<PAGE>
Registration No. 33-____________
As filed with the Securities and Exchange Commission on October ____, 1997
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------------------
FORM S-4
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
FBDC FINANCIAL CORP.
(Exact name of registrant as specified in charter)
<TABLE>
<S> <C> <C>
Alabama 6035 [to be applied for]
- ------------------------------- ---------------------------- ----------------------
(State or Other Jurisdiction of (Primary Standard Industrial (I.R.S. Employer
Incorporation or Organization) Classification Code No.) Identification Number)
</TABLE>
1400 Gault Avenue, North
Fort Payne, Alabama 35967
(205) 845-1077
(Address, Including Zip Code, and Telephone Number, Including Area Code,
of Registrant's Principal Executive Offices)
Edward B. Crosland, Jr., Esquire
Daniel H. Burd, Esquire
Kutak Rock
1101 Connecticut Avenue, N.W., Suite 1000
Washington, D.C. 20036
(202) 828-2400
(Name, Address, Including Zip Code, and Telephone Number,
Including Area Code, of Agent for Service)
Approximate date of commencement of proposed sale to the public:
As soon as practicable after receipt of all regulatory approvals.
If the securities being registered on this form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box.
[_]
-------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
=================================================================================================================
Proposed
Title of Each Class Proposed Maximum Maximum Amount of
of Securities to be Amount to be Offering Price Per Aggregate Registration
Registered Registered Unit/(1)/ Offering Price Fee
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, 283,366 $13.38 $3,791,438 $1,148.92
$.01 par value shares
=================================================================================================================
</TABLE>
- --------------
(1) Pursuant to Rule 457(f)(2), estimated solely for purposes of
calculating registration fee based on book value per share of the
common stock, $1.00 par value per share, of First Federal Bank at
September 30, 1997.
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
statement 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 Commission, acting pursuant to said Section 8(a),
may determine.
================================================================================
<PAGE>
November __, 1997
Dear Stockholder:
We invite you to attend the Annual Meeting of Stockholders of First
Federal Bank (the "Bank"), to be held at the Bank's main office located at 1400
Gault Avenue, North, Fort Payne, Alabama, on Thursday, December ___, 1997 at
2:00 p.m, local time.
The attached Notice of Annual Meeting and Proxy Statement/Prospectus
describe the formal business to be transacted at the Annual Meeting.
Stockholders will consider and vote upon the election of two directors and the
ratification of the Bank's independent auditors. In addition, stockholders will
be asked to consider and vote upon a proposal to reorganize the Bank into the
holding company form of ownership by approving an Agreement and Plan of
Reorganization under which (i) the Bank will become a wholly owned subsidiary of
FBDC Financial Corp., an Alabama corporation formed for the purpose of becoming
the holding company for the Bank (the "Holding Company"), and (ii) each
outstanding share of the common stock of the Bank will be converted into one
share of Holding Company common stock. Reorganization into the holding company
form of ownership will permit diversification into a broader range of financial
and business activities and create greater flexibility in operations. For these
reasons, the Board of Directors of the Bank has unanimously approved the holding
company reorganization and recommends that you vote in favor of this proposal.
As an integral part of the Annual Meeting, we will report on the Bank's
operations. Directors and officers of the Bank will be present to respond to any
questions that our stockholders may have. Detailed information concerning our
activities and operating performance during the 1997 fiscal year is contained in
our Annual Report, which also is enclosed.
YOUR VOTE IS IMPORTANT, REGARDLESS OF THE NUMBER OF SHARES YOU OWN.
Because the holding company reorganization requires the approval of a majority
of the shares outstanding, the failure to vote or an abstention is equivalent to
a vote against both matters. On behalf of the Board of Directors, we urge you to
please sign, date and return the enclosed proxy card in the enclosed
postage-prepaid envelope as soon as possible even if you currently plan to
attend the Annual Meeting. This will not prevent you from voting in person, but
will assure that your vote is counted if you are unable to attend the Annual
Meeting.
Sincerely,
James F. Eberhart, Jr.
Chairman of the Board of Directors,
President and Chief Executive Officer
<PAGE>
- --------------------------------------------------------------------------------
FIRST FEDERAL BANK
1400 GAULT AVENUE, NORTH
FORT PAYNE, ALABAMA 35967
(205) 845-1077
- --------------------------------------------------------------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON DECEMBER __, 1997
- --------------------------------------------------------------------------------
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders (the
"Annual Meeting") of First Federal Bank (the "Bank") will be held at the Bank's
main office located at 1400 Gault Avenue, North, Fort Payne, Alabama, at 2:00
p.m., local time on Thursday, December __, 1997.
The Annual Meeting is for the purpose of considering and acting upon
the following proposals, which are more completely described in the accompanying
Proxy Statement/Prospectus:
1. The election of two directors of the Bank;
2. The ratification of the appointment of Borders &
Associates, P.C. as independent auditors for the Bank for the 1998
fiscal year;
3. The approval of the reorganization of the Bank into the
holding company form of ownership by approving an Agreement and Plan of
Reorganization dated October 14, 1997, pursuant to which the Bank will
become the wholly owned subsidiary of a holding company, FBDC Financial
Corp., an Alabama corporation, and each outstanding share of common
stock of the Bank will be converted into one share of the common stock
of the Holding Company;
4. The adjournment of the Annual Meeting to a later date if an
insufficient number of shares is present in person or by proxy at the
Annual Meeting to approve Proposal 3 above; and
5. Such other matters as may properly come before the Annual
Meeting or any adjournment thereof.
Note: The Board of Directors is not aware of any other business to come
before the Annual Meeting.
Any action may be taken on any one of the foregoing proposals at the
Annual Meeting on the date specified above or on any date or dates to which, by
original or later adjournment, the Annual Meeting may be adjourned. Stockholders
of record at the close of business on October 31, 1997, are the stockholders
entitled to notice of and to vote at the Annual Meeting and any adjournments
thereof. A complete list of stockholders entitled to vote at the Annual Meeting
will be open for examination by any stockholder for any purpose germane to the
Annual Meeting during ordinary business hours at the Bank's main office during
the 20 days prior to the Annual Meeting.
You are requested to fill in and sign the enclosed form of proxy which
is solicited by the Board of Directors and to mail it promptly in the enclosed
envelope. The proxy will not be used if you attend and vote at the Annual
Meeting in person.
BY ORDER OF THE BOARD OF DIRECTORS
LILA A. MCCURDY
ASSISTANT SECRETARY
Fort Payne, Alabama
November __, 1997
- --------------------------------------------------------------------------------
IMPORTANT: THE PROMPT RETURN OF PROXIES WILL SAVE YOUR BANK THE EXPENSE OF
FURTHER REQUESTS FOR PROXIES IN ORDER TO INSURE A QUORUM. A SELF-ADDRESSED
ENVELOPE IS ENCLOSED FOR YOUR CONVENIENCE. NO POSTAGE IS REQUIRED IF MAILED IN
THE UNITED STATES.
- --------------------------------------------------------------------------------
<PAGE>
FIRST FEDERAL BANK
Proxy Statement for
Annual Meeting of Stockholders
to be held on December ___, 1997
FBDC FINANCIAL CORP.
Prospectus for
283,366 shares of Common Stock,
par value $.01 per share
This Proxy Statement/Prospectus is being furnished to the holders of
common stock of First Federal Bank (the "Bank"), a federally chartered stock
savings association, in connection with the solicitation of proxies by the Board
of Directors of the Bank for use at the Annual Meeting of Stockholders to be
held at the Bank's main office, 1400 Gault Avenue, North, Fort Payne, Alabama,
on Thursday, December ___, 1997, at 2:00 p.m., local time.
This Proxy Statement/Prospectus also serves as the Prospectus of FBDC
Financial Corp., an Alabama corporation (the "Holding Company"), under the
Securities Act of 1933, as amended (the "1933 Act") with respect to the issuance
of up to a maximum of 283,366 shares of the Holding Company's common stock, par
value $.01 per share ("Holding Company Common Stock"), in the Reorganization
described herein. The accompanying Notice of Annual Meeting and this Proxy
Statement/Prospectus are first being mailed to stockholders on or about November
__, 1997.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION ("SEC"), THE OFFICE OF THRIFT SUPERVISION
("OTS") OR ANY STATE SECURITIES AUTHORITY, NOR HAS ANY SUCH COMMISSION, OFFICE
OR AUTHORITY PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROXY
STATEMENT/PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
This Proxy Statement/Prospectus does not contain all the information
set forth in the Registration Statement which the Holding Company has filed with
the SEC under the 1933 Act. The Registration Statement, including exhibits, may
be inspected without charge or copied at prescribed rates at the office of the
SEC, Public Reference Section, 450 Fifth Street, N.W., Washington, D.C. 20549.
THE SECURITIES OFFERED HEREBY ARE NOT SAVINGS ACCOUNTS OR DEPOSITS AND
ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE SAVINGS
ASSOCIATION INSURANCE FUND OR ANY OTHER GOVERNMENT AGENCY.
The date of this Proxy Statement/Prospectus is November __, 1997.
<PAGE>
SUMMARY INFORMATION
ON
PROPOSED HOLDING COMPANY FORMATION
----------------------------------
The following summary does not purport to be complete and is qualified
in its entirety by reference to the more detailed information appearing
elsewhere in this Proxy Statement/Prospectus under "Proposal III -- Proposed
Holding Company Formation" and Exhibits A, B, C and D attached hereto.
General
The holding company formation will be accomplished under an Agreement
and Plan of Reorganization, dated October 14, 1997 ("Plan of Reorganization"),
pursuant to which the Bank will become a wholly owned subsidiary of the Holding
Company, an Alabama corporation formed for the purpose of becoming the holding
company for the Bank. Under the terms of the proposed reorganization (the
"Reorganization"), each outstanding share of the Bank's common stock, par value
$1.00 per share ("Bank Common Stock"), will be converted into one share of the
Holding Company's common stock, par value $.01 per share ("Holding Company
Common Stock"). As a result of the Reorganization, the former holders of Bank
Common Stock will become the holders of all of the outstanding Holding Company
Common Stock, and the Holding Company will be the sole stockholder of the Bank.
The Holding Company was incorporated in October 1997 and has no prior operating
history. Following the Reorganization, it is intended that the Bank will
continue its operations at the same locations, with the same management and
subject to all the rights, obligations and liabilities of the Bank existing
immediately prior to the Reorganization.
Reasons for the Reorganization
The Board of Directors of the Bank believes that a holding company
structure will provide greater flexibility than is currently enjoyed by the
Bank. Present regulations applicable to federal savings associations limit both
the types of businesses in which the Bank may engage and the amount which the
Bank may invest in subsidiaries. The Bank is also limited in its ability to
engage in certain corporate transactions, such as stock repurchases, by certain
provisions of the Internal Revenue Code of 1986, as amended (the "Code"), that
are applicable to federal savings associations but not to their holding
companies.
The establishment of the Holding Company as a unitary savings and loan
holding company (i.e., a holding company with only one savings institution
subsidiary) would also permit, under current law, diversification of operations
and the acquisition and formation of companies engaged in lines of business
which, while complementary to the thrift business, should help to reduce the
risks inherent in an industry which is sensitive to interest rate changes.
Moreover, a holding company structure will help facilitate the acquisition of
other financial institutions. The Holding Company presently does not intend to
operate more than one savings institution subsidiary. The Bank's Board of
Directors believes that acquisition or formation of such enterprises, which do
not have the degree of asset and liability interest rate sensitivity inherent in
the structure of a savings association, will provide a beneficial stabilizing
effect on operations. Upon consummation of the Reorganization, the Holding
Company will be in a position to take immediate advantage of any acquisition
opportunities which may arise, although no specific acquisition is planned at
this time. In addition, a holding company structure may facilitate conversion of
the Bank's federal savings association charter into a commercial bank or other
financial institution charter, although no such
ii
<PAGE>
conversion is planned at this time. For further information, see "Proposal III
- -- Proposed Holding Company Formation -- Reasons for the Holding Company
Reorganization."
Proposed federal legislation could, if enacted, require conversion of
federal savings associations, like the Bank, into commercial banks and would
affect the diversification opportunities of savings associations and their
holding companies. See "Proposal III -- Proposed Holding Company Formation --
Regulation of the Holding Company."
Market for Bank Common Stock
At the present time, there is no established public market for the Bank
Common Stock. Accordingly, it is unlikely that such a market will develop or
that, following consummation of the Reorganization, such a market for the
Holding Company Common Stock will develop. Therefore, subsequent transfers of
the Holding Company Common Stock by the holders thereof may only be effected in
private transactions.
Dissenters' Rights of Appraisal
Pursuant to federal regulations, stockholders of the Bank will have
dissenters' appraisal rights in connection with the Reorganization. Such rights
will entitle stockholders who do not vote in favor of the holding company
formation and who comply with certain other conditions to receive the fair or
appraised value of their shares of Bank Common Stock rather than having such
shares converted into shares of Holding Company Common Stock. The Plan of
Reorganization states that it is a condition to consummation of the
Reorganization that the holders of not more than 5% of the Bank Common Stock
exercise their dissenters' rights. Such condition to the Reorganization may be
waived by the parties at the discretion of the Board of Directors. See "Proposal
III -- Proposed Holding Company Formation --Rights of Dissenting Stockholders"
and Exhibit D hereto.
Management of the Holding Company
The Board of Directors of the Holding Company presently consists, and
is expected to continue to consist upon completion of the Reorganization, of
seven (7) members, all of whom are currently members of the Board of Directors
of the Bank. The officers of the Holding Company will consist of persons now
serving as officers of the Bank. See "Proposal III -- Proposed Holding Company
Formation -- Management of FBDC Financial Corp."
Certain Federal Income Tax Consequences
The Reorganization is intended to be treated as a non-taxable
transaction at the corporate and stockholder levels. Generally, no gain or loss
will be recognized by stockholders of the Bank who exchange their Bank Common
Stock solely for Holding Company Common Stock in the Reorganization. A condition
to consummation of the Reorganization is the receipt by the Bank of an opinion
of counsel the Reorganization will be treated as a non-taxable transaction under
applicable provisions of the Code. Each Bank stockholder should consult his or
her own tax advisor as to specific federal, state and local tax consequences of
the Reorganization, if any, to such stockholder. See "Proposal III -- Proposed
Holding Company Formation -- Tax Consequences."
iii
<PAGE>
Conditions to the Reorganization
The Plan of Reorganization sets forth a number of conditions which must
be met before the Reorganization will be consummated, including, among others:
(i) approval of the Plan of Reorganization by the holders of a majority of the
outstanding shares of Bank Common Stock; (ii) receipt of either a ruling from
the IRS or an opinion of legal counsel or independent auditors that the
Reorganization will be treated as a non-taxable transaction for federal income
tax purposes; (iii) approval of the Reorganization by the OTS and any other
federal or state agency having jurisdiction necessary for consummation of the
Reorganization; (iv) registration of the shares of Holding Company Common Stock
to be issued in the Reorganization under the 1933 Act and compliance by the
Holding Company with all applicable state securities laws relating to the
issuance of the Holding Company Common Stock; and (v) the holders of not more
than 5% of the outstanding shares of Bank Common Stock shall have exercised
dissenting stockholder rights under 12 C.F.R. (S) 552.14. Condition (v) may be
waived by the parties at the discretion of the respective Boards of Directors.
See "Proposal III -- Proposed Holding Company Formation -- Conditions to the
Reorganization."
Comparison of Stockholders' Rights
As a result of the Reorganization, holders of Bank Common Stock, whose
rights are presently governed by federal law and regulations and the Federal
Stock Charter and Bylaws of the Bank, will become stockholders of the Holding
Company, an Alabama corporation. Accordingly, their rights will be governed by
the Alabama Business Corporation Act and the Articles of Incorporation and
Bylaws of the Holding Company. Certain differences arise from this change of
governing law, as well as from distinctions between the Federal Stock Charter
and Bylaws of the Bank and the Articles of Incorporation and Bylaws of the
Holding Company. These differences relate to the issuance of capital stock,
payment of dividends, the right to cumulate votes in the election of directors,
the rights of stockholders to dissent, vacancies on the Board of Directors, the
number of directors, removal of directors, approval of mergers, consolidations,
sale of substantially all assets and certain business combinations, advance
notice requirements for nominations of directors and presentation of new
business at meetings of stockholders and procedures for amendment of the Federal
Stock Charter and Bylaws of the Bank as compared to the Articles of
Incorporation and Bylaws of the Holding Company. Further, the Holding Company,
as a general business corporation, will be able to enter into more lines of
business than the Bank, which, as a federal savings bank, is restricted in the
businesses in which it may engage. See "Proposal III --Proposed Holding Company
Formation -- Comparison of Stockholders' Rights."
Articles of Incorporation, Bylaws and Statutory Provisions That Could Discourage
Acquisitions of Control
The Holding Company's Articles of Incorporation and Bylaws contain
certain provisions that could discourage non-negotiated takeover attempts which
certain stockholders might deem to be in their interests or through which
stockholders might otherwise receive a premium for their shares over the
then-current market price and that may tend to perpetuate existing management.
These provisions include supermajority approval requirements for certain
business combinations and provisions allowing the Board of the Holding Company
to consider nonmonetary factors in evaluating a business combination or a tender
or exchange offer. The Articles of Incorporation also authorize the issuance of
additional shares of Holding Company Common Stock without stockholder approval
on terms or in circumstances that could deter a future takeover attempt. In
addition, the Alabama Business Corporation Act provides for certain restrictions
on the acquisition of Alabama corporations. These charter, bylaw and statutory
provisions may have the effect of discouraging or preventing a future takeover
attempt in which stockholders of the Holding Company otherwise might receive a
substantial premium for their shares over then-current
iv
<PAGE>
market prices. See "Proposal III -- Proposed Holding Company Formation --
Comparison of Stockholders' Rights" and "-- Certain Anti-Takeover Provisions of
the Articles of Incorporation and Bylaws."
In addition to the provisions described above, the Holding Company's
Articles of Incorporation contain provisions authorized by Alabama law that
indemnify directors and officers in certain proceedings against them and impose
limitations on directors' liability. There are no such provisions in the Bank's
Federal Stock Charter, although OTS regulations authorize indemnification of
directors and officers under certain circumstances. Directors and officers of
the Bank thus may be deemed to have a personal interest in the consummation of
the Reorganization. See "Proposal III -- Proposed Holding Company Formation --
Management of the Holding Company," and "-- Indemnification of Officers and
Directors and Limitation of Liability."
Recommendation of the Board of Directors
The Board of Directors of the Bank believes that the ability to
diversify through a holding company formation will help the Bank remain
competitive in the future. Approval of the Plan of Reorganization requires the
affirmative vote of a majority of the total votes eligible to be cast at the
Annual Meeting. As of October 31, 1997, the Bank's directors and executive
officers as a group beneficially owned 48,242 shares, or 17.0% of the
outstanding Bank Common Stock. The Bank anticipates that all such shares will be
voted for the Plan of Reorganization. The Board of Directors of the Bank has
unanimously approved the Reorganization and recommends that the stockholders
vote "FOR" the Plan of Reorganization.
v
<PAGE>
- --------------------------------------------------------------------------------
PROXY STATEMENT/PROSPECTUS
FIRST FEDERAL BANK
FBDC FINANCIAL CORP.
1400 Gault Avenue, North
Fort Payne, Alabama 35967
(205) 845-1077
ANNUAL MEETING OF STOCKHOLDERS
DECEMBER __, 1997
- --------------------------------------------------------------------------------
GENERAL
- --------------------------------------------------------------------------------
This Proxy Statement is furnished in connection with the solicitation
of proxies by the Board of Directors of First Federal Bank (hereinafter called
the "Bank") to be used at the 1997 Annual Meeting of Stockholders of the Bank
(hereinafter called the "Annual Meeting"), which will be held at the Bank's main
office located at 1400 Gault Avenue, North, Fort Payne, Alabama, on Thursday,
December ___, 1997, at 2:00 p.m., local time. The Bank has extended the date of
the Annual Meeting in order to prepare the various regulatory filings related to
the proposed holding company reorganization that will be considered and voted
upon at the Annual Meeting. To facilitate such an extension, the Board of
Directors has adopted, and the Office of Thrift Supervision has approved, a
one-time amendment to the Bank's Bylaws to provide for the Annual Meeting to be
held within 180 days after the end of the fiscal year ended June 30, 1997 (i.e.,
on or before December 27, 1997), rather than the 150 days provided in the Bank's
Bylaws.
The Bank was formerly known as "First Federal Savings and Loan
Association of DeKalb County" and adopted its current name in July 1996, but did
not change its status as a federal savings association. The accompanying Notice
of Annual Meeting and form of proxy and this Proxy Statement are being first
mailed to stockholders on or about November __, 1997.
- --------------------------------------------------------------------------------
VOTING AND REVOCABILITY OF PROXIES
- --------------------------------------------------------------------------------
Proxies solicited by the Board of Directors of the Bank will be voted
in accordance with the directions given therein. Where no instructions are
indicated, proxies will be voted for the nominees for director set forth below
and in favor of each of the other proposals set forth in this Proxy Statement
for consideration at the Annual Meeting. The proxy confers discretionary
authority on the persons named therein to vote with respect to the election of
any person as a director where the nominee is unable to serve or for good cause
will not serve, and with respect to matters incident to the conduct of the
Annual Meeting. If any other business is presented at the Annual Meeting,
proxies will be voted by those named therein in accordance with the
determination of a majority of the Board of Directors. Proxies marked as
abstentions will not be counted as votes cast. In addition, shares held in
street name which have been designated by brokers on proxy cards as not voted
will not be counted as votes cast. Proxies marked as abstentions or as broker
non-votes, however, will be treated as shares present for purposes of
determining whether a quorum is present.
<PAGE>
Stockholders who execute proxies retain the right to revoke them at any
time. Unless so revoked, the shares represented by properly executed proxies
will be voted at the Annual Meeting and all adjournments thereof. Proxies may be
revoked by written notice to the Secretary of the Bank at the address above or
by the filing of a later dated proxy prior to a vote being taken on a particular
proposal at the Annual Meeting. A proxy will not be voted if a stockholder
attends the Annual Meeting and votes in person. The presence of a stockholder at
the Annual Meeting in itself will not revoke such stockholder's proxy.
- --------------------------------------------------------------------------------
VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF
- --------------------------------------------------------------------------------
The securities entitled to vote at the Annual Meeting consist of the
shares of the Bank's common stock, $1.00 par value per share (the "Bank Common
Stock"). Stockholders of record as of the close of business on October 31, 1997
(the "Record Date") are entitled to one vote for each share of Bank Common Stock
then held. As of the Record Date, 283,366 shares of Bank Common Stock were
issued and outstanding.
Pursuant to the Bylaws of the Bank, every stockholder voting for the
election of directors is entitled to cumulate his votes by multiplying his
shares times the number of directors to be elected. Each stockholder will be
entitled to cast his votes for one director or distribute his votes among any
number of the nominees being voted on at the Annual Meeting. Stockholders may
not cumulate their votes on the form of proxy solicited by the Board of
Directors. In order to cumulate votes, stockholders must attend the Annual
Meeting and vote in person or make arrangements with their own proxies. The
Board of Directors intends to vote the proxies solicited by it equally between
the two nominees of the Board of Directors. However, the right is reserved, in
the sole discretion of the Board of Directors, to distribute votes among some or
all of the nominees of the Board of Directors in a manner other than equally so
as to elect as directors the maximum possible number of such nominees.
The following table sets forth, as of the Record Date, certain
information as to the Bank Common Stock beneficially owned by the Bank's
directors, by any non-director executive officers of the Bank named in the
Summary Compensation Table set forth under the caption "Proposal I -- Election
of Directors -- Executive Compensation -- Summary Compensation Table," by all
executive officers and directors of the Bank as a group and by all persons who
were known to the Bank to beneficially own more than 5% of the Bank Common Stock
outstanding at the Record Date.
2
<PAGE>
<TABLE>
<CAPTION>
Amount and Percent of
Nature of Shares of
Name and Address of Beneficial Bank Common Stock
Certain Beneficial Owners Ownership (1) Outstanding
------------------------- ------------- -----------------
<S> <C> <C>
Una Miller 23,800 8.4%
400 5th Street, N.E.
