EXHIBIT 99.5
Proxy Statement for Special Meeting of Members of
Empire Federal Savings and Loan Association
EMPIRE FEDERAL SAVINGS AND LOAN ASSOCIATION
123 South Main Street
Livingston, Montana 59047
(406) 222-1981
NOTICE OF SPECIAL MEETING OF MEMBERS
To be held on December 19, 1996
Notice is hereby given that a special meeting ("Special Meeting") of
members of Empire Federal Savings and Loan Association ("Association") will be
held at the Association's office at 123 South Main Street, Livingston, Montana,
on Thursday, December 19, 1996, at __:00 _.m., Mountain Time. Business to be
taken up at the Special Meeting shall be:
(1) To approve a Plan of Conversion adopted by the Board of Directors
on August 29, 1996 to convert the Association from a federally chartered mutual
savings and loan association to a federally chartered capital stock savings bank
to be known as "Empire Federal Savings Bank," to be held as a wholly-owned
subsidiary of a new holding company, Empire Federal Bancorp, Inc.
("Conversion"), including the adoption of a Federal Stock Charter and Bylaws for
the Association, pursuant to the laws of the United States and the rules and
regulations of the Office of Thrift Supervision ("OTS"); and
(2) To consider and vote upon any other matters that may lawfully come
before the Special Meeting.
Note: As of the date of mailing of this Notice, the Board of
Directors is not aware of any other matters that may come
before the Special Meeting.
The members entitled to vote at the Special Meeting shall be those
members of the Association, at the close of business on October 31, 1996, and
who continue as members until the Special Meeting, and should the Special
Meeting be, from time to time, adjourned to a later time, until the final
adjournment thereof.
BY ORDER OF THE BOARD OF DIRECTORS
ERNEST A. SANDBERG
SECRETARY
Livingston, Montana
__________ __, 1996
PLEASE SIGN AND RETURN PROMPTLY EACH PROXY CARD YOU RECEIVE IN THE ENCLOSED
POSTAGE-PAID ENVELOPE. THIS WILL ASSURE NECESSARY REPRESENTATION AT THE SPECIAL
MEETING, BUT WILL NOT PREVENT YOU FROM VOTING IN PERSON IF YOU SO DESIRE. THE
PROXY IS SOLICITED ONLY FOR THIS SPECIAL MEETING (AND ANY ADJOURNMENTS THEREOF)
AND WILL NOT BE USED FOR ANY OTHER MEETING. YOU MAY REVOKE YOUR WRITTEN PROXY BY
WRITTEN INSTRUMENT DELIVERED TO ERNEST A. SANDBERG, SECRETARY, EMPIRE FEDERAL
SAVINGS AND LOAN ASSOCIATION, AT THE ABOVE ADDRESS AT ANY TIME PRIOR TO OR AT
THE SPECIAL MEETING.
EMPIRE FEDERAL SAVINGS AND LOAN ASSOCIATION
123 South Main Street
Livingston, Montana 59047
(406) 222-1981
PROXY STATEMENT
__________ __, 1996
YOUR PROXY, IN THE FORM ENCLOSED, IS SOLICITED BY THE BOARD OF DIRECTORS OF
EMPIRE FEDERAL SAVINGS AND LOAN ASSOCIATION FOR USE AT A SPECIAL MEETING OF
MEMBERS TO BE HELD ON THURSDAY, DECEMBER 19, 1996, AND ANY ADJOURNMENT OF THAT
MEETING, FOR THE PURPOSES SET FORTH IN THE FOREGOING NOTICE OF SPECIAL MEETING.
YOUR BOARD OF DIRECTORS AND MANAGEMENT URGE YOU TO VOTE FOR THE PLAN OF
CONVERSION.
PURPOSE OF MEETING -- SUMMARY
A special meeting of members ("Special Meeting") of Empire Federal
Savings and Loan Association ("Association") will be held at the Association's
office at 123 South Main Street, Livingston, Montana, on Thursday, December
19, 1996, at __:00 _.m., Mountain Time, for the purpose of considering and
voting upon a Plan of Conversion from Federal Mutual Savings and Loan
Association to Federal Stock Savings Bank and Formation of a Holding Company
("Plan of Conversion"), which, if approved by a majority of the total votes of
the members eligible to be cast, will permit the Association to convert from a
federally chartered mutual savings and loan association to a federally chartered
capital stock savings bank, to be known as "Empire Federal Savings Bank," to be
held as a subsidiary of Empire Federal Bancorp, Inc. ("Holding Company"), a
newly organized Delaware corporation formed by the Association. The conversion
of the Association and the acquisition of control of the Association by the
Holding Company are collectively referred to herein as the "Conversion."
Members entitled to vote on the Plan of Conversion are members of the
Association as of October 31, 1996, and who continue as members until the
Special Meeting, and should the Special Meeting be, from time to time, adjourned
to a later time, until the final adjournment thereof. The Conversion requires
the approval of not less than a majority of the total votes eligible to be cast
at the Special Meeting.
The Plan of Conversion provides in part that, after receiving final
authorization from the Office of Thrift Supervision ("OTS"), the Association
will offer for sale shares of common stock of the Holding Company ("Common
Stock"), through the issuance of nontransferable subscription rights
("Subscription Rights"), in order of priority, to (i) depositors with $50.00 or
more on deposit at the Association as of March 31, 1995 ("Eligible Account
Holders"), (ii) the Association's employee stock ownership plan ("ESOP"), a
tax-qualified employee benefit plan, (iii) depositors with $50.00 or more on
deposit at the Association as of September 30, 1996 ("Supplemental Eligible
Account Holders"), and (iv) depositors of the Association as of October 31,
1996 ("Voting Record Date") and borrowers of the Association with loans
outstanding as of _________ __, 1996 which continue to be outstanding as of the
Voting Record Date ("Other Members"), subject to the priorities and purchase
limitations set forth in the Plan of Conversion ("Subscription Offering").
Concurrently, but subject to the prior rights of holders of Subscription Rights,
the Holding Company is offering the Common Stock for sale to members of the
general public through a direct community offering ("Direct Community Offering")
with preference given to natural persons who are permanent residents of Park,
Gallatin and Sweet Grass Counties of Montana ("Local Community"). The
Subscription Offering and the Direct Community Offering are at times referred to
herein as the "Subscription and Direct Community Offering." It is anticipated
that shares of Common Stock not subscribed for or purchased in the Subscription
and Direct Community Offering will be offered to eligible members of the general
public on a best efforts basis by a selling
-1-
group of broker-dealers managed by Charles Webb & Company, a division of
Keefe, Bruyette & Woods, Inc. in a syndicated offering ("Syndicated Community
Offering"). The Subscription and Direct Community Offering and the Syndicated
Community Offering are referred to collectively as the "Offerings." The Holding
Company and the Association reserve the right, in their absolute discretion, to
accept or reject, in whole or in part, any or all orders in the Direct Community
Offering or Syndicated Community Offering either at the time of receipt of an
order or as soon as practicable following the termination of the Offerings. If
an order is rejected in part, the purchaser does not have the right to cancel
the remainder of the order.
Adoption of a Federal Stock Charter ("Federal Stock Charter") and
Bylaws ("Bylaws") of the Association is an integral part of the Plan of
Conversion. Copies of the Plan of Conversion and the proposed Federal Stock
Charter and Bylaws for the Association are attached to this Proxy Statement as
exhibits. They provide, among other things, for the termination of voting rights
of members and their rights to receive any surplus remaining after liquidation
of the Association. These rights, except for the rights of Eligible Account
Holders and Supplemental Eligible Account Holders in the liquidation account,
will vest exclusively in the holders of the stock in the Holding Company and the
Association. For further information, see "THE CONVERSION -- Effects of
Conversion to Stock Form on Depositors and Borrowers of the Association" in the
Prospectus.
EMPIRE FEDERAL SAVINGS AND LOAN ASSOCIATION
The Association is a federally chartered mutual savings and loan
association located in Livingston, Montana, which is approximately 26 miles east
of Bozeman, Montana. Chartered in 1923 as a Montana-chartered mutual savings and
loan association under the name "Empire Building and Loan Association," the
Association converted to a federal charter and adopted its current name in 1970.
In connection with the Conversion, the Association will convert to a federal
stock savings bank and change its name to "Empire Federal Savings Bank." The
Association is regulated by the OTS, its primary federal regulator, and the
Federal Deposit Insurance Corporation, the insurer of its deposits. The
Association's deposits are federally insured by the FDIC under the Savings
Association Insurance Fund. The Association is a member of the Federal Home Loan
Bank ("FHLB") System. At June 30, 1996, the Association had total assets of
$86.8 million, total deposits of $68.6 million and total equity of $15.9
million, or 18.3% of total assets, on a consolidated basis.
The Association is a community oriented financial institution which has
traditionally offered a variety of savings products to its retail customers
while concentrating its lending activities on real estate mortgage loans.
Lending activities have been focused primarily on the origination of loans
secured by one- to four-family residential dwellings, including an emphasis on
loans for construction of residential dwellings. To a lesser extent, lending
activities also have included the origination of multi-family, commercial real
estate and home equity loans. The Association's primary business has been that
of a traditional thrift institution, originating loans in its primary market
area for its portfolio. At June 30, 1996, the Association's gross loan portfolio
totaled $43.1 million, of which 81.7% were one- to four-family residential
mortgage loans, 3.2% were construction loans (most of which related to one- to
four-family residences), 5.4% were multi-family loans, and 2.7% were commercial
real estate loans. In addition the Association has maintained a significant
portion of its assets in investment and mortgage-backed securities. Similar to
its lending activities, the Association's investment portfolio has been weighted
toward mortgage-backed securities secured by one- to four-family residential
properties. The portfolio also includes U.S. Government agency securities.
Investment securities, including mortgage-backed securities, totaled $39.1
million, or 45.0% of total assets, at June 30, 1996. In addition to interest and
dividend income on loans and investments, the Association receives other income
from the sale of insurance products through its wholly-owned subsidiary, Dime
Service Corporation.
The Association's market area is comprised of Park, Gallatin and Sweet
Grass Counties of South Central Montana. The Association faces strong
competition in its market area. See "RISK FACTORS -- Dependence on Local Economy
and Competition Within Market Area" in the Prospectus. The Association's
principal executive office is located at 123 South Main Street, Livingston,
Montana 59047, and its telephone number is (406) 222-1981.
-2-
VOTING RIGHTS AND VOTE REQUIRED FOR APPROVAL
The Board of Directors of the Association has fixed the close of
business on October 31, 1996 as the record date ("Voting Record Date") for the
determination of members entitled to notice of and to vote at the Special
Meeting. All holders of the Association's savings or other authorized accounts
are members of the Association under its current charter. Any member as of the
close of business on the Voting Record Date who ceases to be a member prior to
the Special Meeting or any adjournment thereof shall not be entitled to vote at
the Special Meeting or any adjournment thereof.
Each eligible depositor member will be entitled at the Special Meeting
to cast one vote for each $100, or fraction thereof, of the aggregate withdrawal
value of all of his savings accounts in the Association as of the Voting Record
Date. Borrowers with loans outstanding as of _________ __, 1996, which continue
to be outstanding as of the Voting Record Date, will be entitled to cast one
vote for the period of time such borrowings remain in existence, in addition to
any votes such borrower may also be entitled to in his or her capacity as a
depositor. No member is entitled to cast more than 1,000 votes. Any number of
members present and voting, represented in person or by proxy, at the Special
Meeting will constitute a quorum.
Approval of the Plan of Conversion will require the affirmative vote of
a majority of the total outstanding votes of the Association's members eligible
to be cast at the Special Meeting. As of the Voting Record Date for the Special
Meeting, there were approximately ______ votes eligible to be cast, of which
_______ votes constitutes a majority.
PROXIES
Members may vote at the Special Meeting or any adjournment thereof in
person or by proxy. Enclosed is a proxy which may be used by any eligible member
to vote on the Plan of Conversion. All properly executed proxies received by
management will be voted in accordance with the instructions indicated thereon
by the members giving such proxies. If no instructions are given, such proxies
will be voted in favor of the Plan of Conversion. If any other matters are
properly presented at the Special Meeting and may properly be voted on, all
proxies will be voted on such matters in accordance with the best judgment of
the proxy holders named therein. If the enclosed proxy is returned, it may be
revoked at any time before it is voted by written notice to the Secretary of the
Association, by submitting a later dated proxy, or by attending and voting in
person at the Special Meeting. The proxies being solicited are only for use at
the Special Meeting and at any and all adjournments thereof and will not be used
for any other meeting. Management is not aware of any other business to be
presented at the Special Meeting.
The Association, as trustee for individual retirement accounts at the
Association, will vote in favor of the Plan of Conversion, unless the beneficial
owner executes and returns the enclosed proxy for the Special Meeting or attends
the Special Meeting and votes in person.
To the extent necessary to permit approval of the Plan of Conversion,
proxies may be solicited by officers, directors or regular employees of the
Association, in person, by telephone or through other forms of communication
and, if necessary, the Special Meeting may be adjourned to an alternative date.
Such persons will be reimbursed by the Association for their reasonable
out-of-pocket expenses incurred in connection with such solicitation.
RECOMMENDATION OF THE BOARD OF DIRECTORS
The Board of Directors of the Association unanimously recommends that
you vote "FOR" the Plan of Conversion. Voting in favor of the Plan of Conversion
will not obligate any voter to purchase any stock of the Holding Company.
-3-
THE CONVERSION
The OTS and the Board of Directors of the Association have approved the
Plan of Conversion subject to approval by the members of the Association
entitled to vote on the matter and subject to the satisfaction of certain other
conditions imposed by the OTS in its approval. OTS approval, however, does not
constitute a recommendation or endorsement of the Plan of Conversion.
General
On August 29, 1996, the Association's Board of Directors adopted, and
on October 8, 1996, subsequently amended, the Plan of Conversion, pursuant to
which the Association will convert from a federally chartered mutual savings and
loan association to a federally chartered stock savings bank under the name
"Empire Federal Savings Bank," to be held as a wholly-owned subsidiary of the
Holding Company, a newly formed Delaware corporation. The Holding Company
and the Association intend to pursue the business strategy described in this
Prospectus with the goal of enhancing long-term shareholder value. Neither the
Holding Company nor the Association has any existing plan to pursue any possible
business combination, and neither has any agreement or understanding, written
or oral, with respect to any possible business combination.
The following discussion of the Plan of Conversion is qualified in its
entirety by reference to the Plan of Conversion, which is attached as Exhibit A
hereto. The OTS has approved the Plan of Conversion subject to the Plan's
approval by the members of the Association entitled to vote on the matter at the
Special Meeting and subject to the satisfaction of certain other conditions
imposed by the OTS in its approval.
