Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of
1934
Filed by the registrant [X]
Filed by a party other than the registrant [ ]
Check the appropriate box:
[ ] Preliminary proxy statement
[X] Definitive proxy statement
[ ] Definitive additional materials
[ ] Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
EMPIRE FEDERAL BANCORP, INC.
- ------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
EMPIRE FEDERAL BANCORP, INC.
- ------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of filing fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
N/A
- ------------------------------------------------------------------------------
(2) Aggregate number of securities to which transactions applies:
N/A
- ------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:
N/A
- ------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
N/A
- ------------------------------------------------------------------------------
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11 (a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the form or schedule and the date of its filing.
(1) Amount previously paid:
N/A
- ------------------------------------------------------------------------------
(2) Form, schedule or registration statement no.:
N/A
- ------------------------------------------------------------------------------
(3) Filing party:
N/A
- ------------------------------------------------------------------------------
(4) Date filed:
N/A
- ------------------------------------------------------------------------------
<PAGE>
<PAGE>
June 18, 1997
Dear Stockholder:
You are cordially invited to attend the First Annual Meeting of
Stockholders of Empire Federal Bancorp, Inc. The meeting will be held at the
main office of Empire Federal Savings Bank, 123 South Main Street, Livingston,
Montana, on Wednesday, July 30, 1997, at 12:30 p.m., Mountain Daylight Savings
Time. The Corporation is the parent holding company of Empire Federal
Savings Bank.
The attached Notice of the First Annual Meeting of Stockholders and Proxy
Statement describe the formal business to be transacted at the meeting. During
the meeting, we will also report on the operations of the Corporation.
Directors and officers of the Corporation, as well as a representative of KPMG
Peat Marwick L.L.P., the Corporation's independent auditors, will be present
to respond to appropriate questions of stockholders.
To ensure proper representation of your shares at the meeting, the Board
of Directors requests that you sign, date and return the enclosed proxy card
in the enclosed postage-prepaid envelope as soon as possible, even if you
currently plan to attend the meeting. This will not prevent you from voting
in person, but will assure that your vote is counted if you are unable to
attend the meeting.
We look forward to seeing you at the meeting.
Sincerely,
/s/Beverly D. Harris
Beverly D. Harris
President and Chief Executive Officer
<PAGE>
<PAGE>
EMPIRE FEDERAL BANCORP, INC.
123 SOUTH MAIN STREET
P.O. BOX 1099
LIVINGSTON, MONTANA 59047
(406) 222-1981
- ------------------------------------------------------------------------------
NOTICE OF FIRST ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JULY 30, 1997
- ------------------------------------------------------------------------------
NOTICE IS HEREBY GIVEN that the First Annual Meeting of Stockholders
("Meeting") of Empire Federal Bancorp, Inc. ("Corporation") will be held at
the main office of Empire Federal Savings Bank, 123 South Main Street,
Livingston, Montana, on Wednesday, July 30, 1997, at 12:30 p.m., Mountain
Daylight Savings Time.
A Proxy Card and a Proxy Statement for the Meeting are enclosed.
The Meeting is for the purpose of considering and acting upon:
1. The election of three directors of the Corporation;
2. The ratification of the adoption of the Empire Federal Bancorp, Inc.
1997 Stock Option Plan;
3. The ratification of the adoption of the Empire Federal Bancorp, Inc.
1997 Management Recognition and Development Plan; and
4. Such other matters as may properly come before the Meeting or any
adjournments thereof.
NOTE: The Board of Directors is not aware of any other business to come
before the Meeting.
Any action may be taken on any one of the foregoing proposals at the
Meeting on the date specified above or on any date or dates to which, by
original or later adjournment, the Meeting may be adjourned. Pursuant to the
Corporation's Bylaws, the Board of Directors has fixed the close of business
on June 9, 1997 as the record date for the determination of the stockholders
entitled to notice of and to vote at the Meeting and any adjournments thereof.
You are requested to complete and sign the enclosed form of proxy, which
is solicited by the Board of Directors, and to mail it promptly in the
enclosed envelope. The proxy will not be used if you attend the Meeting and
vote in person.
BY ORDER OF THE BOARD OF DIRECTORS
/s/Ernest A. Sandberg
ERNEST A. SANDBERG
SECRETARY
Livingston, Montana
June 18, 1997
- ------------------------------------------------------------------------------
IMPORTANT: THE PROMPT RETURN OF PROXIES WILL SAVE THE CORPORATION THE EXPENSE
OF FURTHER REQUESTS FOR PROXIES IN ORDER TO ENSURE A QUORUM. A SELF-ADDRESSED
ENVELOPE IS ENCLOSED FOR YOUR CONVENIENCE. NO POSTAGE IS REQUIRED IF MAILED
IN THE UNITED STATES.
- ------------------------------------------------------------------------------
<PAGE>
<PAGE>
PROXY STATEMENT
OF
EMPIRE FEDERAL BANCORP, INC.
123 SOUTH MAIN STREET
P.O. BOX 1099
LIVINGSTON, MONTANA 59047
(406) 222-1981
- ------------------------------------------------------------------------------
FIRST ANNUAL MEETING OF STOCKHOLDERS
JULY 30, 1997
- ------------------------------------------------------------------------------
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Empire Federal Bancorp, Inc.
("Corporation") to be used at the First Annual Meeting of Stockholders of the
Corporation ("Meeting"). The Meeting will be held at the main office of
Empire Federal Savings Bank ("Bank"), 123 South Main Street, Livingston,
Montana, on Wednesday, July 30, 1997, at 12:30 p.m., Mountain Daylight Savings
Time. The Corporation is the holding company for the Bank. The accompanying
Notice of First Annual Meeting of Stockholders and this Proxy Statement are
being first mailed to stockholders on or about June 18, 1997.
- ------------------------------------------------------------------------------
REVOCATION OF PROXIES
- ------------------------------------------------------------------------------
Stockholders who execute proxies retain the right to revoke them at any
time. Unless so revoked, the shares represented by such proxies will be voted
at the Meeting and at all adjournments thereof. Proxies may be revoked by
written notice delivered in person or mailed to the Secretary of the
Corporation at the above address, or by the filing of a later-dated proxy
prior to a vote being taken on a particular proposal at the Meeting. A
previously submitted proxy also will be revoked if a stockholder attends the
Meeting and votes in person. Proxies solicited by the Board of Directors of
the Corporation will be voted in accordance with the directions given therein.
Where no instructions are indicated, proxies will be voted for the nominees
for directors set forth below and in favor of each of the other proposals set
forth in this Proxy Statement for consideration at the Meeting.
- ------------------------------------------------------------------------------
VOTING SECURITIES AND SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
- ------------------------------------------------------------------------------
Stockholders of record as of the close of business on June 9, 1997
("Record Date") are entitled to one vote for each share of common stock of the
Corporation ("Common Stock") then held. Stockholders are not permitted to
cumulate their votes for the election of directors. As of the Record Date,
the Corporation had 2,592,100 shares of Common Stock issued and outstanding.
The presence, in person or by proxy, of at least a majority of the total
number of outstanding shares of Common Stock entitled to vote is necessary to
constitute a quorum at the Meeting. The three directors to be elected at the
Meeting will be elected by a plurality of the votes cast by the stockholders
present in person or by proxy and entitled to vote. Votes may be cast for or
withheld from each nominee for director. Votes that are withheld will have no
effect on the outcome of the election because directors will be elected by a
plurality of votes cast. Abstentions may be specified on all proposals
submitted to a stockholder vote other than the election of directors.
Abstentions will be counted as present for purposes of determining the
existence of a quorum regarding the proposal on which the abstention is noted.
Abstentions on the proposals to ratify the adoption of the Empire Federal
Bancorp, Inc. 1997 Stock Option Plan and to ratify the adoption of the Empire
Federal Bancorp, Inc. 1997 Management Recognition and Development Plan will
have the effect of a vote against such proposals. Broker non-votes will be
counted for purposes of determining the existence of a quorum, but will not be
counted for determining the number of votes cast with respect to a proposal
and, therefore, will have no effect on the outcome of such proposal.
Persons and groups who beneficially own in excess of 5% of the
Corporation's Common Stock are required to file certain reports with the
Securities and Exchange Commission ("SEC") regarding such ownership pursuant
to
<PAGE>
<PAGE>
the Securities Exchange Act of 1934, as amended ("Exchange Act"). Based upon
such reports, the following table sets forth, as of the Record Date, certain
information as to those persons who were beneficial owners of more than 5% of
the outstanding shares of Common Stock. Management knows of no persons other
than those set forth below who owned more than 5% of the outstanding shares of
Common Stock as of the Record Date. The table also sets forth, as of the
Record Date, information as to the shares of Common Stock beneficially owned
by each director, the "named executive officers" of the Corporation, and all
executive officers and directors of the Corporation as a group.
Amount and Nature Percent of
of Beneficial Common Stock
Beneficial Owner Ownership(1) Outstanding
- ---------------- ------------ -----------
Beneficial Owners of More
Than 5%
Empire Federal Savings Bank 207,368 8.00%
Employee Stock Ownership
Plan Trust
Directors
Walter J. Peterson, Jr. 15,600 *
John R. Boe 4,000 *
Edwin H. Doig 10,000 *
Sanroe J. Kaisler, Jr. 5,000 *
Walter R. Sales 10,000 *
Named Executive Officers(2)
Beverly D. Harris 22,506 *
Ernest A. Sandberg 12,500 *
All Executive Officers and *
Directors as a Group
(7 persons)
_______________
* Less than 1 percent of shares outstanding.
(1) In accordance with Rule 13d-3 under the Exchange Act, a person is deemed
to be the beneficial owner, for purposes of this table, of any shares of
Common Stock if he or she has voting or investment power with respect to
such security. The table includes shares owned by spouses, other
immediate family members in trust, shares held in retirement accounts or
funds for the benefit of the named individuals, and other forms of
ownership, over which shares the persons named in the table may possess
voting and/or investment power.
(2) Under SEC regulation, the term "named executive officer" includes the
chief executive officer, regardless of compensation level, and the four
most highly compensated executive officers, other than the chief executive
officer, whose total annual salary and bonus for the last completed fiscal
year exceeded $100,000. Mrs. Beverly D. Harris and Mr. Ernest A. Sandberg
were the Corporation's only "named executive officers" for the year ended
December 31, 1996. Mrs. Harris and Mr. Sandberg also are directors of the
Corporation.
