SCHEDULE 14A INFORMATION
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or
Rule 14a-12
[ ] Confidential, For Use of the Commission Only (as permitted
by Rule 14a-6(e)(2))
CUMBERLAND MOUNTAIN BANCSHARES, INC.
- ----------------------------------------------------------------
(Name of Registrant as Specified in its Charter)
- ----------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the
Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules
14a-6(i)(1) and 0-11.
1. Title of each class of securities to which transaction
applies:
_________________________________________________________________
2. Aggregate number of securities to which transaction
applies:
_________________________________________________________________
3. Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11:
_________________________________________________________________
4. Proposed maximum aggregate value of transaction:
_________________________________________________________________
[ ] Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for which
the offsetting fee was paid previously. Identify the previous
filing by registration statement number, or the Form or Schedule
and the date of its filing.
1. Amount Previously Paid:
____________________________________________
2. Form, Schedule or Registration Statement No.:
____________________________________________
3. Filing Party:
____________________________________________
4. Date Filed:
____________________________________________
September 27, 1999
Dear Stockholder:
We invite you to attend the 1999 Annual Meeting of the
Stockholders of Cumberland Mountain Bancshares, Inc. to be held
at Fountain City Park Bank, a branch office of Middlesboro
Federal Bank, located at 5320 N. Broadway, Fountain City,
Tennessee, on Wednesday, October 20, 1999 at 2:00 p.m., Eastern
Time.
The accompanying notice and proxy statement describe the
formal business to be transacted Enclosed with this proxy
statement are a proxy card and an Annual Report to Stockholders
for the 1999 fiscal year. Directors and officers of the
Company, as well as representatives of Marr, Miller & Myers,
PSC, the Company's independent auditors, will be present at the
Annual Meeting to respond to any questions the stockholders may
have.
You are cordially invited to attend the Annual Meeting.
REGARDLESS OF WHETHER YOU PLAN TO ATTEND, WE URGE YOU TO SIGN,
DATE AND RETURN THE ENCLOSED PROXY CARD AS SOON AS POSSIBLE EVEN
IF YOU CURRENTLY PLAN TO ATTEND THE ANNUAL MEETING. This will
not prevent you from voting in person but will assure that your
vote is counted if you are unable to attend the meeting.
To help us with our planning, please check the box on the
proxy card if you plan to attend the meeting in person.
Sincerely,
/s/ James J. Shoffner
James J. Shoffner
President
_________________________________________________________________
CUMBERLAND MOUNTAIN BANCSHARES, INC.
1431 CUMBERLAND AVENUE
MIDDLESBORO, KENTUCKY 40965
(606) 248-4584
_________________________________________________________________
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON OCTOBER 20, 1999
_________________________________________________________________
NOTICE IS HEREBY GIVEN that the Annual Meeting of
Stockholders (the "Annual Meeting") of Cumberland Mountain
Bancshares, Inc. (the "Company"), will be held at the Fountain
City Park Bank, a branch office of Middlesboro Federal Bank,
5320 N. Broadway, Fountain City, Tennessee 37928 at 2:00 p.m.,
Eastern Time, on Wednesday, October 20, 1999.
The Annual Meeting is for the purpose of considering and
acting upon:
1. The election of two directors for three-year terms;
2. The transaction of such other matters as may
properly come before the Annual Meeting or any
adjournments thereof.
Any action may be taken on any one of the foregoing
proposals at the Annual Meeting on the date specified above or on
any date or dates to which, by original or later adjournment,
the Annual Meeting may be adjourned. Stockholders of record at
the close of business on September 7, 1999 are the stockholders
entitled to notice of and to vote at the Annual Meeting and any
adjournments thereof.
The Company's Proxy Statement for the Annual Meeting
accompanies this Notice and a form of proxy is enclosed
herewith. You are requested to fill in and sign the enclosed
proxy card which is solicited by the Board of Directors and to
mail it promptly in the enclosed envelope. The proxy will not
be used if you attend and vote at the Annual Meeting in person.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ J. D. Howard
J. D. HOWARD
SECRETARY
Middlesboro, Kentucky
September 27, 1999
________________________________________________________________
IMPORTANT: THE PROMPT RETURN OF PROXIES WILL SAVE YOUR COMPANY
THE EXPENSE OF FURTHER REQUESTS FOR PROXIES IN ORDER TO ENSURE A
QUORUM. A SELF-ADDRESSED ENVELOPE IS ENCLOSED FOR YOUR
CONVENIENCE. NO POSTAGE IS REQUIRED IF MAILED IN THE UNITED
STATES.