Fort Payne, Alabama 35967
Randy Owen and Kelly Owen 27,732 9.8
207 Gault Avenue South
Fort Payne, Alabama 35967
Johnny D. Young and Linda M. Young 14,610 5.2
Route 5, Box 381
Fort Payne, Alabama 35967
Martha Brooks 16,000 5.6
2316 Alabama Avenue North
Fort Payne, Alabama 35967
Glen Kilgore 26,760 9.4
220 Rainbow Avenue, S.W.
Rainsville, Alabama 35986
Eloise Smith 48,732 17.1
P.O. Box 554
Rainsville, Alabama 35986
James F. Eberhart, Jr. 14,462 5.1%
First Federal Bank
1400 Gault Avenue, North
Fort Payne, Alabama 35967
Names of Other Directors
and Executive Officers
------------------------
Dr. J. Malcolm Brewer 2,000 0.7
Lowell D. Durham 400 0.01
Paul Thomas 200 0.01
Charles Stephens 3,060 0.11
J. W. Goza 13,000 4.6
All Executive Officers and Directors
as a Group (8 persons) 48,242 17.0
</TABLE>
- ---------------------
(1) A person is deemed to be the beneficial owner, for purposes of this
table, of any shares of Common Stock if he or she has or shares voting
or investment power with respect to such Common Stock or has a right
to acquire beneficial ownership at any time within 60 days from the
Record Date. As used herein, "voting power" is the power to vote or
direct the voting of shares and "investment power" is the power to
dispose or direct the disposition of shares. Except as otherwise
noted, ownership is direct, and the named individuals and group
exercise sole voting and investment power over the shares of the
Common Stock.
3
<PAGE>
- --------------------------------------------------------------------------------
PROPOSAL I -- ELECTION OF DIRECTORS
- --------------------------------------------------------------------------------
The Bank's Board of Directors currently is composed of seven members.
The Bank's Charter currently provides that the Board of Directors shall consist
of a minimum of seven and a maximum of 15 directors. Under the Bank's Federal
Stock Charter, directors of the Bank are divided into three classes and elected
for terms of three years and until their successors are elected and qualified.
At the Annual Meeting, two directors will be elected for a term expiring at the
2000 Annual Meeting of Stockholders.
The Board of Directors has nominated for election as directors Dr.
Malcolm J. Brewer and Paul R. Thomas, who currently are members of the Board, to
serve for three years and until their successors are elected and qualified. It
is intended that the persons named in the proxies solicited by the Board of
Directors will vote for the election of the named nominees. If either nominee is
unable to serve, the shares represented by all properly executed proxies that
have not been revoked will be voted for the election of such substitute as the
Board of Directors may recommend or the size of the Board of Directors may be
reduced to eliminate the vacancy. At this time, the Board knows of no reason why
either nominee might be unavailable to serve.
Neither the Bank's Charter and Bylaws nor applicable federal
regulations specify the vote required to elect a director of a federal savings
association. Alabama corporate law provides that directors shall be elected by a
majority of the votes cast by the shares entitled to vote in the election at a
meeting at which a quorum is present when the vote is taken. Such a vote will be
required in the election of directors at the Annual Meeting.
The following table sets forth, for each nominee and each continuing
director, his name, age as of the Record Date, the year he first became a
director of the Bank and the expiration of his current term as a director of the
Bank. There are no arrangements or understandings between the Bank and any
director pursuant to which such person has been elected a director of the Bank,
and no director is related to any other director or executive officer by blood,
marriage or adoption.
<TABLE>
<CAPTION>
Age as Year First Current
of the Elected as Term
Name Record Date as Director to Expire
---- ----------- ----------- ---------
BOARD NOMINEES FOR TERMS TO EXPIRE AT THE 2000 ANNUAL MEETING
<S> <C> <C> <C>
Dr. J. Malcolm Brewer 83 1965 1997
Paul R. Thomas 53 1985 1997
<CAPTION>
DIRECTORS CONTINUING IN OFFICE
<S> <C> <C> <C>
Lowell D. Durham 70 1985 1998
J. W. Goza 66 1990 1998
Johnny D. Young 53 1985 1998
James F. Eberhart, Jr. 68 1975 1999
Charles R. Stephens 49 1986 1999
</TABLE>
4
<PAGE>
Presented below is certain information concerning the directors of the
Bank. Unless otherwise stated, all directors have held the positions indicated
for at least the past five years.
Charles R. Stephens - Owner - Dixie Machine Shop.
James F. Eberhart, Jr. - Chairman of the Board, President and Chief
Executive Officer of the Bank.
Paul R. Thomas - Probate Judge, DeKalb County, Alabama.
Dr. J. Malcolm Brewer - Dentist. Retired in 1994.
J.W. Goza - Owner - Retired. Previously, J.W. Goza Hosiery.
Johnny D. Young - Owner - Young Steel.
Lowell D. Durham - Retired. Loan Officer of the Bank from 1984 to 1993.
Executive Officer
The Bank has one executive officer who does not also serve as a
director. Lila A. McCurdy (age 53) has served as Assistant to the Chief
Executive Officer of the Bank since 1966 and has been Assistant Secretary
Treasurer since 1971.
Meetings and Committees of the Board of Directors
The Board of Directors of the Bank conducts its business through
meetings of the Board and its committees. During the year ended June 30, 1997,
the Bank's Board of Directors held 14 meetings. All of the directors of the Bank
attended 75% or more of the aggregate number of the meetings of the Board of
Directors and committees on which such Board member served during the year ended
June 30, 1997.
The Board of Directors has a Executive Committee consisting of
Directors James Eberhart, Charles Stephens and Johnny Young, as well as Lila
McCurdy, the Bank's Assistant Secretary Treasurer. The function of the Executive
Committee is to discuss and approve business of the Bank that comes before the
Board of Directors between the regular meetings of the Board. The Executive
Committee did not meet during the year ended June 30, 1997, as it was
constituted for the first time in the current fiscal year.
The Board of Directors has a standing Audit and Compensation Committee
consisting of J. Malcolm Brewer, Paul Thomas and Charles Stephens. The Committee
meets on call. The Audit and Compensation Committee met one time during the year
ended June 30, 1997. The function of the Committee is to determine through an
external and internal audit program that the interests of depositors and
stockholder are properly advanced and safeguarded. It meets on matters relative
to the annual examination by the Bank's accounting firm and discusses the
accounting firm's memorandum on accounting procedures and internal control. The
Committee also considers the independence of the accounting firm for non-audit
functions. The Committee also recommends the election of an external accounting
firm to the Board of Directors. The Committee also recommends compensation for
directors and executive officers of the Bank.
5
<PAGE>
In accordance with the Bank's Bylaws, the entire Board of Directors acts as
the Bank's Nominating Committee. The Nominating Committee meets to consider
potential nominees. In its deliberations, the Nominating Committee considers the
candidate's knowledge of the banking business and involvement in community,
business and civic affairs, and also considers whether the candidate would allow
the Board to continue its geographic diversity that provides for adequate
representation of its market area. The Board of Directors met once as the
Nominating Committee during the year ended June 30, 1997.
Executive Compensation
The following table sets forth the cash and noncash compensation for the
fiscal years ended June 30, 1997, 1996 and 1995 awarded to or earned by the
Chief Executive Officer of the Bank. No executive officer of the Bank earned in
excess of $100,000 in salary and bonus during the fiscal year.
Summary Compensation Table
<TABLE>
<CAPTION>
Annual Compensation
-------------------------------------------------------------------------------
Other Annual All Other
Name Year Salary Bonus Compensation Compensation(1)
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
James F. Eberhart, Jr. 1997 $52,500 $2,110 $5,750(1) $1,747.54(2)
Chairman of the Board, 1996 52,500 2,050 5,820 1,749.64
President and Chief 1995 52,500 1,900 5,838 655.40
Executive Officer
</TABLE>
- ------------
(1) Consists of Board of Directors fees. Executive officers of the Bank receive
indirect compensation in the form of certain perquisites and other personal
benefits. The amount of such benefits in the fiscal year by the named
executive officer did not exceed 10% of the executive officer's annual
salary and bonus.
(2) Consists of matching contribution under the Bank's 401(k) Plan.
Directors' Compensation
Directors of the Bank currently each receive fees of $300 for each meeting
of the Board of Directors attended and $25 for each meeting attended of
committees of the Board of Directors.
Certain Transactions
Under applicable law, the Bank's loans to directors and executive officers
must be made on substantially the same terms, including interest rates, as those
prevailing for comparable transactions with non-affiliated persons, and must not
involve more than the normal risk of repayment or present other unfavorable
features. The Bank has a policy of offering loans to officers and directors and
employees in the ordinary course of business, on substantially the same terms,
including interest rates and collateral, as those prevailing at the time for
comparable transactions with other persons. These loans do not involve more than
the normal risk of collectibility or present other unfavorable features.
- --------------------------------------------------------------------------------
PROPOSAL II -- RATIFICATION OF APPOINTMENT OF AUDITORS
- --------------------------------------------------------------------------------
The Board of Directors has heretofore renewed the Bank's arrangements with
Borders & Associates, P.C. to be its auditors for the 1998 fiscal year, subject
to ratification by the Bank's
6
<PAGE>
stockholders. A representative of Borders & Associates, P.C. will be present at
the Meeting to respond to stockholder's questions and will have the opportunity
to make a statement if he so desires.
The appointment of the auditors must be approved by a majority of the votes
cast by the stockholders of the Bank at the meeting. The Board of Directors
recommends that stockholders vote "FOR" the approval of the appointment of
Borders & Associates, P.C. as the Bank's independent auditors.
- --------------------------------------------------------------------------------
PROPOSAL III -- PROPOSED HOLDING COMPANY FORMATION
- --------------------------------------------------------------------------------
Summary
The formation of a holding company will be accomplished under an Agreement
and Plan of Reorganization, dated October 14, 1997 (the "Plan of
Reorganization"), pursuant to which the Bank will become a wholly owned
subsidiary of the Holding Company, an Alabama corporation recently formed for
the purpose of becoming a holding company for the Bank. Under the terms of the
Plan of Reorganization, each outstanding share of Bank Common Stock will be
converted into one share of Holding Company Common Stock, and the former holders
of Bank Common Stock will become the holders of all of the outstanding Holding
Company Common Stock. The Holding Company was incorporated in October 1997, and
has no prior operating history. Following the Reorganization, it is intended
that the Bank will continue its operations at the same location, with the same
management, and subject to all the rights, obligations and liabilities of the
Bank existing immediately prior to the Reorganization.
Reasons for the Reorganization
The Board of Directors of the Bank believes that a holding company
structure will provide greater flexibility than is currently enjoyed by the
Bank. Federal regulations limit the types of businesses in which the Bank may
engage and limit the amount which may be invested by the Bank in subsidiaries.
The Bank is also limited in its ability to engage in certain corporate
transactions, such as stock repurchases, by provisions of the Internal Revenue
Code of 1986, as amended (the "Code"), applicable to savings banks but not to
their holding companies. The Board of Directors believes that stock repurchases
could improve market liquidity and enhance stockholder value.
Because there are currently no material restrictions on the business
activities of a unitary savings and loan holding company (i.e., a holding
company with only one savings institution subsidiary), the establishment of such
a holding company also permits diversification of operations and the acquisition
and formation of companies engaged in lines of business which, while
complementary to the thrift business, should help to reduce the risks inherent
in an industry which is sensitive to interest rate changes. The qualification of
the Holding Company as a unitary savings and loan holding company will, however,
be subject to the Bank's continued maintenance of its status as a Qualified
Thrift Lender ("QTL"). See "-- Regulation of the Holding Company -- Activities
Restrictions." The Bank is currently, and expects to remain, a QTL, although
there can be no assurance of its ability to do so. Upon consummation of the
Reorganization, it is expected that the Holding Company will be in a position to
take immediate advantage of any acquisition or conversion opportunities which
may arise, though no specific acquisition or conversion is planned at this time.
With respect to diversification, it should be noted that legislation
currently is under consideration by the United States Congress that would, if
enacted as proposed, place restrictions on the business activities of unitary
savings and loan holding companies. However, neither the enactment of such
7
<PAGE>
legislation nor the extent and nature of the legislation's restrictions on
savings and loan holding company activities can presently be predicted. See
"--Regulation of the Holding Company--Activities Restrictions."
The Board of Directors believes that the Bank's status as a wholly owned
subsidiary of the Holding Company may also facilitate the conversion of the
Bank's charter into a commercial bank charter or other financial institution
charter. Should the Bank's business objectives change in the future in a manner
such that it would benefit from conversion to a different form of financial
institution charter, the Bank may consider such a charter conversion at that
time. However, the Bank has no present plans to convert the Bank's charter.
Although the Board of Directors of the Bank presently intends to operate
the Holding Company as a unitary savings and loan holding company in order to
permit diversification, the Holding Company will have the ability to become a
multiple savings and loan holding company (a holding company which has more than
one savings institution subsidiary). The multiple holding company structure can
facilitate the acquisition of other savings institutions in addition to other
companies. If a multiple holding company structure is utilized, the acquired
savings institution 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 institution could retain its own directors,
officers and corporate name, as well as having representation on the Holding
Company's board of directors. This more autonomous operation may be decisive in
acquisition negotiations. Although there are no pending plans, agreements or
understandings for acquisitions, the Holding Company would be in a position to
immediately take advantage of any acquisition opportunities as they arise. Any
acquisition of another savings institution would be subject to regulatory
approval. See "-- Regulation of the Holding Company -- Restrictions on
Acquisitions."
If the Holding Company decides in the future to use a multiple savings and
loan holding company structure, the Holding Company would be able to diversify
its financial services and business activities through the Holding Company or
other subsidiaries of the Holding Company to a greater degree than is currently
possible through the Bank or its service corporation. In general, however, the
business activities of multiple savings and loan holding companies are
restricted to certain enumerated activities (except that such restrictions do
not apply in the case of multiple savings and loan holding companies where each
acquisition of an additional savings association was made pursuant to authority
to approve emergency thrift acquisitions and each subsidiary savings association
satisfies the QTL test). See "--Regulation of the Holding Company --Activities
Restrictions." Despite such restrictions, the range of financial services and
business activities authorized for multiple savings and loan holding companies
is still broader than those authorized for service corporations of federal
savings associations. This ability of a holding company to diversify on a
limited basis while acquiring other savings associations through a multiple
structure or to have complete authority to diversify as a unitary savings and
loan holding company is believed by the Board of Directors of the Bank to be a
substantial operating advantage to the holding company structure.
THE BOARD OF DIRECTORS OF THE BANK HAS UNANIMOUSLY APPROVED THE PLAN OF
REORGANIZATION AND RECOMMENDS THAT THE STOCKHOLDERS VOTE "FOR" THE PLAN OF
REORGANIZATION.
Plan of Reorganization
The Reorganization will be accomplished under the Plan of Reorganization,
which is attached as Exhibit A hereto. The following discussion is qualified in
its entirety by reference to the Plan of
8
<PAGE>
Reorganization. The Plan of Reorganization was unanimously approved by the Board
of Directors on October 14, 1997.
The Holding Company is a newly organized Alabama corporation that was
formed by the Bank solely for the purpose of effecting the Reorganization.
Therefore, the Holding Company has no prior operating history. The Plan of
Reorganization is by and among the Bank, the Holding Company and First Federal
Interim Savings Bank, a to-be-formed interim stock savings bank that will be a
wholly owned subsidiary of the Holding Company ("Interim Savings").
The Reorganization will be accomplished by the following steps: (i) the
formation by the Bank of a wholly-owned operating subsidiary, the Holding
Company, incorporated under the laws of the State of Alabama for the primary
purpose of becoming the sole stockholder of a newly formed interim savings stock
savings bank, and subsequently becoming the sole stockholder of the Bank; (ii)
the formation of an interim savings stock savings bank, Interim Savings, which
will be wholly owned by the Holding Company; and (iii) the merger of Interim
Savings into the Bank, with the Bank as the surviving corporation. Pursuant to
such merger: (i) all of the issued and outstanding shares of Bank Common Stock
will automatically be converted by operation of law on a one-for-one basis into
an equal number of issued and outstanding shares of Holding Company Common
Stock, and (ii) all of the issued and outstanding shares of common stock of
Interim Savings will automatically be converted by operation of law on a one-
for-one basis into an equal number of issued and outstanding shares of Bank
Common Stock, which will be all of the issued and outstanding stock of the Bank.
After the Reorganization, the former holders of Bank Common Stock will be
the holders of all of the outstanding Holding Company Common Stock. In addition,
the Holding Company will hold all of the issued and outstanding voting stock of
the Bank; accordingly, the Bank is described herein as a "wholly owned"
subsidiary of the Holding Company following the Reorganization.
The Board of Directors of the Bank presently intends to cause the Holding
Company to be initially capitalized through a cash dividend to the Holding
Company of up to $100,000, subject to non-objection by the OTS. Future
capitalization of the Holding Company will be dependent upon dividends declared
by the Bank or the raising of additional capital by the Holding Company through
a future issuance of securities or debt or through other means. The Board of
Directors of the Holding Company has no present plans or intentions with respect
to any future issuance of securities or debt at this time.
Further, the Bank will continue its existing business and operations as a
wholly owned subsidiary of the Holding Company, and the consolidated
capitalization, assets, liabilities, income and financial statements of the
Holding Company immediately following the Reorganization will be substantially
the same as those of the Bank immediately prior to consummation of the
Reorganization. The Federal Stock Charter and Bylaws of the Bank will continue
in effect and will not be affected in any manner by the Reorganization, and the
Bank will continue to operate under its current name, "First Federal Bank." The
corporate existence of the Bank will continue unaffected and unimpaired by the
Reorganization.
Financial Resources of the Holding Company
The Bank does not currently intend to transfer any material amount of funds
as a capital contribution to the Holding Company prior to the effective date of
the Reorganization. Immediately following the Reorganization, the assets of the
Holding Company, on an unconsolidated basis, will consist of all of the then-
outstanding shares of Bank Common Stock. However, the Bank anticipates that
following the Reorganization, it will declare and pay a up to $100,000 cash
dividend to the Holding Company, as the Bank's sole stockholder. While the Bank
may in the future transfer funds to the
9
<PAGE>
Holding Company, such transfer would be subject to a number of factors,
including the Holding Company's and the Bank's future financial requirements and
applicable regulatory restrictions.
Set forth below is the consolidated capitalization of the Holding Company
after giving effect to the Reorganization as of June 30, 1997. The pro forma
capitalization of the Holding Company set forth below is essentially identical
to the capitalization of the Bank at June 30, 1997.
<TABLE>
<CAPTION>
As of June 30, 1997
Consolidated Pro Forma
Capitalization of
the Holding Company
----------------------
(In thousands)
<S> <C>
Liabilities
-----------
Deposits $51,084
Other Liabilities 434
-------
Total Liabilities $51,518
=======
Stockholders' Equity
Common Stock $.01 par value,
5,000,000 shares authorized,
283,366 shares outstanding $ 3
Preferred Stock, $.01 par value,
1,000,000 shares authorized,
no shares outstanding 0
Additional paid-in capital 1,269
Retained earnings 2,405
-------
Total stockholders' equity $ 3,677
=======
</TABLE>
The Bank estimates that the total expenses associated with the
Reorganization will be approximately $45,000. These expenses will be capitalized
and amortized by the Bank over a 60 month period.
Financial resources may be available to the Holding Company in the future
through borrowings, debt or equity financings or dividends from the Bank or
other acquired entities or new businesses. Any loans from the Bank to the
Holding Company would be subject to certain collateralization, amount and other
restrictions on covered transactions between FDIC-insured banks and their
affiliates under Section 23A of the Federal Reserve Act. There can be no
assurance as to the amount of financial resources that may be available to the
Holding Company. In particular, dividends from the Bank to the Holding Company
will be subject to tax considerations and regulatory limitations and will result
in taxable income to the Bank to the extent that they are deemed to be from the
Bank's loan loss reserves.
The capital of the Holding Company may be used by the Holding Company for
various corporate purposes, including acquisitions of other financial
institutions or companies engaged in related activities in the financial
services industry, subject to the requirements of applicable federal and state
law, or for repurchases of outstanding shares of Holding Company Common Stock.
At the present time, however, the Holding Company has no agreements,
understandings or plans regarding any such acquisitions or
10
<PAGE>
repurchases. The capital of the Holding Company will also be available for
general corporate purposes, including the payment of dividends to the Holding
Company's stockholders and providing loans to the Bank.
Effective Date
The "Effective Date" of the Reorganization will be the date upon which the
Articles of Combination pertaining to the Reorganization are endorsed by the
OTS. The Bank currently expects that the Effective Date will be immediately
following the satisfaction of all conditions to the Plan of Reorganization,
including the receipt of stockholder approval, approval of the Holding Company's
application to the OTS to serve as the holding company for the Bank, and
endorsement of the Articles of Combination by the OTS.
Optional Exchange of Stock Certificates
After the Effective Date of the Reorganization, certificates evidencing
shares of Bank Common Stock will automatically represent, by operation of law,
the same number of shares of the Holding Company Common Stock. Former holders of
the Bank Common Stock will not be required to exchange their Bank Common Stock
certificates for Holding Company Common Stock certificates, but will have the
option to do so.
Dissenting Stockholders' Rights of Appraisal
Federal regulations entitle a stockholder who votes against the
Reorganization to demand payment by the Association of the fair or appraised
value of his shares. A dissenting stockholder must deliver to Mr. Johnny Young,
Secretary, First Federal Bank, 1400 Gault Avenue, North, Fort Payne, Alabama
35967, before voting on Proposal III, written notice identifying himself and
stating his intention thereby to demand appraisal of and payment for his shares.
Such written notice must be separate from and in addition to any proxy or vote
against Proposal III. Under the Plan of Reorganization, the obligations of the
Holding Company, the Bank and Interim Savings to consummate the Reorganization
are conditioned upon the holders of not more than 5% of the Bank's outstanding
shares electing to exercise their rights as dissenting stockholders. Although
the parties to the Plan of Reorganization could waive this condition, none of
them presently intends to do so.
Provided that such stockholder does not thereafter vote in favor of the
Reorganization, and assuming the holders of the requisite number of shares
approve Proposal II, then, within 10 days after the Effective Date of the
Reorganization, the Bank shall (i) notify each stockholder entitled to such
notice of the Effective Date, (ii) offer to pay to each such stockholder a
specified price deemed by the Bank to be the fair value for his shares, and
(iii) remind each dissenting stockholder that, within 60 days after the
Effective Date of the Reorganization, the stockholder must either agree with the
Bank on the fair value of his shares or file a petition with the OTS demanding
determination of the fair market value of the shares, or the stockholder shall
be deemed to have accepted the terms of the Reorganization. If within 60 days of
the Effective Date of the Reorganization, the fair value is agreed upon between
the Bank and a stockholder is entitled to payment, such payment shall be made
within 90 days of the Effective Date of the Reorganization. Within 60 days of
the Effective Date of the Reorganization, each stockholder demanding appraisal
and payment must, as a condition to exercise of his appraisal rights, submit to
the Secretary of the Bank his certificates of stock for placement of a notation
thereon regarding the stockholder's demand of appraisal and payment. At any time
within 60 days after the Effective Date of the Reorganization, any stockholder
shall have the right to withdraw his demand for appraisal and to accept the
terms of the Reorganization.
11
<PAGE>
In the event that a fair value cannot be determined by the Bank and a
stockholder demanding appraisal and payment, an appraisal will be determined by
the OTS, which shall direct payment by the Bank in accordance with such
appraised value upon surrender of the stockholder's stock certificate.
The OTS has the right to apportion among all or some of the parties any
expenses of any proceeding to demand the fair or appraised value of shares as it
deems equitable. Any stockholder who has demanded appraisal rights for his
shares of Bank Common Stock is, with certain exceptions, thereafter denied
voting and dividend rights with respect to such shares. Shares of the Holding
Company Common Stock into which shares of Bank Common Stock would have been
converted had their holders assented to the Reorganization shall have the status
of authorized and unissued shares of the Holding Company Common Stock. A company
of the governing federal regulation is attached hereto as Exhibit D and
incorporated herein by reference.
Certain Federal Income Tax Consequences
It is a condition to the obligation of the Bank, Holding Company and
Interim Savings to consummate the Reorganization that the Bank receive either a
ruling from the Internal Revenue Service ("IRS") or an opinion from its legal
counsel to the effect that (i) the Reorganization will be treated as a
non-taxable transaction under applicable provisions of the Code, and (ii) no
gain or loss will be recognized by the holders of Bank Common Stock upon the
exchange of their shares of Bank Common Stock for shares of Holding Company
Common Stock in the Reorganization.
Assuming that representations to be made by the Bank in connection with
the Reorganization are true as of the Effective Date, and based upon certain
representations and qualifications, the law firm of Kutak Rock, Washington,
D.C., special counsel to the Bank, will render an opinion that the
Reorganization will be a non-taxable transaction with the consequences described
above. Unlike private letter rulings received from the IRS, an opinion of
counsel is not binding upon the IRS and there can be no assurance that the IRS
will not take a position contrary to that of the opinion, or that such opinion
will be upheld by the courts if challenged by the IRS.
Each holder of Bank Common Stock who properly dissents to the
Reorganization and thereby receives solely cash in exchange for all of his or
her shares of Bank Common Stock will generally recognize gain or loss in an
amount equal to the difference between the aggregate amount of the cash received
and the stockholder's adjusted tax basis in such shares of Bank Common Stock.
