<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 4, 1996
REGISTRATION NO. 333-[ ]
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM SB-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
IFB HOLDINGS, INC.
(Name of Small Business Issuer in Its Charter )
DELAWARE 6712 (TO BE APPLIED FOR)
(State or Jurisdiction (Primary Standard (I.R.S. Employer
of Incorporation or Industrial Classification Identification No.)
Organization) Code Number)
522 WASHINGTON STREET
CHILLICOTHE, MO 64601
(816) 646-3733
(Address and Telephone Number of Principal Executive Offices)
522 WASHINGTON STREET
CHILLICOTHE, MO 64601
(Address of Principal Place of Business or Intended Principal Place of Business)
EARLE S. TEEGARDEN, JR.
522 WASHINGTON STREET
CHILLICOTHE, MO 64601
(816) 646-3733
(Name, Address and Telephone Number of Agent for Service)
COPIES TO:
ROBERT I. LIPSHER, ESQ.
ROBERT B. POMERENK, ESQ.
LUSE LEHMAN GORMAN POMERENK & SCHICK, P.C.
5335 WISCONSIN AVENUE, N.W.
SUITE 400
WASHINGTON, D.C. 20015
APPROXIMATE DATE OF PROPOSED SALE TO THE PUBLIC: As soon as practicable after
this registration statement becomes effective.
If this Form is filed to register additional shares for an offering pursuant to
Rule 462(b) under the Securities Act please check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering: [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering: [ ]
If the delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box: [ ]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
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PROPOSED
PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO MAXIMUM AGGREGATE
SECURITIES TO BE REGISTERED BE OFFERING PRICE OFFERING AMOUNT OF
REGISTERED PER SHARE PRICE REGISTRATION FEE
(1)
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<S> <C> <C> <C> <C>
Common Stock, $.01 par value per share 297,562 $20.00 $5,951,240 $1,804
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</TABLE>
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(1) Estimated solely for the purpose of calculating the registration fee.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE
A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION SHALL
THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE SECURITIES
ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH
DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING PURSUANT TO SAID SECTION
8(A), MAY DETERMINE.
================================================================================
<PAGE>
PROSPECTUS
IFB HOLDINGS, INC.
(PROPOSED HOLDING COMPANY FOR INVESTORS FEDERAL BANK AND SAVINGS ASSOCIATION, TO
BECOME INVESTORS FEDERAL BANK, NATIONAL ASSOCIATION)
Up to 258,750 Shares of Common Stock
(Anticipated Maximum)
IFB Holdings, Inc. (the "Holding Company"), a Delaware corporation, is
offering up to 258,750 shares of its common stock, par value $.01 per share (the
"Common Stock"), in connection with the conversion of Investors Federal Bank and
Savings Association ("Investors Federal" or the "Bank"), from a federally
chartered mutual savings association to a federally chartered stock savings
bank, and the issuance of all of Investors Federal's outstanding capital stock
to the Holding Company pursuant to the Bank's Plan of Conversion (the "Plan" or
"Plan of Conversion"). The simultaneous conversion of the Bank to stock form,
the issuance of Investors Federal's outstanding common stock to the Holding
Company and the Holding Company's sale of its Common Stock are referred to
herein as the "Stock Conversion." As soon as possible following completion of
the Stock Conversion pursuant to the Plan, the Bank intends to convert from a
federal stock savings bank (the "Converted Bank") to a national bank (the "Bank
Conversion") to be known as Investors Federal Bank, National Association (the
"National Bank"). The purpose of the Bank Conversion is to provide the Bank with
additional operating flexibility and to enhance its ability to provide a full
range of banking products and services to its community. It is presently the
intent
(continued on following page)
FOR INFORMATION ON HOW TO SUBSCRIBE FOR SHARES OF COMMON STOCK, CALL THE STOCK
INFORMATION CENTER AT
(816) ________
FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED BY EACH
PROSPECTIVE INVESTOR, SEE "RISK FACTORS" BEGINNING ON PAGE ___
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION, THE OFFICE OF THRIFT SUPERVISION, OR ANY OTHER FEDERAL
AGENCY OR ANY STATE SECURITIES COMMISSION, NOR HAS SUCH COMMISSION,
OFFICE OR OTHER AGENCY OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THE SHARES OF COMMON STOCK OFFERED HEREBY ARE NOT SAVINGS ACCOUNTS OR DEPOSITS
AND ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION ("FDIC"), THE BANK INSURANCE FUND ("BIF"), THE SAVINGS ASSOCIATION
INSURANCE FUND ("SAIF") OR ANY OTHER GOVERNMENT AGENCY.
<TABLE>
<CAPTION>
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Estimated Underwriting Fees
and
Purchase Price(1) Other Expenses(2) Estimated Net Proceeds(2)
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<S> <C> <C> <C>
Minimum Per Share................ $ 20.00 $ 1.93 $ 18.07
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Midpoint Per Share............... $ 20.00 $ 1.69 $ 18.31
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Maximum Per Share................ $ 20.00 $ 1.47 $ 18.53
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Maximum Per Share, as adjusted(3) $ 20.00 $ 1.28 $ 18.72
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Total Minimum.................... $3,825,000 $368,512 $3,456,488
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Total Midpoint................... $4,500,000 $380,000 $4,120,000
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Total Maximum.................... $5,175,000 $380,000 $4,795,000
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Total Maximum, as adjusted(3).... $5,951,240 $380,000 $5,571,240
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(footnotes on second following page)
</TABLE>
TRIDENT SECURITIES, INC.
The date of this Prospectus is November __, 1996.
<PAGE>
(continued from preceding page)
the intent of the Bank's Board of Directors to proceed with both the Conversion
and the Bank Conversion. However, there can be no assurance that the Bank will
obtain regulatory approval to consummate the Bank Conversion, that any such
approval might not contain burdensome conditions, that there will be no
significant delay in obtaining such approvals, or that other developments will
not occur that cause the Board of Directors to conclude that the Bank Conversion
is not in the best interests of the Holding Company and its stockholders. Under
these circumstances, the Board of Directors may elect not to proceed with the
Bank Conversion. See "Risk Factors--Potential Delay in Completion or Denial of
Bank Conversion." The Conversion and the Bank Conversion are herein collectively
referred to as the "Conversion". References herein to the Bank refer to
Investors Federal both in its mutual and stock form as the context may indicate.
Non-transferable rights to subscribe for the Common Stock have been
granted, in order of priority, to (i) the Bank's deposit account holders with
deposits of at least $50 as of June 30, 1995 ("Eligible Account Holders"), (ii)
tax-qualified employee stock benefit plans of the Bank ("Tax Qualified Employee
Plans"), (iii) the Bank's deposit account holders with deposits of at least $50
as of September 30, 1996 ("Supplemental Eligible Account Holders") (iv) certain
other depositors as of _______, 1996 and certain borrowers of the Bank as of
both January 1, 1988 and ________, 1996, who continue to be borrowers as of the
date of the special meeting of members ("Other Members"), and (v) officers,
directors and employees of the Bank in a subscription offering (the
"Subscription Offering"). PURSUANT TO OFFICE OF THRIFT SUPERVISION ("OTS")
REGULATIONS, THESE SUBSCRIPTION RIGHTS ARE NON-TRANSFERABLE. PERSONS VIOLATING
THIS PROHIBITION AGAINST TRANSFER MAY LOSE THEIR RIGHT TO PURCHASE STOCK IN THE
STOCK CONVERSION AND BE SUBJECT TO OTHER POSSIBLE SANCTIONS. Concurrently with,
during, or following the Subscription Offering, and subject to the prior rights
of holders of Subscription Rights, any shares of Common Stock not subscribed for
in the Subscription Offering are being offered in a community offering to
certain members of the general public to whom a prospectus is delivered (the
"Community Offering"). It is anticipated that shares of Common Stock not
subscribed for in the Subscription and Community Offerings may be offered at the
discretion of the Holding Company to certain members of the general public as
part of a community offering on a best efforts basis by a selling group of
broker-dealers managed by Trident Securities, Inc. (the "Syndicated Community
Offering"). The Subscription, Community and Syndicated Community Offerings are
referred to collectively as the "Offerings."
The Bank's Employee Stock Ownership Plan ("ESOP") intends to subscribe
for up to 8% of the total number of shares of Common Stock issued in the Stock
Conversion; however, the Bank reserves the right to have all or part of the
order of the ESOP filled by purchases in the open market, subject to OTS
approval, if required. Shares sold above the maximum of the Estimated Valuation
Range (as hereinafter defined) may be sold to the ESOP to fill its subscription
(prior to filling any other orders). With the exception of the ESOP, no
individual Eligible Account Holder, Supplemental Eligible Account Holder or
Other Member may purchase in the Subscription Offering shares of Common Stock
having an aggregate purchase price which exceeds the lesser of $200,000 or five
percent of the shares sold in the Stock Conversion; no individual person or
other entity, together with associates of and persons acting in concert with
such person, may purchase in the Community Offering and the Syndicated Community
Offering shares of Common Stock having an aggregate purchase price which exceeds
the lesser of $200,000 or five percent of the shares sold in the Stock
Conversion; and no person, together with associates and persons acting in
concert with such person, may purchase in the aggregate shares of Common Stock
having an aggregate purchase price which exceeds the lesser of $200,000 or five
percent of the shares sold in the Stock Conversion. However, the Bank and the
Holding Company in their sole discretion may increase or decrease the purchase
limitations without notice to members or subscribers, provided that the
aggregate purchase limit may not be reduced below 1.0% of the shares offered.
The minimum purchase is 25 shares. See "The Stock Conversion--Offering of
Holding Company Common Stock--Limitations on Purchase of Shares."
The Holding Company may, in its absolute discretion, accept or reject,
in whole or in part, any or all orders in the Community Offering or Syndicated
Community Offering at the time of receipt of an order or as soon as practicable
following the completion of such offerings. ALL ORDERS SUBMITTED ARE IRREVOCABLE
UNTIL COMPLETION OR TERMINATION OF THE STOCK CONVERSION. Subscriptions paid by
cash, check, bank draft or money order will be placed in a segregated account at
Investors Federal and will earn interest at the rate of ____%, the rate
currently paid by Investors Federal on passbook savings accounts, from the date
of receipt until completion or termination of the Stock Conversion. Payments may
be authorized by withdrawal from deposit accounts at Investors Federal
<PAGE>
without penalty and will continue to earn interest at the contractual rate until
the Stock Conversion is completed or terminated; these funds will be otherwise
unavailable to the depositor until such time. See "The Conversion-- Subscription
Offering" and "--Community Offering."
The Holding Company must receive an original stock order form (the
"Stock Order Form") (facsimile copies and photocopies will not be accepted) and
a fully executed separate Certification Form together with full payment (or
appropriate instructions authorizing a withdrawal from a deposit account at the
Bank) of $20.00 per share for all shares for which subscription is made, at the
executive office of the Bank, 522 Washington Street, Chillicothe, Missouri, by
Noon, Central Time, on December ___, 1996. Payment for shares of Common Stock
by wire transfer will not be accepted.
THE SUBSCRIPTION OFFERING WILL TERMINATE AT NOON, CENTRAL TIME, ON
DECEMBER ___, 1996 (THE "EXPIRATION DATE"), unless extended at the discretion of
the Holding Company and the Bank without notice to subscribers, with the
approval of the OTS, if necessary. The Community Offering may commence
simultaneously with, during, or following the completion of the Subscription
Offering and may terminate on the Expiration Date or any date thereafter at the
discretion of the Bank and the Holding Company but not later than 45 days after
the Expiration Date unless extended with the approval of the OTS. The Syndicated
Community Offering may commence subsequent to the Subscription and Community
Offerings and may terminate on any date at the discretion of the Bank and the
Holding Company but not later than 45 days after the Expiration Date unless
extended with the approval of the OTS.
If the Offerings are extended beyond 45 days after the Expiration Date
(i.e., February __, 1997), all subscribers will be notified of such extension,
of their rights to modify or confirm their subscriptions or to rescind their
subscriptions and have their funds returned promptly with interest, and of the
time period within which the subscriber must notify the Bank of his intention to
modify, confirm or rescind his subscription. In the event the value of an
updated independent appraisal of the pro forma market value of the Holding
Company and the Bank, as converted, is less than $3,825,000 or more than
$5,951,240 and the Holding Company determines to sell an amount outside of this
range to its subscribers, all subscribers must be resolicited with an updated
prospectus. The failure of a subscriber to notify the Bank of his intention
during a resolicitation will be deemed a rescission of the subscription and the
funds will be returned promptly with interest. Under applicable OTS regulations,
the Stock Conversion must be completed or terminated no later than 24 months
from the approval of the Stock Conversion by the Bank's members.
The Holding Company and the Bank have engaged Trident Securities, Inc.
("Trident Securities") to consult with and advise the Bank and the Holding
Company in connection with the Stock Conversion and with the sale of shares of
the Common Stock in the Offerings. In addition, in the event the Common Stock is
not fully subscribed for in the Subscription and Community Offerings, Trident
Securities will manage the Syndicated Community Offering. Neither Trident
Securities nor any other broker-dealers will have any obligation to purchase or
accept any shares of Common Stock in the Conversion. See "The Conversion" and "-
- -Marketing Arrangements."
There is currently no market for the Common Stock, and it is unlikely
that an active and liquid trading market for the Common Stock will develop. The
Holding Company has requested Trident Securities to undertake to match buy and
sell orders for the Common Stock and to list the Common Stock over-the-counter
through the National Daily Quotation System "Pink Sheets," and Trident
Securities has agreed to do so. There can be no assurance that purchasers will
be able to sell their shares at or above the Purchase Price after the Stock
Conversion. See "Market for the Common Stock."
_____________________
(footnotes for preceding table)
(1) Determined in accordance with an independent appraisal prepared by
Ferguson & Co., LLP ("Ferguson") as of September 20, 1996. The
estimated pro forma market value of the Holding Company and the Bank,
as converted, ranges from $3,825,000 to $5,175,000 ("Estimated
Valuation Range") or between 191,250 and 258,750 shares of Common
Stock at the purchase price of $20.00 per share, which is the amount
established by the Board of Directors to be paid for each share of
Common Stock sold in the Offerings ("Purchase Price"). See "The
Conversion--Stock Pricing and Number of Shares to be Issued." THE
VALUATION BY FERGUSON IS NOT INTENDED AND MUST NOT BE CONSTRUED AS A
RECOMMENDATION OF ANY KIND
<PAGE>
AS TO THE ADVISABILITY OF VOTING TO APPROVE THE STOCK CONVERSION OR OF
PURCHASING SHARES OF COMMON STOCK. MOREOVER, BECAUSE THE VALUATION IS
NECESSARILY BASED UPON ESTIMATES OF AND PROJECTIONS AS TO A NUMBER OF
MATTERS (INCLUDING CERTAIN ASSUMPTIONS AS TO EXPENSE FACTORS AFFECTING
THE NET PROCEEDS FROM THE SALE OF COMMON STOCK IN THE STOCK CONVERSION
AND AS TO THE NET EARNINGS ON SUCH NET PROCEEDS), ALL OF WHICH ARE
SUBJECT TO CHANGE FROM TIME TO TIME, NO ASSURANCE CAN BE GIVEN THAT
PERSONS WHO PURCHASE SUCH SHARES IN THE STOCK CONVERSION WILL BE ABLE
TO SELL SUCH SHARES THEREAFTER AT OR ABOVE THE PURCHASE PRICE.
(2) Consists of the estimated expenses of $380,000 (assuming the sale of
225,000 shares at the midpoint of the Estimated Valuation Range),
which includes, among other things, printing, postage, legal,
accounting, appraisal and filing fees. These expenses also include
financial advisory and marketing fees to be paid to Trident Securities
of $62,715 (assuming the sale of 225,000 shares at the midpoint of the
Estimated Valuation Range). Such fees may be deemed to be underwriting
fees, and Trident Securities may be deemed to be an underwriter.
Actual expenses and, thus, net proceeds, may be more or less than
estimated amounts. The Holding Company and the Bank have agreed to
indemnify Trident Securities against certain liabilities, including
liabilities that may arise under the Securities Act of 1933 (the
"Securities Act"). See "Pro Forma Data" and "The Stock Conversion--
Marketing Arrangements."
(3) Gives effect to an increase in the number of shares sold which could
occur without a resolicitation of subscribers or any right of
cancellation due to an increase in the Estimated Valuation Range of up
to 15% above the maximum of the Estimated Valuation Range to reflect
changes in market and financial conditions following commencement of
the Offerings or to fill in part or in whole the order of the ESOP.
See "The Stock Conversion--Stock Pricing and Number of Shares to be
Issued."
<PAGE>
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[INSERT MAP HERE]
THE STOCK CONVERSION IS CONTINGENT UPON THE APPROVAL OF THE PLAN BY THE MEMBERS
OF THE BANK, THE SALE OF AT LEAST THE MINIMUM NUMBER OF SHARES OF COMMON STOCK
TO BE ISSUED PURSUANT TO THE PLAN OF CONVERSION AND THE RECEIPT OF ALL
APPLICABLE REGULATORY APPROVALS.
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<PAGE>
________________________________________________________________________________
PROSPECTUS SUMMARY
The following summary does not purport to be complete. It is
qualified in its entirety by the detailed information and Consolidated Financial
Statements and Notes thereto appearing elsewhere in this Prospectus. The
purchase of Common Stock is subject to certain risks. See "Risk Factors."
INVESTORS FEDERAL BANK AND SAVINGS ASSOCIATION
Investors Federal is a federally chartered mutual savings association
headquartered in Chillicothe, Missouri. Investors Federal was originally
chartered as a federal savings association in 1934 under the name Chillicothe
Federal Savings and Loan Association. In 1974, the Bank changed its name to
Investors Federal Savings and Loan Association, and in 1988 the Bank changed its
name to Investors Federal Bank and Savings Association. Its deposits are
insured up to the maximum allowable amount by the SAIF of the FDIC. Through its
main office in Chillicothe and its branch offices in Hamilton and Gallatin,
Missouri, Investors Federal primarily serves communities located in Livingston,
Caldwell and Daviess Counties in the State of Missouri. At June 30, 1996,
Investors Federal had total assets of $52.6 million, deposits of $35.5 million
and total equity of $3.3 million.
Investors Federal has been, and intends to continue to be, a
community-oriented financial institution offering selected financial services to
meet the needs of the communities it serves. The Bank attracts deposits from
the general public and historically has used such deposits, together with other
funds, to originate and purchase one-to four-family residential mortgage loans,
and to originate non-residential real estate loans (primarily farm loans), and
consumer loans consisting primarily of loans secured by automobiles. In
addition, in recent years, the Bank has expanded its loan portfolio by
purchasing Small Business Administration ("SBA")-guaranteed loans and Federal
Housing Administration ("FHA")-insured Title I home improvement loans. At June
30, 1996, the Bank's total loan portfolio was $28.7 million, of which 79.5% were
one- to four-family residential mortgage loans, 6.8% were non-residential real
estate loans, 9.0% were consumer loans (including FHA home improvement loans),
and 3.4% were SBA-guaranteed loans.
During the year ended June 30, 1996, the Bank originated $2.1 million
of fixed-rate and $3.1 million of adjustable rate one-to four-family residential
mortgage loans, all of which were retained in the Bank's portfolio. See
"Business - Lending Activities." To supplement local loan production, the Bank
has purchased adjustable-rate loans in the secondary mortgage market on a non-
recourse basis, with servicing retained by the seller or originator of the
loans. In recent years, the Bank has limited its purchased loans to one- to
four-family residential mortgage loans secured by collateral located in the
State of Missouri, although the Bank's purchased loan portfolio includes
seasoned one- to four-family residential mortgage loans secured by collateral
located outside Missouri. Purchased one- to four-family residential mortgage
loans totaled $7.2 million, or 25.0%, of the Bank's total loan portfolio at June
30, 1996.
Because of the limited lending opportunities in its local market area
and to the extent adjustable-rate one-to four-family residential mortgage loans
are unavailable for purchase at attractive yields, the Bank will invest in
mortgage-backed securities and other investment securities. At June 30, 1996,
the Bank's portfolio of mortgage-backed securities and investment securities was
substantial. At June 30, 1996, the Bank's mortgage-backed securities portfolio
totaled $17.0 million (or 32.3% of total assets), and consisted of $7.9 million
in mortgage-backed securities issued or guaranteed by the FHLMC, FNMA and GNMA,
$3.0 million in collateralized mortgage obligations, including real estate
mortgage investment conduits, and $6.1 million in participations in pools of SBA
loans. Also at June 30, 1996, the Bank's investment portfolio totaled $3.5
million (or 6.6% of total assets) and consisted of federal agency obligations,
municipal bonds, FHLB stock, interest earnings deposits with other financial
institutions and mutual funds. In recent years, management has also utilized the
mortgage-backed securities and investment portfolio to attempt to increase net
interest income by purchasing such securities with the proceeds of FHLB advances
and earning the spread between the yields earned on the mortgage-backed
securities and the rates paid on the FHLB advances. At June 30, 1996, the Bank's
FHLB advances totaled $13.5 million, as compared to FHLB advances of $6.4
million at June 30, 1995.
4
_______________________________________________________________________________
<PAGE>
_______________________________________________________________________________
Investors Federal's executive office is located at 522 Washington
Street, Chillicothe, Missouri 64601. Its telephone number at that address is
(816) 646-3733.
IFB HOLDINGS, INC.
IFB Holdings, Inc. was organized in October 1996 for the purpose of
serving as the holding company for the Converted Bank upon its conversion from
mutual to stock form, and of the National Bank following the Bank Conversion.
Prior to the Conversion, the Holding Company has not engaged and will not engage
in any material operations. Upon consummation of the Stock Conversion, the
Holding Company will have no significant assets other than the outstanding
capital stock of the Converted Bank (or, following the Bank Conversion, the
National Bank), approximately 50% of the net proceeds from the Stock Conversion
(less the amount to fund the Employee Stock Ownership Plan ("ESOP")) and a note
evidencing its loan to the Bank's ESOP. Upon consummation of the Stock
Conversion, the Holding Company's principal business will be directing the
business of the National Bank and investing the net Stock Conversion proceeds
retained by it. In connection with the Bank Conversion, the Holding Company will
register with the Board of Governors of the Federal Reserve System (the "FRB")
as a bank holding company under the Bank Holding Company Act of 1956, as amended
(the "BHCA").
INVESTORS FEDERAL BANK, NATIONAL ASSOCIATION
Upon consummation of the Bank Conversion, the National Bank will
succeed to all of the assets and liabilities of the Converted Bank (which,
pursuant to the Stock Conversion will have succeeded to all of the assets and
liabilities of the Bank), and initially will continue to conduct business in
substantially the same manner as the Bank prior to the Conversion. Over time,
however, management anticipates broadening its range of banking products and
services consistent with the national bank charter. Diversification of the
National Bank's loan portfolio may also alter the risk profile of the National
Bank. See "Risk Factors--Effect of the Conversion to a National Bank Charter on
Operations."
The deposits of the National Bank will continue to be insured by the
SAIF of the FDIC and, as such, the National Bank will continue to be subject to
regulation and supervision by the FDIC. The National Bank will not be subject to
OTS regulation and supervision; rather, the primary regulator of the National
Bank will be the OCC. The National Bank will remain a member of the FHLB of Des
Moines. As a national bank, the National Bank will also be required to become a
member of the Federal Reserve System and to purchase stock in the Federal
Reserve Bank of Kansas City.
THE CONVERSION
The Offerings are being made in connection with the Stock Conversion
of Investors Federal from a federally chartered mutual savings association to a
federally chartered stock savings bank and the formation of IFB Holdings, Inc.
as the holding company of the Bank. The Holding Company will retain up to 50%
of the net proceeds of the issuance of the Common Stock and will use the
remaining 50% of the net proceeds to purchase all of the stock of Investors
Federal issued in the Stock Conversion. Net Conversion proceeds will increase
the capital of the Bank and, consistent with regulatory restrictions, will
support the Bank's lending and investment activities. The conversion to stock
form and the use of a holding company structure are also expected to enhance the
ability of the Bank to expand through possible mergers and acquisitions and
facilitate future access to the capital markets. The Holding Company will have
additional authorized shares of common stock and serial preferred stock
available for issuance to raise additional equity capital for future
acquisitions or for other business purposes, although the Holding Company has no
specific plans for expansion and no present plans for the issuance of such
securities. See "Use of Proceeds" and "Description of Capital Stock - Holding
Company Capital Stock."
Upon consummation of the Stock Conversion, it is anticipated that the
Converted Bank will convert to a national bank. The Bank Conversion will be
consummated as soon as possible thereafter; provided, however, that under the
Plan, the Bank's Board of Directors has the ability to elect, at any time, not
to proceed with the Bank Conversion. Furthermore, there can be no assurance that
the Bank will obtain regulatory approval to consummate
5
________________________________________________________________________________
<PAGE>
________________________________________________________________________________
the Bank Conversion. It is presently the intent of the Bank's Board of Directors
to proceed with both the Stock Conversion and the Bank Conversion. See "Risk
Factors--Potential Delay in Completion or Denial of Bank Conversion" and "The
Conversion--General."
The Stock Conversion is subject to certain conditions, including the
prior approval of the Plan of Conversion by the Bank's members at a special
meeting to be held at 4:00 p.m., Central Time on December __, 1996 (the "Special
Meeting"). Approval of the Plan requires the affirmative vote of members of the
Bank holding not less than a majority of the total number of votes eligible to
be cast at the Special Meeting. AFTER THE STOCK CONVERSION, DEPOSITORS AND
BORROWERS OF THE BANK WILL HAVE NO VOTING RIGHTS IN THE HOLDING COMPANY, UNLESS
THEY BECOME HOLDING COMPANY STOCKHOLDERS. Eligible Account Holders and
Supplemental Eligible Account Holders, however, will have certain liquidation
rights in the Bank. See "The Stock Conversion - Effects of Conversion to Stock
Form on Depositors and Borrowers of the Bank - Liquidation Rights."
SUBSCRIPTION, COMMUNITY AND SYNDICATED COMMUNITY OFFERINGS. The
Holding Company is offering up to 258,750 shares of Common Stock, at a price of
$20.00 per share, in the Subscription, Community and Syndicated Community
Offerings. The shares of Common Stock to be issued in the Stock Conversion are
being offered in the following order of priority: (1) Eligible Account Holders
(deposit account holders of the Bank with an account balance of $50 or more as
of June 30, 1995); (2) Tax-Qualified Employee Plans; (3) Supplemental Eligible
Account Holders (deposit account holders of the Bank with an account balance of
$50 or more as of September 30, 1996); (4) Other Members (deposit account
holders of the Bank as of _______, 1996, other than Eligible Account Holders or
Supplemental Eligible Account Holders, and certain borrowers as of both January
1, 1988 and _______, 1996, who continue to be borrowers as of the date of the
Special Meeting); and (5) employees, officers and directors of the Bank. In
addition, the Tax-Qualified Employee Plans shall have first priority
Subscription Rights to the extent that the total number of shares of Common
Stock sold in the Stock Conversion exceeds the maximum of the Estimated
Valuation Range. Concurrently with, during, or following the Subscription
Offering, and subject to the prior rights of holders of Subscription Rights, any
shares of Common Stock not subscribed for in the Subscription Offering are being
offered in the Community Offering to certain members of the general public to
whom a prospectus is delivered. In the Community Offering, a preference will be
given to natural persons and trusts of natural persons residing in Caldwell,
Daviess and Livingston Counties. See "The Conversion." THE HOLDING COMPANY AND
THE BANK RESERVE THE ABSOLUTE RIGHT TO ACCEPT OR REJECT ANY ORDERS IN THE
COMMUNITY OFFERING, IN WHOLE OR IN PART, EITHER AT THE TIME OF RECEIPT OF AN
ORDER OR AT ANY TIME PRIOR TO THE CONSUMMATION OF THE STOCK CONVERSION.
It is anticipated that shares of Common Stock not otherwise subscribed
for in the Subscription Offering and Community Offering, if any, may be offered
at the discretion of the Holding Company to certain members of the general
public as part of a Syndicated Community Offering on a best efforts basis by a
selling group of selected broker-dealers to be managed by Trident Securities.
See "The Conversion--Offering of Holding Company Common Stock."
The Plan of Conversion places limitations on the number of shares that
may be purchased in the Stock Conversion by various categories of persons.
Except for the Tax-Qualified Employee Plans which intend to subscribe for 8% of
the total number of shares of Common Stock offered in the Stock Conversion, no
Eligible Account Holder, Supplemental Eligible Account Holder or Other Member
may purchase in their capacity as such in the Subscription Offering shares of
Common Stock having an aggregate purchase price which exceeds the lesser of
$200,000 or five percent of the shares sold in the Stock Conversion; no
individual person or other entity, together with associates of and persons
acting in concert with such person, may purchase in the Community Offering and
the Syndicated Community Offering shares of Common Stock having an aggregate
purchase price which exceeds the lesser of $200,000 or five percent of the
shares sold in the Stock Conversion; and no person, together with associates of
or persons acting in concert with such person, may purchase in the aggregate
shares of Common Stock having an aggregate purchase price which exceeds the
lesser of $200,000 or five percent of the shares sold in the Stock Conversion.
THE PURCHASE LIMITATIONS DESCRIBED HEREIN ARE SUBJECT TO INCREASE OR DECREASE
WITHIN THE SOLE DISCRETION OF THE BANK AND THE HOLDING COMPANY. Further, to the
extent that shares are available, each subscriber must subscribe for a minimum
of 25 shares. See "The Conversion - Offering of Holding Company Common
6
________________________________________________________________________________
<PAGE>
________________________________________________________________________________
Stock." The Bank and the Holding Company have engaged Trident Securities to
consult, advise and assist in the distribution of shares of Common Stock in the
Offerings on a best efforts basis. Trident Securities is under no obligation to
purchase any of the Common Stock offered in the Stock Conversion.
ALL SUBSCRIPTION RIGHTS FOR COMMON STOCK ARE NON-TRANSFERABLE AND WILL
EXPIRE AT NOON, CENTRAL TIME ON DECEMBER __, 1996, UNLESS THE SUBSCRIPTION
OFFERING IS EXTENDED BY INVESTORS FEDERAL AND THE HOLDING COMPANY. The
accompanying stock order form and executed certification, together with full
payment for all shares of Common Stock for which subscription is made, or
appropriate instructions authorizing withdrawal of such amount from one or more
deposit accounts at the Bank, must be received by the Holding Company prior to
that time or any extension thereof. Under applicable federal regulations, all
shares of Common Stock must be sold in the Stock Conversion within 45 days after
the completion of the Subscription Offering, unless extended with OTS approval.
If the Conversion is not approved by the members at the Special
Meeting, no shares will be issued, the Stock Conversion will not take place, all
subscription funds received will be returned promptly with interest at the
Bank's current passbook rate, and all withdrawal authorizations will be
terminated. If the aggregate Purchase Price of the Common Stock sold in the
Stock Conversion is below $3,825,000 or above $5,951,240 (15% above the maximum
of the Estimated Valuation Range), or if the Offerings are extended beyond
February __, 1997, subscribers will be permitted to modify or cancel their
subscriptions and to have their subscription funds returned promptly with
interest. In the event of such an extension, each subscriber will be notified
in writing of the time period within which the subscriber must notify the Bank
of his intention to maintain, modify or rescind his subscription. In the event
the subscriber does not respond in any manner to the Bank's notice, the funds
submitted will be refunded to the subscriber with interest at ____% per annum,
the Bank's current passbook rate, and/or the subscriber's withdrawal
authorizations will be terminated.
STOCK PRICING. The Purchase Price of the Common Stock in the
Offerings is a uniform price for all subscribers, including members of the
Bank's board of directors (the "Board of Directors") and management. The
aggregate Purchase Price is based upon an independent appraisal of the aggregate
pro forma market value of the Holding Company and the Bank, as converted. The
aggregate pro forma market value was estimated by Ferguson, an experienced
conversion appraisal firm independent of the Holding Company and the Bank, to
range from $3,825,000 to $5,175,000 at September 20, 1996. Depending upon the
final updated valuation, the number of shares to be issued is subject to a
maximum of 297,562 shares (15% above the maximum of the Estimated Valuation
Range) and a minimum of 191,250 shares. THE APPRAISAL SHOULD NOT BE CONSIDERED
A RECOMMENDATION AS TO THE ADVISABILITY OF PURCHASING SHARES OF THE COMMON
STOCK. IN PREPARING THE APPRAISAL, FERGUSON ASSUMED THE ACCURACY AND
COMPLETENESS OF THE FINANCIAL AND STATISTICAL INFORMATION PROVIDED BY THE BANK
AND DID NOT INDEPENDENTLY VALUE THE BANK'S ASSETS AND LIABILITIES. The Boards
of Directors of the Holding Company and the Bank have reviewed the appraisal of
Ferguson and in determining the reasonableness and adequacy of such appraisal
consistent with OTS regulations and policies, have reviewed the methodology and
reasonableness of the assumptions utilized by Ferguson in the preparation of
such appraisal. See "The Stock Conversion--Stock Pricing and Number of Shares
to be Issued" for a description of the manner in which such valuation was made
and the limitations on its use. Subject to regulatory approval, the Estimated
Valuation Range may be increased or decreased to reflect market and financial
conditions prior to the completion of the Stock Conversion and may be increased
to permit an increase in the number of shares of Common Stock sold in the Stock
Conversion to cover any oversubscriptions in the Offerings. The actual number
of shares to be issued in the Stock Conversion will not be determined until
completion of the Offerings. No resolicitation of subscribers will be made and
subscribers will not be permitted to modify or cancel their subscriptions unless
the gross proceeds from the sale of the Common Stock are below the minimum of
the Estimated Valuation Range or more than 15% above the maximum of the
Estimated Valuation Range. See "The Conversion--Stock Pricing and Number of
Shares to be Issued."
The Estimated Valuation Range is necessarily based upon estimates of a
number of matters (including certain assumptions as to expense factors affecting
the net proceeds from the sale of Common Stock in the Stock Conversion and as to
the net earnings on such net proceeds), all of which are subject to change from
time to time. As a result, no assurance can be given that persons who purchase
such shares in the Stock Conversion will be able to sell such shares thereafter
at or above the Purchase Price.
7
_______________________________________________________________________________
<PAGE>
________________________________________________________________________________
NON-TRANSFERABILITY OF SUBSCRIPTION RIGHTS. Prior to the completion
of the Stock Conversion, federal regulations prohibit any person from
transferring or entering into any agreement or understanding to transfer the
legal or beneficial ownership of the Subscription Rights issued under the Plan
or the shares of Common Stock to be issued upon their exercise. Persons
violating such prohibition may lose their right to purchase stock in the Stock
Conversion and may be subject to sanctions by the OTS. Each person exercising
Subscription Rights will be required to certify that a purchase of Common Stock
is solely for the purchaser's own account and that there is no agreement or
understanding regarding the sale or transfer of such shares. See "The
Conversion--Restrictions on Transferability."
USE OF PROCEEDS
The net proceeds from the sale of Common Stock in the Stock Conversion
are estimated to be approximately $3.5 million, $4.1 million, $4.8 million and
$5.6 million, respectively, based on the minimum, midpoint, maximum and 15%
above the maximum, of the Estimated Valuation Range. See "Pro Forma Data." The
Holding Company will purchase all of the common stock of the Bank to be issued
in the Stock Conversion in exchange for 50% of the net proceeds from the
issuance of the Common Stock and will retain the remaining 50% of such net
proceeds as its initial capitalization (less funds loaned to the ESOP sufficient
to purchase up to 8% of shares sold in the Stock Conversion). In addition, the
Holding Company intends to invest additional proceeds into the Bank to the
extent necessary to increase the Converted Bank's tangible capital to at least
10% of its adjusted total assets. Subject to regulatory approval, the Holding
Company intends to lend a portion of the net proceeds to the ESOP to facilitate
its purchase of up to 8% of the Common Stock sold in the Stock Conversion. It
is anticipated that the funds will be borrowed by the ESOP at an interest rate
equal to the prime rate as published in the Wall Street Journal on the closing
date of the Stock Conversion, which rate is currently ____%. It is anticipated
that the ESOP loan will have a term of 10 years. Based upon the issuance of
shares at the minimum and maximum of the Estimated Valuation Range, the loan to
the ESOP to purchase 8% of the Common Stock would be $306,000 and $414,000,
respectively. The Bank intends to make contributions to the ESOP in an amount
to be determined by the Board of Directors, but not less than the amount needed
to pay any currently maturing obligations under the loan made to the ESOP,
subject to the Bank's continuing compliance with OTS capital requirements.
These contributions would be allocated among all eligible participants in
proportion to their compensation. It is expected the ESOP will purchase up to
8% of the total number of shares sold in the Stock Conversion. See "Management-
- -Benefit Plans--Employee Stock Ownership Plan." The remaining net proceeds
retained by the Holding Company are anticipated to be initially invested in
short- and intermediate-term securities and will be available as general working
capital. Subject to compliance with federal regulations, such funds may also be
used to repurchase the Common Stock. However, since the Holding Company has not
yet issued stock, there is currently insufficient information upon which an
intention to repurchase stock could be based. For information regarding the
possible purchase of stock to implement a restricted stock plan following the
Stock Conversion, see "Use of Proceeds." The net proceeds to the Bank will
become part of the Bank's general funds and will be used to support its lending
and investment activities, subject to applicable regulatory restrictions. All or
a portion of the proceeds may be used to repay a portion of the Bank's FHLB
advances. On an interim basis, such proceeds will be invested primarily in
short- and intermediate-term securities and will be available as general working
capital.
PURCHASES BY DIRECTORS AND EXECUTIVE OFFICERS
The directors and executive officers of Investors Federal have
indicated their intention to purchase in the Stock Conversion an aggregate of
$701,000 of Common Stock (or 35,050 shares, or approximately 18.3%, 15.6%,
13.5%, or 11.8%, respectively, of the shares to be issued in the Stock
Conversion at the minimum, the midpoint, the maximum and 15% above the maximum
of the Estimated Valuation Range). There is no formal agreement among the
executive officers and directors and their affiliates regarding their purchases
of Common Stock. In addition, 8% of the shares issued in the Stock Conversion
are expected to be purchased by the Bank's ESOP. See "Management - Benefit
Plans - Employee Stock Ownership Plan" and "The Stock Conversion - Participation
by Management."
8
________________________________________________________________________________
<PAGE>
________________________________________________________________________________
BENEFITS OF CONVERSION TO DIRECTORS AND EXECUTIVE OFFICERS
EMPLOYMENT AGREEMENTS. The Board of Directors of the Bank intends to
enter into an employment agreement with each of Earle S. Teegarden, Jr.,
President and Chief Executive Officer of the Bank, and Larry R. Johnson, Senior
Vice President and Secretary of the Bank. See "Management--Employment
Agreements." It is anticipated that each of the agreements will be at the
executive officer's current salary and will become effective upon completion of
the Stock Conversion. Under certain circumstances, including involuntary
termination of employment following a change in control, as defined in the
employment agreements, each of the executive officers will also be entitled to a
severance payment equal to up to 299% of his base compensation, as defined.
Assuming a change in control occurred as of June 30, 1996, Messrs. Teegarden and
Johnson would have received approximately $231,000 and $158,000, respectively,
pursuant to the employment agreements' change in control provision. See
"Management--Employment Agreements" for a more detailed description of these
agreements. In addition, the Bank may enter into employment and/or severance
agreements with other offices of the Bank after the Conversion.
EMPLOYEE STOCK OWNERSHIP PLAN. The Board of Directors of the Bank has
adopted an ESOP, a tax-qualified employee benefit plan for officers and
employees of the Holding Company and the Bank. The ESOP intends to buy up to 8%
of the Common Stock issued in the Stock Conversion (approximately $306,000 to
$414,000 of the Common Stock based on the issuance of the minimum (191,250)
shares) and the maximum (258,750 shares of the Estimated Valuation Range and the
$20.00 per share Purchase Price). The ESOP will purchase the shares with funds
borrowed from the Holding Company, and it is anticipated that the ESOP will
repay the loans through periodic tax-deductible contributions from the Bank over
a ten-year period. These contributions will increase the compensation expense
of the Bank. The Bank's contributions to the ESOP will be allocated among
participants on the basis of their compensation. See "Management - Benefit
Plans - Employee Stock Ownership Plan" for a description of this plan.
OTHER STOCK BENEFIT PLANS. The Board of Directors of the Holding
Company intends to adopt a Stock Option and Incentive Plan ("Stock Option Plan")
and a Recognition and Retention Plan ("RRP") to become effective upon approval
by stockholders no earlier than six months following the Stock Conversion. It
is anticipated that certain of the directors and executive officers of the
Holding Company and the Bank will receive awards under these plans. It is
currently anticipated that the Stock Option Plan and the RRP will be funded by
shares subsequently reacquired and held as treasury shares or through the
issuance of authorized but unissued stock of the Holding Company, representing
10% and 4%, respectively, of the shares sold in the Stock Conversion. To the
extent the Stock Option Plan and RRP are funded from authorized but unissued
shares, the funding of such plans will dilute existing shareholders by an
aggregate of approximately 3.85%. See "Management - Benefit Plans" for a
description of these plans. The Stock Option Plan and the RRP may be submitted
for stockholder approval at an annual or special meeting of stockholders
following the Stock Conversion, provided such meeting is at least six months
following the Stock Conversion, or alternatively such approval may not be sought
until after one year following the Stock Conversion. If such plans are adopted
during the first year following the Stock Conversion, they might be subject to
certain allocation and other requirements of the OTS which might not apply after
one year.
STOCK OPTION PLAN. Following consummation of the Stock Conversion,
the Holding Company intends to adopt a stock option plan for the benefit of the
directors, officers and employees of the Holding Company and the Bank (the
"Stock Option Plan"), pursuant to which the Holding Company intends to reserve a
number of shares of Common Stock equal to an aggregate of 10% of the Common
Stock issued in the Stock Conversion (25,875 shares at the maximum of the
Estimated Valuation Range) for issuance pursuant to stock options and stock
appreciation rights. Under regulations of the OTS that may be applicable to the
Bank following the Conversion, if the Stock Option Plan is submitted to and
approved by the stockholders of the Holding Company within one year after
completion of the Stock Conversion, no more than 30% of the shares available
under the Stock Option Plan could be granted to non-employee directors, no more
than 5% of the shares available could be granted to individual non-employee
directors, and no more than 25% of the shares available could be granted to an
individual officer. Under such circumstances, it is expected that each non-
employee director will receive an option for the same number of shares, in which
event options for a total of approximately 1,293 shares would be granted to each
director if the
9
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<PAGE>
________________________________________________________________________________
amount of Common Stock sold in the Stock Conversion is equal to the maximum of
the Estimated Valuation Range. In addition, it is currently expected that stock
options will be granted to Mr. Teegarden and to other officers of the Bank,
although no determination has been made at this time as to the amount of such
stock options. The Holding Company currently anticipates that it will not
implement the Stock Option Plan until after one year following the Stock
Conversion, although it reserves the right to do so as early as six months
following the Stock Conversion. See "Management--Benefit Plan--Stock Option and
Incentive Plan."
RECOGNITION AND RETENTION PLAN. Following consummation of the Stock
Conversion, the Holding Company intends to adopt a recognition and retention
plan for the benefit of the directors, officers and employees of the Holding
Company and the Bank (the "RRP"). It is expected that the RRP will be submitted
to stockholders for approval at the same time as the Stock Option Plan. Upon the
receipt of such approval, the RRP is expected to purchase a number of shares of
Common Stock either from the Holding Company or in the open market equal to an
aggregate of 4% of the Common Stock issued in the Stock Conversion (10,350
shares at the maximum of the Estimated Valuation Range). Assuming the Common
Stock awarded pursuant to the RRP had a value of $20.00 per share, the aggregate
value of RRP awards would be $207,000 at the maximum of the Estimated Valuation
Range. Under regulations of the OTS that may be applicable to the Bank
following the Conversion, if the RRP is submitted to and approved by the
stockholders of the Holding Company within one year after completion of the
Stock Conversion, no more than 30% of the shares available under the RRP could
be granted to non-employee directors, no more than 5% of the shares available
could be granted to an individual non-employee director, and no more than 25% of
the shares available could be granted to an individual officer. Under such
circumstances each non-employee director would receive an award for the same
number of shares, in which event awards of 517 shares would be granted to each
such individual if the amount of common stock sold in the Stock Conversion is
equal to the maximum of the Estimated Value Range. It is currently expected that
awards will be granted to Mr. Teegarden, although no determination has been made
at this time as to the amount of such awards. Awards of Common Stock under the
RRP will be at no cost to the recipient.
DIVIDENDS
Subject to regulatory and other considerations, the Holding Company
intends to establish a dividend policy at an initial rate of $.60 per share per
annum (or 3.0% based upon the initial offering price of $20 per share), payable
semi-annually in December and June of each year, with the first payment expected
in June 1997. In addition, the Holding Company may determine from time to time
to pay a special nonrecurring cash dividend as circumstances warrant. The
payment of dividends will be subject to determination and declaration by the
Board of Directors in its discretion, which will take into account the Holding
Company's consolidated financial condition and results of operations, tax
considerations, industry standards, economic conditions, regulatory restrictions
on dividend payments by the Bank to the Holding Company, general business
practices and other factors. See "Dividends," "Regulation - Regulatory Capital
Requirements" and "Regulation - Limitations on Dividends and Other Capital
Distributions."
MARKET FOR COMMON STOCK
The Holding Company has never issued capital stock to the public and
due to the relatively small size of the Offerings, it is unlikely that an active
and liquid trading market will develop or be maintained. The Holding Company
has requested that Trident Securities undertake to match offers to buy and sell
the Conversion Stock, and that Trident Securities list the Common Stock over the
counter through the National Daily Quotation System "Pink Sheets" published by
the National Quotation Bureau, Inc. and Trident Securities has agreed to do so.
However, purchasers of Common Stock should have a long term investment intent
and recognize that the absence of an active and liquid trading market may make
it difficult to sell the Common Stock, and may have an adverse effect on the
price. See "Illiquid Market for the Common Stock" and "Market for Common
Stock."
10
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<PAGE>
_______________________________________________________________________________
PROSPECTUS DELIVERY AND PROCEDURE FOR PURCHASING SHARES
To ensure that each purchaser receives a Prospectus at least 48 hours
prior to the Expiration Date in accordance with Rule 15c2-8 of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), no Prospectus will be
mailed any later than five days prior to the Expiration Date or hand-delivered
any later than two days prior to such date. Execution of the order form will
confirm receipt of the Prospectus in accordance with Rule 15c2-8. Order forms
will only be distributed with a Prospectus. The Bank is not obligated to accept
for processing orders not submitted on original order forms. Order forms
unaccompanied by an executed certification form will not be accepted. Payment by
check, money order, bank draft, cash or debit authorization to an existing
account at the Bank must accompany the order and certification forms. No wire
transfers will be accepted. The Bank is prohibited from lending funds to any
person or entity for the purpose of purchasing shares of Common Stock in the
Stock Conversion. See "The Conversion--Procedure for Purchasing Shares in
Subscription and Community Offering."
In order to ensure that Eligible Account Holders, Supplemental
Eligible Account Holders and Other Members are properly identified as to their
stock purchase priorities, depositors as of the Eligibility Record Date, the
Supplemental Eligibility Record Date or the Voting Record Date and borrowers
with loans outstanding as of both January 1, 1988 and ______, 1996 who continue
to be borrowers as of the date of the Special Meeting of Members must list all
deposit and/or loan accounts on the stock order form, giving all names on each
account and the account numbers. Failure to list all account numbers may result
in the inability of the Holding Company or the Bank to fill all or part of a
subscription order. In addition, registration of shares in a name or title
different from the names or titles listed on the account may adversely affect
such subscriber's purchase priority. See "The Conversion--Procedure for
Purchasing Shares in Subscription and Community Offering."
RISK FACTORS
See "Risk Factors" for information regarding the geographical
concentration of loans and risks of economic downturn in the Bank's primary
market area, adequacy of the Bank's allowance for loan losses, limited lending
opportunities in the Bank's market area, purchased loan portfolio, effect of the
conversion to a national bank charter on operations, the potential delay in
completion or denial of the Bank Conversion, the Bank's reduced return on equity
ratios after the Stock Conversion, interest rate risk exposure, potential
discouragement of takeover attempts resulting from takeover defensive
provisions, potential operational restrictions associated with regulatory
oversight, disparity between BIF and SAIF insurance premiums, legislation
limiting deduction of bad debt, competition, potential increased costs of
Conversion resulting from a delayed offering, the Bank's ESOP compensation
expense, absence of active market for the common stock, possible consequences of
amendment to Plan of Conversion and the possible adverse income tax consequences
of the distribution of subscription rights.
11
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<PAGE>
________________________________________________________________________________
SELECTED CONSOLIDATED FINANCIAL INFORMATION AND OTHER DATA
Set forth below are selected consolidated financial and other data of the
Bank at and for the periods indicated. The selected consolidated financial and
other data does not purport to be complete and is qualified in its entirety by
reference to the detailed information and Consolidated Financial Statements and
Notes thereto presented elsewhere in this Prospectus.
<TABLE>
<CAPTION>
At June 30,
----------------------------------------------
1996 1995 1994 1993 1992
------- ------- ------- ------- -------
(In Thousands)
SELECTED FINANCIAL CONDITION DATA:
<S> <C> <C> <C> <C> <C>
Total assets.................................. $52,587 $45,013 $41,095 $41,263 $42,584
Loans receivable, net......................... 28,429 26,340 22,719 22,284 22,326
Mortgage-backed securities:
Held to maturity............................. - 8,306 10,674 12,490 15,237
Available for sale........................... 16,971 4,397 470 - -
Investment securities:
Held to maturity............................. 215 815 809 596 1,627
Available for sale........................... 3,264 1,737 2,009 1,354 -
Deposits...................................... 35,495 35,210 37,072 38,429 39,986
FHLB advances................................. 13,474 6,419 1,073 - -
Retained earnings - substantially
restricted................................... 3,268 3,038 2,764 2,599 2,350
</TABLE>
<TABLE>
<CAPTION>
Years Ended June 30,
--------------------------------------------
1996 1995 1994 1993 1992
------- ------- ------- ------ --------
(In Thousands)
<S> <C> <C> <C> <C> <C>
SELECTED OPERATIONS DATA:
Total interest income......................... $ 3,616 $ 2,843 $ 2,509 $ 2,790 $ 3,416
Total interest expense........................ 2,264 1,716 1,432 1,659 2,275
------- ------- ------- ------- -------
Net interest income........................ 1,352 1,127 1,077 1,131 1,141
Provision for loan losses..................... 210 1 15 3 -
------- ------- ------- ------- -------
Net interest income after provision
for loan losses............................. 1,142 1,126 1,062 1,128 1,141
Fees and service charges...................... 231 225 218 188 167
Gain on sales of mortgage-backed
securities and investment securities........ 46 19 7 10 63
Other non-interest income..................... 80 22 59 60 62
------- ------- ------- ------- -------
Total non-interest income..................... 357 266 284 258 292
Total non-interest expense.................... 1,030 1,011 1,101 1,079 1,013
------- ------- ------- ------- -------
Income before income taxes.................... 469 381 245 307 420
Income tax expense............................ 167 135 105 58 133
Cumulative effect on prior years of a change
in accounting principle...................... - 27 25 - -
------- ------- ------- ------- -------
Net income.................................... $ 302 $ 273 $ 165 $ 249 $ 287
======= ======= ======= ======= =======
</TABLE>
12
<PAGE>
<TABLE>
<CAPTION>
At or For the Years Ended June 30,
-------------------------------------------------
1996 1995 1994 1993 1992
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
SELECTED FINANCIAL RATIOS AND OTHER DATA: .61 .64 .40 .59 .67
Performance ratios: 8.86 8.88 6.13 9.16 11.58
Return on assets (1)...........................
Return on total equity (2)..................... 2.38 2.36 2.39 2.45 2.35
Interest rate spread information: 2.29 2.64 2.55 2.84 2.80
Average during period........................ 2.79 2.72 2.67 2.76 2.74
End of period................................
Net interest margin (3)........................ 2.07 2.38 2.66 2.56 2.37
Ratio of noninterest expense to average
total assets................................. 108.63 108.64 108.00 107.48 107.08
Ratio of average interest-earning assets to
average interest-bearing liabilities.........
Asset quality ratios: .24 .06 .33 .25 .44
Non-performing assets to total assets at
end of period (4)............................ 221.09 65.03 64.69 74.77 39.26
Allowance for loan losses to
non-performing loans......................... 1.00 .31 .39 .34 .33
Allowance for loan losses to loans
receivable, net..............................
6.21 6.76 6.67 6.30 5.52
Capital ratios: 6.85 7.24 6.53 6.44 5.80
Total equity to total assets at end of period..
Average total equity to average assets.........
3 3 3 3 3
Other data: 9,062 7,302 7,519 7,624 7,863
Number of full-service offices................. 1,237 1,251 1,205 1,174 1,201
Deposit accounts...............................
Real estate loans outstanding..................
</TABLE>
________________
(1) Ratio of net income to average total assets.
(2) Ratio of net income to average total equity.
(3) Net interest income as a percentage of average interest-earning assets.
(4) Non-performing assets include non-accrual loans, foreclosed real estate and
other repossessed assets.
13
<PAGE>
RISK FACTORS
The following factors, in addition to those discussed elsewhere in
this Prospectus, should be considered by investors before deciding whether to
purchase the Common Stock offered in the Stock Conversion.
GEOGRAPHICAL CONCENTRATION OF LOANS AND RISKS OF ECONOMIC DOWNTURN IN PRIMARY
MARKET AREA
At June 30, 1996, substantially all of the Bank's real estate mortgage
loans were secured by properties located in the Bank's primary market area of
Livingston, Caldwell and Daviess Counties and, to a lesser extent, in the
Missouri Counties of Boone, Greene and Cole. While the Bank currently believes
that its loans are adequately secured or reserved for, in the event that real
estate prices in the Bank's market area substantially weaken or economic
conditions in Missouri deteriorate, reducing the value of properties securing
the Bank's loans, some borrowers may default and the value of the real estate
collateral may be insufficient to fully secure the loan. In either event, the
Bank may experience increased levels of delinquencies and related losses having
an adverse impact on net income.
ADEQUACY OF ALLOWANCE FOR LOAN LOSSES
At June 30, 1996, the Bank's allowance for loan losses was $283,000,
or 1.00% of loans receivable, net. Although the allowance for loan losses is
maintained at a level which management considers adequate to provide for
potential loan losses, because future events affecting borrowers and loan
collateral cannot be predicted with any degree of certainty, there can be no
assurance that the Bank's allowance for loan losses will be adequate to absorb
all future loan losses. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations," "Business--Lending Activities," and "--
Asset Quality."
LIMITED LENDING OPPORTUNITIES IN MARKET AREA
The economy of the Bank's primary market area has experienced little
growth in recent years. Accordingly, the Bank has had limited residential
mortgage lending opportunities in its local market area. As a result, the Bank
has not been able to originate loans in the volume desired and consequently it
has supplemented its investment in loans through the purchase of adjustable-rate
one- to four-family mortgage loans, mortgage-backed and other investment
securities and, to a lesser extent, SBA-guaranteed loans and FHA home
improvement loans. At June 30, 1996, the Bank's investment in mortgage-backed
securities totaled $17.0 million, or 32.2% of total assets. While mortgage-
backed securities generally increase the quality of the Bank's assets by virtue
of the guarantees supporting them, and while lower overhead costs are associated
with maintaining such a portfolio as compared to a loan portfolio, such
securities typically earn lower yields than one- to four-family residential
mortgage loans. The Bank's need to purchase mortgage-backed securities due to
the lack of lending opportunities has caused the Bank's interest rate spread to
be below that of savings institutions with more significant loan originations
relative to their asset size. At June 30, 1996, the Bank's yield on its loan
portfolio was 8.28% compared to a yield of 6.97% on its mortgage-backed
securities portfolio. Because of the limited lending opportunities in its local
market area, the Bank anticipates that the net proceeds of the Stock Conversion
initially will be invested in short term and intermediate term securities and
mortgage-backed securities. Consequently, in the short term the Bank will have
difficulty in improving its interest rate spread which could suppress earnings
and thus the return on equity to stockholders. See "Business -- Market Area and
Competition," "--Lending Activities" and "-- Investment Activities."
PURCHASED LOAN PORTFOLIO
The Bank historically has employed an operating strategy that
emphasized the origination of one- to four-family residential mortgage loans in
its market area, primarily with adjustable rates. In order to supplement local
mortgage loan demand, the Bank also has purchased loans in the secondary
mortgage market. These loans have consisted primarily of one- to four-family
residential mortgage loans secured by property located in the State of
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Missouri, although the Bank's purchased loan portfolio includes seasoned one- to
four-family residential mortgage loans secured by collateral located outside
Missouri. At June 30, 1996, $7.2 million, or 25.0%, of the Bank's total loan
portfolio consisted of purchased one- to four-family residential mortgage loans.
The Bank's purchased loans are generally acquired without recourse with
servicing retained by the seller or originator of the loans. Although the Bank
reviews each purchased loan using the Bank's underwriting criteria for
originations and although a Bank officer or director usually performs an on-site
inspection of each purchased loan, the Bank is dependent on the seller or
originator of the loan for ongoing collection efforts and collateral review. In
addition, the Bank purchases loans with a variety of terms, including
maturities, interest rate caps and indices for adjustment of interest rates that
may differ from those offered at the time by the Bank in connection with loans
the Bank itself originates. Finally, with respect to purchased loans that are
secured by collateral located outside Missouri, the market areas in which the
collateral properties are located are subject to economic and real estate market
conditions that may differ significantly from those experienced in the Bank's
market area. If economic conditions continue to limit the Bank's opportunities
to originate loans in its market area, the Bank may seek to increase its
investment in purchased mortgage loans, including loans secured by collateral
located outside its market area, subject to the availability of such loans for
purchase. General economic conditions, including prevailing interest rates, may
affect the availability of such loans for purchase.
EFFECT OF THE CONVERSION TO A NATIONAL BANK CHARTER ON OPERATIONS
Over time, management anticipates broadening its range of banking
products and services consistent with the national bank charter, and it will
continue to diversify its loan portfolio. Diversification of the National Bank's
loan portfolio may also alter the risk profile of the National Bank, since
certain loans that may be made by national banks, such as commercial and
consumer loans, are generally believed to carry more credit risk than
residential one-to four-family mortgage loans. See "Business of the Bank--
Lending Activities." It is also anticipated that the National Bank will continue
to be a member of the FHLB of Des Moines after the Conversion, although it is
not required to remain a member.
POTENTIAL DELAY IN COMPLETION OR DENIAL OF BANK CONVERSION
The Plan permits the Board of Directors of the Bank to elect, at any
time, not to proceed with the Bank Conversion. The Office of the Comptroller of
the Currency (the "OCC") must approve the Bank's application to convert to a
national bank and the FRB must approve the Holding Company's application to
become a bank holding company. If this election is made by the Board of
Directors or if the FRB or the OCC deny such applications, the Bank will only
proceed with the Stock Conversion. In addition, it is possible that the receipt
of one or more of these approvals will be delayed. Although management of the
Holding Company and the Bank currently intend to consummate the Stock Conversion
and the Bank Conversion contemporaneously, management may elect to consummate
the Stock Conversion before the Bank Conversion should there be significant
delay in obtaining all applicable regulatory approvals for the Bank Conversion.
In that case, following the Stock Conversion, the Holding Company would operate
as a savings and loan holding company and the Converted Bank as a federal stock
savings bank until consummation of the Bank Conversion, which would occur as
soon as practicable thereafter. It is currently the intent of the Bank's Board
of Directors to proceed with both the Stock Conversion and the Bank Conversion.
See "The Conversion--General."
REDUCED RETURN ON EQUITY AFTER STOCK CONVERSION
Return on equity (net income for a given period divided by average
equity during that period) is a ratio used by many investors to compare the
performance of a particular financial institution to its peers. The Bank's
return on equity for the year ended June 30, 1996 was, and the Holding Company's
post-Stock Conversion return on equity will be, less than the average return on
equity for publicly traded thrift institutions and their holding companies. See
"Selected Consolidated Financial Information and Other Data" for numerical
information regarding the Bank's historical return on equity and
"Capitalization" for a discussion of the Holding Company's estimated pro forma
consolidated capitalization as a result of the Conversion. In addition, the
expenses associated with the ESOP
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and the RRP (see "Pro Forma Data"), along with other post-Stock Conversion
expenses, are expected to contribute initially to reduced earnings levels.
Finally, because of the limited lending opportunities in its market area, the
Bank anticipates the proceeds of the Stock Conversion will be used to purchase
mortgage-backed and other investment securities, which typically have a lower
yield than that available on one- to four-family residential mortgage loans. The
Bank intends to deploy the net proceeds of the Offerings to increase earnings
per share and book value per share, without assuming undue risk, with the goal
of achieving a return on equity comparable to the average for publicly traded
thrift institutions and their holding companies. This goal will likely take a
number of years to achieve, particularly given the level of loan demand in the
Bank's market area, and no assurances can be given that this goal can be
attained. Consequently, for the foreseeable future, investors should not expect
a return on equity that will meet or exceed the average return on equity for
publicly traded thrift institutions.
INTEREST RATE RISK EXPOSURE
The Bank's profitability, like that of most financial institutions, is
dependent to a large extent upon its net interest income, which is the
difference between its interest income on interest-earning assets, such as loans
and investments, and its interest expense on interest-bearing liabilities, such
as deposits and borrowings. Changes in the level of interest rates also affect
the amount of loans originated by the Bank and, thus, the amount of loan and
commitment fees, as well as the market value of the Bank's interest-earning
assets. Moreover, increases in interest rates also can result in
disintermediation, which is the flow of funds away from savings institutions
into direct investments, such as corporate securities and other investment
vehicles, which, because of the absence of federal insurance premiums, may yield
higher rates of return than those paid by savings institutions.
In addition, changes in interest rates also can affect the market
value of the Bank's interest-earning assets, which are comprised of fixed- and
adjustable-rate instruments with various terms to maturity. Generally, the value
of fixed-rate, longer-term instruments fluctuates inversely with changes in
interest rates. See "Business - Lending Activities - One- to Four-Family
Mortgage Loans." Increases in interest rates also can affect the type (fixed-
rate or adjustable-rate) and amount of loans originated by the Bank and the
average life of loans and securities, which can adversely impact the yields
earned on the Bank's loan and securities portfolio. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations--Asset/Liability
Management."
The OTS utilizes a net portfolio value methodology to measure the
interest rate risk exposure of savings associations. Effective March 31, 1995,
for purposes of calculating risk-based capital, institutions with more than
normal interest rate risk, as defined by OTS regulations, are required to make a
deduction from capital equal to 50% of their interest rate risk exposure
multiplied by the present value of their assets. Based upon this methodology, at
June 30, 1996, the Bank's interest rate risk exposure to a 200 basis point
increase in interest rates was considered "normal" under this regulation.
However, because the Bank has total assets of less than $300 million and risk-
based capital in excess of 12%, the Bank is exempt from this rule unless
otherwise notified by the OTS. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations - Asset/Liability Management."
POTENTIAL DISCOURAGEMENT OF TAKEOVER ATTEMPTS RESULTING FROM TAKEOVER DEFENSIVE
PROVISIONS
HOLDING COMPANY AND BANK GOVERNING INSTRUMENTS. Certain provisions of
the Holding Company's Certificate of Incorporation and Bylaws assist the Holding
Company in maintaining its status as an independent publicly owned corporation.
These provisions provide for, among other things, limiting voting rights of
beneficial owners of more than 10% of the Common Stock, staggered terms for
directors, noncumulative voting for directors, limits on the calling of special
meetings, a fair price/supermajority vote requirement for certain business
combinations and certain notice requirements. The 10% vote limitation would not
affect the ability of an individual who is not the beneficial owner of more than
10% of the Common Stock to solicit revocable proxies in a public solicitation
for proxies for a particular meeting of stockholders and to vote such proxies.
In addition, provisions in the Bank's federal stock Charter that have an anti-
takeover effect could also be applicable to changes in control of the Holding
Company as the sole shareholder of the Bank. The Converted Bank's Charter
includes a provision
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applicable for five years which prohibits acquisitions and offers to acquire,
directly or indirectly, the beneficial ownership of more than 10% of the Bank's
securities. Any person violating this restriction may not vote the Converted
Bank's securities in excess of 10%. However, the Articles of Association of the
National Bank do not contain a similar provision. Any or all of these
provisions may discourage potential proxy contests and other takeover attempts,
particularly those which have not been negotiated with the Board of Directors.
In addition, the Holding Company's Certificate of Incorporation also authorizes
preferred stock with terms to be established by the Board of Directors which may
rank prior to the Common Stock as to dividend rights, liquidation preferences,
or both, may have full or limited voting rights and may have a dilutive effect
on the ownership interests of holders of the Common Stock. The Board of
Directors of the Holding Company has the ability to waive certain restrictions
on acquisition, provided that the acquisition is approved in advance by a
majority of the disinterested Board of Directors. See "Restrictions on
Acquisitions of Stock and Related Takeover Defensive Provisions."
REGULATORY AND STATUTORY PROVISIONS. Federal regulations prohibit, for
a period of three years following the completion of the Conversion, any person
from offering to acquire or acquiring the beneficial ownership of more than 10%
of the stock of a converted savings institution or its holding company without
prior federal regulatory approval. Federal law also requires federal regulatory
approval prior to the acquisition of "control" (as defined in federal
regulations) of an insured institution, including a holding company thereof. See
"Restrictions on Acquisitions of Stock and Related Takeover Defensive
Provisions."
EMPLOYMENT AGREEMENTS AND OTHER BENEFIT PLANS; VOTING CONTROL OF
DIRECTORS AND OFFICERS AND POSSIBLE DILUTIVE EFFECTS. The employment agreements,
the proposed Stock Option Plan and the proposed RRP also contain provisions that
could have the effect of discouraging takeover attempts of the Holding Company.
The Bank intends to enter into an employment agreement with each of
Earle S. Teegarden, Jr., President and Chief Executive Officer of the Bank, and
Larry R. Johnson, Senior Vice President and Secretary of the Bank. The
employment agreements provide for a payment equal to 299% of the employee's base
compensation, in the event that his employment is involuntarily terminated as a
result of a change in control of the Holding Company or the Bank. These
provisions may have the effect of increasing the cost of, and thereby
discouraging, a future attempt to takeover the Holding Company or the Bank.
Assuming involuntary termination of the employment of such employees occurred
following a change in control as of June 30, 1996, Messrs. Teegarden and Johnson
would have received approximately $231,000 and $158,000, respectively, pursuant
to the employment agreements' change in control provisions. See "Management--
Employment Agreement." In addition, the Bank may enter into employment and/or
severance agreements with other officers of the Bank after the Conversion.
Additionally, if the Holding Company issues additional shares pursuant
to the proposed Stock Option Plan and RRP (as opposed to funding such plans with
shares subsequently reacquired and held as treasury shares) the percentage of
ownership of the Holding Company of those persons purchasing Common Stock in the
Stock Conversion will be diluted. Assuming exercise of all options available
under the Stock Option Plan, the interest of stockholders will be diluted by
approximately 9.1%. The award of all shares available under the RRP will dilute
the interests of stockholders by approximately 3.85%. See "Pro Forma Data,"
"Management - Benefit Plans - Stock Option and Incentive Plan," and "-
Recognition and Retention Plan" and "Restrictions on Acquisitions of Stock and
Related Takeover Defensive Provisions." For financial accounting purposes,
certain incentive grants under the proposed RRP will result in the recording of
compensation expense over the period of vesting. See "Pro Forma Data."
The directors and executive officers of the Bank are anticipated to
purchase an aggregate of approximately $701,000 or approximately 13.5% of the
shares offered in the Stock Conversion at the maximum of the Estimate Valuation
Range, or 11.8% at 15% above the maximum of the Estimated Valuation Range, or
18.3% of the shares offered in the Stock Conversion at the minimum of the
Estimated Valuation Range. Directors and executive officers will also receive
awards under the proposed Stock Option Plan and the proposed RRP. Assuming the
purchase of $701,000 of Common Stock in the Stock Conversion by directors and
executive officers in the aggregate (6 persons), the full vesting of the
restricted stock to be awarded under the proposed RRP and the exercise of all
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options to be awarded under the proposed Stock Option Plan in connection with
the Stock Conversion, approval of the Stock Option Plan and the RRP by the
stockholders, and the acquisition by the Holding Company of shares to fund such
plans in open-market purchases, the shares owned by the directors and executive
officers in the aggregate would amount from approximately 25.8% (at 15% above
the maximum of the Estimated Valuation Range) to 32.3% (at the minimum of the
Estimated Valuation Range) of the outstanding shares. In addition, the ESOP is
expected to purchase 8% of the shares sold in the Stock Conversion. This stock
ownership, if voted as a block, could defeat takeover attempts favored by other
stockholders. See "Management - Benefit Plans - Employee Stock Ownership Plan."
POTENTIAL OPERATIONAL RESTRICTIONS ASSOCIATED WITH REGULATORY OVERSIGHT
The Bank is subject to extensive regulation, supervision and
examination by the OTS as its chartering authority and primary federal
regulator, and by the FDIC, which insures its deposits up to applicable limits.
The Bank is a member of the Federal Home Loan Bank (the "FHLB") of Des Moines
and is subject to certain limited regulation by the Board of Governors of the
Federal Reserve System ("Federal Reserve Board"). See "Regulation." Such
regulation and supervision governs the activities in which an institution can
engage and is intended primarily for the protection of the insurance fund and
depositors. Following the Bank Conversion, the National Bank will be subject to
extensive regulation and supervision by the OCC and the FDIC, and the Holding
Company will be subject to extensive regulation and supervision of the FRB.
Regulatory authorities have been granted extensive discretion in connection with
their supervisory and enforcement activities which are intended to strengthen
the financial condition of the banking industry, including the imposition of
restrictions on the operation of an institution, the classification of assets by
the institution and the adequacy of an institution's allowance for losses on
loans. See "Regulation - Federal Regulation of Savings Associations" and "-
Regulatory Capital Requirements." Any change in such regulation and oversight,
whether by the OTS, the FDIC, the OCC, the FRB or Congress, could have a
material impact on the Holding Company, the Bank and their respective
operations.
RECAPITALIZATION OF SAIF, DISPARITY BETWEEN BIF AND SAIF PREMIUMS
Deposits of the Bank are currently insured by the SAIF of the FDIC.
The FDIC also maintains another insurance fund, the Bank Insurance Fund, which
primarily insures commercial bank deposits. Applicable law requires that both
the SAIF and BIF funds be recapitalized to a ratio of 1.25% of reserves to
deposits, and the FDIC announced that the BIF reached the required reserve ratio
during May 1995. The SAIF, however, was not expected to achieve that reserve
ratio before 2002. Due to the disparity in reserve ratios, on November 14, 1995,
the FDIC reduced annual assessments for BIF-insured institutions to the legal
minimum of $2,000 while SAIF-insured institutions continued to pay assessments
based on a schedule of from $0.23 to $0.31 per $100 of deposits.
In September 1996, Congress enacted legislation to recapitalize the
SAIF by a one-time assessment on all SAIF-insured deposits held as of March 31,
1995. The assessment will be 65.7 basis points per $100 in deposits, payable on
November 30, 1996. For the Bank, the assessment is expected to be $229,000 (or
$147,000 when adjusted for taxes), based on the Bank's deposits on March 31,
1995 of $34.9 million. In addition, beginning January 1, 1997, pursuant to the
legislation, interest payments on bonds ("FICO Bonds") issued in the late 1980s
by the Financing Corporation ("FICO") to recapitalize the now defunct Federal
Savings and Loan Insurance Corporation will be paid jointly by BIF-insured
institutions and SAIF-insured institutions. The FICO assessment will be 1.29
basis points per $100 in BIF deposits and 6.44 basis points per $100 in SAIF
deposits. Beginning January 1, 2000, the FICO interest payments will be paid
pro-rata by banks and thrifts based on deposits (approximately 2.4 basis points
per $100 in deposits). The BIF and SAIF will be merged on January 1, 1999,
provided the bank and savings association charters are merged by that date. In
that event, pro-rata FICO sharing will begin on January 1, 1999.
While the legislation has reduced the disparity between premiums paid
on BIF deposits and SAIF deposits, and has relieved the thrift industry of a
portion of the contingent liability represented by the FICO bonds, the premium
disparity between SAIF-insured institutions, such as the Bank, and BIF-insured
institutions will continue
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until at least January 1, 1999. Under the legislation, the Bank anticipates that
its ongoing annual SAIF premiums will be approximately $23,000.
LEGISLATION LIMITING DEDUCTION OF BAD DEBT
Under Section 593 of the Code, until the first tax year beginning on or
after January 1, 1996, thrift institutions such as the Bank, which met certain
definitional tests primarily relating to their assets and the nature of their
businesses, were permitted to establish a tax reserve for bad debts and to make
annual additions thereto, which additions, within specified limitations, could
be deducted in arriving at their taxable income. The Bank's deduction with
respect to "qualifying loans," which are generally loans secured by certain
interests in real property, were computed using an amount based on the Bank's
actual loss experience (the "Experience Method"), or a percentage equal to 8.0%
of the Bank's taxable income (the "PTI Method"), computed without regard to this
deduction and with additional modifications and reduced by the amount of any
permitted addition to the non-qualifying reserve.
Under recently enacted legislation, the PTI Method was repealed. If a Bank
is not a "large" bank, i.e., the quarterly average of the Bank's total assets or
of the consolidated group of which it is a member exceeds $500 million for the
year, the Bank will continue to be permitted to use the Experience Method. In
addition, the Bank is required to recapture (i.e., take into income) over a
multi-year period its "applicable excess reserves", i.e., the balance of its
reserve for losses on qualifying loans and nonqualifying loans, as of the close
of its last tax year beginning before January 1, 1996, over the greater of (a)
the balance of such reserves as of December 31, 1987 or (b) in the case of a
bank which is not a "large" bank, an amount that would have been the balance of
such reserves as of the close of its last tax year beginning before January 1,
1996, had the Bank always computed the additions to its reserves using the
experience method. The Bank would not be required to recapture its supplemental
reserves or its pre-1988 reserves, even if the Bank later became a "large" bank.
Under the legislation, such recapture requirements would be suspended for each
of two successive taxable years beginning January 1, 1997 if the principle
amount of residential loans made by the Bank during each such year is not less
than the average of the principal amounts of such loans made by the Bank during
its six taxable years preceding January 1, 1996. As of June 30, 1996, the Bank's
bad debt reserve subject to recapture over a six-year period totaled
approximately $129,000.
If the Bank ceases to qualify as a "bank" (as defined in Code Section 581)
or converts to a credit union, the pre-1988 reserves and supplemental reserves
are restored to income ratably over a six-year period, beginning in the tax year
the association no longer qualifies as a bank. The balance of the pre-1988
reserves are also subject to recapture in the case of certain excess
distributions to (including distributions on liquidation and dissolution), or
redemptions of stockholders. See "Regulation" and "Regulation--Federal and State
Taxation--Federal Taxation."
COMPETITION
The Bank experiences strong competition in its local market area in both
originating loans and attracting deposits. This competition arises, with respect
to originating loans, from mortgage bankers and to a lesser extent from
commercial banks, savings institutions and credit unions, and with respect to
attracting deposits, from securities firms and mutual funds and from other
financial institutions in its market area. In Livingston, Caldwell and Daviess
Counties, where the Bank's three offices are located, there are ten commercial
banks, in addition to the Bank. See "Business--Lending Activities" and "--Market
Area and Competition."
POTENTIAL INCREASED COSTS OF CONVERSION RESULTING FROM DELAYED OFFERING
The Subscription Offering will expire at noon, Central Time on December
___, 1996 unless extended by the Bank and the Holding Company. If the Offerings
are extended beyond February __, 1997, all subscribers will have the right to
modify or rescind their subscriptions and to have their subscription funds
returned with interest. There can be no assurance that the Offerings will not be
extended as set forth above.
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A material delay in the completion of the sale of all unsubscribed shares
in the Community or Syndicated Community Offering may result in a significant
increase in the costs in completing the Stock Conversion. Significant changes in
the Bank's operations and financial condition, the aggregate market value of the
shares to be issued in the Stock Conversion and general market conditions may
occur during such material delay. In the event the Stock Conversion is not
consummated within 24 months after the date of the Special Meeting, OTS
regulations would require the Bank to charge accrued Stock Conversion costs to
then-current period operations. See "The Stock Conversion - Risk of Delayed
Offering."
ESOP COMPENSATION EXPENSE
In November, 1993, the American Institute of Certified Public Accountants
("AICPA") Accounting Standards Executive Committee issued Statement of Position
93-6 Employers' Accounting for Employee Stock Ownership Plans ("SOP 93-6"). SOP
93-6 requires an employer to record compensation expense in an amount equal to
the fair value of shares committed to be released to employees from an employee
stock ownership plan. Assuming shares of Common Stock appreciate in value over
time, the adoption of SOP 93-6 will increase compensation expense relating to
the ESOP to be established in connection with the Stock Conversion as compared
with prior guidance which required the recognition of compensation expense based
on the cost of shares acquired by the ESOP. It is impossible to determine at
this time the extent of such impact on future net income. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations -Impact
of New Accounting Standards."
ABSENCE OF ACTIVE MARKET FOR THE COMMON STOCK
The Holding Company and the Bank have never issued capital stock.
Consequently, there is no existing market for the Common Stock. The Holding
Company has requested that Trident Securities undertake to match offers to buy
and offers to sell the Common Stock and that Trident Securities list the Common
Stock over-the-counter through the National Daily Quotation System "Pink Sheets"
published by the National Quotation Bureau, Inc. and Trident Securities has
agreed to do so. The development of a liquid public trading market depends upon
the existence of willing buyers and sellers, the presence of which is not within
the control of the Holding Company, the Bank or any market maker. It is unlikely
that an active and liquid trading market for the Common Stock will develop due
to the relatively small size of the Offerings and the small number of
stockholders expected following the Stock Conversion. Accordingly, purchasers
should consider the illiquid, long-term nature of an investment in the Common
Stock. Furthermore, there can be no assurance that purchasers will be able to
sell their shares at or above the Purchase Price. See "Market for Common Stock."
POSSIBLE CONSEQUENCES OF AMENDMENT TO PLAN OF CONVERSION
The Plan of Conversion provides that, if deemed necessary or desirable by
the Boards of Directors of the Bank and the Holding Company, the Plan of
Conversion may be substantively amended (including an amendment to eliminate the
formation of the holding company as part of the Conversion) by a two-thirds vote
of the respective Boards of Directors of the Bank and the Holding Company, as a
result of comments from regulatory authorities or otherwise, at any time with
the concurrence of the OTS. Moreover, if the Plan of Conversion is amended,
subscriptions which have been received prior to such amendment will not be
refunded unless otherwise required by the OTS. If the Plan of Conversion is
amended in a manner that is deemed to be material to the subscribers by the
Holding Company, the Bank and the OTS, such subscriptions will be resolicited.
No such amendments are currently contemplated, although the Bank reserves the
right to increase or decrease purchase limitations. See "The Conversion -
Approval, Interpretation, Amendment and Termination."
POSSIBLE ADVERSE INCOME TAX CONSEQUENCES OF THE DISTRIBUTION OF SUBSCRIPTION
RIGHTS
If the Subscription Rights granted to Eligible Account Holders,
Supplemental Eligible Account Holders and Other Members are deemed to have an
ascertainable value, receipt of such rights may be taxable only to those
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Eligible Account Holders, Supplemental Eligible Account Holders or Other Members
who exercise the Subscription Rights (either as capital gain or ordinary income)
in an amount equal to such value. Additionally, the Bank could recognize a gain
for tax purposes on such distribution. Whether Subscription Rights are
considered to have ascertainable value is an inherently factual determination.
The Bank has received an opinion of Ferguson that such rights have no value,
which opinion is not binding on the IRS. See "The Conversion--Effects of
Conversion to Stock Form on Depositors and Borrowers of the Bank--Tax Effects."
INVESTORS FEDERAL BANK AND SAVINGS ASSOCIATION
Investors Federal is a federally chartered mutual savings association
headquartered in Chillicothe, Missouri. Investors Federal was originally
chartered as a federal savings association in 1934 under the name Chillicothe
Federal Savings and Loan Association. In 1974, the Bank changed its name to
Investors Federal Savings and Loan Association, and in 1988 the Bank changed its
name to Investors Federal Bank and Savings Association. Its deposits are insured
up to the maximum allowable amount by the SAIF of the FDIC. Through its main
office in Chillicothe and its branch offices in Hamilton and Gallatin, Missouri,
Investors Federal primarily serves communities located in Livingston, Caldwell
and Daviess Counties in the State of Missouri. At June 30, 1996, Investors
Federal had total assets of $52.6 million, deposits of $35.5 million and total
equity of $3.3 million.
Investors Federal has been, and intends to continue to be, a community-
oriented financial institution offering selected financial services to meet the
needs of the communities it serves. The Bank attracts deposits from the general
public and historically has used such deposits, together with other funds, to
originate and purchase one-to four-family residential mortgage loans, and to
originate non-residential real estate loans (primarily farm loans), and consumer
loans consisting primarily of loans secured by automobiles. In addition, in
recent years, the Bank has expanded its loan portfolio by purchasing SBA-
guaranteed loans and FHA-insured Title I home improvement loans. At June 30,
1996, the Bank's total loan portfolio was $28.7 million, of which 79.5% were
one-to four-family residential mortgage loans, 6.8% were non-residential real
estate loans, 9.0% were consumer loans (including FHA home improvement loans),
and 3.4% were SBA-guaranteed loans.
During the year ended June 30, 1996, the Bank originated $2.1 million of
fixed-rate and $3.1 million of adjustable rate one-to four-family residential
mortgage loans, all of which were retained in the Bank's portfolio. See
"Business - Lending Activities." To supplement local loan production, the Bank
has purchased adjustable-rate loans in the secondary mortgage market on a non-
recourse basis, with servicing retained by the seller or originator of the
loans. In recent years, the Bank has limited its purchased loans to one- to
four-family residential mortgage loans secured by collateral located in the
State of Missouri, although the Bank's purchased loan portfolio includes
seasoned one- to four-family residential mortgage loans secured by collateral
located outside Missouri. Purchased one- to four-family residential mortgage
loans totaled $7.2 million, or 25.0%, of the Bank's total loan portfolio at June
30, 1996.
Because of the limited lending opportunities in its local market area and
to the extent adjustable-rate one-to four-family residential mortgage loans are
unavailable for purchase at attractive yields, the Bank will invest in mortgage-
backed securities and other investment securities. At June 30, 1996, the Bank's
portfolio of mortgage-backed securities and investment securities was
substantial. At June 30, 1996, the Bank's mortgage-backed securities portfolio
totaled $17.0 million (or 32.3% of total assets), and consisted of $7.9 million
in mortgage-backed securities issued or guaranteed by the FHLMC, FNMA and GNMA,
$3.0 million in collateralized mortgage obligations, including real estate
mortgage investment conduits, and $6.1 million in participations in pools of
Small Business Administration loans. Also at June 30, 1996, the Bank's
investment portfolio totaled $3.5 million (or 6.6% of total assets) and
consisted of federal agency obligations, municipal bonds, FHLB stock, interest
earnings deposits with other financial institutions and mutual funds. In recent
years, management has also utilized the mortgage-backed securities and
investment portfolio to attempt to increase net interest income by purchasing
such securities with the proceeds of FHLB advances and earning the spread
between the yields earned on the mortgage-backed securities
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and the rates paid on the FHLB advances. At June 30, 1996, the Bank's FHLB
advances totaled $13.5 million, as compared to FHLB advances of $6.4 million at
June 30, 1995.
Investors Federal's executive office is located at 522 Washington Street,
Chillicothe, Missouri 64601. Its telephone number at that address is (816) 646-
3733.
IFB HOLDINGS, INC.
IFB Holdings, Inc. was organized in October 1996 for the purpose of serving
as a holding company for the Converted Bank upon its conversion from mutual to
stock form, and of the National Bank following the Bank Conversion. Prior to the
Conversion, the Holding Company has not engaged and will not engage in any
material operations. Upon consummation of the Stock Conversion, the Holding
Company will have no significant assets other than the outstanding capital stock
of the Converted Bank (or, following the Bank Conversion, the National Bank),
approximately 50% of the net proceeds from the Stock Conversion (less the amount
to fund the Employee Stock Ownership Plan ("ESOP")) and a note evidencing its
loan to the Bank's ESOP. Upon consummation of the Stock Conversion, the Holding
Company's principal business will be overseeing and directing the business of
the National Bank and investing the net Stock Conversion proceeds retained by
it. In connection with the Bank Conversion, the Holding Company will register
with the Board of Governors of the Federal Reserve System (the "FRB") as a bank
holding company under the Bank Holding Company Act of 1956, as amended (the
"BHCA").
The Holding Company has received approval from the OTS to acquire control
of the Converted Bank, subject to satisfaction of certain conditions. The
Holding Company has applied to the FRB for approval to retain control of the
National Bank following the Bank Conversion. Such approval has not been obtained
as of the date of this Prospectus, and there can be no assurance that such
approval will be obtained. See "Risk Factors--Potential Delay in Completion or
Denial of Bank Conversion."
The holding company structure will permit the Holding Company to expand the
financial services currently offered through the Bank, although there are no
definitive plans or arrangements for such expansion at present. The holding
company structure will also provide the Bank with enhanced operational
flexibility and provide the ability to diversify its business opportunities
through acquiring or merging with other financial institutions, thereby
enhancing its financial resources in order to compete more effectively with
other financial service organizations. At the present time, however, the Holding
Company does not have any plans, arrangements, agreements or understandings with
respect to any such acquisitions or mergers. After the Stock Conversion, the
Holding Company will be classified as a unitary savings and loan holding company
and will be subject to regulation by the OTS. After the Bank Conversion, the
Holding Company will be classified as a bank holding company and will be subject
to regulation by the FRB.
The initial activities of the Holding Company are anticipated to be funded
by such retained proceeds and the income thereon and dividends, if any, from
Investors Federal or the National Bank after the Bank Conversion. See
"Dividends," "Use of Proceeds," "Regulation - Holding Company Regulation" and
"Regulation - Federal and State Taxation." Thereafter, activities of the Holding
Company may also be funded through sales of additional securities, through
borrowings and through income generated by other activities of the Holding
Company. At this time, there are no plans regarding any other activities.
The executive office of the Holding Company is located at 522 Washington
Street, Chillicothe, Missouri 64601. Its telephone number at that address is
(816) 646-3733.
INVESTORS FEDERAL BANK, NATIONAL ASSOCIATION
Upon consummation of the Bank Conversion, the National Bank will succeed to
all of the assets and liabilities of the Converted Bank (which, pursuant to the
Stock Conversion will have succeeded to all of the assets and liabilities of the
Bank), and initially will continue to conduct business in substantially the same
manner as the
22
<PAGE>
Bank prior to the Conversion. Over time, however, management anticipates
broadening its range of banking products and services consistent with the
national bank charter. Diversification of the National Bank's loan portfolio may
also alter the risk profile of the National Bank. See "Risk Factors--Effect of
the Conversion to a National Bank Charter on Operations."
The deposits of the National Bank will continue to be insured by the SAIF
of the FDIC and, as such, the National Bank will continue to be subject to
regulation and supervision by the FDIC. The National Bank will not be subject to
OTS regulation and supervision; rather, the primary regulator of the National
Bank will be the OCC. The National Bank will remain a member of the FHLB of Des
Moines. As a national bank, the National Bank will also be required to become a
member of the Federal Reserve System and to purchase stock in the Federal
Reserve Bank of Kansas City.
23
<PAGE>
CAPITALIZATION
The table below sets forth the capitalization, including deposits and
borrowings, of Investors Federal as of June 30, 1996 and the pro forma
capitalization of the Holding Company at the minimum, the midpoint, maximum and
15% above the maximum of the Estimated Valuation Range, after giving effect to
the Stock Conversion and based on other assumptions set forth in the table and
under the caption "Pro Forma Data."
<TABLE>
<CAPTION>
Pro Forma Capitalization of Holding Company
----------------------------------------------------------
<S> <C> <C> <C> <C> <C>
191,250 225,000 258,750 297,562
Capitalization of Shares Shares Shares Shares
Bank at at $20.00 at $20.00 at $20.00 at $20.00
June 30, 1996 Per Share Per Share Per Share Per Share
------------- --------- --------- --------- ---------
(Amounts In Thousands)
Deposits(1) ....................................... $ 35,495 $ 35,495 $ 35,495 $ 35,495 $ 35,495
FHLB advances ..................................... 13,474 13,474 13,474 13,474 13,474
-------- -------- -------- -------- ---------
Total deposits and borrowings .................. $ 48,969 $ 48,969 $ 48,969 $ 48,969 $ 48,969
======== ======== ======== ========= =========
Stockholders' equity:
Preferred Stock, $.01 per value per share:
authorized - 100,000 shares; assumed
outstanding - none............................. $ -- $ -- $ -- $ -- $ --
Common Stock, $.01 par value per share:
authorized - 900,000 shares; shares to
be outstanding - as shown(5) .................. -- 2 2 3 3
Paid-in capital .................................. -- 3,454 4,118 4,792 5,568
Less: Common stock acquired by ESOP(3) ......... -- (306) (360) (414) (476)
Common stock to be acquired by RRP(4) .... -- (153) (180) (207) (238)
Retained earnings, substantially restricted(2) .. 3,339 3,339 3,339 3,339 3,339
Unrealized (losses) on available-for-sale
securities, net of tax .... (71) (71) (71) (71) (71)
--------- --------- --------- --------- ---------
Total stockholders' equity.................... $ 3,268 $ 6,265 $ 6,848 $ 7,442 $ 8,125
========= ========= ========= ========= =========
</TABLE>
________________________________
(1) No effect has been given to withdrawals from savings accounts for the
purpose of purchasing Common Stock in the Stock Conversion. Any such
withdrawals will reduce pro forma deposits by the amount of such
withdrawals.
(2) See Notes 10 and 11 of the Notes to Consolidated Financial Statements
for information regarding restrictions on retained earnings,
"Dividends" and "Regulation - Limitations on Dividends and Other
Capital Distributions" regarding restrictions on future dividend
payments and "The Conversion - Effects of Conversion to Stock Form on
Depositors and Borrowers of the Bank" regarding the liquidation
account to be established upon Stock Conversion. Does not take into
account Holding Company dividends, if any, which may be paid
subsequent to the Stock Conversion. See "Dividends."
(3) Assumes that 8% of the shares issued in the Stock Conversion will be
acquired by the ESOP and that the ESOP will be funded by the Holding
Company. The Bank intends to make contributions to the ESOP sufficient
to service and ultimately retire its debt. Since the Holding Company
will finance the ESOP debt, the ESOP debt will be eliminated through
consolidation and no liability will be reflected on the Holding
Company's consolidated financial statements. Accordingly, the amount
of stock acquired by the ESOP is shown in this table as a reduction of
total stockholders' equity. See "Management - Benefit Plans -Employee
Stock Ownership Plan."
(4) While management does not currently intend to do so, following OTS and
stockholder approval, shares utilized to fund the RRP could be
obtained from newly issued shares. In the event RRP shares are
obtained from authorized but unissued shares, the existing ownership
of current stockholders would be diluted by approximately 3.85%.
However, there would be no impact on stockholders' equity.
(5) Does not reflect the shares of Common Stock that may be reserved for
issuance pursuant to the proposed Stock Option Plan and the proposed
RRP. See "Management--Benefit Plans."
24
<PAGE>
PRO FORMA DATA
The following table sets forth the historical consolidated net income,
total equity and per share data of the Bank at and for the year ended June 30,
1996, and after giving effect to the Stock Conversion, the pro forma
consolidated net income, stockholders' equity and per share data of the Holding
Company at and for the same period. The pro forma data is computed on the
assumptions that (i) the specified number of shares of Common Stock were sold at
the beginning of the specified period and yielded net proceeds to the Holding
Company as indicated and (ii) such net proceeds were invested by the Bank and
the Holding Company at the beginning of the period to yield a return of 5.80%
for the fiscal year ended June 30, 1996. The assumed return is based on the
yield on one-year U.S. Government securities at June 30, 1996, which is deemed
by management to more accurately reflect pro forma reinvestment rates than the
arithmetic average of the Bank's weighted average yield on all interest-earning
assets and the weighted average rate paid on deposits. After adjusting for
applicable federal and state taxes totaling 38.5%, the after-tax yield was equal
to 3.57% for the fiscal year ended June 30, 1996. The table also assumes that
the proposed RRP awards equal to 4% of the shares sold in the Stock Conversion
were purchased by the RRP at $20.00 per share in the open market and fixed Stock
Conversion expenses were $317,285. No effect has been given to the stock
reserved for issuance under the Stock Option Plan. ACTUAL STOCK CONVERSION
EXPENSES MAY BE MORE OR LESS THAN THOSE ESTIMATED BECAUSE FEES PAID MAY VARY
DEPENDING UPON WHETHER SELECTED BROKER-DEALERS ARE USED, MARKET CONDITIONS AND
OTHER FACTORS. THE PRO FORMA NET EARNINGS AMOUNTS DERIVED FROM THE ASSUMPTIONS
SET FORTH HEREIN SHOULD NOT BE CONSIDERED INDICATIVE OF THE ACTUAL RESULTS OF
OPERATIONS OF THE HOLDING COMPANY THAT WOULD HAVE BEEN ATTAINED FOR ANY PERIOD
IF THE STOCK CONVERSION HAD BEEN ACTUALLY CONSUMMATED AT THE BEGINNING OF SUCH
PERIOD, AND THE ASSUMPTIONS REGARDING INVESTMENT YIELDS SHOULD NOT BE CONSIDERED
INDICATIVE OF THE ACTUAL YIELDS EXPECTED TO BE ACHIEVED DURING ANY FUTURE
PERIOD.
The total number of shares to be issued in the Stock Conversion may be
increased or decreased to reflect changes in market and financial conditions
prior to the close of the Offerings. However, if the aggregate Purchase Price of
the Common Stock actually sold in the Conversion is below $3,825,000 or more
than $5,951,240 (15% above the maximum of the Estimated Valuation Range)
subscribers will be offered the opportunity to modify or cancel their
subscriptions. See "The Stock Conversion - Stock Pricing and Number of Shares to
be Issued."
25
<PAGE>
<TABLE>
<CAPTION>
At or For the Year Ended June 30, 1996
--------------------------------------------------------------
297,562
191,250 225,000 258,750 Shares
Shares Shares Shares at $20.00
at $20.00 at $20.00 at $20.00 per Share
per Share per Share per Share (Maximum
(Minimum) (Midpoint) (Maximum) as Adjusted)(1)
------------ ------------- ----------- ------------
<S> <C> <C> <C> <C>
(In thousands, except per share amounts)
Gross proceeds ............................................... $ 3,825 $ 4,500 $ 5,175 $ 5,951
Less estimated expenses ...................................... (369) (380) (380) (380)
-------- -------- -------- --------
Estimated net Stock Conversion proceeds ..................... 3,456 4,120 4,795 5,571
Less Common Stock acquired by ESOP .......................... (306) (360) (414) (476)
Less Common Stock to be acquired by RRP ..................... (153) (180) (207) (238)
-------- -------- -------- --------
Estimated proceeds available for
investment ................................................ $ 2,997 $ 3,580 $ 4,174 $ 4,857
======== ======== ======== ========
Consolidated net income:
Historical .................................................. $ 302 $ 302 $ 302 $ 302
Pro forma adjustments:
Net income from proceeds (2) ............................... 107 128 149 173
Less pro forma ESOP adjustment(3) ........................... (19) (22) (25) (29)
Less pro forma RRP adjustment(4) ............................ (19) (22) (25) (29)
-------- -------- -------- --------
Pro forma net income ..................................... $ 371 $ 385 $ 400 $ 417
======== ======== ======== ========
Consolidated net income per share: (5)(6)
Historical .................................................. $ 1.70 $ 1.45 $ 1.26 $ 1.09
Pro forma adjustments:
Net income from proceeds (2) ............................... 0.60 0.61 0.62 0.63
Less pro forma ESOP adjustment(3) ........................... (0.11) (0.11) (0.11) (0.11)
Less pro forma RRP adjustment(4) ............................ (0.11) (0.11) (0.11) (0.11)
-------- -------- -------- --------
Pro forma net income per share ........................... $ 2.09 $ 1.85 $ 1.67 $ 1.51
======== ======== ======== ========
Consolidated stockholders' equity (book value):(7)
Historical .................................................. 3,268 3,268 3,268 3,268
Estimated net Stock Conversion proceeds...................... 3,456 4,120 4,795 5,571
Less common stock acquired or to be acquired by:
ESOP ....................................................... (306) (360) (414) (476)
RRP (4) .................................................... (153) (180) (207) (238)
-------- -------- -------- --------
Pro forma ................................................ $ 6,265 $ 6,848 $ 7,442 $ 8,125
======== ======== ======== ========
Consolidated stockholders' equity per share: (6)(8)
Historical .................................................. $ 17.09 $ 14.52 $ 12.63 $ 10.98
Estimated net Stock Conversion proceeds ..................... 18.07 18.31 18.53 18.72
Less Common Stock acquired by:
ESOP ....................................................... (1.60) (1.60) (1.60) (1.60)
RRP (4) .................................................... (0.80) (0.80) (0.80) (0.80)
-------- -------- -------- --------
Pro forma stockholders' equity(9) ........................ $ 32.76 $ 30.44 $ 28.76 $ 27.31
======== ======== ======== ========
Pro forma price to book value ................................ 61.05% 65.71% 69.54% 73.25%
======== ======== ======== ========
Pro forma price to earnings (P/E ratio) (10) ................. 9.56x 10.83x 12.01x 13.25x
======== ======== ======== ========
Number of shares used in calculating
equity per share ............................................ 191,250 225,000 258,750 297,562
========= ======== ======== ========
Number of shares used in calculating
earnings per share .......................................... 177,480 208,800 240,120 276,138
========= ======== ======== ========
(footnotes begin on following page)
</TABLE>
26
<PAGE>
__________________________________
(1) Gives effect to the sale of an additional 38,812 shares in the Stock
Conversion, which may be issued as a result of an increase in the pro forma
market value of the Holding Company and the Bank, as converted, without the
resolicitation of subscribers or any right of cancellation. The issuance of
such additional shares will be conditioned on a determination of the
independent appraiser that such issuance is compatible with its
determination of the estimated pro forma market value of the Holding
Company and the Bank, as converted. See "The Stock Conversion--Stock
Pricing and Number of Shares to be Issued."
(2) No effect has been given to withdrawals from accounts for the purpose of
purchasing Common Stock in the Stock Conversion.
(3) It is assumed that 8% of the shares of Common Stock offered in the Stock
Conversion will be purchased by the ESOP. The funds used to acquire such
shares will be borrowed by the ESOP (at an interest rate equal to the prime
rate as published in The Wall Street Journal on the closing date of the
Stock Conversion, which rate is currently ____%), from the net proceeds
from the Stock Conversion retained by the Holding Company. The amount of
this borrowing has been reflected as a reduction from gross proceeds to
determine estimated net proceeds. The Bank intends to make contributions to
the ESOP in amounts at least equal to the principal and interest
requirement of the debt. As the debt is paid down, stockholders' equity
will be increased. The Bank's payment of the ESOP debt is based upon equal
installments of principal over a 10-year period, assuming a combined
federal and state tax rate of 38.5%. Interest income earned by the Holding
Company on the ESOP debt offsets the interest paid by the Bank on the ESOP
loan. No reinvestment is assumed on proceeds contributed to fund the ESOP.
The ESOP expense reflects adoption of Statement of Position ("SOP") 93-6,
which will require recognition of expense based upon shares committed to be
released and the exclusion of unallocated shares from earnings per share
computations. The valuation of shares committed to be released would be
based upon the average market value of the shares during the year, which,
for purposes of this calculation, was assumed to be equal to the $20.00 per
share Purchase Price. See "Management of the Bank--Benefit Plans--Employee
Stock Ownership Plan."
(4) In calculating the pro forma effect of the RRP, it is assumed that the
required stockholder approval has been received, that the shares were
acquired by the RRP at the beginning of the period presented in open market
purchases at the Purchase Price and that 20% of the amount contributed was
an amortized expense during such period. The issuance of authorized but
unissued shares of the Common Stock instead of open market purchases would
dilute the voting interests of existing stockholders by approximately 3.85%
and pro forma net income per share for the year ended June 30, 1996 would
be $2.03, $1.80, $1.63, and $1.48, the pro forma price to earnings ratio
for the year ended June 30, 1996 would be 9.85x, 11.11x, 12.27x, and
13.51x, and pro forma stockholders' equity per share at June 30, 1996 would
be $32.27, $30.03, $28.38, and $26.99, at the minimum, midpoint, maximum,
and 15% above the maximum of the Estimated Valuation Range, respectively.
Shares issued under the RRP vest 20% per year and, for purposes of this
table, compensation expense is recognized on a straight-line basis over
each vesting period. In the event the fair market value per share is
greater than $20.00 per share on the date of stockholder approval of the
RRP, total RRP expense would increase. No effect has been given to the
shares reserved for issuance under the proposed Stock Option Plan. If
stockholders approve the Stock Option Plan following the Stock Conversion,
the Holding Company will have reserved for issuance under the Stock Option
Plan authorized but unissued shares of Common Stock representing an amount
of shares equal to 10% of the shares sold in the Stock Conversion. If all
of the options were to be exercised utilizing these authorized but unissued
shares rather than treasury shares (which could be acquired), the voting
interests of existing stockholders would be diluted by approximately 9.1%.
See "Management of the Bank--Benefit Plans--1996 Stock Option and Incentive
Plan" and "--Recognition and Retention Plan."
(5) Per share amounts are based upon outstanding shares of 177,480, 208,800,
240,120, and 276,138 at the minimum, midpoint, maximum, and 15% above the
maximum of the Estimated Valuation Range. Such shares include all shares
sold in the Stock Conversion minus shares purchased by the ESOP that are
not assumed committed to be released.
(6) Historical per share amounts have been computed as if the shares of Common
Stock expected to be issued in the Stock Conversion had been outstanding at
the beginning of the period or on the date shown, but without any
adjustment of historical net income or historical retained earnings to
reflect the investment of the estimated net proceeds of the sale of shares
in the Stock Conversion, the additional ESOP expense or the proposed RRP
expense, as described above. Amounts shown do not reflect the payment by
the Bank of the special one-time assessment to recapitalize the SAIF. See
"Risk Factors--Recapitalization of SAIF, Disparity between BIF and SAIF
Premiums." Based on assessable deposits on March 31, 1995 of $34.9 million,
the Bank's assessment is expected to be $229,000 (or $147,000 when adjusted
for taxes), or $1.29, $1.10, $0.95 and $0.83 per share, respectively, at
the minimum, midpoint, maximum and 15% above the maximum of the Estimated
Valuation Range.
27
<PAGE>
(7) "Book value" represents the difference between the stated amounts of the
Bank's assets and liabilities. The amounts shown do not reflect the
liquidation account that will be established for the benefit of Eligible
Account Holders and Supplemental Eligible Account Holders in the Stock
Conversion, or the federal income tax consequences of the restoration to
income of the Bank's special bad debt reserves for income tax purposes,
which would be required in the unlikely event of liquidation. See "The
Stock Conversion--Effects of Conversion to Stock Form on Depositors and
Borrowers of the Bank" and "--Income Tax Consequences." The amounts shown
for book value do not represent fair market values or amounts distributable
to stockholders in the unlikely event of liquidation.
(8) Per share amounts are based upon shares outstanding of 191,250, 225,000,
258,750 and 297,562 at the minimum, midpoint, maximum and 15% above the
maximum of the Estimated Valuation Range, respectively.
(9) Neither represents, nor is intended to represent, possible future price
appreciation or depreciation of the Common Stock.
28
<PAGE>
PRO FORMA REGULATORY CAPITAL
The Bank is currently subject to OTS regulatory capital requirements. After
the Bank Conversion, however, the Bank will be required to satisfy OCC
regulatory capital requirements, which are similar but not identical to the OTS
capital requirements. The following table sets forth the Bank's historical
capital position relative to the various minimum OTS regulatory capital
requirements. The next table sets forth the National Bank's historical capital
position relative to the OCC capital requirements to which the National Bank
will be subject. The Federal Reserve's capital requirements for bank holding
companies do not apply to bank holding companies with consolidated assets of
less than $150 million (such as the Holding Company); accordingly, pro forma
data of the Holding Company relative to such capital requirements are not
presented. Pro forma data assumes that the Common Stock has been sold as of June
30, 1996, at the minimum, midpoint, maximum and 15% above the maximum of the
Estimated Valuation Range. For additional information regarding the financial
condition of the Bank and the assumptions underlying the pro forma capital
calculations set forth below, see "Use of Proceeds," "Capitalization" and "Pro
Forma Data" and the Consolidated Financial Statements and related notes
appearing elsewhere herein.
<TABLE>
<CAPTION>
Pro Forma Based Upon Sale of
-----------------------------------------------------------------
Minimum of Midpoint of
Estimated Valuation Estimated Valuation
Range of Range of
Historical at 191,250 Shares 225,000 Shares
June 30, 1996 at $20.00 Per Share at $20.00 Per Share
---------------------- ----------------------------- ------------------------------
Amount Percent(1) Amount(2) Percent(1)(2) Amount(2) Percent(1)(2)
------ ---------- ----------- ---------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
THE BANK (Dollars in Thousands)
- --------
Capital under generally
accepted accounting
principles ..................... $3,268 6.21% $ 4,537 8.38% $ 4,788 8.79%
====== ===== ====== ====== ======= ====
Tangible capital(2) ........... $3,339 6.34% $ 4,608 8.49% $ 4,859 8.90%
Tangible capital
requirement(5) ............... 790 1.50% 814 1.50% 819 1.50%
------ ----- ------ ------- ------ ----
Excess ........................ $2,549 4.84% $ 3,794 6.99% $ 4,040 7.40%
====== ===== ====== ======= ======= ====
Core capital(2) ............... $3,339 6.34% $ 4,608 8.49% $ 4,859 8.90%
Core capital requirement(3)(5) 1,581 3.00 1,628 3.00 1,637 3.00
------ ----- ------ ------- ------- ------
Excess ........................ $1,758 3.34% $ 2,980 5.49% 3,222 5.90%
====== ===== ====== ====== ======= =====
Risk-based capital(2)(4) ...... $3,592 17.30% $ 4,861 23.06% $ 5,112 24.18%
Risk-based capital
requirement(5)(6) ............ 1,661 8.00 1,686 8.00 1,691 8.00
------ ----- ------ ------- ------- -----
Excess ........................ $1,931 9.30% $ 3,175 15.06% $ 3,421 16.18%
====== ===== ====== ====== ======= =====
Maximum of Maximum, as Adjusted,
Estimated Valuation of Valuation
Range of Range of
258,750 Shares 297,562 Shares
----------------------------- --------------------------------
Amount(2) Percent(1)(2) Amount(2) Percent(1)(2)
---------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
THE BANK
- --------
Capital under generally
accepted accounting
principles ..................... $ 5,045 9.21% $ 5,340 9.69%
======== ===== ======= ====
Tangible capital(2) ........... $ 5,116 9.32% $ 5,411 9.79%
Tangible capital
requirement(5) ............... 823 1.50% 829 1.50%
------- ----- ------- ----
Excess ........................ $ 4,293 7.82% $ 4,582 8.29%
====== ===== ======= ====
Core capital(2) ............... $ 5,116 9.32% $ 5,411 9.79%
Core capital requirement(3)(5) 1,647 3.00 1,657 3.00
------- ----- ------- ----
Excess ........................ $ 3,469 6.32% $ 3,754 6.79%
======= ===== ======= ====
Risk-based capital(2)(4) ...... $ 5,369 25.32% $ 5,664 26.62%
Risk-based capital
requirement(5)(6) ............ 1,696 8.00 1,702 8.00
------- ----- ------- -----
Excess ........................ $ 3,673 17.32% $ 3,962 18.62%
======= ===== ======= =====
</TABLE>
_________________
(1) Tangible and core capital levels are shown as a percentage of total
adjusted assets; risk-based capital levels are shown as a percentage of
risk-weighted assets.
(2) Assumes retention by the Holding Company of 50% of the net Stock Conversion
proceeds (less the amount of the loan made to the ESOP from the Holding
Company's portion of the net Stock Conversion proceeds). The remaining 50%
of the net Stock Conversion proceeds will be provided to the Bank. For
regulatory capital purposes, the Bank's capital will be reduced by the
anticipated purchases by the ESOP of 8% of the shares of Common Stock sold
in the Stock Conversion and the proposed issuance of 4% of the shares of
Common Stock sold in the Stock Conversion for the RRP. The Holding Company
intends to invest additional proceeds into the Bank to the extent necessary
to increase the Converted Bank's tangible capital to at least 10% of its
adjusted total assets.
(3) In April 1991, the OTS proposed a core capital requirement for savings
associations comparable to the requirement for national banks that became
effective December 31, 1990. The proposal calls for an OTS core capital
requirement of at least 3% of total adjusted assets for thrifts that
receive the highest supervisory rating for safety and soundness, with a 4%
to 5% core capital requirement for all other thrifts. If adopted as
proposed, management would expect the Bank to be subject to a 4% to 5% core
capital requirement. See "Regulation - Regulatory Capital Requirements."
29
<PAGE>
(4) Includes $253,000 of general valuation allowances, which qualify as
supplementary capital. See "Regulation - Regulatory Capital Requirements."
(5) Assumes investment of net proceeds in U.S. Government agency securities
which have a 20% risk weight.
(6) The OTS utilizes a net market value methodology to measure the interest
rate risk exposure of savings associations. Effective March 31, 1996,
institutions with more than normal interest rate risk, as defined by OTS
regulations, are required to make a deduction from capital equal to 50% of
its interest rate risk exposure multiplied by the present value of its
assets. Based upon this methodology, at June 30, 1996, the latest date for
which such information is available, the Bank's interest rate risk exposure
to a 200 basis point increase in interest rates was considered "normal"
under this regulation. However, since the Bank has assets of less than $300
million and a total risk-based capital ratio in excess of 12%, it is exempt
from this requirement unless the OTS determines otherwise. See
"Regulation - Regulatory Capital Requirements."
30
<PAGE>
<TABLE>
<CAPTION>
Pro Forma at June 30, 1996
------------------------------------------------------------------
Minimum of Midpoint of Maximum of
Estimated Valuation Estimated Valuation Estimated Valuation
Range Range Range
191,250 Shares 225,000 Shares 258,750 Shares
June 30, 1996 at $20.00 Per Share at $20.00 Per Share at $20.00 Per Share
-------------------- -------------------- ------------------- -------------------- --------------------
Amount Percent(1) Amount Percent(1) Amount Percent(1) Amount Percent(1) Amount Percent(1)
====== ========= ====== ========== ====== ========== ====== ========== ====== ==========
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
THE NATIONAL BANK
- -----------------
GAAP capital............... $ 3,268 6.21% $ 4,537 8.38% $ 4,788 8.79% $ 5,045 9.21% $ 5,340 9.69%
======= ======= ======= ======= ======= ======= ======= ======= ======= =======
Tier 1 capital............. $ 3,339 6.34% $ 4,608 8.49% $ 4,859 8.90% $ 5,116 9.32% $ 5,411 9.79%
Tier 1 capital requirement. 2,108 4.00% 2,171 4.00% 2,183 4.00% 2,196 4.00% 2,210 4.00%
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Excess.................. $ 1,231 2.34% $ 2,437 4.49% $ 2,676 4.90% $ 2,920 5.32% $ 3,201 5.79%
======= ======= ======= ======= ======= ======= ======= ======= ======= =======
Tier 1 capital to
risk-weighted
assets.................. $ 3,339 16.08% $ 4,608 21.86% $ 4,859 22.98% $ 5,116 24.13% $ 5,411 25.43%
Requirement................ 831 4.00% 843 4.00% 846 4.00% 848 4.00% 851 4.00%
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Excess.................. $ 2,508 12.08% $ 3,765 17.86% $ 4,013 18.98% $ 4,268 20.13% $ 4,560 21.43%
======= ======= ======= ======= ======= ======= ======= ======= ======= =======
Risk-based capital......... $ 3,592 17.30% $ 4,861 23.06% $ 5,112 24.18% $ 5,369 25.32% $ 5,664 26.62%
requirement............... 1,661 8.00% 1,686 8.00% 1,691 8.00% 1,696 8.00% 1,702 8.00%
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
$ 1,931 9.30% $ 3,175 15.06% $ 3,421 16.18% $ 3,673 17.32% $ 3,962 18.62%
======= ======= ======= ======= ======= ======= ======= ======= ======= =======
</TABLE>
__________________
(1) Based upon adjusted total assets for purposes of the tangible capital and
core capital requirements, and risk-weighted assets for purposes of the risk-
based capital requirement.
31
<PAGE>
USE OF PROCEEDS
The net proceeds from the sale of Common Stock in the Stock Conversion,
based on the minimum, midpoint, maximum and 15% above the maximum of the
Estimated Valuation Range, are estimated at $3.5 million, $4.1 million, $4.8
million and $5.6 million, respectively. See "Pro Forma Data." The Holding
Company will retain up to 50% of the net Stock Conversion proceeds as its
initial capitalization and will use the balance of the net Stock Conversion
proceeds to purchase all of the common stock of the Bank to be issued upon Stock
Conversion. The Holding Company intends to lend a portion of the net proceeds
retained by it to the ESOP to facilitate its purchase of 8% of the Common Stock
in the Stock Conversion. In addition, the Holding Company intends to invest
additional proceeds into the Bank to the extent necessary to increase the
Converted Bank's tangible capital to at least 10% of its adjusted total assets.
It is anticipated that the funds will be borrowed by the ESOP at an interest
rate equal to the prime rate as published in the Wall Street Journal on the
closing date of the Stock Conversion, which rate is currently ____%. It is
anticipated that the ESOP loan will have a term of 10 years. Based upon the
issuance of shares at the minimum and maximum of the Estimated Valuation Range,
the loan to the ESOP to purchase 8% of the Common Stock would be $306,000 and
$414,000, respectively. See "Management - Benefit Plans - Employee Stock
Ownership Plan." The remainder of the proceeds will be invested on an interim
basis in short- and intermediate-term securities. These funds would be
available for general corporate purposes which may include expansion of
operations through acquisitions of other financial service organizations and
diversification into other related or unrelated businesses, or for investment
purposes. Currently, there are no specific plans being considered for the
expansion of the business of the Holding Company. In addition, the funds may be
used to infuse additional capital to the Bank when and if appropriate.
The net proceeds retained by the Holding Company may also be used to
repurchase the Holding Company's Common Stock as permitted by federal
regulation. Upon completion of the Stock Conversion, the Board of Directors
will have the authority to adopt stock repurchase plans, subject to statutory
and regulatory requirements. Since the Holding Company has not yet issued stock,
there is currently insufficient information upon which an intention to
repurchase stock could be based.
Based upon facts and circumstances which may arise following the Stock
Conversion, the Board of Directors may determine to repurchase stock in the
future. Such facts and circumstances may include but are not limited to: (i)
market and economic factors such as the price at which the stock is trading in
the market, the volume of trading, the attractiveness of other investment
alternatives in terms of the rate of return and risk involved in the investment,
the ability to increase the book value or earnings per share of the remaining
outstanding shares, and the effect on the Holding Company's return on equity;
(ii) the avoidance of dilution to stockholders by not having to issue additional
shares to cover the exercise of stock options or to fund employee stock benefit
plans; and (iii) any other circumstances in which repurchases would be in the
best interests of the Holding Company and its shareholders.
Any stock repurchases will be subject to the determination of the Board of
Directors that both the Holding Company and the Bank will be capitalized in
excess of all applicable regulatory requirements after any such repurchases and
that capital will be adequate taking into account, among other things, the level
of non-performing assets and other loans of concern, the Holding Company's and
the Bank's current and projected results of operations and asset/liability
structure, the economic environment and tax and other regulatory considerations.
Repurchases during the first year following the Stock Conversion may be subject
to limitations imposed by federal regulations. A stock repurchase program may
have the effect of: (i) reducing the overall market value of the Holding
Company, (ii) increasing the cost of capital and (iii) promoting a temporary
demand for Common Stock.
Should the Holding Company implement a restricted stock plan (i.e., the
RRP) following the Stock Conversion, a portion of the net proceeds may be used
to fund the purchase by the plan of Common Stock in an amount up to 4% of the
shares sold in the Stock Conversion. The actual cost of such purchase will
depend on the number of shares sold in the Stock Conversion and the market price
at the time of purchase. Based upon the
32
<PAGE>
minimum and the maximum of the Estimated Valuation Range and on a $20.00 per
share Purchase Price, the cost would be approximately $153,000 and $207,000,
respectively.
The net proceeds from the sale of the Common Stock in the Stock Conversion
will substantially increase the capital of Investors Federal. Investors Federal
will use the net proceeds for general corporate business purposes, such as
lending and investment activities in the ordinary course of business. A portion
of the proceeds may be used to repay FHLB advances. On an interim basis, the
proceeds will be invested by the Bank in short- and intermediate-term
securities.
The actual net proceeds may be more or less than the estimated net proceeds
calculated as shown under "Pro Forma Data," above. Additionally, the actual
expenses may be more or less than those estimated. See "The Conversion - Stock
Pricing and Number of Shares to be Issued."
DIVIDENDS
Subject to regulatory and other considerations, the Holding Company intends
to establish a dividend policy at an initial rate of $.60 per share per annum
(or 3.0% based upon the initial public offering price of $20 per share) payable
semi-annually in December and June of each year, with the first dividend payment
expected in June 1997. In addition, the Holding Company may determine from time
to time to pay a special nonrecurring cash dividend. The payment of dividends
will be subject to determination and declaration by the Board of Directors in
its discretion, which will take into account the Holding Company's consolidated
financial condition and results of operations, tax considerations, industry
standards, economic conditions, regulatory restrictions, general business
practices and other factors. Therefore, no assurances can be made as to the
future ability of the Holding Company to pay dividends. Delaware law generally
limits dividends of the Holding Company to an amount equal to the excess of its
net assets (the amount by which total assets exceeds total liabilities) over its
paid-in capital or, if there is no excess, to its net profits for the current
and immediately preceding fiscal year.
It is presently anticipated that the Holding Company will not conduct
significant operations independent of those of the Bank for some time following
the Stock Conversion. As such, the Holding Company does not expect to have any
significant source of income other than earnings on the net Stock Conversion
proceeds retained by the Holding Company and dividends from Investors Federal,
if any. Consequently, the ability of the Holding Company to pay cash dividends
to its stockholders will be dependent upon such retained proceeds and earnings
thereon, and upon the ability of the Bank to pay dividends to the Holding
Company. Management believes that, upon completion of the Stock Conversion, the
Bank will qualify as a Tier 1 institution, and thereby be entitled to make
capital distributions without OTS approval in an amount not exceeding 100% of
its net income year-to-date plus 50% of the Bank's capital surplus, as measured
at the beginning of the calendar year. In addition, upon completion of the Bank
Conversion, the National Bank will be subject to OCC restrictions on its ability
to pay dividends. See "Regulation - Regulatory Capital Requirements" and "-
Limitations on Dividends and Other Capital Distributions." Assuming only the
minimum number of shares are sold in the Stock Conversion, the purchase of the
Bank's stock by the Holding Company in exchange for substantially all the net
proceeds from the Stock Conversion (less 50% to be retained by the Holding
Company) and the investment of such proceeds in 20% risk-weighted assets, on a
pro forma basis as of June 30, 1996, the Bank would have had risk-based capital
of $3.2 million above its fully phased-in, risk-based capital requirement. The
50% of net proceeds retained by the Holding Company would be immediately
available for the payment of dividends. See "Regulation - Regulatory Capital
Requirements" and "- Limitations on Dividends and Other Capital Distributions."
Earnings appropriated to the Bank's "excess" bad debt reserves and deducted for
federal income tax purposes cannot be used by the Bank to pay cash dividends to
the Holding Company without adverse tax consequences. See "Regulation - Federal
and State Taxation."
33
<PAGE>
MARKET FOR COMMON STOCK
The Holding Company and the Bank have never issued capital stock.
Consequently, there is no established market for the Common Stock at this time.
The Holding Company has requested that Trident Securities undertake to match
offers to buy and offers to sell the Common Stock, and that Trident Securities
list the Common Stock over-the-counter through the National Daily Quotation
System "Pink Sheets" published by the National Quotation Bureau, Inc. and
Trident Securities has agreed to do so. The development of a liquid public
trading market depends upon the existence of willing buyers and sellers, the
presence of which is not within the control of the Holding Company, the Bank or
any market maker. It is unlikely that an active and liquid trading market for
the Common Stock will develop due to the relatively small size of the Offerings
and the small number of stockholders expected following the Stock Conversion.
Under such circumstances, investors in the Common Stock could have difficulty
disposing of their shares on short notice and should not view the Common Stock
as a short-term investment. Accordingly, purchasers should consider the
illiquid, long-term nature of an investment in the Common Stock. Furthermore,
there can be no assurance that purchasers will be able to sell their shares at
or above the Purchase Price.
PARTICIPATION BY MANAGEMENT
The following table sets forth information regarding intended Common Stock
purchases by each of the directors of the Bank and the Holding Company, by Mr.
Teegarden, and by all directors and executive officers as a group. This table
excludes shares to be purchased by the ESOP or proposed Restricted Stock Awards
under the proposed RRP or proposed option grants pursuant to the proposed Stock
Option Plan. See "Management - Benefit Plans." The directors and officers of
the Bank have indicated their intention to purchase in the Stock Conversion an
aggregate of $701,000 of Common Stock, equal to 18.3%, 15.6%, 13.5%, and 11.8%
of the number of shares to be issued in the Subscription and Community Offering,
at the minimum, midpoint, maximum and 15% above the maximum of the Estimated
Valuation Range, respectively. For information regarding options and restricted
stock intended to be awarded to management pursuant to the proposed Stock Option
Plan and the proposed RRP, see "Management - Benefit Plans."
<TABLE>
<CAPTION>
Aggregate Number Percent
Purchase of at
Name Title Price Shares Midpoint
- ----------------- ------------------------------------- ---------- -------- ----------
<S> <C> <C> <C> <C>
Earle S. Teegarden, Jr. President, Chief Executive Officer and $ 100,000 5,000 2.2%
Director
Robert T. Fairweather Chairman of the Board 1,000 50 *
Larry R. Johnson Senior Vice President, Secretary and 100,000 5,000 2.2
Director
Edward P. Milbank Vice Chairman of the Board 200,000 10,000 4.4
J. Michael Palmer Director 200,000 10,000 4.4
Armand J. Peterson Director 100,000 5,000 2.2
----------- -------- ----------
All directors and executive officers as a group (6 persons) $ 701,000 35,050 15.6%
</TABLE>
______________________________
*less than 1%.
34
<PAGE>
INVESTORS FEDERAL BANK AND SAVINGS ASSOCIATION
CONSOLIDATED STATEMENTS OF INCOME
The following Consolidated Statements of Income of the Bank for the fiscal
years ended June 30, 1996 and 1995 have been audited by Lockridge, Constant &
Conrad, LLC, independent certified public accountants, whose report thereon
appears elsewhere herein. These Statements should be read in conjunction with
the Consolidated Financial Statements of the Bank and Notes thereto included
elsewhere in this Prospectus.
<TABLE>
<CAPTION>
Years ended
June 30,
--------------------------------
1996 1995
----------- -------------
(In thousands)
<S> <C> <C>
Interest income:
Loans receivable (note 4)................................ $ 2,340 $ 1,969
Investment securities:
Taxable interest..................................... 120 105
Non-taxable interest................................. 13 13
Dividends............................................ 18 --
FHLB dividends........................................... 39 27
Mortgage-backed and related securities................... 1,039 679
Other interest-earning assets............................ 47 50
----------- -------------
Total interest income................................ 3,616 2,843
----------- -------------
Interest expense:
Deposits (note 7)........................................ 1,634 1,481
FHLB advances............................................ 630 235
----------- -------------
2,264 1,716
Total interest expense............................... ----------- -------------
Net interest income.................................. 1,352 1,127
Provision for loan losses (note 4).......................... 210 1
----------- -------------
Net interest income after provision
for loan losses.................................... 1,142 1,126
----------- -------------
Noninterest income:
Banking service charges and fees......................... 231 225
Gain on sales of interest-earning assets, net (note 12) 46 19
Other (note 13).......................................... 80 22
----------- -------------
Total noninterest income............................... 357 266
----------- -------------
Noninterest expense:
Compensation and benefits (note 9)....................... 616 579
Occupancy and equipment (note 6)......................... 65 56
SAIF deposit insurance premium........................... 80 83
Data processing.......................................... 48 95
Professional fees........................................ 47 45
Printing, postage and supplies........................... 65 49
Other (note 13).......................................... 109 104
----------- -------------
Total noninterest expense 1,030 1,011
----------- -------------
Income before income taxes............................. 469 381
Income tax expense (note 10)................................ 167 135
Income before cumulative effect of a
change in accounting principle......................... 302 246
Cumulative effect on prior years of a change in
accounting principle (note 1)............................ -- 27
----------- -------------
Net income............................................. $ 302 $ 273
========== ============
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
35
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
This discussion is intended to assist in understanding the financial
condition and results of operations of the Bank. The information contained in
this section should be read in conjunction with the Consolidated Financial
Statements and accompanying Notes thereto and the other sections contained in
this Prospectus.
The Holding Company has only recently been formed and, accordingly, has no
results of operations. The following discussion relates only to the financial
condition and results of operations of the Bank.
The earnings of the Bank depend primarily on its level of net interest
income, which is the difference between interest earned on interest-earning
assets, consisting primarily of mortgage and consumer loans and other
investments, and the interest paid on interest-bearing liabilities, consisting
of deposits and FHLB advances. Net interest income is a function of the Bank's
"interest rate spread," which is the difference between the average yield earned
on interest-earning assets and the average rate paid on interest-bearing
liabilities, as well as a function of the average balance of interest-earning
assets as compared to interest-bearing liabilities. The interest rate spread is
affected by regulatory, economic and competitive factors that influence interest
rates, loan demand and deposit flows. The Bank, like other financial
institutions, is subject to interest-rate risk to the degree that its interest-
earning assets mature or reprice at different times, or on different bases, than
its interest-bearing liabilities. The Bank's operating results are also affected
by the amount of its non-interest income, including gain on the sales of loans,
service charges, loan originating and commitment fees, and other income. Non-
interest expense consists principally of employee compensation and benefits,
occupancy expense, data processing, federal insurance premiums, advertising,
real estate owned operations, and other operating expenses. The Bank's operating
results are significantly affected by general economic and competitive
conditions, in particular, the changes in market interest rates, government
policies and actions by regulatory authorities.
FINANCIAL CONDITION
Total assets increased $7.6 million, or 16.8%, to $52.6 million at June 30,
1996 from $45.0 million at June 30, 1995. This was primarily the result of
increases of $4.3 million, or 33.6%, in mortgage-backed securities, $2.1
million, or 7.9%, in loans receivable and $927,000, or 36.3%, in investment
securities. The substantial increases in mortgage-backed securities and
investment securities were funded by an increase in FHLB advances of $7.1
million and reflected management's strategy of seeking to earn the spread
between the yield earned on interest-bearing assets and the rates paid on the
FHLB advances. Additionally, deposits increased by $285,000, and total equity by
$226,000 at June 30, 1996 from June 30, 1995.
Loans receivable, net increased by $2.1 million, or 7.9%, to $28.4 million
at June 30, 1996 from $26.3 million at June 30, 1995, due primarily to purchases
and originations of one- to four-family residential mortgage loans and the
origination of $3.0 million in consumer loans.
Deposits increased $285,000, or 0.8%, to $35.5 million at June 30, 1996,
from $35.2 at June 30, 1995. Interest credited during the twelve months ended
June 30, 1996 totaled $1.1 million, while withdrawals exceeded deposits by
$800,000.
FHLB advances increased $7.1 million, or 109.9%, to $13.5 million at June
30, 1996, from $6.4 million at June 30, 1995. Proceeds were used to fund
mortgage-backed securities, loans receivable and investment securities.
36
<PAGE>
Total equity increased $226,000, or 7.4%, to $3.3 million at June 30, 1996
from $3.0 million at June 30, 1995, due to $302,000 of net earnings during the
twelve months ended June 30, 1996 and $76,000 in net unrealized loss on
investment securities available for sale, net of taxes.
ANALYSIS OF NET INTEREST INCOME
Net interest income represents the difference between interest earned on
interest-earning assets and interest paid on interest-bearing liabilities. Net
interest income depends on the volumes of interest-earning assets and interest-
bearing liabilities and the interest rates earned or paid on them.
37
<PAGE>
The following table presents for the periods indicated the total dollar
amount of interest income from average interest-earning assets and the resultant
yields as well as the total dollar amount of interest expense on average
interest-bearing liabilities and the resultant rates. No tax equivalent
adjustments were made. All average balances are monthly average balances. The
Bank's management does not believe that the use of monthly balances instead of
daily balances has caused a material difference in the information presented.
Non-accruing loans have been included in the table as loans carrying a zero
yield.
<TABLE>
<CAPTION>
Years Ended June 30,
----------------------------------------------------------------------
1996 1995
------------------------ ------------------------------
At June 30, 1996 Average Average
------------------------
Outstanding Outstanding Interest Outstanding Interest
Balance Yield/Rate Balance Earned/Paid Yield/Rate Balance Earned/Paid
----------- ----------- ----------- ------------ ----------- ----------- -----------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Interest-earning assets:
Loans receivable (1).... $28,429 8.28% $27,269 $2,340 8.58% $24,889 $1,969
Mortgage-backed
securities............. 16,971 6.97 16,156 1,039 6.43 11,709 679
Investment securities... 3,479 6.06 2,983 151 5.06 2,601 118
Investments in other
financial
institutions........... 1,609 3.42 1,555 47 3.02 1,870 50
FHLB stock.............. 724 7.00 564 39 6.91 350 27
------- ------- ------ ------- ------
Total interest-earning
assets (1)............. 51,212 7.52 48,527 3,616 7.45 41,419 2,843
------ ------
Noninterest-earnings assets 1,375 -- 1,254 -- -- 1,120 --
------- ------- -------
Total assets.............. $52,587 $49,781 $42,539
======= ======= =======
Interest-bearing
liabilities:
Savings deposits........ $ 2,602 3.60 2,742 83 3.04 2,949 85
Demand and NOW
deposits/(2)/.......... 9,669 3.76 9,613 370 3.85 10,718 355
Certificate accounts.... 21,763 5.56 21,177 1,181 5.57 20,749 1,041
FHLB advances........... 13,474 6.19 11,138 630 5.66 3,709 235
------- ------- ------ ------- ------
Total interest-bearing
liabilities............ 47,508 5.23 44,670 2,264 5.07 38,125 1,716
------ ------
Noninterest-bearing
liabilities............... 1,811 -- 1,700 -- -- 1,334 --
------- ------- -------
Total liabilities....... $49,319 $46,370 $39,459
Retained earnings.......... 3,268 3,411 3,080
------- ------- -------
Total liabilities and
retained earnings........ $52,587 $49,781 $42,539
======= ======= =======
Net interest income........ $1,352 $1,127
====== ======
Net interest rate spread
(2)....................... 2.29% 2.38%
==== ====
Net earning assets......... $ 3,704 $ 3,857 $ 3,294
======= ======= =======
Net interest margin........ 2.79% 2.72%
====== ====
Average interest-earning
assets to average
interest-
bearing liabilities....... 1.09x 1.09x
====== ====
<CAPTION>
----------
1995
----------
Yield/Rate
----------
<S>
Interest-earning assets:
Loans receivable (1).... 7.91%
Mortgage-backed
securities............. 5.80
Investment securities... 4.54
Investments in other
financial
institutions........... 2.67
FHLB stock.............. 7.71
Total interest-earning
assets (1)............. 6.86
--
Noninterest-earnings assets
Total assets..............
Interest-bearing
liabilities:
Savings deposits........ 2.89
Demand and NOW
deposits/(2)/.......... 3.31
Certificate accounts.... 5.02
FHLB advances........... 6.34
Total interest-bearing
liabilities............ 4.50
Noninterest-bearing
liabilities...............
--
Total liabilities.......
Retained earnings..........
Total liabilities and
retained earnings........
Net interest income........
Net interest rate spread
(2)....................... 2.36%
====
Net earning assets.........
Net interest margin........
Average interest-earning
assets to average
interest-
bearing liabilities.......
</TABLE>
__________________
(1) Calculated net of deferred loan fees, loan discounts, loans in process and
loss reserves.
(2) Excludes non-interest bearing deposit accounts.
38
<PAGE>
RATE/VOLUME ANALYSIS
The following schedule presents the dollar amount of changes in interest
income and interest expense for major components of interest-earning assets and
interest-bearing liabilities. It distinguishes between the changes due to
changes in outstanding balances and those due to changes in interest rates. For
each category of interest-earning assets and interest-bearing liabilities,
information is provided on changes attributable to (i) changes in volume (i.e.,
changes in volume multiplied by prior interest rate) and (ii) changes in rate
(i.e., changes in rate multiplied by prior volume). For purposes of this table,
changes attributable to both rate and volume, which cannot be segregated, have
been allocated proportionately to the changes due to volume and the changes due
to rate.
<TABLE>
<CAPTION>
Years Ended June 30,
------------------------------------------
1996 vs. 1995
------------------------------------------
Increase/(Decrease)
Due to Total
-------------------
Increase
Volume Rate (Decrease)
------------------- --------- ----------
(In Thousands)
<S> <C> <C> <C>
Interest-earning assets:
Loans receivable...................... $196 $175 $371
Mortgage-backed securities............ 280 80 360
Investment securities................. 18 15 33
Interest earning deposits............. (9) 6 (3)
FHLB stock............................ 15 (3) 12
---- ---- ----
Total interest-earning assets...... $500 $273 $773
==== ==== ----
Interest-bearing liabilities:
Savings deposits...................... $ (6) $ 4 $ (2)
Demand and NOW deposits............... (39) 54 15
Certificate accounts.................. 22 118 140
FHLB advances......................... 423 (28) 395
---- ---- ----
Total interest-bearing liabilities.. $400 $148 548
==== ==== ----
Net interest income..................... $225
====
</TABLE>
39
<PAGE>
COMPARISON OF OPERATING RESULTS FOR THE YEARS ENDED JUNE 30, 1996 AND 1995
PERFORMANCE SUMMARY. Net earnings for the year ended June 30, 1996
increased by $29,000, or 10.6% to $302,000 from $273,000 for the year ended June
30, 1995. The increase was primarily due to the combined effects of a $225,000
increase in net interest income and a $91,000 increase in non-interest income,
which more than offset a $209,000 increase in the provision for loan losses and
a $32,000 increase in income taxes. For the year ended June 30, 1996 and 1995,
the returns on average assets were 0.61% and 0.64% respectively, while the
returns on average equity were 8.86% and 8.88% respectively.
NET INTEREST INCOME. For the year ended June 30, 1996, net interest income
increased by $225,000, or 20.0%, to $1.4 million from $1.1 million for the year
ended June 30, 1995. The increase reflected an increase of $773,000 in interest
income to $3.6 million from $2.8 million which more than offset an increase of
$548,000 in interest expense to $2.3 million from $1.7 million. The increase in
interest income reflected increased balances of loans receivable, mortgage-
backed securities and investment securities together with higher yields earned
on interest-earning assets. Interest expense increased primarily due to an
increased balance of Federal Home Loan Bank advances together with higher rates
paid on deposits.
For the year ended June 30, 1996, the average yield on interest-earning
assets was 7.45% compared to 6.86% for the year ended June 30, 1995. The average
cost of interest-bearing liabilities was 5.07% for the year ended June 30, 1996,
an increase from 4.50% for the same period ended June 30, 1995. The average
balance of interest-earning assets increased by $7.1 million to $48.5 million
for the year ended June 30, 1996 from $41.4 million for the year ended June 30,
1995. During this same period, average interest-bearing liabilities increased by
$6.5 million to $44.7 million for the year ended June 30, 1996 from $38.1
million for the same period ended June 30, 1995.
The Bank's average interest rate spread was 2.38% for the year ended June
30, 1996, compared to 2.36% for the earlier year period. The average net
interest margin was 2.79% for the year ended June 30, 1996, compared to 2.72%
for the year ended June 30, 1995.
PROVISION FOR LOAN LOSSES. During the year ended June 30, 1996, the Bank
charged $210,000 against income as a provision for loan losses compared to a
provision of $1,000 for the year ended June 30, 1995. This charge resulted in an
allowance for loan losses of $283,000, or 1.00% of loans receivable, net at June
30, 1996, compared to $81,000, or 0.31% of loans receivable, net at June 30,
1995. The allowance for loan losses as a percentage of non-performing loans
increased to 221.09% at June 30, 1996, from 65.03% at June 30, 1995. The ratio
increased due to the provision for loan losses for the year ended June 30, 1996,
exceeding net charge-offs. The increase in the provision for loan losses for the
year ended June 30, 1996 reflected an increase in the level of the Bank's
classified assets and management's efforts to maintain its overall allowance for
loan losses at a level consistent with that of its peer institutions, which
generally increased their allowances in the period.
Management will continue to monitor its allowance for loan losses and make
future additions to the allowance through the provision for loan losses as
economic conditions dictate. Although the Bank maintains its allowance for loan
losses at a level which it considers to be adequate to provide for potential
losses, there can be no assurance that future losses will not exceed estimated
amounts or that additional provisions for loan losses will not be required in
future periods.
NON-INTEREST INCOME. For the year ended June 30, 1996, non-interest income
increased $91,000 to $357,000 from $266,000 for the same period ended June 30,
1995. Included in non-interest income was $66,000 of patronage dividends from
and gain on the sale of the Bank's former cooperative data processing service
bureau. Customer service charges, primarily relating to fees on transaction
accounts, were $231,000 for the year ended June 30, 1996 and $225,000 for the
year ended June 30, 1995. Other non-interest income included late charges on
loans of $7,000 and $8,000 for the years ended June 30, 1996 and 1995,
respectively.
40
<PAGE>
NON-INTEREST EXPENSE. Non-interest expense increased by $19,000 to $1.03
million for the year ended June 30, 1996, from $1.01 million for the year ended
June 30, 1995. Compensation expense increased $37,000 to $616,000 for the year
ended June 30, 1996 from $579,000 for the year ended June 30, 1995. Data
processing expense decreased $47,000 to $48,000 for the year ended June 30, 1996
from $95,000 for the year ended June 30, 1995. This was the result of the Bank
implementing an in-house system in October 1995.
INCOME TAXES. Income taxes increased by $32,000 to $167,000 for the twelve
months ended June 30, 1996 from $135,000 for the year ended June 30, 1995. The
effective tax rates were 35.6% and 35.4% for the years ended June 30, 1996 and
1995, respectively.
ASSET/LIABILITY MANAGEMENT
Savings institutions such as the Bank are subject to interest rate risk to
the extent their interest-bearing liabilities (consisting primarily of deposit
accounts, FHLB advances and other borrowings) mature or reprice more rapidly, or
on a different basis, than their interest-earning assets (consisting
predominantly of intermediate and long-term real estate loans and investments
held for investment and liquidity purposes). Having interest-bearing liabilities
that mature or reprice more frequently on average than assets may be beneficial
in times of declining interest rates, although such an asset/liability structure
may result in declining net interest earnings during periods of rising interest
rates. Conversely, having interest-earning assets that mature or reprice more
frequently on average than liabilities may be beneficial in times of rising
interest rates, although this asset/liability structure may result in declining
net interest earnings during periods of falling interest rates.
41
<PAGE>
The following table sets forth the amounts of interest-earning assets and
interest-bearing liabilities outstanding at June 30, 1996, which are expected to
reprice or mature in each of the future time periods shown. The table does not
include any estimates of pre-payments on interest-earning assets. Pre-payments
significantly shorten the average life of the assets and may cause the Bank's
actual repayment experience to differ from that shown below. Except for
transaction accounts, which are classified as repricing in the "within 1 year"
category, the amounts of assets and liabilities shown which reprice or mature
during a particular period were determined in accordance with the earlier of
term to repricing or the contractual terms of the asset or liability. For
information regarding the contractual maturities of the Bank's loans,
investments and deposits, see "Business--Lending Activities," "--Investment
Activities" and "--Sources of Funds."
<TABLE>
<CAPTION>
Amounts Maturing or Repricing at June 30, 1996
---------------------------------------------------------------------------------------------
1 Year 1 Year through Over 3 through Over 5 through Over 10 through
or Less 3 Years 5 Years 10 Years 20 Years
------- ------- ------- -------- --------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C>
Interest-earning assets:
Loans receivable.......... $18,509 $ 3,346 $ 2,013 $ 2,153 $2,570
Mortgage-backed securities 16,369 -- -- 6 --
Investment securities..... 2,295 699 -- -- 485
Investments in other
financial institutions... 1,609 -- -- -- --
------- ------- -------- -------- -------
Total interest-earning
assets.................. $38,782 $ 4,135 $ 2,013 $ 2,159 $3,055
======= ======= ======== ======== =======
Interest-bearing
liabilities:
Savings deposits.......... $ 9,900 $ -- -- $ -- $ --
Demand and NOW deposits... 2,372 -- -- -- --
Certificate accounts...... 13,489 5,646 2,475 152 --
FHLB advances............. 10,555 918 1,334 -- 667
------ ------- -------- -------- --------
Total interest-bearing
liabilities............. $36,316 $ 6,564 $ 3,809 $152 $ 667
======= ======== ======== ========= ========
Interest sensitivity gap... $ 2,466 $(2,429) $ (3,607) $ (1,796) $ 2,388
======= ======= ======== ======== =======
Cumulative interest
sensitivity gap........... $ 2,466 $ 37 $ 8,219 $ (1,759) $ 2,636
======= ======= ======== ======== =======
Ratio of interest-earning
assets to interest-bearing
liabilities............... 106.79% 63.00% 17.59% 52.85% 458.02%
======= ======= ======== ======== =======
Ratio of cumulative gap to
total assets.............. 4.69% 13.72% .07% (3.34)% 5.01%
======= ======= ======== ======== =======
<CAPTION>
Over
20 Years Total
-------- -----
<S> <C> <C>
Interest-earning assets:
Loans receivable.......... $ -- $28,681
Mortgage-backed securities 596 16,971
Investment securities..... -- 3,479
Investments in other
financial institutions... -- 1,609
-------- -------
Total interest-earning
assets.................. $81,930 $50,740
======== =======
Interest-bearing
liabilities:
Savings deposits.......... $ -- $ 9,900
Demand and NOW deposits... -- 2,372
Certificate accounts...... -- 21,762
FHLB advances............. -- 13,474
-------- -------
Total interest-bearing
liabilities............. $ -- $47,508
======== =======
Interest sensitivity gap... $ 596 $ 3,232
========
Cumulative interest
sensitivity gap........... $ 3,232 3,232
========
Ratio of interest-earning
assets to
interest-bearing
liabilities............... --% 106.80%
========
Ratio of cumulative gap to
total assets.............. 6.15% 6.15%
========
</TABLE>
42
<PAGE>
Net Portfolio Value. In order to measure its interest rate risk, the Bank
computes the amounts by which the net present value of the Bank's cash flows
from assets, liabilities and off-balance sheet items, if any (the institution's
Net Portfolio Value, or NPV), would change in the event of a range of assumed
changes in market interest rates. These computations estimate the effect on the
Bank's NPV of instantaneous and permanent 1% to 4% increases and decreases in
market interest rates. The Board of Directors has established maximum increases
and decreases in NPV. The table below indicates the Board limits and the
estimates of projected changes in NPV in the event of 1%, 2%, 3% and 4%
instantaneous and permanent increases and decreases in market interest rates,
respectively.
The Net Portfolio Value method of calculating interest rate risk originated
in a rule adopted by the OTS for the purpose of incorporating an interest rate
risk ("IRR") component into its risk-based capital rules. The IRR component is a
dollar amount that will be deducted from total capital for the purpose of
calculating an institution's risk-based capital requirement and is measured in
terms of the sensitivity of its NPV to changes in interest rates. NPV is the
difference between incoming and outgoing discounted cash flows from assets,
liabilities and off-balance sheet contracts. An institution's IRR is measured as
the change to its NPV as a result of a hypothetical 200 basis point change in
market interest rates. A resulting change in NPV of more than 2% of the
estimated market value of its assets will require the institution to deduct from
its capital 50% of that excess change. The rule provides that the OTS will
calculate the IRR component quarterly for each institution. The Bank, based on
asset size and risk-based capital, has been informed by the OTS that it is
exempt from this rule. Nevertheless, the following table presents the Bank's NPV
at June 30, 1996, as calculated by the OTS, based on information provided to the
OTS by the Bank.
Computations of prospective effects of hypothetical interest rate changes
are based on numerous assumptions, including relative levels of market interest
rates, loan prepayments and deposit run offs, and should not be relied upon as
indicative of actual results. Further, the computations do not contemplate any
actions the Bank may undertake in response to changes in interest rates.
Change in Amount of Percent
Interest Rates Estimated Change Change
(basis points) NPV in NPV in NPV
-------------- --- ------ -------
(Dollars In Thousands)
+400 $2,837 $(1,992) (41)%
+300 3,582 (1,247) (26)
+200 4,167 (662) (14)
+100 4,595 (234) (5)
0 4,829 0 0
-100 4,852 23 0
-200 4,730 (99) (2)
-300 4,666 (163) (3)
-400 4,730 (98) (2)
Although the OTS has informed the Bank that it is not subject to the IRR
component discussed above, the Bank is still subject to interest rate risk and,
as illustrated above, rising interest rates will reduce the Bank's NPV because
over time the Bank's interest bearing liabilities will reprice more rapidly than
its interest earning assets. The OTS has the authority to require otherwise
exempt institutions to comply with the rule concerning interest rate risk. See
"Regulation--Regulatory Capital Requirements."
43
<PAGE>
Certain shortcomings are inherent in the method of analysis presented in
both the computation of NPV and in the analysis presented in the prior table
setting forth the maturing and repricing of interest-earning assets and
interest-bearing liabilities. Although certain assets and liabilities may have
similar maturities or periods within which they will reprice, they may react
differently to changes in market interest rates. The interest rates on certain
types of assets and liabilities may fluctuate in advance of changes in market
interest rates, while interest rates on other types may lag behind changes in
market rates. Additionally, adjustable-rate mortgages have features which
restrict changes in interest rates on a short-term basis and over the life of
the asset. The proportion of adjustable-rate loans could be reduced in future
periods if market interest rates would decrease and remain at lower levels for a
sustained period, due to increased refinance activity. Further, in the event of
a change in interest rates, prepayment and early withdrawal levels would likely
deviate significantly from those assumed in the table. Finally, the ability of
many borrowers to service their adjustable-rate debt may decrease in the event
of a sustained interest rate increase.
The Bank's Board of Directors has formulated an Asset/Liability Policy
designed to promote long-term profitability while managing interest rate risk.
The Asset/Liability Policy is designed to reduce the impact of changes in
interest rates on the Bank's net interest income by achieving a more favorable
match between the maturity or repricing dates of its interest-earning assets and
interest-bearing liabilities. The Bank has sough to reduce exposure of its
earnings to changes in market interest rates by increasing the interest rate
sensitivity of the Bank's assets through the origination of loans with interest
rates subject to periodic adjustment to market conditions. Accordingly, the Bank
has emphasized the origination of adjustable-rate mortgage ("ARM") loans and
consumer loans (which generally have shorter terms) for retention in its
portfolio. The Bank has also increased its FHLB borrowings in an effort to
lengthen the maturity of its liabilities. Finally, the Bank has sought to
maintain a strong base of less interest sensitive and lower costing "core
deposits" in the form of passbook accounts, NOW accounts, money market accounts
and noninterest-bearing demand accounts, and by promoting longer-term
certificates of deposit in an effort to extend the maturity of its liabilities.
LIQUIDITY AND CAPITAL RESOURCES
The Bank's primary sources of funds are deposits, FHLB advances, repayments
on loans, the maturity of investment securities and income from operations.
Although maturity and scheduled amortization of loans are relatively predictable
sources of funds, deposit flows and prepayments on loans are influenced
significantly by general interest rates, economic conditions and competition.
The primary investing activity of the Bank is the origination and purchase
of loans for investment. For the year ended June 30, 1996, the Bank originated
loans for portfolio in the amount of $9.2 million. The Bank also purchased $2.3
million of one- to four-family residential mortgage loans for the year ended
June 30, 1996. The Bank did not sell any loans into the secondary market during
this period. For the year ended June 30, 1996, these activities were funded by
principal repayments of $9.2 million and FHLB advances of $7.1 million.
The Bank is required to maintain minimum levels of liquid assets under the
OTS regulations. Savings institutions are required to maintain an average daily
balance of liquid assets (including cash, certain time deposits, and specified
U.S. Government, state or federal agency obligations) of not less than 5.0% of
its average daily balance of net withdrawal accounts plus short-term borrowings.
It is the Bank's policy to maintain its liquidity portfolio in excess of
regulatory requirements. The Bank's eligible liquidity ratio was 10.5% at June
30, 1996.
The Bank's most liquid assets are cash and cash equivalents, which include
short-term investments. The levels of these assets are dependent on the Bank's
operating, financing, lending and investing activities during any given period.
At June 30, 1996 and 1995, cash and cash equivalents were $2.1 million and $2.3
million, respectively. The decrease in cash and cash equivalents in 1996
compared to 1995 resulted primarily from the use of cash to fund loans. The
principal component of cash provided during the years ended June 30, 1996 and
1995 was the proceeds from loan repayments, sales of loans, deposit activity,
and investment maturities. The Bank will have a higher level of liquidity
following consummation of the Stock Conversion until appropriate investments are
identified for the proceeds raised. See "Use of Proceeds."
44
<PAGE>
Liquidity management for the Bank is both an ongoing and long-term function
of the Bank's asset/liability management strategy. Excess funds generally are
invested in overnight deposits at the FHLB of Des Moines. Should the Bank
require funds beyond its ability to generate them internally, additional sources
of funds are available through FHLB of Des Moines advances. The Bank would
pledge its FHLB of Des Moines stock or certain other assets as collateral for
such advances. For the twelve months ended June 30, 1996, the Bank had an
average balance of $11.1 million in FHLB advances.
At June 30, 1996, the Bank had outstanding loan commitments of $232,000,
unused lines of credit of $316,000 and undisbursed loans in process of $5,000.
The Bank anticipates it will have sufficient funds available to meet its current
loan commitments, including loan applications received and in process prior to
the issuance of firm commitments. Certificates of deposit which are scheduled to
mature in one year or less at June 30, 1996 were $13.3 million. Management
believes that a significant portion of such deposits will remain with the Bank.
Following consummation of the Stock Conversion, the Holding Company
initially will have no business other than holding the capital stock of the Bank
and the investment of the net proceeds from the Stock Conversion retained by it.
Management believes the net proceeds will provide sufficient funds for the
Holding Company's operations.
Under federal law, the Bank is required to meet certain tangible, core and
risk based capital requirements. For information regarding the Bank's regulatory
capital compliance, see "Pro Forma Regulatory Capital" and "Regulation -
Regulatory Capital Requirements."
RECENT ACCOUNTING DEVELOPMENTS
Statement of Financial Accounting Standards No. 119, Disclosures About
Derivative Financial Instruments and Fair Value of Financial Instruments,
requires disclosures of information such as credit and market risks, cash
requirements and accounting policies about derivative financial instruments.
SFAS No. 119 is effective for financial statements issued for fiscal years
ending after December 15, 1994, except for entities with less than $150 million
in total assets. For those entities, SFAS No. 119 is effective for financial
statements issued for fiscal years ending after December 15, 1995. SFAS No. 119
is effective for the Bank for the fiscal year ending June 30, 1996.
The Financial Accounting Standards Board ("FASB") has issued SFAS No. 107,
Disclosure about Fair Value of Financial Instruments, which generally requires
disclosure of the fair value of financial instruments, both assets and
liabilities recognized and not recognized in the balance sheets. The FASB has
also issued SFAS No. 114, Accounting by Creditors for Impairment of a Loan, and
SFAS No. 118, Accounting by Creditors for Impairment of a Loan -Income
Recognition and Disclosures. SFAS No. 107, SFAS No. 114 and SFAS No. 118 are
effective for fiscal years beginning after December 15, 1994. SFAS No. 114, as
amended by SFAS No. 118, requires that impaired loans be measured at the present
value of expected future cash flows discounted at the loan's effective interest
rate or, as a practical expedient, at the loan's observable market price or the
fair value of the collateral if the loan is collateral dependent. Homogeneous
loans, such as single-family loans and most categories of consumer loans, are
excluded from this requirement. Adoption of these statements was effective for
the fiscal year beginning July 1, 1995. The adoption of SFAS Nos. 114 and 118
did not have a material adverse impact on the Bank's financial position or
results of operations.
In November 1993, the AICPA issued SOP 93-6, "Employers' Accounting for
Employee Stock Ownership Plans," which is effective for fiscal years beginning
after December 15, 1993 and which applies to shares of capital stock of
sponsoring employers acquired by ESOPs after December 31, 1992 that have not
been committed to be released as of the beginning of the year in which the ESOP
is adopted. The SOP requires that shares to be released in an accounting period
should be reflected in the consolidated financial statements as compensation
expense equal to the fair value of the shares at the time of release. Thus, as
shares increase or decrease in value, earnings will be affected relative to the
shares to be released in that period. Additionally, the SOP requires that
outstanding shares for purposes of computing both primary and fully diluted
earnings per share include only those shares scheduled to be released in that or
prior periods. Thus, as additional shares are released by the ESOP in future
periods, earnings per share may
45
<PAGE>
be diluted. Shares of Common Stock of the Holding Company to be acquired by the
ESOP are scheduled to be released over a ten-year period commencing with the
consummation of the Conversion. However, the effect on net income and book
value per share for 1996 cannot be predicted due to the uncertainty of the fair
value of the shares subsequent to their issuance.