If the Board of Directors of the Association decides for any reason,
such as possible delays resulting from overlapping regulatory processing or
policies or conditions that could adversely affect the Association's or the
Holding Company's ability to consummate the Conversion and transact its business
as contemplated herein and in accordance with the Association's operating
policies, at any time prior to the issuance of the Common Stock, not to use the
holding company form of organization in implementing the Conversion, the Plan of
Conversion will be amended to not use the holding company form of organization
in the Conversion. In the event that such a decision is made, the Association
will promptly refund all subscriptions or orders received together with accrued
interest, withdraw the Holding Company's registration statement from the SEC and
will take all steps necessary to consummate the Conversion and proceed with a
new offering without the Holding Company, including filing any necessary
documents with the OTS. In such event, and provided there is no regulatory
action, directive or other consideration upon which basis the Association
determines not to consummate the Conversion, the Association will issue and sell
the common stock of the Association. There can be no assurance that the OTS
would approve the Conversion if the Association decided to proceed without the
Holding Company. The following description of the Plan assumes that a holding
company form of organization will be utilized in the Conversion. In the event
that a holding company form of organization is not utilized, all other pertinent
terms of the Plan as described below will apply to the Conversion of the
Association from mutual to stock form of organization and the sale of the
Association's common stock.
The Conversion will be accomplished through adoption of a Federal Stock
Charter and Bylaws to authorize the issuance of capital stock by the
Association. Under the Plan, 1,666,000 to 2,254,000 shares of Common Stock are
being offered for sale by the Holding Company at the Purchase Price of $10.00
per share. As part of the Conversion, the Association will issue all of its
newly issued common stock (1,000 shares) to the Holding Company in exchange for
50% of the net proceeds from the sale of Common Stock by the Holding Company.
The Plan of Conversion provides generally that (i) the Association will
convert from a federally chartered mutual savings and loan association to a
federally chartered stock savings bank; (ii) the Common Stock will be offered
by the Holding Company in the Subscription Offering to persons having
Subscription Rights and in a Direct Community Offering to certain members
of the general public with preference given to natural persons residing in the
Local Community; (iii) if necessary, shares of Common Stock not subscribed for
in the
-4-
Subscription and Direct Community Offering will be offered to certain members of
the general public in a Syndicated Community Offering through a syndicate of
registered broker-dealers pursuant to selected dealers agreements; and (iv) the
Holding Company will purchase all of the capital stock of the Association to be
issued in connection with the Conversion. The Conversion will be effected only
upon completion of the sale of at least 1,666,000 shares of Common Stock to be
issued pursuant to the Plan of Conversion.
As part of the Conversion, the Holding Company is making a Subscription
Offering of its Common Stock to holders of Subscription Rights in the following
order of priority: (i) Eligible Account Holders (depositors with $50.00 or more
on deposit as of March 31, 1995); (ii) the Association's ESOP; (iii)
Supplemental Eligible Account Holders (depositors with $50.00 or more on deposit
as of September 30, 1996); and (iv) Other Members (depositors of the Association
as of October 31, 1996, and borrowers of the Association with loans
outstanding as of __________ __, 199_, which continue to be outstanding as
of October 31, 1996). Concurrent with the Subscription Offering and subject to
the prior rights of holders of Subscription Rights, the Holding Company is
offering the Common Stock for sale to certain members of the general public
through a Direct Community Offering.
Shares of Common Stock not sold in the Subscription and Direct
Community Offering may be offered in the Syndicated Community Offering.
Regulations require that the Syndicated Community Offering be completed within
45 days after completion of the Subscription Offering unless extended by the
Association or the Holding Company with the approval of the regulatory
authorities. If the Syndicated Community Offering is determined not to be
feasible, the Board of Directors of the Association will consult with the
regulatory authorities to determine an appropriate alternative method for
selling the unsubscribed shares of Common Stock. The Plan of Conversion provides
that the Conversion must be completed within 24 months after the date of the
approval of the Plan of Conversion by the members of the Association.
No sales of Common Stock may be completed, either in the Subscription,
Direct Community or Syndicated Community Offerings, unless the Plan of
Conversion is approved by the members of the Association.
The completion of the Offerings, however, is subject to market
conditions and other factors beyond the Association's control. No assurance can
be given as to the length of time after approval of the Plan of Conversion at
the Special Meeting that will be required to complete the Syndicated Community
Offering or other sale of the Common Stock. If delays are experienced,
significant changes may occur in the estimated pro forma market value of the
Holding Company and the Association as converted, together with corresponding
changes in the net proceeds realized by the Holding Company from the sale of the
Common Stock. In the event the Conversion is terminated, the Association would
be required to charge all Conversion expenses against current income.
Orders for shares of Common Stock will not be filled until at least
1,666,000 shares of Common Stock have been subscribed for or sold and the OTS
approves the final valuation and the Conversion closes. If the Conversion is not
consummated by ___________ __, 1997 (45 days after the last day of the fully
extended Subscription Offering) and the OTS consents to an extension of time to
consummate the Conversion, subscribers will be given the right to increase,
decrease or rescind their subscriptions. Unless an affirmative indication is
received from subscribers that they wish to continue to subscribe for shares,
the funds will be returned promptly, together with accrued interest at the
Association's passbook rate (____% per annum as of the date hereof) from the
date payment is received until the funds are returned to the subscriber. If such
period is not extended, or, in any event, if the Conversion is not consummated
by ____________ __, 1997, all withdrawal authorizations will be terminated and
all funds held will be promptly returned together with accrued interest at the
Association's passbook rate from the date payment is received until the
Conversion is terminated.
Effects of Conversion to Stock Form on Depositors and Borrowers
of the Association
Voting Rights. Savings members and borrowers will have no voting rights
in the converted Association or the Holding Company and therefore will not be
able to elect directors of the Association or the Holding Company or to control
their affairs. Currently, these rights are accorded to savings and borrower
members of the Association. Subsequent
-5-
to the Conversion, voting rights will be vested exclusively in the Holding
Company with respect to the Association and the holders of the Common Stock as
to matters pertaining to the Holding Company. Each holder of Common Stock shall
be entitled to vote on any matter to be considered by the stockholders of the
Holding Company. A stockholder will be entitled to one vote for each share of
Common Stock owned.
Savings Accounts and Loans. The Association's savings accounts, account
balances and existing FDIC insurance coverage of savings accounts will not be
affected by the Conversion. Furthermore, the Conversion will not affect the loan
accounts, loan balances or obligations of borrowers under their individual
contractual arrangements with the Association.
Tax Effects. The Association has received an opinion from Breyer &
Aguggia, Washington, D.C., that the Conversion will constitute a nontaxable
reorganization under Section 368(a)(1)(F) of the Code. Among other things, the
opinion states that: (i) no gain or loss will be recognized to the Association
in its mutual or stock form by reason of its Conversion; (ii) no gain or loss
will be recognized to its account holders upon the issuance to them of accounts
in the Association immediately after the Conversion, in the same dollar amounts
and on the same terms and conditions as their accounts at the Association in its
mutual form plus interest in the liquidation account; (iii) the tax basis of
account holders' accounts in the Association immediately after the Conversion
will be the same as the tax basis of their accounts immediately prior to
Conversion; (iv) the tax basis of each account holder's interest in the
liquidation account will be zero; (v) the tax basis of the Common Stock
purchased in the Conversion will be the amount paid and the holding period for
such stock will commence at the date of purchase; and (vi) no gain or loss will
be recognized to account holders upon the receipt or exercise of Subscription
Rights in the Conversion, except to the extent Subscription Rights are deemed to
have value as discussed below. Unlike a private letter ruling issued by the
Internal Revenue Service ("IRS"), an opinion of counsel is not binding on the
IRS and the IRS could disagree with the conclusions reached therein. In the
event of such disagreement, no assurance can be given that the conclusions
reached in an opinion of counsel would be sustained by a court if contested by
the IRS.
Based upon past rulings issued by the IRS, the opinion provides that
the receipt of Subscription Rights by Eligible Account Holders, Supplemental
Eligible Account Holders and Other Members under the Plan will be taxable to the
extent, if any, that the Subscription Rights are deemed to have a fair market
value. Keller & Company, Inc. ("Keller"), a financial consulting firm retained
by the Association, whose findings are not binding on the IRS, has indicated
that the Subscription Rights do not have any value, based on the fact that such
rights are acquired by the recipients without cost, are nontransferable and of
short duration and afford the recipients the right only to purchase shares of
the Common Stock at a price equal to its estimated fair market value, which will
be the same price paid by purchasers in the Direct Community Offering for
unsubscribed shares of Common Stock. If the Subscription Rights are deemed to
have a fair market value, the receipt of such rights may only be taxable to
those Eligible Account Holders, Supplemental Eligible Account Holders (if any)
and Other Members who exercise their Subscription Rights. The Association could
also recognize a gain on the distribution of such Subscription Rights. Eligible
Account Holders, Supplemental Eligible Account Holders and Other Members are
encouraged to consult with their own tax advisors as to the tax consequences in
the event the Subscription Rights are deemed to have a fair market value.
The Association has also received an opinion from
Huppert and Swindlehurst, P.C., Livingston, Montana, that, assuming the
Conversion does not result in any federal income tax liability to the
Association, its account holders, or the Holding Company, implementation of
the Plan of Conversion will not result in any Montana income tax liability to
such entities or persons.
The opinions of Breyer & Aguggia and Huppert and Swindlehurst, P.C.
and the opinion from Keller are filed as exhibits to the Registration Statement.
See "ADDITIONAL INFORMATION."
PROSPECTIVE INVESTORS ARE URGED TO CONSULT WITH THEIR OWN TAX ADVISORS
REGARDING THE TAX CONSEQUENCES OF THE CONVERSION PARTICULAR TO THEM.
-6-
Liquidation Account. In the unlikely event of a complete liquidation of
the Association in its present mutual form, each depositor in the Association
would receive a pro rata share of any assets of the Association remaining after
payment of claims of all creditors (including the claims of all depositors up to
the withdrawal value of their accounts). Each depositor's pro rata share of such
remaining assets would be in the same proportion as the value of his or her
deposit account to the total value of all deposit accounts in the Association at
the time of liquidation.
After the Conversion, holders of withdrawable deposit(s) in the
Association, including certificates of deposit ("Savings Account(s)"), shall not
be entitled to share in any residual assets in the event of liquidation of the
Association. However, pursuant to OTS regulations, the Association shall, at the
time of the Conversion, establish a liquidation account in an amount equal to
its total equity as of the date of the latest statement of financial condition
contained herein.
The liquidation account shall be maintained by the Association
subsequent to the Conversion for the benefit of Eligible Account Holders and
Supplemental Eligible Account Holders who retain their Savings Accounts in the
Association. Each Eligible Account Holder and Supplemental Eligible Account
Holder shall, with respect to each Savings Account held, have a related inchoate
interest in a portion of the liquidation account balance ("subaccount").
The initial subaccount balance for a Savings Account held by an
Eligible Account Holder or a Supplemental Eligible Account Holder shall be
determined by multiplying the opening balance in the liquidation account by a
fraction of which the numerator is the amount of such holder's "qualifying
deposit" in the Savings Account and the denominator is the total amount of the
"qualifying deposits" of all such holders. Such initial subaccount balance shall
not be increased, and it shall be subject to downward adjustment as provided
below.
If the deposit balance in any Savings Account of an Eligible Account
Holder or Supplemental Eligible Account Holder at the close of business on any
annual closing day of the Association subsequent to March 31, 1995 is less than
the lesser of (i) the deposit balance in such Savings Account at the close of
business on any other annual closing date subsequent to March 31, 1995 or
September 30, 1996 or (ii) the amount of the "qualifying deposit" in such
Savings Account on March 31, 1995 or September 30, 1996, then the subaccount
balance for such Savings Account shall be adjusted by reducing such subaccount
balance in an amount proportionate to the reduction in such deposit balance. In
the event of a downward adjustment, such subaccount balance shall not be
subsequently increased, notwithstanding any increase in the deposit balance of
the related Savings Account. If any such Savings Account is closed, the related
subaccount balance shall be reduced to zero.
In the event of a complete liquidation of the Association (and only in
such event) each Eligible Account Holder and Supplemental Eligible Account
Holder shall be entitled to receive a liquidation distribution from the
liquidation account in the amount of the then current adjusted subaccount
balance(s) for Savings Account(s) then held by such holder before any
liquidation distribution may be made to stockholders. No merger, consolidation,
bulk purchase of assets with assumptions of Savings Accounts and other
liabilities or similar transactions with another federally insured institution
in which the Association is not the surviving institution shall be considered to
be a complete liquidation. In any such transaction the liquidation account shall
be assumed by the surviving institution.
REVIEW OF OTS ACTION
Any person aggrieved by a final action of the OTS which approves, with
or without conditions, or disapproves a plan of conversion pursuant to this part
may obtain review of such action by filing in the court of appeals of the United
States for the circuit in which the principal office or residence of such person
is located, or in the United States Court of Appeals for the District of
Columbia, a written petition praying that the final action of the OTS be
modified, terminated or set aside. Such petition must be filed within 30 days
after the publication of notice of such final action in the Federal Register, or
30 days after the mailing by the applicant of the notice to members as provided
for in 12 C.F.R. ss.563b.6(c), whichever is later. The further procedure for
review is as follows: A copy of the petition is forthwith transmitted to the OTS
by the clerk of the court and thereupon the OTS files in
-7-
the court the record in the proceeding, as provided in Section 2112 of Title 28
of the United States Code. Upon the filing of the petition, the court has
jurisdiction, which upon the filing of the record is exclusive, to affirm,
modify, terminate, or set aside in whole or in part, the final action of the
OTS. Review of such proceedings is as provided in Chapter 7 of Title 5 of the
United States Code. The judgment and decree of the court is final, except that
they are subject to review by the United States Supreme Court upon certiorari as
provided in Section 1254 of Title 28 of the United States Code.
ADDITIONAL INFORMATION
The Holding Company has filed with the Securities and Exchange
Commission a Registration Statement on Form SB-2 (File No. 333-12653) under
the Securities Act of 1933, as amended, with respect to the Common Stock
offered in the Conversion. The accompanying Prospectus does not contain all the
information set forth in the Registration Statement, certain parts of which
are omitted in accordance with the rules and regulations of the SEC. Such
information may be inspected at the public reference facilities maintained by
the SEC at 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549; 500 West
Madison Street, Suite 1400, Room 1100, Chicago, Illinois 60661; and 75 Park
Place, New York, New York 10007. Copies may be obtained at prescribed rates
from the Public Reference Section of the SEC at 450 Fifth Street, N.W.,
Washington, D.C. 20549.