________________________________________________________________
_________________________________________________________________
PROXY STATEMENT
OF
CUMBERLAND MOUNTAIN BANCSHARES, INC.
1431 CUMBERLAND AVENUE
MIDDLESBORO, KENTUCKY 40965
ANNUAL MEETING OF STOCKHOLDERS
OCTOBER 20, 1999
_________________________________________________________________
GENERAL
_________________________________________________________________
This Proxy Statement is furnished in connection with the
solicitation of proxies by the Board of Directors of Cumberland
Mountain Bancshares, Inc. (hereinafter called the "Company") to
be used at the 1999 Annual Meeting of Stockholders of the
Company (hereinafter called the "Annual Meeting"), which will be
held at the Fountain City Park Bank, a branch office of
Middlesboro Federal Bank, 5320 N. Broadway, Fountain City,
Tennessee on Wednesday, October 20, 1999, at 2:00 p.m., Eastern
Time. The accompanying Notice of Annual Meeting and form of
proxy and this Proxy Statement are being first mailed to
stockholders on or about September 27, 1999.
_________________________________________________________________
VOTING AND REVOCABILITY OF PROXIES
_________________________________________________________________
Proxies solicited by the Board of Directors of the Company
will be voted in accordance with the directions given therein.
WHERE NO INSTRUCTIONS ARE INDICATED, PROXIES WILL BE VOTED FORTHE
NOMINEES FOR DIRECTOR NAMED BELOW. The proxy confers
discretionary authority on the persons named therein to vote
with respect to the election of any person as a director where
the nominee is unable to serve or for good cause will not serve,
and with respect to matters incident to the conduct of the
Annual Meeting. If any other business is presented at the
Annual Meeting, proxies will be voted by those named therein in
accordance with the determination of a majority of the Board of
Directors. Proxies marked as abstentions will not be counted as
votes cast. In addition, shares held in street name which have
been designated by brokers on proxy cards as not voted will not
be counted as votes cast. Proxies marked as abstentions or as
broker no votes, however, will be treated as shares present for
purposes of determining whether a quorum is present.
Stockholders who execute proxies retain the right to
revoke them at any time. Unless so revoked, the shares
represented by properly executed proxies will be voted at the
Annual Meeting and all adjournments thereof. Proxies may be
revoked by written notice to the Secretary of the Company at the
address above or by the filing of a later dated proxy prior to a
vote being taken on a particular proposal at the Annual Meeting.
A proxy will not be voted if a stockholder attends the Annual
Meeting and votes in person. The presence of a stockholder at
the Annual Meeting will not revoke such stockholder's proxy.
_________________________________________________________________
VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF
_________________________________________________________________
The securities entitled to vote at the Annual Meeting
consist of the Company's common stock, $.01 par value per share
(the "Common Stock"). Stockholders of record as of the close of
business on September 7, 1999 (the "Record Date") are entitled
to one vote for each share of Common Stock then held. As of the
Record Date, there were 678,800 shares of Common Stock issued
and outstanding.
Persons and groups beneficially owning in excess of 5% of
the Common Stock are required to file certain reports with
respect to such ownership pursuant to the Securities Exchange
Act of 1934 (the "Exchange Act"). The following table sets
forth, as of the Record Date, certain information as to the
Common Stock beneficially owned by all persons who have filed
the reports required of persons beneficially owning more than 5%
of the Common Stock or who were known to the Company to
beneficially own more than 5% of the Common Stock outstanding at
the Record Date and the shares of Common Stock beneficially
owned by all executive officers and directors of the Company as
a group.
AMOUNT AND PERCENT OF
NATURE OF SHARES OF
NAME AND ADDRESS BENEFICIAL COMMON STOCK
OF BENEFICIAL OWNER OWNERSHIP (1) OUTSTANDING (2)
- ------------------- ------------- ---------------
James J. Shoffner 63,355 (3) 9.28%
1431 Cumberland Avenue
Middlesboro, Kentucky 40961
Cumberland Mountain Bancshares, Inc. 87,856 12.94%
Employee Stock Ownership Plan
1431 Cumberland Avenue
Middlesboro, Kentucky 40961
Jeffrey L. Gendell 67,116 9.89%
Tontine Management, L.L.C.
Tontine Financial Partners, L.P.
