Registration No. 333-__________
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-4
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
- --------------------------------------------------------------------------------
SECURITY FINANCIAL SERVICES CORPORATION
(Exact name of registrant as specified in its Charter)
WISCONSIN Applied For 6711
(State of (I.R.S. Employer I.D. No.) (Primary Standard
Incorporation) Industrial Classifi-
cation Code No.)
212 WEST PROSPECT STREET
DURAND, WISCONSIN 54736-1123
(715) 672-4237
(Address and telephone number of principal executive offices)
- --------------------------------------------------------------------------------
GERALD V. WEINER JOHN E. KNIGHT
The Security National Bank Boardman, Suhr, Curry & Field LLP
212 West Prospect Street One S. Pinckney Street, 4th Floor
Durand, WI 54736-1123 Post Office Box 927
(715) 672-4237 Madison, WI 53701-0927
(Name, address, telephone no. (Copy of Notices)
of agent for service)
- --------------------------------------------------------------------------------
Approximate date of commencement of proposed sale of the securities to the
public: upon consummation of the reorganization.
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. [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
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.
- --------------------------------------------------------------------------------
CALCULATION OF REGISTRATION FEE
Proposed
Title of Proposed maximum
each class Amount maximum aggregate Amount of
of securities to be offering price offering registration
to be registered registered per unit* price* fee
- ---------------- ---------- -------------- --------- ------------
Common 12,000 $1,553.07 $18,636,840 $5,181.04
Stock,
$100.00 par
value
*Based on the book value of the common stock of The Security National Bank on
April 30, 1999, estimated solely for purposes of calculating the registration
fee pursuant to Rule 457(f)(2).
<PAGE>
Security Financial Services Corporation
Cross Reference Sheet
Form S-4, Part I
Item Number Location in Prospectus
- ---------------- ----------------------
1 FACING PAGE OF REGISTRATION STATEMENT;
OUTSIDE FRONT COVER PAGE OF PROSPECTUS
2 TABLE OF CONTENTS
3 SUMMARY
4 SUMMARY; THE REORGANIZATION; COMPARISON OF
BANK STOCK WITH HOLDING COMPANY STOCK
5 Not applicable
6 SECURITY FINANCIAL SERVICES CORPORATION; THE
SECURITY NATIONAL BANK
7 Not applicable
8 THE REORGANIZATION
9 SECURITY FINANCIAL SERVICES CORPORATION; THE
SECURITY NATIONAL BANK
10 Not applicable
11 Not applicable
12 Not applicable
13 Not applicable
14 SECURITY FINANCIAL SERVICES CORPORATION;
COMPARISON OF BANK STOCK WITH HOLDING COMPANY STOCK
15 Not applicable
16 Not applicable
17 THE SECURITY NATIONAL BANK; COMPARISON OF
BANK STOCK WITH HOLDING COMPANY STOCK
18 THE REORGANIZATION; SECURITY FINANCIAL
SERVICES CORPORATION; THE SECURITY NATIONAL
BANK; RIGHTS OF DISSENTING STOCKHOLDERS OF BANK
19 Not applicable
<PAGE>
_________________, 1999
To the Shareholders of The Security National Bank:
It is my pleasure to invite you to a special meeting of the shareholders of
The Security National Bank ("Bank"). We will hold the meeting on September 22,
1999, at 7:00 p.m., local time, at the Durand Rod and Gun Club, Durand,
Wisconsin.
This meeting is very important to you because you will be asked to approve
the formation of a holding company for the Bank. A bank holding company is a
corporation that owns the stock of a bank. The shareholders of the Bank will
become the shareholders of the bank holding company. It is very important that
you attend the meeting. The Board of Directors of the Bank will be available at
the meeting to answer any questions you may have.
If the shareholders approve the holding company:
o you will become a shareholder of the holding company;
o the holding company will become the sole shareholder of the Bank; and
o you will receive one share of holding company stock for each share of
your Bank stock.
None of this involves the sale of the Bank.
We have formed Security Financial Services Corporation to serve as the
holding company. The same people currently serve as both the Bank's and Security
Financial Services Corporation's Board of Directors.
More than 150 holding companies have been formed in Wisconsin. The Board of
Directors believes that a holding company would be good for you and the Bank
because:
o The holding company can purchase its own stock from shareholders.
Therefore, it can provide a potential market for the stock of the
holding company. National banks are severely restricted in their
ability to purchase their own stock from shareholders. This is the
single most important advantage to a bank holding company.
o It will allow us to respond efficiently to changes in the law
governing banks and bank-related activities.
<PAGE>
o Although we have no intention of acquiring other banks at this time,
it will allow us to more easily acquire other banks and operate them
as branches of the Bank or as separate banks in areas not now served
by the Bank.
o It will allow us to meet future Bank capital needs by having the
holding company take out loans which are repaid by nontaxable Bank
dividends.
o It will allow us to compete more effectively with other bank holding
companies.
This letter is followed by a formal notice of the special meeting of
shareholders and a prospectus-proxy statement. The prospectus-proxy statement
serves two purposes:
o The Bank's proxy statement describes the proposed transaction and asks
you to send in your Proxy to vote on the holding company. A form of
Proxy is enclosed separately (on blue paper).
o A prospectus of the holding company describes the holding company and
its stock.
We have also included financial statements for the Bank.
The Board of Directors of the Bank unanimously recommends that you vote to
approve the formation of the holding company. All of the Bank's directors intend
to vote in favor of Security Financial Services Corporation as a holding company
for the Bank, and they encourage you to join them. Please read the enclosed
prospectus-proxy statement carefully before making your decision.
To approve the holding company, two-thirds of all of the outstanding Bank
shares must vote in favor of Security Financial Services Corporation as a
holding company for the Bank. YOUR VOTE IS IMPORTANT, regardless of how many
shares you own. Whether you plan to attend the meeting or not, please complete,
date, sign and return the enclosed proxy form promptly in the enclosed envelope.
If you attend the meeting and prefer to vote in person, you may do so, even if
you turn your Proxy in at this time.
Please return the enclosed Proxy to ensure that your vote counts. If you
have questions about the holding company or the prospectus-proxy statement,
please call me at (715) 672-4237 or any member of the Bank's Board of Directors.
A list of the Directors and their phone numbers is attached.
Very truly yours,
Gerald V. Weiner
President
<PAGE>
List of Directors and Phone Numbers
Name of Director Phone Number
------------------ ---------------
Jerry M. Bauer (715) 672-4295
T.L. Schiefelbein (715) 672-8089
Richard E. Bates (715) 672-4237
Gerald Sundstrom (715) 672-4425
Gerald L. Levenske (715) 672-4204
Carole Komro (715) 672-5350
Robert Davidian (612) 841-6266
Gerald V. Weiner (715) 672-4237
<PAGE>
THE SECURITY NATIONAL BANK
212 West Prospect Street
Durand, WI 54736
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD SEPTEMBER 22, 1999
A special meeting of shareholders of The Security National Bank ("Bank"),
will be held on September 22, 1999, at the Durand Rod and Gun Club, Durand,
Wisconsin at 7:00 p.m., for the following purposes:
1. To vote on the following resolution:
RESOLVED, that the formation of a bank holding company for The
Security National Bank, pursuant to the terms and conditions of an
Agreement and Plan of Reorganization between The Security National Bank and
Security Financial Services Corporation and a Merger Agreement between The
Security National Bank and New Security National Bank whereby (i) The
Security National Bank will become a wholly-owned subsidiary of Security
Financial Services Corporation, and (ii) shareholders of The Security
National Bank will become shareholders of Security Financial Services
Corporation, is hereby authorized and approved.