The Association has filed with the OTS an Application for Approval of
Conversion, which includes proxy materials for the Association's Special Meeting
and certain other information. The accompanying Prospectus omits certain
information contained in such Application. The Application, including exhibits
and certain other information that are a part thereof, may be inspected, without
charge, at the offices of the OTS, 1700 G Street, N.W., Washington, D.C. 20552
and at the office of the Regional Director of the OTS at the West Regional
Office of the OTS, Pacific Telesis Tower, 1 Montgomery Street, Suite 400, San
Francisco, California 94104.
Copies of the Holding Company's Certificate of Incorporation and Bylaws
may be obtained by written request to the Association.
All persons eligible to vote at the Special Meeting should review both
this Proxy Statement and the accompanying Prospectus carefully. However, no
person is obligated to purchase any Common Stock. For additional information,
you may call the Conversion Center at (406) ___-____.
BY ORDER OF THE BOARD OF DIRECTORS
ERNEST A. SANDBERG
SECRETARY
Livingston, Montana
__________ __, 1996
YOUR BOARD OF DIRECTORS URGES YOU TO CONSIDER CAREFULLY THE INFORMATION
CONTAINED IN THIS PROXY STATEMENT AND, WHETHER OR NOT YOU PLAN TO BE PRESENT IN
PERSON AT THE SPECIAL MEETING, TO FILL IN, DATE, SIGN AND RETURN THE ENCLOSED
PROXY CARD(S) AS SOON AS POSSIBLE TO ASSURE THAT YOUR VOTES WILL BE COUNTED.
THIS WILL NOT PREVENT YOU FROM VOTING IN PERSON IF YOU ATTEND THE SPECIAL
MEETING. YOU MAY REVOKE YOUR PROXY BY WRITTEN INSTRUMENT DELIVERED TO THE
SECRETARY OF THE ASSOCIATION AT ANY TIME PRIOR TO OR AT THE SPECIAL MEETING OR
BY ATTENDING THE SPECIAL MEETING AND VOTING IN PERSON.
THIS PROXY STATEMENT IS NOT AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO
BUY STOCK. THE OFFER IS MADE ONLY BY THE PROSPECTUS IN THOSE JURISDICTIONS IN
WHICH IT IS LAWFUL TO MAKE SUCH OFFER.
-8-
EXHIBIT A
EMPIRE FEDERAL SAVINGS AND LOAN ASSOCIATION
LIVINGSTON, MONTANA
AMENDED PLAN OF CONVERSION
FROM FEDERAL MUTUAL SAVINGS AND LOAN ASSOCIATION
TO FEDERAL STOCK SAVINGS AND LOAN ASSOCIATION
AND FORMATION OF A HOLDING COMPANY
INTRODUCTION
I. General
It is the desire of the Board of Directors to attract new capital to
the Association to increase its net worth, to support future savings growth, to
increase the amount of funds available for other lending and investment, to
provide greater resources for the expansion of customer services and to
facilitate future expansion by the Association. In addition, the Board of
Directors intends to implement stock option plans and other stock benefit plans
as part of the Conversion in order to attract and retain qualified directors and
officers. It is the further desire of the Board of Directors to reorganize the
Association as the wholly owned subsidiary of a holding company to enhance
flexibility of operations, diversification of business opportunities and
financial capability for business and regulatory purposes and to enable the
Association to compete more effectively with other financial service
organizations. Accordingly, on August 29, 1996, the Board of Directors of Empire
Federal Savings and Loan Association ("Association"), after careful study and
consideration, adopted, and on October 8, 1996 subsequently amended, by
unanimous vote this Plan of Conversion ("Plan"), which provides for the
conversion of the Association from a federally chartered mutual savings and loan
association to a federally chartered stock savings bank and the concurrent
formation of a holding company for the Association ("Holding Company").
All capitalized terms contained in the Plan shall have the meanings
ascribed to them in Section II hereof.
Pursuant to the Plan, shares of Conversion Stock in the Holding Company
will be offered as part of the Conversion in a Subscription Offering pursuant to
nontransferable Subscription Rights at a predetermined and uniform price first
to the Association's Eligible Account Holders, second to the Tax-Qualified
Employee Stock Benefit Plans, third to Supplemental Eligible Account Holders of
record as of the last day of the calendar quarter preceding OTS approval of the
Association's application to convert to stock form, and fourth to Other Members
of the Association. Concurrently with the Subscription Offering, shares not
subscribed for in the Subscription Offering will be offered as part of the
Conversion to the general public in a Direct Community Offering. Shares
remaining may then be offered to the general public in an underwritten public
offering or otherwise. The aggregate Purchase Price of the Conversion Stock will
be based upon an independent appraisal of the Association and will reflect the
estimated pro forma market value of the Association, as a subsidiary of the
Holding Company.
The Conversion is subject to regulations of the Director of the OTS of
the United States Department of the Treasury pursuant to Section 5(i) of the
Home Owners' Loan Act; Part 563b of the Rules and Regulations Applicable to All
Savings Associations.
Consummation of the Conversion is subject to the approval of this Plan
and the Conversion by the OTS and by the affirmative vote of Members of the
Association holding not less than a majority of the total votes eligible to be
cast at a special meeting of the Members to be called to consider the
Conversion.
No change will be made in the Board of Directors or management of the
Association as a result of the Conversion.
II. Definitions
As used in this Plan, the terms set forth below have the following
meanings:
A. Acting in Concert: (1) Knowing participation in a joint activity or
interdependent conscious parallel action towards a common goal whether or not
pursuant to an express agreement; or (2) a combination or pooling of voting or
other interests in the securities of an issuer for a common purpose pursuant to
any contract, understanding, relationship, agreement or other arrangement,
whether written or otherwise. A Person (as defined by 12 C.F.R.
ss.563b.2(a)(26)) who acts in concert with another Person ("other party") shall
also be deemed to be acting in concert with any Person who is also acting in
concert with that other party, except that any Tax-Qualified Employee Stock
Benefit Plan will not be deemed to be acting in concert with its trustee or a
Person who serves in a similar capacity solely for the purpose of determining
whether stock held by the trustee and stock held by the Tax- Qualified Employee
Benefit Plan will be aggregated.
B. Associate: When used to indicate a relationship with any Person,
means (l) any corporation or organization (other than the Association or a
majority-owned subsidiary of the Association, or the Holding Company) of which
such Person is an officer or partner or is, directly or indirectly, the
beneficial owner of ten percent or more of any class of equity securities, (2)
any trust or other estate in which such Person has a substantial beneficial
interest or as to which such Person serves as trustee or in a similar fiduciary
capacity, except that it does not include a Tax- Qualified Employee Stock
Benefit Plan and (3) any relative or spouse of such Person or any relative of
such spouse, who has the same home as such Person or who is a director or
officer of the Association, any of its subsidiaries, or the Holding Company.
C. Association: Empire Federal Savings and Loan Association, in its
present form as a federally chartered mutual savings and loan association.
D. Capital Stock: Any and all authorized stock in the Converted
Association.
E. Common Stock: Any and all authorized common stock in the Holding
Company subsequent to the Conversion.
F. Conversion: (1) Amendment of the Association's Charter and Bylaws to
authorize issuance of shares of Capital Stock by the Converted Association and
to conform to the requirements of a Federal stock savings bank under the laws of
the United States and regulations of the OTS; (2) issuance and sale of
Conversion Stock by the Holding Company in the Subscription Offering and Direct
Community Offering; and (3) purchase by the Holding Company of the Capital Stock
of the Converted Association to be issued in the Conversion immediately
following or concurrently with the close of the sale of all Conversion Stock.
G. Conversion Stock: Holding Company stock to be issued and sold by the
Holding Company pursuant to the Plan.
H. Converted Association: The Association in its converted form of
organization as a Federally- chartered capital stock savings bank operating
under the title "Empire Federal Savings Bank," or such other appropriate title.
I. Direct Community Offering: The offering for sale of Conversion Stock
to the public.
J. Eligibility Record Date: March 31, 1995.
K. Eligible Account Holder: Holder of a Qualifying Deposit in the
Association on the Eligibility Record Date.
A-2
L. FDIC: Federal Deposit Insurance Corporation.
M. Form AC Application: The application submitted to the OTS for
approval of the Conversion.
N. H-(e)1 Application: The application submitted to the OTS on OTS Form
H-(e)1 or Form H-(e)1-S, if applicable, for approval of the Holding Company's
acquisition of all of the Capital Stock.
O. Holding Company: A corporation to be formed by the Association under
state law for the purpose of becoming a holding company through the issuance and
sale of its stock under the Plan, and concurrent acquisition of 100% of the
Capital Stock of the Association to be issued pursuant to the Plan.
P. Holding Company Stock: Any and all authorized stock of the Holding
Company.
Q. Local Community: Park, Gallatin and Sweet Grass Counties, Montana.
R. Market Maker: A dealer (i.e., any Person who engages directly or
indirectly as agent, broker, or principal in the business of offering, buying,
selling, or otherwise dealing or trading in securities issued by another Person)
who, with respect to a particular security, (l) regularly publishes bona fide,
competitive bid and offer quotations in a recognized inter-dealer quotation
system or furnishes bona fide competitive bid and offer quotations on request
and (2) is ready, willing and able to effect transactions in reasonable
quantities at his quoted prices with other brokers or dealers.
S. Members: All Persons or entities who qualify as members of the
Association pursuant to its Charter and Bylaws prior to the Conversion.
T. Officer: An executive officer of the Association, which includes the
Chairman of the Board, President, Executive Vice President, Senior Vice
Presidents, Vice Presidents in charge of principal business functions, the
Secretary and the Treasurer as well as any other person performing similar
functions.
U. Order Forms: Forms to be used for the purchase of Conversion Stock
sent to Eligible Account Holders and other parties eligible to purchase
Conversion Stock in the Subscription Offering pursuant to the Plan.
V. Other Member: Holder of a Savings Account (other than Eligible
Account Holders and Supplemental Eligible Account Holders) as of the Record Date
and borrowers from the Association as provided in the Association's Federal
Mutual Charter who continue to be borrowers from the Association as of the
Record Date.
W. OTS: Office of Thrift Supervision of the United States Department of
the Treasury.
X. Person: An individual, corporation, partnership, association, joint
stock company, trusts of natural Persons, unincorporated organization or a
government or any political subdivision thereof.
Y. Plan: This Plan of Conversion, which provides for the conversion of
the Association from a federally chartered mutual savings and loan association
to a federally chartered capital stock savings bank as a wholly owned subsidiary
of the Holding Company, as originally adopted by the Board of Directors or as
amended in accordance with the terms thereof.
Z. Qualifying Deposit: The deposit balance in any Savings Account as of
the Eligibility Record Date or the Supplemental Eligibility Record Date, as
applicable; provided, however, that no Savings Account with a deposit balance of
less than $50 shall constitute a Qualifying Deposit.
AA. Record Date: Date which determines which Members are entitled to
vote at the Special Meeting.
A-3
BB. Registration Statement: The registration statement on Form SB-2 or
other applicable forms filed by the Holding Company with the SEC for the purpose
of registering the Conversion Stock under the Securities Act of 1933, as
amended.
CC. Savings Account(s): Withdrawable deposit(s) in the Association,
including certificates of deposit.
DD. SEC: Securities and Exchange Commission.
EE. Special Meeting: The special meeting of Members called for the
purpose of considering the Plan for approval.
FF. Subscription Offering: The offering of Conversion Stock to Eligible
Account Holders, Tax- Qualified Employee Stock Benefit Plans, Supplemental
Eligible Account Holders and Other Members under the Plan.
GG. Subscription Rights: Nontransferable, nonnegotiable, personal
rights of Eligible Account Holders, Tax-Qualified Employee Stock Benefit Plans,
Supplemental Eligible Account Holders and Other Members to purchase Conversion
Stock.
HH. Supplemental Eligibility Record Date: The last day of the calendar
quarter preceding the approval of the Plan by the OTS.
II. Supplemental Eligible Account Holder: Holder of a Qualifying
Deposit in the Association (other than an Officer or director or their
Associates) on the Supplemental Eligibility Record Date.
JJ. Tax Qualified Employee Stock Benefit Plan: Any defined benefit plan
or defined contribution plan of the Association or Holding Company, such as an
employee stock ownership plan, bonus plan, profit-sharing plan or other plan,
which, with its related trust meets the requirements to be "qualified" under
section 401 of the Internal Revenue Code. A "non-tax-qualified employee stock
benefit plan" is any defined benefit plan or defined contribution plan that is
not so qualified.
III. Steps Prior to Submission of the Plan to the Members for Approval
Prior to submission of the Plan to the Members for approval, the
Association must receive approval from the OTS of the Form AC Application. Prior
to such regulatory approval:
A. The Board of Directors shall adopt the Plan by a vote of not less
than two-thirds of its entire membership.
B. The Association shall notify the Members of the adoption of the Plan
by publishing a statement in a newspaper having a general circulation in each
community in which the Association maintains an office.
C. A press release relating to the proposed Conversion may be submitted
to the local media.
D. Copies of the Plan as adopted by the Board of Directors shall be
made available for inspection at each office of the Association.
E. The Association shall cause the Holding Company to be incorporated
under state law and the Board of Directors of the Holding Company shall concur
in the Plan by at least a two-thirds vote.
F. As soon as practicable following the adoption of this Plan, the
Association shall file the Form AC Application, and the Holding Company shall
file the Registration Statement and the H-(e)1 Application. Upon receipt of
notification from the OTS that the Form AC Application is properly executed and
not materially
A-4
incomplete, the Association shall publish notice of the filing of the Form AC
Application in a newspaper having a general circulation in each community in
which the Association maintains an office and/or by mailing a letter to each of
its Members, and shall publish such other notices of the Conversion as may be
required in connection with the H-(e)1 Application and by the regulations and
policies of the OTS.
G. The Association shall obtain an opinion of its tax advisors or a
favorable ruling from the United States Internal Revenue Service which shall
state that the Conversion will not result in any gain or loss for Federal income
tax purposes to the Association or its Eligible Account Holders, Supplemental
Eligible Account Holders and Other Members. Receipt of a favorable opinion or
ruling is a condition precedent to completion of the Conversion.