SFAS No. 123, Accounting for Stock-Based Compensation, is effective for
fiscal years beginning after December 15, 1995. This statement establishes
financial accounting and reporting standards for stock-based employee
compensation plans, including stock option plans. These plans include all
arrangements by which employees receive shares of stock or other equity
investments of the employer or where an employer issues its equity instruments
to acquire goods and services from nonemployees. This statement will require pro
forma disclosures in fiscal 1997 of net income and earnings per share as if a
new accounting method based on the estimated fair value of employee stock
options had been adopted. The Bank has not yet determined whether the optional
accounting treatment proposed by SFAS No. 123 will be adopted.
SFAS No. 122, Accounting for Mortgage Servicing Rights, will be effective
for the Bank for the year beginning July 1, 1996 and generally requires entities
that sell or securitize loans and retain the mortgage servicing rights to
allocate the total cost of the mortgage loans to the mortgage servicing right
and the loan based on their relative fair value. Costs allocated to mortgage
servicing rights should be recognized as a separate asset and amortized over the
period of estimated net servicing income and evaluated for impairment based on
fair value. The adoption of this statement is not expected to have a material
effect on the Consolidated Financial Statements.
SFAS No. 125, "Accounting for Transfers and Servicing of Financial Assets
and Extinguishments of Liabilities" supersedes SFAS No. 122 and will be
effective for all transfers and servicing of financial assets and
extinguishments of liabilities occurring after December 31, 1996. This
statement provides accounting and reporting standards for transfers and
servicing of financial assets and extinguishments of liabilities based on
consistent application of a financial-components approach that focuses on
control. It distinguished transfers of financial assets that are sales from
transfers that are secured borrowings.
Under the financial-components approach, after a transfer of financial
assets, an entity recognizes all financial assets it no longer controls and
liabilities that have been extinguished. The financial-components approach
focuses on the assets and liabilities that exist after the transfer. Many of
these assets and liabilities are components of financial assets that existed
prior to the transfer. If a transfer does not meet the criteria for a sale, the
transfer is accounted for as a secured borrowing with a pledge of collateral.
The adoption of this statement is not expected to have a material effect on the
consolidated financial statements.
SFAS No. 121, Accounting for the Impairment of Long-Lived Assets and Long-
Lived Assets to be Disposed of, is effective for the fiscal year beginning July
1, 1996. The statement requires that long-lived assets and certain identifiable
intangibles to be held and used by an entity be reviewed for impairment whenever
events or changes in circumstances indicate that the carrying amount of an asset
may not be recoverable. An impairment loss is recognized if the sum of the
expected future cash flows is less than the carrying amount of the asset.
Management does not expect the implementation of SFAS No. 121 to have a material
impact on the Bank's consolidated financial position or results of operations.
In April 1995, the FASB issued SOP 94-6, Disclosure of Certain Significant
Risks and Uncertainties. This SOP applies to financial statements prepared in
conformity with generally accepted accounting principles by all nongovernmental
entities. The disclosure requirements in SOP 94-6 focus primarily on risks and
uncertainties that could significantly affect the amounts reported in the
financial statements in the near-term functioning of the reporting entity. The
risks and uncertainties discussed in SOP 94-6 stem from the nature of the
entity's operations, from the necessary use of estimates in the preparation of
the entity's financial statements, and from significant concentrations in
certain aspects of the entity's operations. SOP 94-6 is effective for financial
statements issued for fiscal years ending after June 30, 1995 and is not
expected to have any impact on the Bank's operations.
46
<PAGE>
IMPACT OF INFLATION AND CHANGING PRICES
The Consolidated Financial Statements and Notes thereto presented herein
have been prepared in accordance with generally accepted accounting principles,
which generally requires the measurement of financial position and operating
results in terms of historical dollars without considering the change in the
relative purchasing power of money over time due to inflation. The impact of
inflation is reflected in the increased cost of the Bank's operations. Nearly
all the assets and liabilities of the Bank are financial, unlike most industrial
companies. As a result, the Bank's performance is directly impacted by changes
in interest rates, which are indirectly influenced by inflationary expectations.
The Bank's ability to match the interest sensitivity of its financial assets to
the interest sensitivity of its financial liabilities in its asset/liability
management may tend to minimize the effect of change in interest rates on the
Bank's performance. Changes in interest rates do not necessarily move to the
same extent as changes in the price of goods and services. In the current
increasing interest rate environment, liquidity and the maturity structure of
the Bank's assets and liabilities are critical to the maintenance of acceptable
performance levels.
BUSINESS
GENERAL
Investors Federal has been, and intends to continue to be, a community-
oriented financial institution offering selected financial services to meet the
needs of the communities it serves. The Bank attracts deposits from the general
public and historically has used such deposits, together with other funds, to
originate and purchase one- to four-family residential mortgage loans, and to
originate non-residential real estate loans (primarily farm loans), and consumer
loans consisting primarily of loans secured by automobiles. In addition, in
recent years, the Bank has expanded its loan portfolio by purchasing SBA-
guaranteed loans and FHA-insured Title I home improvement loans. At June 30,
1996, the Bank's total loan portfolio was $28.7 million, of which 79.5% were
one- to four-family residential mortgage loans, 6.8% were non-residential real
estate loans, 9.0% were consumer loans (including FHA home improvement loans),
and 3.4% were SBA-guaranteed loans.
During the year ended June 30, 1996, the Bank originated $2.1 million of
fixed-rate and $3.1 million of adjustable rate one-to four-family residential
mortgage loans, all of which were retained in the Bank's portfolio. See
"Business - Lending Activities." To supplement local loan production, the Bank
has purchased adjustable-rate loans in the secondary mortgage market on a non-
recourse basis, with servicing retained by the seller or originator of the
loans. In recent years, the Bank has limited its purchased loans to one- to
four-family residential mortgage loans secured generally by collateral located
in the State of Missouri, although the Bank's purchased loan portfolio includes
seasoned one- to four-family residential mortgage loans secured by collateral
located outside Missouri. Purchased one- to four-family residential mortgage
loans totaled $7.2 million, or 25.0%, of the Bank's total loan portfolio at June
30, 1996.
Because of the limited lending opportunities in its local market area and to
the extent adjustable-rate one- to four-family residential mortgage loans are
unavailable for purchase at attractive yields, the Bank will invest in mortgage-
backed securities and other investment securities. At June 30, 1996, the Bank's
portfolio of mortgage-backed securities and investment securities was
substantial. At June 30, 1996, the Bank's mortgage-backed securities portfolio
totaled $17.0 million (or 32.3% of total assets), and consisted of $7.9 million
in mortgage-backed securities issued or guaranteed by the FHLMC, FNMA and GNMA,
$3.0 million in collateralized mortgage obligations, including real estate
mortgage investment conduits, and $6.1 million in participations in pools of
Small Business Administration loans. Also at June 30, 1996, the Bank's
investment portfolio totaled $3.5 million (or 6.6% of total assets) and
consisted of federal agency obligations, municipal bonds, FHLB stock, interest
earnings deposits with other financial institutions and mutual funds. In recent
years, management has also utilized the mortgage-backed securities and
investment portfolio to attempt to increase net interest income by purchasing
such securities with the proceeds of FHLB advances and earning the spread
between the yields earned on the mortgage-backed securities and the rates paid
on the FHLB advances. At June 30, 1996, the Bank's FHLB advances totaled $13.5
million, as compared to FHLB advances of $6.4 million at June 30, 1995.
47
<PAGE>
The Bank currently offers a variety of deposit accounts, which include
passbook savings, NOW, noninterest bearing demand, money market and certificate
accounts. The Bank solicits deposits in its primary market area. The Bank does
not accept any brokered deposits.
CURRENT BUSINESS STRATEGY
The Bank's business strategy is to operate as a well-capitalized, profitable
and independent community savings institution dedicated primarily to home-
mortgage lending and to providing quality service to its customers.
The Bank intends to implement this strategy by (i) closely monitoring the
needs of its customers and providing quality service; (ii) maintaining asset
quality; (iii) utilizing investments in mortgage-backed securities and other
investment securities to invest excess funds and to increase net interest
income; (iv) maintaining capital in excess of regulatory requirements; (v)
attempting to increase the Bank's earnings; and (vi) managing interest rate risk
by attempting to match asset and liability maturities and rates.
The Bank anticipates operating in substantially the same manner following
the consummation of the Bank Conversion. However, it is anticipated that,
subject to market conditions, competition and related factors, among other
things, the Bank anticipates broadening its range of banking products and
services. For example, management anticipates considering the introduction of
various new business products, including, but not limited to, debit cards and
commercial deposits. Accordingly, management anticipates that the Bank will
incur start-up and ongoing expenses as these new programs and services are
introduced. Since no determination has been made by management in connection
with these services and products, no costs associated with them can be projected
at this time. See "Risk Factors--Return on Equity after Conversion."
The highlights of the Bank's business strategy are as follows:
. Providing Quality Service. As a relatively small, community-based
financial institution, the Bank is able to offer personalized banking
services and can utilize management staff to respond to customer
inquiries. Because it operates in a small community, the Bank also
believes it is able to closely monitor the needs of its customers in
that community.
. Asset Quality. The Bank's non-performing assets have ranged between
0.06% and 0.24% of total assets during the last two fiscal years and
represented 0.24% of total assets at June 30, 1996. The Bank's
allowance for loan losses at June 30, 1996 totaled $283,000, or 1.00%
of total loans receivable, net.
. Mortgage-Backed Securities and Investment Securities Portfolio. The
Bank has utilized a substantial mortgage-backed securities and
investment securities portfolio to invest deposits and borrowed funds
in excess of the mortgage and consumer lending volumes available in its
primary market area and to increase the Bank's levels of net interest
income by attempting to match the repricing or maturity periods of its
mortgage-backed securities portfolio with FHLB advances. At June 30,
1996, the Bank's mortgage-backed securities portfolio totaled $17.0
million and included mortgage-backed securities issued or guaranteed by
FNMA, FHLMC and GNMA (46.7% of the portfolio), collateralized mortgage
obligations, including REMICS, all of which were sponsored by United
States Government Agencies and government sponsored entities (17.7% of
the portfolio) and participations in Small Business Administration
pools (35.6% of the portfolio).
. Maintaining Regulatory Capital. At June 30, 1996, the Bank exceeded all
of its regulatory capital requirements with tangible and core capital
of 6.35% of adjusted total assets and risk-based capital of 17.29% of
total risk-based assets. As a result of the Stock Conversion and based
on the assumptions stated herein, at the midpoint of the Estimated
Valuation Range at June 30, 1996, the Bank would have had pro forma
equity of approximately $4.9 million, or 8.9% of total assets.
48
<PAGE>
. Managing Interest Rate Risk. Management of the Bank has attempted to
reduce interest rate risk by: (i) emphasizing the origination and
purchase of adjustable rate mortgages; (ii) originating non-mortgage
consumer loans, which have shorter terms; (iii) maintaining a strong
base of less interest rate sensitive "core deposits"; and (iv)
utilizing FHLB borrowings to lengthen the maturity of its liabilities.
For the fiscal year ended June 30, 1996, of the $5.2 million in one- to
four-family mortgage loans originated by the Bank, $3.1 million, or
58.9%, had adjustable interest rates. In addition, of the $22.8 million
in one- to four- family mortgage loans held by the Bank in portfolio,
$18.6 million, or 81.7%, had adjustable interest rates. Finally, of the
fixed rate mortgage loans originated by the Bank, none are originated
with terms in excess of 20 years. The Bank's base of core deposit
accounts consisting of passbook accounts, demand deposits and money
market deposit accounts amounted to $13.7 million at June 30, 1996, or
38.7% of the Bank's total deposits.
. Profitability. Although no assurance can be made regarding future
profitability, the Bank has been profitable during recent years. The
Bank had net income of $302,000 in fiscal 1996 and $273,000 in fiscal
1995. The Bank's average interest rate spread was 2.38% and 2.36%,
respectively, for fiscal 1996 and 1995. The Bank is attempting to
increase its net earnings by increasing its interest rate spread by
reducing its investment portfolio and increasing higher-yielding
adjustable rate mortgage loans, to the extent available for origination
or purchase, and by increasing the origination of higher-yielding
consumer loans. In addition, the Bank anticipates utilizing the
proceeds of the Stock Conversion to increase its assets in a controlled
manner. See "--Lending Activities."
MARKET AREA AND COMPETITION
Investors Federal conducts its operations through its main office in
Chillicothe and branch offices in Hamilton and Gallatin, Missouri. The Bank's
offices are located in the northwest part of Missouri, approximately 95 miles
northwest of Kansas City and approximately 60 miles south of the Iowa-Missouri
state line.
The annual population growth rate for Livingston County (site of the Bank's
main office) from 1990 to 1996 was a negative 2.25%, while Caldwell and Daviess
Counties (sites of the Bank's branch offices) grew by 2.35% and 1.63%,
respectively. These growth rates and the estimated growth rates through the year
2001 for the three counties were substantially below the State of Missouri and
the United States as a whole. While the population of this area is not expected
to increase substantially, household income for Livingston, Caldwell and Daviess
Counties is expected to increase faster than the rates projected for the State
of Missouri and the United States as a whole. However, notwithstanding the
projected increases in income levels, the local economy is not expected to
produce a large number of one- to four-family residential mortgage lending
opportunities.
The Bank's market area is changing from primarily an agrarian economy into a
subregional manufacturing and distribution center. The major employers in the
Bank's market area are Donaldson Company, Lambert Manufacturing, Midwest Gloves
Corporation, SEMCO, the Department of Corrections, the local school districts,
Wire Rope Corp. of America, Stride-Rite Shoe Company, Landmark Metal Fabricating
and Hamilton Hillcrest.
The Bank faces significant competition in attracting deposits and
originating loans. Such competition consists of ten commercial banks that
maintain 15 offices in the area.
LENDING ACTIVITIES
GENERAL. The Bank has emphasized and, subject to market conditions, will
continue to emphasize the origination and purchase of one- to four-family
residential mortgage loans. In recent years, subject to market conditions, the
Bank has emphasized the origination and purchase of ARM loans and shorter-term
fixed-rate residential mortgage loans. At June 30, 1996, the Bank's portfolio of
one- to four-family residential mortgage loans totaled $22.8 million, or 79.5%
of total loans. The Bank also originates loans secured by farm residences and
combinations of farm residences and farm real estate. At June 30, 1996, the non-
residential real estate portfolio (consisting principally of farm
49
<PAGE>
loans) totaled $2.0 million, or 6.8% of total loans, all of which were secured
by properties located in the Bank's market area. The Bank's non-mortgage loans
consist primarily of automobile loans, all of which are direct originations
(i.e., not through a dealer), SBA-guaranteed loans and FHA-insured Title I home
improvement loans.
Under OTS regulations, a thrift institution's loans-to-one borrower limit is
generally limited to the greater of 15% of unimpaired capital and surplus or
$500,000. See "Regulation - Federal Regulation of Savings Associations." At June
30, 1996, the maximum amount which the Bank could have lent under this limit to
any one borrower and the borrower's related entities was approximately $500,000.
At June 30, 1996, the Bank had no loans or groups of loans to related borrowers
with outstanding balances in excess of this amount. The Bank's largest lending
relationship at June 30, 1996 was three loans to an individual borrower
aggregating $478,000 and secured by one- to four-family residential rental
properties. At June 30, 1996, these loans were performing in accordance with
their terms.
LOAN PORTFOLIO COMPOSITION. Set forth below is data relating to the
composition of the Bank's loan portfolio by type of loan as of the dates
indicated.
<TABLE>
<CAPTION>
At June 30,
--------------------------------------
1996 1995
------------------ ------------------
Amount Percent Amount Percent
-------- -------- -------- --------
(Dollars in Thousands)
<S> <C> <C> <C> <C>
Real estate loans:
- -----------------
One- to four-family................. $22,798 79.49% $21,020 79.63%
Non-residential real estate......... 1,955 6.81 1,874 7.10
Commercial.......................... 369 1.29 409 1.55
------- ------- ------- -------
Total real estate loans......... 25,122 87.59 23,303 88.28
------- ------- ------- -------
Consumer and other loans:
- ------------------------
Automobile......................... 1,365 4.76 1,298 4.92
SBA guaranteed..................... 982 3.42 993 3.76
Home improvement - FHA............. 437 1.52 - -
Savings account.................... 341 1.19 364 1.38
Other.............................. 434 1.52 440 1.66
------- ------- ------- -------
Total consumer and other loans.. 3,559 12.41 3,095 11.72
Total loans..................... 28,681 100.00% 26,398 100.00%
======= ======= ======= =======
Less:
- ----
Loans in process.................... (5) (8)
Deferred fees and origination costs. 36 31
Allowance for losses................ (283) (81)
------- -------
Total loans receivable, net $28,429 $26,340
======= =======
</TABLE>
50
<PAGE>
The following table shows the composition of the Bank's loan portfolio by
fixed- and adjustable-rates at the dates indicated.
<TABLE>
<CAPTION>
At June 30,
------------------------------------------
1996 1995
------------------ ----------------------
Amount Percent Amount Percent
-------- -------- ------------ --------
(Dollars in Thousands)
<S> <C> <C> <C> <C>
Fixed-Rate Loans:
- ----------------
Real estate:
One- to four-family................. $ 4,180 14.58% $ 3,784 14.34%
Commercial.......................... 369 1.28 409 1.55
Non-residential..................... 317 1.11 424 1.60
Total real estate loans.......... 4,866 16.97 4,617 17.49
------- ------ ------- ------
Consumer and other................... 2,530 8.82 2,081 7.88
------- ------ ------- ------
Total fixed-rate loans........... 7,396 25.79 6,698 25.37
Adjustable-Rate Loans:
- ---------------------
Real estate:
One- to four-family................. 18,618 64.91 17,236 65.30
Non-residential..................... 1,638 5.71 1,450 5.49
Total real estate loans.......... 20,256 70.62 18,686 70.79
------- ------ ------- ------
Consumer and other................... 1,029 3.59 1,014 3.84
------- ------ ------- ------
Total adjustable-rate loans...... 21,285 74.21 19,700 74.63
------- ------ ------- ------
Total loans...................... $28,681 100.00% $26,398 100.00%
======= =======
Less:
- ----
Loans in process..................... $ (5) $ (8)
Deferred fees and origination costs.. 36 31
Allowance for loan losses............ (283) (81)
------- -------
Total loans receivable, net....... $28,429 $26,340
======= =======
</TABLE>
ONE- TO FOUR-FAMILY MORTGAGE LOANS. The Bank's primary lending activity is
the origination for its portfolio of one- to four-family, owner-occupied,
residential mortgage loans secured by property located in the Bank's market
area. Loans are generated through the Bank's marketing efforts, its existing
customers and referrals, real estate brokers, builders and local businesses.
The Bank generally has limited its real estate loan originations to the
financing of properties located within its market area, although it has from
time to time in the past purchased loans secured by properties located outside
of its market area. The average principle balance of the loans in the Bank's
one- to four- family residential mortgage loan portfolio was approximately
$20,950 at June 30, 1996. At June 30, 1996, the Bank had $22.8 million, or
79.5% of its total loan portfolio, invested in mortgage loans secured by one-to
four-family residences.
The Bank originates fixed-rate residential one- to four-family loans with
terms of up to 20 years. As of June 30, 1996, $4.2 million, or 14.6% of the
Bank's loan portfolio, consisted of fixed-rate residential one- to four-family
loans. The Bank's fixed-rate mortgage loans amortize monthly with principal and
interest due each month. Residential real estate loans often remain outstanding
for significantly shorter periods than their contractual terms because borrowers
may refinance or prepay loans at their option.
The Bank also offers ARM loans for terms ranging up to 30 years. The Bank
currently offers ARM loans that adjust every year, with interest rate adjustment
limitations up to two percentage points per year and up to six percentage points
over the life of the loan; however, a majority of the ARM loans in the Bank's
portfolio have adjustment limitations of one percentage point per year and five
percentage points over the life of the loan. Additionally, the Bank offers ARM
loans that adjust annually after an initial lock-in term of three or five years
has expired. In a rising interest rate environment, such rate limitations may
prevent ARM loans from repricing to market interest rates, which would have an
adverse effect on net interest income. The Bank has used different interest
indices for ARM loans in the past, and currently uses the one year U.S. Treasury
Index adjusted to a constant maturity, with margins of 300-325 basis points for
agency-conforming ARM loans. ARM loans secured by residential one- to
51
<PAGE>
four-family real estate totaled $18.6 million, or 64.9% of the Bank's total loan
portfolio at June 30, 1996. The origination of fixed-rate mortgage loans versus
ARM loans is monitored on an ongoing basis and is affected significantly by the
level of market interest rates, customer preference, the Bank's interest rate
gap position and loan products offered by the Bank's competitors. Particularly
in a relatively low interest rate environment, borrowers may prefer fixed-rate
loans to ARM loans. During fiscal year 1996, the Bank originated $2.1 million
in fixed-rate residential mortgage loans and $3.1 million of ARM loans. During
fiscal year 1995, the Bank originated $596,000 of fixed-rate residential
mortgage loans and $3.0 million of ARM loans.
The primary purpose of offering ARM loans is to make the Bank's loan
portfolio more interest rate sensitive. However, as the interest income earned
on ARM loans varies with prevailing interest rates, such loans do not offer the
Bank predictable cash flows as would long-term, fixed-rate loans. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Asset/Liability Management." ARM loans carry increased credit risk
associated with potentially higher monthly payments by borrowers as general
market interest rates increase. It is possible, therefore, during periods of
rising interest rates, that the risk of delinquencies and defaults on ARM loans
may increase due to the upward adjustment of interest costs to the borrower,
resulting in increased loan losses.
In order to supplement local mortgage loan demand, the Bank also has
purchased one- to four-family residential mortgage loans. All such purchased
loans are subject to the same underwriting standards and approval procedures as
for loans originated by the Bank. Before a loan is purchased, the Bank obtains a
copy of the original loan application, the original title insurance policy and
personal financial statements of any guarantors of the loan. Officers of the
Bank also usually make a personal inspection of the property securing the loan.
Such purchases are made without recourse. Generally, the originating financial
institution or mortgage banker continues to service the loans, remitting
principal and interest to the Bank. In recent years, the Bank has limited its
purchases of residential mortgage loans to adjustable rate loans. However, the
availability of such loans for purchase is influenced by overall market interest
rates and the demand for such loans from borrowers.
The Bank's residential first mortgage loans customarily include due-on-sale
clauses, which are provisions giving the Bank the right to declare a loan
immediately due and payable in the event, among other things, that the borrower
sells or otherwise disposes of the underlying real property serving as security
for the loan. Due-on-sale clauses are a means of imposing assumption fees and
increasing the interest rate on the Bank's mortgage portfolio during periods of
rising interest rates.
Regulations limit the amount that a savings association may lend relative to
the appraised value of the real estate securing the loan, as determined by an
appraisal at the time of loan origination. Such regulations permit a maximum
loan-to-value ("LTV") ratio of 95% for residential property (and 100% for loans
guaranteed by the Veterans Administration) and 90% for all other real estate
loans. The Bank's lending policies, however, generally limit the maximum LTV
ratio to 80% of the lesser of the appraised value or the purchase price of the
property securing the loan in the case of loans secured by one- to four-family
owner-occupied properties. On conventional one- to four-family loans, the Bank
will lend up to a 95% LTV ratio; however, loans with LTV ratios in excess of 80%
may require private mortgage insurance and loans with LTV ratios in excess of
90%, with rare exceptions, require private mortgage insurance or additional
readily marketable collateral.
When underwriting residential real estate loans, the Bank reviews each loan
applicant's employment, income and credit history. The Bank's policy is to
obtain credit reports and financial statements on all borrowers and guarantors.
Properties securing real estate loans are appraised by the Bank's employees.
Appraisals are subsequently reviewed by the Bank's Chief Lending Officer and the
Loan Committee, as applicable. Management believes that stability of income,
past credit history and adequacy of the proposed security are integral parts in
the underwriting process. Generally, the applicant's total monthly mortgage
payment, including all escrow amounts, is limited to 25% of the applicant's
total monthly income. In addition, total monthly obligations of the applicant,
including mortgage payments, should not generally exceed 33% of total monthly
income. Written appraisals are always required on real estate property offered
to secure an applicant's loan. The Bank requires fire and casualty insurance on
all properties securing real estate loans, as well as title insurance or a
certified abstract and written attorney's title opinion.
52
<PAGE>
NON-RESIDENTIAL REAL ESTATE LENDING. The Bank originates loans secured by
farm residences and combinations of farm residences and farm real estate as well
as chattel and equipment. At June 30, 1996, the non-residential real estate
portfolio totaled $2.0 million, or 6.8% of total loans, all of which were
secured by properties located in the Bank's market area. The principle balance
of such loans in the Bank's portfolio ranged from approximately $1,000 to
$250,000 at June 30, 1996. Non-residential real estate mortgage loans are
generally made for terms of 15 to 20 years.
Loans secured by farm real estate generally involve greater risks than one-
to four- family residential mortgage loans. Payments on loans secured by such
properties may, in some instances, be dependent on farm income from the
properties. To address this risk, applicants may be required to provide income
projections for the coming year as well as a five-year history on past
production from the farm securing the loan. The Bank also evaluates the cash
flow from the farm securing the loan, and the Bank's analysis of such cash flow
data is an important part of the underwriting decision. Nonetheless, such loans
are more difficult to evaluate. If the estimate of value proves to be
inaccurate, the Bank may be confronted with a property the value of which is
insufficient to assure full repayment in the event of default and foreclosure.
The Bank seeks to minimize these risks in a variety of ways, including limiting
the size of such loans, limiting the maximum loan to value ratio to 75% and
strictly scrutinizing the financial condition of the borrower and the quality of
the collateral securing the loan. All of the properties securing the Bank's non-
residential real estate mortgage portfolio are inspected and appraised by the
Bank's lending personnel before the loan is made.
COMMERCIAL REAL ESTATE LENDING. The Bank occasionally occasions originates
loans secured by commercial real estate. At June 30, 1996, $369,000, or 1.3%,
of the Bank's loan portfolio consisted of one commercial real estate loan, which
represented a purchased participation in a commercial real estate loan secured
by a nursing home located in St. Peters, Missouri, a suburb of St. Louis. At
June 30, 1996, this loan was performing according to its terms.
Commercial real estate loans originated or purchased by the Bank may be
either fixed- or adjustable-rate loans with terms to maturity and amortization
schedules of up to 30 years. Commercial real estate loans are written in amounts
of up to 80% of the lesser of the appraised value of the property or the sales
price.
Appraisals on properties which secure commercial real estate loans are
performed by the Bank's employees or an independent appraiser designated by the
Bank before the loan is made. All appraisals on commercial real estate loans
are reviewed by the Bank's management. In underwriting such loans, the Bank
primarily considers the cash flows generated by the real estate to support the
debt service, the financial resources and income level of the borrower and the
Bank's experience with the borrower. In addition, the Bank's underwriting
procedures require verification of the borrower's credit history, an analysis of
the borrower's income, financial statements and banking relationships, a review
of the borrower's property management experience and references, and a review of
the property, including cash flow projections and historical operating results.
The Bank seeks to ensure that the property securing the loans will generate
sufficient cash flow to adequately cover operating expenses and debt service
payments.
Commercial real estate lending affords the Bank an opportunity to receive
interest at rates higher than those generally available from one- to four-family
residential lending. Nevertheless, loans secured by such properties are
generally larger, more difficult to evaluate and monitor and, therefore
generally, involve a greater degree of risk than one- to four-family residential
mortgage loans. Because payments on loans secured by commercial real estate are
often dependent on the successful operation or management of the properties,
repayment of such loans may be subject to adverse conditions in the real estate
market or the economy. If the cash flow from the project is reduced, the
borrower's ability to repay the loan might be impaired. The Bank has attempted
to minimize these risks by lending primarily to the ultimate user of the
property or on existing income-producing properties.
CONSUMER AND OTHER LENDING. Investors Federal originates a limited variety
of consumer loans, primarily direct automobile loans and loans secured by
savings accounts. The Bank currently originates substantially all of its
53
<PAGE>
consumer loans in its primary market area. The Bank also occasionally purchases
consumer and other loans originated by other financial institutions. Such
purchased loans include adjustable rate loans guaranteed by the Small Business
Administration and FHA-insured Title I home improvement loans.
The primary component of the Bank's consumer loan portfolio consists of
automobile loans secured by both new and used cars and light trucks. The Bank
originates automobile loans on a direct basis, where the Bank extends credit
directly to the borrower. The Bank's automobile loans generally have terms that
do not exceed five years and carry a fixed-rate of interest. Generally, loans
on new vehicles are made in amounts up to 80% of cost and loans on used vehicles
are made in amounts up to 90% of the vehicle's "Black Book" value, as published
by the Hearst Business Media Corporation. Collision and comprehensive insurance
coverage is required on all automobile loans.
The Bank also purchases FHA home improvement loans, which are fixed-rate
loans with terms ranging from one to fifteen years. Principal and interest
payments on such loans is 100% guaranteed to investors, such as the Bank, by the
Department of Housing and Urban Development, a Department of the United States
Government. At June 30, 1996, the Bank's purchased FHA home improvement loan
portfolio consisted of two FHA loan packages, one of which had a principal
balance of $174,000 and a fixed interest rate of 10.5% and the other of which
had a principal balance of $255,000 and a fixed interest rate of 9.38%.
The Bank also purchases adjustable rate loans guaranteed by the Small
Business Administration, an independent agency of the Federal Government. Such
loans are generally originated by financial institutions to small-and medium-
sized businesses, with interest rates that adjust monthly or quarterly based on
the prime rate. SBA-guaranteed loans generally have terms ranging from seven to
25 years depending on the use of the proceeds. The principal and interest on
such loans is 90% insured by the Small Business Administration and the Bank has
limited its purchases to the guaranteed portion of such loans. Such loans are
generally sold at a premium to par value primarily due to the SBA's guarantee.
As of June 30, 1996, the Bank's purchased SBA-guaranteed loan portfolio
consisted of three loans in the aggregate amount of $982,000, representing 3.4%
of the Bank's total loan portfolio.
Consumer loan terms vary according to the type and value of collateral,
length of contract and creditworthiness of the borrower. The underwriting
standards employed by the Bank for originated consumer loans include an
application, a determination of the applicant's payment history on other debts
and an assessment of ability to meet existing obligations and payments on the
proposed loan. Although creditworthiness of the applicant is a primary
consideration, the underwriting process also includes a comparison of the value
of the security, if any, in relation to the proposed loan amount.
Consumer loans entail greater credit risk than do residential mortgage
loans, particularly in the case of consumer loans which are unsecured or are
secured by rapidly depreciable assets, such as automobiles. Further, any
repossessed collateral for a defaulted consumer loan may not provide an adequate
source of repayment of the outstanding loan balance as a result of the greater
likelihood of damage, loss or depreciation. In addition, consumer loan
collections are dependent on the borrower's continuing financial stability, and
thus are more likely to be affected by adverse personal circumstances.
Furthermore, the application of various federal and state laws, including
bankruptcy and insolvency laws, may limit the amount which can be recovered on
such loans. At June 30, 1996, $10,000 in consumer loans were non-performing.
See "Asset Quality--Delinquent Loans and Non-performing Assets." There can be
no assurances, however, that delinquencies will not increase in the future.
54
<PAGE>
LOAN MATURITY SCHEDULE
The following schedule illustrates the contractual maturity and weighted
average rates of the Bank's total loan portfolio at June 30, 1996. Mortgages
which have adjustable or renegotiable interest rates are shown as maturing in
the period during which the contract is due. The schedule does not reflect the
effects of scheduled payments, possible prepayments or enforcement of due-on-
sale clauses. The total amount of loans due after June 30, 1997 that have
predetermined interest rates is $5.5 million, and that have floating or
adjustable rates is $21.3 million.
<TABLE>
<CAPTION>
Nonresidential Real
One- to Four-Family Estate & Commercial Consumer and Other Total
------------------- ------------------- ------------------ --------------
Weighted Weighted Weighted Weighted
Average Average Average Average
Amount Rate Amount Rate Amount Rate Amount Rate
------ ---- ------ ---- ------ ---- ------ ----
(Dollars in Thousands)
Due During Years Ending June 30,
- ----------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1997 (1).......................... $ 115 8.25% $ 73 7.69% $1,600 7.87% $ 1,788 7.88%
1998.............................. 133 8.24 2 8.36 283 10.30 418 9.64
1999.............................. 366 8.35 82 9.15 435 10.25 883 9.36
2000 and 2001..................... 786 8.54 81 8.52 588 9.47 1,455 8.91
2002 to 2006...................... 3,349 8.01 894 10.28 242 7.34 4,485 8.43
2007 to 2021...................... 13,969 7.45 1,192 8.48 411 8.64 15,572 7.56
2022 and following................ 4,080 7.55 - - - - 4,080 7.55
------- ------- ------ ----- ------ ----- ------- ----
$22,798 7.61% $2,324 9.19% $3,559 8.67% $28,681 7.87%
======= ====== ====== =======
</TABLE>
_______________________________
(1) Includes demand loans, loans having no stated maturity and overdraft loans.
55
<PAGE>
ORIGINATION, PURCHASES AND SALES OF LOANS
Loan originations are developed from continuing business with depositors and
borrowers, soliciting realtors, builders, walk-in customers and third-party
sources. The Board of Directors of the Bank has authorized certain officers to
originate loans within specified underwriting limits. Specifically, Bank
officers may originate loans secured by single-family, owner occupied residences
up to $100,000 (based on a 60% LTV ratio), up to $87,500 (based on a 70% LTV
ratio), up to $82,500 (based on a 75% LTV ratio), up to $80,000 (based on an 80%
LTV ratio), and up to $72,000 (based on a 90% LTV ratio). All loans over
$100,000 require action by the Bank's Loan Committee and all loans originated
over a 90% LTV ratio require action by the Bank's Loan Committee. In addition,
the full Board of Directors meets monthly to review all real estate loans made
by officers of the Bank.
While the Bank originates both adjustable-rate and fixed-rate loans, its
ability to originate loans to a certain extent is dependent upon the relative
customer demand for loans in its market, which is affected by the interest rate
environment, among other factors. For fiscal year 1996, the Bank originated $5.6
million in fixed-rate loans and $3.6 million in adjustable-rate loans.
In order to supplement local loan demand, the Bank also has purchased loans
in the secondary mortgage market. These loans have consisted of one- to four-
family residential mortgage loans secured by property located in the State of
Missouri, although the Bank's purchased loan portfolio includes seasoned one- to
four-family residential mortgage loans secured by collateral located outside
Missouri. At June 30, 1996, $7.2 million, or 25.0%, of the Bank's total loan
portfolio consisted of purchased one- to four-family residential mortgage loans.
During the year ended June 30, 1996, the Bank purchased $2.3 million in one- to
four-family residential mortgage loans, all of which were collateralized by
properties located in the State of Missouri.
The Bank generally does not sell in the secondary mortgage market
residential mortgage loans that it originates. In the year ended June 30, 1996,
the Bank did not sell any originated mortgage loans; in the year ended June 30,
1995, the Bank sold $80,000 in one- to four- family residential mortgage loans.
The fixed rate residential one- to four- family mortgage loans originated by the
Bank are generally underwritten in conformity with the criteria established by
the FHLMC.
56
<PAGE>
Set forth below is a table showing the Bank's loan originations, purchases,
sales and repayments for the periods indicated.
<TABLE>
<CAPTION>
Years Ended June 30,
----------------------------
1996 1995
----------- ----------
(In Thousands)
<S> <C> <C>
Originations by Type:
- --------------------
Adjustable rate:
Real estate - one- to four-family..................................... $3,068 $3,031
- non-residential....................................... 516 191
Non-real estate - consumer............................................ - 24
Total adjustable-rate.......................................... 3,584 3,246
------ ------
Fixed rate:
Real estate - one- to four-family..................................... 2,144 596
- non-residential....................................... 404 1,284
Non-real estate - consumer............................................ 3,036 2,535
Total fixed-rate............................................... 5,584 4,415
------ ------
Total loans originated......................................... 9,168 7,661
------ ------
Purchases:
- ----------
Real estate - one- to four-family..................................... 2,292 3,651
- commercial............................................ - -
Non-real estate - consumer............................................ - -
------ ------
Total loans purchased.......................................... 2,292 3,651
Sales and Repayments:
- ---------------------
Real estate - one- to four-family..................................... - 80
- commercial............................................ - -
Non-real estate - consumer............................................ - -
------ ------
Total loans sold............................................... - 80
Principal repayments.................................................. 9,166 7,703
------ ------
Total reductions...............................................
Increase (decrease) in other items, net................................. (11) (11)
------ ------
Net increase (decrease)........................................ $2,283 $3,518
====== ======
</TABLE>
57
<PAGE>
ASSET QUALITY
The Bank's collection procedures provide that when a real estate loan is
past due 15 days, a delinquent notice is sent requesting payment. If a payment
is more than 30 days past due then personal contact is made by the collection
officer. If the deed of trust calls for a right-to-cure notice, then the
required notice is mailed by certified mail and regular mail when the loan
becomes 30 days past due. Personal contact is continued on all delinquent real
estate loans until the loan is completely current.
With respect to consumer loans, a delinquent notice is sent requesting
payment five days after the due date. If payment is not made by the 30th day
after it is due, the Bank sends a right to cure letter by certified mail and by
regular mail. If consumer loans are not resolved by 90 days, the account is put
on non-accrual status and repossession and/or legal action is normally
initiated. Real estate loans of 60 days or more past due and consumer loans of
30 or more past due are reported monthly to the Board of Directors. For both
consumer loans and real estate loans, the Bank officer has authority to begin
foreclosure and/or repossession procedures at any time he feels it necessary or
advisable. At June 30, 1996, the percentage of total loans delinquent 90 days or
more to total loans was 0.45% and the percentage of total loans delinquent 60 to
89 days to total loans was 0.65%.
DELINQUENT LOANS AND NON-PERFORMING ASSETS. Loans are reviewed on a regular
basis and are placed on non-accrual status when, in the opinion of management,
the collection of additional interest is doubtful. Mortgage and consumer loans
are placed on non-accrual status when principal is 90 days or more past due.
Interest accrued and unpaid at the time a loan is placed on non-accrual status
is charged against interest income. The loan will remain on non-accrual status
until the loan is brought current.
Real estate acquired through foreclosure or by deed-in-lieu of foreclosure
is classified as real estate owned until such time as it is sold. When real
estate owned is acquired, it is recorded at the lower of the unpaid principal
balance of the related loan, or its fair value, less estimated selling expenses.
Any further write-down of real estate owned is charged against earnings. At June
30, 1996, the Bank had no property classified as real estate owned.
The following table sets forth information with respect to the Bank's
delinquent loans at June 30, 1996.
<TABLE>
<CAPTION>
Loans Delinquent For
------------------------------------------------------------------
60-89 Days 90 Days and Over Total Delinquent Loans
--------------------------------- ------------------------------ ------------------------------
Percent Percent Percent
of Loan of Loan of Loan
Number Amount Category Number Amount Category Number Amount Category
------ ------ --------- ------ ------ -------- ------ ------ --------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Real Estate:
One- to four-family 3 $184 .82% 1 $ 25 .11% 4 $209 .93%
Nonresidential real - - - 1 93 4.76 1 93 4.76
estate 1 3 .07 1 10 .26 2 13 .34
Consumer ---- ---- ---- ---- ---- ------ ------
4 $187 .65% 3 $128 .45% 7 $315 1.10%
Total ==== ==== ==== ==== ==== ====== ======
</TABLE>
58
<PAGE>
The following table sets forth information regarding non-performing loans
at the dates indicated. As of the dates indicated, the Bank had no material
restructured loans within the meaning of SFAS No. 15 and no real estate owned.
In addition, as of the dates indicated, the Bank had no accruing loans that were
delinquent more than 90 days. All loans over 90 days past due are classified as
non-accrual.
<TABLE>
<CAPTION>
At June 30,
-------------------
1996 1995
------ ------
(In Thousands)
<S> <C> <C>
Non-accruing loans:
One- to four-family............................................... $ 25 $ 29
Nonresidential real estate........................................ 93 -
Consumer.......................................................... 10 -
----- -----
Total.......................................................... $ 128 $ 29
----- -----
Total non-accruing loans as a percentage of total assets.. .24% .06%
===== =====
</TABLE>
For the year ended June 30, 1996, gross interest income which would have
been recorded had the non-accruing loans been current in accordance with their
original terms amounted to $14,000. The amount that was included in interest
income on such loans was $10,000 for the year ended June 30, 1996.
CLASSIFIED ASSETS. Federal regulations provide for the classification of
loans and other assets, such as debt and equity securities, considered by the
OTS to be of lesser quality, as "substandard," "doubtful" or "loss." An asset is
considered "substandard" if it is inadequately protected by the current net
worth and paying capacity of the obligor or the collateral pledged, if any.
"Substandard" assets include those characterized by the "distinct possibility"
that the insured institution will sustain "some loss" if the deficiencies are
not corrected. Assets classified as "doubtful" have all of the weaknesses
inherent in those classified "substandard" with the added characteristic that
the weaknesses present make "collection or liquidation in full" on the basis of
currently existing facts, conditions and values, "highly questionable and
improbable." Assets classified as "loss" are those considered "uncollectible"
and of such little value that their continuance as assets without the
establishment of a specific loss reserve is not warranted.
When an insured institution classifies problem assets as either substandard
or doubtful, it may establish general allowances for losses in an amount deemed
prudent by management. General allowances represent loss allowances which have
been established to recognize the inherent risk associated with lending
activities, but which, unlike specific allowances, have not been allocated to
particular problem assets. When an insured institution classifies problem assets
as "loss," it is required either to establish a specific allowance for losses
equal to 100% of that portion of the asset so classified or to charge-off such
amount. An institution's determination as to the classification of its assets
and the amount of its valuation allowances is subject to review by the
regulatory authorities, who may order the establishment of additional general or
specific loss allowances.
In connection with the filing of its periodic reports with the OTS and in
accordance with its classification of assets policy, the Bank reviews loans in
its portfolio quarterly to determine whether such assets require classification
in accordance with applicable regulations.
59
<PAGE>
On the basis of management's review of its assets, at June 30, 1996, the
Bank had classified a total of $382,000 of its loans and other assets as
follows:
<TABLE>
<CAPTION>
At June 30, 1996
----------------------
(In Thousands)
1996 1995
------- -------
<S> <C> <C>
Special Mention....................... $ - $ -
Substandard........................... 378 194
Doubtful.............................. - 3
Loss.................................. 4 4
----- -----
Total.............................. 382 201
===== =====
General loss allowance................ 279 77
===== =====
Specific loss allowance............... 4 4
===== =====
Charge-offs........................... 8 9
===== =====
</TABLE>
OTHER LOANS OF CONCERN. In addition to the non-performing loans set forth
in the tables above, as of June 30, 1996, there were no loans classified by the
Bank with respect to which known information about the possible credit problems
of the borrowers or the cash flows of the security properties have caused
management to have some doubts as to the ability of the borrowers to comply with
present loan repayment terms and which may result in the future inclusion of
such items in the non-performing asset categories.
ALLOWANCE FOR LOAN LOSSES. The allowance for loan losses is established
through a provision for loan losses based on management's evaluation of the risk
inherent in its loan portfolio and changes in the nature and volume of its loan
activity, including those loans which are being specifically monitored by
management. Such evaluation, which includes a review of loans for which full
collectibility may not be reasonably assured, considers among other matters, the
loan classifications discussed above, the estimated fair value of the underlying
collateral, economic conditions, historical loan loss experience, the amount of
loans outstanding and other factors that warrant recognition in providing for an
adequate loan loss allowance.
Real estate properties acquired through foreclosure are recorded at the
lower of cost or fair value minus estimated cost to sell. If fair value at the
date of foreclosure is lower than the balance of the related loan, the
difference will be charged-off to the allowance for loan losses at the time of
transfer. Valuations are periodically updated by management and if the value
declines, a specific provision for losses on such property is established by a
charge to operations. At June 30, 1996, the Bank had no properties that were
acquired through foreclosure.
Although management believes that it uses the best information available to
determine the allowance, unforeseen market conditions could result in
adjustments and net earnings could be significantly affected if circumstances
differ substantially from the assumptions used in making the final
determination. Future additions to the Bank's allowance for loan losses will be
the result of periodic loan, property and collateral reviews and thus cannot be
predicted in advance. In addition, federal regulatory agencies, as an integral
part of the examination process, periodically review the Bank's allowance for
loan losses. Such agencies may require the Bank to increase the allowance based
upon their judgment of the information available to them at the time of their
examination. At June 30, 1996, the Bank had a total allowance for loan losses of
$283,000, representing 66.0% of total non-performing loans and 1.00% of the
Bank's loans receivable, net. See Note 4 of the Notes to Consolidated Financial
Statements and "Management's Discussion and Analysis of Financial Condition and
Results of Operations."
60
<PAGE>
The following table sets forth the allocation for loan losses by category
at the dates indicated:
<TABLE>
<CAPTION>
At June 30,
---------------------------------------------------------------------
1996 1995
------------------------------- ---------------------------------
Percent Percent
of Loans of Loans
Loan in Each Loan in Each
Amount of Amounts Category Amount of Amounts Category
Loan Loss by to Total Loan Loss by to Total
Allowance Category Loans Allowance Category Loans
--------- -------- --------- --------- -------- ---------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C>
One- to four-family..................... $ 225 $22,798 79.49% $64 $21,020 79.63%
Commercial real estate.................. - 369 1.29 - 409 1.55
Non-residential real estate............. 19 1,955 6.81 6 1,874 7.10
Consumer and other...................... 39 3,559 12.41 11 3,095 11.72
------ ------- ------ --- ------- ------
Total.............................. $ 283 $28,681 100.00% $81 $26,398 100.00%
====== ======= ====== === ======= ======
</TABLE>
The following table sets forth information with respect to the Bank's
allowance for loan losses for the periods indicated.
<TABLE>
<CAPTION>
Years Ended June 30,
----------------------------
1996 1995
----------- -----------
(Dollars In Thousands)
<S> <C> <C>
Balance at beginning of period...................................... $ 81 $ 89
Charge-offs:
Consumer and other................................................ (11) (11)
Recoveries:
Consumer and other................................................ 3 2
Net charge-offs..................................................... (8) (9)
Additions charged to operations..................................... 210 1
----- ------
Balance at end of period............................................ $ 283 $ 81
===== ======
Ratio of net charge-offs during the period to
average loans outstanding during the period....................... .03% .04%
===== ======
Ratio of net charge-offs during the period to
average non-performing assets..................................... 6.25% 31.03%
===== ======
</TABLE>
61
<PAGE>
INVESTMENT ACTIVITIES
GENERAL. Investors Federal must maintain minimum levels of investments that
qualify as liquid assets under OTS regulations. Liquidity may increase or
decrease depending upon the availability of funds and comparative yields on
investments in relation to the return on loans. Historically, the Bank has
generally maintained liquid assets at levels above the minimum requirements
imposed by the OTS regulations and at levels believed adequate to meet the
requirements of normal operations, including repayments of maturing debt and
potential deposit outflows. Cash flow projections are regularly reviewed and
updated to assure that adequate liquidity is maintained. At June 30, 1996, the
Bank's liquidity ratio (liquid assets as a percentage of net withdrawable
savings deposits and current borrowings) was 10.5%. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations - Liquidity and
Capital Resources" and "Regulation - Liquidity."
Federally chartered savings institutions have the authority to invest in
various types of liquid assets, including U.S. Treasury obligations, securities
of various federal agencies, certain certificates of deposit of insured banks
and savings institutions, certain bankers' acceptances, repurchase agreements
and federal funds. Subject to various restrictions, federally chartered savings
institutions may also invest their assets in commercial paper, investment grade
corporate debt securities and mutual funds whose assets conform to the
investments that a federally chartered savings institution is otherwise
authorized to make directly.
Generally, the investment policy of the Bank, as established by the Board
of Directors, is to invest funds among various categories of investments and
maturities based upon the Bank's liquidity needs, asset/liability management
policies, investment quality, marketability and performance objectives.
MORTGAGE-BACKED SECURITIES. The Bank purchases mortgage-backed securities
primarily to supplement its lending activities, to generate positive interest
rate spreads on large principal balances with minimal administrative expense, to
lower the credit risk of the Bank as a result of the guarantees provided by
FHLMC, FNMA and GNMA and to generally assist in managing the interest rate risk
of the Bank. The Bank has invested primarily in federal agency securities,
principally FHLMC, FNMA and GNMA obligations. In addition, the Bank invests in
collateralized mortgage obligations ("CMOs") and participations in Small
Business Administration pools. Included in the Bank's mortgage-backed securities
portfolio are real estate mortgage investment conduits ("REMICs") which mature
in 2008 through 2023 and have adjusting interest rates based on a variety of
interest rate indices. At June 30, 1996, the Bank's investment in mortgage-
backed securities totaled $17.0 million, or 32.2% of its total assets. At June
30, 1996 all of the Bank's mortgage-backed securities were classified as
available-for-sale. See Note 3 of the Notes to Consolidated Financial
Statements. The portfolio had coupon rates ranging from 4.00% to 9.16% and had a
weighted average rate of 6.97% during the year ended June 30, 1996.
On November 15, 1995, the FASB issued a FASB Special Report, "A Guide to
Implementation of Statement 115 on Accounting for Certain Investments in Debt
and Equity Securities." The Special Report allows for a "one-time
reclassification" of securities as of a single date between November 15, 1995
and December 31, 1995. In December 1995, the Bank reclassified approximately
$8.1 million of mortgage-backed securities from the held to maturity
classification to the available for sale classification. The estimated fair
value of the Bank's mortgage-backed securities available for sale at June 30,
1996, was $17.0 million, which was equal to the amortized cost of such
securities.
The FHLMC, FNMA and GNMA certificates are modified pass-through mortgage-
backed securities that represent undivided interests in underlying pools of
fixed-rate, or certain types of adjustable-rate, single-family residential
mortgages issued by these government-sponsored entities. As a result, the
interest rate risk characteristics of the underlying pool of mortgages, i.e.,
fixed rate or adjustable rate, as well as prepayment risk, are passed on to the
certificate holder. FHLMC provides the certificate holder a guarantee of timely
payments of interest and ultimate collection of principal, whether or not they
have been collected. GNMA's guarantee to the holder of timely payments of
principal and interest is backed by the full faith and credit of the U.S.
Government. FNMA is a private corporation chartered by Congress which guarantees
the timely payment of principal and interest on FNMA securities, which are
indirect obligations of the United States Government.
62
<PAGE>
Collateralized mortgage obligations include real estate mortgage investment
conduits, and are securities created by segregating or partitioning cash flows
from mortgage pass-through securities or from pools of mortgage loans. CMOs
provide a broad range of mortgage investment vehicles by tailoring cash flows
from mortgages to meet the varied risk and return preferences of investors. CMOs
are typically issued by a special purpose entity that may be organized in a
variety of legal forms, such as a trust, a corporation or a partnership. REMICs
may be sponsored by private issuers, such as mortgage bankers or money center
banks, or by U.S. Government agencies and government-sponsored entities. At June
30, 1996, the Bank's portfolio of REMICs included an investment in the
Huntington Residential Mortgage Trust, which consists of a pool of fixed-rate
mortgage loans. At June 30, 1996, the aggregate book value and aggregate market
value of the Bank's investment in this security was $432,928. CMOs are
collateralized by mortgage loans or mortgage-backed securities that are
transferred to the CMO trust or pool by a sponsor. The issue is structured so
that collections from underlying collateral provide a cash flow to make
principal and interest payment on the obligations, or "tranches," of the issuer.
The Bank's investment in CMOs is in the fixed rate classes with scheduled
repayments and weighted average lives ranging up to five years at the time of
purchase, and in the floating rate classes which reset monthly based on the
applicable index.
Mortgage-backed securities generally yield less than the loans that
underlie such securities because of the cost of payment guarantees and credit
enhancements. In addition, mortgage-backed securities are usually more liquid
than individual mortgage loans and may be used to collateralize certain
liabilities and obligations of the Bank. These types of securities also permit
the Bank to optimize its regulatory capital because they have low risk
weighting.
Thrift Bulletin Number 52 ("TB-52"), the OTS Policy Statement on securities
portfolio policies and unsuitable investment practices, requires that
institutions classify mortgage derivative products acquired, including REMICs
and certain tranches of CMOs, as "high-risk mortgage securities" if such
products exhibit greater price volatility than a benchmark fixed-rate 30-year
mortgage-backed pass-through security. Institutions may only hold high-risk
mortgage securities to reduce interest-rate risk in accordance with safe and
sound practices and must also follow certain prudent safeguards in the purchase
and retention of such securities. At June 30, 1996, the Bank did not have any
securities that would be identified under TB-52 as "high-risk mortgage
securities." The Bank also evaluates its mortgage-backed securities portfolio
annually for compliance with applicable regulatory requirements, including
testing for identification of high risk investments pursuant to Federal
Financial Institutions Examination Council standards.
Of the Bank's $17.0 million mortgage-backed securities portfolio at June
30, 1996, substantially all had contractual maturities over six years. The
actual maturity of a mortgage-backed security may be less than its stated
maturity due to prepayments of the underlying mortgages. Prepayments that are
faster than anticipated may shorten the life of the security and may result in a
loss of any premiums paid and thereby reduce the net yield on such securities.
Although prepayments of underlying mortgages depend on many factors, including
the type of mortgages, the coupon rate, the age of mortgages, the geographical
location of the underlying real estate collateralizing the mortgages and general
levels of market interest rates, the difference between the interest rates on
the underlying mortgages and the prevailing mortgage interest rates generally is
the most significant determinant of the rate of prepayments. During periods of
declining mortgage interest rates, if the coupon rate of the underlying
mortgages exceeds the prevailing market interest rates offered for mortgage
loans, refinancing generally increases and accelerates the prepayment of the
underlying mortgages and the related security. Under such circumstances, the
Bank may be subject to reinvestment risk because, to the extent that the Bank's
mortgage-backed securities amortize or prepay faster than anticipated, the Bank
may not be able to reinvest the proceeds of such repayments and prepayments at a
comparable rate. In contrast to mortgage-backed securities in which cash flow is
received (and hence, prepayment risk is shared) pro rata by all securities
holders, the cash flow from the mortgages or mortgage-backed securities
underlying REMICs are segmented and paid in accordance with a predetermined
priority to investors holding various tranches of such securities or
obligations. A particular tranche of REMICs may therefore carry prepayment risk
that differs from that of both the underlying collateral and other tranches.
The Bank also invests in SBA-guaranteed loan participation certificates,
which represent participations in a pool of Small Business Administration loans.
Such certificates are purchased by the Bank from brokers which purchase the
individual loans directly from the originators and pool such loans for sale to
investors. The Small Business Administration is authorized by the Small Business
Act to guarantee a certain percentage of the loan amount made by financial
institutions to qualifying small businesses. Only the guaranteed portion of the
loan is sold
63
<PAGE>
into the secondary market as a loan or pooled security. Accordingly, the
certificates purchased by the Bank are 100% guaranteed by the full faith and
credit of the United States Government.
Loans in a pool must be fully disbursed and current when the pool is formed
and the minimum aggregate principal balance of the guaranteed portion
outstanding at the time of certificate issuance is $1 million. At least four
guaranteed portions are in each pool and no individual loan may constitute more
than 25% of the pool. The pools are closed end with no substitutions of
guaranteed portions that prepay or default.
The guaranteed portion of a given pool must be all fixed or all variable
rate. The certificates purchased by the Bank generally are adjustable rate and
adjust at a specified discount to the prime rate. While the SBA guarantee
eliminates credit risk, the Bank is subject to the risk that certificates will
prepay. Certificates are available with interim and/or lifetime interest rate
caps. In exchange for accepting the cap, the prices of the certificates to the
Bank are lower. Prepayments on capped pools are generally expected to be less
than uncapped pools because lenders generally offer interest rate caps only to
their most credit-worthy customers.
Set forth below is a table showing the Bank's purchases, sales and
repayments of mortgage-backed securities and mortgage related securities for the
periods indicated.
<TABLE>
<CAPTION>
Years Ended June 30,
------------------------
1996 1995
--------- --------
(In Thousands)
<S> <C> <C>
Purchases:
- ----------
Adjustable-rate mortgage-backed securities (1)................................ $1,311 $1,931
Mortgage related securities:
CMO/REMIC--adjustable-rate................................................. 2,395 850
CMO/REMIC--fixed-rate...................................................... - -
SBA pools--adjustable-rate................................................. 5,013 2,370
SBA pools--fixed-rate...................................................... 645 -
------ ------
Total purchases........................................................ $9,364 $5,151
Sales:
- ------
Adjustable-rate mortgage-backed securities (1)................................ $1,177 $ 478
Mortgage related securities:
CMO/REMIC--adjustable rate................................................. 302 274
CMO/REMIC--fixed rate...................................................... - -
SBA pools--adjustable-rate................................................. 754 1,016
SBA pools--fixed-rate...................................................... - -
------ ------
Total sales............................................................ $2,233 $1,768
Principal Repayments:
- ---------------------
Adjustable-rate mortgage-backed securities (1)................................ $2,360 $1,723
Mortgage related securities:
CMO/REMIC--adjustable-rate................................................. 159 128
CMO/REMIC--fixed-rate...................................................... 63 81
SBA pools--adjustable-rate................................................. 258 12
SBA pools--fixed-rate...................................................... 52 -
------ ------
Total principal repayments............................................. $2,892 $1,944
Increase (decrease) in other items, net......................................... $ 29 $ 120
------ ------
Net increase (decrease)....................................................... $4,268 $1,559
====== ======
</TABLE>
_________________________
(1) Consists of pass-through securities.
64
<PAGE>
The following table sets forth the composition of the Bank's mortgage-
backed securities portfolio at the date indicated.
<TABLE>
<CAPTION>
At June 30,
------------------------------------------------------
1996 1995
---------------------- ------------------------
Book % of Book % of
Value Total Value Total
------- ------- ------- -------
(Dollars in Thousands)
<S> <C> <C> <C> <C>
Mortgage-backed securities
held-to-maturity: (1)
GNMA................................. $ - % $ - %
FNMA................................. - - 6,043 47.57
FHLMC................................ - - 1,699 13.37
CMOs/REMICS.......................... - - 1,074 8.45
SBA pools............................ - - - -
------- ------- ------- ------
$ - $ - $ 8,816 $69.39%
Mortgage-backed securities
available for sale:
GNMA................................. $ 1,163 6.85% $ 1,289 10.15%
FNMA................................. 4,542 26.76 482 3.79
FHLMC................................ 2,240 13.20 628 4.94
CMOs/REMICS.......................... 2,982 17.57 69 .54
SBA pools............................ 5,846 34.45 1,433 11.28
------- ------- ------- ------
$16,773 98.83% $ 3,901 30.70%
Unamortized premium
(discounts), net..................... 198 1.17 (14) (.09)
------- ------- ------- ------
Total mortgage-backed securities.. $16,971 100.00% $12,703 100.00%
======= ======= ======= ======
</TABLE>
__________________
(1) By June 30, 1996, pursuant to SFAS 115, the Bank had classified all of its
mortgage-backed securities as available for sale.
OTHER INVESTMENTS. At June 30, 1996, the Bank's investment securities
other than mortgage-backed securities consisted of federal agency obligations,
municipal bonds, FHLB stock and other FHLB interest-earning assets, and
interest-earning deposits with other financial institutions. In addition, in
recent years, the Bank has also invested in certain mutual funds whose assets
conform to the investments that a federally-chartered saving institution is
otherwise authorized to make directly. The Bank's investments in mutual funds
includes an investment in the Federated U.S. Government Securities Fund. As of
June 30, 1996, the aggregate book value and aggregate market value of the Bank's
investment in this mutual fund was $339,203.
OTS regulations restrict investments in corporate debt and equity
securities by the Bank. These restrictions include prohibitions against
investments in the debt securities of any one issuer in excess of 15% of the
Bank's unimpaired capital and unimpaired surplus as defined by federal
regulations, plus an additional 10% if the investments are fully secured by
readily marketable collateral. At June 30, 1996, the Bank was in compliance
with this regulation. See "Regulation - Federal Regulation of Savings
Associations" for a discussion of additional restrictions on the Bank's
investment activities.
65
<PAGE>
The following table sets forth the composition of the Bank's
investment securities, net of premiums and discounts, at the dates indicated.
<TABLE>
<CAPTION>
At June 30,
------------------------------------------------------
1996 1995
---------------------- ------------------------
Book % of Book % of
Value Total Value Total
------- ------- ------- -------
(Dollars in Thousands)
<S> <C> <C> <C> <C>
Investment securities held to maturity:
Federal agency obligations............... $ - -% $ 600 20.67%
Municipal bonds.......................... 215 5.11 215 7.41
------- ------ ------- -------
Investment securities available for sale:
Federal agency obligations............... 963 22.91 493 16.99
------- ------ ------- -------
Subtotal............................... 1,178 28.02 1,308 45.07
Equity securities:
FHLB stock............................... 724 17.22 350 12.06
Mutual funds............................. 1,308 31.11 1,244 42.87
FNMA preferred stock..................... 994 23.65 - -
------- ------ ------- -------
Total debt and equity securities...... $ 4,204 100.00% $ 2,902 100.00%
======= ====== ======= =======
Average remaining life of
debt securities.......................... 6.68 years 3.31 years
Other interest-earning assets:
Interest-earning deposits................ $ 1,608 100.00% $ 1,808 94.76%
Certificates of deposit.................. - - 100 5.24
------- ------ ------- -------
Total................................. $ 1,608 100.00% $ 1,908 100.00%
======= ====== ======= =======
</TABLE>
INVESTMENT PORTFOLIO MATURITIES. The following table sets forth the
scheduled maturities, carrying values, market values and average yields for the
Bank's investment securities excluding FHLB stock at June 30, 1996.
<TABLE>
<CAPTION>
June 30, 1996
----------------------------------------------------------------------------------
Less than 1 to 5 5 to 10 Over
1 Year Years Years 10 Years Total Investment Securities
------------- ---------- ----------- ---------- ---------------------------
Book Book Book Book Book Market
Value Value Value Value Value Value
------------- ---------- ----------- ---------- ----------- -----------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C>
Municipal securities................. $ -- $ 215 $ -- $ -- $ 215 $ 215
Federal agency obligations........... -- 485 -- 4,787 962 962
Mortgage-backed securities........... -- 334 7 16,630 16,971 16,971
---------- -------- -------- -------- -------- --------
Total investment securities.......... $ -- $ 1,032 $ 7 $ 17,107 $ 18,148 $ 18,148
========== ======== ======== ======== ======== ========
Weighted average yield............... --% 6.66% 7.83% 6.92% 6.90% 6.90%
</TABLE>
SOURCES OF FUNDS
GENERAL. The Bank's primary sources of funds are deposits, receipt of
principal and interest on loans and securities, FHLB advances, and other funds
provided from operations.
FHLB advances are used to support lending activities and to assist in
the Bank's asset/liability management strategy. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations - Asset\Liability
Management." Typically, the Bank does not use other forms of borrowings. At
June 30, 1996, the Bank had $13.5 million in FHLB advances.
DEPOSITS. Investors Federal offers a variety of deposit accounts
having a wide range of interest rates and terms. The Bank's deposits consist of
passbook, demand, NOW, money market deposit and certificate accounts. The
certificate accounts currently range in terms from 91 days to eight years.
The Bank relies primarily on advertising, competitive pricing policies
and customer service to attract and retain these deposits. Currently, Investors
Federal solicits deposits from its market area only, and does not use brokers to
66
<PAGE>
obtain deposits. The flow of deposits is influenced significantly by general
economic conditions, changes in money market and prevailing interest rates and
competition.
The Bank has become more susceptible to short-term fluctuations in
deposit flows as customers have become more interest-rate conscious. The Bank
endeavors to manage the pricing of its deposits in keeping with its
profitability objectives giving consideration to its asset/liability management.
Notwithstanding the foregoing, a significant percentage of the Bank's deposits
are for terms of less than one year. At June 30, 1996, $13.3 million, or 61.1%
of the Bank's certificates of deposit were in certificates of deposit with terms
of 12 months or less. The Bank believes that upon maturity most of these
deposits will remain at the Bank. The ability of the Bank to attract and
maintain savings accounts and certificates of deposit, and the rates paid on
these deposits, has been and will continue to be significantly affected by
market conditions.
SAVINGS PORTFOLIO
The following table sets forth the dollar amount of savings deposits
with various types of deposit programs offered by the Bank at the periods
indicated.
<TABLE>
<CAPTION>
At June 30,
-----------------------------------------------
1996 1995
--------------------- ----------------------
Amount Percent Amount Percent
---------- --------- ---------- ---------
(Dollars in Thousands)
<S> <C> <C> <C> <C>
Transaction Accounts and Savings Deposits:
- ------------------------------------------
Savings deposits........................................... 2,607 7.32 3,004 8.53
Demand and NOW deposits.................................... 3,824 10.74 3,839 10.90
Money market accounts...................................... 7,301 20.51 7,478 21.24
------- ------- ------- ------
Total non-certificates..................................... 13,732 38.57 14,321 40.67
------- ------- ------- ------
Certificates:
- ------------
0.00 - 3.99%............................................. 39 .11 549 1.56
4.00 - 5.99%............................................. 16,839 47.30 14,761 41.92
6.00 - 7.99%............................................. 4,554 12.79 5,171 14.69
8.00 - 9.99%............................................. 331 .93 409 1.16
Total certificates......................................... 21,763 61.13 20,889 59.33
------- ------- ------- ------
Accrued interest........................................... 103 .30 28 -
------- ------- ------- ------
Total deposits............................................. $35,598 100.00% $35,238 100.00%
======= ======= ======= ======
</TABLE>
67
<PAGE>
DEPOSIT ACTIVITY
The following table sets forth the deposit activities of the Bank for
the periods indicated:
Years Ended June 30,
----------------------
1996 1995
---------- ----------
(In Thousands)
Opening balance.............. $35,210 $37,072
Deposits..................... 72,437 72,410
Withdrawals.................. 73,237 75,406
Interest credited............ 1,085 1,134
------- -------
Ending balance............... $35,495 $35,210
======= =======
Net increase (decrease)...... $ 285 $(1,862)
======= =======
Percent increase (decrease).. .81% (5.02)%
======= =======
TIME DEPOSIT MATURITY SCHEDULE
The following table shows weighted average rate and maturity information
for the Bank's certificates of deposit as of June 30, 1996.
WEIGHTED
CERTIFICATE ACCOUNTS MATURING IN TOTAL AVERAGE PERCENT OF
- -------------------------------- BALANCE RATE TOTAL
QUARTER ENDING: -------------- --------- -----------
- --------------
(In Thousands)
September 30, 1996...................... $ 5,402 5.32% 24.82%
December 31, 1996....................... 4,275 5.28 19.64
March 31, 1997.......................... 1,759 5.44 8.08
June 30, 1997........................... 1,866 5.50 8.57
September 30, 1997...................... 1,377 5.57 6.33
December 31, 1997....................... 1,061 5.71 4.88
March 31, 1998.......................... 580 5.53 2.67
June 30, 1998........................... 832 5.66 3.82
September 30, 1998...................... 594 5.75 2.73
December 31, 1998....................... 546 5.97 2.51
March 31, 1999.......................... 456 6.00 2.10
June 30, 1999........................... 387 6.12 1.78
Thereafter.............................. 2,628 6.22 12.07
------- 5.56 ------
Total............................... $21,763 100.00%
======= ======
68
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The following table indicates the amount of the Bank's certificates of
deposit and other deposits by time remaining until maturity as of June 30, 1996.
<TABLE>
<CAPTION>
Maturity
----------------------------------------------
3 Months Over 3 to 6 Over 6 to 12 Over
or Less Months Months 12 Months Total
-------- ----------- ------------ --------- -------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C>
Certificates of deposit less
than $100,000................... $4,880 $4,106 $3,287 $8,217 $20,490
Certificates of deposit of
$100,000 or more................ 500 100 338 244 1,182
Public funds/(1)/................ 22 69 - - 91
------ ------ ------ ------ -------
Total certificates of deposit.. $5,402 $4,275 $3,625 $8,461 $21,762
====== ====== ====== ====== =======
</TABLE>
___________________
/(1)/ Deposits from governmental and other public entities.
BORROWINGS. Investors Federal's borrowings historically have consisted
of advances from the FHLB of Des Moines. Such advances may be made pursuant to
different credit programs, each of which has its own interest rate and range of
maturities. Federal law limits an institution's borrowings from the FHLB to 20
times the amount paid for capital stock in the FHLB, subject to regulatory
collateral requirements. At June 30, 1996, the Bank had $13.5 million in
advances from the FHLB with maturities from August 1996 to April 2001. In
addition, the Bank has a daily line of credit from the FHLB of $3.5 million. The
line of credit's interest rate is based upon the FHLB's average Fed Funds rate
plus 20 basis points, and adjusts daily. As of June 30, 1996, the interest rate
on the line of credit was 5.57% and the Bank had drawn down $1.8 million of the
line of credit. The Bank has the ability to purchase additional capital stock
from the FHLB. For additional information regarding the term to maturity on
FHLB advances, see Note 8 of the Notes to Consolidated Financial Statements and
"Business - Lending Activities."
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For the years ended June 30, 1996 and 1995, the Bank had maximum
balances of FHLB advances of $14.5 million and $6.9 million, respectively. The
average balances of such advances for such periods were $11.1 million and $3.7
million for the years ended June 30, 1996 and 1995, respectively. For such
periods, the Bank did not have any other borrowings or any securities sold under
agreements to repurchase. At June 30, 1996 and 1995, the Bank's balance of FHLB
advances was $13.5 million and $6.4 million, respectively, and the weighted
average interest rate of such advances was 6.19% and 6.40%, respectively.
EMPLOYEES
At June 30, 1996, the Bank had 16 full-time and nine part-time
employees. The Bank's employees are not represented by any collective
bargaining group. Management considers its employee relations to be good.
PROPERTIES
The Bank conducts its business through its main office, located in
Chillicothe, Missouri and two branch offices, one located in Hamilton and one
located in Gallatin, Missouri. The following table sets forth information
relating to the Bank's offices as of June 30, 1996. The total net book value of
the Bank's premises and equipment (including land, buildings and leasehold
improvements and furniture, fixtures and equipment) at June 30, 1996 was
$373,000.
<TABLE>
<CAPTION>
Total
Approximate
Date Square Net Book Value at
Location Acquired Footage June 30, 1996
- ------------------------------ -------- ----------- -----------------
<S> <C> <C> <C>
Main Office:/(1)/ 1966 3,910 $86,000
522 Washington Street
Chillicothe, Missouri 64601
Branch Offices: Leased 660 -
400 North Main (month-to-
Gallatin, Missouri month)
305 North Davis 1975 1,458 6,400
Hamilton, Missouri
</TABLE>
______________
(1) Includes a building located at 520 Washington Street purchased by the Bank
in 1977 as well as a drive through facility purchased in 1985 located at
812 Jackson Street.
In addition to the foregoing facilities, the Bank also owns a lot in
Gallatin, Missouri for a possible new branch facility. At the present time,
there are no plans to build such a facility. The net book value for this lot is
$6,500.
The Bank believes that its current facilities are adequate to meet the
present and foreseeable needs of the Bank and the Holding Company.
LEGAL PROCEEDINGS
Investors Federal is involved, from time to time, as plaintiff or
defendant in various legal actions arising in the normal course of their
businesses. While the ultimate outcome of these proceedings cannot be predicted
with certainty, it is the opinion of management, after consultation with counsel
representing Investors Federal in the proceedings, that the resolution of these
proceedings should not have a material effect on the Holding Company's financial
position or results of operations on a consolidated basis.
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<PAGE>
SERVICE CORPORATION ACTIVITIES
As a federally chartered savings association, Investors Federal is
permitted by OTS regulations to invest up to 2% of its assets, or approximately
$1.1 million at June 30, 1996, in the stock of, or loans to, service corporation
subsidiaries. Investors Federal may invest an additional 1% of its assets in
service corporations where such additional funds are used for inner-city or
community development purposes and up to 50% of its total capital in conforming
loans to service corporations in which it owns more than 10% of the capital
stock. In addition to investments in service corporations, federal associations
are permitted to invest an unlimited amount in operating subsidiaries engaged
solely in activities in which a federal association may engage. At June 30,
1996, Investors Federal had one subsidiary, Investors Federal Service
Corporation, a Missouri corporation, which was established in June 1992 for the
primary purpose of offering credit life, health and accident insurance to its
customers. The Bank is now offering such products directly and the subsidiary is
largely inactive.
As a national bank, the Bank will be able to invest unlimited amounts in
subsidiaries that are engaged in activities in which the parent bank may engage.
In addition, a national bank may invest limited amounts in subsidiaries that
provide banking services, such as data processing, to other financial
institutions.
REGULATION
GENERAL
Investors Federal is a federally chartered savings association, the
deposits of which are federally insured and backed by the full faith and credit
of the U.S. Government. Accordingly, the Bank is subject to broad federal
regulation and oversight extending to all its operations. The Bank is a member
of the FHLB of Des Moines and is subject to certain limited regulation by the
Federal Reserve Board. As the savings and loan holding company of the Bank, the
Holding Company also is subject to federal regulation and oversight. The
purpose of the regulation of the Holding Company and other holding companies is
to protect subsidiary savings and loan associations. The Bank is a member of
the SAIF. The deposits of the Bank are insured by the SAIF of the FDIC. As a
result, the FDIC has certain regulatory and examination authority over the Bank.
The foregoing regulatory oversight will continue to apply to the Bank
following consummation of the Stock Conversion but prior to completion of the
Bank Conversion.
Upon consummation of the Bank Conversion, the Bank will be a national bank
and its deposit accounts will continue to be insured by the SAIF. As a national
bank, the Bank also will be required to become a member of the Federal Reserve
System. The Bank will be subject to supervision, examination and regulation by
the OCC (rather than the OTS) and to OCC regulations governing such matters as
capital standards, mergers, establishment of branch offices, subsidiary
investments and activities and general investment authority, and it will remain
subject to the FDIC's authority to conduct special examinations. The Bank will
be required to file reports with the OCC concerning its activities and financial
condition and will be required to obtain regulatory approvals prior to entering
into certain transactions, including mergers with, or acquisitions of, other
depository institutions.
Certain of these regulatory requirements and restrictions are discussed
below or elsewhere in this document.
FEDERAL REGULATION OF SAVINGS ASSOCIATIONS
The OTS has extensive authority over the operations of savings
associations. As part of this authority, the Bank is required to file periodic
reports with the OTS and is subject to periodic examinations by the OTS and the
FDIC. The last regular OTS and FDIC examinations of the Bank were as of 1995
and 1991, respectively. Such examinations did not result in any material
changes to the operations, personnel or finances of the Bank. When these
examinations are conducted by the OTS and the FDIC, the examiners may require
the Bank to provide for higher general or specific loan loss reserves.
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<PAGE>
All savings associations are subject to a semi-annual assessment, based
upon the savings and loan association's total assets. The Bank's OTS assessment
for the fiscal year ended June 30, 1996, was approximately $15,000.
The OTS also has extensive enforcement authority over all savings
institutions and their holding companies, including the Bank and the Holding
Company. This enforcement authority includes, among other things, the ability
to assess civil money penalties, to issue cease-and-desist or removal orders and
to initiate injunctive actions. In general, these enforcement actions may be
initiated for violations of laws and regulations and unsafe or unsound
practices. Other actions or inactions may provide the basis for enforcement
action, including misleading or untimely reports filed with the OTS. Except
under certain circumstances, public disclosure of final enforcement actions by
the OTS is required.
In addition, the investment, lending and branching authority of the Bank is
prescribed by federal laws, and regulations, and it is prohibited from engaging
in any activities not permitted by such laws and regulations. For example, no
savings institution may invest in non-investment grade corporate debt
securities. In addition, the permissible level of investment by federal
associations in loans secured by non-residential real property may not exceed
400% of total capital, except with approval of the OTS. Federal savings
associations are also generally authorized to branch nationwide. The Bank is in
compliance with the noted restrictions. Following the Bank Conversion, the
National Bank will be able to branch throughout the State of Missouri; however,
its interstate branching authority will be restricted. See "Regulation of
Holding Company following Bank Conversion--Interstate Banking and Branching."
OTS regulations limit a thrift institution's loans to one borrower to the
greater of $500,000 or 15% of unimpaired capital and surplus (except for loans
fully secured by certain readily marketable collateral, in which case this limit
is increased to 25% of unimpaired capital and surplus). At June 30, 1996, the
Bank's lending limit under this restriction was approximately $500,000.
Assuming the sale of the minimum number of shares in the Stock Conversion at
June 30, 1996, that limit would be increased to approximately $1.0 million. The
Bank is in compliance with the loans-to-one borrower limitation. These
percentage limitations will continue to apply to the National Bank following
completion of the Bank Conversion.
The OTS, as well as the other federal banking agencies, has adopted
guidelines establishing safety and soundness standards on such matters as loan
underwriting and documentation, internal controls and audit systems, interest
rate risk exposure and compensation and other employee benefits. Any
institution which fails to comply with these standards must submit a capital
compliance plan. A failure to submit a plan or to comply with an approved plan
will subject the institution to further enforcement action. The OTS and the
other federal banking agencies have also proposed additional guidelines on asset
quality and earnings standards. No assurance can be given as to whether or in
what form the proposed regulations will be adopted. The guidelines are not
expected to materially effect the Bank. Following the completion of the Bank
Conversion, the National Bank will be subject to substantially similar
guidelines adopted by the OCC.
INSURANCE OF ACCOUNTS AND REGULATION BY THE FDIC
Investors Federal is a member of the SAIF, which is administered by the
FDIC. Deposits are insured up to applicable limits by the FDIC and such
insurance is backed by the full faith and credit of the U.S. Government. As
insurer, the FDIC imposes deposit insurance premiums and is authorized to
conduct examinations of and to require reporting by FDIC-insured institutions.
It also may prohibit any FDIC-insured institution from engaging in any activity
the FDIC determines by regulation or order to pose a serious risk to the FDIC.
The FDIC also has the authority to initiate enforcement actions against savings
and loan associations, after giving the OTS an opportunity to take such action,
and may terminate the deposit insurance if it determines that the institution
has engaged or is engaging in unsafe or unsound practices, or is in an unsafe or
unsound condition.
The FDIC's deposit insurance premiums are assessed through a risk-based
system under which all insured depository institutions are placed into one of
nine categories and assessed insurance premiums, ranging from .23% to .31% of
deposits, based upon their level of capital and supervisory evaluation. Under
the system, institutions classified as well capitalized (i.e., a core capital
ratio of at least 5%, a ratio of core capital to risk-weighted assets
72
<PAGE>
of at least 6% and a risk-based capital ratio of at least 10%) and considered
healthy would pay the lowest premium while institutions that are less than
adequately capitalized (i.e., a core capital or core capital to risk-based
capital ratios of less than 4% or a risk-based capital ratio of less than 8%)
and considered of substantial supervisory concern would pay the highest premium.
Risk classification of all insured institutions will be made by the FDIC for
each semi-annual assessment period.
The FDIC is authorized to increase assessment rates, on a semiannual basis,
if it determines that the reserve ratio of the SAIF will be less than the
designated reserve ratio of 1.25% of SAIF insured deposits. In setting these
increased assessments, the FDIC must seek to restore the reserve ratio to that
designated reserve level, or such higher reserve ratio as established by the
FDIC. The FDIC may also impose special assessments on SAIF members to repay
amounts borrowed from the United States Treasury or for any other reason deemed
necessary by the FDIC.
In September 1996, Congress enacted legislation to recapitalize the SAIF by
a one-time assessment on all SAIF-insured deposits held as of March 31, 1995.
The assessment will be 65.7 basis points per $100 in deposits, payable on
November 30, 1996. For the Bank, the assessment is expected to be $229,000 (or
$147,000 when adjusted for taxes), based on the Bank's deposits on March 31,
1995 of $34.9 million. In addition, beginning January 1, 1997, pursuant to the
legislation, interest payments on bonds ("FICO Bonds") issued in the late 1980's
by the Financing Corporation to recapitalize the now defunct Federal Savings and
Loan Insurance Corporation will be paid jointly by BIF-insured institutions and
SAIF-insured institutions. The FICO assessment will be 1.29 basis points per
$100 in BIF deposits and 6.44 basis points per $100 in SAIF deposits. Beginning
January 1, 2000, the FICO interest payments will be paid pro-rata by banks and
thrifts based on deposits (approximately 2.4 basis points per $100 in deposits).
The BIF and SAIF will be merged on January 1, 1999, provided the bank and saving
association charters are merged by that date. In that event, pro-rata FICO
sharing will begin on January 1, 1999.
While the legislation has reduced the disparity between premiums paid on
BIF deposits and SAIF deposits, and has relieved the thrift industry of a
portion of the contingent liability represented by the FICO bonds, the premium
disparity between SAIF-insured institutions, such as the Bank, and BIF-insured
institutions will continue until at least January 1, 1999. Under the
legislation, the Bank anticipates that its ongoing annual SAIF premiums will be
approximately $23,000.
The National Bank will be insured by the SAIF following completion of the
Bank Conversion. To the extent it becomes available, the Bank may consider
paying an exit fee to the SAIF and an entrance fee to the BIF in order to
convert its insured deposits to the BIF. No prediction can be made at this time
as to whether this option, currently prohibited, may become available.
REGULATORY CAPITAL REQUIREMENTS
FEDERAL SAVINGS ASSOCIATIONS. Federally insured savings associations, such
as the Bank, are required to maintain a minimum level of regulatory capital.
The OTS has established capital standards, including a tangible capital
requirement, a leverage ratio (or core capital) requirement and a risk-based
capital requirement applicable to such savings and loan associations.
Generally, these capital requirements must be generally as stringent as the
comparable capital requirements for national banks. The OTS is also authorized
to impose capital requirements in excess of these standards on individual
associations on a case-by-case basis.
The capital regulations require tangible capital of at least 1.5% of
adjusted total assets (as defined by regulation). Tangible capital generally
includes common stockholders' equity and retained income, and certain
noncumulative perpetual preferred stock and related income. In addition, all
intangible assets, other than a limited amount of purchased mortgage servicing
rights, must be deducted from tangible capital for calculating compliance with
the requirement. Further, the valuation allowance applicable to the write-down
of investments and mortgage-backed securities in accordance with SFAS No. 115 is
excluded from the regulatory capital calculation. At June 30, 1996, the Bank
had no intangible assets and a valuation allowance, net of tax under SFAS No.
115 of $71,000.
The OTS regulations establish special capitalization requirements for
savings associations that own subsidiaries. In determining compliance with the
capital requirements, all subsidiaries engaged solely in activities
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<PAGE>
permissible for national banks or engaged in certain other activities solely as
agent for its customers are "includable" subsidiaries that are consolidated for
capital purposes in proportion to the Bank's level of ownership. For excludable
subsidiaries the debt and equity investments in such subsidiaries are deducted
from assets and capital. The Bank has one service corporation subsidiary.
At June 30, 1996, the Bank had tangible capital of $3.3 million, or 6.34%
of adjusted total assets, which is approximately $2.5 million above the minimum
requirement of 1.5% of adjusted total assets in effect on that date. On a pro
forma basis, after giving effect to the sale of the minimum, midpoint and
maximum number of shares of Common Stock offered in the Stock Conversion and
investment of the net proceeds in assets not excluded for tangible capital
purposes, the Bank would have had tangible capital equal to 8.49%, 8.90% and
9.32%, respectively, of adjusted total assets at June 30, 1996, which is $3.8
million, $4.0 million and $4.3 million, respectively, above the requirement.
The capital standards also require core capital equal to at least 3% of
adjusted total assets (as defined by regulation). Core capital generally
consists of tangible capital plus certain intangible assets, including
supervisory goodwill (which is phased-out over a five-year period) and a limited
amount of purchased credit card relationships and purchased mortgage servicing
rights. As a result of the prompt corrective action provisions of the Federal
Deposit Insurance Corporation Improvement Act of 1991 ("FDICIA") discussed
below, however, a savings association must maintain a core capital ratio of at
least 4% to be considered adequately capitalized unless its supervisory
condition is such to allow it to maintain a 3% ratio. At June 30, 1996, the
Bank had no intangibles that were subject to these tests.
At June 30, 1996, the Bank had core capital equal to $3.3 million, or 6.34%
of adjusted total assets, which is $1.8 million above the minimum leverage ratio
requirement of 3% as in effect on that date. On a pro forma basis, after giving
effect to the sale of the minimum, midpoint and maximum number of shares of
Common Stock offered in the Stock Conversion and investment of the net proceeds
in assets not excluded from core capital, the Bank would have had core capital
equal to 8.49%, 8.90% and 9.32%, respectively, of adjusted total assets at June
30, 1996, which is $3.0 million, $3.2 million and $3.5 million, respectively,
above the requirement.
The OTS risk-based requirement requires savings associations to have total
capital of at least 8% of risk-weighted assets. Total capital consists of core
capital, as defined above, and supplementary capital. Supplementary capital
consists of certain permanent and maturing capital instruments that do not
qualify as core capital and general valuation loan and lease loss allowances up
to a maximum of 1.25% of risk-weighted assets. Supplementary capital may be
used to satisfy the risk-based requirement only to the extent of core capital.
At June 30, 1996, the Bank had $283,000 of general loan valuation allowances,
which was more than 1.25% of risk-weighted assets.
Certain exclusions from capital and assets are required to be made for the
purpose of calculating total capital. Such exclusions consist of equity
investments (as defined by regulation) and that portion of land loans and
nonresidential construction loans in excess of an 80% loan-to-value ratio (these
items are excluded on a sliding scale through March 31, 1995, after which they
must be excluded in their entirety) and reciprocal holdings of qualifying
capital instruments. Investors Federal had no such exclusions from capital and
assets at June 30, 1996.
In determining the amount of risk-weighted assets, all assets, including
certain off-balance sheet items, will be multiplied by a risk weight, ranging
from 0% to 100%, based on the risk inherent in the type of asset. For example,
the OTS has assigned a risk weight of 50% for prudently underwritten permanent
one- to four-family first lien mortgage loans not more than 90 days delinquent
and having a loan to value ratio of not more than 80% at origination unless the
loan amount in excess of such ratio is insured by an insurer approved by the
Federal National Mortgage Association ("FNMA") or FHLMC.
On June 30, 1996, the Bank had total capital of $3.3 million (including
approximately $3.3 million in core capital, $324,000 in qualifying supplementary
capital and not reduced by any exclusions from capital) and risk-weighted assets
of $20.8 million (with no converted off-balance sheet assets); or total capital
of 17.3% of risk-weighted assets. This amount was $1.9 million above the 8%
requirement in effect on that date. On a pro forma basis, after giving effect
to the sale of the minimum, midpoint and maximum number of shares of Common
Stock offered in the Stock Conversion, the infusion to the Bank of 50% of the
net Stock Conversion proceeds and the
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<PAGE>
investment of those proceeds in 20% risk-weighted government securities, the
Bank would have had total capital of 23.06%, 24.18% and 25.32%, respectively, of
risk-weighted assets, which is above the current 8% requirement by $3.2 million,
$3.4 million and $3.7 million, respectively.
The OTS has adopted a final rule that requires every savings association
with more than normal interest rate risk exposure to deduct from its total
capital, for purposes of determining compliance with such requirement, an amount
equal to 50% of its interest-rate risk exposure multiplied by the present value
of its assets. This exposure is a measure of the potential decline in the net
portfolio value of a savings association, greater than 2% of the present value
of its assets, based upon a hypothetical 200 basis point increase or decrease in
interest rates (whichever results in a greater decline). Net portfolio value is
the present value of expected cash flows from assets, liabilities and off-
balance sheet contracts. The rule provides for a two quarter lag between
calculating interest rate risk and recognizing any deduction from capital. The
rule will not become effective until the OTS adopts the process by which savings
associations may appeal an interest rate risk deduction determination. Any
savings association with less than $300 million in assets and a total risk-based
capital ratio in excess of 12% is exempt from this requirement unless the OTS
determines otherwise. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations - Asset/Liability Management" for
information regarding the effect of this rule on the Bank.
Pursuant to FDICIA, the federal banking agencies, including the OTS, have
also proposed regulations authorizing the agencies to require a depository
institution to maintain additional total capital to account for concentration of
credit risk and the risk of non-traditional activities. No assurance can be
given as to the final form of any such regulation.
The OTS and the FDIC are authorized and, under certain circumstances
required, to take certain actions against savings associations that fail to meet
their capital requirements. Effective December 19, 1992, the federal banking
agencies, including the OTS, were given additional enforcement authority over
undercapitalized depository institutions. The OTS is generally required to take
action to restrict the activities of an "undercapitalized association"
(generally defined to be one with less than either a 4% core capital ratio, a 4%
Tier 1 risked-based capital ratio or an 8% risk-based capital ratio). Any such
association must submit a capital restoration plan and until such plan is
approved by the OTS may not increase its assets, acquire another institution,
establish a branch or engage in any new activities, and generally may not make
capital distributions. The OTS is authorized to impose the additional
restrictions that are applicable to significantly undercapitalized associations.
As a condition to the approval of the capital restoration plan, any
company controlling an undercapitalized association must agree that it will
enter into a limited capital maintenance guarantee with respect to the
institution's achievement of its capital requirements.
Any savings association that fails to comply with its capital plan or is
"significantly undercapitalized" (i.e., Tier 1 risk-based or core capital ratios
of less than 3% or a risk-based capital ratio of less than 6%) must be made
subject to one or more of additional specified actions and operating
restrictions, which may cover all aspects of its operations and include a forced
merger or acquisition of the Bank. An association that becomes "critically
undercapitalized" (i.e., a tangible capital ratio of 2% or less) is subject to
further mandatory restrictions on its activities in addition to those applicable
to significantly undercapitalized associations. In addition, the OTS must
appoint a receiver (or conservator with the concurrence of the FDIC) for a
savings association, with certain limited exceptions, within 90 days after it
becomes critically undercapitalized.
Any undercapitalized association is also subject to the general enforcement
activity of the OTS and the FDIC, including the appointment of a receiver or
conservator.
The OTS is also generally authorized to reclassify an association into a
lower capital category and impose restrictions applicable to such category if
the institution is engaged in unsafe or unsound practices or is in an unsafe or
unsound condition.
The imposition by the OTS or the FDIC of any of these measures on Investors
Federal may have a substantial adverse effect on the Bank's operations and
profitability and the value of the Common Stock purchased in the Stock
Conversion. Holding Company shareholders do not have preemptive rights and,
therefore, if the
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Holding Company is directed by the OTS or the FDIC to issue additional shares of
Common Stock, such issuance may result in the dilution in the percentage of
ownership of the Holding Company of those persons purchasing shares in the
Conversion.
NATIONAL BANKS. Upon consummation of the Bank Conversion, the National
Bank will no longer be subject to OTS capital regulations, but will be subject
to the capital regulations of the OCC. The OCC's regulations establish two
capital standards for national banks: a leverage requirement and a risk-based
capital requirement. In addition, the OCC may, on a case-by-case basis,
establish individual minimum capital requirements for a national bank that vary
from the requirements which would otherwise apply under OCC regulations. A
national bank that fails to satisfy the capital requirements established under
the OCC's regulations will be subject to such administrative action or sanctions
as the OCC deems appropriate.
The leverage ratio adopted by the OCC requires a minimum ratio of "Tier 1
capital" to adjusted total assets of 3% for national banks rated composite 1
under the CAMEL rating system for banks. National banks not rated composite 1
under the CAMEL rating system for banks are required to maintain a minimum ratio
of Tier 1 capital to adjusted total assets of 4% to 5%, depending upon the level
and nature of risks of their operations. For purposes of the OCC's leverage
requirement, Tier 1 capital generally consists of the same components as core
capital under the OTS's capital regulations, except that no intangibles except
certain PMSRs and PCCRs may be included in capital.
The risk-based capital requirements established by the OCC's regulations
require national banks to maintain "total capital" equal to at least 8% of total
risk-weighted assets. For purposes of the risk-based capital requirement, "total
capital" means Tier 1 capital (as described above) plus "Tier 2 capital" (as
described below), provided that the amount of Tier 2 capital may not exceed the
amount of Tier 1 capital, less certain assets. The components of Tier 2 capital
under the OCC's regulations generally correspond to the components of
supplementary capital under OTS regulations. Total risk-weighted assets
generally are determined under the OCC's regulations in the same manner as under
the OTS's regulations.
The OCC has revised its risk-based capital requirements to permit the OCC
to require higher levels of capital for an institution in light of its interest
rate risk. In addition, the OCC has proposed that a bank's interest rate risk
exposure would be quantified using either the measurement system set forth in
the proposal or the institution's internal model for measuring such exposure, if
such model is determined to be adequate by the institution's examiner. Small
institutions that are highly capitalized and have minimal interest rate risk,
such as the Bank, would be exempt from the rule unless otherwise determined by
the OCC. Management of the Bank has not determined what effect, if any, the
OCC's proposed interest rate risk component would have on the National Bank's
capital if adopted as proposed.
BANK HOLDING COMPANIES. The Federal Reserve Board has established capital
requirements for bank holding companies with consolidated assets of $150 million
or more that generally parallel the capital requirements for national banks
under the OCC's regulations. Since the Holding Company's consolidated assets are
expected to be less than $150 million, the Federal Reserve Board's holding
company capital requirements are not expected to apply to the Holding Company.
LIMITATIONS ON DIVIDENDS AND OTHER CAPITAL DISTRIBUTIONS
FEDERAL SAVINGS ASSOCIATIONS. OTS regulations impose various restrictions
or requirements on associations with respect to their ability to pay dividends
or make other distributions of capital. OTS regulations prohibit an association
from declaring or paying any dividends or from repurchasing any of its stock if,
as a result, the regulatory capital of the association would be reduced below
the amount required to be maintained for the liquidation account established in
connection with its mutual-to-stock conversion. See "The Conversion - Effects
of Conversion to Stock Form on Depositors and Borrowers of the Bank" and "-
Restrictions on Repurchase of Stock."
The OTS utilizes a three-tiered approach to permit associations, based on
their capital level and supervisory condition, to make capital distributions
which include dividends, stock redemptions or repurchases, cash-out mergers and
other transactions charged to the capital account. See "- Regulatory Capital
Requirements."
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Generally, Tier 1 associations, which are associations that before and
after the proposed distribution meet their fully phased-in capital requirements,
may make capital distributions during any calendar year equal to the greater of
100% of net income for the year-to-date plus 50% of the amount by which the
lesser of the association's tangible, core or risk-based capital exceeds its
fully phased-in capital requirement for such capital component, as measured at
the beginning of the calendar year, or the amount authorized for a Tier 2
association. However, a Tier 1 association deemed to be in need of more than
normal supervision by the OTS may be downgraded to a Tier 2 or Tier 3
association as a result of such a determination. The Bank meets the
requirements for a Tier 1 association and has not been notified of a need for
more than normal supervision. Tier 2 associations, which are associations that
before and after the proposed distribution meet their current minimum capital
requirements, may make capital distributions of up to 75% of net income over the
most recent four quarter period.
Tier 3 associations (which are associations that do not meet current
minimum capital requirements) that propose to make any capital distribution and
Tier 2 associations that propose to make a capital distribution in excess of the
noted safe harbor level must obtain OTS approval prior to making such
distribution. Tier 2 associations proposing to make a capital distribution
within the safe harbor provisions and Tier 1 associations proposing to make any
capital distribution need only submit written notice to the OTS 30 days prior to
such distribution. As a subsidiary of the Holding Company, the Bank will also
be required to give the OTS 30 days' notice prior to declaring any dividend on
its stock. The OTS may object to the distribution during that 30-day period
based on safety and soundness concerns. See "- Regulatory Capital
Requirements."
The OTS has proposed regulations that would revise the current capital
distribution restrictions. The proposal eliminates the current tiered structure
and the safe-harbor percentage limitations. Under the proposal a savings
association may make a capital distribution without notice to the OTS (unless it
is a subsidiary of a holding company) provided that it has a CAMEL 1 or 2
rating, is not in troubled condition and would remain adequately capitalized (as
defined by regulation) following the proposed distribution. Savings associations
that would remain adequately capitalized following the proposed distribution but
do not meet the other noted requirements must notify the OTS 30 days prior to
declaring a capital distribution. The OTS stated it will generally regard as
permissible that amount of capital distributions that do not exceed 50% of the
institution's excess regulatory capital plus net income to date during the
calendar year. A savings association may not make a capital distribution
without prior approval of the OTS and the FDIC if it is undercapitalized before,
or as a result of, such a distribution. A savings association will be
considered in troubled condition if it has a CAMEL rating of 4 or 5, is subject
to an enforcement action relating to its safety and soundness or financial
viability or has been informed in writing by the OTS that it is in troubled
condition. As under the current rule, the OTS may object to a capital
distribution if it would constitute an unsafe or unsound practice. No assurance
may be given as to whether or in what form the regulations may be adopted.
NATIONAL BANKS. Following the Bank Conversion, the National Bank's ability
to pay dividends will not be subject to the limitations in the OTS regulations
but will instead be governed by the National Bank Act and OCC regulations. Under
such statute and regulations, all dividends by a national bank must be paid out
of current or retained net profits, after deducting reserves for losses and bad
debts. The National Bank Act further restricts the payment of dividends out of
net profits by prohibiting a national bank from declaring a dividend on its
shares of common stock until the surplus fund equals the amount of capital stock
or, if the surplus fund does not equal the amount of capital stock, until one-
tenth of the Bank's net profits for the preceding half year in the case of
quarterly or semi-annual dividends, or the preceding two half-year periods in
the case of annual dividends, are transferred to the surplus fund. In addition,
the prior approval of the OCC is required for the payment of a dividend if the
total of all dividends declared by a national bank in any calendar year would
exceed the total of its net profits for the year combined with its net profits
for the two preceding years, less any required transfers to surplus or a fund
for the retirement of any preferred stock.
The OCC has the authority to prohibit the payment of dividends by a
national bank when it determines such payment to be an unsafe and unsound
banking practice. In addition, the National Bank would be prohibited by federal
statute and the OCC's prompt corrective action regulations from making any
capital distribution if, after giving effect to the distribution, the National
Bank would be classified as "undercapitalized" under the OCC's regulations. See
"--Prompt Corrective Action." Finally, the National Bank, like the Converted
Bank, would not
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be able to pay dividends on its capital stock if its capital would thereby be
reduced below the remaining balance of the liquidation account established in
connection with the Stock Conversion.
LIQUIDITY
All savings associations, including the Bank, are required to maintain an
average daily balance of liquid assets equal to a certain percentage of the sum
of its average daily balance of net withdrawable deposit accounts and borrowings
payable in one year or less. For a discussion of what the Bank includes in
liquid assets, see "Management's Discussion and Analysis of Financial Condition
and Results of Operations - Liquidity and Capital Resources." This liquid asset
ratio requirement may vary from time to time (between 4% and 10%) depending upon
economic conditions and savings flows of all savings associations. At the
present time, the minimum liquid asset ratio is 5%.
In addition, short-term liquid assets (e.g., cash, certain time deposits,
certain bankers acceptances and short-term U.S. Treasury obligations) currently
must constitute at least 1% of the Bank's average daily balance of net
withdrawable deposit accounts and current borrowings. Penalties may be imposed
upon associations for violations of either liquid assets ratio requirement. At
June 30, 1996, the Bank was in compliance with both requirements, with a liquid
assets ratio of 10.5% and a short-term liquid assets ratio of 4.3%.
National banks are not subject to any prescribed liquidity requirements.
ACCOUNTING
An OTS policy statement applicable to all savings associations clarifies
and re-emphasizes that the investment activities of a savings association must
be in compliance with approved and documented investment policies and
strategies, and must be accounted for in accordance with generally accepted
accounting principles. Under the policy statement, management must support its
classification of and accounting for loans and securities (i.e., whether held
for investment, sale or trading) with appropriate documentation.
The OTS has adopted an amendment to its accounting regulations, which may
be made more stringent than generally accepted accounting principles by the OTS,
to require that transactions be reported in a manner that best reflects their
underlying economic substance and inherent risk and that financial reports must
incorporate any other accounting regulations or orders prescribed by the OTS.
The Bank is in compliance with these amended rules.
The National Bank will be subject to similar requirements following
completion of the Bank Conversion.
QUALIFIED THRIFT LENDER TEST
All savings associations, including the Bank, are required to meet a
qualified thrift lender ("QTL") test to avoid certain restrictions on their
operations. This test requires a savings association to have at least 65% of
its portfolio assets (as defined by regulation) in qualified thrift investments
on a monthly average for nine out of every 12 months on a rolling basis. Such
assets primarily consist of residential housing related loans and investments.
At June 30, 1996, the Bank met the test and has always met the test since its
effectiveness.
Any savings association that fails to meet the QTL test must convert to a
national bank charter, unless it requalifies as a QTL and thereafter remains a
QTL. If an association does not requalify and converts to a national bank
charter, it must remain SAIF-insured until the FDIC permits it to transfer to
the BIF. If such an association has not yet requalified or converted to a
national bank, its new investments and activities are limited to those
permissible for both a savings association and a national bank, and it is
limited to national bank branching rights in its home state. In addition, the
savings association is immediately ineligible to receive any new FHLB borrowings
and is subject to national bank limits for payment of dividends. If such
association has not requalified or converted to a national bank within three
years after the failure, it must divest of all investments and cease all
activities not permissible for a national bank. In addition, it must repay
promptly any outstanding FHLB borrowings, which may result in prepayment
penalties. If any association that fails the QTL test is controlled by
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a holding company, then within one year after the failure, the holding company
must register as a bank holding company and become subject to all restrictions
on bank holding companies. See "- Holding Company Regulation."
The QTL requirements and the penalties imposed for the failure to comply
will not be applicable to the National Bank.
COMMUNITY REINVESTMENT ACT
Under the Community Reinvestment Act ("CRA"), every FDIC insured
institution, including the Bank and the National Bank, has a continuing and
affirmative obligation consistent with safe and sound banking practices to help
meet the credit needs of its entire community, including low and moderate income
neighborhoods. The CRA does not establish specific lending requirements or
programs for financial institutions nor does it limit an institution's
discretion to develop the types of products and services that it believes are
best suited to its particular community, consistent with the CRA. The CRA
requires the OTS, in connection with the examination of the Bank, to assess the
institution's record of meeting the credit needs of its community and to take
such record into account in its evaluation of certain applications, such as a
merger or the establishment of a branch, by the Bank. An unsatisfactory rating
may be used as the basis for the denial of an application by the OTS.
The federal banking agencies, including the OTS, have recently revised the
CRA regulations and the methodology for determining an institution's compliance
with the CRA. Due to the heightened attention being given to the CRA in the
past few years, the Bank may be required to devote additional funds for
investment and lending in its local community. The Bank was examined for CRA
compliance in 1996 and received a rating of "satisfactory record of meeting
community credit needs." Following completion of the Bank Conversion, the
National Bank's compliance with the CRA will be enforced by the OCC.
TRANSACTIONS WITH AFFILIATES
Generally, transactions between a savings association or its subsidiaries
and its affiliates are required to be on terms as favorable to the association
as transactions with non-affiliates. In addition, certain of these
transactions, such as loans to an affiliate, are restricted to a percentage of
the association's capital. Affiliates of the Bank include the Holding Company
and any company which is under common control with the Bank. In addition, a
savings association may not lend to any affiliate engaged in activities not
permissible for a bank holding company or acquire the securities of most
affiliates.
Certain transactions with directors, officers or controlling persons are
also subject to conflict of interest regulations enforced by the OTS. These
conflict of interest regulations and other statutes also impose restrictions on
loans to such persons and their related interests. Among other things, such
loans must be made on terms substantially the same as for loans to unaffiliated
individuals. Following completion of the Bank Conversion, the National Bank will
be subject to substantially identical rules on transactions with affiliates and
loans to directors, officers or controlling persons.
HOLDING COMPANY REGULATION
The Holding Company will be a unitary savings and loan holding company
subject to regulatory oversight by the OTS. As such, the Holding Company is
required to register and file reports with the OTS and is subject to regulation
and examination by the OTS. In addition, the OTS has enforcement authority over
the Holding Company and its non-savings association subsidiaries which also
permits the OTS to restrict or prohibit activities that are determined to be a
serious risk to the subsidiary savings association.
As a unitary savings and loan holding company, the Holding Company
generally is not subject to activity restrictions. If the Holding Company
acquires control of another savings association as a separate subsidiary, it
would become a multiple savings holding company, and the activities of the
Holding Company and any of its subsidiaries (other than the Bank or any other
SAIF-insured savings and loan association) would become subject to such
restrictions unless such other associations each qualify as a QTL and were
acquired in a supervisory acquisition.
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If the Bank fails the QTL test, the Holding Company must obtain the
approval of the OTS prior to continuing after such failure, directly or through
its other subsidiaries, any business activity other than those approved for
multiple savings and loan holding companies or their subsidiaries. In addition,
within one year of such failure the Holding Company must register as, and will
become subject to, the restrictions applicable to bank holding companies. The
activities authorized for a bank holding company are more limited than are the
activities authorized for a unitary or multiple savings and loan holding
company. See "- Qualified Thrift Lender Test."
The Holding Company must obtain approval from the OTS before acquiring
control of any other SAIF-insured association. Such acquisitions are generally
prohibited if they result in a multiple savings and loan holding company
controlling savings and loan associations in more than one state. However, such
interstate acquisitions are permitted based on specific state authorization or
in a supervisory acquisition of a failing savings and loan association.
REGULATION OF THE HOLDING COMPANY FOLLOWING THE BANK CONVERSION
GENERAL. Upon consummation of the Bank Conversion, the Holding Company, as
the sole shareholder of the National Bank, will become a bank holding company
and will register as such with the FRB and deregister with the OTS as a savings
and loan holding company. Bank holding companies are subject to comprehensive
regulation by the FRB under the BHCA, and the regulations of the FRB. As a bank
holding company, the Holding Company will be required to file reports with the
FRB and such additional information as the FRB may require, and will be subject
to regular examinations by the FRB. The FRB also has extensive enforcement
authority over bank holding companies, including, among other things, the
ability to assess civil money penalties, to issue cease and desist or removal
orders and to require that a holding company divest subsidiaries (including its
bank subsidiaries). In general, enforcement actions may be initiated for
violations of law and regulations and unsafe or unsound practices.
Under FRB policy, a bank holding company must serve as a source of strength
for its subsidiary banks. Under this policy the FRB may require, and has
required in the past, a holding company to contribute additional capital to an
undercapitalized subsidiary bank.
Under the BHCA, a bank holding company must obtain FRB approval before:
(i) acquiring, directly or indirectly, ownership or control of any voting shares
of another bank or bank holding company if, after such acquisition, it would own
or control more than 5% of such shares (unless it already owns or controls the
majority of such shares); (ii) acquiring all or substantially all of the assets
of another bank or bank holding company; or (iii) merging or consolidating with
another bank holding company.
The BHCA also prohibits a bank holding company, with certain exceptions,
from acquiring direct or indirect ownership or control of more than 5% of the
voting shares of any company which is not a bank or bank holding company, or
from engaging directly or indirectly in activities other than those of banking,
managing or controlling banks, or providing services for its subsidiaries. The
principal exceptions to these prohibitions involve certain non-bank activities
which, by statute or by FRB regulation or order, have been identified as
activities closely related to the business of banking or managing or controlling
banks. The list of activities permitted by the FRB includes, among other things,
operating a savings institution, mortgage company, finance company, credit card
company or factoring company; performing certain data processing operations;
providing certain investment and financial advice; underwriting and acting as an
insurance agent for certain types of credit-related insurance; leasing property
on a full-payout, non-operating basis; selling money orders, travelers' checks
and United States Savings Bonds; real estate and personal property appraising;
providing tax planning and preparation services; and, subject to certain
limitations, providing securities brokerage services for customers. The Holding
Company has no present plans to engage in any of these activities.
INTERSTATE BANKING AND BRANCHING. On September 29, 1994, the Riegle-Neal
Interstate Banking and Branching Act of 1994 (the "Act") was enacted to ease
restrictions on interstate banking. The Act allows the FRB to approve an
application of an adequately capitalized and adequately managed bank holding
company to acquire control of, or acquire all or substantially all of the assets
of, a bank located in a state other than such holding company's home state,
without regard to whether the transaction is prohibited by the laws of any
state. The FRB may not approve the acquisition of the bank that has not been in
existence for the minimum time period (not
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exceeding five years) specified by the statutory law of the host state. The Act
also prohibits the FRB from approving an application if the applicant (and its
depository institution affiliates) controls or would control more than 10% of
the insured deposits in the United States or 30% or more of the deposits in the
target bank's home state or in any state in which the target bank maintains a
branch. The Act does not affect the authority of states to limit the percentage
of total insured deposits in the state which may be held or controlled by a bank
or bank holding company to the extent such limitation does not discriminate
against out-of-state banks or bank holding companies. Individual states may also
waive the 30% state-wide concentration limit contained in the Act.
Additionally, beginning on June 1, 1997, the federal banking agencies
will be authorized to approve interstate merger transactions without regard to
whether such transaction is prohibited by the law of any state, unless the home
state of one of the banks opts out of the Act by adopting a law after the date
of enactment of the Act and prior to June 1, 1997 which applies equally to all
out-of-state banks and expressly prohibits merger transactions involving out-of-
state banks. Interstate acquisitions of branches will be permitted only if the
law of the state in which the branch is located permits such acquisitions.
Interstate mergers and branch acquisitions will also be subject to the
nationwide and statewide insured deposit concentration amounts described above.
The Act authorizes the OCC and FDIC to approve interstate branching de
novo by national and state banks, respectively, only in states which
specifically allow for such branching. The Act also requires the appropriate
federal banking agencies to prescribe regulations by June 1, 1997 which prohibit
any out-of-state bank from using the interstate branching authority primarily
for the purpose of deposit production. These regulations must include guidelines
to ensure that interstate branches operated by an out-of-state bank in a host
state are reasonably helping to meet the credit needs of the communities which
they serve.
DIVIDENDS. The FRB has issued a policy statement on the payment of
cash dividends by bank holding companies, which expresses the FRB's view that a
bank holding company should pay cash dividends only to the extent that the
holding company's net income for the past year is sufficient to cover both the
cash dividends and a rate of earning retention that is consistent with the
holding company's capital needs, asset quality and overall financial condition.
The FRB also indicated that it would be inappropriate for a company experiencing
serious financial problems to borrow funds to pay dividends. Furthermore, under
the prompt corrective action regulations adopted by the FRB, the FRB may
prohibit a bank holding company from paying any dividends if the holding
company's bank subsidiary is classified as "undercapitalized". See "--Regulatory
Capital Requirements--Prompt Corrective Action."
Bank holding companies are required to give the FRB prior written
notice of any purchase or redemption of its outstanding equity securities if the
gross consideration for the purchase or redemption, when combined with the net
consideration paid for all such purchases or redemptions during the preceding 12
months, is equal to 10% or more of their consolidated net worth. The FRB may
disapprove such a purchase or redemption if it determines that the proposal
would constitute an unsafe or unsound practice or would violate any law,
regulation, FRB order, or any condition imposed by, or written agreement with,
the FRB. This notification requirement does not apply to any company that meets
the well-capitalized standard for commercial banks, has a safety and soundness
examination rating of at least a "2" and is not subject to any unresolved
supervisory issues.
CAPITAL REQUIREMENTS. The FRB has established capital requirements for
bank holding companies that generally parallel the capital requirements for
national banks. For bank holding companies with consolidated assets of less than
$150 million, such as the Holding Company, compliance is measured on a bank-only
basis. See "--Regulatory Capital Requirements--National Banks." The Holding
Company's capital following the Conversion will exceed such requirements and be
at the same levels as that of the National Bank.
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FEDERAL SECURITIES LAW
The stock of the Holding Company will be registered with the
Securities and Exchange Commission ("SEC") under the Securities Exchange Act of
1934, as amended (the "Exchange Act"). The Holding Company will be subject to
the information, proxy solicitation, insider trading restrictions and other
requirements of the SEC under the Exchange Act.
Holding Company stock held by persons who are affiliates (generally
officers, directors and principal stockholders) of the Holding Company may not
be resold without registration or unless sold in accordance with certain resale
restrictions. If the Holding Company meets specified current public information
requirements, each affiliate of the Holding Company is able to sell in the
public market, without registration, a limited number of shares in any three-
month period.
FEDERAL RESERVE SYSTEM
The Federal Reserve Board requires all depository institutions to
maintain noninterest-bearing reserves at specified levels against their
transaction accounts (primarily checking, NOW and Super NOW checking accounts).
At June 30, 1996, the Bank was in compliance with these reserve requirements.
The balances maintained to meet the reserve requirements imposed by the Federal
Reserve Board may be used to satisfy liquidity requirements that may be imposed
by the OTS. See "- Liquidity."
Savings associations are authorized to borrow from the Federal Reserve
Bank "discount window," but Federal Reserve Board regulations require
associations to exhaust other reasonable alternative sources of funds, including
FHLB borrowings, before borrowing from the Federal Reserve Bank.
As a national bank, the National Bank will be required to become a
member of the Federal Reserve System and subscribe for stock in the FRB of
Kansas City in an amount equal to 3% of the National Bank's paid in capital and
surplus (an additional 3% will be subject to call by the FRB of Kansas City).
The National Bank will continue to be subject to the reserve requirements to
which the Bank is presently subject under FRB regulations.
FEDERAL HOME LOAN BANK SYSTEM
The Bank is a member of the FHLB of Des Moines, which is one of 12
regional FHLBs, that administers the home financing credit function of savings
associations. Each FHLB serves as a reserve or central bank for its members
within its assigned region. It is funded primarily from proceeds derived from
the sale of consolidated obligations of the FHLB System. It makes loans to
members (i.e., advances) in accordance with policies and procedures established
by the board of directors of the FHLB. These policies and procedures are subject
to the regulation and oversight of the Federal Housing Finance Board. All
advances from the FHLB are required to be fully secured by sufficient collateral
as determined by the FHLB. In addition, all long-term advances are required to
provide funds for residential home financing.
As a member, the Bank is required to purchase and maintain stock in
the FHLB of Des Moines. At June 30, 1996, the Bank had $724,000 (at cost) of
FHLB stock, which was in compliance with this requirement. In past years, the
Bank has received substantial dividends on its FHLB stock. Over the past five
fiscal years such dividends have averaged 7.99% and were 6.91% for fiscal 1996.
For the fiscal year ended June 30, 1996, dividends paid by the FHLB of Des
Moines to the Bank totaled approximately $39,000, which constitutes a $12,000
increase over the amount of dividends received in fiscal year 1995. No assurance
can be given that such dividends will continue in the future at such levels. The
Bank currently intends to remain a member of the FHLB of Des Moines following
completion of the Bank Conversion.
Under federal law, the FHLBs are required to provide funds for the
resolution of troubled savings associations and to contribute to low- and
moderately priced housing programs through direct loans or interest subsidies on
advances targeted for community investment and low- and moderate-income housing
projects. These contributions have affected adversely the level of FHLB
dividends paid and could continue to do so in the future.
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These contributions could also have an adverse effect on the value of FHLB stock
in the future. A reduction in value of the Bank's FHLB stock may result in a
corresponding reduction in the Bank's capital.
FEDERAL AND STATE TAXATION
FEDERAL TAXATION. Savings associations such as the Bank that meet
certain definitional tests relating to the composition of assets and other
conditions prescribed by the Internal Revenue Code (the "Code") are permitted to
establish reserves for bad debts and to make annual additions thereto which may,
within specified formula limits, be taken as a deduction in computing taxable
income for federal income tax purposes. The amount of the bad debt reserve
deduction for "non-qualifying loans" is computed under the experience method.
For tax years beginning before December 31, 1995, the amount of the bad debt
reserve deduction for "qualifying real property loans" (generally loans secured
by improved real estate) may be computed under either the experience method or
the percentage of taxable income method (based on an annual election). If a
saving association elected the latter method, it could claim, each year, a
deduction based on a percentage of taxable income, without regard to actual bad
debt experience.
Under the experience method, the bad debt reserve deduction is an
amount determined under a formula based generally upon the bad debts actually
sustained by the savings and loan association over a period of years.
Under recently enacted legislation, the percentage of taxable income
method has been repealed for years beginning after December 31, 1995, and
"large" associations, i.e., the quarterly average of the association's total
assets or of the consolidated group of which it is a member, exceeds $500
million for the year, may no longer be entitled to use the experience method of
computing additions to their bad debt reserve. A "large" association must use
the direct write-off method for deducting bad debts, under which charge-offs are
deducted and recoveries are taken into taxable income as incurred. If the Bank
is not a "large" association, the Bank will continue to be permitted to use the
experience method. The Bank will be required to recapture (i.e., take into
income) over a six-year period its applicable excess reserves, i.e, the balance
of its reserves for losses on qualifying loans and nonqualifying loans, as of
the close of the last tax year beginning before January 1, 1996, over the
greater of (a) the balance of such reserves as of December 31, 1987 (pre-1988
reserves) or (b) in the case of a bank which is not a "large" association, an
amount that would have been the balance of such reserves as of the close of the
last tax year beginning before January 1, 1996, had the bank always computed the
additions to its reserves using the experience method. Postponement of the
recapture is possible for a two-year period if an association meets a minimum
level of mortgage lending for 1996 and 1997. As of June 30, 1996, the Bank's bad
debt reserve subject to recapture over a six-year period totaled approximately
$129,000.
If an association ceases to qualify as a "bank" (as defined in Code
Section 581) or converts to a credit union, the pre-1988 reserves and the
supplemental reserve are restored to income ratably over a six-year period,
beginning in the tax year the association no longer qualifies as a bank. The
balance of the pre-1988 reserves are also subject to recapture in the case of
certain excess distributions to (including distributions on liquidation and
dissolution), or redemptions of, shareholders.
In addition to the regular federal income tax, corporations, including
savings and loan associations such as the Bank, generally are subject to a
minimum tax. An alternative minimum tax is imposed at a minimum tax rate of 20%
on alternative minimum taxable income, which is the sum of a corporation's
regular taxable income (with certain adjustments) and tax preference items, less
any available exemption. The alternative minimum tax is imposed to the extent it
exceeds the corporation's regular income tax and net operating losses can offset
no more than 90% of alternative minimum taxable income. For taxable years
beginning after 1986 and before 1996, corporations, including savings and loan
associations such as the Bank, are also subject to an environmental tax equal to
0.12% of the excess of alternative minimum taxable income for the taxable year
(determined without regard to net operating losses and the deduction for the
environmental tax) over $2 million.
The Bank and its subsidiary file consolidated federal income tax
returns on a fiscal year basis using the accrual method of accounting. The
Holding Company intends to file consolidated federal income tax returns with the
Bank. Savings and loan associations, such as the Bank, that file federal income
tax returns as part of a consolidated group are required by applicable Treasury
regulations to reduce their taxable income for purposes of
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computing the percentage bad debt deduction for losses attributable to
activities of the non-savings and loan association members of the consolidated
group that are functionally related to the activities of the savings association
member.
The Bank has not been audited by the IRS recently with respect to
federal income tax returns. In the opinion of management, any examination of
still open returns would not result in a deficiency which could have a material
adverse effect on the financial condition of the Bank.
STATE TAXATION. Missouri-based thrift institutions, such as the Bank,
are subject to a special financial institutions tax, based on net income without
regard to net operating loss carryforwards, at the rate of 7% of net income.
This tax is in lieu of certain other state taxes on thrift institutions, on
their property, capital or income, except taxes on tangible personal property
owned by the Bank and held for lease or rental to others and on real estate,
contributions paid pursuant to the Unemployment Compensation Law of Missouri,
social security taxes, sales taxes and use taxes. In addition, the Bank is
entitled to credit against this tax all taxes paid to the State of Missouri or
any political subdivision, except taxes on tangible personal property owned by
the Bank and held for lease or rental to others and on real estate,
contributions paid pursuant to the Unemployment Compensation Law of Missouri,
social security taxes, sales and use taxes, and taxes imposed by the Missouri
Financial Institutions Tax Law. Missouri thrift institutions are not subject to
the regular corporate income tax.
DELAWARE TAXATION. As a Delaware holding company, the Holding Company
is exempted from Delaware corporate income tax but is required to file an annual
report with and pay an annual fee to the State of Delaware. The Holding Company
is also subject to an annual franchise tax imposed by the State of Delaware.
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS OF THE HOLDING COMPANY
The Board of Directors of the Holding Company currently consists of
six members, each of whom is also a director of the Bank. See "--Directors of
the Bank." Each Director of the Holding Company has served as such since the
Holding Company's incorporation in October 1996. Directors of the Holding
Company will serve three-year staggered terms so that approximately one-third of
the directors will be elected at each annual meeting of stockholders. The terms
of the current directors of the Holding Company are the same as their terms as
directors of the Bank. The Holding Company intends to pay directors a fee of
$_____ per annum, payable on a quarterly basis. See "-Directors of the Bank."
The executive officers of the Holding Company, each of whom held his
present position since October 1996, are elected annually and hold office until
his respective successor has been elected and qualified or until death,
resignation or removal by the Board of Directors. The executive officers of the
Holding Company are set forth below.
<TABLE>
<CAPTION>
Name Age Title
- ------------------------- --- --------------------------------------------
<S> <C> <C>
Earle S. Teegarden, Jr. 60 President, Chief Executive Officer and
Chief
Financial Officer
Larry R. Johnson 48 Senior Vice President and Secretary
</TABLE>
It is not anticipated that the executive officers of the Holding
Company will receive any remuneration in their capacity as Holding Company
executive officers. For information regarding compensation of directors and
executive officers of the Bank, see "- Meetings of the Board of Directors and
Committees of the Bank," "-Compensation of the Board of Directors of the Bank"
and "- Executive Compensation."
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COMMITTEES OF THE HOLDING COMPANY
The Holding Company formed standing Audit, Nominating and Compensation
Committees in connection with its organization in October 1996. The Holding
Company was not incorporated in fiscal 1995 and therefore the committees did not
meet during that fiscal year.
The Audit Committee will review audit reports and related matters to
ensure effective compliance with regulations and internal policies and
procedures. This committee also will act on the recommendation by management of
an accounting firm to perform the Holding Company's annual audit and acts as a
liaison between the auditors and the Board. The current members of this
committee are Directors _____, _____ and _____.
The Nominating Committee will meet annually in order to nominate
candidates for membership on the Board of Directors. This committee is
comprised of the Board members who are not up for election.
The Compensation Committee will establish the Holding Company's
compensation policies and review compensation matters. The current members of
this Committee are Directors _____, _____ and _____.
INDEMNIFICATION
The Certificate of Incorporation of the Holding Company provides that
a director or officer of the Holding Company shall be indemnified by the Holding
Company to the fullest extent authorized by the Delaware General Corporation Law
("DGCL") against all expenses, liability and loss reasonably incurred or
suffered by such person in connection with his activities as a director or
officer or as a director or officer of another company, if the director or
officer held such position at the request of the Holding Company. Delaware law
requires that such director, officer, employee or agent, in order to be
indemnified, must have acted in good faith and in a manner reasonably believed
to be not opposed to the best interests of the Holding Company and, with respect
to any criminal action or proceeding, either had reasonable cause to believe
such conduct was lawful or did not have reasonable cause to believe his conduct
was unlawful.
The Certificate of Incorporation and Delaware law also provide that
the indemnification provisions of such Certificate and the statute are not
exclusive of any other right which a person seeking indemnification may have or
later acquire under any statute, provision of the Certificate of Incorporation,
Bylaws of the Holding Company, agreement, vote of stockholders or disinterested
directors or otherwise.
These provisions may have the effect of deterring shareholder
derivative actions, since the Holding Company may ultimately be responsible for
expenses for both parties to the action. A similar effect would not be expected
for third-party claims.
In addition, the Certificate of Incorporation and Delaware law also
provide that the Holding Company may maintain insurance, at its expense, to
protect itself and any director, officer, employee or agent of the Holding
Company or another corporation, partnership, joint venture, trust or other
enterprise against any expense, liability or loss, whether or not the Holding
Company has the power to indemnify such person against such expense, liability
or loss under the DGCL. The Holding Company intends to obtain such insurance.
DIRECTORS OF THE BANK
Prior to the Stock Conversion, the direction and control of the Bank,
as a mutual savings institution, has been vested in its Board of Directors. Upon
conversion of the Bank to stock form, each of the directors of the Bank will
continue to serve as a director of the converted Bank. The Board of Directors of
the Bank currently consists of six directors. The directors are divided into
three classes. Approximately one-third of the directors will be elected at each
annual meeting of stockholders. Because the Holding Company will own all of the
issued and outstanding shares of capital stock of the converted Bank after the
Stock Conversion, (or the National Bank after the Bank Conversion), directors of
the Holding Company will elect the directors of the Bank.
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The following table sets forth certain information regarding the
directors of the Bank and the Holding Company:
<TABLE>
<CAPTION>
Director Term
Name Position(s) Held with the Bank Age/(1)/ Since Expires
- ---- ------------------------------------- -------- -------- -------
<S> <C> <C> <C> <C>
Robert T. Fairweather Chairman of the Board 72 1966 1999
Earle S. Teegarden, Jr. President, Chief Executive Officer and
Director 60 1964 1997
Larry R. Johnson Senior Vice President, Secretary and
Director 48 1989 1998
Edward P. Milbank Vice Chairman of the Board 57 1974 1999
J. Michael Palmer Director 46 1996 1998
Armand J. Peterson Director 59 1978 1997
</TABLE>
__________________________
/(1)/ At June 30, 1996.
The business experience of each director is set forth below. All
directors have held their present position for at least the past five years,
except as otherwise indicated.
ROBERT T. FAIRWEATHER. Mr. Fairweather is retired. Until his
retirement, Mr. Fairweather was an officer of the Bank of America. Prior to
that, he served as the Chief Executive Officer of a credit union.
EARLE S. TEEGARDEN, JR. Mr. Teegarden has been employed by the Bank
since February 1964. As President and Chief Executive Officer, Mr. Teegarden
oversees the day-to-day operations of the Bank. He is also responsible for
investments and overseeing the Bank's asset/liability management program.
LARRY R. JOHNSON. Mr. Johnson has been employed by the Bank since
December 1974. He is responsible for all lending operations for the Bank and
also serves as personnel officer for the Bank.
EDWARD P. MILBANK. Mr. Milbank is Vice Chairman of the Board of the
Bank. Mr. Milbank is the President and CEO of Milbank Mills, Inc., a feed
manufacturing company.
J. MICHAEL PALMER. Mr. Palmer is currently a private investor. Until
December 1995, he was Chairman of the Board and Treasurer of Midwest Quality
Gloves, Inc., in Chillicothe. Mr. Palmer was appointed to the Board of
Directors in January 1996.
ARMAND J. PETERSON. Mr. Peterson is President and Treasurer of
Chillicothe Iron and Steel, Inc., a steel fabricating company.
There are no executive officers of the Bank that are not also
directors of the Bank.
MEETINGS OF THE BOARD OF DIRECTORS AND COMMITTEES OF THE BANK
The Board of Directors met 15 times during the year ended June 30,
1996. During fiscal 1996, no director of the Bank attended fewer than 75% of
the aggregate of the total number of Board meetings and the total number of
meetings held by the committees of the Board of Directors on which he served.
The Board of Directors of the Bank utilizes various committees. The
Bank has two standing committees, the Loan Committee and the Compliance
Committee. The Bank's Compensation Committee and Audit Committee are composed of
the full Board of Directors. The Compensation Committee met once during the year
ended June 30, 1996.
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The Loan Committee meets monthly (or more often as necessary) to
review loans originated or purchased by the Bank and also to approve loans not
authorized to be made by officers of the Bank. The Loan Committee consists of
Messrs. Teegarden, Johnson and two outside directors of the Bank. The Loan
Committee met 87 times during the year ended June 30, 1996.
The Bank's Compliance Committee meets quarterly for the purpose of
ensuring that the Bank is in compliance with all laws, rules, regulations and
Board policy. The Committee is composed of Messrs. Fairweather (as Chairman) and
Palmer. The Compliance Committee met four times during the year ended June 30,
1996.
The Bank's Compensation Committee, composed of the entire Board of
Directors, meets annually to review the compensation bonuses and profit sharing
for employees of the Bank. This committee met once during the year ended June
30, 1996.
The Audit Committee reviews (i) the independent auditors' reports and
results of their examination, (ii) the internal audit function, which is under
the control of and reports directly to the Audit Committee, and (iii) the
examination reports of the OTS and the FDIC and other regulatory reports. The
Audit Committee met once during the year ended June 30, 1996.
COMPENSATION OF THE BOARD OF DIRECTORS OF THE BANK
During fiscal 1996, all directors received a fee of $425 per month
from July to December 1995, and a fee of $450 per month from January to June
1996. In addition, during fiscal 1996, outside directors of the Bank serving on
the Loan Committee received a $15 fee for each meeting attended. In addition,
each outside member serving on the Compliance Committee received a fee of $60
for each meeting attended, and the Chairman of the Committee received a fee of
$85 for each meeting attended. The aggregate Board and Committee fees paid by
the Bank during fiscal 1996 was approximately $44,000.
In order to encourage directors to remain associated with the Bank's
Board of Directors, in January 1995 the Bank adopted a director emeritus program
in which the Board of Directors, in its discretion, may elect any retiring
director as a Director Emeritus, provided the retiring director has served as a
director until reaching mandatory retirement age (or until being forced to
retire due to medical considerations) and such director has served as a director
of the Bank for at least 10 years. Directors Emeritus of the Bank shall be
compensated for their services at a rate of 50% of full director fees for the
first 10 years following election and at a rate of 25% of full director fees for
the second 10 years following election. Thereafter, no fees shall be payable
except that, upon request from the then current Board of Directors, a Director
Emeritus may be invited to attend a Board meeting and as such shall qualify to
receive full Board fees for that meeting.
Following completion of the Stock Conversion, and subject to the
approval of the Holding Company's stockholders, each director of the Bank who is
not a full-time employee (4 persons) is expected to be granted an option to
purchase shares of Common Stock under the Stock Option Plan and an award of
restricted stock under the RRP. See "Benefit Plans - Stock Option and Incentive
Plan" and "Benefit Plans--Recognition and Retention Plan."
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EXECUTIVE COMPENSATION
The following table sets forth information concerning the compensation
paid or granted to the Bank's President and Chief Executive Officer. No other
executive officer of the Bank had aggregate compensation (salary plus bonus) in
excess of $100,000 in fiscal 1996.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
- -------------------------------------------------------------------------------------------------------------------
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION/(1)/ AWARDS
- ----------------------------------------------------------------------------------------------------
OTHER RESTRICTED
ANNUAL STOCK OPTIONS/ ALL OTHER
NAME AND PRINCIPAL FISCAL COMPENSATION AWARD SARS COMPENSATION
POSITION YEAR/(1)/ SALARY($) BONUS($) ($) ($) (#) ($)
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Earle S. Teegarden, Jr.,
President and Chief
Executive Officer 1996 $69,450 $16,423 $ --- ---/(2)/ ---/(2)/ $ 12,293
- -------------------------------------------------------------------------------------------------------------------
- --------------------------
</TABLE>
/(1)/ In accordance with the rules on executive officer and director
compensation disclosure adopted by the SEC, Summary Compensation
information is excluded for the fiscal years ended June 30, 1994
and 1995, as the Bank was not a public company during such periods.
/(2)/ Following the Stock Conversion, it is expected that Mr. Teegarden
will be granted an option to purchase shares of common stock under
the Stock Option Plan, and an award of restricted stock under the
RRP. See "--Benefits Plans--Stock Option and Incentive Plan" and "
--Benefit Plans--Recognition and Retention Plan."
/(3)/ Includes Board fees of $6,600, a profit-sharing contribution of
$4,381 and earned insurance commissions of $1,322.
EMPLOYMENT AGREEMENTS
The Bank has determined to enter into an employment agreement
effective upon consummation of the Stock Conversion, with Earle S. Teegarden,
Jr., President and Chief Executive Officer, providing for a term of three years.
The contract provides for payment to the employee for the remaining term of the
contract unless the employee is terminated "for cause."
The employment agreement for Mr. Teegarden provides for an annual base
salary as determined by the Board of Directors, but not less than the employee's
current salary. Mr. Teegarden's base salary (exclusive of director fees and
bonuses) will be $70,500, assuming the employment contract is entered into in
fiscal 1997. So long as the contract remains in force, salary increases will be
reviewed not less often than annually thereafter, and are subject to the sole
discretion of the Board of Directors. The employment contract provides for
annual extensions of one additional year, but only upon express authorization by
the Board of Directors at the end of each year. The contract provides for
termination upon the employee's death, for cause or in certain events specified
by OTS regulations. The employment contract is terminable by the employee upon
90 days' notice to the Bank.
In the event there is a change in control of the Holding Company or
the Bank, as defined in the agreement, and if employment terminates
involuntarily, as defined in the agreement, in connection with such change in
control or within 12 months thereafter, the employment contract provides for a
payment equal to 299% of Mr. Teegarden's base amount of compensation as defined
in the Code. Assuming a change in control were to take place as of
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<PAGE>
June 30, 1996, the aggregate amounts payable to Mr. Teegarden pursuant to this
change in control provision would be approximately $231,000.
The contract provides, among other things, for participation in an
equitable manner in employee benefits applicable to executive personnel. The
employment contract may have an "anti-takeover" effect that could affect a
proposed future acquisition of control of the Bank after its Conversion. See
"Restrictions on Acquisitions of Stock and Related Takeover Defensive
Provisions. "
The Bank also intends to enter into an employment agreement with Larry
R. Johnson, Senior Vice President and Secretary. This agreement will also
provide for a term of three years and a change of control payment equal to 299%
of the Mr. Johnson's prior years' compensation plus certain additional benefits
such as health insurance. This agreement is otherwise expected to be similar to
the employment agreement with Mr. Teegarden.
Finally, the Bank may enter into employment and/or severance
agreements with other officers of the Bank after the Conversion.
BENEFIT PLANS
GENERAL. The Bank currently provides health care benefits, including
medical and prescription plan benefits, subject to certain deductibles and
copayments by employees, and group life insurance to its full time employees.
PROFIT SHARING PLAN. The Bank maintains the Investors Federal Bank and
Savings Association Employee Profit Sharing Plan (the "Plan") which is a
qualified, tax-exempt retirement plan under Section 401(k) of the Code. All
employees who have reached the age of 18 and have completed one year of service
with the Bank (i.e., 12 months in which the employee works at least 1,000 hours)
are eligible to participate. The Bank may, but is not required to, make
discretionary contributions to the Plan each year in amounts to be determined
annually. Contributions, when made, are allocated to eligible plan participants
based on the ratio of their compensation to the total compensation for all
eligible participants for the plan year. The Plan operates on the basis of a
calendar plan year. Participants are vested in their profit sharing account
balances at the rate of 20% per year of credited service under the Plan
beginning in their third year of credited service, with participants becoming
fully vested in their account balance after seven years of credited service. If
the Plan is top-heavy, participants become fully vested after six years of
credited service under the Plan. Participants also become fully vested in their
account balance upon attainment of normal retirement age under the Plan (i.e.,
age 65), upon death or disability, or upon termination of the Plan. At September
30, 1996, the market value of the Plan trust fund equaled approximately
$407,330. During the year ended December 31, 1995, the Bank contributed $4,380
to the account of Mr. Teegarden, and contributed an aggregate of $22,580 to the
accounts of all other eligible participants.
In connection with the Offerings and adoption of the Employee Stock
Ownership Plan, the Bank intends to terminate the Plan and distribute its
assets. Upon distribution, former participants in the Plan will be eligible to
purchase Common Stock in the Offerings or in the open market with the proceeds
of their account balances, subject to the purchase priorities set forth in the
Plan of Conversion.
STOCK OPTION AND INCENTIVE PLAN. Following consummation of the Stock
Conversion, the Board of Directors of the Holding Company intends to adopt a
Stock Option Plan, which will be designed to attract and retain qualified
personnel in key positions, provide directors, officers and key employees with a
proprietary interest in the Holding Company as an incentive to contribute to the
success of the Holding Company and reward key employees for outstanding
performance and the attainment of targeted goals. The Stock Option Plan will
provide for the grant of incentive stock options intended to comply with the
requirements of Section 422 of the Code ("incentive stock options"), non-
incentive stock options, stock appreciation rights, and limited stock
appreciation rights (collectively "Awards"). Awards may be granted to key
employees of the Holding Company and any subsidiaries. The Stock Option Plan
will be administered and interpreted by the Holding Company's Compensation
Committee (the "Committee") the members of which will be "disinterested"
pursuant to applicable regulations under the federal securities laws. Non-
employee directors will only be entitled to receive non-incentive stock options
pursuant to a
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<PAGE>
formula governing the amount and timing of such options. Unless sooner
terminated, the Stock Option Plan shall continue in effect for a period of 10
years from the date the Stock Option Plan is adopted by the Board of Directors.
Under the Stock Option Plan, the Committee will determine which
officers and key employees will be granted Awards, whether options will be
incentive or non-incentive options, the number of shares subject to each Award,
the exercise price of each option, whether options may be exercised by
delivering other shares of Common Stock and when such options become
exercisable. The per share exercise price of an incentive or non-incentive stock
option must at least equal the fair market value of a share of Common Stock on
the date the option is granted.
Stock options will become exercisable in the manner specified by the
Committee, provided that all options will become fully exercisable in the event
of a change in control of the Company if the plan is implemented following the
one-year anniversary of the Stock Conversion. If the plan is implemented within
the first year following the Stock Conversion, OTS regulations that may be
applicable to the Bank following the Conversion, would require the stock options
to vest at a rate not in excess of 20% per year and prohibit accelerated vesting
except in the case of disability or death. Each stock option or portion thereof
will be exercisable at any time on or after it vests and will be exercisable
until 10 years after its date of grant or for periods of up to one year
following the death, disability or other termination of the optionee's
employment. However, failure to exercise incentive stock options within three
months after the date on which the optionee's employment terminates may result
in adverse tax consequences to the optionee. Stock options are non-transferable
except by will or the laws of descent and distribution.
The proposed Stock Option Plan provides for the grant of Stock
Appreciation Rights ("SARs") at any time, whether or not the participant then
holds stock options, granting the right to receive the excess of the market
value of the shares represented by the SARs on the date exercised over the
exercise price. SARs generally will be subject to the same terms and conditions
and exercisable to the same extent as stock options. There is no present
intention to grant any SARs.
At the time an Award is granted pursuant to the Plan, the recipient
will not be required to make any payment in consideration for such grant. With
respect to incentive or non-incentive stock options, the optionee will be
required to pay the applicable exercise price at the time of exercise in order
to receive the underlying shares of Common Stock. If a stock appreciation right
is exercised, the holder of the right is entitled to receive an amount equal to
the excess of the fair market value of the underlying shares of Common Stock
over the applicable exercise price, without having to pay the exercise price.
A number of shares of Common Stock equal to an aggregate of 10% of the
Common Stock sold in the Conversion will be reserved for issuance pursuant to
the Stock Option Plan (25,875 shares, based on the sale of 258,750 shares).
Such shares may be authorized but previously unissued shares, treasury shares,
or shares purchased by the Holding Company on the open market or from private
sources. In the event of a stock split, reverse stock split or stock dividend,
the number of shares of Common Stock under the Stock Option Plan, the number of
shares to which any Award relates and the exercise price per share under any
option or stock appreciation right shall be adjusted to reflect such increase or
decrease in the total number of shares of Common Stock outstanding.
Under current provisions of the Code, the federal income tax treatment
of incentive stock options and non-incentive stock options is different. As
regards incentive stock options, an optionee who meets certain holding period
requirements will not recognize income at the time the option is granted or at
the time the option is exercised, and a federal income tax deduction generally
will not be available to the Holding Company at any time as a result of such
grant or exercise. With respect to non-incentive stock options, the difference
between the fair market value on the date of exercise and the option exercise
price generally will be treated as compensation income upon exercise, and the
Holding Company will be entitled to a deduction in the amount of income so
recognized by the optionee. Upon the exercise of a stock appreciation right, the
holder will realize income for federal income tax purposes equal to the amount
received by him, whether in cash, shares of stock or both, and the Holding
Company will be entitled to a deduction for federal income tax purposes in the
same amount.
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<PAGE>
Under regulations of the OTS that may apply to the Bank following the
Conversion, if the Stock Option Plan is submitted to and approved by
stockholders of the Holding Company within one year after completion of the
Conversion, no more than 30% of the shares available under the Stock Option Plan
could be granted to non-employee directors, no more than 5% of the shares
available could be granted to an individual non-employee director, and no more
than 25% of the shares available could be granted to an individual officer. It
is currently expected that each non-employee director will receive an option for
the same number of shares, in which event options for a total of approximately
1,293 shares would be granted to each non-employee director if the amount of
Common Stock sold in the Stock Conversion is equal to the maximum of the
Estimated Valuation Range. In addition, it is currently expected that stock
options will be granted to Mr. Teegarden and other officers of the Bank,
although no determination has been made at this time as to the amount of such
stock option awards. The Holding Company does not expect to grant any stock
appreciation rights or performance share awards in the first year following
completion of the Stock Conversion.
The Holding Company currently intends to submit the Stock Option Plan
to stockholders for approval following the one-year anniversary of the Stock
Conversion. However, the Holding Company reserves the right to submit such plan
to stockholders prior to such time, provided that such meeting is at least six
months following the Stock Conversion. In such event, the proposed Stock Option
Plan might need to include a mandatory five-year vesting schedule and a
prohibition on accelerated vesting in the event of a change in control, which
provisions are required by current OTS regulations for plans implemented within
one year following the Stock Conversion.
RECOGNITION AND RETENTION PLAN. Following consummation of the Stock
Conversion, the Board of Directors of the Company intends to adopt a Recognition
and Retention Plan ("RRP") for directors, officers and key employees. The
objective of the RRP will be to enable the Holding Company to provide directors,
officers and key employees with a proprietary interest in the Holding Company as
an incentive to contribute to its success.
The RRP will be administered and interpreted by the Holding Company's
Compensation Committee (the "Committee), the members of which will be
"disinterested" pursuant to applicable regulations under the federal securities
laws. The Committee will have the responsibility to invest all funds
contributed to the RRP. The Holding Company will contribute sufficient funds so
that the RRP can purchase, following the receipt of stockholder approval, a
number of shares equal to an aggregate of 4% of the Common Stock sold in the
Stock Conversion (10,350 shares, based on the sale of 258,750 shares). Assuming
the Common Stock awarded pursuant to the RRP had a value of $20.00 per share,
and the Holding Company issued 258,750 shares, the aggregate value of RRP awards
would be $207,000. Shares of Common Stock granted pursuant to the RRP generally
will be in the form of restricted stock and, if the RRP is implemented within
the first year following the Stock Conversion, will vest at the rate of 20% per
year over the five years following the date of grant, to the extent required by
applicable law. For accounting purposes, compensation expense in the amount of
the fair market value of the Common Stock at the date of the grant to the
recipient will be recognized pro rata over the period during which the shares
are payable. A recipient will be entitled to all voting and other stockholder
rights, except that the shares, while restricted, may not be sold, pledged or
otherwise disposed of. If a recipient terminates employment for reasons other
than death or disability, the recipient will forfeit all rights to the allocated
shares under restriction. If the recipient's termination is caused by death or
disability, all restrictions will expire and all allocated shares will become
unrestricted. All restrictions also will expire and all allocated shares will
become unrestricted in the event of a change in control of the Holding Company,
as defined in the RRP. However, if the plan is implemented within the first
year following the Stock Conversion, current OTS regulations might prohibit
accelerated vesting except in the event of disability or death. The Board of
Directors of the Holding Company can terminate the RRP at any time, and if it
does so, any shares not allocated will revert to the Holding Company. Recipients
of grants under the RRP will not be required to make any payment at the time of
grant or when the underlying shares of Common Stock become vested.
Under regulations of the OTS that may apply to the Bank following the
Conversion, if the RRP is submitted to and approved by the stockholders of the
Holding Company within one year after completion of the Stock Conversion, no
more than 30% of the shares available under the RRP could be granted to non-
employee directors, no more than 5% of the shares available could be granted to
an individual non-employee director, and no more than 25% of the shares
available could be granted to an individual officer. In such event, it is
expected that each non-employee director will receive an award for the same
number of shares, in which event awards for a total of
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approximately 517 shares would be granted to each non-employee director if the
amount of Common Stock sold in the Stock Conversion is equal to the maximum of
the Estimated Valuation Range. It is currently expected that awards will be
granted to Mr. Teegarden and other officers of the Bank, although no
determination has been made at this time as to the amount of such awards.
The Holding Company currently intends to submit the RRP to
stockholders for approval following the one-year anniversary of the Stock
Conversion. However, the Holding Company reserves the right to submit such plan
to stockholders prior to such time, provided that such meeting is held at least
six months following the Stock Conversion. In such event, the RRP might need to
include a prohibition on accelerated vesting in the event of a change in
control, which provision is required by current OTS regulations applicable to
plans implemented within one year following the Stock Conversion.
It is currently anticipated that the RRP will be funded by shares
subsequently reacquired and held as treasury shares or through the issuance of
authorized but unissued shares. To the extent the RRP is funded from authorized
but unissued shares, the funding of the RRP will have the effect of diluting
existing stockholders. See "Summary -Benefits of Conversion to Directors and
Executive Officers" and "Capitalization."
EMPLOYEE STOCK OWNERSHIP PLAN. The Boards of Directors of Investors
Federal and the Holding Company have approved the adoption of an ESOP for the
benefit of employees of Investors Federal. The ESOP is designed to meet the
requirements of an employee stock ownership plan as described at Section
4975(e)(7) of the Code and Section 407(d)(6) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), and, as such, the ESOP is empowered
to borrow in order to finance purchases of the Holding Company's Common Stock.
It is anticipated that the ESOP will be capitalized with a loan from
the Holding Company. The proceeds from this loan are expected to be used by the
ESOP to purchase up to 8.0% of the Common Stock issued in the Stock Conversion.
After the Stock Conversion, as a qualified employee pension plan under Section
401(a) of the Code, the ESOP will be in the form of a stock bonus plan and will
provide for contributions, predominantly in the form of either the Holding
Company's Common Stock or cash, which will be used within a reasonable period
after the date of contributions primarily to purchase Holding Company Common
Stock. The Bank will receive a tax deduction equal to the amount it contributes
to the ESOP, subject to the limitations set forth in the Code. The maximum tax-
deductible contribution by the Bank in any year is an amount equal to the
maximum amount that may be deducted by the Bank under Section 404 of the Code,
subject to reduction based on contributions to other Tax-Qualified Employee
Plans. Additionally, the Bank will not make contributions if such contributions
would cause the Bank to violate its regulatory capital requirements. The assets
of the ESOP will be invested primarily in Holding Company Common Stock.
From time to time, the ESOP may purchase additional shares of Common
Stock for the benefit of plan participants through purchases of outstanding
shares in the market, upon the original issuance of additional shares by the
Holding Company or upon the sale of shares held in treasury by the Holding
Company. Such purchases, which are not currently contemplated, would be subject
to then-applicable laws, regulations and market conditions.
Generally accepted accounting principles require that any borrowing by
the ESOP be reflected as a liability in the Holding Company's consolidated
financial statements, whether or not such borrowing is guaranteed by, or
constitutes a legally binding contribution commitment of the Holding Company or
the Bank. In addition, shares purchased with borrowed funds will, to the extent
of the borrowings, be excluded from stockholders' equity, representing unearned
compensation to employees for future services not yet performed. Consequently,
if the ESOP purchases already-issued shares in the open market, the Holding
Company's consolidated liabilities will increase to the extent of the ESOP's
borrowings, and total and per share stockholders' equity will be reduced to
reflect such borrowings. If the ESOP purchases newly issued shares from the
Holding Company, total stockholders' equity would neither increase nor decrease,
but per share stockholders' equity and per share net income would decrease
because of the increase in the number of outstanding shares. In either case, as
the borrowings used to fund ESOP purchases are repaid, total stockholders'
equity will correspondingly increase.
All employees of the Bank will be eligible to participate in the ESOP
after they attain age 21 and complete one year of service during which they work
at least 1,000 hours. Employees will be credited for years of service
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to the Bank prior to the adoption of the ESOP for participation and vesting
purposes. The Bank's contribution to the ESOP will be allocated among
participants on the basis of compensation. Each participant's account will be
credited with cash and shares of Holding Company Common Stock based upon
compensation earned during the year with respect to which the contribution is
made. After completing five years of service, a participant will be 100% vested
in his ESOP account. ESOP participants will be entitled to receive
distributions from their ESOP accounts only upon termination of service.
Distribution will be made in cash and in whole shares of Holding Company Common
Stock. Fractional shares will be paid in cash. Participants will not incur a
tax liability until a distribution is made.
Participating employees will be entitled to instruct the trustee of
the ESOP as to how to vote the shares held in their account. The trustee, who
has dispositive power over the shares in the Plan, will not be affiliated with
the Holding Company or Investors Federal. The ESOP may be amended by the Board
of Directors of the Holding Company, except that no amendment may be made which
would reduce the interest of any participant in the ESOP trust fund or divert
any of the assets of the ESOP trust fund to purposes other than the benefit of
participants or their beneficiaries.
DIRECTOR EMERITUS PROGRAM. In order to encourage directors to remain
associated with the Bank's Board of Directors, in January 1995 the Bank adopted
a director emeritus program in which the Board of Directors, in its discretion,
may elect any retiring director as a Director Emeritus, provided the retiring
director has served as a director until reaching mandatory retirement age (or
until being forced to retire due to medical considerations) and such director
has served as a director of the Bank for at least 10 years. Directors Emeritus
of the Bank shall be compensated for their services at a rate of 50% of full
director fees for the first 10 years following election and at a rate of 25% of
full director fees for the second 10 years following election. Thereafter, no
fees shall be payable except that, upon request from the then current Board of
Directors, a Director Emeritus may be invited to attend a Board meeting and as
such shall qualify to receive full Board fees for that meeting.
INDEBTEDNESS OF MANAGEMENT
The Bank has followed a policy of granting consumer loans and loans
secured by one- to four-family real estate to officers, directors and employees.
Loans to directors and executive officers are made in the ordinary course of
business and on the same terms and conditions as those of comparable
transactions with the general public prevailing at the time, in accordance with
the Bank's underwriting guidelines, and do not involve more than the normal risk
of collectibility or present other unfavorable features.
All loans by the Bank to its directors and executive officers are
subject to OTS regulations restricting loan and other transactions with
affiliated persons of the Bank. Federal law currently requires that all loans
to directors and executive officers be made on terms and conditions comparable
to those for similar transactions with non-affiliates. Loans to all directors,
executive officers, employees and their associates totaled $446,000 at June 30,
1996, which was 13.6% of the Bank's equity capital at that date and 9.3% of the
Holding Company's pro forma stockholders' equity at that date, assuming
completion of the Stock Conversion at the midpoint of the Estimated Valuation
Range. There were no loans outstanding to any director, executive officer or
their affiliates at preferential rates or terms which in the aggregate exceeded
$60,000 during the three years ended June 30, 1996. All loans to directors and
officers were performing in accordance with their terms at June 30, 1996.
THE CONVERSION
The Board of Directors of the Bank and the OTS have approved the Plan
of Conversion, subject to approval by the members of the Bank and the
satisfaction of certain other conditions. OTS approval does not constitute a
recommendation or endorsement by the OTS of the Plan of Conversion. Certain
terms used in the following summary are defined in the Plan of Conversion, a
copy of which may be obtained by contacting the Bank.
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GENERAL
On September 23, 1996, the Board of Directors unanimously adopted the
Plan, subject to approval by the OTS and the members of the Bank. Pursuant to
the Plan, the Bank proposes to convert from a federal mutual savings association
to a federal stock savings bank and subsequently to a national bank. The OTS
has approved the Plan, subject to its approval by the affirmative vote of the
members of the Bank holding not less than a majority of the total number of
votes eligible to be cast at a Special Meeting called for that purpose to be
held on December __, 1996.
The Stock Conversion will be accomplished through amendment of the
Bank's federal mutual charter to authorize the issuance of capital stock, at
which time the Bank will become a wholly owned subsidiary of the Holding
Company. Following the consummation of the Stock Conversion, the Board of
Directors of the Bank intends to effectuate the Bank Conversion by converting
the Converted Bank to the National Bank. Upon completion of the Bank Conversion,
the National Bank will be a wholly-owned subsidiary of the Holding Company.
The Holding Company has received approval from the OTS to become the
holding company of the Converted Bank subject to the satisfaction of certain
conditions and to acquire all of the common stock of the Converted Bank to be
issued in the Stock Conversion in exchange for at least 50% of the net proceeds
form the sale of Common Stock in the Stock Conversion. The Stock Conversion will
be effected only upon completion of the sale of the shares of Common Stock to be
issued by the Holding Company pursuant to the Plan of Conversion. The Bank has
applied to the OTS and the OCC for approval of the conversion of the Converted
Bank to a national bank, and the Holding Company has applied to the FRB for
approval of the Holding Company's continued ownership of 100% of the stock of
the National Bank following the Bank Conversion. Such approvals have not been
received to date, and there can be no assurance that such approvals will be
received. If such approvals are not received, the Bank Conversion will not
occur. See "Risk Factors--Potential Delay in Completion or Denial of Bank
Conversion."
The Plan of Conversion provides that the Board of Directors of the
Bank may, at any time, elect not to proceed with the Bank Conversion. It is the
present intent of the Bank's Board of Directors to proceed with both the Stock
Conversion and the Bank Conversion.
