UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-QSB
(Mark One)
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the period ended: June 30, 1998
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from to
Commission file number 000-22103
HEMLOCK FEDERAL FINANCIAL CORP.
(Exact Name of Registrant as Specified In Its Charter)
Delaware 36-4126192
(State or Other Jurisdiction of (IRS Employer
Incorporation or Organization) Identification No.)
5700 West 159th Street 60452
(Address of Principal Executive Offices) (Zip Code)
708-687-9400
(Registrant's telephone number, including area code)
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES X NO ___
Indicate the number of shares outstanding of each the issuer's classes of common
stock, as of the latest practicable date:
Class Outstanding at August 7, 1998
Common Stock, par value $.01 1,889,476 shares
<PAGE>
HEMLOCK FEDERAL FINANCIAL CORP.
AND SUBSIDIARY
INDEX
Part I. Financial Information
Item 1. Financial Statements
Condensed Consolidated Statements of Condition as of June 30, 1998
and December 31, 1997...................................................... 3
Condensed Consolidated Statements of Income for the three and six months
ended June 30, 1998 and 1997............................................... 4
Condensed Consolidated Statements of Cash Flows for the six
months ended June 30, 1998 and 1997........................................ 5
Condensed Consolidated Statements of Changes in Stockholders' Equity
for the six months ended June 30, 1998 and 1997............................ 7
Notes to the Condensed Consolidated Financial Statements as of
June 30, 1998.............................................................. 9
Item 2. Management's Discussion and Analysis of the Financial Condition
and Results of Operation................................................... 11
Item 3. Quantitative and Qualitative Disclosures About Market Risk....... 17
Part II. Other Information................................................... 19
<PAGE>
HEMLOCK FEDERAL FINANCIAL CORP. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CONDITION
(In thousands, except share data)
June 30, December 31,
ASSETS 1998 1997
---- ----
Cash on hand and due from banks $13,132 $14,883
Securities available-for-sale, at fair value 34,062 34,703
Securities held-to-maturity (fair value:
1998 - $49, 423 1997 - $47,418) 48,516 46,418
Loans Receivable, net 91,022 76,159
Property, plant and equipment, net 2,348 2,099
FHLB Stock, at cost 1,200 987
Accrued interest and other assets 1,991 1,434
--------- ----------
Total Assets $ 192,271 $ 176,683
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits $ 136,020 $ 130,958
FHLB advances 11,000
24,000
Advances from borrowers for taxes and insurance 994 804
Accrued interest and other liabilities 2,148 3,494
----------- -----------
Total Liabilities 163,162 146,256
Stockholders' equity
Common stock, $.01 par value; 3,100,000 shares
authorized; 2,076,325 shares issued 21 21
Surplus 20,176 20,105
Unearned ESOP, shares (1,412) (1,495)
Unearned stock awards (1,251) (1,382)
Retained earnings 12,711 12,203
Net unrealized gain on securities
available-for-sale, net of tax 972 975
Treasury Stock at cost 111,117 shares (2,108) 0
---------- ---------
Total Stockholders' Equity 29,109 30,427
---------- ---------
Total Liabilities and Stockholders' Equity $ 192,271 $176,683
========== =========
<PAGE>
HEMLOCK FEDERAL FINANCIAL CORP. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENT OF INCOME
(In thousands, except share data)
<TABLE>
<CAPTION>
Three months ended Six Months Ended
June 30, June 30,
<S> <C> <C> <C> <C>
1998 1997 1998 1997
Interest and Dividend Income
Loans $ 1,622 $1,096 $ 3,095 $ 2,166
Investment securities
1,387 1,437 2,773 2,655
Interest bearing deposits
232 279 478 559
-------- ------- ------- --------
Total interest
Income 3,241 2,812 6,346 5,380
Interest expense
Deposits
1,384 1,344 2,732 2,760
FHLB
advances 331 36 594 73
-------- ------- ------- --------
Total Interest
Expense 1,715 1,380 3,326 2,833
Net interest income
1,526 1,432 3,020 2,547
Provision for loan losses 21 0 21 0
-------- ------- ------- --------
Net interest income after provision for
Loan losses 1,505 1,432 2,999 2,547
Non-interest income
Service fees
141 55 279 105
Other income
27 75 56 130
Gain on Sale of Available For Sale 37 0 37 0
Securities
-------- ------- ------- --------
Total Non-interest
Income 205 130 372 235
Non-interest expenses
Salaries and employee benefits
576 451 1,111 861
Occupancy and equipment expense
145 156 288 312
