occupy, our
temporary executive offices will continue to be located in Suite 306 of the 3401
West End Building, which is approximately four miles west of our main office
facility. The initial lease term for our temporary facility began April 1, 2000
and ends February 28, 2001. We currently pay monthly rent in the amount of
$1,758 for our temporary facility.
We anticipate that our main office location downtown will provide us with
desired visibility in Nashville's prominent commercial and private banking
markets. However, as in most metropolitan markets, there is a growing demand for
more convenient access to banking and investment products and services by
banking clients. Consequently, as part of our strategy to provide convenient
access to our banking products and services and to expand our market visibility,
we expect to implement a distribution strategy that we believe will be a prudent
expansion of Pinnacle National's proposed operations. Under our distribution
strategy, we anticipate opening offices in the Brentwood area, the Belle
Meade/Green Hills area, the Rivergate Mall or Hendersonville area, and the
Bellevue area within the first two years of Pinnacle National's operations. Each
of these areas listed are currently within our primary service area and
represent, in the view of our management, important sub-markets of our overall
primary service area. As of the date of this prospectus, we have not selected or
procured any actual site locations, and there can be no assurance that we will
open these offices, or if opened, that they will be profitable.
LIQUIDITY AND INTEREST RATE SENSITIVITY
Since Pinnacle Financial has been in the organizational stage, there are no
results of operations to present at this time. Nevertheless, once Pinnacle
National begins operations, net interest income, Pinnacle Financial's primary
source of earnings, will fluctuate with significant interest rate movements. To
lessen the impact of these fluctuations, we intend to structure the balance
sheet so that repricing opportunities exist for both assets and liabilities in
roughly equal amounts at approximately the same time intervals. Imbalances in
these repricing opportunities at any point in time constitute interest rate
sensitivity.
Interest rate sensitivity refers to the responsiveness of interest-bearing
assets and liabilities to change in market interest rates. The rate sensitive
position, or "gap," is the difference in the volume of rate sensitive assets and
liabilities at a given time interval. The general objective of gap management is
to actively manage rate sensitive assets and liabilities in order to reduce the
impact of interest rate fluctuations on the net interest margin. We will
generally attempt to maintain a balance between rate sensitive assets and
liabilities as the exposure period is lengthened to minimize Pinnacle National's
overall interest rate risk.
We will regularly evaluate the balance sheet's asset mix in terms of several
variables:
- yield;
- credit quality;
- appropriate funding sources; and
- liquidity.
To effectively manage the balance sheet's liability mix, we plan to focus on
expanding our deposit base and converting assets to cash as necessary.
17
As Pinnacle National continues to grow, we will continuously structure its
rate sensitivity position in an effort to hedge against rapidly rising or
falling interest rates. Pinnacle National's asset and liability committee will
meet on a monthly basis to develop a strategy for the upcoming period.
Liquidity represents the ability to provide steady sources of funds for loan
commitments and investment activities, as well as to maintain sufficient funds
to cover deposit withdrawals and payment of debt and operating obligations. We
can obtain these funds by converting assets to cash or by attracting new
deposits. Pinnacle National's ability to maintain and increase deposits will
serve as its primary source of liquidity.
Other than this offering, we know of no trends, demands, commitments, events
or uncertainties that should result in or are reasonably likely to result in
Pinnacle Financial's liquidity increasing or decreasing in any material way in
the foreseeable future.
CAPITAL ADEQUACY
We believe that the net proceeds of this offering will satisfy our capital
requirements for at least the next 12 months following the opening of Pinnacle
National. Accordingly, we do not anticipate that it will be necessary to raise
additional funds to operate Pinnacle Financial or Pinnacle National for at least
the next 12 months after Pinnacle National opens. All anticipated material
expenditures for this period have been identified and provided for out of the
proceeds of this offering. For additional information about planned
expenditures, see "Use of Proceeds" on page 12.
18
OUR PROPOSED BUSINESS
BACKGROUND
PINNACLE FINANCIAL. We incorporated Pinnacle Financial as a Tennessee
corporation on February 28, 2000 to serve as a bank holding company that will
own 100% of the capital stock of Pinnacle National. Pinnacle Financial plans to
use $22.6 million of the net proceeds of this offering to purchase the capital
stock of Pinnacle National. Initially, we will have no business operations other
than owning and managing Pinnacle National.
We anticipate filing an application with the Federal Reserve to become a
bank holding company after we receive preliminary approval from the OCC to
organize Pinnacle National. We have chosen this holding company structure
because we believe it will provide flexibility that would not otherwise be
available. With a holding company structure, we may assist Pinnacle National in
maintaining its required capital ratios by borrowing money and contributing the
proceeds of that debt to Pinnacle National as primary capital. Additionally,
under provisions of the Gramm-Leach-Bliley Act, which took effect March 11,
2000, a bank holding company may seek to become a financial holding company. A
financial holding company may engage in activities that are financial in nature
or incidental or complementary to a financial activity, including some insurance
transactions, real estate development activities and merchant banking
activities, in which Pinnacle National will be prohibited from engaging.
Although we do not presently intend to become a financial holding company, we
may be able to do so with a proper notice or filing to the Federal Reserve if we
believe that there is a need for these services in our market area, that we can
be successful in these activities and that these activities could be profitable.
See "Supervision and Regulation--Pinnacle Financial" on page 52.
PINNACLE NATIONAL. On March 29, 2000 we submitted our application to the
Office of the Comptroller of the Currency to organize Pinnacle National. In our
application, we indicated to the OCC that we anticipate raising $25.0 million in
capital and investing approximately $22.6 million in Pinnacle National.
Accordingly, in order to receive final approval of our application to organize
Pinnacle National, we anticipate that we will be required to invest a minimum of
$22.6 million in Pinnacle National, receive approval of our application to the
FDIC for deposit insurance and implement appropriate banking policies and
procedures. After receiving all necessary regulatory approvals, we anticipate
beginning operations at our main office facility in the third or fourth quarter
of 2000.
MARKET OPPORTUNITIES
PRIMARY SERVICE AREA. Pinnacle National's primary service area, which
comprises the Nashville Metropolitan Statistical Area, includes the following
counties:
- Cheatham County
- Davidson County
- Dickson County
- Robertson County
- Rutherford County
- Sumner County
- Williamson County
- Wilson County
This area represents a geographic area that covers approximately 4,000 square
miles, eight counties and a population in excess of one million.
Pinnacle National's main office will be located in Nashville's central
business district in downtown Nashville. The downtown market claims a variety of
commercial establishments and entertainment venues, and we believe it to be a
critical location for financial institutions requiring visibility within
Nashville's prominent commercial and private banking markets. Accordingly, we
believe that this location will be well suited for the business development
efforts of the experienced relationship
19
managers that we intend to hire. Additionally, during the first two years after
Pinnacle National opens for business, we intend to establish four more offices
within our primary service area. We believe these additional offices will
strengthen our market presence, allowing us to grow our deposit base more
rapidly.
LOCAL ECONOMY. The economic success of our primary service area depends
heavily upon the economic viability of Nashville, Tennessee. Nashville is the
capital of Tennessee and an important transportation, business and tourism
center within the United States. Additionally, the Nashville-Davidson County
area has recently attracted a number of significant business relocations, and
job growth continues in all sectors. For example, according to the Nashville
Area Chamber of Commerce, over the first half of 1999 Nashville experienced
employment gains as high as 6.7% in the finance and insurance sector, with
service jobs growing at a rate of 4.8% over the same six-month period.
Part of our primary service area's economic strength comes from its large
employer base, which includes the national, state or corporate headquarters of a
number of large corporations such as Nissan Motor Manufacturing Corporation
U.S.A., BellSouth, the Kroger Company, and Columbia/HCA Healthcare Corporation.
With its diverse employer base, our primary service area does not rely on any
single industry sector. Additionally, according to the Nashville Area Chamber of
Commerce, the regional economy continues to benefit from consistent job growth,
substantial outside investment, and expansion and broadening of its labor force.
We anticipate that these factors will cause more businesses to relocate to, or
start operations in, our primary service area and, in turn, will increase the
demand for depository and lending services within our market.
According to the Nashville Area Chamber of Commerce, the largest private
sector employers within our primary service area are Vanderbilt University and
Medical Center and Columbia/HCA Healthcare Corporation. Our primary service
area's top ten private-sector employers are listed below and illustrate the
diversification of the area's business and trade.
[Enlarge/Download Table]
OUR PRIMARY SERVICE AREA'S
TOP TEN PRIVATE-SECTOR EMPLOYERS TOTAL EMPLOYEES INDUSTRY
-------------------------------- --------------- -----------------------
Vanderbilt University & Medical Center................ 12,719 Education
Columbia/HCA Healthcare Corporation................... 8,100 Health care
Gaylord Entertainment................................. 6,454 Music and entertainment
Nissan Motor Manufacturing Corporation U.S.A.......... 6,000 Manufacturing
Kroger Company........................................ 5,750 Retail trade
Reemay, Inc........................................... 5,070 Manufacturing
United Parcel Service................................. 4,500 Service
First American National Bank (now AmSouth)............ 4,200 Financial
Shoney's, Inc......................................... 4,125 Retail trade
St. Thomas Hospital................................... 4,000 Health care
With 18 colleges and universities and four community colleges within 75
miles of Nashville, there is abundant opportunity for workforce preparation and
ongoing development of existing workers. Since 1990, the labor market in the
Nashville Economic Market, which is comprised of our primary service area and
two additional counties--Maury and Montgomery, has increased 15.6% to 710,077
persons. The largest component of employment is non-agricultural services and
retail/wholesale trade.
POPULATION. According to estimates provided by CACI Marketing
Systems, Inc., a marketing research firm retained by Pinnacle Financial, during
the period from 1990 to 1999 the population of our primary service area has
grown from 985,026 to 1,176,596, representing an increase of 19.4%. By 2004,
CACI further projects the area's total population will grow by 100,000 to
approximately 1,278,000.
20
The following table shows the Nashville Area Chamber of Commerce's population
data for each of the eight counties that comprise our primary service area.
[Download Table]
PERCENTAGE
COUNTY 1990 1999 INCREASE
------ -------- -------- ----------
Cheatham........................................ 27,140 35,560 31.0%
Davidson........................................ 510,784 541,490 6.0%
Dickson......................................... 35,061 41,482 18.3%
Robertson....................................... 41,494 51,499 24.1%
Rutherford...................................... 118,570 169,862 43.3%
Sumner.......................................... 103,281 126,227 22.2%
Williamson...................................... 81,021 119,855 47.9%
Wilson.......................................... 67,675 83,672 23.6%
According to CACI estimates, in 1999 our primary service area had
approximately 454,012 households, 41.6% of which had household wealth (defined
as financial net worth) of $100,000 or more. Additionally, the median family
income for our primary service area in 1999 was estimated to be $41,692.
Although CACI's estimates indicated that 40.6% of the population in our primary
service area had income below this average, 39.8% had income equal to or greater
than $50,000.
COMPETITION. According to the FDIC, bank and thrift deposits in Pinnacle
National's primary service area grew from approximately $13.0 billion in
June 1995 to more than $16.1 billion in June 1999. This multi-billion dollar
deposit base is primarily controlled by large, multi-state banks headquartered
outside of Nashville, which include AmSouth, Bank of America, First Union,
SunTrust and Union Planters. Although these large, multi-state institutions are
well established in the area, the majority of the community banks in our primary
service area have been able to increase their deposit market share. According to
the FDIC, the following trends occurred in deposit market share from June 1995
to June 1999:
- Total deposits for the large, multi-state banks described above grew 17.1%
from $10.1 billion to $11.9 billion, compared to 24.6% growth from $13.0
billion to $16.1 billion in the overall deposit market.
- The slower relative growth of these large banks resulted in their combined
relative deposit market share falling from 78.3% to 73.7%.
- The five largest community-oriented banks operating in the service area
during the entire four-year period saw their total deposits grow 72.3%
from $756 million to $1.3 billion. These banks included Wilson Bank &
Trust, Franklin National Bank, Cavalry Bank, The Bank of Nashville and
Farmers Bank.
- These five community banks increased their combined relative deposit
market share from 5.8% to 8.1%.
Although we believe the general trends outlined above indicate that large,
multi-state competitors in our primary service area are losing relative deposit
market share to their community bank competitors, we also believe that
positioning ourselves as solely a community bank will not be enough to compete
in today's financial industry. In the wake of modern technology and the
prosperity of the United States' financial markets over the past decade, banking
clients have generally become more sophisticated in their approach to selecting
financial services providers. We believe that the most important criteria to our
targeted clients when selecting a bank is their desire to receive exceptional
customer service while being able to enjoy convenient access to a broad array of
sophisticated financial products. Additionally, when presented with a choice, we
believe that many of our targeted clients
21
would prefer to deal with a locally-owned institution headquartered in
Nashville, like Pinnacle National, as opposed to a large, multi-state bank.
With the loss of Nashville's only large, locally headquartered bank, First
American National Bank, we believe that there exists an opportunity for Pinnacle
National to lure customers who may be dissatisfied away from large, multi-state
competitors not based in Nashville, as well as from community banks that are not
meeting their customers' sophisticated financial needs. Although The Bank of
Nashville, Citizens Bank and Trust and Capital Bank & Trust operate as
Nashville-based community banks, we believe we can distinguish ourselves by
providing the level of personal service often associated with a community bank
while also offering the requisite technology and skilled advisors to deliver
more sophisticated financial products and services than a typical community
bank.
We understand that we will be continuously faced with significant
competition and that new or existing community banks may establish or expand
their operations into the Nashville-Davidson County area, the focal point of
Pinnacle National's primary service area. However, currently none of the other
larger community banks identified above has a significant presence in the
Nashville-Davidson County area. For example, Cavalry Bank based in Murfreesboro,
Tennessee has nine branches in Rutherford County and holds 18.0% of the county's
deposit base; Franklin National Bank based in Franklin, Tennessee has four
branches in Williamson County and holds 21.0% of the county's deposit base;
Farmers Bank based in Portland, Tennessee has three branches in both Sumner and
Robertson Counties and holds 9.6% of Sumner County's deposit base and 16.0% of
Robertson County's deposit base; and Wilson Bank & Trust based in Lebanon,
Tennessee has eight branches in Wilson County and holds 35.5% of the county's
deposit base. Although we have no current plans to branch into these counties,
it is foreseeable, however, that these other larger community banks could decide
to extend their operations into the Nashville-Davidson County area, potentially
having an adverse impact on our ability to gain market share.
We also recognize that most of our competitors have substantially greater
resources and lending limits than Pinnacle National. As a result, Pinnacle
National may have to pay higher interest rates to attract depositors or extend
credit with lower interest rates to attract borrowers.
PHILOSOPHY AND STRATEGY
Our philosophy is based on three major trends that we see in today's
financial services industry:
- Client usage of more sophisticated financial products continues to grow,
causing traditional banks to lose market share to other types of financial
services companies, such as mutual funds and securities brokerage firms.
As a result, consumers are turning to a much broader set of institutions
to meet the complexity of their growing financial needs. As investment
choices multiply, consumers will likely search for professional guidance
in making their financial decisions.
- Customers generally perceive that service levels at banks are decreasing.
However, this general perception does not mean that consumers are willing
to accept or tolerate impersonal service. On the contrary, according to
PSI Global, small business owners want a reliable point of contact who is
knowledgeable about their businesses and the financial products and
services that are important to the success of their businesses.
- There is significant growth in the demand for convenient access to
financial services, particularly through ATMs, telephone banking and
internet banking.
In light of these trends, our management philosophy will be centered on
delivering to individuals and small- to medium-sized businesses exceptional
client service and effective financial advice through highly trained personnel
who understand and care about the broad financial needs and objectives of
22
our clients. Additionally, we intend to utilize sophisticated technologies that
will allow our clients to access our products and services when it is convenient
for them.
In order to implement our philosophy, our specific business strategies will
involve the following:
EXPERIENCED SENIOR MANAGEMENT. We are assembling a senior management team
that possesses extensive experience in the banking industry, as well as
substantial business and banking contacts in our market. For example, the
proposed top three executives of Pinnacle National, Mr. Turner, Mr. McCabe and
Mr. Queener, collectively have more than 64 years of banking experience, most of
which is in the Nashville market. See "Management" on page 30.
COMMUNITY-ORIENTED BOARD OF DIRECTORS. The majority of our board of
directors consists primarily of long-time metropolitan Nashville residents with
extensive contacts in our primary service area. The board of directors also
represents a wide array of business experience and community involvement, and
their continued active involvement will provide an opportunity to promote
Pinnacle National and its products and services. We anticipate that our
directors will bring substantial business and banking contacts to Pinnacle
National as a result of their experience, involvement and community standing.
SKILLED EMPLOYEES. We will strive to hire highly trained and seasoned
associates that can bring with them existing client relationships established
through their prior banking experience. If we are successful in hiring
associates with established client relationships, Pinnacle National will be able
to grow more rapidly than if we hired associates who require time to develop a
client base. Additionally, we plan to train our associates to answer questions
about all of our products and services, as well as on a breadth of financial
topics, so that they will be in a position to provide effective financial
advice.
INDIVIDUAL CLIENT ATTENTION. We will focus on providing individualized
service and attention to our clients, which will include individuals and
small-to medium-sized businesses. We will concentrate on establishing and
maintaining long-term client relationships by working to ensure that our clients
have positive banking experiences. As our associates, officers and directors
become familiar with each client on an individual basis, we will be able to
respond to credit requests more quickly and be more flexible in approving loans
based on collateral quality and personal knowledge of the client's banking
needs.
CAPITALIZE ON CUSTOMER DISSATISFACTION. With the general perception that
service levels at banks are decreasing, we believe that many traditional banking
clients are looking at alternative institutions like securities brokerage firms
and mutual funds as their desired savings vehicle. Accordingly, we will endeavor
to capitalize on those individuals and businesses who may be dissatisfied by
what we perceive as impersonal customer service or the less than satisfactory
response by some of our competitors to the sophisticated financial needs of
today's consumers. By positioning ourselves as a locally-owned and
locally-headquartered bank that delivers exceptional personal service and
financial advice tailored for today's marketplace, we believe that we will draw
many of these dissatisfied individuals and businesses to us.
LOCAL DECISION-MAKING. We will emphasize local decision-making with
experienced bankers and will focus on both employee retention and the delivery
of personal, professional and responsive service. As Pinnacle National expands
into other communities, it intends to maintain its policy of making decisions
locally. This will allow Pinnacle National to be more responsive to client
requests and to the needs of clients within the particular community.