Subscription Rights are being given to Eligible Account Holders as of
June 30, 1995, the Tax-Qualified Employee Plans of the Bank and the Holding
Company, Supplemental Eligible Account Holders, Other Members, and officers,
directors and employees of the Bank. Concurrently with, during, or following
the Subscription Offering, and subject to the prior rights of holders of
Subscription Rights, members of the general public to whom a prospectus is
delivered are being afforded the opportunity to subscribe for Holding Company
Common Stock in the Community Offering. See "- Offering of Holding Company
Common Stock." Depending upon market conditions, any shares not initially
subscribed for in the Subscription Offering may be offered for sale by the
Holding Company to the general public in a Syndicated Community Offering. See
"-Offering of Holding Company Common Stock-Syndicated Community Offering."
Subscriptions for shares will be subject to the maximum and minimum purchase
limitations set forth in the Plan of Conversion.
BUSINESS PURPOSES
The Bank has several business purposes for the Stock Conversion. The
sale of Holding Company Common Stock will have the immediate result of providing
the Bank with additional equity capital. This increased capital will support
expansion of its financial services, subject to applicable regulatory
restrictions. The sale of the Common Stock is the most effective means of
increasing the Bank's permanent capital and does not involve the high interest
cost and repayment obligation of subordinated debt. In addition, investment of
the net Stock Conversion proceeds is expected to provide additional operating
income to further increase the Bank's capital on a continuing basis.
The Bank's Board of Directors has undertaken the Bank Conversion to
allow the Bank to broaden its range or banking practices and services consistent
with a national bank charter. Management believes such expansion can be more
effectively developed if the Bank operated under regulatory requirements
applicable to a national bank rather than a federally chartered savings
association. Moreover, management believes the additional operating
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flexibility associated with the national bank charter will enable the Bank to
compete more effectively with other financial institutions. See "Regulation."
The Board of Directors of the Bank believes that a holding company
structure could facilitate the acquisition of other financial institutions as
well as other companies. If a multiple holding company structure is utilized in
a future acquisition, the acquired savings institution or bank would be able to
operate on a more autonomous basis as a wholly owned subsidiary of the Holding
Company rather than as a division of the Bank. For example, the acquired
savings institution could retain its own directors, officers and corporate name
as well and have representation on the Board of Directors of the Holding
Company. As of the date hereof, there are no plans or understandings by the
Bank or the Holding Company regarding the acquisition of any other institutions.
The preferred stock and additional common stock of the Holding Company
being authorized in the Stock Conversion will be available for future
acquisitions (although the Holding Company has no current negotiations,
understandings or plans with respect to any acquisition) and for issuance and
sale to raise additional equity capital, subject to market conditions and
generally without stockholder approval.
The Stock Conversion will structure the Bank and, after the Bank
Conversion, the National Bank, in the stock form used in the United States by
all commercial banks, most major business corporations and an increasing number
of savings institutions. The Stock Conversion will permit the Bank's members to
become stockholders of the Holding Company, thereby allowing them to own stock
in the parent corporation of the Bank in which they maintain deposit accounts or
with which they have a borrowing relationship. Such ownership may encourage
customers who become stockholders to promote the Bank to others, thereby further
contributing to the Bank's growth. The more flexible operating structure
provided by the Holding Company and the stock form of ownership is expected to
assist the Bank in competing aggressively with other financial institutions in
its principal market area.
The Bank is also expected to benefit from its management and employees
owning stock, because stock ownership is viewed as an effective performance
incentive and a means of attracting, retaining and compensating personnel.
EFFECTS OF STOCK CONVERSION TO STOCK FORM ON DEPOSITORS AND BORROWERS OF THE
BANK
VOTING RIGHTS. Upon Conversion, neither deposit account holders nor
borrowers will have voting rights in the Bank, the National Bank or the Holding
Company and will therefore not be able to elect directors of either entity or to
control their affairs. These rights are currently accorded to deposit account
holders with regard to the Bank. Subsequent to the Stock Conversion, voting
rights will be vested exclusively in the Holding Company as the sole stockholder
of the Bank and, after the Bank Conversion, the National Bank. Voting rights as
to the Holding Company will be held exclusively by its stockholders. Each
purchaser of Holding Company Common Stock shall be entitled to vote on any
matters to be considered by the Holding Company stockholders. A stockholder
will be entitled to one vote for each share of Common Stock owned, subject to
certain limitations applicable to holders of 10% or more of the shares of the
Common Stock. See "Restrictions on Acquisitions of Stock and Related Takeover
Defensive Provisions." The Holding Company intends to supply each stockholder
with quarterly and annual reports and proxy statements.
DEPOSIT ACCOUNTS AND LOANS. The terms of the Bank's deposit accounts,
the balances of the individual accounts and the existing FDIC insurance coverage
will not be affected by the Conversion. Furthermore, the Conversion will not
affect the loan accounts, the balances of these accounts, or the obligations of
the borrowers under their individual contractual arrangements with the Bank.
TAX EFFECTS. The Bank has received an opinion from Luse Lehman Gorman
Pomerenk & Schick, P.C. with regard to federal income taxation, and an opinion
of Lockridge, Constant & Conrad, LLC with regard to Missouri taxation, to the
effect that the adoption and implementation of the Plan of Conversion set forth
herein will not be taxable for federal or Missouri tax purposes to the Bank or
the Holding Company. See "- Income Tax Consequences."
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LIQUIDATION RIGHTS. The Bank has no plan to liquidate either before
or after the Conversion. However, if there should ever be a complete
liquidation, either before or after Conversion, deposit account holders would
receive the protection of insurance by the FDIC up to applicable limits.
Subject thereto, liquidation rights before and after the Stock Conversion would
be as follows:
LIQUIDATION RIGHTS IN PRESENT MUTUAL BANK. In addition to the
protection of FDIC insurance up to applicable limits, in the event of a complete
liquidation each holder of a deposit account in the Bank in its present mutual
form would receive his pro rata share of any assets of the Bank remaining after
payment of claims of all creditors (including the claims of all depositors in
the amount of the withdrawal value of their accounts). Such holder's pro rata
share of such remaining assets, if any, would be in the same proportion of such
assets as the balance in his deposit account was to the aggregate balance in all
deposit accounts in the Bank at the time of liquidation.
LIQUIDATION RIGHTS IN PROPOSED CONVERTED BANK. After the Stock
Conversion each deposit account holder, in the event of a complete liquidation,
would have a claim of the same general priority as the claims of all other
general creditors of the Bank in addition to the protection of FDIC insurance up
to applicable limits. Therefore, except as described below, the deposit account
holder's claim would be solely in the amount of the balance in his deposit
account plus accrued interest and the holder would have no interest in the value
of the Bank above that amount.
The Plan of Conversion provides that there shall be established, upon
the completion of the Conversion, a special "liquidation account" for the
benefit of Eligible Account Holders and Supplemental Eligible Account Holders
(i.e., depositors with an account balance of $50 or more at June 30, 1995 and
September 30, 1996, respectively) in an amount equal to the net worth of the
Bank as of the date of its latest consolidated statement of financial condition
contained in the final Prospectus relating to the sales of shares of Holding
Company Common Stock in the Stock Conversion. Each Eligible Account Holder and
Supplemental Eligible Account Holder would have an initial interest in such
liquidation account for each qualifying deposit account held in the Bank on the
qualifying date. An Eligible Account Holder's or Supplemental Eligible Account
Holder's interest as to each deposit account would be in the same proportion of
the total liquidation account as the balance in his account on June 30, 1995 and
September 30, 1996, respectively, was to the aggregate balance in all qualifying
deposit accounts of Eligible Account Holders and Supplemental Eligible Account
Holders on such date. For accounts in existence on both dates, separate
subaccounts shall be determined on the basis of the qualifying deposits in such
accounts on the record dates. However, if an Eligible Account Holder or
Supplemental Eligible Account Holder should reduce the amount in the qualifying
deposit account on any annual closing date of the Bank to a level less than the
lowest amount in such account on June 30, 1995 or September 30, 1996,
respectively, and on any subsequent closing date, then the account holder's
interest in this special liquidation account would be reduced by an amount
proportionate to any such reduction, and the account holder's interest would
cease to exist if such qualifying deposit account were closed.
In addition, the interest in the special liquidation account would
never be increased despite any increase in the balance of the account holders'
related accounts after the Stock Conversion, and would only decrease.
Any assets remaining after the above liquidation rights of Eligible
Account Holders and Supplemental Eligible Account Holders were satisfied would
be distributed to the Holding Company as the sole stockholder of the Bank.
No merger, consolidation, purchase of bulk assets with assumption of
deposit accounts and other liabilities, or similar transaction, whether the
Bank, as converted, or another SAIF-insured institution if the surviving
institution, is deemed to be a complete liquidation for purposes of distribution
of the liquidation account and, in any such transaction, the liquidation account
would be assumed to the full extent authorized by regulations of the OTS as then
in effect. The OTS has stated that the consummation of a transaction of the type
described in the preceding sentence in which the surviving entity is not an
SAIF-insured institution would be reviewed on a case-by-case basis to determine
whether the transaction should constitute a "complete liquidation" requiring
distribution of any then remaining balance in the liquidation account. While the
Bank believes that such a transaction should not constitute
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a complete liquidation, there can be no assurance that the OTS will not adopt a
contrary position and, in such event, that the Bank's position will be
determined to be correct.
The Bank Conversion shall not be deemed to be a complete liquidation
of the Converted Bank for purposes of the distribution of the liquidation
account. Upon consummation of the Bank Conversion, the liquidation account, and
all rights and obligations of the Converted Bank in connection therewith, shall
be assumed by the National Bank.
COMMON STOCK. For information as to the characteristics of the Common
Stock to be issued under the Plan of Conversion, see "Dividends" and
"Description of Capital Stock." Common Stock issued under the Plan of Conversion
cannot, and will not, be insured by the FDIC or any other government agency.
THE BANK WILL CONTINUE, IMMEDIATELY AFTER COMPLETION OF THE STOCK
CONVERSION, TO PROVIDE ITS SERVICES TO DEPOSITORS AND BORROWERS PURSUANT TO ITS
EXISTING POLICIES AND WILL MAINTAIN THE EXISTING MANAGEMENT AND EMPLOYEES OF THE
BANK. OTHER THAN FOR PAYMENT OF EXPENSES INCIDENT TO THE STOCK CONVERSION, NO
ASSETS OF THE BANK WILL BE DISTRIBUTED IN THE STOCK CONVERSION. THE BANK WILL
CONTINUE TO BE A MEMBER OF THE FHLB SYSTEM, AND ITS DEPOSIT ACCOUNTS WILL
CONTINUE TO BE INSURED BY THE FDIC. THE AFFAIRS OF THE BANK WILL CONTINUE TO BE
DIRECTED BY THE EXISTING BOARD OF DIRECTORS AND MANAGEMENT.
OFFERING OF HOLDING COMPANY COMMON STOCK
Under the Plan of Conversion, up to 258,750 shares of Holding Company
Common Stock will be offered for sale, subject to certain restrictions described
below through a Subscription and Community Offering.
SUBSCRIPTION OFFERING. The Subscription Offering will expire at noon,
Central Time, on December __, 1996 (the "Subscription Expiration Date") unless
extended by the Bank and the Holding Company. Regulations of the OTS require
that all shares to be offered in the Stock Conversion be sold within a period
ending not more than 45 days after the Subscription Expiration Date (or such
longer period as may be approved by the OTS) or, despite approval of the Plan of
Conversion by members, the Stock Conversion will not be effected and the Bank
will remain in mutual form. This period expires on February __, 1997, unless
extended with the approval of the OTS. If the Stock Conversion is not completed
by February __, 1997, all subscribers will have the right to modify or rescind
their subscriptions and to have their subscription funds returned promptly with
interest. In the event of such an extension, all subscribers will be notified in
writing of the time period within which subscribers must notify the Bank of
their intention to maintain, modify or rescind their subscriptions. If the
subscriber rescinds or does not respond in any manner to the Bank's notice, the
funds submitted will be refunded to the subscriber with interest at ____%, the
Bank's current passbook rate per annum, and/or the subscriber's withdrawal
authorizations will be terminated. In the event that the Stock Conversion is not
effected, all funds submitted and not previously refunded pursuant to the
Subscription and Community Offering will be promptly refunded to subscribers
with interest at ____%, the Bank's current passbook rate per annum, and all
withdrawal authorizations will be terminated.
SUBSCRIPTION RIGHTS. In accordance with OTS regulations, non-
transferable Subscription Rights have been granted under the Plan of Conversion
to the following persons in the following order of priority: (1) Eligible
Account Holders (deposit account holders of the Bank maintaining an account
balance of $50 or more as of June 30, 1995), (2) Tax-Qualified Employee Plans,
(3) Supplemental Eligible Account Holders (deposit account holders of the Bank
maintaining an account balance of $50 or more as of September 30, 1996); (4)
Other Members of the Bank (deposit account holders of the Bank as of _______,
1996 and certain borrowers as of both January 1, 1988 and _______, 1996, who
continue to be borrowers as of the date of the Special Meeting, other than
Eligible Account Holders and Supplemental Eligible Account Holders), and (5)
officers, directors and employees of the Bank. All subscriptions received will
be subject to the availability of Common Stock after satisfaction of all
subscriptions of all persons having prior rights in the Subscription Offering,
and to the maximum and minimum purchase limitations set forth in the Plan of
Conversion. SUBSCRIPTION RIGHTS ARE NON-TRANSFERABLE. PERSONS FOUND TO BE
SELLING OR OTHERWISE TRANSFERRING THEIR RIGHT TO PURCHASE STOCK IN THE
SUBSCRIPTION OFFERING OR PURCHASING COMMON STOCK ON BEHALF OF ANOTHER PERSON
WILL BE SUBJECT TO FORFEITURE OF SUCH RIGHTS AND POSSIBLE FURTHER SANCTIONS AND
PENALTIES IMPOSED BY THE OTS, AN AGENCY OF THE U.S. GOVERNMENT. The preference
categories are more fully described below.
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Category No. 1 is reserved for the Bank's Eligible Account Holders.
Subscription Rights to purchase shares under this category will be allocated
among Eligible Account Holders to permit each such depositor to purchase shares
in an amount equal to the greater of (i) the lesser of $200,000 of the Common
Stock sold in the Stock Conversion; (ii) one-tenth of one percent (.10%) of the
total shares of Common Stock offered in the Conversion; or (iii) or 15 times the
product (rounded down to the next whole number) obtained by multiplying the
total number of shares of Common Stock to be issued by a fraction of which the
numerator is the amount of the qualifying deposit of the Eligible Account Holder
and the denominator is the total amount of the qualifying deposit of the
Eligible Account Holders in the converting Bank in each case on June 30, 1995
(the "Eligibility Record Date"); if sufficient shares are not available, shares
shall be allocated first to permit each subscribing Eligible Account Holder to
purchase to the extent possible 100 shares, and thereafter among each
subscribing Eligible Account Holder pro rata in the same proportion that his
qualifying deposit bears to the total qualifying deposits of all subscribing
Eligible Account Holders whose subscriptions remain unsatisfied.
Category No. 2 provides for the issuance of Subscription Rights to
Tax-Qualified Employee Plans to purchase up to 10% of the total shares issued in
the Subscription Offering, provided that singly or in the aggregate such plans
(other than that portion of such plans which is self-directed) shall not
purchase more than 10% of the shares of the Holding Company Conversion Stock.
Subscription Rights received pursuant to this Category shall be subordinated to
all rights received by Eligible Account Holders to purchase shares pursuant to
Category No. 1; provided, however, that notwithstanding any other provision in
the Plan of Conversion to the contrary, the Tax-Qualified Employee Plans shall
have a first priority Subscription Right to the extent that the total number of
shares of Holding Company Conversion Stock sold in the Subscription and
Community Offering exceeds the maximum of the Estimated Valuation Range.
However, such plans shall not, in the aggregate, purchase more than 10% of the
Holding Company Common Stock issued. It is currently intended that the ESOP will
purchase 8% of the shares of Common Stock issued in the Stock Conversion.
Category No. 3 provides that each Supplemental Eligible Account Holder
shall receive non-transferable Subscription Rights to subscribe for shares of
Holding Company Conversion Stock in an amount equal to the greater of (i) the
lesser of $200,000 or 5% of the Common Stock sold in the Stock Conversion; (ii)
one-tenth of one percent (.10%) of the total offering of shares; or (iii) or 15
times the product (rounded down to the next whole number) obtained by
multiplying the total number of shares of common stock to be issued by a
fraction of which the numerator is the amount of the qualifying deposit of the
Supplemental Eligible Account Holder and the denominator is the total amount of
qualifying deposits of all Supplemental Eligible Account Holders in the
converting association in each case on September 30, 1996 (the "Supplemental
Eligibility Record Date"). Subscription Rights received pursuant to this
category shall be subordinated to all Subscription Rights received by Eligible
Account Holders and Tax-Qualified Employee Plans. Any non-transferable
Subscription Rights to purchase shares received by an Eligible Account Holder in
accordance with Category No. 1 shall reduce to the extent thereof the
Subscription Rights to be distributed to such person pursuant to this Category.
In the event of an oversubscription for shares under the provisions of this
subparagraph, the shares available shall be allocated first to permit each
subscribing Supplemental Eligible Account Holder, to the extent possible, to
purchase a number of shares sufficient to make his total allocation (including
the number of shares, if any, allocated in accordance with Category No. 1) equal
to 100 shares, and thereafter among each subscribing Supplemental Eligible
Account Holder pro rata in the same proportion that his qualifying deposit bears
to the total qualifying deposits of all subscribing Supplemental Eligible
Account Holders whose subscriptions remain unsatisfied.
Category No. 4 provides, to the extent that shares are then available
after satisfying the subscriptions of Eligible Account Holders, Tax-Qualified
Employee Plans and Supplemental Eligible Account Holders, for the issuance of
Subscription Rights to each such Other Member to purchase shares in an amount
equal to the greater of (i) the lesser of $200,000 or 5% of the Common Stock
sold in the Stock Conversion; (ii) or one-tenth of one percent (.10%) of the
total offering of shares offered in the Conversion based on the Estimated
Valuation Range subject to the overall purchase limitation and to the extent
Common Stock is available. In the event of an oversubscription for shares, the
shares available shall be allocated among the subscribing Other Members pro rata
in the same proportion that his number of votes on the Voting Record Date bears
to the total number of votes on the Voting Record Date of all subscribing Other
Members on such date. Such number of votes shall be determined based on the
Bank's mutual charter and bylaws in effect on the date of approval by members of
this Plan of Conversion.
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Category No. 5 provides for the issuance of Subscription Rights to
officers, directors and employees of the Bank, to purchase up to a maximum of
the lesser of $200,000 or 5% of the Common Stock sold in the Stock Conversion to
the extent that shares are available after satisfying the subscriptions of
eligible subscribers in preference Categories 1, 2, 3 and 4. In the event of an
oversubscription, the available shares will be allocated pro rata among all
subscribers in this Category.
The Bank and the Holding Company will make reasonable efforts to
comply with the securities laws of all states in the United States in which
persons entitled to subscribe for shares pursuant to the Plan of Conversion
reside. However, no shares will be offered or sold under the Plan of Conversion
to any such person who (1) resides in a foreign country or (2) resides in a
state of the United States in which a small number of persons otherwise eligible
to subscribe for shares under the Plan of Conversion reside or as to which the
Bank and the Holding Company determine that compliance with the securities laws
of such state would be impracticable for reasons of cost or otherwise,
including, but not limited to, a requirement that the Bank or the Holding
Company or any of their officers, directors or employees register, under the
securities laws of such state, as a broker, dealer, salesman or agent. No
payments will be made in lieu of the granting of Subscription Rights to any such
person.
COMMUNITY OFFERING. To the extent that shares are available for
purchase, the Holding Company and the Bank have determined to offer shares
pursuant to the Plan of Conversion to certain members of the general public to
whom the Holding Company delivers a copy of this Prospectus and a stock order
form in the Community Offering, with preference given to natural persons (or
trusts established by such persons) residing in Livingston, Caldwell and Daviess
Counties, Missouri (the "Local Community"). Such persons, together with
associates of and persons acting in concert with such persons, may purchase up
to the lesser of $200,000 or 5% of the Common Stock sold in the Stock
Conversion. The Community Offering, if any, may terminate at any time without
notice, but may not terminate later than February __, 1997, unless extended with
the approval of the OTS. THE OPPORTUNITY TO SUBSCRIBE FOR SHARES OF COMMON STOCK
IN THE COMMUNITY OFFERING CATEGORY IS SUBJECT TO THE RIGHT OF THE COMPANY AND
THE BANK, IN THEIR SOLE DISCRETION, TO ACCEPT OR REJECT ANY SUCH ORDERS IN WHOLE
OR IN PART EITHER AT THE TIME OF RECEIPT OF AN ORDER OR AS SOON AS PRACTICABLE
THEREAFTER.
If there are not sufficient shares available to fill orders in the
Community Offering, such stock will be allocated first to each natural person
(or trust established by such person) residing in the Local Community whose
order is accepted by the Holding Company, in an amount equal to the lesser of
1,000 shares or the number of shares subscribed for by each such subscriber in
the Local Community, if possible. Thereafter, unallocated shares will be
allocated among the subscribers in the Local Community whose orders remain
unsatisfied in the same proportion that the unfilled subscription of each bears
to the total unfilled subscriptions of all subscribers in the Local Community
whose subscription remains unsatisfied. If there are any shares remaining,
shares will be allocated to other members of the general public who subscribe in
the Community Offering applying the same allocation described above for
subscribers in the Local Community.
SYNDICATED COMMUNITY OFFERING. As part of the Community Offering, all
shares of Common Stock not purchased in the Subscription and Community
Offerings, if any, may be offered for sale to the general public in a Syndicated
Community Offering through a syndicate of registered broker-dealers to be formed
and managed by Trident Securities. The Holding Company and the Bank expect to
market any shares which remain unsubscribed after the Subscription and Community
Offerings through a Syndicated Community Offering. The Holding Company and the
Bank have the right to reject orders in whole or part in their sole discretion
in the Syndicated Community Offering. Neither Trident Securities nor any
registered broker-dealer shall have any obligation to take or purchase any
shares of Common Stock in the Syndicated Community Offering; however, Trident
Securities has agreed to use its best efforts in the sale of shares in the
Syndicated Community Offering.
The price at which Common Stock is sold in the Syndicated Community
Offering will be the same price as in the Subscription and Community Offerings.
Subject to overall purchase limitations, no person will be permitted to
subscribe in the Syndicated Community Offering for more than the lesser of
$200,000 or or 5% of the shares of Common Stock sold in the Stock Conversion.
Trident Securities may enter into agreements with broker-dealers
("Selected Dealers") to assist in the sale of the shares in the Syndicated
Community Offering. No orders may be placed or filled by or for a Selected
Dealer
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during the Subscription Offering. After the close of the Subscription Offering,
Trident Securities will instruct Selected Dealers as to the number of shares to
be allocated to each Selected Dealer. Only after the close of the Subscription
Offering and upon allocation of shares to Selected Dealers may Selected Dealers
take orders from their customers. During the Subscription and Community
Offerings, Selected Dealers may only solicit indications of interest from their
customers to place orders with the Holding Company as of a certain date ("Order
Date") for the purchase of shares of Common Stock. When and if Trident
Securities and the Holding Company believe that enough indications of interest
and orders have not been received in the Subscription and Community Offerings to
consummate the Stock Conversion, Trident Securities will request, as of the
Order Date, Selected Dealers to submit orders to purchase shares for which they
have previously received indications of interest from their customers. Selected
Dealers will send confirmations of the orders to such customers on the next
business day after the Order Date. Selected Dealers will debit the accounts of
their customers on the "Settlement Date" which date will be three business days
from the Order Date. Customers who authorize Selected Dealers to debit their
brokerage accounts are required to have the funds for payment in their account
on but not before the Settlement Date. On the Settlement Date, Selected Dealers
will remit funds to the account established by the Bank for each Selected
Dealer. Each customer's funds so forwarded to the Bank, along with all other
accounts held in the same title, will be insured by the FDIC up to $100,000 in
accordance with applicable FDIC regulations. After payment has been received by
the Bank from Selected Dealers, funds will earn interest at the Bank's passbook
rate until the consummation or termination of the Stock Conversion. Funds will
be promptly returned, with interest, in the event the Stock Conversion is not
consummated as described above.
The Syndicated Community Offering will terminate no more than 45 days
following the Subscription Expiration Date, unless extended by the Holding
Company and the Bank with the approval of the OTS.
LIMITATIONS ON PURCHASE OF SHARES. The Plan also provides for certain
additional limitations to be placed upon the purchase of shares in the Stock
Conversion. Specifically, no person (other than a Tax-Qualified Employee Plan)
by himself or herself or with an associate, and no group of persons acting in
concert, may subscribe for or purchase more than the lesser of $200,000 or 5% of
the Common Stock sold in the Stock Conversion. Officers and directors and their
associates may not purchase, in the aggregate, more than 34% of the shares to be
sold in the Stock Conversion. For purposes of the Plan of Conversion, the
members of the Board of Directors are not deemed to be acting in concert solely
by reason of their Board membership. For purposes of this limitation, an
associate of a person does not include a Tax-Qualified Employee Plan or Non-Tax-
Qualified Employee Plan. Also, for purposes of this limitation, an associate of
an officer or director does not include a Tax-Qualified Employee Plan or a
recognition and retention plan, such as the RRP. Moreover, any shares
attributable to the officers and directors and their associates, but held by a
Tax-Qualified Employee Plan (other than that portion of a plan which is self-
directed) shall not be included in calculating the number of shares which may be
purchased under the limitations in this paragraph. Shares purchased by
employees who are not officers or directors of the Bank, or their associates,
are not subject to this limitation. The term "associate" is used above to
indicate any of the following relationships with a person: (i) any corporation
or organization (other than the Holding Company or the Bank or a majority-owned
subsidiary of the Holding Company or the Bank) of which a person is an officer
or partner or is, directly or indirectly, the beneficial owner of 10% or more of
any class of equity security; (ii) any trust or other estate in which such
person has a substantial beneficial interest or as to which such person serves
as trustee or in a similar fiduciary capacity; and (iii) any relative or spouse
of such person or any relative of such spouse who has the same home as such
person or who is a director or officer of the Holding Company or the Bank or any
subsidiary of the Holding Company or the Bank.
The Boards of Directors of the Holding Company and the Bank may, in
their sole discretion, decrease the maximum purchase limitation referred to
above or increase the maximum purchase limitation up to 9.99% of the shares
being offered in the Stock Conversion, provided that orders for shares exceeding
5.0% of the shares being offered in the Stock Conversion shall not exceed, in
the aggregate, 10% of the shares being offered in the Stock Conversion. Requests
to purchase additional shares of Holding Company Common Stock under this
provision will be allocated by the Boards of Directors on a pro rata basis
giving priority in accordance with the priority rights set forth above.
DEPENDING UPON MARKET AND FINANCIAL CONDITIONS, AND SUBJECT TO CERTAIN
REGULATORY LIMITATIONS, THE BOARDS OF DIRECTORS OF THE HOLDING COMPANY AND THE
BANK, WITH THE APPROVAL OF THE OTS AND WITHOUT FURTHER APPROVAL OF THE MEMBERS,
MAY INCREASE OR DECREASE ANY OF THE ABOVE PURCHASE LIMITATIONS AT ANY TIME.
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To the extent that shares are available, each subscriber must subscribe for a
minimum of 25 shares. In computing the number of shares to be allocated, all
numbers will be rounded down to the next whole number.
Common Stock purchased in the Stock Conversion will be freely
transferable except for shares purchased by executive officers and directors of
the Bank or the Holding Company and except as described below. See "-
Restrictions on Transferability." In addition, under National Association of
Securities Dealers, Inc. ("NASD") guidelines, members of the NASD and their
associates are subject to certain restrictions on transfer of securities
purchased in accordance with Subscription Rights and to certain reporting
requirements upon purchase of such securities.
MARKETING ARRANGEMENTS
The Holding Company and the Bank have engaged Trident Securities as a
financial advisor and marketing agent in connection with the offering of the
Common Stock, and Trident Securities has agreed to use its best efforts to
solicit subscriptions and purchase orders for shares of Common Stock in the
Offerings. Trident Securities is a member of the NASD and an SEC-registered
broker-dealer. Trident Securities is headquartered in Raleigh, North Carolina.
Trident Securities will provide various services including, but not limited to,
(1) training and educating the Bank's directors, officers and employees
regarding the mechanics and regulatory requirements of the stock sales process;
(2) providing its employees to staff the Stock Information Center to assist the
Bank's customers and internal stock purchasers and to keep records of orders for
shares of Common Stock; and (3) targeting the Holding Company's sales efforts,
including preparation of marketing materials. Based upon negotiations between
the Holding Company and the Bank concerning fee structure, Trident Securities
will receive a commission equal to 1.85% of the aggregate dollar amount of the
common stock sold in the Subscription and Community Offerings to persons in the
Local Community, and a commission equal to 1.35% of the aggregate dollar amount
of the common stock sold in the Subscription and Community Offerings to persons
outside the Local Community. Commissions will not be paid on any shares
purchased by officers, directors, or employees of the Bank, or "associates" (as
defined in the Plan) of such persons, and no commissions will be paid on any
shares purchased by the Bank's employee benefit plans (including the ESOP). In
the event that a selected dealers agreement is entered into in connection with a
Syndicated Community Offering, the Bank will pay a fee to be determined to such
selected dealers, for shares sold by an NASD member firm pursuant to a selected
dealers agreement. Fees to Trident Securities and to any other broker-dealer
may be deemed to be underwriting fees, and Trident Securities and such broker-
dealers may be deemed to be underwriters. Trident Securities will also be
reimbursed for its reasonable out of pocket expenses, including legal fees and
expenses, in an amount not to exceed $31,500. Trident Securities has been paid
$10,000 as an advance against these expenses. The Holding Company and the Bank
have agreed to indemnify Trident Securities for reasonable costs and expenses in
connection with certain claims or liabilities, including certain liabilities
under the Securities Act.
In addition, directors and executive officers of the Holding Company
and the Bank, may to a limited extent and subject to applicable state law,
participate in the solicitation of offers to purchase Common Stock. Other
employees of the Bank may participate in the Subscription and Community Offering
in administrative capacities, providing clerical work in effecting a sales
transaction or answering questions of a potential purchaser provided that the
content of the employee's responses is limited to information contained in this
Prospectus or other offering document. Other questions of prospective purchasers
will be directed to registered representatives of Trident Securities. Such other
employees have been instructed not to solicit offers to purchase Common Stock or
provide advice regarding the purchase of Common Stock. Sales of Common Stock by
directors, executive officers and registered representatives will be made from
the Stock Information Center. The Holding Company will rely on Rule 3a4-1 under
the Exchange Act, and sales of Common Stock will be conducted within the
requirements of Rule 3a4-1, so as to permit officers, directors and employees to
participate in the sale of Common Stock except in some states where only
registered broker-dealers may sell. No officer, director or employee of the
Holding Company or the Bank will be compensated in connection with his
participation by the payment of commissions or other remuneration based either
directly or indirectly on the transactions in the Common Stock.
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STOCK PRICING AND NUMBER OF SHARES TO BE ISSUED
Federal regulations require that the aggregate Purchase Price of the
securities of a thrift institution sold in connection with its conversion must
be based on an appraised aggregate market value of the institution as converted
(i.e., taking into account the expected receipt of proceeds from the sale of the
securities in the conversion), as determined by an independent valuation.
Ferguson, which is experienced in the valuation and appraisal of business
entities, including thrift institutions involved in the conversion process, was
retained by the Bank to prepare an appraisal of the estimated pro forma market
value of the Holding Company and the Bank, as converted.
Ferguson will receive a fee of $19,000 for its appraisal and
assistance in preparation of the Bank's business plan plus reasonable out-of-
pocket expenses. The Holding Company has agreed to indemnify Ferguson, under
certain circumstances against liabilities and expenses (including legal fees)
arising out of, related to, or based upon the Stock Conversion.
Ferguson has prepared an appraisal of the estimated pro forma market
value of the Holding Company and the Bank, as converted, taking into account
market conditions for initial public offerings of thrift stocks and the
formation of Holding Company as the holding company for the Bank. Ferguson's
appraisal concluded that at September 20, 1996, an appropriate range for the
estimated pro forma market value of the Holding Company and the Bank, as
converted, ranged from a minimum of $3,825,000 to a maximum of $5,175,000, with
a midpoint of $4,500,000. Assuming that the shares are sold at $20.00 per share
in the Stock Conversion, the estimated number of shares to be issued in the
Stock Conversion is expected to be between 191,250 and 258,750. The appraisal
involved a comparative evaluation of the operating and financial statistics of
the Bank with those of other thrift institutions. The appraisal also took into
account such other factors as the market for thrift institution stocks
generally, prevailing economic conditions, both nationally and in Missouri,
which affect the operations of thrift institutions, the competitive environment
within which the Bank operates, the effect of the Bank becoming a subsidiary of
the Holding Company, and the effect of the Bank becoming a national bank. No
detailed individual analysis of the separate components of the Holding Company's
and the Bank's assets and liabilities was performed in connection with the
evaluation. The Plan of Conversion requires that all of the shares subscribed
for in the Subscription and Community Offering be sold at the same price per
share. The Board of Directors of the Holding Company and the Bank have reviewed
the appraisal of Ferguson and in determining the reasonableness and adequacy of
such appraisal consistent with OTS regulations and policies, have reviewed the
methodology and reasonableness of the assumptions utilized by Ferguson in the
preparation of such appraisal.
No sale of the shares will take place unless, prior thereto, Ferguson
confirms to the Bank, the Holding Company and the OTS that, to the best of
Ferguson's knowledge and judgment, nothing of a material nature has occurred
which would cause Ferguson to conclude that the actual aggregate Purchase Price
was incompatible with its estimate of the total pro forma market value of the
Common Stock at the time of the sale. If, however, the facts do not justify such
a statement, a new Estimated Valuation Range and price per share may be set.
Under such circumstances, the Holding Company will be required to resolicit, and
subscribers would have the right to modify or rescind their subscriptions and to
have their subscription funds returned promptly with interest and holds on funds
authorized for withdrawal from deposit accounts would be released or reduced;
provided that if the pro forma market value of the Bank upon the Stock
Conversion has not decreased below $3,825,000 or increased to an amount which
does not exceed $5,951,240 (15% above the maximum of the Estimated Valuation
Range), the Holding Company and the Bank do not intend to resolicit
subscriptions unless it is determined after consultation with the OTS that a
resolicitation is required.
Depending upon market and financial conditions, the number of shares
issued may be more or less than the range in number of shares shown above. A
decrease in the number of shares to be issued in the Stock Conversion would
increase a purchaser's ownership interest and both pro forma net income and net
worth on a per share basis while decreasing these amounts on an aggregate basis.
In the event of a resolicitation, subscribers will be afforded the opportunity
to increase, decrease or maintain their previously submitted order. In the event
a new valuation range is established by Ferguson, such new range will be subject
to approval by the OTS and the Holding Company will be required to resolicit.
The Holding Company will also be required to resolicit if the aggregate Purchase
Price of Common Stock sold in the Stock Conversion is less than the minimum of
the Estimated Valuation Range or above 15% above the maximum of the Estimated
Valuation Range.
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If purchasers cannot be found for an insignificant residue of
unsubscribed shares from the general public, other purchase arrangements will be
made by the Boards of Directors of the Bank and the Holding Company, if
possible. Such other purchase arrangements will be subject to the approval of
the OTS and may provide for purchases by directors, officers, their associates
and other persons in excess of the limitations discussed herein. If such other
purchase arrangements cannot be made, the Subscription and Community Offering
will terminate.
In preparing its valuation of the pro forma market value of the
Holding Company and the Bank, as converted, Ferguson relied upon and assumed the
accuracy and completeness of all financial and statistical information provided
by the Bank and the Holding Company. Ferguson also considered information based
upon other publicly available sources which it believes are reliable. However,
Ferguson does not guarantee the accuracy and completeness of such information
and did not independently verify the financial statements and other data
provided by the Bank and the Holding Company or independently value the assets
or liabilities of the Bank and the Holding Company. THE VALUATION BY FERGUSON IS
NOT INTENDED AND MUST NOT BE CONSTRUED AS A RECOMMENDATION OF ANY KIND AS TO THE
ADVISABILITY OF VOTING TO APPROVE THE STOCK CONVERSION OR OF PURCHASING SHARES
OF COMMON STOCK. MOREOVER, BECAUSE THE VALUATION IS NECESSARILY BASED UPON
ESTIMATES OF AND PROJECTIONS AS TO A NUMBER OF MATTERS (INCLUDING CERTAIN
ASSUMPTIONS AS TO EXPENSE FACTORS AFFECTING THE NET PROCEEDS FROM THE SALE OF
COMMON STOCK IN THE STOCK CONVERSION AND AS TO THE NET EARNINGS ON SUCH NET
PROCEEDS), ALL OF WHICH ARE SUBJECT TO CHANGE FROM TIME TO TIME, NO ASSURANCE
CAN BE GIVEN THAT PERSONS WHO PURCHASE SUCH SHARES IN THE STOCK CONVERSION WILL
BE ABLE TO SELL SUCH SHARES THEREAFTER AT OR ABOVE THE PURCHASE PRICE.
METHOD OF PAYMENT FOR SUBSCRIPTIONS
Subscribers must, before the Subscription Expiration Date, or such
date to which the Subscription Expiration Date may be extended, return an
original stock order form and certification to the Bank, properly completed,
together with cash, checks or money orders in an amount equal to the Purchase
Price ($20.00 per share) multiplied by the number of shares for which
subscription is made. Subscriptions which are returned by mail must be received
by the Bank by the Expiration Date. Payment for stock purchases can also be
accomplished through authorization on the order form of withdrawals from
accounts with the Bank. Until completion or termination of the Stock Conversion,
subscribers who elect to make payment through authorization of withdrawal from
accounts with the Bank will not be permitted to reduce the deposit balance in
any such accounts below the amount required to purchase the shares for which
they subscribed. In such cases interest will continue to be credited on deposits
authorized for withdrawal until the completion of the Stock Conversion. Interest
at the Bank's current passbook rate per annum will be paid on amounts submitted
in cash, check, bank draft or money order. Authorized withdrawals from
certificate accounts for the purchase of Common Stock will be permitted without
the imposition of early withdrawal penalties or loss of interest. However,
withdrawals from certificate accounts that reduce the balance of said accounts
below the required minimum for specific interest rate qualification will cause
the cancellation of the certificate accounts, and the remaining balance will
earn interest at the Bank's current passbook rate per annum.
The beneficiaries of Individual Retirement Accounts ("IRAs") are
deemed to have the same subscription rights as other depositors. However, the
IRA accounts maintained at the Bank do not permit investment in Common Stock. A
depositor interested in using his IRA funds to purchase Common Stock must do so
through a self-directed IRA account. Since the Bank does not offer such
accounts, it will allow such a depositor to make a trustee to trustee transfer
or other form of transfer of the IRA on deposit at the Bank. There will be no
early withdrawal or IRS penalties for such transfers. The new trustee would hold
the Common Stock in a self-directed account in the same manner as the Bank now
holds the depositor's IRA funds. An annual administrative fee might be payable
to the new trustee. The Bank assumes no responsibility as to the selection of,
or services performed by, a new trustee.
Depositors interested in transferring IRA funds on deposit at the Bank
to purchase Common Stock should contact the Stock Information Center at (816)
________ as soon as possible so that the necessary forms may be completed prior
to the Expiration Date of the Subscription Offering. THIS PROCESS CANNOT BE DONE
THROUGH THE MAIL AND SUFFICIENT TIME SHOULD BE ALLOWED FOR THE COMPLETION OF THE
TRANSFER.
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Stock subscriptions received by the Bank may not be modified,
withdrawn or canceled by the subscriber without the consent of the Bank and, if
accepted by the Bank, are final. SUBSCRIPTIONS WHICH ARE NOT RECEIVED BY THE
SUBSCRIPTION EXPIRATION DATE OR ARE NOT IN COMPLIANCE WITH THE PLAN OF
CONVERSION OR THE STOCK ORDER FORM INSTRUCTIONS MAY BE DEEMED VOID BY THE BANK.
The Bank and the Holding Company have the right to extend the Subscription
Expiration Date, unless objected to by the OTS, or to waive or permit correction
of incomplete or improperly executed stock order forms, but does not represent
that they will do so.
If Tax-Qualified Employee Plans subscribe for shares during the
Subscription Offering, such plans will not be required to pay for the shares
subscribed for at the time they subscribe, but may pay for such shares of Common
Stock subscribed for by such plans at the actual Purchase Price upon
consummation of the Stock Conversion, provided that, in the case of the ESOP,
there is a loan commitment to lend to the ESOP the aggregate Purchase Price of
the shares for which it subscribes.
To ensure that each purchaser receives a Prospectus at least 48 hours
prior to the Subscription Expiration Date in accordance with Rule 15c2-8 under
the Exchange Act, no Prospectus will be mailed any later than five days prior to
such date or hand delivered any later than two days prior to such date.
Execution of the order form will confirm receipt or delivery in accordance with
Rule 15c2-8. Order forms will only be distributed with a Prospectus. The Bank
will accept for processing only orders submitted on original order forms.
Payment by check, money order, bank draft or debit authorization to an existing
account at the Bank must accompany the order form.
RISK OF DELAYED OFFERING
In the event that all shares of the Common Stock are not sold in the
Subscription Offering and Community Offering, the Bank and the Holding Company
may extend the Community Offering for a period of up to 45 days from the date of
the termination of the Subscription Offering. Further extensions are subject to
OTS approval and may be granted for successive periods, but not beyond 24 months
from the date of the Special Meeting.
A material delay in the completion of the sale of all unsubscribed
shares in the Community Offering may result in a significant increase in the
costs in completing the Stock Conversion. Significant changes in the Bank's
operations and financial condition, the aggregate market value of the shares to
be issued in the Stock Conversion and general market conditions may occur during
such material delay. In the event the Stock Conversion is not consummated within
24 months after the date of the Special Meeting, the Bank would charge accrued
Conversion costs to then current period operations.
APPROVAL, INTERPRETATION, AMENDMENT AND TERMINATION
All interpretations of the Plan of Conversion, as well as the
completeness and validity of order forms, will be made by the Bank and the
Holding Company and will be final, subject to the authority of the OTS and the
requirements of applicable law. The Plan of Conversion provides that, if deemed
necessary or desirable by the Boards of Directors of the Bank and the Holding
Company, the Plan of Conversion may be substantively amended (including an
amendment to eliminate the formation of the Holding Company as part of the Stock
Conversion) by the Boards of Directors of the Bank and the Holding Company, as a
result of comments from regulatory authorities or otherwise, at any time but
only with the concurrence of the OTS. Moreover, if the Plan of Conversion is
amended, subscriptions which have been received prior to such amendment will not
be refunded if such amendment is not material to the transaction or otherwise
required by the OTS.
In the event that a decision is made to eliminate the Holding Company
as part of the Stock Conversion, the Holding Company will withdraw its
registration statement from the SEC and the Bank will take all steps necessary
to complete the Stock Conversion without the Holding Company, including filing
any necessary documents with the OTS. In such event, and provided there is no
regulatory action, directive or other consideration upon which basis the Bank
determines not to complete the Stock Conversion, if permitted by the OTS the
Bank will issue and sell the common stock of the Bank and subscribers will be
notified of the elimination of the Holding Company and resolicited (i.e.,
permitted to affirm their orders, in which case they will need affirmatively to
reconfirm their subscriptions prior to the expiration of the resolicitation
offering or their funds will be promptly refunded with interest at the Bank's
current passbook rate per annum; or be permitted to modify or rescind their
subscriptions)
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and notified of the time period within which they must affirmatively notify the
Bank of their intention to affirm, modify or rescind their subscription. In the
event that a holding company form of organization is not used, all other
pertinent terms of the Plan of Conversion as described in "- Offering of Holding
Company Common Stock" will apply to the conversion of the Bank from the mutual
to stock form of organization and the sale of the Bank's common stock, as well
as the subsequent charter conversion of the Converted Bank to the National Bank.
The Plan of Conversion will terminate if the sale of all shares is not
completed within 24 months after the date of the Special Meeting. The Plan of
Conversion may be terminated by the Board of Directors of the Bank with the
concurrence of the OTS at any time. A specific resolution approved by a two-
thirds vote of the Board of Directors would be required to terminate the Plan of
Conversion prior to the end of such 24-month period. See "Risk Factors -Possible
Consequences of Amendment to Plan of Conversion."
RESTRICTIONS ON REPURCHASE OF STOCK
For a period of three years following Conversion, the Holding Company
may not repurchase any shares of its capital stock, except in the case of an
offer to repurchase on a pro rata basis made to all holders of capital stock of
the Holding Company. Any such offer shall be subject to the prior approval of
the OTS. Furthermore, the Holding Company may not repurchase any of its stock
(i) if the result thereof would be to reduce the regulatory capital of the Bank
below the amount required for the liquidation account to be established pursuant
to OTS regulations and (ii) except in compliance with the requirements of the
OTS' capital distribution rule.
The above limitations are subject to the OTS conversion rules which
generally provide that the Holding Company may repurchase its capital stock
provided (i) no repurchases occur within one year following the Stock Conversion
(except with OTS approval), (ii) repurchases during the second and third year
after conversion are part of an open market stock repurchase program that does
not allow for a repurchase of more than 5% of the Holding Company's outstanding
capital stock during a 12-month period, (iii) the repurchases do not cause the
Bank to become undercapitalized, and (iv) the Holding Company provides notice or
an application to the OTS at least ten days prior to the commencement of a
repurchase program and the OTS does not object. In addition, the above
limitations do not preclude repurchases of capital stock by the Holding Company
as otherwise permitted by the OTS or in the event applicable federal regulatory
limitations are subsequently liberalized.
RESTRICTIONS ON TRANSFERABILITY
THE SUBSCRIPTION RIGHTS DESCRIBED IN THIS PROSPECTUS ARE NON-
TRANSFERABLE AND SHALL BE AWARDED TO ELIGIBLE PERSONS WITHOUT PAYMENT. PRIOR TO
THE COMPLETION OF THE STOCK CONVERSION, FEDERAL REGULATIONS PROHIBIT ANY PERSON
FROM TRANSFERRING OR ENTERING INTO ANY AGREEMENT OR UNDERSTANDING TO TRANSFER
THE LEGAL OR BENEFICIAL OWNERSHIP OF THE SUBSCRIPTION RIGHTS ISSUED UNDER THE
PLAN OF CONVERSION OR THE SHARES OF COMMON STOCK TO BE ISSUED UPON THEIR
EXERCISE. PERSONS VIOLATING SUCH PROHIBITION MAY LOSE THEIR RIGHT TO PURCHASE
STOCK IN THE STOCK CONVERSION AND MAY BE SUBJECT TO SANCTIONS BY THE OTS. EACH
PERSON EXERCISING SUBSCRIPTION RIGHTS WILL BE REQUIRED TO CERTIFY THAT A
PURCHASE OF COMMON STOCK IS SOLELY FOR THE PURCHASER'S OWN ACCOUNT AND THAT
THERE IS NO AGREEMENT OR UNDERSTANDING REGARDING THE SALE OR TRANSFER OF SUCH
SHARES. THE BANK AND THE HOLDING COMPANY WILL PURSUE ANY AND ALL LEGAL AND
EQUITABLE REMEDIES IN THE EVENT THEY BECOME AWARE OF THE TRANSFER OF
SUBSCRIPTION RIGHTS AND WILL NOT HONOR ORDERS KNOWN BY THEM TO INVOLVE THE
TRANSFER OF SUCH RIGHTS.
Shares purchased by directors, executive officers or their associates
in the Stock Conversion shall be subject to the restrictions that said shares
shall not be sold during the period of one year following the date of purchase,
except in the event of the death of the stockholder or resulting from an
exchange of securities in a merger or acquisition approved by applicable
regulatory authorities, in which event such restriction shall be released.
Accordingly, stock certificates issued by the Holding Company to directors,
executive officers and associates shall bear a legend giving appropriate notice
of such restriction and, in addition, the Bank and the Holding Company will give
appropriate instructions to the transfer agent for the Holding Company's Common
Stock with respect to the applicable restriction upon transfer of any restricted
shares. Any shares issued at a later date as a stock dividend, stock split or
otherwise, to holders of restricted stock, shall be subject to the same
restrictions that may apply to such restricted stock. Holding Company stock
(like the stock of most companies) is subject to the requirements of
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the Securities Act. Accordingly, Holding Company stock may be offered and sold
only in compliance with such registration requirements or pursuant to an
applicable exemption from registration.
OTS regulations provide that for a period of three years following the
Conversion, without prior approval of the OTS, neither directors and officers of
the Holding Company, the Bank nor their associates may purchase shares of the
Holding Company, except from a broker registered with the SEC. This restriction
does not, however, apply to negotiated transactions involving more than one
percent of the Holding Company's outstanding Common Stock or the purchase of
stock made by or held by any one or more employee stock benefit plans which may
be attributable to individual directors or officers.
Holding Company stock received in the Stock Conversion by persons who
are not "affiliates" of the Holding Company may be resold without registration.
Shares received by affiliates of the Holding Company (primarily the directors,
officers and principal stockholders of the Holding Company) will be subject to
the resale restrictions of Rule 144 under the Securities Act, which are
discussed below. Rule 144 generally requires that there be publicly available
certain information concerning the Holding Company, and that sales thereunder be
made in routine brokerage transactions or through a market maker. If the
conditions of Rule 144 are satisfied, each affiliate (or group of persons acting
in concert with one or more affiliates) is entitled to sell in the public
market, without registration, in any three-month period, a number of shares
which does not exceed the greater of (i) 1% of the number of outstanding shares
of Holding Company stock, or (ii) if the stock is admitted to trading on a
national securities exchange or reported through the automated quotation system
of a registered securities association the average weekly reported volume of
trading during the four weeks preceding the sale.
INCOME TAX CONSEQUENCES
Consummation of the Stock Conversion is expressly conditioned upon
prior receipt by the Bank of either a ruling from the Internal Revenue Service
or an opinion of Luse Lehman Gorman Pomerenk & Schick, P.C. with respect to
federal taxation, and a ruling of the Missouri taxation authorities or an
opinion of Lockridge, Constant & Conrad, LLC with respect to Missouri taxation,
to the effect that consummation of the Stock Conversion will not be taxable to
the Converted Bank or the Holding Company.
An opinion has been received from Luse Lehman Gorman Pomerenk &
Schick, P.C. with respect to the proposed Stock Conversion of the Bank, to the
effect that (i) the Stock Conversion will qualify as a reorganization under
Section 368(a)(1)(F) of the Code, and no gain or loss will be recognized to the
Bank in either its mutual form or its stock form by reason of the proposed Stock
Conversion, (ii) no gain or loss will be recognized to the Bank upon the receipt
of money from the Holding Company for stock of the Bank; and no gain or loss
will be recognized to the Holding Company upon the receipt of money for Common
Stock of the Holding Company; (iii) the assets of the Bank in either its mutual
or its stock form will have the same basis before and after the Stock
Conversion; (iv) the holding period of the assets of the Bank will include the
period during which the assets were held by the Bank in its mutual form prior to
conversion; (v) no gain or loss will be recognized by the depositors of the Bank
upon the issuance to them of withdrawable deposit accounts in the Bank after the
Stock Conversion in the same dollar amount as their deposit accounts in the Bank
plus an interest in the Liquidation Account of the Bank, as described above, in
exchange for their deposit account in the Bank; (vi) the basis of the account
holder's deposit accounts in the Bank after the Stock Conversion will be the
same as the basis of his deposit accounts in the Bank prior to the Stock
Conversion; (vii) the basis of each account holder's interest in the Liquidation
Account will be zero; (viii) the basis of the Holding Company Common Stock to
its shareholders will be the Purchase Price thereof plus, in the case of stock
acquired by account holders, the basis, if any, in the Subscription Rights and a
shareholder's holding period for Holding Company Common Stock acquired through
the exercise of Subscription Rights shall begin on the date on which the
Subscription Rights are exercised; (ix) for purposes of Section 381 of the Code,
the Bank will be treated as if there had been no reorganization, accordingly,
the taxable year of the Bank will not end on the effective date of the Stock
Conversion and the tax attributes of the Bank will be taken into account by the
Bank in stock form as if there had been no reorganization; (x) the part of the
taxable year of the Bank before the reorganization and the part of the taxable
year of the Bank after the reorganization will constitute a single taxable year
of the Bank; (xi) the Bank, immediately after Stock Conversion, will succeed to
the bad debt reserve accounts of the Bank, in mutual form, and the bad debt
reserves will have the same character in the hands of the Bank after Stock
Conversion as if no distribution or transfer had occurred; and (xii) the
creation of the
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liquidation account will have no effect on the Bank's taxable income, deductions
or addition to reserve for bad debts either in its mutual or stock form.
The opinion from Luse Lehman Gorman Pomerenk & Schick, P.C. is based,
among other things, on certain assumptions, including the assumptions that the
exercise price of the Subscription Rights to purchase Holding Company Common
Stock will be approximately equal to the fair market value of that stock at the
time of the completion of the proposed Stock Conversion. The Holding Company and
the Bank have received a letter issued by Ferguson stating that pursuant to
Ferguson's valuation, Ferguson is of the belief that Subscription Rights issued
in connection with the Stock Conversion will have no value. The letter of
Ferguson and the federal and state tax opinions, respectively, referred to
herein are filed as exhibits to the Registration Statement. See "Additional
Information."
The Bank has also received an opinion of Luse Lehman Gorman Pomerenk &
Schick, P.C. to the effect that, based in part on the Ferguson Letter: (i) no
taxable income will be realized by depositors as a result of the receipt or
exercise of non-transferable Subscription Rights to purchase shares of Holding
Company Common Stock at fair market value; and (ii) no taxable income will be
realized by the Bank or Holding Company on the issuance of Subscription Rights
to eligible subscribers to purchase shares of Holding Company Common Stock at
fair market value.
If it is subsequently established that the Subscription Rights
received by such persons have an ascertainable fair market value, then, in such
event, the Subscription Rights will be taxable to the recipient in the amount of
their fair market value. In this regard, the Subscription Rights may be taxed
partially or entirely at ordinary income tax rates.
With respect to Missouri taxation, the Bank has received an opinion
from Lockridge, Constant & Conrad, LLC to the effect that, assuming the Stock
Conversion does not result in any federal taxable income, gain or loss to the
Bank in its mutual or stock form, the Holding Company, the account holders,
borrowers, officers, directors and employees and Tax-Qualified Employee Plans of
the Bank, the Stock Conversion should not result in any Missouri income tax
liability to such entities or persons.
Unlike a private letter ruling, the opinions of Luse Lehman Gorman
Pomerenk & Schick, P.C. and Lockridge, Constant & Conrad, LLC, as well as the
Ferguson Letter, have no binding effect or official status, and no assurance can
be given that the conclusions reached in any of those opinions would be
sustained by a court if contested by the IRS or the Missouri tax authorities.
RESTRICTIONS ON ACQUISITIONS OF STOCK AND
RELATED TAKEOVER DEFENSIVE PROVISIONS
Although the Boards of Directors of the Bank and the Holding Company
are not aware of any effort that might be made to obtain control of the Holding
Company after Conversion, the Boards of Directors, as discussed below, believe
that it is appropriate to include certain provisions as part of the Holding
Company's certificate of incorporation to protect the interests of the Holding
Company and its stockholders from takeovers which the Board of Directors of the
Holding Company might conclude are not in the best interests of the Bank, the
National Bank, the Holding Company or the Holding Company's stockholders.
The following discussion is a general summary of the material
provisions of the Holding Company's certificate of incorporation and bylaws and
certain other regulatory provisions which may be deemed to have an "anti-
takeover" effect. The following description of certain of these provisions is
necessarily general and, with respect to provisions contained in the Holding
Company's certificate of incorporation and bylaws, the Bank's proposed stock
charter and bylaws, and the National Bank's proposed articles and bylaws,
reference should be made in each case to the document in question, each of which
is part of the Bank's application to the OTS and the OCC and the Holding
Company's Registration Statement filed with the SEC and holding company
application filed with the FRB. See "Additional Information."
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PROVISIONS OF THE HOLDING COMPANY'S CERTIFICATE OF INCORPORATION AND BYLAWS
DIRECTORS. Certain provisions of the Holding Company's certificate of
incorporation and bylaws will impede changes in majority control of the Board of
Directors. The Holding Company's certificate of incorporation provides that the
Board of Directors of the Holding Company will be divided into three classes,
with directors in each class elected for three-year staggered terms except for
the initial directors. Thus, it would take two annual elections to replace a
majority of the Holding Company's Board. The Holding Company's certificate of
incorporation provides that the size of the Board of Directors may be increased
or decreased only by a majority vote of the Board. The certificate of
incorporation also provides that any vacancy occurring in the Board of
Directors, including a vacancy created by an increase in the number of
directors, shall be filled for the remainder of the unexpired term by a majority
vote of the directors then in office. Finally, the certificate and bylaws impose
certain notice and information requirements in connection with the nomination by
stockholders of candidates for election to the Board of Directors or the
proposal by stockholders of business to be acted upon at an annual meeting of
stockholders.
The certificate of incorporation provides that a director may only be
removed for cause by the affirmative vote of 80% of the shares eligible to vote.
Removal for "cause" is limited to the grounds for termination in the federal
regulations that applies to employment contracts of federally insured savings
institutions.
RESTRICTIONS ON CALL OF SPECIAL MEETINGS. The certificate of
incorporation of the Holding Company provides that a special meeting of
stockholders may be called by the Chairman of the Board of the Holding Company
or pursuant to a resolution adopted by a majority of the Board of Directors.
Stockholders are not authorized to call a special meeting.
ABSENCE OF CUMULATIVE VOTING. The Holding Company's certificate of
incorporation provides that there shall be no cumulative voting rights in the
election of directors.
AUTHORIZATION OF PREFERRED STOCK. The certificate of incorporation of
the Holding Company authorizes 100,000 shares of serial preferred stock, without
par value. The Holding Company is authorized to issue preferred stock from time
to time in one or more series subject to applicable provisions of law; and the
Board of Directors is authorized to fix the designations, and relative
preferences, limitations, voting rights, if any, including without limitation,
conversion rights of such shares (which could be multiple or as a separate
class). In the event of a proposed merger, tender offer or other attempt to gain
control of the Holding Company that the Board of Directors does not approve, it
might be possible for the Board of Directors to authorize the issuance of a
series of preferred stock with rights and preferences that would impede the
completion of such a transaction. An effect of the possible issuance of
preferred stock, therefore, may be to deter a future takeover attempt. The Board
of Directors has no present plans or understandings for the issuance of any
preferred stock but it may issue any preferred stock on terms which the Board
deems to be in the best interests of the Holding Company and its stockholders.
LIMITATION ON VOTING RIGHTS. The certificate of incorporation of the
Holding Company provides that (i) no person shall directly or indirectly offer
to acquire or acquire the beneficial ownership of more than 10% of any class of
equity security of the Holding Company (provided that such limitation shall not
apply to the acquisition of equity securities by any one or more tax-qualified
employee stock benefit plans maintained by the Holding Company, if the plan or
plans beneficially own no more than 25% of any class of such equity security of
the Holding Company); and that (ii) shares beneficially owned in violation of
the stock ownership restriction described above shall not be entitled to vote
and shall not be voted by any person or counted as voting stock in connection
with any matter submitted to a vote of stockholders. For these purposes, a
person (including management) who has obtained the right to vote shares of the
Common Stock pursuant to revocable proxies shall not be deemed to be the
"beneficial owner" of those shares if that person is not otherwise deemed to be
a beneficial owner of those shares.
The certificate of incorporation of the Holding Company further
provides that the Board of Directors of the Holding Company, when determining to
take or refrain from taking corporate action on any matter, including making or
declining to make any recommendation to the Holding Company's stockholders, may,
in connection with the exercise of its judgment in determining what is in the
best interest of the Holding Company, the Bank, the
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National Bank and the stockholders of the Holding Company, give due
consideration to all relevant factors, including, without limitation, the social
and economic effects of acceptance of such offer on the Holding Company's
customers and the Bank's (and the National Bank's) present and future account
holders, borrowers and employees; the effect on the communities in which the
Holding Company and the Bank (and the National Bank) operate or are located; and
the effect on the ability of the Holding Company to fulfill the objectives of a
financial institution holding company and of the Bank (and the National Bank) or
future subsidiaries to fulfill the objectives of a financial institution under
applicable statutes and regulations. The certificate of incorporation of the
Holding Company also authorizes the Board of Directors to take certain actions
to encourage a person to negotiate for a change of control of the Holding
Company or to oppose such a transaction deemed undesirable by the Board of
Directors including the adoption of so-called shareholder rights plans. By
having these standards and provisions in the certificate of incorporation of the
Holding Company, the Board of Directors may be in a stronger position to oppose
such a transaction if the Board concludes that the transaction would not be in
the best interest of the Holding Company, even if the price offered is
significantly greater than the then market price of any equity security of the
Holding Company.
PROCEDURES FOR CERTAIN BUSINESS COMBINATIONS. The certificate of
incorporation of the Holding Company requires that certain business combinations
between the Holding Company (or any majority-owned subsidiary thereof) and a 10%
or greater stockholder either (i) be approved by at least 80% of the total
number of outstanding voting shares of the Holding Company or (ii) be approved
by a majority of certain directors unaffiliated with such 10% or greater
stockholder or (iii) involve consideration per share generally equal to the
higher of (A) the highest amount paid by such 10% stockholder or its affiliates
in acquiring any shares of the Common Stock or (B) the "Fair Market Value"
(generally, the highest closing bid paid on the Common Stock during the 30 days
preceding the date of the announcement of the proposed business combination or
on the date the 10% or greater stockholder became such, whichever is higher).
AMENDMENT TO CERTIFICATE OF INCORPORATION AND BYLAWS. Amendments to
the Holding Company's certificate of incorporation must be approved by the
Holding Company's Board of Directors and also by a majority of the outstanding
shares of the Holding Company's voting stock; provided, however, that approval
by at least 80% of the outstanding voting stock is generally required for
certain provisions (i.e., provisions relating to number, classification,
election and removal of directors, amendment of bylaws, call of special
stockholder meetings, criteria for evaluating certain offers, offers to acquire
and acquisitions of control, director liability, certain business combinations,
power of indemnification, and amendments to provisions relating to the foregoing
in the certificate of incorporation).
The bylaws may be amended by the affirmative vote of the total number
of directors of the Holding Company or the affirmative vote of at least 80% of
the total votes eligible to be voted at a duly constituted meeting of
stockholders.
PURPOSE AND TAKEOVER DEFENSIVE EFFECTS OF THE HOLDING COMPANY'S
CERTIFICATE OF INCORPORATION AND BYLAWS. The Board of Directors of the Bank
believes that the provisions described above are prudent and will reduce the
Holding Company's vulnerability to takeover attempts and certain other
transactions which have not been negotiated with and approved by its Board of
Directors. These provisions will also assist the Bank in the orderly deployment
of the Stock Conversion proceeds into productive assets during the initial
period after the Stock Conversion. The Board of Directors believes these
provisions are in the best interest of the Bank and of the Holding Company and
its stockholders. In the judgment of the Board of Directors, the Holding
Company's Board will be in the best position to determine the true value of the
Holding Company and to negotiate more effectively for what may be in the best
interests of its stockholders. Accordingly, the Board of Directors believes that
it is in the best interests of the Holding Company and its stockholders to
encourage potential acquirors to negotiate directly with the Board of Directors
of the Holding Company and that these provisions will encourage such
negotiations and discourage hostile takeover attempts. It is also the view of
the Board of Directors that these provisions should not discourage persons from
proposing a merger or other transaction at prices reflective of the true value
of the Holding Company and which is in the best interests of all stockholders.
Attempts to take over financial institutions and their holding
companies have become increasingly common. Takeover attempts which have not been
negotiated with and approved by the Board of Directors present to
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stockholders the risk of a takeover on terms which may be less favorable than
might otherwise be available. A transaction which is negotiated and approved by
the Board of Directors, on the other hand, can be carefully planned and
undertaken at an opportune time in order to obtain maximum value for the Holding
Company and its stockholders, with due consideration given to matters such as
the management and business of the acquiring corporation and maximum strategic
development of the Holding Company's assets.
An unsolicited takeover proposal can seriously disrupt the business
and management of a corporation and cause it great expense. Although a tender
offer or other takeover attempt may be made at a price substantially above then-
current market prices, such offers are sometimes made for less than all of the
outstanding shares of a target company. As a result, stockholders may be
presented with the alternative of partially liquidating their investment at a
time that may be disadvantageous or retaining their investment in an enterprise
which is under different management and whose objectives may not be similar to
those of the remaining stockholders. The concentration of control, which could
result from a tender offer or other takeover attempt, could also deprive the
Holding Company's remaining stockholders of the benefits of certain protective
provisions of the Exchange Act, if the number of beneficial owners becomes less
than the 300 required for Exchange Act registration.
POTENTIAL ANTI-TAKEOVER EFFECTS. Despite the belief of the Bank and
the Holding Company as to the benefits to stockholders of these provisions of
the Holding Company's certificate of incorporation and bylaws, these provisions
may also have the effect of discouraging a future takeover attempt which would
not be approved by the Holding Company's Board, but pursuant to which
stockholders may receive a substantial premium for their shares over then-
current market prices. As a result, stockholders who might desire to participate
in such a transaction may not have any opportunity to do so. Such provisions
will also render the removal of the Holding Company's Board of Directors and of
management more difficult. The Boards of Directors of the Bank and the Holding
Company, however, have concluded that the potential benefits outweigh the
possible disadvantages.
Pursuant to applicable law, at any annual or special meeting of its
stockholders after the Stock Conversion, the Holding Company may adopt
additional provisions to its certificate of incorporation regarding the
acquisition of its equity securities that would be permitted to a Delaware
corporation. The Holding Company and the Bank do not presently intend to propose
the adoption of further restrictions on the acquisition of the Holding Company's
equity securities.
OTHER RESTRICTIONS ON ACQUISITIONS OF STOCK
DELAWARE ANTI-TAKEOVER STATUTE. The State of Delaware has enacted
legislation which provides that subject to certain exceptions a publicly held
Delaware corporation may not engage in any business combination with an
"interested stockholder" for three years after such stockholder became an
interested stockholder, unless, among other things, the interested stockholder
acquired at least 85% of the corporation's voting stock in the transaction that
resulted in the stockholder becoming an interested stockholder. This legislation
generally defines "interested stockholder" as any person or entity that owns 15%
or more of the corporation's voting stock. The term "business combination" is
defined broadly to cover a wide range of corporate transactions, including
mergers, sales of assets, issuances of stock, transactions with subsidiaries and
the receipt of disproportionate financial benefits. Under certain circumstances,
either the board of directors or both the board and two-thirds of the
stockholders other than the acquiror may approve a given business combination
and thereby exempt the corporation from the operation of the statute.
However, these statutory provisions do not apply to Delaware
corporations with fewer than 2,000 stockholders or which do not have voting
stock listed on a national exchange or listed for quotation with a registered
national securities association. The Holding Company has applied to have the
Common Stock listed on the Nasdaq SmallCap Market.
OTS REGULATION. OTS regulations prohibit any person prior to the
completion of a conversion from transferring, or entering into any agreement or
understanding to transfer, the legal or beneficial ownership of the Subscription
Rights issued under a plan of conversion or the stock to be issued upon their
exercise. These regulations also prohibit any person prior to the completion of
a conversion from offering, or making an announcement of an offer or intent to
make an offer, to purchase such Subscription Rights or stock. For three years
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following conversion, this regulation prohibits any person, without the prior
approval of the OTS, from acquiring or making an offer (if opposed by the
institution) to acquire more than 10% of the stock of any converted savings
institution if such person is, or after consummation of such acquisition would
be, the beneficial owner of more than 10% of such stock. In the event that any
person, directly or indirectly, violates this regulation, the securities
beneficially owned by such person in excess of 10% shall not be counted as
shares entitled to vote and shall not be voted by any person or counted as
voting shares in connection with any matter submitted to a vote of stockholders.
Federal law provides that no company "directly or indirectly or acting
in concert with one or more persons, or through one or more subsidiaries, or
through one or more transactions," may acquire "control" of a savings
association at any time without the prior approval of the OTS. "Acting in
concert" is defined very broadly. In addition, federal regulations require that,
prior to obtaining control of a savings association, a person, other than a
company, must give 60 days' prior notice to the OTS and have received no OTS
objection to such acquisition of control. Any company that acquires such control
becomes a "savings and loan holding company" subject to registration,
examination and regulation as a savings and loan holding company. Under federal
law (as well as the regulations referred to below) the term "savings
association" includes state and federally chartered SAIF-insured institutions
and federally chartered savings banks whose accounts are insured by the FDIC's
BIF and holding companies thereof. Following completion of the Bank Conversion,
the control restrictions of the OTS will no longer be applicable.
Control, as defined under federal law, means ownership, control of or
holding irrevocable proxies representing more than 25% of any class of voting
stock, control in any manner of the election of a majority of the savings
association's directors, or a determination by the OTS that the acquiror has the
power to direct, or directly or indirectly to exercise a controlling influence
over, the management or policies of the institution. Acquisition of more than
10% of any class of a savings association's voting stock, if the acquiror also
is subject to any one of eight "control factors," constitutes a rebuttable
determination of control under the regulations. Such control factors include the
acquiror being one of the two largest stockholders. The determination of control
may be rebutted by submission to the OTS, prior to the acquisition of stock or
the occurrence of any other circumstances giving rise to such determination, of
a statement setting forth facts and circumstances which would support a finding
that no control relationship will exist and containing certain undertakings. The
regulations provide that persons or companies which acquire beneficial ownership
exceeding 10% or more of any class of a savings association's stock must file
with the OTS a certification that the holder is not in control of such
institution, is not subject to a rebuttable determination of control and will
take no action which would result in a determination or rebuttable determination
of control without prior notice to or approval of the OTS, as applicable.
FRB REGULATIONS. The CIBC and the BHCA, together with the FRB
regulations under those acts, require that the consent of the FRB be obtained
prior to any person or company acquiring "control" of a bank holding company.
Control is conclusively presumed to exist if an individual or company acquires
more than 25% of any class of voting stock of the bank holding company. Control
is rebuttably presumed to exist if the person acquires more than 10% of any
class of voting stock of a bank holding company if either (i) the Holding
Company has registered securities under Section 12 of the Exchange Act or (ii)
no other person will own a greater percentage of that class of voting securities
immediately after the transaction. The regulations provide a procedure to rebut
the rebuttable control presumption. Since the Holding Company's Common Stock
will be registered under Section 12 of the Exchange Act, any acquisition of 10%
or more of the Holding Company's Common Stock will give rise to a rebuttable
presumption that the acquiror of such stock controls the Holding Company,
requiring the acquiror, prior to acquiring such stock, to rebut the presumption
of control to the satisfaction of the FRB or obtain FRB approval for the
acquisition of control. Restrictions applicable to the operations of bank
holding companies may deter companies from seeking to obtain control of the
Holding Company. See "Regulation."
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DESCRIPTION OF CAPITAL STOCK
HOLDING COMPANY CAPITAL STOCK
The 1,000,000 shares of capital stock authorized by the Holding
Company certificate of incorporation are divided into two classes, consisting of
900,000 shares of Common Stock ($.01 par value) and 100,000 shares of serial
preferred stock ($.01 par value). The Holding Company currently expects to
issue between 191,250 and 258,750 shares of Common Stock in the Stock
Conversion. The aggregate stated value of the issued shares will constitute the
capital account of the Holding Company on a consolidated basis. The balance of
the Purchase Price of Common Stock, less expenses of Stock Conversion, will be
reflected as paid-in capital on a consolidated basis. See "Capitalization."
Upon payment of the Purchase Price for the Common Stock, in accordance with the
Plan of Conversion, all such stock will be duly authorized, fully paid, validly
issued and nonassessable.
Each share of the Common Stock will have the same relative rights and
will be identical in all respects with each other share of the Common Stock.
The Common Stock of the Holding Company will represent non-withdrawable capital,
will not be of an insurable type and will not be insured by the FDIC.
Under Delaware law, the holders of the Common Stock will possess
exclusive voting power in the Holding Company. Each stockholder will be
entitled to one vote for each share held on all matters voted upon by
stockholders, subject to the limitation discussed under "Restrictions on
Acquisitions of Stock and Related Takeover Defensive Provisions - Provisions of
the Holding Company's Certificate of Incorporation and Bylaws - Limitation on
Voting Rights." If the Holding Company issues preferred stock subsequent to the
Stock Conversion, holders of the preferred stock may also possess voting powers.
LIQUIDATION OR DISSOLUTION. In the unlikely event of the liquidation
or dissolution of the Holding Company, the holders of the Common Stock will be
entitled to receive -- after payment or provision for payment of all debts and
liabilities of the Holding Company (including all deposits in the Bank and
accrued interest thereon) and after distribution of the liquidation account
established upon Stock Conversion for the benefit of Eligible Account Holders
and Supplemental Eligible Account Holders who continue their deposit accounts at
the Bank -- all assets of the Holding Company available for distribution, in
cash or in kind. See "The Conversion - Effects of Conversion to Stock Form on
Depositors and Borrowers of the Bank." If preferred stock is issued subsequent
to the Stock Conversion, the holders thereof may have a priority over the
holders of Common Stock in the event of liquidation or dissolution.
NO PREEMPTIVE RIGHTS. Holders of the Common Stock will not be
entitled to preemptive rights with respect to any shares which may be issued.
The Common Stock will not be subject to call for redemption, and, upon receipt
by the Holding Company of the full purchase price therefor, each share of the
Common Stock will be fully paid and nonassessable.
PREFERRED STOCK. After Stock Conversion, the Board of Directors of
the Holding Company will be authorized to issue preferred stock in series and to
fix and state the voting powers, designations, preferences and relative,
participating, optional or other special rights of the shares of each such
series and the qualifications, limitations and restrictions thereof. Preferred
stock may rank prior to the Common Stock as to dividend rights, liquidation
preferences, or both, and may have full or limited voting rights. The holders
of preferred stock will be entitled to vote as a separate class or series under
certain circumstances, regardless of any other voting rights which such holders
may have.
Except as discussed herein, the Holding Company has no present plans
for the issuance of the additional authorized shares of Common Stock or for the
issuance of any shares of preferred stock. In the future, the authorized but
unissued and unreserved shares of Common Stock will be available for general
corporate purposes including but not limited to possible issuance as stock
dividends or stock splits, in future mergers or acquisitions, under a cash
dividend reinvestment and stock purchase plan, in a future underwritten or other
public offering or under an employee stock ownership plan, stock option or
restricted stock plan. The authorized but unissued shares of preferred stock
will similarly be available for issuance in future mergers or acquisitions, in a
future underwritten
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public offering or private placement or for other general corporate purposes.
Except as described above or as otherwise required to approve the transaction in
which the additional authorized shares of Common Stock or authorized shares of
preferred stock would be issued, no stockholder approval will be required for
the issuance of these shares. Accordingly, the Board of Directors of the
Holding Company, without stockholder approval, can issue preferred stock with
voting and conversion rights which could adversely affect the voting power of
the holders of Common Stock.
RESTRICTIONS ON ACQUISITIONS. See "Restrictions on Acquisitions of
Stock and Related Takeover Defensive Provisions" for a description of certain
provisions of the Holding Company's certificate of incorporation and bylaws
which may affect the ability of the Holding Company's stockholders to
participate in certain transactions relating to acquisitions of control of the
Holding Company.
DIVIDENDS. Upon consummation of the formation of the Holding Company,
the Holding Company's only asset will be the Bank's Common Stock. Although it
is anticipated that the Holding Company will retain approximately 50% of the net
proceeds in the Stock Conversion, dividends from the Bank will be an important
source of income for the Holding Company. Should the Bank elect to retain its
income, the ability of the Holding Company to pay dividends to its own
shareholders may be adversely affected. Furthermore, if at any time in the
future the Holding Company owns less than 80% of the outstanding stock of the
Bank, certain tax benefits under the Code as to inter-company distributions will
not be fully available to the Holding Company and it will be required to pay
federal income tax on a portion of the dividends received from the Bank, thereby
reducing the amount of income available for distribution to the shareholders of
the Holding Company. For further information concerning the ability of the
Bank, and following the Bank Conversion, the National Bank, to pay dividends to
the Holding Company, see "Dividends."
LEGAL AND TAX MATTERS
The legality of the Common Stock and the federal income tax
consequences of the Conversion will be passed upon for the Bank and the Holding
Company by the firm of Luse Lehman Gorman Pomerenk & Schick, P.C., Washington,
D.C. The Missouri state income tax consequences of the Conversion will be
passed upon for the Bank and the Holding Company by Lockridge, Constant &
Conrad, LLC, Chillicothe, Missouri. Luse Lehman Gorman Pomerenk & Schick, P.C.
and Lockridge, Constant & Conrad, LLC have consented to the references herein to
their opinions. Certain legal matters regarding the Conversion will be passed
upon for Trident Securities by Breyer & Aguggia, Washington, D.C.
EXPERTS
The Consolidated Financial Statements of the Bank as of June 30, 1996
and 1995, and for the fiscal years ended June 30, 1996 and 1995 have been
included in this Prospectus in reliance on the report of Lockridge, Constant &
Conrad, LLC, certified public accountants, appearing elsewhere herein, and upon
the authority of that firm as experts in accounting and auditing.
Ferguson has consented to the publication herein of the summary of its
report to the Bank and the Holding Company setting forth its opinion as to the
estimated pro forma market value of the Common Stock upon Conversion and its
valuation with respect to Subscription Rights.
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ADDITIONAL INFORMATION
The Holding Company has filed with the SEC a registration statement
under the Securities Act, with respect to the Common Stock offered hereby. As
permitted by the rules and regulations of the SEC, this Prospectus does not
contain all the information set forth in the registration statement. Such
information can be examined without charge at the public reference facilities of
the SEC located at 450 Fifth Street, NW, Washington, D.C. 20549, and copies of
such material can be obtained from the SEC at prescribed rates. The statements
contained herein as to the contents of any contract or other document filed as
an exhibit to the registration statement are, of necessity, brief descriptions
thereof and are not necessarily complete but do contain all material information
regarding such documents; each such statement is qualified by reference to such
contract or document.
The Bank has filed an Application for Conversion with the OTS with
respect to the Stock Conversion. Pursuant to the rules and regulations of the
OTS, this Prospectus omits certain information contained in that Application.
The Application may be examined at the principal offices of the OTS, 1700 G
Street, N.W., Washington, D.C. 20552 and at the Midwest Regional Office of the
OTS located at 122 W. John Carpenter Freeway, Suite 600, Irving, Texas 75039.
In connection with the Stock Conversion, the Holding Company will
register the Common Stock with the SEC under Section 12(g) of the Exchange Act;
and, upon such registration, the Holding Company and the holders of its Common
Stock will become subject to the proxy solicitation rules, reporting
requirements and restrictions on stock purchases and sales by directors,
officers and greater than 10% stockholders, the annual and periodic reporting
and certain other requirements of the Exchange Act. Under the Plan of
Conversion, the Holding Company has undertaken that it will not terminate such
registration for a period of at least three years following the Stock
Conversion.
A copy of the certificate of incorporation and bylaws of the Holding
Company are available without charge from the Bank.
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INVESTORS FEDERAL BANK AND SAVINGS ASSOCIATION
CHILLICOTHE, MISSOURI
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
Independent Auditors' Report................................. F-2
Consolidated Statements of Financial Condition
June 30, 1996 and 1995..................................... F-3
Consolidated Statements of Income for
the years ended June 30, 1996 and 1995..................... 35
Consolidated Statements of Retained Earnings
years ended June 30, 1996 and 1995......................... F-4
Consolidated Statements of Cash Flows for the
years ended June 30, 1996 and 1995......................... F-5
Notes to Consolidated Financial Statements................... F-7
</TABLE>
######
All financial statements of IFB Holdings, Inc. have been omitted because IFB
Holdings, Inc. has not yet issued any stock, has no assets and liabilities and
has not conducted any business other than of an organizational nature.
All schedules are omitted as the required information is not applicable or
because the required information is included in the consolidated financial
statements or related notes.
F-1
<PAGE>
[LOGO OF LOCKRIDGE, CONSTANT & CONRAD, LLC APPEARS HERE]
INDEPENDENT AUDITORS' REPORT
----------------------------
The Board of Directors
Investors Federal Bank and
Savings Association
Chillicothe, Missouri
We have audited the accompanying consolidated statements of financial condition
of Investors Federal Bank and Savings Association and Subsidiary as of June 30,
1996 and 1995, and the related consolidated statements of income, retained
earnings and cash flows for the years then ended. These financial statements
are the responsibility of the Association's management. Our responsibility is
to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to in the first
paragraph present fairly, in all material respects, the financial position of
Investors Federal Bank and Savings Association and Subsidiary as of June 30,
1996 and 1995, and the results of its operations and its cash flows for the
years then ended in conformity with generally accepted accounting principles.
As described in Note 1 to the consolidated financial statements, the Bank
changed its method of accounting for investment securities to conform with
Statement of Financial Accounting Standards No. 115 effective July 1, 1994.
/s/ Lockridge, Constant & Conrad LLC
September 25, 1996
Chillicothe, Missouri
F-2
<PAGE>
Investors Federal Bank and Savings Association and Subsidiary
Consolidated Statements of Financial Condition
<TABLE>
<CAPTION>
At June 30,
--------------------------
1996 1995
------------ ------------
ASSETS (In Thousands)
------ --------------
<S> <C> <C>
Cash on hand and non-interest earning deposits $ 471 $ 492
Interest-earning deposits 1,609 1,808
Certificates of deposit - 100
Investment securities (Note 2):
Securities available-for-sale at fair value 3,264 1,737
Securities held-to-maturity at amortized cost
(estimated market value of $215,000 and
$796,000, respectively) 215 815
Mortgage-backed securities (Note 3):
Securities available-for-sale at fair value 16,971 4,397
Securities held-to-maturity at amortized cost
(estimated market value of $8,341,000 for 1995) - 8,306
Loans receivable, net (Note 4) 28,429 26,340
Accrued interest receivable (Note 5) 457 322
Investment required by law - stock in
Federal Home Loan Bank, at cost 724 350
Premises and equipment (Note 6) 373 257
Other assets 74 89
------- -------
Total Assets $52,587 $45,013
======= =======
</TABLE>
LIABILITIES AND RETAINED EARNINGS
---------------------------------
<TABLE>
<CAPTION>
<S> <C> <C>
Deposits (Note 7) $35,495 $35,210
Federal Home Loan Bank advances (Note 8) 13,474 6,419
Advances from borrowers for taxes and insurance 35 50
Income taxes (Note 10):
Current 17 5
Deferred 101 163
Accrued expenses and other liabilities 197 124
------- -------
Total liabilities 49,319 41,971
------- -------
Commitments and contingencies (Note 14)
Retained earnings, substantially
restricted (Note 10) 3,339 3,037
Unrealized gain (loss) on securities
available-for-sale (71) 5
------- -------
Total retained earnings 3,268 3,042
------- -------
Total Liabilities and Retained Earnings $52,587 $45,013
======= =======
</TABLE>
See accompanying notes to consolidated financial statements.
F-3
<PAGE>
Investors Federal Bank and Savings Association and Subsidiary
Consolidated Statement of Equity
<TABLE>
<CAPTION>
Net
Unrealized
Unrealized Gains and
Retained Loss on (Losses)
Earnings Equity for Available-
Substantially Securities for-Sale
Restricted Held-for-Sale Securities Total
------------------- ------------------- ------------------- -------------------
(In Thousands)
<S> <C> <C> <C> <C>
Balance, June 30, 1994 $ 2,764 $ (21) $ - $ 2,743
Net income for the
year ended June 30,
1995 273 - - 273
Transfer of allowance
account - 21 (21) -
Cumulative effect of
change in accounting
principle - unrealized
net loss for available
-for-sale securities
at July 1, 1994 (Note 1) - - (58) (58)
Change in net unrealized
gains (losses) for
available-for-sale
securities, net of taxes - - 84 84
------------------- ------------------- ------------------- -------------------
Balance, June 30, 1995 3,037 - 5 3,042
Net income for the
year ended June 30,
1996 302 - - 302
Change in net unrealized
gain (losses) for
available-for-sale
securities, net of taxes - - (76) (76)
------------------- ------------------- ------------------- -------------------
Balance, June 30, 1996 $ 3,339 $ - $ (71) $ 3,268
=================== =================== =================== ===================
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE>
Investors Federal Bank and Savings Association and Subsidiary
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
Years ended
June 30,
---------------------
1996 1995
------ ------
(In Thousands)
<S> <C> <C>
Cash flows from operating activities:
Net income $ 302 $ 273
Adjustments to reconcile net
income to net cash provided
by operating activities:
Net loss (gain) on sales of:
Investment securities - (1)
Mortgage-backed securities (46) (18)
Depreciation 23 19
Provision for loan loss 210 1
Amortization of premiums,
discounts, and loan fees 9 62
FHLB stock dividend (9) -
Changes in assets and liabilities:
Interest receivable (135) (65)
Prepaid expenses and other
assets 25 (51)
Income taxes (29) 26
Accrued expenses and other
liabilities 76 64
----- -----
NET CASH PROVIDED BY
OPERATING ACTIVITIES 426 310
----- -----
</TABLE>
(Continued)
See accompanying notes to consolidated financial statements.
F-5
<PAGE>
Investors Federal Bank and Savings Association and Subsidiary
Consolidated Statements of Cash Flows
(Continued)
-----------
<TABLE>
<CAPTION>
Years ended
June 30,
--------------------
1996 1995
-------- --------
(In Thousands)
<S> <C> <C>
Cash flows from investing activities:
Net decrease (increase) in loans (288) 232
Purchased loans (2,007) (3,723)
Sale of loans - 80
Purchase of investment securities-
available-for-sale (1,579) (74)
Purchase of investment securities-
held-to-maturity - (100)
Purchase of mortgage-backed
securities - available-for-sale (9,540) (4,644)
Purchase of mortgage-backed
securities - held-to-maturity - (771)
Mortgage-backed securities
principal repayments -
available-for-sale 3,009 366
Mortgage-backed securities
principal repayments -
held-to-maturity - 1,612
Proceeds from maturities/calls
of investment securities
available-for-sale 600 250
Proceeds from sales of
investment securities -
available-for-sale - 126
Proceeds from sales of mortgage-
backed securities - available
-for-sale 2,257 1,713
Purchase of FHLB stock (365) -
Proceeds from maturities of
certificates of deposit 100 297
Proceeds from sales of real
estate owned - 44
Purchase of office properties
and equipment (140) (7)
------ ------
NET CASH USED IN
INVESTING ACTIVITIES (7,953) (4,599)
------ ------
</TABLE>
(Continued)
See accompanying notes to consolidated financial statements.
F-6
<PAGE>
Investors Federal Bank and Savings Association and Subsidiary
Consolidated Statements of Cash Flows
(Continued)
-----------
<TABLE>
<CAPTION>
Years ended
June 30,
--------------------
1996 1995
-------- --------
(In Thousands)
--------------
<S> <C> <C>
Cash flows from financing activities:
Net increase (decrease) in
demand deposits, NOW accounts,
passbook savings accounts,
and certificates of deposit 268 (1,856)
Net increase in escrow mortgage
funds (15) 1
Proceeds from Federal Home
Loan Bank advances 9,000 5,400
Principal repayments on Federal
Home Loan Bank advances (746) (3,054)
Net borrowings from Federal
Home Loan Bank line of credit (1,200) 3,000
------- -------
NET CASH PROVIDED
BY FINANCING
ACTIVITIES 7,307 3,491
------- -------
INCREASE (DECREASE)
IN CASH (220) (798)
CASH AT BEGINNING OF YEAR 2,300 3,098
------- -------
CASH AT END OF YEAR $ 2,080 $ 2,300
======= =======
Supplemental disclosure of cash
flow information:
Cash paid for:
Interest - deposits $ 383 $ 342
======= =======
Interest - advances $ 619 $ 207
======= =======
Income taxes $ 176 $ 81
======= =======
Noncash investing and financing
activities:
Loans transferred to real
estate owned $ - $ 43
======= =======
Loans to facilitate sales
of real estate owned $ - $ -
======= =======
</TABLE>
See accompanying notes to consolidated financial statements.
F-7
<PAGE>
Investors Federal Bank and Savings Association and Subsidiary
Notes to Consolidated Financial Statements
June 30, 1996 and 1995
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Business
--------
The Association provides financial services to individuals and
corporate customers, and is subject to competition from other
financial institutions. The Association is also subject to the
regulations of certain Federal agencies and undergoes periodic
examination by those regulatory authorities.
The Association is principally engaged in one to four family home
lending in agricultural-based rural communities in and around
Chillicothe, Missouri. The Association also makes consumer loans
depending on demand and management's assessment as to the quality of
the loan.
Basis of Financial Statement Presentation
-----------------------------------------
The accompanying consolidated financial statements include the
accounts of Investors Federal Bank and Savings Association (the
Association) and Investors Federal Service Corporation, its wholly
owned subsidiary. All significant intercompany transactions and
balances are eliminated in consolidation.
The consolidated financial statements have been prepared in conformity
with generally accepted accounting principles. In preparing the
consolidated financial statements, management is required to make
estimates and assumptions that affect the reported amounts of assets
and liabilities as of the date of the statement of financial condition
and revenues and expenses for the year. Actual results could differ
significantly from those estimates.
Material estimates that are particularly susceptible to significant
change relate to the determination of the allowance for losses on
loans and the valuation of real estate acquired in connection with
foreclosure or in satisfaction of loans. In connection with the
determination of the allowances for losses on loans and foreclosed
real estate, management obtains independent appraisals for significant
properties.
While management uses available information to recognize losses on
loans and foreclosed real estate, future additions to the allowances
may be necessary based on changes in local economic conditions. In
addition, regulatory agencies, as an integral part of their
examination process, periodically review the Association's allowances
for losses on loans and foreclosed real estate. Such agencies may
require the Association to recognize additions to the allowances
F-8
<PAGE>
Investors Federal Bank and Savings Association and Subsidiary
Notes to Consolidated Financial Statements
June 30, 1996 and 1995
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
based on their judgements about information available to them at the
time of their examination. Because of these factors, in management's
judgement, the allowances for loan losses reflected in the
consolidated financial statements is adequate to absorb estimated
losses that may exist in the current portfolio.
Statement of Financial Accounting Standards (SFAS) No. 107,
Disclosures About Fair Value of Financial Instruments, requires that
-----------------------------------------------------
the estimated fair value of the Association's financial instruments be
disclosed. Fair market value estimates of financial instruments are
made at a specific point in time, based on relevant market information
and information about the financial instruments. These estimates do
not reflect any premium or discount that could result from offering
for sale at one time the entire holdings or a significant portion of a
particular financial instrument. Because no market exists for a
significant portion of the Association's financial instruments, some
fair value estimates are subjective in nature and involve
uncertainties and matters of significant judgment. Changes in
assumptions could significantly affect these estimates. Fair value
estimates are presented for existing on- balance-sheet and
off-balance-sheet financial instruments without attempting to estimate
the value of anticipated future business and the value of assets and
liabilities that are not considered financial instruments. In
addition, the tax ramifications related to the realization of the
unrealized gains and losses can have a significant affect on fair
value estimates and have not been considered in any of the estimates
(see Note 19).
Cash Equivalents
----------------
Cash equivalents of $2,080,000 and $2,300,000 at June 30, 1996 and
1995, respectively, consist of cash on hand, funds due from banks and
money market mutual funds. For purposes of the statements of cash
flows, the Association considers all highly liquid debt instruments
with original maturities when purchased of three months or less to be
cash equivalents.
F-9
<PAGE>
Investors Federal Bank and Savings Association and Subsidiary
Notes to Consolidated Financial Statements
June 30, 1996 and 1995
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Investment Securities
---------------------
Investment securities that are held for short-term resale are
classified as trading securities and are carried at fair value. Debt
securities that management has the ability and intent to hold to
maturity are classified as held-to-maturity and are carried at cost,
adjusted for amortization of premium and accretion of discounts using
methods approximating the interest method. Other marketable securities
are classified as available-for-sale and are carried at fair value.
Realized and unrealized gains and losses on trading securities are
included in net income. Unrealized gains and losses, net of tax, on
securities available-for-sale are recognized as direct increases or
decreases in retained earnings. Cost of securities sold is determined
using the specific identification method. Yields on tax exempt
obligations are not computed on a tax-equivalent basis.
Mortgage-Backed Securities
--------------------------
Mortgage-backed securities represent participating interest in pools
of long-term first mortgage loans originated and serviced by issuers
of the securities. Mortgage-backed securities are classified as
available-for-sale or held-to- maturity. Available-for-sale securities
are carried at fair value with the unrealized gain or loss, net of
income tax, reflected as a separate component of retained earnings and
held-to-maturity securities are carried at amortized cost. Premiums
and discounts are amortized using methods approximating the interest
method over the remaining period to contractual maturity, adjusted for
anticipated prepayments. Cost of mortgage-backed securities sold is
recognized using the specific identification method.
The Association evaluates mortgage-backed securities on a monthly
basis to monitor prepayments and the resulting effect on yields and
valuations. Management considers the concentration of credit risk to
be minimal on mortgage-backed securities because all such securities
are guaranteed as to timely payment of principal and interest by FNMA,
FHLMC, GNMA and SBA or the underlying loans are insured by private
mortgage insurance. Cost of securities sold are recognized based on
the specific-identification method. All sales are made without
recourse.
At June 30, 1996 and 1995, the Association had no outstanding
commitments to sell loans or securities.
F-10
<PAGE>
Investors Federal Bank and Savings Association and Subsidiary
Notes to Consolidated Financial Statements
June 30, 1996 and 1995
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Mortgage-Backed Securities (Continued)
--------------------------
Equity securities that are nonmarketable are carried at cost.
Nonmarketable equity securities held by the Association consist of
their patronage equity in the Financial Information Trust (a computer
service bureau) and stock in the Federal Home Loan Bank. In June,
1996, the Association sold its interest in the Financial Information
Trust. The Association, as a member of the Federal Home Loan Bank
System, is required to maintain an investment in capital stock of the
Federal Home Loan Bank in an amount based on its outstanding loans and
advances. No ready market exists for the Bank stock and it has no
quoted market value. For reporting purposes these investments are
assumed to have a market value equal to cost. (See Note 13.)
Accounting for Certain Investments in Debt and Equity Securities
----------------------------------------------------------------
In May 1993 the FASB issued SFAS No. 115, Accounting for Certain
----------------------
Investments in Debt and Equity Securities. SFAS No. 115 addresses the
-----------------------------------------
accounting and reporting for investments in equity securities that
have readily determinable fair values and for all investments in debt
securities. Those investments are to be classified in three categories
and accounted for as follows:
* Debt securities that the enterprise has the positive intent and
ability to hold to maturity are classified as held-to-maturity
----------------
securities and reported at amortized cost.
----------
* Debt and equity securities that are bought and held principally
for the purpose of selling them in the near term are classified
as trading securities and reported at fair value, with unrealized
------------------
gains and losses included in earnings.
* Debt and equity securities not classified as either
held-to-maturity securities or trading securities are classified
as available-for-sale securities and reported at fair value, with
-----------------------------
unrealized gains and losses excluded from earnings and reported
in a separate component of retained earnings.
F-11
<PAGE>
Investors Federal Bank and Savings Association and Subsidiary
Notes to Consolidated Financial Statements
June 30, 1996 and 1995
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Accounting for Certain Investments in Debt and Equity Securities -
----------------------------------------------------------------
(Continued)
SFAS No. 115 is restrictive as to suitable reasons for selling any
security classified as held to maturity. Investments and
mortgage-backed securities classified as available-for-sale provide
greater flexibility for asset/liability management, liquidity needs,
reacting to changes in market rates and related prepayment risk, and
changes in availability of and the yield on alternative investments.
As a result of this, the Association has determined that substantially
all of their investments and mortgage-backed securities are classified
as available-for-sale.
SFAS No. 115 was adopted effective July 1, 1994. The effect of
adopting SFAS No. 115 effective July 1, 1994, was to decrease
investment and mortgage-backed securities, deferred taxes payable and
retained earnings by $88,000, $30,000, and $58,000 respectively.
Additionally, $27,000 was included in earnings for the year ended June
30, 1995, representing the cumulative effect, net of deferred tax of
$14,000, of reversing losses that had been previously reflected in
earnings under the prior method of accounting for investments.
Loans Receivable
----------------
Loans receivable are stated at unpaid principal balances, less the
allowance for loan losses, and net deferred loan-origination costs.
The allowance for loan losses is increased by charges to income and
decreased by charge-offs (net of recoveries). Management's periodic
evaluation of the adequacy of the allowance is based on the
Association's past loan loss experience, known and inherent risks in
the portfolio, adverse situations that may affect the borrower's
ability to repay, the estimated value of any underlying collateral,
and current economic conditions.
Uncollectible interest on loans that are contractually past due is
charged off, or an allowance is established based on management's
periodic evaluation. The allowance is established by a charge to
interest income equal to all interest previously accrued, and income
is subsequently recognized only to the extent that cash payments are
received until, in management's judgement, the borrower's ability to
make periodic interest and principal payments is back to normal, in
which case the loan is returned to accrual status.
F-12
<PAGE>
Investors Federal Bank and Savings Association and Subsidiary
Notes to Consolidated Financial Statements
June 30, 1996 and 1995
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Loans Receivable (Continued)
----------------
Effective July 1, 1995, the Association adopted SFAS No. 114,
Accounting by Creditors for Impairment of a Loan, and SFAS No. 118,
------------------------------------------------
Accounting by Creditors for Impairment of a Loan - Income Recognition
---------------------------------------------------------------------
and Disclosures, which amends SFAS No. 114. SFAS No. 114, as amended
---------------
by SFAS No. 118, defines the recognition criteria for loan impairment
and the measurement methods for certain impaired loans and loans for
which terms have been modified in troubled- debt restructurings (a
restructured loan). Specifically, a loan is considered impaired when
it is probable a creditor will be unable to collect all amounts due
-both principal and interest - according to the contractual terms of
the loan agreement. When measuring impairment, the expected future
cash flows of an impaired loan are required to be discounted at the
loan's effective interest rate. Alternatively, impairment can be
measured by reference to an observable market price, if one exists, or
the fair value of the collateral for a collateral-dependent loan.
Regardless of the historical measurement method used, SFAS No. 114
requires a creditor to measure impairment based on the fair value of
the collateral when the creditor determines foreclosure is probable.
Additionally, impairment of a restructured loan is measured by
discounting the total expected future cash flows at the loan's
effective rate of interest as stated in the original loan agreement.
The Association applies the recognition criteria of SFAS No. 114 to
multi-family residential loans, commercial real estate loans and
agriculture loans. Smaller balance, homogeneous loans, including
one-to-four family residential loans and consumer loans, are
collectively evaluated for impairment. SFAS No. 118 amends SFAS No.
114 to allow a creditor to use existing methods for recognizing
interest income on impaired loans. The Association has elected to
continue to use its existing nonaccrual methods for recognizing
interest on impaired loans. The adoption of SFAS No. 114 and SFAS No.
118 resulted in no prospective adjustment to the allowance for loan
losses and did not affect the Association's policies regarding
charge-offs or recoveries.
Loan-Origination Fees, Commitment Fees, and Related Costs
---------------------------------------------------------
Loan fees and certain direct loan origination costs are deferred, and
the net fee or cost is recognized as an adjustment to interest income
using the interest method over the contractual life of the loans,
adjusted for estimated prepayments based on the Association's
historical prepayment experience.
F-13
<PAGE>
Foreclosed Real Estate
----------------------
Real estate properties acquired through, or in lieu of, loan
foreclosure are initially recorded at fair value less estimated
selling costs at the date of foreclosure. Costs relating to
development and improvement of property are capitalized, whereas costs
relating to the holding of property are expensed.
Valuations are periodically performed by management, and an allowance
for losses is established by a charge to operations if the carrying
value of a property exceeds its estimated net realizable value.
All foreclosed real estate owned is held-for-sale. There was no
foreclosed real estate owned at June 30, 1996.
Income Taxes
------------
The Association files a consolidated federal income tax return with
its subsidiary. The provision for federal and state taxes on income is
based on earnings reported in the financial statements.
Deferred income taxes arise from temporary differences between the
financial statement carrying amounts and the tax basis of existing
assets and liabilities.
An asset and liability approach is used for financial accounting and
reporting of income taxes which, among other things, requires the
Association to take into account changes in the tax rates when valuing
the deferred income tax accounts recorded on the balance
F-14
<PAGE>
Investors Federal Bank and Savings Association and Subsidiary
Notes to Consolidated Financial Statements
June 30, 1996 and 1995
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Income Taxes (Continued)
------------
sheet. A deferred tax liability or asset is recognized for the
estimated future tax effects attributable to temporary differences and
loss carryforwards. Temporary differences include differences between
financial statement income and tax return income which are expected to
reverse in future periods as well as differences between the tax bases
of assets and liabilities and their amounts for financial reporting
which are also expected to be settled in future periods. To the extent
a deferred tax asset is established which is not realizable, a
valuation allowance shall be established against such asset.
Premises and Equipment
----------------------
Land is carried at cost. Buildings, furniture, fixtures, and equipment
are carried at cost, less accumulated depreciation and amortization.
Buildings and furniture, fixtures, and equipment are depreciated using
the straight-line method over the estimated useful lives of the
assets.
F-15
<PAGE>
Investors Federal Bank and Savings Association and Subsidiary
Notes to Consolidated Financial Statements
June 30, 1996 and 1995
NOTE 2: INVESTMENT SECURITIES
Securities available-for sale consist of the following:
<TABLE>
<CAPTION>
June 30, 1996
-----------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Bonds, notes and
debentures
at fair value:
Federal agencies $1,000,000 $ - $(38,000) $ 962,000
Equity securities at
fair value:
Mutual funds 1,337,000 2,000 (31,000) 1,308,000
FNMA preferred stock 1,002,000 - (8,000) 994,000
---------- ---------- -------- ----------
$3,339,000 $ 2,000 $(77,000) $3,264,000
========== ========== ======== ==========
<CAPTION>
June 30, 1996
-----------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Bonds, notes and
debentures
at fair value:
Federal agencies $ 500,000 $ - $ (7,000) $ 493,000
Equity securities at
fair value:
Mutual funds 1,260,000 6,000 (22,000) 1,244,000
---------- ---------- -------- ----------
$1,760,000 $ 6,000 $(29,000) $1,737,000
========== ========== ======== ==========
</TABLE>
F-16
<PAGE>
Investors Federal Bank and Savings Association and Subsidiary
Notes to Consolidated Financial Statements
June 30, 1996 and 1995
NOTE 2: INVESTMENT SECURITIES (Continued)
Securities held-to-maturity consist of the following :
<TABLE>
<CAPTION>
June 30, 1996
----------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
---------- ---------- ----------- ---------
<S> <C> <C> <C> <C>
Bonds, notes and
debentures
at fair value:
Municipal securities $215,000 $ - $ - $215,000
========== ========== ========== =========
June 30, 1996
----------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
---------- ---------- ----------- ---------
<S> <C> <C> <C> <C>
Bonds, notes and
debentures
at fair value:
Federal agencies $600,000 $1,000 $(20,000) $581,000
Municipal securities 215,000 - - 215,000
---------- ---------- ---------- ---------
$815,000 $1,000 $(20,000) $796,000
========== ========== ========== =========
</TABLE>
The following is a summary of debt securities at June 30, 1996, by contractual
maturity for available-for-sale and held-to-maturity securities.
<TABLE>
<CAPTION>
Securities Available- Securities To Be Held
for-Sale To Maturity
------------------------ ------------------------
Amortized Fair Amortized Fair
Cost Value Cost Value
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Due in one year or
less $ - $ - $ - $ -
Due after one year
through five years 500,000 484,000 215,000 215,000
Due after five years
through ten years - - - -
Due after ten years 500,000 478,000 - -
----------- ----------- ----------- -----------
$ 1,000,000 $ 962,000 $ 215,000 $ 215,000
=========== =========== =========== ===========
</TABLE>
F-17
<PAGE>
Investors Federal Bank and Savings Association and Subsidiary
Notes to Consolidated Financial Statements
June 30, 1996 and 1995
NOTE 2: INVESTMENT SECURITIES (Continued)
During the year ended June 30, 1996, the Association did not sell any
securities from their available-for-sale portfolio. During the year
ended June 30, 1995, the Association sold securities with total
proceeds of $126,000 resulting in gross realized gains of $1,000 and no
realized losses.
No investment securities were pledged at June 30, 1996.
NOTE 3: MORTGAGE-BACKED SECURITIES
Mortgage-backed securities available-for-sale consist of the following:
<TABLE>
<CAPTION>
June 30, 1996
-------------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
----------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
Mortgage-backed
securities
at fair value:
GNMA certificates $ 1,158,000 $ 4,000 $ (11,000) $ 1,152,000
FHLMC certificates 2,235,000 20,000 (6,000) 2,248,000
FNMA certificates 4,474,000 56,000 (1,000) 4,528,000
CMO/REMIC 3,034,000 5,000 (36,000) 3,003,000
SBA pools 6,105,000 512,000 (578,000) 6,040,000
----------- -------- --------- -----------
$17,006,000 $597,000 $(632,000) $16,971,000
=========== ======== ========= ===========
June 30, 1996
-------------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
----------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
Mortgage-backed
securities
at fair value:
GNMA certificates $ 1,284,000 $ 10,000 $ - $ 1,294,000
FHLMC certificates 620,000 4,000 - 624,000
FNMA certificates 433,000 19,000 - 452,000
CMO/REMIC 569,000 2,000 (2,000) 569,000
SBA pools 1,462,000 - (4,000) 1,458,000
----------- -------- --------- -----------
$ 4,368,000 $ 35,000 $ (6,000) $ 4,397,000
=========== ======== ========= ===========
</TABLE>
F-18
<PAGE>
Investors Federal Bank and Savings Association and Subsidiary
Notes to Consolidated Financial Statements
June 30, 1996 and 1995
NOTE 3: MORTGAGE-BACKED SECURITIES (Continued)
Mortgage-backed securities held-to-maturity consist of the following:
<TABLE>
<CAPTION>
June 30, 1995
-----------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
---------- ---------- ----------- ----------
<S> <C> <C> <C> <C>
Mortgage-backed
securities
at amortized cost:
FHLMC certificates $1,700,000 $20,000 $(27,000) $1,693,000
FNMA certificates 6,029,000 74,000 (11,000) 6,093,000
CMO/REMIC 577,000 2,000 (23,000) 555,000
---------- ------- -------- ----------
$8,306,000 $96,000 $(61,000) $8,341,000
========== ======= ======== ==========
</TABLE>
The amortized cost and fair value of mortgage-backed securities by
contractual maturity, are shown below as of June 30, 1996. Expected maturities
will differ from contractual maturities because borrowers may have the right to
call or prepay obligations with or without call or prepayment penalties.
<TABLE>
<CAPTION>
Mortgage-Backed
Securities
Available-for-Sale
----------------------------
Amortized Fair
Cost Value
----------- ---------------
<S> <C> <C>
Due in one year or less $ - $ -
Due after one year through five years 339,000 334,000
Due after five years through ten years 6,000 7,000
Due after ten years 16,661,000 16,630,000
----------- -----------
$17,006,000 $16,971,000
=========== ===========
</TABLE>
During the year ended June 30, 1996, the Association sold mortgage-
backed securities available-for-sale with total proceeds of $2,257,000 resulting
in gross realized gains of $46,000 and no realized losses. The related income
taxes were approximately $17,000. During the year ended June 30, 1995, the
Association sold mortgage-backed securities available-for-sale with total
proceeds of $1,713,000 resulting in gross realized gains of $18,000 and no
realized losses. The related income taxes were approximately $6,000.
F-19
<PAGE>
Investors Federal Bank and Savings Association and Subsidiary
Notes to Consolidated Financial Statements
June 30, 1996 and 1995
NOTE 3: MORTGAGE-BACKED SECURITIES (Continued)
Mortgage-backed securities available-for-sale with a fair value of
$4,131,000 were pledged in connection with Federal Home Loan Bank
borrowings at June 30, 1996.
NOTE 4: LOANS RECEIVABLE
Loans receivable at June 30, are summarized as follows:
<TABLE>
<CAPTION>
1996 1995
----------- ------------
<S> <C> <C>
Mortgage loans:
One-to-four-family $ 22,798,000 $ 21,020,000
Commercial 369,000 409,000
Non-residential real estate 1,955,000 1,874,000
----------- -----------
Total mortgage loans 25,122,000 23,303,000
----------- -----------
Other loans:
Automobile 1,365,000 1,298,000
SBA guaranteed 982,000 993,000
Home improvement - FHA 437,000 -
Loans on savings accounts 341,000 364,000
Other 434,000 440,000
----------- -----------
Total other loans 3,559,000 3,095,000
----------- -----------
Add:
Deferred loan costs 36,000 31,000
Less:
Loans in process 5,000 8,000
Allowance for loan losses 283,000 81,000
----------- -----------
Loans receivable, net $28,429,000 $26,340,000
=========== ===========
</TABLE>
At June 30, 1996, the Association's loan portfolio consisted of
$7,396,000 of fixed rate loans and $21,285,000 of variable rate loans. The
fixed rate loans had a weighted average term to maturity of 7.92 years and a
weighted average interest rate of 7.87%.
F-20
<PAGE>
Investors Federal Bank and Savings Association and Subsidiary
Notes to Consolidated Financial Statements
June 30, 1996 and 1995
NOTE 4: LOANS RECEIVABLE (Continued)
The Association is required to maintain qualifying collateral for the
Federal Home Loan Bank of Des Moines (the "Bank") representing 150
percent of current Bank credit. (See Note 8.) At June 30, 1996, the
Association met this requirement. Qualifying collateral is defined as
fully disbursed, whole first mortgage loans on improved residential
property or securities representing a whole interest in such mortgages.
The mortgages must not be past due more than 60 days. They must not be
otherwise pledged or encumbered as security for other indebtedness, and
the documents must be in the physical possession or control of the
Association. The documents that govern the determination of the
qualifying mortgage collateral are the (a) Federal Home Loan Bank of Des
Moines' Credit Policy Statement, dated April 1, 1994, and (b) the
Agreement for Advances, Pledge, and Security Agreement between the
Association and the Federal Home Loan Bank of Des Moines, dated April 3,
1989.
Activity in the allowance for loan losses is summarized as follows for
the years ended June 30:
<TABLE>
<CAPTION>
1996 1995
-------- --------
<S> <C> <C>
Balance at beginning of
year $ 81,000 $ 89,000
Provision charged to
income 210,000 1,000
Charge-offs and
recoveries, net (8,000) (9,000)
-------- --------
Balance at end of year $283,000 $ 81,000
======== ========
</TABLE>
Nonaccrual and renegotiated loans for which interest has been reduced
totaled approximately $128,000 and $124,000 at June 30, 1996 and 1995,
respectively. Interest income foregone on these loans was insignificant.
The Association is not committed to lend additional funds to debtors
whose loans have been modified.
NOTE 5: ACCRUED INTEREST RECEIVABLE
Accrued interest receivable at June 30 is summarized as follows:
<TABLE>
<CAPTION>
1996 1995
-------- --------
<S> <C> <C>
Investment securities $ 26,000 $ 25,000
Mortgage-backed securities 170,000 70,000
Loans receivable 261,000 227,000
-------- --------
$457,000 $322,000
======== ========
</TABLE>
F-21
<PAGE>
Investors Federal Bank and Savings Association and Subsidiary
Notes to Consolidated Financial Statements
June 30, 1996 and 1995
NOTE 6: PREMISES AND EQUIPMENT
Premises and equipment at June 30 are summarized as follows:
<TABLE>
<CAPTION>
1996 1995
-------- --------
<S> <C> <C>
Cost:
Land $101,000 $101,000
Building 338,000 338,000
Furniture, fixtures, and equipment 459,000 319,000
898,000 758,000
Less accumulated depreciation and
amortization 525,000 501,000
-------- --------
$373,000 $257,000
======== ========
</TABLE>
Depreciation expense for the years ended June 30, 1996 and 1995 was
$23,000 and $19,000, respectively.
NOTE 7: DEPOSITS
Deposits at June 30 are summarized as follows:
<TABLE>
<CAPTION>
1996 1995
---------------------------- ----------------------------
Weighted Weighted
Average Average
Rate Amount % Rate Amount %
-------- ----------- ----- -------- ----------- -----
<S> <C> <C> <C> <C> <C> <C>
Noninterest-bearing -% $ 1,462,000 4.1 -% $ 1,418,000 4.0
Demand and NOW 2.78% 2,362,000 6.7 1.90% 2,421,000 6.9
Money market 4.08% 7,301,000 20.6 4.15% 7,478,000 21.3
Passbook savings 2.99% 2,607,000 7.3 3.00% 3,004,000 8.5
----- ----------- ----- ----- ----------- -----
3.51% 13,732,000 38.7 3.31% 14,321,000 40.7
----- ----------- ----- ----- ----------- -----
Certificates of
deposit:
3.00% to 3.99% 3.83% 39,000 0.1 3.79% 549,000 1.5
4.00% to 4.99% 4.62% 2,602,000 7.3 4.45% 4,737,000 13.4
5.00% to 5.99% 5.39% 14,237,000 40.1 5.59% 10,024,000 28.5
6.00% to 6.99% 6.29% 4,038,000 11.4 6.34% 4,341,000 12.3
7.00% to 7.99% 7.36% 516,000 1.5 7.40% 830,000 2.4
8.00% to 8.99% 8.34% 331,000 0.9 8.34% 408,000 1.2
----- ----------- ----- ----- ----------- -----
5.56% 21,763,000 61.3 5.56% 20,889,000 59.3
----- ----------- ----- ----- ----------- -----
4.60% $35,495,000 100.0 4.65% $35,210,000 100.0
===== =========== ===== ===== =========== =====
</TABLE>
The aggregate amount of short-term jumbo certificates of deposit with a
minimum denomination of $100,000 was approximately $1,182,000 and
$500,000 at June 30, 1996 and 1995, respectively.
F-22
<PAGE>
Investors Federal Bank and Savings Association and Subsidiary
Notes to Consolidated Financial Statements
June 30, 1996 and 1995
NOTE 7: DEPOSITS (Continued)
At June 30, 1995, scheduled maturities of certificates of deposit are as
follows:
<TABLE>
<CAPTION>
Year Ending June 30,
-----------------------------------------------------
1997 1998 1999 2000 2001 Thereafter
------ ------ ------ ------ ------ ----------
(In Thousands)
--------------
<S> <C> <C> <C> <C> <C> <C>
3.00% to 3.99% $ 39 $ - $ - $ - $ - $ -
4.00% to 4.99% 2,171 271 141 16 1 1
5.00% to 5.99% 9,844 2,594 1,172 258 237 133
6.00% to 6.99% 852 986 249 1,389 544 18
7.00% to 7.99% 99 - 387 30 - -
8.00% to 8.99% 297 - 34 - - -
------- ------ ------ ------ ----- ------
$13,302 $3,851 $1,983 $1,693 $ 782 $ 152
======= ====== ====== ====== ===== ======
</TABLE>
Interest expense on deposits for the years ended June 30 is summarized
as follows:
<TABLE>
<CAPTION>
1996 1995
---------- ----------
<S> <C> <C>
Passbook, money market and NOW $ 453,000 $ 440,000
Interest expense on certificates 75,000 54,000
of deposit greater than $100,000
Certificates of deposit 1,106,000 987,000
---------- ----------
$1,634,000 $1,481,000
========== ==========
</TABLE>
F-23
<PAGE>
Investors Federal Bank and Savings Association and Subsidiary
Notes to Consolidated Financial Statements
June 30, 1996 and 1995
NOTE 8: FEDERAL HOME LOAN BANK ADVANCES
Advances consist of the following:
<TABLE>
<CAPTION>
June 30,
Maturity Interest -----------------------
Date Rate 1996 1995
-------- ------------ ----------- ----------
<S> <C> <C> <C>
07-10-95 6.13% $ - $ 700,000
08-28-95 6.11% - 500,000
08-01-95 5.90% - 500,000
09-18-95 6.08% - 500,000
03-15-96 6.52% - 3,000,000
08-29-96 6.16% 500,000 -
08-15-96 5.45% 1,000,000 -
10-24-96 5.47% 1,000,000 -
07-01-96 5.48% 500,000 -
07-08-96 5.52% 700,000 -
04-18-97 5.35% 1,000,000 -
04-18-97 5.36% 1,000,000 -
07-24-96 5.46% 500,000 -
04-24-97 5.39% 1,000,000 -
08-05-96 5.52% 500,000 -
08-16-96 5.55% 500,000 -
09-16-96 5.62% 500,000 -
02-02-97 5.57% 1,800,000 -
----------- ----------
Total short-term advances 10,500,000 5,200,000
----------- ----------
09-26-08 5.78% 87,000 92,000
10-10-08 5.76% 88,000 93,000
10-24-08 5.90% 88,000 93,000
10-28-08 5.93% 88,000 93,000
11-03-08 6.12% 89,000 93,000
11-07-08 6.20% 89,000 93,000
11-21-08 6.35% 89,000 93,000
11-28-08 6.21% 89,000 93,000
12-05-08 6.24% 89,000 94,000
12-23-08 6.22% 89,000 93,000
01-07-09 6.19% 89,000 94,000
09-23-09 8.07% - 195,000
09-12-97 5.95% 200,000 -
09-14-98 6.03% 200,000 -
09-14-00 6.22% 200,000 -
10-20-98 6.13% 400,000 -
02-27-01 6.00% 500,000 -
04-10-01 6.82% 500,000 -
----------- ----------
Total long-term advances 2,974,000 1,219,000
----------- ----------
Total advances $13,474,000 $6,419,000
=========== ==========
</TABLE>
F-24
<PAGE>
Investors Federal Bank and Savings Association and Subsidiary
Notes to Consolidated Financial Statements
June 30, 1996 and 1995
NOTE 8: FEDERAL HOME LOAN BANK ADVANCES (Continued)
See Notes 3 and 4 of the financial statements for collateral
securing this indebtedness.
Advances at June 30, 1996, have maturity dates as follows:
<TABLE>
<CAPTION>
<S> <C>
06-30-97 $10,554,000
06-30-98 258,000
06-30-99 661,000
06-30-2000 65,000
06-30-2001 1,269,000
Thereafter 667,000
-----------
$13,474,000
===========
</TABLE>
The short-term advances include $6,800,000 which have variable rates
and the rate adjusts daily or monthly. All other advances are at fixed
rates.
The maximum amount of Federal Home Loan Bank advances outstanding at
any month end during the years ended June 30, 1996 and 1995 was
$14,483,000 and $6,934,000 respectively.
The short-term advance maturing February 2, 1997 in the amount of
$1,800,000 was the balance due on a line of credit. The total line of
credit available was $3,500,000. Interest due on the line of credit is
variable and adjusts daily.
F-25
<PAGE>
Investors Federal Bank and Savings Association and Subsidiary
Notes to Consolidated Financial Statements
June 30, 1996 and 1995
NOTE 9: PENSION PLAN
The Association has a defined contribution pension plan which covers
all eligible employees who have completed one full year of continuous
service. The benefits contemplated by the plan are funded through
employer contributions on the basis of salaries. The cost of funding
is charged to current operations as accrued and there is no unfunded
liability for past service. The amounts funded and charged to expense
amounted to approximately $23,000 and $27,000 in 1996, and 1995,
respectively.
NOTE 10: INCOME TAXES
The Association and Subsidiary file consolidated federal income tax
returns on a calendar year basis. If certain conditions are met in
determining taxable income the Association is allowed a special bad-
debt deduction based on specified experience formulas.
Income tax expense for the years ended June 30 is summarized as
follows:
<TABLE>
<CAPTION>
1996 1995
--------- ---------
<S> <C> <C>
Current $208,000 $ 89,000
Deferred (Benefit) (41,000) 46,000
-------- --------
$167,000 $135,000
======== ========
Effective tax rate 35.6% 35.4%
======== ========
</TABLE>
As discussed in Note 1, the Association uses the liability method of
accounting for income taxes. Under this method, deferred income taxes
are recognized for the tax consequences of "temporary differences" by
applying statutory tax rates applicable to future years to differences
between the financial statement carrying amounts and tax bases of
existing assets and liabilities.
A deferred tax asset is to be recognized for the bad debt reserve
established for financial reporting purposes and requires a deferred
tax liability to be recorded for increases in the tax bad debt reserve
since January 1, 1988, the effective date of certain changes made by
the Tax Reform Act of 1986 to the calculation of savings institutions'
bad debt deduction. Accordingly, retained earnings at June 30, 1996,
include approximately $127,000 for which no deferred federal income
tax liability has been recognized.
F-26
<PAGE>
Investors Federal Bank and Savings Association and Subsidiary
Notes to Consolidated Financial Statements
June 30, 1996 and 1995
NOTE 10: INCOME TAXES (Continued)
Total income tax expense differed from the amounts computed by applying
the U.S. Federal income tax rates of 34 percent to income before income
taxes as a result of the following:
<TABLE>
<CAPTION>
1996 1995
------ ------
<S> <C> <C>
Expected income tax expense
at federal tax rate $160,000 $129,000
State tax net of Federal tax benefit 8,000 16,000
Tax rate benefit - (2,000)
Municipal income nontaxable (3,000) (4,000)
Other 2,000 (4,000)
-------- --------
Total income tax expense $167,000 $135,000
======== ========
</TABLE>
Deferred tax liabilities (assets) are comprised of the following at
June 30:
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Income and expenses recognized in the
financial statements on the accrual
basis, but on the cash basis for
tax purposes $ 127,000 $ 84,000
Income tax basis of FHLB
stock versus carrying value 49,000 40,000
Tax bad debt reserve 44,000 40,000
Deferred loan costs 14,000 11,000
Net fixed assets 15,000 5,000
Unrealized gain on
available-for-sale securities - 2,000
--------- --------
Gross deferred tax liabilities 249,000 182,000
--------- --------
Unrealized loss on available-for-sale
securities (38,000) -
Provision for loan loss (110,000) -
Missouri state tax offset - (19,000)
-------- --------
Gross deferred tax assets (148,000) (19,000)
-------- --------
Net deferred tax liability $ 101,000 $163,000
======== ========
</TABLE>
F-27
<PAGE>
Investors Federal Bank and Savings Association and Subsidiary
Notes to Consolidated Financial Statements
June 30, 1996 and 1995
NOTE 10: INCOME TAXES (Continued)
For years ended June 30, 1996 and 1995, deferred tax expense resulted
from temporary differences between the financial statement carrying
amounts and the tax basis of existing assets and liabilities. The
sources and tax effects of these temporary and timing differences are
as follows:
<TABLE>
<CAPTION>
1996 1995
------ ------
<S> <C> <C>
Income and expense recognized in the
financial statements on the accrual
basis, but on the cash basis for
tax purposes $30,000 $10,000
FHLB stock basis 3,000 -
Tax bad debt reserve 4,000 5,000
Deferred loan fees 2,000 10,000
Net fixed assets 9,000 5,000
Provision for loan loss (89,000) -
Missouri state tax offset 16,000
------- -------
$(41,000) $ 46,000
========= ========
</TABLE>
The Association currently files a Savings and Loan Association Tax Return
with the State of Missouri. During the years 1975-1979, the Association
paid an intangibles tax which was subsequently declared unconstitutional.
In May, 1987, the Missouri Department of Revenue determined that interest
would be accrued on the refund claims at the rate of 6% commencing August
13, 1978. All such claims and related accrued interest were to be
remitted to the Association by cash payments and credits to offset future
Missouri savings and loan tax liabilities. A deferred tax asset was
established for this right to offset future Missouri tax liability.
This deferred tax asset was reduced by $19,000 as a result of its state
tax liability for the year ended June 30, 1996.
F-28
<PAGE>
Investors Federal Bank and Savings Association and Subsidiary
Notes to Consolidated Financial Statements
June 30, 1996 and 1995
NOTE 10: INCOME TAXES (Continued)
The Association did not establish a valuation allowance for its
deferred tax assets as management believes they are realizable.
NOTE 11: FEDERAL DEPOSIT INSURANCE CORPORATION IMPROVEMENT ACT OF 1991 (FDICIA)
AND FINANCIAL INSTITUTIONS REFORM, RECOVERY AND ENFORCEMENT ACT OF
1989 (FIRREA)
FDICIA was signed into law on December 19, 1991. Regulations
implementing the prompt corrective action provisions of FDICIA became
effective on December 19, 1992. In addition to the prompt corrective
action requirements, FDICIA includes significant changes to the legal
and regulatory environment for insured depository institutions,
including reductions in insurance coverage for certain kinds of
deposits, increased supervision by the federal regulatory agencies,
increased reporting requirements for insured institutions, and new
regulations concerning internal controls, accounting, and operations.
The prompt corrective action regulations define specific capital
categories based on an institution's capital ratios. The capital
categories, in declining order are "well capitalized", "adequately
capitalized", "under-capitalized", "significantly undercapitalized",
and "critically under-capitalized". Institutions categorized as
"undercapitalized" or worse are subject to certain restrictions,
including the requirement to file a capital plan with their primary
federal regulator, prohibitions on the payment of dividends and
management fees, restrictions on executive compensation, and increased
supervisory monitoring, among other things. Other restrictions may be
imposed on the institution either by its primary federal regulator,
the Office of Thrift Supervision (OTS), or by the Federal Deposit
Insurance Corporation (FDIC), including requirements to raise
additional capital, sell assets, or sell the entire institution. Once
an institution becomes "critically undercapitalized", it must
generally be placed in receivership or conservatorship within 90 days.
F-29
<PAGE>
Investors Federal Bank and Savings Association and Subsidiary
Notes to Consolidated Financial Statements
June 30, 1996 and 1995
NOTE 11: FEDERAL DEPOSIT INSURANCE CORPORATION IMPROVEMENT ACT OF 1991 (FDICIA)
AND FINANCIAL INSTITUTIONS REFORM, RECOVERY AND ENFORCEMENT ACT OF
1989 (FIRREA) (Continued )
FIRREA was signed into law on August 9, 1989; regulations for savings
institutions' minimum-capital requirements went into effect on December
7, 1989. In addition to the capital requirements, FIRREA includes
provisions for changes in the federal regulatory structure for
institutions, including a new deposit insurance system, increased deposit
insurance premiums, and restricted investment activities with respect to
non-investment-grade corporate debt and certain other investments. FIRREA
also increases the required ratio of housing-related assets needed to
qualify as a savings institution. The regulations require institutions to
have minimum regulatory tangible capital equal to 1.5 percent of total
assets, 3 percent core capital ratio, and risk-based capital ratio of 8%.
The following is a reconciliation of GAAP capital to regulatory capital:
<TABLE>
<CAPTION>
Unaudited - Regulatory
----------------------------------
Tangible Core Risk-Based
Capital Capital Capital
---------- ---------- ----------
<S> <C> <C> <C>
GAAP capital, as
adjusted $3,268,000 $3,268,000 $3,268,000
Additional capital
items:
Unrealized loss on
securities
held-for-sale 71,000 71,000 71,000
Loan loss allowance -
limited - - 253,000
---------- ---------- ----------
Regulatory capital-
computed 3,339,000 3,339,000 3,592,000
Minimum-capital
requirement 790,000 1,581,000 1,661,000
---------- ---------- ----------
Regulatory capital-
excess $2,549,000 $1,758,000 $1,931,000
========== ========== ==========
</TABLE>
F-30
<PAGE>
Investors Federal Bank and Savings Association and Subsidiary
Notes to Consolidated Financial Statements
June 30, 1996 and 1995
NOTE 12: GAIN ON SALES OF INTEREST EARNING ASSETS, NET
Gains are summarized as follows for the years ended June 30:
<TABLE>
<CAPTION>
1996 1995
-------- --------
<S> <C> <C>
Realized gains on sales of:
Mortgage-backed securities
- gains $ 46,000 $ 18,000
Investment securities -
gains - 1,000
-------- --------
$ 46,000 $ 19,000
======== ========
</TABLE>
NOTE 13: OTHER NON-INTEREST INCOME AND EXPENSE
Other non-interest income and expense amounts are summarized as
follows for the years ended June 30:
<TABLE>
<CAPTION>
1996 1995
-------- --------
<S> <C> <C>
Other noninterest income:
Loan late charges $ 7,000 $ 8,000
Other 73,000 14,000
-------- --------
$ 80,000 $ 22,000
======== ========
Other noninterest expense:
Advertising and promotion $ 19,000 $ 28,000
Telephone 16,000 8,000
Other 74,000 68,000
-------- --------
$109,000 $104,000
======== ========
</TABLE>
In 1996, other income includes approximately $66,000 of patronage
dividends and gain on the sale of the Association's former
cooperative data processing service bureau.
NOTE 14: COMMITMENTS AND CONTINGENCIES
Loan Commitments
----------------
At June 30, 1996, the Association had outstanding firm commitments
to originate loans as follows:
Fixed Rate Variable Rate Total
---------- ------------- -----
$94,000 $138,000 $232,000
======= ======== ========
F-31
<PAGE>
Investors Federal Bank and Savings Association and Subsidiary
Notes to Consolidated Financial Statements
June 30, 1996 and 1995
NOTE 14: COMMITMENTS AND CONTINGENCIES (Continued)
These loans are at rates of 7.25% to 9.00% for terms of one to twenty
years.
The Association is involved, from time to time, as plaintiff or
defendant in various legal actions arising in the normal course of
their businesses. While the ultimate outcome of these proceedings
cannot be predicted with certainty, it is the opinion of management,
after consultation with counsel representing the Association in the
proceedings, that the resolution of these proceedings should not have
a material effect on the Association's financial position or results
of operations on a consolidated basis.
NOTE 15: FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK
The Association is a party to financial instruments with off-balance-
sheet risk in the normal course of business to meet the financing
needs of its customers. These financial instruments include
commitments to extend credit. Those instruments involve, to varying
degrees, elements of credit risk in excess of the amount recognized in
the statement of financial position. The contract or notional amounts
of those instruments reflect the extent of the Association's
involvement in particular classes of financial instruments.
The Association's exposure to credit loss in the event of
nonperformance by the other party to the commitments to extend credit
is represented by the contractual notional amount of those
instruments. The Association uses the same credit policies in making
commitments and conditional obligations as it does for on-balance-
sheet instruments.
Unless noted otherwise, the Association does not require collateral or
other security to support financial instruments with credit risk.
<TABLE>
<CAPTION>
Contract or
Notional Amount
---------------
<S> <C>
Financial instruments the contract amounts
of which represent credit risk:
Commitments to extend credit $232,000
Open lines of credit $316,000
</TABLE>
F-32
<PAGE>
Investors Federal Bank and Savings Association and Subsidiary
Notes to Consolidated Financial Statements
June 30, 1996 and 1995
NOTE 15: FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK (Continued)
Commitments to extend credit are agreements to lend to a customer as
long as there is no violation of any condition established in the
contract. These commitments and outstanding lines of credit generally
have fixed expiration dates or other termination clauses and may
require payment of a fee. Since some commitments can expire without
being drawn upon, the total commitment amounts do not necessarily
represent future cash requirements. The Association evaluates each
customer's creditworthiness on a case-by-case basis. The amount of
collateral obtained, if it is deemed necessary by the Association upon
extension of credit, is based on management's credit evaluation of the
counterparty. Collateral held varies but may include accounts
receivable, inventory, property, plant, and equipment, and income-
producing commercial properties.
The Association invests funds in other financial institutions in the
form of certificates of deposit, none of which exceed the insured
limit of $100,000. In addition, the Association maintains cash
accounts at the Federal Home Loan Bank and four banks. Balances
reflected on the banks' statements exceed the $100,000 insurance limit
by varying amounts on a daily basis. The Association controls this
risk by monitoring the financial condition of the banks. The Federal
Home Loan Bank is an instrumentality of the U.S. Government.
NOTE 16: RELATED PARTY TRANSACTIONS
Certain directors and executive officers of the Association or its
subsidiary were loan customers. A summary of aggregate related party
loan activity, for loans aggregating $60,000 or more to any one
related party, is as follows:
<TABLE>
<CAPTION>
June 30, June 30,
1996 1995
-------- --------
<S> <C> <C>
Beginning balance $78,000 $ -
New loans - 79,000
Repayments 1,000 1,000
------- -------
Ending balance $77,000 $78,000
======= =======
</TABLE>
In the opinion of management, related party loans are made on
substantially the same terms, including interest rates and collateral, as
those prevailing at the time for comparable transactions with unrelated
persons and do not involve more than the normal risk of collectibility.
F-33
<PAGE>
Investors Federal Bank and Savings Association and Subsidiary
Notes to Consolidated Financial Statements
June 30, 1996 and 1995
NOTE 17: INVESTORS FEDERAL SERVICE CORPORATION
The statement of financial condition and income for Investors Federal
Service Corporation is as follows:
Statement of Financial Condition
--------------------------------
<TABLE>
<CAPTION>
At June 30, At June 30,
1996 1995
----------- ------------
<S> <C> <C>
Assets:
Cash $16,000 $17,000
======= =======
Liabilities:
Accounts payable $ 1,000 $ 2,000
------- -------
Stockholders' Equity:
Common stock 1,000 1,000
Retained earnings 14,000 14,000
------- -------
15,000 15,000
------- -------
Total liabilities and
stockholders' equity $16,000 $17,000
======= =======
</TABLE>
<TABLE>
<CAPTION>
Statement of Income
-------------------
Years Ended
----------------------
June 30, June 30,
1996 1995
-------- --------
<S> <C> <C>
Commission income $ - $ 5,000
Other expense - (1,000)
------ -------
Net income (loss) $ - $ 4,000
====== =======
</TABLE>
The subsidiary corporation's primary source of income was from
insurance sales and it was generally inactive at June 30, 1996.
NOTE 18: RISK OF SPECIAL INSURANCE ASSESSMENT RELATING TO THE RECAPITALIZATION
OF THE SAVINGS ASSOCIATION INSURANCE FUND (SAIF)
Congress has proposed a plan to recapitalize the SAIF which would
require savings institutions with SAIF insured deposits to pay a one-
time special assessment. The proposed assessment would be based on a
65-cent to 80-cent per $100 of deposits on a date that will be
specified by the bill. (The final date and rate have not yet been
finalized pending passage of a successful budget bill.) This proposed
assessment would result in a charge of approximately $230,000 to
$283,000 to noninterest expense. Accordingly, this proposed
assessment would significantly increase noninterest
F-34
<PAGE>
Investors Federal Bank and Savings Association and Subsidiary
Notes to Consolidated Financial Statements
June 30, 1996 and 1995
NOTE 18: RISK OF SPECIAL INSURANCE ASSESSMENT RELATING TO THE RECAPITALIZATION
OF THE SAVINGS ASSOCIATION INSURANCE FUND (SAIF) (Continued)
expense and adversely affect the Association's operations. No
provision for this proposed assessment has been made in the
accompanying financial statements. Conversely, at such time as the
SAIF is adequately recapitalized, the Association's future deposit
premiums could significantly decrease from the 23 cents per $100 of
deposits currently paid.
NOTE 19: FAIR VALUE OF FINANCIAL INSTRUMENTS
The following table presents the carrying amounts and fair values of
the company's financial instruments at June 30, 1996. FASB Statement
No. 107, Disclosures About Fair Value of Financial Instruments,
-----------------------------------------------------
defines the fair value of a financial instrument as the amount at
which the instrument could be exchanged in a current transaction
between willing parties, other than in a forced or liquidation sale.
<TABLE>
<CAPTION>
Carrying Fair
Amount Value
-------- -------
(In Thousands)
<S> <C> <C>
Nontrading instruments:
Cash and cash equivalents $ 2,080 $ 2,080
Investment securities and
mortgage-backed securities $20,450 $20,450
Loans, net $28,429 $28,474
Accrued interest receivable $ 457 $ 457
FHLB stock $ 724 $ 724
Deposit liabilities $35,495 $35,487
Debt-FHLB advances $13,474 $13,375
Other liabilities $ 350 $ 350
</TABLE>
The carrying amounts in the table are included in the statement of
financial position under the indicated captions, except for advances
from borrowers for taxes and insurance, income taxes payable and
accrued expenses and other liabilities which have been combined into
other liabilities.
Estimation of Fair Values
-------------------------
The following notes summarize the major methods and assumptions used
in estimating the fair values of financial instruments.
F-35
<PAGE>
Investors Federal Bank and Savings Association and Subsidiary
Notes to Consolidated Financial Statements
June 30, 1996 and 1995
NOTE 20: RECENT ACCOUNTING DEVELOPMENTS
Statement of Financial Accounting Standards No. 119, Disclosures About
Derivative Financial Instruments and Fair Value of Financial
Instruments, requires disclosures of information such as credit and
market risks, cash requirements and accounting policies about
derivative financial instruments. SFAS No. 119 is effective for
financial statements issued for fiscal years ending after December 15,
1994, except for entities with less than $150 million in total assets.
For those entities, SFAS No. 119 is effective for financial statements
issued for fiscal years ending after December 15, 1995. SFAS No. 119
is effective for the Association for the fiscal year ending June 30,
1996.
The Financial Accounting Standards Board ("FASB" has issued SFAS No.
107, Disclosure about Fair Value of Financial Instruments, which
generally requires disclosure of the fair value of financial
instruments, both assets and liabilities recognized and not recognized
in the balance sheets. The FASB has also issued SFAS No. 114,
Accounting by Creditors for Impairment of a Loan, and SFAS No. 118,
Accounting by Creditors for Impairment of a Loan - Income Recognition
and Disclosures. SFAS No. 107, SFAS No. 114 and SFAS No. 118 are
effective for fiscal years beginning after December 15, 1994. SFAS No.
114, as amended by SFAS No. 118, requires that impaired loans be
measured at the present value of expected future cash flows discounted
at the loan's effective interest rate or, as a practical expedient, at
the loans' observable market price or the fair value of the collateral
if the loan is collateral dependent. Homogeneous loans, such as
single-family loans and most categories of consumer loans, are
excluded from this requirement. Adoption of these statements was
effective for the fiscal year beginning July 1, 1995. The adoption
of SFAS No. 114 and 118 did not have a material adverse impact on
the Association's financial position or results of operations.
In November 1993, the AICPA issued SOP 93-6, "Employers' Accounting
for Employee Stock Ownership Plans," which is effective for fiscal
years beginning after December 15, 1993 and which applied to shares of
capital stock of sponsoring employers acquired by ESOPs after December
31, 1992 that have not been committed to be released as of the
beginning of the year in which the ESOP is adopted. The SOP requires
that shares to be released in an accounting period should be reflected
in the consolidated financial statements as compensation expense equal
to the fair value of the shares at the time of release. Thus, as
shares increase or decrease in value, earnings will be affected
relative to the shares to be released in that period. Additionally,
the SOP requires that outstanding
F-36
<PAGE>
Investors Federal Bank and Savings Association and Subsidiary
Notes to Consolidated Financial Statements
June 30, 1996 and 1995
NOTE 20: RECENT ACCOUNTING DEVELOPMENTS (Continued)
shares for purposes of computing both primary and fully diluted
earnings per share include only those shares scheduled to be released
in that or prior periods. Thus, as additional shares are released by
the ESOP in future periods, earnings per share may be diluted. Shares
of Common Stock of the Holding Company to be acquired by the ESOP are
scheduled to be released over a ten-year period commencing with the
consummation of the Conversion. However, the effect on net income and
book value per share for 1996 cannot be predicted due to the
uncertainty of the fair value of the shares subsequent to their
issuance.
SFAS No. 123, Accounting for Stock-Based Compensation, is effective
for fiscal years beginning after December 15, 1995. This statement
established financial accounting and reporting standards for stock-
based employee compensation plans, including stock option plans. These
plans include all arrangements by which employees receive shares of
stock or other equity investments of the employer or where an employer
issues its equity instruments to acquire goods and services from
nonemployees. This statement will require pro forma disclosures in
fiscal 1997 of net income and earnings per share as if a new
accounting method based on the estimated fair value of employee stock
options had been adopted. The Association has not yet determined
whether the optional accounting treatment proposed by SFAS No. 123
will be adopted.
SFAS No. 122, Accounting for Mortgage Servicing Rights, will be
effective for the Association for the year beginning July 1, 1996 and
generally requires entities that sell or securitize loans and retain
the mortgage servicing rights to allocate the total cost of the
mortgage loans to the mortgage servicing right and the loan based on
their relative fair value. Costs allocated to mortgage servicing
rights should be recognized as a separate asset and amortized over the
period of estimated net servicing income and evaluated for impairment
based on fair value. The adoption of this statement is not expected to
have a material effect on the Consolidated Financial Statements.
SFAS No. 125, "Accounting for Transfers and Servicing of Financial
Assets and Extinguishments of Liabilities" supersedes SFAS No. 122 and
will be effective for all transfers and servicing of financial assets
and extinguishments of liabilities occurring after December 31, 1996.
This statement provides accounting and reporting standards for
transfers and servicing of financial assets and extinguishments of
liabilities based on consistent application of a financial-components
approach that focuses on control. It
F-37
<PAGE>
Investors Federal Bank and Savings Association and Subsidiary
Notes to Consolidated Financial Statements
June 30, 1996 and 1995
NOTE 20: RECENT ACCOUNTING DEVELOPMENTS (Continued)
distinguished transfers of financial assets that are sales from
transfers that are secured borrowings.
Under the financial-components approach, after a transfer of financial
assets, an entity recognizes all financial assets it no longer
controls and liabilities that have been extinguished. The financial-
components approach focuses on the assets and liabilities that exist
after the transfer. Many of these assets and liabilities are
components of financial assets that existed prior to the transfer. If
a transfer does not meet the criteria for a sale, the transfer is
accounted for as a secured borrowing with a pledge of collateral. The
adoption of this statement is not expected to have a material effect
on the Consolidated Financial Statements.
SFAS No. 121, Accounting for the Impairment of Long-Lived Assets and
Long-Lived Assets to be Disposed of, is effective for the fiscal year
beginning July 1, 1996. The statement requires that long-lived assets
and certain identifiable intangibles to be held and used by an entity
to be reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable. An impairment loss is recognized if the sum of the
expected future cash flows is less than the carrying amount of the
asset. Management does not expect the implementation of SFAS No. 121
to have a material impact on the Association's consolidated financial
position or results of operations.
In April 1995, the FASB issued SOP 94-6, Disclosure of Certain
Significant Risks and Uncertainties. This SOP applies to financial
statements prepared in conformity with generally accepted accounting
principles by all nongovernmental entities. The disclosure
requirements in SOP 94-6 focus primarily on risks and uncertainties
that could significantly affect the amounts reported in the financial
statements in the near-term functioning of the reporting entity. The
risks and uncertainties discussed in SOP 94-6 stem from the nature of
the entity's operations, from the necessary use of estimates in the
preparation of the entity's financial statements, and from significant
concentrations in certain aspects of the entity's operations. SOP 94-6
is effective for financial statements issued for fiscal years ending
after June 30, 1995 and is not expected to have any impact on the
Association's operations.
F-38
<PAGE>
Investors Federal Bank and Savings Association and Subsidiary
Notes to Consolidated Financial Statements
June 30, 1996 and 1995
NOTE 21: PLAN OF CONVERSION
On September 23, 1996, the Association's Board of Directors approved a
plan ("Plan") to convert from a federally chartered mutual savings
bank to a federally chartered stock savings bank and then to a
national bank, subject to approval by the Association's members. The
Plan, which includes formation of a holding company to own all of the
outstanding stock of the Association, is subject to approval by the
OTS and includes the filing of a registration statement with the
Securities and Exchange Commission. As of June 30, 1996, the
Association had incurred no costs related to this conversion. If the
conversion is ultimately successful, actual conversion costs will be
accounted for as a reduction in gross proceeds. If the conversion is
unsuccessful, the conversion costs will be expensed.
The Plan calls for the common stock of the holding company to be
offered to various parties in a subscription offering at a price based
on an independent appraisal of the Association. It is anticipated that
any shares not purchased in the subscription offering will be offered
in a community offering.
The Association may not declare or pay a cash dividend if the effect
thereof would cause its net worth to be reduced below either the
amount required for the liquidation account discussed below or the
regulatory capital requirements imposed by the OTS.
At the time of the conversion, the Association will establish a
liquidation account in an amount equal to its retained earnings as
reflected in the latest statement of financial condition used in the
final conversion prospectus. The liquidation account will be
maintained for the benefit of eligible account holders and
supplemental account holders who continue to maintain their deposit
accounts in the Association after conversion. In the event of a
complete liquidation of the Association, and only in such an event,
eligible depositors who continue to maintain accounts shall be
entitled to receive a distribution from the liquidation account before
any liquidation may be made with respect to common stock.
F-39
<PAGE>
================================================================================
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION OTHER THAN AS CONTAINED IN THIS PROSPECTUS IN CONNECTION WITH THE
OFFERING MADE HEREBY, AND, IF GIVEN OR MADE, SUCH OTHER INFORMA TION OR
REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE HOLDING
COMPANY OR INVESTORS FEDERAL. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO
SELL OR A SOLICITATION OF AN OFFER TO BUY ANY OF THE SECURITIES OFFERED HEREBY
TO ANY PERSON IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS NOT
AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT
QUALIFIED TO DO SO, OR TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER
OR SOLICITATION IN SUCH JURISDICTION. NEITHER THE DELIVERY OF THIS PROSPECTUS
NOR ANY SALE HEREUNDER SHALL UNDER ANY CIRCUMSTANCES CREATE ANY IMPLICATION THAT
THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE HOLDING COMPANY OR INVESTORS
FEDERAL SINCE ANY OF THE DATES AS OF WHICH INFORMATION IS FURNISHED HEREIN OR
SINCE THE DATE HEREOF.
_____________
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Prospectus Summary................................. 4
Selected Consolidated Financial Information
and Other Data.................................... 11
Recent Financial Data.............................. 13
Risk Factors....................................... 18
Investors Federal Bank and Savings Association..... 26
IFB Holdings, Inc.................................. 26
Investors Federal Bank, National Association.......
Capitalization..................................... 27
Pro Forma Data..................................... 28
Pro Forma Regulatory Capital....................... 33
Use of Proceeds.................................... 34
Dividends.......................................... 35
Market for Common Stock............................ 36
Investors Federal Bank and Savings Association
Consolidated Statements of Income................. 37
Management's Discussion and Analysis of
Financial Condition and Results of Operations.... 38
Business........................................... 51
Regulation......................................... 75
Management......................................... 85
The Conversion..................................... 94
Restrictions on Acquisitions of Stock and Related
Takeover Defensive Provisions................... 107
Description of Capital Stock....................... 111
Legal and Tax Matters.............................. 113
Experts............................................ 113
Additional Information............................. 113
Index to Consolidated Financial Statements......... F-1
</TABLE>
UNTIL THE LATER OF DECEMBER __, 1996, OR 25 DAYS AFTER COMMENCEMENT OF
THE SYNDICATED COMMUNITY OFFERING, IF ANY, ALL DEALERS EFFECTING TRANSACTIONS IN
THE REGISTERED SECURITIES, WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION,
MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN ADDITION TO THE OBLIGATION
OF DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT
TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
258,750 Shares
IFB HOLDINGS, INC.
(Holding Company for Investors Federal
Bank and Savings Association to become
Investors Federal Bank, National Association)
Common Stock
_____________
PROSPECTUS
_____________
TRIDENT SECURITIES, INC.
November __, 1996
================================================================================
<PAGE>
PART II: INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS OF INVESTORS FEDERAL BANK
AND SAVINGS ASSOCIATION
Generally, federal regulations define areas for indemnity coverage for federal
savings associations, as follows:
(a) Any person against whom any action is brought by reason of the
fact that such person is or was a director or officer of the savings association
shall be indemnified by the savings association for:
(i) Reasonable costs and expenses, including reasonable
attorneys' fees, actually paid or incurred by such person in connection
with proceedings related to the defense or settlement of such action;
(ii) Any amount for which such person becomes liable by reason of
any judgment in such action;
(iii) Reasonable costs and expenses, including reasonable
attorneys' fees, actually paid or incurred in any action to enforce his
rights under this section, if the person attains a final judgment in favor
of such person in such enforcement action.
(b) Indemnification provided for in subparagraph (a) shall be made to
such officer or director only if the requirements of this subsection are met:
(i) The savings association shall make the indemnification
provided by subparagraph (a) in connection with any such action which
results in a final judgment on the merits in favor of such officer or
director.
(ii) The savings association shall make the indemnification
provided by subparagraph (a) in case of settlement of such action, final
judgment against such director or officer or final judgment in favor of
such director or officer other than on the merits except in relation to
matters as to which he shall be adjudged to be liable for negligence or
misconduct in the performance of duty, only if a majority of the directors
of the savings association determines that such a director or officer was
acting in good faith within what he was reasonably entitled to believe
under the circumstances was the scope of his employment or authority and
for a purpose which he was reasonably entitled to believe under the
circumstances was in the best interest of the savings association or its
members.
(c) As used in this paragraph:
(i) "Action" means any action, suit or other judicial or
administrative proceeding, or threatened proceeding, whether civil,
criminal, or otherwise, including any appeal or other proceeding for
review;
(ii) "Court" includes, without limitation, any court to which or
in which any appeal or any proceeding for review is brought;
(iii) "Final Judgment" means a judgment, decree, or order which
is appealable and as to which the period for appeal has expired and no
appeal has been taken;
(iv) "Settlement" includes the entry of a judgment by consent or
by confession or upon a plea of guilty or of nolo contendere.
II-1
<PAGE>
INDEMNIFICATION OF DIRECTORS AND OFFICERS OF IFB HOLDINGS, INC.
Article ELEVENTH of IFB Holdings, Inc.'s (the "Corporation") Certificate of
Incorporation sets forth circumstances under which directors, officers,
employees and agents of the Corporation may be insured or indemnified against
liability which they may incur in their capacities as such.
ELEVENTH:
A. Each person who was or is made a party or is threatened to be made a
party to or is otherwise involved in any action, suit or proceeding, whether
civil, criminal, administrative or investigative (hereinafter a "proceeding"),
by reason of the fact that he or she is or was a director or an officer of the
Corporation or is or was serving at the request of the Corporation as a director
or officer of another corporation, including, without limitation, any Subsidiary
(as defined in Article EIGHTH of the Certificate of Incorporation of the
Corporation), partnership, joint venture, trust or other enterprise, including
service with respect to an employee benefit plan (hereinafter an "indemnitee"),
whether the basis of such proceeding is alleged action in an official capacity
as a director or officer or in any other capacity while serving as a director or
officer, shall be indemnified and held harmless by the Corporation to the
fullest extent authorized by the Delaware General Corporation Law, as the same
exists or may hereafter be amended (but, in the case of any such amendment, only
to the extent that such amendment permits the Corporation to provide broader
indemnification rights than such law permitted the Corporation to provide prior
to such amendment), against all expense, liability and loss (including
attorneys' fees, judgments, fines, ERISA excise taxes or penalties and amounts
paid in settlement) reasonably incurred or suffered by such indemnitee in
connection therewith; provided, however, that, except as provided in Section C
hereof with respect to proceedings to enforce rights to indemnification, the
Corporation shall indemnify any such indemnitee in connection with a proceeding
(or part thereof) initiated by such indemnitee only if such proceeding (or part
thereof) was authorized by the Board of Directors of the Corporation.
B. The right to indemnification conferred in Section A of this Article
ELEVENTH shall include the right to be paid by the Corporation the expenses
incurred in defending any such proceeding in advance of its final disposition
(hereinafter an "advancement of expenses"); provided, however, that, if the
Delaware General Corporation Law requires, an advancement of expenses incurred
by an indemnitee in his or her capacity as a director or officer (and not in any
other capacity in which service was or is rendered by such indemnitee,
including, without limitation, service to an employee benefit plan) shall be
made only upon delivery to the Corporation of an undertaking (hereinafter an
"undertaking"), by or on behalf of such indemnitee, to repay all amounts so
advanced if it shall ultimately be determined by final judicial decision from
which there is no further right to appeal (hereinafter a "final adjudication"),
that such indemnitee is not entitled to be indemnified for such expenses under
this Section or otherwise. The rights to indemnification and to the advancement
of expenses conferred in Sections A and B of this Article ELEVENTH shall be
contract rights and such rights shall continue as to an indemnitee who has
ceased to be a director or officer and shall inure to the benefit of the
indemnitee's heirs, executors and administrators.
C. If a claim under Section A or B of this Article ELEVENTH is not paid
in full by the Corporation within sixty days after a written claim has been
received by the Corporation, except in the case of a claim for an advancement of
expenses, in which case the applicable period shall be twenty days, the
indemnitee may at any time thereafter bring suit against the Corporation to
recover the unpaid amount of the claim. If successful in whole or in part in
any such suit, or in a suit brought by the Corporation to recover an advancement
of expenses pursuant to the terms of an undertaking, the indemnitee shall also
be entitled to be paid the expense of prosecuting or defending such suit. In
(i) any suit brought by the indemnitee to enforce a right to indemnification
hereunder (but not in a suit brought by the indemnitee to enforce a right to an
advancement of expenses) it shall be a defense that, and (ii) in any suit by the
Corporation to recover an advancement of expenses pursuant to the terms of an
undertaking the Corporation shall be entitled to recover such expenses upon a
final adjudication that, the indemnitee has not met any applicable standard for
indemnification set forth in the Delaware General Corporation Law. Neither the
failure of the Corporation (including its Board of Directors, independent legal
counsel, or its stockholders) to have made a determination prior to the
commencement of such suit that indemnification of the indemnitee is proper in
the circumstances because the indemnitee has met the applicable standard of
conduct set forth in the Delaware General Corporation Law, nor an actual
determination by the Corporation (including its Board of Directors, independent
legal counsel, or its stockholders) that the indemnitee has not met such
applicable standard of conduct, shall create a presumption that the indemnitee
has not met the applicable standard of conduct or, in the case of such a suit
brought by the indemnitee,
II-2
<PAGE>
be a defense to such suit. In any suit brought by the indemnitee to enforce a
right to indemnification or to an advancement of expenses hereunder, or by the
Corporation to recover an advancement of expenses pursuant to the terms of an
undertaking, the burden of proving that the indemnitee is not entitled to be
indemnified, or to such advancement of expenses, under this Article ELEVENTH or
otherwise shall be on the Corporation.