IV. Meeting of Members
Subsequent to the approval of the Plan by the OTS, the Special Meeting
shall be scheduled in accordance with the Association's Bylaws. Promptly after
receipt of approval and at least 20 days but not more than 45 days prior to the
Special Meeting, the Association shall distribute proxy solicitation materials
to all Members and beneficial owners of accounts held in fiduciary capacities
where the beneficial owners possess voting rights, as of the Record Date. The
proxy solicitation materials shall include a copy of the proxy statement to be
used in connection with such solicitation ("Proxy Statement") and other
documents authorized for use by the regulatory authorities and may also include
a copy of the Plan and/or a prospectus ("Prospectus") as provided in Paragraph V
below. The Association shall also advise each Eligible Account Holder and
Supplemental Eligible Account Holder not entitled to vote at the Special Meeting
of the proposed Conversion and the scheduled Special Meeting, and provide a
postage prepaid card on which to indicate whether he wishes to receive the
Prospectus, if the Subscription Offering is not held concurrently with the proxy
solicitation.
Pursuant to OTS regulations, an affirmative vote of not less than a
majority of the total outstanding votes of the Members is required for approval
of the Plan. Voting may be in person or by proxy. The OTS shall be notified
promptly of the actions of the Members.
V. Summary Proxy Statement
The Proxy Statement furnished to Members may be in summary form,
provided that a statement is made in bold-face type that a more detailed
description of the proposed transaction may be obtained by returning an enclosed
postage prepaid card or other written communication requesting supplemental
information. Without prior approval of the OTS, the Special Meeting shall not be
held less than 20 days after the last day on which the supplemental information
statement is mailed to requesting Members. The supplemental information
statement may be combined with the Prospectus if the Subscription Offering is
commenced concurrently with or during the proxy solicitation of Members for the
Special Meeting.
VI. Offering Documents
The Holding Company may commence the Subscription Offering and,
provided that the Subscription Offering has commenced, may commence the Direct
Community Offering concurrently with or during the proxy solicitation of
Members. The Holding Company may close the Subscription Offering before the
Special Meeting, provided that the offer and sale of the Conversion Stock shall
be conditioned upon approval of the Plan by the Members at the Special Meeting.
The Association's proxy solicitation materials may require Eligible Account
Holders, Supplemental Eligible Account Holders (if applicable) and Other Members
to return to the Association by a reasonable certain date a postage prepaid card
or other written communication requesting receipt of a Prospectus with respect
to the Subscription Offering, provided that if the Prospectus is not mailed
concurrently with the proxy solicitation materials, the Subscription Offering
shall not be closed until the expiration of 30 days after the mailing of the
proxy solicitation materials. If the Subscription Offering is not commenced
within 45 days after the Special Meeting, the Association may transmit, not more
than 30 days prior to the commencement of the Subscription Offering, to each
Eligible Account Holder, Supplemental Eligible Account Holder and other eligible
subscribers who
A-5
had been furnished with proxy solicitation materials a notice which shall state
that the Association is not required to furnish a Prospectus to them unless they
return by a reasonable date certain a postage prepaid card or other written
communication requesting the receipt of the Prospectus.
Prior to commencement of the Subscription Offering and the Direct
Community Offering, the Holding Company shall file the Registration Statement.
The Holding Company shall not distribute the final Prospectus until the
Registration Statement containing same has been declared effective by the SEC
and the Prospectus has been declared effective by the OTS.
VII. Combined Subscription and Community Offering
Instead of a separate Subscription Offering, all Subscription Rights
may be exercised by delivery of properly completed and executed Order Forms to
the Association or selling group utilized in connection with the Direct
Community Offering. If a separate Subscription Offering is not held, orders for
Conversion Stock in the Direct Community Offering shall first be filled pursuant
to the priorities and limitations stated in Paragraph IX.C., below.
VIII. Consummation of the Conversion
After receipt of all orders for Conversion Stock, and concurrently with
the execution thereof, the amendment of the Association's Federal mutual Charter
and Bylaws to authorize the issuance of shares of Capital Stock and to conform
to the requirements of a Federal capital stock savings and loan association will
be declared effective by the OTS, the amended Charter and Bylaws approved by the
Members will become effective. At such time, the Conversion Stock will be issued
and sold by the Holding Company, the Capital Stock to be issued in the
Conversion will be issued and sold to the Holding Company, and the Converted
Association will become a wholly owned subsidiary of the Holding Company. The
Converted Association will issue to the Holding Company 1,000 shares of its
common stock, representing all of the shares of Capital Stock to be issued by
the Converted Association, and the Holding Company will make payment to the
Converted Association of that portion of the aggregate net proceeds realized by
the Holding Company from the sale of the Conversion Stock under the Plan as may
be authorized or required by the OTS.
IX. Stock Offering
A. Number of Shares
The number of shares of Conversion Stock to be offered pursuant to the
Plan shall be determined initially by the Board of Directors of the Association
and the Board of Directors of the Holding Company in conjunction with the
determination of the Purchase Price (as that term is defined in Paragraph IX.B.
below). The number of shares to be offered may be subsequently adjusted by the
Board of Directors prior to completion of the offering.
B. Independent Evaluation and Purchase Price of Shares
All shares of Conversion Stock sold in the Conversion, including shares
sold in any Direct Community Offering, shall be sold at a uniform price per
share, referred to herein as the "Purchase Price." The Purchase Price shall be
determined by the Board of Directors of the Association and the Board of
Directors of the Holding Company immediately prior to the simultaneous
completion of all such sales contemplated by this Plan on the basis of the
estimated pro forma market value of the Association, as converted, at such time.
The estimated pro forma market value of the Association shall be determined for
such purpose by an independent appraiser on the basis of such appropriate
factors not inconsistent with the regulations of the OTS. Immediately prior to
the Subscription Offering, a subscription price range shall be established which
shall vary from 15% above to 15% below the average of the minimum and maximum of
the estimated price range. The maximum subscription price (i.e., the per share
amount to be remitted when subscribing for shares of Conversion Stock) shall
then be determined within the subscription price range by the Board of Directors
of the Association. The subscription price range and the number of shares
A-6
to be offered may be revised after the completion of the Subscription Offering
with OTS approval without a resolicitation of proxies or Order Forms or both.
C. Method of Offering Shares
Subscription Rights shall be issued at no cost to Eligible Account
Holders, Tax-Qualified Employee Stock Benefit Plans, Supplemental Eligible
Account Holders and Other Members pursuant to priorities established by this
Plan and the regulations of the OTS. In order to effect the Conversion, all
shares of Conversion Stock proposed to be issued in connection with the
Conversion must be sold and, to the extent that shares are available, no
subscriber shall be allowed to purchase less than 25 shares; provided, however,
that if the purchase price is greater than $20 per share, the minimum number of
shares which must be subscribed for shall be adjusted so that the aggregate
actual purchase price required to be paid for such minimum number of shares does
not exceed $500. The priorities established for the purchase of shares are as
follows:
1. Category 1: Eligible Account Holders
a. Each Eligible Account Holder shall receive, without
payment, Subscription Rights entitling such Eligible Account Holder to
purchase that number of shares of Conversion Stock which is equal to
the greater of the maximum purchase limitation established for the
Direct Community Offering, one-tenth of one percent of the total
offering or 15 times the product (rounded down to the next whole
number) obtained by multiplying the total number of shares of
Conversion Stock to be issued by a fraction of which the numerator is
the amount of the Qualifying Deposit of the Eligible Account Holder and
the denominator is the total amount of Qualifying Deposits of all
Eligible Account Holders. If the allocation made in this paragraph
results in an oversubscription, shares of Conversion Stock shall be
allocated among subscribing Eligible Account Holders so as to permit
each such account holder, to the extent possible, to purchase a number
of shares of Conversion Stock sufficient to make his total allocation
equal to 100 shares of Conversion Stock or the total amount of his
subscription, whichever is less. Any shares of Conversion Stock not so
allocated shall be allocated among the subscribing Eligible Account
Holders on an equitable basis, related to the amounts of their
respective Qualifying Deposits as compared to the total Qualifying
Deposits of all Eligible Account Holders.
b. Subscription Rights received by Officers and directors of
the Association and their Associates, as Eligible Account Holders,
based on their increased deposits in the Association in the one-year
period preceding the Eligibility Record Date shall be subordinated to
all other subscriptions involving the exercise of Subscription Rights
pursuant to this Category.
2. Category 2: Tax-Qualified Employee Stock Benefit Plans
a. Tax-Qualified Employee Stock Benefit Plans of the
Association shall receive, without payment, non-transferable
Subscription Rights to purchase in the aggregate up to 8% of the
Conversion Stock, including shares of Conversion Stock to be issued in
the Conversion as result of an increase in the estimated price range
after commencement of the Subscription Offering and prior to the
completion of the Conversion. The Subscription Rights granted to
Tax-Qualified Stock Benefit Plans of the Association shall be subject
to the availability of shares of Conversion Stock after taking into
account the shares of Conversion Stock purchased by Eligible Account
Holders; provided, however, that in the event the number of shares
offered in the Conversion is increased to an amount greater than the
maximum of the estimated price range as set forth in the Prospectus
("Maximum Shares"), the Tax-Qualified Employee Stock Benefit Plans
shall have a priority right to purchase any such shares exceeding the
Maximum Shares up to an aggregate of 8% of the Conversion Stock.
Tax-Qualified Employee Stock Benefit Plans may use funds contributed or
borrowed by the Holding Company or the Association and/or borrowed from
an independent financial institution to exercise such Subscription
Rights, and the Holding Company and the Association
A-7
may make scheduled discretionary contributions thereto, provided that
such contributions do not cause the Holding Company or the Association
to fail to meet any applicable capital requirements.
3. Category 3: Supplemental Eligible Account Holders
a. In the event that the Eligibility Record Date is more than
15 months prior to the date of the latest amendment to the Form AC
Application filed prior to OTS approval, then, and only in that event,
each Supplemental Eligible Account Holder shall receive, without
payment, Subscription Rights entitling such Supplemental Eligible
Account Holder to purchase that number of shares of Conversion Stock
which is equal to the greater of the maximum purchase limitation
established for the Direct Community Offering, one-tenth of one percent
of the total offering or 15 times the product (rounded down to the next
whole number) obtained by multiplying the total number of shares of
Conversion Stock to be issued by a fraction of which the numerator is
the amount of the Qualifying Deposit of the Supplemental Eligible
Account Holder and the denominator is the total amount of the
Qualifying Deposits of all Supplemental Eligible Account Holders.
b. Subscription Rights received pursuant to this category
shall be subordinated to Subscription Rights granted to Eligible
Account Holders and Tax-Qualified Employee Stock Benefit Plans.
c. Any Subscription Rights to purchase shares of Conversion
Stock received by an Eligible Account Holder in accordance with
Category Number 1 shall reduce to the extent thereof the Subscription
Rights to be distributed pursuant to this Category.
d. In the event of an oversubscription for shares of
Conversion Stock pursuant to this Category, shares of Conversion Stock
shall be allocated among the subscribing Supplemental Eligible Account
Holders as follows:
(l) Shares of Conversion Stock shall be allocated so
as to permit each such Supplemental Eligible Account Holder,
to the extent possible, to purchase a number of shares of
Conversion Stock sufficient to make his total allocation
(including the number of shares of Conversion Stock, if any,
allocated in accordance with Category Number 1) equal to 100
shares of Conversion Stock or the total amount of his
subscription, whichever is less.
(2) Any shares of Conversion Stock not allocated in
accordance with subparagraph (l) above shall be allocated
among the subscribing Supplemental Eligible Account Holders on
an equitable basis, related to the amounts of their respective
Qualifying Deposits as compared to the total Qualifying
Deposits of all Supplemental Eligible Account Holders.
4. Category 4: Other Members
a. Other Members shall receive Subscription Rights to purchase
shares of Conversion Stock, after satisfying the subscriptions of
Eligible Account Holders, Tax-Qualified Employee Stock Benefit Plans
and Supplemental Eligible Account Holders pursuant to Category Nos. l,
2 and 3 above, subject to the following conditions:
1. Each such Other Member shall be entitled to subscribe for
the greater of the maximum purchase limitation established for the
Direct Community Offering or one-tenth of one percent of the total
offering.
2. In the event of an oversubscription for shares of
Conversion Stock pursuant to Category No. 4, the shares of Conversion
Stock available shall be allocated among the subscribing Other Members
pro rata on the basis of the amounts of their respective subscriptions.
A-8
D. Direct Community Offering
1. Any shares of Conversion Stock not purchased through the exercise of
Subscription Rights set forth in Category Nos. 1 through 4 above may be sold by
the Holding Company to Persons under such terms and conditions as may be
established by the Association's Board of Directors with the concurrence of the
OTS. The Direct Community Offering may commence concurrently with or as soon as
possible after the completion of the Subscription Offering and must be completed
within 45 days after completion of the Subscription Offering, unless extended
with the approval of the OTS. No Person may purchase shares of Conversion Stock
with an aggregate purchase price that exceeds $225,000. The right to purchase
shares of Conversion Stock under this Category is subject to the right of the
Association or the Holding Company to accept or reject such subscriptions in
whole or in part. In the event of an oversubscription for shares in this
Category, the shares available shall be allocated among prospective purchasers
in an amount equal to the lesser of 100 shares or the number of shares
subscribed for by each such prospective purchaser, if possible. Thereafter,
unallocated shares shall be allocated among the prospective purchasers whose
orders remain unsatisfied after the procedure described in the immediately
preceding sentence until such orders have been filled or the remaining shares
have been allocated. The offering price for which such shares are sold to the
general public in the Direct Community Offering shall be the Purchase Price.
2. Orders received in the Direct Community Offering first shall be
filled up to a maximum of 2% of the Conversion Stock and thereafter remaining
shares shall be allocated on an equal number of shares basis per order until all
orders have been filled.
3. The Conversion Stock offered in the Direct Community Offering shall
be offered and sold in a manner that will achieve the widest distribution
thereof. Preference shall be given in the Direct Community Offering to natural
Persons residing in the Local Community.
4. In the event a Direct Community Offering appears not feasible, the
Association will immediately consult with the OTS to determine the most viable
alternative available to effect the completion of the Conversion. Should no
viable alternative exist, the Association may terminate the Conversion with the
concurrence of the OTS.
E. Limitations Upon Purchases
The following additional limitations and exceptions shall be imposed
upon purchases of shares of Conversion Stock:
1. Purchases of shares of Conversion Stock in the Conversion, including
purchases in the Direct Community Offering by any Person, and Associates
thereof, or a group of Persons Acting in Concert, shall not exceed an aggregate
purchase price of $225,000 except that Tax-Qualified Employee Stock Benefit
Plans may purchase up to 8% of the total Conversion Stock issued in the
Conversion and shares to be held by the Tax-Qualified Employee Stock Benefit
Plans and attributable to a Person shall not be aggregated with other shares
purchased directly by or otherwise attributable to such Person.