STRATEGIC LOCATIONS. Pinnacle National's main office will be located in
Nashville's central business district in downtown Nashville, a critical location
for financial institutions requiring visibility within Nashville's prominent
commercial and private banking markets. We believe this will enhance Pinnacle
National's image as a strong competitor. Additionally, as part of our strategy
to provide convenient access to our banking products and services and to expand
our market visibility, we expect to implement a distribution strategy that we
believe is a prudent expansion of Pinnacle National's physical
23
operations into important sub-markets within our primary service area. However,
our distribution strategy will not be limited to opening new offices, but will
further include the implementation of other convenient delivery systems, such as
24 hour telephone and internet banking.
ADVANCED TECHNOLOGY. Pinnacle National intends to use advanced banking and
communications technology to deliver services that will match the level of
sophistication of Pinnacle National's larger competitors. By positioning
Pinnacle National as a community bank committed to understanding the financial
needs of its clients and by enhancing its service quality and convenience
through user-friendly technologies, we expect to establish meaningful client
relationships from both new and existing residents and businesses in the area.
MARKETING AND ADVERTISING. We have retained Atkinson Public Relations,
which is principally owned by one of our organizers, to promote Pinnacle
National's image as a technologically responsive, community-focused bank that
emphasizes prompt, professional and personalized financial advisory and lending
services to individuals and businesses. Pinnacle National will also sponsor
various community activities in our primary service area and will use media
services such as radio advertising, local newspapers and direct mail campaigns
to promote its products and services.
OFFICER AND DIRECTOR CALL PROGRAM. We intend to implement an active officer
and director call program to promote Pinnacle National's philosophy. The purpose
of this call program will be to personally visit prospective clients, assess
their needs and invite them to do business with us.
OFFER FEE-GENERATING PRODUCTS AND SERVICES. Pinnacle National's range of
services, pricing strategies, interest rates paid and charged, and hours of
operation will be structured to attract its target clients and grow its market
share. Additionally, we plan to offer a competitive array of investment and
financial planning products and services, which should further differentiate us
from our competitors that do not offer such products and services directly from
their banking locations.
LENDING SERVICES
LENDING POLICY. We will offer a full range of lending products, including
commercial, real estate and consumer loans to individuals and small-to
medium-sized businesses and professional concerns. We will compete for these
loans with competitors who are well established in the Nashville metropolitan
area and have greater resources and lending limits.
It is our plan that Pinnacle National's initial loan portfolio be comprised
of the following:
[Download Table]
LOAN CATEGORY RATIO
------------- --------
Commercial loans............................................ 40%
Commercial/residential real estate loans.................... 40%
Consumer loans.............................................. 20%
Based on our management team's past lending experience, we believe that, when
properly managed and monitored, none of these categories represents a
significantly higher risk than the other. Additionally, Pinnacle National plans
to avoid concentrations of loans to a single industry or secured by a particular
type of collateral.
LOAN APPROVAL AND REVIEW. Pinnacle National's loan approval policies will
provide for various levels of officer lending authority. When the amount of
total loans to a single borrower exceeds that individual officer's lending
authority, an officer with a higher lending limit or Pinnacle National's
executive committee will determine whether to approve the loan request. Pinnacle
National will not make any loans to any of its directors or executive officers
unless its board of directors, excluding the interested party, first approves
the loan, and the terms of the loan are no more favorable than would be
available to any comparable borrower.
24
LENDING LIMITS. Pinnacle National's lending activities will be subject to a
variety of lending limits imposed by federal law. Differing limits apply based
on the type of loan or the nature of the borrower, including the borrower's
relationship to the bank. In general, however, Pinnacle National will be able to
loan any one borrower a maximum amount equal to either:
- 15% of Pinnacle National's capital and surplus; or
- 25% of its capital and surplus if the amount that exceeds 15% is fully
secured by readily marketable collateral.
Based on its proposed capitalization and projected pre-opening expenses,
Pinnacle National's initial legal lending limit will be approximately
$3.3 million for loans not fully secured plus an additional $2.2 million, or a
total of approximately $5.5 million, for loans that meet the federal guidelines.
These legal limits will increase or decrease as Pinnacle National's capital
increases or decreases as a result of its earnings or losses, among other
reasons. Our management team has adopted an internal lending limit of
$1.5 million, which will initially be lower than the applicable legal limit.
However, based on either our internal lending limit or our legal lending limit,
Pinnacle National will need to sell participations in its loans to other
financial institutions in order to meet all of the lending needs of our clients
requiring extensions of credit above these limits.
CREDIT RISKS. The principal economic risk associated with each category of
loans that Pinnacle National expects to make is the creditworthiness of the
borrower. Borrower creditworthiness is affected by general economic conditions
and the strength of the relevant business market segment. General economic
factors affecting a borrower's ability to repay include interest, inflation and
employment rates, as well as other factors affecting a borrower's clients,
suppliers and employees.
The well established financial institutions in Nashville's market are likely
to make proportionately more loans to medium- to large-sized businesses than
Pinnacle National will make. Many of Pinnacle National's anticipated commercial
loans will likely be made to small- to medium-sized businesses that may be less
able to withstand competitive, economic and financial pressures than larger
borrowers.
COMMERCIAL LOANS. We expect that loans for commercial purposes in various
lines of businesses will be one of the primary components of Pinnacle National's
loan portfolio. The terms of these loans will vary by purpose and by type of any
underlying collateral.
- EQUIPMENT LOANS. Pinnacle National will typically make equipment loans for
a term of five years or less at fixed or variable rates, with the loan
fully amortized over the term. Equipment loans generally will be secured
by the financed equipment, and the ratio of the loan principal to the
value of the financed equipment or other collateral will generally be 80%
or less. We expect that these loan-to-value ratios will be sufficient to
compensate for fluctuations in the market value of the equipment and will
help minimize losses that could result from poor maintenance or the
introduction of updated equipment models into the market.
- WORKING CAPITAL LOANS. Loans to support working capital will typically
have terms not exceeding one year and will usually be secured by accounts
receivable, inventory or personal guarantees of the principals of the
business. For loans secured by accounts receivable or inventory, principal
will typically be repaid as the assets securing the loan are converted
into cash, and for loans secured with other types of collateral, principal
will typically be due at maturity. The quality of the commercial
borrower's management and its ability both to properly evaluate changes in
the supply and demand characteristics affecting its markets for products
and services and to effectively respond to such changes are significant
factors in a commercial borrower's creditworthiness. General risks
affecting a commercial borrower's ability to repay include interest,
inflation and the demand for the commercial borrower's products and/or
services, as well as other factors affecting a borrower's customers,
suppliers and employees.
25
REAL ESTATE LOANS. Pinnacle National will make commercial real estate
loans, residential real estate loans and, to a limited degree, construction and
development loans. Pinnacle National's real estate loans may include commercial
loans where Pinnacle National takes a security interest in real estate as
supplemental, but not principal, collateral for the loan. Home equity loans and
lines of credit will be classified as consumer loans rather than real estate
loans.
- COMMERCIAL REAL ESTATE. Commercial real estate loan terms generally will
be limited to five years or less, although payments may be structured on a
longer amortization basis. Interest rates may be fixed or adjustable,
although rates typically will not be fixed for a period exceeding
60 months. Pinnacle National will generally charge an origination fee of
one percent. We will attempt to reduce credit risk on our commercial real
estate loans by emphasizing loans on owner-occupied office and retail
buildings where the ratio of the loan principal to the value of the
collateral as established by independent appraisal does not exceed 80% and
net projected cash flow available for debt service greater than or equal
to 120% of the debt service requirement. In addition, Pinnacle National
generally will require personal guarantees from the principal owners of
the property supported by a review by Pinnacle National's management of
the principal owners' personal financial statements. Risks associated with
commercial real estate loans include fluctuations in the value of real
estate, new job creation trends, tenant vacancy rates and the quality of
the borrower's management. Pinnacle National will limit its risk by
analyzing borrowers' cash flow and collateral value on an ongoing basis.
- RESIDENTIAL REAL ESTATE. Pinnacle National's residential real estate loans
will consist of first mortgage products and construction loans. We will
offer fixed and variable rates on our mortgages with the amortization of
the loan generally not exceeding 30 years and the rates generally not
being fixed or "booked" for a period over 60 months. These loans will be
made in accordance with Pinnacle National's appraisal policy and with the
ratio of the loan principal to the value of collateral as established by
independent appraisal generally not exceeding 95%. We expect that these
loan-to-value ratios will be sufficient to compensate for fluctuations in
real estate market value and to minimize losses that could result from a
downturn in the residential real estate market.
- CONSTRUCTION AND DEVELOPMENT LOANS. To a lesser extent, we may make
construction and development loans on a pre-sold basis, but we do not
initially intend to make construction and development loans on a
speculative basis. We may do so in the future, however, if deemed
appropriate by our board of directors. If the borrower has entered into an
agreement to sell the property prior to beginning construction, then the
loan is considered to be on a pre-sold basis. If the borrower has not
entered into an agreement to sell the property prior to beginning
construction, then the loan is considered to be on a speculative basis. If
we make these loans, they would generally have a term of nine to twelve
months and interest would be paid quarterly. The ratio of the loan
principal to the value of the collateral as established by independent
appraisal typically would not exceed 80%. Any speculative loans would be
based on the borrower's financial strength and cash flow position. Loan
proceeds would be disbursed based on the percentage of completion and only
after the project has been inspected by an experienced construction lender
or independent appraiser. Risks associated with construction loans include
fluctuations in the value of real estate and new job creation trends.
CONSUMER LOANS. Pinnacle National will make a variety of loans to
individuals for personal, family and household purposes, including secured and
unsecured installment and term loans, home equity loans and home equity lines of
credit. Consumer loan repayments depend upon the borrower's financial stability
and are more likely to be adversely affected by divorce, job loss, illness and
personal hardships. Because many consumer loans are secured by depreciable
assets such as boats, cars and trailers, the loan should be amortized over the
useful life of the asset. To minimize these risks, the loan officer will review
the borrower's past credit history, past income level, debt history and, when
applicable, cash
26
flow and determine the impact of all these factors on the ability of the
borrower to make future payments as agreed. We expect that the principal
competitors for consumer loans will be the established banks in Pinnacle
National's market.
LENDING OFFICERS. Pinnacle National intends to hire commercial and consumer
lenders with local experience and customer contacts in order to develop our loan
portfolios. Therefore, each lender will be expected to utilize these contacts to
generate business for Pinnacle National.
INVESTMENTS
In addition to loans, Pinnacle National will make other investments
primarily in obligations of the United States, obligations guaranteed as to
principal and interest by the United States and other taxable securities. No
investment in any of those instruments will exceed any applicable limitation
imposed by law or regulation. The Executive Committee will review the investment
portfolio on an ongoing basis in order to ensure that the investments conform to
Pinnacle National's policy as set by the board of directors.
ASSET AND LIABILITY MANAGEMENT
The Executive Committee will manage Pinnacle National's assets and
liabilities and will strive to provide a stable, optimized net interest margin,
adequate liquidity and a profitable after-tax return on assets and return on
equity. The committee will conduct these management functions within the
framework of written loan and investment policies that Pinnacle National will
adopt. The committee will attempt to maintain a balanced position between rate
sensitive assets and rate sensitive liabilities. Specifically, it will chart
assets and liabilities on a matrix by maturity, effective duration and interest
adjustment period and attempt to manage any gaps in maturity ranges.
DEPOSIT SERVICES
Pinnacle National will seek to establish a broad base of core deposits,
including savings, checking, interest-bearing checking, money market and IRA
accounts, as well as a variety of certificates of deposit. To attract deposits,
Pinnacle National will employ an aggressive marketing plan in its overall
service area and will feature a broad product line and competitive rates and
services. The primary sources of deposits will be residents of, and businesses
and their employees located in, Pinnacle National's primary market area.
Pinnacle National plans to obtain these deposits through personal solicitation
by its officers and directors, direct mail solicitations and advertisements
published in the local media. In order to attract its initial deposit base,
Pinnacle National may offer higher interest rates on various deposit accounts.
OTHER BANKING SERVICES
Given client demand for increased convenience in accessing banking and
investment services, Pinnacle National will also offer a broad array of
convenience-centered products and services, including 24 hour telephone and
internet banking, debit cards, credit cards, direct deposit and cash management
services for small- to medium-sized businesses. Additionally, Pinnacle National
plans to become associated with one or more nationwide networks of automated
teller machines that our clients will be able to use throughout Tennessee and
other regions. We do not plan to charge our clients for the use of these
automated teller machines since we will initially have only one location. We
also plan to offer MasterCard-Registered Trademark- and
VISA-Registered Trademark- credit card services through a correspondent bank as
an agent for Pinnacle National. Pinnacle National does not plan to exercise
trust powers during its initial years of operation, but will provide fee-based
asset management advisory services through a strategic business partner that has
not yet been selected. It may in the future offer a full-service trust
department, but cannot do so without the prior approval of the Office of the
Comptroller of the Currency.
27
Given today's significant demand for investment services, we have entered
into a strategic alliance with LM Financial Partners, Inc., a registered
broker-dealer and investment adviser, to offer and sell various securities and
other financial products to the public from Pinnacle National locations. As a
result, Pinnacle National will offer, through LM Financial Partners, non-FDIC
insured investment products in order to assist Pinnacle National's clients in
achieving their financial objectives consistent with their risk tolerances.
Specifically, we anticipate that these investment products will include:
- Mutual Funds
- Fixed Annuities
- Variable Annuities
- Stocks
- Money Market Instruments
- Financial Planning
- Treasury Bills
- Unit Investment Trusts
- Bonds
- Listed Options
- Asset Management Accounts
We anticipate that all of the financial products listed above will be
offered by LM Financial Partners from Pinnacle National's main office when
Pinnacle National begins its banking operations. Additionally, we believe that
the brokerage and investment advisory program to be offered by LM Financial
Partners will not only complement Pinnacle National's general banking business,
but will further support our business philosophy and strategy of delivering to
our clients those products and services that meet their sophisticated financial
needs.
We selected LM Financial Partners after careful review of several different
brokerage and investment advisory service providers. Additionally, we have
structured our relationship with LM Financial Partners in compliance with the
Securities Exchange Act, as amended by the Gramm-Leach-Bliley Act of 1999, and
federal banking regulations and guidelines. For example, as part of our effort
to comply with federal law, we will make it clear to our clients that LM
Financial Partners, as opposed to Pinnacle National itself, is the entity
offering the brokerage and investment advisory products and services and that
these products and services are not FDIC-insured. In addition, all products made
available under the LM Financial Partners program will only be offered in
designated areas of Pinnacle National's offices, and these areas will be leased
to LM Financial Partners. We believe that these and other compliance measures
will significantly decrease our exposure to any potential liability that may be
associated with implementing such a third party arrangement.
The initial term of our arrangement with LM Financial Partners is for one
year and is expected to begin approximately at the same time that Pinnacle
National opens for business. Additionally, the brokerage program agreement and
lease will be terminable upon 60 days written notice by either party. Under the
terms of the lease and the brokerage program agreement with LM Financial
Partners, Pinnacle National will receive a minimum lease payment of
approximately $105 per month for each leased area, plus a percentage of
commission credits and fees generated by the program. Pinnacle National will
remain, however, responsible for various expenses associated with the program,
including promotional and advertising expenses, furnishings and equipment
expenses for the leased areas, and general personnel costs. During the first
12 months of operating the program, we expect that it will generate
approximately $660,000 in gross revenue, leading to an estimated $165,000 in net
income, before taxes, for Pinnacle National. However, as the program becomes
more established and as our client base expands, we expect that the program will
become a more significant revenue source for Pinnacle National.
By offering brokerage and investment advisory products and services through
a third party like LM Financial Partners, we believe that we will be able to
avoid costly organizational and pre-opening expenses often associated with
offering, on a proprietary basis, such an investment product line. With
28
LM Financial Partners being the sponsor of the program, we do not anticipate
having more than approximately $550,000 or 2.4% of Pinnacle National's initial
capital of $22.6 million at risk. As a result, if the program should be
unsuccessful, our financial exposure would be limited.
Additionally, Pinnacle National will also offer various life and health
insurance products through Legg Mason Financial Services, Inc., a licensed
insurance agency and affiliate of LM Financial Partners, in order to assist
clients in achieving their financial objectives. Our agreement with Legg Mason
Financial Services will be governed by the same brokerage program agreement and
lease entered into with LM Financial Partners, as explained above.
As one example of our ability to provide exceptional banking convenience
while limiting branch distribution expense, Pinnacle National will also offer
its targeted commercial clients a courier service that will pick up non-cash
deposits and minimal cash deposits of up to approximately $200 from the client's
place of business. Pinnacle National will provide this service through a third
party, which has not yet been chosen, that is approved by the Public Service
Commission for bank-related work.
EMPLOYEES
When we begin operations, Pinnacle National projects that it will have 34
full-time employees. We do not expect that Pinnacle Financial will have any
employees who are not also employees of Pinnacle National.
29
MANAGEMENT
GENERAL
The following table sets forth, for the directors and executive officers of
Pinnacle Financial, (1) their names, addresses and ages at May 1, 2000,
(2) their respective positions with us, (3) the number of shares of our common
stock they intend to purchase in the offering, (4) the percentage of outstanding
shares such number will represent, and (5) the number of shares subject to
warrants and options that they will receive when we complete this offering. The
numbers of shares indicated in the table are based on "beneficial ownership"
concepts as defined by the Securities and Exchange Commission. Beneficial
ownership includes shares that are either owned or may be acquired within
60 days by the principal, a spouse, minor children and other relatives residing
in the same household, and trusts, partnerships, corporations or deferred
compensation plans which are affiliated with the principal. This table
separately discloses the number of warrants and options that will be granted to
each organizer or executive officer.