D. The rights to indemnification and to the advancement of expenses
conferred in this Article ELEVENTH shall not be exclusive of any other right
which any person may have or hereafter acquire under any statute, the
Corporation's Certificate of Incorporation, Bylaws, agreement, vote of
stockholders or Disinterested Directors or otherwise.
E. The Corporation may maintain insurance, at its expense, to protect
itself and any director, officer, employee or agent of the Corporation or
another corporation, partnership, joint venture, trust or other enterprise
against any expense, liability or loss, whether or not the Corporation would
have the power to indemnify such person against such expense, liability or loss
under the Delaware General Corporation Law.
F. The Corporation may, to the extent authorized from time to time by a
majority vote of the Disinterested Directors, grant rights to indemnification
and to the advancement of expenses to any employee or agent of the Corporation
to the fullest extent of the provisions of this Article with respect to the
indemnification and advancement of expenses of directors and officers of the
Corporation.
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
<TABLE>
<CAPTION>
Amount
------
<S> <C>
* Legal Fees and Expenses......................... $ 85,000
* Printing, Postage and Mailing................... 60,000
* Appraisal and Business Plan Fees and Expenses... 23,000
* Accounting Fees and Expenses.................... 45,000
* Blue Sky Filing Fees and Expenses
(including counsel fees)..................... 15,000
Conversion Agent and Proxy Solicitation Fees 6,000
** Marketing Agent Fees and Expenses............... 79,215
* Marketing Agent Counsel Fees.................... 22,500
* Filing Fees (NASD, OTS and SEC)................. 16,700
* Other Expenses.................................. 35,130
--------
* Total........................................ $317,285
========
</TABLE>
- -----------------
* Estimated
** IFB Holdings, Inc. has retained Trident Securities, Inc. ("Trident
Securities") to assist in the sale of common stock on a best efforts basis
in the Offerings. Trident Securities will receive fees of $62,715,
exclusive of estimated expenses of $9,000, assuming the sale of 5,951,240
shares in the Offerings.
II-3
<PAGE>
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES
Not Applicable.
ITEM 27. EXHIBITS:
The exhibits filed as part of this registration statement are as
follows:
(a) LIST OF EXHIBITS
1.1 Engagement Letter between Investors Federal Bank and Savings Association
and Trident Securities, Inc.
1.2 Form of Agency Agreement among IFB Holdings, Inc., Investors Federal Bank
and Savings Association and Trident Securities, Inc. *
2 Plan of Conversion
3.1 Certificate of Incorporation of IFB Holdings, Inc.
3.2 Bylaws of IFB Holdings, Inc.
3.3 Charter of Investors Federal Bank and Savings Association
3.4 Bylaws of Investors Federal Bank and Savings Association
3.5 Articles of Association of Investors Federal Bank, National Association
3.6 Bylaws of Investors Federal Bank, National Association
4 Form of Common Stock Certificate of IFB Holdings, Inc.
5 Opinion of Luse Lehman Gorman Pomerenk & Schick regarding legality of
securities being registered
8.1 Federal Tax Opinion of Luse Lehman Gorman Pomerenk & Schick
8.2 State Tax Opinion of Lockridge, Constant & Conrad, LLC*
8.3 Opinion of Ferguson & Co., LLP with respect to Subscription Rights
10.1 Form of Employment Agreement for Earle S. Teegarden, Jr. and Larry R.
Johnson
10.2 Employee Stock Ownership Plan
10.3 Profit Sharing Plan
10.4 Director Emeritus Plan
21 Subsidiary
23.1 Consent of Luse Lehman Gorman Pomerenk & Schick (contained in Opinions
included on Exhibits 5 and 8.1)
23.2 Consent of Lockridge, Constant & Conrad, LLC
23.3 Consent of Ferguson & Co., LLP
24 Power of Attorney (set forth on signature page)
II-4
<PAGE>
27.1 EDGAR Financial Data Schedule
99.1 Appraisal Agreement between Investors Federal Bank and Savings Association
and Ferguson & Co., LLP
99.2 Appraisal Report of Ferguson & Co., LLP*
99.3 Proxy Statement
99.4 Marketing Materials
99.5 Order and Acknowledgment Form and Certification Form
- ----------------
* To be filed supplementally or by amendment.
II-5
<PAGE>
ITEM 28. UNDERTAKINGS
The undersigned Registrant hereby undertakes to:
(1) File, during any period in which it offers or sells securities, a
post-effective amendment to this registration statement to:
(i) Include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) Reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent post-
effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
registration statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
duration from the low or high and of the estimated maximum offering range may
be reflected in the form of prospectus filed with the Commission pursuant to
Rule 424(b) if, in the aggregate, the changes in volume and price represent no
more than 20 percent change in the maximum aggregate offering price set forth
in the "Calculation of Registration Fee" table in the effective registration
statement;
(iii) Include any additional or changed material information on the
plan of distribution.
(2) For determining liability under the Securities Act, treat each post-
effective amendment as a new registration statement of the securities offered,
and the offering of the securities at that time to be the initial bona fide
offering.
(3) File a post-effective amendment to remove from registration any of
the securities that remain unsold at the end of the offering.
The small business issuer will provide to the underwriter at the closing
specified in the Underwriting Agreement certificates in such documentation and
registered in such names as required by the underwriter to permit prompt
delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the small business issuer pursuant to the foregoing provisions, or otherwise,
the small business issuer has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Act, and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the small business issuer of expenses incurred or paid by a director, officer or
controlling person of the small business issuer in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the small business
issuer will, unless in the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction the
questions whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issue.
II-6
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant has
duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in Chillicothe, Missouri on October 4,
1996.
IFB HOLDINGS, INC.
By: /s/ Earle S. Teegarden, Jr.
--------------------------
Earle S. Teegarden, Jr.
President
(Duly Authorized Representative)
POWER OF ATTORNEY
We, the undersigned directors and officers of IFB Holdings, Inc. (the
"Company") hereby severally constitute and appoint Earle S. Teegarden, Jr. as
our true and lawful attorney and agent, to do any and all things in our names in
the capacities indicated below which said Earle S. Teegarden, Jr. may deem
necessary or advisable to enable the Company to comply with the Securities Act
of 1933, and any rules, regulations and requirements of the Securities and
Exchange Commission, in connection with the registration statement on Form SB-2
relating to the offering of the Company's Common Stock, including specifically,
but not limited to, power and authority to sign for us in our names in the
capacities indicated below the registration statement and any and all amendments
(including post-effective amendments) thereto; and we hereby approve, ratify and
confirm all that said Earle S. Teegarden, Jr. shall do or cause to be done by
virtue thereof.
Pursuant to the requirements of the Securities Act of 1933, this registration
statement has been signed below by the following persons in the capacities and
as of the dates indicated.
<TABLE>
<CAPTION>
Signatures Title Date
---------- ----- ----
<S> <C> <C>
/s/ Earle S. Teegarden, Jr. President and Director October 4, 1996
- ----------------------------- (Principal Executive Officer)
Earle S. Teegarden, Jr.
/s/ Sherri H. Williams Vice President and Controller October 4, 1996
- ----------------------------- (Principal Accounting Officer)
Sherri H. Williams
/s/ Robert T. Fairweather Chairman of the Board October 4, 1996
- -----------------------------
Robert T. Fairweather
/s/ Larry R. Johnson Senior Vice President, October 4, 1996
- ----------------------------- Secretary
Larry R. Johnson and Director
/s/ Edward P. Milbank Vice-Chairman of the Board October 4, 1996
- -----------------------------
Edward P. Milbank
/s/ J. Michael Palmer Director October 4, 1996
- -----------------------------
J. Michael Palmer
/s/ Armand J. Peterson Director October 4, 1996
- -----------------------------
Armand J. Peterson
</TABLE>
II-7
<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 4, 1996
REGISTRATION NO. 333-[ ]
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------------
EXHIBITS
TO
REGISTRATION STATEMENT
ON
FORM SB-2
-------------------
IFB HOLDINGS, INC.
CHILLICOTHE, MISSOURI
<PAGE>
EXHIBIT INDEX
1.1 Engagement Letter between Investors Federal Bank and Savings Association
and Trident Securities, Inc.
1.2 Form of Agency Agreement among IFB Holdings, Inc., Investors Federal Bank
and Savings Association and Trident Securities, Inc. *
2 Plan of Conversion
3.1 Certificate of Incorporation of IFB Holdings, Inc.
3.2 Bylaws of IFB Holdings, Inc.
3.3 Charter of Investors Federal Bank and Savings Association
3.4 Bylaws of Investors Federal Bank and Savings Association
3.5 Articles of Association of Investors Federal Bank, National Association
3.6 Bylaws of Investors Federal Bank, National Association
4 Form of Common Stock Certificate of IFB Holdings, Inc.
5 Opinion of Luse Lehman Gorman Pomerenk & Schick regarding legality of
securities being registered
8.1 Federal Tax Opinion of Luse Lehman Gorman Pomerenk & Schick
8.2 State Tax Opinion of Lockridge, Constant & Conrad, LLC*
8.3 Opinion of Ferguson & Co., LLP with respect to Subscription Rights
10.1 Form of Employment Agreement for Earle S. Teegarden, Jr. and Larry R.
Johnson
10.2 Employee Stock Ownership Plan
10.3 Profit Sharing Plan
10.4 Director Emeritus Plan
21 Subsidiary
23.1 Consent of Luse Lehman Gorman Pomerenk & Schick (contained in Opinions
included on Exhibits 5 and 8.1)
23.2 Consent of Lockridge, Constant & Conrad, LLC
23.3 Consent of Ferguson & Co., LLP
24 Power of Attorney (set forth on signature page)
27.1 EDGAR Financial Data Schedule
99.1 Appraisal Agreement between Investors Federal Bank and Savings Association
and Ferguson & Co., LLP
99.2 Appraisal Report of Ferguson & Co., LLP*
<PAGE>
99.3 Proxy Statement
99.4 Marketing Materials
99.5 Order and Acknowledgment Form and Certification Form
- --------------------
* To be filed supplementally or by amendment.
<PAGE>
Exhibit 1.1
[TRIDENT SECURITIES LETTERHEAD APPEARS HERE]
September 5, 1996
Board of Directors
Investors Federal Bank and Savings Association
522 Washington
Chillicothe, Missouri 64601
RE: Conversion Stock Marketing Services
Gentlemen:
This letter sets forth the terms of the proposed engagement between Trident
Securities, Inc. ("Trident") and Investors Federal Bank and Savings Association
(the "Bank") concerning our investment banking services in connection with the
conversion of the Bank from a mutual to a capital stock form of organization.
Trident is prepared to assist the Bank in connection with the offering of its
shares of common stock during the subscription offering and community offering
as such terms are defined in the Bank's Plan of Conversion (the "Plan"). The
specific terms of the services contemplated hereunder shall be set forth in a
definitive sales agency agreement (the "Agreement") between Trident and the Bank
to be executed on the date the offering circular/prospectus is declared
effective by the appropriate regulatory authorities. The price of the shares
during the subscription offering and community offering will be the price
established by the Bank's Board of Directors, based upon an independent
appraisal as approved by the appropriate regulatory authorities, provided such
price is mutually acceptable to Trident and the Bank.
In connection with the subscription offering and community offering, Trident
will act as financial advisor and exercise its best efforts to assist the Bank
in the sale of its common stock during the subscription offering and community
offering. Additionally, Trident may enter into agreements with other National
Association of Securities Dealers, Inc., ("NASD") member firms to act as
selected dealers, assisting in the sale of the common stock. Trident and the
Bank will determine the selected dealers to assist the Bank during the community
offering. At the appropriate time, Trident in conjunction with its counsel,
will conduct an examination of the relevant documents and records of the Bank as
Trident deems necessary and appropriate. The Bank will make all documents,
records and other information deemed necessary by Trident or its counsel
available to them upon request.
<PAGE>
Board of Directors
September 5, 1996
Page 2
For its services hereunder, Trident will receive the following compensation and
reimbursement from the Bank:
1. A commission equal to 1.85% of the aggregate dollar amount of capital
stock sold to Eligible Account Holders who reside in the Bank's
primary market area (as defined in the Plan) and a commission equal to
1.35% on sales to Eligible Account Holders residing outside of the
Bank's primary market area. All fees shall be calculated on the final
midpoint appraised value and shall not exceed such amount. No
commissions shall be payable on any shares purchased by officers,
directors, employees or their associates or any employee benefit
plans.
2. A commission equal to 1.85% of the aggregate dollar amount of capital
stock sold to Supplemental Eligible Account Holders and Other Members
who reside in the Bank's primary market area and a commission equal to
1.35% of the aggregate dollar amount of capital stock sold to
Supplemental Eligible Account Holders and Other Members residing
outside of the Bank's primary market area. All fees shall be
calculated on the final midpoint appraised value and shall not exceed
such amount.
3. A commission equal to 1.85% of the aggregate dollar amount of capital
stock sold in the Community Offering to residents of the Bank's
primary market area and a commission equal to 1.35% on sales to
persons residing outside of the Bank's primary market area. All fees
shall be calculated on the final midpoint appraised value and shall
not exceed such amount.
4. For stock sold by other NASD member firms under selected dealer's
agreements, the commission shall not exceed a fee to be agreed upon
jointly by Trident and the Bank to reflect market requirements at the
time of the stock allocation in a Syndicated Community Offering.
5. The foregoing fees and commissions are to be payable to Trident at
closing as defined in the Agreement to be entered into between the
Bank and Trident.
6. Trident shall be reimbursed for allocable expenses incurred by them,
including legal fees, including disbursements of their counsel up to
$1,500 whether or not the Agreement is consummated. Trident's out-of-
pocket expenses will not exceed $7,500 and its legal fees will not
exceed $22,500. The Bank will forward to Trident a check in the
amount of $10,000 as an advance payment to defray the allocable
expenses of Trident.
<PAGE>
Board of Directors
September 5, 1996
Page 3
It further is understood that the Bank will pay all other expenses of the
conversion including but not limited to its attorneys' fees, NASD filing fees,
and filing and registration fees and fees of either Trident's attorneys or the
Bank's attorneys relating to any required state securities law filings,
telephone charges, air freight, rental equipment, supplies, transfer agent
charges, fees relating to auditing and accounting and costs of printing all
documents necessary in connection with the foregoing.
For purposes of Trident's obligation to file certain documents and to make
certain representations to the NASD in connection with the conversion, the Bank
warrants that: (a) the Bank has not privately placed any securities within the
last 18 months; (b) there have been no material dealings within the last 12
months between the Bank and any NASD member or any person related to or
associated with any such member; (c) none of the officers or directors of the
Bank has any affiliation with the NASD; (d) except as contemplated by this
engagement letter with Trident, the Bank has no financial or management
consulting contracts outstanding with any other person; (e) the Bank has not
granted Trident a right of first refusal with respect to the underwriting of any
future offering of the Bank stock; and (f) there has been no intermediary
between Trident and the Bank in connection with the public offering of the
Bank's shares, and no person is being compensated in any manner for providing
such service.
The Bank agrees to indemnify and hold harmless Trident and each person, if any,
who controls the firm against all losses, claims, damages or liabilities, joint
or several and all legal or other expenses reasonably incurred by them in
connection with the investigation or defense thereof (collectively, "Losses"),
to which they may become subject under the securities laws or under the common
law, that arise out of or are based upon the conversion or the engagement
hereunder of Trident, except for liabilities resulting from the gross negligence
or willful misconduct of Trident. If the foregoing indemnification is
unavailable for any reason, the Bank agrees to contribute to such Losses in the
proportion that its financial interest in the conversion bears to that of the
indemnified parties. If the Agreement is entered into with respect to the
common stock to be issued in the conversion, the Agreement will provide for
indemnification, which will be in addition to any rights that Trident or any
other indemnified party may have at common law or otherwise. The
indemnification provision of this paragraph will be superseded by the
indemnification provisions of the Agreement entered into by the Bank and
Trident.
This letter is merely a statement of intent and is not a binding legal agreement
except as to paragraph (6) above with regard to the obligation to reimburse
Trident for allocable expenses to be incurred prior to the execution of the
Agreement and the indemnity described in the preceding paragraph. While Trident
and the Bank agree in principle to the contents hereof and propose to proceed
promptly, and in good faith, to work out the arrangements with respect to the
proposed offering, any legal obligations between Trident and the Bank shall be
only as set forth in a duly executed Agreement. Such Agreement shall be in form
and content satisfactory to Trident and the Bank, as well as their counsel, and
Trident's obligations thereunder shall be subject to, among
<PAGE>
Board of Directors
September 5, 1996
Page 4
other things, there being in Trident's opinion no material adverse change in the
condition or obligations of the Bank or no market conditions which might render
the sale of the shares by the Bank hereby contemplated inadvisable.
Please acknowledge your agreement to the foregoing by signing below and
returning to Trident one copy of this letter. Trident acknowledges receipt of
the advance payment of $10,000.
Yours very truly,
TRIDENT SECURITIES, INC.
By:
---------------------
R. Lee Burrows, Jr.
Managing Director
RLB/cs
7-19-2
Agreed and accepted to this ______ day of ________________, 1996
INVESTORS FEDERAL BANK AND SAVINGS ASSOCIATION
By:
----------------------
Earle Teegarden, Jr.
President
<PAGE>
Exhibit 2
---------
INVESTORS FEDERAL BANK AND SAVINGS ASSOCIATION
Chillicothe, Missouri
PLAN OF CONVERSION
From Mutual to Stock Form of Organization
and From a Savings Institution to a National Bank
I. GENERAL
-------
On September 23, 1996, the Board of Directors of Investors Federal Bank and
Savings Association (the "Bank") adopted a Plan of Conversion whereby the Bank
would convert from a federal mutual savings institution to a federal stock
savings institution pursuant to the Rules and Regulations of the OTS and then
from a federal stock savings institution to a national bank. The Plan includes,
as part of the conversion, the concurrent formation of a holding company. The
new holding company is proposed to be chartered as a Delaware corporation under
the name "IFB Holdings, Inc." The Plan provides that non-transferable
subscription rights to purchase Holding Company Conversion Stock will be offered
first to Eligible Account Holders of record as of the Eligibility Record Date,
then to the Bank's Tax-Qualified Employee Plans, then to Supplemental Eligible
Account Holders of record as of the Supplemental Eligibility Record Date, then
to Other Members, and then to directors, officers and employees. Concurrently
with, at any time during, or promptly after the Subscription Offering, and on a
lowest priority basis, an opportunity to subscribe may also be offered to the
general public in a Direct Community Offering. The price of the Holding Company
Conversion Stock will be based upon an independent appraisal of the Bank and
will reflect its estimated pro forma market value, as converted. It is the
desire of the Board of Directors of the Bank to attract new capital to the Bank
in order to increase its capital, support future savings growth and increase the
amount of funds available for residential and other mortgage lending. The
Converted Bank is also expected to benefit from its management and other
personnel having a stock ownership in its business, since stock ownership is
viewed as an effective performance incentive and a means of attracting,
retaining and compensating management and other personnel. No change will be
made in the Board of Directors or management as a result of the Conversion.
The conversion of the Bank to the Converted Bank is referred to herein as
the "Stock Conversion," the conversion of the Converted Bank to the National
Bank is referred to herein as the "Bank Conversion" and the Stock Conversion and
the Bank Conversion are referred to herein collectively as the "Conversion."
II. DEFINITIONS
-----------
Acting in Concert: The term "acting in concert" shall have the same
-----------------
meaning given it in (S)574.2(c) of the Rules and Regulations of the OTS.
A-1
<PAGE>
Actual Subscription Price: The price per share, determined as provided in
-------------------------
Section VI of the Plan, at which Holding Company Conversion Stock will be sold
in the Subscription Offering.
Affiliate: An "affiliate" of, or a Person "affiliated" with, a Specified
---------
Person, is a Person that directly, or indirectly through one or more
intermediaries, controls, or is controlled by or is under common control with,
the Person specified.
Associate: The term "associate," when used to indicate a relationship with
---------
any Person, means (i) any corporation or organization (other than the Holding
Company, the Bank or a majority-owned subsidiary of the Holding Company) of
which such Person is an officer or partner or is, directly or indirectly, the
beneficial owner of ten percent or more of any class of equity securities, (ii)
any trust or other estate in which such Person has a substantial beneficial
interest or as to which such Person serves as trustee or in a similar fiduciary
capacity, and (iii) any relative or spouse of such Person, or any relative of
such spouse, who has the same home as such Person or who is a director or
officer of the Holding Company or the Bank or any subsidiary of the Holding
Company; provided, however, that any Tax-Qualified or Non-Tax-Qualified Employee
Plan shall not be deemed to be an associate of any director or officer of the
Holding Company or the Bank, to the extent provided in Section VI hereof.
Bank: Investors Federal Bank and Savings Association, or such other name
----
as the institution may adopt.
Bank Conversion: The conversion of the Converted Bank from a federally
---------------
chartered stock savings institution to a national bank ("National Bank").
BIF: Bank Insurance Fund.
---
Capital Stock: Any and all authorized shares of stock of the Converted
-------------
Bank after the Stock Conversion.
Conversion: Except as provided in Section III.F., the term "Conversion"
----------
means the Stock Conversion and the Bank Conversion.
Converted Bank: The federally chartered stock savings institution
--------------
resulting from the Conversion of the Bank in accordance with the Plan.
Deposit Account: Any withdrawable account or deposit in excess of $50 in
---------------
the Bank.
Direct Community Offering: The offering to the general public of any
-------------------------
unsubscribed shares which may be effected as provided in Section VI hereof.
Eligibility Record Date: The close of business on June 30, 1995.
-----------------------
Eligible Account Holder: Any Person holding a Qualifying Deposit in the
-----------------------
Bank on the Eligibility Record Date.
A-2
<PAGE>
Exchange Act: The Securities Exchange Act of 1934, as amended.
------------
FRB: The Board of Governors of the Federal Reserve System.
---
Holding Company: IFB Holdings, Inc., a Delaware corporation, which upon
---------------
completion of the Stock Conversion will own all of the outstanding common stock
of the Converted Bank, and which upon completion of the Bank Conversion will own
all of the outstanding common stock of the National Bank.
Holding Company Conversion Stock: Shares of common stock, par value $.01
--------------------------------
per share, to be issued and sold by the Holding Company as a part of the
Conversion; provided, however, that for purposes of calculating Subscription
Rights and maximum purchase limitations under the Plan, references to the number
of shares of Holding Company Conversion Stock shall refer to the number of
shares offered in the Subscription Offering.
Market Maker: A dealer (i.e., any Person who engages directly or
------------
indirectly as agent, broker or principal in the business of offering, buying,
selling, or otherwise dealing or trading in securities issued by another Person)
who, with respect to a particular security, (i) regularly publishes bona fide,
competitive bid and offer quotations in a recognized inter-dealer quotation
system; or (ii) furnishes bona fide competitive bid and offer quotations on
request; and (iii) is ready, willing, and able to effect transactions in
reasonable quantities at his quoted prices with other brokers or dealers.
Maximum Subscription Price: The price per share of Holding Company
--------------------------
Conversion Stock to be paid initially by subscribers in the Subscription
Offering.
Member: Any Person or entity that qualifies as a member of the Bank
------
pursuant to its charter and bylaws.
National Bank: The national bank resulting from the Bank Conversion.
-------------
Non-Tax-Qualified Employee Plan: Any defined benefit plan or defined
-------------------------------
contribution plan of the Bank or the Holding Company, such as an employee stock
ownership plan, stock bonus plan, profit-sharing plan or other plan, which with
its related trust does not meet the requirements to be "qualified" under Section
401 of the Internal Revenue Code.
OCC: Office of the Comptroller of the Currency, Department of the
---
Treasury.
OCC Conversion Application: The application submitted to the OCC for
--------------------------
approval of the Bank Conversion.
OTS: Office of Thrift Supervision, Department of the Treasury.
---
A-3
<PAGE>
OTS Bank Conversion Application: The application submitted to the OTS for
-------------------------------
approval of the Bank Conversion.
OTS Conversion Application: The application submitted to the OTS on Form
--------------------------
AC.
Officer: An executive officer of the Holding Company or the Bank,
-------
including the Chairman of the Board, President, Executive Vice Presidents,
Senior Vice Presidents in charge of principal business functions, Secretary and
Treasurer.
Order Forms: Forms to be used in the Subscription Offering and in the
-----------
Direct Community Offering to exercise Subscription Rights.
Other Members: Members of the Bank, other than Eligible Account Holders,
-------------
Tax-Qualified Employee Plans or Supplemental Eligible Account Holders, as of the
Voting Record Date.
Person: An individual, a corporation, a partnership, an association, a
------
joint-stock company, a trust, any unincorporated organization, or a government
or political subdivision thereof.
Plan: This Plan of Conversion of the Bank, including any amendment
----
approved as provided in this Plan, which provides for the conversion of the Bank
from a federally chartered mutual savings institution to a federally chartered
stock savings institution, and the subsequent conversion of the Converted Bank
from a federally chartered stock savings institution to a national bank.
Public Offering: The offering for sale by the Underwriters to the general
---------------
public of any shares of Holding Company Conversion Stock not subscribed for in
the Subscription Offering or the Direct Community Offering.
Public Offering Price: The price per share at which any unsubscribed
---------------------
shares of Holding Company Conversion Stock are initially offered for sale in the
Public Offering.
Qualifying Deposit: The aggregate balance of each Deposit Account of an
------------------
Eligible Account Holder as of the Eligibility Record Date or of a Supplemental
Eligible Account Holder as of the Supplemental Eligibility Record Date.
SAIF: Savings Association Insurance Fund.
----
SEC: Securities and Exchange Commission.
---
Special Meeting: The Special Meeting of Members called for the purpose of
---------------
considering and voting upon the Plan of Conversion.
Stock Conversion: The conversion of the Bank to the Converted Bank,
----------------
including the change of the Bank's charter and bylaws to federal stock charter
and bylaws; sale by the Holding
A-4
<PAGE>
Company of Holding Company Conversion Stock; and issuance and sale by the
Converted Bank of Converted Bank Common Stock to the Holding Company, all as
provided for in the Plan.
Subscription Offering: The offering of shares of Holding Company
---------------------
Conversion Stock for subscription and purchase pursuant to Section VI of the
Plan.
Subscription Rights: Non-transferable, non-negotiable, personal rights of
-------------------
the Bank's Eligible Account Holders, Tax-Qualified Employee Plans, Supplemental
Eligible Account Holders, Other Members, and directors, Officers and employees,
or trusts of any such persons including individual retirement accounts and Keogh
accounts, to subscribe for shares of Holding Company Conversion Stock in the
Subscription Offering.
Supplemental Eligibility Record Date: The last day of the calendar quarter
------------------------------------
preceding approval of the Plan by the OTS.
Supplemental Eligible Account Holder: Any person holding a Qualifying
------------------------------------
Deposit in the Bank (other than an officer or director and their associates) on
the Supplemental Eligibility Record Date.
Tax-Qualified Employee Plans: Any defined benefit plan or defined
----------------------------
contribution plan of the Bank or the Holding Company, such as an employee stock
ownership plan, stock bonus plan, profit-sharing plan or other plan, which with
its related trust meets the requirements to be "qualified" under Section 401 of
the Internal Revenue Code.
Underwriters: The investment banking firm or firms agreeing to purchase
------------
Holding Company Conversion Stock in order to offer and sell such Holding Company
Conversion Stock in the Public Offering.
Voting Record Date: The date set by the Board of Directors in accordance
------------------
with federal regulations for determining Members eligible to vote at the Special
Meeting.
III. STEPS PRIOR TO SUBMISSION OF PLAN OF CONVERSION TO THE MEMBERS FOR APPROVAL
---------------------------------------------------------------------------
Prior to submission of the Plan of Conversion to its Members for approval,
the Bank must receive from the OTS approval of the Application for Approval of
Conversion on Form AC to convert to the federal stock form of organization. The
following steps must be taken prior to such regulatory approval:
A. The Board of Directors shall adopt the Plan by not less than a two-
thirds vote.
B. The Bank shall notify its Members of the adoption of the Plan by
publishing a statement in a newspaper having a general circulation in each
community in which the Bank maintains an office.
A-5
<PAGE>
C. Copies of the Plan adopted by the Board of Directors shall be made
available for inspection at each office of the Bank.
D. The Bank will promptly cause an Application for Approval of Conversion
on Form AC, an Application on Form H-(e)1 (or other applicable form) and an
OTS Bank Conversion Application to be prepared and filed with the OTS; a
Holding Company Application on Form Y-3 to be prepared and filed with the
FRB; an OCC Conversion Application to be prepared and filed with the OCC;
and a Registration Statement on Form S-1 (or other applicable form) to be
prepared and filed with the SEC.
E. Upon filing of the Form AC, the Bank shall notify its Members that it
has filed the Form AC by posting notice in each of its offices and by
publishing notice in a newspaper having general circulation in each
community in which the Bank maintains an office.
F. The Board of Directors of the Bank, by majority vote, may, at any
time, and notwithstanding any language in this Plan to the contrary, elect
not to proceed with the Bank Conversion, in which event the FRB Holding
Company Application, the OCC Conversion Application and the OTS Bank
Conversion Application may be withdrawn or abandoned. In the event the Bank
Conversion is not pursued, any references to the Bank Conversion in this
Plan shall be disregarded.
IV. CONVERSION PROCEDURE
--------------------
Upon receipt of all regulatory approvals required for consummation of the
Stock Conversion, the Bank shall convene the Special Meeting scheduled in
accordance with the Bank's Bylaws to vote on the Plan. Promptly after receipt of
OTS approval of the OTS Conversion Application and at least 20 days but not more
than 45 days prior to the Special Meeting, the Bank will distribute proxy
solicitation materials to all voting Members as of the Voting Record Date
established for voting at the Special Meeting. Proxy materials will also be sent
to each beneficial holder of an Individual Retirement Account where the name of
the beneficial holder is disclosed on the Bank's records. The proxy solicitation
materials will include a copy of the Proxy Statement and other documents
authorized for use by the regulatory authorities and may also include a
Prospectus as provided in Section VI below. The Bank will also advise each
Eligible Account Holder and Supplemental Eligible Account Holder not entitled to
vote at the Special Meeting of the proposed Conversion and the scheduled Special
Meeting and provide a postage paid card on which to indicate whether he or she
wishes to receive the Prospectus, if the Subscription Offering is not held
concurrently with the proxy solicitation of Members for the Special Meeting.
Pursuant to applicable regulations, an affirmative vote of at least a
majority of the total outstanding votes of the Members will be required for
approval of the Plan. Voting may be in person or by proxy.
A-6
<PAGE>
By voting in favor of the adoption of the Plan and the Conversion, the
Members will be voting in favor of (i) the Stock Conversion and the adoption by
the Bank of the Federal Stock Charter and Bylaws in the forms attached as
Exhibits A and B to this Plan and (ii) the subsequent Bank Conversion and the
adoption by the Converted Bank of the national bank articles of association and
bylaws in the forms attached as Exhibits C and D to this Plan. Failure to pursue
or receive regulatory approval for the Bank Conversion shall have no effect on
the vote with respect to the Stock Conversion.
Following approval of the application by the OTS, the Plan will be
submitted to a vote of the Members at the Special Meeting. If the Plan is
approved by Members holding a majority of the total number of votes entitled to
be cast at the Special Meeting, the Bank will take all other necessary steps
pursuant to applicable laws and regulations to convert to a federal stock
savings institution as part of a concurrent holding company formation pursuant
to the terms of the Plan.
The Holding Company Conversion Stock will be offered for sale in the
Subscription Offering at the Maximum Subscription Price to Eligible Account
Holders, Tax-Qualified Employee Plans, Supplemental Eligible Account Holders,
Other Members and directors, Officers and employees of the Bank, prior to or
within 45 days after the date of the Special Meeting. The Bank may, either
concurrently with, at any time during, or promptly after the Subscription
Offering, also offer the Holding Company Conversion Stock to and accept
subscriptions from other Persons in a Direct Community Offering; provided that
the Bank's Eligible Account Holders, Tax-Qualified Employee Plans, Supplemental
Eligible Account Holders, Other Members and directors, Officers and employees
shall have the priority rights to subscribe for Holding Company Conversion Stock
set forth in Section VI of this Plan. However, the Holding Company and the Bank
may delay commencing the Subscription Offering beyond such 45 day period in the
event there exist unforeseen material adverse market or financial conditions. If
the Subscription Offering commences prior to the Special Meeting, subscriptions
will be accepted subject to the approval of the Plan at the Special Meeting.
The period for the Subscription Offering will be not less than 20 days nor
more than 45 days and the period for the Direct Community Offering will be not
more than 45 days, unless extended by the Bank. Upon completion of the
Subscription Offering and the Direct Community Offering, if any, any
unsubscribed shares of Holding Company Conversion Stock will, if feasible, be
sold to the Underwriters for resale to the general public in the Public
Offering. If for any reason the Public Offering of all shares not sold in the
Subscription Offering and Direct Community Offering cannot be effected, the
Holding Company and the Bank will use their best efforts to obtain other
purchasers, subject to OTS approval. Completion of the sale of all shares of
Holding Company Conversion Stock not sold in the Subscription Offering and
Direct Community Offering is required within 45 days after termination of the
Subscription Offering, subject to extension of such 45 day period by the Holding
Company and the Bank with the approval of the OTS. The Holding Company and the
Bank may jointly seek one or more extensions of such 45 day period if necessary
to complete the sale of all shares of Holding Company Conversion Stock. In
connection with such extensions, subscribers and other purchasers will be
permitted to increase, decrease or rescind their subscriptions or purchase
orders to the extent required by the OTS in approving the extensions. Completion
of the sale of all
A-7
<PAGE>
shares of Holding Company Conversion Stock is required within 24 months after
the date of the Special Meeting.
V. CONSUMMATION OF CONVERSION
--------------------------
A. Consummation of the Stock Conversion.
------------------------------------
The date of consummation of the Stock Conversion will be the effective date
of the amendment of the Bank's federal mutual charter to read in the form of a
federal stock charter, which shall be the date of the sale of the Holding
Company Conversion Stock. After receipt of all orders for Holding Company
Conversion Stock, and concurrently with the execution thereof, the amendment of
the Bank's federal mutual charter and bylaws to authorize the issuance of shares
of Capital Stock and to conform to the requirements of a federal capital stock
savings institution will be declared effective by the OTS, the amended bylaws
approved by the Members will become effective, and the Bank will thereby be and
become the Converted Bank. At such time, the Holding Company Conversion Stock
will be issued and sold by the Holding Company, the Capital Stock to be issued
in the Conversion will be issued and sold to the Holding Company, and the
Converted Bank will become a wholly owned subsidiary of the Holding Company. The
Converted Bank will issue to the Holding Company 100% of its common stock,
representing all of the shares of Capital Stock to be issued by the Converted
Bank in the Stock Conversion, and the Holding Company will make payment to the
Converted Bank of that portion of the aggregate net proceeds realized by the
Holding Company from the sale of the Holding Company Conversion Stock under the
Plan as is necessary to increase the Converted Bank's tangible capital to at
least 10% of its adjusted total assets, or such other portion of the aggregate
net proceeds as may be authorized or required by the OTS.
B. Consummation of the Bank Conversion.
-----------------------------------
The Bank Conversion shall be deemed to occur and shall be effective upon
completion of all actions necessary or appropriate under applicable federal
statutes and regulations and the policies of the FRB, the OCC and the OTS to
complete the conversion of the Converted Bank to a national bank, including
without limitation, the approval of the Bank Conversion by the Holding Company,
as the sole shareholder of the Converted Bank, whereupon the Converted Bank will
thereby be and become the National Bank. The Bank Conversion shall be
consummated as soon as reasonably practicable following the consummation of the
Stock Conversion as described in Section VI herein.
VI. STOCK OFFERING
--------------
A. Total Number of Shares and Purchase Price of Conversion Stock
-------------------------------------------------------------
The total number of shares of Holding Company Conversion Stock to be issued
and sold in the Conversion will be determined jointly by the Boards of Directors
of the Holding Company and the Bank prior to the commencement of the
Subscription Offering, subject to adjustment if necessitated by market or
financial conditions prior to consummation of the Conversion. The total
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<PAGE>
number of shares of Holding Company Conversion Stock shall also be subject to
increase in connection with any oversubscriptions in the Subscription Offering
or Direct Community Offering.
The aggregate price for which all shares of Holding Company Conversion
Stock will be sold will be based on an independent appraisal of the estimated
total pro forma market value of the Holding Company and the Converted Bank. Such
appraisal shall be performed in accordance with OTS guidelines and will be
updated as appropriate under or required by applicable regulations.
The appraisal will be made by an independent investment banking or
financial consulting firm experienced in the area of thrift institution
appraisals. The appraisal will include, among other things, an analysis of the
historical and pro forma operating results and net worth of the Converted Bank
and a comparison of the Holding Company, the Converted Bank and the Conversion
Stock with comparable thrift institutions and holding companies and their
respective outstanding capital stocks.
Based upon the independent appraisal, the Boards of Directors of the
Holding Company and the Bank will jointly fix the Maximum Subscription Price.
If, following completion of the Subscription Offering and Direct Community
Offering, a Public Offering is effected, the Actual Subscription Price for each
share of Holding Company Conversion Stock will be the same as the Public
Offering Price at which unsubscribed shares of Holding Company Conversion Stock
are initially offered for sale by the Underwriters in the Public Offering. The
Public Offering Price will be a price negotiated by the Holding Company and the
Bank with the Underwriters, not in excess of the Maximum Subscription Price. The
price paid by the Underwriters for each unsubscribed share will be the Public
Offering Price less a negotiated underwriting discount.
If, upon completion of the Subscription Offering and Direct Community
Offering, all of the Holding Company Conversion Stock is subscribed for or only
a limited number of shares remain unsubscribed for, or if a Public Offering
otherwise cannot be effected, the Actual Subscription Price for each share of
Holding Company Conversion Stock will be determined by dividing the estimated
appraised aggregate pro forma market value of the Holding Company and the
Converted Bank, based on the independent appraisal as updated upon completion of
the Subscription Offering or other sale of all of the Holding Company Conversion
Stock, by the total number of shares of Holding Company Conversion Stock to be
issued and sold by the Holding Company upon Conversion. Such appraisal will then
be expressed in terms of a specific aggregate dollar amount rather than as a
range.
B. Subscription Rights
-------------------
Non-transferable Subscription Rights to purchase shares will be issued
without payment therefor to Eligible Account Holders, Tax-Qualified Employee
Plans, Supplemental Eligible
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Account Holders, Other Members and directors, Officers and employees of the Bank
as set forth below.
1. Preference Category No. 1: Eligible Account Holders
-------------------------------------------- -------
Each Eligible Account Holder shall receive non-transferable
Subscription Rights to subscribe for shares of Holding Company Conversion
Stock in an amount equal to the greater of (i) the lesser of $200,000 or
five percent (5.0%) of the total offering of shares; (ii) one-tenth of one
percent (.10%) of the total offering of shares; or (iii) 15 times the
product (rounded down to the next whole number) obtained by multiplying the
total number of shares of common stock to be issued by a fraction of which
the numerator is the amount of the qualifying deposit of the Eligible
Account Holder and the denominator is the total amount of qualifying
deposits of all Eligible Account Holders in the converting Bank in each
case on the Eligibility Record Date. If sufficient shares are not
available, shares shall be allocated first to permit each subscribing
Eligible Account Holder to purchase to the extent possible 100 shares, and
thereafter among each subscribing Eligible Account Holder pro rata in the
same proportion that his Qualifying Deposit bears to the total Qualifying
Deposits of all subscribing Eligible Account Holders whose subscriptions
remain unsatisfied.
Non-transferable Subscription Rights to purchase Holding Company
Conversion Stock received by directors and Officers of the Bank and their
Associates, based on their increased deposits in the Bank in the one year
period preceding the Eligibility Record Date, shall be subordinated to all
other subscriptions involving the exercise of non-transferable Subscription
Rights of Eligible Account Holders.
2. Preference Category No. 2: Tax-Qualified Employee Plans
--------------------------------------------------------
Each Tax-Qualified Employee Plan shall be entitled to receive
non-transferable Subscription Rights to purchase up to 10% of the shares of
Holding Company Conversion Stock, provided that singly or in the aggregate
such plans (other than that portion of such plans which is self-directed)
shall not purchase more than 10% of the shares of the Holding Company
Conversion Stock. Subscription Rights received pursuant to this Category
shall be subordinated to all rights received by Eligible Account Holders to
purchase shares pursuant to Category No. 1; provided, however, that
notwithstanding any other provision of this Plan to the contrary, the
Tax-Qualified Employee Plans shall have a first priority Subscription Right
to the extent that the total number of shares of Holding Company Conversion
Stock sold in the Conversion exceeds the maximum of the appraisal range as
set forth in the subscription prospectus.
3. Preference Category No. 3: Supplemental Eligible Account Holders
-----------------------------------------------------------------
Each Supplemental Eligible Account Holder shall receive
non-transferable Subscription Rights to subscribe for shares of Holding
Company Conversion Stock in an amount equal to the greater of (i) the
lesser of $200,000 or five percent (5.0%) of the total
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offering of shares; (ii) one-tenth of one percent (.10%) of the total
offering of shares; or (iii) 15 times the product (rounded down to the next
whole number) obtained by multiplying the total number of shares of common
stock to be issued by a fraction of which the numerator is the amount of
the qualifying deposit of the Supplemental Eligible Account Holder and the
denominator is the total amount of qualifying deposits of all Supplemental
Eligible Account Holders in the converting Bank in each case on the
Supplemental Eligibility Record Date.
Subscription Rights received pursuant to this category shall be
subordinated to all Subscription Rights received by Eligible Account
Holders and Tax-Qualified Employee Plans pursuant to Category Nos. 1 and 2
above.
Any non-transferable Subscription Rights to purchase shares received
by an Eligible Account Holder in accordance with Category No. 1 shall
reduce to the extent thereof the Subscription Rights to be distributed to
such person pursuant to this Category.
In the event of an oversubscription for shares under the provisions of
this subparagraph, the shares available shall be allocated first to permit
each subscribing Supplemental Eligible Account Holder, to the extent
possible, to purchase a number of shares sufficient to make his total
allocation (including the number of shares, if any, allocated in accordance
with Category No. 1) equal to 100 shares, and thereafter among each
subscribing Supplemental Eligible Account Holder pro rata in the same
proportion that his Qualifying Deposit bears to the total Qualifying
Deposits of all subscribing Supplemental Eligible Account Holders whose
subscriptions remain unsatisfied.
4. Preference Category No. 4: Other Members
-----------------------------------------
Each Other Member shall receive non-transferable Subscription Rights
to subscribe for shares of Holding Company Conversion Stock remaining after
satisfying the subscriptions provided for under Category Nos. 1 through 3
above, subject to the following conditions:
a. Each Other Member shall be entitled to subscribe for an amount
of shares equal to the greater of (i) the lesser of $200,000 or five
percent (5.0%) of the total offering of shares; or (ii) one-tenth of
one percent (.10%) of the total offering of shares of common stock in
the Conversion, to the extent that Holding Company Conversion Stock is
available.
b. In the event of an oversubscription for shares under the
provisions of this subparagraph, the shares available shall be
allocated among the subscribing Other Members pro rata in the same
proportion that his number of votes on the Voting Record Date bears to
the total number of votes on the Voting Record Date of all subscribing
Other Members on such date. Such number of votes shall be determined
based on the Bank's mutual charter and bylaws in effect on the date of
approval by members of this Plan of Conversion.
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<PAGE>
5. Preference Category No. 5: Directors, Officers and Employees
-------------------------------------------------------------
Each director, Officer and employee of the Bank as of the date of
the commencement of the Subscription Offering shall be entitled to
receive non-transferable Subscription Rights to purchase shares of the
Holding Company Conversion Stock to the extent that shares are
available after satisfying subscriptions under Category Nos. 1 through
4 above. The shares which may be purchased under this Category are
subject to the following conditions:
a. The total number of shares which may be purchased under
this Category may not exceed 25% of the number of shares of
Holding Company Conversion Stock.
b. The maximum amount of shares which may be purchased under
this Category by any Person is the lesser of $200,000 or five
percent (5.0%) of the total offering of shares of Holding Company
Conversion Stock. In the event of an oversubscription for shares
under the provisions of this subparagraph, the shares available
shall be allocated pro rata among all subscribers in this
Category.
C. Public Offering and Direct Community Offering
---------------------------------------------
1. Any shares of Holding Company Conversion Stock not subscribed
for in the Subscription Offering may be offered for sale in a Direct
Community Offering. This will involve an offering of all unsubscribed
shares directly to the general public with a preference to those
natural persons residing in the counties in which the Bank maintains
its offices. The Direct Community Offering, if any, shall be for a
period of not more than 45 days unless extended by the Holding Company
and the Bank, and shall commence concurrently with, during or promptly
after the Subscription Offering. The purchase price per share to the
general public in a Direct Community Offering shall be the same as the
Actual Subscription Price. The Holding Company and the Bank may use an
investment banking firm or firms on a best efforts basis to sell the
unsubscribed shares in the Subscription and Direct Community Offering.
The Holding Company and the Bank may pay a commission or other fee to
such investment banking firm or firms as to the shares sold by such
firm or firms in the Subscription and Direct Community Offering and
may also reimburse such firm or firms for expenses incurred in
connection with the sale. The Direct Community Offering may include a
syndicated community offering managed by such investment banking firm
or firms. The Holding Company Conversion Stock will be offered and
sold in the Direct Community Offering, in accordance with OTS
regulations, so as to achieve the widest distribution of the Holding
Company Conversion Stock. No person, by himself or herself, or with an
Associate or group of Persons acting in concert, may subscribe for or
purchase more than the lesser of $200,000 or five percent (5.0%) of
Holding Company Conversion Stock offered in the Direct Community
Offering. Further, the Bank may limit total subscriptions under this
Section VI.C.1 so as to assure that the number of shares available for
the Public Offering may be up to a specified percentage of
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<PAGE>
the number of shares of Holding Company Conversion Stock. Finally, the
Bank may reserve shares offered in the Community Offering for sales to
institutional investors.
In the event of an oversubscription for shares in the Community
Offering, shares may be allocated (to the extent shares remain
available) first to cover any reservation of shares for a public
offering or institutional orders, next to cover orders of natural
persons residing in the counties in which the Bank maintains its
offices, then to cover the orders of any other person subscribing for
shares in the Community Offering so that each such person may receive
1,000 shares, and thereafter, on a pro rata basis to such persons
based on the amount of their respective subscriptions.
The Bank and the Holding Company, in their sole discretion, may
reject subscriptions, in whole or in part, received from any Person
under this Section VI.C.
2. Any shares of Holding Company Conversion Stock not sold in the
Subscription Offering or in the Direct Community Offering, if any,
shall then be sold to the Underwriters for resale to the general
public at the Public Offering Price in the Public Offering. It is
expected that the Public Offering will commence as soon as practicable
after termination of the Subscription Offering and the Direct
Community Offering, if any. The Public Offering shall be completed
within 45 days after the termination of the Subscription Offering,
unless such period is extended as provided in Section IV hereof. The
Public Offering Price and the underwriting discount shall be
determined as provided in Section VI.A hereof and set forth in the
underwriting agreement between the Holding Company, the Bank and the
Underwriters. Such underwriting agreement shall be filed with the OTS
and the SEC.
3. If for any reason a Public Offering of unsubscribed shares of
Holding Company Conversion Stock cannot be effected and any shares
remain unsold after the Subscription Offering and the Direct Community
Offering, if any, the Boards of Directors of the Holding Company and
the Bank will seek to make other arrangements for the sale of the
remaining shares. Such other arrangements will be subject to the
approval of the OTS and to compliance with applicable securities laws.
D. Additional Limitations Upon Purchases of Shares of Holding
-----------------------------------------------------------
Company Conversion Stock
------------------------
The following additional limitations shall be imposed on all purchases
of Holding Company Conversion Stock in the Conversion:
1. No Person, by himself or herself, or with an Associate or
group of Persons acting in concert, may subscribe for or purchase in
the Conversion a number of shares of Holding Company Conversion Stock
which exceeds the lesser of $200,000 or five percent (5.0%) of the
Holding Company Conversion Stock offered in the Conversion. For
purposes of this paragraph, an Associate of a Person does not include
a Tax-Qualified or Non-Tax Qualified Employee Plan in which the person
has a substantial beneficial interest
A-13
<PAGE>
or serves as a trustee or in a similar fiduciary capacity. Moreover,
for purposes of this paragraph, shares held by one or more
Tax-Qualified or Non-Tax Qualified Employee Plans attributed to a
Person shall not be aggregated with shares purchased directly by or
otherwise attributable to that Person.
2. Directors and Officers and their Associates may not purchase
in all categories in the Conversion an aggregate of more than 34% of
the Holding Company Conversion Stock. For purposes of this paragraph,
an Associate of a Person does not include any Tax-Qualified Employee
Plan. Moreover, any shares attributable to the Officers and directors
and their Associates, but held by one or more Tax-Qualified Employee
Plans shall not be included in calculating the number of shares which
may be purchased under the limitation in this paragraph.
3. The minimum number of shares of Holding Company Conversion
Stock that may be purchased by any Person in the Conversion is 25
shares, provided sufficient shares are available.
4. The Boards of Directors of the Holding Company and the Bank
may, in their sole discretion, increase the maximum purchase
limitation referred to in subparagraph 1. herein up to 9.99%, provided
that orders for shares exceeding 5% of the shares being offered in the
Subscription Offering shall not exceed, in the aggregate, 10% of the
shares being offered in the Subscription Offering. Requests to
purchase additional shares of Holding Company Conversion Stock under
this provision will be allocated by the Boards of Directors on a pro
rata basis giving priority in accordance with the priority rights set
forth in this Section VI.
Depending upon market and financial conditions, the Boards of
Directors of the Holding Company and the Bank, with the approval of the OTS
and without further approval of the Members, may increase or decrease any
of the above purchase limitations.
For purposes of this Section VI, the directors of the Holding Company
and the Bank shall not be deemed to be Associates or a group acting in
concert solely as a result of their serving in such capacities.
Each Person purchasing Holding Company Conversion Stock in the
Conversion shall be deemed to confirm that such purchase does not conflict
with the above purchase limitations.
E. Restrictions and Other Characteristics of Holding Company
---------------------------------------------------------
Conversion Stock Being Sold
---------------------------
1. Transferability. Holding Company Conversion Stock purchased by
Persons other than directors and Officers of the Holding Company or
the Bank will be transferable without restriction. Shares purchased by
directors or Officers shall not be sold or otherwise disposed of for
value for a period of one year from the date of Conversion, except for
any disposition of such shares (i) following the death of the original
purchaser,
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<PAGE>
or (ii) resulting from an exchange of securities in a merger or
acquisition approved by the applicable regulatory authorities. Any
transfers that could result in a change of control of the Bank or the
Holding Company or result in the ownership by any Person or group
acting in concert of more than 10% of any class of the Bank's or the
Holding Company's equity securities are subject to the prior approval
of the OTS.
The certificates representing shares of Holding Company
Conversion Stock issued to directors and Officers shall bear a legend
giving appropriate notice of the one year holding period restriction.
Appropriate instructions shall be given to the transfer agent for such
stock with respect to the applicable restrictions relating to the
transfer of restricted stock. Any shares of common stock of the
Holding Company subsequently issued as a stock dividend, stock split,
or otherwise, with respect to any such restricted stock, shall be
subject to the same holding period restrictions for Holding Company or
Bank directors and Officers as may be then applicable to such
restricted stock.
No director or Officer of the Holding Company or of the Bank, or
Associate of such a director or Officer, shall purchase any
outstanding shares of capital stock of the Holding Company for a
period of three years following the Conversion without the prior
written approval of the OTS, except through a broker or dealer
registered with the SEC or in a "negotiated transaction" involving
more than one percent of the then-outstanding shares of common stock
of the Holding Company. As used herein, the term "negotiated
transaction" means a transaction in which the securities are offered
and the terms and arrangements relating to any sale are arrived at
through direct communications between the seller or any Person acting
on its behalf and the purchaser or his investment representative. The
term "investment representative" shall mean a professional investment
advisor acting as agent for the purchaser and independent of the
seller and not acting on behalf of the seller in connection with the
transaction.
2. Repurchase and Dividend Rights. For a period of three years
------------------------------
following Conversion, the Converted Bank shall not repurchase any
shares of its capital stock, except in the case of an offer to
repurchase on a pro rata basis made to all holders of capital stock of
the Converted Bank. Any such offer shall be subject to the prior
non-objection of the OTS. A repurchase of qualifying shares of a
director shall not be deemed to be a repurchase for purposes of this
Section VI.E.2.
Present regulations also provide that the Converted Bank may not
declare or pay a cash dividend on or repurchase any of its stock (i)
if the result thereof would be to reduce the regulatory capital of the
Converted Bank below the amount required for the liquidation account
to be established pursuant to Section XIII hereof, and (ii) except in
compliance with requirements of Section 563.134 of the Rules and
Regulations of the OTS.
The above limitations are subject to Section 563b.3 (g)(3) of the
Rules and Regulations of the OTS, which generally provides that the
Converted Bank may repurchase its capital stock provided (i) no
repurchases occur within one year following conversion,
A-15
<PAGE>
(ii) repurchases during the second and third year after conversion are
part of an open market stock repurchase program that does not allow
for a repurchase of more than 5% of the Bank's outstanding capital
stock during a twelve-month period without OTS approval, (iii) the
repurchases do not cause the Bank to become undercapitalized, and (iv)
the Bank provides notice to the OTS at least 10 days prior to the
commencement of a repurchase program and the OTS does not object. In
addition, the above limitations shall not preclude payments of
dividends or repurchases of capital stock by the Converted Bank in the
event applicable federal regulatory limitations are liberalized
subsequent to OTS approval of the Plan or as otherwise permitted by
the OTS. Such restrictions and limitations shall not apply following
consummation of the Bank Conversion, unless the OTS approval of the
Bank Conversion otherwise requires.
3. Voting Rights. After Conversion, holders of deposit accounts
-------------
will not have voting rights in the Bank or the Holding Company.
Exclusive voting rights as to the Bank will be vested in the Holding
Company, as the sole stockholder of the Bank. Voting rights as to the
Holding Company will be held exclusively by its stockholders.
F. Exercise of Subscription Rights; Order Forms
--------------------------------------------
1. If the Subscription Offering occurs concurrently with the
solicitation of proxies for the Special Meeting, the subscription
prospectus and Order Form may be sent to each Eligible Account Holder,
Tax-Qualified Employee Plan, Supplemental Eligible Account Holder,
Other Member, and director, Officer and employee at their last known
address as shown on the records of the Bank. However, the Bank may,
and if the Subscription Offering commences after the Special Meeting
the Bank shall, furnish a subscription prospectus and Order Form only
to Eligible Account Holders, Tax-Qualified Employee Plans,
Supplemental Eligible Account Holders, Other Members, and directors,
Officers and employees who have returned to the Bank by a specified
date prior to the commencement of the Subscription Offering a post
card or other written communication requesting a subscription
prospectus and Order Form. In such event, the Bank shall provide a
postage-paid post card for this purpose and make appropriate
disclosure in its proxy statement for the solicitation of proxies to
be voted at the Special Meeting and/or letter sent in lieu of the
proxy statement to those Eligible Account Holders, Tax-Qualified
Employee Plans or Supplemental Eligible Account Holders who are not
Members on the Voting Record Date.
2. Each Order Form will be preceded or accompanied by a
subscription prospectus describing the Holding Company and the
Converted Bank and the shares of Holding Company Conversion Stock
being offered for subscription and containing all other information
required by the OTS or the SEC or necessary to enable Persons to make
informed investment decisions regarding the purchase of Holding
Company Conversion Stock.
3. The Order Forms (or accompanying instructions) used for the
Subscription Offering will contain, among other things, the following:
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<PAGE>
(i) A clear and intelligible explanation of the Subscription
Rights granted under the Plan to Eligible Account Holders,
Tax-Qualified Employee Plans, Supplemental Eligible Account Holders,
Other Members, and directors, Officers and employees;
(ii) A specified expiration date by which Order Forms must be
returned to and actually received by the Bank or its representative
for purposes of exercising Subscription Rights, which date will be not
less than 20 days after the Order Forms are mailed by the Bank;
(iii) The Maximum Subscription Price to be paid for each share
subscribed for when the Order Form is returned;
(iv) A statement that 25 shares is the minimum number of shares
of Holding Company Conversion Stock that may be subscribed for under
the Plan;
(v) A specifically designated blank space for indicating the
number of shares being subscribed for;
(vi) A set of detailed instructions as to how to complete the
Order Form including a statement as to the available alternative
methods of payment for the shares being subscribed for;
(vii) Specifically designated blank spaces for dating and signing
the Order Form;
(viii) An acknowledgment that the subscriber has received the
subscription prospectus;
(ix) A statement of the consequences of failing to properly
complete and return the Order Form, including a statement that the
Subscription Rights will expire on the expiration date specified on
the Order Form unless such expiration date is extended by the Holding
Company and the Bank, and that the Subscription Rights may be
exercised only by delivering the Order Form, properly completed and
executed, to the Bank or its representative by the expiration date,
together with required payment of the Maximum Subscription Price for
all shares of Holding Company Conversion Stock subscribed for;
(x) A statement that the Subscription Rights are non-transferable
and that all shares of Holding Company Conversion Stock subscribed for
upon exercise of Subscription Rights must be purchased on behalf of
the Person exercising the Subscription Rights for his own account; and
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<PAGE>
(xi) A statement that, after receipt by the Bank or its
representative, a Subscription may not be modified, withdrawn or
canceled without the consent of the Bank.
G. Method of Payment
-----------------
Payment for all shares of Holding Company Conversion Stock subscribed for,
computed on the basis of the Maximum Subscription Price, must accompany all
completed Order Forms. Payment may be made in cash (if presented in Person), by
check, or, if the subscriber has a Deposit Account in the Bank (including a
certificate of deposit), the subscriber may authorize the Bank to charge the
subscriber's account.
If a subscriber authorizes the Bank to charge his or her account, the funds
will continue to earn interest, but may not be used by the subscriber until all
Holding Company Conversion Stock has been sold or the Plan of Conversion is
terminated, whichever is earlier. The Bank will allow subscribers to purchase
shares by withdrawing funds from certificate accounts without the assessment of
early withdrawal penalties with the exception of prepaid interest in the form of
promotional gifts. In the case of early withdrawal of only a portion of such
account, the certificate evidencing such account shall be canceled if the
remaining balance of the account is less than the applicable minimum balance
requirement, in which event the remaining balance will earn interest at the
passbook rate. This waiver of the early withdrawal penalty is applicable only to
withdrawals made in connection with the purchase of Holding Company Conversion
Stock under the Plan of Conversion. Interest will also be paid, at not less than
the then-current passbook rate, on all orders paid in cash, by check or money
order, from the date payment is received until consummation of the Conversion.
Payments made in cash, by check or money order will be placed by the Bank in an
escrow or other account established specifically for this purpose.
In the event of an unfilled amount of any subscription order, the Converted
Bank will make an appropriate refund or cancel an appropriate portion of the
related withdrawal authorization, after consummation of the Conversion,
including any difference between the Maximum Subscription Price and the Actual
Subscription Price (unless subscribers are afforded the right to apply such
difference to the purchase of additional whole shares). If for any reason the
Conversion is not consummated, purchasers will have refunded to them all
payments made and all withdrawal authorizations will be canceled in the case of
subscription payments authorized from accounts at the Bank.
If any Tax-Qualified Employee Plans or Non-Tax-Qualified Employee Plans
subscribe for shares during the Subscription Offering, such plans will not be
required to pay for the shares subscribed for at the time they subscribe, but
may pay for such shares of Holding Company Conversion Stock subscribed for upon
consummation of the Conversion. In the event that, after the completion of the
Subscription Offering, the amount of shares to be issued is increased above the
maximum of the appraisal range included in the Prospectus, the Tax Qualified and
Non-Tax Qualified Employee Plans shall be entitled to increase their
subscriptions by a percentage equal to the percentage increase in the amount of
shares to be issued above the maximum of the
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<PAGE>
appraisal range provided that such subscriptions shall continue to be subject to
applicable purchase limits and stock allocation procedures.
H. Undelivered, Defective or Late Order Forms; Insufficient Payment
----------------------------------------------------------------
The Boards of Directors of the Holding Company and the Bank shall have the
absolute right, in their sole discretion, to reject any Order Form, including
but not limited to, any Order Forms which (i) are not delivered or are returned
by the United States Postal Service (or the addressee cannot be located); (ii)
are not received back by the Bank or its representative, or are received after
the termination date specified thereon; (iii) are defectively completed or
executed; (iv) are not accompanied by the total required payment for the shares
of Holding Company Conversion Stock subscribed for (including cases in which the
subscribers' Deposit Accounts or certificate accounts are insufficient to cover
the authorized withdrawal for the required payment); or (v) are submitted by or
on behalf of a Person whose representations the Boards of Directors of the
Holding Company and the Bank believe to be false or who they otherwise believe,
either alone or acting in concert with others, is violating, evading or
circumventing, or intends to violate, evade or circumvent, the terms and
conditions of this Plan. In such event, the Subscription Rights of the Person to
whom such rights have been granted will not be honored and will be treated as
though such Person failed to return the completed Order Form within the time
period specified therein. The Bank may, but will not be required to, waive any
irregularity relating to any Order Form or require submission of corrected Order
Forms or the remittance of full payment for subscribed shares by such date as
the Bank may specify. The interpretation of the Holding Company and the Bank of
the terms and conditions of this Plan and of the proper completion of the Order
Form will be final, subject to the authority of the OTS.
I. Member in Non-Qualified States or in Foreign Countries
------------------------------------------------------
The Holding Company and the Bank will make reasonable efforts to comply
with the securities laws of all states in the United States in which Persons
entitled to subscribe for Holding Company Conversion Stock pursuant to the Plan
reside. However, no shares will be offered or sold under the Plan of Conversion
to any such Person who (1) resides in a foreign country or (2) resides in a
state of the United States in which a small number of Persons otherwise eligible
to subscribe for shares under the Plan of Conversion reside or as to which the
Holding Company and the Bank determine that compliance with the securities laws
of such state would be impracticable for reasons of cost or otherwise,
including, but not limited to, a requirement that the Holding Company or the
Bank or any of their officers, directors or employees register, under the
securities laws of such state, as a broker, dealer, salesman or agent. No
payments will be made in lieu of the granting of Subscription Rights to any such
Person.
VII. FEDERAL STOCK CHARTER AND BYLAWS
--------------------------------
A. As part of the Conversion, the Bank will take all appropriate steps to
amend its charter to read in the form of federal stock savings institution
charter as prescribed by the OTS. A copy of the proposed stock charter is
available upon request. By their approval of the Plan, the Members of the Bank
will thereby approve and adopt such charter.
A-19
<PAGE>
B. The Bank will also take appropriate steps to amend its bylaws to read in
the form prescribed by the OTS for a federal stock savings institution. A copy
of the proposed federal stock bylaws is available upon request.
C. The effective date of the adoption of the Bank's federal stock charter
and bylaws shall be the date of the issuance and sale of the Holding Company
Conversion Stock as specified by the OTS.
D. As part of the Bank Conversion, a national bank articles of association
and bylaws will be adopted to allow the National Bank to operate as a national
bank. By approving the Plan, the Members of the Bank will thereby approve such
articles of association and bylaws. Prior to completion of the Bank Conversion,
the articles of association and bylaws may be amended in accordance with the
provisions and limitations for amending the Plan under Section XVI below. The
effective date of the articles of association and bylaws of the National Bank
shall be the date of the consummation of the Bank Conversion.
VIII. HOLDING COMPANY CERTIFICATE OF INCORPORATION
--------------------------------------------
A copy of the proposed certificate of incorporation of the Holding Company
will be made available from the Bank upon request.
IX. DIRECTORS OF THE CONVERTED BANK AND THE NATIONAL BANK
-----------------------------------------------------
Each Person serving as a member of the Board of Directors of the Bank at
the time of the Stock Conversion will thereupon become a director of the
Converted Bank. If the Bank Conversion is consummated, each person serving as a
member of the Board of Directors of the Converted Bank at the time of the Bank
Conversion will become a director of the National Bank.
X. STOCK OPTION AND INCENTIVE PLAN AND RECOGNITION AND RETENTION PLAN
------------------------------------------------------------------
In order to provide an incentive for directors, Officers and employees of
the Holding Company and its subsidiaries (including the Bank), the Board of
Directors of the Holding Company intends to adopt, subject to shareholder
approval, a stock option and incentive plan and a recognition and retention plan
as permitted by applicable regulation following the Conversion.
XI. CONTRIBUTIONS TO TAX-QUALIFIED EMPLOYEE PLANS
---------------------------------------------
The Converted Bank and the Holding Company may in their discretion make
scheduled contributions to any Tax-Qualified Employee Plans, provided that any
such contributions which are for the acquisition of Holding Company Conversion
Stock, or the repayment of debt incurred for such an acquisition, do not cause
the Converted Bank to fail to meet its regulatory capital requirements.
A-20
<PAGE>
XII. SECURITIES REGISTRATION AND MARKET MAKING
-----------------------------------------
Promptly following the Stock Conversion, the Holding Company will register
its common stock with the SEC pursuant to the Exchange Act. In connection with
the registration, the Holding Company will undertake not to deregister such
common stock, without the approval of the OTS, for a period of three years
thereafter.
The Holding Company shall use its best efforts to encourage and assist two
or more market makers to establish and maintain a market for its common stock
promptly following Conversion. The Holding Company will also use its best
efforts to cause its common stock to be quoted on the Nasdaq System or to be
listed on a national or regional securities exchange.
XIII. STATUS OF SAVINGS ACCOUNTS AND LOANS SUBSEQUENT TO CONVERSION
-------------------------------------------------------------
Each Deposit Account holder shall retain, without payment, a withdrawable
Deposit Account or Accounts in the Converted Bank, equal in amount to the
withdrawable value of such account holder's Deposit Account or Accounts prior to
the Stock Conversion. Each Person holding a Deposit Account at the Converted
Bank as of immediately prior to consummation of the Bank Conversion as set forth
in Section V.B. herein shall receive, without payment, a withdrawable Deposit
Account or Deposit Accounts in the National Bank equal in dollar amount and on
the same terms and conditions as in effect as of immediately prior to the
consummation of the Bank Conversion. All Deposit Accounts will continue to be
insured by the Federal Deposit Insurance Corporation up to the applicable limits
of insurance coverage, and shall be subject to the same terms and conditions
(except as to voting and liquidation rights) as such Deposit Account in the Bank
at the time of the Conversion. All loans shall retain the same status after
Conversion as these loans had prior to Conversion.
XIV. LIQUIDATION ACCOUNT
-------------------
For purposes of granting to Eligible Account Holders and Supplemental
Eligible Account Holders who continue to maintain Deposit Accounts at the
Converted Bank a priority in the event of a complete liquidation of the
Converted Bank, the Converted Bank will, at the time of Conversion, establish a
liquidation account in an amount equal to the net worth of the Bank as shown on
its latest statement of financial condition contained in the final offering
circular used in connection with the Conversion. The creation and maintenance of
the liquidation account will not operate to restrict the use or application of
any of the regulatory capital accounts of the Converted Bank; provided, however,
that such regulatory capital accounts will not be voluntarily reduced below the
required dollar amount of the liquidation account. Each Eligible Account Holder
and Supplemental Eligible Account Holder shall, with respect to the Deposit
Account held, have a related inchoate interest in a portion of the liquidation
account balance ("subaccount balance").
The initial subaccount balance of a Deposit Account held by an Eligible
Account Holder or Supplemental Eligible Account Holder shall be determined by
multiplying the opening balance in the liquidation account by a fraction of
which the numerator is the amount of the Qualifying
A-21
<PAGE>
Deposit in the Deposit Account on the Eligibility Record Date or the
Supplemental Eligibility Record Date and the denominator is the total amount of
the Qualifying Deposits of all Eligible Account Holders and Supplemental
Eligible Account Holders on such record dates in the Bank. Such initial
subaccount balance shall not be increased, and it shall be subject to downward
adjustment as provided below.
If the deposit balance in any Deposit Account of an Eligible Account Holder
or Supplemental Eligible Account Holder at the close of business on any annual
closing date subsequent to the record date is less than the lesser of (i) the
deposit balance in such Deposit Account at the close of business on any other
annual closing date subsequent to the Eligibility Record Date or the
Supplemental Eligibility Record Date or (ii) the amount of the Qualifying
Deposit in such Deposit Account on the Eligibility Record Date or Supplemental
Eligibility Record Date, the subaccount balance shall be reduced in an amount
proportionate to the reduction in such deposit balance. In the event of a
downward adjustment, the subaccount balance shall not be subsequently increased,
notwithstanding any increase in the deposit balance of the related Deposit
Account. If all funds in such Deposit Account are withdrawn, the related
subaccount balance shall be reduced to zero.
In the event of a complete liquidation of the Bank (and only in such
event), each Eligible Account Holder and Supplemental Eligible Account Holder
shall be entitled to receive a liquidation distribution from the liquidation
account in the amount of the then-current adjusted subaccount balances for
Deposit Accounts then held before any liquidation distribution may be made to
stockholders. No merger, consolidation, bulk purchase of assets with assumptions
of Deposit Accounts and other liabilities, or similar transactions with another
institution the accounts of which are insured by the Federal Deposit Insurance
Corporation, shall be considered to be a complete liquidation. In such
transactions, the liquidation account shall be assumed by the surviving
institution.
The Bank Conversion shall not be deemed to be a complete liquidation of the
Converted Bank for purposes of the distribution of the liquidation account. Upon
consummation of the Bank Conversion, the liquidation account, and all rights and
obligations of the Converted Bank in connection therewith, shall be assumed by
the National Bank.
The liquidation account shall be maintained by the National Bank, under the
same rules and conditions applicable to the Converted Bank, subsequent to the
Bank Conversion for the benefit of Eligible Account Holders and Supplemental
Eligible Account Holders who retain their Deposit Account in the National Bank.
XV. RESTRICTIONS ON ACQUISITION OF CONVERTED BANK, THE NATIONAL BANK, OR THE
------------------------------------------------------------------------
HOLDING COMPANY
---------------
Regulations of the OTS limit acquisitions, and offers to acquire, direct or
indirect beneficial ownership of more than 10% of any class of an equity
security of the Converted Bank
A-22
<PAGE>
or the Holding Company. In addition, consistent with the regulations of the OTS,
the charter of the Converted Bank shall provide that for a period of five years
following completion of the Conversion: (i) no Person (i.e., no individual,
group acting in concert, corporation, partnership, association, joint stock
company, trust, or unincorporated organization or similar company, syndicate, or
any other group formed for the purpose of acquiring, holding or disposing of
securities of an insured institution) shall directly or indirectly offer to
acquire or acquire beneficial ownership of more than 10% of any class of the
Bank's equity securities. Shares beneficially owned in violation of this charter
provision shall not be counted as shares entitled to vote and shall not be voted
by any Person or counted as voting shares in connection with any matter
submitted to the shareholders for a vote. This limitation shall not apply to any
offer to acquire or acquisition of beneficial ownership of more than 10% of the
common stock of the Bank by a corporation whose ownership is or will be
substantially the same as the ownership of the Bank, provided that the offer or
acquisition is made more than one year following the date of completion of the
Conversion; (ii) shareholders shall not be permitted to cumulate their votes for
elections of directors; and (iii) special meetings of the shareholders relating
to changes in control or amendment of the charter may only be called by the
Board of Directors.
Upon consummation of the Bank Conversion, no person (i.e., an individual, a
group acting in concert, a corporation, a partnership, an association, a joint
stock company, a trust or any unincorporated organization or similar company, a
syndicate or any other group formed for the purpose of acquiring, holding or
disposing of securities of an insured institution or its holding company) shall
directly, or indirectly, offer to purchase or actually acquire the beneficial
ownership of more than 10% of any class of the Holding Company's stock without
the prior approval of the FRB.
The Holding Company may provide in its certificate of incorporation a
provision that, for a specified period of up to five years following the date of
the completion of the Stock Conversion, no person shall directly or indirectly
offer to acquire or actually acquire the beneficial ownership of more than 10%
of any class of Holding Company stock except with respect to purchases by one or
more Tax-Qualified Employee Stock Benefit Plans of the Holding Company or
Converted Bank. The Holding Company may provide in its certificate of
incorporation for such other provisions affecting the acquisition of Holding
Company stock as shall be determined by its Boards of Directors.
XVI. AMENDMENT OR TERMINATION OF PLAN
--------------------------------
If necessary or desirable, the Plan may be amended at any time prior to
submission of the Plan and proxy materials to the Members by a two-thirds vote
of the respective Boards of Directors of the Holding Company and the Bank. After
submission of the Plan and proxy materials to the Members, the Plan may be
amended by a two-thirds vote of the respective Boards of Directors of the
Holding Company and the Bank only with the concurrence of the OTS. Any
amendments to the Plan made after approval by the Members with the concurrence
of the OTS shall not necessitate further approval by the Members unless
otherwise required.
A-23
<PAGE>
The Plan may be terminated by a two-thirds vote of the Bank's Board of
Directors at any time prior to the Special Meeting of Members, and at any time
following such Special Meeting with the concurrence of the OTS. In its
discretion, the Board of Directors of the Bank may modify or terminate the Plan
upon the order or with the approval of the OTS and without further approval by
Members. The Plan shall terminate if the sale of all shares of Conversion Stock
is not completed within 24 months of the date of the Special Meeting. A specific
resolution approved by a majority of the Board of Directors of the Bank is
required in order for the Bank to terminate the Plan prior to the end of such 24
month period.
XVII. EXPENSES OF THE CONVERSION
--------------------------
The Holding Company and the Bank shall use their best efforts to assure
that expenses incurred by them in connection with the Conversion shall be
reasonable.
XVIII. TAX RULING
----------
Consummation of the Conversion is expressly conditioned upon prior receipt
of either a ruling of the United States Internal Revenue Service or an opinion
of tax counsel with respect to federal taxation, and either a ruling of the
Missouri taxation authorities or an opinion of tax counsel or other tax advisor
with respect to Missouri taxation, to the effect that consummation of the
transactions contemplated herein will not be taxable to the Holding Company or
the Bank.
XIX. EXTENSION OF CREDIT FOR PURCHASE OF COMMON STOCK
------------------------------------------------
The Bank may not knowingly loan funds or otherwise extend credit to any
Person to purchase in the Conversion shares of Holding Company Conversion Stock.
A-24
<PAGE>
EXHIBIT 3.1
-----------
CERTIFICATE OF INCORPORATION
OF
IFB HOLDINGS, INC.
FIRST: The name of the Corporation is IFB Holdings, Inc. (hereinafter
-----
sometimes referred to as the "Corporation").
SECOND: The address of the registered office of the Corporation in the
------
State of Delaware is Corporation Trust Center, 1209 Orange Street, in the City
of Wilmington, County of New Castle. The name of the registered agent at that
address is The Corporation Trust Company.
THIRD: The purpose of the Corporation is to engage in any lawful act or
-----
activity for which a corporation may be organized under the General Corporation
Law of Delaware.
FOURTH: A. The total number of shares of all classes of stock which the
------
Corporation shall have the authority to issue is one million (1,000,000)
consisting of:
1. One hundred thousand (100,000) shares of preferred
stock, par value one cent ($.01) per share (the "Preferred Stock"); and
2. Nine hundred thousand (900,000) shares of common
stock, par value one cent ($.01) per share (the "Common Stock").
B. The Board of Directors is hereby expressly authorized,
subject to any limitations prescribed by law, to provide for the issuance of the
shares of Preferred Stock in series, and by filing a certificate pursuant to the
applicable law of the State of Delaware (such certificate being hereinafter
referred to as a "Preferred Stock Designation"), to establish from time to time
the number of shares to be included in each such series, and to fix the
designation, powers, preferences and rights of the shares of each such series
and any qualifications, limitations or restrictions thereof. The number of
authorized shares of the Preferred Stock may be increased or decreased (but not
below the number of shares thereof then outstanding) by the affirmative vote of
the holders of a majority of the Common Stock, without a vote of the holders of
the Preferred Stock, or of any series thereof, unless a vote of any such holders
is required pursuant to the terms of any Preferred Stock Designation.
C. 1. Notwithstanding any other provision of this
Certificate of Incorporation, in no event shall any record owner of any
outstanding Common Stock which is beneficially owned, directly or
indirectly, by a person who, as of any record date for the determination of
stockholders entitled to vote on any matter, beneficially owns in excess of
10% of the then-outstanding shares of Common Stock (the "Limit"), be
entitled, or permitted to any vote in respect of the shares held in excess
of the Limit. The number of votes which may be cast by any record owner by
virtue of the provisions hereof in respect of Common Stock beneficially
owned by such person beneficially owning shares in excess of the Limit
shall be a number equal to the total number of votes which a single record
owner of all Common Stock owned by such person would be entitled to cast
(subject to this Article FOURTH), multiplied by a fraction, the numerator
of which is the number of shares of such class or
<PAGE>
series which are both beneficially owned by such person and owned of record by
such record owner and the denominator of which is the total number of shares of
Common Stock beneficially owned by such person owning shares in excess of the
Limit.
2. The following definitions shall apply to this Section C
of this Article FOURTH:
(a) An "Affiliate" shall have the meaning ascribed to it
in Rule 12b-2 of the General Rules and Regulations under the Securities
Exchange Act of 1934, as amended, as in effect on the date of filing of
this Certificate of Incorporation.
(b) "Beneficial ownership" shall be determined pursuant
to Rule 13d-3 of the General Rules and Regulations under the Securities
Exchange Act of 1934, as amended, (or any successor rule or statutory
provision), or, if said Rule 13d-3 shall be rescinded and there shall be
no successor rule or statutory provision thereto, pursuant to said Rule
13d-3 as in effect on the date of filing of this Certificate of
Incorporation; provided, however, that a person shall, in any event,
also be deemed the "beneficial owner" of any Common Stock:
(1) which such person or any of its affiliates
beneficially owns, directly or indirectly; or
(2) which such person or any of its affiliates has (i)
the right to acquire (whether such right is exercisable
immediately or only after the passage of time), pursuant to any
agreement, arrangement or understanding (but shall not be deemed
to be the beneficial owner of any voting shares solely by reason
of an agreement, contract, or other arrangement with this
Corporation to effect any transaction which is described in any
one or more of the clauses 1 through 5 of Section A of Article
EIGHTH) or upon the exercise of conversion rights, exchange
rights, warrants, or options or otherwise, or (ii) sole or
shared voting or investment power with respect thereto pursuant
to any agreement, arrangement, understanding, relationship or
otherwise (but shall not be deemed to be the beneficial owner of
any voting shares solely by reason of a revocable proxy granted
for a particular meeting of stockholders, pursuant to a public
solicitation of proxies for such meeting, with respect to shares
of which neither such person nor any such affiliate is otherwise
deemed the beneficial owner); or
(3) which is beneficially owned, directly or
indirectly, by any other person with which such first mentioned
person or any of its affiliates acts as a partnership, limited
partnership, syndicate or other group pursuant to any agreement,
arrangement or
-2-
<PAGE>
understanding for the purpose of acquiring, holding, voting or
disposing of any shares of capital stock of this Corporation;
and provided further, however, that (1) no director or officer of this
Corporation (or any affiliate of any such director or officer) shall,
solely by reason of any or all of such directors or officers acting in
their capacities as such, be deemed, for any purposes hereof, to
beneficially own any Common Stock beneficially owned by any other such
director or officer (or any affiliate thereof), and (2) neither any
employee stock ownership or similar plan of this Corporation or any
subsidiary of this Corporation nor any trustee with respect thereto (or
any affiliate of such trustee) shall, solely by reason of such capacity
of such trustee, be deemed, for any purposes hereof, to beneficially own
any Common Stock held under any such plan. For purposes of computing the
percentage beneficial ownership of Common Stock of a person, the
outstanding Common Stock shall include shares deemed owned by such
person through application of this subsection but shall not include any
other Common Stock which may be issuable by this Corporation pursuant to
any agreement, or upon exercise of conversion rights, warrants or
options, or otherwise. For all other purposes, the outstanding Common
Stock shall include only Common Stock then outstanding and shall not
include any Common Stock which may be issuable by this Corporation
pursuant to any agreement, or upon the exercise of conversion rights,
warrants or options, or otherwise.
(c) The "Limit" shall mean 10% of the then-outstanding
shares of Common Stock.
(d) A "person" shall mean any individual, firm,
corporation, or other entity.
3. The Board of Directors shall have the power to construe and
apply the provisions of this section and to make all determinations necessary or
desirable to implement such provisions, including but not limited to matters
with respect to (i) the number of shares of Common Stock beneficially owned by
any person, (ii) whether a person is an affiliate of another, (iii) whether a
person has an agreement, arrangement, or understanding with another as to the
matters referred to in the definition of beneficial ownership, (iv) the
application of any other definition or operative provision of this Section to
the given facts, or (v) any other matter relating to the applicability or effect
of this Section.
4. The Board of Directors shall have the right to demand that
any person who is reasonably believed to beneficially own Common Stock in excess
of the Limit (or holds of record Common Stock beneficially owned by any person
in excess of the Limit) (a "Holder in Excess") supply the Corporation with
complete information as to (1) the record owner(s) of all shares beneficially
owned by such Holder in Excess, and (2) any other factual matter relating to the
applicability or effect
-3-
<PAGE>
of this section as may reasonably be requested of such Holder in Excess.
The Board of Directors shall further have the right to receive from any
Holder in Excess reimbursement for all expenses incurred by the Board in
connection with its investigation of any matters relating to the
applicability or effect of this section on such Holder in Excess, to the
extent such investigation is deemed appropriate by the Board of
Directors as a result of the Holder in Excess refusing to supply the
Corporation with the information described in the previous sentence.
5. Except as otherwise provided by law or expressly
provided in this Section C, the presence, in person or by proxy, of the
holders of record of shares of capital stock of the Corporation
entitling the holders thereof to cast one-third of the votes (after
giving effect, if required, to the provisions of this Section C)
entitled to be cast by the holders of shares of capital stock of the
Corporation entitled to vote shall constitute a quorum at all meetings
of the stockholders, and every reference in this Certificate of
Incorporation to a majority or other proportion of capital stock (or the
holders thereof) for purposes of determining any quorum requirement or
any requirement for stockholder consent or approval shall be deemed to
refer to such majority or other proportion of the votes (or the holders
thereof) then entitled to be cast in respect of such capital stock.
6. Any constructions, applications, or determinations
made by the Board of Directors, pursuant to this Section in good faith
and on the basis of such information and assistance as was then
reasonably available for such purpose, shall be conclusive and binding
upon the Corporation and its stockholders.
7. In the event any provision (or portion thereof) of
this Section C shall be found to be invalid, prohibited or unenforceable
for any reason, the remaining provisions (or portions thereof) of this
Section shall remain in full force and effect, and shall be construed as
if such invalid, prohibited or unenforceable provision had been stricken
herefrom or otherwise rendered inapplicable, it being the intent of this
Corporation and its stockholders that each such remaining provision (or
portion thereof) of this Section C remain, to the fullest extent
permitted by law, applicable and enforceable as to all stockholders,
including stockholders owning an amount of stock over the Limit,
notwithstanding any such finding.
FIFTH: The following provisions are inserted for the management of the
-----
business and the conduct of the affairs of the Corporation, and for further
definition, limitation and regulation of the powers of the Corporation and of
its directors and stockholders:
A. The business and affairs of the Corporation shall be managed
by or under the direction of the Board of Directors. In addition to the powers
and authority expressly conferred upon them by Statute or by this Certificate of
Incorporation or the Bylaws of the Corporation, the directors are hereby
empowered to exercise all such powers and do all such acts and things as may be
exercised or done by the Corporation.
B. The directors of the Corporation need not be elected by
written ballot unless the Bylaws so provide .
-4-
<PAGE>
C. Subject to the rights of holders of any class or series of
Preferred Stock, any action required or permitted to be taken by the
stockholders of the Corporation must be effected at a duly called annual or
special meeting of stockholders of the Corporation and may not be effected by
any consent in writing by such stockholders.
D. Subject to the rights of holders of any class or series of
Preferred Stock, special meetings of stockholders of the Corporation may be
called only by the Board of Directors pursuant to a resolution adopted by a
majority of the total number of directors which the Corporation would have if
there were no vacancies on the Board of Directors (the "Whole Board").
SIXTH: A. The number of directors shall be fixed from time to time
-----
exclusively by the Board of Directors pursuant to a resolution adopted by a
majority of the Whole Board. The directors, other than those who may be elected
by the holders of any class or series of Preferred Stock, shall be divided into
three classes, with the term of office of the first class to expire at the
conclusion of the first annual meeting of stockholders, the term of office of
the second class to expire at the conclusion of the annual meeting of
stockholders one year thereafter and the term of office of the third class to
expire at the conclusion of the annual meeting of stockholders two years
thereafter, with each director to hold office until his or her successor shall
have been duly elected and qualified. At each annual meeting of stockholders
following such initial classification and election, directors elected to succeed
those directors whose terms expire shall be elected for a term of office to
expire at the third succeeding annual meeting of stockholders after their
election, with each director to hold office until his or her successor shall
have been duly elected and qualified.
B. Subject to the rights of the holders of any series of
Preferred Stock then outstanding, newly created directorships resulting from any
increase in the authorized number of directors or any vacancies in the Board of
Directors resulting from death, resignation, retirement, disqualification,
removal from office or other cause may be filled only by a majority vote of the
directors then in office, though less than a quorum, and directors so chosen
shall hold office for a term expiring at the annual meeting of stockholders at
which the term of office of the class to which they have been elected expires,
and until such director's successor shall have been duly elected and qualified.
No decrease in the number of directors constituting the Board of Directors shall
shorten the term of any incumbent director.
C. Advance notice of stockholder nominations for the election
of directors and of business to be brought by stockholders before any meeting of
the stockholders of the Corporation shall be given in the manner provided in the
Bylaws of the Corporation.
D. Subject to the rights of the holders of any series of
Preferred Stock then outstanding, any directors, or the entire Board of
Directors, may be removed from office at any time, but only for cause and only
by the affirmative vote of the holders of at least 80% of the voting power of
all of the then-outstanding shares of capital stock of the Corporation entitled
to vote generally in the election of directors (after giving effect to the
provisions of Article FOURTH of this Certificate of Incorporation), voting
together as a single class.
-5-
<PAGE>
SEVENTH: The Board of Directors is expressly empowered to adopt, amend
-------
or repeal the Bylaws of the Corporation. Any adoption, amendment or
repeal of the Bylaws of the Corporation by the Board of Directors shall
require the approval of a majority of the Whole Board. The stockholders
shall also have power to adopt, amend or repeal the Bylaws of the
Corporation; provided, however, that, in addition to any vote of the
holders of any class or series of stock of this Corporation required by
law or by this Certificate of Incorporation, the affirmative vote of the
holders of at least 80% of the voting power of all of the then-
outstanding shares of the capital stock of the Corporation entitled to
vote generally in the election of directors (after giving effect to the
provisions of Article FOURTH hereof), voting together as a single class,
shall be required to adopt, amend or repeal any provisions of the Bylaws
of the Corporation.
EIGHTH: A. In addition to any affirmative vote required by law or
------
this Certificate of Incorporation, and except as otherwise expressly
provided in this Article EIGHTH:
1. any merger or consolidation of the Corporation or any
Subsidiary (as hereinafter defined) with (i) any Interested Stockholder
(as hereinafter defined) or (ii) any other corporation (whether or not
itself an Interested Stockholder) which is, or after such merger or
consolidation would be, an Affiliate (as hereinafter defined) of an
Interested Stockholder; or
2. any sale, lease, exchange, mortgage, pledge, transfer
or other disposition (in one transaction or a series of transactions) to
or with any Interested Stockholder, or any Affiliate of any Interested
Stockholder, of any assets of the Corporation or any Subsidiary having
an aggregate Fair Market Value (as hereafter defined) equaling or
exceeding 25% or more of the combined assets of the Corporation and its
Subsidiaries; or
3. the issuance or transfer by the Corporation or any
Subsidiary (in one transaction or a series of transactions) of any
securities of the Corporation or any Subsidiary to any Interested
Stockholder or any Affiliate of any Interested Stockholder in exchange
for cash, securities or other property (or a combination thereof) having
an aggregate Fair Market Value equaling or exceeding 25% of the combined
Fair Market Value of the outstanding common stock of the Corporation and
its Subsidiaries except pursuant to an employee benefit plan of the
Corporation or any Subsidiary thereof; or
4. the adoption of any plan or proposal for the
liquidation or dissolution of the Corporation proposed by or on behalf
of any Interested Stockholder or any Affiliate of any Interested
Stockholder; or
5. any reclassification of securities (including any
reverse stock split), or recapitalization of the Corporation, or any
merger or consolidation of the Corporation with any of its Subsidiaries
or any other transaction (whether or not with or into or otherwise
involving an Interested Stockholder) which has the effect, directly or
indirectly, of increasing the proportionate share of the outstanding
shares of any class of equity or convertible securities of the
Corporation or any Subsidiary which is directly or indirectly owned by
any Interested
-6-
<PAGE>
Stockholder or any Affiliate of any Interested Stockholder (a
"Disproportionate Transaction"); provided, however, that no such
transaction shall be deemed a Disproportionate Transaction if the
increase in the proportionate ownership of the Interested Stockholder or
Affiliate as a result of such transaction is no greater than the
increase experienced by the other stockholders generally;
shall require the affirmative vote of the holders of at least 80% of the voting
power of the then-outstanding shares of stock of the Corporation entitled to
vote in the election of directors (the "Voting Stock") (after giving effect to
the provisions of Article FOURTH), voting together as a single class. Such
affirmative vote shall be required notwithstanding the fact that no vote may be
required, or that a lesser percentage may be specified, by law or by any other
provisions of this Certificate of Incorporation or any Preferred Stock
Designation or in any agreement with any national securities exchange or
quotation system or otherwise.
The term "Business Combination" as used in this Article EIGHTH
shall mean any transaction which is referred to in any one or more of paragraphs
1 through 5 of Section A of this Article EIGHTH.
B. The provisions of Section A of this Article EIGHTH shall
not be applicable to any particular Business Combination, and such Business
Combination shall require only the affirmative vote of the majority of the
outstanding shares of capital stock entitled to vote after giving effect to the
provisions of Article FOURTH, or such vote (if any) as is required by law or by
this Certificate of Incorporation, if, in the case of any Business Combination
that does not involve any cash or other consideration being received by the
stockholders of the Corporation solely in their capacity as stockholders of the
Corporation, the condition specified in the following paragraph 1 is met or, in
the case of any other Business Combination, all of the conditions specified in
either of the following paragraphs 1 and 2 are met:
1. The Business Combination shall have been
approved by a majority of the Disinterested Directors (as hereinafter
defined).
2. All of the following conditions shall have been
met:
(a) The aggregate amount of the cash and the Fair
Market Value as of the date of the consummation of the Business
Combination of consideration other than cash to be received per
share by the holders of Common Stock in such Business
Combination shall at least be equal to the higher of the
following:
(1) (if applicable) the Highest Per Share
Price (as hereinafter defined), including any brokerage
commissions, transfer taxes and soliciting dealers'
fees, paid by the Interested Stockholder or any of its
Affiliates for any shares of Common Stock acquired by it
(i) within the two-year period immediately prior to the
first public announcement of the proposal of the
Business Combination (the "Announcement Date"), or (ii)
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in the transaction in which it became an Interested Stockholder,
whichever is higher.
(2) the Fair Market Value per share of Common Stock on the
Announcement Date or on the date on which the Interested Stockholder
became an Interested Stockholder (such latter date is referred to in
this Article EIGHTH as the "Determination Date"), whichever is higher.
(b) The aggregate amount of the cash and the Fair Market Value as of
the date of the consummation of the Business Combination of consideration other
than cash to be received per share by holders of shares of any class of
outstanding Voting Stock other than Common Stock shall be at least equal to the
highest of the following (it being intended that the requirements of this
subparagraph (b) shall be required to be met with respect to every such class of
outstanding Voting Stock, whether or not the Interested Stockholder has
previously acquired any shares of a particular class of Voting Stock):
(1) (if applicable) the Highest Per Share Price (as
hereinafter defined), including any brokerage commissions, transfer
taxes and soliciting dealers' fees, paid by the Interested Stockholder
for any shares of such class of Voting Stock acquired by it (i) within
the two-year period immediately prior to the Announcement Date, or (ii)
in the transaction in which it became an Interested Stockholder,
whichever is higher;
(2) (if applicable) the highest preferential amount per
share to which the holders of shares of such class of Voting Stock are
entitled in the event of any voluntary or involuntary liquidation,
dissolution or winding up of the Corporation; and
(3) the Fair Market Value per share of such class of Voting
Stock on the Announcement Date or on the Determination Date, whichever
is higher.
(c) The consideration to be received by holders of a particular
class of outstanding Voting Stock (including Common Stock) shall be in cash or
in the same form as the Interested Stockholder has previously paid for shares of
such class of Voting Stock. If the Interested Stockholder has paid for shares of
any class of Voting Stock with varying forms of consideration, the form of
consideration to be received per share by holders of shares of such class of
Voting Stock shall be either cash or the form used to acquire the largest number
of shares of such class of Voting Stock previously acquired by the Interested
Stockholder. The price determined in accordance with subparagraph B.2 of this
Article EIGHTH shall
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be subject to appropriate adjustment in the event of any stock dividend,
stock split, combination of shares or similar event.
(d) After such Interested Stockholder has become an
Interested Stockholder and prior to the consummation of such Business
Combination: (1) except as approved by a majority of the Disinterested
Directors, there shall have been no failure to declare and pay at the
regular date therefor any full quarterly dividends (whether or not
cumulative) on any outstanding stock having preference over the Common
Stock as to dividends or liquidation; (2) there shall have been (i) no
reduction in the annual rate of dividends paid on the Common Stock
(except as necessary to reflect any subdivision of the Common Stock),
except as approved by a majority of the Disinterested Directors, and
(ii) an increase in such annual rate of dividends as necessary to
reflect any reclassification (including any reverse stock split),
recapitalization, reorganization or any similar transaction which has
the effect of reducing the number of outstanding shares of Common Stock,
unless the failure to so increase such annual rate is approved by a
majority of the Disinterested Directors; and (3) neither such Interested
Stockholder nor any of its Affiliates shall have become the beneficial
owner of any additional shares of Voting Stock except as part of the
transaction which results in such Interested Stockholder becoming an
Interested Stockholder.
(e) After such Interested Stockholder has become an
Interested Stockholder, such Interested Stockholder shall not have
received the benefit, directly or indirectly (except proportionately as
a stockholder), of any loans, advances, guarantees, pledges or other
financial assistance or any tax credits or other tax advantages
provided, directly or indirectly, by the Corporation, whether in
anticipation of or in connection with such Business Combination or
otherwise.
(f) A proxy or information statement describing the proposed
Business Combination and complying with the requirements of the
Securities Exchange Act of 1934, as amended, and the rules and
regulations thereunder (or any subsequent provisions replacing such Act,
rules or regulations thereunder) shall be mailed to stockholders of the
Corporation at least 30 days prior to the consummation of such Business
Combination (whether or not such proxy or information statement is
required to be mailed pursuant to such Act or subsequent provisions).
C. For the purposes of this Article EIGHTH:
1. A "Person" shall include an individual, a group acting
in concert, a corporation, a partnership, an association, a joint venture, a
pool, a joint stock company, a trust, an unincorporated organization or similar
company, a syndicate or any other group formed for the purpose of acquiring,
holding or disposing of securities or any other entity.
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2. "Interested Stockholder" shall mean any Person (other
than the Corporation or any holding company or Subsidiary thereof) who
or which:
(a) is the beneficial owner, directly or indirectly,
of more than 10% of the outstanding Voting Stock; or
(b) is an Affiliate of the Corporation and at any
time within the two-year period immediately prior to the date in
question was the beneficial owner, directly or indirectly, of 10% or
more of the voting power of the then-outstanding Voting Stock; or
(c) is an assignee of or has otherwise succeeded
to any shares of Voting Stock which were at any time within the two-year
period immediately prior to the date in question beneficially owned by
any Interested Stockholder, if such assignment or succession shall have
occurred in the course of a transaction or series of transactions not
involving a public offering within the meaning of the Securities Act of
1933, as amended.
3. For purposes of this Article EIGHTH, "beneficial
ownership" shall be determined in the manner provided in Section C of Article
FOURTH hereof.
4. For the purpose of determining whether a Person is an
Interested Stockholder pursuant to Paragraph 2 of this Section C, the number of
shares of Voting Stock deemed to be outstanding shall include shares deemed
owned through application of Paragraph 3 of this Section C but shall not include
any other shares of Voting Stock which may be issuable pursuant to any
agreement, arrangement or understanding, or upon exercise of conversion rights,
warrants or options, or otherwise.
5. "Affiliate" and "Associate" shall have the respective
meanings ascribed to such terms in Rule 12b-2 of the General Rules and
Regulations under the Securities Exchange Act of 1934, as amended, as in effect
on the date of filing of this Certificate of Incorporation.
6. "Subsidiary" means any corporation of which a majority
of any class of equity security is owned, directly or indirectly, by the
Corporation; provided, however, that for the purposes of the definition of
Interested Stockholder set forth in Paragraph 2 of this Section C, the term
"Subsidiary" shall mean only a corporation of which a majority of each class of
equity security is owned, directly or indirectly, by the Corporation.
7. "Disinterested Director" means any member of the Board
of Directors who is unaffiliated with the Interested Stockholder and was a
member of the Board of Directors prior to the time that the Interested
Stockholder became an Interested Stockholder, and any director who is thereafter
chosen to fill any vacancy on the Board of Directors or who is elected and who,
in either event, is unaffiliated with the Interested Stockholder, and in
connection with his or her initial assumption of office is recommended for
appointment or election by a majority of Disinterested Directors then on the
Board of Directors.
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8. "Fair Market Value" means:
(a) in the case of stock, the highest closing sales
price of the stock during the 30-day period immediately preceding the
date in question of a share of such stock of the National Association of
Securities Dealers Automated Quotations ("NASDAQ") System or any system
then in use, or, if such stock is admitted to trading on a principal
United States securities exchange registered under the Securities
Exchange Act of 1934, as amended, Fair Market Value shall be the highest
sale price reported during the 30-day period preceding the date in
question, or, if no such quotations are available, the Fair Market Value
on the date in question of a share of such stock as determined by the
Board of Directors in good faith, in each case with respect to any class
of stock, appropriately adjusted for any dividend or distribution in
shares of such stock or any stock split or reclassification of
outstanding shares of such stock into a greater number of shares of such
stock or any combination or reclassification of outstanding shares of
such stock into a smaller number of shares of such stock, and
(b) in the case of property other than cash or
stock, the Fair Market Value of such property on the date in question as
determined by the Board of Directors in good faith.
9. Reference to "Highest Per Share Price" shall in each
case with respect to any class of stock reflect an appropriate adjustment
for any dividend or distribution in shares of such stock or any stock split
or reclassification of outstanding shares of such stock into a greater
number of shares of such stock or any combination or reclassification of
outstanding shares of such stock into a smaller number of shares of such
stock.
10. In the event of any Business Combination in which the
Corporation survives, the phrase "consideration other than cash to be
received" as used in Subparagraphs (a) and (b) of Paragraph 2 of Section B
of this Article EIGHTH shall include the shares of Common Stock and/or the
shares of any other class of outstanding Voting Stock retained by the
holders of such shares.
D. A majority of the Disinterested Directors of the Corporation
shall have the power and duty to determine for the purposes of this Article
EIGHTH, on the basis of information known to them after reasonable inquiry: (a)
whether a person is an Interested Stockholder; (b) the number of shares of
Voting Stock beneficially owned by any person; (c) whether a person is an
Affiliate or Associate of another; and (d) whether the assets which are the
subject of any Business Combination have, or the consideration to be received
for the issuance or transfer of securities by the Corporation or any Subsidiary
in any Business Combination has an aggregate Fair Market Value equaling or
exceeding 25% of the combined Fair Market Value of the common stock of the
Corporation and its Subsidiaries. A majority of the Disinterested Directors
shall have the further power to interpret all of the terms and provisions of
this Article EIGHTH.
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<PAGE>
E. Nothing contained in this Article EIGHTH shall be
construed to relieve any Interested Stockholder from any fiduciary obligation
imposed by law.
F. Notwithstanding any other provisions of this Certificate
of Incorporation or any provision of law which might otherwise permit a lesser
vote or no vote, but in addition to any affirmative vote of the holders of any
particular class or series of the Voting Stock required by law, this Certificate
of Incorporation or any Preferred Stock Designation, the affirmative vote of the
holders of at least 80% of the voting power of all of the then-outstanding
shares of the Voting Stock, voting together as a single class, shall be required
to alter, amend or repeal this Article EIGHTH.
NINTH: The Board of Directors of the Corporation, when evaluating any
-----
offer of another Person (as defined in Article EIGHTH hereof) to (A) make a
tender or exchange offer for any equity security of the Corporation, (B) merge
or consolidate the Corporation with another corporation or entity or (C)
purchase or otherwise acquire all or substantially all of the properties and
assets of the Corporation, may, in connection with the exercise of its judgment
in determining what is in the best interest of the Corporation and its
stockholders, give due consideration to all relevant factors, including, without
limitation, those factors that Directors of any subsidiary of the Corporation
may consider in evaluating any action that may result in a change or potential
change in control of the subsidiary, and the social and economic effect of
acceptance of such offer: on the Corporation's present and future customers and
employees and those of its Subsidiaries (as defined in Article EIGHTH hereof);
on the communities in which the Corporation and its Subsidiaries operate or are
located; on the ability of the Corporation to fulfill its corporate objectives
as a financial institution holding company under applicable laws and regulations
and on the ability of its subsidiary financial institution to fulfill the
objectives of a federally insured financial institution under applicable
statutes and regulations.
TENTH: A. Except as set forth in Section B of this Article TENTH, in
-----
addition to any affirmative vote of stockholders required by law or this
Certificate of Incorporation, any direct or indirect purchase or other
acquisition by the Corporation of any Equity Security (as hereinafter defined)
of any class from any Interested Person (as hereinafter defined) shall require
the affirmative vote of the holders of at least 80% of the Voting Stock of the
Corporation that is not beneficially owned (for purposes of this Article TENTH
beneficial ownership shall be determined in accordance with Section C.2(b) of
Article FOURTH hereof) by such Interested Person, voting together as a single
class. Such affirmative vote shall be required notwithstanding the fact that no
vote may be required, or that a lesser percentage may be specified, by law or by
any other provisions of this Certificate of Incorporation or any Preferred Stock
Designation or in any agreement with any national securities exchange or
quotation system, or otherwise. Certain defined terms used in this Article
TENTH are as set forth in Section C below.
B. The provisions of Section A of this Article TENTH shall
not be applicable with respect to:
1. any purchase or other acquisition of securities made
as part of a tender or exchange offer by the Corporation or a Subsidiary (which
term, as used in this Article TENTH, is as defined in the first clause of
Section C.6 of Article EIGHTH hereof) of the
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Corporation to purchase securities of the same class made on the same
terms to all holders of such securities and complying with the
applicable requirements of the Securities Exchange Act of 1934 and the
rules and regulations thereunder (or any subsequent provision replacing
such Act, rules or regulations);
2. any purchase or acquisition made pursuant to an
open market purchase program approved by a majority of the Board of
Directors, including a majority of the Disinterested Directors (which
term, as used in this Article TENTH, is as defined in Article EIGHTH
hereof); or
3. any purchase or acquisition which is approved by
a majority of the Board of Directors, including a majority of the
Disinterested Directors, and which is made at no more than the Market
Price (as hereinafter defined), on the date that the understanding
between the Corporation and the Interested Person is reached with
respect to such purchase (whether or not such purchase is made or a
written agreement relating to such purchase is executed on such date),
of shares of the class of Equity Security to be purchased.
C. For the purposes of this Article TENTH:
1. The term Interested Person shall mean any Person
(other than the Corporation, Subsidiaries of the Corporation, pension,
profit sharing, employee stock ownership or other employee benefit plans
of the Corporation and its Subsidiaries, entities organized or
established by the Corporation or any of its Subsidiaries pursuant to
the terms of such plans and trustees and fiduciaries with respect to any
such plan acting in such capacity) that is the direct or indirect
beneficial owner of 5% or more of the Voting Stock of the Corporation,
and any Affiliate or Associate of any such person.
2. The Market Price of shares of a class of Equity
Security on any day shall mean the highest sale price of shares of such
class of Equity Security on such day, or, if that day is not a trading
day, on the trading day immediately preceding such day, on the national
securities exchange or the NASDAQ System or any other system then in use
on which such class of Equity Security is traded.
3. The term Equity Security shall mean any security
described in Section 3(a)(11) of the Securities Exchange Act of 1934, as
in effect on September 20, 1993, which is traded on a national
securities exchange or the NASDAQ System or any other system then in
use.
4. For purposes of this Article TENTH, all
references to the term Interested Stockholder in the definition of
Disinterested Director shall be deemed to refer to the term Interested
Person.
ELEVENTH: A. Each person who was or is made a party or is threatened
--------
to be made a party to or is otherwise involved in any action, suit or
proceeding, whether civil, criminal, administrative or investigative
(hereinafter a "proceeding"), by reason of the fact that he or she is or was a
director or an officer of the Corporation or is or was serving at the request of
the Corporation as a director or officer of another corporation, including,
without limitation,
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any Subsidiary (as defined in Article EIGHTH herein), partnership, joint
venture, trust or other enterprise, including service with respect to an
employee benefit plan (hereinafter an "indemnitee"), whether the basis of such
proceeding is alleged action in an official capacity as a director or officer or
in any other capacity while serving as a director or officer, shall be
indemnified and held harmless by the Corporation to the fullest extent
authorized by the Delaware General Corporation Law, as the same exists or may
hereafter be amended (but, in the case of any such amendment, only to the extent
that such amendment permits the Corporation to provide broader indemnification
rights than such law permitted the Corporation to provide prior to such
amendment), against all expense, liability and loss (including attorneys' fees,
judgments, fines, ERISA excise taxes or penalties and amounts paid in
settlement) reasonably incurred or suffered by such indemnitee in connection
therewith; provided, however, that, except as provided in Section C hereof with
respect to proceedings to enforce rights to indemnification, the Corporation
shall indemnify any such indemnitee in connection with a proceeding (or part
thereof) initiated by such indemnitee only if such proceeding (or part thereof)
was authorized by the Board of Directors of the Corporation.
B. The right to indemnification conferred in Section A of
this Article ELEVENTH shall include the right to be paid by the Corporation the
expenses incurred in defending any such proceeding in advance of its final
disposition (hereinafter an "advancement of expenses"); provided, however, that,
if the Delaware General Corporation Law requires, an advancement of expenses
incurred by an indemnitee in his or her capacity as a director or officer (and
not in any other capacity in which service was or is rendered by such
indemnitee, including, without limitation, service to an employee benefit plan)
shall be made only upon delivery to the Corporation of an undertaking
(hereinafter an "undertaking"), by or on behalf of such indemnitee, to repay all
amounts so advanced if it shall ultimately be determined by final judicial
decision from which there is no further right to appeal (hereinafter a "final
adjudication"), that such indemnitee is not entitled to be indemnified for such
expenses under this Section or otherwise. The rights to indemnification and to
the advancement of expenses conferred in Sections A and B of this Article
ELEVENTH shall be contract rights and such rights shall continue as to an
indemnitee who has ceased to be a director or officer and shall inure to the
benefit of the indemnitee's heirs, executors and administrators.
C. If a claim under Section A or B of this Article ELEVENTH
is not paid in full by the Corporation within sixty days after a written claim
has been received by the Corporation, except in the case of a claim for an
advancement of expenses, in which case the applicable period shall be twenty
days, the indemnitee may at any time thereafter bring suit against the
Corporation to recover the unpaid amount of the claim. If successful in whole or
in part in any such suit, or in a suit brought by the Corporation to recover an
advancement of expenses pursuant to the terms of an undertaking, the indemnitee
shall also be entitled to be paid the expense of prosecuting or defending such
suit. In (i) any suit brought by the indemnitee to enforce a right to
indemnification hereunder (but not in a suit brought by the indemnitee to
enforce a right to an advancement of expenses) it shall be a defense that, and
(ii) in any suit by the Corporation to recover an advancement of expenses
pursuant to the terms of an undertaking the Corporation shall be entitled to
recover such expenses upon a final adjudication that, the indemnitee has not met
any applicable standard for indemnification set forth in the Delaware General
Corporation Law. Neither the failure of the Corporation (including its Board of
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Directors, independent legal counsel, or its stockholders) to have made a
determination prior to the commencement of such suit that indemnification of the
indemnitee is proper in the circumstances because the indemnitee has met the
applicable standard of conduct set forth in the Delaware General Corporation
Law, nor an actual determination by the Corporation (including its Board of
Directors, independent legal counsel, or its stockholders) that the indemnitee
has not met such applicable standard of conduct, shall create a presumption that
the indemnitee has not met the applicable standard of conduct or, in the case of
such a suit brought by the indemnitee, be a defense to such suit. In any suit
brought by the indemnitee to enforce a right to indemnification or to an
advancement of expenses hereunder, or by the Corporation to recover an
advancement of expenses pursuant to the terms of an undertaking, the burden of
proving that the indemnitee is not entitled to be indemnified, or to such
advancement of expenses, under this Article ELEVENTH or otherwise shall be on
the Corporation.
D. The rights to indemnification and to the advancement of
expenses conferred in this Article ELEVENTH shall not be exclusive of any other
right which any person may have or hereafter acquire under any statute, the
Corporation's Certificate of Incorporation, Bylaws, agreement, vote of
stockholders or Disinterested Directors or otherwise.
E. The Corporation may maintain insurance, at its expense,
to protect itself and any director, officer, employee or agent of the
Corporation or another corporation, partnership, joint venture, trust or other
enterprise against any expense, liability or loss, whether or not the
Corporation would have the power to indemnify such person against such expense,
liability or loss under the Delaware General Corporation Law.
F. The Corporation may, to the extent authorized from time
to time by a majority vote of the Disinterested Directors, grant rights to
indemnification and to the advancement of expenses to any employee or agent of
the Corporation to the fullest extent of the provisions of this Article with
respect to the indemnification and advancement of expenses of directors and
officers of the Corporation.
TWELFTH: A director of this Corporation shall not be personally liable to
-------
the Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director, except for liability (i) for any breach of the director's
duty of loyalty to the Corporation or its stockholders, (ii) for acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law, (iii) under Section 174 of the Delaware General Corporation
Law, or (iv) for any transaction from which the director derived an improper
personal benefit. If the Delaware General Corporation Law is hereafter amended
to further eliminate or limit the personal liability of directors, then the
liability of a director of the Corporation shall be eliminated or limited to the
fullest extent permitted by the Delaware General Corporation Law, as so amended.
Any repeal or modification of the foregoing paragraph by the
stockholders of the Corporation shall not adversely affect any right or
protection of a director of the Corporation existing at the time of such repeal
or modification.
THIRTEENTH: The Corporation reserves the right to amend or repeal any
----------
provision contained in this Certificate of Incorporation in the manner
prescribed
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by the laws of the State of Delaware and all rights conferred upon stockholders
are granted subject to this reservation; provided, however, that,
notwithstanding any other provision of this Certificate of Incorporation or any
provision of law which might otherwise permit a lesser vote or no vote, but in
addition to any vote of the holders of any class or series of the stock of this
Corporation required by law or by this Certificate of Incorporation, the
affirmative vote of the holders of at least 80% of the voting power of all of
the then-outstanding shares of the capital stock of the Corporation entitled to
vote generally in the election of directors (after giving effect to the
provisions of Article FOURTH), voting together as a single class, shall be
required to amend or repeal this Article THIRTEENTH, Section C of Article
FOURTH, Sections C or D of Article FIFTH, Article SIXTH, Article SEVENTH,
Article EIGHTH, Article TENTH or Article ELEVENTH.
FOURTEENTH: The name and mailing address of the sole incorporator are as
----------
follows:
NAME MAILING ADDRESS
---- ---------------
Earle S. Teegarden, Jr. 522 Washington Street
Chillicothe, Missouri 64601
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I, THE UNDERSIGNED, being the incorporator, for the purpose of forming a
corporation under the laws of the State of Delaware, do make, file and record
this Certificate of Incorporation, do certify that the facts herein stated are
true, and, accordingly, have hereto set my hand this 3rd day of October, 1996.
----------------------------------------
Earle S. Teegarden, Jr.
Incorporator
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EXHIBIT 3.2
IFB HOLDINGS, INC.
BYLAWS
ARTICLE I - STOCKHOLDERS
Section 1. Annual Meeting.
--------------
An annual meeting of the stockholders, for the election of directors to
succeed those whose terms expire and for the transaction of such other business
as may properly come before the meeting, shall be held at such place, on such
date, and at such time as the Board of Directors shall each year fix.
Section 2. Special Meetings.
----------------
Subject to the rights of the holders of any class or series of preferred
stock of the Corporation, special meetings of stockholders of the Corporation
may be called only by the Board of Directors pursuant to a resolution adopted by
a majority of the total number of directors which the Corporation would have if
there were no vacancies on the Board of Directors (hereinafter the "Whole
Board").
Section 3. Notice of Meetings.
------------------
Written notice of the place, date, and time of all meetings of the
stockholders shall be given, not less than ten (10) nor more than sixty (60)
days before the date on which the meeting is to be held, to each stockholder
entitled to vote at such meeting, except as otherwise provided herein or
required by law (meaning, here and hereinafter, as required from time to time by
the Delaware General Corporation Law or the Certificate of Incorporation of the
Corporation).
When a meeting is adjourned to another place, date or time, written notice
need not be given of the adjourned meeting if the place, date and time thereof
are announced at the meeting at which the adjournment is taken; provided,
however, that if the date of any adjourned meeting is more than thirty (30) days
after the date for which the meeting was originally noticed, or if a new record
date is fixed for the adjourned meeting, written notice of the place, date and
time of the adjourned meeting shall be given in conformity herewith. At any
adjourned meeting, any business may be transacted which might have been
transacted at the original meeting.
Section 4. Quorum.
------
At any meeting of the stockholders, the holders of at least one-third of
all of the shares of the stock entitled to vote at the meeting, present in
person or by proxy (after giving effect to the provisions of Article FOURTH of
the Corporation's Certificate of Incorporation), shall constitute a quorum for
all purposes, unless or except to the extent that the presence of a larger
number may be required by law. Where a separate vote by a class or classes is
required, a majority of the shares of such class or classes, present in person
or represented by proxy (after giving effect to the provisions of Article FOURTH
of the Corporation's Certificate of Incorporation), shall constitute a quorum
entitled to take action with respect to that vote on that matter.
<PAGE>
If a quorum shall fail to attend any meeting, the chairman of the meeting
or the holders of a majority of the shares of stock entitled to vote who are
present, in person or by proxy, may adjourn the meeting to another place, date
or time.
If a notice of any adjourned special meeting of stockholders is sent to all
stockholders entitled to vote thereat, stating that it will be held with those
present in person or by proxy constituting a quorum, then except as otherwise
required by law, those present in person or by proxy at such adjourned meeting
shall constitute a quorum, and all matters shall be determined by a majority of
the votes cast at such meeting.
Section 5. Organization.
------------
Such person as the Board of Directors may have designated or, in the
absence of such a person, the President of the Corporation or, in his or her
absence, such person as may be chosen by the holders of a majority of the shares
entitled to vote who are present, in person or by proxy, shall call to order any
meeting of the stockholders and act as chairman of the meeting. In the absence
of the Secretary of the Corporation, the secretary of the meeting shall be such
person as the chairman appoints.
Section 6. Conduct of Business.
-------------------
(a) The chairman of any meeting of stockholders shall determine the
order of business and the procedure at the meeting, including such regulation of
the manner of voting and the conduct of discussion as seem to him or her in
order. The date and time of the opening and closing of the polls for each matter
upon which the stockholders will vote at the meeting shall be announced at the
meeting.
(b) At any annual meeting of the stockholders, only such business shall
be conducted as shall have been brought before the meeting (i) by or at the
direction of the Board of Directors or (ii) by any stockholder of the
Corporation who is entitled to vote with respect thereto and who complies with
the notice procedures set forth in this Section 6(b). For business to be
properly brought before an annual meeting by a stockholder, the business must
relate to a proper subject matter for stockholder action and the stockholder
must have given timely notice thereof in writing to the Secretary of the
Corporation. To be timely, a stockholder's notice must be delivered or mailed to
and received at the principal executive offices of the Corporation not less than
ninety (90) days prior to the date of the annual meeting; provided, however,
that in the event that less than one hundred (100) days' notice or prior public
disclosure of the date of the meeting is given or made to stockholders, notice
by the stockholder to be timely must be received not later than the close of
business on the 10th day following the day on which such notice of the date of
the annual meeting was mailed or such public disclosure was made. A
stockholder's notice to the Secretary shall set forth as to each matter such
stockholder proposes to bring before the annual meeting (i) a brief description
of the business desired to be brought before the annual meeting and the reasons
for conducting such business at the annual meeting, (ii) the name and address,
as they appear on the Corporation's books, of the stockholder who proposed such
business, (iii) the class and number of shares of the Corporation's capital
stock that are beneficially owned by such stockholder and (iv) any material
interest of such stockholder in such business. Notwithstanding anything in these
Bylaws to the contrary, no business shall be
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brought before or conducted at an annual meeting except in accordance with the
provisions of this Section 6(b). The officer of the Corporation or other person
presiding over the annual meeting shall, if the facts so warrant, determine and
declare to the meeting that business was not properly brought before the meeting
in accordance with the provisions of this Section 6(b) and, if he should so
determine, he shall so declare to the meeting and any such business so
determined to be not properly brought before the meeting shall not be
transacted.
At any special meeting of the stockholders, only such business shall be
conducted as shall have been brought before the meeting by or at the direction
of the Board of Directors.
(c) Only persons who are nominated in accordance with the procedures set
forth in these Bylaws shall be eligible for election as directors. Nominations
of persons for election to the Board of Directors of the Corporation may be made
at a meeting of stockholders at which directors are to be elected only (i) by or
at the direction of the Board of Directors or (ii) by any stockholder of the
Corporation entitled to vote for the election of directors at the meeting who
complies with the notice procedures set forth in this Section 6(c). Such
nominations, other than those made by or at the direction of the Board of
Directors, shall be made by timely notice in writing to the Secretary of the
Corporation. To be timely, a stockholder's notice shall be delivered or mailed
to and received at the principal executive offices of the Corporation not less
than ninety (90) days prior to the date of the meeting; provided, however, that
in the event that less than one hundred (100) days' notice or prior public
disclosure of the date of the meeting is given or made to stockholders, notice
by the stockholder to be timely must be so received not later than the close of
business on the 10th day following the day on which such notice of the date of
the meeting was mailed or such prior public disclosure was made. Such
stockholder's notice shall set forth (i) as to each person whom such stockholder
proposes to nominate for election or re-election as a director, all information
relating to such person that is required to be disclosed in solicitations of
proxies for election of directors, or is otherwise required, in each case
pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended
(including such person's written consent to being named in the proxy statement
as a nominee and to serving as a director if elected); and (ii) as to the
stockholder giving the notice (a) the name and address, as they appear on the
Corporation's books, of such stockholder and (b) the class and number of shares
of the Corporation's capital stock that are beneficially owned by such
stockholder. At the request of the Board of Directors, any person nominated by
the Board of Directors for election as a director shall furnish to the Secretary
of the Corporation that information required to be set forth in a stockholder's
notice of nomination which pertains to the nominee. No person shall be eligible
for election as a director of the Corporation unless nominated in accordance
with the provisions of this Section 6(c). The officer of the Corporation or
other person presiding at the meeting shall, if the facts so warrant, determine
that a nomination was not made in accordance with such provisions and, if he or
she should so determine, he or she shall so declare to the meeting and the
defective nomination shall be disregarded.
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Section 7. Proxies and Voting.
------------------
At any meeting of the stockholders, every stockholder entitled to vote may
vote in person or by proxy authorized by an instrument in writing filed in
accordance with the procedure established for the meeting. Any facsimile
telecommunication or other reliable reproduction of the writing or transmission
created pursuant to this paragraph may be substituted or used in lieu of the
original writing or transmission for any and all purposes for which the original
writing or transmission could be used, provided that such copy, facsimile
telecommunication or other reproduction shall be a complete reproduction of the
entire original writing or transmission.
All voting, including on the election of Directors but excepting where
otherwise required by law or by the governing documents of the Corporation, may
be by a voice vote; provided, however, that upon demand therefor by a
stockholder entitled to vote or his or her proxy, a stock vote shall be taken.
Every stock vote shall be taken by ballot, each of which shall state the name of
the stockholder or proxy voting and such other information as may be required
under the procedure established for the meeting. The Corporation shall, in
advance of any meeting of stockholders, appoint one or more inspectors to act at
the meeting and make a written report thereof. The Corporation may designate
one or more persons as alternate inspectors to replace any inspector who fails
to act. If no inspector or alternate is able to act at a meeting of
stockholders, the person presiding at the meeting shall appoint one or more
inspectors at the meeting. Each inspector, before entering upon the discharge of
his duties, shall take and sign an oath faithfully to execute the duties of
inspector with strict impartiality and according to the best of his ability.
All elections shall be determined by a plurality of the votes cast, and
except as otherwise required by law or as provided in the Certificate of
Incorporation, all other matters shall be determined by a majority of the votes
cast.
Each stockholder shall have one (1) vote for every share of stock entitled
to vote which is registered in his or her name on the record date for the
meeting, except as otherwise provided herein or in the Certificate of
Incorporation of the Corporation or as required by law.
Section 8. Stock List.
----------
A complete list of stockholders entitled to vote at any meeting of
stockholders, arranged in alphabetical order for each class of stock and showing
the address of each such stockholder and the number of shares registered in his
or her name, shall be open to the examination of any such stockholder, for any
purpose germane to the meeting, during ordinary business hours for a period of
at least ten (10) days prior to the meeting, either at a place within the city
where the meeting is to be held, which place shall be specified in the notice of
the meeting, or if not so specified, at the place where the meeting is to be
held.
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Section 9. Consent of Stockholders in Lieu of Meeting.
------------------------------------------
Subject to the rights of the holders of any class or series of preferred
stock of the Corporation, any action required or permitted to be taken by the
stockholders of the Corporation must be effected at a duly called annual or
special meeting of stockholders of the Corporation and may not be effected by
any consent in writing by such stockholders.
ARTICLE II - BOARD OF DIRECTORS
Section 1. General Powers, Number and Term of Office.
-----------------------------------------
The business and affairs of the Corporation shall be under the direction of
its Board of Directors. The number of directors who shall constitute the Whole
Board shall be such number as the Board of Directors shall from time to time
have designated, except in the absence of such designation, in which case the
number shall be ___. The Board of Directors shall annually elect a Chairman of
the Board from among its members who shall, when present, preside at its
meetings.
The directors, other than those who may be elected by the holders of any
class or series of preferred stock, shall be divided, with respect to the time
for which they severally hold office, into three classes, with the term of
office of the first class to expire at the conclusion of the first annual
meeting of stockholders, the term of office of the second class to expire at the
conclusion of the annual meeting of stockholders one year thereafter and the
term of office of the third class to expire at the conclusion of the annual
meeting of stockholders two years thereafter, with each director to hold office
until his or her successor shall have been duly elected and qualified. At each
annual meeting of stockholders, directors elected to succeed those directors
whose terms expire shall be elected for a term of office to expire at the third
succeeding annual meeting of stockholders after their election, with each
director to hold office until his or her successor shall have been duly elected
and qualified.
Section 2. Vacancies and Newly Created Directorships.
-----------------------------------------
Subject to the rights of the holders of any class or series of preferred
stock and unless the Board of Directors otherwise determines, newly created
directorships resulting from any increase in the authorized number of directors
or any vacancies in the Board of Directors resulting from death, resignation,
retirement, disqualification, removal from office or other cause may be filled
only by a majority vote of the directors then in office, though less than a
quorum, and directors so chosen shall hold office for a term expiring at the
annual meeting of stockholders at which the term of office of the class to which
they have been elected expires, and until such director's successor shall have
been duly elected and qualified. No decrease in the number of authorized
directors constituting the Board shall shorten the term of any incumbent
director.
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Section 3. Regular Meetings.
----------------
Regular meetings of the Board of Directors shall be held at such place or
places, on such date or dates, and at such time or times as shall have been
established by the Board of Directors and publicized among all directors. A
notice of each regular meeting shall not be required.
Section 4. Special Meetings.
----------------
Special meetings of the Board of Directors may be called by one-third (1/3)
of the directors then in office (rounded up to the nearest whole number) or by
the Chairman of the Board or President and shall be held at such place, on such
date, and at such time as they or he or she shall fix. Notice of the place,
date, and time of each such special meeting shall be given to each director by
whom it is not waived by mailing written notice not less than five (5) days
before the meeting or by telegraphing or telexing or by facsimile transmission
of the same not less than twenty-four (24) hours before the meeting. Unless
otherwise indicated in the notice thereof, any and all business may be
transacted at a special meeting.
Section 5. Quorum.
------
At any meeting of the Board of Directors, a majority of the Whole Board
shall constitute a quorum for all purposes. If a quorum shall fail to attend
any meeting, a majority of those present may adjourn the meeting to another
place, date, or time, without further notice or waiver thereof.
Section 6. Participation in Meetings By Conference Telephone.
-------------------------------------------------
Members of the Board of Directors, or of any committee thereof, may
participate in a meeting of such Board or committee by means of conference
telephone or similar communications equipment by means of which all persons
participating in the meeting can hear each other and such participation shall
constitute presence in person at such meeting.
Section 7. Conduct of Business.
-------------------
At any meeting of the Board of Directors, business shall be transacted in
such order and manner as the Board may from time to time determine, and all
matters shall be determined by the vote of a majority of the directors present,
except as otherwise provided herein or required by law. Action may be taken by
the Board of Directors without a meeting if all members thereof consent thereto
in writing, and the writing or writings are filed with the minutes of
proceedings of the Board of Directors.
Section 8. Powers.
------
The Board of Directors may, except as otherwise required by law, exercise
all such powers and do all such acts and things as may be exercised or done by
the Corporation, including, without limiting the generality of the foregoing,
the unqualified power:
(a) To declare dividends from time to time in accordance with law;
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(b) To purchase or otherwise acquire any property, rights or privileges on
such terms as it shall determine;
(c) To authorize the creation, making and issuance, in such form as it may
determine, of written obligations of every kind, negotiable or non-negotiable,
secured or unsecured, and to do all things necessary in connection therewith;
(d) To remove any officer of the Corporation with or without cause, and
from time to time to devolve the powers and duties of any officer upon any other
person for the time being;
(e) To confer upon any officer of the Corporation the power to appoint,
remove and suspend subordinate officers, employees and agents;
(f) To adopt from time to time such stock, option, stock purchase, bonus or
other compensation plans for directors, officers, employees and agents of the
Corporation and its subsidiaries as it may determine;
(g) To adopt from time to time such insurance, retirement, and other
benefit plans for directors, officers, employees and agents of the Corporation
and its subsidiaries as it may determine; and,
(h) To adopt from time to time regulations, not inconsistent with these
Bylaws, for the management of the Corporation's business and affairs.
Section 9. Compensation of Directors.
-------------------------
Directors, as such, may receive, pursuant to resolution of the Board of
Directors, fixed fees and other compensation for their services as directors,
including, without limitation, their services as members of committees of the
Board of Directors.
ARTICLE III - COMMITTEES
Section 1. Committees of the Board of Directors.
------------------------------------
The Board of Directors, by a vote of a majority of the Board of Directors,
may from time to time designate committees of the Board, with such lawfully
delegable powers and duties as it thereby confers, to serve at the pleasure of
the Board and shall, for those committees and any others provided for herein,
elect a director or directors to serve as the member or members, designating, if
it desires, other directors as alternate members who may replace any absent or
disqualified member at any meeting of the committee. Any committee so
designated may exercise the power and authority of the Board of Directors to
declare a dividend, to authorize the issuance of stock or to adopt a certificate
of ownership and merger pursuant to Section 253 of the Delaware General
Corporation Law if the resolution which designated the committee or a
supplemental resolution of the Board of Directors shall so provide. In the
absence or disqualification of any member of any committee and any alternate
member in his or her place, the member or members of the committee present at
the meeting and not disqualified from voting, whether or not he or she or they
constitute a quorum, may by unanimous vote appoint another member of the Board
of Directors to act at the meeting in the place of the absent or disqualified
member.
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Section 2. Conduct of Business.
-------------------
Each committee may determine the procedural rules for meeting and
conducting its business and shall act in accordance therewith, except as
otherwise provided herein or required by law. Adequate provision shall be made
for notice to members of all meetings; one-third (1/3) of the members shall
constitute a quorum unless the committee shall consist of one (1) or two (2)
members, in which event one (1) member shall constitute a quorum; and all
matters shall be determined by a majority vote of the members present. Action
may be taken by any committee without a meeting if all members thereof consent
thereto in writing, and the writing or writings are filed with the minutes of
the proceedings of such committee.
Section 3. Nominating Committee.
--------------------
The Board of Directors shall appoint a Nominating Committee of the Board,
consisting of not less than three (3) members. The Nominating Committee shall
have authority (a) to review any nominations for election to the Board of
Directors made by a stockholder of the Corporation pursuant to Section 6(c)(ii)
of Article I of these Bylaws in order to determine compliance with such Bylaw
and (b) to recommend to the Whole Board nominees for election to the Board of
Directors to replace those directors whose terms expire at the annual meeting of
stockholders next ensuing.
ARTICLE IV - OFFICERS
Section 1. Generally.
---------
(a) The Board of Directors as soon as may be practicable after the
annual meeting of stockholders shall choose a Chairman of the Board, a
President, a Secretary and a Treasurer and from time to time may choose such
other officers as it may deem proper. The Chairman of the Board shall be chosen
from among the directors. Any number of offices may be held by the same person.
(b) The term of office of all officers shall be until the next annual
election of officers and until their respective successors are chosen, but any
officer may be removed from office at any time by the affirmative vote of a
majority of the authorized number of directors then constituting the Board of
Directors.
(c) All officers chosen by the Board of Directors shall each have such
powers and duties as generally pertain to their respective offices, subject to
the specific provisions of this Article IV. Such officers shall also have such
powers and duties as from time to time may be conferred by the Board of
Directors or by any committee thereof.
Section 2. President.
---------
The President shall have general power over the management and oversight of
the administration and operation of the Corporation's business and general
supervisory power and authority over its policies and affairs. He shall see
that all orders and resolutions of the Board of Directors and of any committee
thereof are carried into effect.
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Each meeting of the stockholders and of the Board of Directors shall be
presided over by such person as has been designated by the Board of Directors
or, in his absence, by such officer or other person as is chosen at the meeting.
The Secretary or, in his absence, the General Counsel of the Corporation or such
officer as has been designated by the Board of Directors or, in his absence,
such officer or other person as is chosen by the person presiding, shall act as
secretary of each such meeting.
Section 3. Vice President.
--------------
The Vice President or Vice Presidents, if any, shall perform the duties of
the President in his absence or during his disability to act. In addition, the
Vice Presidents shall perform the duties and exercise the powers usually
incident to their respective offices and/or such other duties and powers as may
be properly assigned to them from time to time by the Board of Directors, the
Chairman of the Board or the President. A Vice President or Vice Presidents may
be designated as Executive Vice President or Senior Vice President.
Section 4. Secretary.
---------
The Secretary or an Assistant Secretary shall issue notices of meetings,
shall keep their minutes, shall have charge of the seal and the corporate books,
shall perform such other duties and exercise such other powers as are usually
incident to such offices and/or such other duties and powers as are properly
assigned thereto by the Board of Directors, the Chairman of the Board or the
President.
Section 5. Treasurer.
---------
The Treasurer shall have charge of all monies and securities of the
Corporation, other than monies and securities of any division of the Corporation
which has a treasurer or financial officer appointed by the Board of Directors,
and shall keep regular books of account. The funds of the Corporation shall be
deposited in the name of the Corporation by the Treasurer with such banks or
trust companies or other entities as the Board of Directors from time to time
shall designate. He shall sign or countersign such instruments as require his
signature, shall perform all such duties and have all such powers as are usually
incident to such office and/or such other duties and powers as are properly
assigned to him by the Board of Directors, the Chairman of the Board or the
President, and may be required to give bond, payable by the Corporation, for the
faithful performance of his duties in such sum and with such surety as may be
required by the Board of Directors.
Section 6. Assistant Secretaries and Other Officers.
----------------------------------------
The Board of Directors may appoint one or more assistant secretaries and
such other officers who shall have such powers and shall perform such duties as
are provided in these Bylaws or as may be assigned to them by the Board of
Directors, the Chairman of the Board or the President.
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Section 7. Action with Respect to Securities of Other Corporations.
-------------------------------------------------------
Unless otherwise directed by the Board of Directors, the President or any
officer of the Corporation authorized by the President shall have power to vote
and otherwise act on behalf of the Corporation, in person or by proxy, at any
meeting of stockholders of or with respect to any action of stockholders of any
other corporation in which this Corporation may hold securities and otherwise to
exercise any and all rights and powers which this Corporation may possess by
reason of its ownership of securities in such other Corporation.
ARTICLE V - STOCK
Section 1. Certificates of Stock.
---------------------
Each stockholder shall be entitled to a certificate signed by, or in the
name of the Corporation by, the Chairman of the Board, Vice Chairman of the
Board, President or a Vice President, and by the Secretary or an Assistant
Secretary, or the Treasurer or an Assistant Treasurer, certifying the number of
shares owned by him or her. Any or all of the signatures on the certificate may
be by facsimile.
Section 2. Transfers of Stock.
------------------
Transfers of stock shall be made only upon the transfer books of the
Corporation kept at an office of the Corporation or by transfer agents
designated to transfer shares of the stock of the Corporation. Except where a
certificate is issued in accordance with Section 4 of Article V of these Bylaws,
an outstanding certificate for the number of shares involved shall be
surrendered for cancellation before a new certificate is issued therefore.
Section 3. Record Date.
-----------
In order that the Corporation may determine the stockholders entitled to
notice of or to vote at any meeting of stockholders, or to receive payment of
any dividend or other distribution or allotment of any rights or to exercise any
rights in respect of any change, conversion or exchange of stock or for the
purpose of any other lawful action, the Board of Directors may fix a record
date, which record date shall not precede the date on which the resolution
fixing the record date is adopted and which record date shall not be more than
sixty (60) nor less than ten (10) days before the date of any meeting of
stockholders, nor more than sixty (60) days prior to the time for such other
action as hereinbefore described; provided, however, that if no record date is
fixed by the Board of Directors, the record date for determining stockholders
entitled to notice of or to vote at a meeting of stockholders shall be at the
close of business on the day next preceding the day on which notice is given or,
if notice is waived, at the close of business on the day next preceding the day
on which the meeting is held, and, for determining stockholders entitled to
receive payment of any dividend or other distribution or allotment of rights or
to exercise any rights of change, conversion or exchange of stock or for any
other purpose, the record date shall be at the close of business on the day on
which the Board of Directors adopts a resolution relating thereto.
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A determination of stockholders of record entitled to notice of or to vote
at a meeting of stockholders shall apply to any adjournment of the meeting;
provided, however, that the Board of Directors may fix a new record date for the
adjourned meeting.
Section 4. Lost, Stolen or Destroyed Certificates.
--------------------------------------
In the event of the loss, theft or destruction of any certificate of stock,
another may be issued in its place pursuant to such regulations as the Board of
Directors may establish concerning proof of such loss, theft or destruction and
concerning the giving of a satisfactory bond or bonds of indemnity.
Section 5. Regulations.
-----------
The issue, transfer, conversion and registration of certificates of stock
shall be governed by such other regulations as the Board of Directors may
establish.
ARTICLE VI - NOTICES
Section 1. Notices.
-------
Except as otherwise specifically provided herein or required by law, all
notices required to be given to any stockholder, director, officer, employee or
agent shall be in writing and may in every instance be effectively given by hand
delivery to the recipient thereof, by depositing such notice in the mails,
postage paid, or by sending such notice by prepaid telegram or mailgram or other
courier or by sending such notice by facsimile machine or other electronic
transmission. Any such notice shall be addressed to such stockholder, director,
officer, employee or agent at his or her last known address as the same appears
on the books of the Corporation. The time when such notice is received, if hand
delivered, or dispatched, if delivered through the mails, by telegram or
mailgram or other courier or by facsimile machine or other electronic
transmission, shall be the time of the giving of the notice.
Section 2. Waivers.
-------
A written waiver of any notice, signed by a stockholder, director, officer,
employee or agent, whether before or after the time of the event for which
notice is to be given, shall be deemed equivalent to the notice required to be
given to such stockholder, director, officer, employee or agent. Neither the
business nor the purpose of any meeting need be specified in such a waiver.
ARTICLE VII - MISCELLANEOUS
Section 1. Facsimile Signatures.
--------------------
In addition to the provisions for use of facsimile signatures elsewhere
specifically authorized in these Bylaws, facsimile signatures of any officer or
officers of the Corporation may be used whenever and as authorized by the Board
of Directors or a committee thereof.
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Section 2. Corporate Seal.
--------------
The Board of Directors may provide a suitable seal, containing the name of
the Corporation, which seal shall be in the charge of the Secretary. If and
when so directed by the Board of Directors or a committee thereof, duplicates of
the seal may be kept and used by the Treasurer or by an Assistant Secretary or
Assistant Treasurer.
Section 3. Reliance upon Books, Reports and Records.
----------------------------------------
Each director, each member of any committee designated by the Board of
Directors, and each officer of the Corporation shall, in the performance of his
or her duties, be fully protected in relying in good faith upon the books of
account or other records of the Corporation and upon such information, opinions,
reports or statements presented to the Corporation by any of its officers or
employees, or committees of the Board of Directors so designated, or by any
other person as to matters which such director or committee member reasonably
believes are within such other person's professional or expert competence and
who has been selected with reasonable care by or on behalf of the Corporation.
Section 4. Fiscal Year.
-----------
The fiscal year of the Corporation shall be as fixed by the Board of
Directors.
Section 5. Time Periods.
------------
In applying any provision of these Bylaws which requires that an act be
done or not be done a specified number of days prior to an event or that an act
be done during a period of a specified number of days prior to an event,
calendar days shall be used, the day of the doing of the act shall be excluded
and the day of the event shall be included.
ARTICLE VIII - AMENDMENTS
The Bylaws of the Corporation may be adopted, amended or repealed as
provided in Article SEVENTH of the Certificate of Incorporation of the
Corporation.
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EXHIBIT 3.3
FEDERAL STOCK CHARTER
INVESTORS FEDERAL BANK AND SAVINGS ASSOCIATION
Section 1. Corporate Title. The full corporate title of the savings bank
is "INVESTORS FEDERAL BANK AND SAVINGS ASSOCIATION"
Section 2. Office. The home office of the savings bank shall be located
in Chillicothe, Missouri.
Section 3. Duration. The duration of the savings bank is perpetual.
Section 4. Purpose and Powers. The purpose of the savings bank is to
pursue any or all of the lawful objectives of a Federal savings bank chartered
under Section 5 of the Home Owners' Loan Act and to exercise all of the express,
implied, and incidental powers conferred thereby and by all acts amendatory
thereof and supplemental thereto, subject to the Constitution and laws of the
United States as they are now in effect, or as they may hereafter be amended,
and subject to all lawful and applicable rules, regulations, and orders of the
Office of Thrift Supervision ("Office").
Section 5. Capital Stock. The total number of shares of all classes of
the capital stock which the savings bank has the authority to issue is 1,000,000
shares of which 900,000 shares shall be common stock of par value of $.01 per
share and of which 100,000 shares shall be serial preferred stock. The shares
may be issued from time to time as authorized by the board of directors without
further approval of its shareholders, except as otherwise provided in this
Section 5 or to the extent that such approval is required by governing law,
rule, or regulation. The consideration for the issuance of the shares shall be
paid in full before their issuance and shall not be less than the par value.
Neither promissory notes nor future services shall constitute payment or part
payment for the issuance of shares of the savings bank. The consideration for
the shares shall be cash, tangible or intangible property (to the extent direct
investment in such property would be permitted), labor, or services actually
performed for the savings bank or any combination of the foregoing. In the
absence of actual fraud in the transaction, the value of such property, labor,
or services, as determined by the board of directors of the savings bank, shall
be conclusive. Upon payment of such consideration, such shares shall be deemed
to be fully paid and nonassessable. In the case of a stock dividend, that part
of the surplus of the savings bank which is transferred to stated capital upon
the issuance of shares as a share dividend shall be deemed to be the
consideration for their issuance.
Except for shares issuable in connection with the conversion of the savings
bank from the mutual to the stock form of capitalization, no shares of capital
stock (including shares issuable upon conversion, exchange, or exercise of other
securities) shall be issued, directly or indirectly, to officers, directors, or
controlling persons of the savings bank other than as part of a general public
offering or as qualifying shares to a director, unless their issuance or the
plan under which they would be issued has been approved by a majority of the
total votes eligible to be cast at a legal meeting.
Nothing contained in this Section 5 (or in any supplementary sections
hereto) shall entitle the holders of any class of a series of capital stock to
vote as a separate class or series or to more than one vote per share, except as
<PAGE>
to the cumulation of votes for the election of directors; Provided, That this
restriction on voting separately by class or series shall not apply:
(i) To any provision which would authorize the holders of preferred
stock, voting as a class or series, to elect some members of the
board of directors, less than a majority thereof, in the event of
default in the payment of dividends on any class or series of
preferred stock;
(ii) To any provision which would require the holders of preferred
stock, voting as a class or series, to approve the merger or
consolidation of the savings bank with another corporation or the
sale, lease, or conveyance (other than by mortgage or pledge) of
properties or business in exchange for securities of a corporation
other than the savings bank if the preferred stock is exchanged for
securities of such other corporation; Provided, That no provision
may require such approval for transactions undertaken with the
assistance or pursuant to the direction of the Office, the Federal
Deposit Insurance Corporation or the Resolution Trust Corporation;
(iii) To any amendment which would adversely change the specific terms of
any class or series of capital stock as set forth in this Section 5
(or in any supplementary sections hereto), including any amendment
which would create or enlarge any class or series ranking prior
thereto in rights and preferences. An amendment which increases the
number of authorized shares of any class or series of capital
stock, or substitutes the surviving savings bank in a merger or
consolidation for the savings bank, shall not be considered to be
such an adverse change.
A description of the different classes and series (if any) of the savings
bank's capital stock and a statement of the designations, and the relative
rights, preferences, and limitations of the shares of each class of and series
(if any) of capital stock are as follows:
A. Common Stock. Except as provided in this Section 5 (or in any
supplementary sections thereto) the holders of the common stock shall
exclusively possess all voting power. Each holder of shares of common stock
shall be entitled to one vote for each share held by such holder, except as to
the cumulation of votes for the election of directors.
Whenever there shall have been paid, or declared and set aside for payment,
to the holders of the outstanding shares of any class of stock having preference
over the common stock as to the payment of dividends, the full amount of
dividends and of sinking fund, retirement fund, or other retirement payments, if
any, to which such holders are respectively entitled in preference to the common
stock, then dividends may be paid on the common stock and on any class or series
of stock entitled to participate therewith as to dividends out of any assets
legally available for the payment of dividends.
In the event of any liquidation, dissolution, or winding up of the savings
bank, the holders of the common stock (and the holders of any class or series of
stock entitled to participate with the common stock in the distribution of
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assets) shall be entitled to receive, in cash or in kind, the assets of the
savings bank available for distribution remaining after: (i) Payment or
provision for payment of the savings bank's debts and liabilities; (ii)
distributions or provision for distributions in settlement of its liquidation
account; and (iii) distributions or provisions for distributions to holders of
any class or series of stock having preference over the common stock in the
liquidation, dissolution, or winding up of the savings bank. Each share of
common stock shall have the same relative rights as and be identical in all
respects with all the other shares of common stock.
B. Preferred Stock. The savings bank may provide in supplementary
sections to its charter for one or more classes of preferred stock, which shall
be separately identified. The shares of any class may be divided into and
issued in series, with each series separately designated so as to distinguish
the shares thereof from the shares of all other series and classes. The terms
of each series shall be set forth in a supplementary section to the charter.
All shares of the same class shall be identical except as to the following
relative rights and preferences, as to which there may be variations between
different series:
(a) The distinctive serial designation and the number of shares
constituting such series;
(b) The dividend rate or the amount of dividends to be paid on the shares
of such series, whether dividends shall be cumulative and, if so, from
which date(s) the payment date(s) for dividends, and the participating
or other special rights, if any, with respect to dividends;
(c) The voting powers, full or limited, if any, of shares of such series;
(d) Whether the shares of such series shall be redeemable and, if so, the
price(s) at which, and the terms and conditions on which such shares
may be redeemed;
(e) The amount(s) payable upon the shares of such series in the event of
voluntary or involuntary liquidation, dissolution, or winding up of
the savings bank;
(f) Whether the shares of such series shall be entitled to the benefit of
a sinking or retirement fund to be applied to the purchase or
redemption of such shares, and if so entitled, the amount of such fund
and the manner of its application, including the price(s) at which
such shares may be redeemed or purchased through the application of
such fund;
(g) Whether the shares of such series shall be convertible into, or
exchangeable for, shares of any other class or classes of stock of the
savings bank and, if so, the conversion price(s), or the rate(s) of
exchange, and the adjustments thereof, if any, at which such
conversion or exchange may be made, and any other terms and conditions
of such conversion or exchange;
(h) The price or other consideration for which the shares of such series
shall be issued; and
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(i) Whether the shares of such series which are redeemed or converted
shall have the status of authorized but unissued shares of serial
preferred stock and whether such shares may be reissued as shares of
the same or any other series of serial preferred stock.
Each share of each series of serial preferred stock shall have the same
relative rights as and be identical in all respects with all the other shares of
the same series.
The board of directors shall have authority to divide, by the adoption of
supplementary charter sections, any authorized class of preferred stock into
series, and, within the limitations set forth in this section and the remainder
of this charter, fix and determine the relative rights and preferences of the
shares of any series so established.
Prior to the issuance of any preferred shares of a series established by a
supplementary charter section adopted by the board of directors, the savings
bank shall file with the Secretary to the Office a dated copy of that
supplementary section of this charter established and designating the series and
fixing and determining the relative rights and preferences thereof.
Section 6. Preemptive Rights. Holders of the capital stock of the savings
bank shall not be entitled to preemptive rights with respect to any shares of
the savings bank which may be issued.
Section 7. Liquidation Account. Pursuant to the requirements of the
Office's regulations (12 C.F.R. Subchapter D), the savings bank shall establish
and maintain a liquidation account for the benefit of its savings account
holders as of June 30, 1995 and September 30, 1996 ("eligible savers"). In the
event of a complete liquidation of the savings bank, it shall comply with such
regulations with respect to the amount and the priorities on liquidation of each
of the savings bank's eligible saver's inchoate interest in the liquidation
account, to the extent it is still in existence; Provided, That an eligible
saver's inchoate interest in the liquidation account shall not entitle such
eligible saver to any voting rights at meetings of the savings bank's
shareholders.
Section 8. Certain Provisions Applicable for Five Years. Notwithstanding
anything contained in the savings bank's charter or bylaws to the contrary, for
a period of five years from the date of completion of the conversion of the
savings bank from mutual to stock form, the following provisions shall apply:
A. Beneficial Ownership Limitation. No person shall directly or
indirectly offer to acquire or acquire the beneficial ownership of more than 10%
of any class of an equity security of the savings bank. This limitation shall
not apply to a transaction in which the savings bank forms a holding company
without change in the respective beneficial ownership interests of its
shareholders other than pursuant to the exercise of any dissenter and appraisal
rights, the purchase of shares by underwriters in connection with a public
offering, or the purchase of shares by a tax-qualified employee stock benefit
plan which is exempt from the approval requirements under (S) 574.3(c)(1)(vi) of
the Office's regulations.
In the event shares are acquired in violation of this Section 8, all shares
beneficially owned by any person in excess of 10% shall be considered "excess
shares" and shall not be counted as shares entitled to vote and shall not be
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voted by any person or counted as voting shares in connection with any matters
submitted to the shareholders for a vote.
For purposes of this Section 8, the following definitions apply:
(1) The term "person" includes an individual, a group acting in concert, a
corporation, a partnership, an association, a joint stock company, a trust, an
unincorporated organization or similar company, a syndicate or any other group
formed for the purpose of acquiring, holding or disposing of the equity
securities of the savings bank.
(2) The term "offer" includes every offer to buy or otherwise acquire,
solicitation of an offer to sell, tender offer for, or request or invitation for
tenders of, a security or interest in a security for value.
(3) The term "acquire" includes every type of acquisition, whether
effected by purchase, exchange, operation of law or otherwise.
(4) The term "acting in concert" means (a) knowing participation in a
joint activity or conscious parallel action towards a common goal whether or not
pursuant to an express agreement, or (b) a combination or pooling of voting or
other interests in the securities of an issuer for a common purpose pursuant to
any contract, understanding, relationship, agreement or other arrangements,
whether written or otherwise.
B. Cumulative Voting Limitation. Shareholders shall not be permitted to
cumulate their votes for election of directors.
C. Call for Special Meetings. Special meetings of shareholders relating
to changes in control of the savings bank or amendments to its charter shall be
called only upon direction of the Board of Directors.
Section 9. Directors. The savings bank shall be under the direction of a
board of directors. The authorized number of directors, as stated in the
savings bank's bylaws, shall not be fewer than five nor more than fifteen except
when a greater number is approved by the Director of the Office.
Section 10. Amendment of Charter. Except as provided in Section 5, no
amendment, addition, alteration, change or repeal of this charter shall be made,
unless such is first proposed by the board of directors of the savings bank,
then preliminarily approved by the Office, which preliminary approval may be
granted by the Office, pursuant to regulations specifying preapproved charter
amendments, and thereafter approved by the shareholders by a majority of the
total votes eligible to be cast at a legal meeting. Any amendment, addition,
alteration, change, or repeal so acted upon shall be effective upon filing with
the Office in accordance with regulatory procedures or on such other date as the
Office may specify in its preliminary approval.
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INVESTORS FEDERAL BANK AND SAVINGS ASSOCIATION
ATTEST: By:
------------------------------- -------------------------------
Larry Johnson Earle S. Teegarden, Jr.
Secretary President and Chief Executive
Officer
DIRECTOR OF THE OFFICE
OF THRIFT SUPERVISION
ATTEST: By:
------------------------------- -------------------------------
Secretary of the Office
of Thrift Supervision
Declared effective this ______ day of _____________________________, 1996.
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EXHIBIT 3.4
BYLAWS OF
INVESTORS FEDERAL BANK AND SAVINGS ASSOCIATION
ARTICLE I
HOME OFFICE
The home office of the savings bank shall be located in Chillicothe in the
County of Livingston, State of Missouri.
ARTICLE II
SHAREHOLDERS
Section 1. Place of Meetings. All annual and special meetings of
shareholders shall be held at the home office of the savings bank or at such
other place in the State in which the principal place of business of the savings
bank is located as the board of directors may determine.
Section 2. Annual Meeting. A meeting of shareholders of the savings bank
for the election of directors and for the transaction or any other business of
the savings bank shall be held annually within 120 days after the end of the
savings bank's fiscal year on the second Tuesday of October, if not a legal
holiday, and if a legal holiday, then on the next day following which is not a
legal holiday, at 10:00 a.m., or at such other date and time within such 120-day
period as the board of directors may determine.
Section 3. Special Meetings. Special meetings of the shareholders for any
purpose or purposes, unless otherwise prescribed by the regulations of the
Office of Thrift Supervision ("Office"), may be called at any time by the
chairman of the board, the president or a majority of the board of directors,
and shall be called by the chairman of the board, the president, or the
secretary upon the written request of the holders of not less than one-tenth of
all of the outstanding capital stock of the savings bank entitled to vote at the
meeting. Such written request shall state the purpose or purposes of the meeting
and shall be delivered to the home office of the savings bank addressed to the
chairman of the board, the president, or the secretary.
Section 4. Conduct of Meetings. Annual and special meetings shall be
conducted in accordance with the most current edition of Robert's Rules of Order
unless otherwise prescribed by regulations of the Office or these bylaws. The
board of directors shall designate, when present, either the chairman of the
board or president to preside at such meetings.
Section 5. Notice of Meetings. Written notice stating the place, day and
hour of the meeting and the purpose(s) for which the meeting is called shall be
delivered not fewer than 10 nor more than 50 days before the date of the
meeting, either personally or by mail, by or at the direction of the chairman of
the board, the president, or the secretary, or the directors calling the
meeting, to each shareholder of record entitled to vote at such meeting. If
mailed, such notice shall be deemed to be delivered when deposited in the mail,
addressed to the shareholder at the address as it appears on the stock transfer
books or
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records of the savings bank as of the record date prescribed in Section 6 of
this Article II with postage prepaid. When any shareholders' meeting, either
annual or special, is adjourned for 30 days or more, notice of the adjourned
meeting shall be given as in the case of an original meeting. It shall not be
necessary to give any notice of the time and place of any meeting adjourned for
less than 30 days or of the business to be transacted at the meeting, other than
an announcement at the meeting at which such adjournment is taken.