2. To transact such other business as may properly come before the
meeting or any adjournments thereof.
At this meeting, holders of record of common stock of the Bank at the close
of business on August 23, 1999, will be entitled to vote. Two-thirds (66.67%) of
the issued and outstanding shares of the Bank must be voted in favor of the
above resolution in order to permit the holding company formation to proceed.
Shareholders and beneficial shareholders are or may be entitled to assert
dissenters' rights under Subsections 215a(b), (c) and (d) of the United States
Code. A copy of those sections is attached to the following Proxy
Statement/Prospectus as Exhibit C.
THE BOARD OF DIRECTORS OF THE BANK BELIEVES THAT THE PRO POSED HOLDING
COMPANY IS IN THE BEST INTERESTS OF THE BANK AND ITS SHAREHOLDERS AND
UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS OF THE BANK VOTE "FOR" THE PROPOSED
HOLDING COMPANY.
By Order of the Board of Directors
----------------, --------------
- -------------------
<PAGE>
Defined Terms
- -------------
"We" or "Us" means the directors and management of The Security National Bank
and Security Financial Services Corporation.
"Bank" means The Security National Bank.
"Holding Company" or "Company" means Security Financial Services Corporation
"New Bank" means the temporary organization formed for the sole purpose of
merging the Bank into the New Bank as part of the reorganization.
"Reorganization" means the formation of the holding company for the Bank through
the merger of Bank into New Bank and the exchange of Holding Company stock for
Bank stock. As a result of the Reorganization, the Bank will become a subsidiary
of the Holding Company, and the current shareholders of the Bank will become
shareholders of the Holding Company.
"Treasury Shares" means shares of Holding Company stock that were issued to
Holding Company shareholders, but have subsequently been repurchased by the
Holding Company.
<PAGE>
PROSPECTUS OF
SECURITY FINANCIAL SERVICES CORPORATION
212 West Prospect Street
Durand, WI 54736
(715) 672-4237
12,000 Shares of Common Stock, $100.00 Par Value
AND
PROXY STATEMENT
OF
THE SECURITY NATIONAL BANK
Special Meeting of The Security National Bank
Shareholders to be held September 22, 1999
Security Financial Services Corporation is furnishing this prospectus to
you, the shareholders of The Security National Bank. The prospectus relates to
the shares of Security Financial Services Corporation stock which will be
exchanged, on a one-for-one basis, for your shares of The Security National Bank
stock as a result of the formation of a bank holding company for The Security
National Bank.
The holding company will be formed through a reorganization. In the
reorganization, which is described in detail in this prospectus, The Security
National Bank will become a wholly owned subsidiary of Security Financial
Services Corporation, and the shareholders of the Bank will become the
shareholders of Security Financial Services Corporation (the holding company).
The specific components of this reorganization are set forth in the Plan of
Reorganization and Merger Agreement, which are attached to this prospectus -
proxy statement as Exhibit A.
Under the holding company's Articles of Incorporation, the holding company
stock that you will receive in the reorganization will be subject to certain
limits on transfer. The stock of the Bank is not currently subject to these
limits. In addition, under the holding company's Articles, the holding company's
Board of Directors will be comprised of three classes of directors, serving
staggered terms. The Bank directors do not currently serve staggered terms. For
a discussion of these limits on transfer and the directors' staggered terms, see
"SECURITY FINANCIAL SERVICES CORPORATION--Certain Antitakeover and
Indemnification Provisions" and "COMPARISON OF BANK STOCK WITH HOLDING COMPANY
STOCK."
This prospectus-proxy statement is also being furnished to you because the
Board of Directors of The Security National Bank is soliciting your proxy to be
used at the special meeting of shareholders to be held September 22, 1999. At
the special meeting, you will be asked to consider and vote on the proposed
formation of a holding company for The Security National Bank.
Definitions of capitalized terms used in this prospectus-proxy statement
are on the facing page.
As required by the Securities Act of 1933, the holding company has filed a
Registration Statement on Form S-4. This Registration Statement covers the
shares of Security Financial Services Corporation common stock that will be
issued as part of the formation of the holding company for the Bank.
<PAGE>
THE FOLLOWING ARE IMPORTANT DISCLOSURES. PLEASE READ THEM CAREFULLY:
This prospectus-proxy statement is not an offer to sell to or solicitation
of an offer to buy from any person or in any jurisdiction where it is illegal to
make or solicit such an offer. Wherever this offer is required to be made by a
licensed broker or dealer, only a registered, licensed broker-dealer may make
this offer on behalf of the holding company.
You should rely only on the information contained in this document or that
we have referred you to. We have not authorized anyone to provide you with
information that is different. This prospectus-proxy statement is only accurate
as of the date printed on the bottom of this page. We are required to advise you
if there is any fundamental change affecting the formation of the holding
company.
The shares of holding company stock to be issued in the holding company
formation will not be savings accounts or deposits, and will not be insured by
the Federal Deposit Insurance Corporation or any other government agency.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved the securities to be issued in the
holding company formation, passed upon the accuracy of this prospectus-proxy
statement or determined if this prospectus-proxy statement is truthful or
complete. Any representation to the contrary is a criminal offense.
The date of this prospectus-proxy statement is August 11, 1999.
<PAGE>
TABLE OF CONTENTS
-----------------
Page
SUMMARY (i)
INTRODUCTION 1
THE REORGANIZATION 2
General 2
Reasons for the Reorganization 2
Summary of the Reorganization 4
Special Meeting of Shareholders 5
Operation of the Bank Following the Reorganization 6
Conditions Precedent to the Reorganization 6
Closing Date 7
Resales of Holding Company Stock 7
Tax Considerations 8
Securities Regulation 12
Expenses of Reorganization 13
RIGHTS OF DISSENTING STOCKHOLDERS OF BANK 13
SECURITY FINANCIAL SERVICES CORPORATION 14
History, Business, and Properties 14
Management 14
Principal Shareholders 15
Description of Holding Company's Common Stock 15
Executive Compensation 16
Transactions with Related Parties 16
Certain Anti-Takeover and Indemnification Provisions 16
THE SECURITY NATIONAL BANK 18
History, Business, and Properties 18
Management 20
Business Background of Directors and Executive Officers 20
Executive Compensation 22
Director Compensation 23
Board Review of Management Compensation 23
Principal Shareholders 24
Description of the Stock of the Bank 25
Transactions with Related Parties 25
Indemnification of Directors and Officers 25
Shares of the Stock Owned or Controlled by Management 26
Recommendation of the Bank's Board of Directors 26
FINANCIAL INFORMATION 26
<PAGE>
COMPARISON OF BANK STOCK WITH HOLDING COMPANY STOCK 27
Authorized Shares and Par Value 27
Voting Rights 27
Dividends 29
Market for the Stock 30
Value 33
Other 34
SUPERVISION AND REGULATION 35
General 35
Banking Regulation 35
Capital Requirements for Holding Company and Bank 36
Liquidity Requirements for Holding Company and Bank 37
FDIC Insurance Premiums 38
Loan Limits to Borrowers 38
Recent Regulatory Developments 38
AVAILABLE INFORMATION 39
LEGAL MATTERS 40
EXHIBIT A - Agreement and Plan of Reorganization
EXHIBIT B - Tax Opinion of Boardman, Suhr, Curry & Field LLP
EXHIBIT C - United States Code Sections
EXHIBIT D - Articles of Incorporation of Security Financial Services Corporation
<PAGE>
SUMMARY
=======
This summary highlights selected information from this document and may not
contain all of the information that is important to you. To understand the
formation of the holding company for the Bank better, and for a more complete
description of the legal terms of these transactions, you should read this
entire prospectus-proxy statement carefully, including the Exhibits that are
attached at the end.
