SCHEDULE 14A
(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 [ ] Confidential, for use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
[x] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material pursuant to Rule 14a-12
Wells Financial Corp.
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(Name of Registrant as Specified in Its Charter)
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(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:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11. (set forth the amount on which the filing
fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the form or schedule and the date of its filing.
(1) Amount previously paid:
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(2) Form, Schedule or Registration Statement no.:
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(3) Filing Party:
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(4) Date Filed:
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[WELLS FINANCIAL CORP. LETTERHEAD]
October 20, 2003
To Our Stockholders:
On behalf of the Board of Directors and management of Wells Financial
Corp. (the "Company"), I cordially invite you to attend our Special Meeting of
Stockholders ("Meeting") to be held at the corporate office located at 53 First
Street, S.W., Wells, Minnesota on Tuesday, November 18, 2003 at 3:00 p.m., local
time.
The attached Notice of Special Meeting of Stockholders and Proxy
Statement describe the formal business to be transacted at the Meeting. You will
be asked to approve the Wells Financial Corp. 2003 Stock Option Plan and the
Wells Federal Bank 2003 Stock Bonus Plan. The Board of Directors has approved
these proposals and recommends that you vote FOR them.
Whether or not you plan to attend the Meeting, please sign and date the
enclosed form of proxy and mail it in the accompanying postage-paid return
envelope as promptly as possible. This will not prevent you from voting in
person at the Meeting, but will assure that your vote is counted if you are
unable to attend. YOUR VOTE IS VERY IMPORTANT.
Sincerely,
/s/ Lonnie R. Trasamar
Lonnie R. Trasamar
President and Chief Executive Officer
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WELLS FINANCIAL CORP.
53 FIRST STREET, S.W.
WELLS, MINNESOTA 56097
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NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON NOVEMBER 18, 2003
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NOTICE IS HEREBY GIVEN that a Special Meeting of Stockholders (the
"Meeting") of Wells Financial Corp. (the "Company") will be held at the
corporate office located at 53 First Street, S.W., Wells, Minnesota, on Tuesday,
November 18, 2003 at 3:00 p.m., local time. The Meeting is for the purpose of
considering and acting upon the following matters:
1. The approval of the Wells Financial Corp. 2003 Stock Option Plan;
and
2. The approval of the Wells Federal Bank 2003 Stock Bonus Plan.
Action may be taken on any one of the foregoing proposals at the
Meeting on the date specified above or on any date or dates to which, by
original or later adjournment, the Meeting may be adjourned. Stockholders of
record at the close of business on October 10, 2003 are entitled to notice of
and to vote at the Meeting and any adjournments thereof.
You are requested to sign and date the enclosed form of proxy which is
solicited by the Board of Directors and mail it promptly in the enclosed
envelope. This will not prevent you from voting in person at the Meeting, but
will assure that your vote is counted if you are unable to attend. YOUR VOTE IS
VERY IMPORTANT.
EACH STOCKHOLDER, WHETHER OR NOT HE OR SHE PLANS TO ATTEND THE MEETING,
IS REQUESTED TO SIGN, DATE, AND MAIL THE ENCLOSED FORM OF PROXY WITHOUT DELAY IN
THE ENCLOSED POSTAGE-PAID ENVELOPE. ANY PROXY GIVEN BY THE STOCKHOLDER MAY BE
REVOKED BY FILING WITH THE SECRETARY OF THE COMPANY A WRITTEN REVOCATION OR A
DULY EXECUTED PROXY BEARING A LATER DATE. ANY STOCKHOLDER PRESENT AT THE MEETING
MAY REVOKE HIS OR HER PROXY AND VOTE IN PERSON ON EACH MATTER BROUGHT BEFORE THE
MEETING. HOWEVER, IF YOU ARE A STOCKHOLDER WHOSE SHARES ARE NOT REGISTERED IN
YOUR OWN NAME, YOU WILL NEED ADDITIONAL DOCUMENTATION FROM YOUR RECORD HOLDER TO
VOTE IN PERSON AT THE MEETING.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Richard Mueller
Richard Mueller
Secretary
Wells, Minnesota
October 20, 2003
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IMPORTANT: THE PROMPT RETURN OF PROXIES WILL SAVE THE COMPANY THE EXPENSE OF
FURTHER REQUESTS FOR PROXIES IN ORDER TO ENSURE A QUORUM AT THE MEETING. A
SELF-ADDRESSED ENVELOPE IS ENCLOSED FOR YOUR CONVENIENCE. NO POSTAGE IS REQUIRED
IF MAILED IN THE UNITED STATES.
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PROXY STATEMENT
OF
WELLS FINANCIAL CORP.
53 FIRST STREET, S.W.
WELLS, MINNESOTA 56097
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SPECIAL MEETING OF STOCKHOLDERS
NOVEMBER 18, 2003
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GENERAL
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This Proxy Statement is furnished in connection with the solicitation
of proxies by the Board of Directors of Wells Financial Corp. (the "Company") to
be used at the Special Meeting of Stockholders of the Company which will be held
at the corporate office located at 53 First Street, S.W., Wells, Minnesota, on
Tuesday, November 18, 2003 at 3:00 p.m., local time (the "Meeting"). The
accompanying Notice of Special Meeting of Stockholders and this Proxy Statement
are being first mailed to stockholders on or about October 20, 2003. The Company
is the parent company of Wells Federal Bank (the "Bank").
All properly executed written proxies that are delivered pursuant to
this proxy statement will be voted on all matters that properly come before the
Meeting for a vote. If your signed proxy specifies instructions with respect to
matters being voted upon, your shares will be voted in accordance with your
instructions. If no instructions are specified, your shares will be voted (a)
FOR Proposal I (Approval of the Wells Financial Corp. 2003 Stock Option Plan)
(the "Option Plan"), (b) FOR Proposal II (Approval of the Wells Federal Bank
2003 Stock Bonus Plan (the "Stock Bonus Plan"), and (c) in the discretion of the
proxy holders, as to any other matters that may properly come before the Meeting
(including any adjournments). Your proxy may be revoked at any time prior to
being voted by: (i) filing with the Corporate Secretary of the Company (Richard
Mueller, 53 First Street, S.W., P.O. Box 310, Wells, Minnesota 56097) written
notice of such revocation, (ii) submitting a duly executed proxy bearing a later
date, or (iii) attending the Meeting and giving the Secretary notice of your
intention to vote in person.
The approval of the Option Plan provides for authorizing the issuance
of an additional 120,000 shares of common stock of the Company (the "Common
Stock") upon the exercise of stock options to be awarded to officers, directors,
employees and other persons providing services to the Company or any present or
future parent or subsidiary of the Company from time to time. Upon the approval
of the Option Plan, the Company will reduce the share reserve under the 1995
Stock Option Plan by 41,375 shares. The approval of the Stock Bonus Plan
provides for authorization to issue up to an additional 50,000 shares of Common
Stock upon awards to personnel of experience and ability in key positions of
responsibility with the Bank from time to time. At the present time, the Bank
intends to acquire up to 38,527 shares of Common Stock for the Stock Bonus Plan
purposes through open-market purchases and the balance of such shares are held
in the Bank's management stock bonus plan trust. The Stock Bonus Plan has the
authority, however, to buy such common stock directly from the Company. APPROVAL
OF THE OPTION PLAN AND THE STOCK BONUS PLAN MAY BE DEEMED TO HAVE CERTAIN
ANTI-TAKEOVER EFFECTS WITH REGARD TO THE COMPANY. See "Proposal I - Approval of
the Option Plan - Effect of Mergers, Change of Control and Other Adjustments,
and - Possible Dilutive Effects of the Option Plan" and "Proposal II - Approval
of the Stock Bonus Plan - Possible Dilutive Effects of the Stock Bonus Plan."
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VOTING STOCK AND VOTE REQUIRED
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The Board of Directors has set the close of business on October 10,
2003, as the record date for the determination of stockholders who are entitled
to notice of, and to vote at, the Meeting. On the record date, there were
1,131,436 shares of the Common Stock. Each stockholder of record on the record
date is entitled to one vote for each share held.
The Articles of Incorporation of the Company (the "Articles") provide
that in no event shall any record owner of any outstanding Common Stock which is
beneficially owned, directly or indirectly, by a person who beneficially owns in
excess of 10% of the then outstanding shares of Common Stock (the "Limit") be
entitled or permitted to any vote with respect to the shares held in excess of
the Limit and such person may have his or her voting rights reduced below 10%.
Beneficial ownership is determined pursuant to the definition in the Articles
and includes shares beneficially owned by such person or any of his or her
affiliates or associates (as defined in the Articles), shares which such person
or his or her affiliates or associates have the right to acquire upon the
exercise of conversion rights or options, and shares as to which such person and
his or her affiliates or associates have or share investment or voting power,
but shall not include shares beneficially owned by any employee stock ownership
or similar plan of the Company or any subsidiary.
The presence in person or by proxy of at least a majority of the
outstanding shares of Common Stock entitled to vote (after subtracting any
shares held in excess of the Limit) is necessary to constitute a quorum at the
Meeting.
As to the matters being proposed for stockholder action as set forth in
Proposal I, Approval of the Option Plan, and Proposal II, Approval of the Stock
Bonus Plan, and the proxy card being provided by the Board of Directors enables
a stockholder to check the appropriate box on the proxy to (i) vote "FOR" the
item, (ii) vote "AGAINST" the item, or (iii) vote to "ABSTAIN" on such item. An
affirmative vote of the holders of a majority of the total votes cast at the
Meeting, in person or by proxy, is required to constitute stockholder approval
for Proposals I and II. Broker Non-Votes will not have an impact on the outcome
of the vote on such matter and proxies marked "ABSTAIN" will have the same
impact as a vote "AGAINST" such matter.
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INTEREST OF CERTAIN PERSONS IN MATTERS TO BE ACTED UPON
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Executive officers and directors of the Company have an interest in the
matters being presented for stockholder approval. Upon stockholder approval of
the Stock Option Plan and the Stock Bonus Plan, executive officers and directors
of the Company and the Bank may be granted stock options and restricted stock
awards pursuant to the Option Plan and the Stock Bonus Plan. The approval of the
Option Plan and the Stock Bonus Plan is being presented as Proposal I and
Proposal II, respectively. See "Security Ownership of Certain Beneficial Owners"
for information regarding the number of shares of Common Stock beneficially
owned by executive officers and directors.
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
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Persons and groups owning in excess of 5% of the Common Stock are
required to file certain reports regarding such ownership pursuant to the
Securities Exchange Act of 1934, as amended. The following table sets forth, as
of the record date, persons or groups who own more than 5% of the Common Stock
and the ownership of each director, named executive officer, and all executive
officers and directors of the Company
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as a group. Other than as noted below, management knows of no person or group
that owns more than 5% of the outstanding shares of Common Stock at the record
date.
PERCENT OF SHARES
AMOUNT AND NATURE OF BENEFICIAL OF COMMON STOCK
NAME AND ADDRESS OF BENEFICIAL OWNER OWNERSHIP(1)(2) OUTSTANDING
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Wells Federal Bank, fsb 119,717(3) 10.6%
Employee Stock Ownership Plan
53 First Street, S.W.
Wells, Minnesota 56097
De Prince, Race & Zollo, Inc. 80,000(4) 7.1%
201 S. Orange Avenue, Suite 850
Orlando, Florida 32801
Lonnie R. Trasamar 1,243 *
Gerald D. Bastian 32,546(5) 2.8%
Randel I. Bichler 11,385(6)(10) *
Dale E. Stallkamp 29,311(7) 2.5%
Richard Mueller 14,786(6)(8) 1.3%
David Buesing 11,186(6)(7) *
James D. Moll 13,208(9) 1.1%
All directors and executive officers 113,665(11) 9.8%
of the Company as a group (7 persons)
<FN>
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* Less than 1%.
(1) Includes shares of Common Stock held directly as well as by spouses or
minor children, in trust and other indirect ownership, over which
shares the individuals exercise sole voting and/or investment power,
unless otherwise indicated.
(2) Beneficial ownership as of the Voting Record Date.
(3) The Bank's Employee Stock Ownership Plan ("ESOP") purchased such shares
for the exclusive benefit of ESOP participants with funds borrowed from
the Company. These shares are held in a suspense account and are
allocated among ESOP participants annually on the basis of compensation
as the ESOP debt is repaid.
(4) Based on a 13G filed with the Securities and Exchange Commission on
February 12, 2003.
(5) Includes exercisable options to purchase 4,616
shares of Common Stock.
(6) Excludes 119,717 shares of Common Stock held under the ESOP and shares
held under the Management Stock Bonus Plan for which such individual
serves as a member of the ESOP or Management Stock Bonus Plan Committee
or Trustee Committee. Such individual disclaims beneficial ownership
with respect to such shares held in a fiduciary capacity. The Board of
Directors or the ESOP Committee may instruct the ESOP Trustees
regarding investments of funds contributed to the ESOP. The ESOP
Trustees must vote all allocated shares held in the ESOP in accordance
with the instructions of the participating employees. Unallocated
shares and allocated shares for which no timely direction is received
will be voted by the ESOP Trustees as directed by the Board of
Directors or the ESOP Committee, subject to the ESOP Trustees'
fiduciary duties. Shares held in the Management Stock Bonus Plan are
voted by the Management Stock Bonus Plan Trustees as directed by the
Management Stock Bonus Plan Committee. At the record date, there were
12,835 shares in the Management Stock Bonus Plan.
(7) Includes exercisable options to purchase 6,561 shares of Common Stock.