[Enlarge/Download Table]
SHARES ANTICIPATED TO BE
OWNED FOLLOWING WARRANTS
THE OFFERING AND OPTIONS
----------------------------- -----------
NAME, ADDRESS AND AGE POSITION HELD NUMBER PERCENT NUMBER
--------------------- ------------- ------ -------- -----------
CLASS I DIRECTORS:
Sue R. Atkinson (60)............. Director 10,000 * 5,000
5 St. James Place
Nashville, TN 37215
Colleen Conway-Welch (56)........ Director 10,000 * 5,000
109 Lynwood Terrace
Nashville, TN 37205
Clay T. Jackson (46)............. Director 25,000 1.0 12,500
5819 Hillsboro Road
Nashville, TN 37205
CLASS II DIRECTORS:
John E. Maupin, Jr. (52)......... Director 1,000 * 500
2 Morningside Court
Nashville, TN 37215
Robert A. McCabe, Jr. (49)....... Chairman of the 75,000 3.0 82,500(1)
Suite 306 Board
3401 West End Avenue
Nashville, TN 37203
Robert E. McNeilly, Jr. (67)..... Director 25,000 1.0 12,500
4323 Glen Eden Drive
Nashville, TN 37205
30
[Enlarge/Download Table]
SHARES ANTICIPATED TO BE
OWNED FOLLOWING WARRANTS
THE OFFERING AND OPTIONS
----------------------------- -----------
NAME, ADDRESS AND AGE POSITION HELD NUMBER PERCENT NUMBER
--------------------- ------------- ------ -------- -----------
CLASS III DIRECTORS:
Dale W. Polley (50).............. Director 25,000 1.0 12,500
1 Webster Lane
Nashville, TN 37205
James L. Shaub, II (43).......... Director 25,000 1.0 12,500
1103 Belle Meade Blvd.
Nashville, TN 37205
Reese L. Smith, III (52)......... Director 30,000 1.2 15,000
1101 Moran Road
Franklin, TN 37609
M. Terry Turner (45)............. Director, 75,000 3.0 82,500(2)
812 Jones Parkway President,
Brentwood, TN 37027 and Chief Executive
Officer
OFFICER AND ORGANIZER
NOT ALSO A DIRECTOR:
Hugh M. Queener (44)............. Executive Vice 35,000 1.4 47,500(3)
9318 Atherton Drive President and Chief
Brentwood, TN 37027 Administrative
Officer
All Directors and Executive...... 336,000 13.4 288,000
Officers as a Group (11 persons)
------------------------
* Represents ownership of less than 1.0%.
(1) Mr. McCabe will receive an option to purchase 45,000 shares of common stock
under our stock incentive plan, as well as a warrant to purchase 37,500
shares.
(2) Mr. Turner will receive an option to purchase 45,000 shares of common stock
under our stock incentive plan, as well as a warrant to purchase 37,500
shares.
(3) Mr. Queener will receive an option to purchase 30,000 shares of common stock
under our stock incentive plan, as well as a warrant to purchase 17,500
shares.
Other than Dr. Maupin who became a director on March 28, 2000, each person
listed as a director in the table above has been a director of Pinnacle
Financial since its incorporation date of February 28, 2000. Our directors serve
staggered terms, which means that one-third of the directors will be elected
each year at our annual meeting of shareholders. The initial term of our
Class I directors will expire in 2001, the initial term of our Class II
directors will expire in 2002 and the initial term of our Class III directors
will expire in 2003. Thereafter, each respective class of directors will serve
for a term of three years. Our officers are appointed by our board of directors
and hold office at the will of our board. See "Selected Provisions of Our
Charter and Bylaws" on page 45.
Each of our directors listed above is also a proposed director of Pinnacle
National. Each of Pinnacle National's proposed directors will, upon approval by
the OCC, serve until Pinnacle National's
31
first shareholders' meeting, which will convene shortly after Pinnacle National
receives its charter. Pinnacle Financial, as the sole shareholder of Pinnacle
National, will nominate each proposed director to serve as a director of
Pinnacle National at that meeting. After the first shareholders' meeting,
directors of Pinnacle National will serve for a term of one year and will be
elected by Pinnacle Financial each year at Pinnacle National's annual meeting of
shareholders. Pinnacle National's officers will be appointed by its board of
directors and will hold office at the will of its board of directors.
None of our directors and executive officers have a family relationship as
close as first cousins.
Eleven of our fourteen organizers will serve as directors and/or executive
officers of Pinnacle Financial as noted in the previous table. The remaining
three organizers that are not also directors and/or executive officers of
Pinnacle Financial, and the amount of our common stock they intend to purchase
in the offering, are:
[Download Table]
SHARES ANTICIPATED
TO BE OWNED FOLLOWING
ORGANIZER THE OFFERING
--------- ---------------------
John W. Eakin............................................ 10,000
David B. Ingram.......................................... 35,000
Linda E. Rebrovick....................................... 10,000
As organizers, these individuals will also receive warrants to purchase
additional shares of our common stock. See "Description of Our Capital
Stock--Organizers' Shares and Warrants" on page 44.
The 2,500,000 shares of our common stock offered by this prospectus to the
public, which includes our organizers, directors and executive officers, will
not be issued until after the close of the offering. Accordingly, while our
organizers, directors and executive officers intend to purchase 391,000 shares
of the 2,500,000 shares being offered by this prospectus, they will not be
issued shares of our common stock, nor be required to fund their intended
purchases of our common stock, prior to the close of the offering, which we
anticipate will occur within the third quarter of 2000. Our organizers may also
acquire additional shares of our common stock, up to a maximum aggregate number
for all organizers of 1,500,000 shares, in order to achieve the minimum
capitalization required by the Office of the Comptroller of the Currency for
Pinnacle National.
The following is a biographical summary of each of our organizers, directors
and executive officers:
SUE R. ATKINSON
Ms. Atkinson is chairman and chief executive officer of Atkinson Public
Relations of Nashville, Tennessee. Ms. Atkinson was raised in Tennessee and
educated at Vanderbilt University, Nashville, Tennessee, where she received a
bachelor's degree. She began her professional career as director of development
for Nashville Public Television in 1971, serving until 1979. In 1979, she became
president of Holder Kennedy Public Relations of Nashville, and remained in this
capacity until founding her own public relations firm in 1986. In the area of
public relations, Ms. Atkinson has worked with First American Corporation since
1991, and with Commerce Union/Sovran Bank/C&S Sovran from 1986 to 1991.
Ms. Atkinson currently serves on the board of directors and executive committee
of the Nashville Area Chamber of Commerce, and has served as a board member for
the Metropolitan Nashville Convention Commission, the Nashville Symphony
Association, Children's Hospital of Vanderbilt University and Leadership
Nashville. She has also served on the board of trustees of the Alumni
Association of Vanderbilt University.
COLLEEN CONWAY-WELCH
Ms. Conway-Welch is the dean and chief executive officer of the Vanderbilt
University School of Nursing, Nashville, Tennessee, a position she has held
since 1984, and is a director of Quorum Health
32
Group, Inc. Because of her international stature as a voice for the nursing
profession, Ms. Conway-Welch has been previously called on to advise both
President Reagan's Commission on HIV and President Bush's Advisory Committee on
the Arts. Her professional activities include or have included serving as a
member of the board of directors for First Union National Bank of Tennessee, the
American Physicians Network, the Godchaux Brothers Foundation, and Quorum Health
Resources. In her community role, she has served on the board of directors for
the Nashville Symphony, the Nashville Area Chamber of Commerce and the Nashville
Rotary Foundation. Currently, Ms. Conway-Welch chairs the Middle Tennessee
United Way campaign.
JOHN W. EAKIN, JR.
Mr. Eakin is president and owner of Eakin Properties LLC, and has lived and
worked his entire life in Nashville, Tennessee. In 1987, Mr. Eakin co-founded
Eakin & Smith, Inc., a real estate company, which he operated for nine years.
From 1996 to 1999, Mr. Eakin joined the firm of Highwoods Properties as senior
vice president and board member as a result of Highwoods' acquisition of his
company. Currently Mr. Eakin serves as an advisory board member for AmSouth Bank
in Nashville, Tennessee, and as a board member of Montgomery Bell Academy.
Previously, Mr. Eakin has served on the boards of CCA Prison Realty Trust,
Central Parking System, the American Red Cross and the Tennessee Society to
Prevent Blindness. Mr. Eakin's civic affiliations include the Nashville Downtown
Rotary, the Nashville Area Chamber of Commerce and the Young President's
Organization.
DAVID B. INGRAM
Mr. Ingram is chairman and president of Ingram Entertainment, Inc., a
distributor of pre-recorded videocassettes, DVDs, video games, and related
multimedia products. From 1989 to 1991, Mr. Ingram was assistant to the
treasurer at Ingram Industries, the parent to Ingram Distribution. In 1991, he
began working in various capacities at Ingram Entertainment before becoming
chairman and president in 1996. Currently, he is an advisory board member of
AmSouth Bank in Nashville and serves as a board member of Buy.com, a publicly
traded internet shopping service, and the Tennessee Golf Foundation. Mr. Ingram
is a graduate of Duke University, Durham, North Carolina, and the Owen Graduate
School of Management at Vanderbilt University in Nashville. Mr. Ingram is a
native Tennessean and has lived in the Nashville area for 31 years.
CLAY T. JACKSON
Mr. Jackson is president and principal of Cooper, Love & Jackson, a
full-line insurance agency, and has served in this capacity since 1989.
Mr. Jackson is active in the Nashville community, serving as a member of
Leadership Nashville, the Partnership 2000 committee for the Nashville Area
Chamber of Commerce and a member of the Nashville Rotary Club. His prior board
positions include the Nashville Institute for the Arts, the Nashville Ballet,
the Nashville Humane Association and USF&G Insurance Companies. Mr. Jackson is a
native Tennessean and has lived in the Nashville area for 46 years.
JOHN E. MAUPIN, JR.
Dr. Maupin is president and chief executive officer of Meharry Medical
College, a position he has held since 1994. Located in Nashville, Tennessee,
Meharry is one of the nation's largest private minority institutions exclusively
dedicated to education health care professionals and biomedical scientists.
Dr. Maupin came to Meharry from the Morehouse School of Medicine in Atlanta,
Georgia, where he served as executive vice president from 1989 to 1994. Before
joining Morehouse, he was chief executive officer of Southside Healthcare, Inc.,
from 1987-1989 and prior to that Deputy Commissioner of Health, Baltimore City
Health Department (1981-1987). Dr. Maupin has served as president of the
National Dental Association, and has served on several national professional
advisory groups, including the Board of Scientific Counselors, National
Institute of Dental Research. Currently, he serves as a
33
member of the National Committee of Foreign Medical Education Accreditation for
the U.S. Department of Education, and the Board of Overseers of the
Vanderbilt-Ingram Cancer Center. Dr. Maupin is also active in the Nashville
community as a board member of the United Way Middle Tennessee, Community
Foundation of Middle Tennessee and the Nashville Chamber of Commerce. He
currently serves on the board of directors of LifePoint Hospitals, Inc.,
American General Series Portfolio Companies and US Life Income Fund and Monarch
Dental Corporation.
ROBERT A. MCCABE, JR.
Mr. McCabe is the chairman of the board of Pinnacle Financial. Mr. McCabe
began his banking career with First American Corporation as an officer trainee
for its then existing subsidiary, First American National Bank of Knoxville.
From 1976 to 1984, Mr. McCabe held various positions with the bank, including
senior vice president. In 1985, Mr. McCabe was asked to serve as an executive
vice president of the retail bank of First American National Bank of Nashville,
a position he held until 1987 when First American promoted him to president and
chief operating officer of the First American Bank of Knoxville. In 1989,
Mr. McCabe was given added responsibility by being named president and chief
operating officer for First American's east Tennessee region. Mr. McCabe
continued in that position until 1991, when First American selected him as
president of First American's corporate banking division, and shortly
thereafter, as president of its general banking division. In 1994, First
American appointed Mr. McCabe as a vice chairman, a position in which he was
responsible for the fee income strategy of the corporation. In March 1999,
Mr. McCabe assumed additional responsibility for all banking operations, a
position he held until First American's merger with AmSouth in October 1999.
Since then, Mr. McCabe has been active as a consultant to the banking industry.
In addition to his banking experience with First American, Mr. McCabe served as
a director of Sirrom Capital from 1996 to 1999, and currently serves as a
director of SSC Service Solutions, Nashville, Tennessee. Mr. McCabe is a
graduate of the University of Tennessee where he received a B.S. in Economics
and an MBA in Finance. He later attended an Executive Management Program at
Harvard Business School.
Mr. McCabe has been active in various civic organizations within his
community, including Leadership Knoxville, Leadership Nashville, Partnership
2000 and Nucleus Knoxville. He has also been a member of the Bankers Roundtable
since 1993, Young Presidents Organization since 1988, and currently serves on
the Nashville Area Chamber of Commerce Board of Governors and is president of
the Nashville Symphony.
ROBERT E. MCNEILLY, JR.
Mr. McNeilly is a retired banker, and is currently a board member of the
Ragland Corporation, a privately-owned, real estate holding company. From 1993
to 1996, Mr. McNeilly served as president of First American Trust Company,
Nashville, Tennessee, and from 1986 to 1993, as the chairman of First American
Bank of Nashville. Prior to 1986, Mr. McNeilly was involved in the printing
industry for 29 years where he held various management positions. He has lived
and worked in Nashville most of his life, and has held many key civic leadership
roles including chairman of the Nashville Area Chamber of Commerce, chairman of
the Metropolitan Action Commission, and president of the Canby Society of the
Vanderbilt Medical Center. Mr. McNeilly is a board member of the Montgomery Bell
Academy, the Nashville United Way, Tennessee Medical Endowment, Tennessee State
Foundation and the Tennessee Performing Arts Center.
DALE W. POLLEY, SR.
Mr. Polley recently retired as a vice chairman of First American Corporation
and First American National Bank. In the nine years preceding this position,
Mr. Polley served in various executive management positions at First American,
which included serving as its president from 1997 to 1999.
34
Before joining First American in 1991, Mr. Polley was group executive vice
president and treasurer for C&S/Sovran Corporation, and held various positions
within Sovran before its merger with C&S. Mr. Polley joined Sovran from Commerce
Union Bank of Nashville where he was its executive vice president and chief
financial officer.
Mr. Polley serves on the boards of directors of the Federal Reserve Bank of
Atlanta (Nashville branch), Nashville Sports Council, Music City Bowl, T.J.
Martel Foundation, St. Thomas Foundation and Vanderbilt--Ingram Cancer Center.
Additionally, he has formerly served on the boards of directors of: the American
Cancer Society; the American Heart Association; YMCA; and the United Way, where
he served as chairman of the board and chairman of the community's 1995
fundraising campaign. Mr. Polley has also served as president of the Nashville
Club for the University of Kentucky Alumni Association. Currently, Mr. Polley
serves as the chairman of the steering committee for the Sports Council's
hosting of the 2001 SEC Men's Basketball Tournament, and is a member of
Leadership Nashville, Tennessee Society of Certified Public Accountants and the
Financial Executive Institute.
HUGH M. QUEENER
Mr. Queener is Pinnacle Financial's executive vice president and chief
administrative officer and the proposed chief administrative officer of Pinnacle
National. Mr. Queener is a graduate of Tennessee Wesleyan College where he
received his bachelor's degree in Business Administration in 1977. Following his
graduation, Mr. Queener joined Park National Bank in Knoxville where he worked
in the audit and operations support area of the bank until 1981. At that time,
he joined The Kirchman Corporation of Orlando, Florida, and served from 1981 to
1984 and from 1986 to 1987 in various roles, including senior vice president for
client service, installations, software development and support. In between his
employment with The Kirchman Corporation, Mr. Queener served in similar
capacities with Systeme in Orlando, Florida, a competitor of the Kirchman
Corporation. In 1987, Mr. Queener joined First American National Bank of
Nashville, and held various operations and management positions during his
13 year tenure with the bank. Most recently, he was executive vice president of
retail lending. In this role, he oversaw a $7.8 billion loan portfolio, as well
as a staff of 550 people. Since moving to Nashville, Mr. Queener has become
involved in the Brentwood Rotary Club, the Nashville Area Habitat for Humanity,
and the YMCA. Mr. Queener is also on the administrative board of Brentwood
United Methodist Church.
LINDA E. REBROVICK
Ms. Rebrovick is executive vice president and a managing director of KPMG
Consulting LLC, Nashville, Tennessee, and has served as a member of KPMG's board
of directors since 1997. Ms. Rebrovick has worked in Nashville her entire career
following graduation from Auburn University in 1977. Originally operating as a
manager and a business unit executive for IBM, Ms. Rebrovick joined KPMG as
director of the mid-south strategic services consulting practice in 1994. Since
1995, Ms. Rebrovick has held various executive positions within KPMG, and in
1997, the firm named her managing partner of the health care consulting
practice. Ms. Rebrovick is a well recognized business and civic leader. The
Davidson County Business and Professional Women's Club has honored her as Woman
of the Year, NASHVILLE BUSINESS AND LIFESTYLES named her as one Nashville's
Emerging Leaders, and the United Way of Middle Tennessee nominated her as one of
their candidates for Volunteer of the Year. She is a former board member of the
American Heart Association and American Lung Association of Middle Tennessee.
Her current community activities include serving on the boards of the United Way
of Middle Tennessee. Additionally, she is a member of Leadership Nashville,
Tennessee Leadership and Nashville Junior Chamber of Commerce. Ms. Rebrovick is
a native Tennessean and has lived in Nashville for 44 years.
35
JAMES L. SHAUB, II
Mr. Shaub is president and chief executive officer of Southeast Waffles,
LLC, a multi-state waffle house franchise based in Nashville. Mr. Shaub is a
graduate of Vanderbilt University where he received a bachelor's degree in
economics. Before his career as a restaurateur, Mr. Shaub was vice president of
NationsBank of Tennessee, formerly Commerce Union Bank. He has been very active
in Nashville civic affairs, serving as a board member of the Cumberland Science
Museum and Grassmere Wildlife Park and as president of the Nashville Child
Center.
REESE L. SMITH, III
Mr. Smith is president of Haury & Smith Contractors, Inc., a real estate
development firm. He is a native Tennessean, and he has operated this business
in the Nashville area since his graduation from the University of Tennessee at
Martin in 1970. From 1996 to 1999, Mr. Smith served as a board member of First
Union National Bank of Nashville, and was a founder and director of Brentwood
National Bank from its inception in 1991 to 1996. Mr. Smith has previously
served on the Tennessee State Board for Licensing Contractors for 14 years, as a
trustee of Brentwood Academy and as president of the Battleground Academy Alumni
Association. Currently, Mr. Smith serves as a national director of the National
Association of Home Builders and is chairman of the trustees at Forest Hills
United Methodist Church.
M. TERRY TURNER
Mr. Turner is Pinnacle Financial's president and chief executive officer and
the proposed president and chief executive officer of Pinnacle National.
Mr. Turner is a graduate of the Georgia Institute of Technology where he
received his bachelor's degree in Industrial Management in 1976. Following his
graduation, Mr. Turner worked for Arthur Andersen & Company as a consultant in
Atlanta, Georgia, and joined one of his clients, Park National Bank, Knoxville,
Tennessee in 1979 where he held various management positions, including senior
vice president of the bank's commercial division. In 1985, Mr. Turner joined
First American National Bank, Nashville, Tennessee, as a result of its
acquisition of Park National Bank. Mr. Turner remained at First American for the
remainder of his banking career until his position as president and head of the
retail and community banking groups was eliminated following First American's
merger with AmSouth Bank. In this capacity, Mr. Turner had oversight
responsibility for $11.9 billion in deposits, $6.7 billion in loans, 391
branches and 4,600 employees. Mr. Turner's banking career at First American in
Nashville has covered 14 years, and has entailed executive level
responsibilities for almost all aspects of its banking and investment
operations.