Parties
- -------
The Holding Company
o Organized by Bank management.
o Wisconsin corporation.
o Intended by Bank management to become a holding company for the Bank.
o Still in the organizational phase.
o No operating history.
o For more information, see "SECURITY FINANCIAL SERVICES CORPORATION -
History, Business, and Properties."
Address:
Security Financial Services Corporation
212 West Prospect Street
Durand, WI 54736
(715) 672-4237
The Bank
o Chartered by the Comptroller of the Currency.
o Operating as a commercial bank with its main office in Durand,
Wisconsin, since 1934.
o Offers comprehensive banking services to the residential, commercial,
industrial and agricultural areas that it serves.
o Services include agricultural, commercial, real estate and personal
loans; checking, savings and time deposits; and other customer
services, such as safety deposit boxes.
o For more information, see "THE SECURITY NATIONAL BANK--History,
Business, and Properties."
Address:
The Security National Bank
212 West Prospect Street
Durand, WI 54736
(715) 672-4237
The Formation of a Holding Company for the Bank
- -----------------------------------------------
The Board of Directors of the Bank proposes to form a bank holding company
for the Bank. As part of the formation process, the holding company will trade
one share of its common stock for each outstanding share of your Bank stock. As
a result,
o the holding company will be owned by you, the former Bank shareholders
and
i
<PAGE>
o the Bank will become a wholly-owned subsidiary of the holding company.
Other things you should know about the formation of the holding company:
o There will be no change in the compensation or benefits of Bank
directors or executive officers.
o The holding company will not have to file reports with the Securities
and Exchange Commission ("SEC") under the Securities Exchange Act of
1934.
o The holding company will voluntarily provide its shareholders with the
same types of reports that the Bank currently provides to Bank
shareholders.
o For more information, see "AVAILABLE INFORMATION." For more
information about the Reorganization, see "THE REORGANIZATION--
Summary of the Reorganization" and the Agreement and Plan of
Reorganization attached as Exhibit A.
Special Meeting of Shareholders
- -------------------------------
The meeting will be held September 22, 1999, at 7:00 p.m. at the Durand Rod
and Gun Club, Durand, Wisconsin. Only shareholders of record as of the close of
business on August 23, 1999, will be entitled to vote at the meeting.
At the meeting, you, the Bank shareholders, will consider and vote on the
formation of a bank holding company for the Bank pursuant to the Agreement and
Plan of Reorganization that is attached as an exhibit to this proxy
statement-prospectus. We can only form a holding company if the holders of
two-thirds (66.67%) of outstanding Bank stock vote in favor of the transaction.
As of the date of this prospectus-proxy statement, directors and executive
officers of the Bank own or control, directly or indirectly, approximately 15.9%
of the outstanding Bank stock.
For more information, see "THE REORGANIZATION--Special Meeting of
Shareholders."
Recommendation of the Bank's Board of Directors
- -----------------------------------------------
The Board believes that the formation of a holding company for the Bank is
in the best interests of the Bank and its shareholders. The Board unanimously
recommends that you vote your Bank shares to approve the holding company.
For more information, see "THE REORGANIZATION--Reasons for the
Reorganization" and "THE SECURITY NATIONAL BANK--Recommendation of the Bank's
Board of Directors."
Effect on Bank Shareholders
- ---------------------------
Assuming that two-thirds (66.67%) of the Bank shareholders approve the
holding company formation, the directors of the holding company will chose an
appropriate day on which to "close" the formation of the holding company. For a
discussion of how they choose this "closing date," see "THE REORGANIZATION--
Closing Date."
On the closing date, the holding company will exchange one share of its
holding company stock for each share of Bank stock that you hold immediately
prior to the closing date. As a result of this exchange, you and the other Bank
shareholders will become the shareholders of the holding company, and the
holding company will become the sole shareholder of the Bank. For more
information, see "THE REORGANIZATION."
ii
<PAGE>
This exchange will be subject to certain limitations and dissenters' rights
provided by law. For a discussion of dissenters' rights, see the following
sections and "RIGHTS OF DISSENTING SHAREHOLDERS OF BANK".
Dissenters' Rights
- ------------------
Under certain provisions of the United States Code, as a holder of Bank
stock, you have the right to:
o object to the Reorganization and
o obtain payment of the fair value of your shares in cash.
However, you may only exercise these rights if you:
o either vote against the Reorganization at the special meeting of
shareholders or give written notice to the holding company that you
dissent from the Reorganization at or before the shareholder meeting;
o make a written request to the Bank within 30 days after the
consummation of the Reorganization to receive the value of your
shares;
o surrender your Bank stock certificates, and
o take certain other actions.
For more information, see "RIGHTS OF DISSENTING SHAREHOLDERS OF BANK" and
Exhibit C.
Federal Income Tax Consequences
- -------------------------------
We have structured the holding company formation to qualify as a tax free
transaction under the federal tax laws. Therefore, you should not recognize any
gain or loss on the exchange of your Bank stock for holding company stock.
Exhibit B to this prospectus-proxy statement is an opinion of an attorney that
the formation of the holding company is a tax-free transaction. The opinion of
an attorney is not binding on the Internal Revenue Service. See "THE
REORGANIZATION--Tax Considerations."
However, if you exercise your dissenters' rights and receive cash for your
shares of Bank stock instead of exchanging the shares for holding company stock,
as discussed above under "Dissenters' Rights", you will be taxed on the cash
that you receive for your shares of Bank stock.
Date of the Holding Company Formation
- -------------------------------------
We will form the holding company for the Bank as soon as practicable after
we receive all necessary approvals from governmental agencies and authorities,
and after certain other terms and conditions are satisfied. The Bank will close
its transfer records twenty (20) days prior to the closing date, which, as we
mentioned above, is an appropriate date that the directors of the holding
company will choose to "close" the holding company formation process. Until the
Bank's transfer records are closed, you may sell or otherwise transfer your Bank
stock. The holding company formation process will close no later than December
31, 1999, unless the parties agree to another date in writing. It is the
parties' expectation to close on December 31, 1999. See "THE REORGANIZATION--
Closing Date."
iii
<PAGE>
Conditions for the Holding Company Formation
- --------------------------------------------
We cannot form a holding company for the Bank unless the Federal Reserve
Board, the Office of the Comptroller of the Currency, and two-thirds of the
holders of the outstanding stock of the Bank approve the transaction. In
addition, other terms and conditions must also be satisfied. See "THE
REORGANIZATION Conditions Precedent to the Reorganization."
The holding company and the Bank may change or waive certain conditions if,
in the opinion of the Boards of Directors of the holding company and the Bank,
the action would not significantly diminish the benefits intended for holders of
holding company stock.