Computer service fees
54 65 118 124
Foundation contribution 0 0 0 1000
Other expenses
276 157 536 290
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
HEMLOCK FEDERAL FINANCIAL CORP. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(In thousands)
<S> <C> <C> <C> <C>
------------ ------------ ------------ ------------
Total Non-interest
Expense 1,051 829 2,053 2,587
------------ ------------ ------------ ------------
Income before income taxes
659 733 1,318 195
Provision for income taxes
257 266 512 87
------------ ------------ ------------ ------------
Net income
$ 402 $ 467 $ 806 $ 108
========= ========= ========= =========
Earnings per share - Basic
$ 0.22 $ 0.22 $ 0.43 $ .024
========= ========= ========= =========
Earnings per share - Diluted
$ 0.22 $ 0.22 $ 0.43 $ .024
========= ========= ========= =========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Six months ended
<S> <C> <C>
June 30, June 30,
1998 1997
---- ----
Cash flows from operating activities
Net income $ 806 $
108
Adjustments to reconcile net income to net
cash from operating activities
Provision for depreciation 54 65
Net amortization of investment security
premiums/discounts 113 132
Change in deferred loan fees (73) (40)
Gain on sale of securities (37) 2
Provision for loan losses 21 0
Change in accrued interest receivable
and other assets (557) 173
Change in accrued interest payable and
other liabilities (1,361) 550
Stock Awards Expense 130 0
ESOP compensation 155 75
---------- ----------
Net cash provided by operating activities (749) 1,065
Cash flows from investing activities
Purchase of securities (4,495) (12,053)
available-for-sale
Proceeds from sales of securities available for sale 37 596
Principal payments of mortgage-backed
securities and collateralized mortgage obligations 26,760 9,791
Proceeds from maturities and calls of securities 2,450 6,550
Purchase of FHLB stock (213) (86)
Net increase in loans (14,811) (2,785)
Purchases of securities held-to-maturity (26,272) (26,146)
Purchases of building and equipment, net (303) (4)
---
----------- -----------
Net cash used in investing activities (16,847) (24,137)
Cash flows from financing activities
Net increase (decrease) in deposits 5,062 (1,787)
Decrease in advance payments by borrowers
for taxes and insurance 189 72
Issuance of Common Stock 0 18,346
Treasury Stock Purchase 10,892 0
Stock conversion expense 0 30
Dividends Paid (298) 0
----------- -----------
Net cash provided by financing activities 15,845 16,661
Net increase (decrease) in cash and cash equivalents (1,751) (6,412)
Cash and cash equivalents at beginning of period 28,281 17,410
---------- ------------
Cash and cash equivalents at end of $ 26,530 $ 10,999
period
=========== =========
Supplemental disclosure of cash flow information
Cash paid during period for
Interest $ 4,066 $ 2,837
Income taxes 588 83
</TABLE>
<PAGE>
HEMLOCK FEDERAL FINANCIAL CORP. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENT OF CHANGES
IN STOCKHOLDERS EQUITY
FOR SIX MONTHS ENDED JUNE 30, 1998 AND 1997
(In thousands except share data)
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Accumulated
Other
Common Retained Comprehensive Unearned Treasury
Stock Surplus Earnings Income ESOP Stock
Balance at December 31, 1996 $ - $ - $11,508 $ 607 $ - -
Issuance of Common Stock 21 19,986 - - (1,661) -
Net income for six months
ended June 30, 1997 - - 108 - - -
ESOP shares earned - 20 - - 55 -
Conversion Costs - 30 - - - -
Change in unrealized
Gain on securities
Available for sale - - - 221 - -
-------- ------- ------- -------- -------- -------
Balance at June 30, 1997 $ 21 $20,036 $11,616 $ 828 $(1,606) $ -
======== ======= ======= ======== ======== ======
Balance at December 31, 1997 $ 21 $20,105 $12,203 $ 975 $(1,495) -
Net income for six months
ended June 30, 1998 - - 806 - - -
ESOP shares earned - 71 - - 83 -
Stock award earned - - - - - -
Change in unrealized
Gain on securities
Available for sale - - - (3) - -
Treasury Stock Purchase-net - - - - - (2,108)
------- -------- ------ -------- --------- --------
Dividends Paid - - (298) - - -
------- -------- ----- -------- --------- --------
Balance at June 30, 1998 $ 21 $20,176 $12,711 $ 972 $(1,412) $(2,108)
======== ======== ======= ======== ========= ========
</TABLE>
<PAGE>
HEMLOCK FEDERAL FINANCIAL CORP. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENT OF CHANGES
IN STOCKHOLDERS EQUITY
FOR SIX MONTHS ENDED JUNE 30, 1998 AND 1997
(In thousands except share data)
Total
Unearned Unearned
Stock Stockholder Comprehensive
Awards Equity Income (Loss)