THE FEDERAL INCOME TAX DISCUSSION SET FORTH ABOVE DOES NOT PURPORT TO
CONSIDER ALL ASPECTS OF FEDERAL INCOME TAXATION WHICH MAY BE RELEVANT TO A BANK
STOCKHOLDER ENTITLED TO SPECIAL TREATMENT UNDER THE INTERNAL REVENUE CODE, SUCH
AS TRUSTS, INDIVIDUAL RETIREMENT ACCOUNTS, OTHER EMPLOYEE BENEFIT PLANS,
INSURANCE COMPANIES, AND STOCKHOLDERS WHO ARE NOT CITIZENS OR RESIDENTS OF THE
UNITED STATES. DUE TO THE INDIVIDUAL NATURE OF TAX CONSEQUENCES, EACH BANK
STOCKHOLDER IS URGED TO CONSULT HIS OR HER OWN TAX AND FINANCIAL ADVISOR AS TO
THE EFFECT OF SUCH FEDERAL INCOME TAX CONSEQUENCES ON HIS OR HER OWN FACTS AND
CIRCUMSTANCES AND ALSO AS TO ANY STATE, LOCAL, FOREIGN OR OTHER TAX CONSEQUENCES
ARISING OUT OF THE REORGANIZATION.
Cash payments made to the Bank's stockholders who exercise their right to
dissent to the Reorganization will be subject to a 31% backup withholding tax
under federal income tax law unless certain requirements are met. Generally, the
Bank, in its capacity as exchange agent, will be required
12
<PAGE>
to deduct and withhold the tax if (i) the stockholder fails for furnish a
taxpayer identification number ("TIN") to the exchange agent or fails to certify
under penalty of perjury that such TIN is correct; (ii) the IRS notifies the
exchange agent that the TIN furnished by the stockholder is incorrect; (iii) the
IRS notifies the exchange agent that the stockholder has failed to report
interest, dividends or original issue discount in the past; or (iv) there has
been a failure by the stockholder to certify under penalty of perjury that such
stockholder is not subject to such backup withholding tax. Any amounts withheld
by the exchange agent in collection of the backup withholding tax will reduce
the federal income tax liability of the stockholder from whom such tax was
withheld. The TIN of an individual stockholder is that stockholder's Social
Security number.
Consequences Under Federal Securities Laws
The Holding Company has filed with the SEC a registration statement under
the Securities Act of 1933, as amended (the "1933 Act"), for the registration of
the Holding Company Common Stock to be issued and exchanged pursuant to the Plan
of Reorganization. This Proxy Statement and the accompanying Notice of Annual
Meeting constitute the Prospectus of the Holding Company filed as part of such
registration statement. Shares of the Holding Company Common Stock received by
stockholders of the Bank upon consummation of the Reorganization are expected to
be freely transferable under the 1933 Act by those stockholders of the Bank not
deemed to be "affiliates" of the Holding Company or the Bank. Pursuant to Rule
145 under the 1933 Act, shares of Holding Company Common Stock acquired by
persons who are "affiliates" of the Holding Company or the Bank will be subject
to the resale restriction contained in paragraphs (c), (e), (f) and (g) of Rule
144 under the 1933 Act. Affiliates are generally defined as persons who control,
are controlled by, or are under common control with the Holding Company at the
time of the Annual Meeting (generally executive officers and directors).
Under paragraph (e) of Rule 144, each affiliate of the Holding Company,
together with any other person whose sales are required to be aggregated with
those of the affiliate under Rule 144, would be able to sell in the public
market, without registration, a number of shares not to exceed, in any
three-month period, the greater of (i) 1% of the outstanding shares of Holding
Company Common Stock or (ii) the average weekly trading volume in such shares
during the preceding four calendar weeks. Pursuant to paragraph (f) of Rule 144,
the shares are required to be sold in "brokers' transactions," as defined in
paragraph (g) of Rule 144, or in transactions directly with a "market maker," as
defined in Section 3(a)(38) of the Securities Exchange Act of 1934, as amended
(the "1934 Act"), as well as comply with certain other manner of sale
requirements set forth in paragraph (f). Pursuant to paragraph (c) of Rule 144,
the ability of affiliates to resell shares of Holding Company Common Stock
received in the Reorganization under Rule 144 will be subject to the Holding
Company's having satisfied certain 1934 Act reporting requirements for specified
periods prior to the time of sale (see below). Affiliates also would be
permitted to resell the Holding Company Common Stock received in the
Reorganization pursuant to an effective registration statement under the 1933
Act or an available exemption from the 1933 Act registration requirements. This
Proxy Statement/Prospectus does not cover any resales of Holding Company Common
Stock received by persons who may be deemed to be affiliates of the Company upon
consummation of the Reorganization.
Upon consummation of the Reorganization, the Holding Company will not
register the Holding Company Common Stock under the 1934 Act and the Holding
Company will not be required to comply with the insider trading, reporting and
proxy requirements under the 1934 Act. However, the Holding Company will remain
subject to the general antifraud provisions of the federal securities laws
following the Reorganization.
13
<PAGE>
Conditions to the Reorganization
The Plan of Reorganization sets forth a number of conditions which must be
met before the Reorganization will be consummated, including, among others, (i)
the approval of the Plan of Reorganization by the holders of a majority of the
outstanding shares of Bank Common Stock, (ii) the receipt of either a ruling
from the IRS or an opinion of counsel or independent auditors that the
Reorganization will be treated as a nontaxable transaction under the Code (see
"-- Tax Consequences"), (iii) the approval of the Reorganization by the OTS and
the receipt of all approvals from any other governmental agencies that may be
required for the consummation of the Reorganization; (iv) registration of the
shares of Holding Company Common Stock to be issued in the Reorganization under
the 1933 Act and compliance by the Holding Company with all applicable state
securities laws relating to the issuance of Holding Company Common Stock; and
(v) the holders of not more than 5% of the outstanding shares of Bank Common
Stock shall have elected to exercise dissenting stockholder rights pursuant to
12 C.F.R. (S) 552.14. Condition (v) may be waived by the parties at the
discretion of the respective Boards of Directors. Additionally, the Plan of
Reorganization may be terminated at any time prior to the Effective Date of the
Reorganization by the mutual consent of the Boards of Directors of the Bank, the
Holding Company, and Interim Savings.
Amendment, Termination or Waiver
The Board of Directors of the Bank may cause the Plan of Reorganization to
be amended or terminated if the Board determines for any reason that such
amendment or termination would be advisable. Such amendment or termination may
occur at any time prior to the filing of Articles of Combination with the OTS,
whether before or after receipt of stockholder approval of the Plan of
Reorganization, provided that no such amendment may be made to the Plan of
Reorganization after stockholder approval if such amendment is deemed to be
materially adverse to the Bank, the Holding Company or their stockholders.
Additionally, any of the terms or conditions of the Plan of Reorganization may
be waived by the party which is entitled to the benefit thereof.
Business of the Bank
The Bank is a federally chartered stock savings association with three
offices located in northeast Alabama. In 1996, the Bank changed its name from
"First Federal Savings and Loan Association of DeKalb County" to "First Federal
Bank," but did not change its status as a federal savings association. At
October 31, 1997, the Bank had 283,366 shares of Bank Common Stock outstanding.
The Bank is primarily engaged in the business of obtaining funds in the
form of savings deposits and investing such funds in mortgage loans on single-
family residential real estate. To a lesser extent, the Bank is engaged in
making consumer loans.
Business of the Holding Company
General. The Holding Company is currently a nonoperating corporation that
was incorporated by the Bank in October 1997. Upon completion of the
Reorganization, the Bank will become a wholly owned subsidiary of the Holding
Company, and each stockholder of the Bank will become a stockholder of the
Holding Company with the same respective ownership interest therein as presently
held in the Bank.
Immediately after consummation of the Reorganization, it is expected that
the Holding Company will not engage in any business activity other than to hold
all of the stock of the Bank. The Holding
14
<PAGE>
Company does not presently have any arrangements or understandings regarding any
acquisition or merger opportunities. It is anticipated, however, that the
Holding Company in the future may pursue other investment opportunities,
including possible diversification through acquisitions and mergers, although
none is contemplated at this time.
Property. The Holding Company is not expected to own or lease real or
personal property initially. Instead, it intends to utilize the premises,
equipment and furniture of the Bank without the direct payment of any rental
fees to the Bank.
Legal Proceedings. The Holding Company has not, since its organization,
been a party to any legal proceedings.
Employees. At the present time, the Holding Company does not intend to
employ any persons other than its management. It will utilize the support staff
of the Bank from time to time and reimburse the Bank for the time of its
employees. If the Holding Company acquires other savings associations or pursues
other lines of business, at such time it may hire additional employees.
Competition. It is expected that for the immediate future the primary
business of the Holding Company will be the ownership of the Bank's common
stock. Therefore, the competitive conditions to be faced by the Holding Company
will be the same as those faced by the Bank.
Management of the Holding Company
Directors. The Holding Company's Articles of Incorporation provide that
the Board of Directors shall consist of not less than five nor more than 15
members. The Board of Directors will initially consist of seven members. The
directors of the Holding Company are, and upon completion of Reorganization will
continue to be, the same persons who are at present the directors of the Bank.
See "Proposal I -- Election of Directors."
The Holding Company's Articles of Incorporation provide that whenever the
Board of Directors shall consist of eight or fewer members, the directors shall
be elected for terms expiring at the next annual meeting of stockholders
following their election. Whenever the Board of Directors shall consist of nine
or more members, the directors will be divided into three classes as nearly
equal as possible and shall be elected for staggered terms of three years so
that approximately one-third of the directors are elected each year. Since the
Board of Directors currently consists of seven numbers, the directors of the
Holding Company will initially be elected for one-year terms and all of the
directors will be elected each year.
Officers. The officers of the Holding Company are, and upon completion of
the Reorganization will be, the following persons, each of whom is an officer
with the Bank.
<TABLE>
<CAPTION>
Name Position
---- --------
<S> <C>
James F. Eberhart, Jr. Chairman of the Board, President
and Chief Executive Officer
J. Malcolm Brewer Vice President
Johnny D. Young Secretary
Lila A. McCurdy Assistant Secretary Treasurer
</TABLE>
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The age on June 30, 1997, principal occupation and business experience for
the past five years of the officers of the Holding Company are set forth below.
James F. Eberhart, Jr. (age 68) has been Chairman of the Board, President
and Chief Executive Officer of the Bank since 1986.
J. Malcolm Brewer (age 83) is a dentist and has been Vice President and a
director of the Bank since 1985.
Johnny D. Young (age 53) is the owner of Young Steel and has served as
Secretary of the Bank since 1985.
Lila A. McCurdy (age 53) has served with the Bank since 1966 and has been
Assistant Secretary Treasurer and Assistant to the Chief Executive Officer since
1971.
Executive Compensation. Since the formation of the Holding Company,
none of its executive officers or directors has received any remuneration from
the Holding Company. It is expected that, unless and until the Holding Company
becomes actively involved in additional businesses, no separate compensation
will be paid to its directors and officers in addition to compensation paid to
them by the Bank. However, the Holding Company may determine that such separate
compensation is appropriate in the future. At the present time, the Holding
Company does not intend to employ any persons other than its present management.
If the Holding Company acquires other businesses, it may at such time hire
additional employees. For information concerning the compensation of the Chief
Executive Officer of the Bank and Holding Company, see "Proposal I -- Election
of Directors -- Executive Compensation."
Indemnification of Directors and Officers and Limitation of Liability.
The Bank is required by OTS regulations to indemnify its directors, officers and
employees against legal and other expenses incurred in defending lawsuits
brought against them by reason of the performance of their official duties.
Indemnification may be made to such person only if final judgment on the merits
is in his favor or, in case of (i) settlement, (ii) final judgment against him
or (iii) final judgment in his favor, other than on the merits, if a majority of
the directors of the Bank determines that he was acting in good faith within the
scope of his employment or authority as he could reasonably have perceived it
under the circumstances and for a purpose he could have reasonably believed
under the circumstances was in the best interest of the Bank or its
stockholders. If a majority of the directors of the Bank concludes that in
connection with an action any person ultimately may become entitled to
indemnification, the directors may authorize payment of reasonable costs and
expenses arising from defense or settlement of such action.
The Holding Company's Articles of Incorporation provide for indemnification
to the fullest extent permissible under the Alabama Business Corporation Act
("ABCA") of any individual who is or was a director, officer, employee or agent
of the Holding Company, and any individual who serves or served at the Holding
Company's request as a director, officer, partner, trustee, employee or agent of
another corporation, partnership, joint venture, trust, other enterprise or
employee benefit plan, in any proceeding in which the individual is made a party
as a result of his service in such capacity. Pursuant to the ABCA, such
indemnification may be made if the individual acted in good faith and (i)
reasonably believed that, in the case of conduct in his official capacity with
the Holding Company, such conduct was in the best interests of the Holding
Company and in all other cases, at least not opposed to its best interests, and
(ii) in the case of a criminal proceeding, he had no reasonable cause to believe
his conduct was unlawful. This provision does not apply to conduct prior to the
incorporation of the Holding Company or to conduct not as a director, officer,
employee or agent of the Holding Company. In accordance with the ABCA,
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<PAGE>
an individual may not be indemnified (a) in connection with a proceeding by or
in the right of the Holding Company in which the individual was adjudged liable
to the Holding Company or (b) in connection with any other proceeding charging
improper personal benefit to the individual in which he was adjudged liable on
the basis that personal benefit was improperly received by him. Management does
not have any plans to provide for indemnification rights beyond those provided
in the Holding Company's Articles of Incorporation.
Insofar as indemnification for liabilities arising under the 1933 Act may
be permitted to directors, officers or persons controlling the Holding Company
pursuant to the foregoing provisions, the Holding Company has been informed
that, in the opinion of both the SEC and the OTS, such indemnification is
against public policy as expressed in the 1933 Act and is therefore
unenforceable.
The Holding Company's Articles of Incorporation also provide that a
director shall not be personally liable to the Holding Company or its
stockholders for monetary damages for breach of his fiduciary duty as a
director, except liability for (i) the amount of a financial benefit received by
a director to which he is not entitled, (ii) an intentional infliction of harm
on the Holding Company or its stockholders, (iii) certain distributions that are
unlawful under Alabama law, (iv) an intentional violation of criminal law or (v)
breach of the director's duty of loyalty to the Holding Company or its
stockholders.
This provision eliminates the potential liability of the Holding Company's
directors for failure, through ordinary negligence, to satisfy their duty of
care, which requires directors to exercise informed business judgment in
discharging their duties. It may thus reduce the likelihood of derivative
litigation against directors and discourage or deter stockholders or management
from bringing a lawsuit against directors for breach of their duty of care, even
though such an action, if successful, might otherwise have been beneficial to
the Holding Company and its stockholders. Stockholders may thus be surrendering
a cause of action based upon negligent business decisions, including those
relating to attempts to change control of the Holding Company. The provision
will not, however, affect the right to pursue equitable remedies for breach of
the duty of care, although such remedies might not be available as a practical
matter, and the provision does not apply to breaches of duty prior to the
incorporation of the Holding Company or to breaches not committed as a director,
officer, employee or agent of the Holding Company.
To the best of management's knowledge, there is currently no pending or
threatened litigation for which indemnification may be sought or any recent
litigation involving directors of the Bank that might have been affected by the
limited liability provision in the Holding Company's Articles of Incorporation
had they been in effect at the time of the litigation.
Federal regulations applicable to the Bank contain no provisions for
limitation of directors' liability.
The above provisions of the Holding Company's Articles of Incorporation
seek to ensure that the ability of the Holding Company's directors to exercise
their best business judgment in managing the Holding Company's affairs, subject
to their continuing fiduciary duties of loyalty to the Holding Company and its
stockholders, is not unreasonably impeded by exposure to the potentially high
personal costs or other uncertainties of litigation. The nature of the tasks and
responsibilities undertaken by directors and officers often requires such
persons to make difficult judgments of great importance which can expose such
persons to personal liability, but from which they will acquire no personal
benefit (other than as stockholders). In recent years, litigation against
corporations and their directors and officers, often amounting to mere "second
guessing" of good-faith judgments and involving no allegations of personal
wrongdoing, has become common. Such litigation often claims damages in large
amounts which bear
17
<PAGE>
no relationship to the amount of compensation received by the directors or
officers, particularly in the case of directors who are not officers of the
corporation. The expense of defending such litigation, regardless of whether it
is well founded, can be enormous. Individual directors and officers can seldom
bear either the legal defense costs involved or the risk of a large judgment.
In order to attract and retain competent and conscientious directors and
officers in the face of these potentially serious risks, corporations have
historically provided for corporate indemnification in their bylaws and have
obtained liability insurance protecting the company and its directors and
officers against the cost of litigation and related expenses. The Bank currently
has insurance coverage for its directors and officers, and the Bank's management
currently anticipates that the Holding Company will be able to obtain such
coverage for its directors and officers. Based upon the publicized trends in the
insurance industry and the reported experience of other companies, the Bank's
management has no reason to believe that these problems will be alleviated in
the near future. While, in the opinion of the Bank's management, current
conditions have not to date impaired the Bank's ability to secure qualified
directors and officers, management of the Bank believes that these trends may
result in individuals being unwilling, in many instances, to serve as directors
of the Holding Company without at least a partial supplement to the protection
which such insurance has historically provided. The provisions of the Holding
Company's Articles of Incorporation relating to director liability and the ABCA
authorizing such provisions are intended to reduce, in appropriate cases, the
risks incident to serving as a director which otherwise could be covered by
liability insurance. The Holding Company's Board of Directors, the individual
members of which will benefit from the inclusion of the indemnification and
limitation of liability provisions, has a personal interest in including these
provisions in the Holding Company's Articles of Incorporation at the potential
expense of stockholders.
Comparison of Stockholders' Rights
Introduction. As a result of the Reorganization, holders of Bank Common
Stock, whose rights are presently governed by federal law and the Federal Stock
Charter and Bylaws of the Bank, will become stockholders of the Holding Company,
an Alabama corporation. Accordingly, their rights will be governed by the ABCA
and by the Articles of Incorporation and Bylaws of the Holding Company. Certain
differences arise from this change of governing law as well as from distinctions
between the Federal Stock Charter and Bylaws of the Bank and the Articles of
Incorporation and Bylaws of the Holding Company. The following discussion is not
intended to be a complete statement of the differences affecting the rights of
stockholders, but summarizes certain significant differences. The Articles of
Incorporation and Bylaws of the Holding Company are attached hereto as Exhibits
B and C and should be reviewed for more detailed information. The discussion
below is qualified in its entirety by reference to such documents.
Issuance of Capital Stock. The Bank's Federal Stock Charter authorizes
the issuance of 400,000 shares of capital stock, of which 300,000 shares are
common stock, par value $1.00 per share, and 100,000 shares are preferred stock.
The Articles of Incorporation of the Holding Company authorize the issuance of
5,000,000 shares of capital stock, par value $.01 per share, and 1,000,000
shares of serial preferred stock. On the Record Date, there were 283,366 shares
of Bank Common Stock outstanding. Following the Reorganization, there will be
the same number of shares of Holding Company Common Stock outstanding, assuming
that no stockholder exercises dissenters' rights of appraisal. Under the Bank's
Federal Stock Charter, shares of capital stock may not be issued directly or
indirectly to officers, directors or controlling persons of the Bank (other than
as part of a general public offering or as qualifying shares to a director)
unless the issuance or the plan under which they would be issued is approved by
a majority of the votes eligible to be cast. This restriction on issuing stock
to officers, directors or controlling persons is not contained in the Holding
Company's Articles of Incorporation.
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<PAGE>
The Holding Company's Articles of Incorporation authorize the issuance of
additional shares of stock up to the amount authorized as approved by the Board
of Directors without the approval of the stockholders.
The Holding Company has no present intention to issue additional shares of
stock at this time. If additional shares were issued, the percentage ownership
interests of existing stockholders would be reduced, and, depending on the terms
pursuant to which new shares were issued, the book value of outstanding stock
would be diluted. Moreover, such additional share issuance could be construed as
having an anti-takeover effect. The ability to issue additional shares, which
exists under both the Federal Stock Charter of the Bank and the Articles of
Incorporation of the Holding Company, gives management greater flexibility in
financing corporate operations.
Payment of Dividends. Federal regulations impose certain limitations on the
payment of dividends and other capital distributions (including stock
repurchases and cash mergers) by the Bank. Under these regulations, a savings
institution that, immediately prior to, and on a pro forma basis after giving
effect to, a proposed capital distribution, has total capital (as defined by OTS
regulation) that is equal to or greater than the amount of its fully phased-in
capital requirements (a "Tier 1 Association") is generally permitted, after
notice, to make capital distributions during a calendar year in the amount equal
to the greater of: (i) 75% of its net income for the previous four quarters; or
(ii) up to 100% of its net income to date during the calendar year plus an
amount that would reduce by one-half the amount by which its ratio of total
capital to assets exceeded its fully phased-in risk-based capital ratio
requirement at the beginning of the calendar year. Savings associations with
total capital in excess of the fully phased-in capital requirement that have
been notified by the OTS that they are in need of more than normal supervision
will be subject to restriction on dividends. A savings institution with total
capital in excess of current minimum capital ratio requirements but not in
excess of the fully phased-in requirements (a "Tier 2 Association") is
permitted, after notice, to make capital distributions without OTS approval of
up to 75% of its net income for the previous four quarters, less dividends
already paid for such period, depending on the savings institution's level of
risk-based capital. A savings institution that fails to meet current minimum
capital requirements (a "Tier 3 Association") is prohibited from making any
capital distributions without the prior approval of the OTS. Tier 1 Associations
that have been notified by the OTS that they are in need of more than normal
supervision will be treated as either a Tier 2 or Tier 3 Association. The Bank
is a Tier 1 Association.
In addition to the foregoing restrictions, the Bank would be prohibited
under federal regulations from making any capital distributions, including
dividends, if after making the distribution, the Bank would have: (i) a total
risk-based capital ratio of less than 8.0%; (ii) a Tier 1 risk-based capital
ratio of less than 4.0%; or (iii) a leverage ratio of less than 4.0%.
Furthermore, earnings of the Bank appropriated to bad debt reserves and deducted
for federal income tax purposes are not available for payment of cash dividends
or other distributions to the Holding Company without payment of taxes at the
then current tax rate by the Bank on the amount of earnings removed from the
reserves for such distributions. Finally, the Bank is not permitted to pay
dividends on its capital stock if its regulatory capital would thereby be
reduced below the remaining balance of the liquidation account which was
established for the benefit of certain depositors of the Bank at the time of its
conversion from mutual to stock form.
Unlike the Bank, the Holding Company is not subject to regulatory
restrictions on the payment of dividends to stockholders. Under the ABCA,
dividends may be paid unless, after giving effect to the dividend, the
corporation paying the dividend would not be able to pay its debts as they
become due in the usual course of business or the corporation's total assets
would be less than the sum of its total liabilities plus the amount that would
be needed, if the corporation were to be dissolved at the time of the dividend,
to satisfy the preferential rights of any stockholders whose preferential rights
are superior
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<PAGE>
to those receiving the dividend. After the Reorganization, however, the Holding
Company's principal source of income will initially consist of its equity in the
earnings, if any, of the Bank. Although the Holding Company will not be subject
to the above dividend restrictions regarding dividend payments to its
stockholders, the restrictions on the Bank's ability to pay dividends to the
Holding Company may affect the Holding Company's ability to pay dividends.
The payment of future cash dividends by the Bank, and thus by the Holding
Company, will continue to depend upon the Bank's earnings, financial condition
and capital requirements, as well as the tax and regulatory considerations
discussed herein. The Bank's Board of Directors considers many factors,
including profitability, maintenance of adequate capital, current and
anticipated future income, outstanding loan commitments, adequacy of loan loss
reserves, cash flow requirements and economic conditions. Furthermore, before
declaring a dividend, the Board of Directors must determine that the Bank will
exceed its regulatory capital requirements after the payment of the dividend. If
the Reorganization takes place, federal regulations will require the Bank to
give the OTS 30 days' advance notice of any proposed declaration of dividends to
the Holding Company.
Special Meetings of Stockholders. Special meetings of the holders of Bank
Common Stock generally may be called by the chairman of the board, the
president, a majority of the Board of Directors or upon the written request of
the holders of not less than one-tenth of all the outstanding capital stock
entitled to vote at the meeting. The Holding Company's Articles of Incorporation
provides that special meetings of stockholders may only be called by the Holding
Company's Board of Directors, by an appropriate committee appointed by the Board
of Directors, or upon the written demand of not less than 10% of all votes
entitled to be cast on any issue proposed to be considered at the special
meeting. Stockholder action may be taken only at a special or annual meeting of
stockholders and not by written consent.
Cumulative Voting. Cumulative voting entitles each stockholder to cast a
number of votes in the election of directors equal to the number of such
stockholder's shares of common stock multiplied by the number of directors to be
elected, and to distribute such votes among one or more of the nominees to be
elected. The Bank's Federal Stock Charter and Bylaws give stockholders
cumulative voting rights with respect to the election of directors. The Holding
Company's Articles of Incorporation, by contrast, provide that there shall be no
cumulative voting by stockholders in the election of the Holding Company's
directors. The absence of cumulative voting rights effectively means that the
holders of a majority of the shares voted at a meeting of stockholders may, if
they so choose, elect all directors of the Holding Company to be selected at
that meeting, thus precluding minority stockholder representation on the Holding
Company's Board of Directors.