During Mr. Turner's tenure in Nashville, he has served as an advisory board
chairman for the Salvation Army, vice chairman for the Southern Baptist
Foundation and as a member of the board of trustees of Belmont University.
Mr. Turner currently serves on the executive committee of the Nashville Credit
Bureau and as chairman of the board of trustees for Brentwood Academy.
Mr. Turner is an active member in the Young President's Organization and is also
a member of numerous local clubs and organizations including Leadership
Nashville and Caduceus Society.
BOARD COMMITTEES
Pinnacle Financial's board of directors has established the committees
described below. The members of each committee will be the same for Pinnacle
National as they are for Pinnacle Financial.
EXECUTIVE COMMITTEE. The Executive Committee will recommend to the board,
in conjunction with management, all major policies and procedures pertaining to
loan policy. Specifically, the Executive Committee will ensure the establishment
of the loan approval system, review all loans in excess of a predetermined
amount, and review all past due reports, rated loan reports, OREO reports,
non-accrual reports, and other indicators of overall loan portfolio quality.
Additionally, the Executive Committee
36
will establish measurements for adequacy of the loan loss reserve and review any
other matters that are pertinent to the loan portfolio such as yield and
concentrations.
The Executive Committee will have overall responsibility for investment
strategy of Pinnacle Financial and Pinnacle National, which will include:
- managing investment liquidity;
- managing investment risk;
- managing net interest margins;
- monitoring deposit level trends and pricing;
- monitoring asset level trends and pricing; and
- making portfolio investment decisions.
The Executive Committee will be responsible for recommending nominations for
expired board seats and/or additional board members.
AUDIT COMMITTEE. The principal responsibility of the Audit Committee is to
ensure that the board receives objective information regarding policies,
procedures, and controls of Pinnacle Financial and Pinnacle National with
respect to auditing, accounting, internal accounting controls, and financial
reporting. Among other things, this committee's responsibilities will include:
- recommending the appointment of an independent auditor on an annual basis;
- reviewing the independent auditor's report and management's response;
- reviewing all reports from regulatory authorities and management's
responses;
- establishing independent reviews and audits; and
- establishing appropriate levels of director and officer insurance and
blanket bond insurance coverage.
COMMUNITY AFFAIRS COMMITTEE. The Community Affairs Committee will evaluate
overall community relations including public affairs and advertising. The
Community Affairs Committee will establish Pinnacle National's community
development program, and assess and work to ensure compliance with the Community
Reinvestment Act, fair lending laws, and the Home Mortgage Disclosure Act.
Additionally, this committee will oversee Pinnacle National's corporate
contribution program.
HUMAN RESOURCES COMMITTEE. The Human Resources Committee will establish or
approve all policies and procedures related to the human resources function of
Pinnacle Financial and Pinnacle National to include employee compensation,
incentive programs, health insurance, 401(k), and employee stock option plans.
Additionally, this committee will approve the hiring of all executive officers.
37
EXECUTIVE COMPENSATION
OFFICER COMPENSATION
We were incorporated on February 28, 2000, and consequently, do not have
historical compensation information for the requisite period required to be
reported under the rules promulgated by the Securities and Exchange Commission.
Accordingly, the following table shows the anticipated salary information for
our president and chief executive officer during 2000, and for our existing and
proposed executive officers who are each projected to earn approximately
$100,000 or more in salary and bonus in 2000.
SUMMARY COMPENSATION TABLE
[Enlarge/Download Table]
ANNUAL COMPENSATION
-----------------------------------------
OTHER ANNUAL
YEAR SALARY ($) BONUS ($) COMPENSATION ($)
-------- ---------- --------- ----------------
M. Terry Turner,.................................... 2000 183,333 0 0(1)
President and Chief Executive Officer
Robert A. McCabe, Jr................................ 2000 91,667 0 65,500(2)
Chairman of the Board and
Chief Financial Services Officer
Hugh M. Queener..................................... 2000 120,000 0 0(1)
Executive Vice President and
Chief Administrative Officer
------------------------
(1) We have omitted information on "perks" and other personal benefits because
the aggregate value of these items do not exceed $50,000 or 10% of the
executive officer's combined salary and bonus, as reported above.
(2) Mr. McCabe is expected to receive $65,500 from Pinnacle Financial for his
consulting services rendered prior to his employment agreement becoming
effective on August 1, 2000. At that time, his duties as our chief financial
services officer will begin.
EMPLOYMENT AGREEMENTS
M. TERRY TURNER. Effective March 1, 2000, Pinnacle Financial and Pinnacle
National entered into a three-year employment agreement with M. Terry Turner
regarding Mr. Turner's employment as our president and chief executive officer.
Under the terms of the agreement, Mr. Turner will receive a salary of $220,000
per year, plus benefits, and annual bonus compensation as determined by the
board of directors. Mr. Turner's agreement also provides that Pinnacle Financial
will grant Mr. Turner an incentive stock option to purchase 45,000 shares of our
common stock at an exercise price of $10.00 per share. Mr. Turner's option will
be issued under our stock incentive plan and will constitute 11.3% of the shares
reserved for issuance under the plan. Mr. Turner's option will generally become
exercisable in equal one-fifth annual increments over a five-year period
beginning on the one-year anniversary after the close of the offering.
Mr. Turner's agreement will automatically renew for an additional day each
day after March 31, 2000, so that it will always have a three-year term, unless
any of the parties to the agreement gives
38
notice of his or its intent not to renew the agreement. Additionally, under
Mr. Turner's agreement, we will be obligated to pay Mr. Turner his base salary
for the following terminating events:
[Download Table]
PAYMENT OBLIGATION
TERMINATING EVENT OF BASE SALARY
----------------- ------------------------------------------
Mr. Turner becomes permanently
disabled.............................. Maximum of six months
Pinnacle National abandons its
organizational efforts................ Until December 31, 2000
Pinnacle National terminates Mr.
Turner's employment without cause, as
defined............................... End of agreement's term
Mr. Turner terminates his employment for
cause................................. Maximum of 12 months
Mr. Turner terminates his employment
with cause within 12 months after a Three times base salary and target bonus,
change of control, as defined......... plus benefits
ROBERT A. MCCABE, JR. Effective August 1, 2000, Pinnacle Financial and
Pinnacle National will enter into a three-year employment agreement with Robert
A. McCabe, Jr. regarding Mr. McCabe's employment as chairman of the board of
directors and chief financial services officer. Under the terms of the
agreement, Mr. McCabe will receive a salary of $220,000 per year, plus benefits,
and annual bonus compensation as determined by the board of directors.
Mr. McCabe's agreement also provides that Pinnacle Financial will grant
Mr. McCabe an incentive stock option to purchase 45,000 shares of our common
stock at an exercise price of $10.00 per share. Mr. McCabe's option will be
issued under our stock incentive plan and will constitute 11.3% of the shares
reserved for issuance under the plan. Mr. McCabe's option will generally become
exercisable in equal one-fifth annual increments over a five-year period
beginning on the one-year anniversary after the close of the offering.
Mr. McCabe's agreement will automatically renew for an additional day each
day after August 1, 2000, so that it will always have a three-year term, unless
any of the parties to the agreement gives notice of his or its intent not to
renew the agreement. Additionally, under Mr. McCabe's agreement, we will be
obligated to pay Mr. McCabe his base salary under the same conditions and terms
as described above for Mr. Turner's employment agreement.
Although Mr. McCabe's employment agreement does not become effective until
August 1, 2000, Mr. McCabe has been involved in specific pre-opening activities
as an independent consultant. Currently, Mr. McCabe is receiving $15,000 per
month for his consulting services performed in connection with Pinnacle
Financial, which include developing a capital plan and an asset/liability
management structure, obtaining our main office site and locating additional
office sites, and interfacing with regulatory agencies. We anticipate that this
consulting relationship will continue until Mr. McCabe's employment agreement
becomes effective. Additionally, until July 15, 2000, Mr. McCabe will be a party
to an employee non-solicitation agreement entered into with his former employer.
Accordingly, he is not participating in any personnel research or hiring
decisions involving current employees of his former employer.
HUGH M. QUEENER. Effective April 1, 2000, Pinnacle Financial and Pinnacle
National entered into a three-year employment agreement with Hugh M. Queener
regarding Mr. Queener's employment as executive vice president and chief
administrative officer. Under the terms of the agreement, Mr. Queener will
receive a salary of $160,000 per year, plus benefits, and annual bonus
compensation as determined by the board of directors. Mr. Queener's agreement
also provides that Pinnacle Financial will grant Mr. Queener an incentive stock
option to purchase 30,000 shares of our common stock at an exercise price of
$10.00 per share. Mr. Queener's option will be issued under our stock incentive
plan and will constitute 7.5% of the shares reserved for issuance under the
plan. Mr. Queener's option will
39
generally become exercisable in equal one-fifth annual increments over a
five-year period beginning on the one-year anniversary after the close of the
offering.
Mr. Queener's agreement will automatically renew for an additional day each
day after March 1, 2000, so that it will always have a three-year term, unless
any of the parties to the agreement gives notice of his or its intent not to
extend the agreement. Additionally, under Mr. Queener's agreement, we will be
obligated to pay Mr. Queener his base salary under the same conditions and terms
as described earlier for Mr. Turner's employment agreement.
DIRECTOR COMPENSATION
We anticipate paying cash director fees to our non-employee directors of
$500 per board of directors meeting attended and $250 per committee meeting
attended. Additionally, each non-employee, committee chair will also receive
$250 per quarter. Prior to paying director compensation, we will adopt director
compensation policies that conform to applicable law.
STOCK INCENTIVE PLAN
GENERAL. Pinnacle Financial's 2000 Stock Incentive Plan provides us with
the flexibility to grant incentive stock options and non-qualified stock options
to our organizers, directors, executive officers and employees for the purpose
of giving them a proprietary interest in and encouraging them to remain involved
with Pinnacle Financial or Pinnacle National. The board of directors has
reserved 520,000 shares of common stock, an amount equal to 20.8% of the shares
of common stock expected to be sold in the offering, for issuance under the
plan. The number of shares reserved for issuance may be adjusted in the event of
a stock split, recapitalization or similar event as described in the plan.
Our executive officers will be issued stock option awards under the plan in
connection with the employment agreements that we have entered into with them.
See "Executive Compensation--Employment Agreements" on page 38.
ADMINISTRATION. The plan is administered by our Human Resources Committee,
with committee members being appointed by the board of directors of Pinnacle
Financial. The board plans to consider the disinterested standards contained in
both Section 162(m) of the Internal Revenue Code and Rule 16(b)(3) under the
Securities Exchange Act when appointing members to the committee. The committee
will have the authority to grant awards under the plan, to determine the terms
of each award, to interpret the provisions of the plan and to make all other
determinations that it may deem necessary or advisable to administer the plan.
The plan permits the committee to grant stock options to eligible persons.
The committee may grant these options on an individual basis or design a program
providing for grants to a group of eligible persons. The committee determines,
within the limits of the plan, the number of shares of common stock subject to
an option, to whom an option is granted, the exercise price and forfeiture or
termination provisions of each option. Unless otherwise permitted by the
committee, a holder of a stock option generally may not transfer the option
during his or her lifetime.
OPTION TERMS. The plan provides for the grant of incentive stock options
and non-qualified stock options. The committee will determine whether an option
is an incentive stock option or a non-qualified stock option when it grants the
option, and the option will be evidenced by an agreement describing the material
terms of the option. The maximum number of shares of common stock with respect
to which options may be granted during any calendar year to any participant may
not exceed 75,000.
The committee determines the exercise price of an option. The exercise price
of an incentive stock option may not be less than the fair market value of the
common stock on the date of the grant, or less than 110% of the fair market
value if the participant owns more than 10% of the outstanding
40
common stock of Pinnacle Financial or its subsidiaries. When the incentive stock
option is exercised, Pinnacle Financial will be entitled to place a legend on
the certificates representing the shares of common stock purchased upon exercise
of the option to identify them as shares of common stock purchased upon the
exercise of an incentive stock option. The exercise price of non-qualified stock
options granted during the first three years after Pinnacle National opens for
business may not be less than 100% of the fair market value of the common stock
on the date that the option is awarded, based upon any reasonable measure of
fair market value. The exercise price of non-qualified stock options granted
after the third anniversary of the date Pinnacle National opens for business may
not be less than 85% of the fair market value on the date of grant. The
committee may permit the exercise price to be paid in cash or through a cashless
exercise executed through a broker. The committee may authorize financing by
Pinnacle Financial to assist a participant with payment of the exercise price.
The committee may make cash awards designed to cover tax obligations of
participants that result from the receipt or exercise of a stock option.
The committee will also determine the term of an option, which may not
exceed ten years from the date of grant; however, any incentive stock option
granted to a participant who owns more than 10% of the outstanding common stock
of Pinnacle Financial or its subsidiaries will not be exercisable more than five
years after the date the option is granted. Subject to any further limitations
in the applicable agreement, if a participant's employment is terminated, an
option's status as an incentive stock option will expire no later than three
months after the date of termination of employment. If, however, termination of
employment is due to death, disability, up to one year may be substituted for
the three-month period. Incentive stock options are also subject to the further
restriction that the aggregate fair market value, determined as of the date of
the grant, of common stock as to which any incentive stock option first becomes
exercisable in any calendar year is limited to $100,000 per recipient. If
incentive stock options covering common stock with a value in excess of $100,000
first become exercisable in any one calendar year, the excess will be
non-qualified options.
TERMINATION OF OPTIONS. The terms of particular options may provide that
they terminate, among other reasons: upon the holder's termination of employment
or other status with Pinnacle Financial or any affiliate; upon a specified date,
upon the holder's death, disability or retirement; or, upon the occurrence of a
change in control of Pinnacle Financial or Pinnacle National. An agreement may
provide that if the holder of an option dies or becomes disabled, the holder's
estate or personal representative may exercise the option. The committee may,
within the terms of the plan and the applicable agreement, cancel, accelerate,
pay or continue an option that would otherwise terminate for the reasons
discussed above.
REORGANIZATIONS. In the event of any change in the outstanding shares of
common stock by reason of any subdivision or combination of shares, payment of a
stock dividend or other increase or decrease in the number of outstanding shares
effected without the receipt of consideration, the plan provides for appropriate
adjustment, as determined by the committee, in:
- the number and kind of shares reserved for issuance under the plan and
subject to options granted;
- the exercise price subject to unexercised options; and
- the maximum number of shares of common stock for which options may be
granted to any one individual in any calendar year.
In the event of specified corporate reorganizations, the committee may,
within the terms of the plan and the applicable agreement, assume, substitute,
cancel (with or without consideration), accelerate, remove restrictions or
otherwise adjust the terms of an option.
41
AMENDMENT AND TERMINATION OF THE PLAN. The board of directors has the
authority to amend or terminate the plan. The board of directors is not required
to obtain shareholder approval to amend or terminate the plan, but may condition
any amendment or termination of the plan upon shareholder approval if it
determines that shareholder approval is necessary or appropriate under tax,
securities, or other laws. The board's action may not adversely affect the
rights of a holder of a stock option without the holder's consent.
FEDERAL INCOME TAX CONSEQUENCES. The following discussion outlines
generally the federal income tax consequences of participation in the plan.
-INCENTIVE STOCK OPTIONS. A participant will not recognize income and
will not be taxed upon the grant of an incentive stock option nor upon the
exercise of all or a portion of the option. Instead, the participant will be
taxed when he or she sells the shares of common stock purchased upon
exercise of the incentive stock option. The participant will be taxed on the
difference between the price he or she paid for the common stock and the
amount for which he or she sells the common stock. If the participant does
not sell the shares of common stock prior to two years from the date of
grant of the incentive stock option and one year from the date the common
stock is transferred to him or her, any gain will be a capital gain, and
Pinnacle Financial will not be entitled to a corresponding deduction. If the
participant sells the shares of common stock at a gain before that time, the
difference between the amount the participant paid for the common stock and
the lesser of its fair market value on the date of exercise or the amount
for which the stock is sold will be taxed as ordinary income and Pinnacle
Financial will be entitled to a corresponding deduction. If the participant
sells the shares of common stock for less than the amount he or she paid for
the stock prior to the one- or two-year periods indicated, no amount will be
taxed as ordinary income, and the loss will be taxed as a capital loss.
Exercise of an incentive stock option may subject a participant to, or
increase a participant's liability for, the alternative minimum tax.
-NON-QUALIFIED OPTIONS. A participant will not recognize income upon the
grant of a non-qualified option or at any time before the exercise of the
option or a portion of the option. When the participant exercises a
non-qualified option or portion of the option, he or she will recognize
compensation taxable as ordinary income in an amount equal to the excess of
the fair market value of the common stock on the date the option is
exercised over the price paid for the common stock, and Pinnacle Financial
will then be entitled to a corresponding deduction.
Depending upon the time period for which shares of common stock are held
after exercise of a non-qualified option, the sale or other taxable disposition
of shares acquired through the exercise of a non-qualified option generally will
result in a short- or long-term capital gain or loss equal to the difference
between the amount realized on the disposition and the fair market value of the
shares when the non-qualified option was exercised.
Special rules apply to a participant who exercises a non-qualified option by
paying the exercise price, in whole or in part, by the transfer of shares of
common stock to Pinnacle Financial and to a participant who is subject to the
reporting requirements of Section 16 of the Securities Exchange Act.
42
RELATED PARTY TRANSACTIONS
We expect to enter into banking and other business transactions in the
ordinary course of business with our directors and officers, including members
of their families, and corporations, partnerships or other organizations in
which they have a controlling interest. If these transactions occur, each
transaction will:
- in the case of banking transactions, be on substantially the same terms,
including price or interest rate and collateral, as those prevailing at
the time for comparable transactions with unrelated parties, and any
banking transactions will not be expected to involve more than the normal
risk of collectibility or present other unfavorable features to Pinnacle
National;
- in the case of business transactions, be on terms no less favorable than
could be obtained from an unrelated third party; and
- in the case of all related party transactions, be approved by a majority
of the directors, including a majority of the directors who do not have an
interest in the transaction.
In addition to transactions in the ordinary course of our business, our
operations have been and will continue to be funded through a line of credit.
Currently, our line of credit is with SunTrust Bank, Nashville, Tennessee. The
total amount of our line of credit is $1,500,000, of which $522,660 was
outstanding as of July 10, 2000. The loan bears interest at the prime rate, as
printed in the Money Rates section of THE WALL STREET JOURNAL, and is due on
December 31, 2000. To maintain professional independence between our organizers'
existing business interests, all of our organizers except Dr. Maupin have
directly guaranteed the line of credit with SunTrust. We plan to repay the line
of credit after the close of the offering.