Right of First Refusal
- ----------------------
The shares of holding company stock will be subject to a limitation on
transfer that currently does not apply to Bank stock. This limitation is known
as the "right of first refusal." One of the purposes of forming a holding
company for the Bank is to enable the Bank to continue under local control. A
right of first refusal provides the holding company with a mechanism for
assuring local control of the Bank. Here are some important things to know about
a right of first refusal:
o Generally, you will need the consent of the Holding Company to
transfer your shares. If you choose to transfer any of your shares
without the Holding Company's prior written approval, then the right
of first refusal applies.
o If someone offers in writing to buy your holding company stock, a
"right of first refusal" gives the holding company the right to buy
your stock first at the same price and on the same terms as those
offered by the person who wanted to buy your stock.
o The right of first refusal will apply to holding company stock held by
all shareholders. You may pledge your holding company stock, or you
may transfer it to your spouse or children (or any lineal descendent
of your spouse or children), to your parent(s), or to your sibling(s).
However, after it is pledged or transferred, the stock will still be
subject to the right of first refusal.
o In order to amend the right of first refusal, at least seventy-five
percent (75%) of the outstanding shares of holding company voting
stock must be voted in favor of the amendment.
o The holding company's right to purchase your stock first may limit
your ability to sell your shares to buyers other than the holding
company.
o The right of first refusal may reduce the likelihood of another buyer
obtaining control of the holding company through the acquisition of
large blocks of holding company stock.
o The holding company's right of first refusal does not mean that the
holding company can set the price for your stock. If the holding
company wishes to buy your stock instead of allowing you to sell it to
another person, the holding company MUST pay the price offered in
writing by the person who wanted to buy your stock.
Under the Holding Company's Articles of Incorporation, the right of first
refusal may only be amended by the affirmative vote of not less than 75% of the
outstanding shares of voting stock of the Holding Company. For more information,
see "SECURITY FINANCIAL SERVICES CORPORATION--Certain Antitakeover Provisions
and Indemnification Provisions" and "COMPARISON OF BANK STOCK WITH HOLDING
COMPANY STOCK--Market for the Stock."
iv
<PAGE>
Preemptive Rights
- -----------------
The shareholders of the Holding Company will be granted preemptive rights
under Wisconsin law. Preemptive rights allow a shareholder to maintain his or
her proportional ownership interest in the Holding Company. When new stock is to
be issued by the Holding Company, a shareholder having preemptive rights may
purchase his or her pro rata share of the offering before any shares are offered
to others. Shareholders of the Bank are not entitled to preemptive rights. See
"SECURITY FINANCIAL SERVICES CORPORATION--Description of the Holding Company's
Common Stock" and "COMPARISON OF BANK STOCK WITH HOLDING COMPANY
STOCK--Authorized Shares and Par Value."
Staggered Terms
- ---------------
The directors of the holding company, unlike the directors of the Bank,
will serve staggered terms. The holding company's board of directors will
consist of three classes of directors, each serving a three-year term ending in
a successive year. This provision could have the effect of delaying, deferring
or preventing a change in control of the holding company. Under the Holding
Company's Articles of Incorporation, the staggered terms of directors may only
be amended by the affirmative vote of not less than 75% of the outstanding
shares of voting stock of the Holding Company. See "SECURITY FINANCIAL SERVICES
CORPORATION--Certain Anti-Takeover and Indemnification Provisions."
v
<PAGE>
-----------------------------------------
PROXY STATEMENT
AND
PROSPECTUS
------------------------------------------
INTRODUCTION
============
Security Financial Services Corporation ("Holding Company") is a business
corporation organized at the request of the management of The Security National
Bank ("Bank") for the purpose of the reorganization. See "SECURITY FINANCIAL
SERVICES CORPORATION" The Bank is a national banking association that has been
operating as a commercial bank in Durand, Wisconsin since 1934. See "THE
SECURITY NATIONAL BANK."
The reorganization is being conducted for the purpose of forming a holding
company for the Bank, according to a plan of reorganization approved by the
Board of Directors of the Holding Company and by the Board of Directors of the
Bank. See "THE REORGANIZATION--Summary of the Reorganization." The Board of
Directors of the Bank believes that the formation of a bank holding company will
benefit the Bank and its shareholders. See "THE REORGANIZATION--Reasons for the
Reorganization" and "THE SECURITY NATIONAL BANK--Recommendation of the Bank's
Board of Directors."
This Prospectus contains information intended to help each Bank shareholder
decide whether to vote to approve the formation of a bank holding company. See,
for example, "COMPARISON OF BANK STOCK WITH HOLDING COMPANY STOCK." The Board of
Directors of the Holding Company urges each Bank shareholder to carefully read
the entire Prospectus.
FORWARD-LOOKING STATEMENTS
==========================
When used in this prospectus-proxy statement, in the Bank's or Holding
Company's press releases or other public or shareholder communications, and in
oral statements made with the approval of an authorized executive officer, the
words or phrases "are expected to," "estimate," "is anticipated," "project,"
"will continue," "will likely result," or similar expressions are intended to
identify "forward-looking statements." Such statements are subject to certain
risks and uncertainties, including changes in economic conditions in the Bank's
market area, changes in policies by regulatory agencies, fluctuation in interest
rates, demand for loans in the Bank's market area, and competition, that could
cause actual results to differ materially from what the Bank or Holding Company
have presently anticipated or projected. The Bank and Holding Company wish to
caution readers not to place undue reliance on any such forward-looking
statements, which speak only as of the date made. The Bank and Holding Company
wish to advise readers that factors addressed within the prospectus-proxy
statement could affect the Bank's financial performance and could cause the
Bank's actual results for future periods to differ materially from any opinions
or statements expressed with respect to future periods in any current
statements.
Where any such forward-looking statement includes a statement of the
assumptions or bases underlying such forward-looking statement, the Bank and
Holding Company caution that, while they believe such assumptions or bases to be
reasonable and make them in good faith, assumed facts or bases almost always
vary from actual results, and the differences between assumed facts or bases and
actual results can be material, depending on the circumstances. Where, in any
forward-looking statement, the Bank, the Holding Company, or their directors or
officers, express an expectation or belief as to the future results, such
expectation or belief is expressed in good faith and believed to have a
reasonable basis, but there can be no assurance that the statement of
expectation or belief will result, or be achieved or accomplished.
1
<PAGE>
The Bank and Holding Company do not undertake -- and specifically decline
any obligation -- to publicly release the result of any revisions which may be
made to any forward-looking statements to reflect events or circumstances after
the date of such statements or to reflect the occurrence of anticipated or
unanticipated events.
THE REORGANIZATION
==================
General
- -------
The reorganization is designed to offer shareholders of The Security
National Bank ("Bank") the opportunity to form a bank holding company. Pursuant
to the reorganization, the following steps have already occurred:
1. Security Financial Services Corporation ("Holding Company"), a
Wisconsin business corporation, has been incorporated for the purpose
of participating in the reorganization and becoming a bank holding
company.
2. The Board of Directors of the Bank and the Board of Directors of the
Holding Company have adopted and approved an Agreement and Plan of
Reorganization.
The following steps, among others, remain to be completed pursuant to the
reorganization (See "THE REORGANIZATION--Conditions Precedent to the
Reorganization"):
1. The shareholders of the Bank must approve the reorganization by the
affirmative vote of two-thirds (66.67%) of the outstanding Bank stock.
2. The Federal Reserve Board must approve the Holding Company's
application to become a bank holding company under the Bank Holding
Company Act of 1956 ("Act").
3. The Comptroller of the Currency must approve the reorganization.
Reasons for the Reorganization
- ------------------------------
The Board of Directors of the Bank recommends the reorganization because it
believes that a bank holding company will offer opportunities to the Bank to
compete more effectively and to expand its services in type, in number, and in
geographical scope. In addition, the Board believes that the formation of a
holding company will provide benefits to the shareholders and to its community.