Tontine Overseas Associates, L.L.C.
200 Park Avenue, Suite 3900
New York, New York 10166
Sandler O'Neill Asset Management,
LLC 65,000 9.58%
Malta Partners, L.P.
Malta Hedge Fund, L.P.
Malta Partners II, L.P.
Malta Hedge Fund II, L.P.
SOAM Holdings, LLC
Terry Maltese
712 Fifth Avenue
22nd Floor
New York, New York 10019
All Executive Officers and 117,428 (4) 16.92%
Directors as a group (8 persons)
<FN>
___________
(1) For purposes of this table, a person is deemed to be the
beneficial owner of any shares of Common Stock if he or she
has or shares voting or investment power with respect to
such Common Stock or has a right to acquire beneficial
ownership at any time within 60 days from the Record Date.
As used herein, "voting power" is the power to vote or
direct the voting of shares and "investment power" is the
power to dispose or direct the disposition of shares.
Except as otherwise noted, ownership is direct, and the
named persons exercise sole voting and investment power over
the shares of the Common Stock.
(2) In calculating percentage ownership for a named individual
or group, the number of shares outstanding is deemed to
include shares which the named individual or group has the
right to acquire pursuant to the exercise of options
exercisable within 60 days of the Record Date.
(3) Includes 4,187 shares which Mr. Shoffner has the right to
acquire pursuant to the exercise of options.
(4) Includes 15,275 shares which directors and officers have the
right to acquire pursuant to the exercise of options.
</FN>
-2-
________________________________________________________________
PROPOSAL I -- ELECTION OF DIRECTORS
________________________________________________________________
The Company's Board of Directors is currently composed of
five members. Under the Company's Charter, directors are
divided into three classes and elected for terms of three years
each and until their successors are elected and qualified. At
the Annual Meeting two directors will be elected for a term
expiring at the Annual Meeting to be held in the year 2002. The
Board of Directors has nominated Barry Litton and James J.
Shoffner, each to serve for an additional term of three years
and until their successors are elected and qualified. On May
31, 1999 Director Robert R. Long retired from office. Under
Tennessee law, directors are elected by a plurality of the votes
present in person or represented by proxy at the Annual Meeting
and entitled to vote in the election of directors.
Unless contrary instruction is given, the persons named in
the proxies solicited by the Board of Directors will vote each
such proxy for the election of the named nominee. If the
nominee is unable to serve, the shares represented by all
properly executed proxies which have not been revoked will be
voted for the election of such substitute as the Board of
Directors may recommend. At this time, the Board knows of no
reason why the nominee might be unavailable to serve.
The following table sets forth, for the nominee and each
continuing director, his name, age as of the Record Date, the
year he first became a director of the Bank, the expiration of
his current term as a director of the Company and the number and
percentage of shares of Common Stock beneficially owned. All of
the Company's current directors were initially appointed as
directors in 1996 in connection with the incorporation and
organization of the Company, except for Barry Litton who was
appointed to the Board of Directors in November 1997. Each
director of the Company also is a member of the Board of
Directors of the Bank. There are no arrangements or
understandings between the Company and any director or nominee
pursuant to which such person has been selected as a director or
nominee for director of the Company, and, except for J. Roy
Shoffner and James J. Shoffner who are father and son, no
director, nominee or executive officer is related to any other
director, nominee or executive officer by blood, marriage or
adoption.
-3-
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE
NOMINEES LISTED BELOW.
SHARES OF
YEAR FIRST COMMON STOCK
AGE AS ELECTED AS CURRENT BENEFICIALLY
OF THE DIRECTOR TERM OWNED AS OF THE PERCENT
NAME RECORD DATE OF THE BANK TO EXPIRE RECORD DATE (1) OF CLASS
- ---------- ----------- ----------- --------- --------------- --------
BOARD NOMINEE FOR TERM TO EXPIRE
AT THE 2002 ANNUAL MEETING
Barry Litton 48 1997 1999 2,200 (2) 0.32%
James J. Shoffner (3) 38 1988 1999 63,355 (4) 9.28%
DIRECTORS CONTINUING IN OFFICE
J. Roy Shoffner (3) 71 1961 2000 12,429 (5) 1.82%
Reecie Stagnolia, Jr. 63 1993 2001 15,884 (6) 2.34%
Raymond C. Walker 69 1985 2001 14,203 (7) 2.09%
<FN>
__________
(1) In calculating percentage ownership for a named individual or group, the number of
shares outstanding is deemed to include shares which the named individual or group
has the right to acquire pursuant to the exercise of options.