On March 16, 2000, we entered into a letter agreement with Atkinson Public
Relations of which one of our directors, Sue G. Atkinson, is a principal. Under
the agreement, Atkinson Public Relations provides us with general marketing and
public relations services. The agreement's term began March 1, 2000 and ends
August 1, 2000, with monthly fees being $8,000, plus costs. The agreement is
terminable by either party upon 60 days written notice. The agreement was
approved by our board of directors, with Ms. Atkinson abstaining from the vote,
and was based on similar terms used by Atkinson Public Relations for its other
bank clients. At the end of the agreement's initial term, we expect to enter
into a long-term public relations agreement with Atkinson Public Relations on
terms comparable to our current letter agreement.
43
DESCRIPTION OF OUR CAPITAL STOCK
COMMON STOCK
Our charter authorizes our board of directors, without shareholder approval,
to issue up to 10,000,000 shares of common stock, $1.00 par value, of which at
least 2,500,000 shares will be issued in this offering. As of the date of this
prospectus, 520,000 shares of our common stock, or an amount equal to 20.8% of
the shares of common stock offered in this prospectus, were reserved for
issuance under our stock incentive plan and 195,500 shares of our common stock,
or an amount equal to 7.8% of the shares of common stock offered in this
prospectus, were reserved for issuance upon the exercise of the warrants offered
by this prospectus to be issued to our organizers.
All shares of our common stock will be entitled to share equally in
dividends from legally available funds, when, as and if declared by our board of
directors. We do not anticipate that we will pay any cash dividends on our
common stock in the near future. If we were to voluntarily or involuntarily
liquidate or dissolve, all shares of our common stock would be entitled to share
equally in all of our remaining assets available for distribution to our
shareholders. Each holder of common stock will be entitled to one vote for each
share on all matters submitted to the shareholders. Whenever we issue new shares
of capital stock, holders of our common stock will not have any right to acquire
authorized but unissued capital stock of Pinnacle Financial. No cumulative
voting, redemption, sinking fund or conversion rights or provisions apply to our
common stock. All shares of our common stock issued in the offering as described
in this prospectus will be fully paid and non-assessable.
PREFERRED STOCK
Our charter also authorizes our board of directors, without shareholder
approval, to issue up to 10,000,000 shares of preferred stock, no par value. Our
board of directors may determine the terms of the preferred stock. Preferred
stock may have voting rights, subject to applicable law and as determined by our
board of directors. Although we have neither issued nor have any present plans
to issue any preferred stock, the ownership and control of Pinnacle Financial by
the holders of our common stock would be diluted if we were to issue preferred
stock that had voting rights. If issued, however, we would not offer to any of
our organizers preferred stock except on the same terms as offered to other
existing shareholders or new shareholders.
ORGANIZERS' SHARES AND WARRANTS
The organizers intend to purchase a total of 391,000 shares of common stock
in the offering at a price of $10.00 per share. This represents 15.6% of the
shares that will be outstanding after the offering, or 13.9% if the
over-allotment option granted to the underwriters is exercised in full.
We have established a line of credit in the amount of $1,500,000, of which
$522,660 was outstanding as of July 10, 2000. The line of credit is guaranteed
by 13 of our 14 organizers. See "Related Party Transactions" on page 43. In
recognition of our organizers' financial risk and efforts in organizing Pinnacle
Financial and Pinnacle National, our organizers are being offered by this
prospectus, at no cost to them, warrants to purchase one additional share of our
common stock, at $10.00 per share, for every two shares they purchase in the
offering. Given the intent of our organizers to purchase 391,000 shares in this
offering, we expect to issue to our organizers warrants to purchase up to an
aggregate of 195,500 additional shares of our common stock. The warrants will
vest in one-third annual increments over a period of three years beginning on
the one-year anniversary of the date of close of the offering. The warrants will
remain exercisable for the ten-year period following the date of the close of
the offering. Additionally, if Pinnacle National's capital falls below the
minimum level determined by the Office of the Comptroller of the Currency, we
may be directed to require all of our organizers to exercise or forfeit their
warrants.
TRANSFER AGENT
The transfer agent and registrar for our common stock is Registrar and
Transfer Company, Cranford, New Jersey.
44
SELECTED PROVISIONS OF OUR CHARTER AND BYLAWS
PROTECTIVE PROVISIONS
GENERAL. Shareholders' rights and related matters are governed by the
Tennessee Business Corporation Act and our charter and bylaws. Our charter and
bylaws contain protective provisions that would have the effect of impeding an
attempt to change or remove our management or to gain control of Pinnacle
Financial in a transaction not supported by its board of directors. These
provisions are discussed in more detail below. In general, one purpose of these
provisions is to assist our board of directors in playing a role in connection
with attempts to acquire control of Pinnacle Financial. They allow the board of
directors to further and protect Pinnacle Financial's interests, and those of
its shareholders as appropriate under the circumstances, by enhancing the
board's ability to maximize the value to be received by the shareholders upon a
sale.
Although our management believes the protective provisions are beneficial to
Pinnacle Financial's shareholders, they also may tend to discourage some
takeover bids. As a result, Pinnacle Financial's shareholders may be deprived of
opportunities to sell some or all of their shares at prices that represent a
premium over prevailing market prices. On the other hand, defeating undesirable
acquisition offers can be a very expensive and time-consuming process. To the
extent that the protective provisions discourage undesirable proposals, we may
be able to avoid those expenditures of time and money.
The protective provisions also may discourage open market purchases by a
potential acquirer. These purchases could increase the market price of the
common stock temporarily, enabling shareholders to sell their shares at a price
higher than that which otherwise would prevail. In addition, the provisions
could decrease the market price of the common stock by making the stock less
attractive to persons who invest in securities in anticipation of price
increases from potential acquisition attempts. The provisions also could make it
more difficult and time consuming for a potential acquirer to obtain control of
Pinnacle Financial by replacing its board of directors and management.
Furthermore, the provisions could make it more difficult for Pinnacle
Financial's shareholders to replace our board of directors or management, even
if a majority of the shareholders believes that replacing them would be in
Pinnacle Financial's best interests. As a result, the protective provisions
could tend to keep the incumbent board of directors and management in place.
Our charter also contains a provision that eliminates the potential personal
liability of directors for monetary damages in specific circumstances. In
addition, our bylaws contain provisions that provide for indemnification for our
directors and officers. The protective provisions and the provisions relating to
elimination of liability and indemnification of our directors and officers are
discussed more fully below.
PREFERRED STOCK. The existence of preferred stock could impede a takeover
of Pinnacle Financial without the approval of our board of directors. This is
because our board of directors could issue shares of preferred stock to persons
friendly to current management, which could render more difficult or discourage
any attempt to gain control of Pinnacle Financial through a proxy contest,
tender offer, merger or otherwise. In addition, the issuance of shares of
preferred stock with voting rights may adversely affect the rights of the
holders of our common stock and, in various circumstances, could decrease the
market price of our common stock.
STAGGERED TERMS FOR BOARD OF DIRECTORS. Our board of directors is divided
into three classes. Directors serve staggered terms, which means that roughly
one-third of the directors will be elected each year at Pinnacle Financial's
annual meeting of shareholders. The initial term of the Class I directors
expires in 2001, the initial term of the Class II directors expires in 2002 and
the initial term of the Class III directors expires in 2003. Thereafter, each
director will serve for a term of three years. This means that unless the
existing directors were to resign, it would take at least two annual meetings of
Pinnacle Financial's shareholders to replace a majority of its directors. Any
amendment of this
45
provision adopted by less than two-thirds of the entire board of directors would
require the affirmative vote of the holders of at least two-thirds of the
outstanding shares of common stock; otherwise, the amendment would only require
the affirmative vote of at least a majority of the outstanding shares of common
stock.
CHANGE IN NUMBER OF DIRECTORS. Our charter provides that any change in the
number of our directors within the range set forth in our bylaws, or any change
in the range itself as set forth in our bylaws, would have to be made by the
affirmative vote of two-thirds of the entire board of directors or by the
affirmative vote of the holders of at least two-thirds of the issued and
outstanding shares of common stock.
REMOVAL OF DIRECTORS. Our charter provides that one or more directors may
be removed for cause during their terms by the affirmative vote of two-thirds of
the entire board of directors or by the affirmative vote of the holders of at
least a majority of the issued and outstanding shares of common stock entitled
to vote in an election of directors. Directors may also be removed during their
terms without cause only by the affirmative vote of the holders of two-thirds of
the issued and outstanding shares of common stock entitled to vote in an
election of directors. Any amendment of this provision adopted by less than
two-thirds of the entire board of directors would require the affirmative vote
of the holders of at least two-thirds of the outstanding shares of common stock;
otherwise, the amendment would only require the affirmative vote of at least a
majority of the outstanding shares of common stock.
SUPERMAJORITY VOTING ON SELECTED TRANSACTIONS. Our charter, with
exceptions, requires that any merger or similar transaction involving Pinnacle
Financial or any sale or other disposition of all or substantially all of its
assets will require the affirmative vote of a majority of Pinnacle Financial's
directors then in office and the affirmative vote of the holders of at least
two-thirds of the outstanding shares of common stock. However, if our board of
directors has approved the particular transaction by the affirmative vote of
two-thirds of the entire board, then the applicable provisions of Tennessee law
would govern and shareholder approval of the transaction would require only the
affirmative vote of the holders of a majority of the outstanding shares of
common stock entitled to vote on the transaction. Any amendment of this
provision adopted by less than two-thirds of the entire board of directors would
require the affirmative vote of the holders of at least two-thirds of the
outstanding shares of common stock; otherwise, the amendment would only require
the affirmative vote of at least a majority of the outstanding shares of common
stock.
EVALUATION OF AN ACQUISITION PROPOSAL. Our charter provides the factors
that our board of directors must consider in evaluating whether an acquisition
proposal made by another party is in the best interests of Pinnacle Financial
and its shareholders. The term "acquisition proposal" refers to any offer of
another party to:
- make a tender offer or exchange offer for the common stock or any other
equity security of Pinnacle Financial;
- merge or combine Pinnacle Financial with another corporation; or
- purchase or otherwise acquire all or substantially all of the properties
and assets owned by Pinnacle Financial.
The board, in evaluating an acquisition proposal, is required to consider
all relevant factors, including:
- the expected social and economic effects of the transaction on our
employees, our clients and other constituents, such as our suppliers of
goods and services;
46
- the payment being offered by the other corporation in relation to (1) our
current value at the time of the proposal as determined in a freely
negotiated transaction and (2) the board of directors' estimate of our
future value as an independent company at the time of the proposal; and
- the expected social and economic effects on the communities within which
we operate.
We have included this provision in our charter because serving our community
is one of the reasons we are organizing Pinnacle National. As a result, the
board believes its obligation in evaluating an acquisition proposal extends
beyond evaluating merely the payment being offered in relation to the market or
book value of the common stock at the time of the proposal.
While the value of what is being offered to shareholders in exchange for
their stock is the main factor when weighing the benefits of an acquisition
proposal, the board believes it is appropriate also to consider all other
relevant factors. For example, the board will evaluate what is being offered in
relation to the current value of Pinnacle Financial at the time of the proposal
as determined in a freely negotiated transaction and in relation to the board's
estimate of the future value of Pinnacle Financial as an independent concern at
the time of the proposal. A takeover bid often places the target corporation
virtually in the position of making a forced sale, sometimes when the market
price of its stock may be depressed. The board believes that frequently the
payment offered in such a situation, even though it may exceed the value at
which shares are then trading, is less than that which could be obtained in a
freely negotiated transaction. In a freely negotiated transaction, management
would have the opportunity to seek a suitable partner at a time of its choosing
and to negotiate for the most favorable price and terms that would reflect not
only Pinnacle Financial's current value, but also its future value.
One effect of the provision requiring our board of directors to take into
account specific factors when considering an acquisition proposal may be to
discourage a tender offer in advance. Often an offeror consults the board of a
target corporation before or after beginning a tender offer in an attempt to
prevent a contest from developing. In our board's opinion, this provision will
strengthen its position in dealing with any potential offeror that might attempt
to acquire Pinnacle Financial through a hostile tender offer. Another effect of
this provision may be to dissuade shareholders who might be displeased with the
board's response to an acquisition proposal from engaging Pinnacle Financial in
costly litigation.
The charter would not make an acquisition proposal regarded by the board as
being in Pinnacle Financial's best interests more difficult to accomplish. It
would, however, permit the board to determine that an acquisition proposal was
not in Pinnacle Financial's best interests, and thus to oppose it, on the basis
of the various factors that the board deems relevant. In some cases, opposition
by the board might have the effect of maintaining incumbent management.
Any amendment of this provision adopted by less than two-thirds of the
entire board of directors would require the affirmative vote of the holders of
at least two-thirds of the outstanding shares of common stock; otherwise, the
amendment would only require the affirmative vote of at least a majority of the
outstanding shares of common stock.
INDEMNIFICATION
Our bylaws provide that our directors and officers will be indemnified
against expenses that they actually and reasonably incur if they are successful
on the merits of a claim or proceeding. In addition, the bylaws provide that we
will advance to our directors and officers reasonable expenses of any claim or
proceeding so long as the director or officer furnishes us with (1) a written
affirmation of his or her good faith belief that he or she has met the
applicable standard of conduct and (2) a written statement
47
that he or she will repay any advances if it is ultimately determined that he or
she is not entitled to indemnification.
When a case or dispute is settled or otherwise not ultimately determined on
its merits, the indemnification provisions provide that we will indemnify our
directors and officers when they meet the applicable standard of conduct. The
applicable standard of conduct is met if the director or officer acted in a
manner he or she in good faith believed to be in or not opposed to Pinnacle
Financial's best interests and, in the case of a criminal action or proceeding,
if the director or officer had no reasonable cause to believe his or her conduct
was unlawful. Our board of directors, shareholders or independent legal counsel
determines whether the director or officer has met the applicable standard of
conduct in each specific case.
Our bylaws also provide that the indemnification rights contained in the
bylaws do not exclude other indemnification rights to which a director or
officer may be entitled under any bylaw, resolution or agreement, either
specifically or in general terms approved by the affirmative vote of the holders
of a majority of the shares entitled to vote. We can also provide for greater
indemnification than is provided for in the bylaws if we choose to do so,
subject to approval by our shareholders. We may not, however, indemnify a
director or officer for liability arising out of circumstances that would cause
the director or officer to remain liable for his or her actions as described
below under "Limitation of Liability."
The indemnification provisions of the bylaws specifically provide that we
may purchase and maintain insurance on behalf of any director or officer against
any liability asserted against and incurred by him or her in his or her capacity
as a director, officer, employee or agent whether or not we would have had the
power to indemnify against such liability.
Our bylaws further provide that, under similar limitations and conditions
specified above for our directors and officers, we may provide indemnification
for our employees and agents.
We are not aware of any pending or threatened action, suit or proceeding
involving any of our directors or officers for which indemnification may be
sought.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of Pinnacle
Financial under the foregoing provisions, or otherwise, Pinnacle Financial has
been advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable.
LIMITATION OF LIABILITY
Our charter eliminates, with exceptions, the potential personal liability of
a director for monetary damages to Pinnacle Financial and to its shareholders
for breach of a duty as a director. There is no elimination of liability for:
- a breach of the director's duty of loyalty to Pinnacle Financial or its
shareholders;
- an act or omission not in good faith or which involves intentional
misconduct or a knowing violation of law; or
- any payment of a dividend or approval of a stock repurchase that is
illegal under the Tennessee Business Corporation Act.
This provision does not eliminate or limit our right or the right of our
shareholders to seek injunctive or other equitable relief not involving monetary
damages.
48
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of the offering, we will have 2,500,000 shares of common
stock outstanding, or 2,816,500 shares if the over-allotment option granted to
the underwriters is exercised in full. These shares of common stock will be
freely tradable without restriction, except that "affiliates" of Pinnacle
Financial must comply with the resale limitations of Rule 144 under the
Securities Act. Rule 144 defines an "affiliate" of a company as a person who
directly, or indirectly through one or more intermediaries, controls, or is
controlled by, or is under common control with, the company. Affiliates of a
company generally include its directors, officers and principal shareholders. A
total of at least 391,000 shares owned directly or indirectly by our affiliates
will not be available for sale for a period of 180 days after the date of this
prospectus without the underwriters' consent. After the 180-day period, the
shares held by our affiliates will be eligible for sale subject to the resale
limitations of Rule 144 discussed below.
In general, under Rule 144, affiliates will be entitled to sell within any
three-month period a number of shares that does not exceed the greater of:
- 1% of the outstanding shares of common stock; or
- the average weekly trading volume during the four calendar weeks preceding
his or her sale.
Sales under Rule 144 are also subject to manner of sale provisions, notice
requirements and the availability of current public information about Pinnacle
Financial. Affiliates will not be subject to the volume restrictions and other
limitations under Rule 144 beginning 90 days after their status as an affiliate
terminates.
Even though Rule 144 would otherwise permit the sale of shares held by
affiliates beginning 90 days after the date of this prospectus, Pinnacle
Financial and its organizers and executive officers have each agreed with the
underwriters that they will not sell any shares of common stock for a period of
180 days from the date of this prospectus without the underwriters' prior
written consent except in limited circumstances.
We intend to offer by this prospectus warrants to our organizers to purchase
up to a total of 195,500 shares of common stock, representing an amount equal to
7.8% of the common stock sold in the offering. We have also reserved 520,000
shares of common stock, representing 20.8% of the common stock sold in the
offering, for issuance under our stock incentive plan. Of the 520,000 shares
reserved for our stock incentive plan, 120,000 shares or 23.1% of the reserved
shares will be awarded under the terms of the employment agreements entered into
and proposed to be entered into with our executive officers. We intend to
register the shares issuable upon exercise of these warrants and options. Upon
registration, these shares will be eligible for resale in the public market
without restriction by persons who are not affiliates of Pinnacle Financial, and
to the extent they are held by affiliates, under Rule 144 without a holding
period.
Prior to the offering, there has been no public market for our common stock,
and we cannot predict the effect, if any, that the sale of shares or the
availability of shares for sale will have on the market price prevailing from
time to time. Nevertheless, sales of substantial amounts of our common stock in
the public market could adversely affect prevailing market prices and our
ability to raise equity capital in the future.
49
UNDERWRITING
Subject to the terms and conditions of the underwriting agreement among
Pinnacle Financial and the underwriters named below, the underwriters have
agreed to purchase from Pinnacle Financial, and Pinnacle Financial has agreed to
sell to the underwriters, the number of shares of common stock listed opposite
each underwriter's name below.
[Download Table]
NUMBER OF
NUMBER OF OVER-ALLOTMENT
FIRM SHARES SHARES
----------- --------------
J.C. Bradford & Co., LLC...........................