(8) Includes exercisable options to purchase 5,535 shares of Common Stock.
(9) Includes exercisable options to purchase 2,025 shares of Common Stock.
(10) Includes exercisable options to purchase 2,187 shares of Common Stock.
(11) Includes exercisable options to purchase 27,485 shares of Common Stock.
</FN>
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DIRECTOR AND EXECUTIVE OFFICER COMPENSATION
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DIRECTOR COMPENSATION
Members of the Board of Directors of the Company are not compensated by
the Company for serving as a director. During 2002, each member of the Board of
Directors of the Bank received a fee of $1,000 per month regardless of
attendance at Board meetings. For 2002, non-employee directors received between
$100 and $250 per committee meeting attended ($23,200 in the aggregate) for
Audit, Employment Enhancement, Agriculture Credit Committee and Building Site
Committee meetings. For the year ended December 31, 2002, aggregate fees paid to
directors totaled $95,200.
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE. The following table sets forth the
compensation awarded to or earned by the Chief Executive Officer and other
highly compensated officers for the years ended December 31, 2000, 2001 and
2002, as applicable. No other executive officer of the Company had a salary and
bonus during such period that exceeded $100,000 for services rendered in all
capacities to the Bank or the Company in the aggregate.
Annual Compensation (1)
-------------------------------------------
Name and Other Annual All Other
Principal Position Year Salary Bonus Compensation(2) Compensation
- ------------------- ---- ------------ ----- --------------- ------------
Lonnie R. Trasamar 2002 $112,923 $60,000 -- $ 6,920 (3)
President and Chief
Executive Officer
Lawrence H. Kruse 2002 $ 24,540 $ -- $12,000 $ 5,409 (4)
former President and 2001 114,240 10,855 12,000 30,069
Chief Executive Officer 2000 114,109 1,824 11,200 27,772
Gerald D. Bastian 2002 $105,979 $11,205 $12,000 $28,483 (5)
Vice President 2001 98,809 5,685 12,000 30,077
2000 98,386 1,680 11,200 27,782
James D. Moll 2002 $ 95,615 $23,925 -- $22,773 (6)
Chief Financial Officer 2001 86,897 7,220 -- 20,479
2000 82,212 1,572 -- 15,541
<FN>
_________________
(1) All compensation was paid by the Bank.
(2) Constitutes Bank directors' fees.
(3) Consists of $6,920 of health, life, and disability insurance premiums
paid on behalf of Mr. Trasamar for the year ended December 31, 2002. As
of December 31, 2002, Mr. Trasamar had 4,375 shares of unvested
restricted stock which had a value of $91,219 (based on the closing
price of $20.85 on December 31, 2002). Dividends on shares of
restricted stock are held in arrears and paid upon vesting of the
applicable award.
(4) Lawrence H. Kruse retired as President and Chief Executive Officer of
the Company and the Bank on February 28, 2002. Consists of $1,072,
$6,744 and $6,110 of health, life, and disability insurance premiums
paid on behalf of Mr. Kruse for two months in fiscal 2002, and for
years ended December 31, 2001 and 2000, respectively. For the years
ended December 31, 2002, 2001 and 2000, the amount includes an
allocation of 208, 1,246 and 1,359 shares under the ESOP, valued at the
closing per share market prices of $20.85, $18.72 and $15.94 on
December 31, 2002, 2001 and 2000, respectively.
(5) Consists of $7,300, $6,752 and $6,120 of health, life, and disability
insurance premiums paid on behalf of Mr. Bastian for the years ended
December 31, 2002, 2001 and 2000, respectively. For the years ended
December 31, 2002, 2001 and 2000, the amount includes an allocation of
1,016, 1,246 and 1,359 shares under the ESOP, valued at the closing per
share market prices of $20.85, $18.72 and $15.94 on December 31, 2002,
2001 and 2000, respectively. As of December 31, 2002, Mr.
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Bastian had 1,443 shares of unvested restricted stock which had a value
of $30,087 (based on the closing market price of $20.85 on December 31,
2002). Dividends on shares of restricted stock are held in arrears and
paid upon vesting of the applicable award.
(6) Consists of $1,694, $1,684 and $1,673 of health, life, and disability
insurance premiums paid on behalf of Mr. Moll for the years ended
December 31, 2002, 2001 and 2000, respectively. For the years ended
December 31, 2002, 2001 and 2000, the amount includes an allocation of
1,011, 1,004 and 870 shares under the ESOP, valued at the closing per
share prices of $20.85, $18.72 and $15.94 on December 31, 2002, 2001
and 2000, respectively. As of December 31, 2002, Mr. Moll had 1,080
shares of unvested restricted stock which had a value of $22,518 (based
on the closing price of $20.85 on December 31, 2002). Dividends on
shares of restricted stock are held in arrears and paid upon vesting of
the applicable award.
</FN>
EQUITY COMPENSATION PLAN INFORMATION
(a) (b) (c)
Number of securities
Number of securities remaining available
to be issued upon Weighted-average for future issuance
exercise of exercise price of under equity compensation
outstanding options, outstanding options, plans (excluding securities
warrants and rights warrants and rights reflected in column (a))
------------------- ------------------- ------------------------
Equity compensation plans
approved by shareholders
1995 Stock Option Plan 81,119 $13.18 41,375(1)
Management Stock Bonus Plan and
Trust Agreements 18,450 -- 11,473(2)
Equity compensation plans
not approved by shareholders N/A N/A N/A
------ ------ ------
TOTAL............................. 99,569 $10.74 52,848
====== ====== ======
<FN>
_________________
(1) Upon stockholder approval of the 2003 Stock Option Plan (See Proposal I),
the Company will amend the 1995 Stock Option Plan to eliminate these shares
remaining available for issuance.
(2) Upon stockholder approval of the 2003 Stock Bonus Plan (See Proposal II),
the Bank will amend the Management Stock Bonus Plan and Trust to eliminate
these shares from the reserve available for future issuance.
</FN>
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PROPOSAL I - APPROVAL OF THE OPTION PLAN
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GENERAL
The Company's Board of Directors has adopted the Option Plan. The
Option Plan is subject to approval by the Company's stockholders. Pursuant to
the Option Plan, up to 120,000 shares of Common Stock (equal to 10.6% of total
shares of Common Stock currently outstanding), are to be reserved under the
Company's authorized but unissued shares for issuance by the Company upon
exercise of stock options to be granted to officers, directors, employees, and
other persons from time to time. Upon stockholder approval of this Option Plan,
the Company will amend the 1995 Stock Option Plan to reduce the plan share
reserve under that plan by 41,375 shares. The purpose of the Option Plan is to
attract and retain qualified personnel for positions of substantial
responsibility and to provide additional incentive to certain officers,
directors, employees and other persons to promote the success of the business of
the Company and the Bank. The Option Plan, which shall become effective upon the
date of stockholder approval ("Plan Effective Date"), provides for a term of ten
years, after which time no awards may be made. The following summary of the
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material features of the Option Plan is qualified in its entirety by reference
to the complete provisions of the Option Plan which is attached hereto as
Appendix A.
The Option Plan will be administered by the Board of Directors or a
committee of not less than two non-employee directors appointed by the Company's
Board of Directors and serving at the pleasure of the Board (the "Option
Committee"). Members of the Option Committee shall be deemed "Non-Employee
Directors" within the meaning of Rule 16b-3 pursuant to the 1934 Act. The Option
Committee may select the officers and employees to whom options are to be
granted and the number of options to be granted based upon several factors
including prior and anticipated future job duties and responsibilities, job
performance, the Company's financial performance and a comparison of awards
given by other financial institutions. A majority of the members of the Option
Committee shall constitute a quorum and the action of a majority of the members
present at any meeting at which a quorum is present shall be deemed the action
of the Option Committee.
Officers, directors, employees and other persons who are designated by
the Option Committee will be eligible to receive, at no cost to them, options
under the Option Plan (the "Optionees"). Each option granted pursuant to the
Option Plan shall be evidenced by an instrument in such form as the Option
Committee shall from time to time approve. It is anticipated that options
granted under the Option Plan will constitute either Incentive Stock Options
(options meeting the requirements under Section 422 of the Internal Revenue Code
of 1986, as amended (the "Code") or Non-Incentive Stock Options. Common stock
utilized in full or partial payment of the exercise price must have been owned
by the person exercising such Option not less than six months prior to the date
of exercise. Option shares may be paid for in cash, shares of Common Stock, or a
combination of both. The Company will receive no monetary consideration for the
granting of stock options under the Option Plan. Further, the Company will
receive no consideration other than the option exercise price per share for
Common Stock issued to Optionees upon the exercise of those options.
Shares issuable under the Option Plan may be from authorized but
unissued shares, treasury shares or shares purchased in the open market. An
option which expires, becomes unexercisable, or is forfeited for any reason
prior to its exercise will again be available for issuance under the Option
Plan. No option or any right or interest therein is assignable or transferable
except by will or the laws of descent and distribution. The Option Plan shall
continue in effect for a term of ten years from the Plan Effective Date.
STOCK OPTIONS
The Option Committee may grant either Incentive Stock Options or
Non-Incentive Stock Options. In general, if a Optionee ceases to serve as an
employee of the Company for any reason other than disability retirement or
death, an exercisable Incentive Stock Option may continue to be exercisable for
up to three months but in no event after the expiration date of the option,
except as may otherwise be determined by the Option Committee at the time of the
award. In the event of the disability of a Optionee during employment, an
exercisable Incentive Stock Option will continue to be exercisable for one year,
to the extent exercisable by the Optionee immediately prior to the Optionee's
disability but only if, and to the extent that, the Optionee was entitled to
exercise such Incentive Stock Options on the date of termination of employment.
Upon the death of the Optionee, the Incentive Stock Options shall be immediately
exercisable for the remaining term of such options. The terms and conditions of
Non-Incentive Stock Options relating to the effect of a Optionee's termination
of employment or service, disability or death shall be such terms as the Option
Committee, in its sole discretion, shall determine at the time of termination of
service, disability or death, unless specifically determined at the time of
grant of such options.
The exercise price for the purchase of Common Stock subject to an
option may not be less than one hundred percent (100%) of the Fair Market Value
of the Common Stock covered by the option on the date
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of grant of such option. If the Common Stock is listed on a national securities
exchange, including the Nasdaq National Market at the time of the granting of
the option, then the exercise price per share of the option shall be not less
than the average of the highest and lowest selling price of the Common Stock on
such exchange on the date such option is granted or, if there were no sales on
said date, then the exercise price shall be not less than the mean between the
last bid and ask price on such date. If an officer or employee owns Common Stock
representing more than ten percent of the outstanding Common Stock at the time
an Incentive Stock Option is granted, then the exercise price shall be not less
than one hundred and ten percent (110%) of the Fair Market Value of the Common
Stock at the time the Incentive Stock Option is granted. No more than $100,000
of Incentive Stock Options can become exercisable for the first time in any one
year for any one person. The Option Committee may impose additional conditions
upon the right of a Optionee to exercise any option granted hereunder which are
not inconsistent with the terms of the Option Plan or the requirements for
qualification as an Incentive Stock Option, if such option is intended to
qualify as an Incentive Stock Option.
No shares of Common Stock shall be issued upon the exercise of an
option until full payment has been received by the Company, and no Optionee
shall have any of the rights of a stockholder of the Company until shares of
Common Stock are issued to such Optionee. Upon the exercise of an option by a
Optionee (or the Optionee's personal representative), the Option Committee, in
its sole and absolute discretion, may make a cash payment to the Optionee, in
whole or in part, in lieu of the delivery of shares of Common Stock. Such cash
payment to be paid in lieu of delivery of Common Stock shall be equal to the
difference between the Fair Market Value of the Common Stock on the date of the
option exercise and the exercise price per share of the option. Such cash
payment shall be in exchange for the cancellation of such option. Such cash
payment shall not be made in the event that such transaction would result in
liability to the Optionee and the Company under Section 16(b) of the 1934 Act or
any related regulations promulgated thereunder.
The Option Plan provides that the Board of Directors of the Company may
authorize the Option Committee to direct the execution of an instrument
providing for the modification, extension or renewal of any outstanding option,
provided that no such modification, extension or renewal shall confer on the
Optionee any right or benefit which could not be conferred on the Optionee by
the grant of a new option at such time, and shall not materially decrease the
Optionee's benefits under the option without the Optionee's consent, except as
otherwise provided under the Option Plan.
AWARDS UNDER THE OPTION PLAN
The Board or the Option Committee shall from time to time determine the
officers, directors, employees and other persons who shall be granted options
under the Option Plan, the number of options to be granted to any individual,
and whether the options granted will be Incentive Stock Options and/or
Non-Incentive Stock Options. In selecting Optionees and in determining the
number of options to be granted, the Board or the Option Committee may consider
the nature of the services rendered by each such individual, each individual's
current and potential contribution to the Company and such other factors as may
be deemed relevant. The Optionees may, if otherwise eligible, be granted
additional options. In no event shall options be granted under the Option Plan
to any individual exceeding 25% of the total number of available shares of
Common Stock under the Option Plan.
Pursuant to the terms of the Option Plan, Non-Incentive Stock Options
to purchase up to 9,000 shares of Common Stock will be granted to each
non-employee director of the Company, as of the Plan Effective Date, at an
exercise price equal to the Fair Market Value of the Common Stock on such date
of grant. Options may be granted to newly appointed or elected non-employee
directors within the sole discretion of the Option Committee, and the exercise
price shall be equal to the Fair Market Value of such Common Stock on the date
of grant. The options granted to non-employee directors on the Plan Effective
Date will be first exercisable on the date of grant. Such options granted to
non-employee directors will remain exercisable for
-7-
up to ten years from the date of grant. All outstanding options become
immediately exercisable in the event of a Change in Control (as defined in the
Option Plan) of the Company or the Bank.