Flexibility. The proposed reorganization will, in the opinion of the Board,
better prepare the Bank to respond flexibly and efficiently to future changes in
the laws and regulations governing banks and bank-related activities. Often,
opportunities arise for bank holding companies that are not available to banks,
and vice versa. The bank holding company corporate structure may prove valuable
in taking advantage of any new opportunities in banking and bank-related fields
that are made available by deregulation or otherwise.
Market for the Stock. Under federal law, a national bank is prohibited from
purchasing its own stock, except in certain limited circumstances. Therefore,
any Bank shareholder who desires to sell his or her Bank stock must generally
locate a person willing to purchase the stock.
The Holding Company will not be prohibited by law from purchasing Holding
Company stock, unless such a purchase would make the Holding Company insolvent.
Therefore, the Holding Company may become a potential buyer of that stock, and
may create a market that presently does not exist. The Holding Company will not
be required to purchase stock, but may do so in the discretion of its Board of
Directors. If the Holding Company purchases more than 10% of its stock in a
twelve-month period, it may be required to receive the approval of the Federal
Reserve Board. For more information about the Holding Company's ability to
purchase stock, see "COMPARISON OF BANK STOCK WITH HOLDING COMPANY STOCK--
Market for the Stock."
2
<PAGE>
Expansion. The principal means for a bank to seek continued growth, apart
from utilizing more fully the business potential within its present market area,
is by use of the holding company structure to reach into other geographic
markets. After the reorganization, the Holding Company will be able to, and may,
subject to approval of regulatory authorities, create new banks or acquire
existing banks anywhere in Wisconsin and neighboring states. The Holding Company
has no present plans to acquire any such banks.
Diversification. The proposed bank holding company offers the ability to
diversify the business of the Bank by creating or acquiring corporations engaged
in bank-related activities. Diversification into bank-related activities is
governed by the Bank Holding Company Act of 1956, and the regulations of the
Federal Reserve Board promulgated pursuant to that Act. The range of activities
in which the Holding Company may engage through nonbank subsidiaries, subject to
approval of the Federal Reserve Board, includes:
o loan service companies,
o mortgage companies,
o independent trust companies,
o small loan and factoring companies,
o equipment leasing companies,
o credit life and disability insurance companies, and
o certain insurance, advisory, and brokerage operations.
The Holding Company may in the future engage directly or through
subsidiaries in one or more of those activities. However, the timing and extent
of those operations by the Holding Company will depend on many factors,
including competitive and financial conditions existing in the future as well as
the then financial condition of the Holding Company and the Bank.
Capital Requirements. The proposed reorganization will also provide, in the
opinion of the Board, greater flexibility in meeting financing needs of the Bank
or other banks or corporations acquired by the Holding Company. Currently, there
is no need for the Bank to obtain additional capital. If the need for additional
capital should arise, however, those capital requirements of the Bank could be
obtained in the following manner:
1. The Holding Company would borrow the capital.
2. The Holding Company would pay the capital to the Bank as a capital
contribution or as a purchase of additional Bank stock.
3. The loan to the Holding Company would be paid with dividends received
from the Bank, which would not be taxable to the Holding Company if it
holds at least 80% of the Bank stock.
4. The interest expense incurred by the Holding Company on the loan could
be used to offset Bank earnings on a consolidated federal income tax
return.
3
<PAGE>
General. The Board believes that greater overall strength will result to
the Bank through the formation of the Holding Company. The formation of the
Holding Company is not part of a plan or effort to adversely affect any
shareholder, or to unduly benefit any shareholder, director, or officer. Except
for those shareholders who exercise dissenters' rights, the proportionate
interests of the Bank shareholders in the Holding Company stock will be
identical to their current proportionate interests in the Bank stock.
Summary of the Reorganization
- -----------------------------
The Holding Company intends to acquire all of the outstanding stock of the
Bank through a reorganization. To perform the reorganization:
1. The Holding Company will incorporate a new bank, called New Security
National Bank ("New Bank"), as a wholly-owned subsidiary of the
Holding Company;
2. The New Bank will not conduct any banking business or any other
business. It will have no employees, no liabilities, no operations,
and (except for a nominal capital contribution required by law) no
assets. It will be a "shell" corporation, and will be incorporated for
the sole purpose of assisting in the reorganization.
3. The Bank will be merged into the New Bank.
4. The stock of the Bank now held by the shareholders will be converted
into the Holding Company stock at the rate of one share of the Holding
Company stock for each one share of Bank stock that they currently
own.
As a result of the reorganization, the Bank shareholders will become
shareholders of the Holding Company. In addition, by virtue of the merger of the
Bank into the New Bank, the Bank will become a wholly-owned subsidiary of the
Holding Company.
Currently, the Bank shareholders own all 12,000 shares outstanding of the
Bank's stock. After the reorganization, the Holding Company will own the Bank,
and the former Bank shareholders will own the Holding Company.
Current After Reorganization
======= ====================
Shareholders Shareholders
------------------------- --------------------------------
12,000 shares (100%) 12,000 shares (100%) of the
of Bank stock issued and outstanding shares of
Holding Company stock
Holding Company
--------------------------------
12,000 shares (100%) of
Bank stock
Bank
-------------------------
Bank
--------------------------------
Special Meeting of Shareholders
- -------------------------------
The regulations of the Comptroller of the Currency require that at least
two-thirds (66.67%) of the outstanding stock of a national bank approve a merger
of that bank. Because the reorganization will be conducted as a merger of the
New Bank and the Bank, that requirement must be fulfilled.
4
<PAGE>
A vote on the proposed holding company will be taken at the special meeting
of shareholders of the Bank, to be held on September 22, 1999, at 7:00 p.m., at
the Durand Rod and Gun Club, Durand, Wisconsin. The close of business on August
23, 1999, has been fixed as the record date for the determination of share
holders entitled to notice of and to vote at the meeting. On that date there
were outstanding and entitled to vote 12,000 shares of Bank stock.
Each outstanding share of Bank stock entitles the record holder to one vote
on all matters to be acted upon at the meeting. The presence at the meeting in
person or by proxy of the holders of a majority of the issued and outstanding
shares of Bank stock entitled to vote will constitute a quorum for the
transaction of business. The affirmative vote of 8,000 of the issued and
outstanding shares of Bank stock is required to approve the holding company. The
Bank's articles of association and by-laws do not address the issue of whether a
vote for abstention is treated as a "yes" vote or "no" vote. Accordingly, for
purposes of voting at this special meeting of shareholders, abstentions are
treated as "no" votes.
THE BOARD OF DIRECTORS OF THE BANK UNANIMOUSLY RECOMMENDS THAT HOLDERS OF
BANK STOCK VOTE "FOR" THE TRANSACTION. See "THE SECURITY NATIONAL BANK--
Recommendations of the Bank's Board of Directors." As of the date of this
Prospectus, the directors and executive officers of Bank owned or controlled
1,902 shares, or 15.9% percent, of the Bank stock outstanding. See "THE SECURITY
NATIONAL BANK--Management." The directors and officers of Bank have indicated
that they will vote to approve the transaction, and are soliciting proxies from
Bank shareholders.