(2) Includes 733 shares which Mr. Litton has the right to acquire pursuant to the
exercise of options exercisable within 60 days of the Record Date.
(3) On February 24, 1999, without admitting or denying any of the claims therein, J. Roy
Shoffner and James J. Shoffner consented to the issuance by the Office of Thrift
Supervision of a Cease and Desist Order for an alleged violation of the Change in
Bank Control Act. The Order required the Shoffners to pay restitution to the Company
in the amount of $51,612. James J. Shoffner was also required to pay to the Office
of Thrift Supervision a civil money penalty in the amount of $10,000.
(4) Includes 4,187 shares which Mr. Shoffner has the right to acquire pursuant to the
exercise of options exercisable within 60 days of the Record Date. Mr. Shoffner
disclaims beneficial ownership of any shares held by his father.
(5) Includes 733 shares of Common Stock which Mr. Shoffner has the right to acquire
pursuant to the exercise of options exercisable within 60 days of the Record Date.
Does not include 63,355 shares beneficially owned by Mr. Shoffner's adult children as
to which he disclaims beneficial ownership.
(6) Includes 9,154 shares held jointly with Mr. Stagnolia's wife, 2,266 shares held in
Mr. Stagnolia's IRA and 3,065 shares held in his wife's IRA. Includes 1,399 shares
which Mr. Stagnolia has the right to acquire pursuant to the exercise of options.
(7) Includes 10,664 shares held jointly with Mr. Walker's wife. Includes 1,733 shares
which Mr. Walker has the right to acquire pursuant to the exercise of options
exercisable within 60 days of the Record Date.
</FN>
Presented below is certain information concerning the
nominee and directors continuing office. Unless otherwise
stated, all directors and the nominee have held the positions
indicated for at least the past five years.
BARRY LITTON is currently Vice Chairman of the Board. Mr.
Litton owns and manages Litton's Market, a restaurant located in
Knoxville, Tennessee.
JAMES J. SHOFFNER joined Middlesboro Federal in 1994 as
Vice President and Chief Operating Officer and became President
and Chief Managing Officer in March 1996. He also serves as
President of the Company. He also has served as President of
Home Mortgage Loan Corporation since 1996. Prior to joining the
Bank as a full-time officer, Mr. Shoffner is the President of
JRS Restaurant Corporation. He graduated from Middlesboro High
School and attended
-4-
the University of Kentucky. He is a Deacon in the First
Baptist Church of Middlesboro. Mr. Shoffner is a member of the
Middlesboro Kiwanis Club and a member of the Bell County
Industrial Commission. He has served on the Board of Directors
of Middlesboro Federal since June 6, 1988. Mr. Shoffner is the
son of J. Roy Shoffner.
J. ROY SHOFFNER is currently Chairman of the Board and
Chief Executive Officer of the Company and of Middlesboro
Federal, a position he has held since 1994. He is a graduate of
Lincoln Memorial University and a veteran USAF pilot of four
years. Mr. Shoffner owns and operates Shoffner Realty, a real
estate development company and also owns JRS Restaurant
Corporation. Mr. Shoffner is the past owner of a local plastic
pipe manufacturing company and is active in real estate and
business properties. Mr. Shoffner is the father of James J.
Shoffner.
REECIE STAGNOLIA, JR. is currently Vice President and the
Branch Manager and Loan Officer at the Cumberland Branch (Tri-
City Office), of the Bank, a position he has held since 1989.
He previously worked for the Harlan County Board of Education as
a teacher, Assistant Principal and Principal, Assistant
Superintendent and Superintendent from 1962 to 1988. Mr.
Stagnolia is currently a member of the Board of Directors of the
Center for Rural Development, Harlan County Airport, Kentucky
Coal Mine Museum, Tri-City Chamber of Commerce, Cumberland Lions
Club, Sleepy Hollow Country Club, Inc., and Chairman of
Cumberland Tourism Board.
RAYMOND C. WALKER served as president of the Mutual
Holding Company's subsidiary, Home Loan Mortgage Corporation
from October, 1991 to October, 1996. He worked for the
Middlesboro Daily News as Advertising Director for 24 years,
worked at National Bank as Business Development Director for
seven years and served five years as manager of 120 units of the
Section 8 Federally Funded Housing. Mr. Walker served as mayor
of the city of Middlesboro and served as Vice President and
Treasurer of the Bank.