2
<PAGE>
<PAGE>
- -----------------------------------------------------------------------------
PROPOSAL I - ELECTION OF DIRECTORS
- -----------------------------------------------------------------------------
The Corporation's Board of Directors consists of seven members. The
Board is divided into three classes with staggered terms, and each director is
elected for a three-year term. Three directors will be elected at the Meeting
to serve for a three year period, or until their respective successors have
been elected and qualified. The Board of Directors has nominated Walter J.
Peterson, Jr., Sanroe J. Kaisler, Jr. and Walter R. Sales for election as
directors. The nominees are current members of the Boards of Directors of the
Corporation and the Savings Bank. Each director of the Corporation is also a
director of the Savings Bank.
If any nominee is unable to serve, the shares represented by all valid
proxies will be voted for the election of such substitute(s) as the Board of
Directors may recommend. At this time, the Board knows of no reason why any
nominee might be unavailable to serve.
The Board of Directors recommends that stockholders vote "FOR" the
election of Messrs. Peterson, Kaisler and Sales.
The following table sets forth certain information regarding the nominees
for election at the Meeting, as well as information regarding those directors
continuing in office after the Meeting.
Year
First
Principal Occupation Elected Term to
Name Age(1) During Last Five Years Director (2)Expire
---- ------ ---------------------- -------- ---------
NOMINEES
Walter J.
Peterson, Jr. 73 Chairman of the Board 1964 2000(3)
of the Corporation and
the Savings Bank;
Vice President of
Dime Insurance Agency,
Livingston, Montana.
Sanroe J.
Kaisler, Jr. 72 Retired insurance broker. 1964 2000(3)
Walter R. Sales 69 Retired rancher and 1977 2000(3)
former Montana
Legislator.
DIRECTORS CONTINUING IN OFFICE
Beverly D.
Harris(4) 63 President of the 1971 1998
Savings Bank and
President and Chief
Executive Officer
of the Corporation;
Director of Montana
Power Company, a
NYSE-listed company,
since 1992.
Edwin H. Doig 65 Retired pharmacist. 1979 1998
Ernest A.
Sandberg(4) 60 Executive Vice 1971 1999
President and
Secretary of the
Savings Bank and
Treasurer, Chief
Financial Officer
and Secretary of
the Corporation.
John R. Boe 72 Retired junior high 1979 1999
school teacher and
vice principal.
(footnotes on following page)
3
<PAGE>
<PAGE>
- -----------------
(1) At December 31, 1996.
(2) Includes prior service on the Board of Directors of the Savings Bank.
(3) Assuming re-election at the Meeting.
(4) Mrs. Harris and Mr. Sandberg are sister-and brother-in-law.
- -----------------------------------------------------------------------------
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
- -----------------------------------------------------------------------------
The Boards of Directors of the Corporation and the Savings Bank conduct
their business through meetings and committees of the Boards. During the
fiscal year ended December 31, 1996, the Board of Directors of the Corporation
held one meeting in connection with its initial organization and two
subsequent meetings and the Board of Directors of the Savings Bank held
twelve meetings. No director of the Corporation or the Savings Bank attended
fewer than 75% of the total meetings of the Boards and committees on which
such Board member served during this period.
The Executive Committee, consisting of Directors Harris, Peterson and
Kaisler, meets as needed. This Committee generally has the power and
authority to act on behalf of the Board of Directors between scheduled Board
meetings, unless specific matters are delegated to it for action by the Board.
The Executive Committee did not meet during the fiscal year ended December 31,
1996.
The Audit Committee, consisting of Directors Peterson, Kaisler, Sales,
Doig and Boe, meets as needed. This Committee is responsible for reviewing
the external auditors' reports and results of their examination. The Audit
Committee met once during the fiscal year ended December 31, 1996.
The full Board of Directors acts as the Compensation Committee. This
Committee is responsible for reviewing and recommending compensation to be
paid to executive officers. Mrs. Harris and Mr. Sandberg recuse themselves
from the Committee when it considers matters regarding their compensation.
The Compensation Committee met once during the fiscal year ended December 31,
1996.
Article II, Section 14 of the Corporation's Bylaws provides that the
Board of Directors of the Corporation shall act as a nominating committee for
selecting the management nominees for election as directors. Such section of
the Bylaws also provides as follows: "No nominations for directors except
those made by the nominating committee shall be voted upon at the annual
meeting unless other nominations by stockholders are made in writing and
delivered to the Secretary of the Corporation in accordance with the
provisions of the Corporation's Certificate of Incorporation." Article II,
Section 15 further provides that any new business to be taken up at the annual
meeting shall be stated in writing and filed with the Secretary of the
Corporation in accordance with the provisions of the Corporation's Certificate
of Incorporation. Article X of the Certificate of Incorporation provides that
notice of a stockholder's intent to make a nomination or present new business
at the meeting ("stockholder notice") must be given not less than 30 days nor
more than 60 days prior to any such meeting; provided, however, that if less
than 31 days' notice of the meeting is given to stockholders by the
Corporation, a stockholder's notice shall be delivered or mailed, as
prescribed, to the Secretary of the Corporation not later than the close of
the tenth day following the day on which notice of the meeting was mailed to
stockholders. If properly made, such nominations shall be considered by
stockholders at such meeting. The Board of Directors of the Corporation met
once in its capacity as the nominating committee during the fiscal year ended
December 31, 1996.
- ------------------------------------------------------------------------------
DIRECTORS' COMPENSATION
- ------------------------------------------------------------------------------
Directors received a fee of $500 per month and a fee of $500 for
attendance at regular Board meetings during the year ended December 31, 1996.
Effective January 1, 1997, directors receive a retainer of $500 per month and
a fee of $250 for attendance at regular Board meetings of the Savings Bank and
a fee of $250 per month,
4
<PAGE>
<PAGE>
payable quarterly, for service on the Corporation's Board of Directors. In
addition, Directors residing in Bozeman and Big Timber receive $20 per meeting
for travel expenses. No additional fees are paid to Directors for attendance
at committee meetings. Directors' fees totalled $85,000 for the year ended
December 31, 1996.
- -----------------------------------------------------------------------------
EXECUTIVE COMPENSATION
- -----------------------------------------------------------------------------
Summary Compensation Table. The following information is furnished for
Mrs. Harris and Mr. Sandberg for the year ended December 31, 1996.
Annual Compensation
--------------------------------
Other Annual
Name and Position Year(1) Salary Bonus Compensation(2)
- ----------------- ------- ------ ----- ----------------
Beverly D. Harris 1996 $104,580 $19,028 $12,000
President and
Chief Executive
Officer of the
Corporation and
President of the
Savings Bank
Ernest A. Sandberg 1996 $ 95,760 $17,429 $12,000
Treasurer, Chief
Financial Officer
and Secretary of
the Corporation
and Executive Vice
President and
Secretary of the
Savings Bank
- ------------------
(1) Compensation information for the fiscal year ended December 31, 1995 and
1994 has been omitted as the Corporation was not a public company, nor a
subsidiary thereof, at such time. Excludes certain additional benefits,
the aggregate amounts of which do not exceed 10% of total salary and
bonus.
(2) Consists of directors fees.
Employment Agreements. Effective January 23, 1997, the Corporation and
the Savings Bank (collectively,the "Employers") entered into three year
employment agreements with Mrs. Harris and Mr. Sandberg. The agreements
provide for an initial salary level for Mrs. Harris and Mr. Sandberg of
$106,680 and $97,680,respectively, which amounts are paid by the Savings Bank
and may be increased at the discretion of the Board of Directors or an
authorized committee of the Board. In determining salary levels for Mrs.
Harris and Mr. Sandberg,the Board will consider compensation levels for
similarly situated executives at comparable institutions, the financial
performance of the Savings Bank, as well as their individual performance. On
each anniversary of the commencement date of the agreements, the term of the
agreements may be extended for an additional year. The agreements are
terminable by the Employers at any time or upon the occurrence of certain
events specified by federal regulations.
The employment agreements provide for severance payments and other
benefits in the event of involuntary termination of employment in connection
with any change in control of the Employers. Severance payments also are
provided on a similar basis in connection with a voluntary termination of
employment where, subsequent to a change in control, Mrs. Harris and Mr.
Sandberg are assigned duties inconsistent with their positions, duties,
responsibilities and status immediately prior to such change in control. The
term "change in control" is defined in the agreements as having occurred when,
among other things, (a) a person other than the Corporation purchases shares
of Common Stock pursuant to a tender or exchange offer for such shares, (b)
any person (as such term is used in Sections 13(d) and 14(d)(2) of the
Exchange Act) is or becomes the beneficial owner, directly or indirectly, of
securities of the Corporation representing 25% or more of the combined voting
power of the Corporation's then outstanding securities, (c) the membership of
the Board of Directors changes as the result of a contested election,
5
<PAGE>
<PAGE>
or (d) shareholders of the Corporation approve a merger, consolidation, sale
or disposition of all or substantially all of the Corporation's assets, or a
plan of partial or complete liquidation.
The severance payments from the Employers will equal 2.99 times each
executive's average annual compensation during the five-year period preceding
the change in control. Such amount will be paid in a lump sum within 10
business days following the termination of employment. Assuming that a change
in control had occurred at December 31, 1996, Mrs. Harris and Mr. Sandberg
would be entitled to severance payments of approximately $334,000 and
$306,000, respectively. Section 280G of the Code states that severance
payments that equal or exceed three times the base compensation of the
individual are deemed to be "excess parachute payments" if they are contingent
upon a change in control. Individuals receiving excess parachute payments are
subject to a 20% excise tax on the amount of such excess payments, and the
Employers would not be entitled to deduct the amount of such excess payments.
The agreements restrict each executive's right to compete against the
Employers for a period of one year from the date of termination of the
agreement if Mrs. Harris and Mr. Sandberg involuntarily terminate employment,
except in the event of a change in control.
Compensation Committee Interlocks and Insider Participation
Mrs. Harris and Mr. Sandberg serve as members of the Compensation
Committee. Although the Chief Executive Officer recommends compensation to be
paid to executive officers, the entire Board of Directors of the Savings Bank
reviews such recommendations and sets the compensation for Mrs. Harris and Mr.