The table below presents information related to stock option awards
anticipated to be awarded upon stockholder approval of the Option Plan.
NEW PLAN BENEFIT
OPTION PLAN
-----------
Number of Options
Name and Position Dollar Value (1) to be Granted
- ----------------- ---------------- ------------------
Lonnie R. Trasamar, President, Chief Executive Officer and N/A 0(2)
Director
Gerald D. Bastian, Vice President and Director N/A 0(2)
Randel I. Bichler, Director N/A 9,000(3)
Dale E. Stallkamp, Director N/A 9,000(3)
Richard Mueller, Director N/A 9,000(3)
David Buesing, Director N/A 9,000(3)
James D. Moll, Treasurer and Chief Financial Officer N/A 0(2)
Executive Group (3 persons) N/A 0(2)
Non-Executive Director Group (4 persons) N/A 36,000(3)
Non-Executive Officer Employee Group N/A 0(2)
<FN>
______________
(1) The exercise price of such options shall be equal to the fair market
value of the Common Stock on the date of stockholder approval of the
Option Plan. Accordingly, the dollar value of the options was not
determinable at the time of mailing this proxy statement. On October
10, 2003, the closing market price of the Common Stock on the Nasdaq
National Market was $27.20 per share.
(2) No determination has been made at this time for awards to employees.
(3) Options awarded to directors are fully exercisable on the date of grant
and shall remain exercisable for ten years without regard to continued
service as a director.
</FN>
EFFECT OF MERGERS, CHANGE OF CONTROL AND OTHER ADJUSTMENTS
Subject to any required action by the stockholders of the Company,
within the sole discretion of the Option Committee, the aggregate number of
shares of Common Stock for which options may be granted hereunder or the number
of shares of Common Stock represented by each outstanding option will be
proportionately adjusted for any increase or decrease in the number of issued
and outstanding shares of Common Stock resulting from a subdivision or
consolidation of shares or the payment of a stock dividend or any other increase
or decrease in the number of shares of Common Stock effected without the receipt
or payment of consideration by the Company. Subject to any required action by
the stockholders of the Company, in the event of any Change in Control,
recapitalization, merger, consolidation, exchange of shares, spin-off,
reorganization, tender offer, partial or complete liquidation or other
extraordinary corporate action or event, the Option Committee, in its sole
discretion, shall have the power, prior to or subsequent to such action or
events, to (i) appropriately adjust the number of shares of Common Stock subject
to options, the exercise price per share of such option, and the consideration
to be given or received by the Company upon the exercise of any outstanding
options; (ii) cancel any or all previously granted options, provided that
appropriate consideration is paid to the Optionee in connection therewith;
and/or (iii) make such other adjustments in connection with the Option Plan as
the Option Committee, in its sole discretion, deems necessary, desirable,
appropriate or advisable. However, no action may be taken by the Option
Committee
-8-
which would cause Incentive Stock Options granted pursuant to the Option Plan to
fail to meet the requirements of Section 422 of the Code without the consent of
the Optionee.
The Option Committee will at all times have the power to accelerate the
exercise date of all options granted under the Option Plan. In the case of a
Change in Control of the Company or the Bank as determined by the Option
Committee, all outstanding options shall become immediately exercisable. A
Change in Control is defined to include (i) the sale of all, or substantially
all, of the assets of the Company or the Bank; (ii) the merger or
recapitalization of the Company whereby the Company is not the surviving entity;
(iii) a change in control of the Company as otherwise defined or determined by
the Office of Thrift Supervision regulations; or (iv) the acquisition, directly
or indirectly, of the beneficial ownership (within the meaning of Section 13(d)
of the 1934 Act and rules and regulations promulgated thereunder) of 25% or more
of the outstanding voting securities of the Company by any person, trust,
entity, or group.
In the event of a Change in Control, the Option Committee and the Board
of Directors will take one or more of the following actions to be effective as
of the date of such Change in Control: (i) provide that such options shall be
assumed, or equivalent options shall be substituted, ("Substitute Options") by
the acquiring or succeeding company (or an affiliate thereof), provided that:
(A) any such Substitute Options exchanged for Incentive Stock Options shall meet
the requirements of Section 424(a) of the Code, and (B) the shares of stock
issuable upon the exercise of such Substitute Options shall constitute
securities registered in accordance with the Securities Act of 1933, as amended
("1933 Act") or such securities shall be exempt from such registration in
accordance with Sections 3(a)(2) or 3(a)(5) of the 1933 Act (collectively,
"Registered Securities"), or in the alternative, if the securities issuable upon
the exercise of such Substitute Options shall not constitute Registered
Securities, then the Optionee will receive upon consummation of the Change in
Control a cash payment for each option surrendered equal to the difference
between (1) the Fair Market Value of the consideration to be received for each
share of Common Stock in the Change in Control times the number of shares of
Common Stock subject to such surrendered options, and (2) the aggregate exercise
price of all such surrendered options, or (ii) in the event of a transaction
under the terms of which the holders of the Common Stock of the Company will
receive upon consummation thereof a cash payment (the "Merger Price") for each
share of Common Stock exchanged in the Change in Control transaction, to make or
to provide for a cash payment to the Optionees equal to the difference between
(A) the Merger Price times the number of shares of Common Stock subject to such
options held by each Optionee (to the extent then exercisable at prices not in
excess of the Merger Price) and (B) the aggregate exercise price of all such
surrendered options in exchange for such surrendered options.
The power of the Option Committee to accelerate the exercise of options
and the immediate exercisability of options in the case of a Change in Control
of the Company could have an anti-takeover effect by making it more costly for a
potential acquiror to obtain control of the Company due to the higher number of
shares outstanding following such exercise of options. The power of the Option
Committee to make adjustments in connection with the Option Plan, including
adjusting the number of shares subject to options and canceling options, prior
to or after the occurrence of an extraordinary corporate action, allows the
Option Committee to adapt the Option Plan to operate in changed circumstances,
to adjust the Option Plan to fit a smaller or larger institution, and to permit
the issuance of options to new management following such extraordinary corporate
action. However, this power of the Option Committee also has an anti-takeover
effect, by allowing the Option Committee to adjust the Option Plan in a manner
to allow the present management of the Company to exercise more options and hold
more shares of the Company's Common Stock, and to possibly decrease the number
of Options available to new management of the Company.
Although the Option Plan may have an anti-takeover effect, the
Company's Board of Directors did not adopt the Option Plan specifically for
anti-takeover purposes. The Option Plan could render it more difficult to obtain
support for stockholder proposals opposed by the Company's Board and management
in that recipients of options could choose to exercise such options and thereby
increase the number of shares
-9-
for which they hold voting power. Also, the exercise of such options could make
it easier for the Board and management to block the approval of certain
transactions. In addition, the exercise of such options could increase the cost
of an acquisition by a potential acquiror.
AMENDMENT AND TERMINATION OF THE OPTION PLAN
The Board of Directors may alter, suspend or discontinue the Option Plan,
except that no action of the Board shall increase the maximum number of shares
of Common Stock issuable under the Option Plan, materially increase the benefits
accruing to Optionees under the Option Plan or materially modify the
requirements for eligibility for participation in the Option Plan unless such
action of the Board shall be subject to approval by the stockholders of the
Company.
POSSIBLE DILUTIVE EFFECTS OF THE OPTION PLAN
The Common Stock to be issued upon the exercise of options awarded under
the Option Plan may either be authorized but unissued shares of Common Stock or
shares purchased in the open market. Because the stockholders of the Company do
not have preemptive rights, to the extent that the Company funds the Option
Plan, in whole or in part, with authorized but unissued shares, the interests of
current stockholders may be diluted. If upon the exercise of all of the options,
the Company delivers newly issued shares of Common Stock (i.e., 120,000 shares
of Common Stock), then the dilutive effect to current stockholders would be
approximately 9.6%. The Company can avoid dilution resulting from awards under
the Option Plan by delivering shares repurchased in the open market upon the
exercise of options.
FEDERAL INCOME TAX CONSEQUENCES
Under present federal tax laws, awards under the Option Plan will have the
following consequences:
1. The grant of an option will not by itself result in the recognition of
taxable income to a Optionee nor entitle the Company to a tax deduction at
the time of such grant.
2. The exercise of an option which is an "Incentive Stock Option" within the
meaning of Section 422 of the Code generally will not, by itself, result in
the recognition of taxable income to a Optionee nor entitle the Company to
a deduction at the time of such exercise. However, the difference between
the option exercise price and the Fair Market Value of the Common Stock on
the date of option exercise is an item of tax preference which may, in
certain situations, trigger the alternative minimum tax for an Optionee. An
Optionee will recognize capital gain or loss upon resale of the shares of
Common Stock received pursuant to the exercise of Incentive Stock Options,
provided that such shares are held for at least one year after transfer of
the shares or two years after the grant of the option, whichever is later.
Generally, if the shares are not held for that period, the Optionee will
recognize ordinary income upon disposition in an amount equal to the
difference between the option exercise price and the Fair Market Value of
the Common Stock on the date of exercise, or, if less, the sales proceeds
of the shares acquired pursuant to the option.
3. The exercise of a Non-Incentive Stock Option will result in the recognition
of ordinary income by the Optionee on the date of exercise in an amount
equal to the difference between the exercise price and the Fair Market
Value of the Common Stock acquired pursuant to the option.
4. The Company will be allowed a tax deduction for federal tax purposes equal
to the amount of ordinary income recognized by an Optionee at the time the
optionee recognizes such ordinary income.
-10-
5. In accordance with Section 162(m) of the Code, the Company's tax deductions
for compensation paid to the most highly paid executives named in the
Company's Proxy Statement may be limited to no more than $1 million per
year, excluding certain "performance-based" compensation. The Company
intends for the award of options under the Option Plan to comply with the
requirement for an exception to Section 162(m) of the Code applicable to
stock option plans so that the amount of the Company's deduction for
compensation related to the exercise of options would not be limited by
Section 162(m) of the Code.
ACCOUNTING TREATMENT
The Company expects to use the "intrinsic value based method" as prescribed
by APB Opinion 25. Accordingly, neither the grant nor the exercise of an option
under the Option Plan currently requires any charge against earnings under
generally accepted accounting principles. Common Stock issuable pursuant to
outstanding options which are exercisable under the Option Plan will be
considered outstanding for purposes of calculating earnings per share on a
diluted basis.
STOCKHOLDER APPROVAL
Stockholder approval of the Option Plan is being sought to qualify the
Option Plan for the granting of Incentive Stock Options in accordance with the
Code, to enable Optionees to qualify for certain exempt transactions related to
the short-swing profit recapture provisions of Section 16(b) of the 1934 Act, to
meet the requirements under the rules of the Nasdaq National Market for
continued listing of the Company's Common Stock, and to meet the requirements
for the tax-deductibility of certain compensation items under Section 162(m) of
the Code. An affirmative vote of the holders of a majority of the total votes
cast at the Meeting in person or by proxy is required to constitute stockholder
approval of this Proposal I.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE APPROVAL OF THE OPTION
PLAN. ---
- --------------------------------------------------------------------------------
PROPOSAL II - APPROVAL OF THE STOCK BONUS PLAN
- --------------------------------------------------------------------------------
GENERAL
The Board of Directors of the Company and the Bank have adopted the Stock
Bonus Plan as a method of providing directors, officers, and employees of the
Bank with a proprietary interest in the Company in a manner designed to
encourage such persons to remain in the employment or service of the Bank. The
Bank will contribute sufficient funds to the Stock Bonus Plan to purchase up to
50,000 shares of Common Stock, representing up to 4.4% of the aggregate number
of shares presently outstanding. Upon stockholder approval of the Stock Bonus
Plan, the Bank will amend the Management Stock Bonus Plan and Trust in order to
reduce the plan share reserve under that plan by 11,473 shares. Alternatively,
the Stock Bonus Plan may purchase authorized but unissued shares of Common Stock
or treasury shares from the Company. All of the Common Stock to be purchased by
the Stock Bonus Plan will be purchased at the Fair Market Value of such stock on
the date of purchase. Awards under the Stock Bonus Plan will be made in
recognition of expected future services to the Bank by its directors, officers
and employees responsible for implementation of the policies adopted by the
Bank's Board of Directors and as a means of providing a further retention
incentive. The following is a summary of the material features of the Stock
Bonus Plan which is qualified in its entirety by reference to the complete
provisions of the Stock Bonus Plan which is attached hereto as Appendix B.
-11-
AWARDS UNDER THE STOCK BONUS PLAN
Benefits under the Stock Bonus Plan ("Plan Share Awards") may be granted at
the sole discretion of a committee comprised of not less than two directors who
are not employees of the Bank or the Company (the "Stock Bonus Plan Committee")
appointed by the Bank's Board of Directors. The Stock Bonus Plan is managed by
trustees (the "Stock Bonus Plan Trustees") who are non-employee directors of the
Bank or the Company and who have the responsibility to invest all funds
contributed by the Bank to the trust created for the Stock Bonus Plan (the
"Stock Bonus Plan Trust"). Unless the terms of the Stock Bonus Plan or the Stock
Bonus Plan Committee specifies otherwise, awards under the Stock Bonus Plan will
be earned and non- forfeitable at the rate of 25% on the one year anniversary of
the date of grant and 25% annually thereafter, provided that the recipient of
the award remains an employee, director or director emeritus during such period.