Each shareholder is encouraged to return the enclosed Proxy (on blue
paper), even if he or she intends to attend the meeting. All properly executed
proxies not revoked will be voted at the meeting in accordance with the
instructions on the proxy. Proxies containing no instructions will be voted
"FOR" approval of the holding company. On any other matters properly brought
before the meeting and submitted to a vote, all proxies will be voted in
accordance with the judgment of the persons voting the proxies. Any shareholder
executing and returning a proxy may revoke it by:
o submitting a later proxy to Bank,
o giving written notice to Bank, or
o attending the meeting and voting in person.
However, the mere presence of a holder of Bank stock at the meeting will
not operate to revoke a proxy previously executed and submitted, unless that
shareholder indicates at the meeting that he or she wishes to vote directly.
Failure to submit a proxy or to vote at the meeting has the same effect as a
negative vote for purposes of approving or disapproving the transaction.
Federal law provides appraisal rights to holders of Bank stock who dissent
from the merger, if statutory procedures are followed. See "RIGHTS OF DISSENTING
SHAREHOLDERS OF BANK."
Operation of the Bank Following the Reorganization
- --------------------------------------------------
The Holding Company anticipates that, following the reorganization, the
business of the Bank will be conducted substantially unchanged from the manner
in which it is now being conducted.
o The Bank's name will not be changed.
o The Holding Company anticipates that the Bank will be operated under
the same management, and no changes in personnel are anticipated as a
result of the reorganization.
5
<PAGE>
o After the reorganization, the Bank will continue to be subject to
regulation and supervision by regulatory authorities, to the same
extent as currently applicable. See "SUPERVISION AND REGULATION."
o The Bank will continue to prepare an annual report in the same format
as in prior years, and the Holding Company will send to all of its
shareholders a consolidated annual report, in a similar format as that
used in the Bank's report.
o The Holding Company will convene an annual meeting of its
shareholders, at a similar time and for similar purposes as the Bank's
annual meeting.
Conditions Precedent to the Reorganization
- ------------------------------------------
The Agreement and Plan of Reorganization (Exhibit A) provides that the
consummation of the reorganization is subject to certain conditions that have
not yet been met, including, but not limited to, the following:
1. No investigation, action, suit or proceeding before any court or any
governmental or regulatory authority will have been commenced or
threatened seeking to restrain, prevent or change the reorganization
or otherwise arising out of or concerning the reorganization.
2. The application by the Holding Company to be a registered bank holding
company under the Bank Holding Company Act of 1956 ("Act") must have
been approved by the Federal Reserve Board.
3. The Comptroller of the Currency must have granted all required
approvals for consummation of the reorganization.
4. The reorganization must have been approved by shareholders owning at
least two-thirds of the outstanding Bank stock.
5. The Holding Company and the Bank must have received an opinion from
counsel for the Holding Company and the Bank to the effect that the
reorganization will be a tax-free reorganization (that opinion is
attached to this Prospectus as Exhibit B).
6. No change will have occurred or be threatened in the business,
financial condition or operations of the Bank, which, in the judgment
of the Holding Company, is materially adverse.
7. No more than ten percent (10%) of the Bank stock (1,200 shares or
fewer) will be "dissenting shares" pursuant to the exercise of
dissenters' rights. If more than 10% of the shares are dissenting
shares, the Board of Directors of the Holding Company and the Bank
may, in their discretion, waive this condition.
8. The reorganization must be completed by December 31, 1999, unless
extended by the both the Bank and the Holding Company.
These conditions are for the sole benefit of the Holding Company and the
Bank, and may be asserted by them or may be waived or extended by them, in whole
or in part, at any time or from time to time. Any determination by the Holding
Company and the Bank concerning the events described above will be final and
binding.
It is anticipated that these conditions will be met. Any waiver or
extension of conditions not met will be conducted only if, in the opinion of the
Boards of Directors of the Holding Company and the Bank, the action would not
have a material adverse effect on the benefits intended for holders of the
Holding Company stock under the reorganization. The reorganization may be
terminated and abandoned by the mutual consent of the Board of Directors of the
Holding Company and the Board of Directors of the Bank at any time prior to the
closing date.
6
<PAGE>
Closing Date
- ------------
The closing of the reorganization will take place on a date, the "Closing
Date," to be selected by the Holding Company, at the offices of the Bank, 212
West Prospect Street, Durand, Wisconsin. However, the Closing Date will be no
later than December 31, 1999, unless extended by the Board of Directors of the
Bank and the Bank of Directors of the Holding Company. It is the parties'
expectation to close on December 3, 1999.
On the Closing Date, all of the Bank shareholders' right, title and
interest in and to the shares of the Bank stock, without any action on the part
of the shareholders, will automatically become and be converted into a right
only to receive the Holding Company stock. Commencing on the Closing Date, the
Holding Company will issue and deliver the Holding Company stock to the
shareholders as set forth in the Agreement and Plan of Reorganization (Exhibit
A).
Resales of Holding Company Stock
- --------------------------------
The Holding Company stock issued in the reorganization has been registered
under the Securities Act of 1933, as amended ("Securities Act"), and may be
traded by a shareholder subject to the Holding Company's right of first refusal
and consent. See "COMPARISON OF BANK STOCK WITH HOLDING COMPANY STOCK--Market
for the Stock."
Under the federal securities laws, there are certain restrictions on
resales of Holding Company stock received in the reorganization by persons who
are deemed to be an "affiliate" of the Bank. In general, an affiliate for these
purposes would include directors and executive officers and any person who,
individually or through a group, controls ten percent (10%) or more of the
voting securities of the Bank.
Certificates for shares of Holding Company stock received by an affiliate
in the reorganization will carry a legend referring to the resale restrictions.
Specifically, that legend will state:
THE SECURITIES EVIDENCED BY THIS CERTIFICATE MAY BE OFFERED AND
SOLD ONLY IF REGISTERED PURSUANT TO THE PROVISIONS OF THE
SECURITIES ACT OF 1933, AS AMENDED, OR IF AN EXEMPTION FROM
REGISTRATION IS AVAILABLE.
The Holding Company will issue stop-transfer instructions to the Holding
Company transfer agent with respect to such certificates. Neither the Bank nor
the Holding Company will register the shares of Holding Company stock for
resale, and any such registration will be at the expense and instance of any
shareholder desiring such registration.
This Prospectus may not be used by an affiliate of the Bank or the Holding
Company for the resale of Holding Company stock received pursuant to the
reorganization.
Tax Considerations
- ------------------
Corporate Income Tax. After the reorganization, the Holding Company will
own at least 80% of the outstanding stock of the Bank. This will permit the
Holding Company to file a consolidated federal income tax return with the Bank,
with the following results:
1. Any interest expense incurred by the Holding Company as an expense may
be deducted against the income of the Bank.
7
<PAGE>
2. Any dividend paid to the Holding Company by the Bank on the shares of
the Bank's capital stock held by the Holding Company would not be
taxable as income to the Holding Company.
3. The ability to file a consolidated federal income tax return may
increase the cash flow available to the Holding Company to meet its
obligations.
The State of Wisconsin does not permit consolidated income tax returns.
The creation of the Holding Company creates a separate taxpayer under the
Internal Revenue Code. The Holding Company, through its consolidated tax return
with the Bank and any other subsidiaries that may be formed or acquired in the
future, will be required to pay federal and state income taxes on its net
income.
Immediately after the formation of the Holding Company, the principal
income to the Holding Company will be dividends from the Bank. Those dividends
will not be taxable income to the Holding Company as long as the Holding Company
holds at least 80% of the outstanding Bank stock. Therefore, until such time as
the Holding Company generates substantial income from sources other than Bank
dividends, it is not anticipated that it will incur any significant tax
liability.