Sandberg.
- -----------------------------------------------------------------------------
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
- -----------------------------------------------------------------------------
Section 16(a) of the Exchange Act, requires the Corporation's executive
officers and directors, and persons who own more than 10% of any registered
class of the Corporation's equity securities, to file reports of ownership and
changes in ownership with the SEC. Executive officers, directors and greater
than 10% shareholders are required by regulation to furnish the Corporation
with copies of all Section 16(a) forms they file.
Based solely on its review of the copies of such forms it has received
and written representations provided to the Corporation by the above
referenced persons, the Corporation believes that all filing requirements
applicable to its reporting officers, directors and greater than 10%
shareholders were properly and timely complied with since the date of
completion of the Corporation's initial stock offering on January 23, 1997.
- -----------------------------------------------------------------------------
TRANSACTIONS WITH MANAGEMENT
- -----------------------------------------------------------------------------
Applicable law and regulations require that all loans or extensions of
credit to executive officers and directors must be made on substantially the
same terms, including interest rates and collateral, as those prevailing at
the time for comparable transactions with other persons and does not involve
more than the normal risk of repayment or present other unfavorable features,
and the Savings Bank has adopted a policy to this effect. In addition, loans
made to a director or executive officer in an amount that, when aggregated
with the amount of all other loans to such director or executive officer and
his or her related interests are in excess of the greater of$25,000, or 5% of
the Savings Bank's capital and surplus (up to a maximum of $500,000), must be
approved in advance by a majority of the disinterested members of the Board of
Directors. The aggregate amount of loans by the Savings Bank to its executive
officers and directors was $21,000 at December 31, 1996.
Mr. Joseph T. Swindlehurst, General Counsel to the Savings Bank, is a
partner with the law firm of Huppert& Swindlehurst, P.C. Mr. Swindlehurst is
the brother of Mrs. Harris, and the brother-in-law of Mr. Sandberg. As
6
PAGE
<PAGE>
general counsel to the Savings Bank during the year ended December 31, 1996,
Huppert & Swindlehurst, P.C. was paid $11,719 in fees and expense
reimbursement, which amount did not exceed 5% of its annual gross revenues.
The Savings Bank's main office facility is owned by Mr. Swindlehurst,
Mrs. Harris and their sister, Mrs.Jean E. Sandberg, who is the wife of Mr.
Sandberg, and is leased by the Savings Bank. The Savings Bank has negotiated
the purchase of the building, which has been approved by the Office of Thrift
Supervision. During the year ended December 31, 1996, the owners received
approximately $10,000 in rental income from the Savings Bank.
- ------------------------------------------------------------------------------
PROPOSAL II - RATIFICATION OF 1997 STOCK OPTION PLAN
- ------------------------------------------------------------------------------
The Corporation's Board of Directors adopted the Empire Federal Bancorp,
Inc. 1997 Stock Option Plan ("Option Plan") on May 29, 1997, subject to
approval by the Corporation's stockholders. Assuming stockholder approval,
the Option Plan will be effective on January 26, 1998. By postponing the
effective date, the Option Plan will not be subject to certain regulatory
restrictions otherwise applicable to stock benefit plans implemented prior to
the first anniversary of the Savings Bank's mutual to stock conversion. The
following description of the Option Plan is qualified in its entirety by
reference to the complete text of the Option Plan, which is attached to this
Proxy Statement as Exhibit A.
Administration of the Option Plan
The Option Plan is administered by the Board of Directors of the
Corporation. In addition to determining who will be granted options, the
Board has the authority and discretion to determine when options will be
granted and the number of options to be granted. In making such
determination, the Board will consider those non-employee directors, officers
and employees who are expected to make significant contributions to the
long-term success of the Corporation and the Savings Bank. With respect to
awards to officers and employees, the Board also determines which options are
intended to qualify for special treatment under the Code ("Incentive Stock
Options") or to be issued as options which are not intended to so qualify
("Non-Qualified Stock Options"). The Option Plan provides that all options
granted to non-employee directors must be Non-Qualified Stock Options.
The Option Plan provides that (i) no officer or employee will receive an
award of stock options covering in excess of 25% of the number of shares
reserved for issuance under the Option Plan, (ii) no non-employee director
will receive an award of stock options covering in excess of 5% of the number
of shares reserved for issuance under the Option Plan and (iii) non-employee
directors serving as of the date of stockholder approval will not receive
awards of stock options covering in excess of 30% in the aggregate of the
number of shares reserved for issuance under the Option Plan.
The Board may from time to time amend or terminate the Option Plan in any
respect. An amendment to the Option Plan may be subject to stockholder
approval if such approval is necessary to comply with any tax or regulatory
requirement. No amendment or termination may retroactively impair the rights
of any person with respect to an option.
Shares Subject to the Option Plan
The Corporation has reserved an aggregate of 259,210 shares of the
Corporation's Common Stock for issuance pursuant to the exercise of stock
options, which may be granted to officers, employees and non-employee
directors. Such shares may be treasury shares or authorized but unissued
shares. The use of authorized but unissued shares may dilute the interests of
existing stockholders.
In the event of a merger, consolidation, sale of all or substantially all
of the property of the Corporation, reorganization, recapitalization,
reclassification, stock dividend, stock split, reverse stock split or other
distribution,
7
<PAGE>
<PAGE>
an appropriate and proportionate adjustment shall be made in (i) the maximum
number of shares available, (ii) the number and kind of shares subject to
outstanding options, if any, and (iii) the price for each share.
Option Price
The exercise price of Non-Qualified Stock Options and Incentive Stock
Options may not be less than 100% of the fair market value of the shares of
Common Stock of the Corporation on the date of grant. Any Incentive Stock
Option granted to a person owning more than 10% of the Corporation's
outstanding Common Stock must have an exercise price of at least 110% of fair
market value on the date of grant. The maximum aggregate fair market value
(determined as of the date of grant) of the shares to which Incentive Stock
Options held by an individual become exercisable for the first time during any
calendar year may not exceed $100,000.
Terms of Options
In general, the Board has the discretion to fix the term of each option
granted to an officer or employee under the Option Plan, except that the
maximum term of each option is ten years, subject to earlier termination as
provided in the Option Plan (five years in the case of Incentive Stock Options
granted to an employee who owns over 10% of the total combined voting power of
all classes of the Corporation's stock). The Option Plan provides that all
awards under the Option Plan will become exercisable in equal installments
over a minimum five-year period following the date of grant. However,
unvested options will become immediately exercisable in the event of the
option holder's death or disability, or upon a change in control (as defined
in the Option Plan) of the Corporation or the Savings Bank.
Except in limited circumstances, an option may not be transferred other
than by will or by laws of descent and distribution and, during the lifetime
of the option holder, may be exercised only by such holder. If any option
expires or terminates for any reason without having been exercised in full,
the unacquired shares subject to such option will be available again for
purposes of the Option Plan.
Federal Income Tax Consequences of Non-Qualified Options
An option holder who is granted a Non-Qualified Stock Option under the
Option Plan will not realize any income for Federal income tax purposes on the
grant of an option. An option holder will realize ordinary income for Federal
income tax purposes on the exercise of an option, provided the shares are not
then subject to a substantial risk of forfeiture within the meaning of Section
83 of the Code ("Risk of Forfeiture"), in an amount equal to the excess, if
any, of the fair market value of the shares of Common Stock on the date of
exercise over the exercise price thereof. If the shares are subject to a Risk
of Forfeiture on the date of exercise, the option holder will realize ordinary
income for the year in which the shares cease to be subject to a Risk of
Forfeiture in an amount equal to the excess, if any, of the fair market value
of the shares at the date they cease to be subject to a Risk of Forfeiture
over the exercise price, unless the option holder shall have made a timely
election under Section 83 of the Code to include in his or her income for the
year of exercise an amount equal to the excess of the fair market value of the
shares of Common Stock on the date of exercise over the exercise price. The
amount realized for tax purposes by an option holder by reason of the exercise
of a Non-Qualified Stock Option granted under the Option Plan is subject to
withholding by the Corporation and the Corporation is entitled to a deduction
in an amount equal to the income so realized by an option holder, provided all
necessary withholding requirements under the Code are met.
Provided that the option holder satisfies certain holding period
requirements provided by the Code, an employee will realize long-term capital
gain or loss, as the case may be, if the shares issued upon exercise of a
Non-Qualified Stock Option are disposed of more than one year after (i) the
shares are transferred to the employee or (ii) if the shares were subject to
a Risk of Forfeiture on the date of exercise and a valid election under
Section 83 of the Code shall not have been made, the date as of which the
shares cease to be subject to a Risk of Forfeiture. The amount recognized
upon such disposition will be the difference between the option holder's basis
in such shares and
8
<PAGE>
<PAGE>
the amount realized upon such disposition. Generally, an option holder's
basis in the shares will be equal to the exercise price plus the amount of
income recognized upon exercise of the option.
Federal Income Tax Consequences of Incentive Stock Options
An Incentive Stock Option holder who meets the eligibility requirements
of Section 422 of the Code will not realize income for Federal income tax
purposes, and the Corporation will not be entitled to a deduction, on either
the grant or the exercise of an Incentive Stock Option. If the Incentive
Stock Option holder does not dispose of the shares acquired within two years
after the date the Incentive Stock Option was granted to him or her or within
one year after the transfer of the shares to him or her, (i) any proceeds
realized on a sale of such shares in excess of the option price will be
treated as long-term capital gain and (ii) the Corporation will not be
entitled to any deduction for Federal income tax purposes with respect to such
shares.
If an Incentive Stock Option holder disposes of shares during the
two-year or one-year periods referred to above (a "Disqualifying
Disposition"), the Incentive Stock Option holder will not be entitled to the
favorable tax treatment afforded to incentive stock options under the Code.
Instead, the Incentive Stock Option holder will realize ordinary income for
Federal income tax purposes in the year the Disqualifying Disposition is made,
in an amount equal to the excess, if any, of the fair market value of the
shares of Common Stock on the date of exercise over the exercise price.