Stockholders' Rights of Appraisal. Pursuant to OTS regulations,
stockholders of the Bank have dissenters' appraisal rights in connection with a
plan of merger or consolidation to which the Bank is a party. Similarly,
stockholders of the Holding Company will have dissenters' appraisal rights in
connection with a business combination as to which the Holding Company is a
party, unless the ABCA provides otherwise with respect to specific cases.
Vacancies on the Board of Directors. Any vacancy on the Board of Directors
of the Bank may be filled by the affirmative votes of a majority of the
remaining directors although less than a quorum, and any director so appointed
is to serve until the next election of directors by stockholders. Additionally,
any directorship of the Bank 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 only until the next election of directors by the stockholders. The
Articles of Incorporation of the Holding Company provide that vacancies on the
board and newly created directorships may be filled by a two-thirds vote of the
directors
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then in office whether or not a quorum. Directors appointed to fill a vacancy on
the Holding Company's board may serve until the next annual meeting of
stockholders.
Number and Term of Directors. The Bank's Federal Stock Charter provides
that the number of directors, as stated in the Bylaws, shall not be less than
seven. OTS regulations provide that the number of directors of a federal savings
association may not exceed 15. The Bank's Bylaws provide that its Board of
Directors shall consist of seven members and shall be divided into three equal
classes which shall each be elected for three-year terms.
The Holding Company's Articles of Incorporation provide that its Board of
Directors shall consist of not less than five nor more than 15 members, as fixed
by the Board of Directors by the vote of two-thirds of the directors then in
office, provided that the power to increase or decrease the number of directors
last appointed by the stockholders by more than 30% is reserved to the
stockholders. The Articles of Incorporation further provide that, whenever the
number of directors of the Holding Company is nine or greater, the Board of
Directors shall be divided into three equal classes and shall be elected for
three-year terms. However, whenever the number of directors is fewer than nine,
the Board of Directors shall not be classified and each director shall serve for
a one-year term. Since the initial number of directors of the Holding Company is
seven, the directors will serve for one-year terms unless and until the Board of
Directors increases the number of directors to nine or greater. The Holding
Company's Articles of Incorporation set the initial number of directors at seven
persons, and thereafter the Board of Directors shall consist of such number of
members as determined by the board in accordance with the Articles of
Incorporation.
Removal of Directors. OTS regulations provide that at a meeting of
stockholders 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. The regulation states that, 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 pursuant to the provisions of the Bank's Federal Stock Charter or
supplemental sections thereto, the provisions shall apply, with respect to the
removal of a director or directors so elected, by the vote of the holders of the
outstanding shares of that class and not to the vote of the outstanding shares
as a whole. The Articles of Incorporation of the Holding Company provide that
any director or the entire Board of Directors may be removed for cause by the
affirmative vote of the holders of at least 80% of the outstanding shares of
capital stock entitled to vote generally in the election of directors at a
meeting of the stockholders called for that purpose.
Approval of Mergers, Consolidations, Sale of Substantially All Assets and
Certain Business Combinations. Under present federal regulations, the approval
of the holders of at least two-thirds of the Bank Common Stock is required for a
merger, consolidation or sale of assets not in the ordinary course of business
(except for a merger with an interim savings institution such as Interim
Savings, which requires only a majority vote), except that no stockholder
approval is required if the Bank is the acquiring institution and the
transaction involves, among other things, the issuance of shares of Bank Common
Stock amounting to 15% or fewer of the shares of Bank Common Stock outstanding
immediately prior to the transaction. The Bank may effect a dissolution pursuant
to a plan adopted and approved by the Bank's Board of Directors, by the OTS, and
by the holders of a majority of the Bank's outstanding shares of common stock.
Under the ABCA, the approval of the holders of at least two-thirds of the
Holding Company Common Stock is required for a merger, consolidation, share
exchange or sale of assets not in the regular
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course of business. Action by the stockholders of the surviving corporation in a
plan of merger is not required if: (i) the articles of incorporation of the
surviving corporation will not change; (ii) the rights of the surviving
corporation's stockholders will not be affected; and (iii) the number of shares
of the surviving corporation outstanding immediately after the merger, plus the
number of shares issuable as a result of the merger, will not exceed by more
than 20% the total number of shares of the surviving corporation outstanding
immediately before the merger.
The Holding Company's Articles of Incorporation require the approval of the
holders of (i) at least 80% of the Holding Company's outstanding shares of
voting stock and (ii) at least a majority of the Holding Company's outstanding
shares of voting stock, not including shares held by a "Related Person," to
approve certain "Business Combinations" as defined therein, and related
transactions. The increased voting requirements in the Holding Company's
Articles of Incorporation apply in connection with business combinations
involving a "Related Person," except in cases where the proposed transaction has
been approved in advance by two-thirds of those members of the Holding Company's
Board of Directors who are unaffiliated with the Related Person and who were
directors prior to the time when the Related Person became a Related Person (the
"Continuing Directors"). The term "Related Person" is defined to include any
individual, corporation, partnership or other entity which owns beneficially or
controls, directly or indirectly, more than 10% of the outstanding shares of
voting stock of the Holding Company. A "Business Combination" is defined to
include (i) any merger, reorganization, or consolidation of the Holding Company
with or into any Related Person; (ii) any sale, lease, exchange, mortgage,
transfer, or other disposition of all or a substantial part of the assets of the
Holding Company or of a subsidiary to any Related Person (the term "substantial
part" is defined to include more than 25% of the Holding Company's total
assets); (iii) any merger or consolidation of a Related Person with or into the
Holding Company or a subsidiary of the Holding Company; (iv) any sale, lease,
exchange, transfer or other disposition of all or any substantial part of the
assets of a Related Person to the Holding Company or a subsidiary of the Holding
Company; (v) the issuance of any securities of the Holding Company or a
subsidiary of the Holding Company to a Related Person; (vi) the acquisition by
the Holding Company of any securities of the Related Person; (vii) any
reclassification of the Holding Company Common Stock, or any recapitalization
involving the Holding Company Common Stock; and (viii) any agreement, contract
or other arrangement providing for any of the above transactions.
Advance Notice Requirements for Nominations of Directors and Presentation
of New Business at Meetings of Stockholders. The Bank's Bylaws generally provide
that any stockholder desiring to make a nomination for the election of directors
or a proposal for new business at a meeting of stockholders must submit written
notice to the Bank at least five days in advance of the meeting. Failure to
comply with these advance notice requirements will preclude such nominations or
new business from being considered at the meeting.
The Holding Company's Articles of Incorporation provide that a stockholder
wishing to make nominations or proposals generally must give written notice to
the Secretary of the Holding Company not less than 30 nor more than 60 days
before the meeting, together with certain information relating to the nomination
or new business.
Amendment of Federal Stock Charter, Articles of Incorporation and Bylaws.
The Bank's Federal Stock Charter provides that it may be amended only if the
amendment is first proposed by the Bank's Board of Directors, then preliminarily
approved by the OTS, and thereafter approved by the holders of a majority of the
Bank's outstanding shares of common stock. The Bylaws of the Bank may be amended
by the vote of either a majority of the Board of Directors or the holders of a
majority of the outstanding shares of Bank Common Stock.
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The Holding Company's Articles of Incorporation provide that specified
provisions contained in the Articles of Incorporation may not be repealed or
amended except upon the affirmative vote of not less than 80% of the outstanding
shares of the Holding Company's stock entitled to vote generally in the election
of directors, after giving effect to any limits on voting rights. This
requirement exceeds the majority vote of the outstanding stock that would
otherwise be required by Alabama law for the repeal or amendment of a provision
of the Articles. The specific provisions are those (i) governing the calling of
special meetings and the requirement that stockholder action be taken only at
annual or special meetings, (ii) requiring written notice to the Holding Company
of nominations for the election of directors and new business proposals, (iii)
governing the number of the Holding Company's Board of Directors, the filling of
vacancies on the Board of Directors and classification of the Board of
Directors, (iv) providing the mechanism for removing directors, (v) governing
the requirement for the approval of certain Business Combinations involving a
"Related Person," (vi) regarding the consideration of certain nonmonetary
factors in the event of an offer by another party, (vii) providing for the
indemnification of directors, officers, employees and agents of the Holding
Company, (viii) eliminating the liability of the directors to the Holding
Company and its stockholders for monetary damages, with certain exceptions, for
breach of fiduciary duty, and (ix) governing the required stockholder vote for
amending the Articles of Incorporation or Bylaws of the Holding Company. This
provision is intended to prevent the holders of less than 80% of the outstanding
stock of the Holding Company from circumventing any of the foregoing provisions
by amending the Articles of Incorporation to delete or modify one of such
provisions. This provision would enable the holders of more than 20% of the
Holding Company's voting stock to prevent amendments to the Holding Company's
Articles of Incorporation or Bylaws, even if such amendments were favored by the
holders of a majority of the voting stock. This 80% voting requirement is
reduced to a majority vote if the proposed amendment is first approved by a
majority of the directors who are unaffiliated with the "Related Person."
The Holding Company's Articles of Incorporation provide that the Holding
Company's Bylaws may be amended either by a two-thirds vote of the Holding
Company's Board of Directors or by the affirmative vote of the holders of not
less than 80% of the outstanding shares of the Holding Company's stock entitled
to vote generally in the election of directors, after giving effect to any
limits on voting rights. Absent this provision, Alabama law provides that a
corporation's bylaws may be amended by the holders of a majority of a
corporation's outstanding capital stock. The Holding Company's Bylaws contain
numerous provisions concerning the Holding Company's governance, such as fixing
the number of directors and determining the number of directors constituting a
quorum. By reducing the ability of a potential corporate raider to make changes
in the Holding Company's Bylaws and to reduce the authority of the Board of
Directors or impede its ability to manage the Holding Company, this provision
could have the effect of discouraging a tender offer or other takeover attempt
where the ability to make fundamental changes through bylaw amendments is an
important element of the takeover strategy of the acquiror.
Certain Anti-Takeover Provisions of the Articles of Incorporation and Bylaws
The Board of Directors believes that certain of the provisions described
above 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 include: the requirement of the
affirmative vote of 80% of the shares outstanding for the approval of Business
Combinations with Related Persons; the elimination of cumulative voting; the
requirement of advance notice of stockholder nominations and new business; the
authorization of additional shares of Holding Company Common Stock; the
classification of the Board of Directors; and the 80% rate requirement for
amendment of certain Articles of Incorporation and Bylaws provisions. The Board
of Directors believes these provisions are in the best interests of the Bank and
of the Holding Company and its stockholders. In the judgment
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of the Board of Directors, the Board of Directors is in the best position to
consider all relevant factors and to negotiate for what is in the best interests
of the stockholders and the Holding Company's other constituents. Accordingly,
the Board of Directors of the Holding Company and the Bank believe that it is in
the best interests of the Holding Company and its stockholders to encourage
potential acquirors to negotiate directly with the Holding Company's Board of
Directors and that these provisions will encourage such negotiations and
discourage nonnegotiated 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 stockholder.
Certain corporate takeover practices could be highly disruptive to a
company and could result in inequitable treatment among the company's
stockholders. These practices typically involve a purchaser's acquisition of a
substantial portion of a company's capital stock and attempt to replace
incumbent management and the board of directors. Takeover attempts which have
not been negotiated with and approved by the board of directors present to
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 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 target company's assets.
An unsolicited takeover proposal can seriously disrupt the business and
management of a corporation and cause great expense. Although a tender offer or
other takeover attempt may be made at a price substantially above the current
market prices, such offers are sometimes made for less than all the outstanding
shares of a target company. As a result, stockholder 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 stockholder.
While 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 the Reorganization, the Board of Directors, as discussed above, believes
that it is appropriate to include certain provisions as part of the Holding
Company's Articles of Incorporation to protect the interests of the Holding
Company and its stockholders from hostile takeovers which the Board of Directors
might conclude are not in the best interests of the Bank, the Holding Company or
the Holding Company's stockholders. These provisions may have the effect of
discouraging a future takeover attempt which is not approved by the Board of
Directors but which individual stockholders may deem to be in their best
interests or in 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 an opportunity to do
so. Such provisions will also render the removal of the current Board of
Directors or management of the Holding Company more difficult.
Regulation of the Holding Company
Upon completion of the Reorganization, the Holding Company will become a
savings and loan holding company within the meaning of the Home Owners' Loan
Act, as amended. As such, it will be registered with the OTS and will be subject
to OTS regulations, examinations and reporting requirements. As a subsidiary of
a savings and loan holding company, the Bank will be subject to certain
restrictions in its dealings with the Holding Company and with other companies
affiliated with the Holding Company, and will continue to be subject to
regulatory requirements as a federal savings association.
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Activities Restrictions. The Board of Directors presently intends to
operate the Holding Company as a unitary savings and loan holding company. Under
current law, there are generally no restrictions on the activities of a unitary
savings and loan holding company. However, if the Director of the OTS determines
that there is reasonable cause to believe that the continuation by a savings and
loan holding company of an activity constitutes a serious risk to the financial
safety, soundness or stability of its subsidiary savings association, the
Director of the OTS may impose such restrictions as deemed necessary to address
such risk including limiting: (i) payment of dividends by the savings
association; (ii) transactions between the savings association and its
affiliates; and (iii) any activities of the savings association that might
create a serious risk that the liabilities of the holding company and its
affiliates may be imposed on the savings association.
The United States Congress currently is considering legislation that would
require all federal savings associations (like the Bank) to convert to
commercial banks or state savings bank or state savings associations, as well as
forcing savings and loan holding companies to become bank holding companies or
"financial holding companies" (a new type of bank holding company created by the
proposed legislation). If the pending federal legislation were to be enacted in
its current form, the authority of the Holding Company to engage in nonbanking
business activities would likely be restricted to a degree; however, at present
no prediction can be made as to whether the proposed legislation will be enacted
or, if enacted, the extent to which it would affect the potential business
activities of the Company.
If the Holding Company were to acquire control of another savings
association, other than through merger or other business combination with the
Bank, the Holding Company would thereupon become a multiple savings and loan
holding company. Except where such acquisition is pursuant to the authority to
approve emergency thrift acquisitions and where each subsidiary savings
association meets the QTL test, the activities of the Holding Company and any of
its subsidiaries (other than the Bank or other subsidiary savings institutions)
would thereafter be subject to further restrictions. Among other things, no
multiple savings and loan holding company or subsidiary thereof which is not a
savings association shall commence or continue for a limited period of time
after becoming a multiple savings and loan holding company or subsidiary
thereof, any business activity, upon prior notice to, and no objection by, the
OTS, other than: (i) furnishing or performing management services for a
subsidiary savings association; (ii) conducting an insurance agency or escrow
business; (iii) holding, managing, or liquidating assets owned by or acquired
from a subsidiary savings institution; (iv) holding or managing properties used
or occupied by a subsidiary savings institution; (v) acting as trustee under
deeds of trust; (vi) those activities authorized by regulation as of March 5,
1987 to be engaged in by multiple holding companies; or (vii) unless the
Director of the OTS by regulation prohibits or limits such activities for
savings and loan holding companies, those activities authorized by the Federal
Reserve Board as permissible for bank holding companies. Those activities
described in (vii) above must also be approved by the Director of the OTS prior
to being engaged in by a multiple holding company.
Notwithstanding the above rules as to permissible business activities of
unitary savings and loan holding companies, if the savings association
subsidiary of such a holding company fails to meet the qualified thrift leader
("QTL") test of the Home Owners' Loan Act (the "HOLA") and OTS regulations,
test, then such unitary holding company will become subject to the activities
restrictions applicable to multiple holding companies. To qualify as a QTL, a
savings institution must either (i) be deemed a "domestic building and loan
association" under the Code by maintaining at least 60% of its total assets in
specified types of assets, including cash, certain government securities, loans
secured by and other assets related to residential real property, educational
loans, and investments in premises of the institution or (ii) satisfy the HOLA's
QTL test by maintaining at least 65% of "portfolio assets" in certain "Qualified
Thrift Investments." For purposes of the HOLA's QTL test, portfolio assets are
defined as total assets less intangibles, property used by a savings institution
in its business and liquidity investments in an
25
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amount not exceeding 20% of assets. Qualified Thrift Investments consist of (a)
loans, equity positions or securities related to domestic, residential real
estate or manufactured housing, (b) 50% of the dollar amount of residential
mortgage loans subject to sale under certain conditions, and (c) loans to small
businesses, student loans and credit card loans. In addition, subject to 20% of
portfolio assets limit, savings institutions are able to treat as Qualified
Thrift Investments 200% of their investments in loans to finance "starter homes"
and loans for construction, development or improvement of housing and community
service facilities or for financing small business in "credit needy" areas.
A savings institution must maintain its status as a QTL on a monthly basis
in at least nine out of every 12 months. An initial failure to qualify as a QTL
results in a number of sanctions, including the imposition of certain operating
restrictions and a restriction on obtaining additional advances from its Federal
Home Loan Bank. If a savings institution does not requalify under the QTL test
within the three-year period after it fails the QTL test, it would be required
to terminate any activity not permissible for a national bank and repay as
promptly as possible any outstanding advances from its Federal Home Loan Bank.
In addition, the holding company of such an institution, such as the Holding
Company, would similarly be required to register as a bank holding company with
the Federal Reserve Board. On June 30, 1997, the Bank qualified as a QTL.
Restrictions on Acquisitions. Savings and loan holding companies are
prohibited from acquiring, without prior approval of the Director of OTS, (i)
control of any other savings association or savings and loan holding company or
substantially all the assets thereof or (ii) more than 5% of the voting shares
of a savings association or holding company thereof which is not a subsidiary.
In addition, except with the prior approval of the Director of the OTS, no
director or officer of a savings and loan holding company or person owning or
controlling by proxy or otherwise more than 25% of such company's stock, may
also acquire control of any savings association, other than a subsidiary savings
association, or of any other savings and loan holding company.
The Director of the OTS may only approve acquisitions resulting in the
formation of a multiple savings and loan holding company that controls savings
associations in more than one state if: (i) the multiple savings and loan
holding company involved controls a savings institution which operated a home or
branch office in the state of the association to be acquired as of March 5,
1987; (ii) the acquiror is authorized to acquire control of the savings
association pursuant to the emergency acquisition provisions of the Federal
Deposit Insurance Act; or (iii) the statutes of the state in which the bank to
be acquired is located specifically permit institutions to be acquired by state-
chartered banks or savings and loan holding companies located in the state where
the acquiring entity is located (or by a holding company that controls such
state-chartered savings institutions).
Under Alabama law, a southern region savings and loan holding company or
savings institution may acquire a controlling interest in an Alabama savings and
loan holding company or savings institution upon approval of the Alabama
Superintendent of Banks (the "Superintendent"). A southern region savings loan
holding company or savings institution is defined as any savings and loan
holding company or savings institution organized under the laws of the southern
region states including Alabama, Arkansas, Florida, Georgia, Kentucky,
Louisiana, Maryland, Mississippi, North Carolina, South Carolina, Tennessee,
Virginia, West Virginia and the District of Columbia or under the laws of the
United States whose principal place of business is located in a southern region
state other than Alabama and has in excess of 80% of its total deposits or the
deposits of its subsidiaries located in the southern region. Approval by the
Superintendent must include a finding that: (i) the Superintendent determines
that the laws of the state in which the southern region savings and loan holding
company or southern region savings institution making the acquisition has its
principal place of business permit Alabama savings and loan holding companies
and Alabama savings institutions to acquire savings institutions and savings and
26
<PAGE>
loan holding companies in that state; (ii) the Superintendent determines that
the laws of the state in which the southern region savings and loan holding
company or southern region savings institution making the acquisition has its
principal place of business permit such southern region savings and loan holding
company or southern region savings institution to be acquired by the Alabama
savings and loan holding company or Alabama savings institution sought to be
acquired; (iii) the target savings institution has been in existence for more
than five years; and (iv) notice of intent to acquire has been given to the
stockholders of the target institution and the general public by following
specified procedures. Generally, approval by the Superintendent must subject the
acquisition to any conditions, restrictions and requirements that would by
applicable to an acquisition by an Alabama savings and loan holding company or
savings institution of a southern region savings and loan holding company or
savings institution in the state where the southern region institution has its
principal place of business.
Transactions with Affiliates. Transactions between savings associations and
any affiliate are governed by Sections 23A and 23B of the Federal Reserve Act,
as amended. An affiliate of a savings association is any company or entity which
controls, is controlled by or is under common control with the savings
association. In a holding company context, the parent holding company of a
savings association (such as the Holding Company) and any companies which are
controlled by such parent holding company are affiliates of the savings
association. Generally, Sections 23A and 23B (i) limit the extent to which the
savings association or its subsidiaries may engage in "covered transactions"
with any one affiliate to an amount equal to 10% of such savings association's
capital stock and surplus, and contain an aggregate limit on all such
transactions with all affiliates to an amount equal to 20% of such capital stock
and surplus and (ii) require that all such transactions be on terms
substantially the same, or at least as favorable to the institution or
subsidiary, as those provided to a nonaffiliated company or entity. The term
"covered transaction" includes the making of loans, purchase of assets, issuance
of a guarantee and similar other types of transactions. Additionally, in
addition to the restrictions imposed by Sections 23A and 23B, no savings
association may (i) loan or otherwise extend credit to an affiliate, except for
any affiliate which engages only in activities which are permissible for bank
holding companies, or (ii) purchase or invest in any stocks, bonds, debentures,
notes or similar obligations of any affiliate, except for affiliates which are
subsidiaries of the savings association.
Accounting Treatment
The Reorganization will be accounted for as a reorganization under common
control treated in a manner similar to a pooling of interests. Therefore, the
consolidated capitalization, assets, liabilities, income and other financial
data of the Holding Company immediately following the Reorganization will be
substantially the same as those of the Bank immediately prior to consummation of
the Reorganization, and after the Reorganization, will be shown in the Holding
Company's consolidated financial statements at the Bank's historical recorded
values. Because the Reorganization will not result in a change in such financial
statements, this Proxy Statement/Prospectus does not include financial
statements of the Bank or the Holding Company.
Legal Opinion
The validity of the shares of the Holding Company Common Stock issuable
upon consummation of the Reorganization will be passed upon by the law firm of
Kutak Rock, Washington, D.C.
Vote Required
Approval of the Plan of Reorganization requires the affirmative vote of a
majority of the total votes eligible to be cast at the Annual Meeting. Since the
required vote is based on the number of shares
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outstanding, an abstention or failure to vote, including a broker no vote, is
equivalent to voting against the Plan of Reorganization. The Board of Directors
recommends a vote "FOR" the approval of the Plan of Reorganization.
This description of the proposed Holding Company for the Bank does not
purport to be complete, but is qualified in its entirety by the Plan of
Reorganization and the Articles of Incorporation and Bylaws of the Holding
Company attached as Exhibits A, B and C, respectively, to this Proxy
Statement/Prospectus.
- --------------------------------------------------------------------------------
PROPOSAL IV -- ADJOURNMENT OF MEETING
- --------------------------------------------------------------------------------
Approval of the Plan of Reorganization requires the affirmative vote of a
majority of the total votes eligible to be cast at the Annual Meeting. In the
event there is an insufficient number of shares present in person or by proxy at
the Annual Meeting to approve the Plan of Reorganization, the Board of Directors
intends to adjourn the Annual Meeting to a later date. The place and date to
which the Annual Meeting is to be reconvened would be announced at the Annual
Meeting, but, in order to avoid the necessity of setting a new record date or
providing formal written notice of the adjournment, would in no event be more
than 30 days after the date of the Annual Meeting.
The effect of any such adjournment would be to permit the Bank to solicit
additional proxies for approval of the Plan of Reorganization. While such an
adjournment would not invalidate any proxies previously filed, including those
filed by stockholders voting against the subject proposals, it would give the
Bank the opportunity to solicit additional proxies in favor of the Plan of
Reorganization. As a result, such adjournment could be advantageous to
stockholders who favor the proposed Reorganization to the potential disadvantage
of those who would disfavor such proposal.
The Board of Directors recommends a vote "FOR" the approval of the
adjournment under the circumstances described herein. Approval of the
adjournment requires the affirmative vote of the holders of a majority of the
votes cast in person or by proxy at the Annual Meeting.
- --------------------------------------------------------------------------------
OTHER MATTERS
- --------------------------------------------------------------------------------
The Board of Directors is not aware of any business to come before the
Annual Meeting other than those matters described above in this Proxy Statement
and matters incident to the conduct of the Annual Meeting. However, if any other
matters should properly come before the Annual Meeting, it is intended that
proxies in the accompanying form will be voted in respect thereof in accordance
with the determination of a majority of the Board of Directors.