A recipient of such Plan Share Awards will not be entitled to voting rights
associated with such shares prior to the applicable date such shares are earned.
Dividends paid on Plan Share Awards that are not yet earned shall be paid to the
holder of an award as compensation within 30 days of the applicable dividend
payment date. Any shares held by the Stock Bonus Plan Trust which are not yet
earned shall be voted by the Stock Bonus Plan Trustees, as directed by the Stock
Bonus Plan Committee. If a recipient of such restricted stock terminates
employment or service for reasons other than death, Disability or a Change in
Control (as such terms are defined in the Stock Bonus Plan) of the Company or
the Bank, the recipient forfeits all rights to the awards under restriction. If
the recipient's termination of employment or service is caused by death,
Disability or a Change in Control of the Company or the Bank, all restrictions
expire and all shares allocated shall become unrestricted. The Plan Share Awards
to directors shall be immediately non- forfeitable in the event of the death or
Disability of such director or a Change in Control of the Company or the Bank,
and distributed as soon as practicable thereafter. The Board of Directors can
terminate the Stock Bonus Plan at any time, and if it does so, any shares not
allocated will revert to the Bank. The Plan Share Awards under the Stock Bonus
Plan will be determined by the Stock Bonus Plan Committee. In no event shall any
individual receive Plan Share Awards in excess of 25% of the aggregate Common
Stock authorized under the Stock Bonus Plan ("Plan Share Reserve").
The aggregate number of Plan Shares available for issuance pursuant to the
Plan Share Awards and the number of shares to which any Plan Share Award relates
shall be proportionately adjusted for any increase or decrease in the total
number of outstanding shares of Common Stock issued subsequent to the effective
date of the Stock Bonus Plan, resulting from any split, subdivision or
consolidation of the Common Stock or other capital adjustment, change or
exchange of Common Stock, or other increase or decrease in the number or kind of
shares effected without receipt or payment of consideration by the Company.
-12-
The following table presents information related to the anticipated award
of Common Stock under the Stock Bonus Plan upon stockholder approval of the
Stock Bonus Plan as authorized pursuant to the terms of the Stock Bonus Plan or
the anticipated actions of the Stock Bonus Plan Committee.
NEW PLAN BENEFIT
STOCK BONUS PLAN
----------------
Number of Shares
Name and Position Dollar Value (1)($) to be Granted
- ----------------- ------------------- -----------------
Lonnie R. Trasamar, President, Chief Executive Officer and N/A 0(2)
Director
Gerald D. Bastian, Vice President and Director N/A 0(2)
Randel I. Bichler, Director 95,200 3,500(3)
Dale E. Stallkamp, Director 95,200 3,500(3)
Richard Mueller, Director 95,200 3,500(3)
David Buesing, Director 95,200 3,500(3)
Lawrence H. Kruse, Director of the Bank 95,200 3,500(3)
James D. Moll, Treasurer and Chief Financial Officer N/A 0(2)
Executive Group (3 persons) N/A 0(2)
Non-Executive Director Group (5 persons) 476,000 17,500(3)
Non-Executive Officer Employee Group N/A 0(2)
<FN>
__________________
(1) These estimated values are based on the closing market price for the
Common Stock as reported on the Nasdaq National Market on October 10,
2003, which was $27.20 per share. The exact dollar value of the Common
Stock granted will equal the market price of the Common Stock on the
date of vesting of such awards. Accordingly, the exact dollar value is
not presently determinable.
(2) No determination has been made at this time for employee awards.
(3) The plan share awards shall be earned at the rate of 25% on the one
year anniversary of the date of grant, and 25% annually thereafter
unless otherwise noted. All awards shall become immediately 100% vested
upon death, Disability, or termination of service following a Change in
Control of the Company or the Bank. Plan Share Awards shall continue to
vest during periods of service as a director or director emeritus.
</FN>
AMENDMENT AND TERMINATION OF THE STOCK BONUS PLAN
The Board may amend or terminate the Stock Bonus Plan at any time.
POSSIBLE DILUTIVE EFFECTS OF THE STOCK BONUS PLAN
It is the Company's present intention to fund the Stock Bonus Plan
through open-market purchases of Common Stock, which will cause no dilutive
effect. The Stock Bonus Plan provides, however, that Common Stock to be awarded
may be acquired by the Stock Bonus Plan through open-market purchases or from
authorized but unissued shares of Common Stock from the Company. In that
stockholders do not have preemptive rights, to the extent that the Company
utilizes authorized but unissued shares to fund Plan Share Awards, the interests
of current stockholders may be diluted. If all Plan Share Awards are funded with
newly issued shares, the dilutive effect to existing stockholders would be
approximately 4.2%.
-13-
FEDERAL INCOME TAX CONSEQUENCES
Common Stock awarded under the Stock Bonus Plan is generally taxable to the
recipient at the time that such awards become earned and non-forfeitable, based
upon the Fair Market Value of such stock at the time of such vesting.
Alternatively, a recipient may make an election pursuant to Code Section 83(b),
within 30 days of the date of the transfer of such Plan Share Award to elect to
include in gross income for the current taxable year the Fair Market Value of
such award. Such election must be filed with the Internal Revenue Service within
30 days of the date of the transfer of the stock award. The Bank will be allowed
a tax deduction for federal tax purposes as a compensation expense equal to the
amount of ordinary income recognized by a recipient of Plan Share Awards at the
time the recipient recognizes taxable ordinary income. A recipient of a Plan
Share Award may elect to have a portion of such award withheld by the Stock
Bonus Plan Trust in order to meet any necessary tax withholding obligations.
ACCOUNTING TREATMENT
For accounting purposes, the Bank will recognize compensation expense in
the amount of the Fair Market Value of the Common Stock subject to Plan Share
Awards at the grant date pro rata over the period of years during which the Plan
Share Awards are earned.
STOCKHOLDER APPROVAL
The Stock Bonus Plan and awards made thereunder will not be effective until
receipt of stockholder approval of Proposal II. Stockholder approval of the
Stock Bonus Plan is being sought to enable recipients of Plan Share Awards to
qualify for certain exemptive treatment from the short-swing profit recapture
provisions of Section 16(b) of the 1934 Act and to meet the rules of the Nasdaq
National Market for continued listing of the Common Stock. The affirmative vote
of holders of a majority of the total votes cast at the Meeting in person or by
proxy is required to constitute stockholder approval of this Proposal II.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE APPROVAL OF THE STOCK
BONUS PLAN. ---
- --------------------------------------------------------------------------------
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.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Richard Mueller
Richard Mueller
Secretary
Wells, Minnesota
October 20, 2003
-14-
APPENDIX A
WELLS FINANCIAL CORP.
2003 STOCK OPTION PLAN
1. PURPOSE OF THE PLAN. The Plan shall be known as the Wells Financial
-------------------
Corp. ("Company") 2003 Stock Option Plan (the "Plan"). The purpose of the Plan
is to attract and retain qualified personnel for positions of substantial
responsibility and to provide additional incentive to officers, directors,
employees and other persons providing services to the Company, or any present or
future parent or subsidiary of the Company to promote the success of the
business. The Plan is intended to provide for the grant of "Incentive Stock
Options," within the meaning of Section 422 of the Internal Revenue Code of
1986, as amended (the "Code") and Non-Incentive Stock Options, options that do
not so qualify. The provisions of the Plan relating to Incentive Stock Options
shall be interpreted to conform to the requirements of Section 422 of the Code.
2. DEFINITIONS. The following words and phrases when used in this Plan
-----------
with an initial capital letter, unless the context clearly indicates otherwise,
shall have the meaning as set forth below. Wherever appropriate, the masculine
pronoun shall include the feminine pronoun and the singular shall include the
plural.
"Award" means the grant by the Committee of an Incentive Stock
Option or a Non-Incentive Stock Option, or any combination thereof, as provided
in the Plan.
"Bank" shall mean Wells Federal Bank, or any successor
corporation thereto.
"Board" shall mean the Board of Directors of the Company, or
any successor or parent corporation thereto.
"Change in Control" shall mean: (i) the sale of all, or a
material portion, of the assets of the Company; (ii) the merger or
recapitalization of the Company whereby the Company is not the surviving entity;
(iii) a change in control of the Company, as otherwise defined or determined by
the Office of Thrift Supervision or regulations promulgated by it; or (iv) the
acquisition, directly or indirectly, of the beneficial ownership (within the
meaning of that term as it is used in Section 13(d) of the Securities Exchange
Act of 1934 and the rules and regulations promulgated thereunder) of twenty-five
percent (25%) or more of the outstanding voting securities of the Company by any
person, trust, entity or group. This limitation shall not apply to the purchase
of shares by underwriters in connection with a public offering of Company stock,
or the purchase of shares of up to 25% of any class of securities of the Company
by a tax-qualified employee stock benefit plan which is exempt from the approval
requirements, set forth under 12 C.F.R. ss.574.3(c)(1)(vi) as now in effect or
as may hereafter be amended. The term "person" refers to an individual or a
corporation, partnership, trust, association, joint venture, pool, syndicate,
sole proprietorship, unincorporated organization or any other form of entity not
specifically listed herein.
"Code" shall mean the Internal Revenue Code of 1986, as
amended, and regulations promulgated thereunder.
"Committee" shall mean the Board or the Stock Option Committee
appointed by the Board in accordance with Section 5(a) of the Plan.
A-1
"Common Stock" shall mean common stock of the Company, or any
successor or parent corporation thereto.
"Company" shall mean the Wells Financial Corp., the parent
corporation of the Bank, or any successor or Parent thereof.
"Continuous Employment" or "Continuous Status as an Employee"
shall mean the absence of any interruption or termination of employment with the
Company or any present or future Parent or Subsidiary of the Company. Employment
shall not be considered interrupted in the case of sick leave, military leave or
any other leave of absence approved by the Company or in the case of transfers
between payroll locations, of the Company or between the Company, its Parent,
its Subsidiaries or a successor.
"Director" shall mean a member of the Board of the Company, or
any successor or parent corporation thereto.
"Director Emeritus" shall mean a person serving as a director
emeritus, advisory director, consulting director or other similar position as
may be appointed by the Board of Directors of the Bank or the Company from time
to time.
"Disability" means (a) with respect to Incentive Stock
Options, the "permanent and total disability" of the Employee as such term is
defined at Section 22(e)(3) of the Code; and (b) with respect to Non-Incentive
Stock Options, any physical or mental impairment which renders the Participant
incapable of continuing in the employment or service of the Bank or the Parent
in his then current capacity as determined by the Committee.
"Effective Date" shall mean the date specified in Section 15
hereof.
"Employee" shall mean any person employed by the Company or
any present or future Parent or Subsidiary of the Company.
"Fair Market Value" shall mean: (i) if the Common Stock is
traded otherwise than on a national securities exchange, then the Fair Market
Value per Share shall be equal to the mean between the last bid and ask price of
such Common Stock on such date or, if there is no bid and ask price on said
date, then on the immediately prior business day on which there was a bid and
ask price. If no such bid and ask price is available, then the Fair Market Value
shall be determined by the Committee in good faith; or (ii) if the Common Stock
is listed on a national securities exchange, including the Nasdaq National
Market, then the Fair Market Value per Share shall be not less than the average
of the highest and lowest selling price of such Common Stock on such exchange on
such date, or if there were no sales on said date, then the Fair Market Value
shall be not less than the mean between the last bid and ask price on such date.
"Incentive Stock Option" or "ISO" shall mean an option to
purchase Shares granted by the Committee pursuant to Section 8 hereof which is
subject to the limitations and restrictions of Section 8 hereof and is intended
to qualify as an incentive stock option under Section 422 of the Code.
"Non-Incentive Stock Option" or "Non-ISO" shall mean an option
to purchase Shares granted pursuant to Section 9 hereof, which option is not
intended to qualify under Section 422 of the Code.
A-2
"Option" shall mean an Incentive Stock Option or Non-Incentive
Stock Option granted pursuant to this Plan providing the holder of such Option
with the right to purchase Common Stock.
"Optioned Stock" shall mean stock subject to an Option granted
pursuant to the Plan.
"Optionee" shall mean any person who receives an Option or
Award pursuant to the Plan.
"Parent" shall mean any present or future corporation which
would be a "parent corporation" of the Bank or the Company as defined in
Sections 424(e) and (g) of the Code.
"Participant" means any Director, officer or employee of the
Company or any Parent or Subsidiary of the Company or any other person providing
a service to the Company who is selected by the Committee to receive an Award,
or who by the express terms of the Plan is granted an Award.
"Plan" shall mean the Wells Financial Corp. 2003 Stock Option
Plan.
"Share" shall mean one share of the Common Stock.
"Subsidiary" shall mean any present or future corporation
which constitutes a "subsidiary corporation" as defined in Sections 424(f) and
(g) of the Code.
3. SHARES SUBJECT TO THE PLAN. Except as otherwise required by the
---------------------------
provisions of Section 13 hereof, the aggregate number of Shares with respect to
which Awards may be made pursuant to the Plan shall not exceed 120,000 Shares.
Such Shares may either be from authorized but unissued shares, treasury shares
or shares purchased in the market for Plan purposes. If an Award shall expire,
become unexercisable, or be forfeited for any reason prior to its exercise, new
Awards may be granted under the Plan with respect to the number of Shares as to
which such expiration has occurred.