2. Officers and directors and Associates thereof may not purchase in
the aggregate more than 34% of the shares issued in the Conversion.
3. The Association's and Holding Company's Boards of Directors will not
be deemed to be Associates or a group of Persons Acting in Concert with other
directors or trustees solely as a result of membership on the Board of
Directors.
4. Persons, Associates thereof, or group of Persons Acting in Concert,
may not purchase shares of Conversion Stock with an aggregate purchase price of
more than $350,000 except that Tax-Qualified Employee Stock Benefit Plans may
purchase up to 8% of the total Conversion Stock issued and shares held or to be
held by the Tax-Qualified Employee Stock Benefit Plans and attributable to a
Person shall not be aggregated with other shares purchased directly by or
otherwise attributable to such Person.
A-9
5. The Association's Board of Directors, with the approval of the OTS
and without further approval of Members, may, as a result of market conditions
and other factors, increase or decrease the purchase limitation in paragraphs 1
and 4 above or the number of shares of Conversion Stock to be sold in the
Conversion. If the Association or the Holding Company, as the case may be,
increases the maximum purchase limitations or the number of shares of Conversion
Stock to be sold in the Conversion, the Association or the Holding Company, as
the case may be, is only required to resolicit Persons who subscribed for the
maximum purchase amount and may, in the sole discretion of the Association or
the Holding Company, as the case may be, resolicit certain other large
subscribers. If the Association or the Holding Company, as the case may be,
decreases the maximum purchase limitations or the number of shares of Conversion
Stock to be sold in the Conversion, the orders of any Person who subscribed for
the maximum purchase amount shall be decreased by the minimum amount necessary
so that such Person shall be in compliance with the then maximum number of
shares permitted to be subscribed for by such Person.
Each Person purchasing Conversion Stock in the Conversion shall be
deemed to confirm that such purchase does not conflict with the purchase
limitations under the Plan or otherwise imposed by law, rule or regulation. In
the event that such purchase limitations are violated by any Person (including
any Associate or group of Persons affiliated or otherwise Acting in Concert with
such Person), the Holding Company shall have the right to purchase from such
Person at the actual Purchase Price per share all shares acquired by such Person
in excess of such purchase limitations or, if such excess shares have been sold
by such Person, to receive from such Person the difference between the actual
Purchase Price per share paid for such excess shares and the price at which such
excess shares were sold by such Persons. This right of the Holding Company to
purchase such excess shares shall be assignable by the Holding Company.
F. Restrictions On and Other Characteristics of the Conversion Stock
1. Transferability. Conversion Stock purchased by Officers and
directors of the Association and officers and directors of the Holding Company
shall not be sold or otherwise disposed of for value for a period of one year
from the date of Conversion, except for any disposition (i) following the death
of the original purchaser or (ii) resulting from an exchange of securities in a
merger or acquisition approved by the regulatory authorities having
jurisdiction.
The Conversion Stock issued by the Holding Company to such Officers and
directors shall bear a legend giving appropriate notice of the one-year holding
period restriction. Said legend shall state as follows:
"The shares evidenced by this certificate are restricted as to
transfer for a period of one year from the date of this
certificate pursuant to Part 563b of the Rules and Regulations
of the Office of Thrift Supervision. These shares may not be
transferred prior thereto without a legal opinion of counsel
that said transfer is permissible under the provisions of
applicable laws and regulations."
In addition, the Holding Company shall give appropriate instructions to
the transfer agent of the Holding Company's Stock with respect to the foregoing
restrictions. Any shares of Holding Company Stock subsequently issued as a stock
dividend, stock split or otherwise, with respect to any such restricted stock,
shall be subject to the same holding period restrictions for such Persons as may
be then applicable to such restricted stock.
2. Subsequent Purchases by Officers and Directors. Without prior
approval of the OTS, if applicable, Officers and directors of the Association
and officers and directors of the Holding Company, and their Associates, shall
be prohibited for a period of three years following completion of the Conversion
from purchasing outstanding shares of Holding Company Stock, except from a
broker or dealer registered with the SEC. Notwithstanding this restriction,
purchases involving more than 1% of the total outstanding shares of Holding
Company Stock and purchases made and shares held by a Tax-Qualified or
non-Tax-Qualified Employee Stock Benefit Plan which may be attributable to
such directors and officers may be made in negotiated transactions without OTS
permission or the use of a broker or dealer.
A-10
3. Repurchase and Dividend Rights. Pursuant to present regulations,
for a period of three years from the date of Conversion, repurchases of Holding
Company Stock by the Holding Company from any Person are subject to certain
restrictions, with the exception of (i) a repurchase on a pro rata basis
pursuant to an offer approved by the OTS and made to all stockholders, (ii) the
repurchase of qualifying shares of a director or (iii) a purchase in the open
market by a Tax-Qualified Employee Stock Benefit Plan or a non-Tax-Qualified
Employee Stock Benefit Plan of the Association or the Holding Company in an
amount reasonable and appropriate to fund the plan. Repurchases during the first
year following the consummation of the Conversion are generally prohibited
unless "exceptional circumstances" are deemed to exist by the OTS. However, upon
10 days' written notification to the District Director and to the Chief Counsel,
Corporate and Securities Division of the OTS, if the District Director does not
object, the Holding Company may make open market repurchases of outstanding
Holding Company Stock during the second and third years following the
consummation of the Conversion, provided that (i) no more than 5% of the
outstanding Holding Company Stock is to be purchased during any twelve-month
period, (ii) the Association's ratio of regulatory capital to total liabilities
would not be reduced below 6%, and (iii) the repurchases would not adversely
affect the financial condition of the Association.
Present regulations also provide that the Association may not declare
or pay a cash dividend on or repurchase any of its Capital Stock if the result
thereof would be to reduce the regulatory capital of the Association below the
amount required for the liquidation account described in Paragraph XIII.
Further, any dividend declared or paid on, or repurchase of, the Capital Stock
shall be in compliance with the rules and regulations of the OTS, or other
applicable regulations. The above limitations shall not preclude payment of
dividends on, or repurchases of, Capital Stock in the event applicable Federal
regulatory limitations are liberalized subsequent to the Conversion.
4. Voting Rights. After the Conversion, holders of Savings Accounts in
and obligors on loans of the Association will not have voting rights in the
Association. Exclusive voting rights with respect to the Holding Company shall
be vested in the holders of Holding Company Stock; holders of Savings Accounts
in and obligors on loans of the Association will not have any voting rights in
the Holding Company except and to the extent that such Persons become
stockholders of the Holding Company, and the Holding Company will have exclusive
voting rights with respect to the Association's Capital Stock.
G. Mailing of Offering Materials and Collation of Subscriptions
The sale of all shares of Conversion Stock offered pursuant to the Plan
must be completed within 24 months after approval of the Plan at the Special
Meeting. After approval of the Plan by the OTS and the declaration of the
effectiveness of the Prospectus, the Holding Company shall distribute
Prospectuses and Order Forms for the purchase of shares of Conversion Stock in
accordance with the terms of the Plan.
The recipient of an Order Form shall be provided not less than 20 days
nor more than 45 days from the date of mailing, unless extended, properly to
complete, execute and return the Order Form to the Holding Company or the
Association. Self-addressed, postage prepaid, return envelopes shall accompany
all Order Forms when they are mailed. Failure of any eligible subscriber to
return a properly completed and executed Order Form within the prescribed time
limits shall be deemed a waiver and a release by such eligible subscriber of any
rights to purchase shares of Conversion Stock under the Plan.
The sale of all shares of Conversion Stock proposed to be issued in
connection with the Conversion must be completed within 45 days after the last
day of the Subscription Offering, unless extended by the Holding Company with
the approval of the OTS.
H. Method of Payment
Payment for all shares of Conversion Stock may be made in cash, by
check or by money order, or if a subscriber has a Savings Account in the
Association such subscriber may authorize the Association to charge the
subscriber's Savings Account. The Holding Company shall pay interest at not less
than the passbook rate on all
A-11
amounts paid in cash or by check or money order to purchase shares of
Conversion Stock in the Subscription Offering from the date payment is
received until the Conversion is completed or terminated. The
Association is not permitted knowingly to loan funds or otherwise extend any
credit to any Person for the purpose of purchasing Conversion Stock.
If a subscriber authorizes the Association to charge the subscriber's
Savings Account, the funds shall remain in the subscriber's Savings Account and
shall continue to earn interest, but may not be used by such subscriber until
the Conversion is completed or terminated, whichever is earlier. The withdrawal
shall be given effect only concurrently with the sale of all shares of
Conversion Stock proposed to be sold in the Conversion and only to the extent
necessary to satisfy the subscription at a price equal to the Purchase Price.
The Association shall allow subscribers to purchase shares of Conversion Stock
by withdrawing funds from certificate accounts held with the Association without
the assessment of early withdrawal penalties, subject to the approval, if
necessary, of the applicable regulatory authorities. In the case of early
withdrawal of only a portion of such account, the certificate evidencing such
account shall be canceled if the remaining balance of the account is less than
the applicable minimum balance requirement. In that event, the remaining balance
shall earn interest at the passbook rate. This waiver of the early withdrawal
penalty is applicable only to withdrawals made in connection with the purchase
of Conversion Stock under the Plan.
Tax-Qualified Employee Stock Benefit Plans may subscribe for shares by
submitting an Order Form, along with evidence of a loan commitment from a
financial institution for the purchase of shares, if applicable, during the
Subscription Offering and by making payment for the shares on the date of the
closing of the Conversion.
I. Undelivered, Defective or Late Order Forms; Insufficient Payment
If an Order Form (i) is not delivered and is returned to the Holding
Company or the Association by the United States Postal Service (or the Holding
Company or Association is unable to locate the addressee); (ii) is not returned
to the Holding Company or Association, or is returned to the Holding Company or
Association after expiration of the date specified thereon; (iii) is defectively
completed or executed; or (iv) is not accompanied by the total required payment
for the shares of Conversion Stock subscribed for (including cases in which the
subscribers' Savings Accounts are insufficient to cover the authorized
withdrawal for the required payment), the Subscription Rights of the Person to
whom such rights have been granted shall not be honored and shall be treated as
though such Person failed to return the completed Order Form within the time
period specified therein. Alternatively, the Holding Company or Association may,
but shall not be required to, waive any irregularity relating to any Order Form
or require the submission of a corrected Order Form or the remittance of full
payment for the shares of Conversion Stock subscribed for by such date as the
Holding Company or Association may specify. Subscription orders, once tendered,
shall not be revocable. The Holding Company's and Association's interpretation
of the terms and conditions of the Plan and of the Order Forms shall be final.
J. Members in Non-Qualified States or in Foreign Countries
The Holding Company shall make reasonable efforts to comply with the
securities laws of all states of the United States in which Persons entitled to
subscribe for shares of Conversion Stock pursuant to the Plan reside. However,
no such Person shall be offered or receive any such shares under the Plan who
resides in a foreign country or who resides in a state of the United States with
respect to which any of the following apply: (a) a small number of Persons
otherwise eligible to subscribe for shares of Conversion Stock reside in such
state; (b) the granting of Subscription Rights or offer or sale of shares of
Conversion Stock to such Persons would require the Holding Company to register,
under the securities laws of such state, as a broker or dealer or to register or
otherwise qualify its securities for sale in such state; or (c) such
registration or qualification would be impractical for reasons of cost or
otherwise.
A-12
X. Federal Stock Charter and Bylaws
As part of the Conversion, an amended Federal Stock Charter and Bylaws
will be adopted to authorize the Association to operate as a Federal capital
stock savings and loan association. By approving the Plan, the Members of the
Association will thereby approve the amended Federal Stock Charter and Bylaws.
Prior to completion of the Conversion, the proposed Federal Stock Charter and
Bylaws may be amended in accordance with the provisions and limitations for
amending the Plan under Paragraph XVII below. The effective date of the adoption
of the Federal Stock Charter and Bylaws shall be the date of the issuance of the
Conversion Stock, which shall be the date of consummation of the Conversion.
XI. Post Conversion Filing and Market Making
In connection with the Conversion, the Holding Company shall register
the Conversion Stock with the SEC pursuant to the Securities Exchange Act of
1934, as amended, and shall undertake not to deregister such Conversion Stock
for a period of three years thereafter.
The Holding Company shall use its best efforts to encourage and assist
various Market Makers to establish and maintain a market for the shares of its
stock. The Holding Company shall also use its best efforts to list its stock
through Nasdaq or on a national or regional securities exchange.
XII. Status of Savings Accounts and Loans Subsequent to Conversion
All Savings Accounts shall retain the same status after Conversion as
these accounts had prior to Conversion. Each Savings Account holder shall
retain, without payment, a withdrawable Savings Account or accounts after the
Conversion, equal in amount to the withdrawable value of such holder's Savings
Account or accounts prior to Conversion. All Savings Accounts will continue to
be insured by the Savings Association Insurance Fund of the FDIC up to the
applicable limits of insurance coverage. All loans shall retain the same status
after the Conversion as they had prior to the Conversion. See Paragraph IX.F.4.
with respect to the termination of voting rights of Members.
XIII. Liquidation Account
After the Conversion, holders of Savings Accounts shall not be entitled
to share in any residual assets in the event of liquidation of the Association.
However, the Association shall, at the time of the Conversion, establish a
liquidation account in an amount equal to its total net worth as of the date of
the latest statement of financial condition contained in the final Prospectus.
The function of the liquidation account shall be to establish a priority on
liquidation and, except as provided in Paragraph IX.F.3 above, the existence of
the liquidation account shall not operate to restrict the use or application of
any of the net worth accounts of the Association.
The liquidation account shall be maintained by the Association
subsequent to the Conversion for the benefit of Eligible Account Holders and
Supplemental Eligible Account Holders who retain their Savings Accounts in the
Association. Each Eligible Account Holder and Supplemental Eligible Account
Holder shall, with respect to each Savings Account held, have a related inchoate
interest in a portion of the liquidation account balance ("subaccount").
The initial subaccount balance for a Savings Account held by an
Eligible Account Holder and/or a Supplemental Eligible Account Holder shall be
determined by multiplying the opening balance in the liquidation account by a
fraction of which the numerator is the amount of such holder's Qualifying
Deposit in the Savings Account and the denominator is the total amount of the
Qualifying Deposits of all Eligible Account Holders and Supplemental Eligible
Account Holders. Such initial subaccount balance shall not be increased, and it
shall be subject to downward adjustment as provided below.