An Incentive Stock Option holder generally will recognize long-term
capital gains or loss, as the case may be, if the Disqualifying Disposition is
made more than one year after the shares are transferred to the Incentive
Stock Option holder. The amount of any such gain or loss will be equal to the
difference between the amount realized on the Disqualifying Disposition and
the sum of (x) the exercise price and (y) the ordinary income realized by the
Incentive Stock Option holder as the result of the Disqualifying Disposition.
The Corporation will be allowed in the taxable year of a Disqualifying
Disposition a deduction in the same amount as the ordinary income recognized
by the Incentive Stock Option holder provided all necessary withholding
requirements are met.
Notwithstanding the foregoing, if the Disqualifying Disposition is made
in a transaction with respect to which a loss (if sustained) would be
recognized to the Incentive Stock Option holder, then the amount of ordinary
income required to be recognized upon the Disqualifying Disposition will not
exceed the amount by which the amount realized from the disposition exceeds
the exercise price. Generally, a loss may be recognized if the transaction is
not a "wash" sale, a gift or a sale between certain persons or entities
classified under the Code as "related persons."
Alternative Minimum Tax
For purposes of computing the alternative minimum tax with respect to
shares acquired pursuant to the exercise of Incentive Stock Options, the
difference between the fair market value of the shares on the date of exercise
over the exercise price will be an item of tax preference in the year of
exercise if the shares are not subject to a Risk of Forfeiture; if the shares
are subject to a Risk of Forfeiture, the amount of the tax preference taken
into account in the year the Risk of Forfeiture ceased will be the excess of
the fair market value of the shares at the date they cease to be subject to a
Risk of Forfeiture over the exercise price. The basis of the shares for
alternative minimum tax purposes, generally, will be an amount equal to the
exercise price, increased by the amount of the tax preference taken into
account in computing the alternative minimum taxable income.
9
<PAGE>
<PAGE>
New Plan Benefits
Although the Corporation anticipates that option grants will be made to
nonemployee directors, officers and employees on or after the effective date
of the Option Plan, the Board has not made specific determinations regarding
the size of individual awards.
Adoption of the Option Plan
Subject to approval by the Corporation's stockholders, the Board of
Directors adopted the Option Plan to encourage stock ownership by employees
and non-employee directors of the Corporation and its subsidiaries by issuing
options to purchase shares of the Corporation's Common Stock, thereby enabling
such directors, officers and employees to acquire or increase their
proprietary interest in the Corporation and encouraging them to remain in the
employ or remain directors of the Corporation and its subsidiaries. The Board
of Directors has determined that the Option Plan is desirable, cost effective
and produces incentives that will benefit the Corporation and its
stockholders. Moreover, the Board of Directors believes that the terms of the
Option Plan are consistent with the terms of similar stock compensation
programs implemented by other recently converted financial institutions in the
Corporation's peer group. The Option Plan must be approved by a majority of
the outstanding shares of Common Stock of the Corporation. The Board of
Directors recommends a vote "FOR" the adoption of the Option Plan attached as
Exhibit A.
- ------------------------------------------------------------------------------
PROPOSAL III - RATIFICATION OF THE 1997 MANAGEMENT
RECOGNITION AND DEVELOPMENT PLAN
- ------------------------------------------------------------------------------
The Board of Directors of the Corporation adopted the Empire Federal
Bancorp, Inc. 1997 Management Recognition and Development Plan ("MRDP") on May
29, 1997 for the benefit of officers, employees and non-employee directors of
the Corporation and its subsidiaries. Assuming stockholder approval, the MRDP
will be effective on January 26, 1998. By postponing the effective date, the
MRDP will not be subject to certain regulatory restrictions otherwise
applicable to plans implemented prior to the first anniversary of the Savings
Bank's mutual-to-stock conversion. The following description of the MRDP is
qualified in its entirety by reference to the complete text of the MRDP, which
is attached to this Proxy Statement as Exhibit B.
The purpose of the MRDP is to encourage and provide an additional
incentive to non-employee directors, officers and employees of the Corporation
and its subsidiaries to increase the value of the Corporation and its Common
Stock by permitting them to acquire a significant equity interest in the
Corporation. The MRDP is also intended to assist the Corporation and the
Savings Bank in retaining superior personnel and to strengthen their desire to
remain as directors or employees of the Corporation and the Savings Bank.
All awards under the MRDP are made by the Board of Directors. The MRDP
provides that (i) no officer or employee will receive an award of restricted
stock covering in excess of 25% of the number of shares reserved for issuance
under the MRDP, (ii) no non-employee director shall receive an award of
restricted stock covering in excess of 5% of the number of shares reserved for
issuance under the MRDP and (iii) non-employee directors serving as of the
date of stockholder approval will not receive awards of restricted stock
covering in excess of 30% in the aggregate of the number of shares reserved
for issuance under the MRDP.
MRDP awards are made in the form of restricted stock that is subject to
restrictions on transfer of ownership. MRDP awards generally will vest over a
minimum five-year period in equal installments beginning on the first
anniversary of the effective date of the MRDP. If the employee or
non-employee director terminates service for reasons other than death or
disability, the employee or director forfeits all rights to the allocated
shares under restriction. If the employee's or director's termination is
caused by death or disability, all restrictions expire and all shares
allocated become unrestricted. MRDP awards also will become fully vested upon
a change in control (as defined in the MRDP) of the Corporation or the
Savings Bank. Compensation expense in the amount of the fair
10
<PAGE>
<PAGE>
market value of the Common Stock at the date of the grant to the officer or
director will be recognized over the period in which the shares vest. An
eligible officer or director will not be entitled to voting and other
stockholder rights with respect to the shares while restricted. Furthermore,
the shares, while restricted, may not be sold, pledged or otherwise disposed
of and dividends paid during the period of restriction will be held in escrow.
A recipient of an award who receives a grant of restricted stock and does
not elect to be taxed at the time of grant will not recognize income upon an
award of shares of Common Stock, and the Corporation will not be entitled to a
deduction until the termination of the restrictions. Upon such termination,
the recipient will recognize ordinary income in an amount equal to the fair
market value of the Common Stock at the time (less any amount paid by the
recipient for such shares) and the Corporation will be entitled to a deduction
in the same amount after satisfying federal income tax withholding
requirements. However, the recipient may elect to recognize ordinary income
in the year the restricted stock is granted in an amount equal to the fair
market value of the shares at that time, determined without regard to the
restrictions. In that event, the Corporation will be entitled to a deduction
in such year and in the same amount. Any gain or loss recognized by the
recipient upon subsequent disposition of the stock will be capital in nature.
The MRDP may utilize authorized but unissued shares of Common Stock from
the Corporation in fulfillment of awards. Any such use of shares by the MRDP
could dilute the holdings of the Corporation's stockholders. The MRDP also
may purchase Common Stock in the open market through a trust established in
connection with the MRDP and funded with contributions from the Corporation or
the Savings Bank. No more than 66,125 shares may be issued under the MRDP,
subject to adjustment in the event of a stock dividend, stock split, or
similar event. The Board of Directors can terminate the MRDP at any time, and
if it does so, any shares not allocated will revert to the Corporation.
New Plan Benefits
Although the Corporation anticipates that stock awards will be made to
nonemployee directors, officers and employees on or after the effective date
of the MRDP, the Board has not made specific determinations regarding the size
of individual awards.
Adoption of the MRDP
The Board of Directors has determined that the MRDP is desirable and will
produce incentives for management that will benefit the Corporation and its
stockholders. The Board of Directors believes that the MRDP will be a
significant factor in aligning the interests of management with those of
stockholders and that the terms of the MRDP are consistent with the terms of
similar stock compensation programs implemented by other recently converted
financial institutions in the Corporation's peer group. The MRDP must be
approved by a majority of the outstanding shares of Common Stock of the
Corporation. The Board of Directors recommends a vote "FOR" the adoption of
the MRDP attached as Exhibit B.
- -----------------------------------------------------------------------------
INDEPENDENT AUDITORS
- -----------------------------------------------------------------------------
KPMG Peat Marwick L.L.P. served as the Corporation's independent auditors
for the 1996 fiscal year. The Board of Directors has appointed KPMG Peat
Marwick L.L.P. to be its independent auditors for the 1997 fiscal year. A
representative of KPMG Peat Marwick L.L.P. is expected to be present at the
Meeting to respond to appropriate questions from stockholders and will have
the opportunity to make a statement should he desire to do so.
11
<PAGE>
<PAGE>
- ------------------------------------------------------------------------------
OTHER MATTERS
- ------------------------------------------------------------------------------
The Board of Directors of the Corporation is not aware of any business to
come before the Meeting other than the matters described in this Proxy
Statement. However, if any other matters should properly come before the
Meeting, it is intended that proxies in the accompanying form will be voted in
respect thereof according to the judgment of the person or persons voting the
proxies.
- ------------------------------------------------------------------------------
MISCELLANEOUS
- ------------------------------------------------------------------------------
The cost of solicitation of proxies will be borne by the Corporation. In
addition to solicitations by mail, directors, officers and regular employees
of the Corporation may solicit proxies personally or by telephone without
additional compensation. The Corporation also has retained Regan &
Associates, New York, New York, to assist in soliciting proxies at a cost of
$3,500 plus reimbursement of expenses up to $1,750.
The Corporation's Annual Report to Stockholders, including financial
statements, has been mailed to all stockholders of record as of the close of
business on the Record Date. Any stockholder who has not received a copy of
such Annual Report may obtain a copy by writing to the Secretary of the
Corporation. The Annual Report is not to be treated as part of these proxy
solicitation materials or as having been incorporated herein by reference.
- ----------------------------------------------------------------------------
STOCKHOLDER PROPOSALS
- ----------------------------------------------------------------------------
In order to be eligible for inclusion in the Corporation's proxy
materials for next year's Annual Meeting of Stockholders, any stockholder
proposal to take action at such meeting must be received at the Corporation's
main office at 123 South Main Street, Livingston, Montana, no later than
November 14, 1998. Any such proposals shall be subject to the requirements of
the proxy solicitation rules adopted under the Exchange Act.