EXECUTIVE OFFICERS WHO ARE NOT DIRECTORS
The following sets forth information including their ages
as of the Record Date with respect to executive officers of the
Company who do not serve on the Board of Directors. Executive
officers are appointed annually by the Board of Directors.
J. D. HOWARD, age 38, joined the Bank in July 1996 as Vice
President and was appointed Chief Financial Officer in October
1996 and named Senior Vice President in July 1999. He also
serves as Secretary/Treasurer for the Company. Prior to joining
the Bank, Mr. Howard was an internal auditor and compliance
officer at Home Federal of Middlesboro for two years. Prior to
that he was Chief Financial Officer of First Federal Savings
Bank, Pineville, Kentucky for 11 years.
DIANA MIRACLE, age 37, joined the Bank as a compliance
officer in August 1995, was named Vice President and Chief
Operating Officer in October 1996 and was named Senior Vice
President in July 1999. Prior to that time, she was employed at
Security First Network Bank in Pineville, Kentucky.
BETTY HALSEY, age 49, has been Senior Vice President and
Chief Lending Officer of the Bank since July 1999, Prior to
joining the Bank, Ms. Halsey was Chief Executive Officer and
President at Community Trust Bank's Middlesboro office since
June 1995. Prior to 1995, Ms. Halsey was Chief Executive
Officer of Commercial Bank, Middlesboro, since 1994. Prior to
that she was Senior Lender at Commercial Bank. Ms. Halsey is a
member of the Middlesboro Kiwanis Club and Financial Women
International.
________________________________________________________________
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
________________________________________________________________
The business of the Company is conducted at regular and
special meetings of the full Board and its standing committees.
The standing committees consist of the Audit, Compensation,
Finance, Insurance, Investment and Loan Committees.
-5-
During fiscal year 1999, the Board of Directors held 12
regular meetings and two special meetings called in accordance
with the bylaws. No director attended less than 75% of said
meetings and the meetings held by all committees of the Board of
Directors on which he served.
The Audit Committee consists of Directors Barry Litton and
Raymond C. Walker. This committee regularly meets on a
quarterly basis with the internal auditor to review audit
programs and the results of audits of specific areas as well as
other regulatory compliance issues. In addition, the Audit
Committee meets with the independent certified public
accountants to review the results of the annual audit and other
related matters. The Audit Committee met eight times during the
fiscal year ended June 30, 1999.
The Compensation Committee is comprised of any three non-
employee directors and one senior officer who does not
participate in deliberations regarding his compensation. The
Compensation Committee annually reviews the compensation of the
officers of the Bank and makes recommendations to the Board of
Directors. The Committee reports to the full Board of Directors
at the regular meetings. The Compensation Committee met twice
during the fiscal year ended June 30, 1999.
The Loan Committee is made up of any one director and two
senior officers. The committee meets weekly to review and
ratify management's approval of loans made within the scope of
its authority since the last committee meeting and approve all
loans up to $250,000. The Loan Committee met 52 times during
the fiscal year ended June 30, 1999.
Under the Company's Bylaws, the Board of Directors serves
as a nominating committee for selecting management's nominees
for election as directors. While the Board of Directors will
consider nominees recommended by stockholders, it has not
established any procedures for this purpose. The Board of
Directors met twice in its capacity as the nominating committee
during the fiscal year ended June 30, 1999.
________________________________________________________________
DIRECTOR COMPENSATION
________________________________________________________________
DIRECTOR FEES. The members of the Board of Directors
receive $1,100 for regular monthly Board meetings and committee
meetings attended and $100 for each special meeting attended.
The Chairman receives $1,500 monthly for regularly scheduled
Board meetings and committee meetings and $125 for special
meetings. The Vice Chairman receives $1,200 for regular
monthly board meetings attended.
Pursuant to the Cumberland Mountain Bancshares, Inc. Stock
Option and Incentive Plan (the "Option Plan"), non-employee
directors of the Company received automatic grants of stock
options in fiscal year 1999. Each director who was not an
employee on the effective date of the Option Plan received
options to purchase 2,198 shares of Common Stock at an exercise
price equal to the fair market value of the Common Stock on the
date of grant ($16.00). All such options will expire on October
21, 2008. Directors who are also employees are eligible for
awards under the Option Plan as well. During fiscal 1999
Director James J. Shoffner received a grant of 10,993 options
also at an exercise of $16.00 and subject to a three year
vesting schedule.