A-13
If the deposit balance in any Savings Account of an Eligible Account
Holder or Supplemental Eligible Account Holder at the close of business on any
annual closing date subsequent to the Eligibility Record Date is less than the
lesser of (i) the deposit balance in such Savings Account at the close of
business on any other annual closing date subsequent to the Eligibility Record
Date or the Supplemental Eligibility Record Date or (ii) the amount of the
Qualifying Deposit in such Savings Account on the Eligibility Record Date or the
Supplemental Eligibility Record Date, then the subaccount balance for such
Savings Account shall be adjusted by reducing such subaccount balance in an
amount proportionate to the reduction in such deposit balance. In the event of a
downward adjustment, such subaccount balance shall not be subsequently
increased, notwithstanding any increase in the deposit balance of the related
Savings Account. If any such Savings Account is closed, the related subaccount
balance shall be reduced to zero.
In the event of a complete liquidation of the Association, each
Eligible Account Holder and Supplemental Eligible Account Holder shall be
entitled to receive a liquidation distribution from the liquidation account in
the amount of the then current adjusted subaccount balance(s) for Savings
Account(s) then held by such holder before any liquidation distribution may be
made to stockholders. No merger, consolidation, bulk purchase of assets with
assumptions of Savings Accounts and other liabilities or similar transactions
with another Federally-insured institution in which the Association is not the
surviving institution shall be considered to be a complete liquidation. In any
such transaction, the liquidation account shall be assumed by the surviving
institution.
XIV. Regulatory Restrictions on Acquisition of Holding Company
A. Present OTS regulations provide that for a period of three years
following completion of the Conversion, no Person (i.e, individual, a group
Acting in Concert, a corporation, a partnership, an association, a joint stock
company, a trust, or any unincorporated organization or similar company, a
syndicate or any other group formed for the purpose of acquiring, holding or
disposing of securities of an insured institution or its holding company) shall
directly, or indirectly, offer to purchase or actually acquire the beneficial
ownership of more than 10% of any class of equity security of the Holding
Company without the prior approval of the OTS. However, approval is not required
for purchases directly from the Holding Company or the underwriters or selling
group acting on its behalf with a view towards public resale, or for purchases
not exceeding 1% per annum of the shares outstanding. Civil penalties may be
imposed by the OTS for willful violation or assistance of any violation. Where
any Person, directly or indirectly, acquires beneficial ownership of more than
10% of any class of equity security of the Holding Company within such
three-year period, without the prior approval of the OTS, stock of the Holding
Company beneficially owned by such Person in excess of 10% shall not be counted
as shares entitled to vote and shall not be voted by any Person or counted as
voting shares in connection with any matter submitted to the stockholders for a
vote. The provisions of this regulation shall not apply to the acquisition of
securities by Tax-Qualified Employee Stock Benefit Plans provided that such
plans do not have beneficial ownership of more than 25% of any class of equity
security of the Holding Company.
B. The Holding Company may provide in its articles of incorporation a
provision that, for a specified period of up to five years following the date of
the completion of the Conversion, no Person shall directly or indirectly offer
to acquire or actually acquire the beneficial ownership of more than 10% of any
class of equity security of the Holding Company. Such provisions would not apply
to acquisition of securities by Tax-Qualified Employee Stock Benefit Plans
provided that such plans do not have beneficial ownership of more than 25% of
any class of equity security of the Holding Company. The Holding Company may
provide in its articles of incorporation for such other provisions affecting the
acquisition of its stock as shall be determined by its Board of Directors.
XV. Directors and Officers of the Converted Association
The Conversion is not intended to result in any change in the directors
or Officers. Each Person serving as a director of the Association at the time of
Conversion shall continue to serve as a member of the Association's Board of
Directors, subject to the Converted Association's charter and bylaws. The
Persons serving as Officers immediately prior to the Conversion will continue to
serve at the discretion of the Board of Directors in their
A-14
respective capacities as Officers of the Association. In connection with
the Conversion, the Association and the Holding Company may enter into
employment agreements on such terms and with such officers as shall be
determined by the Boards of Directors of the Association and the Holding
Company.
XVI. Executive Compensation
The Association and the Holding Company may adopt, subject to any
required approvals, executive compensation or other benefit programs, including
but not limited to compensation plans involving stock options, stock
appreciation rights, restricted stock grants, employee recognition programs and
the like.
XVII. Amendment or Termination of Plan
If necessary or desirable, the Plan may be amended by a two-thirds vote
of the Association's Board of Directors, at any time prior to submission of the
Plan and proxy materials to the Members. At any time after submission of the
Plan and proxy materials to the Members, the Plan may be amended by a two-thirds
vote of the Board of Directors only with the concurrence of the OTS. The Plan
may be terminated by a two-thirds vote of the Board of Directors at any time
prior to the Special Meeting, and at any time following such Special Meeting
with the concurrence of the OTS. In its discretion, the Board of Directors may
modify or terminate the Plan upon the order of the regulatory authorities
without a resolicitation of proxies or another meeting of the Members.
In the event that mandatory new regulations pertaining to conversions
are adopted by the OTS prior to the completion of the Conversion, the Plan shall
be amended to conform to the new mandatory regulations without a resolicitation
of proxies or another meeting of Members. In the event that new conversion
regulations adopted by the OTS prior to completion of the Conversion contain
optional provisions, the Plan may be amended to utilize such optional provisions
at the discretion of the Board of Directors without a resolicitation of proxies
or another meeting of Members.
By adoption of the Plan, the Members authorize the Board of Directors
to amend and/or terminate the Plan under the circumstances set forth above.
XVIII. Expenses of the Conversion
The Holding Company and the Association shall use their best efforts to
assure that expenses incurred in connection with the Conversion shall be
reasonable.
XIX. Contributions to Tax-Qualified Plans
The Holding Company and/or the Association may make discretionary
contributions to the Tax-Qualified Employee Stock Benefit Plans, provided such
contributions do not cause the Association to fail to meet its regulatory
capital requirements.
A-15
EXHIBIT B
FEDERAL STOCK CHARTER
EMPIRE FEDERAL SAVINGS BANK
Section 1. Corporate title. The full corporate title of the bank is
Empire Federal Savings Bank ("Savings Bank").
Section 2. Office. The home office shall be located in the City of
Livingston, the County of Park, in the State of Montana.
Section 3. Duration. The duration of the Savings Bank is perpetual.
Section 4. Purpose and powers. The purpose of the Savings Bank is to
pursue any or all of the lawful objectives of a Federal savings and loan
association chartered under section 5 of the Home Owners' Loan Act and to
exercise all of the express, implied, and incidental powers conferred thereby
and by all acts amendatory thereof and supplemental thereto, subject to the
Constitution and laws of the United States as they are now in effect, or as they
may hereafter be amended, and subject to all lawful and applicable rules,
regulations, and orders of the Office of Thrift Supervision ("Office").
Section 5. Capital stock. The total number of shares of all classes of
the capital stock which the Savings Bank has authority to issue is 10,000 of
which 1,000 shares shall be common stock, of par value of $1.00 per share and of
which 9,000 shares shall be serial preferred stock having no par value. The
shares may be issued from time to time as authorized by the board of directors
without the approval of its shareholders except as otherwise provided in this
Section 5 or to the extent that such approval is required by governing law,
rule, or regulation. The consideration for the issuance of the shares shall be
paid in full before their issuance and shall not be less than the par value.
Neither promissory notes nor future services shall constitute payment or part
payment for the issuance of shares of the Savings Bank. The consideration for
the shares shall be cash, tangible or intangible property (to the extent direct
investment in such property would be permitted to the Savings Bank), labor or
services actually performed for the Savings Bank, or any combination of the
foregoing. In the absence of actual fraud in the transaction, the value of such
property, labor, or services, as determined by the board of directors of the
Savings Bank, shall be conclusive. Upon payment of such consideration, such
shares shall be deemed to be fully paid and nonassessable. In the case of a
stock dividend, that part of the surplus of the Savings Bank which is
transferred to stated capital upon the issuance of shares as a share dividend
shall be deemed to be the consideration for their issuance.
Except for shares issuable in connection with the conversion of the
Savings Bank from the mutual to stock form of capitalization, no shares of
common stock (including shares issuable upon conversion, exchange or exercise of
other securities) shall be issued, directly or indirectly, to officers,
directors, or controlling persons of the Savings Bank other than as part of a
general public offering or as qualifying shares to a director, unless their
issuance or the plan under which they would be issued has been approved by a
majority of the total votes eligible to be cast at a legal meeting.
Nothing contained in this section 5 (or in any supplementary sections
hereto) shall entitle the holders of any class or series of capital stock to
vote as a separate class or series or to more than one vote per share, except as
to the cumulation of votes for the election of directors: Provided, that this
restriction on voting separately by class or series shall not apply:
B-1
(i) To any provision which would authorize the holders of
preferred stock, voting as a class or series, to elect some members of
the board of directors, less than a majority thereof, in the event of
default in the payment of dividends on any class or series of preferred
stock;
(ii) To any provision which would require the holders of
preferred stock, voting as a class or series, to approve the merger or
consolidation of the Savings Bank with another corporation or the sale,
lease, or conveyance (other than by mortgage or pledge) of properties
or business in exchange for securities of a corporation other than the
Savings Bank if the preferred stock is exchanged for securities of such
other corporation: Provided, that no provision may require such
approval for transactions undertaken with the assistance or pursuant to
the direction of the Office, Federal Deposit Insurance Corporation or
the Resolution Trust Corporation;
(iii) To any amendment which would adversely change the
specific terms of any class or series of capital stock as set forth in
this Section 5 (or in any supplementary sections hereto), including any
amendment which would create or enlarge any class or series ranking
prior thereto in rights and preferences. An amendment which increases
the number of authorized shares of any class or series of capital
stock, or substitutes the surviving Savings Bank in a merger or
consolidation for the Savings Bank, shall not be considered to be such
an adverse change.
A description of the different classes and series, if any, of the
Savings Bank's capital stock and a statement of the designations, and the
relative rights, preferences, and limitations of the shares of each class of and
series, if any, of capital stock are as follows:
A. Common Stock. Except as provided in this Section 5 (or in any
supplementary sections thereto) the holders of common stock shall exclusively
possess all voting power. Each holder of shares of common stock shall be
entitled to one vote for each share held by such holder, except as to the
cumulation of votes for the election of directors.
Whenever there shall have been paid, or declared and set aside for
payment, to the holders of the outstanding shares of any class of stock having
preference over the common stock as to the payment of dividends, the full amount
of dividends and of sinking fund, retirement fund, or other retirement payments,
if any, to which such holders are respectively entitled in preference to the
common stock, then dividends may be paid on the common stock and on any class or
series of stock entitled to participate therewith as to dividends out of any
assets legally available for the payment of dividends.
In the event of any liquidation, dissolution, or winding up of the
Savings Bank, the holders of the common stock (and the holders of any class or
series of stock entitled to participate with the common stock in the
distribution of assets) shall be entitled to receive, in cash or in kind, the
assets of the Savings Bank available for distribution remaining after: (i)
payment or provision for payment of the Savings Bank's debts and liabilities;
(ii) distributions or provision for distributions in settlement of its
liquidation account; and (iii) distributions or provision for distributions to
holders of any class or series of stock having preference over the common stock
in the liquidation, dissolution, or winding up of the Savings Bank. Each share
of common stock shall have the same relative rights as and be identical in all
respects with all the other shares of common stock.
B. Preferred Stock. The Savings Bank may provide in supplementary
sections to its charter for one or more classes of preferred stock, which shall
be separately identified. The shares of any class may be divided into and issued
in series, with each series separately designated so as to distinguish the
shares thereof from the shares of all other series and classes. The terms of
each series shall be set forth in a supplementary section to the charter. All
shares of the same class shall be identical except as to the following relative
rights and preferences, as to which there may be variations between different
series:
B-2
(a) The distinctive serial designation and the number of shares
constituting such series;
(b) The dividend rate or the amount of dividends to be paid on the
shares of such series, whether dividends shall be cumulative and, if so, from
which date(s) the payment date(s) for dividends, and the participating or other
special rights, if any, with respect to dividends;
(c) The voting powers, full or limited, if any, of shares of such
series;
(d) Whether the shares of such series shall be redeemable and, if so,
the price(s) at which, and the terms and conditions on which such shares may be
redeemed;
(e) The amount(s) payable upon the shares of such series in the event
of voluntary or involuntary liquidation, dissolution, or winding up of the
Savings Bank;
(f) Whether the shares of such series shall be entitled to the benefit
of a sinking or retirement fund to be applied to the purchase or redemption of
such shares, and if so entitled, the amount of such fund and the manner of its
application, including the price(s) at which such shares may be redeemed or
purchased through the application of such fund;
(g) Whether the shares of such series shall be convertible into, or
exchangeable for, shares of any other class or classes of stock of the Savings
Bank and, if so, the conversion price(s) or the rate(s) of exchange, and the
adjustments thereof, if any, at which such conversion or exchange may be made,
and any other terms and conditions of such conversion or exchange;
(h) The price or other consideration for which the shares of such
series shall be issued; and
(i) Whether the shares of such series which are redeemed or converted
shall have the status of authorized but unissued shares of serial preferred
stock and whether such shares may be reissued as shares of the same or any other
series of serial preferred stock.
Each share of each series of serial preferred stock shall have the same
relative rights as and be identical in all respects with all the other shares of
the same series.
The board of directors shall have authority to divide, by the adoption
of supplementary charter sections, any authorized class of preferred stock into
series, and, within the limitations set forth in this section and the remainder
of this charter, fix and determine the relative rights and preferences of the
shares of any series so established.
Prior to the issuance of any preferred shares of a series established
by a supplementary charter section adopted by the board of directors, the
Savings Bank shall file with the secretary to the board a dated copy of that
supplementary section of this charter establishing and designating the series
and fixing and determining the relative rights and preferences thereof.
Section 6. Preemptive rights. Holders of the capital stock of the
Savings Bank shall not be entitled to preemptive rights with respect to any
shares of the Savings Bank which may be issued.
Section 7. Liquidation account. Pursuant to the requirements of the
Office's Regulations (12 CFR Subchapter D), the Savings Bank shall establish and
maintain a liquidation account for the benefit of its savings account holders as
of March 31, 1995 and September 30, 1996. In the event of a complete liquidation
of the Savings Bank, it shall comply with such regulations with respect to the
amount and the priorities on liquidation of each of the Savings Bank's eligible
savers' inchoate interest in the liquidation account, to the extent it is still
in existence: Provided, that an eligible savers' inchoate interest in the
liquidation account shall not entitle such eligible saver to any voting rights
at meetings of the Savings Bank's stockholders.