Balance at December 31, 1996 $ - $12,115 $ -
Issuance of Common Stock - 18,346 -
Net income for six months
ended June 30, 1997 - 108 108
ESOP shares earned - 75 -
Conversion Costs - 30 -
Change in unrealized
Gain on securities
Available for sale - 221 (26)
--------- --------- -------
Balance at June 30, 1997 $ - $30,895 $ 82
========= ======= =======
Balance at December 31, 1997 $(1,382) $30,427 -
Net income for six months
ended June 30, 1998 $ - $ 806 $ 806
ESOP shares earned - 154 -
Stock awards earned 131 131 -
Change in unrealized
Gain on securities
Available for sale - (3) (3)
Treasury Stock Purchase-net - (2,108) -
Dividends Paid - (298) -
-------- ---------- -------
Balance at June 30, 1998 $(1,251) $29,109 $803
======== ======== =====
<PAGE>
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1998
NOTE 1
Hemlock Federal Financial Corp. (Corporation) is a one thrift holding
company which owns 100% of the voting stock of Hemlock Federal Bank for
Savings (Bank), a federally chartered thrift located in Oak Forest,
Illinois. The Corporation was incorporated under Delaware law in December
of 1996. In the opinion of management, the accompanying condensed
consolidated financial statements contain all adjustments (consisting of
normally recurring items) necessary to present fairly the Corporation's
consolidated financial position as of June 30, 1998 and December 31, 1997,
and the results of its consolidated operations, for the three and six
month periods ended June 30, 1998 and 1997, and its consolidated cash
flows and changes in stockholders' equity for the six month period ended
June 30, 1998. The results of operations for the period ended June 30,
1998 are not necessarily indicative of the results to be expected for the
full year.
The financial statements and notes are presented as permitted by Form 10-Q
and do not contain certain information included in the Corporation's
annual financial statements and notes thereto.
NOTE 2
On March 31, 1997, Hemlock Federal Bank for Savings (Bank) converted from
a federally chartered mutual thrift to a federally chartered stock thrift.
The Bank issued allof its common stock at $10.00 per share to the
Corporation. The Corporation issued all of its common stock at $10.00 per
share to the ESOP, certain depositors of the Bank, and certain members of
the general public, all pursuant to a plan of conversion.
The ESOP purchased 166,106 shares of common stock representing 8% of the
total issued shares. The ESOP borrowed $1,661,060 from the Corporation to
purchase the stock using the stock as collateral for the loan. The loan is
to be paid principally from theBank's contributions to the ESOP over a
period of up to 10 years.
NOTE 3
The Bank had the following contractual amounts of financial instruments
outstanding at June 30, 1998 (in 000's):
Commitments to originate loans $ 2,015
Standby letters of credit 0
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF THE FINANCIAL CONDITION AND RESULTS OF OPERATIONS
June 30, 1998
NOTE 4
A reconciliation of the numerators and denominators for earnings per
common share computations is presented below.
<TABLE>
<CAPTION>
Three months ended Six months ended
June 30, June 30,
<S> <C> <C> <C> <C>
1998 1997 1998 1997
Basic earnings per share
Net income available to common stockholders $ 402 $ 467 $ 806 $ 108
======= ======= ======= ======
Weighted average common shares outstanding 1,808 1,916 1,808 1,916
Basic earnings per share $ .22 $ .24 $ .43 $ .24
======= ======= ======= ======
</TABLE>
The Corporation's outstanding stock options were not
considered in the computations of earnings per common share - assuming
dilution because the effects of assumed exercise would have been
antidilutive. In addition, the Corporation's outstanding performance-based
stock awards granted in 1997 were not considered in the computations of
earnings per common share - assuming dilution because the performance
conditions for such awards had not been attained as of June 30, 1998. In
future years, outstanding stock options may be exercised which would
increase the weighted average common shares outstanding and, thereby,
dilute earnings per common share. In addition, if the average common stock
price were to exceed the exercise price of outstanding options in a future
year or if the performance conditions specified under the
performance-based stock award plan were to be met by the end of a future
year, the assumed exercise of the options and/or the assumed issuance of
the performance awards may have a dilutive effect on earnings per common
share for thatfuture year.