PaineWebber Incorporated...........................
The underwriting agreement provides that the underwriters' obligations are
subject to approval of specified legal matters by counsel and to various other
conditions customary in a firm commitment, underwritten public offering. The
underwriters are required to purchase and pay for the shares offered by this
prospectus other than those covered by the over-allotment option described
below.
We will not pay an underwriting discount for 391,000 shares purchased in the
offering by our organizers and the underwriting discount that will apply to
shares purchased in the offering by individuals referred to the underwriters by
our organizers, up to 410,000 shares, will equal 3.0% of the public offering
price, or $.30 per share. The underwriting discount that will apply to all other
shares purchased in the offering will equal 7.0% of the public offering price
listed on the cover page of this prospectus, or $.70 per share.
The underwriters propose to offer the common stock directly to the public at
the public offering price listed on the cover page of this prospectus and to
securities dealers at that price less a concession not in excess of $ per
share. The underwriters may allow, and the selected dealers may reallow, a
concession not in excess of $ per share to other brokers and dealers. We expect
that the shares of common stock will be ready for delivery on or about
, 2000. After the offering, the offering price and other selling
terms may change.
The public offering price was determined arbitrarily by Pinnacle Financial
and the underwriters after considering several factors. These factors include
prevailing market conditions and the price of comparable publicly traded
companies.
Pinnacle Financial has granted the underwriters an option, exercisable
within 30 days after the date of this prospectus, to purchase up to 316,500
additional shares of common stock to cover over-allotments, if any, at the
public offering price listed on the cover page of this prospectus, less the
applicable 7.0% underwriting discount. The underwriters may purchase these
shares only to cover over-allotments made in connection with this offering. If
the over-allotment option is exercised, in whole or in part, to cover any short
sales made, the underwriters will deliver a copy of the final prospectus to all
purchasers of the over-allotment shares. Accordingly, these purchasers will be
entitled to the same legal remedies provided under the federal securities laws
as any other purchaser of shares covered by the registration statement. The
potential size of the syndicate short position is not expected to exceed 316,500
shares, or 12.7% of the initial 2,500,000 shares to be outstanding upon the
close of the offering.
The underwriters do not intend to sell shares of common stock to any account
over which it exercises discretionary authority.
Pinnacle Financial and each of our organizers and executive officers has
agreed with the underwriters not to sell any shares of common stock for a period
of 180 days from the date of this prospectus without the underwriters' prior
written consent. The underwriters and their affiliates may on
50
occasion be a client of, engage in transactions with, and perform services for
Pinnacle Financial or Pinnacle National in the ordinary course of business.
Pinnacle Financial has agreed to indemnify the underwriters against
specified liabilities, including liabilities under the Securities Act of 1933,
or to contribute to payments that the underwriters may be required to make in
connection with these liabilities.
In connection with this offering, the underwriters may purchase and sell
common stock in the open market. These transactions may include over-allotment
and stabilizing transactions, and purchases to cover syndicate short positions
created in connection with this offering. Stabilizing transactions consist of
bids or purchases for the purpose of preventing or retarding a decline in the
market price of the common stock, and syndicate short positions involve the
underwriters' sale of a greater number of shares of common stock than they are
required to purchase from Pinnacle Financial in the offering. These activities
may stabilize, maintain or otherwise affect the market price of the common
stock, which may be higher than the price that might otherwise prevail in the
open market. The underwriters may effect these transactions on the OTC Bulletin
Board or otherwise and may discontinue them at any time.
51
SUPERVISION AND REGULATION
Both Pinnacle Financial and Pinnacle National will be subject to extensive
state and federal banking regulations that impose restrictions on and provide
for general regulatory oversight of our operations. These laws are generally
intended to protect depositors and not shareholders. The following discussion
describes the material elements of the regulatory framework that will apply.
PINNACLE FINANCIAL
Since Pinnacle Financial will own all of the capital stock of Pinnacle
National, it will be a bank holding company under the federal Bank Holding
Company Act of 1956. As a result, Pinnacle Financial will primarily be subject
to the supervision, examination, and reporting requirements of the Bank Holding
Company Act and the regulations of the Federal Reserve.
ACQUISITIONS OF BANKS. The Bank Holding Company Act requires every bank
holding company to obtain the Federal Reserve's prior approval before:
- acquiring direct or indirect ownership or control of any voting shares of
any bank if, after the acquisition, the bank holding company will directly
or indirectly own or control more than 5% of the bank's voting shares;
- acquiring all or substantially all of the assets of any bank; or
- merging or consolidating with any other bank holding company.
Additionally, the Bank Holding Company Act provides that the Federal Reserve
may not approve any of these transactions if it would result in or tend to
create a monopoly or, substantially lessen competition or otherwise function as
a restraint of trade, unless the anticompetitive effects of the proposed
transaction are clearly outweighed by the public interest in meeting the
convenience and needs of the community to be served. The Federal Reserve is also
required to consider the financial and managerial resources and future prospects
of the bank holding companies and banks concerned and the convenience and needs
of the community to be served. The Federal Reserve's consideration of financial
resources generally focuses on capital adequacy, which is discussed below.
Under the Bank Holding Company Act, if adequately capitalized and adequately
managed, Pinnacle Financial or any other bank holding company located in
Tennessee may purchase a bank located outside of Tennessee. Conversely, an
adequately capitalized and adequately managed bank holding company located
outside of Tennessee may purchase a bank located inside Tennessee. In each case,
however, restrictions may be placed on the acquisition of a bank that has only
been in existence for a limited amount of time or will result in specified
concentrations of deposits. For example, Tennessee law prohibits a bank holding
company from acquiring control of a Tennessee-based financial institution until
the target financial institution has been incorporated for five years. As a
result, no bank holding company may acquire control of Pinnacle Financial until
after the fifth anniversary date of Pinnacle National's incorporation.
CHANGE IN BANK CONTROL. Subject to various exceptions, the Bank Holding
Company Act and the Change in Bank Control Act, together with related
regulations, require Federal Reserve approval prior to any person or company
acquiring "control" of a bank holding company. Control is conclusively presumed
to exist if an individual or company acquires 25% or more of any class of voting
securities of the bank holding company. Control is rebuttably presumed to exist
if a person or company acquires 10% or more, but less than 25%, of any class of
voting securities and either:
- the bank holding company has registered securities under Section 12 of the
Securities Exchange Act of 1934, or
- no other person owns a greater percentage of that class of voting
securities immediately after the transaction.
52
We intend to register our common stock under the Securities Exchange Act of
1934. The regulations provide a procedure for challenge of the rebuttable
control presumption.
PERMITTED ACTIVITIES. On November 12, 1999 President Clinton signed the
Gramm-Leach-Bliley Act, which amends the Bank Holding Company Act and expands
the activities in which bank holding companies and affiliates of banks are
permitted to engage. The Act eliminates many federal and state law barriers to
affiliations among banks and securities firms, insurance companies, and other
financial service providers. The provisions of the Act relating to permitted
activities of bank holding companies and affiliates of banks became effective on
March 11, 2000. Since we do not intend to begin our operations until
September 2000, the following discussion describes the activities in which
Pinnacle Financial will be permitted to engage under the Bank Holding Company
Act, as amended by the Gramm-Leach-Bliley Act.
Generally, if Pinnacle Financial qualifies and elects to become a financial
holding company, which is described below, it may engage in activities that are:
- financial in nature;
- incidental to a financial activity; or
- complementary to a financial activity and do not pose a substantial risk
to the safety or soundness of depository institutions or the financial
system generally.
In determining whether a particular activity is financial in nature or
incidental or complementary to a financial activity, the Federal Reserve must
consider (1) the purpose of the Bank Holding Company and Gramm-Leach-Bliley
Acts, (2) changes or reasonable expected changes in the marketplace in which
financial holding companies compete and in the technology for delivering
financial services, and (3) whether the activity is necessary or appropriate to
allow financial holding companies to effectively compete with other financial
service providers and to efficiently deliver information and services. The Act
expressly lists the following activities as financial in nature:
- lending, trust and other banking activities;
- insuring, guaranteeing, or indemnifying against loss or harm, or providing
and issuing annuities, and acting as principal, agent, or broker for these
purposes, in any state;
- providing financial, investment, or advisory services;
- issuing or selling instruments representing interests in pools of assets
permissible for a bank to hold directly;
- underwriting, dealing in or making a market in securities;
- other activities that the Federal Reserve may determine to be so closely
related to banking or managing or controlling banks as to be a proper
incident to managing or controlling banks;
- foreign activities permitted outside of the United States if the Federal
Reserve has determined them to be usual in connection with banking
operations abroad;
- merchant banking through securities or insurance affiliates; and
- insurance company portfolio investments.
To qualify to become a financial holding company, our depository institution
subsidiaries must be well capitalized and well managed and must have a Community
Reinvestment Act rating of at least "satisfactory." Additionally, we must file
an election with the Federal Reserve to become a financial holding company and
provide the Federal Reserve with 30 days written notice prior to engaging in a
permitted financial activity. Although we do not have any immediate plans to
file an election with the Federal Reserve to become a financial holding company,
one of the primary reasons we selected the
53
holding company structure was to have increased flexibility. Accordingly, if
deemed appropriate in the future, we may seek to become a financial holding
company.
Under the Bank Holding Company Act, a bank holding company, which has not
qualified or elected to become a financial holding company, is generally
prohibited from engaging in or acquiring direct or indirect control of more than
5% of the voting shares of any company engaged in nonbanking activities unless,
prior to the enactment of the Gramm-Leach-Bliley Act, the Federal Reserve found
those activities to be so closely related to banking as to be a proper incident
to the business of banking. Activities that the Federal Reserve has found to be
so closely related to banking as to be a proper incident to the business of
banking include:
- factoring accounts receivable;
- acquiring or servicing loans;
- leasing personal property;
- conducting discount securities brokerage activities;
- performing selected data processing services;
- acting as agent or broker in selling credit life insurance and other types
of insurance in connection with credit transactions; and
- performing selected insurance underwriting activities.
Despite prior approval, the Federal Reserve may order a bank holding company
or its subsidiaries to terminate any of these activities or to terminate its
ownership or control of any subsidiary when it has reasonable cause to believe
that the bank holding company's continued ownership, activity or control
constitutes a serious risk to the financial safety, soundness, or stability of
any of its bank subsidiaries.
SUPPORT OF SUBSIDIARY INSTITUTIONS. Under Federal Reserve policy, Pinnacle
Financial is expected to act as a source of financial strength for Pinnacle
National and to commit resources to support Pinnacle National. This support may
be required at times when, without this Federal Reserve policy, Pinnacle
Financial might not be inclined to provide it. In the unlikely event of Pinnacle
Financial's bankruptcy, any commitment by it to a federal bank regulatory agency
to maintain the capital of Pinnacle National will be assumed by the bankruptcy
trustee and entitled to a priority of payment.
PINNACLE NATIONAL
Since Pinnacle National will be chartered as a national bank, it will
primarily be subject to the supervision, examination and reporting requirements
of the National Bank Act and the regulations of the Office of the Comptroller of
the Currency. The Office of the Comptroller of the Currency will regularly
examine Pinnacle National's operations and has the authority to approve or
disapprove mergers, the establishment of branches and similar corporate actions.
The Office of the Comptroller of the Currency also has the power to prevent the
continuance or development of unsafe or unsound banking practices or other
violations of law. Additionally, Pinnacle National's deposits will be insured by
the FDIC to the maximum extent provided by law. Pinnacle National will also be
subject to numerous state and federal statutes and regulations that will affect
its business, activities and operations.
BRANCHING. National banks are required by the National Bank Act to adhere
to branching laws applicable to state banks in the states in which they are
located. Under Tennessee law, Pinnacle National may open branch offices
throughout Tennessee with the prior approval of the Office of the Comptroller of
the Currency and Tennessee's Department of Financial Institutions. In addition,
with prior regulatory approval, Pinnacle National will be able to acquire
branches of existing banks located
54
in Tennessee. Pinnacle National and any other national or state-chartered bank
generally may branch across state lines by merging with banks in other states if
allowed by the applicable states' laws. Tennessee law, with limited exceptions,
currently permits branching across state lines either through interstate merger
or branch acquisition.
The Federal Deposit Insurance Act gives a state the authority to allow
out-of-state banks to branch into the state by establishing a new start-up
branch. Tennessee, however, only permits an out-of-state bank, short of an
interstate merger, to branch into Tennessee through branch acquisition on a
reciprocal basis. Consequently, only banks located in states that allows
interstate branching through branch acquisition would be permit to branch into
Tennessee by acquiring an existing branch operating within Tennessee. This
provides a limited barrier of entry into the Tennessee banking market, which
protects us from an important segment of potential competition. However, because
Tennessee does not permit start-up branching in Tennessee by an out-of-state
bank, our ability to branch in another state by establishing a new start-up
branch may be similarly limited.
PROMPT CORRECTIVE ACTION. The Federal Deposit Insurance Corporation
Improvement Act of 1991 establishes a system of prompt corrective action to
resolve the problems of undercapitalized financial institutions. Under this
system, the federal banking regulators have established five capital categories
(well capitalized, adequately capitalized, undercapitalized, significantly
undercapitalized and critically undercapitalized) in which all institutions are
placed. Federal banking regulators are required to take various mandatory
supervisory actions and are authorized to take other discretionary actions with
respect to institutions in the three undercapitalized categories. The severity
of the action depends upon the capital category in which the institution is
placed. Generally, subject to a narrow exception, the banking regulator must
appoint a receiver or conservator for an institution that is critically
undercapitalized. The federal banking agencies have specified by regulation the
relevant capital level for each category.
An institution that is categorized as undercapitalized, significantly
undercapitalized, or critically undercapitalized is required to submit an
acceptable capital restoration plan to its appropriate federal banking agency. A
bank holding company must guarantee that a subsidiary depository institution
meets its capital restoration plan, subject to various limitations. The
controlling holding company's obligation to fund a capital restoration plan is
limited to the lesser of 5% of an undercapitalized subsidiary's assets or the
amount required to meet regulatory capital requirements. An undercapitalized
institution is also generally prohibited from increasing its average total
assets, making acquisitions, establishing any branches or engaging in any new
line of business, except under an accepted capital restoration plan or with FDIC
approval. The regulations also establish procedures for downgrading an
institution and a lower capital category based on supervisory factors other than
capital.
FDIC INSURANCE ASSESSMENTS. The FDIC has adopted a risk-based assessment
system for insured depository institutions that takes into account the risks
attributable to different categories and concentrations of assets and
liabilities. The system assigns an institution to one of three capital
categories: (1) well capitalized; (2) adequately capitalized; and
(3) undercapitalized. These three categories are substantially similar to the
prompt corrective action categories described above, with the "undercapitalized"
category including institutions that are undercapitalized, significantly
undercapitalized, and critically undercapitalized for prompt corrective action
purposes. The FDIC also assigns an institution to one of three supervisory
subgroups based on a supervisory evaluation that the institution's primary
federal regulator provides to the FDIC and information that the FDIC determines
to be relevant to the institution's financial condition and the risk posed to
the deposit insurance funds. Assessments range from 0 to 27 cents per $100 of
deposits, depending on the institution's capital group and supervisory subgroup.
In addition, the FDIC imposes assessments to help pay off the $780 million in
annual interest payments on the $8 billion Financing Corporation bonds issued in
the late 1980s as part of the government rescue of the thrift industry. This
assessment rate is adjusted quarterly and is set at 2.08 cents per $100 of
deposits for the second quarter of 2000.
55
The FDIC may terminate its insurance of deposits if it finds that the
institution has engaged in unsafe and unsound practices, is in an unsafe or
unsound condition to continue operations, or has violated any applicable law,
regulation, rule, order or condition imposed by the FDIC.
COMMUNITY REINVESTMENT ACT. The Community Reinvestment Act requires that,
in connection with examinations of financial institutions within their
respective jurisdictions, the Federal Reserve, the FDIC, or the Office of the
Comptroller of the Currency, shall evaluate the record of each financial
institution in meeting the credit needs of its local community, including low
and moderate income neighborhoods. These facts are also considered in evaluating
mergers, acquisitions, and applications to open a branch or facility. Failure to
adequately meet these criteria could impose additional requirements and
limitations on Pinnacle National. Under the Gramm-Leach-Bliley Act, banks with
aggregate assets of not more than $250 million will be subject to a Community
Reinvestment Act examination only once every 60 months if the bank receives an
outstanding rating, once every 48 months if it receives a satisfactory rating
and as needed if the rating is less than satisfactory. Additionally, banks will
be required to publicly disclose the terms of various Community Reinvestment
Act-related agreements.
OTHER REGULATIONS. Interest and other charges collected or contracted for
by Pinnacle National are subject to state usury laws and federal laws concerning
interest rates. Pinnacle National's loan operations are also subject to federal
laws applicable to credit transactions, such as the:
- federal Truth-In-Lending Act, governing disclosures of credit terms to
consumer borrowers;
- Home Mortgage Disclosure Act of 1975, requiring financial institutions to
provide information to enable the public and public officials to determine
whether a financial institution is fulfilling its obligation to help meet
the housing needs of the community it serves;
- Equal Credit Opportunity Act, prohibiting discrimination on the basis of
race, creed or other prohibited factors in extending credit;
- Fair Credit Reporting Act of 1978, governing the use and provision of
information to credit reporting agencies;
- Fair Debt Collection Act, governing the manner in which consumer debts may
be collected by collection agencies; and
- rules and regulations of the various federal agencies charged with the
responsibility of implementing these federal laws.
The deposit operations of Pinnacle National are subject to the:
- Right to Financial Privacy Act, which imposes a duty to maintain
confidentiality of consumer financial records and prescribes procedures
for complying with administrative subpoenas of financial records; and
- Electronic Funds Transfer Act and Regulation E issued by the Federal
Reserve to implement that act, which govern automatic deposits to and
withdrawals from deposit accounts and clients' rights and liabilities
arising from the use of automated teller machines and other electronic
banking services.
CAPITAL ADEQUACY
Pinnacle Financial and Pinnacle National will be required to comply with the
capital adequacy standards established by the Federal Reserve, in the case of
Pinnacle Financial, and the Office of the Comptroller of the Currency, in the
case of Pinnacle National. The Federal Reserve has established a risk-based and
a leverage measure of capital adequacy for bank holding companies. Pinnacle
National is also subject to risk-based and leverage capital requirements adopted
by the Office of the Comptroller
56
of the Currency, which are substantially similar to those adopted by the Federal
Reserve for bank holding companies.