DIRECTOR RETIREMENT PLAN. The Bank has adopted the
Middlesboro Federal Bank, Federal Savings Bank Retirement Plan
for Directors (the "Directors' Plan") pursuant to which
directors of the Bank are entitled to receive, upon retirement,
60 monthly payments in the amount of 75% of the average monthly
fees that the respective director received for service on the
Board during the 12-month period preceding termination of
service on the Board, subject to a 20 year vesting schedule. In
connection with the adoption of the Directors' Plan, the Bank
incurred an expense of $169,061 which was recognized during the
fiscal year 1997.
In fiscal year 1997, the Bank's Board converted the
Directors' Plan from a defined benefit type of plan to a defined
contribution type. Under the Directors' Plan, as amended, a
bookkeeping account in each participants' name
-6-
is credited, on an annual basis with an amount equal to the sum
of the accrual attributable to the participant equal to the
investment return which would have resulted if such deferred
amounts had been invested in either Common Stock or the Bank's
highest annual rate of interest on certificates of deposit
having a one-year term.
Each participant's account has been credited with an
amount equal to the present value of the benefits in which the
participant has a fully vested interest before its amendment.
This amount was determined based on the participant's years of
service and 75% of average fees paid to directors in the year
prior to the participant's retirement. In addition, beginning
July 1, 1996, each participant's account is credited with $1,516
for each year of service until a maximum of 20 years worth of
credits is reached, including past service credits. Benefits
are payable from the Bank's general assets, although the Bank
may establish a grantor trust that will purchase Common Stock
that will be held to help the Bank meet its liabilities
associated with the Directors' Plan.
Upon a "Change in Control" the present value of each
participant's benefits will become payable in one lump-sum
payment within ten days. "Change in Control" generally refers to
(a) any "person" (as the term is used in Sections 13(d) and
14(d) of the Exchange Act) is or becomes the "beneficial owner"
(as defined in Rule 13d-3 promulgated under the Exchange Act),
directly or indirectly, of securities of the Bank or the Company
representing twenty percent (20%) or more of the combined voting
power of the Bank's or the Company's outstanding securities
except for any securities of the Bank purchased by the Bank's
employee stock ownership plan and trust; or (b) individuals who
constitute the Board of the Bank or the board of directors of
the Company on the date hereof ("Incumbent Board") cease for any
reason to constitute at least a majority thereof; provided that
any person becoming a director subsequent to the date hereof
whose election was approved by a vote of at least three-quarters
of the directors comprising the Incumbent Board, or whose
nomination for election by the Company's stockholders was
approved by the same nominating committee serving under an
Incumbent Board, shall be, for purposes of this clause (b),
considered as though he were a member of the Incumbent Board; or
(c) the occurrence of a plan of reorganization, merger,
consolidation, sale of all or substantially all the assets of
the Bank or the Company or similar transaction in which the Bank
or the Company is not the resulting entity. A Change in Control
will not occur as the result of acquisitions of Common Stock by
Messrs. J. Roy Shoffner and James J. Shoffner.
________________________________________________________________
EXECUTIVE COMPENSATION AND OTHER BENEFITS
________________________________________________________________
SUMMARY COMPENSATION TABLE. The following table sets
forth the cash and noncash compensation for each of the last
three fiscal years awarded to or earned by the Chief Executive
Officer who receives no compensation other than his fees as
director and chairman. No executive officer of the Company
earned a salary and bonus during fiscal year 1999 exceeding
$100,000 for services rendered in all capacities to the Bank.
LONG-TERM
COMPENSATION AWARDS
ANNUAL COMPENSATION -----------------------
NAME AND ------------------------------------- RESTRICTED SECURITIES
PRINCIPAL FISCAL OTHER ANNUAL STOCK UNDERLYING ALL OTHER
POSITION YEAR SALARY BONUS COMPENSATION AWARD(S) OPTIONS COMPENSATION(1)
- ----------- ------ ------ -------- -------------- ---------- ---------- ---------------
J. Roy Shoffner 1999 $52,000 $ -- $ -- $ -- 2,198 $18,250
Chairman 1998 52,000 -- -- -- -- 13,450
1997 13,000 (2) -- -- -- -- 11,425
<FN>
___________
(1) Consists of director's fees.
(2) Mr. Shoffner began receiving a salary from the Company in the fourth quarter of fiscal
year 1997.