Section 6. Fixing of Record Date. For the purpose of determining
shareholders entitled to notice of or to vote at any meeting of shareholders or
any adjournment, or shareholders entitled to receive payment of any dividend, or
in order to make a determination of shareholders for any other proper purpose,
the board of directors shall fix in advance a date as the record date for any
such determination of shareholders. Such date in any case shall be not more
than 60 days and, in case of a meeting of shareholders, not fewer than 10 days
prior to the date on which the particular action, requiring such determination
of shareholders, is to be taken. When a determination of shareholders entitled
to vote at any meeting of shareholders has been made as provided in this
section, such determination shall apply to any adjournment.
Section 7. Voting Lists. At least 20 days before each meeting of the
shareholders, the officer or agent having charge of the stock transfer books for
shares of the savings bank shall make a complete list of the shareholders
entitled to vote at such meeting, or any adjournment, arranged in alphabetical
order, with the address and the number of shares held by each. This list of
shareholders shall be kept on file at the home office of the savings bank and
shall be subject to inspection by any shareholder at any time during usual
business hours for a period of 20 days prior to such meeting. Such list shall
also be produced and kept open at the time and place of the meeting and shall be
subject to inspection by any shareholder during the entire time of the meeting.
The original stock transfer book shall constitute prima facie evidence of the
shareholders entitled to examine such list or transfer books or to vote at any
meeting of shareholders. In lieu of making the shareholder list available for
inspection by shareholders as provided in the preceding paragraph, the board of
directors may elect to follow the procedures prescribed in (S) 552.6(d) of the
Office's regulations as now or hereafter in effect.
Section 8. Quorum. A majority of the outstanding shares of the savings
bank entitled to vote, represented in person or by proxy, shall constitute a
quorum at a meeting of shareholders. If less than a majority of the outstanding
shares is represented at a meeting, a majority of the shares so represented may
adjourn the meeting from time to time without further notice. At such adjourned
meeting at which a quorum shall be present or represented, any business may be
transacted which might have been transacted at the meeting as originally
notified. The shareholders present at a duly organized meeting may continue to
transact business until adjournment, notwithstanding the withdrawal of enough
shareholders to constitute less than a quorum.
Section 9. Proxies. At all meetings of shareholders, a shareholder may
vote by proxy executed in writing by the shareholder or by his or her duly
authorized attorney in fact. Proxies solicited on behalf of the management
shall be voted as directed by the shareholder or, in the absence of such
direction, as
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determined by a majority of the board of directors. No proxy shall be valid
more than eleven months from the date of its execution except for a proxy
coupled with an interest.
Section 10. Voting of Shares in the Name of Two or More Persons. When
ownership stands in the name of two or more persons, in the absence of written
directions to the savings bank to the contrary, at any meeting of the
shareholders of the savings bank any one or more of such shareholders may cast,
in person or by proxy, all votes to which such ownership is entitled. In the
event an attempt is made to cast conflicting votes, in person or by proxy, by
the several persons in whose names shares of stock stand, the vote or votes to
which those persons are entitled shall be cast as directed by a majority of
those holding such stock and present in person or by proxy at such meeting, but
no votes shall be cast for such stock if a majority cannot agree.
Section 11. Voting of Shares by Certain Holders. Shares standing in the
name of another corporation may be voted by any officer, agent, or proxy as the
bylaws of such corporation may prescribe, or, in the absence of such provision,
as the board of directors of such corporation may determine. Shares held by an
administrator, executor, guardian, or conservator may be voted by him or her,
either in person or by proxy, without a transfer of such shares into his or her
name. Shares standing in the name of a trustee may be voted by him or her,
either in person or by proxy, but no trustee shall be entitled to vote shares
held by him or her without a transfer of such shares into his or her name.
Shares standing in the name of a receiver may be voted by such receiver, and
shares held by or under the control of a receiver may be voted by such receiver
without the transfer into his or her name if authority to do so is contained in
an appropriate order of the court or other public authority by which such
receiver was appointed.
A shareholder whose shares are pledged shall be entitled to vote such
shares until the shares have been transferred into the name of the pledgee, and
thereafter the pledgee shall be entitled to vote the shares so transferred.
Neither treasury shares of its own stock held by the savings bank nor
shares held by another corporation, if a majority of the shares entitled to vote
for the election of directors of such other corporation are held by the savings
bank, shall be voted at any meeting or counted in determining the total number
of outstanding shares at any given time for purposes of any meeting.
Section 12. Cumulative Voting. Unless otherwise provided in the charter
of the savings bank, every shareholder entitled to vote at an election for
directors shall have the right to vote, in person or by proxy, the number of
shares owned by the shareholder for as many persons as there are directors to be
elected and for whose election the shareholder has a right to vote, or to
cumulate the votes by giving one candidate as many votes as the number of such
directors to be elected multiplied by the number of shares shall equal or by
distributing such votes on the same principle among any number of candidates.
Section 13. Inspectors of Election. In advance of any meeting of
shareholders, the board of directors may appoint any person other than nominees
for office as inspectors of election to act at such meeting or any adjournment.
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The number of inspectors shall be either one or three. Any such appointment
shall not be altered at the meeting. If inspectors of election are not so
appointed, the chairman of the board or the president may, or on the request of
not fewer than 10 percent of the votes represented at the meeting shall, make
such appointment at the meeting. If appointed at the meeting, the majority of
the votes present shall determine whether one or three inspectors are to be
appointed. In case any person appointed as inspector fails to appear or fails
or refuses to act, the vacancy may be filled by appointment by the board of
directors in advance of the meeting or at the meeting by the chairman of the
board or the president.
Unless otherwise prescribed by regulations of the Office, the duties of
such inspectors shall include: determining the number of shares and the voting
power of each share, the shares represented at the meeting, the existence of a
quorum, and the authenticity, validity and effect of proxies; receiving votes,
ballots or consents; hearing and determining all challenges and questions in any
way arising in connection with the rights to vote; counting and tabulating all
votes or consents; determining the result; and such acts as may be proper to
conduct the election or vote with fairness to all shareholders.
Section 14. Nominating Committee. The board of directors shall act as a
nominating committee for selecting the management nominees for election as
directors. Except in the case of a nominee substituted as a result of the death
or other incapacity of a management nominee, the nominating committee shall
deliver written nominations to the secretary at least 20 days prior to the date
of the annual meeting. Upon delivery, such nominations shall be posted in a
conspicuous place in each office of the savings bank. No nominations for
directors except those made by the nominating committee shall be voted upon at
the annual meeting unless other nominations by shareholders are made in writing
and delivered to the secretary of the savings bank at least five days prior to
the date of the annual meeting. Upon delivery, such nominations shall be posted
in a conspicuous place in each office of the savings bank. Ballots bearing the
names of all the persons nominated by the nominating committee and by
shareholders shall be provided for use at the annual meeting. However, if the
nominating committee shall fail or refuse to act at least 20 days prior to the
annual meeting, nominations for directors may be made at the annual meeting by
any shareholder entitled to vote and shall be voted upon.
Section 15. New Business. At an annual meeting of shareholders only such
new business shall be conducted, and only such proposals shall be acted upon, as
shall have been properly brought before the meeting. For any new business
proposed by management to be properly brought before the annual meeting, such
new business shall be approved by the board of directors, either directly or
through its approval of proxy solicitation materials related thereto, and shall
be stated in writing and filed with the secretary of the savings bank at least
20 days before the date of the annual meeting, and all business so stated,
proposed and filed shall be considered at the annual meeting. Any shareholder
may make any other proposal at the annual meeting and the same may be discussed
and considered, but unless properly brought before the meeting such proposal
shall not be acted upon at the meeting. For a proposal to be properly brought
before an annual meeting by a shareholder, the shareholder must have given
timely notice thereof in writing to the secretary of the savings bank. To be
timely, a
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shareholder's notice must be delivered to or received at the principal executive
offices of the savings bank, not less than 20 days prior to the meeting;
provided, however, that in the event that less than 30 days notice of the date
of the meeting is given to shareholders (which notice shall be accompanied by a
proxy or information statement which describes each matter proposed by the board
of directors to be acted upon at the meeting), notice by the shareholder to be
timely must be so received not later than the close of business on the 10th day
following the day on which such notice of the date of the annual meeting was
mailed. A shareholder's notice to the secretary shall set forth as to each
matter the shareholder proposes to bring before the annual meeting: (a) a brief
description of the proposal desired to be brought before the annual meeting; (b)
the name and address of the shareholder proposing such business, and (c) the
class and number of shares of the savings bank which are owned of record by the
shareholder. Notwithstanding anything in the bylaws to the contrary, no
business shall be conducted at an annual meeting except in accordance with the
procedures set forth in this Section 15.
Section 16. Informal Action by Shareholders. Any action required to be
taken at a meeting of shareholders, or any other action which may be taken at a
meeting of shareholders, may be taken without a meeting if consent in writing,
setting forth the action so taken, shall be given by all of the shareholders
entitled to vote with respect to the subject matter.
ARTICLE III
BOARD OF DIRECTORS
Section 1. General Powers. The business and affairs of the savings bank
shall be under the direction of its board of directors. The board of directors
shall annually elect a chairman of the board and a president from among its
members and shall designate, when present, either the chairman of the board or
the president to preside at its meetings.
Section 2. Number and Term. The board of directors shall consist of six
members and shall be divided into three classes as nearly equal in number as
possible. The members of each class shall be elected for a term of three years
and until their successors are elected and qualified. One class shall be
elected by ballot annually.
Section 3. Regular Meetings. A regular meeting of the board of directors
shall be held without other notice than this bylaw immediately after, and at the
same place as, the annual meeting of shareholders. The board of directors may
provide, by resolution, the time and place, within the savings bank's normal
lending territory, for the holding of additional regular meetings without other
notice than such resolution.
Section 4. Qualification. Each director shall at all times be the
beneficial owner of not less than 100 shares of capital stock of the savings
bank unless the savings bank is a wholly-owned subsidiary of a holding company.
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Section 5. Special Meetings. Special meetings of the board of directors
may be called by or at the request of the chairman of the board, the president,
or one-third of the directors. The persons authorized to call special meetings
of the board of directors may fix any place, within the savings bank's normal
lending territory, as the place for holding any special meeting of the board of
directors called by such persons.
Members of the board of directors may participate in special meetings by
means of conference telephone or similar communications equipment by which all
persons participating in the meeting can hear each other. Such participation
shall constitute presence in person but shall not constitute attendance for the
purpose of compensation pursuant to Section 12 of this Article.
Section 6. Notice. Written notice of any special meeting shall be given
to each director at least two days prior thereto when delivered personally or by
telegram or at least five days prior thereto when delivered by mail at the
address at which the director is most likely to be reached. Such notice shall
be deemed to be delivered when deposited in the mail so addressed, with postage
prepaid if mailed or when delivered to the telegraph company if sent by
telegram. Any director may waive notice of any meeting by a writing filed with
the secretary. The attendance of a director at a meeting shall constitute a
waiver of notice of such meeting, except where a director attends a meeting for
the express purpose of objecting to the transaction of any business because the
meeting is not lawfully called or convened. Neither the business to be
transacted at, nor the purpose of, any meeting of the board of directors need be
specified in the notice or waiver of notice of such meeting.
Section 7. Quorum. A majority of the number of directors fixed by Section
2 of this Article III shall constitute a quorum for the transaction of business
at any meeting of the board of directors; but if less than such majority is
present at a meeting, a majority of the directors present may adjourn the
meeting from time to time. Notice of any adjourned meeting shall be given in
the same manner as prescribed by Section 6 of this Article III.
Section 8. Manner of Acting. The act of the majority of the directors
present at a meeting at which a quorum is present shall be the act of the board
of directors, unless a greater number is prescribed by regulation of the Office
or by these bylaws.
Section 9. Action Without a Meeting. Any action required or permitted to
be taken by the board of directors at a meeting may be taken without a meeting
if a consent in writing, setting forth the action so taken, shall be signed by
all of the directors.
Section 10. Resignation. Any director may resign at any time by sending a
written notice of such resignation to the home office of the savings bank
addressed to the chairman of the board or the president. Unless otherwise
specified, such resignation shall take effect upon receipt by the chairman of
the board or the president. More than three consecutive absences from regular
meetings of the board of directors, unless excused by resolution of the board of
directors, shall automatically constitute a resignation, effective when such
resignation is accepted by the board of directors.
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Section 11. Vacancies. Any vacancy occurring on the board of directors
may be filled by the affirmative vote of a majority of the remaining directors
although less than a quorum of the board of directors. A director elected to
fill a vacancy shall be elected to serve until the next election of directors by
the shareholders. Any directorship to be filled by reason of an increase in the
number of directors may be filled by election by the board of directors for a
term of office continuing only until the next election of directors by the
shareholders.
Section 12. Compensation. Directors, as such, may receive a stated salary
for their services. By resolution of the board of directors, a reasonable fixed
sum, and reasonable expenses of attendance, if any, may be allowed for actual
attendance at each regular or special meeting of the board of directors.
Members of either standing or special committees may be allowed such
compensation for actual attendance at committee meetings as the board of
directors may determine.
Section 13. Presumption of Assent. A director of the savings bank] who is
present at a meeting of the board of directors at which action on any savings
bank matter is taken shall be presumed to have assented to the action taken
unless his or her dissent or abstention shall be entered in the minutes of the
meeting or unless he or she shall file a written dissent to such action with the
person acting as the secretary of the meeting before the adjournment thereof or
shall forward such dissent by registered mail to the secretary of the savings
bank within five days after the date a copy of the minutes of the meeting is
received. Such right to dissent shall not apply to a director who voted in
favor of such action.
Section 14. Removal of Directors. At a meeting of shareholders
called expressly for that purpose, any director may be removed for cause by a
vote of the holders of a majority of the shares then entitled to vote at an
election of directors. If less than the entire board is to be removed, no one
of the directors may be removed if the votes cast against the removal would be
sufficient to elect a director if then cumulatively voted at an election of the
class of directors of which such director is a part. Whenever the holders of
the shares of any class are entitled to elect one or more directors by the
provisions of the charter or supplemental sections thereto, the provisions of
this section shall apply, in respect to the removal of a director or directors
so elected, to the vote of the holders of the outstanding shares of that class
and not to the vote of the outstanding shares as a whole.
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ARTICLE IV
EXECUTIVE AND OTHER COMMITTEES
Section 1. Appointment. The board of directors, by resolution
adopted by a majority of the full board, may designate the chief executive
officer and two or more of the other directors to constitute an executive
committee. The designation of any committee pursuant to this Article IV and the
delegation of authority shall not operate to relieve the board of directors, or
any director, of any responsibility imposed by law or regulation.
Section 2. Authority. The executive committee, when the board of
directors is not in session, shall have and may exercise all of the authority of
the board of directors except to the extent, if any, that such authority shall
be limited by the resolution appointing the executive committee; and except also
that the executive committee shall not have the authority of the board of
directors with reference to: the declaration of dividends; the amendment of the
charter or bylaws of the savings bank, or recommending to the shareholders a
plan of merger, consolidation, or conversion; the sale, lease, or other
disposition of all or substantially all of the property and assets of the
savings bank otherwise than in the usual and regular course of its business; a
voluntary dissolution of the savings bank; a revocation of any of the foregoing;
or the approval of a transaction in which any member of the executive committee,
directly or indirectly, has any material beneficial interest.
Section 3. Tenure. Subject to the provisions of Section 8 of this
Article IV, each member of the executive committee shall hold office until the
next regular annual meeting of the board of directors following his or her
designation and until a successor is designated as a member of the executive
committee.
Section 4. Meetings. Regular meetings of the executive committee may
be held without notice at such times and places as the executive committee may
fix from time to time by resolution. Special meetings of the executive
committee may be called by any member thereof upon not less than one day's
notice stating the place, date, and hour of the meeting, which notice may be
written or oral. Any member of the executive committee may waive notice of any
meeting and no notice of any meeting need be given to any member thereof who
attends in person. The notice of a meeting of the executive committee need not
state the business proposed to be transacted at the meeting.
Section 5. Quorum. A majority of the members of the executive
committee shall constitute a quorum for the transaction of business at any
meeting thereof, and action of the executive committee must be authorized by the
affirmative vote of a majority of the members present at a meeting at which a
quorum is present.
Section 6. Action Without a Meeting. Any action required or
permitted to be taken by the executive committee at a meeting may be taken
without a meeting if a consent in writing, setting forth the action so taken,
shall be signed by all of the members of the executive committee.
Section 7. Vacancies. Any vacancy in the executive committee may be
filled by a resolution adopted by a majority of the full board of directors.
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Section 8. Resignations and Removal. Any member of the executive
committee may be removed at any time with or without cause by resolution adopted
by a majority of the full board of directors. Any member of the executive
committee may resign from the executive committee at any time by giving written
notice to the president or secretary of the savings bank. Unless otherwise
specified, such resignation shall take effect upon its receipt; the acceptance
of such resignation shall not be necessary to make it effective.
Section 9. Procedure. The executive committee shall elect a
presiding officer from its members and may fix its own rules of procedure which
shall not be inconsistent with these bylaws. It shall keep regular minutes of
its proceedings and report the same to the board of directors for its
information at the meeting held next after the proceedings shall have occurred.
Section 10. Other Committees. The board of directors may by
resolution establish an audit, loan or other committee composed of directors as
they may determine to be necessary or appropriate for the conduct of the
business of the savings bank and may prescribe the duties, constitution and
procedures thereof.
ARTICLE V
OFFICERS
Section 1. Positions. The officers of the savings bank shall be a
president, one or more vice presidents, a secretary and a treasurer, each of
whom shall be elected by the board of directors. The board of directors may
also designate the chairman of the board as an officer. The president shall be
the chief executive officer, unless the board of directors designates the
chairman of the board as chief executive officer. The president shall be a
director of the savings bank. The offices of the secretary and treasurer may be
held by the same person and a vice president may also be either the secretary or
the treasurer. The board of directors may designate one or more vice presidents
as executive vice president or senior vice president. The board of directors
may also elect or authorize the appointment of such other officers as the
business of the savings bank may require. The officers shall have such
authority and perform such duties as the board of directors may from time to
time authorize or determine. In the absence of action by the board of
directors, the officers shall have such powers and duties as generally pertain
to their respective offices.
Section 2. Election and Term of Office. The officers of the savings
bank shall be elected annually at the first meeting of the board of directors
held after each annual meeting of the shareholders. If the election of officers
is not held at such meeting, such election shall be held as soon thereafter as
possible. Each officer shall hold office until a successor has been duly
elected and qualified or until the officer's death, resignation, or removal in
the manner hereinafter provided. Election or appointment of an officer,
employee or agent shall not of itself create contractual rights. The board of
directors may authorize the savings bank to enter into an employment contract
with any officer in accordance with regulations of the Office; but no such
contract shall impair
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the right of the board of directors to remove any officer at any time in
accordance with Section 3 of this Article V.
Section 3. Removal. Any officer may be removed by the board of
directors whenever in its judgment the best interests of the savings bank will
be served thereby, but such removal, other than for cause, shall be without
prejudice to the contractual rights, if any, of the person so removed.
Section 4. Vacancies. A vacancy in any office because of death,
resignation, removal, disqualification, or otherwise may be filled by the board
of directors for the unexpired portion of the term.
Section 5. Remuneration. The remuneration of the officers shall be fixed
from time to time by the board of directors.
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ARTICLE VI
CONTRACTS, LOANS, CHECKS AND DEPOSITS
Section 1. Contracts. To the extent permitted by regulations of the
Office, and except as otherwise prescribed by these bylaws with respect to
certificates for shares, the board of directors may authorize any officer,
employee, or agent of the savings bank to enter into any contract or execute and
deliver any instrument in the name of and on behalf of the savings bank. Such
authority may be general or confined to specific instances.
Section 2. Loans. No loans shall be contracted on behalf of the savings
bank and no evidence of indebtedness shall be issued in its name unless
authorized by the board of directors. Such authority may be general or confined
to specific instances.
Section 3. Checks, Drafts, etc. All checks, drafts or other orders for
the payment of money, notes or other evidences of indebtedness issued in the
name of the savings bank shall be signed by one or more officers, employees or
agents of the savings bank in such manner as shall from time to time be
determined by the board of directors.
Section 4. Deposits. All funds of the savings bank not otherwise employed
shall be deposited from time to time to the credit of the savings bank in any
duly authorized depositories as the board of directors may select.
ARTICLE VII
CERTIFICATES FOR SHARES AND THEIR TRANSFER
Section 1. Certificates for Shares. Certificates representing shares of
capital stock of the savings bank shall be in such form as shall be determined
by the board of directors and approved by the Office. Such certificates shall
be signed by the chief executive officer or by any other officer of the savings
bank authorized by the board of directors, attested by the secretary or an
assistant secretary, and sealed with the corporate seal or a facsimile thereof.
The signatures of such officers upon a certificate may be facsimiles if the
certificate is manually signed on behalf of a transfer agent or a registrar
other than the savings bank itself or one of its employees. Each certificate
for shares of capital stock shall be consecutively numbered or otherwise
identified. The name and address of the person to whom the shares are issued,
with the number of shares and date of issue, shall be entered on the stock
transfer books of the savings bank. All certificates surrendered to the savings
bank for transfer shall be canceled and no new certificate shall be issued until
the former certificate for a like number of shares has been surrendered or
canceled, except that in case of a lost or destroyed certificate, a new
certificate may be issued upon such terms and indemnity to the savings bank as
the board of directors may prescribe.
Section 2. Transfer of Shares. Transfer of shares of capital stock of the
savings bank shall be made only on its stock transfer books. Authority for such
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transfer shall be given only by the holder of record or by his or her legal
representative, who shall furnish proper evidence of such authority, or by his
or her attorney authorized by a duly executed power of attorney and filed with
the savings bank. Such transfer shall be made only on surrender for
cancellation of the certificate for such shares. The person in whose name
shares of capital stock stand on the books of the savings bank shall be deemed
by the savings bank to be the owner for all purposes.
ARTICLE VIII
FISCAL YEAR; ANNUAL AUDIT
The fiscal year of the savings bank shall end on the last day of June of
each year. The savings bank shall be subject to an annual audit as of the end
of its fiscal year by independent public accountants appointed by and
responsible to the board of directors. The appointment of such accountants
shall be subject to annual ratification by the shareholders.
ARTICLE IX
DIVIDENDS
Subject to the terms of the savings bank's charter and the regulations and
orders of the Office, the board of directors may, from time to time, declare,
and the savings bank may pay, dividends on its outstanding shares of capital
stock.
ARTICLE X
CORPORATE SEAL
The board of directors shall provide a savings bank seal which shall be two
concentric circles between which shall be the name of the savings bank. The
year of incorporation or an emblem may appear in the center.
ARTICLE XI
AMENDMENTS
These bylaws may be amended in a manner consistent with the regulations of
the Office at any time by a majority vote of the full board of directors, or by
a majority vote of the votes cast by the shareholders of the savings bank at any
legal meeting.
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EXHIBIT 3.5
ARTICLES OF ASSOCIATION
OF
INVESTORS FEDERAL BANK, NATIONAL ASSOCIATION
For the purpose of organizing a Bank to carry on the business of banking
under the laws of the United States, the undersigned do enter into the following
Articles of Association:
FIRST. The title of this Bank shall be Investors Federal Bank, National
Association.
SECOND. The Main Office of the Bank shall be in Chillicothe, Missouri,
County of Livingston, State of Missouri. The general business of the Bank shall
be conducted at its main office and its branches and facilities.
THIRD. The board of directors of this Bank shall consist of not less than
five nor more than twenty-five persons, the exact number to be fixed and
determined from time to time by resolution of a majority of the full board of
directors or by resolution of the shareholders at any annual or special meeting
thereof. Each director shall own common or preferred stock of the Bank with an
aggregate par value of not less than $1,000, or common or preferred stock of a
bank holding company owning the Bank with an aggregate par, fair market or
equity value of not less than $1,000, as of either (i) the date of purchase,
(ii) the date the person became a director or (iii) the date of that person's
most recent election to the board of directors, whichever is greater. Any
combination of common or preferred stock of the Bank or holding company may be
used.
Any vacancy in the board of directors may be filled by action of the board
of directors; provided, however, that a majority of the full board of directors
may not increase the number of directors to a number which: (1) exceeds by more
than two the number of directors last elected by shareholders where the number
was 15 or less; and (2) exceeds by more than four the number of directors last
elected by shareholders where the number was 16 or more, but in no event shall
the number of directors exceed 25.
Terms of directors, including directors selected to fill vacancies, shall
expire at the next regular meeting of shareholders at which directors are
elected, unless the directors resign or are removed from office.
Despite the expiration of a director's term, the director shall continue to
serve until his or her successor is elected and qualifies or until there is a
decrease in the number of directors and his or her position is eliminated.
Honorary or advisory members of the board of directors, without voting
power or power of final decision in matters concerning the business of the Bank,
may be appointed by resolution of a majority of the full board of directors, or
by resolution of shareholders at any annual or special meeting. Honorary or
advisory directors shall not be counted for purposes of determining the number
of directors of the Bank or the presence of a quorum in connection with any
board action, and shall not be required to own qualifying shares.
<PAGE>
FOURTH. There shall be an annual meeting of the shareholders to elect
directors and transact whatever other business may be brought before the
meeting. It shall be held at the main office or any other convenient place the
board of directors may designate, on the day of each year specified therefor in
the bylaws, but if no election is held on that day, it may be held on any
subsequent day, according to such lawful rules as may be prescribed by the board
of directors. In all cases, at least 10 days advance notice of the meeting shall
be given to the shareholders by first class mail.
In all elections of directors, the number of votes each common shareholder
may cast will be determined by multiplying the number of shares he or she owns
by the number of directors to be elected. Those votes may be cumulated and cast
for a single candidate or may be distributed among two or more candidates in the
manner selected by the shareholder. On all other questions, each common
shareholder shall be entitled to one vote for each share of stock held by him or
her. If the issuance of preferred stock with voting rights has been authorized
by a vote of shareholders owning a majority of the common stock of the Bank,
preferred shareholders will have cumulative voting rights and will be included
within the same class as common shareholders, for purposes of the election of
directors.
A director may resign at any time by delivering written notice to the board
of directors, its chairperson, or the Bank, which resignation shall be effective
when the notice is delivered unless the notice specifies a later effective date.
FIFTH. The authorized amount of capital stock of this Bank shall be
900,000 shares of common stock of the par value of ten dollars ($10.00) each;
and 100,000 shares of preferred stock; but said capital stock may be increased
or decreased from time to time, according to the provisions of the laws of the
United States.
No holder of shares of the capital stock of any class of the Bank shall
have any pre-emptive or preferential right of subscription to any shares of any
class of stock of the Bank, whether now or hereafter authorized, or to any
obligations convertible into stock of the Bank, issued, or sold, nor any right
of subscription to any thereof other than such, if any, as the board of
directors, in its discretion may from time to time determine and at such price
as the board of directors may from time to time fix.
Unless otherwise specified in the articles of association or required by
law, (1) all matters requiring shareholder action, including amendments to the
articles of association must be approved by shareholders owning a majority
voting interest in the outstanding voting stock, and (2) each shareholder shall
be entitled to one vote per share.
Shares of the same class or series may be issued as a dividend on a pro
rata basis and respect of without consideration. Shares of another class or
series may be issued as a share dividend in respect of a class or series of
stock if approved by a majority of the votes entitled to be cast by the class or
series to be issued unless there are no outstanding shares of the class or
series to be issued. Unless otherwise provided by the board of directors, the
record date for
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determining shareholders entitled to a share dividend shall be the date the
board of directors authorizes the share dividend.
Unless otherwise provided in the bylaws, the record date for determining
shareholders entitled to notice of and to vote at any meeting is the close of
business on the day before the first notice is mailed or otherwise sent to the
shareholders, provided that in no event may a record date be more than 70 days
before the meeting.
If a shareholder is entitled to fractional shares pursuant to a stock
dividend, consolidation or merger, reverse stock split or otherwise, the Bank
may (a) issue fractional shares or, (b) in lieu of the issuance of fractional
shares, issue script or warrants entitling the holder to receive a full share
upon surrendering enough script or warrants to equal a full share, (c) if there
is an established and active market in the Bank's stock, make reasonable
arrangements to provide the shareholder with an opportunity to realize a fair
price through sale of the fraction, or purchase of the additional fraction
required for a full share, (d) remit the cash equivalent of the fraction to the
shareholder, or (e) sell full shares representing all the fractions at public
auction or to the highest bidder after having solicited and received sealed bids
from at least three licensed stock brokers, and distribute the proceeds pro rata
to shareholders who otherwise would be entitled to the fractional shares. The
holder of a fractional share is entitled to exercise the rights of a
shareholder, including the right to vote, to receive dividends, and to
participate in the assets of the Bank upon liquidation, in proportion to the
fractional interest. The holder of script or warrants is not entitled to any of
these rights unless the script or warrants explicitly provide for such rights.
The script or warrants may be subject to such additional conditions as (1) that
the script or warrants will become void if not exchanged for full shares before
a specified date; and (2) that the shares for which the script or warrants are
exchangeable may be sold at the option of the Bank and the proceeds paid to
scriptholders.
The Bank, at any time and from time to time, may authorize and issue debt
obligations, whether or not subordinated, without the approval of the
shareholders.
SIXTH. The board of directors shall appoint one of its members president
of this Bank, and one of its members chairperson of the board and shall have the
power to appoint one or more vice presidents, a secretary who shall keep minutes
of the directors' and shareholders' meetings and be responsible for
authenticating the records of the Bank, and such other officers and employees as
may be required to transact the business of this Bank.
The board of directors shall have the power to:
(1) Define the duties of the officers and employees of the Bank.
(2) Delegate the performance of its duties, but not the responsibility for
its duties, to the officers, employees, and agents of the Bank.
(3) Fix the compensation and enter into employment contracts with its
officers and employees upon reasonable terms and conditions consistent
with applicable law.
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(4) Dismiss officers and employees.
(5) Require bonds from officers and employees and to fix the penalty
thereof.
(6) Ratify written policies authorized by the Bank's management or
committees of the board.
(7) Regulate the manner in which any increase or decrease of the capital
of the Bank shall be made, provided that nothing herein shall restrict
the power of shareholders to increase or decrease the capital of the
Bank in accordance with law, and nothing shall raise or lower from
two-thirds the percentage required for shareholder approval to
increase or reduce the capital.
(8) Manage and administer the business and affairs of the Bank.
(9) Adopt initial bylaws, not inconsistent with law or the articles of
Bank, for managing the business and regulating the affairs of the
Bank.
(10) Amend or repeal bylaws, except to the extent that the articles of Bank
reserve this power in whole or in part to shareholders.
(11) Make contracts.
(12) Generally to perform all acts that are legal for a Board of directors
to perform.
SEVENTH. The board of directors shall have the power to change the
location of the Main Office to any other place within the limits of Chillicothe,
Missouri, without the approval of the shareholders, and shall have the power to
establish or change the location of any branch or branches of the Bank to any
other location, without the approval of the shareholders, subject to the
approval of the Office of the Comptroller of the Currency.
EIGHTH. The corporate existence of this Bank shall continue until
terminated according to the laws of the United States.
NINTH. The board of directors of this Bank, or any three or more
shareholders owning, in the aggregate, not less than 25 percent of the stock of
this Bank, may call a special meeting of shareholders at any time. Unless
otherwise provided by the laws of the United States, a notice of the time,
place, and purpose of every annual and special meeting of the shareholders shall
be given by first-class mail, postage prepaid, mailed at least 10, and no more
than 60 days prior to the date of the meeting to each shareholder of record at
his/her address as shown upon the books of this Bank. Unless otherwise provided
by the Bylaws, any action requiring approval by the shareholders must be
effected at a duly called annual or special meeting.
TENTH. These articles of association may be amended at any regular or
special meeting of the shareholders by the affirmative vote of the holders of a
majority of the stock of this Bank,
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unless the vote of the holders of a greater amount of stock is required by law,
and in that case by the vote of the holders of such greater amount. The Bank's
Board of directors may propose one or more amendments to the articles of
association for submission to the shareholders.
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In witness whereof, we have hereunto set our hands this ___ day of
______________, 1996.
- ------------------------------- --------------------------------
Robert T. Fairweather Edward P. Milbank
- ------------------------------- --------------------------------
Earle S. Teegarden, Jr. J. Michael Palmer
- ------------------------------- --------------------------------
Larry R. Johnson Armand J. Peterson
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EXHIBIT 3.6
BYLAWS OF
INVESTORS FEDERAL BANK, NATIONAL ASSOCIATION
ARTICLE I
Meetings of Shareholders
Section 1.1. Annual Meeting. The regular annual meeting of the
shareholders to elect directors and transact whatever other business may
properly come before the meeting, shall be held at the main office of the Bank,
522 Washington Street, City of Chillicothe, State of Missouri or such other
places as the board of directors may designate, at 10:00 a.m. on the second
Tuesday of October of each year. Notice of the meeting shall be mailed, postage
prepaid, at least 10 days and no more than 60 days prior to the date thereof,
addressed to each stockholder at his/her address appearing on the books of the
Bank. If, for any cause, an election of directors is not made on that date, or
in the event of a legal holiday, on the next following banking day, an election
may be held on any subsequent day within 60 days of the date fixed, to be
designated by the board of directors, or if the directors fail to fix the date,
by the shareholders representing two-thirds of the shares.
Section 1.2. Special Meetings. Except as otherwise specifically provided
by statute, special meetings of the shareholders may be called for any purpose
at any time by the board of directors or by any one or more shareholders owning,
in the aggregate, not less than 25 percent of the stock of the Bank. Any
shareholder having actual notice of a special meeting of shareholders and of the
business to be transacted at such meeting may waive formal notice of the meeting
by a writing filed with the secretary of the Bank.
The board of directors may fix a record date for determining shareholders
entitled to notice and to vote at any meeting, in reasonable proximity to the
date of giving notice to the shareholders of such meeting. The record date for
determining shareholders entitled to demand a special meeting is the date the
first shareholder signs a demand for the meeting describing the purpose or
purposes for which it is to be held.
A special meeting may be called by shareholders or the board of directors
to amend the articles of association or bylaws, whether or not such bylaws may
be amended by the board in the absence of shareholder approval.
If an annual or special shareholders' meeting is adjourned to a different
date, time, or place, notice need not be given of the new date, time or place,
if the new date, time or place is announced at the meeting before adjournment,
unless any additional items of business are to be considered, or the Bank
becomes aware of an intervening event materially affecting any matter to be
voted on more than 10 days prior to the date to which the meeting is adjourned.
If a new record date for the adjourned meeting is fixed, however, notice of the
adjourned meeting must be given to persons who are shareholders as of the new
record date.
<PAGE>
Section 1.3. Nominations of Directors. Nominations for election to the
board of directors may be made by the board of directors or by any stockholder
of any outstanding class of capital stock of the Bank entitled to vote for
election of directors. Nominations, other than those made by or on behalf of
the existing management of the Bank shall be made in writing and be delivered or
mailed to the president of the Bank and to the Comptroller of the Currency,
Washington, D.C., not less than 14 days nor more than 50 days prior to any
meeting of shareholders called for the election of directors; provided, however,
that if less than 21 days notice of the meeting is given to shareholders, such
nominations shall be mailed or delivered to the president of the Bank and to the
Comptroller of the Currency not later than the close of business on the seventh
day following the day on which the notice of meeting was mailed. Such
notification shall contain the following information to the extent known to the
notifying shareholder.
(1) The name and address of each proposed nominee.
(2) The principal occupation of each proposed nominee.
(3) The total number of shares of capital stock of the Bank that will be voted
for each proposed nominee.
(4) The name and residence address of the notifying shareholder.
(5) The number of shares of capital stock of the Bank owned by the notifying
shareholder.
Nominations not made in accordance herewith may, in his/her discretion, be
disregarded by the chairperson of the meeting, and the vote tellers may
disregard all votes cast for each such nominee. No bylaw may unreasonably
restrict the nomination of directors by shareholders.
Such notification shall contain the following information to the extent
known to the notifying shareholder: (i) the name and address of the proposed
nominee; (ii) the principal occupation of the proposed nominee; (iii) the total
number of shares of capital stock of the Bank that will be voted for each
proposed nominee; (iv) the name and residence of the notifying shareholder; and
(v) the number of shares of capital stock of the Bank owned by the notifying
shareholder. Nominations not made in accordance herewith may, in the discretion
of the chairperson of the meeting, be disregarded by the chairperson and upon
the chairperson's instructions, the vote tellers may disregard all votes cast
for each such nominee.
Section 1.4. Proxies. Shareholders may vote at any meeting of the
shareholders by proxies duly authorized in writing, but no officer or employee
of this Bank shall act as proxy. Proxies shall be valid only for one meeting, to
be specified therein, and any adjournments of such meeting. Proxies shall be
dated and filed with the records of the meeting. Proxies with rubber stamped
facsimile signatures may be used and unexecuted proxies may be counted upon
receipt of a confirming telegram from the shareholder. Proxies meeting the
above requirements submitted at any time during a meeting shall be accepted.
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Section 1.5. Quorum. A majority of the outstanding capital stock,
represented in person or by proxy, shall constitute a quorum at any meeting of
shareholders, unless otherwise provided by law, or by the shareholders or
directors pursuant to Section 8.2; but less than a quorum may adjourn any
meeting from time to time, and the meeting may be held, as adjourned, without
further notice. A majority of the votes cast shall decide every question or
matter submitted to the shareholders at any meeting, unless otherwise provided
by law or by the Articles of Association, or by the shareholders or directors
pursuant to Section 8.2.
Section 1.6. Action Without a Meeting. Any action that may be taken at or
may be required to be taken at any annual or special meeting of shareholders of
the Bank, may be taken without a meeting, without prior notice and without a
vote, if a consent or consents in writing, setting forth the action so taken,
shall be signed by all of the shareholders entitled to vote upon such action.
In the event that the action which is consented to is one that would have
required the filing of a certificate with the Office of the Comptroller of the
Currency if such action that had been voted on by shareholders at a meeting
thereof, the certificate filed shall state, in lieu of any statement concerning
any vote of shareholders, that written consent has been given in accordance with
the provisions of this Section 1.6.
ARTICLE II
Directors
Section 2.1. Board of Directors. The board of directors (board) shall
have the power to manage and administer the business and affairs of the Bank.
Except as expressly limited by law, all corporate powers of the Bank shall be
vested in and may be exercised by the board.
Section 2.2. Number. The board shall consist of not less than five nor
more than twenty-five shareholders, the exact number within such minimum and
maximum limits to be fixed and determined from time to time by resolution of a
majority of the full board or by resolution of a majority of the shareholders at
any meeting thereof.
Section 2.3. Organization Meeting. The cashier, upon receiving the
certificate of the Judges of the result of any election, shall notify the
directors-elect of their election and of the time at which they are required to
meet at the main office of the Bank to organize the new board and elect and
appoint officers of the Bank for the succeeding year. Such meeting shall be
held on the day of the election or as soon thereafter as practicable, and, in
any event, within 30 days thereof. If, at the time fixed for such meeting, there
shall not be a quorum, the directors present may adjourn the meeting, from time
to time, until a quorum is obtained.
Section 2.4. Regular Meetings. The regular meetings of the board shall be
held, without notice, immediately after, and at the same place as, the annual
meeting of shareholders. When any regular meeting of the board falls upon a
holiday, the meeting shall be held on the next banking business day unless the
board shall designate another day.
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Section 2.5. Special Meetings. Special meetings of the board may be
called by the chairperson of the board, the president of the Bank or at the
request of three or more directors. Each member of the board shall be given
notice stating the time and place by telegram, letter, or in person, of each
special meeting. Any directors having actual notice of a special meeting may
waive formal notice of the meeting by writing filed with the secretary of the
bank. Members of the board may participate in special meetings of the board by
means of a conference telephone or similar communications equipment by which all
person participating in the meeting can hear each other. Such participation
shall constitute presence in person.
Section 2.6. Quorum. A majority of the director positions on the board
shall constitute a quorum at any meeting, except when otherwise provided by law
or these Bylaws, provided that a quorum may not be reduced below one-third of
the director positions but a less number may adjourn any meeting, from time to
time, and the meeting may be held, as adjourned, without further notice. If the
number of directors is reduced below the number that would constitute a quorum,
no business may be transacted, except selecting directors to fill vacancies in
conformance with Section 2.8.
If a quorum is present, the board may take action through the vote of a
majority of the directors who are in attendance.
Section 2.7. Action Without a Meeting. Any action required or permitted
to be taken by the board at a meeting may be taken without a meeting if a
consent in writing, setting forth the action so taken, shall be signed by a
majority of the entire board.
Section 2.8. Vacancies. When any vacancy occurs among the directors, a
majority of the remaining members of the board, according to the laws of the
United States, may appoint a director to fill such vacancy at any regular
meeting of the board, or at a special meeting called for that purpose at which a
quorum is present, or if the directors remaining in office constitute fewer than
a quorum of the board, by the affirmative vote of a majority of all the
directors remaining in office, or by shareholders at a special meeting called
for that purpose, in conformance with Section 2.2. At any such shareholder
meeting, each shareholder entitled to vote shall have the right to multiply the
number of votes he or she is entitled to cast by the number of vacancies being
filled and cast the product for a single candidate or distribute the product
among two or more candidates.
A vacancy that will occur at a specific later date (by reason of a
resignation effective at a later date) may be filled before the vacancy occurs,
but the new director may not take office until the vacancy occurs.
Section 2.9. Removal of Directors. At a meeting of shareholders
called expressly for the purpose of removing a director, any director may be
removed, with or without cause, by the affirmative vote of the holders of a
majority of the outstanding shares entitled to vote at an election of directors;
provided, however, (i) no director shall be removed at a meeting of shareholders
unless the notice of such meeting shall state that a purpose of the meeting is
to vote upon the removal of one or more directors named in the notice and only
such named directors may
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be removed at such meeting and, (ii) if less than the entire board is to be
removed, no director may be removed, with or without cause, if the vote cast
against such director's removal would be sufficient to elect such director if
then cumulatively voted at an election of the entire board.
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ARTICLE III
Committees of the Board
Section 3.1. General. Each committee of the board shall have one or
more members, who shall serve at the pleasure of the board. The provisions of
Article II of these bylaws governing notice of meeting, quorum and voting
requirements of the board shall also apply to committees of the board.
Section 3.2. Executive Committee. There shall be an executive
committee composed of the president and two directors, appointed by the board
annually or more often. The executive committee shall have power to discount
and purchase bills, notes and other evidence of debt, to buy and sell bills of
exchange, to exercise authority delegated by the board regarding loans and
discounts, and generally to exercise, when the board is not in session, all
other powers of the board that may lawfully be delegated. The executive
committee shall keep minutes of its meetings, and such minutes shall be
submitted at the next regular meeting of the board at which a quorum is present,
and any action by the board with respect thereto shall be entered in the minutes
of the board.
Section 3.3. Investment Committee. There shall be an investment
committee composed of three directors, and such officers as shall be selected by
the board appointed by the board annually or more often. The investment
committee shall have the power to insure adherence to investment policy, to
recommend amendments thereto, to purchase and sell securities, to exercise
authority regarding investments and to exercise, when the board is not in
session, all other powers of the board regarding investment securities that may
be lawfully delegated. The investment committee shall keep minutes of its
meetings, and such minutes shall be submitted at the next regular meeting of the
board at which a quorum is present, and any action taken by the board with
respect thereto shall be entered in the minutes of the board.
Section 3.4. Examining Committee. There shall be an Examining
Committee composed of not less than three directors, exclusive of any active
officers, appointed by the board annually or more often. The duty of the
committee shall be to examine at least once during each calendar year and within
15 months of the last examination the affairs of the Bank or cause suitable
examinations to be made by auditors responsible only to the board and to report
the result of such examination in writing to the board at the next regular
meeting thereafter. Such report shall state whether the Bank is in a sound
condition, whether adequate internal controls and procedures are being
maintained and shall recommend to the board such changes in the manner of
conducting the affairs of the Bank as shall be deemed advisable.
Section 3.5. Other Committees. The board may appoint, from time to
time, from its own members, special litigation and other committees of one or
more persons, for such purposes and with such powers as the board may determine.
However, a committee may not: (i) authorize distributions of assets for
dividends; (ii) approve action required to be approved by shareholders;
(iii) fill vacancies on the board or any of its committees; (iv) amend the
Articles of Association; (v) adopt, amend or repeal the Bylaws; (vi) authorize
or approve issuances or sales or contracts
6
<PAGE>
for sale of shares, or determine the designation and relative rights,
preferences and limitations of a class or series or shares; or (vii) elect
officers, appoint committees, appoint judges of election or increase or decrease
salaries or terms of officers.
ARTICLE IV
Officers and Employees
Section 4.1. Chairperson of the Board. The board shall appoint one of
its members to be the chairperson of the board to serve at its pleasure. Such
person shall preside at all meetings of the board. The chairperson of the board
shall supervise the carrying out of the policies adopted or approved by the
board; shall have general executive powers, as well as the specific powers
conferred by these Bylaws; and shall also have and may exercise such further
powers and duties as from time to time may be conferred upon, or assigned to,
him or her by the board.
Section 4.2. President. The board shall appoint one of its members to
be the president of the Bank. In the absence of the chairperson, the president
shall preside at any meeting of the board. The president shall have all general
executive powers, and shall have and may exercise any and all other powers and
duties pertaining by law, regulation, or practice, to the Office of President,
or imposed by these Bylaws. The president shall also have and may exercise such
further powers and duties as from time to time may be conferred upon, or
assigned to him or her by the board.
Section 4.3 Vice President. The board may appoint one or more vice
presidents. Each vice president shall have such powers and duties as may be
assigned by the board. One vice president shall be designated by the board, in
the absence of the president, to perform all the duties of the president.
Section 4.4. Secretary. The board shall appoint a secretary, cashier,
or other designated officer who shall be Secretary of the board and of the Bank,
and shall keep accurate minutes of all meetings. The secretary shall attend to
the giving of all notices required by these Bylaws; shall be custodian of the
corporate seal, records, documents and papers of the Bank; shall provide for the
keeping of proper records of all transactions of the Bank; shall have and may
exercise any and all other powers and duties pertaining by law, regulation or
practice, to the office of cashier, or imposed by these Bylaws; and shall also
perform such other duties as may be assigned from time to time, by the board.
Section 4.5. Other Officers. The board may appoint one or more
assistant vice presidents, one or more trust officers, one or more assistant
secretaries, one or more assistant cashiers, one or more managers and assistant
managers of branches and such other officers and attorneys in fact as from time
to time may appear to the board to be required or desirable to transact the
business of the Bank. Such officers shall respectively exercise such powers and
perform such duties as pertain to their several offices, or as may be conferred
upon, or assigned to, them by the board, the chairperson of the board or the
president. The board may authorize an officer to appoint one or more officers
or assistant officers.
7
<PAGE>
Section 4.6. Tenure of Office. The president and all other officers
shall serve at the pleasure of the board and hold office for the current year
for which the board was elected, unless they shall resign, die, become
disqualified, or be removed; and any vacancy occurring in the office of
president or other officer shall be filled promptly by the board.
Section 4.7. Resignation. An officer may resign at any time by
delivering notice to the Bank. A resignation is effective when the notice is
given unless the notice specifies a later effective date.
ARTICLE V
Stock and Stock Certificates
Section 5.1. Transfers. Shares of stock shall be transferable on the
books of the Bank, and a transfer book shall be kept in which all transfers of
stock shall be recorded. Every person becoming a shareholder by such transfer
shall in proportion to his shares, succeed to all rights of the prior holder of
such shares. The board may impose conditions upon the transfer of the stock
reasonably calculated to simplify the work of the Bank with respect to stock
transfers, voting at shareholder meetings and related matters, and to protect it
against fraudulent transfers.
Section 5.2. Stock Certificates. Certificates of stock shall bear the
signature of the president (which may be engraved, printed or impressed), and
shall be signed manually or by facsimile process by the secretary, assistant
secretary, cashier, assistant cashier, or any other officer appointed by the
board for that purpose, to be known as an authorized officer, and the seal of
the Bank shall be engraved thereon. Each certificate shall recite on its face
that the stock represented thereby is transferable only upon the books of the
Bank properly endorsed.
The board may adopt or utilize procedures for replacing lost, stolen,
or destroyed stock certificates as permitted by law.
The Bank may establish a procedure through which the beneficial owner
of shares that are registered in the name of a nominee may be recognized by the
Bank as the shareholder. The procedure may set forth: (i) the types of
nominees to which it applies; (ii) the rights or privileges that the Bank
recognizes in a beneficial owner; (iii) how the nominee may request the Bank to
recognize the beneficial owner as the shareholder; (iv) the information that
must be provided when the procedure is selected; (v) the period over which the
Bank will continue to recognize the beneficial owner as the shareholder; and
(vi) other aspects of the rights and duties created.
8
<PAGE>
ARTICLE VI
Corporate Seal
The president, the cashier, the secretary or any assistant cashier or
assistant secretary, or other officer thereunto designated by the board, shall
have authority to affix the corporate seal to any document requiring such seal,
and to attest the same. Such seal shall be substantially in the following form:
ARTICLE VII
Miscellaneous Provisions
Section 7.1. Fiscal Year. The fiscal year of the Bank shall end on the
30th of June of each year.
Section 7.2. Execution of Instruments. All agreements, indentures,
mortgages, deeds, conveyances, transfers, certificates, declarations, receipts,
discharges, releases, satisfactions, settlements, petitions, schedules,
accounts, affidavits, bonds, undertakings, proxies and other instruments or
documents may be signed, executed, acknowledged, verified, delivered or accepted
on behalf of the Bank by the chairperson of the board, or the president, or any
vice president, or the secretary, or the cashier, or, if in connection with the
exercise of fiduciary powers of the Bank, by any of those officers or by any
trust officer. Any such instruments may also be executed, acknowledged,
verified, delivered or accepted on behalf of the Bank in such other manner and
by such other officers as the board may from time to time direct. The
provisions of this Section 7.2 are supplementary to any other provision of these
Bylaws.
Section 7.3. Records. The Articles of Association, the Bylaws and the
proceedings of all meetings of the shareholders, the board, and standing
committees of the board, shall be recorded in appropriate minute books provided
for that purpose. The minutes of each meeting shall be signed by the secretary,
cashier or other officer appointed to act as secretary of the meeting.
9
<PAGE>
ARTICLE VIII
Indemnification of Directors and Officers
Section 8.1. Indemnification. Each person who was or is made a party
or is threatened to be made a party to or is otherwise involved in any action,
suit or proceeding, whether civil, criminal, administrative or investigative
(hereinafter a "proceeding"), by reason of the fact that he or she is or was a
director or an officer of the Bank or is or was serving at the request of the
Bank as a director or officer of another corporation, including, without
limitation, any subsidiary of the Bank, partnership, joint venture, trust or
other enterprise, including service with respect to an employee benefit plan
(hereinafter an "indemnitee"), whether the basis of such proceeding is alleged
action in an official capacity as a director or officer or in any other capacity
while serving as a director or officer, shall be indemnified and held harmless
by the Bank to the fullest extent authorized by the Delaware General Corporation
Law, as the same exists or may hereafter be amended (but, in the case of any
such amendment, only to the extent that such amendment permits a corporation to
provide broader indemnification rights than such law permitted a corporation to
provide prior to such amendment), against all expense, liability and loss
(including attorneys' fees, judgments, fines, ERISA excise taxes or penalties
and amounts paid in settlement) reasonably incurred or suffered by such
indemnitee in connection therewith; provided, however, that, except as provided
in Section 8.3 hereof with respect to proceedings to enforce rights to
indemnification, the Bank shall indemnify any such indemnitee in connection with
a proceeding (or part thereof) initiated by such indemnitee only if such
proceeding (or part thereof) was authorized by the Board of Directors of the
Bank.
Section 8.2. Advance Payment. The right to indemnification conferred
in Section 8.1 of this Article VIII shall include the right to be paid by the
Bank the expenses incurred in defending any such proceeding in advance of its
final disposition (hereinafter an "advancement of expenses"); provided, however,
that, if the Delaware General Corporation Law requires, an advancement of
expenses incurred by an indemnitee in his or her capacity as a director or
officer (and not in any other capacity in which service was or is rendered by
such indemnitee, including, without limitation, service to an employee benefit
plan) shall be made only upon delivery to the Bank of an undertaking
(hereinafter an "undertaking"), by or on behalf of such indemnitee, to repay all
amounts so advanced if it shall ultimately be determined by final judicial
decision from which there is no further right to appeal (hereinafter a "final
adjudication"), that such indemnitee is not entitled to be indemnified for such
expenses under this Section or otherwise. The rights to indemnification and to
the advancement of expenses conferred in Sections 8.1 and 8.2 of this Article
VIII shall be contract rights and such rights shall continue as to an indemnitee
who has ceased to be a director or officer and shall inure to the benefit of the
indemnitee's heirs, executors and administrators.
Section 8.3. Enforcement. If a claim under Section 8.1 or 8.2 of this
Article VIII is not paid in full by the Bank within sixty days after a written
claim has been received by the Bank, except in the case of a claim for an
advancement of expenses, in which case the applicable period shall be twenty
days, the indemnitee may at any time thereafter bring suit against the Bank to
10
<PAGE>
recover the unpaid amount of the claim. If successful in whole or in part in
any such suit, or in a suit brought by the Bank to recover an advancement of
expenses pursuant to the terms of an undertaking, the indemnitee shall also be
entitled to be paid the expense of prosecuting or defending such suit. In
(i) any suit brought by the indemnitee to enforce a right to indemnification
hereunder (but not in a suit brought by the indemnitee to enforce a right to an
advancement of expenses) it shall be a defense that, and (ii) in any suit by the
Bank to recover an advancement of expenses pursuant to the terms of an
undertaking the Bank shall be entitled to recover such expenses upon a final
adjudication that, the indemnitee has not met any applicable standard for
indemnification set forth in the Delaware General Corporation Law. Neither the
failure of the Bank (including its Board of Directors, independent legal
counsel, or its stockholders) to have made a determination prior to the
commencement of such suit that indemnification of the indemnitee is proper in
the circumstances because the indemnitee has met the applicable standard of
conduct set forth in the Delaware General Corporation Law, nor an actual
determination by the Bank (including its Board of Directors, independent legal
counsel, or its stockholders) that the indemnitee has not met such applicable
standard of conduct, shall create a presumption that the indemnitee has not met
the applicable standard of conduct or, in the case of such a suit brought by the
indemnitee, be a defense to such suit. In any suit brought by the indemnitee to
enforce a right to indemnification or to an advancement of expenses hereunder,
or by the Bank to recover an advancement of expenses pursuant to the terms of an
undertaking, the burden of proving that the indemnitee is not entitled to be
indemnified, or to such advancement of expenses, under this Article VIII or
otherwise shall be on the Bank.
Section 8.4. Nonexclusive. The rights to indemnification and to the
advancement of expenses conferred in this Article VIII shall not be exclusive of
any other right which any person may have or hereafter acquire under any
statute, the IFB Holdings, Inc. Certificate of Incorporation or Bylaws,
agreement, vote of stockholders or disinterested directors or otherwise.
Section 8.5. Insurance. The Bank may maintain insurance, at its
expense, to protect itself and any director, officer, employee or agent of the
Bank or another corporation, partnership, joint venture, trust or other
enterprise against any expense, liability or loss, whether or not the Bank would
have the power to indemnify such person against such expense, liability or loss
under the Delaware General Corporation Law.
Section 8.6. Other Persons. The Bank may, to the extent authorized
from time to time by a majority vote of the disinterested directors, grant
rights to indemnification and to the advancement of expenses to any employee or
agent of the Bank to the fullest extent of the provisions of this Article with
respect to the indemnification and advancement of expenses of directors and
officers of the Bank.
Section 8.7. Restriction on Indemnification in Administrative
Proceedings. Any contrary provision of this Article VIII notwithstanding, the
Bank shall not indemnify any director, officer or employee against expenses,
penalties or other payments incurred in an administrative proceeding or action
instituted by an appropriate bank regulatory agency, which proceeding or action
results in a final order assessing civil money penalties or requiring
affirmative action by an individual or individuals in the form of payments to
the Bank; nor shall it purchase insurance
11
<PAGE>
coverage for a formal order assessing civil money penalties against a director,
officer or employee.
12
<PAGE>
ARTICLE IX
Liability of Directors
Section 9.1. Limitation on Liability. A director of this Bank shall
not be personally liable to the Bank or its stockholders for monetary damages
for breach of fiduciary duty as a director, except for liability (i) for any
breach of the director's duty of loyalty to the Bank or its stockholders, (ii)
for acts or omissions not in good faith or which involve intentional misconduct
or a knowing violation of law, (iii) under Section 174 of the Delaware General
Corporation Law, as if such law applied to the Bank, or (iv) for any transaction
from which the director derived an improper personal benefit. If the Delaware
General Corporation Law is hereafter amended to further eliminate or limit the
personal liability of directors, then the liability of a director of the Bank
shall be eliminated or limited to the fullest extent permitted by the Delaware
General Corporation Law, as so amended.
Any repeal or modification of the foregoing paragraph by the stockholders
of the Bank shall not adversely affect any right or protection of a director
of the Bank existing at the time of such repeal or modification.
ARTICLE X
Bylaws
Section 10.1. Inspection. A copy of the Bylaws, with all amendments,
shall at all times be kept in a convenient place at the main office of the Bank,
and shall be open for inspection to all shareholders during banking hours.
Section 10.2. Amendments. The Bylaws may be amended, altered or
repealed, at any regular meeting of the board, by a vote of a majority of the
total number of the directors except as provided below. The Bank's shareholders
may amend or repeal the Bylaws even though the Bylaws also may be amended or
repealed by its board.
I, Larry R. Johnson, certify that: (1) I am the duly constituted
secretary of Investors Federal Bank, National Association and the secretary of
its board, and as such officer am the official custodian of its records; (2) the
foregoing bylaws are the bylaws of the Bank, and all of them are now lawfully in
force and effect.
I have hereunto affixed my official signature and the seal of the
Bank, in the City of Chillicothe, on this ____ day of ____________, 1996.
-------------------------------
Larry R. Johnson
Secretary
13
<PAGE>
EXHIBIT 4
INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE
IFB Holdings, Inc.
Chillicothe, Missouri
$.01 par value common stock--fully paid and non assessable
This certifies that _____________________________ is the owner of __________
shares of the common stock of IFB Holdings, Inc. (the "Corporation"), a Delaware
corporation.
The shares evidenced by this certificate are transferable only on the stock
transfer books of the Corporation by the holder of record hereof, in person or
by his duly authorized attorney or legal representative, upon surrender of this
certificate properly endorsed. This Certificate in not valid until
countersigned and registered by the Corporation's transfer agent and registrar.
This security is not a deposit or account and is not federally insured or
guaranteed.
In Witness Whereof, the Corporation has caused this certificate to be executed
by the facsimile signatures of its duly authorized officers and has caused its
seal to be affixed hereto.
Dated:
--------------------
- ----------------------------------- -------------------------------
Secretary (SEAL) President and
Chief Executive Officer
<PAGE>
IFB HOLDINGS, INC.
The shares represented by this certificate are issued subject to all the
provisions of the Certificate of Incorporation and Bylaws of IFB Holdings,
Inc. (the "Corporation") as from time to time amended (copies of which are on
file at the principal executive offices of the Corporation).
The Corporation's Certificate of Incorporation provides that no "person"
(as defined in the Certificate of Incorporation) who "beneficially owns" (as
defined in the Certificate of Incorporation) in excess of 10% of the
outstanding shares of the Corporation shall be entitled to vote any shares
held in excess of such limit. This provision of the Certificate of
Incorporation shall not apply to an acquisition of securities of the
Corporation by an employee stock purchase plan or other employee benefit plan
of the Corporation or any of its subsidiaries.
The Corporation's Certificate of Incorporation also includes a provision
the general effect of which is to require the affirmative vote of the holders
of 80% of the outstanding voting shares of the Corporation to approve certain
"business combinations" (as defined in the Certificate of Incorporation)
between the Corporation and a stockholder owning in excess of 10% of the
outstanding shares of the Corporation. However, only the affirmative vote of
a majority of the outstanding shares or such vote as is otherwise required by
law (rather than the 80% voting requirement) is applicable to the particular
transaction if it is approved by a majority of the "disinterested directors"
(as defined in the Certificate of Incorporation) or, alternatively, the
transaction satisfies certain minimum price and procedural requirements. The
Corporation's Certificate of Incorporation also contains a provision which
requires the affirmative vote of holders of at least 80% of the outstanding
voting shares of the Corporation which are not beneficially owned by the
"interested person" (as defined in the Certificate of Incorporation) to
approve the direct or indirect purchase or other acquisition by the
Corporation of any "equity security" (as defined in the Certificate of
Incorporation) from such interested person.
The Corporation will furnish to any stockholder upon request and without
charge a full statement of the powers, designations, preferences and relative
participating, optional or other special rights of each authorized class of
stock or series thereof and the qualifications, limitations or restrictions of
such preferences and/or rights, to the extent that the same have been fixed,
and of the authority of the board of directors to designate the same with
respect to other series. Such request may be made to the Corporation or to
its Transfer Agent and Registrar.
The following abbreviations, when used in the inscription on the face of
this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM - as tenants in common UNIF GIFT MIN ACT_______ Custodian________
TEN ENT - as tenants by the entirety (Cust) (Minor)
JT TEN - as joint tenants with Under Uniform Gift to Minors Act -
right of survivorship and (State) --------
not as tenants in common. UNIF TRANS MIN ACT_______Custodian________
(Cust) (Minor)
Under Uniform Transfers to Minors
Act - _________
(State)
Additional abbreviations may also be used though not in the above list.
For Value Received,_______ hereby sell, assign and transfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
----------------------------
| |
----------------------------
_________________________________________________
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE, OF
ASSIGNEE)
_________________________________________________
_________________________________________________Shares
of Common Stock represented by the within certificate, and do hereby
irrevocably constitute and appoint
___________________________________________________________________Attorney
to transfer the said shares on the books of the within named Corporation with
full power of substitution in the premises.
Dated _______________________________
------------------
NOTICE: THE SIGNATURE TO THIS ASSIGNMENT MUST CORRESPOND WITH THE NAME AS
WRITTEN UPON THE FACE OF THE CERTIFICATE IN EVERY PARTICULAR, WITHOUT
ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATEVER.
2
<PAGE>
EXHIBIT 5
_____________________, 1996
The Board of Directors
Investors Federal Bank and Savings Association
522 Washington Street
Chillicothe, Missouri 64601
Re: IFB Holdings, Inc.
Common Stock Par Value $.01 Per Share
-------------------------------------
Gentlemen:
You have requested the opinion of this firm as to certain matters in
connection with the offer and sale (the "Offering") of the IFB Holdings, Inc.
("Company") Common Stock par value $.01 per share ("Common Stock"). We have
reviewed the Company's Certificate of Incorporation, Registration Statement on
Form SB-2 ("Form SB-2"), as well as applicable statutes and regulations
governing the Company and the offer and sale of the Common Stock.
We are of the opinion that upon the declaration of effectiveness of the
Form SB-2, the Common Stock, when sold, will be legally issued, fully paid and
non-assessable.
This opinion has been prepared solely for the use of the Company in
connection with the Form SB-2, and should not be used for any other purpose nor
relied upon by any other person (except for the Securities and Exchange
Commission in connection with its processing of the Form SB-2 and prospective
investors in the Offering), without the prior written consent of this firm. We
hereby consent to our firm being referenced under the caption "Legal Opinions."
Very truly yours,
Luse Lehman Gorman Pomerenk & Schick
A Professional Corporation
<PAGE>
Exhibit 8.1
FORM OF
FEDERAL TAX OPINION(202) 274-2000
(202) 274-2000
_____________, 1996
VIA FEDERAL EXPRESS
- -------------------
Board of Directors
Investors Federal Bank and
Savings Association
522 Washington Street
Chillicothe, Missouri 64601
RE: CERTAIN FEDERAL INCOME TAX CONSEQUENCES RELATING TO PROPOSED HOLDING
COMPANY CONVERSION AND SUBSEQUENT CONVERSION TO NATIONAL BANK
--------------------------------------------------------------------
Ladies and Gentlemen:
In accordance with your request, set forth hereinbelow is the opinion of
this firm relating to certain federal income tax consequences of (i) the
proposed conversion of Investors Federal Bank and Savings Association (the
"Bank") from a federally-chartered mutual saving association to a federally-
chartered stock savings bank (the "Converted Bank") and the concurrent
acquisition of 100% of the outstanding capital stock of the Converted Bank by
IFB Holdings, Inc. (the "Company"), a Delaware corporation formed at the
direction of the Board of Directors of the Bank to become the parent holding
company of the Converted Bank and, thereafter, the National Bank (as hereinafter
defined) (the "Stock Conversion"); and, thereafter, (ii) the conversion of the
Converted Bank to a national bank (the "Bank Conversion") to be known as
"Investors Federal Bank, National Association" (the "National Bank"). The Stock
Conversion and the Bank Conversion are referred to herein collectively as the
"Conversion."
For purposes of this opinion, we have examined such documents and questions
of law as we have considered necessary or appropriate, including but not limited
to the Plan of Conversion as adopted by the Board of Directors of the Bank on
September 23, 1996 (the "Plan"); the federal mutual charter and bylaws of the
Bank; the charter and bylaws of the Converted Bank; the articles of association
and bylaws of the National Bank; the articles of incorporation and bylaws of the
Company; the Affidavit of Representations dated ________, 1996 provided to us by
the Bank (the "affidavit"), and the Prospectus (the "Prospectus") included in
the Registration Statement on Form SB-2 expected to be filed with the Securities
and Exchange Commission ("SEC") on October 4, 1996 (the "Registration
Statement"). In such examination, we have assumed, and have not independently
verified, the genuineness of all signatures on original documents where due
execution and delivery are requirements to the effectiveness thereof. Terms used
but not defined herein, whether capitalized or not, shall have the same meaning
as defined in the Plan.
<PAGE>
Board of Directors
Investors Federal Bank and
Savings Association
____________, 1996
Page 2
BACKGROUND
----------
Based solely upon our review of such documents, and upon such
information as the Bank has provided to us (which we have not attempted to
verify in any respect), and in reliance upon such documents and information, we
set forth hereinbelow a general summary of the relevant facts and proposed
transactions, qualified in its entirety by reference to the documents cited
above.
The Bank is a federally-chartered mutual savings association that is
in the process of converting to a federally-chartered stock savings bank and
thereafter to a national bank. The Bank was formed in 1934 under the name
Chillicothe Federal Savings and Loan Association. In 1974, the Bank changed its
name to Investors Federal Savings and Loan Association, and in 1988, the Bank
changed its name to Investors Federal Bank and Savings Association. The Bank
operates through its main office in Chillicothe and two branch offices located
in Hamilton and Gallatin, Missouri. It is currently a member of the Federal Home
Loan Bank ("FHLB") System and its deposits are insured up to the applicable
limits by the Savings Association Insurance Fund ("SAIF") administered by the
Federal Deposit Insurance Corporation ("FDIC"). The Bank is subject to
comprehensive regulation and supervision by the FDIC and the Office of Thrift
Supervision ("OTS"), and to examination by the OTS.
The principal business of the Bank consists of attracting deposits
from the general public and using these funds, together with other funds, to
originate and purchase one- to four- family residential mortgage loans, and to
originate non-residential real estate loans (primarily farm loans) and consumer
loans consisting primarily of loans secured by automobiles. In recent years, the
Bank has expanded its loan portfolio by purchasing SBA-guaranteed loans and FHA-
insured Title I home improvement loans. The Bank also maintains a substantial
mortgage-backed securities and investment portfolio. The Bank derives its income
principally from interest earned on loans and, to a lesser extent, interest
earned on mortgage-backed securities and investment securities, and other
noninterest income. The Bank's principal expenses are interest expense on
deposits and borrowings and general and administrative expense such as
compensation and employee benefits and other miscellaneous expenses. Funds for
these activities are provided principally by deposits, FHLB advances, repayments
of outstanding loans and mortgage-backed securities and operating revenues. At
June 30, 1996, the Bank had total assets of $52.6 million, deposits of $35.5
million, and total equity of $3.3 million.
As a federally-chartered mutual savings association, the Bank has no
authorized capital stock. Instead, the Bank, in mutual form, has a unique equity
structure. A savings depositor of the Bank is entitled to payment of interest on
his account balance as declared and paid by the Bank, but has no right to a
distribution of any earnings of the Bank except for interest paid on his
deposit. Rather, such earnings become retained earnings of the Bank.
<PAGE>
Board of Directors
Investors Federal Bank and
Savings Association
____________, 1996
Page 3
However, a savings depositor does have a right to share pro rata, with
--------
respect to the withdrawal value of his respective savings account, in any
liquidation proceeds distributed if the Bank is ever liquidated. Further,
savings depositors and certain borrowers are members of the Bank and thereby
have voting rights in the Bank. Under the Bank's federal mutual charter and
bylaws, savings depositors are entitled to cast one vote for each $100 or
fraction thereof held in a withdrawable deposit account of the Bank and each
borrower member (hereinafter "borrower") is entitled to one vote in addition to
the votes (if any) to which such person is entitled in such borrower's capacity
as a savings depositor of the Bank. Also under such mutual charter, no member is
entitled to cast more than 1,000 votes. All of the interest held by a savings
depositor in the Bank cease when such depositor closes his accounts with the
Bank.
The Company was incorporated in October 1996 under the laws of the
State of Delaware to act as the holding company of the Converted Bank upon
consummation of the Stock Conversion, and then as the bank holding company of
the National Bank upon consummation of the Bank Conversion. Prior to
consummation of the Stock Conversion, the Company has not engaged and is not
expected to engage in any material operations. After the Conversion, the
Company's principal business will be overseeing the business of the National
Bank and investing the portion of the net Stock Conversion proceeds retained by
it, and, assuming the requisite federal regulatory approvals are obtained, the
Company will register with the Board of Governors of the Federal Reserve Board
(the "FRB") as a bank holding company and deregister with the OTS as a savings
and loan holding company. The Company has an authorized capital structure of
900,000 shares of common stock (the "Common Stock") and 100,000 shares of serial
preferred stock.
PROPOSED TRANSACTION
--------------------
The Board of Directors of the Bank has decided that in order to
increase the Bank's net worth, support future savings growth, increase the
amount of funds available for other lending and investment, provide greater
resources for the expansion of customer services and facilitate future
expansion, and because applicable laws and regulations do not provide for the
organization of mutual national banks, it would be advantageous for the Bank to
convert from a federally-chartered mutual savings association to a federally-
chartered stock savings bank and, thereafter, to convert to a national bank. In
addition, the Board of Directors intends to implement stock option plans and
other stock benefit plans following the Stock Conversion in order to better
attract and retain qualified directors and officers. The purpose of the Bank
Conversion is, among other things, to provide the Bank with additional operating
flexibility and enhance its ability to provide a full range of banking products
and services to its community.
It is the further desire of the Board of Directors to reorganize the
Converted Bank (and the
<PAGE>
Board of Directors
Investors Federal Bank and
Savings Association
____________, 1996
Page 4
National Bank upon the Bank Conversion) as the wholly owned subsidiary of the
Company to enhance flexibility of operations, diversification of business
opportunities and financial capability for business and regulatory purposes and
to enable the National Bank to compete more effectively with other financial
service organizations.
THE STOCK CONVERSION. Accordingly, pursuant to the Plan, the Bank will
undergo the Stock Conversion whereby it will be converted from a federally-
chartered mutual savings association to a federally-chartered stock savings
bank. As part of the Stock Conversion, the Bank will amend its existing mutual
savings association charter and bylaws to read in the form of a federal stock
charter and bylaws. The Converted Bank will then issue to the Company 100 shares
of the Converted Bank's common stock, representing all of the shares of capital
stock to be issued by the Converted Bank in the Conversion, in exchange for
payment by the Company of 50% of the net proceeds realized by the Company from
the sale of the Common Stock under the Plan.
Also pursuant to the Plan, the Company will offer its shares of Common
Stock for sale in a Subscription Offering and a Community Offering which will
commence concurrently with, during or following the Subscription Offering.
Shares of Common Stock remaining, if any, may then be offered to the general
public in an underwritten public offering or otherwise. The purchase price per
share and total number of shares of Common Stock to be offered and sold pursuant
to the Plan will be determined by the Boards of Directors of the Bank and the
Company on the basis of the estimated pro forma market value of the Stock Bank
---------
as a subsidiary of the Company, which will in turn be determined by an
independent appraiser. The aggregate purchase price for all shares of the Common
Stock will be equal to such estimated pro forma market value. Pursuant to the
Plan, all such shares of Common Stock will be issued and sold at a uniform price
per share. The conversion of the Bank from mutual to stock form and the sale of
newly issued shares of the stock of the Stock Bank to the Company (i.e., the
Stock Conversion) will be deemed effective concurrently with the closing of the
sale of the Common Stock.
Under the Plan and in accordance with regulations of the OTS, the
shares of Common Stock will first be offered through the Subscription Offering
pursuant to non-transferable subscription rights on the basis of preference
categories in the following order of priority:
(1) Eligible Account Holders;
(2) Tax-Qualified Employee Stock Benefit Plans (i.e., the ESOP);
(3) Supplemental Eligible Account Holders;
(4) Other Members; and
<PAGE>
Board of Directors
Investors Federal Bank and
Savings Association
____________, 1996
Page 5
(5) Officers, directors and employees of the Bank.
Subscription Rights received in any lower preference category shall be
subordinated to Subscription Rights received by persons in any higher preference
category. However, any shares of Common Stock sold in excess of the maximum of
the Valuation Range may be first sold to Tax-Qualified Employee Stock Benefit
Plans set forth in category (2) above. In the event of an oversubscription in
preference category 1 and 3, the shares available shall be allocated first to
permit each subscribing person to purchase a number of shares to make his total
allocation equal to 100 shares, and thereafter among each subscribing person in
the same proportion that his Qualifying Deposits bears to the total of all
Qualifying Deposits in the preference category. In the event of an
oversubscription in preference category 4 and 5, the shares available shall be
allocated pro rata among all subscribers in the preference category.
Any shares of Common Stock not subscribed for in the Subscription
Offering may be offered in the Community Offering to members of the general
public with a preference given, first to cover any reservation of shares for a
public offering or institutional orders, next to natural persons (and trusts
established by such persons) residing in the counties in which the Bank
maintains its offices. Shares not sold in the Subscription Offering and the
Community Offering, if any, may then be sold to the Underwriters for resale to
the general public at the Public Offering Price in the Public Offering.
The Plan also provides for the establishment of a Liquidation Account
by the Converted Bank for the benefit of all Eligible Account Holders and
Supplemental Eligible Account Holders in an amount equal to the net worth of the
Bank as of the date of the latest statement of financial condition contained in
the final prospectus issued in connection with the Stock Conversion. The
establishment of the Liquidation Account will not operate to restrict the use or
application of any of the regulatory capital accounts of the Converted Bank,
except that the Converted Bank may not declare or pay cash dividends on or
repurchase any of its stock if the result thereof would be to reduce its net
worth below the amount required to maintain the Liquidation Account. All such
account holders will have an inchoate interest in a proportionate amount of the
Liquidation Account with respect to each savings account held and will be paid
by the Converted Bank in the event of liquidation prior to any liquidating
distribution being made with respect to capital stock. Under the Plan, the Bank
Conversion shall not be deemed to be a liquidation of the Converted Bank for
purposes of distribution of the Liquidation Account. Instead, upon consummation
of the Bank Conversion, the Liquidation Account, together with the related
rights and obligations of the Converted Bank, shall be assumed by the National
Bank.
The Stock Conversion will not interrupt the business of the Bank. The
Converted Bank will, after the Stock Conversion, engage in the same business as
that of the Bank immediately prior to the
<PAGE>
Board of Directors
Investors Federal Bank and
Savings Association
____________, 1996
Page 6
Stock Conversion, and will continue to be subject to regulation and supervision
by the OTS and the FDIC. Further, the deposits of the Converted Bank will
continue to be insured by the SAIF of the FDIC. Each depositor will retain a
withdrawable savings account or accounts equal in dollar amount to, and on the
same terms and conditions as, the withdrawable account or accounts at the time
of Stock Conversion except to the extent funds on deposit are used to pay for
Common Stock purchased in connection with the Stock Conversion. All loans of the
Bank will remain unchanged and retain their same characteristics in the
Converted Bank immediately following the Stock Conversion.
Following the Stock Conversion, voting rights in the Converted Bank
will rest exclusively with the sole holder of stock in the Converted Bank, which
will be the Company. Following the Bank Conversion, voting rights in the
National Bank will similarly be vested in the Company. Voting rights in the
Company, both after the Stock Conversion and after the Bank Conversion, will be
vested in the holders of the Common Stock.
THE BANK CONVERSION. Following completion of the Stock Conversion, the
Bank intends to convert from a federally-chartered stock savings bank to a
national bank to be known as "Investors Federal Bank, National Association"
Under the Plan, the Board of Directors of the Bank has the ability to elect, at
any time, not to proceed with the Bank Conversion. As set forth in the
Registration Statement, the Board of Directors currently intends to proceed with
both the Stock Conversion and the Bank Conversion.
As with the Stock Conversion, the Bank Conversion will not interrupt
the business of the Converted Bank. Management of the Bank expects that, after
the Bank Conversion, the National Bank will initially continue to conduct
business in substantially the same manner as that of the Converted Bank
immediately prior to the Bank Conversion. Further, the Bank Conversion is
expected to allow the National Bank to compete more effectively with other
financial service organizations. The National Bank also will continue to have
its savings accounts insured by the SAIF of the FDIC, although it will be
subject to regulation, supervision and examination by the Office of the
Comptroller of the Currency rather than the OTS. Each depositor will retain a
withdrawable savings account or accounts equal in dollar amount to, and on the
same terms and conditions as, the withdrawable account or accounts at the time
of the Bank Conversion. All loans of the Converted Bank will remain unchanged
and retain their same characteristics in the National Bank immediately following
the Bank Conversion.
OTHER. The Plan must be approved by the OTS and by an affirmative vote
of at least a majority of the total votes eligible to be cast at a meeting of
the Bank's members called to vote on the Plan. The Bank Conversion is also
subject to approval of the FRB.
<PAGE>
Board of Directors
Investors Federal Bank and
Savings Association
____________, 1996
Page 7
Immediately prior to the Conversion, the Bank will have a positive net
worth determined in accordance with generally accepted accounting principles.
OPINION
Based on the foregoing and in reliance thereon, and subject to the
conditions stated herein, it is our opinion that the following federal income
tax consequences will result from the proposed transaction.
1. The Stock Conversion will constitute a reorganization within the meaning
of Section 368(a)(1)(F) of the Internal Revenue Code of 1986, as amended
(the "Code"), and no gain or loss will be recognized to either the Bank
or the Converted Bank as a result of the Stock Conversion (see Rev. Rul.
---
80-105, 1980-1 C.B. 78). The Bank and the Converted Bank will each be
a party to the reorganization within the meaning of Section 368(b) of
the Code. (Rev. Rul. 72-206, 1972-1 C.B. 104)
2. The assets of the Bank will have the same basis in the hands of the
Converted Bank as in the hands of the Bank immediately prior to the
Stock Conversion (Section 362(b) of the Code).
3. The holding period of the assets of the Bank to be received by the
Converted Bank will include the period during which the assets were held
by the Bank prior to the Stock Conversion (Section 122392) of the Code).
4. No gain or loss will be recognized by the Converted Bank upon its
receipt of money from the Company in exchange for shares of common stock
of the Converted Bank (Section 1032(a) of the Code). The Company will be
transferring solely cash to the Converted Bank in exchange for all the
outstanding capital stock of the Converted Bank and therefore will not
recognize any gain or loss upon such transfer. (Section 351(a) of the
Code; see Rev. Rul. 69-357, 1969-1 C.B. 101).
---
5. No gain or loss will be recognized by the Company upon its receipt of
money in exchange for shares of the Common Stock (Section 1032(a) of the
Code).
6. No gain or loss will be recognized by the Eligible Account Holders,
Supplemental Eligible Account Holders or Other Members of the Bank upon
the issuance to them of deposit accounts in the Converted Bank in the
same dollar amount and on the same terms and conditions in exchange for
their deposit accounts in the Bank held immediately prior to the Stock
Conversion. (Section 1001(a) of the Code; Treas.
<PAGE>
Board of Directors
Investors Federal Bank and
Savings Association
____________, 1996
Page 8
Reg. (S)1.1001-1(a)).
7. The tax basis of the savings accounts of the Eligible Account Holders,
Supplemental Eligible Account Holders, and Other members in the
Converted Bank received as part of the Stock Conversion will equal the
tax basis of such account holders' corresponding deposit accounts in the
Bank surrendered in exchange therefor (Section 1012 of the Code).
8. Each depositor of the Bank will recognize gain upon the receipt of his
or her respective interest in the Liquidation Account established by the
Converted Bank pursuant to the Plan and the receipt of his or her
subscription rights deemed to have been received for federal income tax
purposes, but only to the extent of the excess of the combined fair
market value of a depositor's interest in such Liquidation Account and
subscription rights over the depositor's basis in the former interests
in the Bank other than deposit accounts. Persons who subscribe in the
Stock Conversion but who are not depositors of the Bank will recognize
gain upon the receipt of subscription rights deemed to have been
received for federal income tax purposes, but only to the extent of the
excess of the fair market value of such subscription rights over such
person's former interests in the Bank, if any. Any such gain realized in
the Stock Conversion would be subject to immediate recognition.
9. The basis of each account holder's interest in the Liquidation Account
received in the Stock Conversion and to be established by the Converted
Bank pursuant to the Stock Conversion will be equal to the value, if
any, of that interest.
10. No gain or loss will be recognized upon the exercise of a subscription
right in the Stock Conversion. (Rev. Rul. 56-572, 1956-2 C.B. 182).
11. The basis of the shares of Common Stock acquired in the Stock Conversion
will be equal to the purchase price of such shares, increased, in the
case of such shares acquired pursuant to the exercise of subscription
rights, by the fair market value, if any, of the subscription rights
exercised (Section 1012 of the Code).
12. The holding period of the Common Stock acquired in the Stock Conversion
pursuant to the exercise of subscription rights will commence on the
date on which the subscription rights are exercised (Section 1223(6) of
the Code). The holding period of the Common Stock acquired in the
Community Offering will commence on the date following the date on which
such stock is purchased (Rev. Rul. 70-598, 1970-2 C.B. 168; Rev. Rul.
66-97, 1966-1 C.B. 190).
<PAGE>
Board of Directors
Investors Federal Bank and
Savings Association
____________, 1996
Page 9
13. The Bank Conversion will constitute a reorganization within the meaning
of Section 368(a)(1)(F) of the Code (see Rev. Rul. 80-105, 1980-1 C.B.
---
78).
14. The assets of the Converted Bank will have the same basis in the hands
of the National Bank as in the hands of the Converted Bank immediately
prior to the Bank Conversion (Section 362(b) of the Code).
15. The holding period of the assets of the Converted Bank to be received by
the National Bank will include the period during which the assets were
held by the Converted Bank prior to the Bank Conversion (Section 1223(2)
of the Code).
SCOPE OF OPINION
----------------
Our opinion is limited to the federal income tax matters described above
and does not address any other federal income tax considerations or any state,
local, foreign or other federal tax considerations. If any of the information
upon which we have relied is incorrect, or if changes in the relevant facts
occur after the date hereof, our opinion could be affected thereby. Moreover,
our opinion is based on the case law, Code, current and proposed Treasury
Regulations thereunder and Internal Revenue Service rulings as they now exist.
These authorities are all subject to change, and such change may be made with
retroactive effect. We can give no assurance that, after such change, our
opinion would not be different. We undertake no responsibility to update or
supplement our opinion subsequent to consummation of the Stock Conversion. Prior
to that time, we undertaken to update or supplement our opinion in the event of
a material change in the federal income ta consequences set forth above and to
file such revised opinion as an exhibit to the Registration Statement and the
Bank's Application for Conversion on Form AC ("Form AC"). This opinion is not
binding on the Internal Revenue Service and there can be no assurance, and none
is hereby given, that the Internal Revenue Service will not take a position
contrary to one or more of the positions reflected in the foregoing opinion, or
that our opinion will be upheld by the courts if challenged by the Internal
Revenue Service.
<PAGE>
Board of Directors
Investors Federal Bank and
Savings Association
____________, 1996
Page 10
CONSENTS
--------
We hereby consent to the filing of this opinion with the OTS as an exhibit
to the Application H-(e)1-S filed by the Company with the OTS in connection with
the Stock Conversion and the reference to our firm in the Application H-(e)1-S
under Item 110.55 therein. We also hereby consent to the filing of this opinion
with the SEC and the OTS as exhibits to the Registration Statement and Form AC,
respectively, and the reference to our firm in the Prospectus, which is a part
of both the Registration Statement and the Form AC, under the headings "The
Conversion--Effect of Conversion to Stock Form on Depositors and Borrowers of
the Bank--Tax Effects" and "Tax Opinions."
Very truly yours,
LUSE LEHMAN GORMAN POMERENK & SCHICK, P.C.
<PAGE>
EXHIBIT 8.3
[LETTERHEAD OF FERGUSON & CO., LLP APPEARS HERE]
October 4, 1996
Board of Directors
Investors Federal Bank and Savings Association
522 Washington Street
Chillicothe, Missouri
Gentlemen:
All capitalized terms not otherwise defined in this letter have the
meanings given such terms in the Plan of Conversion adopted by the Board of
Directors ofInvestors Federal Bank and Savings Association, Chillicothe,
Missouri, ("Investors Federal") on September 23, 1996.
It is our understanding that, pursuant to Office of Thrift Supervision
regulations, subscription rights are non-transferable. Persons violating such
prohibition may lose their rights to purchase stock in the Conversion and be
subject to other possible sanctions.
Because the Subscription Rights to purchase shares of Common Stock in the
Association to be issued to the Association's employee stock benefit plans,
depositors of the Association, and to other members of the Association will be
acquired by such recipients, without cost, will be non-transferable and of short
duration and will afford the recipients the right only to purchase shares of
Common Stock at the same price as will paid by members of the general public in
a Community Offering, we are of the opinion that:
1. the Subscription Rights will have no ascertainable fair market value
and,
<PAGE>
Board of Directors
October 4, 1996
Page 2
2. the price at which the Subscription Rights are exercisable will not
be more or less than the fair market value of the shares on the date
of exercise.
Sincerely,
Ferguson & Co., LLP
/s/ Charles M. Hebert
Charles M. Hebert
Principal
<PAGE>
EXHIBIT 10.1
EMPLOYMENT AGREEMENT
--------------------
THIS EMPLOYMENT AGREEMENT ("Agreement") is made and entered into as of this ___
day of __________, 199_, by and between Investors Federal Bank and Savings
Association (hereinafter referred to as the "Bank" whether in mutual or stock
form), and ______________ (the "Employee").
WHEREAS, the Employee is currently serving as ___________________ of the
Bank; and
WHEREAS, the Bank has adopted a plan of conversion whereby the Bank will
convert to capital stock form as the subsidiary of ____ Bancorp, Inc. (the
"Holding Company"), subject to the approval of the Bank's members and the Office
of Thrift Supervision (the "Conversion"); and
WHEREAS, the board of directors of the Bank ("Board of Directors")
recognizes that, as is the case with publicly held corporations generally, the
possibility of a change in control of the Holding Company and/or the Bank may
exist and that such possibility, and the uncertainty and questions which it may
raise among management, may result in the departure or distraction of key
management personnel to the detriment of the Bank, the Holding Company and their
respective stockholders; and
WHEREAS, the Board of Directors believes it is in the best interests of the
Bank to enter into this Agreement with the Employee in order to assure
continuity of management of the Bank and to reinforce and encourage the
continued attention and dedication of the Employee to the Employee's assigned
duties without distraction in the face of potentially disruptive circumstances
arising from the possibility of a change in control of the Holding Company or
the Bank, although no such change is now contemplated; and
WHEREAS, the Board of Directors has approved and authorized the execution
of this Agreement with the Employee to take effect as stated in Section 2
hereof;
NOW, THEREFORE, in consideration of the foregoing and of the respective
covenants and agreements of the parties herein, it is AGREED as follows:
1. Definitions.
-----------
(a) The term "Change in Control" means (1) an event of a nature that
(i) results in a change in control of the Bank or the Holding Company within the
meaning of the Home Owners' Loan Act of 1933 and 12 C.F.R. Part 574 as in effect
on the date hereof; or (ii) would be required to be reported in response to Item
1 of the current report on Form 8-K, as in effect on the date hereof, pursuant
to Section 13 or 15(d) of the Securities Exchange Act of 1934 (the "Exchange
Act"); (2) any person (as the term is used in Sections 13(d) and 14(d) of the
Exchange Act) is or becomes the beneficial owner (as defined in Rule 13d-3 under
the Exchange Act), directly or indirectly of securities of the Bank or the
Holding Company representing 25% or more
<PAGE>
of the Bank's or the Holding Company's outstanding securities; (3) individuals
who are members of the board of directors of the Bank or the Holding Company on
the date hereof (the "Incumbent Board") cease for any reason to constitute at
least a majority thereof, provided that any person becoming a director
subsequent to the date hereof whose election was approved by a vote of at least
three-quarters of the directors comprising the Incumbent Board, or whose
nomination for election by the Holding Company's stockholders was approved by
the nominating committee serving under an Incumbent Board, shall be considered a
member of the Incumbent Board; or (4) a reorganization, merger, consolidation,
sale of all or substantially all of the assets of the Bank or the Holding
Company or a similar transaction in which the Bank or the Holding Company is not
the resulting entity. The term "Change in Control" shall not include an
acquisition of securities by an employee benefit plan of the Bank or the Holding
Company or the acquisition of securities of the Bank by the Holding Company in
connection with the Conversion. In the application of 12 C.F.R. Part 574 to a
determination of a Change in Control, determinations to be made by the OTS or
its Director under such regulations shall be made by the Board of Directors.
(b) The term "Commencement Date" means the date of completion of
Conversion.
(c) The term "Date of Termination" means the date upon which the
Employee ceases to serve as an employee of the Bank.
(d) The term "Involuntarily Termination" means termination of the
employment of Employee without the Employee's express written consent, and shall
include a material diminution of or interference with the Employee's duties,
responsibilities and benefits as _________ of the Bank, including (without
limitation) any of the following actions unless consented to in writing by the
Employee: (1) a change in the principal workplace of the Employee to a location
outside of a 30 mile radius from the Bank's headquarters office as of the date
hereof; (2) a material demotion of the Employee; (3) a material reduction in the
number or seniority of other Bank personnel reporting to the Employee or a
material reduction in the frequency with which, or in the nature of the matters
with respect to which, such personnel are to report to the Employee, other than
as part of a Bank- or Holding Company-wide reduction in staff; (4) a material
adverse change in the Employee's salary, perquisites, benefits, contingent
benefits or vacation, other than as part of an overall program applied uniformly
and with equitable effect to all members of the senior management of the Bank or
the Holding Company; and (5) a material permanent increase in the required hours
of work or the workload of the Employee. The term "Involuntary Termination"
does not include Termination for Cause or termination of employment due to
retirement, death, disability or suspension or temporary or permanent
prohibition from participation in the conduct of the Bank's affairs under
Section 8 of the Federal Deposit Insurance Act ("FDIA").
(e) The terms "Termination for Cause" and "Terminated For Cause"
mean termination of the employment of the Employee because of the Employee's
personal dishonesty, incompetence, willful misconduct, breach of a 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 final cease-and-desist order, or material breach of any
provision
2
<PAGE>
of this Agreement. The Employee shall not be deemed to have been Terminated for
Cause unless and until there shall have been delivered to the Employee a copy of
a resolution, duly adopted by the affirmative vote of not less than a majority
of the entire membership of the Board of Directors of the Bank at a meeting of
the Board called and held for such purpose (after reasonable notice to the
Employee and an opportunity for the Employee, together with the Employee's
counsel, to be heard before the Board), stating that in the good faith opinion
of the Board the Employee has engaged in conduct described in the preceding
sentence and specifying the particulars thereof in detail.
2. Term. The term of this Agreement shall be a period of [up to three]
----
years commencing on the Commencement Date, subject to earlier termination as
provided herein. Beginning on the first anniversary of the Commencement Date,
and on each anniversary thereafter, the term of this Agreement shall be extended
for a period of one year in addition to the then-remaining term, provided that
-------------
(1) the Bank has not given notice to the Employee in writing at least 90 days
prior to such anniversary that the term of this Agreement shall not be extended
further; and (2) prior to such anniversary, the Board of Directors of the Bank
explicitly reviews and approves the extension. Reference herein to the term of
this Agreement shall refer to both such initial term and such extended terms.
3. Employment. The Employee is employed as _____________ of the Bank. As
----------
such, the Employee shall render administrative and management services as are
customarily performed by persons situated in similar executive capacities, and
shall have such other powers and duties of an officer of the Bank as the Board
of Directors may prescribe from time to time.
4. Compensation.
------------
(a) Salary. The Bank agrees to pay the Employee during the term of
------
this Agreement, not less frequently than monthly, the salary established by the
Board of Directors, which shall be at least the Employee's salary in effect as
of the Commencement Date. The amount of the Employee's salary shall be reviewed
by the Board of Directors, beginning not later than the first anniversary of the
Commencement Date. Adjustments in salary or other compensation shall not limit
or reduce any other obligation of the Bank under this Agreement. The Employee's
salary in effect from time to time during the term of this Agreement shall not
thereafter be reduced.
(b) Discretionary Bonuses. The Employee shall be entitled to
---------------------
participate in an equitable manner with all other executive officers of the Bank
in discretionary bonuses as authorized and declared by the Board of Directors to
its executive employees. No other compensation provided for in this Agreement
shall be deemed a substitute for the Employee's right to participate in such
bonuses when and as declared by the Board of Directors.
(c) Expenses. The Employee shall be entitled to receive prompt
--------
reimbursement for all reasonable expenses incurred by the Employee in performing
services under this Agreement in accordance with the policies and procedures
applicable to the executive officers of the Bank,
3
<PAGE>
provided that the Employee accounts for such expenses as required under such
- -------- ----
policies and procedures.
5. Benefits.
--------
(a) Participation in Retirement and Employee Benefit Plans. The
------------------------------------------------------
Employee shall be entitled to participate in all plans relating to pension,
thrift, profit-sharing, group life and disability insurance, medical and dental
coverage, education, cash bonuses, and other retirement or employee benefits or
combinations thereof, in which the Bank's executive officers participate.
(b) Fringe Benefits. The Employee shall be eligible to participate
---------------
in, and receive benefits under, any fringe benefit plans which are or may become
applicable to the Bank's executive officers.
6. Vacations; Leave. The Employee shall be entitled to annual paid
----------------
vacation in accordance with the policies established by the Bank's Board of
Directors for executive employees and to voluntary leave of absence, with or
without pay, from time to time at such times and upon such conditions as the
Board of Directors of the Bank may determine in its discretion.
7. Termination of Employment.
-------------------------
(a) Involuntary Termination. The Board of Directors may terminate the
-----------------------
Employee's employment at any time, but, except in the case of Termination for
Cause, termination of employment shall not prejudice the Employee's right to
compensation or other benefits under this Agreement. In the event of
Involuntary Termination other than in connection with or within twelve (12)
months after a Change in Control, (1) the Bank shall pay to the Employee during
the remaining term of this Agreement, the Employee's salary at the rate in
effect immediately prior to the Date of Termination, payable in such manner and
at such times as such salary would have been payable to the Employee under
Section 4 if the Employee had continued to be employed by the Bank, and (2) the
Bank shall provide to the Employee during the remaining term of this Agreement
substantially the same health benefits as the Bank maintained for its executive
officers immediately prior to the Date of Termination.
(b) Termination for Cause. In the event of Termination for Cause,
---------------------
the Bank shall pay the Employee the Employee's salary through the Date of
Termination, and the Bank shall have no further obligation to the Employee under
this Agreement.
(c) Voluntary Termination. The Employee's employment may be
---------------------
voluntarily terminated by the Employee at any time upon 90 days written notice
to the Bank or upon such shorter period as may be agreed upon between the
Employee and the Board of Directors of the Bank. In the event of such voluntary
termination, the Bank shall be obligated to continue to pay to the Employee the
Employee's salary and benefits only through the Date of Termination, at the time
such payments are due, and the Bank shall have no further obligation to the
Employee under this Agreement.
4
<PAGE>
(d) Change in Control. In the event of Involuntary Termination in
-----------------
connection with or within 12 months after a Change in Control which occurs at
any time while the Employee is employed under this Agreement, the Bank shall,
subject to Section 8 of this Agreement, (1) pay to the Employee in a lump sum in
cash within 25 business days after the Date of Termination an amount equal to
299% of the Employee's "base amount" as defined in Section 280G of the Internal
Revenue Code of 1986, as amended (the "Code"); and (2) provide to the Employee
during the remaining term of this Agreement substantially the same health
benefits as the Bank maintained for its executive officers immediately prior to
the Change in Control.
(e) Death; Disability. In the event of the death of the Employee
-----------------
while employed under this Agreement and prior to any termination of employment,
the Employee's estate, or such person as the Employee may have previously
designated in writing, shall be entitled to receive from the Bank the salary of
the Employee through the last day of the calendar month in which the Employee
died. If the Employee becomes disabled as defined in the Bank's then current
disability plan, if any, or if the employee is otherwise unable to serve as
______________, this Agreement shall continue in full force and effect, except
that the salary paid to the Employee shall be reduced by any disability
insurance payments made to Employee on policies of insurance maintained by the
Bank at its expense.
(f) Temporary Suspension or Prohibition. If the Employee is suspended
-----------------------------------
and/or temporarily prohibited from participating in the conduct of the Bank's
affairs by a notice served under Section 8(e)(3) or (g)(1) of the FDIA, 12
U.S.C. (S) 1818(e)(3) and (g)(1), the Bank's obligations under this Agreement
shall be suspended as of the date of service, unless stayed by appropriate
proceedings. If the charges in the notice are dismissed, the Bank may in its
discretion (1) pay the Employee all or part of the compensation withheld while
its obligations under this Agreement were suspended and (ii) reinstate in whole
or in part any of its obligations which were suspended.
(g) Permanent Suspension or Prohibition. If the Employee is removed
-----------------------------------
and/or permanently prohibited from participating in the conduct of the Bank's
affairs by an order issued under Section 8(e)(4) or (g)(1) of the FDIA, 12
U.S.C. (S) 1818(e)(4) and (g)(1), all obligations of the Bank under this
Agreement shall terminate as of the effective date of the order, but vested
rights of the contracting parties shall not be affected.
(h) Default of the Bank. If the Bank is in default (as defined in
-------------------
Section 3(x)(1) of the FDIA), all obligations under this Agreement shall
terminate as of the date of default, but this provision shall not affect any
vested rights of the contracting parties.
(i) Termination by Regulators. All obligations under this Agreement
-------------------------
shall be terminated, except to the extent determined that continuation of this
Agreement is necessary for the continued operation of the Bank: (1) by the
Director of the Office of Thrift Supervision (the "Director") or his or her
designee, at the time the Federal Deposit Insurance Corporation enters into an
agreement to provide assistance to or on behalf of the Bank under the authority
contained in Section 13(c) of the FDIA; or (2) by the Director or his or her
designee, at the time the
5
<PAGE>
Director or his or her designee approves a supervisory merger to resolve
problems related to operation of the Bank or when the Bank is determined by the
Director to be in an unsafe or unsound condition. Any rights of the parties
that have already vested, however, shall not be affected by any such action.
8. Certain Reduction of Payments by the Bank.
-----------------------------------------
(a) Notwithstanding any other provision of this Agreement, if
payments under this Agreement, together with any other payments received or to
be received by the Employee in connection with a Change in Control would be
deemed to include an "excess parachute payment" pursuant to Section 280G of the
Code, then benefits under this Agreement shall be reduced (not less than zero)
to the extent necessary to avoid the payment of an excess parachute payment by
the Bank. The Employee shall determine the allocation of such reduction among
payments to the Employee.
(b) Any payments made to the Employee pursuant to this Agreement, or
otherwise, are subject to and conditioned upon their compliance with 12 U.S.C.
(S) 1828(k) and any regulations promulgated thereunder.
9. No Mitigation. The Employee shall not be required to mitigate the
-------------
amount of any salary or other payment or benefit provided for in this Agreement
by seeking other employment or otherwise, nor shall the amount of any payment or
benefit provided for in this Agreement be reduced by any compensation earned by
the Employee as the result of employment by another employer, by retirement
benefits after the Date of Termination, or otherwise.
10. Attorneys Fees. In the event the Bank exercises its right of
--------------
Termination for Cause, but it is determined by a court of competent jurisdiction
or by an arbitrator pursuant to Section 17 that cause did not exist for such
termination, or if in any event it is determined by any such court or arbitrator
that the Bank has failed to make timely payment of any amounts owed to the
Employee under this Agreement, the Employee shall be entitled to reimbursement
for all reasonable costs, including attorneys' fees, incurred in challenging
such termination or collecting such amounts. Such reimbursement shall be in
addition to all rights to which the Employee is otherwise entitled under this
Agreement.
11. No Assignments.
--------------
(a) This Agreement is personal to each of the parties hereto, and
neither party may assign or delegate any of its rights or obligations hereunder
without first obtaining the written consent of the other party; provided,
however, that the Bank shall require any successor or assign (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Bank, by an assumption
agreement in form and substance satisfactory to the Employee, to expressly
assume and agree to perform this Agreement in the same manner and to the same
extent that the Bank would be required to perform it if no such succession or
assignment had taken place. Failure of the Bank to obtain such an assumption
agreement prior to the effectiveness of any such succession or assignment shall
be a breach of this
6
<PAGE>
Agreement and shall entitle the Employee to compensation from the Bank in the
same amount and on the same terms as the compensation pursuant to Section 7(d)
hereof. For purposes of implementing the provisions of this Section 11(a), the
date on which any such succession becomes effective shall be deemed the Date of
Termination.
(b) This Agreement and all rights of the Employee hereunder shall
inure to the benefit of and be enforceable by the Employee's personal and legal
representatives, executors, administrators, successors, heirs, distributees,
devisees and legatees. If the Employee should die while any amounts would still
be payable to the Employee hereunder if the Employee had continued to live, all
such amounts, unless otherwise provided herein, shall be paid in accordance with
the terms of this Agreement to the Employee's devisee, legatee or other designee
or if there is no such designee, to the Employee's estate.
12. Notice. For the purposes of this Agreement, notices and all other
------
communications provided for in the Agreement shall be in writing and shall be
deemed to have been duly given when personally delivered or sent by certified
mail, return receipt requested, postage prepaid, to the Bank at its home office,
to the attention of the Board of Directors with a copy to the Secretary of the
Bank, or, if to the Employee, to such home or other address as the Employee has
most recently provided in writing to the Bank.
13. Amendments. No amendments or additions to this Agreement shall be
----------
binding unless in writing and signed by both parties, except as herein otherwise
provided.
14. Headings. The headings used in this Agreement are included solely for
--------
convenience and shall not affect, or be used in connection with, the
interpretation of this Agreement.
15. Severability. The provisions of this Agreement shall be deemed
------------
severable and the invalidity or unenforceability of any provision shall not
affect the validity or enforceability of the other provisions hereof.
16. Governing Law. This Agreement shall be governed by the laws of the
-------------
United States to the extent applicable and otherwise by the laws of the State of
Missouri.
17. Arbitration. Any dispute or controversy arising under or in
-----------
connection with this Agreement shall be settled exclusively by arbitration in
accordance with the rules of the American Arbitration Association then in
effect. Judgment may be entered on the arbitrator's award in any court having
jurisdiction.
[Remainder of Page Intentionally Left Blank]
7
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day
and year first above written.
THIS AGREEMENT CONTAINS A BINDING ARBITRATION PROVISION WHICH MAY BE
ENFORCED BY THE PARTIES.
Attest: INVESTORS FEDERAL BANK AND
SAVINGS ASSOCIATION
- ---------------------------- ------------------------------
Secretary By:
Its:
Employee
------------------------------
8
<PAGE>
Exhibit 10.2
INVESTORS FEDERAL BANK AND SAVINGS ASSOCIATION
EMPLOYEE STOCK OWNERSHIP PLAN
(adopted effective January 1, 1996)
<PAGE>
INVESTORS FEDERAL BANK AND SAVINGS ASSOCIATION
EMPLOYEE STOCK OWNERSHIP PLAN
This Employee Stock Ownership Plan, executed on the ____ day of
_____________, 1996, by Investors Federal Bank and Savings Association, a
federally chartered stock savings bank (the "Bank"),
W I T N E S S E T H T H A T
WHEREAS, the board of directors of the Bank has resolved to adopt an
employee stock ownership plan for eligible employees in accordance with the
terms and conditions presented to the directors;
NOW, THEREFORE, the Bank hereby adopts the following Plan setting forth the
terms and conditions pertaining to contributions by the Employer and the payment
of benefits to Participants and Beneficiaries.
IN WITNESS WHEREOF, the Bank has adopted this Plan and caused this
instrument to be executed by its duly authorized officers as of the above date.
ATTEST:
- ----------------------- By: -----------------------
Secretary President
<PAGE>
C 0 N T E N T S
Page No.
--------
Section 1. Plan Identity .................................................. -1-
1.1 Name ..................................................... -1-
1.2 Purpose .................................................. -1-
1.3 Effective Date ........................................... -1-
1.4 Fiscal Period ............................................ -1-
1.5 Single Plan for All Employers ............................ -1-
1.6 Interpretation of Provisions ............................. -1-
Section 2. Definitions .................................................... -1-
Section 3. Eligibility for Participation .................................. -8-
3.1 Initial Eligibility ...................................... -8-
3.2 Definition of Eligibility Year ........................... -8-
3.3 Terminated Employees ..................................... -8-
3.4 Certain Employees Ineligible ............................. -8-
3.5 Participation and Reparticipation ........................ -8-
3.6 Omission of Eligible Employee ............................ -8-
3.7 Inclusion of Ineligible Employee ......................... -9-
Section 4. Contributions and Credits ..................................... -9-
4.1 Discretionary Contributions ............................. -9-
4.2 Contributions for Stock Obligations ..................... -9-
4.3 Definitions Related to Contributions .................... -9-
4.4 Conditions as to Contributions .......................... -10-
4.5 Transfers ............................................... -10-
Section 5. Limitations on Contributions and Allocations .................. -10-
5.1 Limitation on Annual Additions .......................... -10-
5.2 Coordinated Limitation With Other Plans ................. -12-
5.3 Effect of Limitations ................................... -12-
5.4 Limitations as to Certain Participants .................. -13-
Section 6. Trust Fund and Its Investment ................................. -13-
6.1 Creation of Trust Fund .................................. -13-
6.2 Stock Fund and Investment Fund .......................... -13-
6.3 Acquisition of Stock .................................... -14-
6.4 Participants' Option to Diversify ....................... -14-
Section 7. Voting Rights and Dividends on Stock .......................... -15-
7.1 Voting and Tendering of Stock ............................. -15-
7.2 Dividends on Stock ........................................ -16-
(i)
<PAGE>
Section 8. Adjustments to Accounts ....................................... -16-
8.1 Adjustments for Transactions .............................. -16-
8.2 Valuation of Investment Fund .............................. -16-
8.3 Adjustments for Investment Experience ..................... -17-
Section 9. Vesting of Participants' Interests ............................ -17-
9.3 Full Vesting Upon Certain Events .......................... -18-
9.4 Full Vesting Upon Plan Termination ........................ -19-
9.5 Forfeiture, Repayment, and Restoral ....................... -19-
9.6 Accounting for Forfeitures ................................ -19-
9.7 Vesting and Nonforfeitability ............................. -19-
Section 10. Payment of Benefits .......................................... -19-
10.1 Benefits for Participants ................................. -19-
10.2 Time for Distribution ..................................... -20-
10.3 Marital Status ............................................ -21-
10.4 Delay in Benefit Determination ............................ -21-
10.5 Accounting for Benefit Payments ........................... -21-
10.6 Options to Receive and Sell Stock ......................... -21-
10.7 Restrictions on Disposition of Stock ...................... -22-
10.8 Continuing Loan Provisions; Creations of
Protections and Rights .................................... -23-
10.9 Direct Rollover of Eligible Distribution .................. -23-
10.10 In Service Distribution of Roll over Account .............. -23-
10.11 Waiver of 30 Day Period After Notice of Distribution ...... -24-
Section 11. Rules Governing Benefit Claims and Review of Appeals ......... -24-
11.1 Claim for Benefits ........................................ -24-
11.2 Notification by Committee ................................. -24-
11.3 Claims Review Procedure ................................... -24-
Section 12. The Committee and Its Functions .............................. -25-
12.1 Authority of Committee .................................... -25-
12.2 Identity of Committee ..................................... -25-
12.3 Duties of Committee ....................................... -25-
12.4 Valuation of Stock ........................................ -25-
12.5 Compliance with ERISA ..................................... -26-
12.6 Action by Committee ....................................... -26-
12.7 Execution of Documents .................................... -26-
12.8 Adoption of Rules ......................................... -26-
12.9 Responsibilities to Participants .......................... -26-
12.10 Alternative Payees in Event of Incapacity ................. -26-
12.11 Indemnification by Employers .............................. -26-
12.12 Nonparticipation by Interested Member ..................... -27-
<PAGE>
Section 13. Adoption, Amendment, or Termination of the Plan .............. -27-
13.1 Adoption of Plan by Other Employers ..................... -27-
13.2 Adoption of Plan by Successor ........................... -27-
13.3 Plan Adoption Subject to Qualification .................. -27-
13.4 Right to Amend or Terminate ............................. -27-
Section 14. Miscellaneous Provisions ..................................... -28-
14.1 Plan Creates No Employment Rights ....................... -28-
14.2 Nonassignability of Benefits ............................ -28-
14.3 Limit of Employer Liability ............................. -28-
14.4 Treatment of Expenses ................................... -28-
14.5 Number and Gender ....................................... -28-
14.6 Nondiversion of Assets .................................. -28-
14.7 Separability of Provisions .............................. -28-
14.8 Service of Process ...................................... -29-
14.9 Governing State Law ..................................... -29-
14.10 Employer Contributions Conditioned on Deductibility ..... -29-
14.11 Unclaimed Accounts ...................................... -29-
14.12 Qualified Domestic Relations Order ...................... -29-
Section 15. Top Heavy Provisions ......................................... -30-
15.1 Top Heavy Plan .......................................... -30-
15.2 Super Top Heavy Plan .................................... -30-
15.3 Definitions ............................................. -31-
15.4 Top Heavy Rules of Application .......................... -32-
15.5 Top Heavy Ratio ......................................... -33-
15.6 Minimum Contributions ................................... -33-
15.7 Minimum Vesting ......................................... -34-
15.8 Top Heavy Provisions Control in Top Heavy Plan .......... -34-
<PAGE>
INVESTORS FEDERAL BANK AND SAVINGS ASSOCIATION
EMPLOYEE STOCK OWNERSHIP PLAN
Section 1. Plan Identity.
-------------
1.1 Name. The name of this Plan is "Investors Federal Bank and Savings
----
Association Employee Stock Ownership Plan."
1.2 Purpose. The purpose of this Plan is to describe the terms and
-------
conditions under which contributions made pursuant to the Plan will be credited
and paid to the Participants and their Beneficiaries.
1.3 Effective Date. The Effective Date of this Plan is January 1, 1996.
--------------
1.4 Fiscal Period. This Plan shall be operated on the basis of a
-------------
January 1 to December 31 fiscal year for the purpose of keeping the Plan's books
and records and distributing or filing any reports or returns required by law.
1.5 Single Plan for All Employers. This Plan shall be treated as a
-----------------------------
single plan with respect to all participating Employers for the purpose of
crediting contributions and forfeitures and distributing benefits, determining
whether there has been any termination of Service, and applying the limitations
set forth in Section 5.
1.6 Interpretation of Provisions. The Employers intend this Plan and
----------------------------
the Trust to be a qualified stock bonus plan under Section 401(a) of the Code
and an employee stock ownership plan within the meaning of Section 407(d)(6) of
ERISA and Section 4975(e)(7) of the Code. The Plan is intended to have its
assets invested primarily in qualifying employer securities of one or more
Employers within the meaning of Section 407(d)(3) of ERISA, and to satisfy any
requirement under ERISA or the Code applicable to such a plan.
Accordingly, the Plan and Trust Agreement shall be interpreted and applied
in a manner consistent with this intent and shall be administered at all times
and in all respects in a nondiscriminatory manner.
Section 2. Definitions.
-----------
The following capitalized words and phrases shall have the meanings
specified when used in this Plan and in the Trust Agreement, unless the context
clearly indicates otherwise:
"Account" means a Participant's interest in the assets accumulated under
this Plan as expressed in terms of a separate account balance which is
periodically adjusted to reflect his Employer's contributions, the Plan's
investment experience, and distributions and forfeitures.
"Active Participant" means any Employee who has satisfied the eligibility
requirements of Section 3 and who qualifies as an Active Participant for a
particular Plan Year under Section 4.3.
<PAGE>
"Bank" means Investors Federal Bank and Savings Association, and any entity
which succeeds to the business of Investors Federal Bank and Savings
Association, and adopts this Plan as its own pursuant to Section 14.2.
"Beneficiary" means the person or persons who are designated by a
Participant to receive benefits payable under the Plan on the Participant's
death. In the absence of any designation or if all the designated Beneficiaries
shall die before the Participant dies or shall die before all benefits have been
paid, the Participant's Beneficiary shall be his surviving spouse, if any, or
his estate if he is not survived by a spouse. The Committee may rely upon the
advice of the Participant's executor or administrator as to the identity of the
Participant's spouse.
"Break in Service" means any Plan Year in which an Employee has 500 or fewer
Hours of Service. Solely for this purpose, an Employee shall be considered
employed for his normal hours of paid employment during a Recognized Absence
(said employee shall not be credited with more than 501 Hours of Service to
avoid a Break in Service), unless he does not resume his Service at the end of
the Recognized Absence. Further, if an Employee is absent for any period
beginning on or after January 1, 1985, (i) by reason of the Employee's
pregnancy, (ii) by reason of the birth of the Employee's child, (iii) by reason
of the placement of a child with the Employee in connection with the Employee's
adoption of the child, or (iv) for purposes of caring for such child for a
period beginning immediately after such birth or placement, the Employee shall
be credited with the Hours of Service which would normally have been credited
but for such absence, up to a maximum of 501 Hours of Service.
"Code" means the Internal Revenue Code of 1986, as amended.
"Committee" means the committee responsible for the administration of this
Plan in accordance with Section 12.
"Company" means _____________, Inc., the ____________ stock holding company
of Bank.
"Disability" means only a disability which renders the Participant totally
unable, as a result of bodily or mental disease or injury, to perform any duties
for an Employer for which he is reasonably fitted, which disability is expected
to be permanent or of long and indefinite duration. However, this term shall
not include any disability directly or indirectly resulting from or related to
habitual drunkenness or addiction to narcotics, a criminal act or attempt,
service in the armed forces of any country, an act of war, declared or
undeclared, any injury or disease occurring while compensation to the
Participant is suspended, or any injury which is intentionally self-inflicted.
Further, this term shall apply only if (i) the Participant is sufficiently
disabled to qualify for the payment of disability benefits under the federal
Social Security Act or Veterans Disability Act, or (ii) the Participant's
disability is certified by a physician selected by the Committee. Unless the
Participant is sufficiently disabled to qualify for disability benefits under
the federal Social Security Act or Veterans Disability Act, the Committee may
require the Participant to be appropriately examined from time to time by one or
more physicians chosen by the Committee, and no Participant who refuses to be
examined shall be treated as having a Disability. In any event, the Committee's
good faith decision as to whether a Participant's Service has been terminated by
Disability shall be final and conclusive.
"Early Retirement" means retirement on or after a Participant's attainment
of age 55 and the completion of twenty years of Service for an Employer. If the
participant separates from Service before satisfying the age requirement, but
has satisfied the Service requirement, the Participant will be entitled to elect
early retirement upon satisfaction of the age requirement.
-2-
<PAGE>
"Effective Date" means January 1, 1996.
"Employee" means any individual who is or has been employed or self-employed
by an Employer. "Employee" also means an individual employed by a leasing
organization who, pursuant to an agreement between an Employer and the leasing
organization, has performed services for the Employer and any related persons
(within the meaning of Section 414(n)(6) of the Code) on a substantially full-
time basis for more than one year, if such services are of a type historically
performed by employees in the Employer's business field. However, such a
"leased employee" shall not be considered an Employee if (i) he participates in
a money purchase pension plan sponsored by the leasing organization which
provides for immediate participation, immediate full vesting, and an annual
contribution of at least 10 percent of the Employee's Total Compensation, and
(ii) leased employees do not constitute more than 20 percent of the Employer's
total work force (including leased employees, but excluding Highly Paid
Employees and any other employees who have not performed services for the
Employer on a substantially full-time basis for at least one year).
"Employer" means the Bank or any affiliate within the purview of section
414(b), (c) or (m) and 415(h) of the Code, any other corporation, partnership,
or proprietorship which adopts this Plan with the Bank's consent pursuant to
Section 13.1, and any entity which succeeds to the business of any Employer and
adopts the Plan pursuant to Section 13.2.
"Entry Date" means the Effective Date of the Plan and each January 1 and
July 1 of each Plan Year after the Effective Date.
"ERISA" means the Employee Retirement Income Security Act of 1974 (P.L. 93-
406, as amended).
"Highly Paid Employee" for any Plan Year means an Employee who, during
either of that or the immediately preceding Plan Year, (i) owned more than five
percent of the outstanding equity interest or the outstanding voting interest in
any Employer, (ii) had Total Compensation exceeding $75,000 (as adjusted
pursuant to section 415(d) of the Code), (iii) had Total Compensation exceeding
$50,000 (as adjusted pursuant to section 415(d) of the Code) and was among the
most highly compensated one-fifth of all Employees, or (iv) was at any time an
officer of an Employer and had Total Compensation exceeding $45,000 (or 50
percent of the currently applicable dollar limit under Section 415(b)(1)(A) of
the Code). For this purpose:
(a) "Total Compensation" shall include any amount which is
excludable from the Employee's gross income for tax purposes pursuant to
Sections 125, 402(a)(8), 402(h)(1)(B), or 403(b) of the Code.
(b) The number of Employees in "the most highly compensated one-
fifth of all Employees" shall be determined by taking into account all
individuals working for all related Employer entities described in the
definition of "Service", but excluding any individual who has not completed
six months of Service, who normally works fewer than 17-1/2 hours per week
or in fewer than six months per year, who has not reached age 21, whose
employment is covered by a collective bargaining agreement, or who is a
nonresident alien who receives no earned income from United States sources.
(c) The number of individuals counted as "officers" shall not be
more than the lesser of (i) 50 individuals and (ii) the greater of 3
individuals or 10 percent of the total number of
-3-
<PAGE>
Employees. If no officer earns more than $45,000 (or the adjusted limit), then
the highest paid officer shall be a Highly Paid Employee.
(d) A former employee shall be treated as a highly compensated employee if
such employee was a highly paid employee when such employee separated from
service, or if such employee was a highly paid employee at any time after
attaining age 55.
"Hours of Service" means hours to be credited to an Employee under the
following rules:
(a) Each hour for which an Employee is paid or is entitled to be paid for
services to an Employer is an Hour of Service.
(b) Each hour for which an Employee is directly or indirectly paid or is
entitled to be paid for a period of vacation, holidays, illness, disability,
lay-off, jury duty, temporary military duty, or leave of absence is an Hour of
Service. However, except as otherwise specifically provided, no more than 501
Hours of Service shall be credited for any single continuous period which an
Employee performs no duties. No more than 501 hours of service will be credited
under this paragraph for any single continuous period (whether or not such
period occurs in a single computation period). Further, no Hours of Service
shall be credited on account of payments made solely under a plan maintained to
comply with worker's compensation, unemployment compensation, or disability
insurance laws, or to reimburse an Employee for medical expenses.
(c) Each hour for which back pay (ignoring any mitigation of damages) is
either awarded or agreed to by an Employer is an Hour of Service. However, no
more than 501 Hours of Service shall be credited for any single continuous
period during which an Employee would not have performed any duties. The same
hours of service will not be credited both under paragraph (a) or (b) as the
case may be, and under this paragraph (c). These hours will be credited to the
employee for the computation period or periods to which the award or agreement
pertains rather than the computation period in which the award agreement or
payment is made.
(d) Hours of Service shall be credited in any one period only under one of
the foregoing paragraphs (a), (b) and (c); an Employee may not get double credit
for the same period.
(e) If an Employer finds it impractical to count the actual Hours of Service
for any class or group of non-hourly Employees, each Employee in that class or
group shall be credited with 45 Hours of Service for each weekly pay period in
which he has at least one Hour of Service. However, an Employee shall be
credited only for his normal working hours during a paid absence.
(f) Hours of Service to be credited on account of a payment to an Employee
(including back pay) shall be recorded in the period of Service for which the
payment was made. If the period overlaps two or more Plan Years, the Hours of
Service credit shall be allocated in proportion to the respective portions of
the period included in the several Plan Years. However, in the case of periods
of 31 days or less, the Administrator may apply a uniform policy of crediting
the Hours of Service to either the first Plan Year or the second.
(g) In all respects an Employee's Hours of Service shall be counted as
required by Section 2530.200b-2(b) and (c) of the Department of Labor's
regulations under Title I of ERISA.
-4-
<PAGE>
"Investment Fund" means that portion of the Trust Fund consisting of assets
other than Stock.
"Normal Retirement" means retirement on or after a Participant's 65th
birthday.
"Normal Retirement Date" means the date on which a Participant attains age
65.
"Participant" means any Employee who is participating in the Plan, or who
has previously participated in the Plan and still has a balance credited to his
Account.
"Plan Year" means the twelve month period commencing January 1 and ending
December 31, 1996 and each period of 12 consecutive months beginning on January
1 of each succeeding year.
"Recognized Absence" means a period for which --
(a) an Employer grants an Employee a leave of absence for a limited
period, but only if an Employer grants such leave on a nondiscriminatory
basis; or
(b) an Employee is temporarily laid off by an Employer because of a
change in business conditions; or
(c) an Employee is on active military duty, but only to the extent
that his employment rights are protected by the Military Selective Service
Act of 1967 (38 U.S.C. Sec. 2021).
"Roll Over Account" means the separate account established to hold a
Participant's roll-over contributions and direct transfers.
"Service" means an Employee's period(s) of employment or self-employment
with an Employer, excluding for initial eligibility purposes any period in which
the individual was a nonresident alien and did not receive from an Employer any
earned income which constituted income from sources within the United States.
An Employee's Service shall include any service which constitutes service with a
predecessor employer within the meaning of Section 414(a) of the Code. An
Employee's Service shall also include any service with an entity which is not an
Employer, but only either (i) for a period after 1975 in which the other entity
is a member of a controlled group of corporations or is under common control
with other trades and businesses within the meaning of Section 414(b) or 414(c)
of the Code, and a member of the controlled group or one of the trades and
businesses is an Employer, (ii) for a period after 1979 in which the other
entity is a member of an affiliated service group within the meaning of Section
414(m) of the Code, and a member of the affiliated service group is an Employer,
or (iii) all employers aggregated with the Employer under Section 414(o) of the
Code (but not until the Proposed Regulations under Section 414(o) become
effective).
"Spouse" means the individual, if any, to whom a Participant is lawfully
married on the date benefit payments to the Participant are to begin, or on the
date of the Participant's death, if earlier. A former spouse shall be treated
as the Spouse or surviving spouse to the extent provided under a qualified
domestic relations order as described in section 414(p) of the Code.
"Stock" means shares of the Company's voting common stock or preferred stock
meeting the requirements of Section 409(e)(3) of the Code issued by an Employer
which is a member of the same controlled group of corporations within the
meaning of Code Section 414(b).
"Stock Fund" means that portion of the Trust Fund consisting of Stock.
-5-
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"Stock Obligation" means an indebtedness arising from any extension of
credit to the Plan or the Trust which satisfies the requirements set forth in
Section 6.3 and which was obtained for any or all of the following purposes:
(i) to acquire qualifying employer securities as defined in
Treasury Regulations (S) 54,4975012l
(ii) to repay such Stock Obligation; or
(iii) to repay a prior exempt loan.
"Total Compensation" (a) shall mean:
(i) A Participant's wages, salaries, fees for professional services
and other amounts received (without regard to whether an amount is paid in
cash) for personal services actually rendered in the course of employment
with the Employer while a Participant in the Plan, (including, but not
limited to, commissions paid to salesmen, compensation for services on the
basis of a percentage of profits, commissions on insurance premiums, tips,
bonuses, severance payments and amounts paid as a result of termination, and
any deferred compensation contributions made to this or any other Section
401(k) Plan on behalf of the Participants), taxable fringe benefits,
reimbursements and expense allowances under a nonaccountable plan (as
described in Section 1.62-2(c) of the Treasury Regulations).
(ii) Amounts described in sections 104(a)(3), 105(a), and 105(h),
but only to the extent that these amounts are includable in the gross income
of the employee.
(iii) Amounts paid or reimbursed by the employer for moving expenses
incurred by an employee, but only to the extent that at the time of payment
it is reasonable to believe that these amounts are not deductible by the
employee under section 217.
(iv) The value of a non-qualified stock option granted to an
employee by the employer, but only to the extent that the value of the
option is includable in the gross income of the employee for the taxable
year in which granted.
(v) The amount includable in the gross income of an employee upon
making the election described in section 83(b).
(b) The term "Total Compensation" does not include items such as:
(i) Contributions made by the Employer to a Plan of deferred
compensation to the extent that before the application of Section 415
limitations to the Plan, the contributions are not includable in the gross
income of the Employee for the taxable year in which contributed, except for
deferred compensation contributions made by the Employer to a Section 401(k)
Plan on behalf of the Participant. However, for purposes of computing Code
Section 415 annual additions, deferred compensation contributions made by
the Employer to a Section 401(k) Plan on behalf of a Participant shall be
deducted from Total Compensation. In addition, Employer contributions made
on behalf of an Employee to a simplified employee pension plan described in
Code Section 408(k) are not considered as compensation for the taxable year
in which contributed to the extent such contributions are deductible by the
Employee under Code Section 219(b)(7). Additionally, any distributions from
a Plan of deferred compensation are not considered as compensation for
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Code Section 415 purposes, regardless of whether such amounts are includable
in the gross income of the Employee when distributed. However, any amounts
received by an Employee pursuant to an unfunded non-qualified Plan may be
considered as compensation for Code Section 415 purposes in the year such
amounts are includable in the gross income of the Employee.
(ii) Amounts realized from the exercise of a non-qualified stock
option, or when restricted stock (or property) held by an Employee either
becomes freely transferable or is no longer subject to a substantial risk of
forfeiture.
(iii) Amounts realized from the sale, exchange or other disposition
of stock acquired under a qualified stock option.
(iv) Other amounts which receive special tax benefits, such as
premiums for group term life insurance (but only to the extent that the
premiums are not includable in the gross income of the Employee), or
contributions made by the Employer (whether or not under a salary reduction
agreement) towards the purchase of an annuity contract described in Code
Section 403(b) (whether or not the contributions are excludable from the
gross income of the Employee).
(c) For Plan Years beginning after December 31, 1993, Total
Compensation in excess of $150,000 (as indexed) shall be disregarded for all
Participants. For purposes of this sub-section, the $150,000 limit shall be
referred to as the "applicable limit" for the Plan Year in question. Such
amount shall be adjusted in such manner as permitted under Code Section
401(a)(17)(B), effective for the Plan Year which begins within the
applicable calendar year. For purposes of the applicable limit, Total
Compensation shall be prorated over short plan years. In determining the
Total Compensation of a Participant for purposes of the applicable limit,
the rules of Code Section 414(q)(6) shall apply, except as set forth in
Section 4.3 hereof. If as a result of the application of such rules, the
adjusted applicable limit is exceeded, then the limitation shall be prorated
among the affected individuals in proportion to each such individual's Total
Compensation, as determined under this Section prior to the application of
this limitation.
"Trust" or "Trust Fund" means the trust fund created under this Plan.
"Trust Agreement" means the agreement between the Bank and the Trustee
concerning the Trust Fund. If any assets of the Trust Fund are held in a co-
mingled trust fund with assets of other qualified retirement plans, "Trust
Agreement" shall be deemed to include the trust agreement governing that co-
mingled trust fund. With respect to the allocation of investment responsibility
for the assets of the Trust Fund, the provisions of Article II of the Trust
Agreement are incorporated herein by reference.
"Trustee" means one or more corporate persons or individuals selected from
time to time by the Bank to serve as trustee or co-trustees of the Trust Fund.
"Unallocated Stock Fund" means that portion of the Stock Fund consisting of
the Plan's holding of stock which have been acquired in exchange for one or more
Stock obligations and which have not yet been allocated to the Participant's
Accounts in accordance with Section 4.2
"Valuation Date" means the last day of the Plan Year and each other date as
of which the committee shall determine the investment experience of the
Investment Fund and adjust the Participants' accounts accordingly.
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"Valuation Period" means the period following a Valuation Date and ending
with the next Valuation Date.
"Vesting Year" means a unit of Service credited to a Participant pursuant to
Section 9.2 for purposes of determining his vested interest in his Account.
Section 3. Eligibility for Participation.
-----------------------------
3.1 Initial Eligibility. An Employee shall enter the Plan as of the
-------------------
Entry Date coincident with or next following the later of the following dates:
(a) the last day of the Employee's first Eligibility Year, and
(b) the Employee's 21st birthday. However, if an Employee is not in
active Service with an Employer on the date he would otherwise first enter the
Plan, his entry shall be deferred until the next day he is in Service.
3.2 Definition of Eligibility Year. An "Eligibility Year" means an
------------------------------
applicable eligibility period (as defined below) in which the Employee has
completed 1,000 Hours of Service for the Employer. For this purpose:
(a) an Employee's first "eligibility period" is the 12-consecutive
month period beginning on the first day on which he has an Hour of Service, and
(b) his subsequent eligibility periods will be 12-consecutive month
periods beginning on each January 1 after that first day of Service.
3.3 Terminated Employees. No Employee shall have any interest or rights
--------------------
under this Plan if he is never in active Service with an Employer on or after
the Effective Date.
3.4 Certain Employees Ineligible. No Employee shall participate in the
----------------------------
Plan while his Service is covered by a collective bargaining agreement between
an Employer and the Employee's collective bargaining representative if (i)
retirement benefits have been the subject of good faith bargaining between the
Employer and the representative and (ii) the collective bargaining agreement
does not provide for the Employee's participation in the Plan. No Employee
shall participate in the Plan while he is actually employed by a leasing
organization rather than an Employer.
3.5 Participation and Reparticipation. Subject to the satisfaction of
---------------------------------
the foregoing requirements, an Employee shall participate in the Plan during
each period of his Service from the date on which he first becomes eligible
until his termination. For this purpose, an Employee who returns before five (5)
consecutive Breaks in Service who previously satisfied the initial eligibility
requirements or who returns after 5 consecutive one year Breaks in Service with
a vested account balance in the Plan shall re-enter the Plan as of the date of
his return to Service with an Employer.
3.6 Omission of Eligible Employee. If, in any Plan Year, any Employee
-----------------------------
who should be included as a Participant in the Plan is erroneously omitted and
discovery of such omission is not make until after a contribution by his
Employer for the year has been made, the Employer shall make a subsequent
contribution with respect to the omitted Employee in the amount which the said
Employer would have contributed shall be made regardless of whether or not it is
deductible in whole or in part in any taxable year under applicable provisions
of the Code.
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3.7 Inclusion of Ineligible Employee. If, in any Plan Year, any person
--------------------------------
who should not have been included as a Participant in the Plan is erroneously
included and discovery of such incorrect inclusion is not made until after a
contribution for the year has been made, the Employer shall not be entitled to
recover the contribution made with respect to the ineligible person regardless
of whether or not a deduction is allowable with respect to the ineligible person
shall constitute a Forfeiture for the Plan Year in which the discovery is made.
Section 4. Contributions and Credits.
-------------------------
4.1 Discretionary Contributions. The Employer shall from time to time
---------------------------
contribute, with respect to a Plan Year, such amounts as it may determine from
time to time. The Employer shall have no obligation to contribute any amount
under this Plan except as so determined in its sole discretion. The Employer's
contributions and available forfeitures for a Plan Year shall be credited as of
the last day of the year to the Accounts of the Active Participants in
proportion to their amounts of Cash Compensation.
4.2 Contributions for Stock Obligations. If the Trustee, upon
-----------------------------------
instructions from the Committee, incurs any Stock Obligation upon the purchase
of Stock, the Employer may contribute for each Plan Year an amount sufficient to
cover all payments of principal and interest as they come due under the terms of
the Stock Obligation. If there is more than one Stock Obligation, the Employer
shall designate the one to which any contribution is to be applied. Investment
earnings realized on Employer contributions and any dividends paid by the
Employer on Stock held in the Unallocated Stock Account, which earnings and
dividends shall be applied to the Stock Obligation related to that Stock.
In each Plan Year in which Employer contributions, earnings on
contributions, or dividends on unallocated Stock are used as payments under a
Stock Obligation, a certain number of shares of the Stock acquired with that
Stock Obligation which is then held in the Unallocated Stock Fund shall be
released for allocation among the Participants. The number of shares released
shall bear the same ratio to the total number of those shares then held in the
Unallocated Stock Fund (prior to the release) as (i) the principal and interest
payments made on the Stock Obligation in the current Plan Year bears to (ii)
the sum of (i) above, and the remaining principal and interest payments required
---
(or projected to be required on the basis of the interest rate in effect at the
end of the Plan Year) to satisfy the Stock Obligation.
At the direction of the Committee, the current and projected payments of
interest under a Stock Obligation may be ignored in calculating the number of
shares to be released in each year if (i) the Stock Obligation provides for
annual payments of principal and interest at a cumulative rate that is not less
rapid at any time than level annual payments of such amounts for 10 years, (ii)
the interest included in any payment is ignored only to the extent that it would
be determined to be interest under standard loan amortization tables, and (iii)
the term of the Stock Obligation, by reason of renewal, extension, or
refinancing, has not exceeded 10 years from the original acquisition of the
Stock.
For these purposes, each Stock Obligation, the Stock purchased with it, and
any dividends on such Stock, shall be considered separately. The Stock released
from the Unallocated Stock Fund in any Plan Year shall be credited as of the
last day of the year to the Accounts of the Active Participants in proportion to
their amounts of Cash Compensation.
4.3 Definitions Related to Contributions. For the purposes of this Plan,
------------------------------------
the following terms have the meanings specified:
"Active Participant" means a Participant who has satisfied the eligibility
requirements under Section 3 and who has at least 1000 Hours of Service during
the current Plan Year. However, a
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Participant shall not qualify as an Active Participant unless (i) he is in
active Service with an Employer as of the last day of the Plan Year, or (ii) he
is on a Recognized Absence as of that date, or (iii) his Service terminated
during the Plan Year by reason of Disability, death, Early or Normal Retirement.
"Cash Compensation" A Participant's Cash Compensation shall include base
salary, bonuses and overtime received by the Participant during the Plan Year
while a Participant in the Plan, and shall also include amounts contributed
under a salary reduction agreement pursuant to Section 401(k) or Section 125 of
the Code.
In the event a Plan Year is a period of less than 12 months for any reason,
then Cash Compensation for the short period shall not exceed the pro rata
portion of this limit created by multiplying a fraction which is the number of
months in the short period divided by twelve times the annual compensation
limit.
In determining the Cash Compensation of a Participant for purposes of this
limitation, the rules of Code Section 414(q)(6) shall apply, except in applying
such rules, the term "family" shall include only the spouse of the Participant
and any lineal descendants of the Participant who have not attained age 19 years
before the close of the year. If as a result of the application of such rules
the adjusted $150,000 limitation is exceeded, then the limitation shall be
prorated among the affected individuals in proportion to each individual's
compensation, as determined under this Section prior to the application of this
limitation
4.4 Conditions as to Contributions. Employers' contributions shall in
------------------------------
all events be subject to the limitations set forth in Section 5. Contributions
may be made in the form of cash, or securities and other property to the extent
permissible under ERISA, including Stock, and shall be held by the Trustee in
accordance with the Trust Agreement. In addition to the provisions of Section
13.3 for the return of an Employer's contributions in connection with a failure
of the Plan to qualify initially under the Code, any amount contributed by an
Employer due to a good faith mistake of fact, or based upon a good faith but
erroneous determination of its deductibility under Section 404 of the Code,
shall be returned to the Employer within one year after the date on which the
contribution was originally made, or within one year after its nondeductibility
has been finally determined. However, the amount to be returned shall be reduced
to take account of any adverse investment experience within the Trust Fund in
order that the balance credited to each Participant's Account is not less that
it would have been if the contribution had never been made.
4.5 Transfers. This plan shall accept direct and indirect transfers,
---------
including roll-over contributions from other tax-qualified plans, provided,
however, that this Plan shall not accept any direct or indirect transfers from
any other retirement plan that is tax-qualified under Section 401(a) of the Code
and which is subject to the survivor annuity requirements of section 401(a)(11)
and section 417 of the Code.
Section 5. Limitations on Contributions and Allocations.
--------------------------------------------
5.1 Limitation on Annual Additions. Notwithstanding anything herein to
------------------------------
the contrary, allocation of Employer contributions for any Plan Year shall be
subject to the following:
5.1-1 If allocation of Employer contributions in accordance with
Section 4.1 will result in an allocation of more than one-third the total
contributions for a Plan Year to the accounts of Highly Paid Employees, then
allocation of such amount shall be adjusted so that such excess will not occur.
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<PAGE>
5.1-2 After adjustment, if any, required by the preceding paragraph, the
annual additions during any Plan Year to any Participant's Account under this
and any other defined contribution plans maintained by the Employer or an
affiliate (within the purview of Section 414(b), (c) and (m) and Section 415(h)
of the Code, which affiliate shall be deemed the Employer for this purpose)
shall not exceed the lesser of $30,000 (or such other dollar amount which
results from cost-of-living adjustments under Section 415(d) of the Code) or "25
percent of the Participant's Total Compensation for such limitation year." In
the event that annual additions exceed the aforesaid limitations, they shall be
reduced in the following priority:
(i) If the Participant is covered by the Plan at the end of the Plan Year,
any excess amount at the end of the Plan Year that cannot be allocated to the
Participant's account shall be used to reduce the employer contribution for such
Participant in the next limitation year and any succeeding limitation years if
necessary.
(ii) If the Participant is not covered by the Plan at the end of the Plan
Year, the excess amount will be held unallocated in a suspense account. The
suspense account will be applied to reduce future employer contributions for all
remaining Participants in the next limitation year and each succeeding
limitation year if necessary.
(iii) If a suspense account is in existence at any time during a limitation
year, it will not participate in any allocation of investment gains and losses.
All amounts held in suspense accounts must be allocated to Participant's
accounts before any contributions may be made to the Plan for the limitation
year.
(iv) If a suspense account exists at the time of plan termination, amounts
held in the suspense account that cannot be allocated shall revert to the
Employer.
5.1-3 For purposes of this Section 5.1 and the following Section 5.2, the
"annual addition" to a Participant's accounts means the sum of (I) employer
contributions, (ii) employee contributions, if any, and (iii) forfeitures.
Annual additions to a defined contribution plan also include amounts allocated,
after March 31, 1984, to an individual medical account, as defined in Section
415(l)(2) of the Internal Revenue Code, which is part of a pension or annuity
plan maintained by the Employer, amounts derived from contributions paid or
accrued after December 31, 1985, in taxable years ending after such date, which
are attributable to post-retirement medical benefits allocated to the separate
account of a Key Employee under a welfare benefit fund, as defined in Section
419A(d) of the Internal Revenue Code, maintained by the Employer. For these
purposes, annual additions to a defined contribution plan shall not include the
allocation of the excess amounts remaining in the Unallocated Stock Fund
subsequent to a sale of stock from such fund in accordance with a transaction
described in Section 8.1 of the Plan. The $30,000 limitations referred to shall,
for each limitation year ending after 1988, be automatically adjusted to the new
dollar limitations determined by the Commissioner of Internal Revenue for the
calendar year beginning in that limitation year.
5.1-4 Notwithstanding the foregoing, if no more than one-third of the
Employer Contributions to the Plan for a year which are deductible under Section
404(a)(9) of the Code are allocated to Highly Paid Employees (within the meaning
of Section 414(q) of the Internal Revenue Code), the limitations imposed herein
shall not apply to:
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<PAGE>
(i) forfeitures of employer securities (within the meaning of Section
409 of the Code) under the Plan if such securities were acquired with the
proceeds of a loan described in Section 404(a)(9)(A) of the Code), or
(ii) Employer Contributions to the Plan which are deductible under
Section 404(a)(9)(B) and charged against a Participant's account.
5.1-5 If the Employer contributes amounts, on behalf of Employees
covered by this Plan, to other "defined contribution plans" as defined in
Section 3(34) of ERISA, the limitation on annual additions provided in this
Section shall be applied to annual additions in the aggregate to this Plan
and to such other plans. Reduction of annual additions, where required,
shall be accomplished first by reductions under such other plan pursuant to
the directions of the named Fiduciary for administration of such other
plans or under priorities, if any, established under the terms of such
other plans and then by allocating any remaining excess for this Plan in
the manner and priority set out above with respect to this Plan."
5.1-6 A limitation year shall mean each 12 consecutive month period
beginning each January 1.
5.2 Coordinated Limitation With Other Plans. Aside from the limitation
---------------------------------------
prescribed by Section 5.1 with respect to the annual addition to a Participant's
accounts for any single limitation year, if a Participant has ever participated
in one or more defined benefit plans maintained by an Employer or an affiliate,
then the accrued benefit shall be limited so that the sum of his defined plan
fraction and his defined contribution plan fraction does not exceed one. For
this purpose:
5.2-1 A Participant's defined contribution plan fraction with respect
to a Plan Year shall be a fraction, (i) the numerator of which is the sum
of the annual additions to his accounts through the current year, and (ii)
the denominator of which is the sum of the lesser of the following
amounts -A- and -B- determined for the current limitation year and each
prior limitation year of Service with an Employer: -A- is 1.25 times the
dollar limit in effect for the year under Section 415(c)(1)(A) of the Code,
or 1.0 times such dollar limitation if the Plan is top-heavy, and -B- is 35
percent of the Participant's Total Compensation for such year. Further, if
the Participant participated in any related defined contribution plan in
any years beginning before 1976, any-excess of the sum of the actual annual
additions to the Participant's accounts for those years over the maximum
annual additions which could have been made in accordance with Section 5.1
shall be ignored, and voluntary contributions by the Participant during
those years shall be taken into account as to each such year only to the
extent that his average annual voluntary contribution in those years
exceeded 10 percent of his average annual Total Compensation in those
years.
5.2-2 A Participant's defined benefit plan fraction with respect to a
limitation year shall be a fraction, (i) the numerator of which is his
projected annual benefit payable at normal retirement under the Employers'
defined benefit plans, and (ii) the denominator of which is the lesser of
(a) 1.25 times $90,000, or 1.0 times such dollar limitation if the Plan is
top-heavy, and (b) 1.4 times the Participant's average Total Compensation
during his highest-paid three consecutive limitation years.
5.3 Effect of Limitations. The Committee shall take whatever action may
---------------------
be necessary from time to time to assure compliance with the limitations set
forth in Section 5.1 and 5.2. Specifically, the Committee shall see that each
Employer restrict its contributions for any Plan Year to an amount which,
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taking into account the amount of available forfeitures, may be completely
allocated to the Participants consistent with those limitations. Where the
limitations would otherwise be exceeded by any Participant, further allocations
to the Participant shall be curtailed to the extent necessary to satisfy the
limitations. Where an excessive amount is contributed on account of a mistake as
to one or more Participants' compensation, or there is an amount of forfeitures
which may not be credited in the Plan Year in which it becomes available, the
amount shall be corrected in accordance with Section 5.1-2 of the Plan.
5.4 Limitations as to Certain Participants. Aside from the limitations
--------------------------------------
set forth in Section 5.1 and 5.2, if the Plan acquires any Stock in a
transaction as to which a selling shareholder or the estate of a deceased
shareholder is claiming the benefit of Section 1042 of the Code, the Committee
shall see that none of such Stock, and no other assets in lieu of such Stock,
are allocated to the Accounts of certain Participants in order to comply with
Section 409(n) of the Code.
This restriction shall apply at all times to a Participant who owns
(taking into account the attribution rules under Section 318(a) of the Code,
without regard to the exception for employee plan trusts in Section
318(a)(2)(B)(i) more than 25 percent of any class of stock of a corporation
which issued the Stock acquired by the Plan, or another corporation within the
same controlled group, as defined in Section 409(l)(4) of the Code (any such
class of stock hereafter called a "Related Class"). For this purpose, a
Participant who owns more than 25 percent of any Related Class at any time
within the one year preceding the Plan's purchase of the Stock shall be subject
to the restriction as to all allocations of the Stock, but any other Participant
shall be subject to the restriction only as to allocations which occur at a time
when he owns more than 25 percent of any Related Class.
Further, this restriction shall apply to the selling shareholder
claiming the benefit of Section 1042 and any other Participant who is related to
such a shareholder within the meaning of Section 267(b) of the Code, during the
period beginning on the date of sale and ending on the later of (1) the date
that is ten years after the date of sale, or (2) the date of the plan allocation
attributable to the final payment of acquisition indebtedness incurred in
connection with the sale.
This restriction shall not apply to any Participant who is a lineal
descendant of a selling shareholder if the aggregate amounts allocated under the
Plan for the benefit of all such descendants do not exceed five percent of the
Stock acquired from the shareholder.
Section 6. Trust Fund and Its Investment.
-----------------------------
6.1 Creation of Trust Fund. All amounts received under the Plan from
----------------------
Employers and investments shall be held as the Trust Fund pursuant to the terms
of this Plan and of the Trust Agreement between the Bank and the Trustee. The
benefits described in this Plan shall be payable only from the assets of the
Trust Fund, and none of the Bank, any other Employer, its board of directors or
trustees, its stockholders, its officers, its employees, the Committee, and the
Trustee shall be liable for payment of any benefit under this Plan except from
the Trust Fund.
6.2 Stock Fund and Investment Fund. The Trust Fund held by the Trustee
------------------------------
shall be divided into the Stock Fund, consisting entirely of Stock, and the
Investment Fund, consisting of all assets of the Trust other than Stock. The
Trustee shall have no investment responsibility for the Stock Fund, but shall
accept any Employer contributions made in the form of Stock, and shall acquire,
sell, exchange, distribute, and otherwise deal with and dispose of Stock in
accordance with the instructions of the Committee. The Trustee shall have full
responsibility for the investment of the Investment Fund, except to the extent
such responsibility may be delegated from time to time to one or more investment
managers pursuant to Section 2.2 of the Trust Agreement.
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6.3 Acquisition of Stock. From time to time the Committee may, in its
--------------------
sole discretion, direct the Trustee to acquire Stock from the issuing Employer
or from shareholders, including shareholders who are or have been Employees,
Participants, or fiduciaries with respect to the Plan. The Trustee shall pay
for such Stock no more than its fair market value, which shall be determined
conclusively by the Committee pursuant to Section 12.4. The Committee may direct
the Trustee to finance the acquisition of Stock by incurring or assuming
indebtedness to the seller or another party which indebtedness shall be called a
"Stock Obligation". The term "Stock Obligation" shall refer to a loan made to
the Plan by a disqualified person within the meaning of Section 4975(e)(2) of
the Code, or a loan to the Plan which is guaranteed by a disqualified person. A
Stock Obligation includes a direct loan of cash, a purchase-money transaction,
and an assumption of an obligation of a tax-qualified employee stock ownership
plan under Section 4975(e)(7) of the Code ("ESOP"). For these purposes, the
term "guarantee" shall include an unsecured guarantee and the use of assets of a
disqualified person as collateral for a loan, even though the use of assets may
not be a guarantee under applicable state law. An amendment of a Stock
Obligation in order to qualify as an "exempt loan" is not a refinancing of the
Stock Obligation or the making of another Stock Obligation. The term "exempt
loan" refers to a loan that satisfies the provisions of this paragraph. A "non-
exempt loan" fails to satisfy this paragraph. Any Stock Obligation shall be
subject to the following conditions and limitations:
6.3-1 A Stock Obligation shall be for a specific term, shall not be
payable on demand except in the event of default, and shall bear a
reasonable rate of interest.
6.3-2 A Stock Obligation may, but need not, be secured by a
collateral pledge of either the Stock acquired in exchange for the Stock
Obligation, or the Stock previously pledged in connection with a prior
Stock Obligation which is being repaid with the proceeds of the current
Stock Obligation. No other assets of the Plan and Trust may be used as
collateral for a Stock Obligation, and no creditor under a Stock
Obligation shall have any right or recourse to any Plan and Trust assets
other than Stock remaining subject to a collateral pledge.
6.3-3 Any pledge of Stock to secure a Stock Obligation must provide
for the release of pledged Stock in connection with payments on the
Stock obligations in the ratio prescribed in Section 4.2.
6.3-4 Repayments of principal and interest on any Stock Obligation
shall be made by the Trustee only from Employer cash contributions
designated for such payments, from earnings on such contributions, and
from cash dividends received on Stock, in the last case, however,
subject to the further requirements of Section 7.2.
6.3-5 In the event of default of a Stock Obligation, the value of
plan assets transferred in satisfaction of the Stock Obligation must not
exceed the amount of the default. If the lender is a disqualified person
within the meaning of Section 4975 of the Code, a Stock Obligation must
provide for a transfer of plan assets upon default only upon and to the
extent of the failure of the plan to meet the payment schedule of said
Stock Obligation. For purposes of this paragraph, the making of a
guarantee does not make a person a lender."
6.4 Participants' Option to Diversify. The Committee shall provide for
---------------------------------
a procedure under which each Participant may, during the qualified election
period, elect to "diversify" a portion of the Employer Stock allocated to his
Account, as provided in Section 401(a)(28)(B) of the Code. An election to
diversity must be made on the prescribed form and filed with the Committee
within the period specified herein. For each of the first five (5) Plan years in
the qualified election period, the Participant may elect to diversify an amount
which does not exceed 25% of the number of shares allocated to his
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Account since the inception of the Plan, less all shares with respect to which
an election under this Section has already been made. For the last year of the
qualified election period, the Participant may elect to have up to 50 percent of
the value of his Account committed to other investments, less all shares with
respect to which an election under this Section has already been made. The term
"qualified election period" shall mean the six (6) Plan Year period beginning
with the first Plan Year in which a Participant has both attained age 55 and
completed 10 years of participation in the Plan. A Participant's election to
diversify his Account may be made within each year of the qualified election
period and shall continue for the 90-day period immediately following the last
day of each year in the qualified election period. Once a Participant makes such
election, the Plan must complete diversification in accordance with such
election within 90 days after the end of the period during which the election
could be made for the Plan Year. In the discretion of the Committee, the Plan
may satisfy the diversification requirement by any of the following methods:
6.4-1 The Plan may distribute all or part of the amount subject to
the diversification election.
6.4-2 The Plan may offer the Participant at least three other
distinct investment options, if available under the Plan. The other
investment options shall satisfy the requirements of Regulations under
Section 404(c) of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA").
6.4-3 The Plan may transfer the portion of the Participant's
Account subject to the diversification election to another qualified
defined contribution plan of the Employer that offers at least three
investment options satisfying the requirements of the Regulations under
Section 404(c) of ERISA.
Section 7. Voting Rights and Dividends on Stock.
------------------------------------
7.1 Voting and Tendering of Stock. The Trustee generally shall vote all
-----------------------------
shares of Stock held under the Plan in accordance with the written instructions
of the Committee. However, if any Employer has registration-type class of
securities within the meaning of Section 409(e)(4) of the Code, or if a matter
submitted to the holders of the Stock involves a merger, consolidation,
recapitalization, reclassification, liquidation, dissolution, or sale of
substantially all assets of an entity, then (i) the shares of Stock which have
been allocated to Participants' Accounts shall be voted by the Trustee in
accordance with the Participants' written instructions, and (ii) the Trustee
shall vote any unallocated Stock and allocated Stock for which it has received
no voting instructions in the same proportions as it votes the allocated Stock
for which it has received instructions from Participants; provided, however,
that if an exempt loan, as defined in Section 4975(d) of the Code, is
outstanding and the Plan is in default on such exempt loan, as default is
defined in the loan documents, then to the extent that such loan documents
require the lender to exercise voting rights with respect to the unallocated
shares, the loan documents will prevail. In the event no shares of Stock have
been allocated to Participants' Accounts at the time Stock is to be voted and
any exempt loan which may be outstanding is not in default, each Participant
shall be deemed to have one share of Stock allocated to his or her account for
the sole purpose of providing the Trustee with voting instructions.
Notwithstanding any provision hereunder to the contrary, all unallocated
shares of Stock must be voted by the Trustee in a manner determined by the
Trustee to be for the exclusive benefit of the Participants and Beneficiaries.
Whenever such voting rights are to be exercised, the Employers shall provide the
Trustee, in a timely manner, with the same notices and other materials as are
provided to other holders of the Stock, which the Trustee shall distribute to
the Participants. The Participants shall
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<PAGE>
be provided with adequate opportunity to deliver their instructions to the
Trustee regarding the voting of Stock allocated to their Accounts. The
instructions of the Participants' with respect to the voting of allocated shares
hereunder shall be confidential.
7.1-1 In the event of a tender offer, Stock shall be tendered by
the Trustee in the same manner as set forth above with respect to the
voting of Stock. Notwithstanding any provision hereunder to the
contrary, Stock must be tendered by the Trustee in a manner determined
by the Trustee to be for the exclusive benefit of the Participants and
Beneficiaries.