BY ORDER OF THE BOARD OF DIRECTORS
/s/Ernest A. Sandberg
ERNEST A. SANDBERG
SECRETARY
Livingston, Montana
June 18, 1997
- -----------------------------------------------------------------------------
FORM 10-KSB
- -----------------------------------------------------------------------------
A copy of the Corporation's Form 10-KSB for the fiscal year ended December 31,
1996, as filed with the Securities and Exchange Commission, will be furnished
without charge to stockholders as of the record date upon written request to
Ernest A. Sandberg, Corporate Secretary, Empire Federal Bancorp, Inc., 123
South Main Street, Livingston, Montana 59047.
- -----------------------------------------------------------------------------
12
PAGE
<PAGE>
EXHIBIT A
EMPIRE FEDERAL BANCORP, INC.
1997 STOCK OPTION PLAN
SECTION 1. PURPOSE
The Empire Federal Bancorp, Inc. 1997 Stock Option Plan (the "Plan") is
hereby established to foster and promote the long-term success of Empire
Federal Bancorp, Inc. and its shareholders by providing directors, officers
and employees of the Corporation with an equity interest in the Corporation.
The Plan will assist the Corporation in attracting and retaining the highest
quality of experienced persons as directors, officers and employees and in
aligning the interests of such persons more closely with the interests of the
Corporation's shareholders by encouraging such parties to maintain an equity
interest in the Corporation.
SECTION 2. DEFINITIONS
For purposes of this Plan, the capitalized terms set forth below shall
have the following meanings:
BANK means Empire Federal Savings Bank, Livingston, Montana.
BOARD means the Board of Directors of the Corporation.
CHANGE IN CONTROL shall mean an event deemed to occur if and when (a) an
offeror other than the Corporation purchases shares of the stock of the
Corporation or the Bank pursuant to a tender or exchange offer for such
shares, (b) any person (as such term is used in Sections 13(d) and 14(d)(2) of
the Exchange Act) is or becomes the beneficial owner, directly or indirectly,
of securities of the Corporation or the Bank representing twenty-five percent
(25%) or more of the combined voting power of the Corporation's or the Bank's
then outstanding securities, (c) the membership of the board of directors of
the Corporation or the Bank changes as the result of a contested election,
such that individuals who were directors at the beginning of any twenty-four
(24) month period (whether commencing before or after the date of adoption of
this Plan) do not constitute a majority of the Board at the end of such
period, or (d) shareholders of the Corporation or the Bank approve a merger,
consolidation, sale or disposition of all or substantially all of the
Corporation's or the Bank's assets, or a plan of partial or complete
liquidation. If any of the events enumerated in clauses (a) - (d) occur, the
Board shall determine the effective date of the change in control resulting
therefrom, for purposes of the Plan.
CODE means the Internal Revenue Code of 1986, as amended from time to
time, and the regulations promulgated thereunder.
CORPORATION means Empire Federal Bancorp, Inc., a Delaware corporation.
DIRECTOR shall mean a director of the Corporation who is not also an
employee of the Corporation or its subsidiaries.
DISABILITY means any physical or mental injury or disease of a permanent
nature which renders a Participant incapable of meeting the requirements of
the employment or service performed by such Participant immediately prior to
the commencement of such disability. The determination of whether a
Participant is disabled shall be made by the Committee in its sole and
absolute discretion.
EXCHANGE ACT means the Securities Exchange Act of 1934, as amended from
time to time, and the rules and regulations promulgated thereunder.
A-1
<PAGE>
<PAGE>
FAIR MARKET VALUE shall be determined as follows:
(a) If the Stock is traded or quoted on the Nasdaq Stock Market or other
national securities exchange at the time of grant of an Option, then the Fair
Market Value shall be the average of the highest and lowest selling price on
such exchange on the date such Option is granted or, if there were no sales on
such date, then on the next prior business day on which there was a sale.
(b) If the Stock is not traded or quoted on the Nasdaq Stock Market or
other national securities exchange, then the Fair Market Value shall be a
value determined by the Board in good faith on such basis as it deems
appropriate.
INCENTIVE STOCK OPTION means an option to purchase shares of Stock
granted to a Participant under the Plan which is intended to meet the
requirements of Section 422 of the Code.
NON-QUALIFIED STOCK OPTION means an option to purchase shares of Stock
granted to a Participant under the Plan which is not intended to be an
Incentive Stock Option.
OPTION means an Incentive Stock Option or a Non-Qualified Stock Option.
PARTICIPANT means a Director or employee of the Corporation or its
subsidiaries selected by the Board to receive an Option under the Plan.
PLAN means this Empire Federal Bancorp, Inc. 1997 Stock Option Plan.
STOCK means the common stock, $0.01 par value, of the Corporation.
TERMINATION FOR CAUSE shall mean because of a Participant's personal
dishonesty, incompetence, willful misconduct, breach of fiduciary duty
involving personal profit, intentional failure to perform stated duties,
willful violation of any law, rule or regulation (other than traffic
violations or similar offenses) or material breach of any provision of any
employment agreement between the Corporation and/or, the Bank and a
Participant.
SECTION 3. ADMINISTRATION
(a) The Plan shall be administered by the Board. Among other things, the
Board shall have authority, subject to the terms of the Plan, to grant
Options, to determine the individuals to whom and the time or times at which
Options may be granted, to determine whether such Options are to be Incentive
Options or Non-Qualified Stock Options (subject to the requirements of the
Code), to determine the terms and conditions of any Option granted hereunder,
and the exercise price thereof.
(b) Subject to the other provisions of the Plan, the Board of Directors
shall have authority to adopt, amend, alter and repeal such administrative
rules, guidelines and practices governing the operation of the Plan as it
shall from time to time consider advisable, to interpret the provisions of the
Plan and any Option and to decide all disputes arising in connection with the
Plan. The Board may correct any defect or supply any omission or reconcile any
inconsistency in the Plan or in any option agreement in the manner and to the
extent it shall deem appropriate to carry the Plan into effect, in its sole
and absolute discretion. The Board's decision and interpretations shall be
final and binding. Any action of the Board with respect to the administration
of the Plan shall be taken pursuant to a majority vote or by the unanimous
written consent of its members.
SECTION 4. ELIGIBILITY AND PARTICIPATION; LIMITATIONS ON AWARDS
(a) Officers and employees of the Corporation and its subsidiaries and
Directors shall be eligible to participate in the Plan. The Participants under
the Plan shall be selected from time to time by the Board of Directors,
A-2
<PAGE>
<PAGE>
in its sole discretion, from among those eligible, and the Board shall
determine, in its sole discretion, the numbers of shares to be covered by the
Option or Options granted to each Participant. Options intended to qualify as
Incentive Stock Options shall be granted only to persons who are eligible to
receive such options under Section 422 of the Code.
(b) Notwithstanding anything herein to the contrary, (i) no officer or
employee shall be granted Options covering in excess of twenty five percent
(25%), (ii) no Director shall be granted Options covering in excess of five
percent (5%) and (iii) Directors serving as of the effective date of the Plan
shall not be granted Options covering in excess of thirty percent (30%) in the
aggregate, of the number of shares reserved for issuance under the Plan.
(c) Notwithstanding anything herein to the contrary, no grant of Options
under the Plan shall become exercisable more rapidly than in substantially
equal installments over a five (5) year period beginning on the date of grant.
SECTION 5. SHARES OF STOCK AVAILABLE FOR OPTIONS
(a) The maximum number of shares of Stock which may be issued and
purchased pursuant to Options granted under the Plan is 259,210, subject to
the adjustments as provided in Section 5 and Section 9, to the extent
applicable. If an Option granted under this Plan expires or terminates before
exercise or is forfeited for any reason, the shares of Stock subject to such
Option, to the extent of such expiration, termination or forfeiture, shall
again be available for subsequent Option grant under Plan. Shares of Stock
issued under the Plan may consist in whole or in part of authorized but
unissued shares or treasury shares.
(b) In the event that the Board of Directors determines, in its sole
discretion, that any stock dividend, stock split, reverse stock split or
combination, extraordinary cash dividend, creation of a class of equity
securities, recapitalization, reclassification, reorganization, merger,
consolidation, split-up, spin-off, combination, exchange of shares, or other
similar transaction affects the Stock such that an adjustment is required in
order to preserve the benefits or potential benefits intended to be granted or
made available under the Plan to Participants, the Board shall have the right
to proportionately and appropriately adjust equitably any or all of (i) the
maximum number and kind of shares of Stock in respect of which Options may be
granted under the Plan to Participants, (ii) the number and kind of shares of
Stock subject to outstanding Options held by Participants, and (iii) the
exercise price with respect to any Options held by Participants, without
changing the aggregate purchase price as to which such Options remain
exercisable, provided that no adjustment shall be made pursuant to this
Section if such adjustment would cause the Plan to fail to comply with Section
422 of the Code with regard to any Incentive Stock Options granted hereunder.
No fractional Shares shall be issued on account of any such adjustment.
(c) Any adjustments under this Section will be made by the Board of
Directors, whose determination as to what adjustments, if any, will be made
and the extent thereof will be final, binding and conclusive.
SECTION 6. NON-QUALIFIED STOCK OPTIONS
6.1 Grant of Non-Qualified Stock Options.
Subject to Sections 4(b) and (c) the Board of Directors may, from time to
time, grant Non-Qualified Stock Options to Participants upon such terms and
conditions as the Board of Directors may determine. Non-Qualified Stock
Options granted under this Plan are subject to the following terms and
conditions:
(a) Price. The purchase price per share of Stock deliverable upon the
exercise of each Non-Qualified Stock Option shall be determined by the Board
of Directors on the date the option is granted. Such purchase price shall not
be less than one hundred percent (100%) of the Fair Market Value of the Stock
on the date of grant. Shares may be purchased only upon full payment of the
purchase price. Payment of the purchase price may be made, in
A-3
<PAGE>
<PAGE>
whole or in part, through the surrender of shares of the Stock at the Fair
Market Value of such shares on the date of surrender or through a "cashless
exercise" involving a stock brokerage firm.
(b) Terms of Options. The term during which each Non-Qualified Stock
Option may be exercised shall be determined by the Board of Directors, but in
no event shall a Non-Qualified Stock Option be exercisable in whole or in part
more than ten (10) years from the date of grant. Except as provided herein, no
Non-Qualified Stock Option granted under this Plan is transferable except by
will or the laws of descent and distribution. The Board shall have
discretionary authority to permit the transfer of any Non-Qualified Stock
Option to members of a Participant's immediate family, including trusts for
the benefit of such family members and partnerships in which such family
members are the only partners; provided, however, that a transferred
Non-Qualified Stock Option may be exercised by the transferee on any date only
to the extent that the Participant would have been entitled to exercise the
Non- Qualified Stock Option on such date had the Non-Qualified Stock Option
not been transferred. Any transferred Non-Qualified Stock Option shall remain
subject to the terms and conditions of the Participant's stock option
agreement.