4. SIX MONTH HOLDING PERIOD.
------------------------
Subject to vesting requirements, if applicable, except in the event
of death or disability of the Optionee, a minimum of six months must elapse
between the date of the grant of an Option and the date of the sale of the the
Common Stock received through the exercise of such Option.
5. ADMINISTRATION OF THE PLAN.
-------------------------
(a) COMPOSITION OF THE COMMITTEE. The Plan shall be administered by
the Board of Directors of the Company or a Committee which shall consist of not
less than two Directors of the Company appointed by the Board and serving at the
pleasure of the Board. All persons designated as members of the Committee shall
meet the requirements of a "Non-Employee Director" within the meaning of Rule
16b-3 under the Securities Exchange Act of 1934, as amended, as found at 17 CFR
ss.240.16b-3.
(b) POWERS OF THE COMMITTEE. The Committee is authorized (but only
to the extent not contrary to the express provisions of the Plan or to
resolutions adopted by the Board) to interpret the Plan, to prescribe, amend and
rescind rules and regulations relating to the Plan, to determine the form and
content of Awards to be issued under the Plan and to make other determinations
necessary or advisable for the administration of the Plan, and shall have and
may exercise such other power and authority as may be delegated to it by the
Board from time to time. A majority of the entire Committee shall constitute a
quorum and the action of a majority of the members present at any meeting at
which a quorum
A-3
is present shall be deemed the action of the Committee. In no event may the
Committee revoke outstanding Awards without the consent of the Participant.
The President of the Company and such other officers as shall
be designated by the Committee are hereby authorized to execute written
agreements evidencing Awards on behalf of the Company and to cause them to be
delivered to the Participants. Such agreements shall set forth the Option
exercise price, the number of shares of Common Stock subject to such Option, the
expiration date of such Options, and such other terms and restrictions
applicable to such Award as are determined in accordance with the Plan or the
actions of the Committee.
(c) EFFECT OF COMMITTEE'S DECISION. All decisions, determinations
and interpretations of the Committee shall be final and conclusive on all
persons affected thereby.
6. ELIGIBILITY FOR AWARDS AND LIMITATIONS.
-------------------------------------
(a) The Committee shall from time to time determine the officers,
Directors, employees and other persons who shall be granted Awards under the
Plan, the number of Awards to be granted to each such persons, and whether
Awards granted to each such Participant under the Plan shall be Incentive and/or
Non-Incentive Stock Options. In selecting Participants and in determining the
number of Shares of Common Stock to be granted to each such Participant, the
Committee may consider the nature of the prior and anticipated future services
rendered by each such Participant, each such Participant's current and potential
contribution to the Company and such other factors as the Committee may, in its
sole discretion, deem relevant. Participants who have been granted an Award may,
if otherwise eligible, be granted additional Awards.
(b) The aggregate Fair Market Value (determined as of the date the
Option is granted) of the Shares with respect to which Incentive Stock Options
are exercisable for the first time by each Employee during any calendar year
(under all Incentive Stock Option plans, as defined in Section 422 of the Code,
of the Company or any present or future Parent or Subsidiary of the Company)
shall not exceed $100,000. Notwithstanding the prior provisions of this Section
6, the Committee may grant Options in excess of the foregoing limitations,
provided said Options shall be clearly and specifically designated as not being
Incentive Stock Options.
(c) In no event shall Shares subject to Options granted to
non-employee Directors in the aggregate under this Plan exceed more than 30% of
the total number of Shares authorized for delivery under this Plan pursuant to
Section 3 herein. In no event shall Shares subject to Options granted to any
Employee exceed more than 25% of the total number of Shares authorized for
delivery under the Plan.
7. TERM OF THE PLAN. The Plan shall continue in effect for a term of
----------------
ten (10) years from the Effective Date, unless sooner terminated pursuant to
Section 18 hereof. No Option shall be granted under the Plan after ten (10)
years from the Effective Date.
8. TERMS AND CONDITIONS OF INCENTIVE STOCK OPTIONS. Incentive Stock
-------------------------------------------------
Options may be granted only to Participants who are Employees. Each Incentive
Stock Option granted pursuant to the Plan shall be evidenced by an instrument in
such form as the Committee shall from time to time approve. Each Incentive Stock
Option granted pursuant to the Plan shall comply with, and be subject to, the
following terms and conditions:
A-4
(a) OPTION PRICE.
(i) The price per Share at which each Incentive Stock Option
granted by the Committee under the Plan may be exercised shall not, as to any
particular Incentive Stock Option, be less than the Fair Market Value of the
Common Stock on the date that such Incentive Stock Option is granted.
(ii) In the case of an Employee who owns Common Stock
representing more than ten percent (10%) of the outstanding Common Stock at the
time the Incentive Stock Option is granted, the Incentive Stock Option exercise
price shall not be less than one hundred and ten percent (110%) of the Fair
Market Value of the Common Stock on the date that the Incentive Stock Option is
granted.
(b) PAYMENT. Full payment for each Share of Common Stock purchased
upon the exercise of any Incentive Stock Option granted under the Plan shall be
made at the time of exercise of each such Incentive Stock Option and shall be
paid in cash (in United States Dollars), Common Stock or a combination of cash
and Common Stock. Common Stock utilized in full or partial payment of the
exercise price must have been owned by the party exercising such Option for not
less than six months prior to the date of exercise of such Option, and such
Common Stock shall be valued at the Fair Market Value at the date of exercise.
The Company shall accept full or partial payment in Common Stock only to the
extent permitted by applicable law. No Shares of Common Stock shall be issued
until full payment has been received by the Company, and no Optionee shall have
any of the rights of a stockholder of the Company until Shares of Common Stock
are issued to the Optionee.
(c) TERM OF INCENTIVE STOCK OPTION. The term of exercisability of
each Incentive Stock Option granted pursuant to the Plan shall be not more than
ten (10) years from the date each such Incentive Stock Option is granted,
provided that in the case of an Employee who owns stock representing more than
ten percent (10%) of the Common Stock outstanding at the time the Incentive
Stock Option is granted, the term of exercisability of the Incentive Stock
Option shall not exceed five (5) years.
(d) EXERCISE GENERALLY. Except as otherwise provided in Section 10
hereof, no Incentive Stock Option may be exercised unless the Optionee shall
have been in the employ of the Company at all times during the period beginning
with the date of grant of any such Incentive Stock Option and ending on the date
three (3) months prior to the date of exercise of any such Incentive Stock
Option. The Committee may impose additional conditions upon the right of an
Optionee to exercise any Incentive Stock Option granted hereunder which are not
inconsistent with the terms of the Plan or the requirements for qualification as
an Incentive Stock Option. Except as otherwise provided by the terms of the Plan
or by action of the Committee at the time of the grant of the Options, the
Options will be first exercisable as of the date of grant of such Options.
(e) CASHLESS EXERCISE. Subject to vesting requirements, if
applicable, an Optionee who has held an Incentive Stock Option for at least six
months may engage in the "cashless exercise" of the Option. Upon a cashless
exercise, an Optionee gives the Company written notice of the exercise of the
Option together with an order to a registered broker-dealer or equivalent third
party, to sell part or all of the Optioned Stock and to deliver enough of the
proceeds to the Company to pay the Option exercise price and any applicable
withholding taxes. If the Optionee does not sell the Optioned Stock through a
registered broker-dealer or equivalent third party, the Optionee can give the
Company written notice of the exercise of the Option and the third party
purchaser of the Optioned Stock shall pay the Option exercise price plus any
applicable withholding taxes to the Company. Such Options shall not be deemed
exercised until the Company has received full payment of the exercise price of
such Options.
A-5
(f) TRANSFERABILITY. An Incentive Stock Option granted pursuant to
the Plan shall be exercised during an Optionee's lifetime only by the Optionee
to whom it was granted and shall not be assignable or transferable otherwise
than by will or by the laws of descent and distribution.
9. TERMS AND CONDITIONS OF NON-INCENTIVE STOCK OPTIONS. Each
----------------------------------------------------------
Non-Incentive Stock Option granted pursuant to the Plan shall be evidenced by an
instrument in such form as the Committee shall from time to time approve. Each
Non-Incentive Stock Option granted pursuant to the Plan shall comply with and be
subject to the following terms and conditions.
(a) OPTIONS GRANTED TO DIRECTORS. Subject to the limitations of
Section 6(c), Non-Incentive Stock Options to purchase 9,000 shares of Common
Stock will be granted to each Director who is not an Employee as of the
Effective Date, at an exercise price equal to the Fair Market Value of the
Common Stock on such date of grant. The Options will be first exercisable as of
the Effective Date. Such Options shall continue to be exercisable for a period
of ten years following the date of grant without regard to the continued
services of such Director as a Director or Director Emeritus. In the event of
the Optionee's death, such Options may be exercised by the personal
representative of his estate or person or persons to whom his rights under such
Option shall have passed by will or by the laws of descent and distribution. All
Options shall be immediately exercisable upon a Change of Control of the Company
or the Bank. Options may be granted to newly appointed or elected non-employee
Directors within the sole discretion of the Committee. The exercise price per
Share of such Options granted shall be equal to the Fair Market Value of the
Common Stock at the time such Options are granted. Unless otherwise
inapplicable, or inconsistent with the provisions of this paragraph, the Options
to be granted to Directors hereunder shall be subject to all other provisions of
this Plan.
(b) OPTION PRICE. The exercise price per Share of Common Stock for
each Non-Incentive Stock Option granted pursuant to the Plan shall be at such
price as the Committee may determine in its sole discretion, but in no event
less than the Fair Market Value of such Common Stock on the date of grant as
determined by the Committee in good faith.
(c) PAYMENT. Full payment for each Share of Common Stock purchased
upon the exercise of any Non-Incentive Stock Option granted under the Plan shall
be made at the time of exercise of each such Non-Incentive Stock Option and
shall be paid in cash (in United States Dollars), Common Stock or a combination
of cash and Common Stock. Common Stock utilized in full or partial payment of
the exercise price must have been owned by the party exercising such Option for
not less than six months prior to the date of exercise of such Option, and such
Common Stock shall be valued at the Fair Market Value at the date of exercise.
The Company shall accept full or partial payment in Common Stock only to the
extent permitted by applicable law. No Shares of Common Stock shall be issued
until full payment has been received by the Company and no Optionee shall have
any of the rights of a stockholder of the Company until the Shares of Common
Stock are issued to the Optionee.
(d) TERM. The term of exercisability of each Non-Incentive Stock
Option granted pursuant to the Plan shall be not more than ten (10) years from
the date each such Non-Incentive Stock Option is granted.
(e) EXERCISE GENERALLY. The Committee may impose additional
conditions upon the right of any Participant to exercise any Non-Incentive Stock
Option granted hereunder which is not inconsistent with the terms of the Plan.
Except as otherwise provided by the terms of the Plan or by action of the
Committee at the time of the grant of the Options, the Options will be first
exercisable as of the date of grant of such Options.
A-6
(f) CASHLESS EXERCISE. Subject to vesting requirements, if
applicable, an Optionee who has held a Non-Incentive Stock Option for at least
six months may engage in the "cashless exercise" of the Option. Upon a cashless
exercise, an Optionee gives the Company written notice of the exercise of the
Option together with an order to a registered broker-dealer or equivalent third
party, to sell part or all of the Optioned Stock and to deliver enough of the
proceeds to the Company to pay the Option exercise price and any applicable
withholding taxes. If the Optionee does not sell the Optioned Stock through a
registered broker-dealer or equivalent third party, the Optionee can give the
Company written notice of the exercise of the Option and the third party
purchaser of the Optioned Stock shall pay the Option exercise price plus any
applicable withholding taxes to the Company. Such Options shall not be deemed
exercised until the Company has received full payment of the exercise price of
such Options.
(g) TRANSFERABILITY. Any Non-Incentive Stock Option granted
pursuant to the Plan shall be exercised during an Optionee's lifetime only by
the Optionee to whom it was granted and shall not be assignable or transferable
otherwise than by will or by the laws of descent and distribution.
10. EFFECT OF TERMINATION OF EMPLOYMENT, DISABILITY OR DEATH ON
-----------------------------------------------------------------
INCENTIVE STOCK OPTIONS.
-----------------------
(a) TERMINATION OF EMPLOYMENT. In the event that any Optionee's
employment with the Company shall terminate for any reason, other than
Disability or death, all of any such Optionee's Incentive Stock Options, and all
of any such Optionee's rights to purchase or receive Shares of Common Stock
pursuant thereto, shall automatically terminate on (A) the earlier of (i) or
(ii): (i) the respective expiration dates of any such Incentive Stock Options,
or (ii) the expiration of not more than three (3) months after the date of such
termination of employment; or (B) at such later date as is determined by the
Committee at the time of the grant of such Award, but only if, and to the extent
that, the Optionee was entitled to exercise any such Incentive Stock Options at
the date of such termination of employment, and further that such Award shall
thereafter be deemed a Non-Incentive Stock Option. In the event that a
Subsidiary ceases to be a Subsidiary of the Company, the employment of all of
its employees who are not immediately thereafter employees of the Company shall
be deemed to terminate upon the date such Subsidiary so ceases to be a
Subsidiary of the Company.
(b) DISABILITY. In the event that any Optionee's employment with
the Company shall terminate as the result of the Disability of such Optionee,
such Optionee may exercise any Incentive Stock Options granted to the Optionee
pursuant to the Plan at any time prior to the earlier of (i) the respective
expiration dates of any such Incentive Stock Options or (ii) the date which is
one (1) year after the date of such termination of employment, but only if, and
to the extent that, the Optionee was entitled to exercise any such Incentive
Stock Options at the date of such termination of employment.