7.2 Dividends on Stock. Dividends on Stock which are received by the
------------------
Trustee in the form of additional Stock shall be retained in the Stock Fund, and
shall be allocated among the Participant's Accounts and the Unallocated Stock
Fund in accordance with their holdings of the Stock on which the dividends have
been paid. Dividends on Stock credited to Participants' Accounts which are
received by the Trustee in the form of cash shall, at the direction of the
Employer paying the dividends, either (i) be credited to the Accounts in
accordance with Section 8.3 and invested as part of the Investment Fund, (ii) be
distributed immediately to the Participants in proportion with the Participants'
Account balance (iii) be distributed to the Participants within 90 days of the
close of the Plan Year in which paid in proportion with the Participants'
Account balance or (iv) be used to make payments on an exempt loan. If dividends
allocated to a participant's account are used to repay an exempt loan, stock
with a fair market value equal to the dividends so used must be allocated to
such Participant's Account in lieu of the dividends. Dividends on Stock held in
the Unallocated Stock Fund which are received by the Trustee in the form of cash
shall be applied as soon as practicable to payments of principal and interest
under the Stock Obligation incurred with the purchase of the Stock.
Section 8. Adjustments to Accounts.
-----------------------
8.1 Adjustments for Transactions. An Employer contribution pursuant to
----------------------------
Section 4.1 shall be credited to the Participants' Accounts as of the last day
of the Plan Year for which it is contributed. Stock released from the
Unallocated Stock Fund upon the Trust's repayment of a Stock Obligation pursuant
to Section 4.2 shall be credited to the Participants' Accounts as of the last
day of the Plan Year in which the repayment occurred. Any excess amounts
remaining from the use of proceeds of a sale of Stock from the Unallocated Stock
Fund to repay a Stock Obligation shall be allocated as of the last day of the
Plan Year in which the repayment occurred among the Participants' Accounts in
proportion to the opening balance in each Account. Any benefit which is paid to
a Participant or Beneficiary pursuant to Section 10 shall be charged to the
Participant's Account as of the first day of the Valuation Period in which it is
paid. Any forfeiture or restoral shall be charged or credited to the
Participant's Account as of the first day of the Valuation Period in which the
forfeiture or restoral occurs pursuant to Section 9.6.
8.2 Valuation of Investment Fund. As of each Valuation Date, the
----------------------------
Trustee shall prepare a balance sheet of the Investment Fund, recording each
asset (including any contribution receivable from an Employer) and liability at
its fair market value. Any liability with respect to short positions or options
and any item of accrued income or expense and unrealized appreciation or
depreciation shall be included; provided, however, that such an item may be
estimated or excluded if it is not readily ascertainable unless estimating or
excluding it would result in a material distortion. The Committee shall then
determine the net gain or loss of the Investment Fund since the preceding
Valuation Date, which shall mean the entire income of the Investment Fund,
including realized and unrealized capital gains and losses, net of any expenses
to be charged to the general Investment Fund and excluding any contributions by
the Employer. The determination of gain or loss shall be consistent with the
balance sheets of the Investment Fund for the current and preceding Valuation
Dates.
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<PAGE>
8.3 Adjustments for Investment Experience. Any net gain or loss of
-------------------------------------
the Investment Fund during a Valuation Period, as determined pursuant to
Section 8.2, shall be allocated as of the last day of the Valuation Period among
the Participants' Accounts in proportion to the opening balance in each Account,
as adjusted for benefit payments and forfeitures during the Valuation Period,
without regard to whatever Stock may be credited to an Account.
Section 9. Vesting of Participants' Interests.
----------------------------------
9.1 Deferred Vesting in Accounts. A Participant's vested interest
----------------------------
in his Account shall be based on his Vesting Years in accordance with the
following Table, subject to the balance of this Section 9:
<TABLE>
<CAPTION>
Vesting Percentage of
Years Interest Vested
------- ---------------
<S> <C>
Fewer than 5 0%
5 or more 100%
</TABLE>
9.2 Computation of Vesting Years. For purposes of this Plan, a
----------------------------
"Vesting Year" means generally a calendar year in which an Employee has at least
1,000 Hours of Service, beginning with the first Plan Year in which the Employee
has completed an Hour of Service with the Employer, and including Service with
other employers as provided in the definition of "Service". Notwithstanding the
above, an Employee who was employed with First Federal Bank and Savings
Association, a Missouri-chartered mutual savings bank (the "Mutual Bank") which
is the predecessor to the Bank, shall receive credit for vesting purposes for
each calendar year of employment with the Mutual Bank in which such Employee
completed 1,000 Hours of Service, not to exceed 5 years of credit for vesting
purpose (such years shall also be referred to as "Vesting Years"). However, a
Participant's Vesting Years shall be computed subject to the following
conditions and qualifications:
9.2-1 A Participant's Vesting Years shall not include any
Service prior to the date on which an Employee attains age 18.
9.2-2 A Participant's vested interest in his Account
accumulated before five (5) consecutive Breaks in Service shall be
determined without regard to any Service after such five consecutive
Breaks in Service. Further, if a Participant has five (5) consecutive
Breaks in Service before his interest in his Account has become vested to
some extent, pre-Break years of Service shall not be required to be taken
into account for purposes of determining his post-Break vested percentage.
9.2-3 In the case of a participant who has 5 or more
consecutive 1-year Breaks in Service, the participant's pre-break service
will count in vesting of the employer-derived post-break accrued benefit
only if either:
(i) such Participant has any nonforfeitable interest in the
accrued benefit attributable to employer contributions at
the time of separation from service, or
(ii) upon returning to service the number of consecutive
1-year Breaks in Service is less than the number of years
of service.
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<PAGE>
9.2-4 Unless otherwise specifically excluded, a Participant's
Vesting Years shall include any period of active military duty to the
extent required by the Military Selective Service Act of 1967 (38 U.S.C.
Section 2021).
9.2-5 If any amendment changes the vesting schedule, including
an automatic change to or from a top-heavy vesting schedule, any
Participant with three (3) or more Vesting Years may, by filing a written
request with the Employer, elect to have his vested percentage computed
under the vesting schedule in effect prior to the amendment. The election
period must begin not later than the later of sixty (60) days after the
amendment is adopted, the amendment becomes effective, or the Participant
is issued written notice of the amendment by the Employer or the
Committee.
9.3 Full Vesting Upon Certain Events.
--------------------------------
9.3-1 Notwithstanding Section 9.1, a Participant's interest in his
Account shall fully vest on the Participant's Normal Retirement Date. The
Participant's interest shall also fully vest in the event that his Service is
terminated by Early Retirement, Disability or by death.
9.3-2 The Participant's interest in his Account shall also fully vest
in the event of a "Change in Control" of the Bank, or the Company. For these
purposes, "Change in Control" shall mean an event of a nature that; (i) would be
required to be reported in response to Item 1a of the current report on Form 8-
K, as in effect on the date hereof, pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 (the "Exchange Act'); or (ii) results in a
Change in Control of the Bank or the Company within the meaning of the Bank
Holding Company Act of 1956, as amended, and applicable rules and regulations
promulgated thereunder as in effect at the time of the Change in Control
(collectively, the BHCA"); or (iii) without limitation such a Change in Control
shall be deemed to have occurred at such time as (a) any "Person' (as the term
is used in Sections 13(d) and 14(d) of the Exchange Act) is or becomes the
"beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly
or indirectly, of securities of the Bank or the Company representing 25% or more
of the Bank's or the Company's outstanding securities except for any securities
of the Bank purchased by the Company in connection with the conversion of the
Bank to the stock form and any securities purchased by the Bank's employee stock
ownership plan and trust; or (b) individuals who constitute the Board on the
date hereof (the "Incumbent Board") cease for any reason to constitute at least
a majority thereof, provided, however, that this sub-section (b) shall not apply
if the Incumbent Board is replaced by the appointment by a Federal banking
agency of a conservator or receiver for the Bank and, provided further that any
person becoming a director subsequent to the date hereof whose election was
approved by a vote of at least two-thirds of the directors comprising the
Incumbent Board or whose nomination for election by the Company's stockholders
was approved by the same Nominating Committee serving under an Incumbent Board,
shall be, for purposes of this clause (b), considered as though he were a member
of the Incumbent Board; or (c) a plan of reorganization, merger, consolidation,
sale of all or substantially all the assets of the Bank or the Company; or (d) a
proxy statement soliciting proxies from stockholders of the Company, by someone
other than the current management of the Company, seeking stockholder approval
of a plan of reorganization, merger or consolidation of the Company or Bank or
similar transaction with one or more corporations as a result of which the
outstanding shares of the class of securities then subject to such plan or
transaction are exchanged for or converted into cash or property or securities
not issued by the Bank or the Company shall be distributed and the requisite
number of proxies approving such plan of reorganization, merger or consolidation
of the Company or Bank are received and voted in favor of such transactions; or
(e) a tender offer is made for 25% or more of the outstanding securities of the
Bank or Company and shareholders owning beneficially or of record 25% or more of
the outstanding securities
-18-
<PAGE>
of the Bank or Company have tendered or offered to sell their shares pursuant to
such tender offer and such tendered shares have been accepted by the tender
offeror.
9.4 Full Vesting Upon Plan Termination. Notwithstanding Section 9.1,
----------------------------------
a Participant's interest in his Account shall fully vest if he is in active
Service upon termination of this Plan or upon the permanent and complete
discontinuance of contributions by his Employer. In the event of a partial
termination, the interest of each affected Participant who is in Service shall
fully vest with respect to that part of the Plan which is terminated.
9.5 Forfeiture, Repayment, and Restoral. If a Participant's Service
-----------------------------------
terminates before his interest in his Account is fully vested, that portion
which has not vested shall be forfeited if he either (i) receives a distribution
of his entire vested interest pursuant to Section 10.1, or (ii) incurs five (5)
consecutive one year Breaks In Service. If a Participant's Service terminates
prior to having any portion of his Account become vested, such Participant shall
be deemed to have a received a distribution of his vested interest as of the
Valuation Date next following his termination of Service.
If a Participant who has received his entire vested interest returns to
Service before he has five (5) consecutive Breaks in Service, he may repay to
the Trustee an amount equal to the distribution. The Participant may repay such
amount at any time within five years after he has returned to Service. The
amount shall be credited to his account at the time it is repaid; an additional
amount equal to that portion of his Account which was previously forfeited shall
be restored to his Account at the same time from other Employees' forfeitures
and, if such forfeitures are insufficient, from a special contribution by his
Employer for that year. A Participant who was deemed to have received a
distribution of his vested interest in the Plan shall have his account restored
as of the first day on which he performs an Hour of Service after his return.
9.6 Accounting for Forfeitures. If a portion of a Participant's
--------------------------
account is forfeited, Stock allocated to said Participant's account shall be
forfeited only after other assets are forfeited. If interests in more than one
class of Stock have been allocated to a Participant's account, the Participant
must be treated as forfeiting the same proportion of each class of Stock. A
forfeiture shall be charged to the Participant's Account as of the first day of
the first Valuation Period in which the forfeiture becomes certain pursuant to
Section 9.5. Except as otherwise provided in that Section, a forfeiture shall be
added to the contributions of the terminated Participant's Employer which are to
be credited to other Participants pursuant to Section 4.1 as of the last day of
the Plan Year in which the forfeiture becomes certain.
9.7 Vesting and Nonforfeitability. A Participant's interest in his
-----------------------------
Account which has become vested shall be nonforfeitable for any reason.
Section 10. Payment of Benefits.
-------------------
10.1 Benefits for Participants. For a Participant whose Service ends
-------------------------
for any reason, distribution will be made to or for the benefit of the
Participant or, in the case of the Participant's death, his Beneficiary, by
either, or a combination of the following methods:
10.1.1 By payment in a lump sum, in accordance with Section 10.2;
or
10.1.2 By payment in a series of substantially equal annual
installments over a period not to exceed five (5) years, provided the
maximum period over which the distribution of a
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<PAGE>
Participant's Account may be made shall be extended by 1 year, up to five
(5) additional years, for each $100,000 (or fraction thereof) by which such
Participant's Account balance exceeds $500,000 (the aforementioned figures
are subject to cost-of-living adjustments prescribed by the Secretary of
the Treasury pursuant to Section 409(o)(2) of the Code).
The Participant shall elect the manner in which his vested Account balance
will be distributed to him. If a Participant so desires, he may direct how his
benefits are to be paid to his Beneficiary. If a deceased Participant did not
file a direction with the Committee, the Participant's benefits shall be
distributed to his Beneficiary in a lump sum. Notwithstanding the foregoing, if
the balance credited to his Account exceeds $3,500, his benefits shall not be
paid before the latest of his 65th birthday or the tenth anniversary of the year
in which he commenced participation in the Plan unless he elects an early
payment date in a written election filed with the Committee. A Participant may
modify such an election at any time, provided any new benefit payment date is at
least 30 days after a modified election is delivered to the Committee, subject
to the provisions of Section 10.11 hereof. In all events, a Participant's
benefits shall be paid by April lst of the calendar year in which he reaches age
71-1/2.
10.2 Time for Distribution.
---------------------
10.2.1 Distribution of the balance of a Participant's Account
generally shall commence as soon as practicable after the last day of the
Plan Year next following his termination of Service for any reason, but no
later than one year after the close of the Plan Year:
(i) in which the Participant separates from service by
reason of Normal Retirement, Disability, or death; or
(ii) which is the fifth Plan Year following the year in
which the Participant resigns or is dismissed, unless he is
reemployed before such date.
10.2.2 Unless the Participant elects otherwise, the distribution
of the balance of a Participant's Account shall commence not later than the
60th day after the latest of the close of the plan year in which -
(i) the Participant attains the age of 65;
(ii) occurs the tenth anniversary of the year in which
the Participant commenced participation in the Plan; or
(iii) the participant terminates his service with the
Employer.
10.2.3 Notwithstanding any other provision in this Section 10.2
to the contrary, distribution of a Participant's Account shall commence
(whether or not he remains in the employ of the Employer) not later than
the April 1 of the calendar year next following the calendar year in which
the Participant attains age 70 and 1/2 years. A Participant's benefit from
that portion of his Account committed to the Investment Fund shall be
calculated on the basis of the most recent Valuation Date before the date
of payment.
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<PAGE>
10.2.4 Distribution of a Participant's Account balance after
his death shall comply with the following requirements:
(i) If a Participant dies before his distributions have
commenced, distribution of his Account to his Beneficiary shall
commence not later than one year after the end of the Plan Year in
which the Participant died, however, if the Participant's
Beneficiary is his surviving spouse, distributions may commence on
the date on which the Participant would have attained age 70-1/2.
In either case, distributions shall be completed within five years
after the they commence.
(ii) If the Participant dies after distribution has
commenced pursuant to Section 10.1.2 but before his entire
interest in the Plan has been distributed to him, then the
remaining portion of that interest shall, in accordance with
Section 401(a)(9) of the Code, be distributed at least as rapidly
as under the method of distribution being used under Section
10.1.2 at the date of his death.
(iii) If a married Participant dies before his benefit
payments begin, then unless he has specifically elected otherwise
the Committee shall cause the balance in his Account to be paid to
his Spouse. No election by a married Participant of a different
Beneficiary shall be valid unless the election is accompanied by
the Spouse's written consent, which (i) must acknowledge the
effect of the election, (ii) must explicitly provide either that
the designated Beneficiary may not subsequently be changed by the
Participant without the Spouse's further consent, or that it may
be changed without such consent, and (iii) must be witnessed by
the Committee, its representative, or a notary public. (This
requirement shall not apply if the Participant establishes to the
Committee's satisfaction that the Spouse may not be located.)
10.3 Marital Status. The Committee shall from time to time take
--------------
whatever steps it deems appropriate to keep informed of each Participant's
marital status. Each Employer shall provide the Committee with the most reliable
information in the Employer's possession regarding its Participants' marital
status, and the Committee may, in its discretion, require a notarized affidavit
from any Participant as to his marital status. The Committee, the Plan, the
Trustee, and the Employers shall be fully protected and discharged from any
liability to the extent of any benefit payments made as a result of the
Committee's good faith and reasonable reliance upon information obtained from a
Participant and his Employer as to his marital status.
10.4 Delay in Benefit Determination. If the Committee is unable to
------------------------------
determine the benefits payable to a Participant or Beneficiary on or before the
latest date prescribed for payment pursuant to Section 10.1 or 10.2, the
benefits shall in any event be paid within 60 days after they can first be
determined, with whatever makeup payments may be appropriate in view of the
delay.
10.5 Accounting for Benefit Payments. Any benefit payment shall be
-------------------------------
charged to the Participant's Account as of the first day of the Valuation Period
in which the payment is made.
10.6 Options to Receive and Sell Stock. Unless ownership of virtually
---------------------------------
all Stock is restricted to active Employees and qualified retirement plans for
the benefit of Employees pursuant to the certificates of incorporation or
by-laws of the Employers issuing Stock, a terminated Participant or the
Beneficiary of a deceased Participant may instruct the Committee to distribute
the Participant's entire vested interest in his Account in the form of Stock. In
that event, the Committee shall apply the
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<PAGE>
Participant's vested interest in the Investment Fund to purchase sufficient
Stock from the Stock Fund or from any owner of stock to make the required
distribution. In all other cases, the Participant's vested interest in the
Stock Fund shall be distributed in shares of Stock, and his vested interest in
the Investment Fund shall be distributed in cash.
Any Participant who receives Stock pursuant to Section 10.1, and any person
who has received Stock from the Plan or from such a Participant by reason of the
Participant's death or incompetency, by reason of divorce or separation from the
Participant, or by reason of a rollover contribution described in Section
402(a)(5) of the Code, shall have the right to require the Employer which issued
the Stock to purchase the Stock for its current fair market value (hereinafter
referred to as the "put right"). The put right shall be exercisable by written
notice to the Committee during the first 60 days after the Stock is distributed
by the Plan, and, if not exercised in that period, during the first 60 days in
the following Plan Year after the Committee has communicated to the Participant
its determination as to the Stock's current fair market value. However, the put
right shall not apply to the extent that the Stock, at the time the put right
would otherwise be exercisable, may be sold on an established market in
accordance with federal and state securities laws and regulations. Similarly,
the put option shall not apply with respect to the portion of a Participant's
account which the employee elected to have reinvested under Code Section
401(a)(28)(B). If the put right is exercised, the Trustee may, if so directed
by the Committee in its sole discretion, assume the Employer's rights and
obligations with respect to purchasing the Stock. Notwithstanding anything
herein to the contrary, in the case of a plan established by a Bank (as defined
in Code Section 581), the put option shall not apply if prohibited by a federal
or state law and Participants are entitled to elect their benefits be
distributed in cash.
If a Participant elects to receive his distribution in the form of a lump
sum pursuant to Section 10.1.1 of the Plan, the Employer or the Trustee, as the
case may be, may elect to pay for the Stock in equal periodic installments, not
less frequently than annually, over a period not longer than five years from the
day after the put right is exercised, with adequate security and interest at a
reasonable rate on the unpaid balance, all such terms to be set forth in a
promissory note delivered to the seller with normal terms as to acceleration
upon any uncured default.
If a Participant elects to receive his distribution in the form of an
installment payment pursuant to Section 10.1.2 of the Plan, the Employer or the
Trustee, as the case may be, shall pay for the Stock distributed in the
installment distribution over a period which shall not exceed 30 days after the
exercise of the put right.
Nothing contained herein shall be deemed to obligate any Employer to
register any Stock under any federal or state securities law or to create or
maintain a public market to facilitate the transfer or disposition of any Stock.
The put right described herein may only be exercised by a person described in
the second preceding paragraph, and may not be transferred with any Stock to any
other person. As to all Stock purchased by the Plan in exchange for any Stock
Obligation, the put right shall be nonterminable. The put right for Stock
acquired through a Stock Obligation shall continue with respect to such Stock
after the Stock Obligation is repaid or the Plan ceases to be an employee stock
ownership plan.
10.7 Restrictions on Disposition of Stock. Except in the case of
------------------------------------
Stock which is traded on an established market, a Participant who receives Stock
pursuant to Section 10.1, and any person who has received Stock from the Plan or
from such a Participant by reason of the Participant's death or incompetency, by
reason of divorce or separation from the Participant, or by reason of a rollover
contribution described in Section 402(a)(5) of the Code, shall, prior to any
sale or other transfer of the Stock to any other person, first offer the Stock
to the issuing Employer and to the Plan at the greater of
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<PAGE>
(i) its current fair market value, or (ii) the purchase price offered in good
faith by an independent third party purchaser. This restriction shall apply to
any transfer, whether voluntary, involuntary, or by operation of law, and
whether for consideration or gratuitous. Either the Employer or the Trustee may
accept the offer within 14 days after it is delivered. Any Stock distributed by
the Plan shall bear a conspicuous legend describing the right of first refusal
under this Section 10.7, as well as any other restrictions upon the transfer of
the Stock imposed by federal and state securities laws and regulations.
10.8 Continuing Loan Provisions; Creations of Protections and Rights.
---------------------------------------------------------------
Except as otherwise provided in Sections 10.6 and 10.7 and this Section, no
shares of Employer Stock held or distributed by the Trustee may be subject to a
put, call or other option, or buy-sell arrangement. The provisions of this
Section shall continue to by applicable to such Stock even if the Plan ceases to
be an employee stock ownership plan under Section 4975(e)(7) of the Code.
10.9 Direct Rollover of Eligible Distribution. A Participant or
----------------------------------------
distributee may elect, at the time and in the manner prescribed by the Trustee
or the Committee, to have any portion of an eligible rollover distribution paid
directly to an eligible retirement plan specified by the Participant or
distributee in a direct rollover.
10.9-1 An "eligible rollover" is any distribution that does not
include: any distribution that is one of a series of substantially equal
periodic payments (not less frequently than annually) made for the life (or
life expectancy) of the distributee or the joint lives (or joint life
expectancies) of the Participant and the Participant's Beneficiary, or for
a specified period of ten years or more; any distribution to the extent
such distribution is required under Code Section 401(a)(9); and the portion
of any distribution that is not included in gross income (determined
without regard to the exclusion for net unrealized appreciation with
respect to employer securities).
10.9-2 An "eligible retirement plan" is an individual
retirement account described in Code Section 401(a), an individual
retirement annuity described in Code Section 408(b), an annuity plan
described in Code Section 403(a), or a qualified trust described in Code
Section 401(a), that accepts the distributee's eligible rollover
distribution. However, in the case of an eligible rollover distribution to
the surviving spouse, an eligible retirement plan is an individual
retirement account or individual retirement annuity.
10.9-3 A "direct rollover" is a payment by the Plan to the
eligible retirement plan specified by the distributee.
10.9-4 The term "distributee" shall refer to a deceased
Participant's spouse or a Participant's former spouse who is the alternate
payee under a qualified domestic relations order, as defined in Code
Section 414(p).
10.10 In Service Distribution of Roll-over Account. Upon the written
--------------------------------------------
election of a Participant delivered to the Committee, all or any portion of the
amounts held in the Participant's Roll-over Account, shall be distributed to the
Participant at any time within 30 days or as soon thereafter as is reasonably
practicable.
-23-
<PAGE>
10.11 Waiver of 30 Day Period After Notice of Distribution. If a
----------------------------------------------------
distribution is one to which Sections 401(a)(11) and 417 of the Code do not
apply, such distribution may commence less than 30 days after the notice
required under Section 4.11(a)-11(c) of the Income Tax Regulations is given,
provided that:
(i) the Trustee or Administrative Committee, as
applicable, clearly informs the Participant that the
Participant has a right to a period of at least 30
days after receiving the notice to consider the
decision of whether or not to elect a distribution
(and, if applicable, a particular option), and
(ii) the Participant, after receiving the notice,
affirmatively elects a distribution.
Section 11. Rules Governing Benefit Claims and Review of Appeals.
----------------------------------------------------
11.1 Claim for Benefits. Any Participant or Beneficiary who qualifies
------------------
for the payment of benefits shall file a claim for his benefits with the
Committee on a form provided by the Committee. The claim, including any election
of an alternative benefit form, shall be filed at least 30 days before the date
on which the benefits are to begin. If a Participant or Beneficiary fails to
file a claim by the day before the date on which benefits become payable, he
shall be presumed to have filed a claim for payment for the Participant's
benefits in the standard form prescribed by Sections 10.1 or 10.2
11.2 Notification by Committee. Within 90 days after receiving a
-------------------------
claim for benefits (or within 180 days, if special circumstances require an
extension of time and written notice of the extension is given to the
Participant or Beneficiary within 90 days after receiving the claim for
benefits), the Committee shall notify the Participant or Beneficiary whether the
claim has been approved or denied. If the Committee denies a claim in any
respect, the Committee shall set forth in a written notice to the Participant or
Beneficiary:
(i) each specific reason for the denial;
(ii) specific references to the pertinent Plan provisions on
which the denial is based;
(iii) a description of any additional material or information
which could be submitted by the Participant or Beneficiary to support his
claim, with an explanation of the relevance of such information; and
(iv) an explanation of the claims review procedures set forth
in Section 11.3.
11.3 Claims Review Procedure. Within 60 days after a Participant or
-----------------------
Beneficiary receives notice from the Committee that his claim for benefits has
been denied in any respect, he may file with the Committee a written notice of
appeal setting forth his reasons for disputing the Committee's determination.
In connection with his appeal the Participant or Beneficiary or his
representative may inspect or purchase copies of pertinent documents and records
to the extent not inconsistent with other Participants' and Beneficiaries'
rights of privacy. Within 60 days after receiving a notice of appeal from a
prior determination (or within 120 days, if special circumstances require an
extension of time and written notice of the extension is given to the
Participant or Beneficiary and his representative within 60 days after receiving
the notice of appeal), the Committee shall furnish to the Participant or
Beneficiary
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and his representative, if any, a written statement of the Committee's final
decision with respect to his claim, including the reasons for such decision and
the particular Plan provisions upon which it is based.
Section 12. The Committee and Its Functions.
-------------------------------
12.1 Authority of Committee. The Committee shall be the "plan
----------------------
administrator" within the meaning of ERISA and shall have exclusive
responsibility and authority to control and manage the operation and
administration of the Plan, including the interpretation and application of its
provisions, except to the extent such responsibility and authority are otherwise
specifically (i) allocated to the Bank, the Employers, or the Trustee under the
Plan and Trust Agreement, (ii) delegated in writing to other persons by the
Bank, the Employers, the Committee, or the Trustee, or (iii) allocated to other
parties by operation of law. The Committee shall have exclusive responsibility
regarding decisions concerning the payment of benefits under the Plan. The
Committee shall have no investment responsibility with respect to the Investment
Fund except to the extent, if any, specifically provided in the Trust Agreement.
In the discharge of its duties, the Committee may employ accountants, actuaries,
legal counsel, and other agents (who also may be employed by an Employer or the
Trustee in the same or some other capacity) and may pay their reasonable
expenses and compensation.
12.2 Identity of Committee. The Committee shall consists of three or
---------------------
more individuals selected by the Bank. Any individual, including a director,
trustee, shareholder, officer, or employee of an Employer, shall be eligible to
serve as a member of the Committee. The Bank shall have the power to remove any
individual serving on the Committee at any time without cause upon 10 days
written notice, and any individual may resign from the Committee at any time
upon 10 days written notice to the Bank. The Bank shall notify the Trustee of
any change in membership of the Committee.
12.3 Duties of Committee. The Committee shall keep whatever records
-------------------
may be necessary to implement the Plan and shall furnish whatever reports may be
required from time to time by the Bank. The Committee shall furnish to the
Trustee whatever information may be necessary to properly administer the Trust.
The Committee shall see to the filing with the appropriate government agencies
of all reports and returns required of the plan Committee under ERISA and other
laws.
Further, the Committee shall have exclusive responsibility and authority
with respect to the Plan's holdings of Stock and shall direct the Trustee in all
respects regarding the purchase, retention, sale, exchange, and pledge of Stock
and the creation and satisfaction of Stock Obligations. The Committee shall at
all times act consistently with the Bank's long-term intention that the Plan, as
an employee stock ownership plan, be invested primarily in Stock. Subject to the
direction of the Board as to the application of Employer contributions to Stock
Obligations, and subject to the provisions of Sections 6.4 and 10.6 as to
Participants' rights under certain circumstances to have their Accounts invested
in Stock or in assets other than Stock, the Committee shall determine in its
sole discretion the extent to which assets of the Trust shall be used to repay
Stock Obligations, to purchase Stock, or to invest in other assets to be
selected by the Trustee or an investment manager. No provision of the Plan
relating to the allocation or vesting of any interests in the Stock Fund or the
Investment Fund shall restrict the Committee from changing any holdings of the
Trust, whether the changes involve an increase or a decrease in the Stock or
other assets credited to Participants' Accounts. In determining the proper
extent of the Trust's investment in Stock, the Committee shall be authorized to
employ investment counsel, legal counsel, appraisers, and other agents to pay
their reasonable expenses and compensation.
12.4 Valuation of Stock. If the valuation of any Stock is not established by
------------------
reported trading on a generally recognized public market, the Committee shall
have the exclusive authority and responsibility to determine its value for all
purposes under the Plan. Such value shall be determined as
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of each Valuation Date, and on any other date as of which the Plan purchases or
sells such Stock. The Committee shall use generally accepted methods of valuing
stock of similar corporations for purposes of arm's length business and
investment transactions, and in this connection the Committee shall obtain, and
shall be protected in relying upon, the valuation of such Stock as determined by
an independent appraiser experienced in preparing valuations of similar
businesses.
12.5 Compliance with ERISA. The Committee shall perform all acts
---------------------
necessary to comply with ERISA. Each individual member or employee of the
Committee shall discharge his duties in good faith and in accordance with the
applicable requirements of ERISA.
12.6 Action by Committee. All actions of the Committee shall be
-------------------
governed by the affirmative vote of a number of members which is a majority of
the total number of members currently appointed, including vacancies. The
members of the Committee may meet informally and may take any action without
meeting as a group.
12.7 Execution of Documents. Any instrument executed by the Committee
----------------------
shall be signed by any member or employee of the Committee.
12.8 Adoption of Rules. The Committee shall adopt such rules and
-----------------
regulations of uniform applicability as it deems necessary or appropriate for
the proper administration and interpretation of the Plan.
12.9 Responsibilities to Participants. The Committee shall determine
--------------------------------
which Employees qualify to enter the Plan. The Committee shall furnish to each
eligible Employee whatever summary plan descriptions, summary annual reports,
and other notices and information may be required under ERISA. The Committee
also shall determine when a Participant or his Beneficiary qualifies for the
payment of benefits under the Plan. The Committee shall furnish to each such
Participant or Beneficiary whatever information is required under ERISA (or is
otherwise appropriate) to enable the Participant or Beneficiary to make whatever
elections may be available pursuant to Sections 6 and 10, and the Committee
shall provide for the payment of benefits in the proper form and amount from the
assets of the Trust Fund. The Committee may decide in its sole discretion to
permit modifications of elections and to defer or accelerate benefits to the
extent consistent with applicable law and the best interests of the individuals
concerned.
12.10 Alternative Payees in Event of Incapacity. If the Committee
-----------------------------------------
finds at any time that an individual qualifying for benefits under this Plan is
a minor or is incompetent, the Committee may direct the benefits to be paid, in
the case of a minor, to his parents, his legal guardian, or a custodian for him
under the Uniform Gifts to Minors Act, or, in the case of an incompetent, to his
spouse, or his legal guardian, the payments to be used for the individual's
benefit. The Committee and the Trustee shall not be obligated to inquire as to
the actual use of the funds by the person receiving them under this Section
12.10, and any such payment shall completely discharge the obligations of the
Plan, the Trustee, the Committee, and the Employers to the extent of the
payment.
12.11 Indemnification by Employers. Except as separately agreed in
----------------------------
writing, the Committee, and any member or employee of the Committee, shall be
indemnified and held harmless by the Employer, jointly and severally, to the
fullest extent permitted by law against any and all costs, damages, expenses,
and liabilities reasonably incurred by or imposed upon it or him in connection
with any claim made against it or him or in which it or he may be involved by
reason of its or his being, or having been, the Committee, or a member or
employee of the Committee, to the extent such amounts are not paid by insurance.
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<PAGE>
12.12 Nonparticipation by Interested Member. Any member of the
-------------------------------------
Committee who also is a Participant in the Plan shall take no part in any
determination specifically relating to his own participation or benefits, unless
his abstention would leave the Committee incapable of acting on the matter.
Section 13. Adoption, Amendment, or Termination of the Plan.
-----------------------------------------------
13.1 Adoption of Plan by Other Employers. With the consent of the
-----------------------------------
Bank, any entity may become a participating Employer under the Plan by
(i) taking such action as shall be necessary to adopt the Plan, (ii) becoming a
party to the Trust Agreement establishing the Trust Fund, and (iii) executing
and delivering such instruments and taking such other action as may be necessary
or desirable to put the Plan into effect with respect to the entity's Employees.
13.2 Adoption of Plan by Successor. In the event that any Employer
-----------------------------
shall be reorganized by way of merger, consolidation, transfer of assets or
otherwise, so that an entity other than an Employer shall succeed to all or
substantially all of the Employer's business, the successor entity may be
substituted for the Employer under the Plan by adopting the Plan and becoming a
party to the Trust Agreement. Contributions by the Employer shall be
automatically suspended from the effective date of any such reorganization until
the date upon which the substitution of the successor entity for the Employer
under the Plan becomes effective. If, within 90 days following the effective
date of any such reorganization, the successor entity shall not have elected to
become a party to the Plan, or if the Employer shall adopt a plan of complete
liquidation other than in connection with a reorganization, the Plan shall be
automatically terminated with respect to Employees of the Employer as of the
close of business on the 90th day following the effective date of the
reorganization, or as of the close of business on the date of adoption of a plan
of complete liquidation, as the case may be.
13.3 Plan Adoption Subject to Qualification. Notwithstanding any other
--------------------------------------
provision of the Plan, the adoption of the Plan and the execution of the Trust
Agreement are conditioned upon their being determined initially by the Internal
Revenue Service to meet the qualification requirements of Section 401(a) of the
Code, so that the Employers may deduct currently for federal income tax purposes
their contributions to the Trust and so that the Participants may exclude the
contributions from their gross income and recognize income only when they
receive benefits. In the event that this Plan is held by the Internal Revenue
Service not to qualify initially under Section 401(a), the Plan may be amended
retroactively to the earliest date permitted by U.S. Treasury Regulations in
order to secure qualification under Section 401(a). If this Plan is held by
the Internal Revenue Service not to qualify initially under Section 401(a)
either as originally adopted or as amended, each Employer's contributions to the
Trust under this Plan (including any earnings thereon) shall be returned to it
and this Plan shall be terminated. In the event that this Plan is amended after
its initial qualification and the Plan as amended is held by the Internal
Revenue Service not to qualify under Section 401(a), the amendment may be
modified retroactively to the earliest date permitted by U.S. Treasury
Regulations in order to secure approval of the amendment under Section 401(a).
13.4 Right to Amend or Terminate. The Bank intends to continue this
---------------------------
Plan as a permanent program. However, each participating Employer separately
reserves the right to suspend, supersede, or terminate the Plan at any time and
for any reason, as it applies to that Employer's Employees, and the Bank
reserves the right to amend, suspend, supersede, merge, consolidate, or
terminate the Plan at any time and for any reason, as it applies to the
Employees of each Employer. No amendment, suspension, supersession, merger,
consolidation, or termination of the Plan shall (i) reduce any Participant's or
Beneficiary's proportionate interest in the Trust Fund, (ii) reduce or restrict,
either directly or indirectly, the benefit provided any Participant prior to the
amendment, or (iii) divert any portion of the Trust Fund
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<PAGE>
to purposes other than the exclusive benefit of the Participants and their
Beneficiaries prior to the satisfaction of all liabilities under the Plan.
Moreover, there shall not be any transfer of assets to a successor plan or
merger or consolidation with another plan unless, in the event of the
termination of the successor plan or the surviving plan immediately following
such transfer, merger, or consolidation, each participant or beneficiary would
be entitled to a benefit equal to or greater than the benefit he would have been
entitled to if the plan in which he was previously a participant or beneficiary
had terminated immediately prior to such transfer, merger, or consolidation.
Following a termination of this Plan by the Bank, the Trustee shall continue to
administer the Trust and pay benefits in accordance with the Plan as amended
from time to time and the Committee's instructions.
Section 14. Miscellaneous Provisions.
------------------------
14.1 Plan Creates No Employment Rights. Nothing in this Plan shall be
---------------------------------
interpreted as giving any Employee the right to be retained as an Employee by an
Employer, or as limiting or affecting the rights of an Employer to control its
Employees or to terminate the Service of any Employee at any time and for any
reason, subject to any applicable employment or collective bargaining
agreements.
14.2 Nonassignability of Benefits. No assignment, pledge, or other
----------------------------
anticipation of benefits from the Plan will be permitted or recognized by the
Employer, the Committee, or the Trustee. Moreover, benefits from the Plan shall
not be subject to attachment, garnishment, or other legal process for debts or
liabilities of any Participant or Beneficiary, to the extent permitted by law.
This prohibition on assignment or alienation shall apply to any judgment,
decree, or order (including approval of a property settlement agreement) which
relates to the provision of child support, alimony, or property rights to a
present or former spouse, child or other dependent of a Participant pursuant to
a State domestic relations or community property law, unless the judgment,
decree, or order is determined by the Committee to be a qualified domestic
relations order within the meaning of Section 414(p) of the Code, as more fully
set forth in Section 14.2 hereof.
14.3 Limit of Employer Liability. The liability of the Employer with
---------------------------
respect to Participants under this Plan shall be limited to making contributions
to the Trust from time to time, in accordance with Section 4.
14.4 Treatment of Expenses. All expenses incurred by the Committee
---------------------
and the Trustee in connection with administering this Plan and Trust Fund shall
be paid by the Trustee from the Trust Fund to the extent the expenses have not
been paid or assumed by the Employer or by the Trustee.
14.5 Number and Gender. Any use of the singular shall be interpreted
-----------------
to include the plural, and the plural the singular. Any use of the masculine,
feminine, or neuter shall be interpreted to include the masculine, feminine, or
neuter, as the context shall require.
14.6 Nondiversion of Assets. Except as provided in Sections 5.3 and
----------------------
13.3, under no circumstances shall any portion of the Trust Fund be diverted to
or used for any purpose other than the exclusive benefit of the Participants and
their Beneficiaries prior to the satisfaction of all liabilities under the Plan.
14.7 Separability of Provisions. If any provision of this Plan is
--------------------------
held to be invalid or unenforceable, the other provisions of the Plan shall not
be affected but shall be applied as if the invalid or unenforceable provision
had not been included in the Plan.
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<PAGE>
14.8 Service of Process. The agent for the service of process upon
------------------
the Plan shall be the president of the Bank, or such other person as may be
designated from time to time by the Bank.
14.9 Governing State Law. This Plan shall be interpreted in
-------------------
accordance with the laws of the State of Missouri to the extent those laws are
applicable under the provisions of ERISA.
14.10 Employer Contributions Conditioned on Deductibility. Employer
---------------------------------------------------
Contributions to the Plan are conditioned on deductibility under Code
Section 404. In the event that the Internal Revenue Service shall determine that
all or any portion of an Employer Contribution is not deductible under that
Section, the nondeductible portion shall be returned to the Employer within one
year of the disallowance of the deduction.
14.11 Unclaimed Accounts. Neither the Employer nor the Trustees shall
------------------
be under any obligation to search for, or ascertain the whereabouts of, any
Participant or beneficiary. The Employer or the Trustees, by certified or
registered mail addressed to his last known address of record with the Employer,
shall notify any Participant or beneficiary that he is entitled to a
distribution under this Plan, and the notice shall quote the provisions of this
Section. If the Participant or beneficiary fails to claim his benefits or make
his whereabouts known in writing to the Employer or the Trustees within seven
(7) calendar years after the date of notification, the benefits of the
Participant or beneficiary under the Plan will be disposed of as follows:
(a) If the whereabouts of the Participant is unknown but the
whereabouts of the Participant's beneficiary is known to the Trustees,
distribution will be made to the beneficiary.
(b) If the whereabouts of the Participant and his beneficiary
are unknown to the Trustees, the plan will forfeit the benefit, provided
that the benefit is subject to a claim for reinstatement if the Participant
or Beneficiary make a claim for the forfeited benefit.
Any payment made pursuant to the power herein conferred upon the Trustees
shall operate as a complete discharge of all obligations of the Trustees, to the
extent of the distributions so made.
14.12 Qualified Domestic Relations Order. Section 14.2 shall not
----------------------------------
apply to a "qualified domestic relations order" defined in Code Section 414(p),
and such other domestic relations orders permitted to be so treated by
Administrator under the provisions of the Retirement Equity Act of 1984.
Further, to the extent provided under a "qualified domestic relations order", a
former spouse of a Participant shall be treated as the spouse or surviving
spouse for all purposes under the Plan.
In the case of any domestic relations order received by the Plan:
(a) The Employer or the Plan Committee shall promptly notify
the Participant and any other alternate payee of the receipt of such order and
the Plan's procedures for determining the qualified status of domestic relations
orders, and
(b) Within a reasonable period after receipt of such order,
the Employer or the Plan Committee shall determine whether such order is a
qualified domestic relations order and notify the Participant and each alternate
payee of such determination. The Employer or the Plan Committee shall establish
reasonable procedures to determine the qualified status of domestic relations
orders and to administer distributions under such qualified orders.
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<PAGE>
During any period in which the issue of whether a domestic relations
order is a qualified domestic relations order is being determined (by the
Employer or Plan Committee, by a court of competent jurisdiction, or otherwise),
the Employer or the Plan Committee shall segregate in a separate account in the
Plan or in an escrow account the amounts which would have been payable to the
alternate payee during such period if the order had been determined to be a
qualified domestic relations order. If within eighteen (18) months the order (or
modification thereof) is determined to be a qualified domestic relations order,
the Employer or the Plan Committee shall pay the segregated amounts (plus any
interest thereon) to the person or persons entitled thereto. If within eighteen
(18) months it is determined that the order is not a qualified domestic
relations order, or the issue as to whether such order is a qualified domestic
relations order is not resolved, then the Employer or the Plan Committee shall
pay the segregated amounts (plus any interest thereon) to the person or persons
who would have been entitled to such amounts if there had been no order. Any
determination that an order is a qualified domestic relations order which is
made after the close of the eighteen (18) month period shall be applied
prospectively only. The term "alternate payee" means any spouse, former spouse,
child or other dependent of a Participant who is recognized by a domestic
relations order as having a right to receive all, or a portion of, the benefit
payable under a Plan with respect to such Participant.
Section 15. Top-Heavy Provisions.
--------------------
15.1 Top-Heavy Plan. For any Plan Year beginning after
--------------
December 31, 1983, this Plan is top-heavy if any of the following conditions
exist:
(a) If the top-heavy ratio for this Plan exceeds sixty
percent (60%) and this Plan is not part of any required aggregation group or
permissive aggregation group;
(b) If this Plan is a part of a required aggregation group
(but is not part of a permissive aggregation group) and the aggregate top-heavy
ratio for the group of Plans exceeds sixty percent (60%); or
(c) If this Plan is a part of a required aggregation group and
part of a permissive aggregation group and the aggregate top-heavy ratio for the
permissive aggregation group exceeds sixty percent (60%).
15.2 Super Top-Heavy Plan. For any Plan Year beginning after
--------------------
December 31, 1983, this Plan will be a super top-heavy Plan if any of the
following conditions exist:
(a) If the top-heavy ratio for this Plan exceeds ninety
percent (90%) and this Plan is not part of any required aggregation group or
permissive aggregation group.
(b) If this Plan is a part of a required aggregation group
(but is not part of a permissive aggregation group) and the aggregate top-heavy
ratio for the group of Plans exceeds ninety percent (90%), or
(c) If this Plan is a part of a required aggregation group
and part of a permissive aggregation group and the aggregate top-heavy ratio for
the permissive aggregation group exceeds ninety percent (90%).
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<PAGE>
15.3 Definitions.
-----------
In making this determination, the Committee shall use the following definitions
and principles:
15.3-1 The "Determination Date', with respect to the first Plan
Year of any plan, means the last day of that Plan Year, and with respect to
each subsequent Plan Year, means the last day of the preceding Plan Year.
If any other plan has a Determination Date which differs from this Plan's
Determination Date, the top-heaviness of this Plan shall be determined on
the basis of the other plan's Determination Date falling within the same
calendar years as this Plan's Determination Date.
15.3-2 A "Key Employee", with respect to a Plan Year, means an
Employee who at any time during the five years ending on the top-heavy
Determination Date for the Plan Year has received compensation from an
Employer and has been (i) an officer of the Employer having Total
Compensation greater than 50 percent of the limit then in effect under
Section 415(b)(1)(A) of the Code, (ii) one of the 10 Employees owning the
largest interests in the Employer having Total Compensation greater than
the limit then in effect under Section 415(c)(1)(A), (iii) an owner of more
than five percent of the outstanding equity interest or the outstanding
voting interest in any Employer, or (iv) an owner of more than one percent
of the outstanding equity interest or the outstanding voting interest in an
Employer whose annual compensation exceeds $150,000. For purposes of
determining whether an Employee is a Key Employee, annual compensation
means compensation as defined in Section 415(c)(3) of the Code, but
including amounts contributed by the Employee pursuant to a salary
reduction agreement which are excludable from the Employee's gross income
under Section 125, Section 402(e)(3), Section 402(H)(1)(B) or Section
403(b) of the Code. The Beneficiary of a Key Employee shall also be
considered a Key Employee.
15.3-3 A "Non-key Employee" means an Employee who at any time
during the five years ending on the top-heavy Determination Date for the
Plan Year has received compensation from an Employer and who has never been
a Key Employee, and the Beneficiary of any such Employee.
15.3-4 A "required aggregation group" includes (a) each qualified
Plan of the Employer in which at least one Key Employee participates in the
Plan Year containing the Determination Date and any of the four (4)
preceding Plan Years, and (b) any other qualified Plan of the Employer
which enables a Plan described in (a) to meet the requirements of Code
Sections 401(a)(4) and 410. For purposes of the preceding sentence, a
qualified Plan of the Employer includes a terminated Plan maintained by the
Employer within the five (5) year period ending on the Determination Date.
In the case of a required aggregation group, each Plan in the group will be
considered a top-heavy Plan if the required aggregation group is a
top-heavy group. No Plan in the required aggregation group will be
considered a top-heavy Plan if the required aggregation group is not a
top-heavy group. All Employers aggregated under Code Sections 414(b), (c)
or (m) or (o) (but only after the Code Section 414(o) regulations become
effective) are considered a single Employer.
15.3-5 A "permissive aggregation group" includes the required
aggregation group of Plans plus any other qualified Plan(s) of the Employer
that are not required to be aggregated but which, when considered as a
group with the required aggregation group, satisfy the requirements of Code
Sections 401(a)(4) and 410 and are comparable to the Plans in the required
aggregation
-31-
<PAGE>
group. No Plan in the permissive aggregation group will be considered a
top-heavy Plan if the permissive aggregation group is not a top-heavy
group. Only a Plan that is part of the required aggregation group will be
considered a top-heavy Plan if the permissive aggregation group is
top-heavy.
15.4 Top-Heavy Rules of Application.
------------------------------
For purposes of determining the value of account balances and
the present value of accrued benefits the following provisions shall apply:
15.4-1 The value of account balances and the present value of
accrued benefits will be determined as of the most recent valuation date
that falls within or ends with the twelve (12) month period ending on the
Determination Date.
15.4-2 For purposes of testing whether this Plan is top-heavy,
the present value of an individual's accrued benefits and an individual's
account balances is counted only once each year.
15.4-3 The account balances and accrued benefits of a
Participant who is not presently a Key Employee but who was a Key Employee
in a Plan Year beginning on or after January 1, 1984 will be disregarded.
15.4-4 For years beginning after December 31, 1984,
non-deductible Voluntary Employee Contributions will be taken into account
for purposes of computing the top-heavy ratio. Employer contributions
attributable to a salary reduction or similar arrangement will be taken
into account.
15.4-5 When aggregating Plans, the value of account balances
and accrued benefits will be calculated with reference to the Determination
Dates that fall within the same calendar year.
15.4-6 The present value of the accrued benefits or the amount of
the account balances of an Employee shall be increased by the aggregate
distributions made to such Employee from a Plan of the Employer. No
distribution, however, made from the Plan to an individual (other than the
beneficiary of a deceased Employee who was an Employee within the five (5)
year period ending on the Determination Date) who has not been an Employee
at any time during the five (5) year period ending on the Determination
Date shall be taken into account in determining whether the Plan is
top-heavy. Also, any amounts recontributed by an Employee upon becoming a
Participant in the Plan shall no longer be counted as a distribution under
this paragraph.
15.4-7 The present value of the accrued benefits or the amount
of the account balances of an Employee shall be increased by the aggregate
distributions made to such Employee from a terminated Plan of the Employer,
provided that such Plan (if not terminated) would have been required to be
included in the aggregation group.
15.4-8 Accrued benefits and account balances of an individual
shall not be taken into account for purposes of determining the top-heavy
ratios if the individual has performed no services for the Employer during
the five (5) year period ending on the applicable Determination Date.
Compensation for purposes of this subparagraph shall not include any
payments made to an individual by the Employer pursuant to a qualified or
non-qualified deferred compensation plan.
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<PAGE>
15.4-9 The present value of the accrued benefits or the amount
of the account balances of any Employee participating in this Plan shall
not include any rollover contributions or other transfers voluntarily
initiated by the Employee except as described below. If a rollover was
received by this Plan after December 31, 1983, the rollover or transfer
voluntarily initiated by the Employee was received prior to January 1,
1984, then the rollover or transfer shall be considered as part of the
accrued benefit by the Plan receiving such rollover or transfer. If this
Plan transfers or rolls over funds to another Plan in a transaction
voluntarily initiated by the Employee after December 31, 1983, then this
Plan shall count the distribution for purposes of determining account
balances or the present value of accrued benefits. A transfer incident to a
merger or consolidation of two or more Plans of the Employer (including
Plans of related Employers treated as a single Employer under Code Section
414), or a transfer or rollover between Plans of the Employer, shall not be
considered as voluntarily initiated by the Employee.
15.5 Top-Heavy Ratio.
---------------
If the Employer maintains one (1) or more defined contribution plans
(including any simplified Employee pension plan) and the Employer has never
maintained any defined benefit plans which have covered or could cover a
Participant in this Plan, the top-heavy ratio is a fraction, the numerator of
which is the sum of the account balances of all Key Employees as of the
Determination Date, and the denominator of which is the sum of the account
balances of all Employees as of the Determination Date. Both the numerator and
denominator of the top-heavy ratio shall be increased to reflect any
contribution which is due but unpaid as of the Determination Date.
If the Employer maintains one (1) or more defined contribution plans
(including any simplified Employee pension plan) and the Employer maintains or
has maintained one (1) or more defined benefit plans which have covered or could
cover a Participant in this Plan, the top-heavy ratio is a fraction, the
numerator of which is the sum of account balances under the defined contribution
plans for all Key Employees and the present value of accrued benefits under the
defined benefit plans for all Key Employees, and the denominator of which is the
sum of the account balances under the defined contribution plans for all
Employees and the present value of accrued benefits under the defined benefit
plans for all Employees.
15.6 Minimum Contributions. For any Top-Heavy Year, each Employer
---------------------
shall make a special contribution on behalf of each Participant to the extent
that the total allocations to his Account pursuant to Section 4 is less than the
lesser of:
(i) three percent of his Total Compensation for that year, or
(ii) the highest ratio of such allocation to Total Compensation
received by any Key Employee for that year. For purposes of the special
contribution of this Section 15.2, a Key Employee's Total Compensation
shall include amounts the Key Employee elected to defer under a qualified
401(k) arrangement. Such a special contribution shall be made on behalf of
each Participant who is employed by an Employer on the last day of the Plan
Year, regardless of the number of his Hours of Service, and shall be
allocated to his Account.
For any Plan Year when (1) the Plan is top-heavy and (2) a Non-key
Employee is a Participant in both this Plan and a defined benefit plan included
in the plan aggregation group which is top heavy, the sum of the Employer
contributions and forfeitures allocated to the Account of each such Non-key
Employee shall be equal to at least five percent (5%) of such Non-key Employee's
Total Compensation for that year.
-33-
<PAGE>
15.7 Minimum Vesting. If a Participant's vested interest in his
---------------
Account is to be determined in a Top-Heavy Year, it shall be based on the
following "top-heavy table":
<TABLE>
<CAPTION>
Vesting Percentage of
Years Interest Vested
------- ---------------
<S> <C>
Fewer than 3 years 0%
3 or more 100%
</TABLE>
15.8 Top-Heavy Provisions Control in Top-Heavy Plan. In the event
----------------------------------------------
this Plan becomes top-heavy and a conflict arises between the top-heavy
provisions herein set forth and the remaining provisions set forth in this Plan,
the top-heavy provisions shall control.
-34-
<PAGE>
Exhibit 10.3
ADOPTION AGREEMENT #006
---
STANDARDIZED CODE (S)401(k) PLAN
(PAIRED PROFIT SHARING PLAN)
The undersigned, Investor Federal Bank & Savings Association
-------------------------------------------
("Employer"), by executing this Adoption Agreement, elects to become a
participating Employer in the Commerce Bank, N. A. Master Plan Defined
--------------------------------
Contribution Master Plan (basic plan document #01) by adopting the accompanying
--
Plan and Trust in full as if the Employer were a signatory to that Agreement.
The Employer makes the following elections granted under the provisions of the
Master Plan.
ARTICLE I
DEFINITIONS
1.02 TRUSTEE. The Trustee executing this Adoption Agreement is:
-------
(Choose (a) or (b))
[X] (a) A discretionary Trustee. See Section 10.03[A] of the Plan.
[ ] (b) A nondiscretionary Trustee. See Section 10.03[B] of the
Plan. [Note: The Employer may not elect Option (b) if a Custodian
executes the Adoption Agreement.]
1.03 PLAN. The name of the Plan as adopted by the Employer is
----
Investors Federal Bank & Savings Association Employee Profit Sharing Plan.
- -------------------------------------------------------------------------
1.07 EMPLOYEE. The following Employees are not eligible to
--------
participate in the Plan: (Choose (a) or at least one of (b) or (c))
[X] (a) No exclusions.
[ ] (b) Collective bargaining employees (as defined in Section 1.07
of the Plan). [Note: If the Employer excludes union employees
from the Plan, the Employer must be able to provide evidence that
retirement benefits were the subject of good faith bargaining.]
[ ] (c) Nonresident aliens who do not receive any earned income (as
defined in Code (S)911(d)(2)) from the Employer which constitutes
United States source income (as defined in Code (S)861(a)(3)).
Related Employers/Leased Employees. An Employee of any member of the Employer's
related group (as defined in Section 1.30 of the Plan), and any Leased Employee
treated as an Employee under Section 1.31 of the Plan, is eligible to
participate in the Plan, unless excluded by reason of Options (b) or (c). [Note:
A related group member may not contribute to this Plan unless it executes a
Participation Agreement, even if its Employees are Participants in the Plan.]
1.12 COMPENSATION.
------------
Treatment of elective contributions. (Choose (a) or (b))
[ ] (a) "Compensation" includes elective contributions made by the
Employer on the Employee's behalf.
[X] (b) "Compensation" does not include elective contributions.
Modifications to Compensation definition. (Choose (c) or at least one of
(d) and (e))
[X] (c) No modifications other than as elected under Options (a) or (b).
[ ] (d) The Plan excludes Compensation in excess of $ .
-------------
<PAGE>
[ ] (e) In lieu of the definition in Section 1.12 of the Plan,
Compensation means any earnings reportable as W-2 wages for Federal
income tax withholding purposes, subject to any other election under
this Adoption Agreement Section 1.12.
Special definition for salary reduction contributions. An Employee's salary
reduction agreement applies to his Compensation determined prior to the
reduction authorized by that salary reduction agreement, with the following
exceptions: (Choose (f) or any combination of (g) and (h), if applicable)
[X] (f) No exceptions.
[ ] (g) The dollar limitation described in Option (d) does not
apply.
[ ] (h) If the Employee makes elective contributions to another plan
maintained by the Employer, the Advisory Committee will determine the
amount of the Employee's salary reduction contribution for the
withholding period: (Choose (1) or (2))
[ ] (1) After the reduction for such period of elective
contributions to the other plan(s).
[ ] (2) Prior to the reduction for such period of elective
contributions to the other plan(s).
1.17 PLAN YEAR/LIMITATION YEAR.
-------------------------
Plan Year. Plan Year means: (Choose (a) or (b))
[X] (a) The 12 consecutive month period ending every December 31.
-----------
[ ] (b) (Specify)
-------------------------------------------------------
.
------------------------
Limitation Year. The Limitation Year is: (Choose (c) or (d))
[X] (c) The Plan Year.
[ ] (d) The 12 consecutive month period ending every .
------
1.18 EFFECTIVE DATE.
--------------
New Plan. The "Effective Date" of the Plan is .
--------------------
Restated Plan. The restated Effective Date is January 1, 1992.
---------------
This Plan is a substitution and amendment of an existing retirement plan(s)
originally established December 28, 1978. [Note: See the Effective Date
-----------------
Addendum.]
1.27 HOUR OF SERVICE. The crediting method for Hours of Service
---------------
is: (Choose (a) or (b))
[X] (a) The actual method.
[ ] (b) The equivalency method, except:
[ ] (1) No exceptions.
[ ] (2) The actual method applies for purposes of: (Choose at
least one)
[ ] (i) Participation under Article II.
2
<PAGE>
[ ] (ii) Vesting under Article V.
[ ] (iii) Accrual of benefits under Section 3.06.
[Note: On the blank line, insert "daily," "weekly," "semi-monthly payroll
periods" or "monthly."]
1.29 SERVICE FOR PREDECESSOR EMPLOYER. In addition to the
--------------------------------
predecessor service the Plan must credit by reason of Section 1.29 of
the Plan, the Plan credits Service with the following predecessor
employer(s): Investors Federal Savings & Loan Association
------------------------------------------------------------------.
Service with the designated predecessor employer(s) applies: (Choose at
least one of (a) or (b))
[X] (a) For purposes of participation under Article II.
[X] (b) For purposes of vesting under Article V.
[Note: If the Plan does not credit any predecessor service under this provision,
insert "N/A" in the first blank line. The Employer may attach a schedule to this
Adoption Agreement, in the same format as this Section 1.29, designating
additional predecessor employers and the applicable service crediting
elections.]
1.31 LEASED EMPLOYEES. If a Leased Employee participates in a safe
----------------
harbor money purchase plan (as described in Section 1.31) maintained by the
leasing organization, but the Employer is not eligible for the safe harbor plan
exception: (Choose (a) or (b))
[ ] (a) The Advisory Committee will determine the Leased Employee's
allocation of Employer contributions under Article III without taking
into account the Leased Employee's allocation under the safe harbor
plan.
[X] (b) The Advisory Committee will reduce the Leased Employee's
allocation of Employer nonelective contributions (other than
designated qualified nonelective contributions) under this Plan
by the Leased Employee's allocation under the safe harbor plan,
but only to the extent that allocation is attributable to the
Leased Employee's service provided to the Employer. [Note: The
Employer may not elect Option (b) if a Paired Plan or any other
plan of the Employer makes a similar reduction for the same plan
of the leasing organization.]
ARTICLE II
EMPLOYEE PARTICIPANTS
2.01 ELIGIBILITY.
-----------
Eligibility conditions. To become a Participant in the Plan, an Employee must
satisfy the following eligibility conditions: (Choose (a) or (b) or both)
[X] (a) Attainment of age 18 (specify age, not exceeding 21).
[X] (b) Service requirement. (Choose (1), (2) or (3))
[X] (1) One Year of Service.
[ ] (2) months (not exceeding 12) following the Employee's
--
Employment Commencement Date.
[ ] (3) One Hour of Service.
3
<PAGE>
Plan Entry Date. "Plan Entry Date" means the Effective Date and: (Choose (c),
(d) or (e))
[ ] (c) Semi-annual Entry Dates. The first day of the Plan Year and
the first day of the seventh month of the Plan Year.
[X] (d) The first day of the Plan Year.
[ ] (e) (Specify entry dates)
------------------------------------------
.
-----------------------
Time of Participation. An Employee will become a Participant, unless excluded
under Adoption Agreement Section 1.07, on the Plan Entry Date (if employed on
that date): (Choose (f), (g) or (h))
[ ] (f) immediately following
[X] (g) immediately preceding
[ ] (h) nearest
the date the Employee completes the eligibility conditions described in Options
(a) and (b) of this Adoption Agreement Section 2.01. [Note: The Employer must
coordinate the selection of (f), (g) or (h) with the "Plan Entry Date" selection
in (c), (d) or (e). Unless otherwise excluded under Section 1.07, the Employee
must become a Participant by the earlier of: (1) the first day of the Plan Year
beginning after the date the Employee completes the age and service requirements
of Code (S)410(a); or (2) 6 months after the date the Employee completes those
requirements.]
Dual eligibility. The eligibility conditions of this Section 2.01 apply to:
(Choose (i) or (j))
[X] (i) All Employees of the Employer, except: (Choose (1) or (2))
[X] (1) No exceptions.
[ ] (2) Employees who are Participants in the Plan as of the
Effective Date.
[ ] (j) Solely to an Employee employed by the Employer after
. If the Employee was employed by the Employer on
------------
or before the specified date, the Employee will become a Participant:
(Choose (1) or (2))
[ ] (1) On the latest of the Effective Date, his Employment
Commencement Date or the date he attains age (not to
---
exceed 21).
[ ] (2) Under the eligibility conditions in effect under the
Plan prior to the restated Effective Date. If the restated
Plan required more than one Year of Service to participate,
the eligibility condition under this Option (2) for
participation in the Code (S)401(k) arrangement under this
Plan is one Year of Service for Plan Years beginning after
December 31, 1988. [For restated plans only]
2.02 YEAR OF SERVICE - PARTICIPATION.
-------------------------------
Hours of Service. An Employee must complete: (Choose (a) or (b))
[X] (a) 1,000 Hours of Service
4
<PAGE>
[ ] (b) Hours of Service
-----
during an eligibility computation period to receive credit for a Year of
Service. [Note: The Hours of Service requirement may not exceed 1,000.]
Eligibility computation period. After the initial eligibility computation period
described in Section 2.02 of the Plan, the Plan measures the eligibility
computation period as: (Choose (c) or (d))
[ ] (c) The 12 consecutive month period beginning with each anniversary
of an Employee's Employment Commencement Date.
[X] (d) The Plan Year, beginning with the Plan Year which includes the
first anniversary of the Employee's Employment Commencement Date.
2.03 BREAK IN SERVICE - PARTICIPATION. The Break in Service rule
--------------------------------
described in Section 2.03(B) of the Plan: (Choose (a) or (b))
[X] (a) Does not apply to the Employer's Plan.
[ ] (b) Applies to the Employer's Plan.
ARTICLE III
EMPLOYER CONTRIBUTIONS AND FORFEITURES
3.01 AMOUNT.
------
Part I. [Options (a) through (g)] Amount of Employer's contribution. The
Employer's annual contribution to the Trust will equal the total amount of
deferral contributions, matching contributions, qualified nonelective
contributions and nonelective contributions, as determined under this Section
3.01. (Choose any combination of (a), (b), (c) and (d), or choose (e))
[ ] (a) Deferral contributions (Code (S)401(k) arrangement). The
Employer must contribute the amount by which the Participants have
reduced their Compensation for the Plan Year, pursuant to their salary
reduction agreements on file with the Advisory Committee. A reference
in the Plan to salary reduction contributions is a reference to these
amounts.
[ ] (b) Matching contributions. The Employer will make matching
contributions in accordance with the formula(s) elected in Part II of
this Adoption Agreement Section 3.01.
[ ] (c) Designated qualified nonelective contributions. The Employer, in
its sole discretion, may contribute an amount which it designates as a
qualified nonelective contribution.
[X] (d) Nonelective contributions.
[X] (1) Discretionary contribution. The amount (or additional
amount) the Employer may from time to time deem advisable.
[ ] (2) % of the Compensation of all Participants under
----------
the Plan, determined for the Employer's taxable year for
which it makes the contribution. [Note: The percentage
selected may not exceed 15%.]
[ ] (3) % of Net Profits but not more than $ .
---------- ------------
5
<PAGE>
[ ] (e) Frozen Plan. This Plan is a frozen Plan effective . The Employer
will not contribute to the Plan with respect to any period following
the stated date.
Net Profits. The Employer: (Choose (f) or (g))
[X] (f) Need not have Net Profits to make its annual contribution
under this Plan.
[ ] (g) Must have current or accumulated Net Profits exceeding $
to make the following contributions: (Choose at least one
of (1), (2) and (3))
[ ] (1) Matching contributions described in Option (b), except:
--------------------------------------------------------------
.
-------------------------------
[ ] (2) Qualified nonelective contributions described in
Option (c).
[ ] (3) Nonelective contributions described in Option
.
----------------
"Net Profits" means the Employer's net income or profits for any taxable year
determined by the Employer upon the basis of its books of account in accordance
with generally accepted accounting practices consistently applied without any
deductions for Federal and state taxes upon income or for contributions made by
the Employer under this Plan or under any other employee benefit plan the
Employer maintains. The term "Net Profits" specifically excludes
----------------
. [Note: Enter "N/A" if no exclusions apply.]
- ----------------------------------
If the Employer requires Net Profits for matching contributions and the Employer
does not have sufficient Net Profits under Option (g), it will reduce the
matching contribution under a fixed formula on a prorata basis for all
Participants. A Participant's share of the reduced contribution will bear the
same ratio as the matching contribution the Participant would have received if
Net Profits were sufficient bears to the total matching contribution all
Participants would have received if Net Profits were sufficient. If more than
one member of a related group (as defined in Section 1.30) execute this Adoption
Agreement, each participating member will determine Net Profits separately but
will not apply this reduction unless, after combining the separately determined
Net Profits, the aggregate Net Profits are insufficient to satisfy the matching
contribution liability. "Net Profits" includes both current and accumulated Net
Profits.
Part II. [Options (h) and (i)] Matching contribution formula. [Note:
If the Employer elected Option (b), complete Options (h) and (i).]
[ ] (h) Amount of matching contributions. Subject to Option (i),
for each Plan Year, the Employer's matching contribution is:
(Choose any combination of (1), (2), (3) and (4))
[ ] (1) An amount equal to % of each Participant's salary
-------
reduction contributions for the Plan Year.
[ ] (2) An amount equal to % of each Participant's first tier
of salary reduction contributions for the Plan Year, plus the
following matching percentage(s) for the following subsequent
tiers of salary reduction contributions for the Plan Year:
-------------------------------------------------------------
-------------------------------------------------------------
.
-------------------------------------------------------------
6
<PAGE>
[ ] (3) Discretionary formula.
[ ] (i) An amount (or additional amount) equal to a
matching percentage the Employer from time to time
may deem advisable of the Participant's salary
reduction contributions for the Plan Year.
[ ] (ii) An amount (or additional amount) equal to a
matching percentage the Employer from time to time
may deem advisable of each tier of the Participant's
salary reduction contributions for the Plan Year.
[Note: Under Options (2) or (3)(ii), the matching percentage for
any subsequent tier of salary reduction contributions may not
exceed the matching percentage for any prior tier.]
[ ] (4) A Participant's matching contributions may not:
[ ] (i) Exceed
---------------------------------------
.
----------------------------------------------------
[ ] (ii) Be less than
---------------------------------
.
----------------------------------------------------
[ ] (i) Amount of salary reduction contributions taken into account.
When determining a Participant's salary reduction contributions taken
into account under the matching contributions formula(s), the
following rules apply: (Choose any combination of (1) through (3))
[ ] (1) The Advisory Committee will take into account all
salary reduction contributions credited for the Plan Year.
[ ] (2) The Advisory Committee will disregard salary
reduction contributions exceeding
----------------------------
.
-------------------------------------------------------------
[ ] (3) The Advisory Committee will treat as the first tier of
salary reduction contributions, an amount not exceeding:
-----
.
-------------------------------------------------------------
The subsequent tiers of salary reduction contributions are:
-------------------------------------------------------------
.
-------------------------------------------------------------
Part III. [Option (j).]. Special rules for Code (S)401(k) Arrangement.
(Choose (j), if applicable)
[X] (j) Salary Reduction Agreements. The following rules and
restrictions apply to an Employee's salary reduction agreement:
(Make a selection under (1), (2), (3) and (4))
(1) Limitation on amount. The Employee's salary reduction
contributions: (Choose (i) or at least one of (ii) or (iii))
[X] (i) No maximum limitation other than as provided in the
Plan.
[ ] (ii) May not exceed % of Compensation for the
---------
Plan Year, subject to the annual additions limitation
described in Part 2 of Article III and the 402(g)
limitation described in Section 14.07 of the Plan.
[ ] (iii) Based on percentages of Compensation must equal at
least .
--------------------------------------------------
7
<PAGE>
(2) An Employee may revoke, on a prospective basis, a salary
reduction agreement: (Choose (i), (ii), (iii) or (iv))
[ ] (i) Once during any Plan Year but not later than
--------------------------------------------------------
of the Plan Year.
[ ] (ii) As of any Plan Entry Date.
[ ] (iii) As of the first day of any month.
[X] (iv) (Specify, but must be at least once per Plan Year)
N/A.
---
(3) An Employee who revokes his salary reduction agreement may
file a new salary reduction agreement with an effective date:
(Choose (i), (ii), (iii) or (iv))
[ ] (i) No earlier than the first day of the next Plan
Year.
[ ] (ii) As of any subsequent Plan Entry Date.
[ ] (iii) As of the first day of any month subsequent to the
month in which he revoked an Agreement.
[X] (iv) (Specify, but must be at least once per Plan Year
following the Plan Year of revocation) N/A .
-----------------
(4) A Participant may increase or may decrease, on a
prospective basis, his salary reduction percentage or dollar
amount: (Choose (i), (ii), (iii) or (iv))
[ ] (i) As of the beginning of each payroll period.
[ ] (ii) As of the first day of each month.
[ ] (iii) As of any Plan Entry Date.
[X] (iv) (Specify, but must permit an increase or a
decrease at least once per Plan Year) N/A.
---
3.04 CONTRIBUTION ALLOCATION. The Advisory Committee will allocate
-----------------------
deferral contributions, matching contributions, qualified nonelective
contributions and nonelective contributions in accordance with Section 14.06 of
the Plan and the elections under this Adoption Agreement Section 3.04.
Part I. [Options (a) through (d)]. Special Accounting Elections. (Choose
whichever elections are applicable to the Employer's Plan)
[ ] (a) Matching Contributions Account. The Advisory Committee will
allocate matching contributions to a Participant's: (Choose (1)
or (2); (3) is available only in addition to (1))
[ ] (1) Regular Matching Contributions Account.
[ ] (2) Qualified Matching Contributions Account.
[ ] (3) Except, matching contributions under Option(s) of
Adoption Agreement Section 3.01 are allocable to the Qualified
Matching Contributions Account.
8
<PAGE>
[ ] (b) Special Allocation Dates for Salary Reduction Contributions.
The Advisory Committee will allocate salary reduction
contributions as of the Accounting Date and as of the following
additional allocation dates:
-----------------------------------------
.
---------------------------------------------------------------------
[ ] (c) Special Allocation Dates for Matching Contributions. The
Advisory Committee will allocate matching contributions as of the
Accounting Date and as of the following additional allocation
dates:
---------------------------------------------------------------
.
---------------------------------------------------------------------
[ ] (d) Designated Qualified Nonelective Contributions - Definition
of Participant. For purposes of allocating the designated
qualified nonelective contribution, "Participant" means: (Choose
(1) or (2))
[ ] (1) All Participants.
[ ] (2) Participants who are Nonhighly Compensated Employees.
Part II. Method of Allocation - Nonelective Contribution. Subject to any
restoration allocation required under Section 5.04, the Advisory Committee will
allocate and credit the annual nonelective contributions (and Participant
forfeitures treated as nonelective contributions) to the Employer Contributions
Account of each Participant who satisfies the conditions of Section 3.06, in
accordance with the method selected under this Part II. (Choose an allocation
method under (e), (f), (g) or (h); (i) is mandatory if the Employer elects (f),
(g) or (h))
[X] (e) Nonintegrated Allocation Formula. The Advisory Committee will
allocate the annual nonelective contributions in the same ratio that
each Participant's Compensation for the Plan Year bears to the total
Compensation of all Participants for the Plan Year.
[ ] (f) Two-Tiered Integrated Allocation Formula - Maximum
Disparity. First, the Advisory Committee will allocate the annual
nonelective contributions in the same ratio that each
Participant's Compensation plus Excess Compensation for the Plan
Year bears to the total Compensation plus Excess Compensation of
all Participants for the Plan Year. The allocation under this
paragraph, as a percentage of each Participant's Compensation plus
Excess Compensation, must not exceed the applicable percentage
(5.7%, 5.4% or 4.3%) listed under the Maximum Disparity Table
following Option (i).
The Advisory Committee then will allocate any remaining nonelective
contributions in the same ratio that each Participant's Compensation
for the Plan Year bears to the total Compensation of all Participants
for the Plan Year.
[ ] (g) Three-Tiered Integrated Allocation Formula. First, the
Advisory Committee will allocate the annual nonelective
contributions in the same ratio that each Participant's
Compensation for the Plan Year bears to the total Compensation of
all Participants for the Plan Year. The allocation under this
paragraph, as a percentage of each Participant's Compensation may
not exceed the applicable percentage (5.7%, 5.4% or 4.3%) listed
under the Maximum Disparity Table following Option (i).
As a second tier allocation, the Advisory Committee will allocate the
nonelective contributions in the same ratio that each Participant's
Excess Compensation for the Plan Year bears to the total Excess
Compensation of all Participants for the Plan Year. The allocation
under this paragraph, as a percentage of each Participant's Excess
Compensation, may not exceed the allocation percentage in the first
paragraph.
9
<PAGE>
Finally, the Advisory Committee will allocate any remaining
nonelective contributions in the same ratio that each Participant's
Compensation for the Plan Year bears to the total Compensation of all
Participants for the Plan Year.
[ ] (h) Four-Tiered Integrated Allocation Formula. First, the Advisory
Committee will allocate the annual nonelective contributions in the
same ratio that each Participant's Compensation for the Plan Year
bears to the total Compensation of all Participants for the Plan Year,
but not exceeding 3% of each Participant's Compensation.
As a second tier allocation, the Advisory Committee will allocate the
nonelective contributions in the same ratio that each Participant's
Excess Compensation for the Plan Year bears to the total Excess
Compensation of all Participants for the Plan Year, but not exceeding
3% of each Participant's Excess Compensation.
As a third tier allocation, the Advisory Committee will allocate the
annual contributions in the same ratio that each Participant's
Compensation plus Excess Compensation for the Plan Year bears to the
total Compensation plus Excess Compensation of all Participants for
the Plan Year. The allocation under this paragraph, as a percentage of
each Participant's Compensation plus Excess Compensation, must not
exceed the applicable percentage (2.7%, 2.4% or 1.3%) listed under the
Maximum Disparity Table following Option (i).
The Advisory Committee then will allocate any remaining nonelective
contributions in the same ratio that each Participant's Compensation
for the Plan Year bears to the total Compensation of all Participants
for the Plan Year.
[ ] (i) Excess Compensation. For purposes of Option (f), (g) or (h),
"Excess Compensation" means Compensation in excess of the following
Integration Level: (Choose (1) or (2))
[ ] (1) % (not exceeding 100%) of the taxable wage base, as
------
determined under Section 230 of the Social Security Act, in
effect on the first day of the Plan Year: (Choose any
combination of (i) and (ii) or choose (iii))
[ ] (i) Rounded to
-----------------------------------
(but not exceeding the taxable wage base).
[ ] (ii) But not greater than $ .
------
[ ] (iii) Without any further adjustment or limitation.
[ ] (2) $ [Note: Not exceeding the taxable wage base
------------
for the Plan Year in which this Adoption Agreement first is
effective.]
10
<PAGE>
Maximum Disparity Table. For purposes of Options (f), (g) and (h), the
applicable percentage is:
<TABLE>
<CAPTION>
Integration Level (as Applicable Percentages for Applicable Percentages
percentage of taxable wage base) Option (f) or Option (g) for Option (h)
- -------------------------------- -------------------------- ----------------------
<S> <C> <C>
100% 5.7% 2.7%
More than 80% but less than 100% 5.4% 2.4%
More than 20% (but not less than $10,001)
and not more than 80% 4.3% 1.3%
20% (or $10,000, if greater) or less 5.7% 2.7%
</TABLE>
Top Heavy Minimum Allocation - Application of Requirement. The Plan applies the
top heavy minimum allocation requirements of Section 3.04(B)(1): (Choose
(j) or (k))
[ ] (j) In all Plan Years. A Participant is entitled to the top
heavy minimum allocation if he is employed by the Employer on the
last day of the Plan Year, unless: (Choose (1) or (2))
[ ] (1) No exceptions.
[ ] (2) The Participant is a Key Employee for the Plan Year.
[Note: If the Employer selects this Option (2), it will have
to determine for each Plan Year who are the Key Employees
under the Plan.]
[X] (k) Only in Plan Years for which the Plan is top heavy. A
Participant is entitled to the top heavy minimum allocation if he
is employed by the Employer on the last day of the Plan Year,
unless he is a Key Employee. [Note: Option (k) will require the
Advisory Committee to determine whether the Plan is top heavy for
a Plan Year.]
Top Heavy Minimum Allocation - Method of Compliance. If a Participant's
allocation under this Section 3.04 is less than the top heavy minimum allocation
to which he is entitled under Section 3.04(B):
(Choose (l) or (m))
[X] (l) The Employer will make any necessary additional contribution
to the Participant's Account, as described in Section
3.04(B)(7)(a) of the Plan.
[ ] (m) The Employer will satisfy the top heavy minimum allocation under
the Paired Pension Plan the Employer also maintains under this Master
Plan. However, the Employer will make any necessary additional
contribution to satisfy the top heavy minimum allocation for an
Employee covered only under this Plan and not under the Paired Pension
Plan. See Section 3.04(B)(7)(b) of the Plan.
If the Employer maintains another plan which is not a Paired Pension Plan
offered under this Master Plan, the Employer may provide in an addendum to this
Adoption Agreement, numbered Section 3.04, any modifications to the Plan
necessary to satisfy the top heavy requirements under Code (S)416.
11
<PAGE>
Related employers. If two or more related employers (as defined in Section 1.30)
contribute to this Plan, the Advisory Committee must allocate all Employer
contributions and forfeitures to each Participant in the Plan, in accordance
with the elections in this Adoption Agreement Section 3.04, without regard to
which contributing related group member employs the Participant. A Participant's
Compensation includes Compensation from all related employers, irrespective of
which related employers are contributing to the Plan. The signatory Employer and
any Participating Employer(s) will satisfy any fixed matching contribution
formula under Adoption Agreement Section 3.01 as agreed upon by those Employers.
3.05 FORFEITURE ALLOCATION. Subject to any restoration allocation
----------------------
required under Sections 5.04 or 9.14, the Advisory Committee will allocate a
Participant forfeiture in accordance with Section 3.04: (Choose (a) or (b); (c)
and (d) are optional in addition to (a) or (b))
[X] (a) As an Employer nonelective contribution for the Plan Year in which
the forfeiture occurs, as if the Participant forfeiture were an
additional nonelective contribution for that Plan Year.
[ ] (b) To reduce the Employer matching contributions and
nonelective contributions for the Plan Year: (Choose (1) or (2))
[ ] (1) in which the forfeiture occurs.
[ ] (2) immediately following the Plan Year in which the
forfeiture occurs.
[ ] (c) To the extent attributable to matching contributions:
(Choose (1), (2) or (3))
[ ] (1) In the manner elected under Options (a) or (b).
[ ] (2) First to reduce Employer matching contributions for the
Plan Year: (Choose (i) or (ii))
[ ] (i) in which the forfeiture occurs,
[ ] (ii) immediately following the Plan Year in which
the forfeiture occurs, then as elected in Options (a)
or (b).
[ ] (3) As a discretionary matching contribution for the Plan
Year in which the forfeiture occurs, in lieu of the manner
elected under Options (a) or (b).
[ ] (d) First to reduce the Plan's ordinary and necessary administrative
expenses for the Plan Year, and then will allocate any remaining
forfeitures in the manner described in Options (a), (b) or (c),
whichever applies. If the Employer elects Option (c), the forfeitures
used to reduce Plan expenses: (Choose (1) or (2))
[ ] (1) relate proportionately to forfeitures described in
Option (c) and to forfeitures described in Options (a) or (b).
[ ] (2) relate first to forfeitures described in Option .
-----
Allocation of forfeited excess aggregate contributions. The Advisory Committee
will allocate any forfeited excess aggregate contributions (as described in
Section 14.09): (Choose (e), (f) or (g))
[ ] (e) To reduce Employer matching contributions for the Plan Year:
(Choose (1) or (2))
[ ] (1) in which the forfeiture occurs.
[ ] (2) immediately following the Plan Year in which the
forfeiture occurs.
12
<PAGE>
[ ] (f) As Employer discretionary matching contributions for the Plan
Year in which forfeited, except the Advisory Committee will not
allocate these forfeitures to the Highly Compensated Employees who
incurred the forfeitures.
[X] (g) In accordance with Options (a) through (d), whichever applies,
except the Advisory Committee will not allocate these forfeitures
under Option (a) or under Option (c)(3) to the Highly Compensated
Employees who incurred the forfeitures.
3.06 ACCRUAL OF BENEFIT.
------------------
Compensation taken into account. For the Plan Year in which the Employee first
becomes a Participant, the Advisory Committee will determine the allocation of
any designated qualified nonelective contribution or nonelective contribution by
taking into account: (Choose (a) or (b))
[ ] (a) The Employee's Compensation for the entire Plan Year.
[ ] (b) The Employee's Compensation for the portion of the Plan Year
in which the Employee actually is a Participant in the Plan,
except: (Choose (1) or (2))
[X] (1) No exceptions.
[ ] (2) For purposes of the first 3% of Compensation allocated
under Option (e), (g) or (h) of Adoption Agreement Section
3.04, whichever applies, the Advisory Committee will take into
account the Employee's Compensation for the entire Plan Year.
Accrual Requirements. To receive an allocation of designated qualified
nonelective contributions, nonelective contributions and Participant forfeitures
treated as nonelective contributions for the Plan Year, a Participant must
satisfy the accrual requirements of this paragraph. If the Participant is
employed by the Employer on the last day of the Plan Year, the Participant must
complete at least one Hour of Service for that Plan Year. If the Participant
terminates employment with the Employer during the Plan Year, the Participant
must complete at least 501 Hours of Service (not exceeding 501) during the Plan
---
Year, except: (Choose (c) or (d))
[X] (c) No exceptions.
[ ] (d) No Hour of Service requirement if the Participant terminates
employment during the Plan Year on account of: (Choose at least
one of (1), (2) and (3))
[ ] (1) Death.
[ ] (2) Disability.
[ ] (3) Attainment of Normal Retirement Age in the current Plan
Year or in a prior Plan Year.
Special accrual requirements for matching contributions. To receive an
allocation of matching contributions (and forfeitures applied to reduce matching
contributions) a Participant must satisfy the following condition(s): (Choose
(e) or any combination of (f), (g) and (h))
[ ] (e) No conditions other than making salary reduction
contributions.
[X] (f) The accrual requirements prescribed for an allocation of
nonelective contributions.
[ ] (g) The Participant does not revoke his salary reduction agreement
effective during the Plan Year.
13
<PAGE>
[ ] (h) The Participant is not a Highly Compensated Employee for the
Plan Year. This Option (h) applies to: (Choose (1) or (2))
[ ] (1) All matching contributions.
[ ] (2) Matching contributions described in Option(s)
---------
of Adoption Agreement Section 3.01.
3.15 MORE THAN ONE PLAN LIMITATION. If the provisions of
-----------------------------
Section 3.15 apply, the Excess Amount attributed to this Plan equals: (Choose
(a), (b) or (c))
[ ] (a) The product of:
(i) the total Excess Amount allocated as of such date
(including any amount which the Advisory Committee would have
allocated but for the limitations of Code (S)415), times
(ii) the ratio of (1) the amount allocated to the Participant
as of such date under this Plan divided by (2) the total
amount allocated as of such date under all qualified defined
contribution plans (determined without regard to the
limitations of Code (S)415).
[X] (b) The total Excess Amount.
[ ] (c) None of the Excess Amount.
[Note: If the Employer adopts Paired Plans available under this Master Plan, the
Employer must coordinate its elections under Section 3.15 of each Adoption
Agreement.]
3.18 DEFINED BENEFIT PLAN LIMITATION.
-------------------------------
Application of limitation. The limitation under Section 3.18 of the Plan:
(Choose (a) or (b))
[X] (a) Does not apply to the Employer's Plan because the Employer does
not maintain and never has maintained a defined benefit plan covering
any Participant in this Plan.
[ ] (b) Applies to the Employer's Plan. To the extent necessary to
satisfy the limitation under Section 3.18, the Employer will
reduce: (Choose (1) or (2))
[ ] (1) The Participant's projected annual benefit under the
defined benefit plan under which the Participant participates.
[ ] (2) Its contribution or allocation on behalf of the
Participant to the defined contribution plan under which the
Participant participates and then, if necessary, the
Participant's projected annual benefit under the defined
benefit plan under which the Participant participates.
[Note: If the Employer selects (a), the remaining options in this Section 3.18
do not apply to the Employer's Plan.]
Override of 100% Limitation. The Employer elects: (Choose (c) or (d))
[ ] (c) To apply the 100% limitation described in Section 3.19(l) of
the Plan in all Limitation Years. [Note: This election will avoid
having to calculate the Plan's top heavy ratio for any year,
unless the Employer has elected Adoption Agreement
Section 3.04(k).]
14
<PAGE>
[ ] (d) Not to apply the 100% limitation for Limitation Years in
which the Plan's top heavy ratio (as determined under Section 1.33
of the Plan) does not exceed 90%, but only if the defined benefit
plan satisfies the extra minimum benefit requirements of Code
(S)416(h)(2) (and the applicable Treasury regulations) after taking
into account the Employer's election under Options (e), (f), (g)
or (h) of this Section 3.18. To determine the top heavy ratio,
the Advisory Committee will use the following interest rate and
mortality assumptions to value accrued benefits under a defined
benefit plan:
-------------------------------------------------------
--------------------------------------------------------------------
. [Note: This
--------------------------------------------
election will require the Advisory Committee to calculate the
Plan's top heavy ratio.]
Coordination with top heavy minimum allocation. The Advisory Committee will
apply the top heavy minimum allocation provisions of Section 3.04(B) of the Plan
with the following modifications: (Choose (e), (f), (g) or (h))
[ ] (e) No modifications.
[ ] (f) By substituting 4% for 3% in Paragraph (b) of Section 3.04(B)(1)
or of Section 3.04(B)(2) of the Plan, whichever applies, but only for
any Plan Year in which Option (d) applies to override the 100%
limitation.
[ ] (g) By increasing the top heavy minimum allocation to 5% for any
Plan Year in which the 100% limitation applies, and to 7 1/2% for any
Plan Year in which Option (d) applies to override the 100% limitation.
The increased percentage under this Option (g) applies irrespective of
whether the highest contribution rate for the Plan Year is less than
that increased percentage.
[ ] (h) By eliminating the top heavy minimum allocation. [Note: The
Employer may not select this Option (h) if the defined benefit
plan does not guarantee the top heavy minimum benefit under Code
(S)416 for every Participant in this Plan who is a Non-Key
Employee.]
If the elections under this Section 3.18 are not appropriate to satisfy the
limitations of Section 3.18, or the top heavy requirements under Code (S)416,
the Employer must provide the appropriate provisions in an addendum to this
Adoption Agreement.
ARTICLE IV
PARTICIPANT CONTRIBUTIONS
4.01 PARTICIPANT NONDEDUCTIBLE CONTRIBUTIONS. The Plan: (Choose
---------------------------------------
(a) or (b))
[ ] (a) Does not permit Participant nondeductible contributions.
[X] (b) Permits Participant nondeductible contributions, pursuant to
Section 14.04 of the Plan.
Allocation dates. The Advisory Committee will allocate nondeductible
contributions for each Plan Year as of the Accounting Date and the following
additional allocation dates: (Choose (c) or (d))
[X] (c) No other allocation dates.
[ ] (d) (Specify)
-------------------------------------------------------
.
---------
As of an allocation date, the Advisory Committee will credit all nondeductible
contributions made for the relevant allocation period. Unless otherwise
specified in (d), a nondeductible contribution relates to an allocation period
only if actually made to the Trust no later than 30 days after that allocation
period ends.
15
<PAGE>
ARTICLE V
TERMINATION OF SERVICE - PARTICIPANT VESTING
5.01 NORMAL RETIREMENT. Normal Retirement Age under the Plan is:
-----------------
(Choose (a) or (b))
[X] (a) 65 [State age, but may not exceed age 65].
--
[ ] (b) The later of the date the Participant attains years
------
of age or the anniversary of the first day of the Plan Year
------
in which the Participant commenced participation in the Plan.
[The age selected may not exceed age 65 and the anniversary
selected may not exceed the 5th.]
5.02 PARTICIPANT DEATH OR DISABILITY. The 100% vesting rule under
-------------------------------
Section 5.02 of the Plan: (Choose (a) or choose one or both of (b) and (c))
[ ] (a) Does not apply.
[X] (b) Applies to death.
[X] (c) Applies to disability.
5.03 VESTING SCHEDULE.
----------------
Deferral Contributions Account/Qualified Matching Contributions
Account/Qualified Nonelective Contributions Account. A Participant has a 100%
Nonforfeitable interest at all times in his Deferral Contribution Account, his
Qualified Matching Contributions Account and in his Qualified Nonelective
Contributions Account.
Regular Matching Contributions Account/Employer Contributions Account.
With respect to a Participant's Regular Matching Contributions Account
and Employer Contributions Account, the Employer elects the following
vesting schedule: (Choose (a) or (b); (c) and (d) are available only as
additional options)
[ ] (a) Immediate vesting. 100% Nonforfeitable at all times.
[X] (b) Graduated Vesting Schedules.
<TABLE>
<CAPTION>
Top Heavy Schedule
(Mandatory)
Years of Nonforfeitable
Service Percentage
-------- --------------
<S> <C>
Less than 1........................... 0%
1................................ 0%
2................................ 20%
3................................ 40%
4................................ 60%
5................................ 80%
6 or more........................ 100%
</TABLE>
<TABLE>
<CAPTION>
Non Top Heavy Schedule
(Optional)
Years of Nonforfeitable
Service Percentage
-------- --------------
<S> <C>
Less than 1........................... %
1................................ %
2................................ %
3................................ %
4................................ %
5................................ %
6................................ %
7 or more........................ 100%
</TABLE>
16
<PAGE>
[ ] (c) Special vesting election for Regular Matching Contributions
Account. In lieu of the election under Options (a) or (b), the
Employer elects the following vesting schedule for a Participant's
Regular Matching Contributions Account: (Choose (1) or (2))
[ ] (1) 100% Nonforfeitable at all times.
[ ] (2) In accordance with the vesting schedule described in
the addendum to this Adoption Agreement, numbered 5.03(c).
[Note: If the Employer elects this Option (c)(2), the addendum
must designate the applicable vesting schedule(s) using the
same format as used in Option (b).]
[Note: Under Options (b) and (c)(2), the Employer must complete a Top
Heavy Schedule which satisfies Code (S)416. The Employer, at its option,
may complete a Non Top Heavy Schedule only if the Employer elected
Adoption Agreement Section 3.04(k). The Non Top Heavy Schedule must
satisfy Code (S)411(a)(2). Also see Section 7.05 of the Plan.]
[ ] (d) The Top Heavy Schedule under Option (b) (and, if applicable,
under Option (c)(2)) applies: (Choose (1) or (2))
[ ] (1) Only in a Plan Year for which the Plan is top heavy.
[ ] (2) In the Plan Year for which the Plan first is top heavy
and then in all subsequent Plan Years. [Note: The Employer
may not elect Option (d) unless it has completed a Non Top
Heavy Schedule.]
Minimum vesting. (Choose (e) or (f))
[X] (e) The Plan does not apply a minimum vesting rule.
[ ] (f) A Participant's Nonforfeitable Accrued Benefit will never be
less than the lesser of $ or his entire Accrued Benefit, even if the
application of a graduated vesting schedule under Options (b) or (c)
would result in a smaller Nonforfeitable Accrued Benefit.
5.04 CASH-OUT DISTRIBUTIONS TO PARTIALLY-VESTED PARTICIPANTS/
--------------------------------------------------------
RESTORATION OF FORFEITED ACCRUED BENEFIT. The deemed cash-out rule
- ----------------------------------------
described in Section 5.04(C) of the Plan: (Choose (a) or (b))
[X] (a) Does not apply.
[ ] (b) Will apply to determine the timing of forfeitures for 0% vested
Participants. A Participant is not a 0% vested Participant if he has a
Deferral Contributions Account.
5.06 YEAR OF SERVICE - VESTING.
-------------------------
Vesting computation period. The Plan measures a Year of Service on the
basis of the following 12 consecutive month periods: (Choose (a) or (b))
[X] (a) Plan Years.
[ ] (b) Employment Years. An Employment Year is the 12 consecutive month
period measured from the Employee's Employment Commencement Date and
each successive 12 consecutive month period measured from each
anniversary of that Employment Commencement Date.
17
<PAGE>
Hours of Service. The minimum number of Hours of Service an Employee
must complete during a vesting computation period to receive credit for
a Year of Service is: (Choose (c) or (d))
[X] (c) 1,000 Hours of Service.
[ ] (d) Hours of Service. [Note: The Hours of Service requirement
------
may not exceed 1,000.]
5.08 INCLUDED YEARS OF SERVICE - VESTING. The Employer
-----------------------------------
specifically excludes the following Years of Service: (Choose (a) or at
least one of (b), (c) and (d))
[ ] (a) None other than as specified in Section 5.08(a) of the Plan.
[X] (b) Any Year of Service before the Participant attained the age
of 18. [Note: The age selected may not exceed age 18.]
[ ] (c) Any Year of Service during the period the Employer did not
maintain this Plan or a predecessor plan.
[ ] (d) Any Year of Service before a Break in Service if the number
of consecutive Breaks in Service equals or exceeds the greater of
5 or the aggregate number of the Years of Service prior to the
Break. This exception applies only if the Participant is 0%
vested in his Accrued Benefit derived from Employer contributions
at the time he has a Break in Service. Furthermore, the aggregate
number of Years of Service before a Break in Service do not
include any Years of Service not required to be taken into account
under this exception by reason of any prior Break in Service.
ARTICLE VI
TIME AND METHOD OF PAYMENTS OF BENEFITS
Code (S)411(d)(6) Protected Benefits. The elections under this Article VI may
not eliminate Code (S)411(d)(6) protected benefits. To the extent the elections
would eliminate a Code (S)411(d)(6) protected benefit, see Section 13.02 of the
Plan. Furthermore, if the elections liberalize the optional forms of benefit
under the Plan, the more liberal options apply on the later of the adoption date
or the effective date of this Adoption Agreement.
6.01 TIME OF PAYMENT OF ACCRUED BENEFIT.
----------------------------------
Distribution date. A distribution date under the Plan means January 1 .
------------------
[Note: The Employer must specify the appropriate date(s). The specified
distribution dates primarily establish annuity starting dates and the notice and
consent periods prescribed by the Plan. The Plan allows the Trustee an
administratively practicable period of time to make the actual distribution
relating to a particular distribution date.]
Nonforfeitable Accrued Benefit Not Exceeding $3,500. Subject to the limitations
of Section 6.01(A)(1), the distribution date for distribution of a
Nonforfeitable Accrued Benefit not exceeding $3,500 is: (Choose (a), (b), (c) or
(d))
[ ] (a)
-----------------------------------------------------------------
of the Plan Year beginning after the
-----------------------------
Participant's Separation from Service.
[X] (b) The second Distribution Date following the Participant's
----------------------------
Separation from Service.
[ ] (c)
-----------------------------------------------------------------
of the Plan Year after the Participant incurs Break(s) in
----
Service (as defined in Article V).
18
<PAGE>
[ ] (d) following the Participant's
----------------------------------
attainment of Normal Retirement Age, but not earlier than
days following his Separation from Service.
--------------------
Nonforfeitable Accrued Benefit Exceeds $3,500. See the elections under
Section 6.03.
Disability. The distribution date, subject to the limitations of
Section 6.01(A)(3), is: (Choose (e) or (f))
[ ] (e)
-----------------------------------------------------------------
after the Participant terminates employment because of disability.
[X] (f) The same as if the Participant had terminated employment
without disability.
Hardship. (Choose (g) or (h))
[X] (g) The Plan does not permit a hardship distribution to a
Participant who has separated from Service.
[ ] (h) The Plan permits a hardship distribution to a Participant
who has separated from Service in accordance with the hardship
distribution policy stated in: (Choose (1) or (2))
[ ] (1) Section 6.01(A)(4) of the Plan.
[ ] (2) Section 14.11 of the Plan.
Default on a Loan. If a Participant or Beneficiary defaults on a loan made
pursuant to a loan policy adopted by the Advisory Committee pursuant to Section
9.04, the Plan: (Choose (i) or (j))
[ ] (i) Treats the default as a distributable event. The Trustee,
at the time of the default, will reduce the Participant's
Nonforfeitable Accrued Benefit by the lesser of the amount in
default (plus accrued interest) or the Plan's security interest
in that Nonforfeitable Accrued Benefit. To the extent the loan
is attributable to the Participant's Deferral Contributions
Account, Qualified Matching Contributions Account or Qualified
Nonelective Contributions Account, the Trustee will not reduce the
Participant's Nonforfeitable Accrued Benefit unless the
Participant has separated from Service or unless the Participant
has attained age 59 1/2.
[X] (j) Does not treat the default as a distributable event. When an
otherwise distributable event first occurs pursuant to Section 6.01 or
Section 6.03 of the Plan, the Trustee will reduce the Participant's
Nonforfeitable Accrued Benefit by the lesser of the amount in default
(plus accrued interest) or the Plan's security interest in that
Nonforfeitable Accrued Benefit.
6.02 METHOD OF PAYMENT OF ACCRUED BENEFIT. The Advisory Committee
------------------------------------
will apply Section 6.02 of the Plan with the following modifications:
(Choose (a) or (b))
[X] (a) No modifications.
[ ] (b) The Plan permits the following annuity options:
-----------------
.
---------------------------------------------------------------------
Any Participant who elects a life annuity option is subject to the
requirements of Sections 6.04(A), (B), (C) and (D) of the Plan.
See Section 6.04(E). [Note: The Employer may specify additional
annuity options in an addendum to this Adoption Agreement, numbered
6.02(b).]
19
<PAGE>
6.03 BENEFIT PAYMENT ELECTIONS.
-------------------------
Participant Elections After Separation from Service. A Participant who
is eligible to make distribution elections under Section 6.03 of the
Plan may elect to commence distribution of his Nonforfeitable Accrued
Benefit: (Choose (a) or (b))
[ ] (a) As of any distribution date, but not earlier than
----------------
of the Plan Year beginning after the
---------------------
Participant's Separation from Service.
[X] (b) As of the following date(s): (Choose at least one of Options
(1) through (5))
[ ] (1) As of any distribution date after the close of the Plan
Year in which the Participant attains Normal Retirement Age.
[ ] (2) Any distribution date following his Separation from
Service.
[X] (3) Any distribution date in the second Plan Year(s)
------
beginning after his Separation from Service.
[ ] (4) Any distribution date in the Plan Year after the
Participant incurs Break(s) in Service
-----------------
(as defined in Article V).
[ ] (5) Any distribution date following attainment of age
----
and completion of at least Years of Service (as defined
-----
in Article V).
The distribution events described in the election(s) made under Options
(a) or (b) apply equally to all Accounts maintained for the Participant.
Participant Elections Prior to Separation from Service - Regular Matching
Contributions Account and Employer Contributions Account. Subject to the
restrictions of Article VI, the following distribution options apply to a
Participant's Regular Matching Contributions Account and Employer Contributions
Account prior to his Separation from Service: (Choose (c) or at least one of (d)
through (f))
[X] (c) No distribution options prior to Separation from Service.
[ ] (d) Attainment of Specified Age. Until he retires, the
Participant has a continuing election to receive all or any
portion of his Nonforfeitable interest in these Accounts after he
attains: (Choose (1) or (2))
[ ] (1) Normal Retirement Age.
[ ] (2) years of age and is at least % vested in
------ -----
these Accounts. [Note: If the percentage is less than 100%,
see the special vesting formula in Section 5.03.]
[ ] (e) After a Participant has participated in the Plan for a
period of not less than years and he is 100% vested in
------
these Accounts, until he retires, the Participant has a continuing
election to receive all or any portion of the Accounts. [Note:
The number in the blank space may not be less than 5.]
[ ] (f) Hardship. A Participant may elect a hardship distribution
prior to his Separation from Service in accordance with the
hardship distribution policy: (Choose (1) or (2); (3) is available
only in addition to (1) or (2))
[ ] (1) Under Section 6.01(A)(4) of the Plan.
[ ] (2) Under Section 14.11 of the Plan.
20
<PAGE>
[ ] (3) In no event may a Participant receive a hardship
distribution before he is at least % vested in these
-----
Accounts. [Note: If the percentage in the blank is less than
100%, see the special vesting formula in Section 5.03.]
Participant Elections Prior to Separation from Service - Deferral Contributions
Account, Qualified Matching Contributions Account and Qualified Nonelective
Contributions Account. Subject to the restrictions of Article VI, the following
distribution options apply to a Participant's Deferral Contributions Account,
Qualified Matching Contributions Account and Qualified Nonelective Contributions
Account prior to his Separation from Service: (Choose (g) or at least one of (h)
or (i))
[X] (g) No distribution options prior to Separation from Service.
[ ] (h) Until he retires, the Participant has a continuing election to
receive all or any portion of these Accounts after he attains:
(Choose (1) or (2))
[ ] (1) The later of Normal Retirement Age or age 59 1/2.
[ ] (2) Age (at least 59 1/2).
------
[ ] (i) Hardship. A Participant, prior to this Separation from Service,
may elect a hardship distribution in accordance with the hardship
distribution policy under Section 14.11 of the Plan.
Sale of trade or business/subsidiary. If the Employer sells substantially all of
the assets (within the meaning of Code (S)409(d)(2)) used in a trade or business
or sells a subsidiary (within the meaning of Code (S)409(d)(3)), a Participant
who continues employment with the acquiring corporation is eligible for
distribution from his Deferral Contributions Account, Qualified Matching
Contributions Account and Qualified Nonelective Contributions Account: (Choose
(j) or (k))
[X] (j) Only as described in this Adoption Agreement Section 6.03
for distributions prior to Separation from Service.
[ ] (k) As if he has a Separation from Service. After March 31, 1988, a
distribution authorized solely by reason of this Option (k) must
constitute a lump sum distribution, determined in a manner consistent
with Code (S)401(k)(10) and the applicable Treasury regulations.
6.04 ANNUITY DISTRIBUTIONS TO PARTICIPANTS AND SURVIVING SPOUSES.
-----------------------------------------------------------
The annuity distribution requirements of Section 6.04: (Choose (a) or (b))
[X] (a) Apply only to a Participant described in Section 6.04(E) of the
Plan (relating to the profit sharing exception to the joint and
survivor requirements).
[ ] (b) Apply to all Participants.
ARTICLE IX
ADVISORY COMMITTEE - DUTIES WITH RESPECT TO PARTICIPANTS' ACCOUNTS
9.10 VALUE OF PARTICIPANT'S ACCRUED BENEFIT. If a distribution (other
--------------------------------------
than a distribution from a segregated Account and other than a corrective
distribution described in Sections 14.07, 14.08, 14.09 or 14.10 of the Plan)
occurs more than 90 days after the most recent valuation date, the distribution
will include interest at: (Choose (a) or (b))
[X] (a) 0% per annum. [Note: The percentage may equal 0%.]
-
[ ] (b) The 90 day Treasury bill rate in effect at the beginning of
the current valuation period.
21
<PAGE>
9.11 ALLOCATION AND DISTRIBUTION OF NET INCOME GAIN OR LOSS.
------------------------------------------------------
Pursuant to Section 14.12, to determine the allocation of net income,
gain or loss: (Choose only those items, if any, which are applicable to
the Employer's Plan)
[ ] (a) For salary reduction contributions, the Advisory Committee
will: (Choose (1), (2), (3) or (4))
[ ] (1) Apply Section 9.11 without modification.
[ ] (2) Use the segregated account approach described in
Section 14.12.
[ ] (3) Use the weighted average method described in
Section 14.12, based on a weighting
---------------------
period.
[ ] (4) Treat as part of the relevant Account at the beginning
of the valuation period % of the salary reduction
-----
contributions: (Choose (i) or (ii))
[ ] (i) made during that valuation period.
[ ] (ii) made by the following specified time:
.
----------------------------------------------------
[ ] (b) For matching contributions, the Advisory Committee will:
(Choose (1), (2) or (3))
[ ] (1) Apply Section 9.11 without modification.
[ ] (2) Use the weighted average method described in
Section 14.12, based on a weighting
--------------------
period.
[ ] (3) Treat as part of the relevant Account at the
beginning of the valuation period % of the matching
------
contributions allocated during the valuation period.
[X] (c) For Participant nondeductible contributions, the Advisory
Committee will: (Choose (1), (2), (3) or (4))
[ ] (1) Apply Section 9.11 without modification.
[ ] (2) Use the segregated account approach described in
Section 14.12.
[ ] (3) Use the weighted average method described in
Section 14.12, based on a weighting
--------------------
period.
[X] (4) Treat as part of the relevant Account at the beginning
of the valuation period 50% of the Participant nondeductible
--
contributions: (Choose (i) or (ii))
[X] (i) made during that valuation period.
[ ] (ii) made by the following specified time:
.
----------------------------------------------------
22
<PAGE>
ARTICLE X
TRUSTEE AND CUSTODIAN, POWERS AND DUTIES
10.14 VALUATION OF TRUST. In addition to each Accounting Date, the
------------------
Trustee must value the Trust Fund on the following valuation date(s):
(Choose (a) or (b))
[X] (a) No other mandatory valuation dates.
[ ] (b) (Specify)
--------------------------------------------------------
.
-------------------------------
23
<PAGE>
EFFECTIVE DATE ADDENDUM
(Restated Plans Only)
The Employer must complete this addendum only if the restated Effective
Date specified in Adoption Agreement Section 1.18 is different than the restated
effective date for at least one of the provisions listed in this addendum. In
lieu of the restated Effective Date in Adoption Agreement Section 1.18, the
following special effective dates apply: (Choose whichever elections apply)
[X] (a) Compensation definition. The Compensation definition of
Section 1.12 (other than the $200,000 limitation) is effective for
Plan Years beginning after December 31, 1991. [Note: May not be
-----------------
effective later than the first day of the first Plan Year
beginning after the Employer executes this Adoption Agreement to
restate the Plan for the Tax Reform Act of 1986, if applicable.]
[ ] (b) Eligibility conditions. The eligibility conditions
specified in Adoption Agreement Section 2.01 are effective for
Plan Years beginning after .
--------------------
[ ] (c) Suspension of Years of Service. The suspension of Years of
Service rule elected under Adoption Agreement Section 2.03 is
effective for Plan Years beginning after .
------------------------
[ ] (d) Contribution/allocation formula. The contribution formula
elected under Adoption Agreement Section 3.01 and the method of
allocation elected under Adoption Agreement Section 3.04 is effective
for Plan Years beginning after .
----------------------
[X] (e) Accrual requirements. The accrual requirements of Section
3.06 are effective for Plan Years beginning after December 31, 1991.
-----------------
[Note: If the effective date is later than Plan Years
beginning after December 31, 1989, the accrual requirements in the
Plan prior to its restatement may not be more restrictive for
post-1989 Plan Years than the requirements permitted under
Adoption Agreement Section 3.06.]
[ ] (f) Elimination of Net Profits. The requirement for the
Employer not to have net profits to contribute to this Plan is
effective for Plan Years beginning after .
--------------------
[Note: The date specified may not be earlier than December 31, 1985.]
[X] (g) Vesting Schedule. The vesting schedule elected under
Adoption Agreement Section 5.03 is effective for Plan Years
beginning after December 31, 1991.
-----------------
[ ] (h) Allocation of Earnings. The special allocation provisions
elected under Adoption Agreement Section 9.11 are effective for Plan
Years beginning after .
---------------------
For Plan Years prior to the special Effective Date, the terms of the
Plan prior to its restatement under this Adoption Agreement will control for
purposes of the designated provisions. A special Effective Date may not result
in the delay of a Plan provision beyond the permissible Effective Date under any
applicable law requirements.
24
<PAGE>
Execution Page
The Trustee (and Custodian, if applicable), by executing this Adoption
Agreement, accepts its position and agrees to all of the obligations,
responsibilities and duties imposed upon the Trustee (or Custodian) under the
Master Plan and Trust. The Employer hereby agrees to the provisions of this Plan
and Trust, and in witness of its agreement, the Employer by its duly authorized
officers, has executed this Adoption Agreement, and the Trustee (and Custodian,
if applicable) signified its acceptance, on this day of , 19 .
-- -------------- --
Name and EIN of Employer: Investor Federal Bank & Savings Association 43-1156208
------------------------------------------------------
Signed:
-----------------------------------------------------------------------
Earle Teegarden Jr., President
Name(s) of Trustee: Commerce Bank of Kansas City, N.A.
-----------------------------------------
Signed:
-----------------------------------------------------------------------
-----------------------------------------------------------------------
Name of Custodian:
-----------------------------------------------------
Signed:
-----------------------------------------------------------------------
[Note: A Trustee is mandatory, but a Custodian is optional. See Section 10.03 of
the Plan.]
Plan Number. The 3-digit plan number the Employer assigns to this Plan
for ERISA reporting purposes (Form 5500 Series) is: 001.
---
Use of Adoption Agreement. Failure to complete properly the elections in this
Adoption Agreement may result in disqualification of the Employer's Plan. The
3-digit number assigned to this Adoption Agreement (see page 1) is solely for
the Master Plan Sponsor's recordkeeping purposes and does not necessarily
correspond to the plan number the Employer designated in the prior paragraph.
The Master Plan Sponsor offers the following Paired Pension Plan(s) with this
Paired Profit Sharing Plan, identified by 3-digit adoption agreement number:
.
- ---
Master Plan Sponsor. The Master Plan Sponsor identified on the first page of the
basic plan document will notify all adopting employers of any amendment of this
Master Plan or of any abandonment or discontinuance by the Master Plan Sponsor
of its maintenance of this Master Plan. For inquiries regarding the adoption of
the Master Plan, the Master Plan Sponsor's intended meaning of any plan
provisions or the effect of the opinion letter issued to the Master Plan
Sponsor, please contact the Master Plan Sponsor at the following address and
telephone number: 922 Walnut, Suite 600 Kansas City, MO 64106 816-234-2000.
--------------------------------------------------------
Reliance on Opinion Letter. If the Employer does not maintain (and has never
maintained) any other plan other than this Plan and a Paired Pension Plan, it
may rely on the Master Plan Sponsor's opinion letter covering this Plan for
purposes of plan qualification. For this purpose, the Employer has not
maintained another plan if this Plan, or the Paired Pension Plan, amended and
restated that prior plan and the prior plan was the same type of plan as the
restated plan. If the Employer maintains or has maintained another plan other
than a Paired Pension Plan, including a welfare benefit fund, as defined in Code
(S)419(e), which provides post-retirement medical benefits for key employees (as
defined in Code (S)419A(d)(3)), or an individual medical account (as defined in
Code (S)415(l)(2)), the Employer may not rely on this Plan's qualified status
unless it obtains a determination letter from the applicable IRS Key District
office.
25
<PAGE>
PARTICIPATION AGREEMENT
For Participation by Related Group Members (Plan Section 1.30)
The undersigned Employer, by executing this Participation Agreement,
elects to become a Participating Employer in the Plan identified in Section 1.03
of the accompanying Adoption Agreement, as if the Participating Employer were a
signatory to that Agreement. The Participating Employer accepts, and agrees to
be bound by, all of the elections granted under the provisions of the Master
Plan as made by Investor Federal Bank & Savings Association, the Signatory
-------------------------------------------
Employer to the Execution Page of the Adoption Agreement.
1. The Effective Date of the undersigned Employer's participation
in the designated Plan is: .
---------------------
2. The undersigned Employer's adoption of this Plan constitutes:
[ ] (a) The adoption of a new plan by the Participating Employer.
[ ] (b) The adoption of an amendment and restatement of a plan
currently maintained by the Employer, identified as
-----------------
, and having an original effective date of .
------------ ---------------
Dated this day of , 19 .
---- --------- --
Name of Participating Employer:
----------------
-----------------------------------------------
Signed:
----------------------------------
Participating Employer's EIN:
--------
Acceptance by the Signatory Employer to the Execution Page of the Adoption
Agreement and by the Trustee.
Name of Signatory Employer: Investor Federal
----------------
Bank & Savings Association
--------------------------
Accepted:
----------------------
[Date] Signed:
-----------------------------------
Name(s) of Trustee:
----------------------------
-----------------------------------------------
Accepted:
----------------------
[Date] Signed:
-----------------------------------
[Note: Each Participating Employer must execute a separate Participation
Agreement. See the Execution Page of the Adoption Agreement for important Master
Plan information.]
26
<PAGE>
Commerce Bank, N. A. Master Plan
DEFINED CONTRIBUTION MASTER PLAN
AND
TRUST AGREEMENT
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
ALPHABETICAL LISTING OF DEFINITIONS...............................................................................v
ARTICLE I, DEFINITIONS
1.01 Employer.................................................................................... 1.01
1.02 Trustee......................................................................................1.01
1.03 Plan.........................................................................................1.01
1.04 Adoption Agreement...........................................................................1.01
1.05 Plan Administrator...........................................................................1.02
1.06 Advisory Committee...........................................................................1.02
1.07 Employee.....................................................................................1.02
1.08 Self-Employed Individual/Owner-Employee......................................................1.02
1.09 Highly Compensated Employee..................................................................1.02
1.10 Participant..................................................................................1.03
1.11 Beneficiary..................................................................................1.03
1.12 Compensation.................................................................................1.03
1.13 Earned Income................................................................................1.05
1.14 Account......................................................................................1.05
1.15 Accrued Benefit..............................................................................1.05
1.16 Nonforfeitable...............................................................................1.05
1.17 Plan Year/Limitation Year....................................................................1.05
1.18 Effective Date...............................................................................1.05
1.19 Plan Entry Date..............................................................................1.05
1.20 Accounting Date..............................................................................1.05
1.21 Trust........................................................................................1.05
1.22 Trust Fund...................................................................................1.05
1.23 Nontransferable Annuity......................................................................1.05
1.24 ERISA........................................................................................1.06
1.25 Code.........................................................................................1.06
1.26 Service......................................................................................1.06
1.27 Hour of Service..............................................................................1.06
1.28 Disability...................................................................................1.07
1.29 Service for Predecessor Employer.............................................................1.07
1.30 Related Employers............................................................................1.07
1.31 Leased Employees.............................................................................1.08
1.32 Special Rules for Owner-Employers............................................................1.08
1.33 Determination of Top Heavy Status............................................................1.09
1.34 Paired Plans.................................................................................1.10
ARTICLE II, EMPLOYEE PARTICIPANTS
2.01 Eligibility..................................................................................2.01
2.02 Year of Service - Participation..............................................................2.01
2.03 Break in Service - Participation.............................................................2.01
2.04 Participation upon Re-employment.............................................................2.02
2.05 Change in Employee Status....................................................................2.02
2.06 Election Not to Participate..................................................................2.02
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ARTICLE III, EMPLOYER CONTRIBUTIONS AND FORFEITURES
<S> <C> <C>
3.01 Amount.......................................................................................3.01
3.02 Determination of Contribution................................................................3.01
3.03 Time of Payment of Contribution..............................................................3.01
3.04 Contribution Allocation......................................................................3.01
3.05 Forfeiture Allocation........................................................................3.03
3.06 Accrual of Benefit...........................................................................3.03
3.07 - 3.16 Limitations on Allocations................................................................3.05
3.17 Special Allocation Limitation................................................................3.07
3.18 Defined Benefit Plan Limitation..............................................................3.07
3.19 Definitions - Article III....................................................................3.07
ARTICLE IV, PARTICIPANT CONTRIBUTIONS
4.01 Participant Nondeductible Contributions......................................................4.01
4.02 Participant Deductible Contributions.........................................................4.01
4.03 Participant Rollover Contributions...........................................................4.01
4.04 Participant Contribution - Forfeitability....................................................4.02
4.05 Participant Contribution - Withdrawal/Distribution...........................................4.02
4.06 Participant Contribution - Accrued Benefit...................................................4.02
ARTICLE V, TERMINATION OF SERVICE - PARTICIPANT VESTING
5.01 Normal Retirement Age........................................................................5.01
5.02 Participant Disability or Death..............................................................5.01
5.03 Vesting Schedule.............................................................................5.01
5.04 Cash-Out Distributions to Partially-Vested Participants/Restoration
of Forfeited Accrued Benefit.................................................................5.01
5.05 Segregated Account for Repaid Amount.........................................................5.03
5.06 Year of Service - Vesting....................................................................5.03
5.07 Break in Service - Vesting...................................................................5.03
5.08 Included Years of Service - Vesting..........................................................5.03
5.09 Forfeiture Occurs............................................................................5.03
ARTICLE VI, TIME AND METHOD OF PAYMENT OF BENEFITS
6.01 Time of Payment of Accrued Benefit...........................................................6.01
6.02 Method of Payment of Accrued Benefit.........................................................6.03
6.03 Benefit Payment Elections....................................................................6.05
6.04 Annuity Distributions to Participants and Surviving Spouses..................................6.06
6.05 Waiver Election - Qualified Joint and Survivor Annuity.......................................6.07
6.06 Waiver Election - Preretirement Survivor Annuity.............................................6.08
6.07 Distributions Under Domestic Relations Orders................................................6.09
ARTICLE VII, EMPLOYER ADMINISTRATIVE PROVISIONS
7.01 Information to Committee.....................................................................7.01
7.02 No Liability.................................................................................7.01
7.03 Indemnity of Plan Administrator and Committee................................................7.01
7.04 Employer Direction of Investment.............................................................7.01
7.05 Amendment to Vesting Schedule................................................................7.01
</TABLE>
ii
<PAGE>
ARTICLE VIII, PARTICIPANT ADMINISTRATIVE PROVISIONS
<TABLE>
<S> <C> <C>
8.01 Beneficiary Designation......................................................................8.01
8.02 No Beneficiary Designation/Death of Beneficiary..............................................8.01
8.03 Personal Data to Committee...................................................................8.02
8.04 Address for Notification.....................................................................8.02
8.05 Assignment or Alienation.....................................................................8.02
8.06 Notice of Change in Terms....................................................................8.02
8.07 Litigation Against the Trust.................................................................8.02
8.08 Information Available........................................................................8.02
8.09 Appeal Procedure for Denial of Benefits......................................................8.02
8.10 Participant Direction of Investment..........................................................8.03
ARTICLE IX, ADVISORY COMMITTEE - DUTIES WITH RESPECT TO
PARTICIPANTS' ACCOUNTS
9.01 Members' Compensation, Expenses..............................................................9.01
9.02 Term.........................................................................................9.01
9.03 Powers.......................................................................................9.01
9.04 General......................................................................................9.01
9.05 Funding Policy...............................................................................9.02
9.06 Manner of Action.............................................................................9.02
9.07 Authorized Representative....................................................................9.02
9.08 Interested Member............................................................................9.02
9.09 Individual Accounts..........................................................................9.02
9.10 Value of Participant's Accrued Benefit.......................................................9.02
9.11 Allocation and Distribution of Net Income Gain or Loss.......................................9.03
9.12 Individual Statement.........................................................................9.03
9.13 Account Charged..............................................................................9.03
9.14 Unclaimed Account Procedure..................................................................9.04
ARTICLE X, CUSTODIAN/TRUSTEE, POWERS AND DUTIES
10.01 Acceptance..................................................................................10.01
10.02 Receipt of Contributions....................................................................10.01
10.03 Investment Powers...........................................................................10.01
10.04 Records and Statements......................................................................10.05
10.05 Fees and Expenses from Fund.................................................................10.06
10.06 Parties to Litigation.......................................................................10.06
10.07 Professional Agents.........................................................................10.06
10.08 Distribution of Cash or Property............................................................10.06
10.09 Distribution Directions.....................................................................10.06
10.10 Third Party/Multiple Trustees...............................................................10.06
10.11 Resignation.................................................................................10.06
10.12 Removal.....................................................................................10.07
10.13 Interim Duties and Successor Trustee........................................................10.07
10.14 Valuation of Trust..........................................................................10.07
10.15 Limitation on Liability - If Investment Manager, Ancillary
Trustee or Independent Fiduciary............................................................10.07
10.16 Investment in Group Trust Fund..............................................................10.07
10.17 Appointment of Ancillary Trustee or Independent Fiduciary...................................10.08
</TABLE>
iii
<PAGE>
ARTICLE XI, PROVISIONS RELATING TO INSURANCE AND INSURANCE COMPANY
<TABLE>
<S> <C> <C>
11.01 Insurance Benefit...........................................................................11.01
11.02 Limitation on Life Insurance Protection.....................................................11.01
11.03 Definitions.................................................................................11.02
11.04 Dividend Plan...............................................................................11.02
11.05 Insurance Company Not a Party to Agreement..................................................11.02
11.06 Insurance Company Not Responsible for Trustee's Actions.....................................11.03
11.07 Insurance Company Reliance on Trustee's Signature...........................................11.03
11.08 Acquittance.................................................................................11.03
11.09 Duties of Insurance Company.................................................................11.03
ARTICLE XII, MISCELLANEOUS
12.01 Evidence....................................................................................12.01
12.02 No Responsibility for Employer Action.......................................................12.01
12.03 Fiduciaries Not Insurers....................................................................12.01
12.04 Waiver of Notice............................................................................12.01
12.05 Successors..................................................................................12.01
12.06 Word Usage..................................................................................12.01
12.07 State Law...................................................................................12.01
12.08 Employer's Right to Participate.............................................................12.01
12.09 Employment Not Guaranteed...................................................................12.02
ARTICLE XIII, EXCLUSIVE BENEFIT, AMENDMENT, TERMINATION
13.01 Exclusive Benefit...........................................................................13.01
13.02 Amendment By Employer.......................................................................13.01
13.03 Amendment By Master Plan Sponsor............................................................13.02
13.04 Discontinuance..............................................................................13.02
13.05 Full Vesting on Termination.................................................................13.02
13.06 Merger/Direct Transfer......................................................................13.02
13.07 Termination.................................................................................13.03
ARTICLE XIV, CODE (S)401(k) ARRANGEMENTS
14.01 Application.................................................................................14.01
14.02 Code (S)401(k) Arrangement..................................................................14.01
14.03 Definitions.................................................................................14.02
14.04 Matching Contributions/Employee Contributions...............................................14.03
14.05 Time of Payment of Contributions............................................................14.04
14.06 Special Allocation Provisions - Deferral Contributions,
Matching Contributions and Qualified Nonelective Contributions..............................14.04
14.07 Annual Elective Deferral Limitation.........................................................14.05
14.08 Actual Deferral Percentage ("ADP") Test.....................................................14.06
14.09 Nondiscrimination Rules for Employer Matching Contributions
and Participant Nondeductible Contributions.................................................14.08
14.10 Multiple Use Limitation.....................................................................14.10
14.11 Distribution Restrictions...................................................................14.11
14.12 Special Allocation Rules....................................................................14.12
ARTICLE A - APPENDIX TO BASIC PLAN DOCUMENT.............................................................A-1
</TABLE>
iv
<PAGE>
<TABLE>
<S> <C> <C>
ARTICLE B - APPENDIX TO BASIC PLAN DOCUMENT.............................................................B-1
</TABLE>
v
<PAGE>
ALPHABETICAL LISTING OF DEFINITIONS
<TABLE>
<CAPTION>
Plan Definition Section Reference
(Page Number)
<S> <C>
100% Limitation......................................................................................3.19(l) (3.09)
Account.................................................................................................1.14 (1.05)
Accounting Date.........................................................................................1.20 (1.05)
Accrued Benefit.........................................................................................1.15 (1.05)
Actual Deferral Percentage ("ADP") Test...............................................................14.08 (14.06)
Adoption Agreement......................................................................................1.04 (1.01)
Advisory Committee......................................................................................1.06 (1.02)
Annual Addition......................................................................................3.19(a) (3.07)
Average Contribution Percentage Test..................................................................14.09 (14.08)
Beneficiary.............................................................................................1.11 (1.03)
Break in Service for Eligibility Purposes...............................................................2.03 (2.01)
Break in Service for Vesting Purposes...................................................................5.07 (5.03)
Cash-out Distribution...................................................................................5.04 (5.01)
Code....................................................................................................1.25 (1.06)
Code ss.411(d)(6) Protected Benefits..................................................................13.02 (13.01)
Compensation............................................................................................1.12 (1.03)
Compensation for Code (S)401(k) Purposes...........................................................14.03(f) (14.02)
Compensation for Code (S)415 Purposes................................................................3.19(b) (3.07)
Compensation for Top Heavy Purposes...............................................................1.33(B)(3) (1.10)
Contract(s)........................................................................................11.03(c) (11.02)
Custodian Designation..............................................................................10.03[B] (10.02)
Deemed Cash-out Rule.................................................................................5.04(C) (5.02)
Deferral Contributions.............................................................................14.03(g) (14.02)
Deferral Contributions Account........................................................................14.06 (14.04)
Defined Benefit Plan.................................................................................3.19(i) (3.08)
Defined Benefit Plan Fraction........................................................................3.19(j) (3.08)
Defined Contribution Plan............................................................................3.19(h) (3.08)
Defined Contribution Plan Fraction...................................................................3.19(k) (3.09)
Determination Date................................................................................1.33(B)(7) (1.10)
Disability..............................................................................................1.28 (1.07)
Distribution Date.......................................................................................6.01 (6.01)
Distribution Restrictions..........................................................................14.03(m) (14.03)
Earned Income...........................................................................................1.13 (1.05)
Effective Date..........................................................................................1.18 (1.05)
Elective Deferrals.................................................................................14.03(h) (14.02)
Elective Transfer..................................................................................13.06(A) (13.02)
Eligible Employee..................................................................................14.03(c) (14.02)
Employee................................................................................................1.07 (1.02)
Employee Contributions.............................................................................14.03(n) (14.03)
Employer................................................................................................1.01 (1.01)
Employer Contribution Account.........................................................................14.06 (14.04)
</TABLE>
vi
<PAGE>
<TABLE>
<S> <C>
Employer for Code (S)415 Purposes....................................................................3.19(c) (3.08)
Employer for Top Heavy Purposes...................................................................1.33(B)(6) (1.10)
Employment Commencement Date............................................................................2.02 (2.01)
ERISA...................................................................................................1.24 (1.06)
Excess Aggregate Contributions........................................................................14.09 (14.09)
Excess Amount........................................................................................3.19(d) (3.08)
Excess Contributions..................................................................................14.08 (14.07)
Exempt Participant......................................................................................8.01 (8.01)
Forfeiture Break in Service.............................................................................5.08 (5.03)
Group Trust Fund......................................................................................10.16 (10.07)
Hardship..........................................................................................6.01(A)(4) (6.02)
Hardship for Code (S)401(k) Purposes..................................................................14.11 (14.11)
Highly Compensated Employee.............................................................................1.09 (1.02)
Highly Compensated Group...........................................................................14.03(d) (14.02)
Hour of Service.........................................................................................1.27 (1.06)
Incidental Insurance Benefits.........................................................................11.01 (11.01)
Insurable Participant..............................................................................11.03(d) (11.02)
Investment Manager...................................................................................9.04(i) (9.01)
Issuing Insurance Company..........................................................................11.03(b) (11.02)
Joint and Survivor Annuity...........................................................................6.04(A) (6.06)
Key Employee......................................................................................1.33(B)(1) (1.10)
Leased Employees........................................................................................1.31 (1.08)
Limitation Year..................................................................1.17 and 3.19(e) (1.05) and (3.08)
Loan Policy..........................................................................................9.04(A) (9.02)
Mandatory Contributions...............................................................................14.04 (14.04)
Mandatory Contributions Account.......................................................................14.04 (14.04)
Master or Prototype Plan.............................................................................3.19(f) (3.08)
Matching Contributions.............................................................................14.03(i) (14.03)
Maximum Permissible Amount...........................................................................3.19(g) (3.08)
Minimum Distribution Incidental Benefit (MDIB).......................................................6.02(A) (6.03)
Multiple Use Limitation...............................................................................14.10 (14.10)
Named Fiduciary....................................................................................10.03[D] (10.04)
Nonelective Contributions..........................................................................14.03(j) (14.03)
Nonforfeitable..........................................................................................1.16 (1.05)
Nonhighly Compensated Employee.....................................................................14.03(b) (14.02)
Nonhighly Compensated Group........................................................................14.03(e) (14.02)
Non-Key Employee..................................................................................1.33(B)(2) (1.10)
Nontransferable Annuity.................................................................................1.23 (1.05)
Normal Retirement Age...................................................................................5.01 (5.01)
Owner-Employee..........................................................................................1.08 (1.02)
Paired Plans............................................................................................1.34 (1.10)
Participant.............................................................................................1.10 (1.03)
Participant Deductible Contributions....................................................................4.02 (4.01)
Participant Forfeiture..................................................................................3.05 (3.03)
Participant Loans..................................................................................10.03[E] (10.05)
Participant Nondeductible Contributions.................................................................4.01 (4.01)
Permissive Aggregation Group......................................................................1.33(B)(5) (1.10)
Plan....................................................................................................1.03 (1.01)
</TABLE>
vii
<PAGE>
<TABLE>
<S> <C>
Plan Administrator......................................................................................1.05 (1.02)
Plan Entry Date.........................................................................................1.19 (1.05)
Plan Year...............................................................................................1.17 (1.05)
Policy.............................................................................................11.03(a) (11.02)
Predecessor Employer....................................................................................1.29 (1.07)
Preretirement Survivor Annuity.......................................................................6.04(B) (6.06)
Qualified Domestic Relations Order......................................................................6.07 (6.09)
Qualified Matching Contributions...................................................................14.03(k) (14.03)
Qualified Nonelective Contributions................................................................14.03(l) (14.03)
Qualifying Employer Real Property..................................................................10.03[F] (10.05)
Qualifying Employer Securities.....................................................................10.03[F] (10.05)
Related Employers.......................................................................................1.30 (1.07)
Required Aggregation Group........................................................................1.33(B)(4) (1.10)
Required Beginning Date..............................................................................6.01(B) (6.02)
Rollover Contributions..................................................................................4.03 (4.01)
Self-Employed Individual................................................................................1.08 (1.02)
Service.................................................................................................1.26 (1.06)
Term Life Insurance Contract..........................................................................11.03 (11.02)
Top Heavy Minimum Allocation.........................................................................3.04(B) (3.01)
Top Heavy Ratio.........................................................................................1.33 (1.09)
Trust...................................................................................................1.21 (1.05)
Trustee.................................................................................................1.02 (1.01)
Trustee Designation................................................................................10.03[A] (10.01)
Trust Fund..............................................................................................1.22 (1.05)
Weighted Average Allocation Method....................................................................14.12 (14.12)
Year of Service for Eligibility Purposes................................................................2.02 (2.01)
Year of Service for Vesting Purposes....................................................................5.06 (5.03)
</TABLE>
viii
<PAGE>
Commerce Bank, N. A. Master Plan
--------------------------------
DEFINED CONTRIBUTION MASTER PLAN AND TRUST AGREEMENT
----------------------------------------------------
BASIC PLAN DOCUMENT # 01
------------------------
Commerce Bank, N. A., in its capacity as Master Plan Sponsor, establishes
--------------------
this Master Plan intended to conform to and qualify under ss.401 and ss.501 of
the Internal Revenue Code of 1986, as amended. An Employer establishes a Plan
and Trust under this Master Plan by executing an Adoption Agreement. If the
Employer adopts this Plan as a restated Plan in substitution for, and in
amendment of, an existing plan, the provisions of this Plan, as a restated Plan,
apply solely to an Employee whose employment with the Employer terminates on or
after the restated Effective Date of the Employer's Plan. If an Employee's
employment with the Employer terminates prior to the restated Effective Date,
that Employee is entitled to benefits under the Plan as the Plan existed on the
date of the Employee's termination of employment.
ARTICLE I
DEFINITIONS
1.01 "Employer" means each employer who adopts this Plan by executing an
Adoption Agreement.
1.02 "Trustee" means the person or persons who as Trustee execute the
Employer's Adoption Agreement, or any successor in office who in writing accepts
the position of Trustee. The Employer must designate in its Adoption Agreement
whether the Trustee will administer the Trust as a discretionary Trustee or as a
nondiscretionary Trustee. If a person acts as a discretionary Trustee, the
Employer also may appoint a Custodian. See Article X. If the Master Plan Sponsor
is a bank, savings and loan, credit union or similar financial institution, a
person other than the Master Plan Sponsor (or its affiliate) may not serve as
Trustee or as Custodian of the Employer's Plan without the written consent of
the Master Plan Sponsor.
1.03 "Plan" means the retirement plan established or continued by the
Employer in the form of this Agreement, including the Adoption Agreement under
which the Employer has elected to participate in this Master Plan. The Employer
must designate the name of the Plan in its Adoption Agreement. An Employer may
execute more than one Adoption Agreement offered under this Master Plan, each of
which will constitute a separate Plan and Trust established or continued by that
Employer. The Plan and the Trust created by each adopting Employer is a separate
Plan and a separate Trust, independent from the plan and the trust of any other
employer adopting this Master Plan. All section references within the Plan are
Plan section references unless the context clearly indicates otherwise.
1.04 "Adoption Agreement" means the document executed by each Employer
adopting this Master Plan. The terms of this Master Plan as modified by the
terms of an adopting Employer's Adoption Agreement constitute a separate Plan
and Trust to be construed as a single Agreement. Each elective provision of the
Adoption Agreement corresponds by section reference to the section of the Plan
which grants the election. Each Adoption Agreement offered under this Master
Plan is either a Nonstandardized Plan or a Standardized Plan, as identified in
the preamble to that Adoption Agreement. The provisions of this Master Plan
apply equally to Nonstandardized Plans and to Standardized Plans unless
otherwise specified.
1.01
<PAGE>
1.05 "Plan Administrator" is the Employer unless the Employer designates
another person to hold the position of Plan Administrator. In addition to his
other duties, the Plan Administrator has full responsibility for compliance with
the reporting and disclosure rules under ERISA as respects this Agreement.
1.06 "Advisory Committee" means the Employer's Advisory Committee as from
time to time constituted.
1.07 "Employee" means any employee (including a Self-Employed Individual) of
the Employer. The Employer must specify in its Adoption Agreement any Employee,
or class of Employees, not eligible to participate in the Plan. If the Employer
elects to exclude collective bargaining employees, the exclusion applies to any
employee of the Employer included in a unit of employees covered by an agreement
which the Secretary of Labor finds to be a collective bargaining agreement
between employee representatives and one or more employers unless the collective
bargaining agreement requires the employee to be included within the Plan. The
term "employee representatives" does not include any organization more than half
the members of which are owners, officers, or executives of the Employer.
1.08 "Self-Employed Individual/Owner-Employee." "Self-Employed Individual"
means an individual who has Earned Income (or who would have had Earned Income
but for the fact that the trade or business did not have net earnings) for the
taxable year from the trade or business for which the Plan is established.
"Owner-Employee" means a Self-Employed Individual who is the sole proprietor in
the case of a sole proprietorship. If the Employer is a partnership,
"Owner-Employee" means a Self-Employed Individual who is a partner and owns more
than 10% of either the capital or profits interest of the partnership.
1.09 "Highly Compensated Employee" means an Employee who, during the Plan
Year or during the preceding 12-month period:
(a) is a more than 5% owner of the Employer (applying the constructive
ownership rules of Code ss.318, and applying the principles of Code ss.318,
for an unincorporated entity);
(b) has Compensation in excess of $75,000 (as adjusted by the
Commissioner of Internal Revenue for the relevant year);
(c) has Compensation in excess of $50,000 (as adjusted by the Commissioner
of Internal Revenue for the relevant year) and is part of the top-paid 20%
group of employees (based on Compensation for the relevant year); or
(d) has Compensation in excess of 50% of the dollar amount prescribed in
Code ss.415(b)(1)(A) (relating to defined benefit plans) and is an officer
of the Employer.
If the Employee satisfies the definition in clause (b), (c) or (d) in the
Plan Year but does not satisfy clause (b), (c) or (d) during the preceding
12-month period and does not satisfy clause (a) in either period, the Employee
is a Highly Compensated Employee only if he is one of the 100 most highly
compensated Employees for the Plan Year. The number of officers taken into
account under clause (d) will not exceed the greater of 3 or 10% of the total
number (after application of the Code (S)414(q) exclusions) of Employees, but no
more than 50 officers. If no Employee satisfies the Compensation requirement in
clause (d) for the relevant year, the Advisory Committee will treat the highest
paid officer as satisfying clause (d) for that year.
For purposes of this Section 1.09, "Compensation" means Compensation as
defined in Section 1.12, except any exclusions from Compensation elected in the
Employer's Adoption Agreement Section 1.12 do not apply, and Compensation must
include "elective contributions" (as defined in Section 1.12). The Advisory
Committee must make the determination of who is a Highly Compensated Employee,
including the determinations of the number and identity of the top paid 20%
group, the top 100 paid Employees, the number of officers includible in clause
(d) and the relevant Compensation, consistent with Code (S)414(q) and
regulations issued under that Code section. The Employer may make a calendar
year election to determine the Highly Compensated Employees for the Plan Year,
as prescribed by Treasury regulations. A calendar year election must apply to
1.02
<PAGE>
all plans and arrangements of the Employer. For purposes of applying any
nondiscrimination test required under the Plan or under the Code, in a manner
consistent with applicable Treasury regulations, the Advisory Committee will
treat a Highly Compensated Employee and all family members (a spouse, a lineal
ascendant or descendant, or a spouse of a lineal ascendant or descendant) as a
single Highly Compensated Employee, but only if the Highly Compensated Employee
is a more than 5% owner or is one of the 10 Highly Compensated Employees with
the greatest Compensation for the Plan Year. This aggregation rule applies to a
family member even if that family member is a Highly Compensated Employee
without family aggregation.
The term "Highly Compensated Employee" also includes any former Employee who
separated from Service (or has a deemed Separation from Service, as determined
under Treasury regulations) prior to the Plan Year, performs no Service for the
Employer during the Plan Year, and was a Highly Compensated Employee either for
the separation year or any Plan Year ending on or after his 55th birthday. If
the former Employee's Separation from Service occurred prior to January 1, 1987,
he is a Highly Compensated Employee only if he satisfied clause (a) of this
Section 1.09 or received Compensation in excess of $50,000 during: (1) the year
of his Separation from Service (or the prior year); or (2) any year ending after
his 54th birthday.
1.10 "Participant" is an Employee who is eligible to be and becomes a
Participant in accordance with the provisions of Section
2.01.
1.11 "Beneficiary" is a person designated by a Participant who is or may
become entitled to a benefit under the Plan. A Beneficiary who becomes entitled
to a benefit under the Plan remains a Beneficiary under the Plan until the
Trustee has fully distributed his benefit to him. A Beneficiary's right to (and
the Plan Administrator's, the Advisory Committee's or a Trustee's duty to
provide to the Beneficiary) information or data concerning the Plan does not
arise until he first becomes entitled to receive a benefit under the Plan.
1.12 "Compensation" means, except as provided in the Employer's Adoption
Agreement, the Participant's Earned Income, wages, salaries, fees for
professional service and other amounts received for personal services actually
rendered in the course of employment with the Employer maintaining the plan
(including, but not limited to, commissions paid salesmen, compensation for
services on the basis of a percentage of profits, commissions on insurance
premiums, tips and bonuses). The Employer must elect in its Adoption Agreement
whether to include elective contributions in the definition of Compensation.
"Elective contributions" are amounts excludible from the Employee's gross income
under Code (S)(S)125, 402(a)(8), 402(h) or 403(b), and contributed by the
Employer, at the Employee's election, to a Code (S)401(k) arrangement, a
Simplified Employee Pension, cafeteria plan or tax-sheltered annuity. The term
"Compensation" does not include:
(a) Employer contributions (other than "elective contributions," if
includible in the definition of Compensation under Section 1.12 of the
Employer's Adoption Agreement) to a plan of deferred compensation to the
extent the contributions are not included in the gross income of the
Employee for the taxable year in which contributed, on behalf of an Employee
to a Simplified Employee Pension Plan to the extent such contributions are
excludible from the Employee's gross income, and any distributions from a
plan of deferred compensation, regardless of whether such amounts are
includible in the gross income of the Employee when distributed.
(b) Amounts realized from the exercise of a non-qualified stock option, or
when restricted stock (or property) held by an Employee either becomes
freely transferable or is no longer subject to a substantial risk of
forfeiture.
(c) Amounts realized from the sale, exchange or other disposition of stock
acquired under a stock option described in Part II, Subchapter D, Chapter 1
of the Code.
1.03
<PAGE>
(d) Other amounts which receive special tax benefits, such as premiums for
group term life insurance (but only to the extent that the premiums are not
includible in the gross income of the Employee), or contributions made by an
Employer (whether or not under a salary reduction agreement) towards the
purchase of an annuity contract described in Code (S)403(b) (whether or not
the contributions are excludible from the gross income of the Employee),
other than "elective contributions," if elected in the Employer's Adoption
Agreement.
Any reference in this Plan to Compensation is a reference to the definition
in this Section 1.12, unless the Plan reference specifies a modification to this
definition. The Advisory Committee will take into account only Compensation
actually paid for the relevant period. A Compensation payment includes
Compensation by the Employer through another person under the common paymaster
provisions in Code (S)(S)3121 and 3306.
(A) Limitations on Compensation.
(1) Compensation dollar limitation. For any Plan Year beginning after
December 31, 1988, the Advisory Committee must take into account only the first
$200,000 (or beginning January 1, 1990, such larger amount as the Commissioner
of Internal Revenue may prescribe) of any Participant's Compensation. For any
Plan Year beginning prior to January 1, 1989, this $200,000 limitation (but not
the family aggregation requirement described in the next paragraph) applies only
if the Plan is top heavy for such Plan Year or operates as a deemed top heavy
plan for such Plan Year.
(2) Application of compensation limitation to certain family members. The
$200,000 Compensation limitation applies to the combined Compensation of the
Employee and of any family member aggregated with the Employee under Section
1.09 who is either (i) the Employee's spouse; or (ii) the Employee's lineal
descendant under the age of 19. If, for a Plan Year, the combined Compensation
of the Employee and such family members who are Participants entitled to an
allocation for that Plan Year exceeds the $200,000 (or adjusted) limitation,
"Compensation" for each such Participant, for purposes of the contribution and
allocation provisions of Article III, means his Adjusted Compensation. Adjusted
Compensation is the amount which bears the same ratio to the $200,000 (or
adjusted) limitation as the affected Participant's Compensation (without regard
to the $200,000 Compensation limitation) bears to the combined Compensation of
all the affected Participants in the family unit. If the Plan uses permitted
disparity, the Advisory Committee must determine the integration level of each
affected family member Participant prior to the proration of the $200,000
Compensation limitation, but the combined integration level of the affected
Participants may not exceed $200,000 (or the adjusted limitation). The combined
Excess Compensation of the affected Participants in the family unit may not
exceed $200,000 (or the adjusted limitation) minus the affected Participants'
combined integration level (as determined under the preceding sentence). If the
combined Excess Compensation exceeds this limitation, the Advisory Committee
will prorate the Excess Compensation limitation among the affected Participants
in the family unit in proportion to each such individual's Adjusted Compensation
minus his integration level. If the Employer's Plan is a Nonstandardized Plan,
the Employer may elect to use a different method in determining the Adjusted
Compensation of the affected Participants by specifying that method in an
addendum to the Adoption Agreement, numbered Section 1.12.
(B) Nondiscrimination. For purposes of determining whether the Plan
discriminates in favor of Highly Compensated Employees, Compensation means
Compensation as defined in this Section 1.12, except: (1) the Employer may elect
to include or to exclude elective contributions, irrespective of the Employer's
election in its Adoption Agreement regarding elective contributions; and (2) the
Employer will not give effect to any elections made in the "modifications to
Compensation definition" section of Adoption Agreement Section 1.12. The
Employer's election described in clause (1) must be consistent and uniform with
respect to all Employees and all plans of the Employer for any particular Plan
Year. If the Employer's Plan is a Nonstandardized Plan, the Employer,
irrespective of clause (2), may elect to exclude from this nondiscrimination
definition of Compensation any items of Compensation excludible under Code
(S)414(s) and the applicable Treasury regulations, provided such adjusted
definition conforms to the nondiscrimination requirements of those regulations.
1.04
<PAGE>
1.13 "Earned Income" means net earnings from self-employment in the trade or
business with respect to which the Employer has established the Plan, provided
personal services of the individual are a material income producing factor. The
Advisory Committee will determine net earnings without regard to items excluded
from gross income and the deductions allocable to those items. The Advisory
Committee will determine net earnings after the deduction allowed to the
Self-Employed Individual for all contributions made by the Employer to a
qualified plan and, for Plan Years beginning after December 31, 1989, the
deduction allowed to the Self-Employed under Code (S)164(f) for self-employment
taxes.
1.14 "Account" means the separate account(s) which the Advisory Committee or
the Trustee maintains for a Participant under the Employer's Plan.
1.15 "Accrued Benefit" means the amount standing in a Participant's
Account(s) as of any date derived from both Employer contributions and Employee
contributions, if any.
1.16 "Nonforfeitable" means a Participant's or Beneficiary's unconditional
claim, legally enforceable against the Plan, to the Participant's Accrued
Benefit.
1.17 "Plan Year" means the fiscal year of the Plan, the consecutive month
period specified in the Employer's Adoption Agreement. The Employer's Adoption
Agreement also must specify the "Limitation Year" applicable to the limitations
on allocations described in Article III. If the Employer maintains Paired Plans,
each Plan must have the same Plan Year.
1.18 "Effective Date" of this Plan is the date specified in the Employer's
Adoption Agreement.
1.19 "Plan Entry Date" means the date(s) specified in Section 2.01 of the
Employer's Adoption Agreement.
1.20 "Accounting Date" is the last day of an Employer's Plan Year. Unless
otherwise specified in the Plan, the Advisory Committee will make all Plan
allocations for a particular Plan Year as of the Accounting Date of that Plan
Year.
1.21 "Trust" means the separate Trust created under the Employer's Plan.
1.22 "Trust Fund" means all property of every kind held or acquired by the
Employer's Plan, other than incidental benefit insurance contracts.
1.23 "Nontransferable Annuity" means an annuity which by its terms provides
that it may not be sold, assigned, discounted, pledged as collateral for a loan
or security for the performance of an obligation or for any purpose to any
person other than the insurance company. If the Plan distributes an annuity
contract, the contract must be a Nontransferable Annuity.
1.24 "ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
1.25 "Code" means the Internal Revenue Code of 1986, as amended.
1.26 "Service" means any period of time the Employee is in the employ of the
Employer, including any period the Employee is on an unpaid leave of absence
authorized by the Employer under a uniform, nondiscriminatory policy applicable
to all Employees. "Separation from Service" means the Employee no longer has an
employment relationship with the Employer maintaining this Plan.
1.05
<PAGE>
1.27 "Hour of Service" means:
(a) Each Hour of Service for which the Employer, either directly or
indirectly, pays an Employee, or for which the Employee is entitled to
payment, for the performance of duties. The Advisory Committee credits Hours
of Service under this paragraph (a) to the Employee for the computation
period in which the Employee performs the duties, irrespective of when paid;
(b) Each Hour of Service for back pay, irrespective of mitigation of
damages, to which the Employer has agreed or for which the Employee has
received an award. The Advisory Committee credits Hours of Service under
this paragraph (b) to the Employee for the computation period(s) to which
the award or the agreement pertains rather than for the computation period
in which the award, agreement or payment is made; and
(c) Each Hour of Service for which the Employer, either directly or
indirectly, pays an Employee, or for which the Employee is entitled to
payment (irrespective of whether the employment relationship is terminated),
for reasons other than for the performance of duties during a computation
period, such as leave of absence, vacation, holiday, sick leave, illness,
incapacity (including disability), layoff, jury duty or military duty. The
Advisory Committee will credit no more than 501 Hours of Service under this
paragraph (c) to an Employee on account of any single continuous period
during which the Employee does not perform any duties (whether or not such
period occurs during a single computation period). The Advisory Committee
credits Hours of Service under this paragraph (c) in accordance with the
rules of paragraphs (b) and (c) of Labor Reg. (S)2530.200b-2, which the
Plan, by this reference, specifically incorporates in full within this
paragraph (c).
The Advisory Committee will not credit an Hour of Service under more than
one of the above paragraphs. A computation period for purposes of this Section
1.27 is the Plan Year, Year of Service period, Break in Service period or other
period, as determined under the Plan provision for which the Advisory Committee
is measuring an Employee's Hours of Service. The Advisory Committee will resolve
any ambiguity with respect to the crediting of an Hour of Service in favor of
the Employee.
(A) Method of crediting Hours of Service. The Employer must elect in its
Adoption Agreement the method the Advisory Committee will use in crediting an
Employee with Hours of Service. For purposes of the Plan, "actual" method means
the determination of Hours of Service from records of hours worked and hours for
which the Employer makes payment or for which payment is due from the Employer.
If the Employer elects to apply an "equivalency" method, for each equivalency
period for which the Advisory Committee would credit the Employee with at least
one Hour of Service, the Advisory Committee will credit the Employee with: (i)
10 Hours of Service for a daily equivalency; (ii) 45 Hours of Service for a
weekly equivalency; (iii) 95 Hours of Service for a semimonthly payroll period
equivalency; and (iv) 190 Hours of Service for a monthly equivalency.
(B) Maternity/paternity leave. Solely for purposes of determining whether the
Employee incurs a Break in Service under any provision of this Plan, the
Advisory Committee must credit Hours of Service during an Employee's unpaid
absence period due to maternity or paternity leave. The Advisory Committee
considers an Employee on maternity or paternity leave if the Employee's absence
is due to the Employee's pregnancy, the birth of the Employee's child, the
placement with the Employee of an adopted child, or the care of the Employee's
child immediately following the child's birth or placement. The Advisory
Committee credits Hours of Service under this paragraph on the basis of the
number of Hours of Service the Employee would receive if he were paid during the
absence period or, if the Advisory Committee cannot determine the number of
Hours of Service the Employee would receive, on the basis of 8 hours per day
during the absence period. The Advisory Committee will credit only the number
(not exceeding 501) of Hours of Service necessary to prevent an Employee's Break
in Service. The Advisory Committee credits all Hours of Service described in
this paragraph to the computation period in which the absence period begins or,
if the Employee does not need these Hours of Service to prevent a Break in
Service in the computation period in which his absence period begins, the
Advisory Committee credits these Hours of Service to the immediately following
computation period.
1.06
<PAGE>
1.28 "Disability" means the Participant, because of a physical or mental
disability, will be unable to perform the duties of his customary position of
employment (or is unable to engage in any substantial gainful activity) for an
indefinite period which the Advisory Committee considers will be of long
continued duration. A Participant also is disabled if he incurs the permanent
loss or loss of use of a member or function of the body, or is permanently
disfigured, and incurs a Separation from Service. The Plan considers a
Participant disabled on the date the Advisory Committee determines the
Participant satisfies the definition of disability. The Advisory Committee may
require a Participant to submit to a physical examination in order to confirm
disability. The Advisory Committee will apply the provisions of this Section
1.28 in a nondiscriminatory, consistent and uniform manner. If the Employer's
Plan is a Nonstandardized Plan, the Employer may provide an alternate definition
of disability in an addendum to its Adoption Agreement, numbered Section 1.28.
1.29 SERVICE FOR PREDECESSOR EMPLOYER. If the Employer maintains the plan of
--------------------------------
a predecessor employer, the Plan treats service of the Employee with the
predecessor employer as service with the Employer. If the Employer does not
maintain the plan of a predecessor employer, the Plan does not credit service
with the predecessor employer, unless the Employer identifies the predecessor in
its Adoption Agreement and specifies the purposes for which the Plan will credit
service with that predecessor employer.
1.30 RELATED EMPLOYERS. A related group is a controlled group of
-----------------
corporations (as defined in Code (S)414(b)), trades or businesses (whether or
not incorporated) which are under common control (as defined in Code (S)414(c))
or an affiliated service group (as defined in Code (S)414(m) or in Code
(S)414(o)). If the Employer is a member of a related group, the term "Employer"
includes the related group members for purposes of crediting Hours of Service,
determining Years of Service and Breaks in Service under Articles II and V,
applying the Participation Test and the Coverage Test under Section 3.06(E),
applying the limitations on allocations in Part 2 of Article III, applying the
top heavy rules and the minimum allocation requirements of Article III, the
definitions of Employee, Highly Compensated Employee, Compensation and Leased
Employee, and for any other purpose required by the applicable Code section or
by a Plan provision. However, an Employer may contribute to the Plan only by
being a signatory to the Execution Page of the Adoption Agreement or to a
Participation Agreement to the Employer's Adoption Agreement. If one or more of
the Employer's related group members become Participating Employers by executing
a Participation Agreement to the Employer's Adoption Agreement, the term
"Employer" includes the participating related group members for all purposes of
the Plan, and "Plan Administrator" means the Employer that is the signatory to
the Execution Page of the Adoption Agreement.
If the Employer's Plan is a Standardized Plan, all Employees of the Employer
or of any member of the Employer's related group, are eligible to participate in
the Plan, irrespective of whether the related group member directly employing
the Employee is a Participating Employer. If the Employer's Plan is a
Nonstandardized Plan, the Employer must specify in Section 1.07 of its Adoption
Agreement, whether the Employees of related group members that are not
Participating Employers are eligible to participate in the Plan. Under a
Nonstandardized Plan, the Employer may elect to exclude from the definition of
"Compensation" for allocation purposes any Compensation received from a related
employer that has not executed a Participation Agreement and whose Employees are
not eligible to participate in the Plan.