<PAGE>
Earnings per share for the six months ended June 30, 1997 reflect earnings
since March 31, 1997 (date of conversion) available to common stockholders
divided by the weighted average number of common shares outstanding since
March 31, 1997.
The following discussion focuses on the consolidated financial condition
of Hemlock Federal Financial Corp. and Subsidiary at June 30, 1998 and the
consolidated results of operations for the three and six months ending
June30, 1998, compared to the same period in 1997. For the purposes of
this Form 10-Q, the results of operations in 1997 presented herein are for
the Bank as a predecessor entity to the Corporation, since the initial
public offering was not completed until March 31, 1997. The purpose of
this discussion is to provide a better understanding of the condensed
consolidated financial statements and the operations of the Corporation
and its subsidiary, Hemlock Federal Bank for Savings (Bank). This
discussion should be read in conjunction with the interim condensed
consolidated financial statements and notes thereto included herein.
Results of Operations
Consolidated net income of the Corporation for the second quarter of 1998
totaled $402,000, or $.22 per share,as compared to net income of $467,000,
or $.24 per share earned for the second quarter of 1997. Net income for
the six month period ended June 30, 1998 totaled $806,000, or $.43 per
share, as compared to net income of $108,000 for same period in 1997.
Net Interest Income
Net interest income before provision for loan losses increased to $1.53
million and $3.02 million for the three and six month periods ended June
30, 1998, respectively, as compared to $1.43 million and $2.55 million,
for the same periods in 1997. For the three and six month periods ended
June 30, 1998, interest income increased to $3.24 and $6.35 million,
respectively, from $2.81 and $5.38 million for the same periods ended June
30, 1997. This increase is due primarily to an increase in securities and
loans, funded by FHLB advances, with terms to maturity ranging from one to
ten years. Interest expense increased to $1.72 and $3.33 million for the
three and six months ended June 30, 1998, from $1.38 million for the same
period in 1997. This increase is attributable to increases in deposits and
FHLB advances.
<PAGE>
Provision for Loan Losses
The Corporation's allowance for loan losses was $775,000 as of June 30,
1998, equal to .85% of total loans. The bank had non-performing assets
totaling $312,000 as of June 30, 1998. Management believes the existing
level of reserves is adequate, given current economic conditions as well
as loss experience and credit demand. A provision for loan losses of
$21,000 was made during the six months endedJune 30, 1998, with no
provision made during the same period ended June 30, 1997.
Changes In Non-Interest Income and Non-Interest Expense
Non-interest income increased to $205,000 and $372,000 for the three and
six month periods ended June 30, 1998, respectively, as compared to
$130,000 and $235,000 for the same periods ended June 30, 1997. The
increase is due primarily to an increase in fees associated with lending
acivities, as well as a $37,000 gain on the sale of securities in 1998.
Non-interest expense for the three and nine month periods ended June 30,
1998 increased to $1.05 and $2.05 million, as compared to $829,000 and
$2.59 million for the same periods ended June 30, 1997. The increase in
expenses for the quarter is due to an increasein compensation expense
associated with the ESOP and RRP plans, which were implemented in April
and October, respectively, of 1997. In addition loan expense has
increased, resulting from an increase in loan activity. The decrease in
expenses for the sixmonths period ended June 30, 1998 is due to the $1
million contribution to establish the Hemlock Federal Foundation, which
was recorded during the first six months of 1997.
Provision for Income Taxes
The Corporation's federal and state income tax expense decreased to
$257,000 for the three months ended June 30, 1998, from $266,000 for the
same period ended June 30, 1997 The decrease in income tax was the result
of a decrease in net income before income taxes. The Corporation's federal
and state income tax expense increased to $512,000 for the six months
ended June 30, 1998, from $87,000 for the same period ended June 30, 1997.
Financial Condition
Consolidated total assets increased to $192.27 million as of June 30,
1998, from $176.68 million as of December 31, 1997, an increase in total
assets of $15.59 million. Loans receivable increased to $91.02 million as
of June 30, 1998 from $76.16 million as of December 31, 1997, due to an
increase in loan originations, resulting from a surge in refinancing
activity, as well as the addition of a new loan officer. In addition,
securities held to maturity increased to $48.52 million as of June 30,
1998, from $46.42 million as of December 31, 1997, an increase of $2.1
million.