(c) Termination of Service. Unless otherwise determined by the Board of
Directors, upon the termination of a Participant's service as an employee or
member of the Board of Directors for any reason other than Disability, death
or Termination for Cause, the Participant's Non-Qualified Stock Options shall
be exercisable only as to those shares which were immediately exercisable by
the Participant at the date of termination and only for a period of one year
following termination. Notwithstanding any provision set forth herein nor
contained in any Agreement relating to the award of an Option, in the event of
Termination for Cause, all rights under the Participant's Non-Qualified Stock
Options shall expire upon termination. In the event of death or termination of
service as a result of Disability of any Participant, all Non-Qualified Stock
Options held by the Participant, whether or not exercisable at such time,
shall be exercisable by the Participant or his legal representatives or
beneficiaries of the Participant for two years or such longer period as
determined by the Board following the date of the Participant's death or
termination of service due to Disability, provided that in no event shall the
period extend beyond the expiration of the Non-Qualified Stock Option term.
SECTION 7. INCENTIVE STOCK OPTIONS
7.1 Grant of Incentive Stock Options.
The Board of Directors may, from time to time, grant Incentive Stock
Options to eligible employees. Incentive Stock Options granted pursuant to the
Plan shall be subject to the following terms and conditions:
(a) Price. The purchase price per share of Stock deliverable upon the
exercise of each Incentive Stock Option shall be not less than one hundred
percent (100%) of the Fair Market Value of the Stock on the date of grant.
However, if a Participant owns stock possessing more than ten percent (10%) of
the total combined voting power of all classes of Stock, the purchase price
per share of Stock deliverable upon the exercise of each Incentive Stock
Option shall not be less than one hundred ten percent (110%) of the Fair
Market Value of the Stock on the date of grant. Shares may be purchased only
upon payment of the full purchase price. Payment of the purchase price may be
made, in whole or in part, through the surrender of shares of the Stock at the
Fair Market Value of such shares on the date of surrender or through a
"cashless exercise" involving a stock brokerage firm.
(b) Amounts of Options. Subject to Sections 4(b) and (c), Incentive
Stock Options may be granted to any eligible employee in such amounts as
determined by the Board of Directors. In the case of an option intended to
qualify as an Incentive Stock Option, the aggregate Fair Market Value
(determined as of the time the option is granted) of the Stock with respect to
which Incentive Stock Options granted are exercisable for the first time by
the Participant during any calendar year shall not exceed $100,000. The
provisions of this Section 7.1(b) shall be construed and applied in accordance
with Section 422(d) of the Code and the regulations, if any, promulgated
thereunder. To the extent an award is in excess of such limit, it shall be
deemed a Non-Qualified Stock Option. The Board shall have discretion to
redesignate options granted as Incentive Stock Options as Non-Qualified Stock
Options.
A-4
<PAGE>
<PAGE>
(c) Terms of Options. The term during which each Incentive Stock Option
may be exercised shall be determined by the Board of Directors, but in no
event shall an Incentive Stock Option be exercisable in whole or in part more
than ten (10) years from the date of grant. If at the time an Incentive Stock
Option is granted to an employee, the employee owns Stock representing more
than ten percent (10%) of the total combined voting power of the Corporation
(or, under Section 422(d) of the Code, is deemed to own Stock representing
more than ten percent (10%) of the total combined voting power of all such
classes of Stock, by reason of the ownership of such classes of Stock,
directly or indirectly, by or for any brother, sister, spouse, ancestor or
lineal descendent of such employee, or by or for any corporation, partnership,
estate or trust of which such employee is a shareholder, partner or
beneficiary), the Incentive Stock Option granted to such employee shall not be
exercisable after the expiration of five years from the date of grant. No
Incentive Stock Option granted under this Plan is transferable except by will
or the laws of descent and distribution.
(d) Termination of Employment. Upon the termination of a Participant's
service for any reason other than Disability, death or Termination for Cause,
the Participant's Incentive Stock Options which are then exercisable at the
date of termination may only be exercised by the Participant for a period of
three months following termination, after which time they shall be void.
Notwithstanding any provisions set forth herein nor contained in any Agreement
relating to an award of an Option, in the event of Termination for Cause, all
rights under the Participant's Incentive Stock Options shall expire
immediately upon termination.
Unless otherwise determined by the Board of Directors, in the event of
death or termination of service as a result of Disability of any Participant,
all Incentive Stock Options held by such Participant, whether or not
exercisable at such time, shall be exercisable by the Participant or the
Participant's legal representatives or the beneficiaries of the Participant
for one year following the date of the Participant's death or termination of
employment as a result of Disability. In no event shall the exercise period
extend beyond the expiration of the Incentive Stock Option term.
(f) Compliance with Code. The options granted under this Section 7 of
the Plan are intended to qualify as incentive stock options within the meaning
of Section 422 of the Code, but the Corporation makes no warranty as to the
qualification of any option as an incentive stock option within the meaning of
Section 422 of the Code. A Participant shall notify the Board in writing in
the event that he disposes of Stock acquired upon exercise of an Incentive
Stock Option within the two-year period following the date the Incentive Stock
Option was granted or within the one-year period following the date he
received Stock upon the exercise of an Incentive Stock Option and shall comply
with any other requirements imposed by the Corporation in order to enable the
Corporation to secure the related income tax deduction to which it will be
entitled in such event under the Code.
SECTION 8. EXTENSION
The Board of Directors may, in its sole discretion, extend the dates
during which all or any particular Option or Options granted under the Plan
may be exercised; provided, however, that no such extension shall be permitted
if it would cause Incentive Stock Options issued under the Plan to fail to
comply with Section 422 of the Code.
SECTION 9. GENERAL PROVISIONS APPLICABLE TO OPTIONS
(a) Each Option under the Plan shall be evidenced by a writing delivered
to the Participant specifying the terms and conditions thereof and containing
such other terms and conditions not inconsistent with the provisions of the
Plan as the Board of Directors considers necessary or advisable to achieve the
purposes of the Plan or comply with applicable tax and regulatory laws and
accounting principles.
(b) Each Option may be granted alone, in addition to or in relation to
any other Option. The terms of each Option need not be identical, and the
Board of Directors need not treat Participants uniformly. Except as otherwise
provided by the Plan or a particular Option, any determination with respect to
an Option may be made by the Board at the time of grant or at any time
thereafter.
A-5
<PAGE>
<PAGE>
(c) In the event of a Change in Control, all then outstanding Options
shall become one hundred percent vested and exercisable as of the effective
date of the Change in Control. If, in connection with or as a consequence of
a Change in Control, the Corporation or the Bank is merged into or
consolidated with another corporation, if the Corporation or the Bank becomes
a subsidiary of another corporation or if the Corporation or the Bank sells or
otherwise disposes of substantially all of its assets to another corporation,
then unless provisions are made in connection with such transactions for the
continuance of the Plan and/or the assumption or substitution of then
outstanding Options with new options covering the stock of the successor
corporation, or parent or subsidiary thereof, with appropriate adjustments as
to the number and kind of shares and prices, such Options shall be canceled as
of the effective date of the merger, consolidation, or sale and the
Participant shall be paid in cash an amount equal to the difference between
the Fair Market Value of the Stock subject to the Options on the effective
date of such corporate event and the exercise price of the Options.
(d) The Corporation shall be entitled to withhold (or secure payment
from the Participant in lieu of withholding) the amount of any withholding or
other tax required by law to be withheld or paid by the Corporation with
respect to any Options exercised under this Plan, and the Corporation may
defer issuance of Stock hereunder until and unless indemnified to its
satisfaction against any liability for any such tax. The amount of such
withholding or tax payment shall be determined by the Board or its delegate
and shall be payable by the Participant at such time as the Board determines.
Such withholding obligation may be satisfied by, without limitation, the
payment of cash by the Participant to the Corporation, the tendering of
previously acquired shares of Stock of the Participant or the withholding, at
the appropriate time, of shares of Stock otherwise issuable to the
Participant, in a number sufficient, based upon the Fair Market Value of such
Stock, to satisfy such tax withholding requirements. The Board shall be
authorized, in its sole discretion, to establish such rules and procedures
relating to any such withholding methods as it deems necessary or appropriate,
including, without limitation, rules and procedures relating to elections by
Participants who are subject to the provisions of Section 16 of the Exchange
Act.
(e) Subject to the terms of the Plan, the Board of Directors may at any
time, and from time to time, amend, modify or terminate the Plan or any
outstanding Option held by a Participant, including substituting therefor
another Option of the same or a different type or changing the date of
exercise or realization, provided that the Participant's consent to each
action shall be required unless the Board of Directors determines that the
action, taking into account any related action, would not materially and
adversely affect the Participant.
SECTION 10. MISCELLANEOUS
(a) No person shall have any claim or right to be granted an Option, and
the grant of an Option shall not be construed as giving a Participant the
right to continued employment or service on the Corporation's Board of
Directors. The Corporation expressly reserves the right at any time to dismiss
a Participant free from any liability or claim under the Plan, except as
expressly provided in the Plan or the applicable Option.
(b) Nothing contained in the Plan shall prevent the Corporation from
adopting other or additional compensation arrangements.
(c) Subject to the provisions of the applicable Option, no Participant
shall have any rights as a shareholder (including, without limitation, any
rights to receive dividends, or non cash distributions with respect to such
shares) with respect to any shares of Stock to be distributed under the Plan
until he or she becomes the holder thereof.
(d) Notwithstanding anything to the contrary expressed in this Plan, any
provisions hereof that vary from or conflict with any applicable Federal or
State securities laws (including any regulations promulgated thereunder) shall
be deemed to be modified to conform to and comply with such laws.