</FN>
-7-
OPTION GRANTS IN LAST FISCAL YEAR. The following table
contains information concerning the grants of stock options
under the Option Plan to the Company's Chief Executive Officer.
No executive officer of the Company received a total salary and
bonus in fiscal year 1999 that exceeded $100,000 for services
rendered in all capacities to the Company.
INDIVIDUAL GRANTS
---------------------------
% OF TOTAL
NUMBER OF OPTIONS
SECURITIES GRANTED TO
UNDERLYING EMPLOYEES
OPTIONS IN FISCAL EXERCISE EXPIRATION
NAME GRANTED (1) YEAR PRICE DATE
- ---- ------------- --------- --------- ----------
J. Roy Shoffner 2,198 8.34% $16.00 10/28/2008
<FN>
__________
(1) All options vest at the rate of 33 1/3% per year from the effective date
of grant, August 18, 1999. To the extent not already exercisable, the
options generally will become immediately exercisable in the event of a
change in control of the Company, generally defined as the acquisition of
beneficial ownership of 25% or more of the Company's voting securities by
any person or group of persons.
</FN>
OPTION YEAR-END VALUE TABLE. The following table sets
forth information concerning the value of options held by the
Chief Executive Officer at June 30, 1999.
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
OPTIONS AT FISCAL YEAR-END AT FISCAL YEAR-END (1)
-------------------------- --------------------------
EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
----------- ------------- ----------- -------------
J. Roy Shoffner 3,559 1,465 $2,472.75 $ --
<FN>
(1) Based on aggregate fair market value of the shares of Common Stock
underlying the options at June 30, 1999 less aggregate exercise price.
For purposes of this calculation, the fair market value of the Common
Stock at June 30, 1999 is assumed to be equal to the last known sale
price of $8.375 per share. Of the 5,024 options held by Mr. Shoffner,
2,826 options were granted at an adjusted exercise price of $7.50 per
share, and 2,198 options were granted at an exercise price of $16.00.
</FN>
________________________________________________________________
CERTAIN TRANSACTIONS
________________________________________________________________
During the fiscal year ended June 30, 1999, certain loans
made by the Bank were outstanding in an amount exceeding $60,000
to certain directors and executive officers and associates of
directors and executive officers. All of such loans were made
in the ordinary course of business, were made on substantially
the same terms, including interest rates and collateral, as
those prevailing at the time for comparable transactions with
other persons, and did not involve more than the normal risk of
collectibility or present other unfavorable features.
________________________________________________________________
OTHER MATTERS
________________________________________________________________
The Board of Directors is not aware of any business to
come before the Annual Meeting other than those matters
described above in this Proxy Statement and matters incident to
the conduct of the Annual Meeting. If any other matters should
properly come before the Annual Meeting, it is intended that
proxies in the accompanying form will be voted in respect
thereof in accordance with the determination of a majority of
the Board of Directors.
-8-
________________________________________________________________
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
________________________________________________________________
Pursuant to regulations promulgated under the Exchange
Act, the Company's officers, directors and persons who own more
than ten percent of the outstanding Common Stock are required to
file reports detailing their ownership and changes of ownership
in such Common Stock, and to furnish the Company with copies of
all such reports. Based on the Company's review of such reports
which the Company received during the last fiscal year, or
written representations from such persons that no annual report
of change in beneficial ownership was required, the Company
believes that, during the last fiscal year, all persons subject
to such reporting requirements have complied with the reporting
requirements.
________________________________________________________________
MISCELLANEOUS
________________________________________________________________
The cost of soliciting proxies will be borne by the
Company. The Company will reimburse brokerage firms and other
custodians, nominees and fiduciaries for reasonable expenses
incurred by them in sending proxy materials to the beneficial
owners of Common Stock. In addition to solicitations by mail,
directors, officers and regular employees of the Company may
solicit proxies personally or by telegraph or telephone without
additional compensation.
The Company's 1999 Annual Report to Stockholders,
including financial statements, has been mailed to all
stockholders of record as of the close of business on the Record
Date. Any stockholder who has not received a copy of such
Annual Report may obtain a copy by writing to the Secretary of
the Company. Such Annual Report is not to be treated as a part
of the proxy solicitation material or as having been
incorporated herein by reference.