<PAGE>
Total liabilities increased to $163.16 million as of June 30, 1998, from
$146.26 million as of December 31, 1997. The $16.90 million increase in
liabilities is due primarily to a $13 million increase in FHLB borrowings,
which grew to $24 million as of June 30, 1998, from $11 million as
ofDecember 31, 1997. In addition, total deposits increased to $136.02
million as of June 30, 1998 from $130.96 million as of December 31, 1997,
an increase of $5.06 million. The increase in deposits is attributable to
a certificate of deposit promotion, as well as consumers' response to
merger activity of financial institutions within the Bank's market area.
Stockholders' equity decreased to $29.11 million as of June 30, 1998 from
$30.43 million as of December 31, 1997, a decrease of $1.32 million. This
decrease is attributable to the repurchase of 186,849 shares of the
Corporation's common stock in the open market.
Capital Resources and Commitments
The Bank is subject to two capital to asset requirements in accordance
with bank regulations. The following table summarizes the Bank's
regulatory capital requirements versus actual capital as of June 30, 1998
and December 31, 1997.
Regulatory Actual
Requirement 6/31/98 12/31/97
Core capital 4.0% 11.60% 12.30%
Risk-based capital 8.0% 30.10% 34.85%
The bank is in the process of constructing a full service branch facility
in Lemont, Illinois, a southwest suburb of Chicago. The purchase price of
the land was $975,000. The building and necessary equipment are estimated
to cost $1.3 million. The branch is expected to be completed and open for
business in November of 1998.
<PAGE>
Liquidity
Liquidity measures the ability of the Corporation to meet maturing
obligations and its existing commitments, to withstand fluctuations in
deposit levels, to fund operations, and to provide for customers' credit
needs. The liquidity of the Corporation principally depends on cash flows
from operating activities, investment in and maturity of assets, changes
in balances of deposits and borrowings, and its ability to borrow funds in
the money or capital markets.
The Bank's regulatory liquidity ratio at June 30, 1998 was 17.92%, a
portion of which includes interest-earning assets with terms of 5 years
orless. This is primarily as a result of the reinvestment of the proceeds
raised in the initial public offering into short-term securities. Loan
commitments outstanding totaled $2.02 million at June 30, 1998.
Impact of New Accounting Standards
In June 1997, the FASB issued Statement of Financial Accounting Standards
No. 125 ("SFAS No. 125"), "Accounting for Transfers and Extinguishments of
Liabilities." SFAS No. 125 provides accounting and reporting standard for
transfers and servicing offinancial assets and extinguishments of
liabilities. SFAS No. 125 requires a consistent application of a
financial-components approach that focuses on control. Under that
approach, after a transfer of financial assets, an entity recognizes the
financial and servicing assets it controls and the liabilities it has
incurred, and derecognizes liabilities when extinguished. SFAS No. 125
also supersedes SFAS No. 122 and requires that servicing assets and
liabilities be subsequently measured by amortization in proportion to and
over the period of estimated net servicing income or loss and requires
assessment for asset impairment or increases obligation based on their
fair values. SFAS No. 125 applies to transfers and extinguishments
occurring after December 31, 1997, and early or retroactive application is
not permitted. Because the volume and variety of certain transactions will
make it difficult for some entities to comply, some provision have been
delayed by SFAS No. 127. The adoption of SFAS No. 125 did not have a
material impact on the results of operations or financial condition of the
Corporation.
On March 3, 1997, the Financial Accounting Standards Board (FASB) issued
Statement 128, "Earnings Per Share", which is effective for financial
statements beginning with year end 1997. Statement 128 simplifies the
calculation of earnings per share (EPS) by replacing primary EPS with
basic EPS. It also requires dual presentation of basic EPS and diluted EPS
for entities with complex capital structures. Basic EPS include no
dilution and is computed by dividing income available to common
shareholders by the weighted-average common shares outstanding for the
period. Diluted EPS reflects the potential dilution of securities that
could share in earnings, such as stock options, warrants or other common
stock equivalents All prior period EPS data has been restated to conform
with the new presentation.
<PAGE>
The Financial Accounting Standards Board (SFAS) issued Statement 130,
which is effective for fiscal years beginning after December 15, 1997.
This statement provides standards for reporting and display of
comprehensive income and its components. The most common items of other
comprehensive income include unrealized gains on investments in debt and
equity securities, foreign currency items, and minimum pension
liabilities. Disclosures required by SFAS 130 have been included in the
financial statements for all periods presented.