- --------------------------------------------------------------------------------
MISCELLANEOUS
- --------------------------------------------------------------------------------
The cost of soliciting proxies will be borne by the Bank. The Bank will
reimburse brokerage firms and other custodians, nominees and fiduciaries for
reasonable expenses incurred by them in sending proxy materials to the
beneficial owners of Common Stock. In addition to solicitations by mail,
directors, officers and regular employees of the Bank may solicit proxies
personally or by telegraph or telephone without additional compensation.
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The Bank's Annual Report to Stockholders, including financial statements,
is being mailed to all stockholders of record as of the close of business on the
Record Date. Any stockholder who has not received a copy of such Annual Report
may obtain a copy by writing to the Secretary of the Bank. Such Annual Report is
not to be treated as a part of the proxy solicitation material nor as having
been incorporated herein by reference.
BY ORDER OF THE BOARD OF DIRECTORS
-----------------------------------
LILA A. MCCURDY
ASSISTANT SECRETARY
Fort Payne, Alabama
November __, 1997
29
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EXHIBIT A
FIRST FEDERAL BANK
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION, dated October 14, 1997, by and
among FIRST FEDERAL BANK, a federal stock savings and loan association ("First
Federal"); FBDC FINANCIAL CORP., an Alabama corporation ("Holding Company"), and
FIRST FEDERAL INTERIM SAVINGS BANK, a to-be-formed interim stock savings bank
("Interim Savings").
The parties hereto desire to enter into an Agreement and Plan of
Reorganization whereby the corporate structure of First Federal will be
reorganized into the holding company form of ownership. The result of such
reorganization will be that, immediately after the Effective Date (as defined in
Article V below), all of the issued and outstanding shares of common stock,
$1.00 par value per share, of First Federal ("First Federal Common Stock") will
be held by Holding Company, and the holders of the issued and outstanding shares
of First Federal Common Stock will become the holders of the issued and
outstanding shares of the common stock, $.01 par value per share, of Holding
Company ("Holding Company Common Stock").
The reorganization of First Federal will be accomplished by the following
steps: (1) the formation by First Federal of a wholly owned operating
subsidiary, Holding Company, incorporated under the laws of the State of Alabama
for the primary purpose of becoming the sole stockholder of a newly formed
interim federal stock savings bank, and subsequently becoming the sole holder of
the capital stock of First Federal; (2) the formation of an interim federal
stock savings bank, Interim Savings, which will be wholly owned by Holding
Company; and (3) the merger of Interim Savings into First Federal, with First
Federal as the surviving corporation. Pursuant to such merger: (i) all of the
issued and outstanding shares of First Federal Common Stock will automatically
be converted by operation of law on a one-for-one basis into an equal number of
issued and outstanding shares of Holding Company Common Stock; and (ii) all of
the issued and outstanding shares of common stock of Interim Savings will
automatically be converted by operation of law on a one-for-one basis into an
equal number of issued and outstanding shares of First Federal Common Stock,
which will be all of the issued and outstanding capital stock of First Federal.
NOW, THEREFORE, in order to consummate this Agreement and Plan of
Reorganization, and in consideration of the mutual covenants herein set forth,
the parties agree as follows:
ARTICLE I
MERGER OF INTERIM SAVINGS INTO
FIRST FEDERAL AND RELATED MATTERS
---------------------------------
1.1 The Merger. On the Effective Date, Interim Savings will be merged with
and into First Federal (the "Merger") and the separate existence of Interim
Savings shall cease, and all assets and property (real, personal and mixed,
tangible and intangible, choses in action, rights and credits) then owned by
Interim Savings, or which would inure to it, shall immediately and
automatically, by operation of law and without any conveyance, transfer, or
further action, become the property of First Federal.
A-1
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First Federal shall be deemed to be a continuation of Interim Savings, and First
Federal shall succeed to the rights and obligations of Interim Savings.
1.2 Continued Existence of First Federal. Following the Merger, the
existence of First Federal shall continue unaffected and unimpaired by the
Merger, with all the rights, privileges, immunities and powers, and subject to
all the duties and liabilities, of a corporation organized under the laws of the
United States with a Federal Stock Charter and Bylaws in the form approved by
the Office of Thrift Supervision (the "OTS"). The Federal Stock Charter and
Bylaws of First Federal, as presently in effect, shall continue in full force
and effect and shall not be changed in any manner whatsoever by the Merger.
1.3 Continued Business of First Federal. From and after the Effective
Date, and subject to the actions of the Board of Directors of First Federal, the
business presently conducted by First Federal (whether directly or through its
subsidiary) will continue to be conducted by it, as a wholly owned subsidiary of
Holding Company, and the present directors and officers of First Federal will
continue in their present positions.
1.4 Office Locations. The locations of the home and branch offices of
First Federal immediately prior to the Effective Date shall continue to be the
locations of the home and branch offices, respectively, of First Federal from
and after the Effective Date. A list of the office locations of First Federal is
attached hereto as Exhibit A.
1.5 Directors. The number of directors of First Federal after the Merger
shall be seven (7). A list of those persons who will be the directors of First
Federal following the Merger and their residence addresses is attached hereto as
Exhibit B.
1.6 Savings Accounts. The issuance of savings accounts and other
instruments and obligations by First Federal shall not be affected by the
Merger.
1.7 Further Assurances. First Federal and Interim Savings each agree that
at any time, or from time to time, as and when requested by First Federal or by
its successors or assigns, Interim Savings will execute and deliver, or cause to
be executed and delivered, in its name by its last acting officers or by the
corresponding officers of First Federal (Interim Savings hereby authorizing such
officer so to act in its name), all such conveyances, assignments, transfers,
deeds and other instruments, and will take or cause to be taken such further or
other action as First Federal or its successors or assigns may deem necessary or
desirable in order to carry out the vesting, perfecting, confirming, assignment,
devolution or other transfer of the interests, property, privileges, powers,
immunities, franchises and other rights referred to in this Article I, or
otherwise to carry out the intents and purposes of this Agreement.
ARTICLE II
CONVERSION OF STOCK
-------------------
2.1 Conversion of Stock. The terms and conditions of the Merger, the mode
of carrying the same into effect, and the manner and basis of converting the
respective shares of common stock of the parties to this Agreement shall be as
follows:
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2.1.1 Holding Company Common Stock. On the Effective Date, any shares
of Holding Company Common Stock that may be held by First Federal immediately
prior to the Effective Date shall be cancelled and shall no longer be deemed
outstanding for any purpose.
2.1.2 First Federal Common Stock. On the Effective Date, each share
of First Federal Common Stock issued and outstanding immediately prior to the
Effective Date shall automatically, by operation of law and without any action
on the part of the holder thereof, be converted into and shall become one share
of Holding Company Common Stock.
2.1.3 Interim Savings Common Stock. Each share of common stock of
Interim Savings issued and outstanding immediately prior to the Effective Date
shall, on the Effective Date, automatically by operation of law and without any
action on the part of the holder thereof be converted into and shall become one
share of First Federal Common Stock and shall not be further converted into
shares of Holding Company Common Stock, so that from and after the Effective
Date, all of the issued and outstanding shares of First Federal Common Stock
shall be held by Holding Company.
2.1.4 Exchange of First Federal Common Stock Certificates. From and
after the Effective Date, each holder of an outstanding certificate or
certificates that, prior thereto, represented shares of First Federal Common
Stock, shall, upon surrender of the same to the designated agent of First
Federal, be entitled to receive, in exchange therefore, a certificate or
certificates representing the number of whole shares of Holding Company Common
Stock into which the shares theretofore represented by the certificate or
certificates so surrendered shall have been converted, as provided in the
foregoing provisions of this Article II. Until so surrendered, each such
outstanding certificate that, prior to the Effective Date, represented shares of
First Federal Common Stock shall be deemed for all corporate purposes to
evidence the ownership of the number of whole shares of Holding Company Common
Stock into which such shares of First Federal Common Stock shall have been so
converted. Former holders of shares of First Federal Common Stock will not be
required to exchange their First Federal Common Stock certificates for new
certificates evidencing the same number of shares of Holding Company Common
Stock.
2.1.5 Full Satisfaction. All shares of Holding Company Common Stock
into which shares of First Federal Common Stock shall have been converted
pursuant to this Article II shall be deemed to have been issued in full
satisfaction of all rights pertaining to such converted shares.
2.1.6 Sole Rights, Etc. On the Effective Date, the holders of
certificates formerly representing First Federal Common Stock outstanding on the
Effective Date shall cease to have any rights with respect to the First Federal
Common Stock, and their sole rights shall be with respect to the Holding Company
Common Stock into which their shares of First Federal Common Stock shall have
been converted by the Merger.
ARTICLE III
CONDITIONS TO THE OBLIGATIONS
OF FIRST FEDERAL,
HOLDING COMPANY AND INTERIM SAVINGS
-----------------------------------
3.1 Conditions. The obligations of First Federal, Holding Company
and Interim Savings to effect the Merger and otherwise consummate the
transactions which are the subject matter hereof shall be subject to
satisfaction of the following conditions:
A-3
<PAGE>
3.1.1 Stockholder Approvals. To the extent required by applicable
law, rules, and regulations, the holders of the outstanding shares of First
Federal Common Stock shall, at a meeting of the stockholders of First Federal
duly called, have approved this Agreement by the affirmative vote of 50 percent
of the outstanding shares of First Federal Common Stock plus one affirmative
vote.
3.1.2 Registration. The shares of Holding Company Common Stock to be
issued to holders of First Federal Common Stock pursuant to the Merger shall, if
required under applicable law, have been duly registered pursuant to Section 5
of the Securities Act of 1933, as amended, and Holding Company shall have
complied with all applicable state securities or "blue sky" laws relating to the
issuance of the Holding Company Common Stock.
3.1.3 Approvals, Consents. Any and all approvals from the OTS, the
Securities and Exchange Commission and any other governmental agency having
jurisdiction necessary for the lawful consummation of the Merger and the
issuance and delivery of Holding Company Common Stock as contemplated by this
Agreement shall have been obtained.
3.1.4 Tax Status. First Federal shall have received either (i) a
ruling from the Internal Revenue Service or (ii) an opinion from its legal
counsel or independent auditors, to the effect that the Merger will be treated
as a non-taxable transaction under applicable provisions of the Internal Revenue
Code of 1986, as amended, and that no gain or loss will be recognized by the
holders of First Federal Common Stock upon the exchange of First Federal Common
Stock held by them solely for Holding Company Common Stock.
3.1.5 Dissenter and Appraisal Rights. The holders of not more than
five percent (5%) of the outstanding shares of First Federal Common Stock shall
have elected to exercise dissenting shareholder rights under 12 C.F.R. (S)
552.14 unless waived by the parties hereto, to the extent such rights are
available.
ARTICLE IV
TERMINATION; EXPENSES
---------------------
4.1 Termination. This Agreement may be terminated at any time prior
to the Effective Date at the election of any of the parties hereto, if any one
or more of the conditions to the obligations of any of them hereunder shall not
have been satisfied and shall have become incapable of fulfillment and shall not
be waived. This Agreement may also be terminated at any time prior to the
Effective Date by the mutual consent of the respective Boards of Directors of
the parties.
4.2 No Further Obligation. In the event of the termination of this
Agreement pursuant to this Article IV, this Agreement shall be void and of no
further force or effect, and there shall be no further liability or obligation
of any nature by reason of this Agreement or the termination hereof on the part
of any of the parties hereto or their respective directors, officers, employees,
agents or stockholders.
4.3 Costs and Expenses. First Federal shall pay all costs and
expenses incurred by it, Holding Company and Interim Savings in connection with
this Agreement and the transactions contemplated hereunder.
A-4
<PAGE>
ARTICLE V
EFFECTIVE DATE OF MERGER
------------------------
Upon satisfaction or waiver (in accordance with the provisions of this
Agreement) of each of the conditions set forth in Article III, the parties
hereto shall execute and cause to be filed Articles of Combination, and such
certificates or further documents as shall be required by the OTS, with the
Secretary of the OTS and shall cause to be filed with such other federal or
state regulatory agencies all such certificates and other documents as may be
required in the opinion of counsel to First Federal and Holding Company. Upon
approval by the OTS and endorsement of such Articles of Combination by the
Secretary of the OTS, the Merger and other transactions contemplated by this
Agreement shall become effective. The "Effective Date" for all purposes
hereunder shall be the date of such endorsement by the Secretary of the OTS.
ARTICLE VI
MISCELLANEOUS
-------------
6.1 Waiver. Any of the terms or conditions of this Agreement which
may legally be waived may be waived at any time by any party hereto which is
entitled to the benefit thereof, or any of such terms or conditions may be
amended or modified in whole or in part at any time, to the extent authorized by
applicable law, by an agreement in writing, executed in the same manner as this
Agreement.
6.2 Amendment. Any of the terms or conditions of this Agreement may
be amended or modified in whole or in part at any time, to the extent permitted
by applicable law, rules, and regulations, by an amendment in writing, provided
that any such amendment or modification is not materially adverse to First
Federal, Holding Company or their stockholders. In the event that any
governmental agency requests or requires that the transactions contemplated
herein be modified in any respect as a condition of providing a necessary
regulatory approval or favorable ruling, or that in the opinion of counsel to
First Federal such modification is necessary to obtain such approval or ruling,
this Agreement may be modified, at any time before or after adoption thereof by
the stockholders of First Federal, by an instrument in writing, provided that
the effect of such amendment would not be materially adverse to First Federal,
Holding Company or their stockholders.
6.3 Counterparts. This Agreement may be executed by the parties
hereto in any number of separate counterparts, each of which shall be an
original, but such counterparts together shall constitute but one and the same
instrument.
6.4 Headings. The section and other headings contained in this
Agreement are for reference purposes only and shall not be deemed to be part of
this Agreement.
6.5 Execution by Interim Savings. First Federal and Holding Company
acknowledge that, as of the date hereof, the charter of Interim Savings has not
been issued by the OTS and therefore Interim Savings does not have the legal
capacity to execute this Agreement. First Federal and Holding Company agree to
be bound by this Agreement notwithstanding the non- execution of the Agreement
by Interim Savings.
6.8 Governing Law. This Agreement shall be governed by and
construed under the laws of the State of Alabama, except insofar as the federal
law of the United States is deemed to preempt such law or otherwise apply.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement and Plan of Reorganization as of the date first above written.
FIRST FEDERAL BANK
By: /s/ James F. Eberhart, Jr.
-----------------------------
James F. Eberhart, Jr.
President and Chief Executive Officer
FIRST FEDERAL INTERIM SAVINGS BANK
(in formation)
By:
----------------------------------------
James F. Eberhart, Jr.
President and Chief Executive Officer
FBDC FINANCIAL CORP.
By: /s/ James F. Eberhart, Jr.
----------------------------------------
James F. Eberhart, Jr.
President and Chief Executive Officer
A-6
<PAGE>
SCHEDULE A
OFFICES OF FIRST FEDERAL BANK
Main Office 1400 Gault Avenue, North
Fort Payne, AL 35967
Branch Offices 960 Main Street, West
Rainsville, AL 35986
10838 Alabama Highway 75
Ider, AL 35981
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SCHEDULE B
DIRECTORS OF FIRST FEDERAL BANK
Name Residence Address
- ---- -----------------
Dr. J. Malcolm Brewer 300 16th Street, NW
Fort Payne, AL 35967
Lowell D. Durham 805 Alabama Avenue, South
Fort Payne, AL 35967
James F. Eberhart, Jr. 112 Lakeview Road, SE
Fort Payne, AL 35967
J. W. Goza 2102 Mountain Trace, Apt. 302
Fort Payne, AL 35967
Charles R. Stephens 3453 County Road 121
Fort Payne, AL 35968
Paul R. Thomas 7737 County Road 444
Fort Payne, AL 35968
Johnny D. Young 944 County Road 494
Fort Payne, AL 35968
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<PAGE>
EXHIBIT B
RESTATED ARTICLES OF INCORPORATION
OF
FBDC FINANCIAL CORP.
ARTICLE I
Name
The name of the corporation is FBDC Financial Corp. (herein the "Corporation").
ARTICLE II
Purpose and Powers
The purpose for which the Corporation is organized is to act as a
savings institution holding company and to transact all other lawful business
for which corporations may be incorporated pursuant to the laws of the State of
Alabama. The Corporation shall have all the powers of a corporation organized
under the Alabama Business Corporation Act or any successor statute.
ARTICLE III
Term
The Corporation is to have perpetual existence.
ARTICLE IV
Capital Stock
The aggregate number of shares of all classes of capital stock which
the Corporation has authority to issue is 6,000,000, of which 5,000,000 are to
be shares of common stock, $.01 par value per share (hereinafter, "Common
Stock"), and 1,000,000 are to be shares of preferred stock, $.01 par value per
share (hereinafter, "Preferred Stock").
The shares may be issued by the Corporation from time to time as
approved by the board of directors of the Corporation without the approval of
the stockholders except as otherwise provided in this Article IV, or the rules
of a national securities exchange if applicable. The consideration for the
issuance of the shares shall be paid to or received by the Corporation in full
before their issuance and shall not be less than the par value per share. The
consideration for the issuance of the shares shall be cash, services rendered,
personal property (tangible or intangible), real property or any combination of
the foregoing, to the full extent permitted under Alabama law. In the absence of
actual fraud in the transaction, the judgment of the board of directors as to
the value of such consideration 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, the part of the surplus of the Corporation which
is
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transferred to stated capital upon the issuance of shares as a stock dividend
shall be deemed to be the consideration for their issuance.
A description of the different classes and series (if any) of the
Corporation's capital stock, and a statement of the relative powers, preferences
and rights of the shares of each class and series (if any), and the
qualifications, limitations or restrictions thereof, are as follows:
A. Common Stock. Except as provided in these Articles or in Articles
------------
of Amendment hereto, the holders of the common stock of the Corporation 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
otherwise expressly set forth in these Articles. 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 sinking fund or
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, but only when and as declared by the board of
directors of the Corporation.
In the event of any liquidation, dissolution or winding up of the
Corporation, after there shall have been paid, or declared and set aside for
payment, to the holders of the outstanding shares of any class having preference
over the common stock in any such event, the full preferential amounts to which
they are respectively entitled, the holders of the common stock and of any class
or series of stock entitled to participate therewith, in whole or in part, as to
distribution of assets shall be entitled, after payment or provision for payment
of all debts and liabilities of the Corporation, to receive the remaining assets
of the Corporation available for distribution, in cash or in kind.
Each share of common stock shall have the same relative powers,
preferences and rights as, and shall be identical in all respects with, all the
other shares of common stock of the Corporation, except as otherwise expressly
set forth in these Articles.
B. Preferred Stock. The Preferred Stock may be issued from time to
---------------
time in one or more series, the shares of each series to have such voting
powers, full or limited, and such designations, preferences, and relative,
participating, optional, or other special rights and qualifications,
limitations, or restrictions thereof as are stated and expressed herein or in
the resolution or resolutions providing for the issue of such series, adopted by
the board of directors as hereinafter provided.
Authority is hereby granted to the board of directors of the
Corporation, subject to the provisions of this Article IV and to the limitations
prescribed by law, to authorize the issue of one or more series of Preferred
Stock and with respect to each such series to fix and state by resolution or
resolutions providing for the issue of each such series the voting powers, full
or limited, if any, of the shares of each such series and the designations,
preferences, and relative, participating, optional or other qualifications,
limitations, or restrictions thereof to the full extent now or hereafter
permitted by Alabama law. The authority of the board of directors with respect
to each series shall include, but not be limited to, the determination or fixing
of the following:
(i) The distinctive serial designation and the number of shares
constituting such series;
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(ii) The dividend rate of such series, the conditions and dates
upon which such dividends shall be payable, the relation that such
dividends shall bear to the dividends payable on any other class or
classes of stock, and whether such dividends shall be cumulative or
noncumulative;
(iii) Whether the shares of such series shall be subject to
redemption by the Corporation and, if made subject to such redemption,
the times, prices, and other terms and conditions of such redemption;
(iv) The terms and amount of any sinking fund provided for the
purchase or redemption of the shares of such series, and if so
entitled, the amount of such fund and the manner of its application,
including the price or prices at which such shares may be redeemed or
purchased through the application of such fund;
(v) Whether or not the shares of such series shall be
convertible into, or exchangeable for, shares of any other class or
classes or of any other series of the same or any other class or
classes of stock of the Corporation, and, if provision be made for
conversion or exchange, the times, prices, rates, adjustments, and
other terms and conditions of such conversion or exchange;
(vi) The extent, if any, to which the holders of the shares of
such series shall be entitled to vote with respect to the election of
directors or otherwise;
(vii) The restrictions, if any, on the issue or reissue of any
additional Preferred Stock;
(viii) The rights of the holders of the shares of such series
upon the dissolution of, or upon the distribution of assets of, the
Corporation; and
(ix) Whether the shares of such series which are redeemed or
converted should have the status of authorized but unissued shares of
Preferred Stock and whether such shares may be reissued as shares of
the same or any other series of Preferred Stock.
Dividends on outstanding shares of Preferred Stock shall be paid, or
declared and set apart for payment, before any dividends shall be paid or
declared and set apart for payment on the Common Stock with respect to the same
dividend period. If upon any voluntary or involuntary liquidation, dissolution
or winding up of the Corporation, the assets available for distribution to
holders of shares of Preferred Stock of all series shall be insufficient to pay
such holders the full preferential amount to which they are entitled, then such
assets shall be distributed ratably among the shares of all series of Preferred
Stock in accordance with the respective preferential amounts (including unpaid
cumulative dividends, if any) payable with respect thereto.
Each share of each series of Preferred Stock shall have preferences,
limitations and relative rights identical with those of all other shares of the
same series.
Except as otherwise required by law and except for such voting powers
with respect to the election of directors or other matters as may be stated in
the resolution or resolutions of the board of directors providing for the issue
of any series of Preferred Stock, the holders of any such series shall have no
voting power. Subject to such restrictions as may be stated in the resolution or
resolutions of the board of directors providing for the issue of any series of
Preferred Stock, any amendment to the Articles of Incorporation that shall
increase or decrease the authorized stock of any class or classes may be
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<PAGE>
adopted by the affirmative vote of the holders of a majority of the outstanding
shares of the voting stock of the Corporation.
ARTICLE V
Preemptive Rights
No holder of any of the shares of any class or series of stock or of
options, warrants or other rights to purchase shares of any class or series of
stock or of other securities of the Corporation shall have any preemptive right
to purchase or subscribe for any unissued stock of any class or series, or any
unissued bonds, certificates of indebtedness, debentures or other securities
convertible into or exchangeable for stock of any class or series or carrying
any right to purchase stock of any class or series; but any such unissued stock,
bonds, certificates or indebtedness, debentures or other securities convertible
into or exchangeable for stock or carrying any right to purchase stock may be
issued pursuant to resolution of the board of directors of the Corporation to
such persons, firms, corporations or associations, whether or not holders
thereof, and upon such terms as may be deemed advisable by the board of
directors in the exercise of its sole discretion.
ARTICLE VI
Repurchase of Shares
The Corporation may from time to time, pursuant to authorization by the
board of directors of the Corporation and without action by the stockholders,
purchase or otherwise acquire shares of any class, bonds, debentures, notes,
scrip, warrants, obligations, evidences of indebtedness, or other securities of
the Corporation in such manner, upon such terms, and in such amounts as the
board of directors shall determine; subject, however, to such limitations or
restrictions, if any, as are contained in the express terms of any class of
shares of the Corporation outstanding at the time of the purchase or acquisition
in question or as are imposed by law.
ARTICLE VII
Meetings of Stockholders; Quorum; Voting
A. Special Meetings. Special meetings of the stockholders of the
----------------
Corporation for any purpose or purposes may be called at any time by (i) the
board of directors of the Corporation, (ii) by a committee of the board of
directors which has been duly designated by the board of directors and whose
powers and authorities, as provided in a resolution of the board of directors or
in the Bylaws of the Corporation, include the power and authority to call such
meetings, or (iii) in accordance with the Bylaws of the Corporation.
B. Cumulative Voting. There shall be no cumulative voting by
-----------------
stockholders of any class or series in the election of directors of the
Corporation.
C. Quorum. One-third of the outstanding shares of the Corporation
------
entitled to vote, represented in person or by proxy, shall constitute a quorum
at a meeting of stockholders. If less than one-third of the outstanding shares
are 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 stockholders present at a duly organized meeting
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<PAGE>
may continue to transact business until adjournment, notwithstanding the
withdrawal of enough stockholders to leave less than a quorum.
D. Voting. Unless otherwise provided by these Articles, at each
------
election for directors every stockholder entitled to vote at such election shall
be entitled to one vote for each share of stock held. Unless otherwise provided
by these Articles, by statute, or by these Bylaws, a majority of those votes
cast by stockholders at a lawful meeting shall be sufficient to pass on a
transaction or matter, except in the election of directors, which election shall
be determined by a plurality of the votes of the shares present in person or by
proxy at the meeting and entitled to vote on the election of directors.