________________________________________________________________
STOCKHOLDER PROPOSALS
________________________________________________________________
In order to be eligible for inclusion in the Company's
proxy materials for next year's Annual Meeting of Stockholders,
any stockholder proposal to take action at such meeting must be
received at the Company's executive office at 1431 Cumberland
Avenue, Middlesboro, Kentucky 40961 no later than May 30, 2000.
Any such proposals shall be subject to the requirements of the
proxy rules adopted by the Securities and Exchange Commission
under the Exchange Act.
Stockholder proposals, other than those submitted pursuant
to the Exchange Act, must be submitted in writing, delivered or
mailed by first class United States mail, postage prepaid, to
the secretary of the Company not fewer than 30 days nor more
than 60 days prior to any such meeting; provided, however, that
if notice or public disclosure of the meeting is given fewer
than 40 days before the meeting, such written notice shall be
delivered or mailed to the secretary of the Company not later
than the close of the 10th day following the day on which notice
of the meeting was mailed to shareholders.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ J. D. Howard
J. D. HOWARD
SECRETARY
Middlesboro, Kentucky
September 27, 1999
-9-
________________________________________________________________
FORM 10-KSB
________________________________________________________________
A COPY OF THE COMPANY'S FORM 10-KSB FOR THE FISCAL YEAR
ENDED JUNE 30, 1999 AS FILED WITH THE SECURITIES AND EXCHANGE
COMMISSION WILL BE FURNISHED WITHOUT CHARGE TO STOCKHOLDERS AS
OF THE RECORD DATE UPON WRITTEN REQUEST TO THE STOCKHOLDER
RELATIONS, CUMBERLAND MOUNTAIN BANCSHARES, INC., 1431 CUMBERLAND
AVENUE, MIDDLESBORO, KENTUCKY 40961.
________________________________________________________________
-10-
CUMBERLAND MOUNTAIN BANCSHARES, INC.
1431 CUMBERLAND AVENUE
MIDDLESBORO, KENTUCKY 40965
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints J. Roy Shoffner, Reecie
Stagnolia, Jr. and Raymond C. Walker, with full powers of
substitution, to act as attorneys and proxies for the
undersigned, to vote all shares of Common Stock of Cumberland
Mountain Bancshares, Inc. (the "Company") which the undersigned
is entitled to vote at the Annual Meeting of Stockholders (the
"Annual Meeting"), to be held at the Fountain City Park Bank, a
branch office of Middlesboro Federal Bank, 5320 N. Broadway,
Fountain City, Tennessee on Wednesday, October 20, 1999 at 2:00
p.m., Eastern Time, and at any and all adjournments thereof, as
indicated below and in accordance with the determination of a
majority of the Board of Directors with respect to other matters
which come before the Annual Meeting.
A VOTE "FOR" ALL NOMINEES IS RECOMMENDED BY THE BOARD OF
DIRECTORS
1. Election of directors
[ ] FOR all nominees listed below (except as marked to
the contrary)
[ ] WITHHOLD AUTHORITY to vote for all nominees
Barry Litton James J. Shoffner
Instructions: To withhold authority to vote for any individual
nominees, write the nominees name in the space provided.
THIS PROXY WILL BE VOTED AS DIRECTED, BUT IF NO INSTRUCTIONS ARE
SPECIFIED, THIS PROXY WILL BE VOTED FOR THE NOMINEES LISTED
ABOVE. IF ANY OTHER BUSINESS IS PRESENTED AT THE ANNUAL
MEETING, THIS PROXY WILL BE VOTED BY THOSE NAMED IN THIS PROXY
IN ACCORDANCE WITH THE DETERMINATION OF A MAJORITY OF THE BOARD
OF DIRECTORS. THIS PROXY CONFERS DISCRETIONARY AUTHORITY ON THE
HOLDERS THEREOF TO VOTE WITH RESPECT TO THE ELECTION OF ANY
PERSON AS DIRECTOR WHERE THE NOMINEE IS UNABLE TO SERVE OR FOR
GOOD CAUSE WILL NOT SERVE AND MATTERS INCIDENT TO THE CONDUCT OF
THE ANNUAL MEETING.
___________________________________, 1999
____________________________________
Signature
____________________________________
Signature if Held Jointly
Please sign exactly as your name appears above. For joint
accounts, both owners should sigh. When signing as executor,
administrator, attorney, trustee or guardian, etc., please give
your full title. If a corporation, please sign in full
corporate name by President or other authorized officer. If a
partnership, please sign in partnership name by authorized
person.