Year 2000
The Corporation has conducted a review of its computer systems to review
the systems that could be affected by the "Year 2000" issue and is
developing an implementation plan to resolve the issue. The Year 2000
problem is the result of computer programs being written using two digits
rather than four to define the applicable year.For example, programs that
have time-sensitive software may recognize a date using "))" as the year
1900 rather than the year 2000. This could result in a major system
failure or miscalculations. The Corporation presently believes that, with
modifications to existing software and by converting to new software, the
Year 2000 problem will not pose significant operational problems for the
Corporation's computer systems as so modified and converted. However, if
such modifications and conversions are not complete in a timely manner,
the Year 2000 problem may have a material impact on the operations of the
Corporation. As of June 30, 1998, the expected costs of Year 2000
compliance are less than $30,000.
Forward Looking Statements
When used in this Form 10-Q or future filings made by the Corporation with
the Securities and Exchange Commission, in the Corporation's press
releases or other public shareholder communications, or in oral statements
made with the approval of an authorized executive officer, the words or
phrases "will likely result", "are expected to," "will continue," "is
anticipated," "estimate," "project," or similar expressions are intended
to identify "forward-looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1995. The Corporation wishes to
caution readers not to place undue reliance on any forward-looking
statements, which speak only as of the date made, and to advise readers
that various factors - including regional and national economic
conditions, changes in levels of market interest rates, credit risks of
lending activities, and competitive and regulatory factors - could affect
the Bank's financial performance and could cause the Corporation's actual
results for future periods to differ materially from those anticipated or
projected.
The Corporation does not undertake, and specifically disclaims, any
obligation to publicly release the result of any revisions which may be
made to any forward-looking statements to reflect the occurrence of
anticipated or unanticipated events or circumstances after the date of
such statements.
<PAGE>
HEMLOCK FEDERAL FINANCIAL CORPORATION AND SUBSIDIARY
Quantitative and Qualitative Disclosures About Market Risk
In an attempt to manage its exposure to changes in interest rates,
management monitors the Company's interest rate risk. The Board of
Directors reviews at least quarterly the Bank's interest rate risk
position and profitability. The Board of Directors also reviews the Bank's
portfolio, formulates investment strategies and oversees the timing and
implementation of transactions to assure attainment of the Bank's
objectives in the most effective manner. In addition, the Board
anticipates reviewing on a quarterly basis the Bank's asset/liability
position, including simulations of the effect on the Bank's capital of
various interest rate scenarios.
In managing its asset/liability mix, Hemlock Federal, depending on the
relationship between long- and short-term interest rates, market
conditions and consumer preference, at times places more emphasis on
managing net interest margin than on better matching the interest rate
sensitivity of its assets and liabilities in an effort to enhance net
interest income. Management believes that the increased net interest
income resulting from a mismatch in the maturity of its asset and
liability portfolios can, during periods of declining or stable interest
rates, provide high enough returns to justify the increased exposure to
sudden and unexpected increases in interest rates.
Management utilizes the net portfolio value ("NPV") analysis to quantify
interest rate risk. In essence, this approach calculates the difference
between the present value of liabilities, expected cash flows from assets
and cash flows from off balance sheet contracts. Under OTS regulations, an
institution's "normal" level of interest rate risk in the event of an
immediate and sustained 200 basis point change in interest rates is a
decrease in the institution's NPV in an amount not exceeding 2% of the
present value of its assets. Pursuant to this regulation, thrift
institutions with greater than "normal" interest rate exposure must take a
deduction from their total capital available to meet their risk-based
capital requirement. The amount of that deduction is one-half of the
difference between(a) the institution's actual calculated exposure to the
200 basis point interest rate increase or decrease (whichever results in
the greater pro forma decrease in NPV) and (b) its "normal" level of
exposure which is 2% of the present value of its assets.Savings
institutions, however, with less than $300 million in assets and a total
capital ratio in excess of 12%, will be exempt from this requirement
unless the OTS determines otherwise. The OTS has postponed the
implementation of the rule until furthernotice. Based upon its asset size
and capital level at March 31, 1998, the Bank would qualify for an
exemption from this rule; however, management believes that the Bank would
not be required to make a deduction from capital if it were subject to
this rule.
<PAGE>
The following table sets forth, at March 31, 1998, an analysis of the
Bank's interest rate risk as measured by the estimated changes in NPV
resulting from instantaneous and sustained parallel shifts in the yield
curve (+/-400 basis points, measured in 100 basis point increments) as
compared to tolerance limits under the Bank's current policy.