ARTICLE VIII
Notice for Nominations and Proposals
A. Nominations for the election of directors at any annual meeting of
stockholders may be made by the board of directors of the Corporation or by any
stockholder of the Corporation entitled to vote generally in the election of
directors. In order for a stockholder of the Corporation to make any such
nominations, he or she shall give notice thereof in writing, delivered or mailed
by first class United States mail, postage prepaid, to the Secretary of the
Corporation not less than 30 days nor more than sixty days prior to the date of
any such meeting; provided, however, that if less than 40 days' notice of the
meeting is given to stockholders, such written notice shall be delivered or
mailed, as prescribed, to the Secretary of the Corporation not later than the
close of business on the tenth day following the day on which notice of the
meeting was mailed to stockholders. Each such notice by a stockholder shall set
forth (i) the name, age, business address and, if known, residence address of
each nominee proposed in such notice, (ii) the principal occupation or
employment of each such nominee, and (iii) the number of shares of stock of the
Corporation which are beneficially owned by each such nominee. In addition, the
stockholder making such nomination shall promptly provide any other information
reasonably requested by the Corporation.
B. Proposals for new business to be taken up at any annual or special
meeting of stockholders may be made by the board of directors of the Corporation
or by any stockholder of the Corporation entitled to vote generally in the
election of directors. In order for a stockholder to make such proposals, he or
she shall give notice thereof in writing delivered or mailed by first class
United States mail, postage prepaid, to the Secretary of the Corporation not
less than 30 days nor more than sixty days prior to the date of any such
meeting; provided, however, that if less than 40 days' notice of the meeting is
given to stockholders, such written notice shall be delivered or mailed, as
prescribed, to the Secretary of the Corporation not later than the close of
business on the tenth day following the day on which notice of the meeting was
mailed to stockholders. Each such notice by a stockholder shall set forth in
writing as to each proposal to be brought before the meeting: (i) a brief
description of the business desired to be brought before the meeting and the
reasons for conducting such business at the meeting; (ii) the name and address,
as they appear on the Corporation's books, of the stockholder proposing such
business; (iii) the class and number of shares of the Corporation which are
beneficially owned by the stockholder; and (iv) any material interest of the
stockholder in such business. Notwithstanding anything in these Articles to the
contrary, no new business shall be conducted at the meeting except in accordance
with the procedures set forth in this Article VIII.
C. The Chairman of the annual or special meeting of stockholders may,
if the facts warrant, determine and declare to such meeting that a nomination or
proposal was not made in accordance with the foregoing procedures, and, if he
should so determine, he shall so declare to the meeting and the defective
nomination or proposal shall be disregarded and laid over for action at the next
succeeding
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<PAGE>
special or annual meeting of the stockholders taking place thirty days or more
thereafter. This provision shall not require the holding of any adjourned or
special meeting of stockholders for the purpose of considering such defective
nomination or proposal.
ARTICLE IX
Directors
A. Number; Vacancies. The number of directors of the Corporation shall
-----------------
be a variable range, which is fixed at a minimum number of five (5) and a
maximum number of 15, including vacancies resulting from an increase in the
number of directors, exclusive of directors, if any, to be elected by holders of
preferred stock of the Corporation, voting separately as a class. The number of
directors may be fixed or changed from time to time, within the minimum and
maximum, by the board of directors by vote of two-thirds of the directors then
in office, whether or not a quorum, provided that the power to increase or
decrease the number of directors last appointed by the stockholders by more than
30 percent is reserved to the stockholders. Vacancies in the board of directors
of the Corporation, however caused, including vacancies resulting from an
increase in the number of directors, shall be filled by a vote of two-thirds of
the directors then in office, whether or not a quorum, and any director so
chosen shall hold office for a term expiring at next meeting of stockholders at
which directors are elected and when the director's successor is elected and
qualified.
B. Terms of Directors; Classified Board. Whenever the board of
------------------------------------
directors of the Corporation shall consist of eight or fewer members, the
directors of the Corporation shall be elected for terms expiring at the next
annual meeting following their election. Whenever the board of director of the
Corporation shall consist of nine or more members, the board of directors of the
Corporation shall be divided into three classes of directors, which shall be
designated Class I, Class II and Class III. The members of each class shall be
elected for a term of three years and until their successors are elected and
qualified. Such classes shall be as nearly equal in number as the then total
number of directors constituting the entire board of directors shall permit,
with the terms of office of all members of one class expiring each year. Subject
to the provisions of this Article IX, should the number of directors not be
equally divisible by three, the excess director or directors shall be assigned
to Classes I or II as follows: (i) if there shall be an excess of one
directorship over a number equally divisible by three, such extra directorship
shall be classified in Class I; and (ii) if there be an excess of two
directorships over a number equally divisible by three, one shall be classified
in Class I and the other in Class II. Notwithstanding the foregoing, the
director whose term shall expire at any annual meeting shall continue to serve
until such time as his successor shall have been duly elected and shall have
qualified unless his position on the board of directors shall have been
abolished by action taken to reduce the size of the board of directors prior to
said meeting.
Should the number of directors of the Corporation be reduced, the
directorship(s) eliminated shall be allocated among classes as appropriate so
that the number of directors in each class is as specified in the immediately
preceding paragraph. The board of directors shall designate, by the name of the
incumbent(s), the position(s) to be abolished. Notwithstanding the foregoing, no
decrease in the number of directors shall have the effect of shortening the term
of any incumbent director. Should the number of directors of the Corporation be
increased, the additional directorships shall be allocated among classes as
appropriate so that the number of directors in each class is as specified in the
immediately preceding paragraph.
Whenever the holders of any one or more series of preferred stock of
the Corporation shall have the right, voting separately as a class, to elect one
or more directors of the Corporation, the board of
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<PAGE>
directors shall consist of said directors so elected in addition to the number
of directors fixed as provided in this Article IX. Notwithstanding the
foregoing, and except as otherwise may be required by law or by the terms and
provisions of the preferred stock of the Corporation, whenever the holders of
any one or more series of preferred stock of the Corporation shall have the
right, voting separately as a class, to elect one or more directors of the
Corporation, the terms of the director or directors elected by such holders
shall expire at the next succeeding annual meeting of stockholders.
ARTICLE X
Removal of Directors
Notwithstanding any other provision of these Articles or the Bylaws of
the Corporation, any director or the entire board of directors of the
Corporation may be removed, at any time, but only for cause and only by the
affirmative vote of the holders of at least 80% of the outstanding shares of
capital stock of the Corporation entitled to vote generally in the election of
directors (considered for this purpose as one class) cast at a meeting of the
stockholders called for that purpose pursuant to notice stating that the
purpose, or one of the purposes, of such meeting is the removal of the director
or directors. Notwithstanding the foregoing, whenever the holders of any one or
more series of preferred stock of the Corporation shall have the right, voting
separately as a class, to elect one or more directors of the Corporation, the
preceding provisions of this Article X shall not apply with respect to the
director or directors elected by such holders of preferred stock. For purposes
of this Article X, "cause" is defined as a final conviction of a felony, unsound
mind, adjudication of bankruptcy, non-acceptance of office or conduct
prejudicial to the interests of the Corporation. A director may only be removed
by vote of the stockholders after service of specific charges, adequate notice,
and full opportunity to refute the charges.
ARTICLE XI
Approval of Certain Business Combinations
The stockholder vote required to approve Business Combinations (as
hereinafter defined) shall be as set forth in this section.
A. (1) Except as otherwise expressly provided in this
Article XI, the affirmative vote of the holders of (i) at least 80% of
the outstanding shares entitled to vote thereon (and, if any class or
series of shares is entitled to vote thereon separately, the
affirmative vote of the holders of at least 80% of the outstanding
shares of each such class or series), and (ii) at least a majority of
the outstanding shares entitled to vote thereon, not including shares
deemed beneficially owned by a Related Person (as hereinafter defined),
shall be required in order to authorize any of the following:
(a) any merger or consolidation of the Corporation with
or into a Related Person (as hereinafter defined);
(b) any sale, lease, exchange, transfer or other
disposition, including without limitation, a mortgage, or any
other capital device, of all or any Substantial Part (as
hereinafter defined) of the assets of the Corporation
(including without limitation any voting securities of a
subsidiary) or of a subsidiary, to a Related Person;
(c) any merger or consolidation of a Related Person
with or into the Corporation or a subsidiary of the
Corporation;
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(d) any sale, lease, exchange, transfer or other
disposition of all or any Substantial Part of the assets of a
Related Person to the Corporation or a subsidiary of the
Corporation;
(e) the issuance of any securities of the Corporation
or a subsidiary of the Corporation to a Related Person;
(f) the acquisition by the Corporation or a
subsidiary of the Corporation of any securities of a Related
Person;
(g) any reclassification of the common stock of the
Corporation, or any recapitalization involving the common
stock of the Corporation; and
(h) any agreement, contract or other arrangement
providing for any of the transactions described in this
Article XI.
(2) Such affirmative vote shall be required
notwithstanding any other provision of these Articles, any provision of
law, or any agreement with any regulatory agency or national securities
exchange which might otherwise permit a lesser vote or no vote.
(3) The term "Business Combination" as used in this
Article XI shall mean any transaction which is referred to in any one
or more of subparagraphs A(l)(a) through (h) above.
B. The provisions of paragraph A of this Article XI shall not be
applicable to any particular Business Combination, and such Business Combination
shall require only such affirmative vote as is required by any other provision
of these Articles, any provision of law, or any agreement with any regulatory
agency or national securities exchange, if the Business Combination shall have
been approved by a majority of the Continuing Directors (as hereinafter
defined); provided, however, that such approval shall only be effective if
obtained at a meeting at which a Continuing Director Quorum (as hereinafter
defined) is present.
C. For the purposes of this Article XI the following definitions
apply:
(1) The term "Related Person" shall mean and include (a)
any individual, corporation, partnership or other person or entity
which together with its "affiliates" (as that term is defined in Rule
12b-2 of the General Rules and Regulations under the Securities
Exchange Act of 1934), "beneficially owns" (as that term is defined in
Rule 13d-3 of the General Rules and Regulations under the Securities
Act of 1934) in the aggregate 10% or more of the outstanding shares of
the common stock of the Corporation; and (b) any "affiliate" (as that
term is defined in Rule 12b-2 under the Securities Exchange Act of
1934) of any such individual, corporation, partnership or other person
or entity. Without limitation, any shares of the common stock of the
Corporation which any Related Person has the right to acquire pursuant
to any agreement, or upon exercise or conversion rights, warrants or
options, or otherwise, shall be deemed "beneficially owned" by such
Related Person.
(2) The term "Substantial Part" shall mean more than 25
percent of the total assets of the Corporation, as of the end of its
most recent fiscal year ending prior to the time the determination is
made.
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(3) The term "Continuing Director" shall mean' any member
of the board of directors of the Corporation who is unaffiliated with
the Related Person and was a member of the board prior to the time that
the Related Person became a Related Person, and any successor of a
Continuing Director who is unaffiliated with the Related Person and is
recommended to succeed a Continuing Director by a majority of
Continuing Directors then on the board.
(4) The term "Continuing Director Quorum" shall mean
two-thirds of the Continuing Directors capable of exercising the powers
conferred on them.
D. Nothing contained in this Article XI shall be construed to
relieve any Related Person from any fiduciary obligation imposed by law.
ARTICLE XII
Evaluation of Business Combinations
In connection with the exercise of its judgment in determining what is
in the best interests of the Corporation and of the shareholders, when
evaluating a Business Combination (as defined in Article XI) or a tender or
exchange offer, the board of directors of the Corporation shall, in addition to
considering the adequacy of the amount to be paid in connection with any such
transaction, consider all of the following factors and any other factors which
it deems relevant; (i) the social and economic effects of the transaction on the
Corporation and its subsidiaries, employees, depositors, loan and other
customers, creditors and other elements of the communities in which the
Corporation and its subsidiaries operate or are located; (ii) the business and
financial condition and earnings prospects of the acquiring person or entity,
including, but not limited to, debt service and other existing financial
obligations, financial obligations to be incurred in connection with the
acquisition and other likely financial obligations of the acquiring person or
entity and the possible effect of such conditions upon the Corporation and its
subsidiaries and the other elements of the communities in which the Corporation
and its subsidiaries operate or are located; and (iii) the competence,
experience, and integrity of the acquiring person or entity and its or their
management.
ARTICLE XIII
Indemnification; Insurance
The Corporation shall indemnify, to the fullest extent permissible
under the Alabama Business Corporation Act, as amended from time to time, any
individual who is or was a director, officer, employee or agent of the
Corporation, and any individual who serves or served at the Corporation's
request as a director, officer, partner, trustee, employee or agent of another
corporation, partnership, joint venture, trust, other enterprise or employee
benefit plan, in any proceeding in which the individual is made a party as a
result of his service in such capacity.
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.
The Corporation may purchase and maintain insurance on behalf of (i)
any person who is or was a director, officer, employee, or agent of the
Corporation; and (ii) any person who serves or served at the Corporation's
request as a director, officer, employee, agent, partner or trustee of another
corporation, partnership, joint venture, trust or other enterprise, against any
liability incurred by him in
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any such position, or arising out of his status as such, whether or not the
Corporation would have power to indemnify him against such liability under the
Alabama Business Corporation Act.
ARTICLE XIV
Limitations on Directors' Liability
A director of the Corporation shall not be personally liable to the
Corporation or its stockholders for monetary damages for any action taken, or
any failure to take any action, as a director, except liability for (i) the
amount of a financial benefit received by a director to which he or she is not
entitled, (ii) an intentional infliction of harm on the Corporation or its
stockholders; (iii) a violation of Section 10- 2B-8.33 ("Liability for Unlawful
Distributions") of the Alabama Business Corporation Act; (iv) an intentional
violation of criminal law; or (v) a breach of the director's duty of loyalty to
the Corporation or its stockholders. If the Alabama Business Corporation Act or
other Alabama law is amended or enacted after the date of filing of these
Articles 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 Alabama Business Corporation Act, as so
amended, or such other Alabama law. Any repeal or modification of this Article
XIV 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.
ARTICLE XV
Amendment of Bylaws
In furtherance and not in limitation of the powers conferred by
statute, the board of directors of the Corporation is expressly authorized to
adopt, repeal, alter, amend and rescind the Bylaws of the Corporation by a vote
of two-thirds of the board of directors. Notwithstanding any other provision of
these Articles or the Bylaws of the Corporation (and notwithstanding the fact
that some lesser percentage may be specified by law), the Bylaws shall not be
adopted, repealed, altered, amended or rescinded by the stockholders of the
Corporation except by the vote of the holders of not less than 80% of the
outstanding shares of capital stock of the Corporation entitled to vote
generally in the election of directors (considered for this purpose as a single
class) cast at a meeting of the stockholders called for that purpose (provided
that notice of such proposed adoption, repeal, alteration, amendment or
rescission is included in the notice of such meeting), or, as set forth above,
by the board of directors.
ARTICLE XVI
Amendment of Articles of Incorporation
The Corporation reserves the right to repeal, alter, amend or rescind
any provision contained in these Articles in the manner now or hereafter
prescribed by law, and all rights conferred on stockholders herein are granted
subject to this reservation. Notwithstanding the foregoing, the provisions set
forth in Articles VII, VIII, IX, X, XI, XII, XIII, XIV, XV and this Article XVI
may not be repealed, altered, amended or rescinded in any respect unless the
same is approved by the affirmative vote of the holders of not less than 80% of
the outstanding shares of capital stock of the Corporation entitled to vote
generally in the election of directors (considered for this purpose as a single
class) cast at a meeting of the stockholders called for that purpose (provided
that notice of such proposed repeal, alteration, amendment or rescission is
included in the notice of such meeting); except that such repeal, alteration,
amendment or rescission may be made by the affirmative vote of the holders of a
majority of the
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outstanding shares of capital stock of the Corporation entitled to vote
generally in the election of directors (considered for this purpose as a single
class) if the same is first approved by a majority of the Continuing Directors,
as defined in Article XI of these Articles.
ARTICLE XVII
Initial Registered Office and Agent
The address of the Corporation's initial registered office in the State
of Alabama is 1400 Gault Avenue North, Fort Payne, Alabama 35967. The name of
the Corporation's initial registered agent at such address is James F. Eberhart,
Jr.
ARTICLE XVIII
Incorporator
The name and mailing address of the incorporator are as follows:
Name Mailing Address
---- ---------------
James F. Eberhart, Jr. 1400 Gault Avenue, North
Fort Payne, AL 35967
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EXHIBIT C
BYLAWS
OF
FBDC FINANCIAL CORP.
ARTICLE I
Principal Executive Office
The principal executive office of FBDC Financial Corp. (the
"Corporation") shall be at Fort Payne, DeKalb County, Alabama. The Corporation
may also have offices at such other places within or without the State of
Alabama as the board of directors shall from time to time determine.
ARTICLE II
Stockholders
SECTION 1. Place of Meetings. All annual and special meetings of
-----------------
stockholders shall be held at the principal executive office of the Corporation
or at such other place within or without the State of Alabama as the board of
directors may determine and as designated in the notice of such meeting.
SECTION 2. Annual Meeting. A meeting of the stockholders of the
--------------
Corporation for the election of directors and for the transaction of any other
business of the Corporation shall be held annually at such date and time as the
board of directors may determine.
SECTION 3. Special Meetings. Special meetings of the stockholders for
----------------
any purpose or purposes may be called at any time by the board of directors or
by a committee of the board of directors in accordance with the provisions of
the Corporation's Articles of Incorporation or upon the written demand of not
less than 50% of all votes entitled to be cast on any issue proposed to be
considered at the special meeting. Such written demand shall describe the
purpose or purposes for which the special meeting is to be held and the matters
to be acted on at the meeting and shall be delivered to the principal executive
office of the Corporation addressed to the secretary of the Corporation. Within
21 days of receiving such written demand, the secretary shall cause notice of
the meeting to be given, in accordance with the requirements of Section 5, each
stockholder entitled to receive such notice. Only business within the purpose or
purposes of the notice of meeting prescribed by Section 5 may be conducted at a
special meeting of stockholders.
SECTION 4. Conduct of Meetings. Annual and special meetings shall be
-------------------
conducted in accordance with these Bylaws or as otherwise prescribed by the
board of directors. The chairman or the chief executive officer of the
Corporation shall preside at such meetings.
SECTION 5. Notice of Meeting. Written notice stating the place, day and
-----------------
hour of the meeting and the purpose or purposes for which the meeting is called
shall be mailed by the secretary or the officer performing his duties, not less
than 10 days nor more than 60 days before the meeting, to each stockholder of
record entitled to vote at such meeting. If mailed, such notice shall be deemed
to be
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delivered when deposited in the United States mail, addressed to the stockholder
at his address as it appears on the stock transfer books or records of the
Corporation as of the record date prescribed in Section 6, with postage thereon
prepaid. If a stockholder be present at a meeting, or in writing waives notice
thereof before or after the meeting, notice of the meeting to such stockholder
shall be unnecessary. It shall not be necessary to give any notice of the time
and place of any meeting adjourned or of the business to be transacted at such
adjourned meeting, other than an announcement at the meeting at which such
adjournment is taken, unless a new record date must be declared pursuant to
Section 6 of this Article II. In that case, notice of the adjourned meeting must
be given to persons who are stockholders as of the new record date and shall be
given as in the case of an original meeting.
SECTION 6. Fixing of Record Date. For the purpose of determining
---------------------
stockholders entitled to notice of or to vote at any meeting of stockholders, or
any adjournment thereof, or stockholders entitled to receive payment of any
dividend, or in order to make a determination of stockholders for any other
proper purpose, the board of directors shall fix in advance a date as the record
date for any such determination of stockholders. Such date in any case shall be
not more than 70 days, and in case of a meeting of stockholders, not less than
ten (10) days prior to the date on which the particular action, requiring such
determination of stockholders, is to be taken. When a determination of
stockholders entitled to vote at any meeting of stockholders has been made as
provided in this section, such determination shall apply to any adjournment
thereof, unless the board of directors fixes a new record date, as it must do if
the meeting is adjourned to a date more than 120 days after the date fixed for
the original meeting.
SECTION 7. Voting Lists. Beginning two business days after notice of a
------------
meeting of the stockholders is given and continuing through the meeting, the
officer or agent having charge of the stock transfer books for shares of the
Corporation shall make available for inspection by stockholders a complete
alphabetical record of the stockholders entitled to notice of such meeting or
any adjournment thereof, with the address of and the number of shares held by
each. The record shall be arranged by voting group (and within each voting group
by class or series of shares). The record shall be kept on file at the principal
office of the Corporation within the State of Alabama, and shall be subject to
inspection by any stockholder for any purpose germane to the meeting at any time
during usual business hours. A stockholder, his or her agent, or attorney is
entitled on written demand to inspect and, for a proper purpose, to copy the
list, during regular business hours and at his or her expense, during the period
it is available for inspection. Such record shall also be produced and kept open
at the time and place of the meeting and shall be subject to the inspection of
any stockholder, his or her agent, or attorney, for any purpose germane to the
meeting during the whole time of the meeting. The original stock transfer books
shall be prima facie evidence as to who are the stockholders entitled to examine
such record or transfer books or to vote at any meeting of stockholders.
SECTION 8. Proxies. At all meetings of stockholders, a stockholder may
-------
vote by proxy executed in writing by the stockholder or by his duly authorized
attorney-in-fact. 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 unless otherwise provided in
the proxy.
SECTION 9. Voting of Shares in the Name of Two or More Persons. When
---------------------------------------------------
ownership of stock stands in the name of two or more persons, in the absence of
written directions to the Corporation to the contrary, at any meeting of the
stockholders of the Corporation any one or more of such stockholders may cast,
in person or by proxy, all votes to which such ownership is entitled if such
person appears to be acting on behalf of all co-owners.
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SECTION 10. Voting of Shares by Certain Holders. Shares standing in the
-----------------------------------
name of another corporation may be voted by an officer or agent of such
corporation. Shares held by an administrator, executor, guardian or conservator
may be voted by him, either in person or by proxy, without a transfer of such
shares into his name. Shares standing in the name of a trustee may be voted by
him, either in person or by proxy, but no trustee shall be entitled to vote
shares held by him without a transfer of such shares into his name. Shares
standing in the name of a receiver may be voted by such receiver, and shares
held by or under the control of a receiver may be voted by such receiver without
the transfer thereof into his name if authority to do so is contained in an
appropriate order of the court or other public authority by which such receiver
was appointed.
A stockholder 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 Corporation, 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
Corporation, 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.
However, the preceding sentence does not limit power of the Corporation to vote,
or to count in determining the number of votes outstanding, any shares,
including its own shares, held by it in a fiduciary capacity.
SECTION 11. Inspectors of Election. In advance of any meeting of
----------------------
stockholders, the chairman of the board or the board of directors may appoint
any persons, other than nominees for office, as inspectors of election to act at
such meeting or any adjournment thereof. The number of inspectors shall be
either one or three. If the board of directors so appoints either one or three
inspectors, that appointment shall not be altered at the meeting. If inspectors
of election are not so appointed, the chairman of the board may make such
appointment at the meeting. In case any person appointed as inspector fails to
appear or fails or refuses to act, the vacancy may be filled by appointment in
advance of the meeting or at the meeting by the chairman of the board or the
president.
Unless otherwise prescribed by applicable law, the duties of such
inspectors shall include: determining the number of shares of stock and the
voting power of each share, the shares of stock represented at the meeting, the
existence of a quorum, 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 right 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 stockholders.
SECTION 12. Nominating Committee. The board of directors or a committee
--------------------
appointed by 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 twenty days prior to the date of the annual meeting.
Provided that such committee makes such nominations, no nominations for
directors except those made by the nominating committee shall be voted upon at
the annual meeting unless other nominations by stockholders are made in writing
and delivered to the secretary of the Corporation in accordance with the
provisions of the Corporation's Articles of Incorporation.
SECTION 13. New Business. Any new business to be taken up at the annual
------------
meeting shall be stated in writing and filed with the secretary of the
Corporation in accordance with the provisions of the
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Corporation's Articles of Incorporation. This provision shall not prevent the
consideration and approval or disapproval at the annual meeting of reports of
officers, directors and committees, but in connection with such reports no new
business shall be acted upon at such annual meeting unless stated and filed as
provided in the Corporation's Articles of Incorporation.
ARTICLE III
Board of Directors
SECTION 1. General Powers. The business and affairs of the Corporation
--------------
shall be under the direction of its board of directors. The chairman shall
preside at all meetings of the board of directors.
SECTION 2. Number and Term. The number of directors may be fixed or
---------------
changed and the terms of the directors shall be established in accordance with
the provisions of the Corporation's Articles of Incorporation.
SECTION 3. Regular Meetings. A regular meeting of the board of
----------------
directors shall be held at such time and place as shall be determined by
resolution of the board of directors without other notice than such resolution.