1.31 LEASED EMPLOYEES. The Plan treats a Leased Employee as an Employee of
----------------
the Employer. A Leased Employee is an individual (who otherwise is not an
Employee of the Employer) who, pursuant to a leasing agreement between the
Employer and any other person, has performed services for the Employer (or for
the Employer and any persons related to the Employer within the meaning of Code
(S)144(a)(3)) on a substantially full time basis for at least one year and who
performs services historically performed by employees in the Employer's business
field. If a Leased Employee is treated as an Employee by reason of this Section
1.31 of the Plan, "Compensation" includes Compensation from the leasing
organization which is attributable to services performed for the Employer.
1.07
<PAGE>
(A) Safe harbor plan exception. The Plan does not treat a Leased Employee as an
Employee if the leasing organization covers the employee in a safe harbor plan
and, prior to application of this safe harbor plan exception, 20% or less of the
Employer's Employees (other than Highly Compensated Employees) are Leased
Employees. A safe harbor plan is a money purchase pension plan providing
immediate participation, full and immediate vesting, and a nonintegrated
contribution formula equal to at least 10% of the employee's compensation
without regard to employment by the leasing organization on a specified date.
The safe harbor plan must determine the 10% contribution on the basis of
compensation as defined in Code (S)415(c)(3) plus elective contributions (as
defined in Section 1.12).
(B) Other requirements. The Advisory Committee must apply this Section 1.31 in a
manner consistent with Code (S)(S)414(n) and 414(o) and the regulations issued
under those Code sections. The Employer must specify in the Adoption Agreement
the manner in which the Plan will determine the allocation of Employer
contributions and Participant forfeitures on behalf of a Participant if the
Participant is a Leased Employee covered by a plan maintained by the leasing
organization.
1.32 SPECIAL RULES FOR OWNER-EMPLOYEES. The following special
---------------------------------
provisions and restrictions apply to Owner-Employees:
(a) If the Plan provides contributions or benefits for an Owner-Employee or
for a group of Owner-Employees who controls the trade or business with
respect to which this Plan is established and the Owner-Employee or
Owner-Employees also control as Owner-Employees one or more other trades or
businesses, plans must exist or be established with respect to all the
controlled trades or businesses so that when the plans are combined they
form a single plan which satisfies the requirements of Code ss.401(a) and
Code (S)401(d) with respect to the employees of the controlled trades or
businesses.
(b) The Plan excludes an Owner-Employee or group of Owner-Employees if the
Owner-Employee or group of Owner-Employees controls any other trade or
business, unless the employees of the other controlled trade or business
participate in a plan which satisfies the requirements of Code (S)401(a) and
Code (S)401(d). The other qualified plan must provide contributions and
benefits which are not less favorable than the contributions and benefits
provided for the Owner-Employee or group of Owner-Employees under this Plan,
or if an Owner-Employee is covered under another qualified plan as an
Owner-Employee, then the plan established with respect to the trade or
business he does control must provide contributions or benefits as favorable
as those provided under the most favorable plan of the trade or business he
does not control. If the exclusion of this paragraph (b) applies and the
Employer's Plan is a Standardized Plan, the Employer may not participate or
continue to participate in this Master Plan and the Employer's Plan becomes
an individually-designed plan for purposes of qualification reliance.
(c) For purposes of paragraphs (a) and (b) of this Section 1.32, an
Owner-Employee or group of Owner-Employees controls a trade or business if
the Owner-Employee or Owner-Employees together (1) own the entire interest
in an unincorporated trade or business, or (2) in the case of a partnership,
own more than 50% of either the capital interest or the profits interest in
the partnership.
1.33 DETERMINATION OF TOP HEAVY STATUS. If this Plan is the only qualified
---------------------------------
plan maintained by the Employer, the Plan is top heavy for a Plan Year if the
top heavy ratio as of the Determination Date exceeds 60%. The top heavy ratio is
a fraction, the numerator of which is the sum of the present value of Accrued
Benefits of all Key Employees as of the Determination Date and the denominator
of which is a similar sum determined for all Employees. The Advisory Committee
must include in the top heavy ratio, as part of the present value of Accrued
Benefits, any contribution not made as of the Determination Date but includible
under Code (S)416 and the applicable Treasury regulations, and distributions
made within the Determination Period. The Advisory Committee must calculate the
top heavy ratio by disregarding the Accrued Benefit (and distributions, if any,
of the Accrued Benefit) of any Non-Key Employee who was formerly a Key Employee,
and by disregarding the Accrued Benefit (including distributions, if any, of the
Accrued Benefit) of an individual who has not received credit for at least one
Hour of Service with the Employer during the Determination Period. The Advisory
Committee must calculate the top heavy ratio, including the extent to which it
must take
1.08
<PAGE>
into account distributions, rollovers and transfers, in accordance with Code
(S)416 and the regulations under that Code section.
If the Employer maintains other qualified plans (including a simplified
employee pension plan), or maintained another such plan which now is terminated,
this Plan is top heavy only if it is part of the Required Aggregation Group, and
the top heavy ratio for the Required Aggregation Group and for the Permissive
Aggregation Group, if any, each exceeds 60%. The Advisory Committee will
calculate the top heavy ratio in the same manner as required by the first
paragraph of this Section 1.33, taking into account all plans within the
Aggregation Group. To the extent the Advisory Committee must take into account
distributions to a Participant, the Advisory Committee must include
distributions from a terminated plan which would have been part of the Required
Aggregation Group if it were in existence on the Determination Date. The
Advisory Committee will calculate the present value of accrued benefits under
defined benefit plans or simplified employee pension plans included within the
group in accordance with the terms of those plans, Code ss.416 and the
regulations under that Code section. If a Participant in a defined benefit plan
is a Non-Key Employee, the Advisory Committee will determine his accrued benefit
under the accrual method, if any, which is applicable uniformly to all defined
benefit plans maintained by the Employer or, if there is no uniform method, in
accordance with the slowest accrual rate permitted under the fractional rule
accrual method described in Code (S)411(b)(1)(C). If the Employer maintains a
defined benefit plan, the Employer must specify in Adoption Agreement Section
3.18 the actuarial assumptions (interest and mortality only) the Advisory
Committee will use to calculate the present value of benefits from a defined
benefit plan. If an aggregated plan does not have a valuation date coinciding
with the Determination Date, the Advisory Committee must value the Accrued
Benefits in the aggregated plan as of the most recent valuation date falling
within the twelve-month period ending on the Determination Date, except as Code
(S)416 and applicable Treasury regulations require for the first and second plan
year of a defined benefit plan. The Advisory Committee will calculate the top
heavy ratio with reference to the Determination Dates that fall within the same
calendar year.
(A) Standardized Plan. If the Employer's Plan is a Standardized Plan, the Plan
operates as a deemed top heavy plan in all Plan Years, except, if the
Standardized Plan includes a Code (S)401(k) arrangement, the Employer may elect
to apply the top heavy requirements only in Plan Years for which the Plan
actually is top heavy. Under a deemed top heavy plan, the Advisory Committee
need not determine whether the Plan actually is top heavy. However, if the
Employer, in Adoption Agreement Section 3.18, elects to override the 100%
limitation, the Advisory Committee will need to determine whether a deemed top
heavy Plan's top heavy ratio for a Plan Year exceeds 90%.
(B) Definitions. For purposes of applying the provisions of this Section 1.33:
(1) "Key Employee" means, as of any Determination Date, any Employee or
former Employee (or Beneficiary of such Employee) who, for any Plan Year in
the Determination Period: (i) has Compensation in excess of 50% of the
dollar amount prescribed in Code (S)415(b)(1)(A) (relating to defined
benefit plans) and is an officer of the Employer; (ii) has Compensation in
excess of the dollar amount prescribed in Code (S)415(c)(1)(A) (relating to
defined contribution plans) and is one of the Employees owning the ten
largest interests in the Employer; (iii) is a more than 5% owner of the
Employer; or (iv) is a more than 1% owner of the Employer and has
Compensation of more than $150,000. The constructive ownership rules of Code
(S)318 (or the principles of that section, in the case of an unincorporated
Employer,) will apply to determine ownership in the Employer. The number of
officers taken into account under clause (i) will not exceed the greater of
3 or 10% of the total number (after application of the Code (S)414(q)
exclusions) of Employees, but no more than 50 officers. The Advisory
Committee will make the determination of who is a Key Employee in accordance
with Code (S)416(i)(1) and the regulations under that Code section.
(2) "Non-Key Employee" is an employee who does not meet the
definition of Key Employee.
(3) "Compensation" means Compensation as determined under Section 1.09 for
purposes of identifying Highly Compensated Employees.
1.09
<PAGE>
(4) "Required Aggregation Group" means: (i) each qualified plan of the
Employer in which at least one Key Employee participates at any time during
the Determination Period; and (ii) any other qualified plan of the Employer
which enables a plan described in clause (i) to meet the requirements of
Code (S)401(a)(4) or of Code (S)410.
(5) "Permissive Aggregation Group" is the Required Aggregation Group plus
any other qualified plans maintained by the Employer, but only if such group
would satisfy in the aggregate the requirements of Code (S)401(a)(4) and of
Code (S)410. The Advisory Committee will determine the Permissive
Aggregation Group.
(6) "Employer" means the Employer that adopts this Plan and any related
employers described in Section 1.30.
(7) "Determination Date" for any Plan Year is the Accounting Date of the
preceding Plan Year or, in the case of the first Plan Year of the Plan, the
Accounting Date of that Plan Year. The "Determination Period" is the 5 year
period ending on the Determination Date.
1.34 "Paired Plans" means the Employer has adopted two Standardized Plan
Adoption Agreements offered with this Master Plan, one Adoption Agreement being
a Paired Profit Sharing Plan and one Adoption Agreement being a Paired Pension
Plan. A Paired Profit Sharing Plan may include a Code ss.401(k) arrangement. A
Paired Pension Plan must be a money purchase pension plan or a target benefit
pension plan. Paired Plans must be the subject of a favorable opinion letter
issued by the National Office of the Internal Revenue Service. This Master Plan
does not pair any of its Standardized Plan Adoption Agreements with Standardized
Plan Adoption Agreements under a defined benefit master plan.
* * * * * * * * * * * * * * *
1.10
<PAGE>
ARTICLE II
EMPLOYEE PARTICIPANTS
2.01 ELIGIBILITY. Each Employee becomes a Participant in the Plan in
-----------
accordance with the participation option selected by the Employer in its
Adoption Agreement. If this Plan is a restated Plan, each Employee who was a
Participant in the Plan on the day before the Effective Date continues as a
Participant in the Plan, irrespective of whether he satisfies the participation
conditions in the restated Plan, unless otherwise provided in the Employer's
Adoption Agreement.
2.02 YEAR OF SERVICE - PARTICIPATION. For purposes of an Employee's
-------------------------------
participation in the Plan under Adoption Agreement Section 2.01, the Plan takes
into account all of his Years of Service with the Employer, except as provided
in Section 2.03. "Year of Service" means an eligibility computation period
during which the Employee completes not less than the number of Hours of Service
specified in the Employer's Adoption Agreement. The initial eligibility
computation period is the first 12 consecutive month period measured from the
Employment Commencement Date. The Plan measures succeeding eligibility
computation periods in accordance with the option selected by the Employer in
its Adoption Agreement. If the Employer elects to measure subsequent periods on
a Plan Year basis, an Employee who receives credit for the required number of
Hours of Service during the initial eligibility computation period and during
the first applicable Plan Year will receive credit for two Years of Service
under Article II. "Employment Commencement Date" means the date on which the
Employee first performs an Hour of Service for the Employer. If the Employer
elects a service condition under Adoption Agreement Section 2.01 based on
months, the Plan does not apply any Hour of Service requirement after the
completion of the first Hour of Service.
2.03 BREAK IN SERVICE - PARTICIPATION. An Employee incurs a "Break in
--------------------------------
Service" if during any 12 consecutive month period he does not complete more
than 500 Hours of Service with the Employer. The "12 consecutive month period"
under this Section 2.03 is the same 12 consecutive month period for which the
Plan measures "Years of Service" under Section 2.02.
(A) 2-year Eligibility. If the Employer elects a 2 years of service condition
for eligibility purposes under Adoption Agreement Section 2.01, the Plan treats
an Employee who incurs a one year Break in Service and who has never become a
Participant as a new Employee on the date he first performs an Hour of Service
for the Employer after the Break in Service.
(B) Suspension of Years of Service. The Employer must elect in its Adoption
Agreement whether a Participant will incur a suspension of Years of Service
after incurring a one year Break in Service. If this rule applies under the
Employer's Plan, the Plan disregards a Participant's Years of Service (as
defined in Section 2.02) earned prior to a Break in Service until the
Participant completes another Year of Service and the Plan suspends the
Participant's participation in the Plan. If the Participant completes a Year of
Service following his Break in Service, the Plan restores that Participant's
pre-Break Years of Service (and the Participant resumes active participation in
the Plan) retroactively to the first day of the computation period in which the
Participant earns the first post-Break Year of Service. The initial computation
period under this Section 2.03(B) is the 12 consecutive month period measured
from the date the Participant first receives credit for an Hour of Service
following the one year Break in Service period. The Plan measures any subsequent
periods, if necessary, in a manner consistent with the computation period
selection in Adoption Agreement Section 2.02. This Section 2.03(B) does not
affect a Participant's vesting credit under Article V and, during a suspension
period, the Participant's Account continues to share fully in Trust Fund
allocations under Section 9.11. Furthermore, this Section 2.03(B) will not
result in the restoration of any Year of Service disregarded under the Break in
Service rule of Section 2.03(A).
2.01
<PAGE>
2.04 PARTICIPATION UPON RE-EMPLOYMENT. A Participant whose employment with
--------------------------------
the Employer terminates will re-enter the Plan as a Participant on the date of
his re-employment, subject to the Break in Service rule, if applicable, under
Section 2.03(B). An Employee who satisfies the Plan's eligibility conditions but
who terminates employment with the Employer prior to becoming a Participant will
become a Participant on the later of the Plan Entry Date on which he would have
entered the Plan had he not terminated employment or the date of his
re-employment, subject to the Break in Service rule, if applicable, under
Section 2.03(B). Any Employee who terminates employment prior to satisfying the
Plan's eligibility conditions becomes a Participant in accordance with Adoption
Agreement Section 2.01.
2.05 CHANGE IN EMPLOYEE STATUS. If a Participant has not incurred a
-------------------------
Separation from Service but ceases to be eligible to participate in the Plan, by
reason of employment within an employment classification excluded by the
Employer under Adoption Agreement Section 1.07, the Advisory Committee must
treat the Participant as an Excluded Employee during the period such a
Participant is subject to the Adoption Agreement exclusion. The Advisory
Committee determines a Participant's sharing in the allocation of Employer
contributions and Participant forfeitures, if applicable, by disregarding his
Compensation paid by the Employer for services rendered in his capacity as an
Excluded Employee. However, during such period of exclusion, the Participant,
without regard to employment classification, continues to receive credit for
vesting under Article V for each included Year of Service and the Participant's
Account continues to share fully in Trust Fund allocations under Section 9.11.
If an Excluded Employee who is not a Participant becomes eligible to
participate in the Plan by reason of a change in employment classification, he
will participate in the Plan immediately if he has satisfied the eligibility
conditions of Section 2.01 and would have been a Participant had he not been an
Excluded Employee during his period of Service. Furthermore, the Plan takes into
account all of the Participant's included Years of Service with the Employer as
an Excluded Employee for purposes of vesting credit under Article V.
2.06 ELECTION NOT TO PARTICIPATE. If the Employer's Plan is a Standardized
---------------------------
Plan, the Plan does not permit an otherwise eligible Employee nor any
Participant to elect not to participate in the Plan. If the Employer's Plan is a
Nonstandardized Plan, the Employer must specify in its Adoption Agreement
whether an Employee eligible to participate, or any present Participant, may
elect not to participate in the Plan. For an election to be effective for a
particular Plan Year, the Employee or Participant must file the election in
writing with the Plan Administrator not later than the time specified in the
Employer's Adoption Agreement. The Employer may not make a contribution under
the Plan for the Employee or for the Participant for the Plan Year for which the
election is effective, nor for any succeeding Plan Year, unless the Employee or
Participant re-elects to participate in the Plan. After an Employee's or
Participant's election not to participate has been effective for at least the
minimum period prescribed by the Employer's Adoption Agreement, the Employee or
Participant may re-elect to participate in the Plan for any Plan Year and
subsequent Plan Years. An Employee or Participant may re-elect to participate in
the Plan by filing his election in writing with the Plan Administrator not later
than the time specified in the Employer's Adoption Agreement. An Employee or
Participant who re-elects to participate may again elect not to participate only
as permitted in the Employer's Adoption Agreement. If an Employee is a
Self-Employed Individual, the Employee's election (except as permitted by
Treasury regulations without creating a Code (S)401(k) arrangement with respect
to that Self-Employed Individual) must be effective no later than the date the
Employee first would become a Participant in the Plan and the election is
irrevocable. The Plan Administrator must furnish an Employee or a Participant
any form required for purposes of an election under this Section 2.06. An
election timely filed is effective for the entire Plan Year.
2.02
<PAGE>
A Participant who elects not to participate may not receive a distribution
of his Accrued Benefit attributable either to Employer or to Participant
contributions except as provided under Article IV or under Article VI. However,
for each Plan Year for which a Participant's election not to participate is
effective, the Participant's Account, if any, continues to share in Trust Fund
allocations under Article IX. Furthermore, the Employee or the Participant
receives vesting credit under Article V for each included Year of Service during
the period the election not to participate is effective.
* * * * * * * * * * * * * * *
2.03
<PAGE>
ARTICLE III
EMPLOYER CONTRIBUTIONS AND FORFEITURES
Part 1. Amount of Employer Contributions and Plan Allocations: Sections 3.01
--------------------------------------------------------------------
through 3.06
------------
3.01 AMOUNT. For each Plan Year, the Employer contributes to the Trust the
------
amount determined by application of the contribution option selected by the
Employer in its Adoption Agreement. The Employer may not make a contribution to
the Trust for any Plan Year to the extent the contribution would exceed the
Participants' Maximum Permissible Amounts.
The Employer contributes to this Plan on the condition its contribution is
not due to a mistake of fact and the Revenue Service will not disallow the
deduction for its contribution. The Trustee, upon written request from the
Employer, must return to the Employer the amount of the Employer's contribution
made by the Employer by mistake of fact or the amount of the Employer's
contribution disallowed as a deduction under Code (S)404. The Trustee will not
return any portion of the Employer's contribution under the provisions of this
paragraph more than one year after:
(a) The Employer made the contribution by mistake of fact; or
(b) The disallowance of the contribution as a deduction, and then,
only to the extent of the disallowance.
The Trustee will not increase the amount of the Employer contribution
returnable under this Section 3.01 for any earnings attributable to the
contribution, but the Trustee will decrease the Employer contribution returnable
for any losses attributable to it. The Trustee may require the Employer to
furnish it whatever evidence the Trustee deems necessary to enable the Trustee
to confirm the amount the Employer has requested be returned is properly
returnable under ERISA.
3.02 DETERMINATION OF CONTRIBUTION. The Employer, from its records,
-----------------------------
determines the amount of any contributions to be made by it to the Trust under
the terms of the Plan.
3.03 TIME OF PAYMENT OF CONTRIBUTION. The Employer may pay its contribution
-------------------------------
for each Plan Year in one or more installments without interest. The Employer
must make its contribution to the Plan within the time prescribed by the Code or
applicable Treasury regulations. Subject to the consent of the Trustee, the
Employer may make its contribution in property rather than in cash, provided the
contribution of property is not a prohibited transaction under the Code or under
ERISA.
3.04 CONTRIBUTION ALLOCATION.
-----------------------
(A) Method of Allocation. The Employer must specify in its Adoption Agreement
the manner of allocating each annual Employer contribution to this Trust.
(B) Top Heavy Minimum Allocation. The Plan must comply with the provisions of
this Section 3.04(B), subject to the elections in the Employer's Adoption
Agreement.
(1) Top Heavy Minimum Allocation Under Standardized Plan. Subject to the
Employer's election under Section 3.04(B)(3), the top heavy minimum allocation
requirement applies to a Standardized Plan for each Plan Year, irrespective of
whether the Plan is top heavy.
(a) Each Participant employed by the Employer on the last day of the
Plan Year will receive a top heavy minimum allocation for that Plan
Year. The Employer may elect in Section 3.04 of its Adoption
Agreement to apply this paragraph (a) only to a Participant who is a
Non-Key Employee.
3.01
<PAGE>
(b) Subject to any overriding elections in Section 3.18 of the
Employer's Adoption Agreement, the top heavy minimum allocation is
the lesser of 3% of the Participant's Compensation for the Plan Year
or the highest contribution rate for the Plan Year made on behalf of
any Participant for the Plan Year. However, if the Employee
participates in Paired Plans, the top heavy minimum allocation is 3%
of his Compensation. If, under Adoption Agreement Section 3.04, the
Employer elects to apply paragraph (a) only to a Participant who is a
Non-Key Employee, the Advisory Committee will determine the "highest
contribution rate" described in the first sentence of this paragraph
(b) by reference only to the contribution rates of Participants who
are Key Employees for the Plan Year.
(2) Top Heavy Minimum Allocation Under Nonstandardized Plan. The top heavy
minimum allocation requirement applies to a Nonstandardized Plan only in Plan
Years for which the Plan is top heavy. Except as provided in the Employer's
Adoption Agreement, if the Plan is top heavy in any Plan Year:
(a) Each Non-Key Employee who is a Participant and is employed by the
Employer on the last day of the Plan Year will receive a top heavy
minimum allocation for that Plan Year, irrespective of whether he
satisfies the Hours of Service condition under Section 3.06 of the
Employer's Adoption Agreement; and
(b) The top heavy minimum allocation is the lesser of 3% of the
Non-Key Employee's Compensation for the Plan Year or the highest
contribution rate for the Plan Year made on behalf of any Key
Employee. However, if a defined benefit plan maintained by the
Employer which benefits a Key Employee depends on this Plan to
satisfy the antidiscrimination rules of Code (S)401(a)(4) or the
coverage rules of Code (S)410 (or another plan benefiting the Key
Employee so depends on such defined benefit plan), the top heavy
minimum allocation is 3% of the Non-Key Employee's Compensation
regardless of the contribution rate for the Key Employees.
(3) Special Election for Standardized Code (S)401(k) Plan. If the Employer's
Plan is a Standardized Code (S)401(k) Plan, the Employer may elect in Adoption
Agreement Section 3.04 to apply the top heavy minimum allocation requirements of
Section 3.04(B)(1) only for Plan Years in which the Plan actually is a top heavy
plan.
(4) Special Definitions. For purposes of this Section 3.04(B), the term
"Participant" includes any Employee otherwise eligible to participate in the
Plan but who is not a Participant because of his Compensation level or because
of his failure to make elective deferrals under a Code (S)401(k) arrangement or
because of his failure to make mandatory contributions. For purposes of
subparagraph (1)(b) or (2)(b), "Compensation" means Compensation as defined in
Section 1.12, except Compensation does not include elective contributions,
irrespective of whether the Employer has elected to include these amounts in
Section 1.12 of its Adoption Agreement, any exclusion selected in Section 1.12
of the Adoption Agreement (other than the exclusion of elective contributions)
does not apply, and any modification to the definition of Compensation in
Section 3.06 does not apply.
(5) Determining Contribution Rates. For purposes of this Section 3.04(B), a
Participant's contribution rate is the sum of all Employer contributions (not
including Employer contributions to Social Security) and forfeitures allocated
to the Participant's Account for the Plan Year divided by his Compensation for
the entire Plan Year. However, for purposes of satisfying a Participant's top
heavy minimum allocation in Plan Years beginning after December 31, 1988, the
Participant's contribution rate does not include any elective contributions
under a Code (S)401(k) arrangement nor any Employer matching contributions
allocated on the basis of those elective contributions or on the basis of
employee contributions, except a Nonstandardized Plan may include in the
contribution rate any matching contributions not necessary to satisfy the
nondiscrimination requirements of Code (S)401(k) or of Code (S)401(m).
3.02
<PAGE>
If the Employee is a Participant in Paired Plans, the Advisory Committee
will consider the Paired Plans as a single Plan to determine a Participant's
contribution rate and to determine whether the Plans satisfy this top heavy
minimum allocation requirement. To determine a Participant's contribution rate
under a Nonstandardized Plan, the Advisory Committee must treat all qualified
top heavy defined contribution plans maintained by the Employer (or by any
related Employers described in Section 1.30) as a single plan.
(6) No Allocations. If, for a Plan Year, there are no allocations of
Employer contributions or forfeitures for any Participant (for purposes of
Section 3.04 (B)(1)(b)) or for any Key Employee (for purposes of Section
3.04(B)(2)(b)), the Plan does not require any top heavy minimum allocation for
the Plan Year, unless a top heavy minimum allocation applies because of the
maintenance by the Employer of more than one plan.
(7) Election of Method. The Employer must specify in its Adoption Agreement
the manner in which the Plan will satisfy the top heavy minimum allocation
requirement.
(a) If the Employer elects to make any necessary additional contribution to
this Plan, the Advisory Committee first will allocate the Employer
contributions (and Participant forfeitures, if any) for the Plan Year in
accordance with the provisions of Adoption Agreement Section 3.04. The
Employer then will contribute an additional amount for the Account of any
Participant entitled under this Section 3.04(B) to a top heavy minimum
allocation and whose contribution rate for the Plan Year, under this Plan
and any other plan aggregated under paragraph (5), is less than the top
heavy minimum allocation. The additional amount is the amount necessary to
increase the Participant's contribution rate to the top heavy minimum
allocation. The Advisory Committee will allocate the additional contribution
to the Account of the Participant on whose behalf the Employer makes the
contribution.
(b) If the Employer elects to guarantee the top heavy minimum allocation
under another plan, this Plan does not provide the top heavy minimum
allocation and the Advisory Committee will allocate the annual Employer
contributions (and Participant forfeitures) under the Plan solely in
accordance with the allocation method selected under Adoption Agreement
Section 3.04.
3.05 FORFEITURE ALLOCATION. The amount of a Participant's Accrued Benefit
---------------------
forfeited under the Plan is a Participant forfeiture. The Advisory Committee
will allocate Participant forfeitures in the manner specified by the Employer in
its Adoption Agreement. The Advisory Committee will continue to hold the
undistributed, non-vested portion of a terminated Participant's Accrued Benefit
in his Account solely for his benefit until a forfeiture occurs at the time
specified in Section 5.09 or if applicable, until the time specified in Section
9.14. Except as provided under Section 5.04, a Participant will not share in the
allocation of a forfeiture of any portion of his Accrued Benefit.
3.06 ACCRUAL OF BENEFIT. The Advisory Committee will determine the accrual
------------------
of benefit (Employer contributions and Participant forfeitures) on the basis of
the Plan Year in accordance with the Employer's elections in its Adoption
Agreement.
(A) Compensation Taken Into Account. The Employer must specify in its Adoption
Agreement the Compensation the Advisory Committee is to take into account in
allocating an Employer contribution to a Participant's Account for the Plan Year
in which the Employee first becomes a Participant. For all other Plan Years, the
Advisory Committee will take into account only the Compensation determined for
the portion of the Plan Year in which the Employee actually is a Participant.
The Advisory Committee must take into account the Employee's entire Compensation
for the Plan Year to determine whether the Plan satisfies the top heavy minimum
allocation requirement of Section 3.04(B). The Employer, in an addendum to its
Adoption Agreement numbered 3.06(A), may elect to measure Compensation for the
Plan Year for allocation purposes on the basis of a specified period other than
the Plan Year.
3.03
<PAGE>
(B) Hours of Service Requirement. Subject to the applicable minimum allocation
requirement of Section 3.04, the Advisory Committee will not allocate any
portion of an Employer contribution for a Plan Year to any Participant's Account
if the Participant does not complete the applicable minimum Hours of Service
requirement specified in the Employer's Adoption Agreement.
(C) Employment Requirement. If the Employer's Plan is a Standardized Plan, a
Participant who, during a particular Plan Year, completes the accrual
requirements of Adoption Agreement Section 3.06 will share in the allocation of
Employer contributions for that Plan Year without regard to whether he is
employed by the Employer on the Accounting Date of that Plan Year. If the
Employer's Plan is a Nonstandardized Plan, the Employer must specify in its
Adoption Agreement whether the Participant will accrue a benefit if he is not
employed by the Employer on the Accounting Date of the Plan Year. If the
Employer's Plan is a money purchase plan or a target benefit plan, whether
Nonstandardized or Standardized, the Plan conditions benefit accrual on
employment with the Employer on the last day of the Plan Year for the Plan Year
in which the Employer terminates the Plan.
(D) Other Requirements. If the Employer's Adoption Agreement includes options
for other requirements affecting the Participant's accrual of benefits under the
Plan, the Advisory Committee will apply this Section 3.06 in accordance with the
Employer's Adoption Agreement selections.
(E) Suspension of Accrual Requirements Under Nonstandardized Plan. If the
Employer's Plan is a Nonstandardized Plan, the Employer may elect in its
Adoption Agreement to suspend the accrual requirements elected under Adoption
Agreement Section 3.06 if, for any Plan Year beginning after December 31, 1989,
the Plan fails to satisfy the Participation Test or the Coverage Test. A Plan
satisfies the Participation Test if, on each day of the Plan Year, the number of
Employees who benefit under the Plan is at least equal to the lesser of 50 or
40% of the total number of Includible Employees as of such day. A Plan satisfies
the Coverage Test if, on the last day of each quarter of the Plan Year, the
number of Nonhighly Compensated Employees who benefit under the Plan is at least
equal to 70% of the total number of Includible Nonhighly Compensated Employees
as of such day. "Includible" Employees are all Employees other than: (1) those
Employees excluded from participating in the Plan for the entire Plan Year by
reason of the collective bargaining unit exclusion or the nonresident alien
exclusion under Adoption Agreement Section 1.07 or by reason of the
participation requirements of Sections 2.01 and 2.03; and (2) any Employee who
incurs a Separation from Service during the Plan Year and fails to complete at
least 501 Hours of Service for the Plan Year. A "Nonhighly Compensated Employee"
is an Employee who is not a Highly Compensated Employee and who is not a family
member aggregated with a Highly Compensated Employee pursuant to Section 1.09 of
the Plan.
For purposes of the Participation Test and the Coverage Test, an Employee is
benefiting under the Plan on a particular date if, under Adoption Agreement
Section 3.04, he is entitled to an allocation for the Plan Year. Under the
Participation Test, when determining whether an Employee is entitled to an
allocation under Adoption Agreement Section 3.04, the Advisory Committee will
disregard any allocation required solely by reason of the top heavy minimum
allocation, unless the top heavy minimum allocation is the only allocation made
under the Plan for the Plan Year.
If this Section 3.06(E) applies for a Plan Year, the Advisory Committee will
suspend the accrual requirements for the Includible Employees who are
Participants, beginning first with the Includible Employee(s) employed with the
Employer on the last day of the Plan Year, then the Includible Employee(s) who
have the latest Separation from Service during the Plan Year, and continuing to
suspend in descending order the accrual requirements for each Includible
Employee who incurred an earlier Separation from Service, from the latest to the
earliest Separation from Service date, until the Plan satisfies both the
Participation Test and the Coverage Test for the Plan Year. If two or more
Includible Employees have a Separation from Service on the same day, the
Advisory Committee will suspend the accrual requirements for all such Includible
Employees, irrespective of whether the Plan can satisfy the Participation Test
and the Coverage Test by accruing benefits for fewer than all such Includible
Employees. If the Plan suspends the accrual requirements for an Includible
Employee, that Employee will share in the allocation of Employer contributions
and Participant forfeitures, if any, without regard to the number of Hours of
Service he has earned for the Plan Year and without regard to whether he
3.04
<PAGE>
is employed by the Employer on the last day of the Plan Year. If the Employer's
Plan includes Employer matching contributions subject to Code (S)401(m), this
suspension of accrual requirements applies separately to the Code (S)401(m)
portion of the Plan, and the Advisory Committee will treat an Employee as
benefiting under that portion of the Plan if he is an Eligible Employee for
purposes of the Code (S)401(m) nondiscrimination test. The Employer may modify
the operation of this Section 3.06(E) by electing appropriate modifications in
Section 3.06 of its Adoption Agreement.
Part 2. Limitations On Allocations: Sections 3.07 through 3.19
------------------------------------------------------
[Note: Sections 3.07 through 3.10 apply only to Participants in this
Plan who do not participate, and who have never participated, in
another qualified plan or in a welfare benefit fund (as defined in Code
(S)419(e)) maintained by the Employer.]
3.07 The amount of Annual Additions which the Advisory Committee may
allocate under this Plan on a Participant's behalf for a Limitation Year may not
exceed the Maximum Permissible Amount. If the amount the Employer otherwise
would contribute to the Participant's Account would cause the Annual Additions
for the Limitation Year to exceed the Maximum Permissible Amount, the Employer
will reduce the amount of its contribution so the Annual Additions for the
Limitation Year will equal the Maximum Permissible Amount. If an allocation of
Employer contributions, pursuant to Section 3.04, would result in an Excess
Amount (other than an Excess Amount resulting from the circumstances described
in Section 3.10) to the Participant's Account, the Advisory Committee will
reallocate the Excess Amount to the remaining Participants who are eligible for
an allocation of Employer contributions for the Plan Year in which the
Limitation Year ends. The Advisory Committee will make this reallocation on the
basis of the allocation method under the Plan as if the Participant whose
Account otherwise would receive the Excess Amount is not eligible for an
allocation of Employer contributions.
3.08 Prior to the determination of the Participant's actual Compensation for
a Limitation Year, the Advisory Committee may determine the Maximum Permissible
Amount on the basis of the Participant's estimated annual Compensation for such
Limitation Year. The Advisory Committee must make this determination on a
reasonable and uniform basis for all Participants similarly situated. The
Advisory Committee must reduce any Employer contributions (including any
allocation of forfeitures) based on estimated annual Compensation by any Excess
Amounts carried over from prior years.
3.09 As soon as is administratively feasible after the end of the Limitation
Year, the Advisory Committee will determine the Maximum Permissible Amount for
such Limitation Year on the basis of the Participant's actual Compensation for
such Limitation Year.
3.10 If, pursuant to Section 3.09, or because of the allocation of
forfeitures, there is an Excess Amount with respect to a Participant for a
Limitation Year, the Advisory Committee will dispose of such Excess Amount as
follows:
(a) The Advisory Committee will return any nondeductible voluntary Employee
contributions to the Participant to the extent the return would reduce the
Excess Amount.
(b) If, after the application of paragraph (a), an Excess Amount still
exists, and the Plan covers the Participant at the end of the Limitation
Year, then the Advisory Committee will use the Excess Amount(s) to reduce
future Employer contributions (including any allocation of forfeitures)
under the Plan for the next Limitation Year and for each succeeding
Limitation Year, as is necessary, for the Participant. If the Employer's
Plan is a profit sharing plan, the Participant may elect to limit his
Compensation for allocation purposes to the extent necessary to reduce his
allocation for the Limitation Year to the Maximum Permissible Amount and
eliminate the Excess Amount.
3.05
<PAGE>
(c) If, after the application of paragraph (a), an Excess Amount still
exists, and the Plan does not cover the Participant at the end of the
Limitation Year, then the Advisory Committee will hold the Excess Amount
unallocated in a suspense account. The Advisory Committee will apply the
suspense account to reduce Employer Contributions (including allocation of
forfeitures) for all remaining Participants in the next Limitation Year, and
in each succeeding Limitation Year if necessary. Neither the Employer nor
any Employee may contribute to the Plan for any Limitation Year in which the
Plan is unable to allocate fully a suspense account maintained pursuant to
this paragraph (c).
(d) The Advisory Committee will not distribute any Excess Amount(s) to
Participants or to former Participants.
[Note: Sections 3.11 through 3.16 apply only to Participants who, in
addition to this Plan, participate in one or more plans (including Paired
Plans), all of which are qualified Master or Prototype defined contribution
plans or welfare benefit funds (as defined in Code (S)419(e)) maintained by the
Employer during the Limitation Year.]
3.11 The amount of Annual Additions which the Advisory Committee may
allocate under this Plan on a Participant's behalf for a Limitation Year may not
exceed the Maximum Permissible Amount, reduced by the sum of any Annual
Additions allocated to the Participant's Accounts for the same Limitation Year
under this Plan and such other defined contribution plan. If the amount the
Employer otherwise would contribute to the Participant's Account under this Plan
would cause the Annual Additions for the Limitation Year to exceed this
limitation, the Employer will reduce the amount of its contribution so the
Annual Additions under all such plans for the Limitation Year will equal the
Maximum Permissible Amount. If an allocation of Employer contributions, pursuant
to Section 3.04, would result in an Excess Amount (other than an Excess Amount
resulting from the circumstances described in Section 3.10) to the Participant's
Account, the Advisory Committee will reallocate the Excess Amount to the
remaining Participants who are eligible for an allocation of Employer
contributions for the Plan Year in which the Limitation Year ends. The Advisory
Committee will make this reallocation on the basis of the allocation method
under the Plan as if the Participant whose Account otherwise would receive the
Excess Amount is not eligible for an allocation of Employer contributions.
3.12 Prior to the determination of the Participant's actual Compensation for
the Limitation Year, the Advisory Committee may determine the amounts referred
to in 3.11 above on the basis of the Participant's estimated annual Compensation
for such Limitation Year. The Advisory Committee will make this determination on
a reasonable and uniform basis for all Participants similarly situated. The
Advisory Committee must reduce any Employer contribution (including allocation
of forfeitures) based on estimated annual Compensation by any Excess Amounts
carried over from prior years.
3.13 As soon as is administratively feasible after the end of the Limitation
Year, the Advisory Committee will determine the amounts referred to in 3.11 on
the basis of the Participant's actual Compensation for such Limitation Year.
3.14 If pursuant to Section 3.13, or because of the allocation of
forfeitures, a Participant's Annual Additions under this Plan and all such other
plans result in an Excess Amount, such Excess Amount will consist of the Amounts
last allocated. The Advisory Committee will determine the Amounts last allocated
by treating the Annual Additions attributable to a welfare benefit fund as
allocated first, irrespective of the actual allocation date under the welfare
benefit fund.
3.15 The Employer must specify in its Adoption Agreement the Excess Amount
attributed to this Plan, if the Advisory Committee allocates an Excess Amount to
a Participant on an allocation date of this Plan which coincides with an
allocation date of another plan.
3.16 The Advisory Committee will dispose of any Excess Amounts attributed to
this Plan as provided in Section 3.10.
3.06
<PAGE>
[Note: Section 3.17 applies only to Participants who, in addition to
this Plan, participate in one or more qualified plans which are
qualified defined contribution plans other than a Master or Prototype
plan maintained by the Employer during the Limitation Year.]
3.17 SPECIAL ALLOCATION LIMITATION. The amount of Annual Additions which the
-----------------------------
Advisory Committee may allocate under this Plan on behalf of any Participant are
limited in accordance with the provisions of Section 3.11 through 3.16, as
though the other plan were a Master or Prototype plan, unless the Employer
provides other limitations in an addendum to the Adoption Agreement, numbered
Section 3.17.
3.18 DEFINED BENEFIT PLAN LIMITATION. If the Employer maintains a defined
-------------------------------
benefit plan, or has ever maintained a defined benefit plan which the Employer
has terminated, then the sum of the defined benefit plan fraction and the
defined contribution plan fraction for any Participant for any Limitation Year
must not exceed 1.0. The Employer must provide in Adoption Agreement Section
3.18 the manner in which the Plan will satisfy this limitation. The Employer
also must provide in its Adoption Agreement Section 3.18 the manner in which the
Plan will satisfy the top heavy requirements of Code (S)416 after taking into
account the existence (or prior maintenance) of the defined benefit plan.
3.19 DEFINITIONS - ARTICLE III. For purposes of Article III, the following
-------------------------
terms mean:
(a) "Annual Addition" - The sum of the following amounts allocated on behalf
of a Participant for a Limitation Year, of (i) all Employer contributions;
(ii) all forfeitures; and (iii) all Employee contributions. Except to the
extent provided in Treasury regulations, Annual Additions include excess
contributions described in Code (S)401(k), excess aggregate contributions
described in Code (S)401(m) and excess deferrals described in Code
(S)402(g), irrespective of whether the plan distributes or forfeits such
excess amounts. Annual Additions also include Excess Amounts reapplied to
reduce Employer contributions under Section 3.10. Amounts allocated after
March 31, 1984, to an individual medical account (as defined in Code
(S)415(l)(2)) included as part of a defined benefit plan maintained by the
Employer are Annual Additions. Furthermore, Annual Additions include
contributions paid or accrued after December 31, 1985, for taxable years
ending after December 31, 1985, attributable to post-retirement medical
benefits allocated to the separate account of a key employee (as defined in
Code (S)419A(d)(3)) under a welfare benefit fund (as defined in Code
(S)419(e)) maintained by the Employer.
(b) "Compensation" - For purposes of applying the limitations of Part 2 of
this Article III, "Compensation" means Compensation as defined in Section
1.12, except Compensation does not include elective contributions,
irrespective of whether the Employer has elected to include these amounts as
Compensation under Section 1.12 of its Adoption Agreement, and any exclusion
selected in Section 1.12 of the Adoption Agreement (other than the exclusion
of elective contributions) does not apply.
(c) "Employer" - The Employer that adopts this Plan and any related
employers described in Section 1.30. Solely for purposes of applying the
limitations of Part 2 of this Article III, the Advisory Committee will
determine related employers described in Section 1.30 by modifying Code
(S)(S)414(b) and (c) in accordance with Code (S)415(h).
(d) "Excess Amount" - The excess of the Participant's Annual Additions for
the Limitation Year over the Maximum Permissible Amount.
(e) "Limitation Year" - The period selected by the Employer under Adoption
Agreement Section 1.17. All qualified plans of the Employer must use the
same Limitation Year. If the Employer amends the Limitation Year to a
different 12 consecutive month period, the new Limitation Year must begin on
a date within the Limitation Year for which the Employer makes the
amendment, creating a short Limitation Year.
(f) "Master or Prototype Plan" - A plan the form of which is the subject of
a favorable notification letter or a favorable opinion letter from the
Internal Revenue Service.
3.07
<PAGE>
(g) "Maximum Permissible Amount" - The lesser of (i) $30,000 (or, if
greater, one-fourth of the defined benefit dollar limitation under Code
(S)415(b)(1)(A)), or (ii) 25% of the Participant's Compensation for the
Limitation Year. If there is a short Limitation Year because of a change in
Limitation Year, the Advisory Committee will multiply the $30,000 (or
adjusted) limitation by the following fraction:
Number of months in the short Limitation Year
---------------------------------------------
12
(h) "Defined contribution plan" - A retirement plan which provides for an
individual account for each participant and for benefits based solely on the
amount contributed to the participant's account, and any income, expenses,
gains and losses, and any forfeitures of accounts of other participants
which the plan may allocate to such participant's account. The Advisory
Committee must treat all defined contribution plans (whether or not
terminated) maintained by the Employer as a single plan. Solely for purposes
of the limitations of Part 2 of this Article III, the Advisory Committee
will treat employee contributions made to a defined benefit plan maintained
by the Employer as a separate defined contribution plan. The Advisory
Committee also will treat as a defined contribution plan an individual
medical account (as defined in Code (S)415(l)(2)) included as part of a
defined benefit plan maintained by the Employer and, for taxable years
ending after December 31, 1985, a welfare benefit fund under Code (S)419(e)
maintained by the Employer to the extent there are post-retirement medical
benefits allocated to the separate account of a key employee (as defined in
Code (S)419A(d)(3)).
(i) "Defined benefit plan" - A retirement plan which does not provide for
individual accounts for Employer contributions. The Advisory Committee must
treat all defined benefit plans (whether or not terminated) maintained by
the Employer as a single plan.
[Note: The definitions in paragraphs (j), (k) and (l) apply only if the
limitation described in Section 3.18 applies to the Employer's Plan.]
(j) "Defined benefit plan fraction" -
Projected annual benefit of the Participant under the defined benefit plan(s)
-----------------------------------------------------------------------------
The lesser of (i) 125% (subject to the "100% limitation" in
paragraph (l)) of the
dollar limitation in effect under Code (S) 415(b)(1)(A) for the Limitation Year,
or (ii) 140% of the Participant's average Compensation for his
high three (3) consecutive Years of Service
To determine the denominator of this fraction, the Advisory Committee
will make any adjustment required under Code (S)415(b) and will determine a
Year of Service, unless otherwise provided in an addendum to Adoption
Agreement Section 3.18, as a Plan Year in which the Employee completed at
least 1,000 Hours of Service. The "projected annual benefit" is the annual
retirement benefit (adjusted to an actuarially equivalent straight life
annuity if the plan expresses such benefit in a form other than a straight
life annuity or qualified joint and survivor annuity) of the Participant
under the terms of the defined benefit plan on the assumptions he continues
employment until his normal retirement age (or current age, if later) as
stated in the defined benefit plan, his compensation continues at the same
rate as in effect in the Limitation Year under consideration until the date
of his normal retirement age and all other relevant factors used to
determine benefits under the defined benefit plan remain constant as of the
current Limitation Year for all future Limitation Years.
3.08
<PAGE>
Current Accrued Benefit. If the Participant accrued benefits in one
or more defined benefit plans maintained by the Employer which were in
existence on May 6, 1986, the dollar limitation used in the denominator of
this fraction will not be less than the Participant's Current Accrued
Benefit. A Participant's Current Accrued Benefit is the sum of the annual
benefits under such defined benefit plans which the Participant had accrued
as of the end of the 1986 Limitation Year (the last Limitation Year
beginning before January 1, 1987), determined without regard to any change
in the terms or conditions of the Plan made after May 5, 1986, and without
regard to any cost of living adjustment occurring after May 5, 1986. This
Current Accrued Benefit rule applies only if the defined benefit plans
individually and in the aggregate satisfied the requirements of Code (S)415
as in effect at the end of the 1986 Limitation Year.
(k) "Defined contribution plan fraction" -
The sum, as of the close of the Limitation Year,
of the Annual Additions to the Participant's Account
under the defined contribution plan(s)
----------------------------------------------------------
The sum of the lesser of the following amounts determined
for the Limitation Year and for each prior Year of Service
with the Employer:(i) 125%
(subject to the "100% limitation" in paragraph (l))
of the dollar limitation in effect under
Code (S)415(c)(1)(A) for the Limitation Year
(determined without regard to the special dollar limitations
for employee stock ownership plans), or
(ii) 35% of the Participant's Compensation for the Limitation Year
For purposes of determining the defined contribution plan fraction,
the Advisory Committee will not recompute Annual Additions in Limitation
Years beginning prior to January 1, 1987, to treat all Employee
contributions as Annual Additions. If the Plan satisfied Code (S)415 for
Limitation Years beginning prior to January 1, 1987, the Advisory Committee
will redetermine the defined contribution plan fraction and the defined
benefit plan fraction as of the end of the 1986 Limitation Year, in
accordance with this Section 3.19. If the sum of the redetermined fractions
exceeds 1.0, the Advisory Committee will subtract permanently from the
numerator of the defined contribution plan fraction an amount equal to the
product of (1) the excess of the sum of the fractions over 1.0, times (2)
the denominator of the defined contribution plan fraction. In making the
adjustment, the Advisory Committee must disregard any accrued benefit under
the defined benefit plan which is in excess of the Current Accrued Benefit.
This Plan continues any transitional rules applicable to the determination
of the defined contribution plan fraction under the Employer's Plan as of
the end of the 1986 Limitation Year.
(l) "100% limitation." If the 100% limitation applies, the Advisory
Committee must determine the denominator of the defined benefit plan
fraction and the denominator of the defined contribution plan fraction by
substituting 100% for 125%. If the Employer's Plan is a Standardized Plan,
the 100% limitation applies in all Limitation Years, subject to any override
provisions under Section 3.18 of the Employer's Adoption Agreement. If the
Employer overrides the 100% limitation under a Standardized Plan, the
Employer must specify in its Adoption Agreement the manner in which the Plan
satisfies the extra minimum benefit requirement of Code (S)416(h) and the
100% limitation must continue to apply if the Plan's top heavy ratio exceeds
90%. If the Employer's Plan is a Nonstandardized Plan, the 100% limitation
applies only if: (i) the Plan's top heavy ratio exceeds 90%; or (ii) the
Plan's top heavy ratio is greater than 60%, and the Employer does not elect
in its Adoption Agreement Section 3.18 to provide extra minimum benefits
which satisfy Code (S)416(h)(2).
* * * * * * * * * * * * * * *
3.09
<PAGE>
ARTICLE IV
PARTICIPANT CONTRIBUTIONS
4.01 PARTICIPANT NONDEDUCTIBLE CONTRIBUTIONS. This Plan does not permit
---------------------------------------
Participant nondeductible contributions unless the Employer maintains its Plan
under a Code ss.401(k) Adoption Agreement. If the Employer does not maintain its
Plan under a Code ss.401(k) Adoption Agreement and, prior to the adoption of
this Master Plan, the Plan accepted Participant nondeductible contributions for
a Plan Year beginning after December 31, 1986, those contributions must satisfy
the requirements of Code ss.401(m). This Section 4.01 does not prohibit the
Plan's acceptance of Participant nondeductible contributions prior to the first
Plan Year commencing after the Plan Year in which the Employer adopts this
Master Plan.
4.02 PARTICIPANT DEDUCTIBLE CONTRIBUTIONS. A qualified Plan may not accept
------------------------------------
Participant deductible contributions after April 15, 1987. If the Employer's
Plan includes Participant deductible contributions ("DECs") made prior to April
16, 1987, the Advisory Committee must maintain a separate accounting for the
Participant's Accrued Benefit attributable to DECs, including DECs which are
part of a rollover contribution described in Section 4.03. The Advisory
Committee will treat the accumulated DECs as part of the Participant's Accrued
Benefit for all purposes of the Plan, except for purposes of determining the top
heavy ratio under Section 1.33. The Advisory Committee may not use DECs to
purchase life insurance on the Participant's behalf.
4.03 PARTICIPANT ROLLOVER CONTRIBUTIONS. Any Participant, with the
----------------------------------
Employer's written consent and after filing with the Trustee the form prescribed
by the Advisory Committee, may contribute cash or other property to the Trust
other than as a voluntary contribution if the contribution is a "rollover
contribution" which the Code permits an employee to transfer either directly or
indirectly from one qualified plan to another qualified plan. Before accepting a
rollover contribution, the Trustee may require an Employee to furnish
satisfactory evidence that the proposed transfer is in fact a "rollover
contribution" which the Code permits an employee to make to a qualified plan. A
rollover contribution is not an Annual Addition under Part 2 of Article III.
The Trustee will invest the rollover contribution in a segregated investment
Account for the Participant's sole benefit unless the Trustee (or the Named
Fiduciary, in the case of a nondiscretionary Trustee designation), in its sole
discretion, agrees to invest the rollover contribution as part of the Trust
Fund. The Trustee will not have any investment responsibility with respect to a
Participant's segregated rollover Account. The Participant, however, from time
to time, may direct the Trustee in writing as to the investment of his
segregated rollover Account in property, or property interests, of any kind,
real, personal or mixed; provided however, the Participant may not direct the
Trustee to make loans to his Employer. A Participant's segregated rollover
Account alone will bear any extraordinary expenses resulting from investments
made at the direction of the Participant. As of the Accounting Date (or other
valuation date) for each Plan Year, the Advisory Committee will allocate and
credit the net income (or net loss) from a Participant's segregated rollover
Account and the increase or decrease in the fair market value of the assets of a
segregated rollover Account solely to that Account. The Trustee is not liable
nor responsible for any loss resulting to any Beneficiary, nor to any
Participant, by reason of any sale or investment made or other action taken
pursuant to and in accordance with the direction of the Participant. In all
other respects, the Trustee will hold, administer and distribute a rollover
contribution in the same manner as any Employer contribution made to the Trust.
An eligible Employee, prior to satisfying the Plan's eligibility conditions,
may make a rollover contribution to the Trust to the same extent and in the same
manner as a Participant. If an Employee makes a rollover contribution to the
Trust prior to satisfying the Plan's eligibility conditions, the Advisory
Committee and Trustee must treat the Employee as a Participant for all purposes
of the Plan except the Employee is not a Participant for purposes of sharing in
Employer contributions or Participant forfeitures under the Plan until he
actually becomes a Participant in the Plan. If the Employee has a Separation
from Service prior to becoming a Participant, the Trustee will distribute his
rollover contribution Account to him as if it were an Employer contribution
Account.
4.01
<PAGE>
4.04 PARTICIPANT CONTRIBUTION - FORFEITABILITY. A Participant's Accrued
-----------------------------------------
Benefit is, at all times, 100% Nonforfeitable to the extent the value of his
Accrued Benefit is derived from his Participant contributions described in this
Article IV.
4.05 PARTICIPANT CONTRIBUTION - WITHDRAWAL/DISTRIBUTION. A Participant, by
--------------------------------------------------
giving prior written notice to the Trustee, may withdraw all or any part of the
value of his Accrued Benefit derived from his Participant contributions
described in this Article IV. A distribution of Participant contributions must
comply with the joint and survivor requirements described in Article VI, if
those requirements apply to the Participant. A Participant may not exercise his
right to withdraw the value of his Accrued Benefit derived from his Participant
contributions more than once during any Plan Year. The Trustee, in accordance
with the direction of the Advisory Committee, will distribute a Participant's
unwithdrawn Accrued Benefit attributable to his Participant contributions in
accordance with the provisions of Article VI applicable to the distribution of
the Participant's Nonforfeitable Accrued Benefit.
4.06 PARTICIPANT CONTRIBUTION - ACCRUED BENEFIT. The Advisory Committee must
------------------------------------------
maintain a separate Account(s) in the name of each Participant to reflect the
Participant's Accrued Benefit under the Plan derived from his Participant
contributions. A Participant's Accrued Benefit derived from his Participant
contributions as of any applicable date is the balance of his separate
Participant contribution Account(s).
* * * * * * * * * * * * * * *
4.02
<PAGE>
ARTICLE V
TERMINATION OF SERVICE - PARTICIPANT VESTING
5.01 NORMAL RETIREMENT AGE. The Employer must define Normal Retirement Age
---------------------
in its Adoption Agreement. A Participant's Accrued Benefit derived from Employer
contributions is 100% Nonforfeitable upon and after his attaining Normal
Retirement Age (if employed by the Employer on or after that date).
5.02 PARTICIPANT DISABILITY OR DEATH. The Employer may elect in its Adoption
-------------------------------
Agreement to provide a Participant's Accrued Benefit derived from Employer
contributions will be 100% Nonforfeitable if the Participant's Separation from
Service is a result of his death or his disability.
5.03 VESTING SCHEDULE. Except as provided in Sections 5.01 and 5.02, for
----------------
each Year of Service, a Participant's Nonforfeitable percentage of his Accrued
Benefit derived from Employer contributions equals the percentage in the vesting
schedule completed by the Employer in its Adoption Agreement.
(A) Election of Special Vesting Formula. If the Trustee makes a distribution
(other than a cash-out distribution described in Section 5.04) to a
partially-vested Participant, and the Participant has not incurred a Forfeiture
Break in Service at the relevant time, the Advisory Committee will establish a
separate Account for the Participant's Accrued Benefit. At any relevant time
following the distribution, the Advisory Committee will determine the
Participant's Nonforfeitable Accrued Benefit derived from Employer contributions
in accordance with the following formula: P(AB + (R x D)) - (R x D).
To apply this formula, "P" is the Participant's current vesting percentage
at the relevant time, "AB" is the Participant's Employer- derived Accrued
Benefit at the relevant time, "R" is the ratio of "AB" to the Participant's
Employer-derived Accrued Benefit immediately following the earlier distribution
and "D" is the amount of the earlier distribution. If, under a restated Plan,
the Plan has made distribution to a partially-vested Participant prior to its
restated Effective Date and is unable to apply the cash-out provisions of
Section 5.04 to that prior distribution, this special vesting formula also
applies to that Participant's remaining Account. The Employer, in an addendum to
its Adoption Agreement, numbered Section 5.03, may elect to modify this formula
to read as follows: P(AB + D) - D.
5.04 CASH-OUT DISTRIBUTIONS TO PARTIALLY-VESTED PARTICIPANTS/ RESTORATION OF
-----------------------------------------------------------------------
FORFEITED ACCRUED BENEFIT. If, pursuant to Article VI, a partially-vested
- -------------------------
Participant receives a cash-out distribution before he incurs a Forfeiture Break
in Service (as defined in Section 5.08), the cash-out distribution will result
in an immediate forfeiture of the nonvested portion of the Participant's Accrued
Benefit derived from Employer contributions. See Section 5.09. A
partially-vested Participant is a Participant whose Nonforfeitable Percentage
determined under Section 5.03 is less than 100%. A cash-out distribution is a
distribution of the entire present value of the Participant's Nonforfeitable
Accrued Benefit.
(A) Restoration and Conditions upon Restoration. A partially-vested Participant
who is re-employed by the Employer after receiving a cash-out distribution of
the Nonforfeitable percentage of his Accrued Benefit may repay the Trustee the
amount of the cash-out distribution attributable to Employer contributions,
unless the Participant no longer has a right to restoration by reason of the
conditions of this Section 5.04(A). If a partially-vested Participant makes the
cash-out distribution repayment, the Advisory Committee, subject to the
conditions of this Section 5.04(A), must restore his Accrued Benefit
attributable to Employer contributions to the same dollar amount as the dollar
amount of his Accrued Benefit on the Accounting Date, or other valuation date,
immediately preceding the date of the cash-out distribution, unadjusted for any
gains or losses occurring subsequent to that Accounting Date, or other valuation
date. Restoration of the Participant's Accrued Benefit includes restoration of
all Code ss.411(d)(6) protected benefits with respect to that restored Accrued
Benefit, in accordance with applicable Treasury regulations. The Advisory
Committee will not restore a re-employed Participant's Accrued Benefit under
this paragraph if:
5.01
<PAGE>
(1) 5 years have elapsed since the Participant's first re-employment
date with the Employer following the cash-out distribution; or
(2) The Participant incurred a Forfeiture Break in Service (as defined in
Section 5.08). This condition also applies if the Participant makes
repayment within the Plan Year in which he incurs the Forfeiture Break in
Service and that Forfeiture Break in Service would result in a complete
forfeiture of the amount the Advisory Committee otherwise would restore.
(B) Time and Method of Restoration. If neither of the two conditions preventing
restoration of the Participant's Accrued Benefit applies, the Advisory Committee
will restore the Participant's Accrued Benefit as of the Plan Year Accounting
Date coincident with or immediately following the repayment. To restore the
Participant's Accrued Benefit, the Advisory Committee, to the extent necessary,
will allocate to the Participant's Account:
(1) First, the amount, if any, of Participant forfeitures the Advisory
Committee would otherwise allocate under Section 3.05;
(2) Second, the amount, if any, of the Trust Fund net income or gain
for the Plan Year; and
(3) Third, the Employer contribution for the Plan Year to the extent made
under a discretionary formula.
In an addendum to its Adoption Agreement numbered 5.04(B), the Employer may
eliminate as a means of restoration any of the amounts described in clauses (1),
(2) and (3) or may change the order of priority of these amounts. To the extent
the amounts described in clauses (1), (2) and (3) are insufficient to enable the
Advisory Committee to make the required restoration, the Employer must
contribute, without regard to any requirement or condition of Section 3.01, the
additional amount necessary to enable the Advisory Committee to make the
required restoration. If, for a particular Plan Year, the Advisory Committee
must restore the Accrued Benefit of more than one re-employed Participant, then
the Advisory Committee will make the restoration allocations to each such
Participant's Account in the same proportion that a Participant's restored
amount for the Plan Year bears to the restored amount for the Plan Year of all
re-employed Participants. The Advisory Committee will not take into account any
allocation under this Section 5.04 in applying the limitation on allocations
under Part 2 of Article III.
(C) 0% Vested Participant. The Employer must specify in its Adoption Agreement
whether the deemed cash-out rule applies to a 0% vested Participant. A 0% vested
Participant is a Participant whose Accrued Benefit derived from Employer
contributions is entirely forfeitable at the time of his Separation from
Service. If the Participant's Account is not entitled to an allocation of
Employer contributions for the Plan Year in which he has a Separation from
Service, the Advisory Committee will apply the deemed cash-out rule as if the 0%
vested Participant received a cash-out distribution on the date of the
Participant's Separation from Service. If the Participant's Account is entitled
to an allocation of Employer contributions or Participant forfeitures for the
Plan Year in which he has a Separation from Service, the Advisory Committee will
apply the deemed cash-out rule as if the 0% vested Participant received a
cash-out distribution on the first day of the first Plan Year beginning after
his Separation from Service. For purposes of applying the restoration provisions
of this Section 5.04, the Advisory Committee will treat the 0% vested
Participant as repaying his cash-out "distribution" on the first date of his
re-employment with the Employer. If the deemed cash-out rule does not apply to
the Employer's Plan, a 0% vested Participant will not incur a forfeiture until
he incurs a Forfeiture Break in Service.
5.02
<PAGE>
5.05 SEGREGATED ACCOUNT FOR REPAID AMOUNT. Until the Advisory Committee
------------------------------------
restores the Participant's Accrued Benefit, as described in Section 5.04, the
Trustee will invest the cash-out amount the Participant has repaid in a
segregated Account maintained solely for that Participant. The Trustee must
invest the amount in the Participant's segregated Account in Federally insured
interest bearing savings account(s) or time deposit(s) (or a combination of
both), or in other fixed income investments. Until commingled with the balance
of the Trust Fund on the date the Advisory Committee restores the Participant's
Accrued Benefit, the Participant's segregated Account remains a part of the
Trust, but it alone shares in any income it earns and it alone bears any expense
or loss it incurs. Unless the repayment qualifies as a rollover contribution,
the Advisory Committee will direct the Trustee to repay to the Participant as
soon as is administratively practicable the full amount of the Participant's
segregated Account if the Advisory Committee determines either of the conditions
of Section 5.04(A) prevents restoration as of the applicable Accounting Date,
notwithstanding the Participant's repayment.
5.06 YEAR OF SERVICE - VESTING. For purposes of vesting under Section 5.03,
-------------------------
Year of Service means any 12-consecutive month period designated in the
Employer's Adoption Agreement during which an Employee completes not less than
the number of Hours of Service (not exceeding 1,000) specified in the Employer's
Adoption Agreement. A Year of Service includes any Year of Service earned prior
to the Effective Date of the Plan, except as provided in Section 5.08.
5.07 BREAK IN SERVICE - VESTING. For purposes of this Article V, a
--------------------------
Participant incurs a "Break in Service" if during any vesting computation period
he does not complete more than 500 Hours of Service. If, pursuant to Section
5.06, the Plan does not require more than 500 Hours of Service to receive credit
for a Year of Service, a Participant incurs a Break in Service in a vesting
computation period in which he fails to complete a Year of Service.
5.08 INCLUDED YEARS OF SERVICE - VESTING. For purposes of determining "Years
-----------------------------------
of Service" under Section 5.06, the Plan takes into account all Years of Service
an Employee completes with the Employer except:
(a) For the sole purpose of determining a Participant's Nonforfeitable
percentage of his Accrued Benefit derived from Employer contributions which
accrued for his benefit prior to a Forfeiture Break in Service, the Plan
disregards any Year of Service after the Participant first incurs a
Forfeiture Break in Service. The Participant incurs a Forfeiture Break in
Service when he incurs 5 consecutive Breaks in Service.
(b) The Plan disregards any Year of Service excluded under the
Employer's Adoption Agreement.
The Plan does not apply the Break in Service rule under Code
ss.411(a)(6)(B). Therefore, an Employee need not complete a Year of Service
after a Break in Service before the Plan takes into account the Employee's
otherwise includible Years of Service under this Article V.
5.09 FORFEITURE OCCURS. A Participant's forfeiture, if any, of his Accrued
-----------------
Benefit derived from Employer contributions occurs under the
Plan on the earlier of:
(a) The last day of the vesting computation period in which the
Participant first incurs a Forfeiture Break in Service; or
(b) The date the Participant receives a cash-out distribution.
The Advisory Committee determines the percentage of a Participant's Accrued
Benefit forfeiture, if any, under this Section 5.09 solely by reference to the
vesting schedule of Section 5.03. A Participant does not forfeit any portion of
his Accrued Benefit for any other reason or cause except as expressly provided
by this Section 5.09 or as provided under Section 9.14.
* * * * * * * * * * * * * * *
5.03
<PAGE>
ARTICLE VI
TIME AND METHOD OF PAYMENT OF BENEFITS
6.01 TIME OF PAYMENT OF ACCRUED BENEFIT. Unless, pursuant to Section 6.03,
----------------------------------
the Participant or the Beneficiary elects in writing to a different time or
method of payment, the Advisory Committee will direct the Trustee to commence
distribution of a Participant's Nonforfeitable Accrued Benefit in accordance
with this Section 6.01. A Participant must consent, in writing, to any
distribution required under this Section 6.01 if the present value of the
Participant's Nonforfeitable Accrued Benefit, at the time of the distribution to
the Participant, exceeds $3,500 and the Participant has not attained the later
of Normal Retirement Age or age 62. Furthermore, the Participant's spouse also
must consent, in writing, to any distribution, for which Section 6.04 requires
the spouse's consent. For all purposes of this Article VI, the term "annuity
starting date" means the first day of the first period for which the Plan pays
an amount as an annuity or in any other form. A distribution date under this
Article VI, unless otherwise specified within the Plan, is the date or dates the
Employer specifies in the Adoption Agreement, or as soon as administratively
practicable following that distribution date. For purposes of the consent
requirements under this Article VI, if the present value of the Participant's
Nonforfeitable Accrued Benefit, at the time of any distribution, exceeds $3,500,
the Advisory Committee must treat that present value as exceeding $3,500 for
purposes of all subsequent Plan distributions to the Participant.
(A) Separation from Service For a Reason Other Than Death.
(1) Participant's Nonforfeitable Accrued Benefit Not Exceeding $3,500. If
the Participant's Separation from Service is for any reason other than death,
the Advisory Committee will direct the Trustee to distribute the Participant's
Nonforfeitable Accrued Benefit in a lump sum, on the distribution date the
Employer specifies in the Adoption Agreement, but in no event later than the
60th day following the close of the Plan Year in which the Participant attains
Normal Retirement Age. If the Participant has attained Normal Retirement Age at
the time of his Separation from Service, the distribution under this paragraph
will occur no later than the 60th day following the close of the Plan Year in
which the Participant's Separation from Service occurs.
(2) Participant's Nonforfeitable Accrued Benefit Exceeds $3,500. If the
Participant's Separation from Service is for any reason other than death, the
Advisory Committee will direct the Trustee to commence distribution of the
Participant's Nonforfeitable Accrued Benefit in a form and at the time elected
by the Participant, pursuant to Section 6.03. In the absence of an election by
the Participant, the Advisory Committee will direct the Trustee to distribute
the Participant's Nonforfeitable Accrued Benefit in a lump sum (or, if
applicable, the normal annuity form of distribution required under Section
6.04), on the 60th day following the close of the Plan Year in which the latest
of the following events occurs: (a) the Participant attains Normal Retirement
Age; (b) the Participant attains age 62; or (c) the Participant's Separation
from Service.
(3) Disability. If the Participant's Separation from Service is because of
his disability, the Advisory Committee will direct the Trustee to pay the
Participant's Nonforfeitable Accrued Benefit in lump sum, on the distribution
date the Employer specifies in the Adoption Agreement, subject to the notice and
consent requirements of this Article VI and subject to the applicable mandatory
commencement dates described in Paragraphs (1) and (2).
(4) Hardship. Prior to the time at which the Participant may receive
distribution under Paragraphs (1), (2) or (3), the Participant may request a
distribution from his Nonforfeitable Accrued Benefit in an amount necessary to
satisfy a hardship, if the Employer elects in the Adoption Agreement to permit
hardship distributions. Unless the Employer elects otherwise in the Adoption
Agreement, a hardship distribution must be on account of any of the following:
(a) medical expenses; (b) the purchase (excluding mortgage payments) of the
Participant's principal residence; (c) post-secondary education tuition, for the
next semester or quarter, for the Participant or for the Participant's spouse,
children or dependents; (d) to prevent the eviction of the Participant from his
principal residence or the foreclosure on the mortgage of the Participant's
principal residence; (e) funeral expenses of the Participant's family member; or
(f) the Participant's disability. A partially-vested Participant may not receive
a hardship distribution described in this Paragraph (A)(4) prior to incurring
6.01
<PAGE>
a Forfeiture Break in Service, unless the hardship distribution is a cash-out
distribution (as defined in Article V). The Advisory Committee will direct the
Trustee to make the hardship distribution as soon as administratively
practicable after the Participant makes a valid request for the hardship
distribution.
(B) Required Beginning Date. If any distribution commencement date described
under Paragraph (A) of this Section 6.01, either by Plan provision or by
Participant election (or nonelection), is later than the Participant's Required
Beginning Date, the Advisory Committee instead must direct the Trustee to make
distribution on the Participant's Required Beginning Date, subject to the
transitional election, if applicable, under Section 6.03(D). A Participant's
Required Beginning Date is the April 1 following the close of the calendar year
in which the Participant attains age 70 1/2. However, if the Participant, prior
to incurring a Separation from Service, attained age 70 1/2 by January 1, 1988,
and, for the five Plan Year period ending in the calendar year in which he
attained age 70 1/2 and for all subsequent years, the Participant was not a more
than 5% owner, the Required Beginning Date is the April 1 following the close of
the calendar year in which the Participant separates from Service or, if
earlier, the April 1 following the close of the calendar year in which the
Participant becomes a more than 5% owner. Furthermore, if a Participant who was
not a more than 5% owner attained age 70 1/2 during 1988 and did not incur a
Separation from Service prior to January 1, 1989, his Required Beginning Date is
April 1, 1990. A mandatory distribution at the Participant's Required Beginning
Date will be in lump sum (or, if applicable, the normal annuity form of
distribution required under Section 6.04) unless the Participant, pursuant to
the provisions of this Article VI, makes a valid election to receive an
alternative form of payment.
(C) Death of the Participant. The Advisory Committee will direct the Trustee, in
accordance with this Section 6.01(C), to distribute to the Participant's
Beneficiary the Participant's Nonforfeitable Accrued Benefit remaining in the
Trust at the time of the Participant's death. Subject to the requirements of
Section 6.04, the Advisory Committee will determine the death benefit by
reducing the Participant's Nonforfeitable Accrued Benefit by any security
interest the Plan has against that Nonforfeitable Accrued Benefit by reason of
an outstanding Participant loan.
(1) Deceased Participant's Nonforfeitable Accrued Benefit Does Not Exceed
$3,500. The Advisory Committee, subject to the requirements of Section 6.04,
must direct the Trustee to distribute the deceased Participant's Nonforfeitable
Accrued Benefit in a single sum, as soon as administratively practicable
following the Participant's death or, if later, the date on which the Advisory
Committee receives notification of or otherwise confirms the Participant's
death.
(2) Deceased Participant's Nonforfeitable Accrued Benefit Exceeds $3,500.
The Advisory Committee will direct the Trustee to distribute the deceased
Participant's Nonforfeitable Accrued Benefit at the time and in the form elected
by the Participant or, if applicable by the Beneficiary, as permitted under this
Article VI. In the absence of an election, subject to the requirements of
Section 6.04, the Advisory Committee will direct the Trustee to distribute the
Participant's undistributed Nonforfeitable Accrued Benefit in a lump sum on the
first distribution date following the close of the Plan Year in which the
Participant's death occurs or, if later, the first distribution date following
the date the Advisory Committee receives notification of or otherwise confirms
the Participant's death.
If the death benefit is payable in full to the Participant's surviving
spouse, the surviving spouse, in addition to the distribution options provided
in this Section 6.01(C), may elect distribution at any time or in any form
(other than a joint and survivor annuity) this Article VI would permit for a
Participant.
6.02 METHOD OF PAYMENT OF ACCRUED BENEFIT. Subject to the annuity
------------------------------------
distribution requirements, if any, prescribed by Section 6.04, and any
restrictions prescribed by Section 6.03, a Participant or Beneficiary may elect
distribution under one, or any combination, of the following methods: (a) by
payment in a lump sum; or (b) by payment in monthly, quarterly or annual
installments over a fixed reasonable period of time, not exceeding the life
expectancy of the Participant, or the joint life and last survivor expectancy of
the Participant and his Beneficiary. The Employer may elect in its Adoption
Agreement to modify the methods of payment available under this Section 6.02.
6.02
<PAGE>
The distribution options permitted under this Section 6.02 are available
only if the present value of the Participant Nonforfeitable Accrued Benefit, at
the time of the distribution to the Participant, exceeds $3,500. To facilitate
installment payments under this Article VI, the Advisory Committee may direct
the Trustee to segregate all or any part of the Participant's Accrued Benefit in
a separate Account. The Trustee will invest the Participant's segregated Account
in Federally insured interest bearing savings account(s) or time deposit(s) (or
a combination of both), or in other fixed income investments. A segregated
Account remains a part of the Trust, but it alone shares in any income it earns,
and it alone bears any expense or loss it incurs. A Participant or Beneficiary
may elect to receive an installment distribution in the form of a
Nontransferable Annuity Contract. Under an installment distribution, the
Participant or Beneficiary, at any time, may elect to accelerate the payment of
all, or any portion, of the Participant's unpaid Nonforfeitable Accrued Benefit,
subject to the requirements of Section 6.04.
(A) Minimum Distribution Requirements for Participants. The Advisory Committee
may not direct the Trustee to distribute the Participant's Nonforfeitable
Accrued Benefit, nor may the Participant elect to have the Trustee distribute
his Nonforfeitable Accrued Benefit, under a method of payment which, as of the
Required Beginning Date, does not satisfy the minimum distribution requirements
under Code ss.401(a)(9) and the applicable Treasury regulations. The minimum
distribution for a calendar year equals the Participant's Nonforfeitable Accrued
Benefit as of the latest valuation date preceding the beginning of the calendar
year divided by the Participant's life expectancy or, if applicable, the joint
and last survivor expectancy of the Participant and his designated Beneficiary
(as determined under Article VIII, subject to the requirements of the Code
ss.401(a)(9) regulations). The Advisory Committee will increase the
Participant's Nonforfeitable Accrued Benefit, as determined on the relevant
valuation date, for contributions or forfeitures allocated after the valuation
date and by December 31 of the valuation calendar year, and will decrease the
valuation by distributions made after the valuation date and by December 31 of
the valuation calendar year. For purposes of this valuation, the Advisory
Committee will treat any portion of the minimum distribution for the first
distribution calendar year made after the close of that year as a distribution
occurring in that first distribution calendar year. In computing a minimum
distribution, the Advisory Committee must use the unisex life expectancy
multiples under Treas. Reg. ss.1.72-9. The Advisory Committee, only upon the
Participant's written request, will compute the minimum distribution for a
calendar year subsequent to the first calendar year for which the Plan requires
a minimum distribution by redetermining the applicable life expectancy. However,
the Advisory Committee may not redetermine the joint life and last survivor
expectancy of the Participant and a nonspouse designated Beneficiary in a manner
which takes into account any adjustment to a life expectancy other than the
Participant's life expectancy.
If the Participant's spouse is not his designated Beneficiary, a method of
payment to the Participant (whether by Participant election or by Advisory
Committee direction) may not provide more than incidental benefits to the
Beneficiary. For Plan Years beginning after December 31, 1988, the Plan must
satisfy the minimum distribution incidental benefit ("MDIB") requirement in the
Treasury regulations issued under Code ss.401(a)(9) for distributions made on or
after the Participant's Required Beginning Date and before the Participant's
death. To satisfy the MDIB requirement, the Advisory Committee will compute the
minimum distribution required by this Section 6.02(A) by substituting the
applicable MDIB divisor for the applicable life expectancy factor, if the MDIB
divisor is a lesser number. Following the Participant's death, the Advisory
Committee will compute the minimum distribution required by this Section 6.02(A)
solely on the basis of the applicable life expectancy factor and will disregard
the MDIB factor. For Plan Years beginning prior to January 1, 1989, the Plan
satisfies the incidental benefits requirement if the distributions to the
Participant satisfied the MDIB requirement or if the present value of the
retirement benefits payable solely to the Participant is greater than 50% of the
present value of the total benefits payable to the Participant and his
Beneficiaries. The Advisory Committee must determine whether benefits to the
Beneficiary are incidental as of the date the Trustee is to commence payment of
the retirement benefits to the Participant, or as of any date the Trustee
redetermines the payment period to the Participant.
6.03
<PAGE>
The minimum distribution for the first distribution calendar year is due by
the Participant's Required Beginning Date. The minimum distribution for each
subsequent distribution calendar year, including the calendar year in which the
Participant's Required Beginning Date occurs, is due by December 31 of that
year. If the Participant receives distribution in the form of a Nontransferable
Annuity Contract, the distribution satisfies this Section 6.02(A) if the
contract complies with the requirements of Code ss.401(a)(9) and the applicable
Treasury regulations.
(B) Minimum Distribution Requirements for Beneficiaries. The method of
distribution to the Participant's Beneficiary must satisfy Code ss.401(a)(9) and
the applicable Treasury regulations. If the Participant's death occurs after his
Required Beginning Date or, if earlier, the date the Participant commences an
irrevocable annuity pursuant to Section 6.04, the method of payment to the
Beneficiary must provide for completion of payment over a period which does not
exceed the payment period which had commenced for the Participant. If the
Participant's death occurs prior to his Required Beginning Date, and the
Participant had not commenced an irrevocable annuity pursuant to Section 6.04,
the method of payment to the Beneficiary, subject to Section 6.04, must provide
for completion of payment to the Beneficiary over a period not exceeding: (i) 5
years after the date of the Participant's death; or (ii) if the Beneficiary is a
designated Beneficiary, the designated Beneficiary's life expectancy. The
Advisory Committee may not direct payment of the Participant's Nonforfeitable
Accrued Benefit over a period described in clause (ii) unless the Trustee will
commence payment to the designated Beneficiary no later than the December 31
following the close of the calendar year in which the Participant's death
occurred or, if later, and the designated Beneficiary is the Participant's
surviving spouse, December 31 of the calendar year in which the Participant
would have attained age 70 1/2. If the Trustee will make distribution in
accordance with clause (ii), the minimum distribution for a calendar year equals
the Participant's Nonforfeitable Accrued Benefit as of the latest valuation date
preceding the beginning of the calendar year divided by the designated
Beneficiary's life expectancy. The Advisory Committee must use the unisex life
expectancy multiples under Treas. Reg. ss.1.72-9 for purposes of applying this
paragraph. The Advisory Committee, only upon the written request of the
Participant or of the Participant's surviving spouse, will recalculate the life
expectancy of the Participant's surviving spouse not more frequently than
annually, but may not recalculate the life expectancy of a nonspouse designated
Beneficiary after the Trustee commences payment to the designated Beneficiary.
The Advisory Committee will apply this paragraph by treating any amount paid to
the Participant's child, which becomes payable to the Participant's surviving
spouse upon the child's attaining the age of majority, as paid to the
Participant's surviving spouse. Upon the Beneficiary's written request, the
Advisory Committee must direct the Trustee to accelerate payment of all, or any
portion, of the Participant's unpaid Accrued Benefit, as soon as
administratively practicable following the effective date of that request.
6.03 BENEFIT PAYMENT ELECTIONS. Not earlier than 90 days, but not later
-------------------------
than 30 days, before the Participant's annuity starting date, the Advisory
Committee must provide a benefit notice to a Participant who is eligible to make
an election under this Section 6.03. The benefit notice must explain the
optional forms of benefit in the Plan, including the material features and
relative values of those options, and the Participant's right to defer
distribution until he attains the later of Normal Retirement Age or age 62.
If a Participant or Beneficiary makes an election prescribed by this Section
6.03, the Advisory Committee will direct the Trustee to distribute the
Participant's Nonforfeitable Accrued Benefit in accordance with that election.
Any election under this Section 6.03 is subject to the requirements of Section
6.02 and of Section 6.04. The Participant or Beneficiary must make an election
under this Section 6.03 by filing his election with the Advisory Committee at
any time before the Trustee otherwise would commence to pay a Participant's
Accrued Benefit in accordance with the requirements of Article VI.
6.04
<PAGE>
(A) Participant Elections After Separation from Service. If the present value of
a Participant's Nonforfeitable Accrued Benefit exceeds $3,500, he may elect to
have the Trustee commence distribution as of any distribution date permitted
under the Employer's Adoption Agreement Section 6.03. The Participant may
reconsider an election at any time prior to the annuity starting date and elect
to commence distribution as of any other distribution date permitted under the
Employer's Adoption Agreement Section 6.03. If the Participant is
partially-vested in his Accrued Benefit, an election under this Paragraph (A) to
distribute prior to the Participant's incurring a Forfeiture Break in Service
(as defined in Section 5.08), must be in the form of a cash-out distribution (as
defined in Article V). A Participant may not receive a cash-out distribution if,
prior to the time the Trustee actually makes the cash-out distribution, the
Participant returns to employment with the Employer. Following his attainment of
Normal Retirement Age, a Participant who has separated from Service may elect
distribution as of any distribution date, irrespective of the elections under
Adoption Agreement Section 6.03.
(B) Participant Elections Prior to Separation from Service. The Employer must
specify in its Adoption Agreement the distribution election rights, if any, a
Participant has prior to his Separation from Service. A Participant must make an
election under this Section 6.03(B) on a form prescribed by the Advisory
Committee at any time during the Plan Year for which his election is to be
effective. In his written election, the Participant must specify the percentage
or dollar amount he wishes the Trustee to distribute to him. The Participant's
election relates solely to the percentage or dollar amount specified in his
election form and his right to elect to receive an amount, if any, for a
particular Plan Year greater than the dollar amount or percentage specified in
his election form terminates on the Accounting Date. The Trustee must make a
distribution to a Participant in accordance with his election under this Section
6.03(B) within the 90 day period (or as soon as administratively practicable)
after the Participant files his written election with the Trustee. The Trustee
will distribute the balance of the Participant's Accrued Benefit not distributed
pursuant to his election(s) in accordance with the other distribution provisions
of this Plan.
(C) Death Benefit Elections. If the present value of the deceased Participant's
Nonforfeitable Accrued Benefit exceeds $3,500, the Participant's Beneficiary may
elect to have the Trustee distribute the Participant's Nonforfeitable Accrued
Benefit in a form and within a period permitted under Section 6.02. The
Beneficiary's election is subject to any restrictions designated in writing by
the Participant and not revoked as of his date of death.
(D) Transitional Elections. Notwithstanding the provisions of Sections 6.01 and
6.02, if the Participant (or Beneficiary) signed a written distribution
designation prior to January 1, 1984, the Advisory Committee must distribute the
Participant's Nonforfeitable Accrued Benefit in accordance with that
designation, subject however, to the survivor requirements, if applicable, of
Sections 6.04, 6.05 and 6.06. This Section 6.03(D) does not apply to a pre-1984
distribution designation, and the Advisory Committee will not comply with that
designation, if any of the following applies: (1) the method of distribution
would have disqualified the Plan under Code ss.401(a)(9) as in effect on
December 31, 1983; (2) the Participant did not have an Accrued Benefit as of
December 31, 1983; (3) the distribution designation does not specify the timing
and form of the distribution and the death Beneficiaries (in order of priority);
(4) the substitution of a Beneficiary modifies the payment period of the
distribution; or, (5) the Participant (or Beneficiary) modifies or revokes the
distribution designation. In the event of a revocation, the Plan must
distribute, no later than December 31 of the calendar year following the year of
revocation, the amount which the Participant would have received under Section
6.02(A) if the distribution designation had not been in effect or, if the
Beneficiary revokes the distribution designation, the amount which the
Beneficiary would have received under Section 6.02(B) if the distribution
designation had not been in effect. The Advisory Committee will apply this
Section 6.03(D) to rollovers and transfers in accordance with Part J of the Code
ss.401(a)(9) Treasury regulations.
6.05
<PAGE>
6.04 ANNUITY DISTRIBUTIONS TO PARTICIPANTS AND SURVIVING SPOUSES.
----------------------------------------------------------------
(A) Joint and Survivor Annuity. The Advisory Committee must direct the Trustee
to distribute a married or unmarried Participant's Nonforfeitable Accrued
Benefit in the form of a qualified joint and survivor annuity, unless the
Participant makes a valid waiver election (described in Section 6.05) within the
90 day period ending on the annuity starting date. If, as of the annuity
starting date, the Participant is married, a qualified joint and survivor
annuity is an immediate annuity which is purchasable with the Participant's
Nonforfeitable Accrued Benefit and which provides a life annuity for the
Participant and a survivor annuity payable for the remaining life of the
Participant's surviving spouse equal to 50% of the amount of the annuity payable
during the life of the Participant. If, as of the annuity starting date, the
Participant is not married, a qualified joint and survivor annuity is an
immediate life annuity for the Participant which is purchasable with the
Participant's Nonforfeitable Accrued Benefit. On or before the annuity starting
date, the Advisory Committee, without Participant or spousal consent, must
direct the Trustee to pay the Participant's Nonforfeitable Accrued Benefit in a
lump sum, in lieu of a qualified joint and survivor annuity, in accordance with
Section 6.01, if the Participant's Nonforfeitable Accrued Benefit is not greater
than $3,500. This Section 6.04(A) applies only to a Participant who has
completed at least one Hour of Service with the Employer after August 22, 1984.
(B) Preretirement Survivor Annuity. If a married Participant dies prior to his
annuity starting date, the Advisory Committee will direct the Trustee to
distribute a portion of the Participant's Nonforfeitable Accrued Benefit to the
Participant's surviving spouse in the form of a preretirement survivor annuity,
unless the Participant has a valid waiver election (as described in Section
6.06) in effect, or unless the Participant and his spouse were not married
throughout the one year period ending on the date of his death. A preretirement
survivor annuity is an annuity which is purchasable with 50% of the
Participant's Nonforfeitable Accrued Benefit (determined as of the date of the
Participant's death) and which is payable for the life of the Participant's
surviving spouse. The value of the preretirement survivor annuity is
attributable to Employer contributions and to Employee contributions in the same
proportion as the Participant's Nonforfeitable Accrued Benefit is attributable
to those contributions. The portion of the Participant's Nonforfeitable Accrued
Benefit not payable under this paragraph is payable to the Participant's
Beneficiary, in accordance with the other provisions of this Article VI. If the
present value of the preretirement survivor annuity does not exceed $3,500, the
Advisory Committee, on or before the annuity starting date, must direct the
Trustee to make a lump sum distribution to the Participant's surviving spouse,
in lieu of a preretirement survivor annuity. This Section 6.04(B) applies only
to a Participant who dies after August 22, 1984, and either (i) completes at
least one Hour of Service with the Employer after August 22, 1984, or (ii)
separated from Service with at least 10 Years of Service (as defined in Section
5.06) and completed at least one Hour of Service with the Employer in a Plan
Year beginning after December 31, 1975.
(C) Surviving Spouse Elections. If the present value of the preretirement
survivor annuity exceeds $3,500, the Participant's surviving spouse may elect to
have the Trustee commence payment of the preretirement survivor annuity at any
time following the date of the Participant's death, but not later than the
mandatory distribution periods described in Section 6.02, and may elect any of
the forms of payment described in Section 6.02, in lieu of the preretirement
survivor annuity. In the absence of an election by the surviving spouse, the
Advisory Committee must direct the Trustee to distribute the preretirement
survivor annuity on the first distribution date following the close of the Plan
Year in which the latest of the following events occurs: (i) the Participant's
death; (ii) the date the Advisory Committee receives notification of or
otherwise confirms the Participant's death; (iii) the date the Participant would
have attained Normal Retirement Age; or (iv) the date the Participant would have
attained age 62.
6.06
<PAGE>
(D) Special Rules. If the Participant has in effect a valid waiver election
regarding the qualified joint and survivor annuity or the preretirement survivor
annuity, the Advisory Committee must direct the Trustee to distribute the
Participant's Nonforfeitable Accrued Benefit in accordance with Sections 6.01,
6.02 and 6.03. The Advisory Committee will reduce the Participant's
Nonforfeitable Accrued Benefit by any security interest (pursuant to any offset
rights authorized by Section 10.03[E]) held by the Plan by reason of a
Participant loan to determine the value of the Participant's Nonforfeitable
Accrued Benefit distributable in the form of a qualified joint and survivor
annuity or preretirement survivor annuity, provided any post-August 18, 1985,
loan satisfied the spousal consent requirement described in Section 10.03[E] of
the Plan. For purposes of applying this Article VI, the Advisory Committee
treats a former spouse as the Participant's spouse or surviving spouse to the
extent provided under a qualified domestic relations order described in Section
6.07. The provisions of this Section 6.04, and of Sections 6.05 and 6.06, apply
separately to the portion of the Participant's Nonforfeitable Accrued Benefit
subject to the qualified domestic relations order and to the portion of the
Participant's Nonforfeitable Accrued Benefit not subject to that order.
(E) Profit Sharing Plan Election. If this Plan is a profit sharing plan, the
Employer must elect the extent to which the preceding provisions of Section 6.04
apply. If the Employer elects to apply this Section 6.04 only to a Participant
described in this Section 6.04(E), the preceding provisions of this Section 6.04
apply only to the following Participants: (1) a Participant as respects whom the
Plan is a direct or indirect transferee from a plan subject to the Code ss.417
requirements and the Plan received the transfer after December 31, 1984, unless
the transfer is an elective transfer described in Section 13.06; (2) a
Participant who elects a life annuity distribution (if Section 6.02 or Section
13.02 of the Plan requires the Plan to provide a life annuity distribution
option); and (3) a Participant whose benefits under a defined benefit plan
maintained by the Employer are offset by benefits provided under this Plan. If
the Employer elects to apply this Section 6.04 to all Participants, the
preceding provisions of this Section 6.04 apply to all Participants described in
the first two paragraphs of this Section 6.04, without regard to the limitations
of this Section 6.04(E). Sections 6.05 and 6.06 only apply to Participants to
whom the preceding provisions of this Section 6.04 apply.
6.05 WAIVER ELECTION - QUALIFIED JOINT AND SURVIVOR ANNUITY. Not earlier
------------------------------------------------------
than 90 days, but not later than 30 days, before the Participant's annuity
starting date, the Advisory Committee must provide the Participant a written
explanation of the terms and conditions of the qualified joint and survivor
annuity, the Participant's right to make, and the effect of, an election to
waive the joint and survivor form of benefit, the rights of the Participant's
spouse regarding the waiver election and the Participant's right to make, and
the effect of, a revocation of a waiver election. The Plan does not limit the
number of times the Participant may revoke a waiver of the qualified joint and
survivor annuity or make a new waiver during the election period.
A married Participant's waiver election is not valid unless (a) the
Participant's spouse (to whom the survivor annuity is payable under the
qualified joint and survivor annuity), after the Participant has received the
written explanation described in this Section 6.05, has consented in writing to
the waiver election, the spouse's consent acknowledges the effect of the
election, and a notary public or the Plan Administrator (or his representative)
witnesses the spouse's consent, (b) the spouse consents to the alternate form of
payment designated by the Participant or to any change in that designated form
of payment, and (c) unless the spouse is the Participant's sole primary
Beneficiary, the spouse consents to the Participant's Beneficiary designation or
to any change in the Participant's Beneficiary designation. The spouse's consent
to a waiver of the qualified joint and survivor annuity is irrevocable, unless
the Participant revokes the waiver election. The spouse may execute a blanket
consent to any form of payment designation or to any Beneficiary designation
made by the Participant, if the spouse acknowledges the right to limit that
consent to a specific designation but, in writing, waives that right. The
consent requirements of this Section 6.05 apply to a former spouse of the
Participant, to the extent required under a qualified domestic relations order
described in Section 6.07.
6.07
<PAGE>
The Advisory Committee will accept as valid a waiver election which does not
satisfy the spousal consent requirements if the Advisory Committee establishes
the Participant does not have a spouse, the Advisory Committee is not able to
locate the Participant's spouse, the Participant is legally separated or has
been abandoned (within the meaning of State law) and the Participant has a court
order to that effect, or other circumstances exist under which the Secretary of
the Treasury will excuse the consent requirement. If the Participant's spouse is
legally incompetent to give consent, the spouse's legal guardian (even if the
guardian is the Participant) may give consent.
6.06 WAIVER ELECTION - PRERETIREMENT SURVIVOR ANNUITY. The Advisory
------------------------------------------------
Committee must provide a written explanation of the preretirement survivor
annuity to each married Participant, within the following period which ends
last: (1) the period beginning on the first day of the Plan Year in which the
Participant attains age 32 and ending on the last day of the Plan Year in which
the Participant attains age 34; (2) a reasonable period after an Employee
becomes a Participant; (3) a reasonable period after the joint and survivor
rules become applicable to the Participant; or (4) a reasonable period after a
fully subsidized preretirement survivor annuity no longer satisfies the
requirements for a fully subsidized benefit. A reasonable period described in
clauses (2), (3) and (4) is the period beginning one year before and ending one
year after the applicable event. If the Participant separates from Service
before attaining age 35, clauses (1), (2), (3) and (4) do not apply and the
Advisory Committee must provide the written explanation within the period
beginning one year before and ending one year after the Separation from Service.
The written explanation must describe, in a manner consistent with Treasury
regulations, the terms and conditions of the preretirement survivor annuity
comparable to the explanation of the qualified joint and survivor annuity
required under Section 6.05. The Plan does not limit the number of times the
Participant may revoke a waiver of the preretirement survivor annuity or make a
new waiver during the election period.
A Participant's waiver election of the preretirement survivor annuity is not
valid unless (a) the Participant makes the waiver election no earlier than the
first day of the Plan Year in which he attains age 35 and (b) the Participant's
spouse (to whom the preretirement survivor annuity is payable) satisfies the
consent requirements described in Section 6.05, except the spouse need not
consent to the form of benefit payable to the designated Beneficiary. The
spouse's consent to the waiver of the preretirement survivor annuity is
irrevocable, unless the Participant revokes the waiver election. Irrespective of
the time of election requirement described in clause (a), if the Participant
separates from Service prior to the first day of the Plan Year in which he
attains age 35, the Advisory Committee will accept a waiver election as respects
the Participant's Accrued Benefit attributable to his Service prior to his
Separation from Service. Furthermore, if a Participant who has not separated
from Service makes a valid waiver election, except for the timing requirement of
clause (a), the Advisory Committee will accept that election as valid, but only
until the first day of the Plan Year in which the Participant attains age 35. A
waiver election described in this paragraph is not valid unless made after the
Participant has received the written explanation described in this Section 6.06.
6.07 DISTRIBUTIONS UNDER DOMESTIC RELATIONS ORDERS. Nothing contained in
---------------------------------------------
this Plan prevents the Trustee, in accordance with the direction of the Advisory
Committee, from complying with the provisions of a qualified domestic relations
order (as defined in Code ss.414(p)). This Plan specifically permits
distribution to an alternate payee under a qualified domestic relations order at
any time, irrespective of whether the Participant has attained his earliest
retirement age (as defined under Code ss.414(p)) under the Plan. A distribution
to an alternate payee prior to the Participant's attainment of earliest
retirement age is available only if: (1) the order specifies distribution at
that time or permits an agreement between the Plan and the alternate payee to
authorize an earlier distribution; and (2) if the present value of the alternate
payee's benefits under the Plan exceeds $3,500, and the order requires, the
alternate payee consents to any distribution occurring prior to the
Participant's attainment of earliest retirement age. The Employer, in an
addendum to its Adoption Agreement numbered 6.07, may elect to limit
distribution to an alternate payee only when the Participant has attained his
earliest retirement age under the Plan. Nothing in this Section 6.07 gives a
Participant a right to receive distribution at a time otherwise not permitted
under the Plan nor does it permit the alternate payee to receive a form of
payment not otherwise permitted under the Plan.
6.08
<PAGE>
The Advisory Committee must establish reasonable procedures to determine the
qualified status of a domestic relations order. Upon receiving a domestic
relations order, the Advisory Committee promptly will notify the Participant and
any alternate payee named in the order, in writing, of the receipt of the order
and the Plan's procedures for determining the qualified status of the order.
Within a reasonable period of time after receiving the domestic relations order,
the Advisory Committee must determine the qualified status of the order and must
notify the Participant and each alternate payee, in writing, of its
determination. The Advisory Committee must provide notice under this paragraph
by mailing to the individual's address specified in the domestic relations
order, or in a manner consistent with Department of Labor regulations.
If any portion of the Participant's Nonforfeitable Accrued Benefit is
payable during the period the Advisory Committee is making its determination of
the qualified status of the domestic relations order, the Advisory Committee
must make a separate accounting of the amounts payable. If the Advisory
Committee determines the order is a qualified domestic relations order within 18
months of the date amounts first are payable following receipt of the order, the
Advisory Committee will direct the Trustee to distribute the payable amounts in
accordance with the order. If the Advisory Committee does not make its
determination of the qualified status of the order within the 18-month
determination period, the Advisory Committee will direct the Trustee to
distribute the payable amounts in the manner the Plan would distribute if the
order did not exist and will apply the order prospectively if the Advisory
Committee later determines the order is a qualified domestic relations order.
To the extent it is not inconsistent with the provisions of the qualified
domestic relations order, the Advisory Committee may direct the Trustee to
invest any partitioned amount in a segregated subaccount or separate account and
to invest the account in Federally insured, interest-bearing savings account(s)
or time deposit(s) (or a combination of both), or in other fixed income
investments. A segregated subaccount remains a part of the Trust, but it alone
shares in any income it earns, and it alone bears any expense or loss it incurs.
The Trustee will make any payments or distributions required under this Section
6.07 by separate benefit checks or other separate distribution to the alternate
payee(s).
* * * * * * * * * * * * * * *
6.09
<PAGE>
ARTICLE VII
EMPLOYER ADMINISTRATIVE PROVISIONS
7.01 INFORMATION TO COMMITTEE. The Employer must supply current information
------------------------
to the Advisory Committee as to the name, date of birth, date of employment,
annual compensation, leaves of absence, Years of Service and date of termination
of employment of each Employee who is, or who will be eligible to become, a
Participant under the Plan, together with any other information which the
Advisory Committee considers necessary. The Employer's records as to the current
information the Employer furnishes to the Advisory Committee are conclusive as
to all persons.
7.02 NO LIABILITY. The Employer assumes no obligation or responsibility to
------------
any of its Employees, Participants or Beneficiaries for any act of, or failure
to act, on the part of its Advisory Committee (unless the Employer is the
Advisory Committee), the Trustee, the Custodian, if any, or the Plan
Administrator (unless the Employer is the Plan Administrator).
7.03 INDEMNITY OF CERTAIN FIDUCIARIES. The Employer indemnifies and saves
--------------------------------
harmless the Plan Administrator and the members of the Advisory Committee, and
each of them, from and against any and all loss resulting from liability to
which the Plan Administrator and the Advisory Committee, or the members of the
Advisory Committee, may be subjected by reason of any act or conduct (except
willful misconduct or gross negligence) in their official capacities in the
administration of this Trust or Plan or both, including all expenses reasonably
incurred in their defense, in case the Employer fails to provide such defense.
The indemnification provisions of this Section 7.03 do not relieve the Plan
Administrator or any Advisory Committee member from any liability he may have
under ERISA for breach of a fiduciary duty. Furthermore, the Plan Administrator
and the Advisory Committee members and the Employer may execute a letter
agreement further delineating the indemnification agreement of this Section
7.03, provided the letter agreement must be consistent with and does not violate
ERISA. The indemnification provisions of this Section 7.03 extend to the Trustee
(or to a Custodian, if any) solely to the extent provided by a letter agreement
executed by the Trustee (or Custodian) and the Employer.
7.04 EMPLOYER DIRECTION OF INVESTMENT. The Employer has the right to direct
--------------------------------
the Trustee with respect to the investment and re-investment of assets
comprising the Trust Fund only if the Trustee consents in writing to permit such
direction. If the Trustee consents to Employer direction of investment, the
Trustee and the Employer must execute a letter agreement as a part of this Plan
containing such conditions, limitations and other provisions they deem
appropriate before the Trustee will follow any Employer direction as respects
the investment or re-investment of any part of the Trust Fund.
7.05 AMENDMENT TO VESTING SCHEDULE. Though the Employer reserves the right
-----------------------------
to amend the vesting schedule at any time, the Advisory Committee will not apply
the amended vesting schedule to reduce the Nonforfeitable percentage of any
Participant's Accrued Benefit derived from Employer contributions (determined as
of the later of the date the Employer adopts the amendment, or the date the
amendment becomes effective) to a percentage less than the Nonforfeitable
percentage computed under the Plan without regard to the amendment. An amended
vesting schedule will apply to a Participant only if the Participant receives
credit for at least one Hour of Service after the new schedule becomes
effective.
If the Employer makes a permissible amendment to the vesting schedule, each
Participant having at least 3 Years of Service with the Employer may elect to
have the percentage of his Nonforfeitable Accrued Benefit computed under the
Plan without regard to the amendment. For Plan Years beginning prior to January
1, 1989, the election described in the preceding sentence applies only to
Participants having at least 5 Years of Service with the Employer. The
Participant must file his election with the Advisory Committee within 60 days of
the latest of (a) the Employer's adoption of the amendment; (b) the effective
date of the amendment; or (c) his receipt of a copy of the amendment. The
Advisory Committee, as soon as practicable, must forward a true copy of any
amendment to the vesting schedule to each affected Participant, together with an
explanation of the effect of the amendment, the appropriate form upon which the
Participant may make an election to remain under the
7.01
<PAGE>
vesting schedule provided under the Plan prior to the amendment and notice of
the time within which the Participant must make an election to remain under the
prior vesting schedule. The election described in this Section 7.05 does not
apply to a Participant if the amended vesting schedule provides for vesting at
least as rapid at all times as the vesting schedule in effect prior to the
amendment. For purposes of this Section 7.05, an amendment to the vesting
schedule includes any Plan amendment which directly or indirectly affects the
computation of the Nonforfeitable percentage of an Employee's rights to his
Employer derived Accrued Benefit. Furthermore, the Advisory Committee must treat
any shift in the vesting schedule, due to a change in the Plan's top heavy
status, as an amendment to the vesting schedule for purposes of this Section
7.05.
* * * * * * * * * * * * * * *
7.02
<PAGE>
ARTICLE VIII
PARTICIPANT ADMINISTRATIVE PROVISIONS
8.01 BENEFICIARY DESIGNATION. Any Participant may from time to time
-----------------------
designate, in writing, any person or persons, contingently or successively, to
whom the Trustee will pay his Nonforfeitable Accrued Benefit (including any life
insurance proceeds payable to the Participant's Account) in the event of his
death and the Participant may designate the form and method of payment. The
Advisory Committee will prescribe the form for the written designation of
Beneficiary and, upon the Participant's filing the form with the Advisory
Committee, the form effectively revokes all designations filed prior to that
date by the same Participant.
(A) Coordination with survivor requirements. If the joint and survivor
requirements of Article VI apply to the Participant, this Section 8.01 does not
impose any special spousal consent requirements on the Participant's Beneficiary
designation. However, in the absence of spousal consent (as required by Article
VI) to the Participant's Beneficiary designation: (1) any waiver of the joint
and survivor annuity or of the preretirement survivor annuity is not valid; and
(2) if the Participant dies prior to his annuity starting date, the
Participant's Beneficiary designation will apply only to the portion of the
death benefit which is not payable as a preretirement survivor annuity.
Regarding clause (2), if the Participant's surviving spouse is a primary
Beneficiary under the Participant's Beneficiary designation, the Trustee will
satisfy the spouse's interest in the Participant's death benefit first from the
portion which is payable as a preretirement survivor annuity.
(B) Profit sharing plan exception. If the Plan is a profit sharing plan, the
Beneficiary designation of a married Exempt Participant is not valid unless the
Participant's spouse consents (in a manner described in Section 6.05) to the
Beneficiary designation. An "Exempt Participant" is a Participant who is not
subject to the joint and survivor requirements of Article VI. The spousal
consent requirement in this paragraph does not apply if the Exempt Participant
and his spouse are not married throughout the one year period ending on the date
of the Participant's death, or if the Participant's spouse is the Participant's
sole primary Beneficiary.
8.02 NO BENEFICIARY DESIGNATION/DEATH OF BENEFICIARY. If a Participant fails
-----------------------------------------------
to name a Beneficiary in accordance with Section 8.01, or if the Beneficiary
named by a Participant predeceases him, then the Trustee will pay the
Participant's Nonforfeitable Accrued Benefit in accordance with Section 6.02 in
the following order of priority, unless the Employer specifies a different order
of priority in an addendum to its Adoption Agreement, to:
(a) The Participant's surviving spouse;
(b) The Participant's surviving children, including adopted children,
in equal shares;
(c) The Participant's surviving parents, in equal shares; or
(d) The Participant's estate.
If the Beneficiary does not predecease the Participant, but dies prior to
distribution of the Participant's entire Nonforfeitable Accrued Benefit, the
Trustee will pay the remaining Nonforfeitable Accrued Benefit to the
Beneficiary's estate unless the Participant's Beneficiary designation provides
otherwise or unless the Employer provides otherwise in its Adoption Agreement.
If the Plan is a profit sharing plan, and the Plan includes Exempt Participants,
the Employer may not specify a different order of priority in the Adoption
Agreement unless the Participant's surviving spouse will be first in the
different order of priority. The Advisory Committee will direct the Trustee as
to the method and to whom the Trustee will make payment under this Section 8.02.
8.01
<PAGE>
8.03 PERSONAL DATA TO COMMITTEE. Each Participant and each Beneficiary of a
--------------------------
deceased Participant must furnish to the Advisory Committee such evidence, data
or information as the Advisory Committee considers necessary or desirable for
the purpose of administering the Plan. The provisions of this Plan are effective
for the benefit of each Participant upon the condition precedent that each
Participant will furnish promptly full, true and complete evidence, data and
information when requested by the Advisory Committee, provided the Advisory
Committee advises each Participant of the effect of his failure to comply with
its request.
8.04 ADDRESS FOR NOTIFICATION. Each Participant and each Beneficiary of a
------------------------
deceased Participant must file with the Advisory Committee from time to time, in
writing, his post office address and any change of post office address. Any
communication, statement or notice addressed to a Participant, or Beneficiary,
at his last post office address filed with the Advisory Committee, or as shown
on the records of the Employer, binds the Participant, or Beneficiary, for all
purposes of this Plan.
8.05 ASSIGNMENT OR ALIENATION. Subject to Code ss.414(p) relating to
------------------------
qualified domestic relations orders, neither a Participant nor a Beneficiary may
anticipate, assign or alienate (either at law or in equity) any benefit provided
under the Plan, and the Trustee will not recognize any such anticipation,
assignment or alienation. Furthermore, a benefit under the Plan is not subject
to attachment, garnishment, levy, execution or other legal or equitable process.
8.06 NOTICE OF CHANGE IN TERMS. The Plan Administrator, within the time
-------------------------
prescribed by ERISA and the applicable regulations, must furnish all
Participants and Beneficiaries a summary description of any material amendment
to the Plan or notice of discontinuance of the Plan and all other information
required by ERISA to be furnished without charge.
8.07 LITIGATION AGAINST THE TRUST. A court of competent jurisdiction may
----------------------------
authorize any appropriate equitable relief to redress violations of ERISA or to
enforce any provisions of ERISA or the terms of the Plan. A fiduciary may
receive reimbursement of expenses properly and actually incurred in the
performance of his duties with the Plan.
8.08 INFORMATION AVAILABLE. Any Participant in the Plan or any Beneficiary
---------------------
may examine copies of the Plan description, latest annual report, any bargaining
agreement, this Plan and Trust, contract or any other instrument under which the
Plan was established or is operated. The Plan Administrator will maintain all of
the items listed in this Section 8.08 in his office, or in such other place or
places as he may designate from time to time in order to comply with the
regulations issued under ERISA, for examination during reasonable business
hours. Upon the written request of a Participant or Beneficiary the Plan
Administrator must furnish him with a copy of any item listed in this Section
8.08. The Plan Administrator may make a reasonable charge to the requesting
person for the copy so furnished.
8.09 APPEAL PROCEDURE FOR DENIAL OF BENEFITS. A Participant or a Beneficiary
---------------------------------------
("Claimant") may file with the Advisory Committee a written claim for benefits,
if the Participant or Beneficiary determines the distribution procedures of the
Plan have not provided him his proper Nonforfeitable Accrued Benefit. The
Advisory Committee must render a decision on the claim within 60 days of the
Claimant's written claim for benefits. The Plan Administrator must provide
adequate notice in writing to the Claimant whose claim for benefits under the
Plan the Advisory Committee has denied. The Plan Administrator's notice to the
Claimant must set forth:
(a) The specific reason for the denial;
(b) Specific references to pertinent Plan provisions on which the
Advisory Committee based its denial;
(c) A description of any additional material and information needed
for the Claimant to perfect his claim and an explanation of why the
material or information is needed; and
8.02
<PAGE>
(d) That any appeal the Claimant wishes to make of the adverse determination
must be in writing to the Advisory Committee within 75 days after receipt of
the Plan Administrator's notice of denial of benefits. The Plan
Administrator's notice must further advise the Claimant that his failure to
appeal the action to the Advisory Committee in writing within the 75-day
period will render the Advisory Committee's determination final, binding and
conclusive.
If the Claimant should appeal to the Advisory Committee, he, or his duly
authorized representative, may submit, in writing, whatever issues and comments
he, or his duly authorized representative, feels are pertinent. The Claimant, or
his duly authorized representative, may review pertinent Plan documents. The
Advisory Committee will re-examine all facts related to the appeal and make a
final determination as to whether the denial of benefits is justified under the
circumstances. The Advisory Committee must advise the Claimant of its decision
within 60 days of the Claimant's written request for review, unless special
circumstances (such as a hearing) would make the rendering of a decision within
the 60-day limit unfeasible, but in no event may the Advisory Committee render a
decision respecting a denial for a claim for benefits later than 120 days after
its receipt of a request for review.
The Plan Administrator's notice of denial of benefits must identify the name
of each member of the Advisory Committee and the name and address of the
Advisory Committee member to whom the Claimant may forward his appeal.
8.10 PARTICIPANT DIRECTION OF INVESTMENT. A Participant has the right to
-----------------------------------
direct the Trustee with respect to the investment or re-investment of the assets
comprising the Participant's individual Account only if the Trustee consents in
writing to permit such direction. If the Trustee consents to Participant
direction of investment, the Trustee will accept direction from each Participant
on a written election form (or other written agreement), as a part of this Plan,
containing such conditions, limitations and other provisions the parties deem
appropriate. The Trustee or, with the Trustee's consent, the Advisory Committee,
may establish written procedures, incorporated specifically as part of this
Plan, relating to Participant direction of investment under this Section 8.10.
The Trustee will maintain a segregated investment Account to the extent a
Participant's Account is subject to Participant self-direction. The Trustee is
not liable for any loss, nor is the Trustee liable for any breach, resulting
from a Participant's direction of the investment of any part of his directed
Account.
The Advisory Committee, to the extent provided in a written loan policy
adopted under Section 9.04, will treat a loan made to a Participant as a
Participant direction of investment under this Section 8.10. To the extent of
the loan outstanding at any time, the borrowing Participant's Account alone
shares in any interest paid on the loan, and it alone bears any expense or loss
it incurs in connection with the loan. The Trustee may retain any principal or
interest paid on the borrowing Participant's loan in an interest bearing
segregated Account on behalf of the borrowing Participant until the Trustee (or
the Named Fiduciary, in the case of a nondiscretionary Trustee) deems it
appropriate to add the amount paid to the Participant's separate Account under
the Plan.
If the Trustee consents to Participant direction of investment of his
Account, the Plan treats any post-December 31, 1981, investment by a
Participant's directed Account in collectibles (as defined by Code ss.408(m)) as
a deemed distribution to the Participant for Federal income tax purposes.
* * * * * * * * * * * * * * *
8.03
<PAGE>
ARTICLE IX
ADVISORY COMMITTEE - DUTIES WITH RESPECT TO PARTICIPANTS' ACCOUNTS
9.01 MEMBERS' COMPENSATION, EXPENSES. The Employer must appoint an Advisory
-------------------------------
Committee to administer the Plan, the members of which may or may not be
Participants in the Plan, or which may be the Plan Administrator acting alone.
In the absence of an Advisory Committee appointment, the Plan Administrator
assumes the powers, duties and responsibilities of the Advisory Committee. The
members of the Advisory Committee will serve without compensation for services
as such, but the Employer will pay all expenses of the Advisory Committee,
except to the extent the Trust properly pays for such expenses, pursuant to
Article X.
9.02 TERM. Each member of the Advisory Committee serves until the
----
appointment of his successor.
9.03 POWERS. In case of a vacancy in the membership of the Advisory
------
Committee, the remaining members of the Advisory Committee may exercise any and
all of the powers, authority, duties and discretion conferred upon the Advisory
Committee pending the filling of the vacancy.
9.04 GENERAL. The Advisory Committee has the following powers and
-------
duties:
(a) To select a Secretary, who need not be a member of the Advisory
Committee;
(b) To determine the rights of eligibility of an Employee to participate in
the Plan, the value of a Participant's Accrued Benefit and the
Nonforfeitable percentage of each Participant's Accrued Benefit;
(c) To adopt rules of procedure and regulations necessary for the proper and
efficient administration of the Plan provided the rules are not inconsistent
with the terms of this Agreement;
(d) To construe and enforce the terms of the Plan and the rules and
regulations it adopts, including interpretation of the Plan documents and
documents related to the Plan's operation;
(e) To direct the Trustee as respects the crediting and distribution
of the Trust;
(f) To review and render decisions respecting a claim for (or denial
of a claim for) a benefit under the Plan;
(g) To furnish the Employer with information which the Employer may
require for tax or other purposes;
(h) To engage the service of agents whom it may deem advisable to
assist it with the performance of its duties;
(i) To engage the services of an Investment Manager or Managers (as defined
in ERISA ss.3(38)), each of whom will have full power and authority to
manage, acquire or dispose (or direct the Trustee with respect to
acquisition or disposition) of any Plan asset under its control;
(j) To establish, in its sole discretion, a nondiscriminatory policy (see
Section 9.04(A)) which the Trustee must observe in making loans, if any, to
Participants and Beneficiaries; and
(k) To establish and maintain a funding standard account and to make credits
and charges to the account to the extent required by and in accordance with
the provisions of the Code.
The Advisory Committee must exercise all of its powers, duties and
discretion under the Plan in a uniform and nondiscriminatory manner.
9.01
<PAGE>
(A) Loan Policy. If the Advisory Committee adopts a loan policy, pursuant to
paragraph (j), the loan policy must be a written document and must include: (1)
the identity of the person or positions authorized to administer the participant
loan program; (2) a procedure for applying for the loan; (3) the criteria for
approving or denying a loan; (4) the limitations, if any, on the types and
amounts of loans available; (5) the procedure for determining a reasonable rate
of interest; (6) the types of collateral which may secure the loan; and (7) the
events constituting default and the steps the Plan will take to preserve plan
assets in the event of default. This Section 9.04 specifically incorporates a
written loan policy as part of the Employer's Plan.
9.05 FUNDING POLICY. The Advisory Committee will review, not less often than
--------------
annually, all pertinent Employee information and Plan data in order to establish
the funding policy of the Plan and to determine the appropriate methods of
carrying out the Plan's objectives. The Advisory Committee must communicate
periodically, as it deems appropriate, to the Trustee and to any Plan Investment
Manager the Plan's short-term and long-term financial needs so investment policy
can be coordinated with Plan financial requirements.
9.06 MANNER OF ACTION. The decision of a majority of the members
----------------
appointed and qualified controls.
9.07 AUTHORIZED REPRESENTATIVE. The Advisory Committee may authorize any one
-------------------------
of its members, or its Secretary, to sign on its behalf any notices, directions,
applications, certificates, consents, approvals, waivers, letters or other
documents. The Advisory Committee must evidence this authority by an instrument
signed by all members and filed with the Trustee.
9.08 INTERESTED MEMBER. No member of the Advisory Committee may decide or
-----------------
determine any matter concerning the distribution, nature or method of settlement
of his own benefits under the Plan, except in exercising an election available
to that member in his capacity as a Participant, unless the Plan Administrator
is acting alone in the capacity of the Advisory Committee.
9.09 INDIVIDUAL ACCOUNTS. The Advisory Committee will maintain, or direct
-------------------
the Trustee to maintain, a separate Account, or multiple Accounts, in the name
of each Participant to reflect the Participant's Accrued Benefit under the Plan.
If a Participant re-enters the Plan subsequent to his having a Forfeiture Break
in Service, the Advisory Committee, or the Trustee, must maintain a separate
Account for the Participant's pre-Forfeiture Break in Service Accrued Benefit
and a separate Account for his post-Forfeiture Break in Service Accrued Benefit,
unless the Participant's entire Accrued Benefit under the Plan is 100%
Nonforfeitable.
The Advisory Committee will make its allocations, or request the Trustee to
make its allocations, to the Accounts of the Participants in accordance with the
provisions of Section 9.11. The Advisory Committee may direct the Trustee to
maintain a temporary segregated investment Account in the name of a Participant
to prevent a distortion of income, gain or loss allocations under Section 9.11.
The Advisory Committee must maintain records of its activities.
9.10 VALUE OF PARTICIPANT'S ACCRUED BENEFIT. The value of each Participant's
--------------------------------------
Accrued Benefit consists of that proportion of the net worth (at fair market
value) of the Employer's Trust Fund which the net credit balance in his Account
(exclusive of the cash value of incidental benefit insurance contracts) bears to
the total net credit balance in the Accounts (exclusive of the cash value of the
incidental benefit insurance contracts) of all Participants plus the cash
surrender value of any incidental benefit insurance contracts held by the
Trustee on the Participant's life.
For purposes of a distribution under the Plan, the value of a Participant's
Accrued Benefit is its value as of the valuation date immediately preceding the
date of the distribution. Any distribution (other than a distribution from a
segregated Account) made to a Participant (or to his Beneficiary) more than 90
days after the most recent valuation date may include interest on the amount of
the distribution as an expense of the Trust Fund. The interest, if any, accrues
from such valuation date to the date of the distribution at the rate established
in the Employer's Adoption Agreement.
9.02
<PAGE>
9.11 ALLOCATION AND DISTRIBUTION OF NET INCOME GAIN OR LOSS. A "valuation
------------------------------------------------------
date" under this Plan is each Accounting Date and each interim valuation date
determined under Section 10.14. As of each valuation date the Advisory Committee
must adjust Accounts to reflect net income, gain or loss since the last
valuation date. The valuation period is the period beginning the day after the
last valuation date and ending on the current valuation date.
(A) Trust Fund Accounts. The allocation provisions of this paragraph apply to
all Participant Accounts other than segregated investment Accounts. The Advisory
Committee first will adjust the Participant Accounts, as those Accounts stood at
the beginning of the current valuation period, by reducing the Accounts for any
forfeitures arising under Section 5.09 or under Section 9.14, for amounts
charged during the valuation period to the Accounts in accordance with Section
9.13 (relating to distributions) and Section 11.01 (relating to insurance
premiums), and for the cash value of incidental benefit insurance contracts. The
Advisory Committee then, subject to the restoration allocation requirements of
Section 5.04 or of Section 9.14, will allocate the net income, gain or loss pro
rata to the adjusted Participant Accounts. The allocable net income, gain or
loss is the net income (or net loss), including the increase or decrease in the
fair market value of assets, since the last valuation date.
(B) Segregated investment Accounts. A segregated investment Account receives all
income it earns and bears all expense or loss it incurs. The Advisory Committee
will adopt uniform and nondiscriminatory procedures for determining income or
loss of a segregated investment Account in a manner which reasonably reflects
investment directions relating to pooled investments and investment directions
occurring during a valuation period. As of the valuation date, the Advisory
Committee must reduce a segregated Account for any forfeiture arising under
Section 5.09 after the Advisory Committee has made all other allocations,
changes or adjustments to the Account for the Plan Year.
(C) Additional rules. An Excess Amount or suspense account described in Part 2
of Article III does not share in the allocation of net income, gain or loss
described in this Section 9.11. If the Employer maintains its Plan under a Code
ss.401(k) Adoption Agreement, the Employer may specify in its Adoption Agreement
alternate valuation provisions authorized by that Adoption Agreement. This
Section 9.11 applies solely to the allocation of net income, gain or loss of the
Trust. The Advisory Committee will allocate the Employer contributions and
Participant forfeitures, if any, in accordance with Article III.
9.12 INDIVIDUAL STATEMENT. As soon as practicable after the Accounting Date
--------------------
of each Plan Year, but within the time prescribed by ERISA and the regulations
under ERISA, the Plan Administrator will deliver to each Participant (and to
each Beneficiary) a statement reflecting the condition of his Accrued Benefit in
the Trust as of that date and such other information ERISA requires be furnished
the Participant or Beneficiary. No Participant, except a member of the Advisory
Committee, has the right to inspect the records reflecting the Account of any
other Participant.
9.13 ACCOUNT CHARGED. The Advisory Committee will charge a Participant's
---------------
Account for all distributions made from that Account to the Participant, to his
Beneficiary or to an alternate payee. The Advisory Committee also will charge a
Participant's Account for any administrative expenses incurred by the Plan
directly related to that Account.
9.14 UNCLAIMED ACCOUNT PROCEDURE. The Plan does not require
either the Trustee or the Advisory Committee to search for, or to ascertain the
whereabouts of, any Participant or Beneficiary. At the time the Participant's or
Beneficiary's benefit becomes distributable under Article VI, the Advisory
Committee, by certified or registered mail addressed to his last known address
of record with the Advisory Committee or the Employer, must notify any
Participant, or Beneficiary, that he is entitled to a distribution under this
Plan. The notice must quote the provisions of this Section 9.14 and otherwise
must comply with the notice requirements of Article VI. If the Participant, or
Beneficiary, fails to claim his distributive share or make his whereabouts known
in writing to the Advisory Committee within 6 months from the date of mailing of
the notice, the Advisory Committee will treat the Participant's or Beneficiary's
unclaimed payable Accrued Benefit as forfeited and will reallocate the unclaimed
payable Accrued Benefit in accordance with Section 3.05. A
9.03
<PAGE>
forfeiture under this paragraph will occur at the end of the notice period or,
if later, the earliest date applicable Treasury regulations would permit the
forfeiture. Pending forfeiture, the Advisory Committee, following the expiration
of the notice period, may direct the Trustee to segregate the Nonforfeitable
Accrued Benefit in a segregated Account and to invest that segregated Account in
Federally insured interest bearing savings accounts or time deposits (or in a
combination of both), or in other fixed income investments.
If a Participant or Beneficiary who has incurred a forfeiture of his Accrued
Benefit under the provisions of the first paragraph of this Section 9.14 makes a
claim, at any time, for his forfeited Accrued Benefit, the Advisory Committee
must restore the Participant's or Beneficiary's forfeited Accrued Benefit to the
same dollar amount as the dollar amount of the Accrued Benefit forfeited,
unadjusted for any gains or losses occurring subsequent to the date of the
forfeiture. The Advisory Committee will make the restoration during the Plan
Year in which the Participant or Beneficiary makes the claim, first from the
amount, if any, of Participant forfeitures the Advisory Committee otherwise
would allocate for the Plan Year, then from the amount, if any, of the Trust
Fund net income or gain for the Plan Year and then from the amount, or
additional amount, the Employer contributes to enable the Advisory Committee to
make the required restoration. The Advisory Committee must direct the Trustee to
distribute the Participant's or Beneficiary's restored Accrued Benefit to him
not later than 60 days after the close of the Plan Year in which the Advisory
Committee restores the forfeited Accrued Benefit. The forfeiture provisions of
this Section 9.14 apply solely to the Participant's or to the Beneficiary's
Accrued Benefit derived from Employer contributions.
* * * * * * * * * * * * * * *
9.04
<PAGE>
ARTICLE X
CUSTODIAN/TRUSTEE, POWERS AND DUTIES
10.01 ACCEPTANCE. The Trustee accepts the Trust created under the Plan and
----------
agrees to perform the obligations imposed. The Trustee must provide bond for the
faithful performance of its duties under the Trust to the extent required by
ERISA.
10.02 RECEIPT OF CONTRIBUTIONS. The Trustee is accountable to the Employer
------------------------
for the funds contributed to it by the Employer, but does not have any duty to
see that the contributions received comply with the provisions of the Plan. The
Trustee is not obliged to collect any contributions from the Employer, nor is
obliged to see that funds deposited with it are deposited according to the
provisions of the Plan.
10.03 INVESTMENT POWERS.
-----------------
[A] Discretionary Trustee Designation. If the Employer, in Adoption Agreement
Section 1.02, designates the Trustee to administer the Trust as a discretionary
Trustee, then the Trustee has full discretion and authority with regard to the
investment of the Trust Fund, except with respect to a Plan asset under the
control or direction of a properly appointed Investment Manager or with respect
to a Plan asset properly subject to Employer, Participant or Advisory Committee
direction of investment. The Trustee must coordinate its investment policy with
Plan financial needs as communicated to it by the Advisory Committee. The
Trustee is authorized and empowered, but not by way of limitation, with the
following powers, rights and duties:
(a) To invest any part or all of the Trust Fund in any common or preferred
stocks, open-end or closed-end mutual funds, put and call options traded on
a national exchange, United States retirement plan bonds, corporate bonds,
debentures, convertible debentures, commercial paper, U.S. Treasury bills,
U.S. Treasury notes and other direct or indirect obligations of the United
States Government or its agencies, improved or unimproved real estate
situated in the United States, limited partnerships, insurance contracts of
any type, mortgages, notes or other property of any kind, real or personal,
to buy or sell options on common stock on a nationally recognized exchange
with or without holding the underlying common stock, to buy and sell
commodities, commodity options and contracts for the future delivery of
commodities, and to make any other investments the Trustee deems
appropriate, as a prudent man would do under like circumstances with due
regard for the purposes of this Plan. Any investment made or retained by the
Trustee in good faith is proper but must be of a kind constituting a
diversification considered by law suitable for trust investments.
(b) To retain in cash so much of the Trust Fund as it may deem advisable to
satisfy liquidity needs of the Plan and to deposit any cash held in the
Trust Fund in a bank account at reasonable interest.
(c) To invest, if the Trustee is a bank or similar financial institution
supervised by the United States or by a State, in any type of deposit of the
Trustee (or of a bank related to the Trustee within the meaning of Code
(S)414(b)) at a reasonable rate of interest or in a common trust fund, as
described in Code (S)584, or in a collective investment fund, the provisions
of which govern the investment of such assets and which the Plan
incorporates by this reference, which the Trustee (or its affiliate, as
defined in Code (S)1504) maintains exclusively for the collective investment
of money contributed by the bank (or the affiliate) in its capacity as
trustee and which conforms to the rules of the Comptroller of the Currency.
(d) To manage, sell, contract to sell, grant options to purchase, convey,
exchange, transfer, abandon, improve, repair, insure, lease for any term
even though commencing in the future or extending beyond the term of the
Trust, and otherwise deal with all property, real or personal, in such
manner, for such considerations and on such terms and conditions as the
Trustee decides.
10.01
<PAGE>
(e) To credit and distribute the Trust as directed by the Advisory
Committee. The Trustee is not obliged to inquire as to whether any payee or
distributee is entitled to any payment or whether the distribution is proper
or within the terms of the Plan, or as to the manner of making any payment
or distribution. The Trustee is accountable only to the Advisory Committee
for any payment or distribution made by it in good faith on the order or
direction of the Advisory Committee.
(f) To borrow money, to assume indebtedness, extend mortgages and encumber
by mortgage or pledge.
(g) To compromise, contest, arbitrate or abandon claims and demands,
in its discretion.
(h) To have with respect to the Trust all of the rights of an individual
owner, including the power to give proxies, to participate in any voting
trusts, mergers, consolidations or liquidations, and to exercise or sell
stock subscriptions or conversion rights.
(i) To lease for oil, gas and other mineral purposes and to create mineral
severances by grant or reservation; to pool or unitize interests in oil, gas
and other minerals; and to enter into operating agreements and to execute
division and transfer orders.
(j) To hold any securities or other property in the name of the Trustee or
its nominee, with depositories or agent depositories or in another form as
it may deem best, with or without disclosing the trust relationship.
(k) To perform any and all other acts in its judgment necessary or
appropriate for the proper and advantageous management, investment and
distribution of the Trust.
(l) To retain any funds or property subject to any dispute without liability
for the payment of interest, and to decline to make payment or delivery of
the funds or property until final adjudication is made by a court of
competent jurisdiction.
(m) To file all tax returns required of the Trustee.
(n) To furnish to the Employer, the Plan Administrator and the Advisory
Committee an annual statement of account showing the condition of the Trust
Fund and all investments, receipts, disbursements and other transactions
effected by the Trustee during the Plan Year covered by the statement and
also stating the assets of the Trust held at the end of the Plan Year, which
accounts are conclusive on all persons, including the Employer, the Plan
Administrator and the Advisory Committee, except as to any act or
transaction concerning which the Employer, the Plan Administrator or the
Advisory Committee files with the Trustee written exceptions or objections
within 90 days after the receipt of the accounts or for which ERISA
authorizes a longer period within which to object.
(o) To begin, maintain or defend any litigation necessary in connection with
the administration of the Plan, except that the Trustee is not obliged or
required to do so unless indemnified to its satisfaction.
[B] Nondiscretionary Trustee Designation/Appointment of Custodian. If the
Employer, in its Adoption Agreement Section 1.02, designates the Trustee to
administer the Trust as a nondiscretionary Trustee, then the Trustee will not
have any discretion or authority with regard to the investment of the Trust
Fund, but must act solely as a directed trustee of the funds contributed to it.
A nondiscretionary Trustee, as directed trustee of the funds held by it under
the Employer's Plan, is authorized and empowered, by way of limitation, with the
following powers, rights and duties, each of which the nondiscretionary Trustee
exercises solely as directed trustee in accordance with the written direction of
the Named Fiduciary (except to the extent a Plan asset is subject to the control
and management of a properly appointed Investment Manager or subject to Advisory
Committee or Participant direction of investment):
(a) To invest any part or all of the Trust Fund in any common or preferred
stocks, open-end or closed-end mutual funds, put and call options traded on
a national exchange, United States retirement plan bonds,
10.02
<PAGE>
corporate bonds, debentures, convertible debentures, commercial paper, U.S.
Treasury bills, U.S. Treasury notes and other direct or indirect obligations
of the United States Government or its agencies, improved or unimproved real
estate situated in the United States, limited partnerships, insurance
contracts of any type, mortgages, notes or other property of any kind, real
or personal, to buy or sell options on common stock on a nationally
recognized options exchange with or without holding the underlying common
stock, to buy and sell commodities, commodity options and contracts for the
future delivery of commodities, and to make any other investments the Named
Fiduciary deems appropriate.
(b) To retain in cash so much of the Trust Fund as the Named Fiduciary may
direct in writing to satisfy liquidity needs of the Plan and to deposit any
cash held in the Trust Fund in a bank account at reasonable interest,
including, specific authority to invest in any type of deposit of the
Trustee (or of a bank related to the Trustee within the meaning of Code
(S)414(b)) at a reasonable rate of interest.
(c) To sell, contract to sell, grant options to purchase, convey, exchange,
transfer, abandon, improve, repair, insure, lease for any term even though
commencing in the future or extending beyond the term of the Trust, and
otherwise deal with all property, real or personal, in such manner, for such
considerations and on such terms and conditions as the Named Fiduciary
directs in writing.
(d) To credit and distribute the Trust as directed by the Advisory
Committee. The Trustee is not obliged to inquire as to whether any payee or
distributee is entitled to any payment or whether the distribution is proper
or within the terms of the Plan, or as to the manner of making any payment
or distribution. The Trustee is accountable only to the Advisory Committee
for any payment or distribution made by it in good faith on the order or
direction of the Advisory Committee.
(e) To borrow money, to assume indebtedness, extend mortgages and encumber
by mortgage or pledge.
(f) To have with respect to the Trust all of the rights of an individual
owner, including the power to give proxies, to participate in any voting
trusts, mergers, consolidations or liquidations, and to exercise or sell
stock subscriptions or conversion rights, provided the exercise of any such
powers is in accordance with and at the written direction of the Named
Fiduciary.
(g) To lease for oil, gas and other mineral purposes and to create mineral
severances by grant or reservation; to pool or unitize interests in oil, gas
and other minerals; and to enter into operating agreements and to execute
division and transfer orders, provided the exercise of any such powers is in
accordance with and at the written direction of the Named Fiduciary.
(h) To hold any securities or other property in the name of the
nondiscretionary Trustee or its nominee, with depositories or agent
depositories or in another form as the Named Fiduciary may deem best, with
or without disclosing the custodial relationship.
(i) To retain any funds or property subject to any dispute without liability
for the payment of interest, and to decline to make payment or delivery of
the funds or property until a court of competent jurisdiction makes final
adjudication.
(j) To file all tax returns required of the Trustee.
10.03
<PAGE>
(k) To furnish to the Named Fiduciary, the Employer, the Plan Administrator
and the Advisory Committee an annual statement of account showing the
condition of the Trust Fund and all investments, receipts, disbursements and
other transactions effected by the nondiscretionary Trustee during the Plan
Year covered by the statement and also stating the assets of the Trust held
at the end of the Plan Year, which accounts are conclusive on all persons,
including the Named Fiduciary, the Employer, the Plan Administrator and the
Advisory Committee, except as to any act or transaction concerning which the
Named Fiduciary, the Employer, the Plan Administrator or the Advisory
Committee files with the nondiscretionary Trustee written exceptions or
objections within 90 days after the receipt of the accounts or for which
ERISA authorizes a longer period within which to object.
(l) To begin, maintain or defend any litigation necessary in connection with
the administration of the Plan, except that the Trustee is not obliged or
required to do so unless indemnified to its satisfaction.
Appointment of Custodian. The Employer may appoint a Custodian under the
Plan, the acceptance by the Custodian indicated on the execution page of the
Employer's Adoption Agreement. If the Employer appoints a Custodian, the
Employer's Plan must have a discretionary Trustee, as described in Section
10.03[A]. A Custodian has the same powers, rights and duties as a
nondiscretionary Trustee, as described in this Section 10.03[B]. The Custodian
accepts the terms of the Plan and Trust by executing the Employer's Adoption
Agreement. Any reference in the Plan to a Trustee also is a reference to a
Custodian where the context of the Plan dictates. A limitation of the Trustee's
liability by Plan provision also acts as a limitation of the Custodian's
liability. Any action taken by the Custodian at the discretionary Trustee's
direction satisfies any provision in the Plan referring to the Trustee's taking
that action.
Modification of Powers/Limited Responsibility. The Employer and the
Custodian or nondiscretionary Trustee, by letter agreement, may limit the powers
of the Custodian or nondiscretionary Trustee to any combination of powers listed
within this Section 10.03[B]. If there is a Custodian or a nondiscretionary
Trustee under the Employer's Plan, then the Employer, in adopting this Plan
acknowledges the Custodian or nondiscretionary Trustee has no discretion with
respect to the investment or re-investment of the Trust Fund and that the
Custodian or nondiscretionary Trustee is acting solely as custodian or as
directed trustee with respect to the assets comprising the Trust Fund.
[C] Limitation of Powers of Certain Custodians. If a Custodian is a bank which,
under its governing state law, does not possess trust powers, then paragraphs
(a), (c), (e), (f), (g) of Section 10.03[B], Section 10.16 and Article XI do not
apply to that bank and that bank only has the power and authority to exercise
the remaining powers, rights and duties under Section 10.03[B].
[D] Named Fiduciary/Limitation of Liability of Nondiscretionary Trustee or
Custodian. Under a nondiscretionary Trustee designation, the Named Fiduciary
under the Employer's Plan has the sole responsibility for the management and
control of the Employer's Trust Fund, except with respect to a Plan asset under
the control or direction of a properly appointed Investment Manager or with
respect to a Plan asset properly subject to Participant or Advisory Committee
direction of investment. If the Employer appoints a Custodian, the Named
Fiduciary is the discretionary Trustee. Under a nondiscretionary Trustee
designation, unless the Employer designates in writing another person or persons
to serve as Named Fiduciary, the Named Fiduciary under the Plan is the president
of a corporate Employer, the managing partner of a partnership Employer or the
sole proprietor, as appropriate. The Named Fiduciary will exercise its
management and control of the Trust Fund through its written direction to the
nondiscretionary Trustee or to the Custodian, whichever applies to the
Employer's Plan.
10.04
<PAGE>
The nondiscretionary Trustee or Custodian has no duty to review or to make
recommendations regarding investments made at the written direction of the Named
Fiduciary. The nondiscretionary Trustee or Custodian must retain any investment
obtained at the written direction of the Named Fiduciary until further directed
in writing by the Named Fiduciary to dispose of such investment. The
nondiscretionary Trustee or Custodian is not liable in any manner or for any
reason for making, retaining or disposing of any investment pursuant to any
written direction described in this paragraph. Furthermore, the Employer agrees
to indemnify and to hold the nondiscretionary Trustee or Custodian harmless from
any damages, costs or expenses, including reasonable counsel fees, which the
nondiscretionary Trustee or Custodian may incur as a result of any claim
asserted against the nondiscretionary Trustee, the Custodian or the Trust
arising out of the nondiscretionary Trustee's or Custodian's compliance with any
written direction described in this paragraph.
[E] Participant Loans. This Section 10.03[E] specifically authorizes the Trustee
to make loans on a nondiscriminatory basis to a Participant or to a Beneficiary
in accordance with the loan policy established by the Advisory Committee,
provided: (1) the loan policy satisfies the requirements of Section 9.04;
(2) loans are available to all Participants and Beneficiaries on a reasonably
equivalent basis and are not available in a greater amount for Highly
Compensated Employees than for other Employees; (3) any loan is adequately
secured and bears a reasonable rate of interest; (4) the loan provides for
repayment within a specified time; (5) the default provisions of the note
prohibit offset of the Participant's Nonforfeitable Accrued Benefit prior to the
time the Trustee otherwise would distribute the Participant's Nonforfeitable
Accrued Benefit; (6) the amount of the loan does not exceed (at the time the
Plan extends the loan) the present value of the Participant's Nonforfeitable
Accrued Benefit; and (7) the loan otherwise conforms to the exemption provided
by Code (S)4975(d)(1). If the joint and survivor requirements of Article VI
apply to the Participant, the Participant may not pledge any portion of his
Accrued Benefit as security for a loan made after August 18, 1985, unless,
within the 90 day period ending on the date the pledge becomes effective, the
Participant's spouse, if any, consents (in a manner described in Section 6.05
other than the requirement relating to the consent of a subsequent spouse) to
the security or, by separate consent, to an increase in the amount of security.
If the Employer is an unincorporated trade or business, a Participant who is an
Owner- Employee may not receive a loan from the Plan, unless he has obtained a
prohibited transaction exemption from the Department of Labor. If the Employer
is an "S Corporation," a Participant who is a shareholder- employee (an employee
or an officer) who, at any time during the Employer's taxable year, owns more
than 5%, either directly or by attribution under Code (S)318(a)(1), of the
Employer's outstanding stock may not receive a loan from the Plan, unless he has
obtained a prohibited transaction exemption from the Department of Labor. If the
Employer is not an unincorporated trade or business nor an "S Corporation," this
Section 10.03[E] does not impose any restrictions on the class of Participants
eligible for a loan from the Plan.
[F] Investment in qualifying Employer securities and qualifying Employer real
property. The investment options in this Section 10.03[F] include the ability to
invest in qualifying Employer securities or qualifying Employer real property,
as defined in and as limited by ERISA. If the Employer's Plan is a
Nonstandardized profit sharing plan, it may elect in its Adoption Agreement to
permit the aggregate investments in qualifying Employer securities and in
qualifying Employer real property to exceed 10% of the value of Plan assets.
10.04 RECORDS AND STATEMENTS. The records of the Trustee pertaining to the
----------------------
Plan must be open to the inspection of the Plan Administrator, the Advisory
Committee and the Employer at all reasonable times and may be audited from time
to time by any person or persons as the Employer, Plan Administrator or Advisory
Committee may specify in writing. The Trustee must furnish the Plan
Administrator or Advisory Committee with whatever information relating to the
Trust Fund the Plan Administrator or Advisory Committee considers necessary.
10.05
<PAGE>
10.05 FEES AND EXPENSES FROM FUND. A Trustee or Custodian will receive
---------------------------
reasonable annual compensation as may be agreed upon from time to time between
the Employer and the Trustee or Custodian. No person who is receiving full pay
from the Employer may receive compensation for services as Trustee or as
Custodian. The Trustee will pay from the Trust Fund all fees and expenses
reasonably incurred by the Plan, to the extent such fees and expenses are for
the ordinary and necessary administration and operation of the Plan, unless the
Employer pays such fees and expenses. Any fee or expense paid, directly or
indirectly, by the Employer is not an Employer contribution to the Plan,
provided the fee or expense relates to the ordinary and necessary administration
of the Fund.
10.06 PARTIES TO LITIGATION. Except as otherwise provided by ERISA, no
---------------------
Participant or Beneficiary is a necessary party or is required to receive notice
of process in any court proceeding involving the Plan, the Trust Fund or any
fiduciary of the Plan. Any final judgment entered in any proceeding will be
conclusive upon the Employer, the Plan Administrator, the Advisory Committee,
the Trustee, Custodian, Participants and Beneficiaries.
10.07 PROFESSIONAL AGENTS. The Trustee may employ and pay from the Trust
-------------------
Fund reasonable compensation to agents, attorneys, accountants and other persons
to advise the Trustee as in its opinion may be necessary. The Trustee may
delegate to any agent, attorney, accountant or other person selected by it any
non-Trustee power or duty vested in it by the Plan, and the Trustee may act or
refrain from acting on the advice or opinion of any agent, attorney, accountant
or other person so selected.
10.08 DISTRIBUTION OF CASH OR PROPERTY. The Trustee may make distribution
--------------------------------
under the Plan in cash or property, or partly in each, at its fair market value
as determined by the Trustee. For purposes of a distribution to a Participant or
to a Participant's designated Beneficiary or surviving spouse, "property"
includes a Nontransferable Annuity Contract, provided the contract satisfies the
requirements of this Plan.
10.09 DISTRIBUTION DIRECTIONS. If no one claims a payment or distribution
-----------------------
made from the Trust, the Trustee must promptly notify the Advisory Committee and
then dispose of the payment in accordance with the subsequent direction of the
Advisory Committee.
10.10 THIRD PARTY/MULTIPLE TRUSTEES. No person dealing with the Trustee is
-----------------------------
obligated to see to the proper application of any money paid or property
delivered to the Trustee, or to inquire whether the Trustee has acted pursuant
to any of the terms of the Plan. Each person dealing with the Trustee may act
upon any notice, request or representation in writing by the Trustee, or by the
Trustee's duly authorized agent, and is not liable to any person in so acting.
The certificate of the Trustee that it is acting in accordance with the Plan
will be conclusive in favor of any person relying on the certificate. If more
than two persons act as Trustee, a decision of the majority of such persons
controls with respect to any decision regarding the administration or investment
of the Trust Fund or of any portion of the Trust Fund with respect to which such
persons act as Trustee. However, the signature of only one Trustee is necessary
to effect any transaction on behalf of the Trust.
10.11 RESIGNATION. The Trustee or Custodian may resign its position at any
-----------
time by giving 30 days' written notice in advance to the Employer and to the
Advisory Committee. If the Employer fails to appoint a successor Trustee within
60 days of its receipt of the Trustee's written notice of resignation, the
Trustee will treat the Employer as having appointed itself as Trustee and as
having filed its acceptance of appointment with the former Trustee. The
Employer, in its sole discretion, may replace a Custodian. If the Employer does
not replace a Custodian, the discretionary Trustee will assume possession of
Plan assets held by the former Custodian.
10.06
<PAGE>
10.12 REMOVAL. The Employer, by giving 30 days' written notice in advance to
-------
the Trustee, may remove any Trustee or Custodian. In the event of the
resignation or removal of a Trustee, the Employer must appoint a successor
Trustee if it intends to continue the Plan. If two or more persons hold the
position of Trustee, in the event of the removal of one such person, during any
period the selection of a replacement is pending, or during any period such
person is unable to serve for any reason, the remaining person or persons will
act as the Trustee.
10.13 INTERIM DUTIES AND SUCCESSOR TRUSTEE. Each successor Trustee succeeds
------------------------------------
to the title to the Trust vested in his predecessor by accepting in writing his
appointment as successor Trustee and by filing the acceptance with the former
Trustee and the Advisory Committee without the signing or filing of any further
statement. The resigning or removed Trustee, upon receipt of acceptance in
writing of the Trust by the successor Trustee, must execute all documents and do
all acts necessary to vest the title of record in any successor Trustee. Each
successor Trustee has and enjoys all of the powers, both discretionary and
ministerial, conferred under this Agreement upon his predecessor. A successor
Trustee is not personally liable for any act or failure to act of any
predecessor Trustee, except as required under ERISA. With the approval of the
Employer and the Advisory Committee, a successor Trustee, with respect to the
Plan, may accept the account rendered and the property delivered to it by a
predecessor Trustee without incurring any liability or responsibility for so
doing.
10.14 VALUATION OF TRUST. The Trustee must value the Trust Fund as of each
------------------
Accounting Date to determine the fair market value of each Participant's Accrued
Benefit in the Trust. The Trustee also must value the Trust Fund on such other
valuation dates as directed in writing by the Advisory Committee or as required
by the Employer's Adoption Agreement.
10.15 LIMITATION ON LIABILITY - IF INVESTMENT MANAGER, ANCILLARY TRUSTEE OR
---------------------------------------------------------------------
INDEPENDENT FIDUCIARY APPOINTED. The Trustee is not liable for the acts or
- -------------------------------
omissions of any Investment Manager the Advisory Committee may appoint, nor is
the Trustee under any obligation to invest or otherwise manage any asset of the
Plan which is subject to the management of a properly appointed Investment
Manager. The Advisory Committee, the Trustee and any properly appointed
Investment Manager may execute a letter agreement as a part of this Plan
delineating the duties, responsibilities and liabilities of the Investment
Manager with respect to any part of the Trust Fund under the control of the
Investment Manager.
The limitation on liability described in this Section 10.15 also applies to
the acts or omissions of any ancillary trustee or independent fiduciary properly
appointed under Section 10.17 of the Plan. However, if a discretionary Trustee,
pursuant to the delegation described in Section 10.17 of the Plan, appoints an
ancillary trustee, the discretionary Trustee is responsible for the periodic
review of the ancillary trustee's actions and must exercise its delegated
authority in accordance with the terms of the Plan and in a manner consistent
with ERISA. The Employer, the discretionary Trustee and an ancillary trustee may
execute a letter agreement as a part of this Plan delineating any
indemnification agreement between the parties.
10.16 INVESTMENT IN GROUP TRUST FUND. The Employer, by adopting this Plan,
------------------------------
specifically authorizes the Trustee to invest all or any portion of the assets
comprising the Trust Fund in any group trust fund which at the time of the
investment provides for the pooling of the assets of plans qualified under Code
(S)401(a). This authorization applies solely to a group trust fund exempt from
taxation under Code (S)501(a) and the trust agreement of which satisfies the
requirements of Revenue Ruling 81-100. The provisions of the group trust fund
agreement, as amended from time to time, are by this reference incorporated
within this Plan and Trust. The provisions of the group trust fund will govern
any investment of Plan assets in that fund. The Employer must specify in an
attachment to its adoption agreement the group trust fund(s) to which this
authorization applies. If the Trustee is acting as a nondiscretionary Trustee,
the investment in the group trust fund is available only in accordance with a
proper direction, by the Named Fiduciary, in accordance with Section 10.03[B].
Pursuant to paragraph (c) of Section 10.03[A] of the Plan, a Trustee has the
authority to invest in certain common trust funds and collective investment
funds without the need for the authorizing addendum described in this Section
10.16.
10.07
<PAGE>
Furthermore, at the Employer's direction, the Trustee, for collective
investment purposes, may combine into one trust fund the Trust created under
this Plan with the Trust created under any other qualified retirement plan the
Employer maintains. However, the Trustee must maintain separate records of
account for the assets of each Trust in order to reflect properly each
Participant's Accrued Benefit under the plan(s) in which he is a Participant.
10.17 APPOINTMENT OF ANCILLARY TRUSTEE OR INDEPENDENT FIDUCIARY. The
---------------------------------------------------------
Employer, in writing, may appoint any person in any State to act as ancillary
trustee with respect to a designated portion of the Trust Fund, subject to the
consent required under Section 1.02 if the Master Plan Sponsor is a financial
institution. An ancillary trustee must acknowledge in writing its acceptance of
the terms and conditions of its appointment as ancillary trustee and its
fiduciary status under ERISA. The ancillary trustee has the rights, powers,
duties and discretion as the Employer may delegate, subject to any limitations
or directions specified in the instrument evidencing appointment of the
ancillary trustee and to the terms of the Plan or of ERISA. The investment
powers delegated to the ancillary trustee may include any investment powers
available under Section 10.03 of the Plan including the right to invest any
portion of the assets of the Trust Fund in a common trust fund, as described in
Code (S)584, or in any collective investment fund, the provisions of which
govern the investment of such assets and which the Plan incorporates by this
reference, but only if the ancillary trustee is a bank or similar financial
institution supervised by the United States or by a State and the ancillary
trustee (or its affiliate, as defined in Code (S)1504) maintains the common
trust fund or collective investment fund exclusively for the collective
investment of money contributed by the ancillary trustee (or its affiliate) in a
trustee capacity and which conforms to the rules of the Comptroller of the
Currency. The Employer also may appoint as an ancillary trustee, the trustee of
any group trust fund designated for investment pursuant to the provisions of
Section 10.16 of the Plan.
The ancillary trustee may resign its position at any time by providing at
least 30 days' advance written notice to the Employer, unless the Employer
waives this notice requirement. The Employer, in writing, may remove an
ancillary trustee at any time. In the event of resignation or removal, the
Employer may appoint another ancillary trustee, return the assets to the control
and management of the Trustee or receive such assets in the capacity of
ancillary trustee. The Employer may delegate its responsibilities under this
Section 10.17 to a discretionary Trustee under the Plan, but not to a
nondiscretionary Trustee or to a Custodian, subject to the acceptance by the
discretionary Trustee of that delegation.
If the U.S. Department of Labor ("the Department") requires engagement of an
independent fiduciary to have control or management of all or a portion of the
Trust Fund, the Employer will appoint such independent fiduciary, as directed by
the Department. The independent fiduciary will have the duties, responsibilities
and powers prescribed by the Department and will exercise those duties,
responsibilities and powers in accordance with the terms, restrictions and
conditions established by the Department and, to the extent not inconsistent
with ERISA, the terms of the Plan. The independent fiduciary must accept its
appointment in writing and must acknowledge its status as a fiduciary of the
Plan.
* * * * * * * * * * * * * * *
10.08
<PAGE>
ARTICLE XI
PROVISIONS RELATING TO INSURANCE AND INSURANCE COMPANY
11.01 INSURANCE BENEFIT. The Employer may elect to provide incidental life
-----------------
insurance benefits for insurable Participants who consent to life insurance
benefits by signing the appropriate insurance company application form. The
Trustee will not purchase any incidental life insurance benefit for any
Participant prior to an allocation to the Participant's Account. At an insured
Participant's written direction, the Trustee will use all or any portion of the
Participant's nondeductible voluntary contributions, if any, to pay insurance
premiums covering the Participant's life. This Section 11.01 also authorizes the
purchase of life insurance, for the benefit of the Participant, on the life of a
family member of the Participant or on any person in whom the Participant has an
insurable interest. However, if the policy is on the joint lives of the
Participant and another person, the Trustee may not maintain that policy if that
other person predeceases the Participant.
The Employer will direct the Trustee as to the insurance company and
insurance agent through which the Trustee is to purchase the insurance
contracts, the amount of the coverage and the applicable dividend plan. Each
application for a policy, and the policies themselves, must designate the
Trustee as sole owner, with the right reserved to the Trustee to exercise any
right or option contained in the policies, subject to the terms and provisions
of this Agreement. The Trustee must be the named beneficiary for the Account of
the insured Participant. Proceeds of insurance contracts paid to the
Participant's Account under this Article XI are subject to the distribution
requirements of Article V and of Article VI. The Trustee will not retain any
such proceeds for the benefit of the Trust.
The Trustee will charge the premiums on any incidental benefit insurance
contract covering the life of a Participant against the Account of that
Participant. The Trustee will hold all incidental benefit insurance contracts
issued under the Plan as assets of the Trust created under the Plan.
(A) Incidental insurance benefits. The aggregate of life insurance premiums paid
for the benefit of a Participant, at all times, may not exceed the following
percentages of the aggregate of the Employer's contributions allocated to any
Participant's Account: (i) 49% in the case of the purchase of ordinary life
insurance contracts; or (ii) 25% in the case of the purchase of term life
insurance or universal life insurance contracts. If the Trustee purchases a
combination of ordinary life insurance contract(s) and term life insurance or
universal life insurance contract(s), then the sum of one-half of the premiums
paid for the ordinary life insurance contract(s) and the premiums paid for the
term life insurance or universal life insurance contract(s) may not exceed 25%
of the Employer contributions allocated to any Participant's Account.
(B) Exception for certain profit sharing plans. If the Employer's Plan is a
profit sharing plan, the incidental insurance benefits requirement does not
apply to the Plan if the Plan purchases life insurance benefits only from
Employer contributions accumulated in the Participant's Account for at least two
years (measured from the allocation date).