B-3
Section 8. Directors. The Savings Bank shall be under the direction of
a Board of Directors. The authorized number of directors, as stated in the
Savings Bank's bylaws, shall not be fewer than five nor more than fifteen except
when a greater number is approved by the Director of the Office.
Section 9. Amendment of charter. Except as provided in Section 5, no
amendment, addition, alteration, change, or repeal of this charter shall be
made, unless such is first proposed by the Board of Directors of the Savings
Bank, then preliminarily approved by the Office, which preliminary approval may
be granted by the Office pursuant to regulations specifying preapproved charter
amendments, and thereafter approved by the shareholders by a majority of the
total votes eligible to be cast at a legal meeting. Any amendment, addition,
alteration, change, or repeal so acted upon shall be effective upon filing with
the Office in accordance with regulatory procedures or on such other date as the
Office may specify in its preliminary approval.
Attest: By:
Secretary President and Chief Executive Officer
Empire Federal Savings Bank Empire Federal Savings Bank
Declared effective this ___ day of _________________, 199_.
Office of Thrift Supervision
By: By:
---------------------------------------------
Secretary Director
Office of Thrift Supervision Office of Thrift Supervision
B-4
EXHIBIT C
BYLAWS
EMPIRE FEDERAL SAVINGS BANK
ARTICLE I - Home Office
The home office of Empire Federal Savings Bank ("Savings Bank"),
shall be located at 123 South Main Street, in the City of Livingston, the County
of Park, in the State of Montana.
ARTICLE II - Shareholders
Section 1. Place of Meetings. All annual and special meetings of
shareholders shall be held at the home office of the Savings Bank or at such
other place in the State of Montana as the Board of Directors may determine.
Section 2. Annual Meeting. A meeting of the shareholders of the
Savings Bank for the election of directors and for the transaction of any other
business of the Savings Bank shall be held annually within 120 days after the
end of the Savings Bank's fiscal year on the second Monday after the first
Tuesday of April, if not a legal holiday, and if a legal holiday, then on the
next day following which is not a legal holiday, at 10:00 a.m., Mountain Time,
or at such other date and time within such 120-day period as the Board of
Directors may determine.
Section 3. Special Meetings. Special meetings of the shareholders
for any purpose or purposes, unless otherwise prescribed by the regulations of
the Office of Thrift Supervision ("Office"), may be called at any time by the
Chairman of the Board, the President, or a majority of the Board of Directors,
and shall be called by the Chairman of the Board, the President, or the
Secretary upon the written request of the holders of not less than one-tenth of
all of the outstanding capital stock of the Savings Bank entitled to vote at the
meeting. Such written request shall state the purpose or purposes of the meeting
and shall be delivered to the home office of the Savings Bank addressed to the
Chairman of the Board, the President, or the Secretary.
Section 4. Conduct of Meetings. Annual and special meetings shall
be conducted in accordance with rules and procedures adopted by the Board of
Directors. The Board of Directors shall designate, when present, either the
Chairman of the Board or President to preside at such meetings.
Section 5. Notice of Meetings. Written notice stating the place,
day, and hour of the meeting and the purpose(s) for which the meeting is called
shall be delivered not fewer than 10 nor more than 50 days before the date of
the meeting, either personally or by mail, by or at the direction of the
Chairman of the Board, the President, or the Secretary, or the directors calling
the meeting, to each shareholder of record entitled to vote at such meeting. If
mailed, such notice shall be deemed to be delivered when deposited in the mail,
addressed to the shareholder at the address as it appears on the stock transfer
books or records of the Savings Bank as of the record date prescribed in Section
6 of this Article II with postage prepaid. When any shareholders' meeting,
either annual or special, is adjourned for 30 days or more, notice of the
adjourned meeting shall be given as in the case of an original meeting. It shall
not be necessary to give any notice of the time and place of any meeting
adjourned for less than 30 days or of the business to be transacted at the
meeting, other than an announcement at the meeting at which such adjournment is
taken.
Section 6. Fixing of Record Date. For the purpose of determining
shareholders entitled to notice of or to vote at any meeting of shareholders or
any adjournment, or shareholders entitled to receive payment of any dividend, or
in order to make a determination of shareholders for any other proper purpose,
the Board of Directors shall fix in advance a date as the record date for any
such determination of shareholders. Such date in any case shall be not more than
60 days and, in case of a meeting of shareholders, not fewer than 10 days prior
to the date on
C-1
which the particular action requiring such determination of shareholders is to
be taken. When a determination of shareholders entitled to vote at any meeting
of shareholders has been made as provided in this section, such determination
shall apply to any adjournment.
Section 7. Voting Lists. At least 20 days before each meeting of
the shareholders, the officer or agent having charge of the stock transfer books
for shares of the Savings Bank shall make a complete list of the shareholders
entitled to vote at such meeting, or any adjournment, arranged in alphabetical
order, with the address and the number of shares held by each. This list of
shareholders shall be kept on file at the home office of the Savings Bank and
shall be subject to inspection by any shareholder at any time during usual
business hours for a period of 20 days prior to such meeting. Such list shall
also be produced and kept open at the time and place of the meeting and shall be
subject to inspection by any shareholder during the entire time of the meeting.
The original stock transfer book shall constitute prima facie evidence of the
shareholders entitled to examine such list or transfer books or to vote at any
meeting of shareholders.
In lieu of making the shareholder list available for inspection by
shareholders as provided in the preceding paragraph, the Board of Directors may
perform such acts as required by paragraphs (a) and (b) of Rule 14a-7 of the
General Rules and Regulations under the Securities Exchange Act of 1934, as may
be duly requested in writing, with respect to any matter which may be properly
considered at a meeting of shareholders, by any shareholder who is entitled to
vote on such matter and who shall defray the reasonable expenses to be incurred
by the Savings Bank in performance of the act or acts required.
Section 8. Quorum. A majority of the outstanding shares of the
Savings Bank entitled to vote, represented in person or by proxy, shall
constitute a quorum at a meeting of shareholders. If less than a majority of the
outstanding shares is represented at a meeting, a majority of the shares so
represented may adjourn the meeting from time to time without further notice. At
such adjourned meeting at which a quorum shall be present or represented, any
business may be transacted which might have been transacted at the meeting as
originally notified. The shareholders present at a duly organized meeting may
continue to transact business until adjournment, notwithstanding the withdrawal
of enough shareholders to constitute less than a quorum.
Section 9. Proxies. At all meetings of shareholders, a shareholder
may vote by proxy executed in writing by the shareholder or by his or her duly
authorized attorney in fact. Proxies solicited on behalf of the management shall
be voted as directed by the shareholder or, in the absence of such direction, as
determined by a majority of the Board of Directors. No proxy shall be valid more
than eleven months from the date of its execution except for a proxy coupled
with an interest.
Section 10. Voting of Shares in the Name of Two or More Persons.
When ownership stands in the name of two or more persons, in the absence of
written directions to the Savings Bank to the contrary, at any meeting of the
shareholders of the Savings Bank any one or more of such shareholders may cast,
in person or by proxy, all votes to which such ownership is entitled. In the
event an attempt is made to cast conflicting votes, in person or by proxy, by
the several persons in whose names shares of stock stand, the vote or votes to
which those persons are entitled shall be cast as directed by a majority of
those holding such shares and present in person or by proxy at such meeting, but
no votes shall be cast for such stock if a majority cannot agree.
Section 11. Voting of Shares by Certain Holders. Shares standing
in the name of another corporation may be voted by any officer, agent, or proxy
as the bylaws of such corporation may prescribe, or, in the absence of such
provision, as the Board of Directors of such corporation may determine. Shares
held by an administrator, executor, guardian, or conservator may be voted by
him, either in person or by proxy, without a transfer of such shares into his
or her name. Shares standing in the name of a trustee may be voted by him or
her, either in person or by proxy, but no trustee shall be entitled to vote
shares held by him or her without a transfer of such shares into his name.
Shares standing in the name of a receiver may be voted by such receiver, and
shares held by or under the control of a receiver may be voted by such receiver
without the transfer into his name if authority to do so is contained in an
appropriate order of the court or other public authority by which such receiver
was appointed.
C-2
A shareholder whose shares are pledged shall be entitled to vote
such shares until the shares have been transferred into the name of the pledgee,
and thereafter the pledgee shall be entitled to vote the shares so transferred.
Neither treasury shares of its own stock held by the Savings Bank
nor shares held by another corporation, if a majority of the shares entitled to
vote for the election of directors of such other corporation are held by the
Savings Bank, shall be voted at any meeting or counted in determining the total
number of outstanding shares at any given time for purposes of any meeting.
Section 12. Cumulative Voting. Unless otherwise provided in the
Savings Bank's charter, every shareholder entitled to vote at an election for
directors shall have the right to vote, in person or by proxy, the number of
shares owned by the shareholder for as many persons as there are directors to be
elected and for whose election the shareholder has a right to vote, or to
cumulate the votes by giving one candidate as many votes as the number of such
directors to be elected multiplied by the number of shares shall equal or by
distributing such votes on the same principle among any number of candidates.
Section 13. Inspectors of Election. In advance of any meeting of
shareholders, the Board of Directors may appoint any persons other than nominees
for office as inspectors of election to act at such meeting or any adjournment.
The number of inspectors shall be either one or three. Any such appointment
shall not be altered at the meeting. If inspectors of election are not so
appointed, the Chairman of the Board or the President may, or on the request of
not fewer than 10 percent of the votes represented at the meeting shall, make
such appointment at the meeting. If appointed at the meeting, the majority of
the votes present shall determine whether one or three inspectors are to be
appointed. In case any person appointed as inspector fails to appear or fails or
refuses to act, the vacancy may be filled by appointment by the Board of
Directors in advance of the meeting or at the meeting by the Chairman of the
Board or the President.
Unless otherwise prescribed by regulations of the Office, the
duties of such inspectors shall include: determining the number of shares and
the voting power of each share, the shares represented at the meeting, the
existence of a quorum, and the authenticity, validity and effect of proxies;
receiving votes, ballots, or consents; hearing and determining all challenges
and questions in any way arising in connection with the rights to vote; counting
and tabulating all votes or consents; determining the result; and such acts as
may be proper to conduct the election or vote with fairness to all shareholders.
Section 14. Nominating Committee. The Board of Directors shall act
as a nominating committee for selecting the management nominees for election as
directors. Except in the case of a nominee substituted as a result of the death
or other incapacity of a management nominee, the nominating committee shall
deliver written nominations to the secretary at least 20 days prior to the date
of the annual meeting. Upon delivery, such nominations shall be posted in a
conspicuous place in each office of the Savings Bank. No nominations for
directors except those made by the nominating committee shall be voted upon at
the annual meeting unless other nominations by shareholders are made in writing
and delivered to the Secretary of the Savings Bank at least five days prior to
the date of the annual meeting. Upon delivery, such nominations shall be posted
in a conspicuous place in each office of the Savings Bank. Ballots bearing the
names of all persons nominated by the nominating committee and by shareholders
shall be provided for use at the annual meeting. However, if the nominating
committee shall fail or refuse to act at least 20 days prior to the annual
meeting, nominations for directors may be made at the annual meeting by any
shareholder entitled to vote and shall be voted upon.
Section 15. New Business. Any new business to be taken up at the annual
meeting shall be stated in writing and filed with the Secretary of the Savings
Bank at least five days before the date of the annual meeting, and all business
so stated, proposed, and filed shall be considered at the annual meeting; but no
other proposal shall be acted upon at the annual meeting. Any shareholder may
make any other proposal at the annual meeting and the same may be discussed and
considered, but unless stated in writing and filed with the Secretary at least
five days before the meeting, such proposal shall be laid over for action at an
adjourned, special, or annual meeting of the shareholders taking place 30 days
or more thereafter. This provision shall not prevent the consideration and
approval
C-3
or disapproval at the annual meeting of reports of officers, directors, and
committees; but in connection with such reports, no new business shall be acted
upon at such annual meeting unless stated and filed as herein provided.
Section 16. Informal Action by Shareholders. Any action required
to be taken at a meeting of the shareholders, or any other action which may be
taken at a meeting of shareholders, may be taken without a meeting if consent in
writing, setting forth the action so taken, shall be given by all of the
shareholders entitled to vote with respect to the subject matter.
ARTICLE III - Board of Directors
Section 1. General Powers. The business and affairs of the Savings
Bank shall be under the direction of its Board of Directors. The Board of
Directors shall annually elect a Chairman of the Board and a President from
among its members and shall designate, when present, either the Chairman of the
Board or the President to preside at its meetings.
Section 2. Number and Term. The Board of Directors shall consist
of seven members and shall be divided into three classes as nearly equal in
number as possible. The members of each class shall be elected for a term of
three years and until their successors are elected and qualified. One class
shall be elected by ballot annually.
Section 3. Regular Meetings. A regular meeting of the Board of
Directors shall be held without other notice than this bylaw immediately after,
and at the same place as, the annual meeting of shareholders. The Board of
Directors may provide, by resolution, the time and place, within the Savings
Bank's normal lending territory, for the holding of additional regular meetings
without other notice than such resolution.
Section 4. Qualification. Each director shall at all times be the
beneficial owner of not less than 100 shares of capital stock of the Savings
Bank unless the Savings Bank is a wholly owned subsidiary of a holding company.
Section 5. Special Meetings. Special meetings of the Board of
Directors may be called by or at the request of the Chairman of the Board, the
President, or one-third of the directors. The persons authorized to call special
meetings of the Board of Directors may fix any place, within the Savings Bank's
normal lending territory, as the place for holding any special meeting of the
Board of Directors called by such persons.
Members of the Board of Directors may participate in special
meetings by means of conference telephone or similar communications equipment by
which all persons participating in the meeting can hear each other. Such
participations shall constitute presence in person but shall not constitute
attendance for the purpose of compensation pursuant to Section 12 of this
Article.
Section 6. Notice. Written notice of any special meeting shall be
given to each director at least two days prior thereto when delivered personally
or by telegram or at least five days prior thereto when delivered by mail at the
address at which the director is most likely to be reached. Such notice shall be
deemed to be delivered when deposited in the mail so addressed, with postage
prepaid if mailed or when delivered to the telegraph company if sent by
telegram. Any director may waive notice of any meeting by a writing filed with
the Secretary. The attendance of a director at a meeting shall constitute a
waiver of notice of such meeting, except where a director attends a meeting for
the express purpose of objecting to the transaction of any business because the
meeting is not lawfully called or convened. Neither the business to be
transacted at, nor the purpose of, any meeting of the Board of Directors need be
specified in the notice of waiver of notice of such meeting.