The risk-based capital standards are designed to make regulatory capital
requirements more sensitive to differences in risk profiles among banks and bank
holding companies, to account for off-balance-sheet exposure, and to
minimize disincentives for holding liquid assets. Assets and
off-balance-sheet items, such as letters of credit and unfunded loan
commitments, are assigned to broad risk categories, each with appropriate risks
weights. The resulting capital ratios represent capital as a percentage of total
risk-weighted assets and off-balance-sheet items.
The minimum guideline for the ratio of total capital to risk-weighted assets
is 8%. Total capital consists of two components, Tier 1 capital and Tier 2
capital. Tier 1 capital generally consist of common stock, minority interests in
the equity accounts of consolidated subsidiaries, noncumulative perpetual
preferred stock, and a limited amount of cumulative perpetual preferred stock,
less goodwill and other specified intangible assets. Tier 1 capital must equal
at least 4% of risk-weighted assets. Tier 2 capital generally consists of
subordinated debt, other preferred stock, and a limited amount of loan loss
reserves. The total amount of Tier 2 capital is limited to 100% of Tier 1
capital.
In addition, the Federal Reserve has established minimum leverage ratio
guidelines for bank holding companies. These guidelines provide for a minimum
ratio of Tier 1 capital to average assets, less goodwill and other specified
intangible assets, of 3% for bank holding companies that meet specified
criteria, including having the highest regulatory rating and implementing the
Federal Reserve's risk-based capital measure for market risk. All other bank
holding companies generally are required to maintain a leverage ratio of at
least 4%. The guidelines also provide that bank holding companies experiencing
internal growth, as will initially be the case for Pinnacle Financial, or making
acquisitions will be expected to maintain strong capital positions substantially
above the minimum supervisory levels. Furthermore, the Federal Reserve has
indicated that it will consider a bank holding company's Tier 1 capital leverage
ratio, after deducting all intangibles, and other indicators of capital strength
in evaluating proposals for expansion or new activities.
We are also subject to capital guidelines issued by our respective primary
regulators, which provide for minimum ratios of total capital to total assets.
Failure to meet capital guidelines could subject a bank or bank holding
company to a variety of enforcement remedies, including issuance of a capital
directive, the termination of deposit insurance by the FDIC, a prohibition on
accepting brokered deposits, and other restrictions on its business. As
described above, significant additional restrictions can be imposed on
FDIC-insured depository institutions that fail to meet applicable capital
requirements. See "--Pinnacle National--Prompt Corrective Action" on page 55.
PAYMENT OF DIVIDENDS
Pinnacle Financial is a legal entity separate and distinct from Pinnacle
National. The principal sources of Pinnacle Financial's cash flow, including
cash flow to pay dividends to its shareholders, are dividends that Pinnacle
National pays to its sole shareholder, Pinnacle Financial. Statutory and
regulatory limitations apply to Pinnacle National's payment of dividends to
Pinnacle Financial as well as to Pinnacle Financial's payment of dividends to
its shareholders.
Pinnacle National is required by federal law to obtain the prior approval of
the Office of the Comptroller of the Currency for payments of dividends if the
total of all dividends declared by our board of directors in any year will
exceed (1) the total of Pinnacle National's net profits for that year, plus
(2) Pinnacle National's retained net profits of the preceding two years, less
any required transfers to surplus.
57
The payment of dividends by Pinnacle Financial and Pinnacle National may
also be affected by other factors, such as the requirement to maintain adequate
capital above regulatory guidelines. If, in the opinion of the Office of the
Comptroller of the Currency, Pinnacle National were engaged in or about to
engage in an unsafe or unsound practice, the Office of the Comptroller of the
Currency could require, after notice and a hearing, that Pinnacle National stop
or refrain from engaging in the practice. The federal banking agencies have
indicated that paying dividends that deplete a depository institution's capital
base to an inadequate level would be an unsafe and unsound banking practice.
Under the Federal Deposit Insurance Corporation Improvement Act of 1991, a
depository institution may not pay any dividend if payment would cause it to
become undercapitalized or if it already is undercapitalized. Moreover, the
federal agencies have issued policy statements that provide that bank holding
companies and insured banks should generally only pay dividends out of current
operating earnings. See "--Pinnacle National--Prompt Corrective Action" on
page 55.
RESTRICTIONS ON TRANSACTIONS WITH AFFILIATES
Pinnacle Financial and Pinnacle National are subject to the provisions of
Section 23A of the Federal Reserve Act. Section 23A places limits on the amount
of:
- a bank's loans or extensions of credit to affiliates;
- a bank's investment in affiliates;
- assets a bank may purchase from affiliates, except for real and personal
property exempted by the Federal Reserve;
- the amount of loans or extensions of credit to third parties
collateralized by the securities or obligations of affiliates; and
- a bank's guarantee, acceptance or letter of credit issued on behalf of an
affiliate.
The total amount of the above transactions is limited in amount, as to any
one affiliate, to 10% of a bank's capital and surplus and, as to all affiliates
combined, to 20% of a bank's capital and surplus. In addition to the limitation
on the amount of these transactions, each of the above transactions must also
meet specified collateral requirements. Pinnacle National must also comply with
other provisions designed to avoid the taking of low-quality assets.
Pinnacle Financial and Pinnacle National are also subject to the provisions
of Section 23B of the Federal Reserve Act which, among other things, prohibits
an institution from engaging in the above transactions with affiliates unless
the transactions are on terms substantially the same, or at least as favorable
to the institution or its subsidiaries, as those prevailing at the time for
comparable transactions with nonaffiliated companies.
Pinnacle National is also subject to restrictions on extensions of credit to
its executive officers, directors, principal shareholders and their related
interests. These extensions of credit (1) must be made on substantially the same
terms, including interest rates and collateral, as those prevailing at the time
for comparable transactions with third parties, and (2) must not involve more
than the normal risk of repayment or present other unfavorable features.
PRIVACY
Financial institutions are required to disclose their policies for
collecting and protecting confidential information. Clients generally may
prevent financial institutions from sharing personal financial information with
nonaffiliated third parties except for third parties that market the
institutions' own products and services. Additionally, financial institutions
generally may not disclose consumer account numbers to any nonaffiliated third
party for use in telemarketing, direct mail marketing or other marketing through
electronic mail to consumers.
58
LEGAL MATTERS
Powell, Goldstein, Frazer & Murphy LLP, Atlanta, Georgia will pass upon the
validity of the shares of common stock offered by this prospectus for Pinnacle
Financial. Waller Lansden Dortch & Davis, A Professional Limited Liability
Company, Nashville, Tennessee, is acting as counsel for the underwriters in
connection with legal matters relating to the shares of common stock offered by
this prospectus.
EXPERTS
Pinnacle Financial's audited financial statements as of March 31, 2000, and
for the period from February 28, 2000 (inception) to March 31, 2000, included in
this prospectus have been included in reliance on the report of Arthur Andersen
LLP, independent certified public accountants, given on the authority of that
firm as experts in accounting and auditing.
REPORTS TO SHAREHOLDERS
Upon the effective date of the Registration Statement on Form SB-2 that
registers the shares of common stock offered by this prospectus with the
Securities and Exchange Commission, Pinnacle Financial will be subject to the
reporting requirements of the Securities Exchange Act, which include
requirements to file annual reports on Form 10-KSB and quarterly reports on
Form 10-QSB with the Securities and Exchange Commission. This reporting
obligation will exist for at least one year and will continue for successive
fiscal years, except that these reporting obligations may be suspended for any
subsequent fiscal year if at the beginning of such year the common stock is held
of record by less than 300 persons.
At any time that Pinnacle Financial is not a reporting company, it intends
to furnish its shareholders with annual reports containing audited financial
information for each fiscal year on or before the date of the annual meeting of
shareholders. Pinnacle Financial's fiscal year ends on December 31.
Additionally, Pinnacle Financial will also furnish such other reports as it may
determine to be appropriate or as otherwise may be required by law.
ADDITIONAL INFORMATION
Pinnacle Financial has filed with the Securities and Exchange Commission a
Registration Statement on Form SB-2 under the Securities Act with respect to the
shares of common stock offered by this prospectus. This prospectus does not
contain all of the information contained in the Registration Statement. For
further information with respect to Pinnacle Financial and the common stock, we
refer you to the Registration Statement and the exhibits to it. The Registration
Statement may be examined and copied at the public reference room maintained by
the Securities and Exchange Commission at Room 1024, 450 Fifth Street, N.W.,
Judiciary Plaza, Washington, D.C. 20549 and at the regional offices of the
Securities and Exchange Commission located at Citicorp Center, 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661-2511 and Seven World Trade Center,
13th Floor, New York, New York 10048. You may also obtain information on the
operation of the public reference room by calling 1-800-SEC-0330. The Securities
and Exchange Commission also maintains a Web site (http://www.sec.gov) that
contains registration statements, reports, proxy and information statements and
other information regarding registrants, such as Pinnacle Financial, that file
electronically with the Securities and Exchange Commission.
Pinnacle Financial and the organizers have filed various applications with
the FDIC, the Federal Reserve, the Tennessee Department of Financial
Institutions and the Office of the Comptroller of the Currency. These
applications and the information they contain are not incorporated into this
prospectus. You should rely only on information contained in this prospectus and
in the related Registration Statement in making an investment decision. To the
extent that other available information not presented in this prospectus,
including information available from Pinnacle Financial and
59
information in public files and records maintained by the FDIC, the Federal
Reserve, the Tennessee Department of Financial Institutions and the Office of
the Comptroller of the Currency, is inconsistent with information presented in
this prospectus or provides additional information, that information is
superseded by the information presented in this prospectus and should not be
relied on. Projections appearing in the applications are based on assumptions
that the organizers believe are reasonable, but as to which they can make no
assurances. Pinnacle Financial specifically disaffirms those projections for
purposes of this prospectus and cautions you against relying on them for
purposes of making an investment decision.
60
INDEX TO FINANCIAL STATEMENTS
[Download Table]
Report of Independent Public Accountants.................... F-2
Balance Sheet as of March 31, 2000 and June 30, 2000
(unaudited)............................................... F-3
Statement of Operations and Accumulated Deficit for the
Period February 28, 2000 (inception) to March 31, 2000 and
for the period February 28, 2000 (inception) to June 30,
2000 (unaudited).......................................... F-4
Statement of Changes in Stockholder's Deficit for the Period
February 28, 2000 (inception)
to March 31, 2000 and for the period February 28, 2000
(inception) to June 30, 2000 (unaudited).................. F-5
Statement of Cash Flows for the Period February 28, 2000
(inception) to March 31, 2000 and for the period
February 28, 2000 (inception) to June 30, 2000
(unaudited)............................................... F-6
Notes to Financial Statements............................... F-7
F-1
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Organizers
Pinnacle Financial Partners, Inc.
We have audited the accompanying balance sheet of PINNACLE FINANCIAL
PARTNERS, INC. (a Tennessee Corporation, a Company in the development stage and
formerly TMP, Inc.) as of March 31, 2000 and related statement of operations and
accumulated deficit, stockholder's deficit and cash flows for the period from
February 28, 2000 (inception) to March 31, 2000. These financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audit.
We conducted our audit in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Pinnacle Financial
Partners, Inc., (a Company in the development stage) as of March 31, 2000, and
the results of its operations and its cash flows for the period from
February 28, 2000 (inception) to March 31, 2000 in conformity with accounting
principles generally accepted in the United States.
/s/ ARTHUR ANDERSEN LLP
Nashville, Tennessee
May 19, 2000
F-2
PINNACLE FINANCIAL PARTNERS, INC.
(A COMPANY IN THE DEVELOPMENT STAGE)
BALANCE SHEETS
[Enlarge/Download Table]
MARCH 31, 2000 JUNE 30, 2000
-------------- -------------
(UNAUDITED)
ASSETS
Cash and cash equivalents................................... $ 19,844 $ 3,497
Deposits, legal retainer and other.......................... 27,246 85,839
Deferred stock offering costs............................... 9,500 39,500
Furniture and fixtures...................................... -- 4,486
-------- ---------
Total assets.......................................... $ 56,590 $ 133,322
-------- ---------
LIABILITIES AND STOCKHOLDER'S DEFICIT
LIABILITIES:
Line of credit............................................ $100,000 $ 472,660
Accrued expenses.......................................... 43,678 45,281
COMMITMENT AND CONTINGENCIES
STOCKHOLDER'S DEFICIT:
Common stock, $1 par value; 10,000,000 shares authorized;
1 share issued and outstanding.......................... 1 1
Preferred stock, no par value; 10,000,000 shares
authorized, no shares issued and outstanding............ -- --
Additional paid-in capital................................ 9 9
Deficit accumulated in the development stage.............. (87,098) (384,629)
-------- ---------
Total stockholder's deficit........................... (87,088) (384,619)
-------- ---------
Total liabilities and stockholder's deficit........... $ 56,590 $ 133,322
======== =========
The accompanying notes are an integral part of this financial statement.
F-3
PINNACLE FINANCIAL PARTNERS, INC.
(A COMPANY IN THE DEVELOPMENT STAGE)
STATEMENT OF OPERATIONS AND ACCUMULATED DEFICIT
FOR THE PERIOD FEBRUARY 28, 2000 (INCEPTION) TO MARCH 31, 2000
AND FOR THE PERIOD FEBRUARY 28, 2000 (INCEPTION) TO JUNE 30, 2000 (UNAUDITED)
[Enlarge/Download Table]
PERIOD ENDING
------------------------------
MARCH 31, 2000 JUNE 30, 2000
-------------- -------------
(UNAUDITED)
EXPENSES:
Interest.................................................. $ 308 $ 6,506
Salaries and employee benefits............................ 23,658 137,747
Legal and consulting fees................................. 54,496 168,175
Other..................................................... 8,636 72,201
------- --------
Total expenses.......................................... 87,098 384,629
======= ========
NET LOSS AND ACCUMULATED DEFICIT............................ $87,098 $384,629
======= ========
The accompanying notes are an integral part of this financial statement.
F-4
PINNACLE FINANCIAL PARTNERS, INC.
(A COMPANY IN THE DEVELOPMENT STAGE)
STATEMENT OF STOCKHOLDER'S DEFICIT
FOR THE PERIOD FEBRUARY 28, 2000 (INCEPTION) TO MARCH 31, 2000
AND FOR THE PERIOD FEBRUARY 28, 2000 (INCEPTION) TO JUNE 30, 2000 (UNAUDITED)
[Enlarge/Download Table]
DEFICIT
ACCUMULATED
COMMON STOCK ADDITIONAL IN THE TOTAL
------------------- PAID-IN DEVELOPMENT STOCKHOLDER'S
SHARES AMOUNT CAPITAL STAGE DEFICIT
-------- -------- ---------- ----------- -------------
Issuance of common stock.................... 1 $ 1 $ 9 $ $ 10
Net loss for the period February 28, 2000 to
March 31, 2000............................ (87,098) (87,098)
--- ---- ---- --------- ---------
BALANCE, MARCH 31, 2000..................... 1 $ 1 $ 9 $ (87,098) $ (87,088)
=== ==== ==== ========= =========
Issuance of common stock.................... 1 $ 1 $ 9 $ $ 10
Net loss for the period February 28, 2000 to
June 30, 2000 (unaudited)................. (384,629) (384,629)
--- ---- ---- --------- ---------
BALANCE, JUNE 30, 2000 (UNAUDITED).......... 1 $ 1 $ 9 $(384,629) $(384,619)
=== ==== ==== ========= =========
The accompanying notes are an integral part of this financial statement.
F-5
PINNACLE FINANCIAL PARTNERS, INC.
(A COMPANY IN THE DEVELOPMENT STAGE)
STATEMENT OF CASH FLOWS
FOR THE PERIOD FEBRUARY 28, 2000 (INCEPTION) TO MARCH 31, 2000
AND FOR PERIOD FEBRUARY 28, 2000 (INCEPTION) TO JUNE 30, 2000 (UNAUDITED)
[Enlarge/Download Table]
PERIOD ENDING
------------------------------
MARCH 31, 2000 JUNE 30, 2000
-------------- -------------
(UNAUDITED)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss.................................................. $(87,098) $(384,629)
Adjustments to reconcile net income to net cash provided
by operating activities:
Accrued expenses........................................ 43,678 45,281
-------- ---------
Cash used by operating activities..................... (43,420) (339,348)
-------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Deposits, legal retainer and other........................ (27,246) (85,839)
-------- ---------
Purchase of furniture and fixtures.................... -- (4,486)
-------- ---------
Cash used by investing activities..................... (27,246) (90,325)
-------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from borrowings.................................. 100,000 472,660
Proceeds from issuance of common stock.................... 10 10
Deferred stock offering costs............................. (9,500) (39,500)
-------- ---------
Cash provided by financing activities................. 90,510 433,170
-------- ---------
CASH BALANCE AT END OF PERIOD............................... $ 19,844 $ 3,497
======== =========
The accompanying notes are an integral part of this financial statement.
F-6
PINNACLE FINANCIAL PARTNERS, INC.
(A COMPANY IN THE DEVELOPMENT STAGE)
NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION
Pinnacle Financial Partners, Inc. (the "Company") was formed to organize and
own all of the capital stock of Pinnacle National Bank (the "Bank"), a proposed
national bank to be located in Nashville, Tennessee, by a group of fourteen
individuals (the "Organizers"). The Company was originally incorporated in the
state of Tennessee in February 2000 as TMP, Inc. In April 2000, the Company's
board of directors approved a name change to Pinnacle Financial Partners, Inc.,
and the Company filed an application for reservation of corporate name with the
Tennessee Secretary of State on April 25, 2000. Upon receipt of required
regulatory approvals, the proposed bank will operate as a community bank
emphasizing personalized banking relationships with individuals and businesses.
The Organizers have filed applications with the Office of The Comptroller of the
Currency to obtain a national bank charter and with the Federal Deposit
Insurance Corporation ("FDIC") for deposit insurance. Provided the necessary
capital is raised and the necessary regulatory approvals are received, it is
expected that operations will commence in the third or fourth quarter of 2000.
Ten of the fourteen Organizers will serve on the initial board of directors.
The Company is a development stage enterprise as defined by Statement of
Financial Accounting Standard No.7, "Accounting and Reporting by Development
Stage Enterprises", as it devotes substantially all its efforts to establishing
a new business. The Company's planned principal operations have not commenced
and revenue has not been recognized from the planned principal operations.
The Company plans to raise a minimum of $25,000,000 by offering for sale
2,500,000 shares of its common stock. The Company will use $22,600,000 of the
proceeds to capitalize the proposed Bank. The Organizers, directors, executive
officers, and members of their immediate families expect to purchase a total of
391,000 shares at an aggregate purchase price of approximately $3,910,000.
ORGANIZATIONAL AND PRE-OPENING COSTS
Activities since inception have consisted of organizational activities
necessary to obtain regulatory approvals and preparation activities to commence
business as a commercial bank. Organizational costs are primarily legal fees,
consulting fees, and application fees related to the incorporation of the
Company and initial organization of the Bank. The organizational and pre-opening
costs will be charged against the initial period's operating results.