(e) No member of the Board of Directors shall be liable for any action
or determination taken or granted in good faith with respect to this Plan nor
shall any member of the Board of Directors be liable for any
A-6
<PAGE>
<PAGE>
agreement issued pursuant to this Plan or any grants under it. Each member of
the Board of Directors shall be indemnified by the Corporation against any
losses incurred in such administration of the Plan, unless his action
constitutes serious and willful misconduct.
(f) The Plan shall be effective on January 26, 1998; but only if, prior
to such date, the Plan is approved by the Corporation's shareholders at the
1997 annual meeting of shareholders. The Plan will be so approved if at such
meeting a quorum is present and the votes of the holders of a majority of the
securities of the Corporation entitled to vote with respect to the Plan shall
be cast in favor of its approval.
(g) The Board may amend, suspend or terminate the Plan or any portion
thereof at any time, provided that no amendment shall be granted without
shareholder approval if such approval is necessary to comply with any
applicable tax laws or regulatory requirement.
(h) Options may not be granted under the Plan after the tenth
anniversary of the effective date of the Plan, but then outstanding Options
may extend beyond such date.
(i) To the extent that State laws shall not have been preempted by any
laws of the United States, the Plan shall be construed, regulated, interpreted
and administered according to the other laws of the State of Delaware.
* * * * *
A-7
<PAGE>
<PAGE>
EXHIBIT B
EMPIRE FEDERAL BANCORP, INC.
1997 MANAGEMENT RECOGNITION AND DEVELOPMENT PLAN
SECTION 1. PURPOSE AND ADOPTION OF THE PLAN
1.01 PURPOSE. The purpose of the Empire Federal Bancorp, Inc.
Management Recognition and Development Plan is to assist the Corporation and
its subsidiaries in attracting, retaining and motivating key management
employees and non-employee directors who will contribute to the Corporation's
success. The Plan is intended to recognize the contributions of key
management personnel to the success of the Corporation and its subsidiaries,
to link the benefits paid to eligible employees and directors who have
substantial responsibility for the successful operation, administration and
management of the Corporation with the enhancement of shareholder value and to
provide eligible employees and directors with an opportunity to acquire a
greater proprietary interest in the Corporation through the grant of
restricted shares of Stock which, in accordance with the terms and conditions
set forth below, will vest only if the employees meet the vesting criteria
established by the Board and this Plan.
1.02 ADOPTION AND EFFECTIVE DATE. The Plan shall be effective on
January 26, 1998; but only if, prior to such date, the Plan is approved by the
Corporation's shareholders at the 1997 annual meeting of shareholders. The
Plan will be so approved if at such meeting a quorum is present and the votes
of the holders of a majority of the securities of the Corporation entitled to
vote with respect to the Plan shall be cast in favor of its approval.
SECTION 2. DEFINITIONS
For purposes of this Plan, the capitalized terms set forth below shall
have the following meanings:
AWARD AGREEMENT means a written agreement between the Corporation and a
Participant specifically setting forth the terms and conditions of an award of
Restricted Stock granted to a Participant pursuant to Article V of the Plan.
BANK means Empire Federal Savings Bank, Livingston, Montana.
BOARD means the Board of Directors of the Corporation.
CHANGE IN CONTROL shall mean an event deemed to occur if and when (a) an
offeror other than the Corporation purchases shares of the common stock of the
Corporation or the Bank pursuant to a tender or exchange offer for such
shares, (b) any person (as such term is used in Sections 13(d) and 14(d)(2) of
the Exchange Act) is or becomes the beneficial owner, directly or indirectly,
of securities of the Corporation or Bank representing twenty- five percent
(25%) or more of the combined voting power of the Corporation's or the Bank's
then outstanding securities, (c) the membership of the board of directors of
the Corporation or the Bank changes as the result of a contested election,
such that individuals who were directors at the beginning of any twenty-four
(24) month period (whether commencing before or after the date of adoption of
this Plan) do not constitute a majority of the Board at the end of such
period, or (d) shareholders of the Corporation or the Bank approve a merger,
consolidation, sale or disposition of all or substantially all of the
Corporation's or the Bank's assets or a plan of partial or complete
liquidation. If any of the events enumerated in clauses (a) - (d) occur, the
Board shall determine the effective date of the change in control resulting
therefrom.
CORPORATION means Empire Federal Bancorp, Inc., a Delaware corporation,
and its successors.
DATE OF GRANT means the date as of which an award of Restricted Stock is
granted in accordance with Article V.
B-1
<PAGE>
<PAGE>
DIRECTOR means a member of the Board of Directors of the Corporation who
is not also an employee of the Corporation or its subsidiaries.
DISABILITY means any physical or mental injury or disease of a permanent
nature which renders a Participant incapable of meeting the requirements of
the employment or service performed by such Participant immediately prior to
the commencement of such disability. The determination of whether a
Participant is disabled shall be made by the Board in its sole and absolute
discretion.
EFFECTIVE DATE means the date as of which the Plan shall become
effective, as determined in accordance with Section 1.02.
EXCHANGE ACT means the Securities Exchange Act of 1934, as amended.
FAIR MARKET VALUE shall be determined as follows:
(a) If the stock is traded or quoted on the Nasdaq Stock Market or
other national securities exchange at the time of grant of the award, then the
Fair Market Value shall be the average of the highest and lowest selling price
on such exchange on the date such award is granted or, if there were no sales
on such date, then on the next prior business day on which there was a sale.
(b) If the stock is not traded or quoted on the Nasdaq Stock Market or
other national securities exchange, then the Fair Market Value shall be a
value determined by the Board in good faith on such basis as it deems
appropriate.
PARTICIPANT means any person selected by the Board, pursuant to Section
3.02, to participate under the Plan.
PLAN means this Empire Federal Bancorp, Inc. 1997 Management Recognition
and Development Plan, as the same may be amended from time to time.
RESTRICTED STOCK means shares of Stock awarded to a Participant subject
to restrictions as described in Article V.
STOCK means the common stock, par value $0.01 per share, of the
Corporation.
SECTION 3. ADMINISTRATION AND PARTICIPATION
3.01 ADMINISTRATION. The Plan shall be administered by the Board
which shall have exclusive and final authority and discretion in each
determination, interpretation or other action affecting the Plan and its
Participants. The Board shall have the sole and absolute authority and
discretion to interpret the Plan, to establish and modify administrative rules
for the Plan, to select, in accordance with Section 3.02, the persons who will
be Participants hereunder, to impose, in accordance with Section 5.01, such
conditions and restrictions as it determines appropriate and to take such
other actions and make such other determinations in connection with the Plan
as it may deem necessary or advisable.
3.02 DESIGNATION OF PARTICIPANTS. Participants in the Plan shall be
such employees of the Corporation and its subsidiaries or Directors as the
Board, in its sole discretion, may designate. The Board shall consider such
factors as it deems pertinent in selecting Participants.
B-2
<PAGE>
<PAGE>
SECTION 4. STOCK ISSUABLE UNDER THE PLAN
4.01 NUMBER OF SHARES OF STOCK ISSUABLE. Subject to adjustments as
provided in Section 6.03, the maximum number of shares of Stock available for
issuance under the Plan shall be 103,684. The Stock to be offered under the
Plan shall be authorized and unissued Stock, Stock which shall have been
reacquired by the Corporation and held in its treasury, or Stock held in a
trust established by the Corporation for the purpose of funding awards under
the Plan with shares acquired on the open market with funds contributed by the
Corporation or the Bank.
4.02 SHARES SUBJECT TO TERMINATED AWARDS. Shares of Stock forfeited
as provided in Section 5.02 may again be issued under the Plan.
SECTION 5. RESTRICTED STOCK
5.01 RESTRICTED STOCK AWARDS. Subject to the terms of this Plan, the
Board may grant to any Participant an award of Restricted Stock in respect of
such number of shares of Stock, and subject to such terms and conditions
relating to forfeitability and restrictions on delivery and transfer (whether
based on performance standards, periods of service or otherwise), as the Board
shall determine in its sole discretion. The terms of all such Restricted
Stock awards shall be set forth in an Award Agreement between the Corporation
and the Participant which shall contain such provisions, not inconsistent with
this Plan, as shall be determined by the Board.
(a) ISSUANCE OF RESTRICTED STOCK. As soon as practicable after the Date
of Grant of Restricted Stock, the Corporation shall cause to be transferred on
the books of the Corporation shares of Stock, registered on behalf of the
Participant, evidencing such Restricted Stock, but subject to forfeiture to
the Corporation retroactive to the Date of Grant if an Award Agreement
delivered to the Participant by the Corporation with respect to the Restricted
Stock is not duly executed by the Participant and timely returned to the
Corporation. Unless the Board determines otherwise, until the lapse or
release of all restrictions applicable to an award of Restricted Stock, the
stock certificates representing such Restricted Stock shall be held in custody
by the Corporation or its designee. Notwithstanding the foregoing, the
Corporation may, in its sole discretion, establish a trust for the purpose of
holding Restricted Stock awarded pursuant to this Plan. In the event that a
trust is established, the Corporation may elect to hold any or all shares of
Stock subject to awards in the name of the trust for the benefit of the
Participant and subject to the forfeiture conditions applicable to the award.
(b) LIMITATIONS ON AWARDS. Notwithstanding anything herein to the
contrary, (i) no officer or employee shall be granted an award covering in
excess of twenty five percent, (ii) no Director shall be granted an award
covering in excess of five percent and (iii) Directors serving as of the
effective date of the Plan shall not be granted awards covering in excess of
thirty percent in the aggregate, of the number of shares reserved for issuance
under the Plan. In addition, no award of Restricted Stock under the Plan
shall vest more rapidly than in substantially equal installments over a
five-year period beginning on the date of grant.
(c) SHAREHOLDER RIGHTS. Beginning on the Date of Grant of the
Restricted Stock and subject to execution of the Award Agreement as provided
in Section 5.01(a), the Participant shall become a shareholder of the
Corporation with respect to all Stock subject to the Award Agreement and shall
have all of the rights of a shareholder, including, but not limited to, the
right to vote such Stock and the right to receive dividends and other
distributions paid with respect to such Stock; provided, however, that any
Stock distributed as a dividend or otherwise with respect to any Restricted
Stock as to which the restrictions have not yet lapsed shall be subject to the
same restrictions as such Restricted Stock and shall be held as prescribed in
Section 5.01(a). Cash dividends paid with respect to Restricted Stock shall
be held by the Corporation in escrow until such time as the Participant vests
in such shares. The Corporation may credit a reasonable rate of interest to
such cash dividends prior to distribution.