A-7
(c) DEATH. In the event of the death of an Optionee, any Incentive
Stock Options granted to such Optionee may be exercised by the person or persons
to whom the Optionee's rights under any such Incentive Stock Options pass by
will or by the laws of descent and distribution (including the Optionee's estate
during the period of administration) at any time prior to the earlier of (i) the
respective expiration dates of any such Incentive Stock Options or (ii) the date
specified at the time of grant of such Award, if any, but in either case only
if, and to the extent that, the Optionee was entitled to exercise any such
Incentive Stock Options at the date of death. For purposes of this Section
10(c), any Incentive Stock Option held by an Optionee shall be considered
exercisable at the date of his death if the only unsatisfied condition precedent
to the exercisability of such Incentive Stock Option at the date of death is the
passage of a specified period of time. At the discretion of the Committee, upon
exercise of such Options the Optionee may receive Shares or cash or a
combination thereof. If cash shall be paid in lieu of Shares, such cash shall be
equal to the difference between the Fair Market Value of such Shares and the
exercise price of such Options on the exercise date.
(d) INCENTIVE STOCK OPTIONS DEEMED EXERCISABLE. For purposes of
Sections 10(a), 10(b) and 10(c) above, any Incentive Stock Option held by any
Optionee shall be considered exercisable at the date of termination of
employment if any such Incentive Stock Option would have been exercisable at
such date of termination of employment without regard to the Disability or death
of the Participant.
(e) TERMINATION OF INCENTIVE STOCK OPTIONS. Except as may be
specified by the Committee at the time of grant of an Option, to the extent that
any Incentive Stock Option granted under the Plan to any Optionee whose
employment with the Company terminates shall not have been exercised within the
applicable period set forth in this Section 10, any such Incentive Stock Option,
and all rights to purchase or receive Shares of Common Stock pursuant thereto,
as the case may be, shall terminate on the last day of the applicable period.
11. EFFECT OF TERMINATION OF EMPLOYMENT, DISABILITY OR DEATH ON
-----------------------------------------------------------------
NON-INCENTIVE STOCK OPTIONS. The terms and conditions of Non-Incentive Stock
- ---------------------------
Options relating to the effect of the termination of an Optionee's employment or
service, Disability of an Optionee or his death shall be such terms and
conditions as the Committee shall, in its sole discretion, determine at the time
of termination of service, unless specifically provided for by the terms of the
Agreement at the time of grant of the award.
12. WITHHOLDING TAX. The Company shall have the right to deduct from
----------------
all amounts paid in cash with respect to the cashless exercise of Options any
taxes required by law to be withheld with respect to such cash payments. Where a
Participant or other person is entitled to receive Shares pursuant to the
exercise of an Option, the Company shall have the right to require the
Participant or such other person to pay the Company the amount of any taxes
which the Company is required to withhold with respect to such Shares, or, in
lieu thereof, to retain, or to sell without notice, a number of such Shares
sufficient to cover the amount required to be withheld.
A-8
13. RECAPITALIZATION, MERGER, CONSOLIDATION, CHANGE IN CONTROL AND
OTHER TRANSACTIONS.
(a) ADJUSTMENT. Subject to any required action by the stockholders
of the Company, within the sole discretion of the Committee, the aggregate
number of Shares of Common Stock for which Options may be granted hereunder, the
number of Shares of Common Stock covered by each outstanding Option, and the
exercise price per Share of Common Stock of each such Option, shall all be
proportionately adjusted for any increase or decrease in the number of issued
and outstanding Shares of Common Stock resulting from a subdivision or
consolidation of Shares (whether by reason of merger, consolidation,
recapitalization, reclassification, split-up, combination of shares, or
otherwise) or the payment of a stock dividend (but only on the Common Stock) or
any other increase or decrease in the number of such Shares of Common Stock
effected without the receipt or payment of consideration by the Company (other
than Shares held by dissenting stockholders).
(b) CHANGE IN CONTROL. All outstanding Awards shall become
immediately exercisable in the event of a Change in Control of the Company or
the Bank. In the event of such a Change in Control, the Committee and the Board
of Directors will take one or more of the following actions to be effective as
of the date of such Change in Control:
(i) provide that such Options shall be assumed, or equivalent
options shall be substituted, ("Substitute Options") by the acquiring or
succeeding corporation (or an affiliate thereof), provided that: (A) any such
Substitute Options exchanged for Incentive Stock Options shall meet the
requirements of Section 424(a) of the Code, and (B) the shares of stock issuable
upon the exercise of such Substitute Options shall constitute securities
registered in accordance with the Securities Act of 1933, as amended, ("1933
Act") or such securities shall be exempt from such registration in accordance
with Sections 3(a)(2) or 3(a)(5) of the 1933 Act, (collectively, "Registered
Securities"), or in the alternative, if the securities issuable upon the
exercise of such Substitute Options shall not constitute Registered Securities,
then the Optionee will receive upon the exercise of the Substitute Options a
cash payment for each Option surrendered equal to the difference between (1) the
Fair Market Value of the consideration to be received for each share of Common
Stock in the Change in Control transaction times the number of shares of Common
Stock subject to such surrendered Options, and (2) the aggregate exercise price
of all such surrendered Options, or
(ii) in the event of a transaction under the terms of which the
holders of the Common Stock of the Company will receive upon consummation
thereof a cash payment (the "Merger Price") for each share of Common Stock
exchanged in the Change in Control transaction, to make or to provide for a cash
payment to the Optionees equal to the difference between (A) the Merger Price
times the number of shares of Common Stock subject to such Options held by each
Optionee (to the extent then exercisable at prices not in excess of the Merger
Price) and (B) the aggregate exercise price of all such surrendered Options in
exchange for such surrendered Options.
A-9
(c) EXTRAORDINARY CORPORATE ACTION. Notwithstanding any provisions
of the Plan to the contrary, subject to any required action by the stockholders
of the Company, in the event of any Change in Control, recapitalization, merger,
consolidation, exchange of Shares, spin-off, reorganization, tender offer,
partial or complete liquidation or other extraordinary corporate action or
event, the Committee, in its sole discretion, shall have the power, prior or
subsequent to such action or event to:
(i) appropriately adjust the number of Shares of Common Stock
subject to each Option, the Option exercise price per Share of Common Stock, and
the consideration to be given or received by the Company upon the exercise of
any outstanding Option;
(ii) cancel any or all previously granted Options, provided that
appropriate consideration is paid to the Optionee in connection therewith;
and/or
(iii) make such other adjustments in connection with the Plan as
the Committee, in its sole discretion, deems necessary, desirable, appropriate
or advisable; PROVIDED, however, that no action shall be taken by the Committee
which would cause Incentive Stock Options granted pursuant to the Plan to fail
to meet the requirements of Section 422 of the Code without the consent of the
Optionee.
(d) ACCELERATION. The Committee shall at all times have the power
to accelerate the exercise date of Options previously granted under the Plan.
Except as expressly provided in Sections 13(a) and 13(b), no
Optionee shall have any rights by reason of the occurrence of any of the events
described in this Section 13.
14. TIME OF GRANTING OPTIONS. The date of grant of an Option under the
------------------------
Plan shall, for all purposes, be the date on which the Committee makes the
determination of granting such Option. Notice of the grant of an Option shall be
given to each individual to whom an Option is so granted within a reasonable
time after the date of such grant in a form determined by the Committee.
15. EFFECTIVE DATE. The Plan shall become effective upon the date of
--------------
approval of the Plan by the stockholders of the Company. The Committee may make
a determination related to Awards prior to the Effective Date with such Awards
to be effective upon the date of stockholder approval of the Plan.
16. APPROVAL BY STOCKHOLDERS. The Plan shall be approved by
---------------------------
stockholders of the Company within twelve (12) months before or after the date
the Plan is approved by the Board.
17. MODIFICATION OF OPTIONS. At any time and from time to time, the
------------------------
Board may authorize the Committee to direct the execution of an instrument
providing for the modification of any outstanding Option, provided no such
modification, extension or renewal shall confer on the holder of said Option any
right or benefit which could not be conferred on the Optionee by the grant of a
new Option at such time, or shall not materially decrease the Optionee's
benefits under the Option without the consent of the holder of the Option,
except as otherwise permitted under Section 18 hereof.
18. AMENDMENT AND TERMINATION OF THE PLAN.
-------------------------------------
(a) ACTION BY THE BOARD. The Board may alter, suspend or
discontinue the Plan, except that no action of the Board may increase (other
than as provided in Section 13 hereof) the maximum number of Shares permitted to
be optioned under the Plan, materially increase the benefits accruing to
Participants under
A-10
the Plan or materially modify the requirements for eligibility for participation
in the Plan unless such action of the Board shall be subject to approval by the
stockholders of the Company.
(b) CHANGE IN APPLICABLE LAW. Notwithstanding any other provision
contained in the Plan, in the event of a change in any federal or state law,
rule, regulation or policy which would make the exercise of all or part of any
previously granted Option unlawful or subject the Company to any penalty, the
Committee may restrict any such exercise without the consent of the Optionee or
other holder thereof in order to comply with any such law, rule or regulation or
to avoid any such penalty.
19. CONDITIONS UPON ISSUANCE OF SHARES; LIMITATIONS ON OPTION
-----------------------------------------------------------------
EXERCISE; CANCELLATION OF OPTION RIGHTS.
---------------------------------------
(a) Shares shall not be issued with respect to any Option granted
under the Plan unless the issuance and delivery of such Shares shall comply with
all relevant provisions of applicable law, including, without limitation, the
Securities Act of 1933, as amended, the rules and regulations promulgated
thereunder, any applicable state securities laws and the requirements of any
stock exchange upon which the Shares may then be listed.
(b) The inability of the Company to obtain any necessary
authorizations, approvals or letters of non-objection from any regulatory body
or authority deemed by the Company's counsel to be necessary to the lawful
issuance and sale of any Shares issuable hereunder shall relieve the Company of
any liability with respect to the non-issuance or sale of such Shares.
(c) As a condition to the exercise of an Option, the Company may
require the person exercising the Option to make such representations and
warranties as may be necessary to assure the availability of an exemption from
the registration requirements of federal or state securities law.
(d) Notwithstanding anything herein to the contrary, upon the
termination of employment or service of an Optionee by the Company or its
Subsidiaries for "cause" as defined at 12 C.F.R. 563.39(b)(1) as determined by
the Board of Directors, all Options held by such Participant shall cease to be
exercisable as of the date of such termination of employment or service.
(e) Upon the exercise of an Option by an Optionee (or the
Optionee's personal representative), the Committee, in its sole and absolute
discretion, may make a cash payment to the Optionee, in whole or in part, in
lieu of the delivery of shares of Common Stock. Such cash payment to be paid in
lieu of delivery of Common Stock shall be equal to the difference between the
Fair Market Value of the Common Stock on the date of the Option exercise and the
exercise price per share of the Option. Such cash payment shall be in exchange
for the cancellation of such Option. Such cash payment shall not be made in the
event that such transaction would result in liability to the Optionee or the
Company under Section 16(b) of the Securities Exchange Act of 1934, as amended,
and regulations promulgated thereunder.
20. RESERVATION OF SHARES. During the term of the Plan, the Company
----------------------
will reserve and keep available a number of Shares sufficient to satisfy the
requirements of the Plan.
21. UNSECURED OBLIGATION. No Participant under the Plan shall have any
--------------------
interest in any fund or special asset of the Company by reason of the Plan or
the grant of any Option under the Plan. No trust fund shall be created in
connection with the Plan or any grant of any Option hereunder and there shall be
no required funding of amounts which may become payable to any Participant.
A-11
22. NO EMPLOYMENT RIGHTS. No Director, Employee or other person shall
--------------------
have a right to be selected as a Participant under the Plan. Neither the Plan
nor any action taken by the Committee in administration of the Plan shall be
construed as giving any person any rights of employment or retention as an
Employee, Director or in any other capacity with the Company, the Bank or other
Subsidiaries.
23. GOVERNING LAW. The Plan shall be governed by and construed in
--------------
accordance with the laws of the State of Minnesota, except to the extent that
federal law shall be deemed to apply.
A-12
APPENDIX B
WELLS FEDERAL BANK
2003 STOCK BONUS PLAN
AND TRUST AGREEMENT
ARTICLE I
---------
ESTABLISHMENT OF THE PLAN AND TRUST
1.01 Wells Federal Bank ("Bank") hereby establishes the 2003 Stock
Bonus Plan (the "Plan") and Trust (the "Trust") upon the terms and conditions
hereinafter stated in this Stock Bonus Plan and Trust Agreement (the
"Agreement").
1.02 The Trustee hereby accepts this Trust and agrees to hold the Trust
assets existing on the date of this Agreement and all additions and accretions
thereto upon the terms and conditions hereinafter stated.
ARTICLE II
----------
PURPOSE OF THE PLAN
2.01 The purpose of the Plan is to reward and to retain personnel of
experience and ability in key positions of responsibility with the Bank and its
subsidiaries, by providing such personnel of the Bank and its subsidiaries with
an increased equity interest in the parent corporation of the Bank, Wells
Financial Corp. ("Parent"), as compensation for their future professional
contributions and service to the Bank and its subsidiaries.