The Company estimates that both it and the Bank will incur organizational
and pre-opening costs totaling approximately $1,005,000.
DEFERRED STOCK OFFERING COSTS
Deferred stock offering costs are expenses incurred by the Company in
connection with the offering and issuance of its stock. The deferred stock
offering costs will be deducted from the Company's additional paid-in capital
after the stock offering. If the stock offering is deemed unsuccessful, all
deferred stock offering costs will be charged to operations during the period in
which the offering is deemed unsuccessful. These expenses are estimated to be
approximately $120,000.
F-7
PINNACLE FINANCIAL PARTNERS, INC.
(A COMPANY IN THE DEVELOPMENT STAGE)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
2. LINE OF CREDIT
As of March 31, 2000, borrowings consist of $100,000 drawn on a $700,000
line of credit obtained from The Bank of Nashville. Interest is payable monthly,
at the prime rate plus 1/2 percent, with the principal being due on
February 28, 2001. Twelve of the Company's fourteen organizers have directly
guaranteed the line of credit. The line of credit is being used to fund the
Bank's organizational and pre-opening costs.
3. STOCKHOLDER'S EQUITY
COMMON STOCK
The Company has the authority to issue up to 10,000,000 shares of voting
common stock, $1 par value.
CUMULATIVE VOTING RIGHTS
The Company has elected not to have cumulative voting, and no shares issued
by the Company may be cumulatively voted.
PREEMPTIVE RIGHTS
The stockholders of the Company shall not have any preemptive rights
regarding any issuance of the Company's capital stock.
PREFERRED STOCK
The Company has the authority to issue up to 10,000,000 shares of preferred
stock, no par value. The board of directors may determine the terms of the
preferred stock. Preferred stock may have voting rights, subject to applicable
law and as determined by the board of directors.
STOCK OFFERING
Upon receiving preliminary regulatory approvals, the Company, through its
underwriter, plans to offer for sale to the general public 2,500,000 shares of
$1 stated par value common stock at an offering price of $10.00 per share. The
underwriter has the right to exercise its over-allotment option to purchase up
to an additional 316,500 shares of common stock at $10.00 per share, less the
applicable underwriting discount. The Organizers as executive officers intend to
purchase an aggregate of 391,000 shares of common stock to be sold in the
offering which represents approximately 15.6% of the offering. The Organizers
will receive a warrant to purchase one share of common stock for every two
shares of common stock purchased in the offering. The exercise price for the
warrants will be $10.00 per share and the warrants will vest in one-third annual
increments over a period of three years beginning on the one-year anniversary of
the date of close of the offering. The warrants will remain exercisable for the
ten-year period following the date of the close of the offering.
4. INCOME TAXES
As of March 31, 2000, the Company had a net operating loss carryforward of
$87,098.
F-8
PINNACLE FINANCIAL PARTNERS, INC.
(A COMPANY IN THE DEVELOPMENT STAGE)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
4. INCOME TAXES (CONTINUED)
There was no provision (benefit) for income taxes for the period from
March 1, 2000 to March 31, 2000, since a 100% valuation reserve is being
maintained for the net operating loss carryforward.
5. COMMITMENT AND CONTINGENCIES
EMPLOYMENT CONTRACT
The Company entered into a three-year employment contract with its President
and Chief Executive Officer ("CEO") on March 1, 2000. The agreement will
automatically renew for an additional day each day after March 31, 2000, so that
it will always have a three-year term, unless any of the parties to the
agreement gives notice of intent not to renew the agreement. The contract
provides that the President and CEO will receive an initial annual salary of
$220,000. The contract provides that the President and CEO shall receive an
annual bonus as determined by the board of directors. Additionally, the
President and CEO will receive other benefits including an incentive stock
option to purchase 45,000 shares of common stock at an exercise price of $10 per
share. The stock options will become exercisable in equal one-fifth annual
increments over a five-year period beginning on the one-year anniversary after
the prospectus becomes effective.
LEASE AGREEMENT
On March 16, 2000, the Company entered into an agreement with Commerce
Street Associates to lease 12,135 square feet of office space in an office
building in Nashville, Tennessee that will be the site of the Bank's main office
facility. The planned tenant build-out of the main office is expected to begin
in the second quarter of 2000 with total costs, including furniture, fixtures
and equipment, estimated at $1.66 million. After the Bank is capitalized, it
will assume the lease with Commerce Street Associates and will pay the remaining
balance of the renovation costs incurred. The term of the main office lease is
10 years with initial monthly rent being $20,471.
6. RELATED PARTY TRANSACTIONS
The Company paid a director $5,500 for consulting services related to
pre-opening activities of the Company.
The Company entered into a letter agreement with a public relations company,
of which one of the Company's directors is a principal. The agreement term began
March 1, 2000 and ends August 1, 2000. As of March 31, 2000 the Company incurred
$8,000 of expenses under the agreement.
7. SUBSEQUENT EVENT
In April 2000, the Company entered into a lease for temporary office space.
The lease, which began on April 1, 2000 and ends February 28, 2000, requires
monthly rent in the amount of $1,758.
F-9
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
PROSPECTIVE INVESTORS MAY RELY ONLY ON THE INFORMATION CONTAINED IN THIS
PROSPECTUS. NO ONE HAS AUTHORIZED ANYONE TO PROVIDE PROSPECTIVE INVESTORS WITH
INFORMATION DIFFERENT FROM THAT CONTAINED IN THIS PROSPECTUS. THIS PROSPECTUS IS
NOT AN OFFER TO SELL NOR IS IT SEEKING AN OFFER TO BUY THESE SECURITIES IN ANY
JURISDICTION WHERE THE OFFER OR SALE IS NOT PERMITTED. THE INFORMATION CONTAINED
IN THIS PROSPECTUS IS CORRECT ONLY AS OF THE DATE OF THIS PROSPECTUS, REGARDLESS
OF THE TIME OF THE DELIVERY OF THIS PROSPECTUS OR ANY SALE OF THESE SECURITIES.
------------------------
TABLE OF CONTENTS
[Download Table]
PAGE
--------
Summary................................ 1
Risk Factors........................... 6
Caution Regarding Forward-Looking
Statements........................... 11
Use of Proceeds........................ 12
Capitalization......................... 14
Dividends.............................. 15
Management's Discussion and Analysis of
Financial Condition and Plan of
Operations........................... 16
Our Proposed Business.................. 19
Management............................. 30
Executive Compensation................. 38
Related Party Transactions............. 43
Description of Our Capital Stock....... 44
Selected Provisions of Our Charter and
Bylaws............................... 45
Shares Eligible for Future Sale........ 49
Underwriting........................... 50
Supervision and Regulation............. 52
Legal Matters.......................... 59
Experts................................ 59
Reports to Shareholders................ 59
Additional Information................. 59
Index to Financial Statements.......... F-1
------------------------
UNTIL 2000 (40 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL DEALERS
THAT BUY, SELL OR TRADE THE COMMON STOCK, WHETHER OR NOT PARTICIPATING IN THIS
OFFERING, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN ADDITION TO THE
DEALERS' OBLIGATION TO DELIVER A PROSPECTUS WHEN ACTING AS AN UNDERWRITER AND
WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
2,500,000 SHARES
[LOGO]
A PROPOSED BANK HOLDING
COMPANY FOR
PINNACLE NATIONAL BANK
(PROPOSED)
COMMON STOCK
---------------------
PROSPECTUS
---------------------
PaineWebber Incorporated
J.C. Bradford & Co.
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Consistent with the applicable provisions of the laws of Tennessee, the
Registrant's charter and bylaws provide that the Registrant shall indemnify its
directors and officers against expenses (including attorneys' fees) and
liabilities arising from actual or threatened actions, suits or proceedings,
whether or not settled, to which they become subject by reason of having served
in such role if such director or officer acted in good faith and in a manner he
or she reasonably believed to be in or not opposed to the best interests of the
Registrant and, with respect to a criminal action or proceeding, had no
reasonable cause to believe his or her conduct was unlawful. Advances against
expenses shall be made so long as the person seeking indemnification agrees to
refund the advances if it is ultimately determined that he or she is not
entitled to indemnification. A determination of whether indemnification of a
director or officer is proper because he or she met the applicable standard of
conduct shall be made (1) by the board of directors of the Registrant, (2) in
certain circumstances, by independent legal counsel in a written opinion or
(3) by the affirmative vote of a majority of the shares entitled to vote, but
shares owned by or are under voting control of directors or officers who are at
the time parties to the proceeding may not vote on the determination.
In addition, the Registrant's charter, subject to exceptions, eliminates the
potential personal liability of a director for monetary damages to the
Registrant and to the shareholders of the Registrant for breach of a duty as a
director. There is no release of liability for (1) a breach of the director's
duty of loyalty to the Registrant or its shareholders, (2) an act or omission
not in good faith or which involves intentional misconduct or a knowing
violation of law, or (3) as to any payment of a dividend or approval of a stock
repurchase that is illegal under the Tennessee Business Corporation Act. The
charter does not eliminate or limit the right of the Registrant or its
shareholders to seek injunctive or other equitable relief not involving monetary
damages.
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
Estimated expenses, other than underwriting discounts and commissions, of
the sale of the Registrant's common stock, no par value, are as follows:
[Download Table]
Securities and Exchange Commission Registration Fee......... $ 7,436
National Association of Securities Dealers, Inc. Filing
Fee....................................................... 3,000
Blue Sky Fees and Expenses.................................. 10,000
Legal Fees and Expenses..................................... 30,000
Accounting Fees and Expenses................................ 20,000
Printing and Engraving Expenses............................. 45,000
Miscellaneous............................................... 4,564
--------
Total..................................................... $120,000
========
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES.
On March 30, 2000, the Registrant issued to M. Terry Turner, in a private
placement, one share of the Registrant's Common Stock, $1.00 par value, for an
aggregate price of $10.00 in connection with the organization of the Company.
The sale to Mr. Turner was exempt from registration under the Securities Act
pursuant to Section 4(2) of the Act because it was a transaction by an issuer
that did not involve a public offering.
II-1
ITEM 27. EXHIBITS.
[Download Table]
EXHIBIT
NUMBER DESCRIPTION
--------------------- ------------------------------------------------------------
1.1 Form of Underwriting Agreement
3.1 Charter, as amended and restated*
3.2 Bylaws
4.1 Specimen Common Stock Certificate
4.2 See Exhibits 3.1 and 3.2 for provisions of the Charter and
Bylaws defining rights of holders of the Common Stock
5.1 Legal Opinion of Powell, Goldstein, Frazer & Murphy LLP
10.1 Lease Agreement by and between TMP, Inc. (former name of
Pinnacle Financial Partners, Inc.) and Commercial Street
Associates dated March 16, 2000 (main office)*
10.2 Lease Agreement by and between TMP, Inc. (former name of
Pinnacle Financial Partners, Inc.) and D and W Companies,
Inc. d/b/a Psychiatric Solutions, Inc. dated March 3, 2000
(temporary facility)*
10.3 Promissory Note dated February 29, 2000 executed by TMP,
Inc. (former name of Pinnacle Financial Partners, Inc.) and
accepted by The Bank of Nashville, Nashville, Tennessee, and
form of Commercial Guaranty*
10.4 Form of Pinnacle Financial Partners, Inc.'s Organizers'
Warrant Agreement*
10.5 Pinnacle Financial Partners, Inc. 2000 Stock Incentive Plan*
10.6 Employment Agreement dated as of March 1, 2000 by and
between Pinnacle National Bank (Proposed), Pinnacle
Financial Partners, Inc. and M. Terry Turner*
10.7 Proposed Employment Agreement to be dated as of August 1,
2000 by and between Pinnacle National Bank (Proposed),
Pinnacle Financial Partners, Inc. and Robert A. McCabe, Jr.
10.8 Employment Agreement dated as of April 1, 2000 by and
between Pinnacle National Bank (Proposed), Pinnacle
Financial Partners, Inc. and Hugh M. Queener
10.9 Letter Agreement dated March 14, 2000 and accepted March 16,
2000 by and between Pinnacle Financial Corporation (now
known as Pinnacle Financial Partners, Inc.) and Atkinson
Public Relations*
10.10 Form of Agreement of Sale and License Agreement by and
between Pinnacle Financial Partners, Inc. and SER Macrosoft,
Inc.
10.11 Brokerage Program Agreement and Lease by and between
Pinnacle Financial Partners, Inc., LM Financial Partners,
Inc. and Legg Mason Financial Services, Inc.
10.12 Understanding of Terms and Conditions Agreement dated
June 21, 2000 (and accepted June 27, 2000) by and between
Pinnacle Financial Partners, Inc. and Interior Design
Services, Inc.
10.13 Promissory Note dated June 28, 2000 executed by Pinnacle
Financial Partners, Inc. and accepted by SunTrust Bank,
Nashville, Tennessee, and form of Guaranty (supercedes
exhibit 10.3 previously filed)
II-2
[Download Table]
EXHIBIT
NUMBER DESCRIPTION
--------------------- ------------------------------------------------------------
10.14 Employment Agreement dated March 1, 2000 by and between
Pinnacle National Bank (Proposed), Pinnacle Financial
Partners, Inc. and M. Terry Turner (supercedes exhibit 10.6
previously filed)
10.15 Pinnacle Financial Partners, Inc. 2000 Stock Incentive Plan
(supercedes Exhibit 10.5 previously filed)
23.1 Consent of Arthur Andersen LLP dated May 30, 2000*
23.2 Consent of Powell, Goldstein, Frazer & Murphy LLP (contained
in Exhibit 5.1)
23.3 Consent of Arthur Andersen LLP dated July 11, 2000
24.1 Power of Attorney*
27.1 Financial Data Schedule (for SEC use only) 3/31/2000*
27.2 Financial Data Schedule (for SEC use only) 6/30/2000
------------------------
* Previously filed.
ITEM 28. UNDERTAKINGS.
The Registrant hereby undertakes to provide to the underwriters at the
closing specified in the underwriting agreement certificates in such
denominations and registered in such names as required by the underwriters to
permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
Registrant pursuant to foregoing provisions, or otherwise, the Registrant has
been advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
The undersigned Registrant hereby undertakes as follows:
(a) (1) To file, during any period in which it offers or sells securities,
a post-effectiveamendment to this Registration Statement to:
(i) Include any prospectus required by Section 10(a)(3) of the
Securities Act;
(ii) Reflect in the prospectus any facts or events which,
individually or together, represent a fundamental change in the
information set forth in the Registration Statement.
Notwithstanding the foregoing, any increase or decrease in volume
of securities offered (if the total dollar value of securities
offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum
offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) if, in the aggregate,
the changes in volume and price represent no more than a 20%
change in the maximum aggregate offering price set forth in the
"Calculation of Registration Fee" table in the effective
Registration Statement;
II-3
(iii) Include any additional or changed material information on the
plan of distribution.
(2) For determining liability under the Securities Act, treat each
post-effective amendment as a new registration statement of the
securities offered, and the offering of the securities at that time
to be the initial bona fide offering.
(3) File a post-effective amendment to remove from registration any of
the securities being registered that remain unsold at the end of the
offering.
The Registrant hereby undertakes as follows:
(b) (1) For determining any liability under the Securities Act, to treat
the information omitted from the form of prospectus filed as part
of this Registration Statement in reliance upon Rule 430A and
contained in a form of prospectus filed by the Registrant under
Rule 424(b)(1), or (4) or 497(h) under the Securities Act as part
of this Registration Statement as of the time the Commission
declared it effective.
(2) For determining any liability under the Securities Act, to treat each
post-effective amendment that contains a form of prospectus as a new
registration statement for the securities offered in the Registration
Statement, and that offering of the securities at that time as the
initial bona fide offering of those securities.
II-4
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, as
amended, the Registrant certifies that it has reasonable grounds to believe that
it meets all of the requirements of filing on Form SB-2 and authorized this
Registration Statement Amendment to be signed on its behalf by the undersigned
in the City of Nashville, State of Tennessee, on July 10, 2000.
[Download Table]
PINNACLE FINANCIAL PARTNERS, INC.
By: /s/ M. TERRY TURNER
-----------------------------------------
M. Terry Turner
PRESIDENT AND CHIEF EXECUTIVE OFFICER
In accordance with the requirements of the Securities Act of 1933, as
amended, this Registration Statement has been signed by the following persons in
the capacities and on the dates stated.
[Enlarge/Download Table]
SIGNATURE TITLE DATE
--------- ----- ----
/s/ SUE R. ATKINSON+ Director
------------------------------------------- July 10,
Sue R. Atkinson 2000
/s/ COLLEEN CONWAY-WELCH+ Director
------------------------------------------- July 10,
Colleen Conway-Welch 2000
/s/ CLAY T. JACKSON+ Director
------------------------------------------- July 10,
Clay T. Jackson 2000
/s/ JOHN E. MAUPIN, JR.+ Director
------------------------------------------- July 10,
John E. Maupin, Jr. 2000
/s/ ROBERT A. MCCABE, JR.+ Chairman of the Board of
------------------------------------------- Directors July 10,
Robert A. Mccabe, Jr. 2000
/s/ ROBERT E. MCNEILLY, JR.+ Director
------------------------------------------- July 10,
Robert E. Mcneilly, Jr. 2000
/s/ DALE W. POLLEY+ Director
------------------------------------------- July 10,
Dale W. Polley 2000
/s/ HUGH M. QUEENER+ Executive Vice President, Chief
------------------------------------------- Administrative Officer ** July 10,
Hugh M. Queener 2000
II-5
[Download Table]
SIGNATURE TITLE DATE
--------- ----- ----
/s/ JAMES L. SHAUB, II+ Director
------------------------------------------- July 10,
James L. Shaub, II 2000
/s/ REESE L. SMITH, III+ Director
------------------------------------------- July 10,
Reese L. Smith, III 2000
/s/ M. TERRY TURNER President, Chief Executive
------------------------------------------- Officer, and Director* July 10,
M. Terry Turner 2000
------------------------
* Principal executive officer.
** Principal financial and accounting officer.
[Download Table]
+ /s/ M. TERRY TURNER
--------------------------------------
M. Terry Turner
ATTORNEY-IN-FACT
II-6
Dates Referenced Herein and Documents Incorporated by Reference
5 Subsequent Filings that Reference this Filing
↑Top
Filing Submission 0000912057-00-031616 – Alternative Formats (Word / Rich Text, HTML, Plain Text, et al.)
Copyright © 2024 Fran Finnegan & Company LLC – All Rights Reserved.
About — Privacy — Redactions — Help —
Fri., May 17, 9:08:44.2pm ET 