B-3
<PAGE>
<PAGE>
(d) RESTRICTION ON TRANSFERABILITY. None of the Restricted Stock may be
assigned, transferred (other than by will or the laws of descent and
distribution), pledged, sold or otherwise disposed of prior to lapse or
release of the restrictions applicable thereto.
(e) DELIVERY OF STOCK UPON RELEASE OF RESTRICTIONS. Upon expiration or
earlier termination of the forfeiture period without a forfeiture, and the
satisfaction of or release from any other conditions prescribed by the Board,
the restrictions applicable to the Restricted Stock shall lapse. As promptly
as administratively feasible thereafter, subject to the requirements of
Section 6.02, the Corporation shall deliver to the Participant or, in case of
the Participant's death, to the Participant's legal representatives, one or
more stock certificates for the appropriate number of shares of Stock, free of
all such restrictions, except for any restrictions that may be imposed by law.
5.02 TERMS OF RESTRICTED STOCK; FORFEITURE OF RESTRICTED STOCK. All
Restricted Stock shall be forfeited and returned to the Corporation and all
rights of the Participant with respect to such Restricted Stock shall cease
and terminate in their entirety if during the forfeiture period the employment
or service as a Director of the Participant with the Corporation and its
subsidiaries terminates for any reason. Subject to the terms of the Plan, the
Board, in its sole discretion, shall establish the forfeiture period for each
grant of Restricted Stock, and may provide for the forfeiture period to lapse
in installments. Notwithstanding the foregoing, upon the termination of a
Participant's employment by reason of death or Disability, all forfeiture
restrictions imposed on Restricted Stock shall immediately and fully lapse.
In addition, upon the occurrence of a Change in Control, all forfeiture
restrictions imposed on Restricted Stock shall immediately and fully lapse.
SECTION 6. MISCELLANEOUS
6.01 LIMITATIONS ON TRANSFER. The rights and interest of a
Participant under the Plan may not be assigned or transferred other than by
will or the laws of descent and distribution. During the lifetime of a
Participant, only the Participant personally may exercise rights under the
Plan.
6.02 TAXES. The Corporation shall be entitled to withhold (or secure
payment from the Participant in lieu of withholding) the amount of any
withholding or other tax required by law to be withheld or paid by the
Corporation with respect to any Stock issuable under this Plan, or with
respect to any income recognized upon the lapse of restrictions applicable to
Restricted Stock and the Corporation may defer issuance of Stock hereunder
until and unless indemnified to its satisfaction against any liability for any
such tax. The amount of such withholding or tax payment shall be determined
by the Board or its delegate and shall be payable by the Participant at such
time as the Board determines. Such withholding obligation may be satisfied
by, without limitation, the payment of cash by the Participant to the
Corporation, the tendering of previously acquired shares of Stock of the
Participant or the withholding, at the appropriate time, of shares of Stock
otherwise issuable to the Participant, in a number sufficient, based upon the
Fair Market Value of such Stock, to satisfy such tax withholding requirements.
The Board shall be authorized, in its sole discretion, to establish such rules
and procedures relating to any such withholding methods as it deems necessary
or appropriate, including, without limitation, rules and procedures relating
to elections by Participants who are subject to the provisions of Section 16
of the Exchange Act.
6.03 ADJUSTMENTS TO REFLECT CAPITAL CHANGES. The amount and kind of
Stock available for issuance under the Plan and the limit on the number of
shares of Stock in respect of which awards may be made to any Participant in
any calendar year shall be appropriately adjusted to reflect any stock
dividend, stock split, combination or exchange of shares, merger,
consolidation or other change in capitalization with a similar substantive
effect upon the Plan. The Board shall have the power and sole discretion to
determine the nature and amount of the adjustment, if any, to be made pursuant
to this Section 6.03.
6.04 NO RIGHT TO AWARD; NO RIGHT TO EMPLOYMENT. No employee or other
person shall have any claim of right to be permitted to participate or be
granted an award under this Plan. Neither the Plan nor
B-4
<PAGE>
<PAGE>
any action taken hereunder shall be construed as giving any employee any right
to be retained in the employ of the Corporation.
6.05 GOVERNING LAW. The Plan and all determinations made and actions
taken pursuant to the Plan shall be governed by the laws of the State of
Delaware other than the conflict of laws provisions of such laws, and shall be
construed in accordance therewith.
6.06 CAPTIONS. The captions (i.e., all Section and subsection
headings) used in the Plan are for convenience only, do not constitute a part
of the Plan, and shall not be deemed to limit, characterize or affect in any
way any provisions of the Plan, and all provisions of the Plan shall be
construed as if no captions had been used in the Plan.
6.07 SEVERABILITY. Whenever possible, each provision in the Plan and
every Award Agreement shall be interpreted in such manner as to be effective
and valid under applicable law, but if any provision of the Plan or any Award
Agreement shall be held to be prohibited by or invalid under applicable law,
then (a) such provision shall be deemed amended to accomplish the objectives
of the provision as originally written to the fullest extent permitted by law
and (b) all other provisions of the Plan and every Award Agreement shall
remain in full force and effect.
6.08 LEGENDS. All certificates for Stock delivered under the Plan
shall be subject to such transfer restrictions set forth in the Plan and such
other restrictions as the Board may deem advisable under the rules,
regulations and other requirements of the Securities and Exchange Commission,
any stock exchange upon which the Stock is then listed and any applicable
federal or state securities law, and the Board may cause a legend or legends
to be endorsed on any such certificates making appropriate references to such
restrictions.
6.09 AMENDMENT AND TERMINATION.
(a) AMENDMENT. Subject to applicable law and regulations, the Board
shall have complete power and authority to amend the Plan at any time it is
deemed necessary or appropriate; provided, however, that no amendment shall be
made without shareholder approval if such approval is necessary for the
Corporation to comply with an applicable tax law or regulatory requirement.
No termination or amendment of the Plan may, without the consent of the
Participant to whom any award shall theretofore have been granted under the
Plan, adversely affect the right of such individual under such award
(b) TERMINATION. The Board shall have the right and the power to
terminate the Plan at any time. Unless sooner terminated by action of the
Board, the Plan shall automatically terminate, without further action of the
Board or the Corporation's shareholders, on the tenth anniversary of the
Effective Date. No award shall be granted under the Plan after the
termination of the Plan, but the termination of the Plan shall not have any
other effect and any award outstanding at the time of the termination of the
Plan shall continue in effect in accordance with its terms as if the Plan has
not terminated.
* * * * *
B-5
<PAGE>
<PAGE>
REVOCABLE PROXY
EMPIRE FEDERAL BANCORP, INC.
- ----------------------------------------------------------------------------
FIRST ANNUAL MEETING OF STOCKHOLDERS
JULY 30, 1997
- ----------------------------------------------------------------------------
The undersigned hereby appoints the entire Board of Directors as the
official Proxy Committee with full powers of substitution, as attorneys and
proxies for the undersigned, to vote all shares of common stock of Empire
Federal Bancorp, Inc. which the undersigned is entitled to vote at the First
Annual Meeting of Stockholders, to be held at the main office of Empire
Federal Savings Bank, 123 South Main Street, Livingston, Montana, on
Wednesday, July 30, 1997, at 12:30 p.m., Mountain Daylight Savings Time, and
at any and all adjournments thereof, as follows:
VOTE
FOR WITHHELD
1. The election as directors of
all nominees listed below
(except as marked to the [ ] [ ]
contrary below).
Walter J. Peterson, Jr.
Sanroe J. Kaisler, Jr.
Walter R. Sales
INSTRUCTION: To withhold your vote
for any individual nominee, write
that nominee's name on the line below.
--------------------------------------
--------------------------------------
FOR AGAINST ABSTAIN
2. The ratification of the [ ] [ ] [ ]
adoption of the Empire
Federal Bancorp, Inc. 1997
Stock Option Plan.
3. The ratification of the [ ] [ ] [ ]
adoption of the Empire
Federal Bancorp, Inc. 1997
Management Recognition and
Development Plan.
4. Such other matters as may properly come before the
Meeting or any adjournments thereof.
The Board of Directors recommends a vote "FOR" the above proposals.
- -----------------------------------------------------------------------------
THIS PROXY WILL BE VOTED AS DIRECTED, BUT IF NO INSTRUCTIONS ARE SPECIFIED,
THIS PROXY WILL BE VOTED FOR THE PROPOSITIONS STATED. IF ANY OTHER BUSINESS
IS PRESENTED AT SUCH MEETING, THIS PROXY WILL BE VOTED BY THOSE NAMED IN THIS
PROXY IN THEIR BEST JUDGMENT. AT THE PRESENT TIME, THE BOARD OF DIRECTORS
KNOWS OF NO OTHER BUSINESS TO BE PRESENTED AT THE MEETING.
- -----------------------------------------------------------------------------
<PAGE>
<PAGE>
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
Should the undersigned be present and elect to vote at the First Annual
Meeting of Stockholders or at any adjournment thereof and after notification
to the Secretary of the Corporation at the Meeting of the stockholder's
decision to terminate this proxy, then the power of said attorneys and proxies
shall be deemed terminated and of no further force and effect.
The undersigned acknowledges receipt from the Corporation prior to the
execution of this proxy of the Notice of First Annual Meeting of Stockholders,
a proxy statement for the First Annual Meeting of Stockholders, and the 1996
Annual Report to Stockholders.
Dated: , 1997
-------------
- ------------------------- -------------------------
PRINT NAME OF STOCKHOLDER PRINT NAME OF STOCKHOLDER
- ------------------------ -------------------------
SIGNATURE OF STOCKHOLDER SIGNATURE OF STOCKHOLDER
Please sign exactly as your name appears on this proxy card. When signing as
attorney, executor, administrator, trustee or guardian, please give your full
title. If shares are held jointly, each holder should sign.
- -----------------------------------------------------------------------------
PLEASE COMPLETE, DATE, SIGN AND MAIL THIS PROXY PROMPTLY IN THE ENCLOSED
POSTAGE-PREPAID ENVELOPE.
- -----------------------------------------------------------------------------
<PAGE>