Change in
Interest Estimated Ratio of NPV Estimated Increase
Rates NPV to (Decrease) in NPV
(Basis Points) Amount PV of Assets Amount Percent
(Dollars in Thousands)
- ---------------------------------------------------------------------------
+400 $21,336 11.93% $(8,159) (28)%
- ---------------------------------------------------------------------------
+300 23,868 13.09 (5,626) (19)
- ---------------------------------------------------------------------------
+200 26,327 14.17 (3,167) (11)
- ---------------------------------------------------------------------------
+100 28,282 14.98 (1,212) (4)
- ---------------------------------------------------------------------------
--- 29,494 15.43 --- ---
- ---------------------------------------------------------------------------
-100 29,617 15.39 (123) ---
- ---------------------------------------------------------------------------
-200 29,490 15.23 (-5) ---
- ---------------------------------------------------------------------------
-300 29,540 15.14 45 ---
- ---------------------------------------------------------------------------
-400 30,183 15.30 688 2
- ------------------------------------------------------------------------
Certain assumptions utilized in assessing the interest rate risk
of thrift institutions were employed in preparing the preceding table.
These assumptions relate to interest rates, loan prepayment rates, deposit
decay rates, and the market values of certain assets under the various
interest rate scenarios. It was also assumed that delinquency rates will
not change as a result of changes in interest rates although there can be
no assurance that this will be the case. Even if interest rates changein
the designated amounts, there can be no assurance that the Bank's assets
and liabilities would perform as set forth above. In addition, a change in
U.S. Treasury rates in the designated amounts accompanied by a change in
the shape of the Treasury yield curve would cause significantly different
changes to the NPV than indicated above.
While the above estimates are based on data provided as of March 31, 1998,
management believes that the Bank's rate risk as of June 30, 1998 has not
significantly changedfrom the level indicated in the above table.
<PAGE>
Part II Other Information
Item 1. Legal Proceedings
None
Item 2. Changes in Securities and Use of Proceeds
None
Item 3. Defaults upon Senior Securities
None
Item 4. Submission of Matters to a vote of Security Holders
The following is a record of the votes cast at the Corporation's Annual
Meeting of Stockholders in the election of directors of the Corporation:
FOR VOTE WITHHELD
Rosanne Pastorek-Belczak 1,573,687 71,850
Frank A. Bucz 1,574,537 71,000
G. Gerald Shiera 1,576,537 69,000
Accordingly, the individuals named above were declared to be duly elected
directors of the Corporation for the term indicated.
The following is a record of the votes cast in respect of the
proposal to ratify the appointment of Crowe, Chizek and Company LLP as the
Corporation's auditors for the fiscal year ending December 31, 1998.
NUMBER OF ELIGIBLE ACTUALLY
VOTES TO BE CAST CAST
FOR 1,575,487 75.8% 95.7%
AGAINST 300 - -
ABSTAIN 69,750 3.3% 4.2%
Accordingly, the proposal described above was declared to be duly adopted
by the stockholders of the Corporation.
The Board of Directors has also announced April 21, 1999 as the date for
the 1999 Annual Meeting of Stockholders.
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K.
a. Exhibits - 03 Amended and Restated Bylaws
27 Financial Data Schedule
b. Reports on Form 8-K - none
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
HEMLOCK FEDERAL FINANCIAL CORP.
(Registrant)
Maureen G. Partynski
Chief Executive Officer
August 11, 1998
Michael R. Stevens
President
August 11, 1998
AMENDED AND RESTATED
BY-LAWS OF
HEMLOCK FINANCIAL CORPORATION
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 nor more than 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 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, shall constitute a quorum for all purposes, unless or except
to the extent that the presence of a larger number may be
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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, shall constitute a quorum entitled to take action with
respect to that vote on that matter.
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 constituting a quorum, then except as otherwise required by law,
those present 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.
(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 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 70 days
prior to the anniversary of the preceding year's annual meeting; provided,
however, that in the event that the date of the annual meeting is advanced by
more than 20 days or delayed by more than 60 days from such anniversary date,
notice by the stockholder to be timely must be so delivered by the close of
business on the later of (i) the 70th day prior to such annual meeting or (ii)
the 10th day following the earlier of the day on which notice of the date of the
annual meeting is mailed or the day on which a public announcement of the date
of such meeting is first 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
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such stockholder and (iv) any material interest of such stockholder in such
business. Notwithstanding anything in these By-laws to the contrary, no business
shall be 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 or she 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 By-laws 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 70 days prior to the date of the meeting; provided,
however, that in the event that less than 80 days' notice of the date of the
meeting is given 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
earlier of (i) the day on which such notice of the date of the meeting is mailed
or (ii) the day on which a public announcement of the date of the meeting is
first 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: (x) the name and address, as they appear on
the Corporation's books, of such stockholder and (y) 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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<PAGE>
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 (or as
otherwise permitted under applicable law) by the stockholder or his duly
authorized attorney-in-fact filed in accordance with the procedure established
for the meeting. Proxies solicited on behalf of the management shall be voted as
directed by the stockholder or in the absence of such direction, as determined
by a majority of the Board of Directors. No proxy shall be valid after eleven
months from the date of its execution except for a proxy coupled with an
interest.