As a separate taxpayer, the Holding Company may incur a separate tax on any
liquidation of the Holding Company or on an acquisition of the Holding Company's
assets by a third party. Therefore, a liquidation of the Holding Company or a
sale of Bank stock by the Holding Company could generate a double-level tax, a
tax on the Holding Company and a tax on the Holding Company shareholders. A
double-level tax can be avoided, however, if the third party acquires the
Holding Company stock for cash or acquires Holding Company stock or Bank stock
in a tax-free reorganization.
Individual Income Tax. The Holding Company has been advised by its counsel,
Boardman, Suhr, Curry & Field LLP, Madison, Wisconsin, that as a result of the
transaction contemplated by the reorganization, for federal income tax purposes:
1. No gain or loss will be recognized to the Bank shareholders on the
conversion of their shares of Bank stock into shares of Holding
Company's common stock;
2. The income tax basis of the shares of Holding Company's common stock
in the hands of the Bank shareholders will be the same as their basis
in the shares of the Bank stock; and
3. The holding period of the shares of Holding Company's common stock in
the hands of the Bank shareholders will include the holding period of
the shares of the Bank stock, provided the shares of the Bank stock
constituted a capital asset as of the time of the reorganization.
A copy of that opinion is attached hereto as Exhibit B (which opinion also
includes matters pertaining to corporate tax consequences of the
reorganization). Counsel is also of the opinion that the same treatment will
apply for Wisconsin income tax purposes.
No tax rulings from the Internal Revenue Service have been obtained, and
the opinion of counsel will not be binding on the Internal Revenue Service.
Therefore, shareholders may find it advisable to consult their own counsel as to
the specific tax consequences to them under the federal tax laws, as well as any
consequences under applicable state or local tax laws.
Shareholders who exercise dissenters' rights and receive cash for their
Bank stock should be aware that the transaction will be a taxable transaction
for federal and state income tax purposes, and those shareholders are urged to
consult their tax advisors to determine the tax consequences to them under the
federal tax laws, as well as any consequence under applicable state or local tax
laws. The opinion of counsel attached as Exhibit B does not pertain to cash
payments received pursuant to the reorganization.
8
<PAGE>
Securities Regulation
- ---------------------
The offer to enter into this reorganization is not being made to (nor can
it be accepted from or on behalf of) holders of Bank stock in any jurisdiction
in which the making of the offer or the acceptance thereof would not be in
compliance with the securities laws of such jurisdiction. The Holding Company is
not, and will not be, obligated to acquire any shares of Bank stock, or issue or
deliver any shares of its common stock, in any jurisdiction in which the
agreement to do so would not be in compliance with the securities laws of such
jurisdiction. However, the Holding Company, at its discretion, may take such
action as it may deem necessary or desirable to comply with the securities laws
of any such jurisdiction.
This transaction may be registered in certain states, according to the laws
of those states. No securities commissioner, securities department, or similar
office of any state has approved or disapproved the Holding Company stock to be
issued in the reorganization or has passed upon the accuracy or adequacy of this
Prospectus. Any representation to the contrary may be a criminal offense.
Expenses of Reorganization
- --------------------------
If the reorganization is consummated, the Holding Company and the Bank will
assume and pay their respective costs and expenses, if any, incurred in
connection with the reorganization. If the reorganization is not consummated,
all costs and expenses will be paid by the Bank. It is estimated that those
costs and expenses will be approximately $30,000.
RIGHTS OF DISSENTING SHAREHOLDERS OF THE BANK
=============================================
Subsections 215a(b), (c), and (d) of the United States Code, the full text
of which is attached hereto as Exhibit C, set forth the procedure to be followed
by any shareholder of Bank who wishes to dissent from the reorganization and
obtain the value of his or her shares of Bank stock in cash in lieu of Holding
Company stock pursuant to the reorganization. Shareholders should refer to
Exhibit C because the following description does not purport to be a complete
summary of those subsections.
In order to exercise such dissenter's rights, a Bank share holder:
1. must either vote against the reorganization at the special meeting of
shareholders or give written notice to an officer of the Bank at or
before the special meeting of shareholders that he or she dissents
from the reorganization, and
2. must make a written request to the Bank within 30 days after the
consummation of the reorganization to receive the value of his or her
shares, and that written request must be accompanied by the surrender
of his or her Bank stock certificates.
The written request should be addressed to: Gerald V. Weiner, President,
The Security National Bank, 212 West Prospect Street, Durand, Wisconsin
54736-1123. The law does not provide for a dissent with respect to less than all
of a dissenting shareholder's shares.
After receipt by the Bank of a timely request for payment, the law provides
for an appraisal of the shares held by the dissenters. The value of those shares
is to be determined by a committee of three persons, one selected by the
dissenting shareholders, one selected by the directors of the Bank, and the
third selected by the two so chosen. The value determined by any two of the
three appraisers will govern. The expense of appraisal is to be borne by the
Bank. If the value fixed by the committee is not satisfactory to a dissenting
shareholder he or she may, within five days after being notified of such value,
appeal to the Comptroller, who will then appoint an appraiser or appraisers for
reappraisal. The value of a dissenting Bank shareholder's shares as determined
by such appraisal, or reappraisal if such is performed, is final and binding and
will be paid by Bank as soon as practicable thereafter.
9
<PAGE>
If a Bank shareholder properly exercises dissenter's rights, then as of the
Effective Date of the reorganization, all of the Bank stock owned by such
shareholder will cease to represent any ownership rights in the Bank, and will
be converted into the right to receive fair value for those shares, as required
by law.
SECURITY FINANCIAL SERVICES CORPORATION
=======================================
History, Business, and Properties
- ---------------------------------
The Holding Company was incorporated as a Wisconsin business corporation
under the Wisconsin Business Corporation Law, Chapter 180 of the Wisconsin
Statutes, in June, 1999, at the direction of the management of the Bank. The
Holding Company was formed to acquire the Bank stock and to engage in business
as a bank holding company under the Act. A true and correct copy of the Articles
of Incorporation of the Holding Company is attached as Exhibit D. A copy of the
Holding Company's Bylaws will be provided to any Bank shareholder upon request.
The Holding Company is in the organizational and develop mental stage, and
has no earnings or history of operation. The Holding Company has no employees,
no current business, and owns no property, except that the Holding Company will
own all of the stock of the New Bank immediately prior to the reorganization. It
has not issued any stock. It is not a party to any legal proceedings.
The Holding Company has no present plans to engage in any activities other
than as a holding company for the capital stock of the Bank, except that the
Holding Company may hold real estate presently owned by the Bank. That property
will be leased back to the Bank. The Holding Company's management, however,
believes that the opportunities available to a bank holding company for
diversification of its business and raising of capital cause the bank holding
company to be a more advantageous form of operation than a bank. The Holding
Company may examine and may pursue opportunities from time to time that arise
for expansion of its operations and activities. See "THE REORGANIZATION--Reasons
for the Reorganization."