11.02 LIMITATION ON LIFE INSURANCE PROTECTION. The Trustee will not continue
---------------------------------------
any life insurance protection for any Participant beyond his annuity starting
date (as defined in Article VI). If the Trustee holds any incidental benefit
insurance contract(s) for the benefit of a Participant when he terminates his
employment (other than by reason of death), the Trustee must proceed as follows:
(a) If the entire cash value of the contract(s) is vested in the terminating
Participant, or if the contract(s) will have no cash value at the end of the
policy year in which termination of employment occurs, the Trustee will
transfer the contract(s) to the Participant endorsed so as to vest in the
transferee all right, title and interest to the contract(s), free and clear
of the Trust; subject however, to restrictions as to surrender or payment of
benefits as the issuing insurance company may permit and as the Advisory
Committee directs;
11.01
<PAGE>
(b) If only part of the cash value of the contract(s) is vested in the
terminating Participant, the Trustee, to the extent the Participant's
interest in the cash value of the contract(s) is not vested, may adjust the
Participant's interest in the value of his Account attributable to Trust
assets other than incidental benefit insurance contracts and proceed as in
(a), or the Trustee must effect a loan from the issuing insurance company on
the sole security of the contract(s) for an amount equal to the difference
between the cash value of the contract(s) at the end of the policy year in
which termination of employment occurs and the amount of the cash value that
is vested in the terminating Participant, and the Trustee must transfer the
contract(s) endorsed so as to vest in the transferee all right, title and
interest to the contract(s), free and clear of the Trust; subject however,
to the restrictions as to surrender or payment of benefits as the issuing
insurance company may permit and the Advisory Committee directs;
(c) If no part of the cash value of the contract(s) is vested in the
terminating Participant, the Trustee must surrender the contract(s) for cash
proceeds as may be available.
In accordance with the written direction of the Advisory Committee, the
Trustee will make any transfer of contract(s) under this Section 11.02 on the
Participant's annuity starting date (or as soon as administratively practicable
after that date). The Trustee may not transfer any contract under this Section
11.02 which contains a method of payment not specifically authorized by Article
VI or which fails to comply with the joint and survivor annuity requirements, if
applicable, of Article VI. In this regard, the Trustee either must convert such
a contract to cash and distribute the cash instead of the contract, or before
making the transfer, require the issuing company to delete the unauthorized
method of payment option from the contract.
11.03 DEFINITIONS. For purposes of this Article XI:
-----------
(a) "Policy" means an ordinary life insurance contract or a term life
insurance contract issued by an insurer on the life of a Participant.
(b) "Issuing insurance company" is any life insurance company which has
issued a policy upon application by the Trustee under the terms of this
Agreement.
(c) "Contract" or "Contracts" means a policy of insurance. In the event of
any conflict between the provisions of this Plan and the terms of any
contract or policy of insurance issued in accordance with this Article XI,
the provisions of the Plan control.
(d) "Insurable Participant" means a Participant to whom an insurance
company, upon an application being submitted in accordance with the Plan,
will issue insurance coverage, either as a standard risk or as a risk in an
extra mortality classification.
11.04 DIVIDEND PLAN. The dividend plan is premium reduction unless the
-------------
Advisory Committee directs the Trustee to the contrary. The Trustee must use all
dividends for a contract to purchase insurance benefits or additional insurance
benefits for the Participant on whose life the insurance company has issued the
contract. Furthermore, the Trustee must arrange, where possible, for all
policies issued on the lives of Participants under the Plan to have the same
premium due date and all ordinary life insurance contracts to contain guaranteed
cash values with as uniform basic options as are possible to obtain. The term
"dividends" includes policy dividends, refunds of premiums and other credits.
11.05 INSURANCE COMPANY NOT A PARTY TO AGREEMENT. No insurance
------------------------------------------
company, solely in its capacity as an issuing insurance company, is a
party to this Agreement nor is the company responsible for its validity.
11.06 INSURANCE COMPANY NOT RESPONSIBLE FOR TRUSTEE'S ACTIONS.
-------------------------------------------------------
No insurance company, solely in its capacity as an issuing insurance
company, need examine the terms of this Agreement nor is responsible
for any action taken by the Trustee.
11.02
<PAGE>
11.07 INSURANCE COMPANY RELIANCE ON TRUSTEE'S SIGNATURE. For the purpose of
-------------------------------------------------
making application to an insurance company and in the exercise of any right or
option contained in any policy, the insurance company may rely upon the
signature of the Trustee and is saved harmless and completely discharged in
acting at the direction and authorization of the Trustee.
11.08 ACQUITTANCE. An insurance company is discharged from all liability
-----------
for any amount paid to the Trustee or paid in accordance with the direction of
the Trustee, and is not obliged to see to the distribution or further
application of any moneys it so pays.
11.09 DUTIES OF INSURANCE COMPANY. Each insurance company must keep such
---------------------------
records, make such identification of contracts, funds and accounts within funds,
and supply such information as may be necessary for the proper administration of
the Plan under which it is carrying insurance benefits.
Note: The provisions of this Article XI are not applicable, and the Plan may
not invest in insurance contracts, if a Custodian signatory to the Adoption
Agreement is a bank which has not acquired trust powers from its governing state
banking authority.
* * * * * * * * * * * * * * *
11.03
<PAGE>
ARTICLE XII
MISCELLANEOUS
12.01 EVIDENCE. Anyone required to give evidence under the terms of the
--------
Plan may do so by certificate, affidavit, document or other information which
the person to act in reliance may consider pertinent, reliable and genuine, and
to have been signed, made or presented by the proper party or parties. The
Advisory Committee and the Trustee are fully protected in acting and relying
upon any evidence described under the immediately preceding sentence.
12.02 NO RESPONSIBILITY FOR EMPLOYER ACTION. Neither the Trustee nor the
-------------------------------------
Advisory Committee has any obligation or responsibility with respect to any
action required by the Plan to be taken by the Employer, any Participant or
eligible Employee, or for the failure of any of the above persons to act or make
any payment or contribution, or to otherwise provide any benefit contemplated
under this Plan. Furthermore, the Plan does not require the Trustee or the
Advisory Committee to collect any contribution required under the Plan, or to
determine the correctness of the amount of any Employer contribution. Neither
the Trustee nor the Advisory Committee need inquire into or be responsible for
any action or failure to act on the part of the others, or on the part of any
other person who has any responsibility regarding the management, administration
or operation of the Plan, whether by the express terms of the Plan or by a
separate agreement authorized by the Plan or by the applicable provisions of
ERISA. Any action required of a corporate Employer must be by its Board of
Directors or its designate.
12.03 FIDUCIARIES NOT INSURERS. The Trustee, the Advisory Committee, the
------------------------
Plan Administrator and the Employer in no way guarantee the Trust Fund from loss
or depreciation. The Employer does not guarantee the payment of any money which
may be or becomes due to any person from the Trust Fund. The liability of the
Advisory Committee and the Trustee to make any payment from the Trust Fund at
any time and all times is limited to the then available assets of the Trust.
12.04 WAIVER OF NOTICE. Any person entitled to notice under the Plan may
----------------
waive the notice, unless the Code or Treasury regulations prescribe the notice
or ERISA specifically or impliedly prohibits such a waiver.
12.05 SUCCESSORS. The Plan is binding upon all persons entitled to benefits
----------
under the Plan, their respective heirs and legal representatives, upon the
Employer, its successors and assigns, and upon the Trustee, the Advisory
Committee, the Plan Administrator and their successors.
12.06 WORD USAGE. Words used in the masculine also apply to the feminine
----------
where applicable, and wherever the context of the Employer's Plan dictates, the
plural includes the singular and the singular includes the plural.
12.07 STATE LAW. The law of the state of the Employer's principal place of
---------
business (unless otherwise designated in an addendum to the Employer's Adoption
Agreement) will determine all questions arising with respect to the provisions
of this Agreement except to the extent superseded by Federal law.
12.08 EMPLOYER'S RIGHT TO PARTICIPATE. If the Employer's Plan fails to
-------------------------------
qualify or to maintain qualification or if the Employer makes any amendment or
modification to a provision of this Plan (other than a proper completion of an
elective provision under the Adoption Agreement or the attachment of an addendum
authorized by the Plan or by the Adoption Agreement), the Employer may no longer
participate under this Master Plan. The Employer also may not participate (or
continue to participate) in this Master Plan if the Trustee or Custodian (or a
change in the Trustee or Custodian) does not satisfy the requirements of Section
1.02 of the Plan. If the Employer is not entitled to participate under this
Master Plan, the Employer's Plan is an individually-designed plan and the
reliance procedures specified in the applicable Adoption Agreement no longer
will apply.
12.01
<PAGE>
12.09 EMPLOYMENT NOT GUARANTEED. Nothing contained in this Plan, or with
-------------------------
respect to the establishment of the Trust, or any modification or amendment to
the Plan or Trust, or in the creation of any Account, or the payment of any
benefit, gives any Employee, Employee-Participant or any Beneficiary any right
to continue employment, any legal or equitable right against the Employer, or
Employee of the Employer, or against the Trustee, or its agents or employees, or
against the Plan Administrator, except as expressly provided by the Plan, the
Trust, ERISA or by a separate agreement.
* * * * * * * * * * * * * * *
12.02
<PAGE>
ARTICLE XIII
EXCLUSIVE BENEFIT, AMENDMENT, TERMINATION
13.01 EXCLUSIVE BENEFIT. Except as provided under Article III, the Employer
-----------------
has no beneficial interest in any asset of the Trust and no part of any asset in
the Trust may ever revert to or be repaid to an Employer, either directly or
indirectly; nor, prior to the satisfaction of all liabilities with respect to
the Participants and their Beneficiaries under the Plan, may any part of the
corpus or income of the Trust Fund, or any asset of the Trust, be (at any time)
used for, or diverted to, purposes other than the exclusive benefit of the
Participants or their Beneficiaries. However, if the Commissioner of Internal
Revenue, upon the Employer's request for initial approval of this Plan,
determines the Trust created under the Plan is not a qualified trust exempt from
Federal income tax, then (and only then) the Trustee, upon written notice from
the Employer, will return the Employer's contributions (and increment
attributable to the contributions) to the Employer. The Trustee must make the
return of the Employer contribution under this Section 13.01 within one year of
a final disposition of the Employer's request for initial approval of the Plan.
The Employer's Plan and Trust will terminate upon the Trustee's return of the
Employer's contributions.
13.02 AMENDMENT BY EMPLOYER. The Employer has the right at any time and
-----------------------
from time to time:
(a) To amend the elective provisions of the Adoption Agreement in any manner
it deems necessary or advisable in order to qualify (or maintain
qualification of) this Plan and the Trust created under it under the
provisions of Code (S)401(a);
(b) To amend the Plan to allow the Plan to operate under a waiver of
the minimum funding requirement; and
(c) To amend this Agreement in any other manner.
No amendment may authorize or permit any of the Trust Fund (other than the
part which is required to pay taxes and administration expenses) to be used for
or diverted to purposes other than for the exclusive benefit of the Participants
or their Beneficiaries or estates. No amendment may cause or permit any portion
of the Trust Fund to revert to or become a property of the Employer. The
Employer also may not make any amendment which affects the rights, duties or
responsibilities of the Trustee, the Plan Administrator or the Advisory
Committee without the written consent of the affected Trustee, the Plan
Administrator or the affected member of the Advisory Committee. The Employer
must make all amendments in writing. Each amendment must state the date to which
it is either retroactively or prospectively effective. See Section 12.08 for the
effect of certain amendments adopted by the Employer.
(A) Code (S)411(d)(6) protected benefits. An amendment (including the adoption
of this Plan as a restatement of an existing plan) may not decrease a
Participant's Accrued Benefit, except to the extent permitted under Code
(S)412(c)(8), and may not reduce or eliminate Code (S)411(d)(6) protected
benefits determined immediately prior to the adoption date (or, if later, the
effective date) of the amendment. An amendment reduces or eliminates Code
(S)411(d)(6) protected benefits if the amendment has the effect of either (1)
eliminating or reducing an early retirement benefit or a retirement-type subsidy
(as defined in Treasury regulations), or (2) except as provided by Treasury
regulations, eliminating an optional form of benefit. The Advisory Committee
must disregard an amendment to the extent application of the amendment would
fail to satisfy this paragraph. If the Advisory Committee must disregard an
amendment because the amendment would violate clause (1) or clause (2), the
Advisory Committee must maintain a schedule of the early retirement option or
other optional forms of benefit the Plan must continue for the affected
Participants.
13.01
<PAGE>
13.03 AMENDMENT BY MASTER PLAN SPONSOR. The Master Plan Sponsor (or PPD, as
--------------------------------
agent of the Master Plan Sponsor), without the Employer's consent, may amend the
Plan and Trust, from time to time, in order to conform the Plan and Trust to any
requirement for qualification of the Plan and Trust under the Internal Revenue
Code. The Master Plan Sponsor may not amend the Plan in any manner which would
modify any election made by the Employer under the Plan without the Employer's
written consent. Furthermore, the Master Plan Sponsor may not amend the Plan in
any manner which would violate the proscription of Section 13.02. A Trustee does
not have the power to amend the Plan or Trust.
13.04 DISCONTINUANCE. The Employer has the right, at any time, to suspend
--------------
or discontinue its contributions under the Plan, and to terminate, at any time,
this Plan and the Trust created under this Agreement. The Plan will terminate
upon the first to occur of the following:
(a) The date terminated by action of the Employer;
(b) The dissolution or merger of the Employer, unless the successor makes
provision to continue the Plan, in which event the successor must substitute
itself as the Employer under this Plan. Any termination of the Plan
resulting from this paragraph (b) is not effective until compliance with any
applicable notice requirements under ERISA.
13.05 FULL VESTING ON TERMINATION. Upon either full or partial termination
---------------------------
of the Plan, or, if applicable, upon complete discontinuance of profit sharing
plan contributions to the Plan, an affected Participant's right to his Accrued
Benefit is 100% Nonforfeitable, irrespective of the Nonforfeitable percentage
which otherwise would apply under Article V.
13.06 MERGER/DIRECT TRANSFER. The Trustee may not consent to, or be a party
----------------------
to, any merger or consolidation with another plan, or to a transfer of assets or
liabilities to another plan, unless immediately after the merger, consolidation
or transfer, the surviving Plan provides each Participant a benefit equal to or
greater than the benefit each Participant would have received had the Plan
terminated immediately before the merger or consolidation or transfer. The
Trustee possesses the specific authority to enter into merger agreements or
direct transfer of assets agreements with the trustees of other retirement plans
described in Code (S)401(a), including an elective transfer, and to accept the
direct transfer of plan assets, or to transfer plan assets, as a party to any
such agreement.
The Trustee may accept a direct transfer of plan assets on behalf of an
Employee prior to the date the Employee satisfies the Plan's eligibility
conditions. If the Trustee accepts such a direct transfer of plan assets, the
Advisory Committee and Trustee must treat the Employee as a Participant for all
purposes of the Plan except the Employee is not a Participant for purposes of
sharing in Employer contributions or Participant forfeitures under the Plan
until he actually becomes a Participant in the Plan.
(A) Elective transfers. The Trustee, after August 9, 1988, may not consent to,
or be a party to a merger, consolidation or transfer of assets with a defined
benefit plan, except with respect to an elective transfer, or unless the
transferred benefits are in the form of paid-up individual annuity contracts
guaranteeing the payment of the transferred benefits in accordance with the
terms of the transferor plan and in a manner consistent with the Code and with
ERISA. The Trustee will hold, administer and distribute the transferred assets
as a part of the Trust Fund and the Trustee must maintain a separate Employer
contribution Account for the benefit of the Employee on whose behalf the Trustee
accepted the transfer in order to reflect the value of the transferred assets.
Unless a transfer of assets to this Plan is an elective transfer, the Plan will
preserve all Code (S)411(d)(6) protected benefits with respect to those
transferred assets, in the manner described in Section 13.02. A transfer is an
elective transfer if: (1) the transfer satisfies the first paragraph of this
Section 13.06; (2) the transfer is voluntary, under a fully informed election by
the Participant; (3) the Participant has an alternative that retains his Code
(S)411(d)(6) protected benefits (including an option to leave his benefit in the
transferor plan, if that plan is not terminating); (4) the transfer satisfies
the applicable spousal consent requirements of the Code; (5) the transferor plan
satisfies the joint and survivor notice requirements of the Code, if the
Participant's transferred benefit is subject to those requirements; (6) the
Participant has a right to immediate distribution from
13.02
<PAGE>
the transferor plan, in lieu of the elective transfer; (7) the transferred
benefit is at least the greater of the single sum distribution provided by the
transferor plan for which the Participant is eligible or the present value of
the Participant's accrued benefit under the transferor plan payable at that
plan's normal retirement age; (8) the Participant has a 100% Nonforfeitable
interest in the transferred benefit; and (9) the transfer otherwise satisfies
applicable Treasury regulations. An elective transfer may occur between
qualified plans of any type. Any direct transfer of assets from a defined
benefit plan after August 9, 1988, which does not satisfy the requirements of
this paragraph will render the Employer's Plan individually-designed. See
Section 12.08.
(B) Distribution restrictions under Code (S)401(k). If the Plan receives a
direct transfer (by merger or otherwise) of elective contributions (or amounts
treated as elective contributions) under a Plan with a Code (S)401(k)
arrangement, the distribution restrictions of Code (S)(S)401(k)(2) and (10)
continue to apply to those transferred elective contributions.
13.07 TERMINATION.
-----------
(A) Procedure. Upon termination of the Plan, the distribution provisions of
Article VI remain operative, with the following exceptions:
(1) if the present value of the Participant's Nonforfeitable Accrued Benefit
does not exceed $3,500, the Advisory Committee will direct the Trustee to
distribute the Participant's Nonforfeitable Accrued Benefit to him in lump
sum as soon as administratively practicable after the Plan terminates; and
(2) if the present value of the Participant's Nonforfeitable Accrued Benefit
exceeds $3,500, the Participant or the Beneficiary, in addition to the
distribution events permitted under Article VI, may elect to have the
Trustee commence distribution of his Nonforfeitable Accrued Benefit as soon
as administratively practicable after the Plan terminates.
To liquidate the Trust, the Advisory Committee will purchase a deferred
annuity contract for each Participant which protects the Participant's
distribution rights under the Plan, if the Participant's Nonforfeitable Accrued
Benefit exceeds $3,500 and the Participant does not elect an immediate
distribution pursuant to Paragraph (2).
If the Employer's Plan is a profit sharing plan, in lieu of the preceding
provisions of this Section 13.07 and the distribution provisions of Article VI,
the Advisory Committee will direct the Trustee to distribute each Participant's
Nonforfeitable Accrued Benefit, in lump sum, as soon as administratively
practicable after the termination of the Plan, irrespective of the present value
of the Participant's Nonforfeitable Accrued Benefit and whether the Participant
consents to that distribution. This paragraph does not apply if: (1) the Plan
provides an annuity option; or (2) as of the period between the Plan termination
date and the final distribution of assets, the Employer maintains any other
defined contribution plan (other than an ESOP). The Employer, in an addendum to
its Adoption Agreement numbered 13.07, may elect not to have this paragraph
apply.
The Trust will continue until the Trustee in accordance with the direction
of the Advisory Committee has distributed all of the benefits under the Plan. On
each valuation date, the Advisory Committee will credit any part of a
Participant's Accrued Benefit retained in the Trust with its proportionate share
of the Trust's income, expenses, gains and losses, both realized and unrealized.
Upon termination of the Plan, the amount, if any, in a suspense account under
Article III will revert to the Employer, subject to the conditions of the
Treasury regulations permitting such a reversion. A resolution or amendment to
freeze all future benefit accrual but otherwise to continue maintenance of this
Plan, is not a termination for purposes of this Section 13.07.
13.03
<PAGE>
(B) Distribution restrictions under Code (S)401(k). If the Employer's Plan
includes a Code (S)401(k) arrangement or if transferred assets described in
Section 13.06 are subject to the distribution restrictions of Code
(S)(S)401(k)(2) and (10), the special distribution provisions of this Section
13.07 are subject to the restrictions of this paragraph. The portion of the
Participant's Nonforfeitable Accrued Benefit attributable to elective
contributions (or to amounts treated under the Code (S)401(k) arrangement as
elective contributions) is not distributable on account of Plan termination, as
described in this Section 13.07, unless: (a) the Participant otherwise is
entitled under the Plan to a distribution of that portion of his Nonforfeitable
Accrued Benefit; or (b) the Plan termination occurs without the establishment of
a successor plan. A successor plan under clause (b) is a defined contribution
plan (other than an ESOP) maintained by the Employer (or by a related employer)
at the time of the termination of the Plan or within the period ending twelve
months after the final distribution of assets. A distribution made after March
31, 1988, pursuant to clause (b), must be part of a lump sum distribution to the
Participant of his Nonforfeitable Accrued Benefit.
* * * * * * * * * * * * * * *
13.04
<PAGE>
ARTICLE XIV
CODE (S)401(k) ARRANGEMENTS
14.01 APPLICATION. This Article XIV applies to an Employer's Plan only if
-----------
the Employer is maintaining its Plan under a Code (S)401(k) Adoption Agreement.
14.02 CODE (S)401(k) ARRANGEMENT. The Employer will elect in Section 3.01
--------------------------
of its Adoption Agreement the terms of the Code (S)401(k) arrangement, if any,
under the Plan. If the Employer's Plan is a Standardized Plan, the Code
(S)401(k) arrangement must be a salary reduction arrangement. If the Employer's
Plan is a Nonstandardized Plan, the Code (S)401(k) arrangement may be a salary
reduction arrangement or a cash or deferred arrangement.
(A) Salary Reduction Arrangement. If the Employer elects a salary reduction
arrangement, any Employee eligible to participate in the Plan may file a salary
reduction agreement with the Advisory Committee. The salary reduction agreement
may not be effective earlier than the following date which occurs last: (i) the
Employee's Plan Entry Date (or, in the case of a reemployed Employee, his
reparticipation date under Article II); (ii) the execution date of the
Employee's salary reduction agreement; (iii) the date the Employer adopts the
Code (S)401(k) arrangement by executing the Adoption Agreement; or (iv) the
effective date of the Code (S)401(k) arrangement, as specified in the Employer's
Adoption Agreement. Regarding clause (i), an Employee subject to the Break in
Service rule of Section 2.03(B) of the Plan may not enter into a salary
reduction agreement until the Employee has completed a sufficient number of
Hours of Service to receive credit for a Year of Service (as defined in Section
2.02) following his reemployment commencement date. A salary reduction agreement
must specify the amount of Compensation (as defined in Section 1.12) or
percentage of Compensation the Employee wishes to defer. The salary reduction
agreement will apply only to Compensation which becomes currently available to
the Employee after the effective date of the salary reduction agreement. The
Employer will apply a reduction election to all Compensation (and to increases
in such Compensation) unless the Employee specifies in his salary reduction
agreement to limit the election to certain Compensation. The Employer will
specify in Adoption Agreement Section 3.01 the rules and restrictions applicable
to the Employees salary reduction agreements.
(B) Cash or deferred arrangement. If the Employer elects a cash or deferred
arrangement, a Participant may elect to make a cash election against his
proportionate share of the Employer's Cash or Deferred Contribution, in
accordance with the Employer's elections in Adoption Agreement Section 3.01. A
Participant's proportionate share of the Employer's Cash or Deferred
Contribution is the percentage of the total Cash or Deferred Contribution which
bears the same ratio that the Participant's Compensation for the Plan Year bears
to the total Compensation of all Participants for the Plan Year. For purposes of
determining each Participant's proportionate share of the Cash or Deferred
Contribution, a Participant's Compensation is his Compensation as determined
under Section 1.12 of the Plan (as modified by Section 3.06 for allocation
purposes), excluding any effect the proportionate share may have on the
Participant's Compensation for the Plan Year. The Advisory Committee will
determine the proportionate share prior to the Employer's actual contribution to
the Trust, to provide the Participants the opportunity to file cash elections.
The Employer will pay directly to the Participant the portion of his
proportionate share the Participant has elected to receive in cash.
(C) Election not to participate. A Participant's or Employee's election not to
participate, pursuant to Section 2.06, includes his right to enter into a salary
reduction agreement or to share in the allocation of a Cash or Deferred
Contribution, unless the Participant or Employee limits the effect of the
election to the non-401(k) portions of the Plan.
14.03 DEFINITIONS. For purposes of this Article XIV:
-----------
(a) "Highly Compensated Employee" means an Eligible Employee who satisfies
the definition in Section 1.09 of the Plan. Family members aggregated as a
single Employee under Section 1.09 constitute a single Highly Compensated
Employee, whether a particular family member is a Highly Compensated
Employee or a Nonhighly Compensated Employee without the application of
family aggregation.
14.01
<PAGE>
(b) "Nonhighly Compensated Employee" means an Eligible Employee who is not a
Highly Compensated Employee and who is not a family member treated as a
Highly Compensated Employee.
(c) "Eligible Employee" means, for purposes of the ADP test described in
Section 14.08, an Employee who is eligible to enter into a salary reduction
agreement for the Plan Year, irrespective of whether he actually enters into
such an agreement, and a Participant who is eligible for an allocation of
the Employer's Cash or Deferred Contribution for the Plan Year. For purposes
of the ACP test described in Section 14.09, an "Eligible Employee" means a
Participant who is eligible to receive an allocation of matching
contributions (or would be eligible if he made the type of contributions
necessary to receive an allocation of matching contributions) and a
Participant who is eligible to make nondeductible contributions,
irrespective of whether he actually makes nondeductible contributions. An
Employee continues to be an Eligible Employee during a period the Plan
suspends the Employee's right to make elective deferrals or nondeductible
contributions following a hardship distribution.
(d) "Highly Compensated Group" means the group of Eligible Employees who are
Highly Compensated Employees for the Plan Year.
(e) "Nonhighly Compensated Group" means the group of Eligible Employees who
are Nonhighly Compensated Employees for the Plan Year.
(f) "Compensation" means, except as specifically provided in this Article
XIV, Compensation as defined for nondiscrimination purposes in Section
1.12(B) of the Plan. For Plan Years beginning prior to the later of
January 1, 1992, or 60 days after the Treasury issues final regulations
under Code (S)(S)401(k) and 401(m), the Plan may limit Compensation taken
into account to Compensation received only for the portion of the Plan Year
in which the Employee was an Eligible Employee and only for the portion of
the Plan Year in which the Plan or the Code (S)401(k) arrangement was in
effect. For subsequent Plan Years, Compensation must include Compensation
for the entire Plan Year, irrespective of whether the Plan or the Code
(S)401(k) arrangement was in effect for the entire Plan Year or whether the
Employee begins, resumes or ceases to be an Eligible Employee during the
Plan Year.
(g) "Deferral contributions" are Salary Reduction Contributions and Cash or
Deferred Contributions the Employer contributes to the Trust on behalf of an
Eligible Employee, irrespective of whether, in the case of Cash or Deferred
Contributions, the contribution is at the election of the Employee.
(h) "Elective deferrals" are all Salary Reduction Contributions and that
portion of any Cash or Deferred Contribution which the Employer contributes
to the Trust at the election of an Eligible Employee. Any portion of a Cash
or Deferred Contribution contributed to the Trust because of the Employee's
failure to make a cash election is an elective deferral. However, any
portion of a Cash or Deferred Contribution over which the Employee does not
have a cash election is not an elective deferral. Elective deferrals do not
include amounts which have become currently available to the Employee prior
to the election nor amounts designated as nondeductible contributions at the
time of deferral or contribution.
(i) "Matching contributions" are contributions made by the Employer on
account of elective deferrals under a Code (S)401(k) arrangement or on
account of employee contributions. Matching contributions also include
Participant forfeitures allocated on account of such elective deferrals or
employee contributions.
(j) "Nonelective contributions" are contributions made by the Employer which
are not subject to a deferral election by an Employee and which are not
matching contributions.
14.02
<PAGE>
(k) "Qualified matching contributions" are matching contributions which are
100% Nonforfeitable at all times and which are subject to the distribution
restrictions described in paragraph (m). Matching contributions are not 100%
Nonforfeitable at all times if the Employee has a 100% Nonforfeitable
interest because of his Years of Service taken into account under a vesting
schedule. Any matching contributions allocated to a Participant's Qualified
Matching Contributions Account under the Plan automatically satisfy the
definition of qualified matching contributions.
(l) "Qualified nonelective contributions" are nonelective contributions
which are 100% Nonforfeitable at all times and which are subject to the
distribution restrictions described in paragraph (m). Nonelective
contributions are not 100% Nonforfeitable at all times if the Employee has a
100% Nonforfeitable interest because of his Years of Service taken into
account under a vesting schedule. Any nonelective contributions allocated to
a Participant's Qualified Nonelective Contributions Account under the Plan
automatically satisfy the definition of qualified nonelective contributions.
(m) "Distribution restrictions" means the Employee may not receive a
distribution of the specified contributions (nor earnings on those
contributions) except in the event of (1) the Participant's death,
disability, termination of employment or attainment of age 59 1/2,
(2) financial hardship satisfying the requirements of Code (S)401(k) and the
applicable Treasury regulations, (3) a plan termination, without
establishment of a successor defined contribution plan (other than an ESOP),
(4) a sale of substantially all of the assets (within the meaning of Code
(S)409(d)(2)) used in a trade or business, but only to an employee who
continues employment with the corporation acquiring those assets, or (5) a
sale by a corporation of its interest in a subsidiary (within the meaning of
Code (S)409(d)(3)), but only to an employee who continues employment with
the subsidiary. For Plan Years beginning after December 31, 1988, a
distribution on account of financial hardship, as described in clause (2),
may not include earnings on elective deferrals credited as of a date later
than December 31, 1988, and may not include qualified matching contributions
and qualified nonelective contributions, nor any earnings on such
contributions, irrespective of when credited. A distribution described in
clauses (3), (4) or (5), if made after March 31, 1988, must be a lump sum
distribution, as required under Code (S)401(k)(10).
(n) "Employee contributions" are contributions made by a Participant on an
after-tax basis, whether voluntary or mandatory, and designated, at the time
of contribution, as an employee (or nondeductible) contribution. Elective
deferrals and deferral contributions are not employee contributions.
Participant nondeductible contributions, made pursuant to Section 4.01 of
the Plan, are employee contributions.
14.04 MATCHING CONTRIBUTIONS/EMPLOYEE CONTRIBUTIONS. The Employer may elect
---------------------------------------------
in Adoption Agreement Section 3.01 to provide matching contributions. The
Employer also may elect in Adoption Agreement Section 4.01 to permit or to
require a Participant to make nondeductible contributions.
(A) Mandatory contributions. Any Participant nondeductible contributions
eligible for matching contributions are mandatory contributions. The Advisory
Committee will maintain a separate accounting, pursuant to Section 4.06 of the
Plan, to reflect the Participant's Accrued Benefit derived from his mandatory
contributions. The Employer, under Adoption Agreement Section 4.05, may
prescribe special distribution restrictions which will apply to the Mandatory
Contributions Account prior to the Participant's Separation from Service.
Following his Separation from Service, the general distribution provisions of
Article VI apply to the distribution of the Participant's Mandatory
Contributions Account.
14.05 TIME OF PAYMENT OF CONTRIBUTIONS. The Employer must make Salary
--------------------------------
Reduction Contributions to the Trust within an administratively reasonable
period of time after withholding the corresponding Compensation from the
Participant. Furthermore, the Employer must make Salary Reduction Contributions,
Cash or Deferred Contributions, Employer matching contributions (including
qualified Employer matching contributions) and qualified Employer nonelective
contributions no later than the time prescribed by the Code or by applicable
Treasury regulations. Salary Reduction Contributions and Cash or Deferred
Contributions are Employer contributions for all purposes under this Plan,
except to the extent the Code or Treasury regulations prohibit the use of these
contributions to satisfy the qualification requirements of the Code.
14.03
<PAGE>
14.06 SPECIAL ALLOCATION PROVISIONS - DEFERRAL CONTRIBUTIONS, MATCHING
----------------------------------------------------------------
CONTRIBUTIONS AND QUALIFIED NONELECTIVE CONTRIBUTIONS. To make allocations under
- -----------------------------------------------------
the Plan, the Advisory Committee must establish a Deferral Contributions
Account, a Qualified Matching Contributions Account, a Regular Matching
Contributions Account, a Qualified Nonelective Contributions Account and an
Employer Contributions Account for each Participant.
(A) Deferral contributions. The Advisory Committee will allocate to each
Participant's Deferral Contributions Account the amount of Deferral
Contributions the Employer makes to the Trust on behalf of the Participant. The
Advisory Committee will make this allocation as of the last day of each Plan
Year unless, in Adoption Agreement Section 3.04, the Employer elects more
frequent allocation dates for salary reduction contributions.
(B) Matching contributions. The Employer must specify in its Adoption Agreement
whether the Advisory Committee will allocate matching contributions to the
Qualified Matching Contributions Account or to the Regular Matching
Contributions Account of each Participant. The Advisory Committee will make this
allocation as of the last day of each Plan Year unless, in Adoption Agreement
Section 3.04, the Employer elects more frequent allocation dates for matching
contributions.
(1) To the extent the Employer makes matching contributions under a fixed
matching contribution formula, the Advisory Committee will allocate the
matching contribution to the Account of the Participant on whose behalf the
Employer makes that contribution. A fixed matching contribution formula is a
formula under which the Employer contributes a certain percentage or dollar
amount on behalf of a Participant based on that Participant's deferral
contributions or nondeductible contributions eligible for a match, as
specified in Section 3.01 of the Employer's Adoption Agreement. The Employer
may contribute on a Participant's behalf under a specific matching
contribution formula only if the Participant satisfies the accrual
requirements for matching contributions specified in Section 3.06 of the
Employer's Adoption Agreement and only to the extent the matching
contribution does not exceed the Participant's annual additions limitation
in Part 2 of Article III.
(2) To the extent the Employer makes matching contributions under a
discretionary formula, the Advisory Committee will allocate the
discretionary matching contributions to the Account of each Participant who
satisfies the accrual requirements for matching contributions specified in
Section 3.06 of the Employer's Adoption Agreement. The allocation of
discretionary matching contributions to a Participant's Account is in the
same proportion that each Participant's eligible contributions bear to the
total eligible contributions of all Participants. If the discretionary
formula is a tiered formula, the Advisory Committee will make this
allocation separately with respect to each tier of eligible contributions,
allocating in such manner the amount of the matching contributions made with
respect to that tier. "Eligible contributions" are the Participant's
deferral contributions or nondeductible contributions eligible for an
allocation of matching contributions, as specified in Section 3.01 of the
Employer's Adoption Agreement.
If the matching contribution formula applies both to deferral contributions
and to Participant nondeductible contributions, the matching contributions apply
first to deferral contributions. Furthermore, the matching contribution formula
does not apply to deferral contributions that are excess deferrals under Section
14.07. For this purpose: (a) excess deferrals relate first to deferral
contributions for the Plan Year not otherwise eligible for a matching
contribution; and (2) if the Plan Year is not a calendar year, the excess
deferrals for a Plan Year are the last elective deferrals made for a calendar
year.
14.04
<PAGE>
(C) Qualified nonelective contributions. If the Employer, at the time of
contribution, designates a contribution to be a qualified nonelective
contribution for the Plan Year, the Advisory Committee will allocate that
qualified nonelective contribution to the Qualified Nonelective Contributions
Account of each Participant eligible for an allocation of that designated
contribution, as specified in Section 3.04 of the Employer's Adoption Agreement.
The Advisory Committee will make the allocation to each eligible Participant's
Account in the same ratio that the Participant's Compensation for the Plan Year
bears to the total Compensation of all eligible Participants for the Plan Year.
The Advisory Committee will determine a Participant's Compensation in accordance
with the general definition of Compensation under Section 1.12 of the Plan, as
modified by the Employer in Sections 1.12 and 3.06 of its Adoption Agreement.
(D) Nonelective contributions. To the extent the Employer makes nonelective
contributions for the Plan Year which, at the time of contribution, it does not
designate as qualified nonelective contributions, the Advisory Committee will
allocate those contributions in accordance with the elections under Section 3.04
of the Employer's Adoption Agreement. For purposes of the special
nondiscrimination tests described in Sections 14.08 and 14.09, the Advisory
Committee may treat nonelective contributions allocated under this paragraph as
qualified nonelective contributions, if the contributions otherwise satisfy the
definition of qualified nonelective contributions.
14.07 ANNUAL ELECTIVE DEFERRAL LIMITATION.
-----------------------------------
(A) Annual Elective Deferral Limitation. An Employee's elective deferrals for a
calendar year beginning after December 31, 1986, may not exceed the 402(g)
limitation. The 402(g) limitation is the greater of $7,000 or the adjusted
amount determined by the Secretary of the Treasury. If, pursuant to a salary
reduction agreement or pursuant to a cash or deferral election, the Employer
determines the Employee's elective deferrals to the Plan for a calendar year
would exceed the 402(g) limitation, the Employer will suspend the Employee's
salary reduction agreement, if any, until the following January 1 and pay in
cash the portion of a cash or deferral election which would result in the
Employee's elective deferrals for the calendar year exceeding the 402(g)
limitation. If the Advisory Committee determines an Employee's elective
deferrals already contributed to the Plan for a calendar year exceed the 402(g)
limitation, the Advisory Committee will distribute the amount in excess of the
402(g) limitation (the "excess deferral"), as adjusted for allocable income, no
later than April 15 of the following calendar year. If the Advisory Committee
distributes the excess deferral by the appropriate April 15, it may make the
distribution irrespective of any other provision under this Plan or under the
Code. The Advisory Committee will reduce the amount of excess deferrals for a
calendar year distributable to the Employee by the amount of excess
contributions (as determined in Section 14.08), if any, previously distributed
to the Employee for the Plan Year beginning in that calendar year.
If an Employee participates in another plan under which he makes elective
deferrals pursuant to a Code ss.401(k) arrangement, elective deferrals under a
Simplified Employee Pension, or salary reduction contributions to a
tax-sheltered annuity, irrespective of whether the Employer maintains the other
plan, he may provide the Advisory Committee a written claim for excess deferrals
made for a calendar year. The Employee must submit the claim no later than the
March 1 following the close of the particular calendar year and the claim must
specify the amount of the Employee's elective deferrals under this Plan which
are excess deferrals. If the Advisory Committee receives a timely claim, it will
distribute the excess deferral (as adjusted for allocable income) the Employee
has assigned to this Plan, in accordance with the distribution procedure
described in the immediately preceding paragraph.
14.05
<PAGE>
(B) Allocable income. For purposes of making a distribution of excess deferrals
pursuant to this Section 14.07, allocable income means net income or net loss
allocable to the excess deferrals for the calendar year in which the Employee
made the excess deferral and for the "gap period" measured from the beginning of
the next calendar year to the date of the distribution. If the distribution of
the excess deferral occurs during the calendar year in which the Employee made
the excess deferral, the Advisory Committee will treat as a "gap period" the
period from the first day of that calendar year to the date of the distribution.
The Advisory Committee will determine allocable income in the same manner as
described in Section 14.08(F) for excess contributions, except the numerator of
the allocation fraction will be the amount of the Employee's excess deferrals
and the denominator of the allocation fraction will be the Employee's Accrued
Benefit attributable to his elective deferrals.
14.08 ACTUAL DEFERRAL PERCENTAGE ("ADP") TEST. For each Plan Year, the
---------------------------------------
Advisory Committee must determine whether the Plan's Code ss.401(k) arrangement
satisfies either of the following ADP tests:
(i) The average ADP for the Highly Compensated Group does not exceed 1.25
times the average ADP of the Nonhighly Compensated Group; or
(ii) The average ADP for the Highly Compensated Group does not exceed the
average ADP for the Nonhighly Compensated Group by more than two percentage
points (or the lesser percentage permitted by the multiple use limitation in
Section 14.10) and the average ADP for the Highly Compensated Group is not
more than twice the average ADP for the Nonhighly Compensated Group.
(A) Calculation of ADP. The average ADP for a group is the average of the
separate ADPs calculated for each Eligible Employee who is a member of that
group. An Eligible Employee's ADP for a Plan Year is the ratio of the Eligible
Employee's deferral contributions for the Plan Year to the Employee's
Compensation for the Plan Year. For aggregated family members treated as a
single Highly Compensated Employee, the ADP of the family unit is the greater
of: (i) the ADP determined by combining the deferral contributions and
Compensation of the family members who are Highly Compensated Employees without
family aggregation; or (ii) the ADP determined by combining the deferral
contributions and Compensation of all aggregated family members. A Nonhighly
Compensated Employee's ADP does not include elective deferrals made to this Plan
or to any other Plan maintained by the Employer, to the extent such elective
deferrals exceed the 402(g) limitation described in Section 14.07(A).
The Advisory Committee may determine (in a manner consistent with Treasury
regulations) the ADPs of the Eligible Employees by taking into account qualified
nonelective contributions or qualified matching contributions, or both, made to
this Plan or to any other qualified Plan maintained by the Employer. The
Advisory Committee may not include qualified nonelective contributions in the
ADP test unless the allocation of nonelective contributions is nondiscriminatory
when the Advisory Committee takes into account all nonelective contributions
(including the qualified nonelective contributions) and also when the Advisory
Committee takes into account only the nonelective contributions not used in
either the ADP test described in this Section 14.08 or the ACP test described in
Section 14.09. For Plan Years beginning after December 31, 1989, the Advisory
Committee may not include in the ADP test any qualified nonelective
contributions or qualified matching contributions under another qualified plan
unless that plan has the same plan year as this Plan. The Advisory Committee
must maintain records to demonstrate compliance with the ADP test, including the
extent to which the Plan used qualified nonelective contributions or qualified
matching contributions to satisfy the test.
(B) Special aggregation rule for Highly Compensated Employees. To determine the
ADP of any Highly Compensated Employee, the deferral contributions taken into
account must include any elective deferrals made by the Highly Compensated
Employee under any other Code ss.401(k) arrangement maintained by the Employer,
unless the elective deferrals are to an ESOP. If the plans containing the Code
ss.401(k) arrangements have different plan years, the Advisory Committee will
determine the combined deferral contributions on the basis of the plan years
ending in the same calendar year.
14.06
<PAGE>
(C) Aggregation of certain Code (S)401(k) arrangements. If the Employer treats
two plans as a unit for coverage or nondiscrimination purposes, the Employer
must combine the Code (S)401(k) arrangements under such plans to determine
whether either plan satisfies the ADP test. This aggregation rule applies to the
ADP determination for all Eligible Employees, irrespective of whether an
Eligible Employee is a Highly Compensated Employee or a Nonhighly Compensated
Employee. The Advisory Committee also may elect to aggregate the Code (S)401(k)
arrangements under plans which the Employer does not treat as a unit for
coverage or nondiscrimination purposes. For Plan Years beginning after December
31, 1989, an aggregation of Code (S)401(k) arrangements under this paragraph
does not apply to plans which have different plan years and, for Plan Years
beginning after December 31, 1988, the Advisory Committee may not aggregate an
ESOP (or the ESOP portion of a plan) with a non-ESOP plan (or non-ESOP portion
of a plan).
(D) Characterization of excess contributions. If, pursuant to this Section
14.08, the Advisory Committee has elected to include qualified matching
contributions in the average ADP, the Advisory Committee will treat excess
contributions as attributable proportionately to deferral contributions and to
qualified matching contributions allocated on the basis of those deferral
contributions. If the total amount of a Highly Compensated Employee's excess
contributions for the Plan Year exceeds his deferral contributions or qualified
matching contributions for the Plan Year, the Advisory Committee will treat the
remaining portion of his excess contributions as attributable to qualified
nonelective contributions. The Advisory Committee will reduce the amount of
excess contributions for a Plan Year distributable to a Highly Compensated
Employee by the amount of excess deferrals (as determined in Section 14.07), if
any, previously distributed to that Employee for the Employee's taxable year
ending in that Plan Year.
(E) Distribution of excess contributions. If the Advisory Committee determines
the Plan fails to satisfy the ADP test for a Plan Year, it must distribute the
excess contributions, as adjusted for allocable income, during the next Plan
Year. However, the Employer will incur an excise tax equal to 10% of the amount
of excess contributions for a Plan Year not distributed to the appropriate
Highly Compensated Employees during the first 2 1/2 months of that next Plan
Year. The excess contributions are the amount of deferral contributions made by
the Highly Compensated Employees which causes the Plan to fail to satisfy the
ADP test. The Advisory Committee will distribute to each Highly Compensated
Employee his respective share of the excess contributions. The Advisory
Committee will determine the respective shares of excess contributions by
starting with the Highly Compensated Employee(s) who has the greatest ADP,
reducing his ADP to the next highest ADP, then, if necessary, reducing the ADP
of the Highly Compensated Employee(s) at the next highest ADP level (including
the ADP of the Highly Compensated Employee(s) whose ADP the Advisory Committee
already has reduced), and continuing in this manner until the average ADP for
the Highly Compensated Group satisfies the ADP test. If the Highly Compensated
Employee is part of an aggregated family group, the Advisory Committee, in
accordance with the applicable Treasury regulations, will determine each
aggregated family member's allocable share of the excess contributions assigned
to the family unit.
(F) Allocable income. To determine the amount of the corrective distribution
required under this Section 14.08, the Advisory Committee must calculate the
allocable income for the Plan Year in which the excess contributions arose and
for the "gap period" measured from the beginning of the next Plan Year to the
date of the distribution. "Allocable income" means net income or net loss. To
calculate allocable income for the Plan Year, the Advisory Committee: (1) first
will determine the net income or net loss for the Plan Year on the Highly
Compensated Employee's Accrued Benefit attributable to deferral contributions;
and (2) then will multiply this net income or net loss by the following
fraction:
Amount of the Highly Compensated Employee's excess contributions
------------------------------------------------------------------
Accrued Benefit attributable to deferral contributions
The Accrued Benefit attributable to deferral contributions includes the Accrued
Benefit attributable to qualified matching contributions and qualified
nonelective contributions taken into account in the ADP test for the Plan Year
or for any prior Plan Year. For purposes of the denominator of the fraction, the
Advisory Committee will calculate the Accrued Benefit attributable to deferral
contributions as of the last day of the Plan Year (without regard to the net
income or net loss for the Plan Year on that Accrued Benefit).
14.07
<PAGE>
To calculate allocable income for the "gap period," the Advisory Committee
will perform the same calculation as described in the preceding paragraph,
except in clause (1) the Advisory Committee will determine, as of the last day
of the month preceding the date of distribution, the net income or net loss for
the "gap period" and in clause (2) will calculate the Accrued Benefit
attributable to deferral contributions as of the day before the distribution. If
the Plan does not perform a valuation on the last day of the month preceding the
date of distribution, the Advisory Committee, in lieu of the calculation
described in this paragraph, will calculate allocable income for each month in
the "gap period" as equal to 10% of the allocable income for the Plan Year.
Under this alternate calculation, the Advisory Committee will disregard the
month in which the distribution occurs, if the Plan makes the distribution no
later than the 15th day of that month.
14.09 NONDISCRIMINATION RULES FOR EMPLOYER MATCHING
---------------------------------------------
CONTRIBUTIONS/PARTICIPANT NONDEDUCTIBLE CONTRIBUTIONS. For Plan Years beginning
- -----------------------------------------------------
after December 31, 1986, the Advisory Committee must determine whether the
annual Employer matching contributions (other than qualified matching
contributions used in the ADP under Section 14.08), if any, and the Employee
contributions, if any, satisfy either of the following average contribution
percentage ("ACP") tests:
(i) The ACP for the Highly Compensated Group does not exceed
1.25 times the ACP of the Nonhighly Compensated Group; or
(ii) The ACP for the Highly Compensated Group does not exceed the ACP for
the Nonhighly Compensated Group by more than two percentage points (or the
lesser percentage permitted by the multiple use limitation in Section 14.10)
and the ACP for the Highly Compensated Group is not more than twice the ACP
for the Nonhighly Compensated Group.
(A) Calculation of ACP. The average contribution percentage for a group is the
average of the separate contribution percentages calculated for each Eligible
Employee who is a member of that group. An Eligible Employee's contribution
percentage for a Plan Year is the ratio of the Eligible Employee's aggregate
contributions for the Plan Year to the Employee's Compensation for the Plan
Year. "Aggregate contributions" are Employer matching contributions (other than
qualified matching contributions used in the ADP test under Section 14.08) and
employee contributions (as defined in Section 14.03). For aggregated family
members treated as a single Highly Compensated Employee, the contribution
percentage of the family unit is the greater of: (i) the contribution percentage
determined by combining the aggregate contributions and Compensation of the
family members who are Highly Compensated Employees without family aggregation;
or (ii) the contribution percentage determined by combining the aggregate
contributions and Compensation of all aggregated family members.
The Advisory Committee, in a manner consistent with Treasury regulations,
may determine the contribution percentages of the Eligible Employees by taking
into account qualified nonelective contributions (other than qualified
nonelective contributions used in the ADP test under Section 14.08) or elective
deferrals, or both, made to this Plan or to any other qualified Plan maintained
by the Employer. The Advisory Committee may not include qualified nonelective
contributions in the ACP test unless the allocation of nonelective contributions
is nondiscriminatory when the Advisory Committee takes into account all
nonelective contributions (including the qualified nonelective contributions)
and also when the Advisory Committee takes into account only the nonelective
contributions not used in either the ADP test described in Section 14.08 or the
ACP test described in this Section 14.09. The Advisory Committee may not include
elective deferrals in the ACP test, unless the Plan which includes the elective
deferrals satisfies the ADP test both with and without the elective deferrals
included in this ACP test. For Plan Years beginning after December 31, 1989, the
Advisory Committee may not include in the ACP test any qualified nonelective
contributions or elective deferrals under another qualified plan unless that
plan has the same plan year as this Plan. The Advisory Committee must maintain
records to demonstrate compliance with the ACP test, including the extent to
which the Plan used qualified nonelective contributions or elective deferrals to
satisfy the test.
14.08
<PAGE>
(B) Special aggregation rule for Highly Compensated Employees. To determine the
contribution percentage of any Highly Compensated Employee, the aggregate
contributions taken into account must include any matching contributions (other
than qualified matching contributions used in the ADP test) and any Employee
contributions made on his behalf to any other plan maintained by the Employer,
unless the other plan is an ESOP. If the plans have different plan years, the
Advisory Committee will determine the combined aggregate contributions on the
basis of the plan years ending in the same calendar year.
(C) Aggregation of certain plans. If the Employer treats two plans as a unit for
coverage or nondiscrimination purposes, the Employer must combine the plans to
determine whether either plan satisfies the ACP test. This aggregation rule
applies to the contribution percentage determination for all Eligible Employees,
irrespective of whether an Eligible Employee is a Highly Compensated Employee or
a Nonhighly Compensated Employee. The Advisory Committee also may elect to
aggregate plans which the Employer does not treat as a unit for coverage or
nondiscrimination purposes. For Plan Years beginning after December 31, 1989, an
aggregation of plans under this paragraph does not apply to plans which have
different plan years and, for Plan Years beginning after December 31, 1988, the
Advisory Committee may not aggregate an ESOP (or the ESOP portion of a plan)
with a non-ESOP plan (or non-ESOP portion of a plan).
(D) Distribution of excess aggregate contributions. The Advisory Committee will
determine excess aggregate contributions after determining excess deferrals
under Section 14.07 and excess contributions under Section 14.08. If the
Advisory Committee determines the Plan fails to satisfy the ACP test for a Plan
Year, it must distribute the excess aggregate contributions, as adjusted for
allocable income, during the next Plan Year. However, the Employer will incur an
excise tax equal to 10% of the amount of excess aggregate contributions for a
Plan Year not distributed to the appropriate Highly Compensated Employees during
the first 2 1/2 months of that next Plan Year. The excess aggregate
contributions are the amount of aggregate contributions allocated on behalf of
the Highly Compensated Employees which causes the Plan to fail to satisfy the
ACP test. The Advisory Committee will distribute to each Highly Compensated
Employee his respective share of the excess aggregate contributions. The
Advisory Committee will determine the respective shares of excess aggregate
contributions by starting with the Highly Compensated Employee(s) who has the
greatest contribution percentage, reducing his contribution percentage to the
next highest contribution percentage, then, if necessary, reducing the
contribution percentage of the Highly Compensated Employee(s) at the next
highest contribution percentage level (including the contribution percentage of
the Highly Compensated Employee(s) whose contribution percentage the Advisory
Committee already has reduced), and continuing in this manner until the ACP for
the Highly Compensated Group satisfies the ACP test. If the Highly Compensated
Employee is part of an aggregated family group, the Advisory Committee, in
accordance with the applicable Treasury regulations, will determine each
aggregated family member's allocable share of the excess aggregate contributions
assigned to the family unit.
(E) Allocable income. To determine the amount of the corrective distribution
required under this Section 14.09, the Advisory Committee must calculate the
allocable income for the Plan Year in which the excess aggregate contributions
arose and for the "gap period" measured from the beginning of the next Plan Year
to the date of the distribution. "Allocable income" means net income or net
loss. The Advisory Committee will determine allocable income in the same manner
as described in Section 14.08(F) for excess contributions, except the numerator
of the allocation fraction will be the Highly Compensated Employee's excess
aggregate contributions and the denominator of the allocation fraction will be
the Employee's Accrued Benefit attributable to aggregate contributions and, if
applicable, to qualified nonelective contributions and elective deferrals
included in the ACP test for the Plan Year or for any prior Plan Year.
14.09
<PAGE>
(F) Characterization of excess aggregate contributions. The Advisory Committee
will treat a Highly Compensated Employee's allocable share of excess aggregate
contributions in the following priority: (1) first as attributable to his
Employee contributions which are voluntary contributions, if any; (2) then as
matching contributions allocable with respect to excess contributions determined
under the ADP test described in Section 14.08; (3) then on a pro rata basis to
matching contributions and to the deferral contributions relating to those
matching contributions which the Advisory Committee has included in the ACP
test; (4) then on a pro rata basis to Employee contributions which are mandatory
contributions, if any, and to the matching contributions allocated on the basis
of those mandatory contributions; and (5) last to qualified nonelective
contributions used in the ACP test. To the extent the Highly Compensated
Employee's excess aggregate contributions are attributable to matching
contributions, and he is not 100% vested in his Accrued Benefit attributable to
matching contributions, the Advisory Committee will distribute only the vested
portion and forfeit the nonvested portion. The vested portion of the Highly
Compensated Employee's excess aggregate contributions attributable to Employer
matching contributions is the total amount of such excess aggregate
contributions (as adjusted for allocable income) multiplied by his vested
percentage (determined as of the last day of the Plan Year for which the
Employer made the matching contribution). The Employer will specify in Adoption
Agreement Section 3.05 the manner in which the Plan will allocate forfeited
excess aggregate contributions.
14.10 MULTIPLE USE LIMITATION. For Plan Years beginning after December 31,
-----------------------
1988, if at least one Highly Compensated Employee is includible in the ADP test
under Section 14.08 and in the ACP test under Section 14.09, the sum of the
Highly Compensated Group's ADP and ACP may not exceed the multiple use
limitation.
The multiple use limitation is the sum of (i) and (ii):
(i) 125% of the greater of: (a) the ADP of the Nonhighly Compensated Group
under the Code (S)(S)401(k) arrangement; or (b) the ACP of the Nonhighly
Compensated Group for the Plan Year beginning with or within the Plan Year
of the Code (S)(S)401(k) arrangement.
(ii) 2% plus the lesser of (i)(a) or (i)(b), but no more than twice the
lesser of (i)(a) or (i)(b).
For Plan Years beginning prior to the later of January 1, 1992, or 60 days
after the Treasury issues final regulations under Code (S)(S)401(m), the
Advisory Committee, in lieu of determining the multiple use limitation as the
sum of (i) and (ii), may elect to determine the multiple use limitation as the
sum of (iii) and (iv):
(iii) 125% of the lesser of: (a) the ADP of the Nonhighly Compensated Group
under the Code (S)(S)401(k) arrangement; or (b) the ACP of the Nonhighly
Compensated Group for the Plan Year beginning with or within the Plan Year
of the Code (S)(S)401(k) arrangement.
(iv) 2% plus the greater of (iii)(a) or (iii)(b), but no
more than twice the greater of (iii)(a) or (iii)(b).
The Advisory Committee will determine whether the Plan satisfies the
multiple use limitation after applying the ADP test under Section 14.08 and the
ACP test under Section 14.09 and after making any corrective distributions
required by those Sections. If, after applying this Section 14.10, the Advisory
Committee determines the Plan has failed to satisfy the multiple use limitation,
the Advisory Committee will correct the failure by treating the excess amount as
excess aggregate contributions under Section 14.09. This Section 14.10 does not
apply unless, prior to application of the multiple use limitation, the ADP and
the ACP of the Highly Compensated Group each exceeds 125% of the respective
percentages for the Nonhighly Compensated Group.
14.11 DISTRIBUTION RESTRICTIONS. The Employer must elect in Section 6.03
-------------------------
the Adoption Agreement the distribution events permitted under the Plan. The
distribution events applicable to the Participant's Deferral Contributions
Account, Qualified Nonelective Contributions Account and Qualified Matching
Contributions Account must satisfy the distribution restrictions described in
paragraph (m) of Section 14.03.
14.10
<PAGE>
(A) Hardship distributions from Deferral Contributions Account. The Employer
must elect in Adoption Agreement Section 6.03 whether a Participant may receive
hardship distributions from his Deferral Contributions Account prior to the
Participant's Separation from Service. Hardship distributions from the Deferral
Contributions Account must satisfy the requirements of this Section 14.11. A
hardship distribution option may not apply to the Participant's Qualified
Nonelective Contributions Account or Qualified Matching Contributions Account.
(1) Definition of hardship. A hardship distribution under this Section 14.11
must be on account of one or more of the following immediate and heavy financial
needs: (1) medical expenses described in Code (S)(S)213(d) incurred by the
Participant, by the Participant's spouse, or by any of the Participant's
dependents; (2) the purchase (excluding mortgage payments) of a principal
residence for the Participant; (3) the payment of post-secondary education
tuition, for the next semester or for the next quarter, for the Participant, for
the Participant's spouse, or for any of the Participant's dependents; or (4) to
prevent the eviction of the Participant from his principal residence or the
foreclosure on the mortgage of the Participant's principal residence.
(2) Restrictions. The following restrictions apply to a Participant who
receives a hardship distribution: (a) the Participant may not make elective
deferrals or employee contributions to the Plan for the 12-month period
following the date of his hardship distribution; (b) the distribution is not in
excess of the amount of the immediate and heavy financial need; (c) the
Participant must have obtained all distributions, other than hardship
distributions, and all nontaxable loans currently available under this Plan and
all other qualified plans maintained by the Employer; and (d) the Participant
agrees to limit elective deferrals under this Plan and under any other qualified
Plan maintained by the Employer, for the Participant's taxable year immediately
following the taxable year of the hardship distribution, to the 402(g)
limitation (as described in Section 14.07), reduced by the amount of the
Participant's elective deferrals made in the taxable year of the hardship
distribution. The suspension of elective deferrals and employee contributions
described in clause (a) also must apply to all other qualified plans and to all
nonqualified plans of deferred compensation maintained by the Employer, other
than any mandatory employee contribution portion of a defined benefit plan,
including stock option, stock purchase and other similar plans, but not
including health or welfare benefit plans (other than the cash or deferred
arrangement portion of a cafeteria plan).
(3) Earnings. For Plan Years beginning after December 31, 1988, a hardship
distribution under this Section 14.11 may not include earnings on an Employee's
elective deferrals credited after December 31, 1988, and may not include
qualified matching contributions and qualified nonelective contributions, nor
any earnings on such contributions, irrespective of when credited.
(B) Distributions after Separation from Service. Following the Participant's
Separation from Service, the distribution events applicable to the Participant
apply equally to all of the Participant's Accounts, except as elected in Section
6.03 of the Employer's Adoption Agreement.
14.12 SPECIAL ALLOCATION RULES. If the Code (S)(S)401(k) arrangement
------------------------
provides for salary reduction contributions, if the Plan accepts Employee
contributions, pursuant to Adoption Agreement Section 4.01, or if the Plan
allocates matching contributions as of any date other than the last day of the
Plan Year, the Employer must elect in Adoption Agreement 9.11 whether any
special allocation provisions will apply under Section 9.11 of the Plan. For
purposes of the elections:
(a) A "segregated Account" direction means the Advisory Committee will
establish a segregated Account for the applicable contributions made on the
Participant's behalf during the Plan Year. The Trustee must invest the
segregated Account in Federally insured interest bearing savings account(s)
or time deposits, or a combination of both, or in any other fixed income
investments, unless otherwise specified in the Employer's Adoption
Agreement. As of the last day of each Plan Year (or, if earlier, an
allocation date coinciding with a valuation date described in Section 9.11),
the Advisory Committee will reallocate the segregated Account to the
Participant's appropriate Account, in accordance with Section 3.04 or
Section 4.06, whichever applies to the contributions.
14.11
<PAGE>
(b) A "weighted average allocation" method will treat a weighted portion of
the applicable contributions as if includible in the Participant's Account
as of the beginning of the valuation period. The weighted portion is a
fraction, the numerator of which is the number of months in the valuation
period, excluding each month in the valuation period which begins prior to
the contribution date of the applicable contributions, and the denominator
of which is the number of months in the valuation period. The Employer may
elect in its Adoption Agreement to substitute a weighting period other than
months for purposes of this weighted average allocation.
* * * * * * * * * * * * * * *
14.12
<PAGE>
ARTICLE A
APPENDIX TO PLAN AND TRUST AGREEMENT
This Article is necessary to comply with the Unemployment Compensation
Amendments Act of 1992 and is an integral part of the basic plan document.
Section 12.08 applies to any modification or amendment of this Article.
A-1. APPLICATIONS. This Article applies to distributions made on or after
------------
January 1, 1993. Notwithstanding any provision of the Plan to the contrary that
would otherwise limit a distributee's election under this Article, a distributee
may elect, at the time and in the manner prescribed by the Plan Administrator,
to have any portion of an eligible rollover distribution paid directly to an
eligible retirement plan specified by the distributee in a direct rollover.
A-2. DEFINITIONS.
-----------
(a) "Eligible rollover distribution." An eligible rollover distribution is
any distribution of all or any portion of the balance to the credit of the
distributee, except that an eligible rollover distribution does not include: any
distribution that is one of a series of substantially equal periodic payments
(not less frequently than annually) made for the life (or life expectancy) of
the distributee or the joint lives (or joint life expectancies) of the
distributee and the distributee's designated beneficiary, or for a specified
period of ten years or more; any distribution to the extent such distribution is
required under Code (S)401(a)(9); and the portion of any distribution that is
not includible in gross income (determined without regard to the exclusion of
net unrealized appreciation with respect to employer securities).
(b) "Eligible retirement plan." An eligible retirement plan is an individual
retirement account described in Code (S)408(a), an individual retirement annuity
described in Code (S)408(b), an annuity plan described in Code (S)403(a), or a
qualified trust described in Code (S)401(a), that accepts the distributee's
eligible rollover distribution. However, in the case of an eligible rollover
distribution to the surviving spouse, an eligible retirement plan is an
individual retirement account or individual retirement annuity.
(c) "Distributee." A distributee includes an Employee or former Employee. In
addition, the Employee's or former Employee's surviving spouse and the
Employee's or former Employee's spouse or former spouse who is the alternate
payee under a qualified domestic relations order, as defined in Code (S)414(p),
are distributees with regard to the interest of the spouse or former spouse.
(d) "Direct rollover." A direct rollover is a payment by the Plan to the
eligible retirement plan specified by the distributee.
A-1
<PAGE>
ARTICLE B
APPENDIX TO BASIC PLAN DOCUMENT
This Article is necessary to comply with the Omnibus Budget Reconciliation
Act of 1993 (OBRA '93) and is an integral part of the basic plan document.
Section 12.08 applies to any modification or amendment of this Article.
In addition to other applicable limitations set forth in the plan, and
notwithstanding any other provision of the plan to the contrary, for plan years
beginning on or after January 1, 1994, the annual compensation of each employee
taken into account under the plan shall not exceed the OBRA '93 annual
compensation limit. The OBRA '93 annual compensation limit is $150,000 , as
adjusted by the Commissioner for increases in the cost of living in accordance
with Section 401(a)(17)(B) of the Internal Revenue Code. The cost-of-living
adjustment in effect for a calendar year applies to any period, not exceeding 12
months, over which compensation is determined (determination period) beginning
in such calendar year. If a determination period consists of fewer than 12
months, the OBRA '93 annual compensation limit will be multiplied by a fraction,
the numerator of which is the number of months in the determination period, and
the denominator of which is 12.
For plan years beginning on or after January 1, 1994, any reference in this
plan to the limitation under Section 401(a)(17) of the Code shall mean the OBRA
'93 annual compensation limit set forth in this provision.
If compensation for any prior determination period is taken into account in
determining an employee's benefits accruing in the current plan year, the
compensation for that prior determination period is subject to the OBRA '93
annual compensation limit in effect for that prior determination period. For
this purpose, for determination period beginning before the first day of the
first plan year beginning on or after January 1, 1994, the OBRA '93 annual
compensation limit is $150,000.
A-2
<PAGE>
Exhibit 10.4
IFB HOLDINGS, INC.
EXHIBIT 10.4
DIRECTOR EMERITUS PLAN
In order to encourage directors to remain associated with the Bank's Board
of Directors, in January 1995 the Bank adopted a director emeritus program in
which the Board of Directors, in its discretion, may elect any retiring director
as a Director Emeritus, provided the retiring director has served as a director
until reaching mandatory retirement age (or until being forced to retire due to
medical considerations) and such director has served as a director of the Bank
for at least 10 years. Directors Emeritus of the Bank shall be compensated for
their services at a rate of 50% of full director fees for the first 10 years
following election and at a rate of 25% of full director fees for the second 10
years following election. Thereafter, no fees shall be payable except that, upon
request from the then current Board of Directors, a Director Emeritus may be
invited to attend a Board meeting and as such shall qualify to receive full
Board fees for that meeting.
<PAGE>
EXHIBIT 21
SUBSIDIARY
----------
Investors Federal Service Corporation
<PAGE>
EXHIBIT 23.2
[LETTERHEAD OF LOCKRIDGE, CONSTANT & CONRAD, LLC APPEARS HERE]
ACCOUNTANTS' CONSENT
--------------------
The Board of Directors
Investors Federal Bank and Savings Association
We consent to the use in this Registration Statement of IFB Holdings, Inc. Form
SB-2 and the Application for Conversion on Form AC of our report dated September
25, 1996, on the Consolidated Financial Statements of Investors Federal Bank and
Savings Association and subsidiary as of June 30, 1996 and 1995, and for the
fiscal years ended June 30, 1996 and 1995, and to the references to our firm
under the headings "Legal and Tax Matters" and "Experts" in the related
prospectus.
/s/ Lockridge, Constant & Conrad, LLC
October 4, 1996
Chillicothe, Missouri
<PAGE>
EXHIBIT 23.3
[LETTERHEAD OF FERGUSON & CO., LLP APPEARS HERE]
October 4, 1996
Board of Directors
Investors Federal Bank and Savings Association
522 Washington Street
Chillicothe, Missouri
Dear Directors:
We hereby consent to the use of our firm's name in the Form AC Application
for Conversion of Investors Federal Bank and Savings Association, Chillicothe,
Missouri, and any amendments thereto, and in the Form SB-2 Registration
Statement of IFB Holdings, Inc., and any amendments thereto. We also
hereby consent to the inclusion of, summary of, and references to our Appraisal
Report and our opinion concerning subscription rights in such filings including
the Prospectus of IFB Holdings, Inc.
Sincerely,
/s/ Charles M. Hebert
Charles M. Hebert
Principal
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-END> JUN-30-1996
<CASH> 471
<INT-BEARING-DEPOSITS> 1,609
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 20,235
<INVESTMENTS-CARRYING> 215
<INVESTMENTS-MARKET> 215
<LOANS> 28,712
<ALLOWANCE> 283
<TOTAL-ASSETS> 52,587
<DEPOSITS> 35,495
<SHORT-TERM> 0
<LIABILITIES-OTHER> 350
<LONG-TERM> 13,474
0
0
<COMMON> 0
<OTHER-SE> 3,268
<TOTAL-LIABILITIES-AND-EQUITY> 52,587
<INTEREST-LOAN> 2,340
<INTEREST-INVEST> 190
<INTEREST-OTHER> 1,086
<INTEREST-TOTAL> 3,616
<INTEREST-DEPOSIT> 1,634
<INTEREST-EXPENSE> 2,264
<INTEREST-INCOME-NET> 1,352
<LOAN-LOSSES> 210
<SECURITIES-GAINS> 46
<EXPENSE-OTHER> 1,030
<INCOME-PRETAX> 469
<INCOME-PRE-EXTRAORDINARY> 469
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 302
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<YIELD-ACTUAL> 7.45
<LOANS-NON> 128
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 81
<CHARGE-OFFS> 11
<RECOVERIES> 3
<ALLOWANCE-CLOSE> 283
<ALLOWANCE-DOMESTIC> 283
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 283
</TABLE>
<PAGE>
[LETTERHEAD FOR FERGUSON & CO., LLP APPEARS HERE]
EXHIBIT 99.1
August 29, 1996
Board of Directors
Investors Federal Bank and Savings Association
522 Washington
Chillicothe, Missouri 64601
Dear Directors:
This letter sets forth the agreement between Investors Federal Bank and
Savings Association ("Investors"), Chillicothe, Missouri, and Ferguson & Co.,
LLP ("F&C"), Irving, Texas, under the terms of which Investors has engaged F&C,
in connection with its conversion from mutual to stock form, to (1) determine
the pro forma market value of the shares of common stock to be issued and sold
by Investors' holding company; and (2) assist Investors in preparing a business
plan to be filed with the application for approval to convert to stock.
F&C agrees to deliver the written valuation and business plan to Investors
at the above address on or before a mutually agreed upon date. Further, F&C
agrees to perform such other services as are necessary or required in connection
with comments from the applicable regulatory authorities relating to the
business plan and appraisal and the preparation of appraisal updates as
requested by Investors or its counsel. It is understood that the services of
F&C under this agreement shall be limited as herein described.
F&C's fee for the business plan, and initial appraisal valuation report and
any required updates shall be $18,900. In addition, Investors shall reimburse
F&C for all out-of-pocket expenses (not to exceed $4,000). Payment under this
agreement shall be made as follows:
1. Upon execution of this engagement letter-$5,000
2. Upon delivery of the business plan--$4,500
3. Upon delivery of the completed appraisal report --$9,400
4. Out-of-pocket expenses are to be paid monthly.
If, during the course of Investors' conversion, unforeseen events occur so
as to change materially the nature of the work content of the services described
in this contract, the terms of the contract shall be subject to renegotiation.
Such unforeseen events shall include, but not be limited to, major changes in
the conversion regulations, appraisal
<PAGE>
Board of Directors
August 29, 1996
Page2
guidelines or processing procedures as they relate to conversion appraisals,
major changes in Investors' management or operating policies, execution of a
merger agreement with another institution prior to completion of conversion, and
excessive delays or suspension of processing of conversions by the regulatory
authorities such that completion of Investors' conversion requires the
preparation by F&C of a new appraisal report or business plan, excluding
appraisal updates during the course of the engagement.
To induce F&C to provide the services described above, Investor hereby
agrees as follows:
1. Investors shall supply in a timely manner to F&C such information with
respect to its business and financial condition as F&C reasonably may
request in order to make the aforesaid valuation. Such information made
available to F&C shall include, but not be limited to, annual financial
statements, periodic regulatory filings, material agreements, debt
instruments and corporate books and records.
2. Investors hereby represents and warrants, to the best of its knowledge,
that any information provided to F&C does not and will not, at any time
relevant hereto, contain any misstatament or untrue statement of
material fact or omit any and all material facts required to be stated
therein or necessary to make the statements therein not false or
misleading in light of the circumstances under which they were made.
3. (a) Investors shall indemnify and hold harmless F&C and any employees
of F&C who act for or on behalf of F&C in connection with the services
called for under this agreement, from and against any and all loss,
cost, damage, claim, liability or expense of any kind, including
reasonable attorneys fees and other expenses incurred in investigating,
preparing to defend and defending any claim or claims (specifically
including, but not limited to, claims under federal and state
securities laws) arising out of any misstatement or untrue statement of
a material fact contained in the information supplied by Investors to
F&C or by an omission to state a material fact in the information so
provided which is required to be stated therein in order to make the
statement therein not false or misleading.
(b) F&C shall not be entitled to indemnification pursuant to Paragraph
3(a) above with regard to any claim arising where, with regard to the
basis for such claim, F&C had knowledge that a statement of a fact
material to the evaluation and contained in the information supplied by
Investor was
<PAGE>
Board of Directors
August 29, 1996
Page 3
untrue or had knowledge that a material fact was omitted from the
information so provided and that such material fact was necessary in
order to make the statement made to F&C not false or misleading.
(c) F&C additionally shall not be entitled to indemnification pursuant
to Paragraph 3(a) above notwithstanding its lack of actual knowledge
of an intentional misstatement or omission of a material fact in the
information provided if F&C is determined to have been negligent or to
have failed to exercise due diligence in the preparation of its
valuation.
Investors and F&C are not affiliated, and neither Investors nor F&C has an
economic interest in, or held in common with, the other and has not derived a
significant portion of its gross revenue, receipts or net income for any period
from transactions with the other.
In order for F&C to consider this proposal binding, please acknowledge your
consent to the foregoing by executing the enclosed copies of this letter and
returning one copy to us, together with a check payable to Ferguson & Co., LLP
in the amount of $5,000. The extra copy of this letter is for your conversion
counsel.
Yours very truly,
/s/ Robin L. Fussell
Robin L. Fussell
Principal
Agreed to ($5,000 check enclosed):
Investors Federal Bank and Savings Association
Chillicothe, Missouri
By: [SIGNATURE APPEARS HERE]
--------------------------------------
<PAGE>
Exhibit 99.3
INVESTORS FEDERAL BANK AND SAVINGS ASSOCIATION
522 Washington Street
Chillicothe, Missouri 64601
(816) 646-3733
- --------------------------------------------------------------------------------
NOTICE OF SPECIAL MEETING OF MEMBERS
- --------------------------------------------------------------------------------
Notice is hereby given that a Special Meeting of Members (the "Special
Meeting") of Investors Federal Bank and Savings Association (the "Bank"), will
be held at the main office of the Bank located at 522 Washington Street,
Chillicothe, Missouri, on December __, 1996 at 4:00 p.m., Central time. The
purpose of this Special Meeting is to consider and vote upon:
A Plan of Conversion providing for the conversion of the Bank from a
federally chartered mutual savings association to a federally
chartered stock savings bank as a wholly owned subsidiary of IFB
Holdings, Inc., a newly organized Delaware corporation formed by the
Bank for the purpose of becoming the holding company for the Bank, the
subsequent conversion of the Bank to a national bank under the name
"Investors Federal Bank, National Association" and the related
transactions provided for in such Plan of Conversion, including the
adoption of an amended federal Stock Charter and Bylaws for the Bank
and the adoption of the Articles of Association and Bylaws for
Investors Federal Bank, National Association, pursuant to the laws of
the United States and the Rules and Regulations administered by the
Office of Thrift Supervision and the Office of the Comptroller of the
Currency; and
such other business as may properly come before this Special Meeting or any
adjournment thereof. Management is not aware of any such other business.
The members who shall be entitled to notice of and to vote at the Special
Meeting and any adjournment thereof are depositors and certain borrowers of the
Bank at the close of business on _______, 1996 who continue to be members as of
the date of the Special Meeting. In the event there are not sufficient votes
for approval of the Plan of Conversion at the time of the Special Meeting, the
Special Meeting may be adjourned from time to time in order to permit further
solicitation of proxies.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Robert T. Fairweather
Robert T. Fairweather
Chairman of the Board
Chillicothe, Missouri
November __, 1996
- --------------------------------------------------------------------------------
YOUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE
FOR APPROVAL OF THE PLAN OF CONVERSION BY COMPLETING THE
ENCLOSED PROXY CARD AND RETURNING IT IN THE ENCLOSED
POSTAGE-PAID ENVELOPE AS SOON AS POSSIBLE.
YOUR VOTE IS VERY IMPORTANT.
- --------------------------------------------------------------------------------
<PAGE>
SUMMARY OF PROPOSED CONVERSION
This summary does not purport to be complete and is qualified in its
entirety by the more detailed information contained in the remainder of this
Proxy Statement and the accompanying Prospectus.
Under its present "mutual" form of organization, the Bank has no
stockholders. Its deposit account holders and certain borrowers are members of
the Bank and have voting rights in that capacity. In the unlikely event of
liquidation, the Bank's deposit account holders would have the sole right to
receive any assets of the Bank remaining after payment of its liabilities
(including the claims of all deposit account holders to the withdrawal value of
their deposits). Under the Plan of Conversion (the "Plan of Conversion") to be
voted on at the Special Meeting, the Bank would be converted into a federally
chartered savings bank organized in stock form, and all of the Bank's common
stock would be sold concurrently to the Holding Company (the "Stock
Conversion"). Subsequently, the Bank expects to convert from a federally
chartered stock savings bank to a national bank (the "Bank Conversion") under
the name "Investors Federal Bank, National Association." The Holding Company
will offer and sell its common stock (the "Common Stock") in an offering (1) to
depositors with an account balance of $50 or more on June 30, 1995 ("Eligible
Account Holders"), (2) tax-qualified employee stock benefit plans of the Bank
("Tax-Qualified Employee Plans"), (3) depositors of the Bank with an account
balance of $50 or more as of September 30, 1996 ("Supplemental Eligible Account
Holders"), (4) depositors of the Bank as of _______, 1996, other then Eligible
or Supplemental Eligible Account Holders and certain borrowers as of both
January 1, 1988 and _______, 1996, who continue to be borrowers as of the date
of this Special Meeting ("Other Members") and (5) directors, officers and
employees of the Bank (the "Subscription Offering"). Notwithstanding the
foregoing, to the extent orders for shares exceed the maximum of the appraisal
range, Tax-Qualified Employee Plans shall be afforded a first priority to
purchase shares sold above the maximum of the appraisal range. It is
anticipated that Tax-Qualified Employee Plans will purchase 8% of the Common
Stock sold in the Stock Conversion.
Concurrent with, during or following completion of the Subscription
Offering, to the extent the Common Stock is not all sold to the persons in the
foregoing categories, the Holding Company may offer Common Stock to members of
the general public to whom a prospectus (the "Prospectus") has been delivered
("Other Subscribers"), with first preference to natural persons (or trusts
established by such persons) residing in Livingston, Caldwell and Daviess
Counties, Missouri (the "Community Offering"). The Subscription Offering and
the Community Offering are referred to collectively as the "Subscription and
Community Offering." Voting and liquidation rights with respect to the Bank
would thereafter be held by the Holding Company, except to the limited extent of
the liquidation account (the "Liquidation Account") that will be established for
the benefit of Eligible Account Holders and Supplemental Eligible Account
Holders of the Bank and voting and liquidation rights in the Holding Company
would be held only by those persons who become stockholders of the Holding
Company through purchase of shares of its Common Stock. See "Description of the
Plan of Conversion - Principal Effects of Conversion - Liquidation Rights of
Depositor Members."
THE CONVERSION WILL NOT AFFECT THE BALANCE, INTEREST RATE OR FEDERAL
INSURANCE PROTECTION OF ANY SAVINGS DEPOSIT, AND NO PERSON WILL BE OBLIGATED TO
PURCHASE ANY STOCK IN THE STOCK CONVERSION.
Business Purposes Net Stock Conversion proceeds are expected to increase
for Conversion the capital of the Bank, which will support the
expansion of its financial services to the public. The
conversion to stock form and the use of a holding
company structure are also expected to enhance its
ability to expand through possible mergers and
acquisitions (although no such transactions are
contemplated at this time) and will facilitate its
future access of the Holding Company and the Converted
Bank and the National Bank to the capital markets. The
Bank Conversion shall be deemed to occur and shall be
effective upon completion of all actions necessary or
appropriate under applicable federal statutes and
regulations and the policies of the Office of the
Comptroller of the Currency ("OCC") and the Office of
Thrift Supervision ("OTS") to complete the conversion of
the Converted Bank to a national bank, including without
limitation the approval of the Bank Conversion by the
Holding Company as the sole stockholder of the Converted
Bank, and the Converted Bank will thereby become the
national bank. The Bank Conversion is expected to be
consummated as soon as practicable following the
consummation of the Stock Conversion.
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Subscription and As part of the Stock Conversion, Common Stock is being
Community Offering offered for sale in the Subscription Offering, in the
priorities summarized below, to the Bank's (1) Eligible
Account Holders, (2) Tax-Qualified Employee Plans, (3)
Supplemental Eligible Account Holders (4) Other Members,
and (5) employees, officers and directors. In addition,
in the Community Offering, Other Subscribers may
purchase Common Stock to the extent shares are available
after satisfaction of subscriptions in the Subscription
Offering, with a preference first to natural persons (or
trusts established by such persons) residing in
Livingston, Caldwell and Daviess Counties, Missouri.
Subscription Rights Each Eligible Account Holder has been given non-
of Eligible Account transferable rights to subscribe for an amount of shares
Holders equal to the greater of (i) the lesser of $200,000 of
Common Stock or 5% of the total number of shares offered
in the Stock Conversion; (ii) one-tenth of one percent
of the total offering of shares of common stock in the
Stock Conversion, to the extent such shares are
available; or (iii) 15 times the product (rounded down
to the whole next number) obtained by multiplying the
total number of shares to be issued by a fraction of
which the numerator is the amount of qualifying deposits
of such subscriber and the denominator is the total
qualifying deposits of all account holders in this
category on the qualifying date.
Subscription Rights The Bank's Tax-Qualified Employee Plans have been given
of Tax-Qualified non-transferable rights to subscribe, individually and
Employee Plans in the aggregate, for up to 10% of the total number of
shares sold in the Stock Conversion after satisfaction
of subscriptions of Eligible Account Holders.
Notwithstanding the foregoing, to the extent orders for
shares exceed the maximum of the appraisal range, Tax-
Qualified Employee Plans shall be afforded a first
priority to purchase shares sold above the maximum of
the appraisal range. It is anticipated that Tax-
Qualified Employee Plans will purchase 8% of the Common
Stock sold in the Stock Conversion.
Subscription Rights After satisfaction of subscriptions of Eligible Account
of Supplemental Holders and Tax-Qualified Employee Plans, each
Eligible Account Supplemental Eligible Account Holder (other than
Holders directors and officers of the Bank and their associates)
has been given non-transferable rights to subscribe for
an amount of shares equal to the greater of (i) the
lesser of $200,000 or 5% of the total number of shares
offered in the Stock Conversion; (ii) one-tenth of one
percent of the total number of shares offered in the
Stock Conversion; or (iii) 15 times the product (rounded
down to the whole next number) obtained by multiplying
the total number of shares to be issued by a fraction of
which the numerator is the amount of qualifying deposits
of such subscriber and the denominator is the total
qualifying deposits of all account holders in this
category on the qualifying date. The subscription rights
of each Supplemental Eligible Account Holder shall be
reduced to the extent of such person's subscription
rights as an Eligible Account Holder.
Subscription Rights Each Other Member has been given non-transferable rights
of Other Members to subscribe for an amount of shares equal to the
greater of (i) the lesser of $200,000 or 5% of the total
number of shares offered in the Stock Conversion; or
(ii) one-tenth of one percent of the total number of
shares offered in the Stock Conversion after
satisfaction of the subscriptions of the Bank's Eligible
Account Holders, Tax-Qualified Employee Plans and
Supplemental Eligible Account Holders.
Subscription Rights Each individual employee, officer and director of the
of Bank Personnel Bank has been given the right to subscribe for an amount
of shares equal to the lesser of $200,000 or 5% of the
total number of shares offered in the Stock Conversion
after satisfaction of the subscriptions of Eligible
Account Holders, Tax-Qualified Employee Plans,
Supplemental Eligible Account Holders and Other Members.
Total shares subscribed for by the employees, officers
and directors in this category may not exceed 25% of the
total shares offered in the Stock Conversion.
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Purchase No person, together with associates, and persons acting
Limitations in concert, may purchase more than $200,000 of Common
Stock offered in the Stock Conversion based on the
Estimated Valuation Range (as calculated without giving
effect to any increase in such range subsequent to the
date hereof). The aggregate purchases of directors and
executive officers and their associates may not exceed
34% of the total number of shares offered in the Stock
Conversion. These purchase limitations do not apply to
the Bank's Tax-Qualified Employee Plans.
Expiration Date of All subscriptions for Common Stock must be received
Subscription and by noon, Central time on December __, 1996.
Community Offerings
How to Subscribe For information on how to subscribe for Common Stock
for Shares being offered in the Stock Conversion, please read the
Prospectus and the stock order form and instructions
accompanying this Proxy Statement. Subscriptions will
not become effective until the Plan of Conversion has
been approved by the Bank's members and all of the
Common Stock offered in the Stock Conversion has been
subscribed for or sold in the Subscription and Community
Offering or through such other means as may be approved
by the OTS.
Price of Common All sales of Common Stock in the Subscription and
Stock Community Offering will be made at the same price per
share which is currently expected to be $20.00 per share
on the basis of an independent appraisal of the pro
forma market value of the Bank and the Holding Company
upon Stock Conversion. On the basis of a preliminary
appraisal by Ferguson & Co., LLP which has been reviewed
by the OTS, a minimum of 191,250 and a maximum of
258,750 shares will be offered in the Stock Conversion.
See "The Conversion - Stock Pricing and Number of Shares
to be Issued" in the Prospectus.
Tax Consequences The Bank has received an opinion from its special
counsel, Luse Lehman Gorman Pomerenk & Schick, P.C.,
stating that the Stock Conversion is a nontaxable
reorganization under Section 368(a)(1)(F) of the
Internal Revenue Code. The Bank has also received an
opinion from Lockridge, Constant and Conrad, LLC stating
that the Stock Conversion will not be a taxable
transaction for Missouri income tax purposes.
Required Vote Approval of the Plan of Conversion
will require the affirmative vote of a majority of all
votes eligible to be cast at the Special Meeting.
YOUR BOARD OF DIRECTORS URGES YOU TO VOTE FOR
---
THE PLAN OF CONVERSION
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INVESTORS FEDERAL BANK AND SAVINGS ASSOCIATION
PROXY STATEMENT
SPECIAL MEETING OF MEMBERS TO BE HELD ON DECEMBER __, 1996
PURPOSE OF MEETING
This Proxy Statement is being furnished to you in connection with the
solicitation on behalf of the Board of Directors of Investors Federal Bank and
Savings Association (the "Bank") of the proxies to be voted at the Special
Meeting of Members (the "Special Meeting") of the Bank to be held at the Bank's
main office located at 522 Washington Street, Chillicothe, Missouri, on December
__, 1996 at 4:00 p.m. Central time, and at any adjournments thereof. The
Special Meeting is being held for the purpose of considering and voting upon a
Plan of Conversion under which the Bank would be converted (the "Stock
Conversion") from its present mutual form of organization into a federally
chartered savings bank organized in stock form, the concurrent sale of all the
common stock of the stock savings bank to IFB Holdings, Inc. (the "Holding
Company"), a Delaware corporation, and the sale by the Holding Company of shares
of its common stock (the "Common Stock") and the subsequent conversion of the
Bank to a national bank under the name "Investors Federal Bank, National
Association" and such other business as may properly come before the meeting and
any adjournment thereof.
RECOMMENDATION OF THE BOARD OF DIRECTORS
THE BOARD OF DIRECTORS OF THE BANK UNANIMOUSLY RECOMMENDS THAT YOU VOTE TO
APPROVE THE PLAN OF CONVERSION.
The Bank is currently organized in "mutual" rather than "stock" form,
meaning that it has no stockholders and no authority under its federal mutual
charter to issue capital stock. The Bank's Board of Directors has adopted the
Plan of Conversion providing for the Conversion. The sale of Common Stock of
the Holding Company, which was recently formed to become the holding company of
the Bank, will substantially increase the Bank's net worth. The Holding Company
will exchange 50% of the net proceeds from the sale of the Common Stock for the
common stock of the Bank to be issued upon Stock Conversion. The Holding
Company expects to retain the balance of the net proceeds, as its initial
capitalization of which the Holding Company intends to lend funds to the ESOP to
fund its purchase of Common Stock. This increased capital will support the
expansion of the Bank's financial services to the public. The Board of
Directors of the Bank also believes that the conversion to stock form and the
use of a holding company structure will enhance the Converted Bank's and the
National Bank's ability to expand through possible mergers and acquisitions
(although no such transactions are contemplated at this time) and will
facilitate its future access to the capital markets.
The Board of Directors of the Bank believes that the Stock Conversion will
further benefit the Bank by enabling it to attract and retain key personnel
through prudent use of stock-related incentive compensation and benefit plans.
See "Management - Benefit Plans" in the accompanying Prospectus.
Voting in favor of the Plan of Conversion will not obligate any person to
purchase any Common Stock.
THE OTS HAS APPROVED THE PLAN OF CONVERSION SUBJECT TO THE APPROVAL OF THE
BANK'S MEMBERS AND THE SATISFACTION OF CERTAIN OTHER CONDITIONS. HOWEVER, SUCH
APPROVAL DOES NOT CONSTITUTE A RECOMMENDATION OR ENDORSEMENT OF THE PLAN OF
CONVERSION BY THE OTS.
<PAGE>
INFORMATION RELATING TO VOTING AT THE SPECIAL MEETING
The Board of Directors of the Bank has fixed _______, 1996 as the voting
record date ("Voting Record Date") for the determination of members entitled to
notice of the Special Meeting. All Bank depositors and certain borrowers are
members of the Bank under its current charter. All Bank members of record as of
the close of business on the Voting Record Date and borrowers as of both January
1, 1988 and _______, 1996 who continue to be members as of the date of the
Special Meeting will be entitled to vote at the Special Meeting or any
adjournment thereof.
Each depositor (including IRA and Keogh account beneficiaries) will be
entitled at the Special Meeting to cast one vote for each $100, or fraction
thereof, of the aggregate withdrawal value of all of such depositor's accounts
in the Bank as of the Voting Record Date, up to a maximum of 1,000 votes. In
general, accounts held in different ownership capacities will be treated as
separate memberships for purposes of applying the 1,000 vote limitation. For
example, if two persons hold a $100,000 account in their joint names and each of
the persons also holds a separate account for $100,000 in his own name, each
person would be entitled to 1,000 votes for each separate account and they would
together be entitled to cast 1,000 votes on the basis of the joint account.
Where no proxies are received from IRA and Keogh account beneficiaries, after
due notification, the Bank, as trustee of these accounts, is entitled to vote
these accounts in favor of the Plan of Conversion.
Each borrower member of the Bank as of both January 1, 1988 and _______,
1996 who continues to be a borrower as of the date of the Special Meeting will
be entitled to cast one vote as a borrower member, in addition to any votes he
or she may be entitled to cast as a depositor.
Approval of the Plan of Conversion requires the affirmative vote of a
majority of the total outstanding votes of the Bank's members eligible to be
cast at the Special Meeting. As of _______, 1996, the Bank had _____ members
who were entitled to cast a total of _______ votes at the Special Meeting.
Bank members may vote at the Special Meeting or any adjournment thereof in
person or by proxy. Any member giving a proxy will have the right to revoke the
proxy at any time before it is voted by giving written notice to the Secretary
of the Bank, provided that such written notice is received by the Secretary
prior to the Special Meeting or any adjournment thereof, or upon request if the
member is present and chooses to vote in person.
All properly executed proxies received by the Board of Directors of the
Bank will be voted in accordance with the instructions indicated thereon by the
members giving such proxies. If no instructions are given, such proxies will be
voted in favor of the Plan of Conversion. If any other matters are properly
presented at the Special Meeting and may properly be voted on, the proxies
solicited hereby will be voted on such matters in accordance with the best
judgment of the proxy holders named thereon. Management is not aware of any
other business to be presented at the Special Meeting.
If a proxy is not executed and is returned or the member does not vote in
person, the Bank is prohibited by OTS regulations from using a previously
executed proxy to vote for the Conversion. As a result, failure to vote may
have the same effect as a vote against the Plan of Conversion.
To the extent necessary to permit approval of the Plan of Conversion,
proxies may be solicited by officers, directors or regular employees of the
Bank, in person, by telephone or through other forms of communication and, if
necessary, the Special Meeting may be adjourned to a later date. Such persons
will be reimbursed by the Bank for their expenses incurred in connection with
such solicitation. The Bank will bear all costs of this solicitation. The
proxies solicited hereby will be used only at the Special Meeting and at any
adjournment thereof.
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<PAGE>
DESCRIPTION OF THE PLAN OF CONVERSION
The Plan of Conversion to be presented for approval at the Special Meeting
provides for the Conversion to be accomplished through adoption of amended
charter and bylaws for the Bank to authorize the issuance of capital stock along
with the concurrent formation of a holding company, the subsequent conversion of
the Bank to a national bank under the name "Investors Federal Bank, National
Association" and the related transactions provided for in the Plan of
Conversion, including the adoption of an amended Federal Stock Charter and
Bylaws for the Bank and the adoption of Articles of Association and Bylaws for
Investors Federal Bank, National Association. As part of the Conversion, the
Plan of Conversion provides for the subscription offering (the "Subscription
Offering") of the Common Stock to the Bank's (i) Eligible Account Holders
(deposit account holders with an account balance of $50 or more as of June 30,
1995); (ii) Tax-Qualified Employee Plans, (iii) Supplemental Eligible Account
Holders (deposit account holders with an account balance of $50 or more as of
September 30, 1996); (iv) Other Members (deposit account holders and certain
borrowers eligible to vote at the Special Meeting who are not Eligible Account
Holders or Supplemental Eligible Account Holders); and (v) the Bank's employees,
officers and directors. Notwithstanding the foregoing, to the extent orders for
shares exceed the maximum of the appraisal range, Tax-Qualified Employee Plans
shall be afforded a first priority to purchase shares sold above the maximum of
the appraisal range. It is anticipated that Tax-Qualified Employee Plans will
purchase 8% of the Common Stock sold in the Stock Conversion. Concurrently with,
during or following completion of the Subscription Offering, members of the
general public, with a preference first to natural persons (or trusts
established by such persons) residing in Livingston, Caldwell and Daviess
Counties, Missouri, will be afforded the opportunity to purchase the Common
Stock not subscribed for in the Subscription Offering (the "Community Offering"
and when referred to with the Subscription Offering, the "Subscription and
Community Offering").
THE SUBSCRIPTION OFFERING HAS COMMENCED AS OF THE DATE OF MAILING OF THIS
PROXY STATEMENT. A PROSPECTUS EXPLAINING THE TERMS OF THE SUBSCRIPTION AND
COMMUNITY OFFERING, INCLUDING HOW TO ORDER AND PAY FOR SHARES AND DESCRIBING THE
BUSINESS OF THE BANK AND THE HOLDING COMPANY, ACCOMPANIES THIS PROXY STATEMENT
AND SHOULD BE READ BY ALL PERSONS WHO WISH TO CONSIDER SUBSCRIBING FOR COMMON
STOCK. THE SUBSCRIPTION AND COMMUNITY OFFERING EXPIRES AT NOON, CENTRAL TIME ON
DECEMBER __, 1996 UNLESS EXTENDED BY THE BANK AND THE HOLDING COMPANY.
The federal conversion regulations require that all stock offered in a
conversion must be sold in order for the conversion to become effective. The
conversion regulations require that the offering be completed within 45 days
after completion of the Subscription Offering period unless extended by the Bank
and the Holding Company with the approval of the OTS. This 45-day period
expires February __, 1997 unless the Subscription Offering is extended. If this
is not possible, an occurrence that is currently not anticipated, the Board of
Directors of the Bank and the Holding Company will consult with the OTS to
determine an appropriate alternative method of selling all unsubscribed shares
offered in the Stock Conversion. The Plan of Conversion provides that the Stock
Conversion must be completed within 24 months after the date of the Special
Meeting.
The Subscription and Community Offering or any other sale of the
unsubscribed shares will be made as soon as practicable after the date of the
Special Meeting. No sales of shares may be completed, either in the
Subscription and Community Offering or otherwise, unless the Plan of Conversion
is approved by the members of the Bank.
The commencement and completion of the Subscription and Community Offering,
however, is subject to market conditions and other factors beyond the Bank's
control. Due to adverse conditions in the stock market in the past, a number of
converting thrift institutions encountered significant delays in completing
their stock offerings or were not able to complete them at all. No assurance
can be given as to the length of time after approval of the Plan of Conversion
at the Special Meeting that will be required to complete the Subscription and
Community Offering or other sale of the Common Stock to be offered in the Stock
Conversion. If delays are experienced, significant changes may occur in the
estimated pro forma market value of the Holding Company's Common Stock, together
with corresponding changes in the offering price and the net proceeds realized
by the Bank and the Holding
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<PAGE>
Company from the sale of the Common Stock. The Bank and the Holding Company may
also incur substantial additional printing, legal, accounting and other expenses
in completing the Conversion.
The following is a brief summary of the Conversion and is qualified in its
entirety by reference to the Plan of Conversion, a complete copy of which is
attached hereto as Exhibit A. The Bank's federal stock charter and bylaws that
will become effective upon completion of the Stock Conversion are attached
hereto as Exhibits B and C, respectively. A copy of the National Bank's Articles
of Association and Bylaws that will become effective upon completion of the Bank
Conversion are attached hereto as Exhibits D and E, respectively. A copy of the
Holding Company's certificate of incorporation and bylaws are also available
from the Bank upon request.
PRINCIPAL EFFECTS OF CONVERSION
Depositors. The Conversion will not change the amount, interest rate,
withdrawal rights or federal insurance protection of deposit accounts, or affect
deposit accounts in any way other than with respect to voting and liquidation
rights as discussed below.
Borrowers. The rights and obligations of borrowers under their loan
agreements with the Bank will remain unchanged by the Conversion. The principal
amount, interest rate and maturity date of loans will remain as they were
contractually fixed prior to the Conversion.
Voting Rights of Members. Under the Bank's current federal mutual charter,
depositors and certain borrowers have voting rights as members of the Bank with
respect to the election of directors and certain other affairs of the Bank.
After the Conversion, exclusive voting rights with respect to all such matters
will be vested in the Holding Company as the sole stockholder of the Bank and,
following the Bank Conversion, the National Bank. Depositors and borrowers will
no longer have any voting rights, except to the extent that they become
stockholders of the Holding Company through the purchase of its Common Stock.
Voting rights in the Holding Company will be held exclusively by its
stockholders.
Liquidation Rights of Depositor Members. Currently, in the unlikely event
of liquidation of the Bank, any assets remaining after satisfaction of all
creditors' claims in full (including the claims of all depositors to the
withdrawal value of their accounts) would be distributed pro rata among the
depositors of the Bank, with the pro rata share of each being the same
proportion of all such remaining assets as the withdrawal value of each
depositor's account is of the total withdrawal value of all accounts in the Bank
at the time of liquidation. After the Conversion, the assets of the Bank would
first be applied, in the event of liquidation, against the claims of all
creditors (including the claims of all depositors to the withdrawal value of
their accounts). Any remaining assets would then be distributed to the persons
who qualified as Eligible Account Holders or Supplemental Eligible Account
Holders under the Plan of Conversion to the extent of their interests in a
"Liquidation Account" that will be established at the time of the completion of
the Conversion and then to the Holding Company as the sole stockholder of the
Bank's outstanding common stock. The Bank's depositors who did not qualify as
Eligible Account Holders or Supplemental Eligible Account Holders would have no
right to share in any residual net worth of the Bank in the event of liquidation
after the Conversion, but would continue to have the right as creditors of the
Bank to receive the full withdrawal value of their deposits prior to any
distribution to the Holding Company as the Bank's sole stockholder. In addition,
the Bank's deposit accounts will continue to be insured by the Federal Deposit
Insurance Corporation ("FDIC") to the maximum extent permitted by law, currently
up to $100,000 per insured account. The Liquidation Account will initially be
established in an amount equal to the net worth of the Bank as of the date of
the Bank's latest statement of financial condition contained in the final
prospectus used in connection with the Conversion. Each Eligible Account Holder
and/or Supplemental Eligible Account Holder will receive an initial interest in
the Liquidation Account in the same proportion as the balance in all of his
qualifying deposit accounts was of the aggregate balance in all qualifying
deposit accounts of all Eligible Account Holders and Supplemental Eligible
Account Holders on June 30, 1995 or September 30, 1996, respectively. For
accounts in existence on both dates, separate subaccounts shall be determined on
the basis of the qualifying deposits in such accounts on the record dates.
However, if the amount in the qualifying deposit account on any annual closing
date of the Bank is less than the lowest amount in such deposit account on the
Eligibility Record Date and/or Supplemental Eligibility Record Date, and any
subsequent annual closing date, this interest in the Liquidation Account will be
reduced by an amount proportionate to such reduction in the related deposit
account and will not thereafter be increased despite any
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<PAGE>
subsequent increase in the related deposit account. The Bank Conversion shall
not be deemed to be a complete liquidation of the Converted Bank for purposes of
the distribution of the liquidation account. Upon consummation of the Bank
Conversion, the liquidation account and all rights and obligations of the
Converted Bank in connection therewith, shall be assumed by the National Bank.
The Bank. Under federal law, the stock savings bank resulting from the
Stock Conversion will be deemed to be a continuation of the mutual association
rather than a new entity and will continue to have all of the rights,
privileges, properties, assets and liabilities of the Bank prior to the Stock
Conversion. The Stock Conversion will enable the Bank to issue capital stock,
but will not change the general objectives, purposes or types of business
currently conducted by the Bank, and no assets of the Bank will be distributed
in order to effect the Conversion, other than to pay the expenses incident
thereto. After the Stock Conversion, the Bank will remain subject to
examination and regulation by the OTS and will continue to be a member of the
Federal Home Loan Bank System. The Stock Conversion will not cause any change in
the executive officers or directors of the Bank.
The National Bank. The National Bank will be deemed to be a continuation of
the Converted Bank and will have all the rights, privileges, properties, assets
and liabilities of the Converted Bank. The Bank Conversion shall be deemed to
occur and shall be effective upon completion of all actions necessary or
appropriate to complete the Bank Conversion. After the Bank Conversion, the
National Bank will be subject to examination and regulation by the OCC and will
become a member of the Federal Reserve System. The National Bank intends to
remain a member of the Federal Home Loan Bank System. The Bank Conversion will
not cause any change in the executive officers or directors of the National
Bank.
Tax Consequences. Consummation of the Stock Conversion is expressly
conditioned upon prior receipt by the Bank of either a ruling from the Internal
Revenue Service or an opinion of Luse Lehman Gorman Pomerenk & Schick, P.C. with
respect to federal taxation, and a ruling of the Missouri taxation authorities
or an opinion of Lockridge, Constant & Conrad, LLC with respect to Missouri
taxation, to the effect that consummation of the Stock Conversion will not be
taxable to the Converted Bank or the Holding Company.
An opinion has been received from Luse Lehman Gorman Pomerenk & Schick,
P.C. with respect to the proposed Stock Conversion of the Bank, to the effect
that (i) the Stock Conversion will qualify as a reorganization under Section
368(a)(1)(F) of the Code, and no gain or loss will be recognized to the Bank in
either its mutual form or its stock form by reason of the proposed Stock
Conversion, (ii) no gain or loss will be recognized to the Bank upon the receipt
of money from the Holding Company for stock of the Bank; and no gain or loss
will be recognized to the Holding Company upon the receipt of money for Common
Stock of the Holding Company; (iii) the assets of the Bank in either its mutual
or its stock form will have the same basis before and after the Stock
Conversion; (iv) the holding period of the assets of the Bank will include the
period during which the assets were held by the Bank in its mutual form prior to
conversion; (v) no gain or loss will be recognized by the depositors of the Bank
upon the issuance to them of withdrawable deposit accounts in the Bank after the
Stock Conversion in the same dollar amount as their deposit accounts in the Bank
plus an interest in the Liquidation Account of the Bank, as described above, in
exchange for their deposit account in the Bank; (vi) the basis of the account
holder's deposit accounts in the Bank after the Stock Conversion will be the
same as the basis of his deposit accounts in the Bank prior to the Stock
Conversion; (vii) the basis of each account holder's interest in the Liquidation
Account will be zero; (viii) the basis of the Holding Company Common Stock to
its shareholders will be the Purchase Price thereof plus, in the case of stock
acquired by account holders, the basis, if any, in the Subscription Rights and a
shareholder's holding period for Holding Company Common Stock acquired through
the exercise of Subscription Rights shall begin on the date on which the
Subscription Rights are exercised; (ix) for purposes of Section 381 of the Code,
the Bank will be treated as if there had been no reorganization, accordingly,
the taxable year of the Bank will not end on the effective date of the Stock
Conversion and the tax attributes of the Bank will be taken into account by the
Bank in stock form as if there had been no reorganization; (x) the part of the
taxable year of the Bank before the reorganization and the part of the taxable
year of the Bank after the reorganization will constitute a single taxable year
of the Bank; (xi) the Bank, immediately after Stock Conversion, will succeed to
the bad debt reserve accounts of the Bank, in mutual form, and the bad debt
reserves will have the same character in the hands of the Bank after Stock
Conversion as if no distribution or transfer had occurred; and (xii) the
creation of the liquidation account will have no effect on the Bank's taxable
income, deductions or addition to reserve for bad debts either in its mutual or
stock form.
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The opinion from Luse Lehman Gorman Pomerenk & Schick, P.C. is based, among
other things, on certain assumptions, including the assumptions that the
exercise price of the Subscription Rights to purchase Holding Company Common
Stock will be approximately equal to the fair market value of that stock at the
time of the completion of the proposed Stock Conversion. The Holding Company and
the Bank have received a letter issued by Ferguson & Co., LLP ("Ferguson")
stating that pursuant to Ferguson's valuation, Ferguson is of the belief that
Subscription Rights issued in connection with the Stock Conversion will have no
value.
The Bank has also received an opinion of Luse Lehman Gorman Pomerenk &
Schick, P.C. to the effect that, based in part on the Ferguson Letter: (i) no
taxable income will be realized by depositors as a result of the receipt or
exercise of non-transferable Subscription Rights to purchase shares of Holding
Company Common Stock at fair market value; and (ii) no taxable income will be
realized by the Bank or Holding Company on the issuance of Subscription Rights
to eligible subscribers to purchase shares of Holding Company Common Stock at
fair market value.
If it is subsequently established that the Subscription Rights received by
such persons have an ascertainable fair market value, then, in such event, the
Subscription Rights will be taxable to the recipient in the amount of their fair
market value. In this regard, the Subscription Rights may be taxed partially or
entirely at ordinary income tax rates.
With respect to Missouri taxation, the Bank has received an opinion from
Lockridge, Constant & Conrad, LLC to the effect that, assuming the Stock
Conversion does not result in any federal taxable income, gain or loss to the
Bank in its mutual or stock form, the Holding Company, the account holders,
borrowers, officers, directors and employees and Tax-Qualified Employee Plans of
the Bank, the Stock Conversion should not result in any Missouri income tax
liability to such entities or persons.
APPROVAL, INTERPRETATION, AMENDMENT AND TERMINATION
Under the Plan of Conversion, the letter from the OTS giving approval
thereto, and applicable regulations, consummation of the Conversion is subject
to the satisfaction of the following conditions: (a) approval of the Plan of
Conversion by members of the Bank casting at least a majority of the votes
eligible to be cast at the Special Meeting; (b) sale of all of the Common Stock
to be offered in the Stock Conversion; and (c) receipt of favorable rulings or
opinions of counsel as to the federal and Missouri tax consequences of the Stock
Conversion. The Bank Conversion is subject to OCC approval of the conversion of
the Bank to a national bank.
The Plan of Conversion may be substantively amended by the Boards of
Directors of the Bank and the Holding Company with the concurrence of the OTS.
If the Plan of Conversion is amended, proxies which have been received prior to
such amendment will not be resolicited unless otherwise required by the OTS.
Also, as required by the federal regulations, the Plan of Conversion provides
that the transactions contemplated thereby may be terminated by the Board of
Directors of the Bank alone at any time prior to the Special Meeting and may be
terminated by the Board of Directors of the Bank at any time thereafter with the
concurrence of the OTS, notwithstanding approval of the Plan of Conversion by
the members of the Bank at the Special Meeting. All interpretations by the Bank
and the Holding Company of the Plan of Conversion and of the Order Forms and
related materials for the Subscription and Community Offering will be final,
except as regards or affects the OTS.
JUDICIAL REVIEW
Section 5(i)(2)(B) of the Home Owners' Loan Act, as amended, 12 U.S.C.
(S)1464(i)(2)(B) and Section 563b.8(u) of the Rules and Regulations promulgated
thereunder (12 C.F.R. Section 563b.8(u)) provide: (i) that persons aggrieved by
a final action of the OTS which approves, with or without conditions, or
disapproves a plan of conversion, may obtain review of such final action only by
filing a written petition in the United States Court of Appeals for the circuit
in which the principal office or residence of such person is located, or in the
United States Court of Appeals for the District of Columbia, requesting that the
final action of the OTS be modified, terminated or set aside, and (ii) that such
petition must be filed within 30 days after publication of notice of such final
action in the Federal Register, or 30 days after the date of mailing of the
notice and proxy statement for the meeting of the converting institution's
members at which the conversion is to be voted on, whichever is later. The
6
<PAGE>
notice of the Special Meeting of the Bank's members to vote on the Plan of
Conversion described herein is included at the beginning of this Proxy
Statement. The statute and regulation referred to above should be consulted for
further information.
ADDITIONAL INFORMATION
The information contained in the accompanying Prospectus, including a more
detailed description of the Plan of Conversion, consolidated financial
statements of the Bank and a description of the capitalization and business of
the Bank and the Holding Company, including the Bank's directors and executive
officers and their compensation, the conversion of the Bank to a national bank,
the anticipated use of the net proceeds from the sale of the Common Stock and a
description of the Common Stock, is intended to help you evaluate the Conversion
and is incorporated by this reference.
7
<PAGE>
YOUR VOTE IS VERY IMPORTANT TO US. PLEASE TAKE A MOMENT NOW TO COMPLETE
AND RETURN YOUR PROXY CARD IN THE POSTAGE-PAID ENVELOPE PROVIDED. YOU MAY STILL
ATTEND THE SPECIAL MEETING AND VOTE IN PERSON EVEN THOUGH YOU HAVE VOTED YOUR
PROXY. FAILURE TO SUBMIT A PROXY WILL HAVE THE SAME EFFECT AS VOTING AGAINST
THE CONVERSION.
If you have any questions, please call our Stock Information Center at
(816) ________.
IMPORTANT: YOU MAY BE ENTITLED TO VOTE IN MORE THAN ONE CAPACITY. PLEASE
SIGN, DATE AND PROMPTLY RETURN EACH PROXY CARD YOU RECEIVE.
--------------------------------------
THIS PROXY STATEMENT IS NOT AN OFFER TO SELL OR THE SOLICITATION OF AN
OFFER TO BUY STOCK. THE OFFER WILL BE MADE ONLY BY THE PROSPECTUS.
THIS SECURITY IS NOT A DEPOSIT OR ACCOUNT AND IS NOT FEDERALLY INSURED OR
GUARANTEED.
8
<PAGE>
REVOCABLE PROXY
SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
INVESTORS FEDERAL BANK AND SAVINGS ASSOCIATION
FOR A SPECIAL MEETING OF MEMBERS
TO BE HELD ON DECEMBER __, 1996
The undersigned member of Investors Federal Bank and Savings Association,
hereby appoints the full Board of Directors, with full powers of substitution,
as attorneys-in-fact and agents for and in the name of the undersigned, to vote
such votes as the undersigned may be entitled to vote at the Special Meeting of
Members of Investors Federal Bank and Savings Association, to be held at the
Bank's main office, 522 Washington Street, Chillicothe, Missouri on December __,
1996, at 4:00 p.m., Central time, and at any and all adjournments thereof. They
are authorized to cast all votes to which the undersigned is entitled as
follows:
FOR AGAINST
--- -------
The adoption of the Plan of
Conversion providing for the [ ] [ ]
conversion of the Bank from a
federally chartered mutual savings
association to a federally chartered
stock savings bank as a wholly owned
subsidiary of IFB Holdings, Inc., a
newly organized Delaware corporation
formed by the Bank for the purpose
of becoming the Holding Company for
the Bank, the subsequent conversion
of the Bank to a national bank under
the name "Investors Federal Bank,
National Association" and the
related transactions provided for in
such Plan of Conversion, including
the adoption of an amended Federal
Stock Charter and Bylaws for the
Bank and the adoption of the
Articles of Association and Bylaws
for Investors Federal Bank, National
Association pursuant to the laws of
the United States and the Rules and
Regulations administered by the
Office of Thrift Supervision and the
Office of the Comptroller of the
Currency.
NOTE: The Board of Directors is not aware of any other matter that may come
before the Special Meeting of Members.
- --------------------------------------------------------------------------------
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 THE MEETING, THIS PROXY WILL BE VOTED BY THE BOARD OF DIRECTORS IN
THEIR BEST JUDGMENT. AT THE PRESENT TIME, THE BOARD OF DIRECTORS KNOWS OF NO
OTHER BUSINESS TO BE PRESENTED AT THE MEETING.
- --------------------------------------------------------------------------------
9
<PAGE>
Votes will be cast in accordance with the Proxy. Should the undersigned be
present and elect to vote at the Special Meeting or at any adjournment thereof
and after notification to the Secretary of the Bank at said Meeting of the
member's decision to terminate this Proxy, then the power of said attorney-in-
fact or agents shall be deemed terminated and of no further force and effect.
The undersigned acknowledges receipt of a Notice of Special Meeting of Members
and a Proxy Statement dated November __, 1996, prior to the execution of this
Proxy.
----------------------------------
Date
----------------------------------
Signature
NOTE: Only one signature is required
in the case of a joint account.
- --------------------------------------------------------------------------------
PLEASE COMPLETE, DATE, SIGN AND MAIL THIS PROXY PROMPTLY IN
THE ENCLOSED ENVELOPE.
- --------------------------------------------------------------------------------
10
<PAGE>
EXHIBIT A
PLAN OF CONVERSION
<PAGE>
EXHIBIT B
FEDERAL STOCK CHARTER
<PAGE>
EXHIBIT C
FEDERAL STOCK BYLAWS
<PAGE>
EXHIBIT D
NATIONAL BANK ARTICLES OF ASSOCIATION
<PAGE>
EXHIBIT E
NATIONAL BANK BYLAWS
<PAGE>
Exhibit 99.4
IFB HOLDINGS, INC.
(PROPOSED HOLDING COMPANY FOR
INVESTORS FEDERAL BANK AND SAVINGS ASSOCIATION,
TO BECOME INVESTORS FEDERAL BANK, N.A.)
CHILLICOTHE, MISSOURI
PROPOSED MARKETING MATERIALS
<PAGE>
Marketing Materials for
Investors Federal Bank and Savings Association
Table of Contents
-----------------
I. Press Release
A. Explanation
B. Schedule
C. Examples
II. Question and Answer Brochure
A. Explanation
B. Method of Distribution
C. Example
III. Officer and Director Brochure
A. Explanation
B. Method of Distribution
C. Example
IV. Counter Cards, Lobby Posters and a Tombstone Announcement
A. Explanation
B. Quantity
C. Examples
V. Community Meeting Materials
A. Explanation
B. Example
VI. Proxygram
A. Explanation
B. Example
<PAGE>
I. Press Releases
A. Explanation
In an effort to assure that all customers, community members, and other
interested investors receive prompt accurate information in a simultaneous
manner, Trident Securities, Inc. advises Investors Federal to forward press
releases to national and regional publications, newspapers, radio stations,
etc., at various points during the conversion process.
Only press releases approved by Conversion Counsel will be forwarded for
publication in any manner.
B. Press Releases
1. Approval of Conversion by the Office of Thrift Supervision and the
Securities and Exchange Commission
2. Close of Stock Offering
C. Distribution Lists (see attached)
D. Examples (see attached)
<PAGE>
National Media Distribution List
--------------------------------
American Banker
- ---------------
One State Street Plaza
New York, New York 10004
Michael Weinstein
Business Wire
- -------------
212 South Tryon
Suite 1460
Charlotte, North Carolina 28281
Wall Street Journal
- -------------------
World Financial Center
200 Liberty
New York, New York 10004
SNL Securities
- --------------
Post Office Box 2124
Charlottesville, Virginia 22902
Barrons
- -------
Dow Jones & Company
Barron's Statistical Information
200 Burnett Road
Chicopee, Massachusetts 01020
Investors Business Daily
- ------------------------
12655 Beatrice Street
Post Office Box 661750
Los Angeles, California 90066
<PAGE>
Press Release
FOR IMMEDIATE RELEASE
---------------------
For More Information Contact:
Earle Teegarden, Jr., President
Telephone: (816) 646-3733
INVESTORS FEDERAL BANK AND SAVINGS ASSOCIATION
----------------------------------------------
STOCK SALE APPROVED
-------------------
Chillicothe, Missouri - Mr. Earle Teegarden, Jr., President of Investors
Federal Bank and Savings Association ("Investors Federal"), Chillicothe,
Missouri, announced today that Investors Federal has received approval from the
Office of Thrift Supervision to convert from a federal mutual savings and loan
association to a federal stock savings and loan association and to become a
wholly-owned subsidiary of a newly-formed holding company, IFB Holdings, Inc.
(the "Company"). As soon as possible, following completion of the stock
conversion, Investors Federal intends to convert from a federal stock savings
and loan association to a national bank to be known as "Investors Federal Bank,
N.A.."
A Prospectus and Proxy Statement describing the Plan of Conversion will be
mailed to certain members of Investors Federal on or about November 16, 1996.
Under the Plan of Conversion, the company is offering an estimated 225,000
shares of common stock at $20.00 per share. Certain of Investors Federal's past
and present depositors and borrowers will have the opportunity to purchase stock
through a subscription offering that closes on December 17, 1996. Shares that
are not subscribed for during the subscription offering, if any, will be offered
to the general public, with preference given to natural persons and trusts of
natural persons who are residents of Livingston, Caldwell and Daviess Counties,
Missouri. The offerings are being managed by Trident Securities, Inc., of
Raleigh, North Carolina.
<PAGE>
Earle Teegarden, Jr. stated "Investors Federal remains committed to its
local market as a hometown community financial institution with even stronger
financial resources."
Investors Federal Bank and Savings Association is located in Chillicothe,
Missouri with branch offices in Hamilton and Gallatin, Missouri. The
Association was founded in 1934. At June 30, 1996, Investors Federal had total
assets of $52.5 million and retained income of $3.3 million. Customers or
interested members of the community with questions concerning the stock offering
should call the institution at (816) 646-3733 or visit Investors Federal.
<PAGE>
Press Release FOR IMMEDIATE RELEASE
- ------------- ---------------------
Contact: Earle Teegarden, Jr., President
Telephone: (816) 646-3733
IFB Holdings, Inc., HOLDING COMPANY FOR
---------------------------------------
Investors Federal Bank and Savings Association,
-----------------------------------------------
COMPLETES INITIAL STOCK OFFERING
--------------------------------
Chillicothe, Missouri - Mr. Earle Teegarden, Jr., President of Investors
Federal Bank and Savings Association ("Investors Federal"), based in
Chillicothe, Missouri, announced today that IFB Holdings, Inc., the holding
company for Investors Federal Bank and Savings Association, has completed its
initial common stock offering. It is anticipated that the common stock of IFB
Holdings, Inc. will begin trading over-the-counter through the National Daily
Quotation Symbol "Pink Sheets" on or about January 2, 1997. Trident Securities
will match make a market in the Common Stock. In addition, following the stock
conversion, the institution will convert to a national bank now known as
"Investors Federal Bank, N.A. (the "Bank")." IFB Holdings, Inc., will issue
__________ shares of its common stock.
The net proceeds contributed to Investors Federal upon conversion will
substantially increase its capital. Investors Federal ultimately intends to use
such funds for general corporate purposes, among them the origination of loans
and other investments. It is expected that in the interim all or part of the
proceeds will be invested in short-term and intermediate-term securities.
On __________, 1996, Investors Federal's Plan of Conversion was approved by
Investors Federal's depositor and borrower members at a Special Meeting that was
held at the main office of the institution.
Mr. Teegarden indicated that the Officers and Board of Directors of
Investors Federal want to express their thanks for the response by customers and
the community to the stock
<PAGE>
offering and that the Bank looks forward to serving the needs of its customers
as a stock institution.
Trident Securities, Inc. of Raleigh, North Carolina managed the
subscription and community offerings for IFB Holdings, Inc.
<PAGE>
II. Question and Answer Brochure
A. Explanation
The Question and Answer brochure is an essential marketing piece in any
conversion. It serves to answer some of the most commonly asked questions
in "plain, everyday language." Although most of the answers are taken
verbatim from the Prospectus and Proxy Statement, it assists the individual
in finding answers to simple questions.
Conversion Counsel approves the language for each Question and Answer.
Trident Securities, Inc. and Investors Federal will be responsible for any
introductory or concluding remarks, design, layout, color, and paper stock.
This will be coordinated through Trident Securities, Inc. in conjunction
with the financial printer.
B. Method of Distribution
There are three primary methods of distribution of the Question and Answer
brochure. However, regardless of the method, the brochure is always
accompanied by a Prospectus.
1. A Question and Answer brochure is sent out in the initial mailing to
all members of Investors Federal.
2. Question and Answer brochures are available in Investors Federal's
office.
3. Question and Answer brochures are sent out in a standard information
packet to all interested investors who phone the Stock Information
Center requesting information.
C. Example
<PAGE>
Investors Federal Bank and Savings Association ("Investors Federal")
Chillicothe, Missouri
Questions and Answers Regarding the Subscription and Community Offering
MUTUAL TO STOCK CONVERSION
--------------------------
Investors Federal's Board of Directors has unanimously voted to convert the
savings association from its present mutual form to a stock institution, subject
to approval of the conversion by Investors Federal's members and regulatory
authorities, and, thereafter, to convert to a federal savings and loan
association and then to a national bank. Complete details on the conversion,
including reasons for conversion, are contained in the Prospectus and Proxy
Statement. We urge you to read them carefully.
This brochure is provided to answer basic questions you might have about the
conversion. Remember, the conversion will not affect the rate on any of your
savings accounts, deposit certificates, or loans.
1. Q. What is a "Conversion"?
A. Conversion is a change in the legal form of organization. Following
completion of the conversion from a federal mutual savings and loan
association to a federal stock savings and loan association, Investors
Federal intends to convert from a federal stock savings and loan
association to a national bank to be known as "Investors Federal Bank,
N.A." (the "Bank"). Investors Federal currently operates as a federal
mutual savings and loan association with no shareholders. Through the
conversion, Investors Federal will form a holding company, IFB
Holdings, Inc., which will ultimately own all of the outstanding stock
of the Bank. IFB Holdings, Inc. will issue stock in the conversion,
as described below, and will be a publicly-owned company.
2. Q. Why is Investors Federal converting?
A. The stock form of ownership is used by most business corporations and
financial institutions. Investors Federal has reached an important
point in its development with its decision to convert to the stock
form of ownership. Investors Federal's management believes the
continued diversification of the institution's asset and deposit base
and the establishment of new banking services should enhance long-term
operating potential. The capital raised by issuing stock will:
* Enhance the Association's capital position.
* Facilitate future access to the capital markets.
<PAGE>
* Provide additional funds for increased lending and investment
opportunities.
* Enable the Association to provide commercial banking services.
* Enhance long-term operating potential.
3. Q. Will the conversion have any effect on savings accounts,
certificates of deposit or loans with Investors Federal?
A. No. The conversion will not change the amount, interest rate or
withdrawal rights of savings and checking accounts or certificates of
deposit. The rights and obligations of borrowers under their loan
agreements will not be affected.
However, upon consummation of the conversion, Investors Federal's
deposit account holders and borrowers will no longer have voting
rights unless they purchase common stock in IFB Holdings, Inc.
4. Q. Will the conversion cause any changes in personnel or management?
A. No. The conversion will not cause any changes in personnel or
management. The normal day-to-day operations will continue as before.
5. Q. Did the Board of Directors of Investors Federal approve the
conversion?
A. Yes. The Board of Directors unanimously adopted the Plan of
Conversion on September 23, 1996.
THE SUBSCRIPTION AND COMMUNITY OFFERING
---------------------------------------
6. Q. Who is entitled to buy IFB Holdings, Inc. common stock?
A. Subscription rights to buy common stock will be given in order of
priority to (i) depositors of the Association as of June 30, 19954
with a $50.00 minimum deposit at that date (the "Eligible Account
Holders"); (ii) the Company's employee stock ownership plan (the
"ESOP"), a tax qualified employee stock benefit plan; (iii) depositors
of the Association with $50.00 or more on deposit as of September 30,
1996 (the "Supplemental Eligible Account Holders"); and (iv) certain
depositors and borrowers as of ________, 1996 ("Other Members"),
subject to the purchase limitations set forth in the Plan of
Conversion.
Shares that are not subscribed for during the subscription offering,
if any, may be offered to the general public through a community
offering with preference given to natural persons and trusts of
natural persons who are permanent residents of Livingston, Caldwell
and Daviess Counties, Missouri (the "Local Community"). It is
anticipated that any shares not subscribed for in the
<PAGE>
Subscription and Community Offerings will be offered to certain
members of the general public through a syndicate of registered broker
dealers pursuant to selected dealers agreements in a Syndicated
Community Offering.
7. Q. How do I subscribe for shares of stock?
A. Eligible customers wishing to exercise their subscription rights must
return the enclosed Stock Order Form to Investors Federal. The Stock
Order Form must be completed and returned along with full payment or
appropriate instructions authorizing a withdrawal from a deposit
account at Investors Federal on or prior to the close of the
Subscription Offering which is 12:00 noon, Central time, on _________,
1996, unless extended. Members of the public who wish to order stock
directly from Investors Federal in the Community Offering should
return their Stock Order Form and accompanying payment to Investors
Federal prior to 12:00 noon Central time on ___________, 1996, unless
extended.
8. Q. How can I pay for my subscription?
A. First, you may pay for your stock in cash (if delivered in person to
Investors Federal) or by check or money order. These funds will earn
interest at Investors Federal's passbook rate from the day we receive
them until the completion or termination of the conversion.
Second, you may authorize us to withdraw funds from your Investors
Federal savings account or certificate of deposit without early
withdrawal penalty. These funds will continue to earn interest at the
rate in effect for your account until completion of the offering at
which time your funds will be withdrawn for your purchase. Funds
remaining in this account (if any) will continue at the contractual
rate unless the withdrawal reduces the account balance below the
applicable minimum in which case you will receive interest at the
passbook rate. A hold will be placed on your account for the amount
you specify for stock payment. You will not have access to these
funds from the day we receive your order until the completion or
termination of the conversion.
If you want to use Individual Retirement Account deposits held at
Investors Federal to purchase stock, call our Stock Information Center
at (816) _________ for assistance. There will be no early withdrawal
or IRS penalties incurred by these transactions.
9. Q. When must I place my order for shares of stock?
A. To exercise subscription rights in the subscription offering, a Stock
Order Form must be received by Investors Federal with full payment for
all shares subscribed for not later than 12:00 noon, Central time, on
_________, 1996.
<PAGE>
Non-customers desiring to order shares through the community offering
must order shares before the close of the community offering, which
will be at 12:00 noon, Central time on _________, 1996, unless
extended.
10. Q. How many shares of stock are being offered?
A. IFB Holdings, Inc. is offering 225,000 shares of common stock at a
price of $20.00 per share. The number of shares may be decreased to
191,250 or increased to 297,562 in response to the independent
appraiser's final determination of the consolidated pro forma market
---------
value of the common stock issued in the conversion.
11. Q. What is the minimum and maximum number of shares that I can purchase
during the offering period?
A. The minimum number of shares that may be purchased is 25 shares. No
Stock Order Form will be accepted for less than $500.00. The maximum
number of shares may not exceed 10,000 shares for any individual or
their associates or any group acting in concert as defined in
Investors Federal's Plan of Conversion.
12. Q. How was it determined that between 191,250 shares and 297,562 shares
of stock would be issued at $20.00 per share?
A. The share range was determined through an appraisal of Investors
Federal by Ferguson & Company, an independent appraisal firm
specializing in the thrift industry.
13. Q. Must I pay a commission on the stock for which I subscribe?
A. You will not pay a commission on stock purchased in the Subscription
Offering or the Community Offering or Syndicated Community Offering,
if any. Conversion expenses, including commissions, will be deducted
from the proceeds of the offering upon completion of the conversion.
14. Q. Will I receive interest on funds I submit for stock purchases?
A. Yes. Investors Federal will pay its current passbook rate from the
date funds are received (with a completed Stock Order Form) during the
subscription and community offerings until completion of the stock
conversion.
15. Q. If I have misplaced my Stock Order Form, what should I do?
A. Investors Federal will mail you another order form or you may obtain
one from the Investors Federal main office. If you need assistance in
obtaining or completing a Stock Order Form, a Investors Federal
employee or Trident Securities, Inc. Representative will be happy to
help you.
<PAGE>
16. Q. Will there be any dividends paid on the stock?
A. The payment of cash dividends on the Common Stock will be subject to
the requirements of applicable law and the determination by the Board
of Directors of the Company that the net income, capital and financial
condition of the Company, banking industry trends and general economic
conditions justify the payment of dividends. The Board of Directors
has declared an annual dividend of $0.60 a share paid semi annually.
This dividend will depend upon various factors, including the
Converted Association's (or the Bank's) profitability and liquidity,
alternative investment opportunities and regulatory restrictions on
dividend payments and on capital levels. In addition, from time to
time in an effort to manage capital to a reasonable level, the Board
may determine if it is prudent to pay periodic special cash dividends.
Periodic special cash dividends, if paid, may be paid in addition to,
or in lieu of, regular cash dividends. Like all possible dividends,
there can be no assurance that periodic special cash dividends will be
paid or, that, if paid, will continue to be paid.
17. Q. How much stock do the directors and officers of Investors Federal
intend to purchase through the Subscription Offering?
A. Directors and executive officers intend to purchase approximately
$701,000 of the stock to be offered in the conversion. The purchase
price paid by directors and officers will be the same as that paid by
customers and the general public.
18. Q. Are the subscription rights transferable to another party?
A. No. Pursuant to federal regulations, subscription rights granted to
Eligible Account Holders, Supplemental Eligible Account Holders and
Other Members may be exercised only by the person(s) to whom they are
granted. Any person found to be transferring subscription rights will
be subject to forfeiture of such rights.
19. Q. I closed my account several months ago. Someone told me that I am
still eligible to buy stock. Is that true?
A. If you were an account holder on the Eligibility Record Date, June 30,
1995, or the Supplemental Eligibility Record Date, September 30, 1996,
you are entitled to purchase stock without regard to whether you
continued to hold your Investors Federal account.
20. Q. May I obtain a loan from Investors Federal using stock as collateral
to pay for my shares?
A. No. Federal regulations do not allow Investors Federal to make loans
for this purpose, but other financial institutions could make a loan
for this purpose.
<PAGE>
21. Q. Will the FDIC (Federal Deposit Insurance Corporation) insure the
shares of stock?
A. No. The shares are not and may not be insured by the FDIC. However,
the Savings Association Insurance Fund of the FDIC will continue to
insure savings accounts and certificates of deposit up to the
applicable limits allowed by law.
22. Q. Will there be a market for the stock following the conversion?
A. Neither the Company nor the Association has ever issued stock before,
and due to the relatively small size of the Offerings, it is unlikely
that an active and liquid trading market will develop or be
maintained. The Company will request that Trident Securities
undertake to match offers to buy and offers to sell the Common Stock,
and Trident Securities intends to list the Common Stock over-the-
counter through the National Daily Quotation System "Pink Sheets"
published by the National Quotation Bureau, Inc. However, purchasers
of Common Stock should have a long-term investment intent and
recognize that the absence of an active and liquid trading market may
make it difficult to sell the Common Stock and may have an adverse
effect on the price.
23. Q. Can I purchase stock using funds in a Investors Federal IRA account?
A. Yes. Contact the Stock Information Center for the necessary forms.
However, it takes several days to process the necessary IRA forms and,
therefore, it is necessary that your response be received by ________,
1996, to accommodate your order.
ABOUT VOTING "FOR" THE PLAN OF CONVERSION
24. Q. Am I eligible to vote at the Special Meeting of Members to be held to
consider the Plan of Conversion?
A. At the Special Meeting of Members to be held on _______, 1996, you are
eligible to vote if you are one of the "Voting Members," who are
holders of Investors Federal's deposits or other authorized accounts
or loans as of _______, 1996 (the "Voting Record Date") for the
Special Meeting. However, Association members of record as of the
close of business on the Voting Record Date who cease to be depositors
or borrowers prior to the date of the Special Meeting are no longer
members and will not be entitled to vote at the Special Meeting. If
you are a Voting Member, you should have received a proxy statement
and proxy card with which to vote.
25. Q. How many votes do I have as a Voting Member?
A. Each account holder is entitled to one vote for each $100, or fraction
thereof, on deposit in such account. Each borrower who holds eligible
borrowings is entitled
<PAGE>
to cast one vote in addition to the number of votes, if any, he or she
is entitled to vote as an account holder. No member may cast more
than 1,000 votes.
26. Q. If I vote "against" the Plan of Conversion and it is approved, will I
be prohibited from buying stock during the subscription offering?
A. No. Voting against the Plan of Conversion in no way restricts you
from purchasing stock in either the subscription offering or the
community offering.
27. Q. What happens if Investors Federal does not get enough votes to approve
the Plan of Conversion?
A. Investors Federal's Conversion would not take place and Investors
Federal would remain a mutual savings and loan association.
28. Q. As a qualifying depositor or borrower of Investors Federal, am I
required to vote?
A. No. However, failure to return your proxy card will have the same
effect as a vote "Against" the Plan of Conversion.
29. Q. What is a Proxy Card?
A. A Proxy Card gives you the ability to vote without attending the
Special Meeting in person. You may attend the meeting and vote in
person, even if you have returned your proxy card, if you choose to do
so. However, if you are unable to attend, you still are represented
by proxy.
30. Q. How does the conversion affect me?
A. The conversion is intended, among other things, to assist Investors
Federal in maintaining and expanding its many services to Investors
Federal's customers and community. By purchasing stock, you will also
have the opportunity to invest in IFB Holdings, Inc., the holding
company that will own the national bank into which Investors Federal
will convert. However, there is no obligation to purchase stock; the
purchase of stock is strictly optional.
31. Q. How can I get further information concerning the stock offering?
A. You may call the Stock Information Center, collect at (410) _________
for further information or a copy of the Prospectus, Stock Order Form,
Proxy Statement and Proxy Card.
THIS INFORMATION IS NEITHER AN OFFER TO SELL NOR A SOLICITATION OF AN OFFER TO
BUY SECURITIES. THE OFFER IS MADE ONLY BY THE PROSPECTUS. A PROSPECTUS CAN BE
OBTAINED AT THE INVESTORS FEDERAL
<PAGE>
OFFICE OR BY CALLING THE INVESTORS FEDERAL STOCK INFORMATION CENTER. THERE
SHALL BE NO SALE OF STOCK IN ANY STATE IN WHICH ANY OFFER, SOLICITATION OF AN
OFFER OR SALE OF STOCK WOULD BE UNLAWFUL.
THE STOCK IS NOT A DEPOSIT OR ACCOUNT AND IS NOT FEDERALLY INSURED OR
GUARANTEED.
FOR YOUR CONVENIENCE
In order to assist you during the stock offering period, we have
established a Stock Information Center to answer your questions. Please call
collect:
(816) _________
<PAGE>
III. Officer and Director Brochure
A. Explanation
An Officer and Director Brochure merely highlights the intended stock
purchases shown in the Prospectus.
B. Method of Distribution
There are three primary methods of distribution of Officer and Director
Brochures. However, regardless of the method, they are always accompanied
by a Prospectus.
1. An Officer and Director Brochure is sent out in the initial mailing to
all members of the Association.
2. Officer and Director Brochures will be available in any of the
Association's offices.
3. Officer and Director Brochures are sent out in a standard information
packet to all interested investors who telephone the Stock Information
Center requesting information.
<PAGE>
OFFICER AND DIRECTOR STOCK PURCHASE COMMITMENTS
Name Amount Shares Percent at Midpoint
- ---- ------ ------ -------------------
(to be completed)
Total $701,000 18.7%
======== =====
THIS INFORMATION IS NEITHER AN OFFER TO SELL NOR A SOLICITATION OF AN OFFER TO
BUY SECURITIES. THE OFFER IS MADE ONLY BY THE PROSPECTUS.
THE STOCK IS NOT A DEPOSIT OR ACCOUNT AND IS NOT FEDERALLY INSURED OR
GUARANTEED.
<PAGE>
IV. Counter Cards, Lobby Posters and the Tombstone Announcement
A. Explanation
Counter cards, lobby posters and the tombstone announcement serve three
-----
purposes: (1) As a notice to Investors Federal's customers and members of
the local community that the stock sale is underway; (2) to remind the
customers of the end of the Subscription Offering; and (3) to invite
members of the community to an informational meeting, if applicable.
Trident has learned in the past that many people need reminding of the
deadline for subscribing and therefore we suggest the use of these simple
reminders.
B. Quantity
Approximately 3 - 4 counter cards will be used at the Association's office,
at teller windows and on customer service representatives' desks. These
counter cards will be exact duplicates of the lobby poster and will be no
larger than 8-1/2" x 11".
Approximately 1 - 2 lobby posters will be used at the office of the
Association. These posters will be approximately 2' x 3'.
Tombstone announcements may be used for placement in local newspapers. The
advertisements will run no more than twice each in the local newspaper.
The ads will be no larger than 8-1/2" x 11".
C. Examples enclosed
<PAGE>
POSTER
Investors Federal Bank and Savings Association
STOCK OFFERING MATERIALS
AVAILABLE HERE
Customer and Community Priority Rights for the Stock Offering
by IFB Holdings, Inc.
Expire on _______, 1996
<PAGE>
- --------------------------------------------------------------------------------
This announcement is neither an offer to sell nor a solicitation of
an offer to buy these securities. The offer is made only by
the Prospectus and Proxy Statement. These shares have not been
approved or disapproved by the Securities and Exchange
Commission Office of Thrift Supervision, or Federal Deposit Insurance
Corporation, nor has such Commission, Office or Corporation passed upon the
accuracy or adequacy of the Prospectus and Proxy Statement.
Any representation to the contrary is unlawful.
NEW ISSUE __________, 1996
- ---------
UP TO 297,562 SHARES
These shares are being offered pursuant
to a Plan of Conversion whereby
INVESTORS FEDERAL BANK AND SAVINGS ASSOCIATION
of Chillicothe, Missouri will convert
from a federal mutual savings and loan association
to a federal stock savings and loan association and,
following completion of the offering, convert to a
national bank, to be known as "Investors Federal Bank, N.A."
and become the wholly-owned subsidiary of
IFB HOLDINGS, INC.
COMMON STOCK
_______________
PRICE $20.00 PER SHARE
_______________
Copies of the Prospectus may be obtained in any State
in which this announcement
is circulated from such of the undersigned or other brokers and dealers
as may legally offer these securities in such state.
TRIDENT SECURITIES, INC.
For a copy of the Prospectus call (816) ________.
- --------------------------------------------------------------------------------
<PAGE>
V. Community Meeting Materials
A. Explanation
In order to educate the public about the stock offering, Trident suggests
holding Community meetings in various locations. In an effort to target a
group of interested investors, Trident requests that each Director of the
Association submit a list of acquaintances that he or she would like to
invite to a Community meeting.
B. Method of Distribution of Invitations and Prospect Letters
Each Director submits his list of prospects.
Invitations are sent to each Director's prospects through the mail. All
invitations are preceded by a Prospectus and all attendees are given a
Prospectus at the meeting. Letters will be sent to prospects to thank them
for their attendance and to remind them of closing dates.
C. Examples enclosed
<PAGE>
The Directors and Officers
of
Investors Federal Bank and Savings Association
cordially invite you to attend a brief
presentation regarding the stock offering of
IFB Holdings, Inc., our proposed holding company
Please join us at the
Place
Address
Date
at 7:00 p.m.
for hors d'oeuvres
R.S.V.P.
(___) (Collect)
<PAGE>
VI. Proxygram
A. Explanation
A proxygram is used when the majority of votes needed to adopt the Plan of
Conversion is still outstanding. The proxygram is mailed to those "target
vote" depositors who have not previously returned their signed proxy.
The target vote depositors are determined by the conversion agent.
B. Example enclosed
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
P R O X Y G R A M
(LOGO)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
YOUR VOTE ON OUR CONVERSION PLAN HAS NOT BEEN RECEIVED.
---- --------
YOUR VOTE IS VERY IMPORTANT, PARTICULARLY SINCE FAILURE TO VOTE
- ---------------------------
IS EQUIVALENT TO VOTING AGAINST THE PLAN.
VOTING FOR THE CONVERSION PLAN WILL NOT AFFECT THE INSURANCE OF
YOUR ACCOUNT. IT WILL CONTINUE TO BE INSURED UP TO THE LEGAL LIMIT ($100,000
----------------------
PER ACCOUNT AS DEFINED BY LAW) BY THE SAVINGS ASSOCIATION INSURANCE FUND OF THE
FEDERAL DEPOSIT INSURANCE CORPORATION, AN AGENCY OF THE U.S. GOVERNMENT.
REMEMBER, VOTING FOR CONVERSION DOES NOT OBLIGATE YOU TO BUY
--------
ANY STOCK.
PLEASE ACT PROMPTLY! SIGN THE ENCLOSED PROXY CARD AND MAIL OR
----------
DELIVER IT TO Investors Federal Bank and Savings Association.
WE RECOMMEND THAT YOU VOTE "FOR" THE PLAN OF CONVERSION.
-----
THANK YOU!
THE BOARD OF DIRECTORS AND
MANAGEMENT OF INVESTORS FEDERAL
BANK AND SAVINGS ASSOCIATION
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
Exhibit 99.5
IFB HOLDINGS, INC.
NUMBER OF SHARES
Fill in the number of shares you wish to purchase and the total amount due. No
fractional shares will be issued. The minimum purchase is _____ shares.
METHOD OF PAYMENT
Check the appropriate box(es). You may pay by check, bank draft or money order
and/or authorize withdrawal from your Investors Federal savings or certificate
account(s). If paying by certified or teller's check, please make it payable to
Investors Federal Bank and Savings Association. Your funds will earn interest
at the Bank's certificate rate per annum until the offering is completed. If
paying by withdrawal, please list the appropriate account number(s); these
designated funds will continue to earn interest from a savings or certificate
account at the same account rate and cannot be withdrawn by you until the
Closing Date, as defined on the front page of the Prospectus.
STOCK REGISTRATION
Print the name(s) in which you want the stock registered. See the reverse side
of this form for registration guidelines.
Enter the social security number (or tax I.D. number) of the registered owner.
Only one number is required.
Indicate the manner in which you wish to take ownership by checking the
appropriate box. If necessary, check other and note ownership such as
corporation, estate or trust. If stock is purchased for a trust, the date of
the trust agreement and trust title must be included.
NASD AFFILIATION
Please refer to the National Association of Securities Dealers, Inc. (NASD)
affiliation section and check the box if applicable. Under the guidelines of
the NASD, members of the NASD and their associates are subject to certain
restrictions on the transfer of securities purchased in accordance with
subscription rights and to certain reporting requirements upon the purchase of
such securities, as established by the NASD.
_____ Check here and initial below if you are a member of the NASD or a person
associated with an NASD member or a member of the immediate family of any such
person to whose support such person contributes directly or indirectly or if you
have an account in which an NASD member or person associated with an NASD member
has a beneficial interest. I agree (i) not to sell, transfer or hypothecate the
stock for a period of 150 days following issuance, and (ii) to report this
purchase order in writing to the applicable NASD member I am associated with
within one day of the payment for the stock. (Initials)_________
ACKNOWLEDGMENT
Sign and date the form. When purchasing as a custodian, corporate officer,
etc., add your full title to your signature. An additional signature is
required only when payment is by withdrawal from an account that requires more
than one signature to withdraw funds.
DEADLINE
This form along with the Form of Acknowledgment, properly executed and with the
correct payments must be received by Noon, Central Time, ___________, 1996 and
will be deemed received upon the date and the time of delivery of the form to
our office. Please submit your order using the enclosed postage-paid envelope
or hand-delivering to any Investors Federal office.
TELEPHONE INFORMATION
Please enter both a daytime and evening telephone number where you may be
reached in the event we cannot execute your order as given.
Daytime Phone ( ) ____________________
Evening Phone ( ) ____________________
STOCK ORDER FORM
NUMBER OF SHARES OFFERING PRICE TOTAL AMOUNT DUE
X $ 20.00 =
- --------------- --------------------- ---------------------
_____ Enclosed is a certified teller's check, bank draft, or money order
PAYABLE TO INVESTORS FEDERAL BANK AND SAVINGS ASSOCIATION for $________.
_____ I authorize withdrawal from the following Investors Federal account(s):
Account Number(s) Amount
$
$
Total Withdrawal $
- -------------------------------------------------------------------
Name(s) in which your stock is to be registered
- -------------------------------------------------------------------
Name(s) in which your stock is to be registered
- -------------------------------------------------------------------
Address
- -------------------------------------------------------------------
City County
- -------------------------------------------------------------------
State Zip Code
- -------------------------------------------------------------------
Social Security # or Tax ID #
_______ Individual _______ Joint Tenants _______ Tenants in Common
_______ Uniform Gift or Transfer to Minors
_______ Other _____________________________________________
I (we) acknowledge receipt of the Prospectus and the terms and conditions
described therein. I (we) understand that, after receipt by Investors Federal,
this order may not be modified or withdrawn without the consent of Investors
Federal. Further, I (we) certify that my (our) purchase does not conflict with
the purchase limitations in the Plan of Conversion, and that the shares being
purchased are for my (our) account only and that there is no present agreement
or understanding regarding any subsequent sale or transfer of such shares.
Under penalties of perjury, I (we) certify that: (1) the Social Security number
or Taxpayer Identification number given above is correct; and (2) I am not
subject to backup withholding. INSTRUCTIONS: YOU MUST CROSS OUT #2 ABOVE IF
YOU HAVE BEEN NOTIFIED BY THE INTERNAL REVENUE SERVICE THAT YOU ARE SUBJECT TO
WITHHOLDING BECAUSE OF UNDER-REPORTING INTEREST OR DIVIDENDS ON YOUR TAX RETURN.
I ACKNOWLEDGE THAT THIS SECURITY IS NOT A DEPOSIT OR ACCOUNT AND IS NOT
FEDERALLY INSURED AND IS NOT GUARANTEED BY INVESTORS FEDERAL OR ANY FEDERAL OR
STATE GOVERNMENT OR AGENCY.
If anyone asserts that this security is federally insured or guaranteed, or is
as safe as an insured deposit, I should call the Midwest Regional Director of
the Office of Thrift Supervision, Irving, Texas at (214) 281-2000.
I further certify that, before purchasing the Common Stock of IFB Holdings,
Inc., I received a Prospectus. The Prospectus that I received contains
disclosure concerning the nature of the security being offered and describes the
risks involved in the investment. See the "Risk Factors" section of the
Prospectus. In executing this Stock Order Form I affirm that I have read the
Prospectus and am aware of the risks associated with investing in IFB Holdings,
Inc. Common Stock.
- ------------------------------------------------------------
Signature Date
- ------------------------------------------------------------
Additional Signature (if required) Date
FOR ASSISTANCE, PLEASE CALL THE STOCK INFORMATION CENTER,
INVESTORS FEDERAL BANK AND SAVINGS ASSOCIATION,
AT (___) ___-____ FROM 9:00 A.M. TO 5:00 P.M., CENTRAL TIME,
MONDAY THROUGH FRIDAY.
<PAGE>
GUIDELINES FOR REGISTERING STOCK
For reasons of clarity and standardization, the stock transfer industry has
developed uniform stock ownership registration which we will use in issuing your
stock certificate. Common ownership registrations are explained below. If you
have any questions about how your IFB Holdings, Inc. common stock should be
registered, see your legal advisor.
To ensure correct registration, please follow the instructions for the
ownership you select.
- --------------------------------------------------------------------------------
GENERAL INSTRUCTION: . Include the first name, middle initial, and last name
of each person listed. Avoid the use of an initial
in place of the first name.
. Do not use titles such as Mr., Mrs., Dr., etc.
. Omit words that do not affect ownership rights such
as special account, personal property, etc.
- --------------------------------------------------------------------------------
INDIVIDUAL: Instructions: Print the first name, middle initial, and
last name of the person in whose name the stock is to be
registered. You may not list beneficiaries for this
ownership.
- --------------------------------------------------------------------------------
JOINT TENANTS: Joint Tenancy with Right of Survivorship identifies two or
more persons as owners of the stock. Upon the death of one
of the owners, ownership automatically passes to the
surviving tenant(s).
Instructions: Print the first name, middle initial, and
last name of each co-tenant. You may not list
beneficiaries for this ownership.
- --------------------------------------------------------------------------------
UNIFORM GIFTS TO For residents of certain states, stock may be held in the
MINORS/UNIFORM name of a custodian for the benefit of a minor under the
TRANSFERS TO MINORS: uniform Transfers to Minors Act. For residents of most
other states, stock may be held in a similar type of
ownership under the Uniform Gifts to Minors Act of the
individual states. For either ownership, the minor is the
actual owner of the stock with the adult custodian being
responsible for the investment until the minor reaches
legal age.
Instructions: If you are a Missouri resident and wish to
register stock in this ownership check Uniform Transfers
to Minors Act. For other states, see your legal advisor if
you are unsure about the correct registration of your
stock.
On the first NAME line, print the first name, middle
initial, and last name of the custodian, with the
abbreviation CUST after the name
Print the first name, middle initial, and last name of the
minor on the second NAME line. Only one custodian and one
minor may be designated.
Please indicate the minor's social security number in the
signature block.
- --------------------------------------------------------------------------------
OTHER: Generally, fiduciary relationships (such as
Conservatorship, Legal Trust, Guardianship, etc.) are
established under a form of trust agreement or are
pursuant to a court order. Without a legal document
establishing a fiduciary relationship, your stock may not
be registered in a fiduciary capacity.
Instructions: On the first NAME line, print the first
name, middle initial, and last name of the fiduciary if
the fiduciary is an individual. If the fiduciary is a
corporation, list the corporate title on the first NAME
line. Following the name, print the fiduciary title such
as conservator, personal representative, etc.
On the second NAME line, print either the name of the
maker, donor or testator OR the name of the beneficiary.
Following the name, indicate the date and type of legal
document establishing the fiduciary relationship
(agreement, court order, etc.) (Use the space marked OTHER
if necessary). Please contact us if you have any
questions.
EXAMPLE OF A FIDUCIARY REGISTRATION:
John D. Smith Trustee for Tom A. Smith Under Agreement
Dated 06/09/74.
PLEASE NOTE THAT TOTTEN TRUST AND PAYABLE ON DEATH
OWNERSHIPS MAY NOT BE USED IN REGISTERING STOCK.
For example, stock cannot be registered as John Doe
Trustee for Jane Doe or John Doe Payable on Death to
Jane Doe.
- --------------------------------------------------------------------------------
NASD AFFILIATION: Please refer to the NASD AFFILIATION statement on the face
of this form. If applicable, initial where indicated and
check the box. the National Association of Securities
Dealers, Inc. Interpretation With Respect to Free-Riding
and Withholding (the Interpretation) restricts the sale of
a hot issue (securities that trade at a premium in the
aftermarket) to NASD members, persons associated with NASD
members (i.e., an owner, director, officer, partner,
employee or agent of a NASD member) and certain members of
their families. Such persons are required to indicate that
they will comply with certain conditions required for an
exemption from the restrictions.
- --------------------------------------------------------------------------------
<PAGE>
CERTIFICATION FORM
(This Signed Form Must Accompany A Signed Stock Order Form)
I acknowledge that the shares of common stock, $.01 par value per share
("common stock"), of IFB Holdings, Inc. (the "corporation"), the proposed
holding company for Investors Federal Bank and Savings Association ("investors
federal" or the "Bank"), are not guaranteed by the corporation, Investors
Federal or the Federal Government.
If anyone asserts that this security is federally insured or guaranteed, or
is as safe as an insured deposit, I should call the Office of Thrift Supervision
Regional Director, Frederick R. Casteel, at (214) 281-2000.
I further certify that, before purchasing the shares of Common Stock of the
Corporation, I received a copy of the Prospectus dated November __, 1996 which
discloses the nature of the shares of Common Stock being offered thereby, and
describes the following risks involved in an investment in the Common Stock
under the heading "Risk Factors" beginning on page __ of the Prospectus:
1. Geographical Concentration of Loans and Risks of Economic Downturn in
Primary Market Area.
2. Adequacy of Allowance for Loan Losses.
3. Limited Lending Opportunities in Market Area.
4. Purchased Loan Portfolio.
5. Effect of the Conversion to a National Bank Charter on Operations.
6. Potential Delay in Completion or Denial of Bank Conversion.
7. Reduced Return on Equity After Stock Conversion.
8. Interest Rate Risk Exposure.
9. Potential Discouragement of Takeover Attempts Resulting From Takeover
Defensive Provisions.
10. Potential Operational Restrictions Associated with Regulatory
Oversight.
11. Recapitalization of SAIF, Disparity Between BIF and SAIF Premiums.
12. Legislation Limiting Deduction of Bad Debt.
13. Competition.
14. Potential Increased Costs of Conversion Resulting From Delayed
Offering.
15. ESOP Compensation Expense.
16. Absence of active Market for the Common Stock.
17. Possible Consequences of Amendment to Plan of Conversion.
18. Potential Adverse Income Tax Consequences of the Distribution of
Subscription Rights.
For a more detailed description of the risks involved in the offering, see
"Risk Factors" at pages __ through __ of the Prospectus.
Signature:
---------------------------
Signature:
---------------------------
(NOTE: IF STOCK IS TO BE HELD JOINTLY, BOTH PARTIES MUST SIGN)
----
Date:
-------------------------