SECTION 4. Special Meetings. Special meetings of the board of directors
----------------
may be called by or at the request of the chairman, the chief executive officer
or one-third of the directors. The person calling the special meetings of the
board of directors may fix any place 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.
SECTION 5. Notice. Written notice of any special meeting shall be given
------
to each director at least 24 hours previous thereto delivered personally, by
telegram or at least five days previous thereto 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 United States mail so addressed, with
postage thereon 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 6. Quorum. A majority of the number of directors fixed by
------
Section 2 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 5 of this Article III.
SECTION 7. 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 these Bylaws, the
Corporation's Articles of Incorporation or the Alabama Business Corporation Act.
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SECTION 8. 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 and included in the minutes or filed with the
corporate records reflecting the action taken.
SECTION 9. Resignation. Any director may resign at any time by sending
-----------
a written notice of such resignation to the principal executive office of the
Corporation addressed to the chairman of the board. Unless otherwise specified
therein, such resignation shall take effect upon delivery.
SECTION 10. Vacancies. Any vacancy occurring in the board of directors
---------
shall be filled in accordance with the provisions of the Corporation's Articles
of Incorporation.
SECTION 11. Removal of Directors. Any director or the entire board of
--------------------
directors may be removed only in accordance with the provisions of the
Corporation's Articles of Incorporation.
SECTION 12. Compensation. Directors, as such, may receive compensation
------------
for service on the board of directors. Members of either standing or special
committees may be allowed such compensation as the board of directors may
determine.
ARTICLE IV
Committees of the Board of Directors
The board of directors may, by resolution passed by a majority of the
whole board, designate one or more committees, as they may determine to be
necessary or appropriate for the conduct of the business of the Corporation, and
may prescribe the duties, constitution and procedures thereof. Each committee
shall consist of one or more directors of the Corporation appointed by a
majority of the whole board. The board may designate one or more directors as
alternate members of any committee, who may replace any absent or disqualified
member at any meeting of the committee.
The board of directors shall have power at any time to change the
members of, to fill vacancies in, and to discharge any committee of the board.
Any member of any such committee may resign at any time by giving notice to the
Corporation; provided, however, that notice to the board, the chairman of the
board, the chief executive officer, the chairman of such committee, or the
secretary shall be deemed to constitute notice to the Corporation. Such
resignation shall take effect upon receipt of such notice or at any later time
specified therein; and, unless otherwise specified therein, acceptance of such
resignation shall not be necessary to make it effective. Any member of any such
committee may be removed at any time, either with or without cause, by the
affirmative vote of a majority of the authorized number of directors at any
meeting of the board called for that purpose.
ARTICLE V
Officers
SECTION 1. Positions. The officers of the Corporation shall be a
---------
chairman, 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 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 Corporation 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
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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 Corporation
---------------------------
shall be elected annually by the board of directors at the first meeting of the
board of directors held after each annual meeting of the stockholders. If the
election of officers is not held at such meeting, such election shall be held as
soon thereafter as possible. Each officer shall hold office until his successor
shall have been duly elected and qualified or until his death or until he shall
resign or shall have been removed in the manner hereinafter provided. Election
or appointment of an officer, employee or agent shall not of itself create
contract rights. The board of directors may authorize the Corporation to enter
into an employment contract with any officer in accordance with state law; but
no such contract shall impair the right of the board of directors to remove any
officer at any time in accordance with Section 3 of this Article V.
SECTION 3. Removal. Any officer may be removed by vote of two-thirds of
-------
the board of directors whenever, in its judgment, the best interests of the
Corporation will be served thereby, but such removal, other than for cause,
shall be without prejudice to the contract 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, and no officer shall be
prevented from receiving such salary by reason of the fact that he is also a
director of the Corporation.
ARTICLE VI
Contracts, Loans, Checks and Deposits
SECTION 1. Contracts. To the extent permitted by applicable law, and
---------
except as otherwise prescribed by the Corporation's Articles of Incorporation or
these Bylaws with respect to certificates for shares, the board of directors or
the executive committee may authorize any officer, employee, or agent of the
Corporation to enter into any contract or execute and deliver any instrument in
the name of and on behalf of the Corporation. Such authority may be general or
confined to specific instances.
SECTION 2. Loans. No loans shall be contracted on behalf of the
-----
Corporation 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 Corporation shall be signed by one or more officers, employees or
agents of the Corporation in such manner, including in facsimile form, as shall
from time to time be determined by resolution of the board of directors.
SECTION 4. Deposits. All funds of the Corporation not otherwise
--------
employed shall be deposited from time to time to the credit of the Corporation
in any of its duly authorized depositories as the board of directors may select.
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ARTICLE VII
Certificates for Shares and Their Transfer
SECTION 1. Certificates for Shares. The shares of the Corporation shall
-----------------------
be represented by certificates signed by (a) the board of directors, or (b) the
president or a vice president and by the treasurer or an assistant treasurer or
the secretary or an assistant secretary of the Corporation, and may be sealed
with the seal of the Corporation or a facsimile thereof. Any or all of the
signatures upon a certificate may be facsimiles if the certificate is
countersigned by a transfer agent, or registered by a registrar, other than the
Corporation itself or an employee of the Corporation. If any officer who has
signed or whose facsimile signature has been placed upon such certificate shall
have ceased to be such officer before the certificate is issued, it may be
issued by the Corporation with the same effect as if he were such officer at the
date of its issue.
SECTION 2. Form of Share Certificates. Each certificate representing
--------------------------
shares shall state upon the face thereof: the name of the Corporation; that the
Corporation is organized under the laws of the State of Alabama; the name of the
person to whom issued; the number and class of shares, the designation of the
series, if any, which such certificate represents; the par value of each share
represented by such certificate, or a statement that the shares are without par
value. Other matters in regard to the form of the certificates shall be
determined by the board of directors.
All certificates representing shares issued by the Corporation shall
conspicuously set forth upon the face or back that the Corporation will furnish
to any stockholder upon request and without charge a full statement of the
designations, preferences, limitations, and relative rights of the shares of
each class authorized to be issued, the variations in the relative rights and
preferences between the shares of each such series so far as the same have been
fixed and determined, and the authority of the board of directors to fix and
determine the relative rights and preferences of subsequent series.
SECTION 3. Payment for Shares. No certificate shall be issued for any
------------------
share until such share is fully paid.
SECTION 4. Form of Payment for Shares. The consideration for the
--------------------------
issuance of shares shall be paid in accordance with the provisions of the
Corporation's Articles of Incorporation.
SECTION 5. Transfer of Shares. Transfer of shares of capital stock of
------------------
the Corporation shall be made only on its stock transfer books. Authority for
such transfer shall be given only the holder of record thereof or by his legal
representative, who shall furnish proper evidence of such authority, or by his
attorney thereunto authorized by power of attorney duly executed and filed with
the Corporation. 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 Corporation shall be deemed by the Corporation
to be the owner thereof for all purposes.
SECTION 6. Lost Certificates. The board of directors may direct a new
-----------------
certificate to be issued in place of any certificate theretofore issued by the
Corporation alleged to have been lost, stolen, or destroyed, upon the making of
an affidavit of that fact by the person claiming the certificate of stock to be
lost, stolen, or destroyed. When authorizing such issue of a new certificate,
the board of directors may, in its discretion and as a condition precedent to
the issuance thereof, require the owner of such lost, stolen, or destroyed
certificate, or his legal representative, to give the Corporation a bond in such
sum as it may direct as indemnity against any claim that may be made against the
Corporation with respect to the certificate alleged to have been lost, stolen,
or destroyed.
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ARTICLE VIII
Fiscal Year: Annual Audit
The fiscal year of the Corporation shall end on the last day of June of
each year. The Corporation 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.
ARTICLE IX
Dividends
Dividends upon the stock of the Corporation, subject to the provisions
of the Corporation's Articles of Incorporation, if any, may be declared by the
board of directors at any regular or special meeting, pursuant to law. Dividends
may be paid in cash, in property or in the Corporation's own stock.
ARTICLE X
Corporation Seal
The corporate seal of the Corporation shall be in such form as the
board of directors shall prescribe.
ARTICLE XI
Amendments
In accordance with the Corporation's Articles of Incorporation, these
Bylaws may be repealed, altered, amended or rescinded by the stockholders of the
Corporation only by vote of not less than 80% of the outstanding shares of
capital stock of the Corporation entitled to vote generally in the election of
directors (considered for this purpose as one class) cast at a meeting of the
stockholders called for that purpose (provided that notice of such proposed
repeal, alteration, amendment or rescission is included in the notice of such
meeting). In addition, the board of directors may repeal, alter, amend or
rescind these Bylaws by vote of two-thirds of the board of directors at a legal
meeting held in accordance with the provisions of these Bylaws.
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EXHIBIT D
DISSENTER AND APPRAISAL RIGHTS
Dissenter and appraisal rights in a federal stock savings and loan
association are governed by Section 552.14 of Title 12 of the Code of Federal
Regulations, the text of which is reproduced below:
(S) 552.14 Dissenter and appraisal rights.
(a) Right to demand payment of fair or appraised value. Except as
provided in paragraph (b) of this section, any stockholder of a Federal stock
association combining in accordance with (S) 552.13 of this part shall have the
right to demand payment of the fair or appraised value of his stock: Provided,
That such stockholder has not voted in favor of the combination and complies
with the provisions of paragraph (c) of this section.
(b) Exceptions. No stockholder required to accept only qualified
consideration for his or her stock shall have the right under this section to
demand payment of the stock's fair or appraised value, if such stock was listed
on a national securities exchange or quoted on the National Association of
Securities Dealers' Automated Quotation System ("NASDAQ") on the date of the
meeting at which the combination was acted or stockholder action is not required
for a combination made pursuant to (S) 552.13(h)(2) of this part. "Qualified
consideration" means cash, shares of stock of any association or corporation
which at the effective date of the combination will be listed on a national
securities exchange or quoted on NASDAQ, or any combination of such shares of
stock and cash.
(c) Procedure -- (1) Notice. Each constituent Federal stock
association shall notify all stockholders entitled to rights under this section,
not less than twenty days prior to the meeting at which the combination
agreement is to be submitted for stockholder approval, of the right to demand
payment of appraised value of shares, and shall include in such notice a copy of
this section. Such written notice shall be mailed to stockholders of record and
may be part of management's proxy solicitation for such meeting.
(2) Demand for appraisal and payment. Each stockholder electing to
make a demand under this section shall deliver to the Federal stock association,
before voting on the combination, a writing identifying himself or herself and
stating his or her intention thereby to demand appraisal of and payment for his
or her shares. Such demand must be in addition to and separate from any proxy or
vote against the combination by the stockholder.
(3) Notification of effective date and written offer. Within ten days
after the effective date of the combination, the resulting association shall:
(i) Give written notice by mail to stockholders of constituent
Federal stock associations who have complied with the provisions of
paragraph (c)(2) of this section and have not voted in favor of the
combination, of the effective date of the combination;
(ii) Make a written offer to each stockholder to pay for
dissenting shares at a specified price deemed by the resulting
association to be the fair value thereof; and
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(iii) Inform them that, within sixty days of such date, the
respective requirements of paragraphs (c)(5) and (c)(6) of this section
(set out in the notice) must be satisfied.
The notice and offer shall be accompanied by a balance sheet and statement of
income for the association the shares of which the dissenting stockholder holds,
for a fiscal year ending not more than sixteen months before the date of notice
and offer, together with the latest available interim financial statements.
(4) Acceptance of offer. If within sixty days of the effective date of
the combination the fair value is agreed upon between the resulting association
and any stockholder who has complied with the provisions of paragraph (c)(2) of
this section, payment therefor shall be made within ninety days of the effective
date of the combination.
(5) Petition to be filed if offer not accepted. If within sixty days
of the effective date of the combination the resulting association and any
stockholder who has complied with the provisions of paragraph (c)(2) of this
section do not agree as to the fair value, then any such stockholder may file a
petition with the Office, with a copy by registered or certified mail to the
resulting association, demanding a determination of the fair market value of the
stock of all such stockholders. A stockholder entitled to file a petition under
this section who fails to file such petition within sixty days of the effective
date of the combination shall be deemed to have accepted the terms offered under
the combination.
(6) Stock certificates to be noted. Within sixty days of the effective
date of the combination, each stockholder demanding appraisal and payment under
this section shall submit to the transfer agent his certificates of stock for
notation thereon that an appraisal and payment have been demanded with respect
to such stock and that appraisal proceedings are pending. Any stockholder who
fails to submit his or her stock certificates for such notation shall no longer
be entitled to appraisal rights under this section and shall be deemed to have
accepted the terms offered under the combination.
(7) Withdrawal of demand. Notwithstanding the foregoing, at any time
within sixty days after the effective date of the combination, any stockholder
shall have the right to withdraw his or her demand for appraisal and to accept
the terms offered upon the combination.
(8) Valuation and payment. The Director shall, as he or she may elect,
either appoint one or more independent persons or direct appropriate staff of
the Office to appraise the shares to determine their fair market value, as of
the effective date of the combination, exclusive of any element of value arising
from the accomplishment or expectation of the combination. Appropriate staff of
the Office shall review and provide an opinion on appraisals prepared by
independent persons as to the suitability of the appraisal methodology and the
adequacy of the analysis and supportive data. The Director after consideration
of the appraisal report and the advice of the appropriate staff shall, if he or
she concurs in the valuation of the shares, direct payment by the resulting
association of the appraised fair market value of the shares, upon surrender of
the certificates representing such stock. Payment shall be made, together with
interest from the effective date of the combination, at a rate deemed equitable
by the Director.
(9) Costs and expenses. The costs and expenses of any proceeding under
this section may be apportioned and assessed by the Director as he or she may
deem equitable against all or some of the parties. In making this determination
the Director shall consider whether any party has acted arbitrarily,
vexatiously, or not in good faith in respect to the rights provided by this
section.
(10) Voting and distribution. Any stockholder who has demanded
appraisal rights as provided in paragraph (c)(2) of this section shall
thereafter neither be entitled to vote such stock for any purpose nor be
entitled to the payment of dividends or other distributions on the stock (except
dividends or other
D-2
<PAGE>
distribution payable to, or a vote to be taken by stockholders of record at a
date which is on or prior to, the effective date of the combination): Provided,
That if any stockholder becomes unentitled to appraisal and payment of appraised
value with respect to such stock and accepts or is deemed to have accepted the
terms offered upon the combination, such stockholder shall thereupon be entitled
to vote and receive the distributions described above.
(11) Status. Shares of the resulting association into which shares of
the stockholders demanding appraisal rights would have been converted or
exchanged, had they assented to the combination, shall have the status of
authorized and unissued shares of the resulting association.
D-3
<PAGE>
================================================================================
No person is authorized to give any information or to make any
representation not contained in this Proxy Statement/Prospectus, and, if given
or made, such information or representation should not be relied upon as having
been authorized by the Holding Company or the Bank. This Proxy
Statement/Prospectus does not constitute an offer to sell a security, or a
solicitation of a proxy, in any jurisdiction to any person to whom it is
unlawful to make such offer or solicitation in such jurisdiction. Neither the
delivery of this Proxy Statement/Prospectus nor any distribution of the
securities made under this Proxy Statement/Prospectus shall, under any
circumstances, create any implication that there has been no change in the
affairs of the Bank or the Holding Company since the date of this Proxy
Statement and Prospectus.
Table of Contents
Page
----
Summary Information on Proposed
Formation of Holding Company....................... i
Introduction
Revocability of Proxies..............................
Voting Securities and Principal
Holders Thereof....................................
Proposal I - Election of Directors...................
Proposal II - Ratification of Appointment
of Auditors........................................
Proposal III - Proposed Holding......................
Company Formation .................................
Proposal IV - Adjournment of Meeting.................
Other Matters........................................
Miscellaneous........................................
Exhibit A - Agreement and Plan
of Reorganization.................................. A-1
Exhibit B - Articles of Incorporation................ B-1
Exhibit C - Bylaws................................... C-1
Exhibit D - Dissenter and Appraisal Rights........... D-1
================================================================================
================================================================================
FIRST FEDERAL BANK
FBDC FINANCIAL CORP.
----------
Proxy Statement/
Prospectus
----------
November , 1997
================================================================================
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 20. Indemnification of Directors and Officers
Division E of Article 8 of the Alabama Business Corporation Act set
forth circumstances under which directors, officers, employees and agents of a
corporation may be indemnified or insured against liabilities that they may
incur in their official capacities.
DIVISION E. INDEMNIFICATION
10-2B-8.50 DEFINITIONS.-In Division E of this Article 8:
(1) "Corporation" includes any domestic or foreign
predecessor entity of a corporation in a merger or other
transaction in which the predecessor's existence ceased upon
consummation of the transaction.
(2) "Director" means an individual who is or was a
director of a corporation or an individual who, while a
director of a corporation, is or was serving at the
corporation's request as a director, officer, partner,
trustee, employee, or agent of another foreign or domestic
corporation, partnership, joint venture, trust, employee
benefit plan, or other enterprise. A director is considered to
be serving an employee benefit plan at the corporation's
request if his or her duties to the corporation also impose
duties on, or otherwise involve services by, the director to
the plan or to participants in or beneficiaries of the plan.
"Director" includes, unless the context requires otherwise,
the estate or personal representative of a director.
(3) "Expenses" include counsel fees.
(4) "Liability" means the obligation to pay a
judgment, settlement, penalty, fine (including an excise tax
assessed with respect to an employee benefit plan), or
reasonable expenses incurred with respect to a proceeding.
(5) "Official capacity" means (i) when used with
respect to a director, the office of director in a
corporation; and (ii) when used with respect to an individual
other than a director, as contemplated in Section 8.56, the
office in a corporation held by an officer or the employment
or agency relationship undertaken by the employee or agent on
behalf of the corporation. "Official capacity" does not
include service for any foreign or domestic corporation or any
partnership, joint venture, trust, employee benefit plan, or
other enterprise.
(6) "Party" includes an individual who was, is or is
threatened to be made a named defendant or respondent in a
proceeding.
(7) "Proceeding" means any threatened, pending, or
completed action, suit, or proceeding, whether civil,
criminal, administrative, or investigative and whether formal
or informal.
II-1
<PAGE>
10-2B-8.51 AUTHORITY TO INDEMNIFY.-(a) Except as provided in
subsection (d), a corporation may indemnify an individual made a party
to a proceeding because he or she is or was a director against
liability incurred in the proceeding if:
(1) The individual conducted himself or herself in
good faith; and
(2) The individual reasonably believed:
(i) In the case of conduct in his or her
official capacity with the corporation, that the
conduct was in its best interests; and
(ii) In all other cases, that the conduct was
at least not opposed to its best interest; and
(3) In the case of any criminal proceeding, the
individual had no reasonable cause to believe his or her
conduct was unlawful.
(b) A director's conduct with respect to an employee
benefit plan for a purpose he or she reasonably believed to be in the
interests of the participants in, and beneficiaries of the plan is
conduct that satisfies the requirement of subsection (a)(2)(ii).
(c) The termination of a proceeding by judgment, order,
settlement, conviction, or upon a plea of nolo contendere or its
equivalent is not, of itself, determinative that the director did not
meet the standard of conduct described in this section.
(d) A corporation may not indemnify a director under this
section:
(1) In connection with a proceeding by or in the
right of the corporation in which the director was adjudged
liable to the corporation; or
(2) In connection with any other proceeding charging
improper personal benefit to the director, whether or not
involving action in his or her official capacity, in which the
director was adjudged liable on the basis that personal
benefit was improperly received by him or her.
(e) Indemnification permitted under this section in
connection with a proceeding by or in the right of the corporation is
limited to reasonable expenses incurred in connection with the
proceeding.
10-2B-8.52 MANDATORY INDEMNIFICATION.-A corporation shall
indemnify a director who was successful, on the merits or otherwise, in
the defense of any proceeding, or of any claim, issue or matter in such
proceeding, where he or she was a party because he or she is or was a
director of the corporation, against reasonable expenses incurred in
connection therewith, notwithstanding that he or she was not successful
on any other claim, issue or matter in any such proceeding.
10-2B-8.53 ADVANCE FOR EXPENSES.-(a) A corporation may pay for
or reimburse the reasonable expenses incurred by a director who is a
party to a proceeding in advance of final disposition of the proceeding
if:
II-2
<PAGE>
(1) The director furnishes the corporation a written
affirmation of good faith belief that he or she has met the
standard of conduct described in Section 8.51;
(2) The director furnishes the corporation a written
undertaking, executed personally or on the director's behalf,
to repay the advance if it is ultimately determined that the
director did not meet the standard of conduct, or is not
otherwise entitled to indemnification under Section 8.51(d),
unless indemnification is approved by the court under Section
8.54;
(3) A determination is made that the facts then known
to those making the determination would not preclude
indemnification under Division E of this article.
(b) The undertaking required by subsection (a)(2) must be
an unlimited general obligation of the director but need not be secured
and may be accepted without reference to financial ability to make
repayment.
(c) Determinations and authorizations of payments under
this section shall be made in the manner specified in Section 8.55.
10-2B-8.54 COURT-ORDERED INDEMNIFICATION.-A director of the
corporation who is a party to a proceeding may apply for
indemnification to the court conducting the proceeding, or may file an
action therefor in another court of competent jurisdiction if such
court has jurisdiction over the corporation and the corporation is a
party to the proceeding. On receipt of such an application or the
filing of such an action, the court after giving any notice it
considers necessary may order indemnification if it determines:
(1) The director is entitled to mandatory
indemnification under Section 8.52, in which case the court
shall also order the corporation to pay the director's
reasonable expenses incurred to obtain court-ordered
indemnification; or
(2) The director is fairly and reasonably entitled to
indemnification in view of all the relevant circumstances,
whether or not he or she met the standard of conduct set forth
in Section 8.51 or was adjudged liable as described in Section
8.51(d), but if he or she was adjudged so liable the
indemnification is limited to reasonable expenses incurred.
10-2B-8.55 DETERMINATION AND AUTHORIZATION OF
INDEMNIFICATION.-(a) A corporation may not indemnify a director under
Section 8.51 unless authorized in the specific case after a
determination has been made that indemnification of the director is
permissible in the circumstances because the director has met the
standard of conduct set forth in Section 8.51.
(b) The determination shall be made:
(1) By the board of directors by majority vote of a
quorum consisting of directors not at the time parties to the
proceeding;
II-3
<PAGE>
(2) If a quorum cannot be obtained under subdivision
(1), by majority vote of a committee duly designated by the
board of directors (in which designation directors who are
parties may participate) consisting solely of two or more
directors not at the time parties to the proceeding;
(3) By special legal counsel:
(i) Selected by the board of directors or its
committee in the manner prescribed in subdivision (1)
or (2); or
(ii) If a quorum of the board of directors cannot
be obtained under subdivision (1) and a committee
cannot be designated under subdivision (2), selected
by majority vote of the full board of directors (in
which selection directors who are parties may
participate); or
(4) By the shareholders, but shares owned by or voted
under the control of directors who are at the time parties to
the proceeding may not be voted on the determination. A
majority of the shares that are entitled to vote on the
transaction by virtue of not being owned by or under the
control of such directors constitutes a quorum for the purpose
of taking action under this section.
(c) Authorization of indemnification and evaluation as to
reasonableness of expenses shall be made in the same manner as the
determination that indemnification is permissible, except that if the
determination is made by special legal counsel, authorization of
indemnification and evaluation as to reasonableness of expenses shall
be made by those entitled under subsection (b)(3) to select counsel.
10-2B-8.56 INDEMNIFICATION OF OFFICERS, EMPLOYEES, AND
AGENTS.-(a) an officer of a corporation who is not a director is
entitled to mandatory indemnification under Section 8.52, and is
entitled to apply for court-ordered indemnification under Section 8.54,
in each case to the same extent as a director.
(b) A corporation may indemnify and may advance expenses
under Division E of this article to an officer, employee, or agent of
the corporation who is not a director to the same extent as to a
director.
10-2B-8.57 INSURANCE.-A corporation may purchase and maintain
insurance, or furnish similar protection (including but not limited to
trust funds, self-insurance reserves, or the like), on behalf of an
individual who is or was a director, officer, employee, or agent of the
corporation, or who, while a director, officer, employee, or agent of
the corporation, is or was serving at the request of the corporation as
a director, officer, partner, trustee, employee, or agent of another
foreign or domestic corporation, partnership, joint venture trust,
employee benefit plan, or other enterprise, against liability asserted
against or incurred by him or her in that capacity or arising from his
or her status as a director, officer, employee, or agent, whether or
not the corporation would have power to indemnify him or her against
the same liability under Section 8.51 or 8.52.
10-2B-8.58 APPLICATION OF INDEMNIFICATION PROVISIONS.-(a) Any
indemnification, or advance for expenses, authorized under Division E
of this article
II-4
<PAGE>
shall not be deemed exclusive of and shall be in addition to that which
may be contained in a corporation's articles of incorporation, bylaws,
a resolution of its shareholders or board of directors, or in a
contract or otherwise.