ARTICLE III
DEFINITIONS
The following words and phrases when used in this Plan with an initial
capital letter, unless the context clearly indicates otherwise, shall have the
meaning as set forth below. Wherever appropriate, the masculine pronoun shall
include the feminine pronoun and the singular shall include the plural.
"Bank" means Wells Federal Bank, and any successor corporation thereto.
"Beneficiary" means the person or persons designated by the Participant
to receive any benefits payable under the Plan in the event of such
Participant's death. Such person or persons shall be designated in writing by
the Participant and addressed to the Bank or the Committee on forms provided for
this purpose by the Committee and delivered to the Bank and may be changed from
time to time by similar written notice to the Committee. A Participant's last
will and testament or any codicil thereto shall not constitute written
designation of a Beneficiary. In the absence of such written designation, the
Beneficiary shall be the Participant's surviving spouse, if any, or if none, the
Participant's estate.
"Board" means the Board of Directors of the Bank, or any successor
corporation thereto.
B-1
"Cause" means the personal dishonesty, incompetence, willful
misconduct, breach of fiduciary duty involving personal profits, intentional
failure to perform stated duties, willful violation of a material provision of
any law, rule or regulation (other than traffic violations and similar offense),
or a material violation of a final cease-and-desist order or any other action
which results in a substantial financial loss to the Parent, Bank or its
Subsidiaries.
"Change in Control" shall mean: (i) the sale of all, or a material
portion, of the assets of the Parent or Bank; (ii) the merger or
recapitalization of the Parent or the Bank whereby the Parent or Bank is not the
surviving entity; (iii) a change in control of the Parent or Bank, as otherwise
defined or determined by the Office of Thrift Supervision ("OTS") or regulations
promulgated by it; or (iv) the acquisition, directly or indirectly, of the
beneficial ownership (within the meaning of that term as it is used in Section
13(d) of the 1934 Act and the rules and regulations promulgated thereunder) of
twenty-five percent (25%) or more of the outstanding voting securities of the
Parent or Bank by any person, trust, entity or group. This limitation shall not
apply to the purchase of shares of up to 25% of any class of securities of the
Parent or Bank by a tax-qualified employee stock benefit plan which is exempt
from the approval requirements, set forth under 12 C.F.R. ss.574.3(c)(1)(vi) as
now in effect or as may hereafter be amended. The term "person" refers to an
individual or a corporation, partnership, trust, association, joint venture,
pool, syndicate, sole proprietorship, unincorporated organization or any other
form of entity not specifically listed herein.
"Committee" means the Board of Directors of the Bank or the Stock Bonus
Plan Committee appointed by the Board of Directors of the Bank pursuant to
Article IV hereof.
"Common Stock" means shares of the common stock of the Parent, or any
successor corporation or parent thereto.
"Director" means a member of the Board of the Bank.
"Director Emeritus" means a person serving as a director emeritus,
advisory director, consulting director, or other similar position as may be
appointed by the Board of Directors of the Bank, a Subsidiary or the Parent from
time to time.
"Disability" means any physical or mental impairment which renders the
Participant incapable of continuing in the employment or service of the Bank or
the Parent in his current capacity as determined by the Committee.
"Effective Date" shall mean the date of ratification of the Plan by the
stockholders of Parent.
"Eligible Participant" means an Employee, Director or director of a
Subsidiary who may receive a Plan Share Award under the Plan.
"Employee" means any person who is employed by the Bank or a
Subsidiary.
"Parent" shall mean Wells Financial Corp., the parent corporation of
the Bank.
"Participant" means an Employee, Director, Director Emeritus or
director of a Subsidiary who previously received a Plan Share Award under the
Plan.
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"Plan Shares" means shares of Common Stock held in the Trust which are
awarded or issuable to a Participant pursuant to the Plan.
"Plan Share Award" or "Award" means a right granted to a Participant
under this Plan to earn or to receive Plan Shares.
"Plan Share Reserve" means the shares of Common Stock held by the
Trust pursuant to Sections 5.03 and 5.04.
"Subsidiary" means those subsidiaries of the Bank which, with the
consent of the Board, agree to participate in this Plan.
"Trustee" or "Trustee Committee" means that person(s) or entity
nominated by the Committee and approved by the Board pursuant to Sections 4.01
and 4.02 to hold legal title to the Plan assets for the purposes set forth
herein.
ARTICLE IV
----------
ADMINISTRATION OF THE PLAN
4.01 ROLE OF THE COMMITTEE. The Plan shall be administered and
interpreted by the Board of Directors of the Bank or a Committee appointed by
said Board, which shall consist of not less than two non-employee members of the
Board, which shall have all of the powers allocated to it in this and other
sections of the Plan. All persons designated as members of the Committee shall
be "Non-Employee Directors" within the meaning of Rule 16b-3 under the
Securities Exchange Act of 1934, as amended ("1934 Act"). The interpretation and
construction by the Committee of any provisions of the Plan or of any Plan Share
Award granted hereunder shall be final and binding. The Committee shall act by
vote or written consent of a majority of its members. Subject to the express
provisions and limitations of the Plan, the Committee may adopt such rules,
regulations and procedures as it deems appropriate for the conduct of its
affairs. The Committee shall report its actions and decisions with respect to
the Plan to the Board at appropriate times, but in no event less than one time
per calendar year. The Committee shall recommend to the Board one or more
persons or entity to act as Trustee in accordance with the provision of this
Plan and Trust and the terms of Article VIII hereof.
4.02 ROLE OF THE BOARD. The members of the Committee and the Trustee
shall be appointed or approved by, and will serve at the pleasure of the Board.
The Board may in its discretion from time to time remove members from, or add
members to, the Committee, and may remove, replace or add Trustees. The Board
shall have all of the powers allocated to it in this and other sections of the
Plan, may take any action under or with respect to the Plan which the Committee
is authorized to take, and may reverse or override any action taken or decision
made by the Committee under or with respect to the Plan, provided, however, that
the Board may not revoke any Plan Share Award already made except as provided in
Section 7.01(b) herein.
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4.03 LIMITATION ON LIABILITY. No member of the Board, the Committee or
the Trustee shall be liable for any determination made in good faith with
respect to the Plan or any Plan Share Awards granted. If a member of the Board,
Committee or any Trustee is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative, by any reason of anything done or not
done by him in such capacity under or with respect to the Plan, the Parent and
the Bank shall indemnify such member against expenses (including attorney's
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by him or her in connection with such action, suit or proceeding if he
or she acted in good faith and in a manner he or she reasonably believed to be
in the best interests of the Parent, the Bank and its Subsidiaries and, with
respect to any criminal action or proceeding, had no reasonable cause to believe
his conduct was unlawful. Notwithstanding anything herein to the contrary, in no
event shall the Bank take any actions with respect to this Section 4.03 which is
not in compliance with the limitations or requirements set forth at 12 C.F.R.
545.121, as may be amended from time to time.
ARTICLE V
---------
CONTRIBUTIONS; PLAN SHARE RESERVE
5.01 AMOUNT AND TIMING OF CONTRIBUTIONS. The Board of Directors of the
Bank shall determine the number of shares of Common Stock or the amount of cash
to be contributed by the Bank to the Trust established under this Plan. Such
contributions to the Trust shall be delivered to the Trustee at the time of such
contribution. No contributions to the Trust by Participants shall be permitted
except with respect to amounts necessary to meet tax withholding obligations.
5.02 INITIAL INVESTMENT. Any funds held by the Trust prior to
investment in the Common Stock shall be invested by the Trustee in such
interest-bearing account or accounts at the Bank as the Trustee shall determine
to be appropriate.
5.03 MAXIMUM PLAN SHARE RESERVE; INVESTMENT OF TRUST ASSETS. The Trust
shall purchase Common Stock in an amount not greater than 100% of the Trust's
cash assets, after providing for any required withholding as needed for tax
purposes, provided, however, that the Trust shall not distribute more than
50,000 shares of Common Stock in the aggregate pursuant to Awards under the
Plan. The Trustee may accept the transfer of Common Stock held by the Bank in
other trust accounts, purchase shares of Common Stock in the open market or, in
the alternative, may purchase authorized but unissued shares of the Common Stock
or treasury shares from the Parent sufficient to fund the Plan Share Reserve.
5.04 EFFECT OF ALLOCATIONS, RETURNS AND FORFEITURES UPON PLAN SHARE
RESERVES. Upon the allocation of Plan Share Awards under Sections 6.02 and 6.05,
or the decision of the Committee to return Plan Shares to the Parent, the Plan
Share Reserve shall be reduced by the number of Shares subject to the Awards so
allocated or returned. Any Shares subject to an Award which are not earned
because of forfeiture by the Participant pursuant to Section 7.01 shall be added
to the Plan Share Reserve.
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ARTICLE VI
----------
ELIGIBILITY; ALLOCATIONS
6.01 ELIGIBILITY. Eligible Participants may receive Plan Share Awards
within the sole discretion of the Committee. Directors who are not otherwise
Employees shall receive Plan Share Awards pursuant to Section 6.05.
6.02 ALLOCATIONS. The Committee will determine which Eligible
Participants will be granted Plan Share Awards and the number of Shares covered
by each Award, provided, however, that in no event shall any Awards be made
which will violate the Charter or Bylaws of the Bank or its Parent or
Subsidiaries or any applicable federal or state law or regulation. In the event
Shares are forfeited for any reason or additional Shares are purchased by the
Trustee, the Committee may, from time to time, determine which of the Eligible
Participants will be granted Plan Share Awards to be awarded from forfeited
Shares. In selecting those Eligible Participants to whom Plan Share Awards will
be granted and the number of shares covered by such Awards, the Committee shall
consider the prior and anticipated future position, duties and responsibilities
such individuals, the value of their prior and anticipated future services to
the Bank and its Subsidiaries, and any other factors the Committee may deem
relevant. All actions by the Committee shall be deemed final, except to the
extent that such actions are revoked by the Board. Notwithstanding anything
herein to the contrary, in no event shall any Participant receive Plan Share
Awards in excess of 25% of the aggregate Plan Shares authorized under the Plan.
6.03 FORM OF ALLOCATION. As promptly as practicable after a
determination is made pursuant to Section 6.02 or Section 6.05 that a Plan Share
Award is to be made, the Committee shall notify the Participant in writing of
the grant of the Award, the number of Plan Shares covered by the Award, and the
terms upon which the Plan Shares subject to the award may be earned. The date on
which the Committee makes its award determination or the date the Committee so
notifies the Participant shall be considered the date of grant of the Plan Share
Awards as determined by the Committee. The Committee shall maintain records as
to all grants of Plan Share Awards under the Plan.
6.04 ALLOCATIONS NOT REQUIRED. Notwithstanding anything to the contrary
at Sections 6.01, 6.02 or 6.05, no Eligible Participant shall have any right or
entitlement to receive a Plan Share Award hereunder, such Awards being at the
sole discretion of the Committee and the Board, nor shall the Eligible
Participants as a group have such a right. The Committee may, with the approval
of the Board (or, if so directed by the Board) return all Common Stock in the
Plan Share Reserve to the Bank at any time, and cease issuing Plan Share Awards.
6.05 AWARDS TO DIRECTORS. Notwithstanding anything herein to the
contrary, as of the Effective Date, a Plan Share Award consisting of 3,500 Plan
Shares shall be awarded to each Director of the Bank that is not otherwise an
Employee. Such Plan Share Award shall be earned and non-forfeitable at the rate
of one-fourth as of the one year anniversary of the Effective Date and an
additional one-fourth following each of the next three successive years during
such periods of continued service as a Director or Director Emeritus. Further,
such Plan Share Award shall be immediately 100% earned and non-forfeitable in
the event of the death or Disability of such Director or Director Emeritus, or
upon a Change in Control of the Bank or Parent. Subsequent to the Effective
Date, Plan Share Awards may be awarded to newly elected or appointed Directors
of the Bank by the Committee, provided that total Plan Share Awards granted to
non-employee Directors of the Bank shall not exceed 25,000 Plan Share Awards in
the aggregate under the Plan.
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ARTICLE VII
-----------
EARNINGS AND DISTRIBUTION OF PLAN SHARES; VOTING RIGHTS
7.01 EARNINGS PLAN SHARES; FORFEITURES.
(a) GENERAL RULES. Unless the Committee shall specifically state to the
contrary at the time a Plan Share Award is granted, Plan Shares subject to an
Award shall be earned and non-forfeitable by a Participant at the rate of
one-fourth of such Award following one year after the granting of such Award,
and an additional one-fourth following each of the next three successive years;
provided that such Participant remains an Employee, Director, Director Emeritus
or Subsidiary director during such period.
(b) REVOCATION FOR MISCONDUCT. Notwithstanding anything herein to the
contrary, the Board shall, by resolution, immediately revoke, rescind and
terminate any Plan Share Award, or portion thereof, previously awarded under
this Plan, to the extent Plan Shares have not been delivered thereunder to the
Participant, whether or not yet earned, in the case of a Participant who is
discharged from the employ or service of the Parent, Bank or a Subsidiary for
Cause, or who is discovered after termination of employment or service to have
engaged in conduct that would have justified termination for Cause. A
determination of Cause shall be made by the Board within its sole discretion.
(c) EXCEPTION FOR TERMINATIONS DUE TO DEATH OR DISABILITY.
Notwithstanding the general rule contained in Section 7.01(a) above, all Plan
Shares subject to a Plan Share Award held by a Participant whose employment or
service with the Parent, Bank or a Subsidiary terminates due to death or
Disability, shall be deemed earned and nonforfeitable as of the Participant's
last date of employment or service with the Parent, Bank or Subsidiary and shall
be distributed as soon as practicable thereafter.