Section 7. Quorum. A majority of the number of directors fixed by
Section 2 of this Article III shall constitute a quorum for the transaction of
business at any meeting of the Board of Directors; but if less than such
majority is present at a meeting, a majority of the directors present may
adjourn the meeting from time to time. Notice of any adjourned meeting shall be
given in the same manner as prescribed by Section 6 of this Article III.
C-4
Section 8. Manner of Acting. The act of the majority of the
directors present at a meeting at which a quorum is present shall be the act of
the Board of Directors, unless a greater number is prescribed by regulation of
the Office or by these bylaws.
Section 9. Action Without a Meeting. Any action required or
permitted to be taken by the Board of Directors at a meeting may be taken
without a meeting if a consent in writing, setting forth the action so taken,
shall be signed by all of the directors.
Section 10. Resignation. Any director may resign at any time by
sending a written notice of such resignation to the home office of the Savings
Bank addressed to the Chairman of the Board or the President. Unless otherwise
specified, such resignation shall take effect upon receipt by the Chairman of
the Board or the President. More than three consecutive absences from regular
meetings of the Board of Directors, unless excused by resolution of the Board of
Directors, shall automatically constitute a resignation, effective when such
resignation is accepted by the Board of Directors.
Section 11. Vacancies. Any vacancy occurring on the Board of
Directors may be filled by the affirmative vote of a majority of the remaining
directors although less than a quorum of the Board of Directors. A director
elected to fill a vacancy shall be elected to serve until the next election of
directors by the shareholders. Any directorship to be filled by reason of an
increase in the number of directors may be filled by election by the Board of
Directors for a term of office continuing only until the next election of
directors by the shareholders.
Section 12. Compensation. Directors, as such, may receive a stated
salary for their services. By resolution of the Board of Directors, a reasonable
fixed sum, and reasonable expenses of attendance, if any, may be allowed for
actual attendance at each regular or special meeting of the Board of Directors.
Members of either standing or special committees may be allowed such
compensation for actual attendance at committee meetings as the Board of
Directors may determine.
Section 13. Presumption of Assent. A director of the Savings Bank
who is present at a meeting of the Board of Directors at which action on any
Association matter is taken shall be presumed to have assented to the action
taken unless his or her dissent or abstention shall be entered in the minutes of
the meeting or unless he or she shall file a written dissent to such action with
the person acting as the secretary of the meeting before the adjournment thereof
or shall forward such dissent by registered mail to the Secretary of the Savings
Bank within five days after the date a copy of the minutes of the meeting is
received. Such right to dissent shall not apply to a director who voted in favor
of such action.
Section 14. Removal of Directors. At a meeting of shareholders
called expressly for that purpose, any director may be removed for cause by a
vote of the holders of a majority of the shares then entitled to vote at an
election of directors. If less than the entire board is to be removed, no one of
the directors may be removed if the votes cast against the removal would be
sufficient to elect a director if then cumulatively voted at an election of the
class of directors of which such director is a part. Whenever the holders of the
shares of any class are entitled to elect one or more directors by the
provisions of the charter or supplemental sections thereto, the provisions of
this section shall apply, in respect to the removal of a director or directors
so elected, to the vote of the holders of the outstanding shares of that class
and not to the vote of the outstanding shares as a whole.
ARTICLE IV - Executive And Other Committees
Section 1. Appointment. The Board of Directors, by resolution adopted
by a majority of the full board, may designate the chief executive officer and
two or more of the other directors to constitute an executive committee. The
designation of any committee pursuant to this Article IV and the delegation of
authority shall not operate to relieve the Board of Directors, or any director,
of any responsibility imposed by law or regulation.
C-5
Section 2. Authority. The executive committee, when the Board of
Directors is not in session, shall have and may exercise all of the authority of
the Board of Directors except to the extent, if any, that such authority shall
be limited by the resolution appointing the executive committee; and except also
that the executive committee shall not have the authority of the Board of
Directors with reference to: the declaration of dividends; the amendment of the
charter or bylaws of the Savings Bank, or recommending to the shareholders a
plan of merger, consolidation, or conversion; the sale, lease, or other
disposition of all or substantially all of the property and assets of the
Savings Bank otherwise than in the usual and regular course of its business; a
voluntary dissolution of the Savings Bank; a revocation of any of the foregoing;
or the approval of a transaction in which any member of the executive committee,
directly or indirectly, has any material beneficial interest.
Section 3. Tenure. Subject to the provisions of Section 8 of this
Article IV, each member of the executive committee shall hold office until the
next regular annual meeting of the Board of Directors following his or her
designation and until a successor is designated as a member of the executive
committee.
Section 4. Meetings. Regular meetings of the executive committee
may be held without notice at such times and places as the executive committee
may fix from time to time by resolution. Special meetings of the executive
committee may be called by any member thereof upon not less than one day's
notice stating the place, date, and hour of the meeting, which notice may be
written or oral. Any member of the executive committee may waive notice of any
meeting and no notice of any meeting need be given to any member thereof who
attends in person. The notice of a meeting of the executive committee need not
state the business proposed to be transacted at the meeting.
Section 5. Quorum. A majority of the members of the executive
committee shall constitute a quorum for the transaction of business at any
meeting thereof, and action of the executive committee must be authorized by the
affirmative vote of a majority of the members present at a meeting at which a
quorum is present.
Section 6. Action Without a Meeting. Any action required or
permitted to be taken by the executive committee at a meeting may be taken
without a meeting if a consent in writing, setting forth the action so taken,
shall be signed by all of the members of the executive committee.
Section 7. Vacancies. Any vacancy in the executive committee may be
filled by a resolution adopted by a majority of the full Board of Directors.
Section 8. Resignations and Removal. Any member of the executive
committee may be removed at any time with or without cause by resolution adopted
by a majority of the full Board of Directors. Any member of the executive
committee may resign from the executive committee at any time by giving written
notice to the President or Secretary of the Savings Bank. Unless otherwise
specified, such resignation shall take effect upon its receipt; the acceptance
of such resignation shall not be necessary to make it effective.
Section 9. Procedure. The executive committee shall elect a
presiding officer from its members and may fix its own rules of procedure which
shall not be inconsistent with these bylaws. It shall keep regular minutes of
its proceedings and report the same to the Board of Directors for its
information at the meeting held next after the proceedings shall have occurred.
Section 10. Other Committees. The Board of Directors may by
resolution establish an audit, loan, or other committee composed of directors as
they may determine to be necessary or appropriate for the conduct of the
business of the Savings Bank and may prescribe the duties, constitution, and
procedures thereof.
C-6
ARTICLE V - Officers
Section 1. Positions. The officers of the Savings Bank shall be a
President, one or more Vice Presidents, a Secretary, and a Treasurer, each of
whom shall be elected by the Board of Directors. The Board of Directors may also
designate the Chairman of the Board as an officer. The President shall be the
Chief Executive Officer unless the Board of Directors designates the Chairman of
the Board as Chief Executive Officer. The President shall be a Director of the
Savings Bank. The offices of the Secretary and Treasurer may be held by the same
person and a Vice President may also be either the Secretary or the Treasurer.
The Board of Directors may designate one or more vice presidents as Executive
Vice President or Senior Vice President. The Board of Directors may also elect
or authorize the appointment of such other officers as the business of the
Savings Bank may require. The officers shall have such authority and perform
such duties as the Board of Directors may from time to time authorize or
determine. In the absence of action by the Board of Directors, the officers
shall have such powers and duties as generally pertain to their respective
offices.
Section 2. Election and Term of Office. The officers of the
Savings Bank shall be elected annually at the first meeting of the Board of
Directors held after each annual meeting of the stockholders. If the election of
officers is not held at such meeting, such election shall be held as soon
thereafter as possible. Each officer shall hold office until a successor has
been duly elected and qualified or until the officer's death, resignation, or
removal in the manner hereinafter provided. Election or appointment of an
officer, employee, or agent shall not of itself create contractual rights. The
Board of Directors may authorize the Savings Bank to enter into an employment
contract with any officer in accordance with regulations of the Office; but no
such contract shall impair the right of the Board of Directors to remove any
officer at any time in accordance with Section 3 of this Article V.
Section 3. Removal. Any officer may be removed by the Board of
Directors whenever in its judgment the best interests of the Savings Bank will
be served thereby, but such removal, other than for cause, shall be without
prejudice to any contractual rights, if any, of the person so removed.
Section 4. Vacancies. A vacancy in any office because of death,
resignation, removal, disqualification, or otherwise may be filled by the Board
of Directors for the unexpired portion of the term.
Section 5. Remuneration. The remuneration of the officers shall be
fixed from time to time by the Board of Directors.
ARTICLE VI - Contracts, Loans, Checks, and Deposits
Section 1. Contracts. To the extent permitted by regulations of
the Board, and except as otherwise prescribed by these bylaws with respect to
certificates for shares, the Board of Directors may authorize any officer,
employee, or agent of the Savings Bank to enter into any contract or execute and
deliver any instrument in the name of and on behalf of the Savings Bank. Such
authority may be general or confined to specific instances.
Section 2. Loans. No loans shall be contracted on behalf of the Savings
Bank and no evidence of indebtedness shall be issued in its name unless
authorized by the Board of Directors. Such authority may be general or confined
to specific instances.
Section 3. Checks, Drafts, etc. All checks, drafts, or other
orders for the payment of money, notes, or other evidences of indebtedness
issued in the name of the Savings Bank shall be signed by one or more officers,
employees, or agents of the Savings Bank in such manner as shall from time to
time be determined by the Board of Directors.
Section 4. Deposits. All funds of the Savings Bank not otherwise
employed shall be deposited from time to time to the credit of the Savings Bank
in any duly authorized depositories as the Board of Directors may select.
C-7
ARTICLE VII - Certificates for Shares and Their Transfer
Section 1. Certificates for Shares. Certificates representing
shares of capital stock of the Savings Bank shall be in such form as shall be
determined by the Board of Directors and approved by the Office. Such
certificates shall be signed by the Chief Executive Officer or by any other
officer of the Savings Bank authorized by the Board of Directors, attested by
the Secretary or an Assistant Secretary, and sealed with the corporate seal or a
facsimile thereof. The signatures of such officers upon a certificate may be
facsimiles if the certificate is manually signed on behalf of a transfer agent
or a registrar other than the Savings Bank itself or one of its employees. Each
certificate for shares of capital stock shall be consecutively numbered or
otherwise identified. The name and address of the person to whom the shares are
issued, with the number of shares and date of issue, shall be entered on the
stock transfer books of the Savings Bank. All certificates surrendered to the
Savings Bank for transfer shall be canceled and no new certificate shall be
issued until the former certificate for a like number of shares has been
surrendered and canceled, except that in the case of a lost or destroyed
certificate, a new certificate may be issued upon such terms and indemnity to
the Savings Bank as the Board of Directors may prescribe.
Section 2. Transfer of Shares. Transfer of shares of capital stock
of the Savings Bank shall be made only on its stock transfer books. Authority
for such transfer shall be given only by the holder of record or by his legal
representative, who shall furnish proper evidence of such authority, or by his
attorney authorized by a duly executed power of attorney and filed with the
Savings Bank. Such transfer shall be made only on surrender for cancellation of
the certificate for such shares. The person in whose name shares of capital
stock stand on the books of the Savings Bank shall be deemed by the Savings Bank
to be the owner for all purposes.
ARTICLE VIII - Fiscal Year; Annual Audit
The fiscal year of the Savings Bank shall end on the 31st day of
December of each year. The Savings Bank shall be subject to an annual audit as
of the end of its fiscal year by independent public accountants appointed by and
responsible to the Board of Directors. The appointment of such accountants shall
be subject to annual ratification by the shareholders.
ARTICLE IX - Dividends
Subject to the terms of the Savings Bank's charter and the
regulations and orders of the Office, the Board of Directors may, from time to
time, declare, and the Savings Bank may pay, dividends on its outstanding
classes of capital stock.
ARTICLE X - Corporate Seal
The Board of Directors shall provide a Savings Bank seal which
shall be two concentric circles between which shall be the name of the Savings
Bank. The year of incorporation or an emblem may appear in the center.
ARTICLE XI - Amendments
These bylaws may be amended in a manner consistent with
regulations of the Office at any time by a majority vote of the full Board of
Directors or by a majority vote of the votes cast by the stockholders of the
Savings Bank at any legal meeting.
C-8
REVOCABLE PROXY
SOLICITED ON BEHALF OF
THE BOARD OF DIRECTORS
OF
EMPIRE FEDERAL SAVINGS AND LOAN ASSOCIATION
FOR THE SPECIAL MEETING OF MEMBERS
TO BE HELD ON DECEMBER 19, 1996
The undersigned member of Empire Federal Savings and Loan Association
("Association") hereby appoints the Board of Directors, with full powers of
substitution, as attorneys-in-fact and agents for and in the name of the
undersigned, to vote such shares as the undersigned may be entitled to cast at
the Special Meeting of Members ("Meeting") of the Association, to be held at the
Association's office at 123 South Main Street, Livingston, Montana, on the date
and time indicated on the Notice of Special Meeting of Members, and at any
adjournment thereof. They are authorized to cast all votes to which the
undersigned is entitled, as follows:
FOR AGAINST
(1) To approve a Plan of Conversion adopted by the Board of Directors
on August 29, 1996, as subsequently amended on October 8, 1996, to
convert the Association from a federally chartered mutual savings and
loan association to a federally chartered capital stock savings bank,
to be known as "Empire Federal Savings Bank," to be held as a
wholly-owned subsidiary of a new holding company, Empire Federal
Bancorp, Inc., including the adoption of a Federal Stock Charter and
Bylaws for the Association, pursuant to the laws of the United States
and the rules and regulations of the Office of Thrift Supervision. [ ] [ ]
NOTE: The Board of Directors is not aware of any other matter that may come
before the Meeting.
THIS PROXY WILL BE VOTED FOR THE PROPOSITIONS
STATED IF NO CHOICE IS MADE HEREIN
Should the undersigned be present and elect to vote at said Meeting or
at any adjournment thereof and, after notification to the Secretary of the
Association at said Meeting of the member's decision to terminate this Proxy,
then the power of said attorney-in-fact or agents shall be deemed terminated and
of no further force and effect.
The undersigned acknowledges receipt of a Notice of Special Meeting of
Members of the Association called on the date and time indicated on the Notice
of Special Meeting, and a Proxy Statement relating to said Meeting from the
Association, prior to the execution of this Proxy.
- -------------------------
Date
- -------------------------
Signature
Note: Only one signature is required in the case of a joint account.