Each stockholder shall have one 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.
All voting, including on the election of directors but excepting where
otherwise required by law, may be by a voice vote; provided, however, that upon
demand therefore 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.
Every vote taken by ballot shall be counted by an inspector or inspectors
appointed by the chairman of the meeting.
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.
Section 8. Stock List.
The officer who has charge of the stock transfer books of the
Corporation shall prepare and make, in the time and manner required by
applicable law, a list of stockholders entitled to vote and shall make such list
available for such purposes, at such places, at such times and to such persons
as required by applicable law. The stock transfer books shall be the only
evidence as to the identity of the stockholders entitled to examine the stock
transfer books or to vote in person or by proxy at any meeting of stockholders.
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.
4
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Section 10. Inspectors of Election
The Board of Directors shall, in advance of any meeting of
stockholders, appoint one or more persons as inspectors of election, to act at
the meeting or any adjournment thereof and make a written report thereof, in
accordance with applicable law.
ARTICLE II
BOARD OF DIRECTORS
Section 1. General Powers, Number and Term of Office.
The business and affairs of the Corporation shall be managed by or
under the direction of the Board of Directors. The number of directors shall be
as provided for in the Certificate of Incorporation. 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.
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, as
nearly equal in number as reasonably possible, 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, commencing with the first annual meeting, 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 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 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 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 days before the meeting or by
telegraphing or telexing or by facsimile transmission of the same not less than
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 authorized
number of directors then constituting the 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:
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(i) To declare dividends from time to time in accordance with
law;
(ii) To purchase or otherwise acquire any property, rights or
privileges on such terms as it shall determine;
(iii) 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;
(iv) 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;
(v) To confer upon any officer of the Corporation the power to
appoint, remove and suspend subordinate officers, employees and agents;
(vi) 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;
(vii) 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,
(viii) To adopt from time to time regulations, not
inconsistent with these By-laws, 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.
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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.
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 or two members, in
which event one 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 may appoint a Nominating Committee of the Board,
consisting of not less than three members, one of which shall be the President
if, and only so long as, the President remains in office as a member of the
Board of Directors. The Nominating Committee shall have authority (i) 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 By-laws in
order to determine compliance with such By-law and (ii) 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.
8
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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 President, a Secretary and a
Treasurer and from time to time may choose such other officers as it may deem
proper. The President 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 be the chief executive officer and, subject to the
control of the Board of Directors, 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. The
President shall see that all orders and resolutions of the Board of Directors
and of any committee thereof are carried into effect.
Each meeting of the stockholders and of the Board of Directors shall be
presided over by such officer as has been designated by the Board of Directors
or, in his or her absence, by such officer or other person as is chosen at the
meeting. The Secretary or, in his or her absence, the General Counsel of the
Corporation or such officer as has been designated by the Board of Directors or,
in his or her 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 the President's absence or during his or her 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.
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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. The Treasurer shall sign or countersign such instruments as
require his or her 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 or her 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 one or more assistants to the Treasurer, or one appointee to both such
positions, which officers shall have such powers and shall perform such duties
as are provided in these By-laws or as may be assigned to them by the Board of
Directors, the Chairman of the Board or the President.
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.
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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 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
By-laws, 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
60 nor less than ten days before the date of any meeting of stockholders, nor
more than 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.
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.
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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 mail,
postage paid, by sending such notice by prepaid telegram or mailgram 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 mail, by telegram or mailgram 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.
12
<PAGE>
ARTICLE VII
MISCELLANEOUS
Section 1. Facsimile Signatures.
In addition to the provisions for use of facsimile signatures elsewhere
specifically authorized in these By-laws, 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.
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 By-laws 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.
13
<PAGE>
ARTICLE VIII
AMENDMENTS
The By-laws of the Corporation may be adopted, amended or repealed as
provided in Article SEVENTH of the Certificate of Incorporation of the
Corporation.
14
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