(d) EXCEPTION FOR TERMINATION AFTER A CHANGE IN CONTROL.
Notwithstanding the general rule contained in Section 7.01 above, all Plan
Shares subject to a Plan Share Award held by a Participant shall be deemed to be
immediately 100% earned and non-forfeitable in the event of a Change in Control
of the Parent or Bank and shall be distributed as soon as practicable
thereafter.
7.02 PAYMENT OF DIVIDENDS ON PLAN SHARE AWARDS. A holder of a Plan
Share Award, whether or not earned, shall also be entitled to receive an amount
equal to any cash dividends declared and paid with respect to shares of Common
Stock represented by such Plan Share Award between the date the relevant Plan
Share Award was granted to such Participant and the date the Plan Shares are
distributed. Such cash amounts shall be paid as compensation to the Participant
by the Trust or the Bank within 30 days of the applicable dividend payment date,
less applicable tax withholding, if applicable.
7.03 DISTRIBUTION OF PLAN SHARES.
(a) TIMING OF DISTRIBUTIONS: GENERAL RULE. Except as provided in
Subsections (d) and (e) below, Plan Shares shall be distributed to the
Participant or his Beneficiary, as the case may be, as soon as practicable after
they have been earned. No fractional shares shall be distributed.
Notwithstanding anything herein to the contrary, at the discretion of the
Committee, Plan Shares may be distributed prior to such Shares being 100%
earned, provided that such Plan Shares shall contain a restrictive legend
detailing the applicable limitations of such shares with respect to transfer and
forfeiture.
B-6
(b) FORM OF DISTRIBUTION. All Plan Shares, together with any shares
representing stock dividends, shall be distributed in the form of Common Stock.
One share of Common Stock shall be given for each Plan Share earned. Payments
representing cash dividends (and earnings thereon) shall be made in cash.
Notwithstanding anything within the Plan to the contrary, upon a Change in
Control whereby substantially all of the Common Stock of the Parent shall be
acquired for cash, all Plan Shares associated with Plan Share Awards, together
with any shares representing stock dividends associated with Plan Share Awards,
shall be, at the sole discretion of the Committee, distributed as of the
effective date of such Change in Control, or as soon as administratively
feasible thereafter, in the form of cash equal to the consideration received in
exchange for such Common Stock represented by such Plan Shares.
(c) WITHHOLDING. The Trustee may withhold from any payment or
distribution made under this Plan sufficient amounts of cash or shares of Common
Stock necessary to cover any applicable withholding and employment taxes, and if
the amount of such payment or distribution is not sufficient, the Trustee may
require the Participant or Beneficiary to pay to the Trustee the amount required
to be withheld in taxes as a condition of delivering the Plan Shares. The
Trustee shall pay over to the Parent, Bank or Subsidiary which employs or
employed such Participant any such amount withheld from or paid by the
Participant or Beneficiary.
(d) TIMING: EXCEPTION FOR 10% SHAREHOLDERS. Notwithstanding Subsection
(a) above, no Plan Shares may be distributed to the extent the Participant or
Beneficiary, as the case may be, would after receipt of such Shares own in
excess of ten percent (10%) of the issued and outstanding shares of Common
Stock, unless such action is approved in advance by a majority vote of
disinterested directors of the Board of the Parent.
(e) REGULATORY EXCEPTIONS. No Plan Shares shall be distributed,
however, unless and until all of the requirements of all applicable law and
regulation shall have been fully complied with as determined by the Board upon
advice of legal counsel.
7.04 VOTING OF PLAN SHARES. After a Plan Share Award has become earned
and non-forfeitable, the Participant shall be entitled to direct the Trustee as
to the voting of the Plan Shares which are associated with the Plan Share Award
and which have not yet been distributed pursuant to Section 7.03, subject to
rules and procedures adopted by the Committee for this purpose. All shares of
Common Stock held by the Trust as to which Participants are not entitled to
direct, or have not directed, the voting of such Shares, shall be voted by the
Trustee as directed by the Committee.
ARTICLE VIII
------------
TRUST
8.01 TRUST. The Trustee shall receive, hold, administer, invest and
make distributions and disbursements from the Trust in accordance with the
provisions of the Plan and Trust and the applicable directions, rules,
regulations, procedures and policies established by the Committee pursuant to
the Plan.
8.02 MANAGEMENT OF TRUST. It is the intention of this Plan and Trust
that the Trustee shall have complete authority and discretion with respect to
the management, control and investment of the Trust, and that the Trustee shall
invest all assets of the Trust, except those attributable to cash dividends paid
with respect to Plan Shares not held in the Plan Share Reserve, in Common Stock
to the fullest extent practicable, except to the extent that the Trustee
determines that the holding of monies in cash or cash equivalents is necessary
to
B-7
meet the obligations of the Trust. In performing their duties, the Trustees
shall have the power to do all things and execute such instruments as may be
deemed necessary or proper, including the following powers:
(a) To invest up to one hundred percent (100%) of all Trust assets in
the Common Stock without regard to any law now or hereafter in force
limiting investments for Trustees or other fiduciaries. The investment
authorized herein may constitute the only investment of the Trust, and
in making such investment, the Trustee is authorized to purchase Common
Stock from the Parent or from any other source, and such Common Stock
so purchased may be outstanding, newly issued, or treasury shares.
(b) To invest any Trust assets not otherwise invested in accordance
with (a) above in such deposit accounts, and certificates of deposit
(including those issued by the Bank), obligations of the United States
government or its agencies or such other investments as shall be
considered the equivalent of cash.
(c) To sell, exchange or otherwise dispose of any property at any time
held or acquired by the Trust.
(d) To cause stocks, bonds or other securities to be registered in the
name of a nominee, without the addition of words indicating that such
security is an asset of the Trust (but accurate records shall be
maintained showing that such security is an asset of the Trust).
(e) To hold cash without interest in such amounts as may be in the
opinion of the Trustee reasonable for the proper operation of the Plan
and Trust.
(f) To employ brokers, agents, custodians, consultants and accountants.
(g) To hire counsel to render advice with respect to their rights,
duties and obligations hereunder, and such other legal services or
representation as they may deem desirable.
(h) To hold funds and securities representing the amounts to be
distributed to a Participant or his Beneficiary as a consequence of a
dispute as to the disposition thereof, whether in a segregated account
or held in common with other assets.
(i) As may be directed by the Committee or the Board from time to time,
the Trustee shall pay to the Bank earnings of the Trust attributable to
the Plan Share Reserve.
Notwithstanding anything herein contained to the contrary, the Trustee
shall not be required to make any inventory, appraisal or settlement or report
to any court, or to secure any order of a court for the exercise of any power
herein contained, or to maintain bond.
8.03 RECORDS AND ACCOUNTS. The Trustee shall maintain accurate and
detailed records and accounts of all transactions of the Trust, which shall be
available at all reasonable times for inspection by any legally entitled person
or entity to the extent required by applicable law, or any other person
determined by the Committee.
8.04 EARNINGS. All earnings, gains and losses with respect to Trust
assets shall be allocated in accordance with a reasonable procedure adopted by
the Committee, to bookkeeping accounts for Participants or to the general
account of the Trust, depending on the nature and allocation of the assets
generating such
B-8
earnings, gains and losses. In particular, any earnings on cash dividends
received with respect to shares of Common Stock shall be allocated to accounts
for Participants, except to the extent that such cash dividends are distributed
to Participants, if such shares are the subject of outstanding Plan Share
Awards, or, otherwise to the Plan Share Reserve.
8.05 EXPENSES. All costs and expenses incurred in the operation and
administration of this Plan, including those incurred by the Trustee, shall be
paid by the Bank.
8.06 INDEMNIFICATION. Subject to the requirements and limitations of
applicable laws and regulations, the Parent and the Bank shall indemnify, defend
and hold the Trustee harmless against all claims, expenses and liabilities
arising out of or related to the exercise of the Trustee's powers and the
discharge of their duties hereunder, unless the same shall be due to their gross
negligence or willful misconduct.
ARTICLE IX
----------
MISCELLANEOUS
9.01 ADJUSTMENTS FOR CAPITAL CHANGES. The aggregate number of Plan
Shares available for issuance pursuant to the Plan Share Awards and the number
of Shares to which any Plan Share Award relates shall be proportionately
adjusted for any increase or decrease in the total number of outstanding shares
of Common Stock issued subsequent to the effective date of the Plan resulting
from any split, subdivision or consolidation of the Common Stock or other
capital adjustment, change or exchange of the Common Stock, or other increase or
decrease in the number or kind of shares effected without receipt or payment of
consideration by the Parent.
9.02 AMENDMENT AND TERMINATION OF THE PLAN. The Board may, by
resolution, at any time, amend or terminate the Plan. The power to amend or
terminate the Plan shall include the power to direct the Trustee to return to
the Parent all or any part of the assets of the Trust, including shares of
Common Stock held in the Plan Share Reserve, as well as shares of Common Stock
and other assets subject to Plan Share Awards which have not yet been earned by
the Participants to whom they have been awarded. However, the termination of the
Trust shall not affect a Participant's right to earn Plan Share Awards and to
the distribution of Common Stock relating thereto, including earnings thereon,
in accordance with the terms of this Plan and the grant by the Committee or the
Board.
9.03 NONTRANSFERABLE. Plan Share Awards and rights to Plan Shares shall
not be transferable by a Participant, and during the lifetime of the
Participant, Plan Shares may only be earned by and paid to the Participant who
was notified in writing of the Award by the Committee pursuant to Section 6.03.
No Participant or Beneficiary shall have any right in or claim to any assets of
the Plan or Trust, nor shall the Parent, Bank, or any Subsidiary be subject to
any claim for benefits hereunder.
9.04 NO EMPLOYMENT RIGHTS. Neither the Plan nor any grant of a Plan
Share Award or Plan Shares hereunder nor any action taken by the Trustee, the
Committee or the Board in connection with the Plan shall create any right,
either express or implied, on the part of any Participant to continue in the
employ or service of the Parent, Bank, or a Subsidiary thereof.
9.05 VOTING AND DIVIDEND RIGHTS. No Participant shall have any voting
or dividend rights of a stockholder with respect to any Plan Shares covered by a
Plan Share Award, except as expressly provided in Sections 7.02 and 7.04 above,
prior to the time said Plan Shares are actually distributed to such Participant.
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9.06 GOVERNING LAW. The Plan and Trust shall be governed by and
construed under the laws of the State of Minnesota, except to the extent that
Federal Law shall be deemed applicable.
9.07 EFFECTIVE DATE. The Plan shall be effective as of the date of
approval of the Plan by the stockholders of Parent.
9.08 TERM OF PLAN. This Plan shall remain in effect until the earlier of
(i) termination by the Board, (ii) the distribution of all assets of the Trust,
or (iii) 21 years from the Effective Date. Termination of the Plan shall not
effect any Plan Share Awards previously granted, and such Plan Share Awards
shall remain valid and in effect until they have been earned and paid, or by
their terms expire or are forfeited.
9.09 TAX STATUS OF TRUST. It is intended that the Trust established
hereby shall be treated as a grantor trust of the Bank under the provisions of
Section 671 et seq. of the Internal Revenue Code of 1986, as amended, as the
same may be amended from time to time.
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WELLS FINANCIAL CORP.
53 FIRST STREET, S.W.
WELLS, MINNESOTA 56097
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SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON NOVEMBER 18, 2003
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The undersigned hereby appoints the Board of Directors of Wells
Financial Corp. (the "Company"), or its designee, with full powers of
substitution, to act as attorneys and proxies for the undersigned, to vote all
shares of common stock of the Company which the undersigned is entitled to vote
at the Special Meeting of Stockholders (the "Meeting"), to be held at the
corporate office located at 53 First Street, S.W., Wells, Minnesota on November
18, 2003, at 3:00 p.m., local time and at any and all adjournments thereof, as
follows:
FOR AGAINST ABSTAIN
--- ------- -------
1. The approval of the Wells Financial Corp.
2003 Stock Option Plan |_| |_| |_|
2. The approval of the Wells Federal Bank
2003 Stock Bonus Plan |_| |_| |_|
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" EACH OF THE LISTED
PROPOSALS. ---
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THIS PROXY WILL BE VOTED AS DIRECTED, BUT IF NO INSTRUCTIONS ARE SPECIFIED, THIS
SIGNED PROXY WILL BE VOTED "FOR" THE PROPOSALS STATED. IF ANY OTHER BUSINESS IS
PRESENTED AT SUCH MEETING, THIS PROXY WILL BE VOTED BY THOSE NAMED IN THIS PROXY
IN THEIR BEST JUDGMENT.
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THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
The undersigned acknowledges receipt from the Company, prior to the
execution of this proxy, of Notice of the Meeting and a Proxy Statement dated
October 20, 2003.
|_| Please check here if you plan to attend the Meeting.
Dated: ____________________________________, 2003
________________________________________ _________________________________
PRINT NAME OF STOCKHOLDER PRINT NAME OF STOCKHOLDER
________________________________________ _________________________________
SIGNATURE OF STOCKHOLDER SIGNATURE OF STOCKHOLDER
Please sign exactly as your name appears on this Proxy. When signing as
attorney, executor, administrator, trustee, or guardian, please give your full
title. If shares are held jointly, each holder should sign.
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PLEASE COMPLETE, SIGN, DATE, AND MAIL THIS PROXY PROMPTLY IN THE ENCLOSED
POSTAGE-PAID ENVELOPE.
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