(b) Division E of this article does not limit a
corporation's power to pay or reimburse expenses incurred by a director
in connection with the director's appearance as a witness in a
proceeding at a time when he or she has not been made a named defendant
or respondent to the proceeding.
Article XIII of the Articles of Incorporation of FBDC Financial Corp.
(the "Holding Company") provides that the Holding Company shall indemnify, to
the fullest extent permissible under the Alabama Business Corporation Act, any
individual who is or was a director, officer, employee or agent of the Holding
Company, and any individual who serves or served at the Holding Company's
request as a director, officer, partner, trustee, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, in any
proceeding in which the individual is made a party as a result of his service in
such capacity.
The Holding Company intends to purchase director and officer liability
insurance that insures directors and officers against certain liabilities in
connection with the performance of their duties as directors and officers and
will provide for payment to the Holding Company of costs incurred by it in
indemnifying its directors.
Item 21. Exhibits and Financial Statement Schedules
The exhibits and financial statements filed as part of this
Registration Statement are as follows:
(a) Exhibits
The Index of Exhibits immediately precedes the accompanying
exhibits.
(b) Financial Statements
Not applicable.
(c) Report or Appraisal
Not applicable.
Item 22. Undertakings
(a) Rule 415 Offering. The undersigned registrant hereby
-----------------
undertakes:
(1) To file, during any period in which offers or sales are
being made, a post-effective amendment to this registration statement;
(i) to include any prospectus required by Section
10(a)(3) of the Securities Act of 1933;
(ii) to reflect in the prospectus any facts or events
arising after the effective date of the registration statement
(or most recent post-effective amendment thereof) which
II-5
<PAGE>
individually or in the aggregate represent a fundamental
change in the information set forth in the registration
statement;
(iii) to include any material information with respect
to the plan of distribution not previously disclosed in the
registration statement or any material change to such
information in the registration statement.
(2) That, for purposes of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall
be deemed to be a bona fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at
the termination of the offering.
(b) Registration on Form S-4 of Securities Offered for Resale.
---------------------------------------------------------
(1) The undersigned registrant hereby undertakes as follows:
that prior to any public reoffering of the securities registered
hereunder through use of a prospectus which is a part of this
registration statement, by any person or party who is deemed to be an
underwriter within the meaning of Rule 145(c), the issuer undertakes
that such reoffering prospectus will contain the information called for
by the applicable registration form with respect to reofferings by
persons who may be deemed underwriters, in addition to the information
called for by the other items of the applicable form.
(2) The registrant undertakes that every prospectus (i) that
is filed pursuant to paragraph (1) immediately preceding, or (ii) that
purports to meet the requirements of Section 10(a)(3) of the Act and is
used in connection with an offering of securities subject to Rule 415,
will be filed as a part of an amendment to the registration statement
and will not be used until such amendment is effective, and for the
purpose of determining any liability under the Securities Act of 1933,
each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the registrant pursuant to the foregoing provisions, or otherwise,
the registrant 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
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant, 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 registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question 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.
(d) The undersigned registrant hereby undertakes to supply by
means of a post-effective amendment all information concerning a transaction,
and the company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
II-6
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
the registrant has duly caused this registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Fort Payne,
State of Alabama on October 28, 1997.
FBDC FINANCIAL CORP.
Date: October 28, 1997 By: /s/ James F. Eberhart, Jr.
-------------------------------------
James F. Eberhart, Jr.
Chairman of the Board, President and
Chief Executive Officer
(Duly Authorized Representative)
II-7
<PAGE>
POWER OF ATTORNEY
We, the undersigned Directors of FBDC Financial Corp., severally
constitute and appoint James F. Eberhart, Jr., with full power of substitution,
our true and lawful attorney and agent, to do any and all things and acts in our
names in the capacities indicated below which said James F. Eberhart, Jr., may
deem necessary or advisable to enable FBDC Financial Corp. to comply with the
Securities Act of 1933, as amended, and any rules, regulations and requirements
of the Securities and Exchange Commission, in connection with the registration
statement on Form S-4 relating to the offering of common stock of FBDC Financial
Corp., including specifically, but not limited to, power and authority to sign
for us or any of 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
James F. Eberhart, Jr. shall do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this registration statement has been signed below by the following persons in
the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
By: /s/ James F. Eberhart, Jr. Director, Chairman of the October 28, 1997
----------------------------------- Board, President and Chief
James F. Eberhart, Jr. Executive Officer (Principal
Executive Officer, Principal
Financial Officer and Principal
Accounting Officer)
By: /s/ Dr. J. Malcolm Brewer Director October 28, 1997
-----------------------------------
Dr. J. Malcolm Brewer
By: /s/ Lowell D. Durham Director October 28, 1997
-----------------------------------
Lowell D. Durham
By: /s/ J.W. Goza Director October 28, 1997
-----------------------------------
J.W. Goza
By: /s/ Charles R. Stephens Director October 28, 1997
-----------------------------------
Charles R. Stephens
By: /s/ Paul R. Thomas Director October 28, 1997
-----------------------------------
Paul R. Thomas
By: /s/ Johnny D. Young Director October 28, 1997
-----------------------------------
Johnny D. Young
</TABLE>
II-8
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number Description of Document
------ -----------------------
<S> <C>
2 Form of Agreement and Plan of Reorganization (attached
as Exhibit A to the Proxy Statement/Prospectus filed as
part of this registration statement)
3.1 Articles of Incorporation of FBDC Financial Corp.
(attached as Exhibit B to the Proxy Statement/Prospectus
filed as part of this registration statement)
3.2 Bylaws of FBDC Financial Corp. (attached as Exhibit C
to the Proxy Statement/Prospectus filed as part of this
registration statement)
4 Form of Common Stock Certificate of FBDC Financial
Corp.
5 Opinion of Kutak Rock regarding legality of securities
8 Opinion of Kutak Rock regarding federal tax
consequences of Reorganization
23.1 Consents of Kutak Rock (contained in its opinion filed as
Exhibit 5)
24 Power of Attorney (reference is made to the signature
page of the Form S-4)
99 Form of proxy to be mailed to stockholders of First
Federal Bank
</TABLE>
II-9
<PAGE>
EXHIBIT 4
<PAGE>
COMMON STOCK
Number ______________ ______ SHARES
FBDC FINANCIAL CORP.
INCORPORATED UNDER THE LAWS OF THE STATE OF ALABAMA
SEE REVERSE FOR CERTAIN DEFINITIONS
This certifies that -- VOID -- is the owner of ____ fully paid
----------------------------
and nonassessable shares of common stock, par value $.01 per share, of FBDC
Financial Corp. (the "Corporation"), an Alabama corporation.
The shares represented by this Certificate are transferable only on the stock
transfer books of the Corporation by the holder of record hereof, or by his or
her duly authorized attorney or legal representative, upon surrender of this
Certificate properly endorsed.
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 its duly authorized officers and has caused its corporate seal to be hereunto
affixed.
DATED: _______________________
By: By:
--------------------------- --------------------------
Johnny D. Young James F. Eberhart, Jr.
Secretary President
<PAGE>
The shares represented by this Certificate are issued subject to all
the provisions of the Articles of Incorporation and Bylaws of the Corporation as
from time to time amended (copies of which are on file at the principal
executive offices of the Corporation), to all of which the holder by acceptance
hereof assents.
The Corporation will furnish to any stockholder upon request in writing
and without charge a full statement of the designations, preferences,
limitations and relative rights of each authorized class of stock or series
thereof, so far as they have been determined, and the authority of the board of
directors to determine the relative rights and preferences with respect to
subsequent classes or series. Such request may be made to the Secretary of the
Corporation.
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
TEN ENT - as tenants by the entireties
JT TEN - as joint tenants with right of survivorship and not as tenants
in common
UNIF GIFT MIN ACT - Custodian under Uniform Gifts
------------------------------------
(Cust) (Minor)
to Minors Act
-----------
(State)
UNIF TRANSFER MIN ACT - Custodian under Uniform Transfers
--------------------------------
(Cust) (Minor)
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 the common stock evidenced by this Certificate, and do hereby
irrevocably constitute and appoint ___________, Attorney, to transfer the said
shares on the books of the Corporation, with full power of substitution in the
premises.
Dated
-------------- -----------------------------------------
Signature
NOTE: THE SIGNATURE TO THIS ASSIGNMENT MUST CORRESPOND WITH THE NAME OF THE
STOCKHOLDER(S) AS WRITTEN UPON THE FACE OF THE CERTIFICATE IN EVERY PARTICULAR,
WITHOUT ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATEVER.
<PAGE>
EXHIBIT 5
<PAGE>
October 30, 1997
Board of Directors
FBDC Financial Corp.
1400 Gault Avenue, North
Fort Payne, Alabama 35967
Re: FBDC Financial Corp.
--------------------
Registration Statement on Form S-4
Gentlemen:
You have requested our opinion as special counsel to FBDC Financial
Corp., an Alabama corporation, in connection with a registration statement on
Form S-4 filed with the Securities and Exchange Commission under the Securities
Act of 1933, as amended. The registration statement relates to shares to be
issued in connection with the reorganization of First Federal Bank as a wholly
owned savings association subsidiary of FBDC Financial Corp.
(the "Reorganization").
In rendering this opinion, we understand that the common stock of FBDC
Financial Corp. will be issued in the manner described in the Proxy
Statement/Prospectus which is a part of the registration statement. We have
examined such records and documents and made such investigation as we have
deemed relevant in connection with this opinion.
Based upon the foregoing, it is our opinion that the shares of common
stock of FBDC Financial Corp. will, upon issuance pursuant to the
Reorganization, be legally issued, fully paid and nonassessable.
This opinion is furnished for use as an exhibit to the registration
statement 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 review of the registration statement) without the prior written consent
of this firm. We hereby consent to the filing of this opinion as an exhibit to
the registration statement and to the references to us in the Proxy
Statement/Prospectus under the headings "Proposal III -- Proposed Conversion and
Reorganization -- Certain Federal Income Tax Consequences" and "--Legal
Opinion."
Very truly yours,
/s/ Kutak Rock
--------------
KUTAK ROCK
<PAGE>
EXHIBIT 8
<PAGE>
October 30, 1997
Board of Directors
First Federal Bank
1400 Gault Avenue, North
Fort Payne, Alabama 35967
Re: Certain Federal Income Tax Consequences Relating to
Proposed Reorganization into Holding Company Structure
Gentlemen:
In accordance with your request, set forth hereinbelow is the opinion
of this firm relating to certain federal income tax consequences of the proposed
reorganization (the "Reorganization") of First Federal Bank (the "Bank") into
the holding company form of ownership whereby the Bank will become a
wholly-owned subsidiary of FBDC Financial Corp. (the "Holding Company") and the
stockholders of the Bank will become the stockholders of the Holding Company.
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 Agreement and Plan of Reorganization dated October 14, 1997
(the "Plan"); the Restated Articles of Incorporation and Bylaws of the Holding
Company; the Affidavit of Representations dated October 28, 1997 provided to us
by the Bank in connection with this opinion (the "Affidavit"), and the Proxy
Statement/Prospectus included in the Registration Statement on Form S-4 ("Form
S-4") to be filed by the Holding Company with the Securities and Exchange
Commission ("SEC") in connection with the Reorganization. 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 meanings as defined in the Plan.
BACKGROUND
----------
The Bank is headquartered in Fort Payne, Alabama and was originally
chartered as First Federal Savings and Loan Association of DeKalb County, a
federal mutual savings and loan association, in 1965. In 1985, the Bank became a
federal stock savings and loan association upon its conversion to the stock form
of organization. The Bank adopted its current name in 1986, while remaining a
federal stock savings and loan association. The Bank is subject to examination
and comprehensive regulation by the Office of Thrift Supervision ("OTS"), and
its savings deposits are insured up to applicable limits by the Savings
Association Insurance Fund administered by the Federal Deposit Insurance
Corporation. In addition, the Bank is a member of and owns capital stock in the
Federal Home Loan Bank (the "FHLB") of Atlanta, which is one of 12 regional
banks in the FHLB System. The Bank is further subject to regulations of the
Board of Governors of the Federal Reserve System governing reserves to be
maintained and certain other matters. Currently, the Bank maintains a bad debt
reserve for federal income tax purposes pursuant to Section 593 of the Internal
Revenue Code of 1986, as amended (the "Code").
The capital stock of the Bank possesses the voting, dividend and
residual equity rights of the Bank. At June 30, 1997, the Bank had authorized
capital stock consisting of 300,000 shares of common stock, par value $1.00 per
share ("Bank Common Stock"), and 100,000 shares of preferred stock authorized,
of which 283,366 shares of Bank Common Stock and no shares of preferred stock
were issued and outstanding.
<PAGE>
Board of Directors
First Federal Bank
October 30, 1997
Page 2
The Bank's principal business consists of attracting deposits from the
general public and investing these funds, together with advances from the FHLB
of Atlanta, primarily in loans secured by first mortgages on residential real
estate and, to a lesser extent, in consumer loans. The Bank derives its income
principally from interest earned on loans and investment securities and, to a
lesser extent, gains from the sale of mortgage loans. The principal expenses of
the Bank are interest expense on deposits and borrowings of non-interest expense
such as compensation and employee benefits, office occupancy expenses and
Federal Deposit Insurance Corporation insurance premiums. Funds for these
activities are provided principally by deposits, principal repayments on loans
and mortgage backed securities, and FHLB advances.
The Holding Company is an Alabama corporation incorporated in October
1997 to become the sole stockholder of the Bank. The Holding Company has
6,000,000 shares of authorized stock, of which 5,000,000 shares are common
stock, par value $.01 per share ("Holding Company Common Stock"), and 1,000,000
shares are serial preferred stock, par value $.01 per share. Except for ten (10)
shares issued to the President of the Corporation for purposes of the
Corporation's corporate organization, which shares will be cancelled prior to
the Reorganization, no shares of the Holding Company are issued and outstanding
nor are any shares expected to be issued prior to the Reorganization. Further,
prior to the Reorganization, the Holding Company has not engaged in, and is not
expected to engage in, any material operations.
PROPOSED TRANSACTION
--------------------
The Board of Directors of the Bank believes that a holding company
structure will provide greater flexibility than is currently enjoyed by the Bank
as a federal savings association. Present regulations applicable to savings
associations limit both the types of businesses in which the Bank may engage and
the amount which the Bank may invest in subsidiaries. The Bank is also limited
in its ability to engage in certain corporate transactions such as stock
repurchases, by certain provisions of the Code applicable to savings
associations but not to their holding companies. The Board of Directors believes
that stock repurchases could improve market liquidity and enhance stockholder
value. The establishment of the Holding Company as a unitary savings and loan
holding company (i.e., a holding company with only one savings association
subsidiary) will also permit diversification of operations and the acquisition
and formation of companies engaged in lines of business which, while
complementary to the thrift business, should help to reduce the risks inherent
in an industry which is sensitive to interest rate changes. Moreover, a holding
company structure will help facilitate the acquisition of other financial
institutions. The Holding Company presently does not intend to operate more than
one savings association subsidiary. The Bank's Board of Directors believes that
acquisition or formation of such enterprises, which do not have the degree of
asset and liability interest rate sensitivity inherent in the structure of a
savings association, will provide a beneficial stabilizing effect on operations.
Upon consummation of the Reorganization, the Holding Company will be in a
position to take immediate advantage of any acquisition opportunities which may
arise, although no specific acquisition is planned at this time.
Accordingly, the following transaction is proposed to effect the
Reorganization:
(1) The Bank has formed the Holding Company as a wholly owned
subsidiary incorporated under the laws of the State of Alabama for the
purpose of initially becoming the sole stockholder of a newly formed
interim federal stock savings bank, and subsequently becoming the sole
holder of the capital stock of the Bank.
(2) The Holding Company will form an interim federal stock
savings bank ("Interim Federal"), which will be wholly owned by the
Holding Company.
(3) Interim Federal will merge with and into the Bank, with
the Bank as the surviving corporation.
<PAGE>
Board of Directors
First Federal Bank
October 30, 1997
Page 3
(4) Pursuant to such merger:
(i) all of the issued and outstanding shares of
Bank Common Stock will automatically be converted by operation
of law on a one-for-one basis into issued and outstanding
shares of Holding Company Common Stock, except to the extent
that holders of the Bank Common stock exercise their
dissenters' rights of appraisal pursuant to OTS regulations;
and
(ii) all of the issued and outstanding shares of
common stock of Interim Federal will automatically be
converted by operation of law on a one-for-one basis into an
equal number of issued and outstanding shares of Bank Common
Stock, which will be all of the issued and outstanding capital
stock of the Bank.
(5) As a result of the proposed transaction, the stockholders
of the Bank immediately prior to the proposed transaction will,
immediately after the proposed transaction, own all of the issued and
outstanding stock of the Holding Company, which will in turn own all of
the issued and outstanding stock of the Bank. Pursuant to 12 C.F.R. (S)
552.14, stockholders of the Bank will have dissenters' appraisal rights
in connection with the Reorganization.
The proposed transaction is to be executed in compliance with the laws
of the United States and applicable federal regulations. Consummation of the
Reorganization requires, among other things, that the Plan receive the approval
of at least a majority of the issued and outstanding shares of the Bank Common
Stock and appropriate regulatory approval.
Immediately after consummation of the Reorganization in the manner set
forth above, the Bank will continue to operate as a federally chartered stock
savings association and retain its present name and federal charter. Directors
of the Bank before the Reorganization will continue as Directors of the Bank
after the Reorganization.
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 proposed transaction will constitute a reorganization
within the meaning of Section 368(a)(1)(A) of the Code. The
reorganization will not be disqualified by reason of the fact that
stock of the Holding Company is used in the transaction. (Section
368(a)(2)(E) of the Code).
(2) Interim will not recognize any gain or loss on the
transfer of its assets to the Bank in exchange for Bank Common Stock
and the assumption by the Bank of the liabilities, if any, of Interim
(Sections 361(a) and 357(a) of the Code).
(3) The Bank will not recognize any gain or loss on the
receipt of the assets of Interim in exchange for the transfer to
Interim of Bank Common Stock (Section 1032(a) of the Code).
(4) The Bank's basis in the assets received from Interim in
the proposed transaction will, in each case, be the same as the basis
of such assets in the hands of Interim immediately prior to the
transaction (Section 362(b) of the Code).
(5) The Bank's holding period for the assets received from
Interim in the proposed transaction will, in each instance, include the
period during which such assets were held by Interim (Section 1223(2)
of the Code).
<PAGE>
Board of Directors
First Federal Bank
October 30, 1997
Page 4
(6) The Holding Company will not recognize any gain or loss
upon its receipt of Bank Common Stock in exchange for Interim Stock
(Section 354(a) of the Code).
(7) Stockholders of the Bank will not recognize any gain or
loss upon their exchange of Bank Common Stock solely for shares of
Holding Company Stock (Section 354(a) of the Code).
(8) A stockholder's aggregate basis in his or her shares of
Holding Company Stock received in the proposed transaction will be the
same as the aggregate basis of his or her shares of Bank Common Stock
surrendered in exchange therefor (Section 358(a) of the Code).
(9) A stockholder's holding period in his or her Holding
Company Stock received in the proposed transaction will include the
period during which such Bank Common Stock surrendered in exchange
therefor was held by such stockholder, provided that such Bank Common
Stock is a capital asset in the hands of the stockholder on the date of
the exchange (Section 1223(1) 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
federal, state, local, foreign or other 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, 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 Reorganization. Prior
to that time, we undertake to update or supplement our opinion in the event of a
material change in the federal income tax consequences set forth above and to
file such revised opinion as an exhibit to the Registration Statement. 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.
CONSENT
-------
We hereby consent to the filing of this opinion as an exhibit to the
Form S-4 filed by the Holding Company with the SEC and as an exhibit to the
Application on Form H-(e)1-S ("Form H-(e)1-S") to be filed by the Holding
Company with the OTS with respect to the Reorganization, and to the references
to this firm in the Holding Company's Proxy Statement/Prospectus, which is a
part of both the Form S-4 and the Form H-(e)1-S.
Very truly yours,
/s/ Kutak Rock
--------------
KUTAK ROCK
<PAGE>
EXHIBIT 99
<PAGE>
REVOCABLE PROXY
FIRST FEDERAL BANK
ANNUAL MEETING OF STOCKHOLDERS
December __, 1997
The undersigned hereby appoints the full Board of Directors with full
powers of substitution to act, as attorneys and proxies for the undersigned, to
vote all shares of Common Stock of the First Federal Bank (the "Bank") which the
undersigned is entitled to vote at the Annual Meeting of Stockholders (the
"Annual Meeting"), to be held at Bank's main office located at 1400 Gault
Avenue, North, Fort Payne, Alabama, on Thursday, December , 1997 at 2:00 p.m.,
local time, and at any and all adjournments thereof, as indicated below and in
accordance with the determination of a majority of the Board of Directors with
respect to other matters which come before the Annual Meeting.
<TABLE>
<CAPTION>
VOTE
FOR WITHHELD
<S> <C> <C>
1. The election as director, for a term [_] [_]
of three years or until their successors are
elected and qualified, of the nominees
listed below.
Dr. J. Malcolm Brewer
Paul R. Thomas
</TABLE>
INSTRUCTION: To withhold your vote for any individual nominee, insert that
nominee's name on the line provided below.
- ---------------------
<TABLE>
<CAPTION>
FOR AGAINST ABSTAIN
<S> <C> <C> <C>
2. The ratification of the appointment [_] [_] [_]
of Borders & Associates, P.C. as
auditors for the 1998 fiscal year.
3. The proposal to reorganize the [_] [_] [_]
Bank into the holding company
structure of ownership, including the
approval of the Agreement and Plan
of Reorganization.
4. In their discretion, the proxies are [_] [_] [_]
authorized to vote upon such other
matters as may properly come before
the meeting.
</TABLE>
The Board of Directors recommends a vote "FOR" each of the listed
propositions.
- --------------------------------------------------------------------------------
<PAGE>
THIS PROXY WILL BE VOTED AS DIRECTED, BUT IF NO INSTRUCTIONS ARE SPECIFIED, THIS
PROXY WILL BE VOTED FOR EACH OF THE NOMINEES AND EACH OF THE OTHER PROPOSITIONS
STATED. THE UNDERSIGNED STOCKHOLDER HEREBY AUTHORIZES THE BOARD OF DIRECTORS, IN
THEIR SOLE DISCRETION, TO DISTRIBUTE THE STOCKHOLDER'S VOTES AMONG SOME OR ALL
OF THE NOMINEES IN A MANNER OTHER THAN EQUALLY SO AS TO ELECT AS DIRECTORS THE
POSSIBLE NUMBER OF NOMINEES. IF ANY OTHER BUSINESS IS PRESENTED AT THE ANNUAL
MEETING, THIS PROXY WILL BE VOTED BY THOSE NAMED IN THIS PROXY IN ACCORDANCE
WITH THE DETERMINATION OF A MAJORITY OF THE BOARD OF DIRECTORS. AT THE PRESENT
TIME, THE BOARD OF DIRECTORS KNOWS OF NO OTHER BUSINESS TO BE PRESENTED AT THE
ANNUAL MEETING. THIS PROXY CONFERS DISCRETIONARY AUTHORITY ON THE HOLDERS
THEREOF TO VOTE WITH RESPECT TO THE ELECTION OF ANY PERSON AS DIRECTOR WHERE A
NOMINEE IS UNABLE TO SERVE OR FOR GOOD CAUSE WILL NOT SERVE AND MATTERS INCIDENT
TO THE CONDUCT OF THE ANNUAL MEETING.
- --------------------------------------------------------------------------------
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
Should the undersigned be present and elect to vote at the Annual
Meeting or at any adjournment thereof and after notification to the Secretary of
the Bank at the Annual Meeting of the stockholder's decision to terminate this
proxy, then the power of said attorneys and proxies shall be deemed terminated
and of no further force and effect. The undersigned hereby revokes any and all
proxies heretofore given with respect to the shares of Common Stock held of
record by the undersigned.
The undersigned acknowledges receipt from the Bank prior to the
execution of this proxy of a Notice of Annual Meeting, the Bank's Proxy
Statement for the Annual Meeting and an Annual Report for the 1997 fiscal year.
Dated: ______________, 1997
- ------------------------------------ ------------------------------------
PRINT NAME OF STOCKHOLDER PRINT NAME OF STOCKHOLDER
- ------------------------------------ ------------------------------------
SIGNATURE OF STOCKHOLDER SIGNATURE OF STOCKHOLDER
Please sign exactly as your name appears on the envelope in which this card was
mailed. When signing as attorney, executor, administrator, trustee or guardian,
please give your full title. If shares are held jointly, each holder should
sign.
- --------------------------------------------------------------------------------
PLEASE COMPLETE, DATE, SIGN AND MAIL THIS PROXY PROMPTLY IN THE ENCLOSED
POSTAGE-PREPAID ENVELOPE.
- --------------------------------------------------------------------------------
2