Management
- ----------
The name, age and position of each of the Directors and executive officers
of the Holding Company are as follows:
Name Age Position
- ---- --- --------
Richard E. Bates............................ 49 Director
Jerry M. Bauer.............................. 47 Director
Robert Davidian............................. 44 Director
Carole Komro................................ 58 Director
Gerald L. Levenske.......................... 55 Director
T.L. Schiefelbein........................... 67 Director/Chairman
Gerald Sundstrom............................ 58 Director
Gerald V. Weiner............................ 56 Director/President, CEO
James F. Mayo............................... 47 Secretary/Treasurer
10
<PAGE>
A description of the business background of each of the directors and named
executive officers is set forth on pages 15-17. Each of the directors and
executive officers named has had the same principal occupation or employment for
the past five years. Each of the directors and executive officers named has
served in the capacity listed above since the incorporation of the Holding
Company in June, 1999. The directors and executive officers named will initially
serve until the Holding Company's first annual shareholder meeting.
Principal Shareholders
- ----------------------
After the reorganization, the persons beneficially owning 5% or more of
Holding Company common stock will be the same persons who currently own 5% or
more of the Bank stock. The directors and executive officers of the Holding
Company will beneficially own the same amount of stock of the Holding Company as
they presently own of the Bank. See "THE SECURITY NATIONAL BANK--Principal
Shareholders."
Description of Holding Company's Common Stock
- ---------------------------------------------
The Holding Company's authorized capital stock consists of 24,000 shares,
all of one class, designated as common stock, none of which shares, as of the
date hereof, is issued or outstanding. The maximum number of shares of the
Holding Company's common stock which will be issued to the holders of Bank
stock, upon the terms and subject to the conditions of the reorganization, is
12,000 shares.
The Holding Company currently has no plans to sell, distribute, or
otherwise issue the remaining 12,000 shares of authorized but unissued stock.
The excess 12,000 shares have been authorized at this time to provide the
Holding Company with greater flexibility to expand or diversify its business in
the future. The Holding Company's Articles of Incorporation provide that
authorized but unissued stock of the Holding Company may not be sold or issued
by the Holding Company except on a majority vote of the entire Board of
Directors. However, this requirement does not apply to any shares repurchased by
the Holding Company from existing shareholders, which are called "treasury
shares."
The shareholders of the Holding Company will be granted preemptive rights
under Wisconsin law to acquire additional shares of Holding Company common stock
that may be issued in the future. The exercise of preemptive rights will allow a
shareholder to maintain his or her proportionate ownership interest in the
Holding Company. When new common stock is to be issued, a shareholder having
preemptive rights may purchase his or her pro rata share of the offering before
any shares are offered to others. For example, a shareholder who owns 240 shares
of the total 12,000 shares of Holding Company stock that will be outstanding
after the Reorganization owns 2% of the Holding Company's stock. If the Holding
Company should offer additional common stock for sale in the future, such a
shareholder will be entitled to purchase 2% of the amount of common stock being
offered. Any fractional shares produced by the application of preemptive rights
will be rounded up to the next whole share.
There are circumstances under which preemptive rights are not applicable.
Under Wisconsin law, a shareholder of the Holding Company will not have
preemptive rights with respect to the shares enumerated below. However, except
for treasury shares, the Board does not presently intend to issue any shares
where preemptive rights are not applicable.
1. Shares issued as compensation to directors, officers or employees of
the Holding Company or its affiliates. No such shares are anticipated
at this time.
2. Shares issued to satisfy conversion or option rights created to
provide compensation to directors, officers or employees of the
Holding Company or its affiliates. No such shares are anticipated at
this time.
3. Shares authorized in the Holding Company's Articles of Incorporation
that are issued within six months of the effective date of
incorporation. The Holding Company's Board of Directors has no
intention of issuing additional shares of stock within six months of
the effective dated of incorporation.
11
<PAGE>
4. Shares sold for other than money or an obligation to pay money. No
such shares are anticipated at this time.
5. Treasury shares. These are shares of Holding Company stock that were
issued to shareholders but have been subsequently repurchased by the
Holding Company. The Holding Company has no treasury shares at this
time. However, the Board of Directors of the Holding Company generally
intends to purchase Holding Company stock from shareholders as and
when it becomes available from time to time for fair value as
determined by the Board, and any such shares held by the Holding
Company will become treasury shares. This intention is not a
commitment or offer to purchase Holding Company stock.
For more information about the Holding Company's common stock, see
"COMPARISON OF BANK STOCK WITH HOLDING COMPANY STOCK."
Executive Compensation
- ----------------------
Since its incorporation, the Holding Company has not paid any remuneration
to any of its directors or executive officers, to date has not proposed
remuneration to be made in the future to any of its directors or executive
officers, and to date has not established standards or other arrangements by
which its directors are compensated for services as directors, including any
additional amounts payable for committee participation or special assignments.
No profit-sharing plan or any other benefit plan exists or is contemplated for
the Holding Company. No change in the compensation or benefits to the Bank
employees is contemplated by reason of the Holding Company formation.
Transactions with Related Parties
- ---------------------------------
The Holding Company has not engaged in any transactions or entered into any
contracts with any of its directors or officers. No such transactions or
contracts are anticipated at this time by the Holding Company.
Certain Anti-takeover and Indemnification Provisions
- ----------------------------------------------------
Anti-Takeover Provisions: The Holding Company's Articles contain certain
provisions that may have an effect of delaying, deferring or preventing a change
in control of the Company.
o Right of First Refusal. The Holding Company's Articles of
Incorporation give the Holding Company a right of first refusal to
purchase shares of its stock at a price and on the terms and
conditions offered to a shareholder by a prospective purchaser.
Transactions with a shareholder's spouse or children (including
stepchildren), or any lineal descendant thereof, with his or her
parent(s), or with his or her sibling(s), and stock pledges are
permitted (although the stock so transferred or pledged remains
subject to the right of first refusal). The right of first refusal may
limit a shareholder's ability to sell shares to purchasers other than
the Holding Company. In addition, the right of first refusal may
reduce the likelihood of another buyer obtaining control of the
Holding Company through the acquisition of large blocks of Holding
Company stock. Neither the Bank's Articles of Incorporation nor its
Bylaws contain a comparable provision. See "COMPARISON OF BANK STOCK
WITH HOLDING COMPANY STOCK--Market for the Stock."
o Staggered Director Terms. The Holding Company's Articles provide that
the Board of Directors shall consist of three classes of directors,
each serving for a three-year term ending in a successive year. This
provision may make it more difficult to effect a takeover of the
Holding Company because an acquiring party would generally need two
annual meetings of shareholders to elect a majority of the Board of
Directors.
12
<PAGE>
o Supermajority Vote Required to Amend Anti-Takeover Provisions. The
Holding Company's Articles provide that these anti-takeover provisions
may be amended only by the affirmative vote of not less than 75% of
the outstanding shares of voting stock of the Holding Company.
Indemnification Provisions. As set forth in Sections 180.0850 through
180.0859 of the Wisconsin Statutes, the Bylaws of the Holding Company require
that the Holding Company indemnify a director or officer from all reasonable
expenses and liabilities asserted against, incurred by, or imposed on that
person in any proceeding to which he or she is made or threatened to be made a
party by reason of being or having been an officer or director of the Holding
Company. Indemnification will not be made if the person breached a duty to the
Holding Company in one of the following ways: (a) a wilful failure to deal
fairly with the Holding Company in a matter in which the director or officer has
a material conflict of interest; (b) a violation of criminal law, unless the
person had reasonable cause to believe his or her conduct was lawful or had no
reasonable cause to believe his or her conduct was unlawful; (c) a transaction
from which the person derived improper personal profit; or (d) wilful
misconduct. The right to indemnification includes, in some circumstances, the
right to receive reimbursement of costs and expenses in such a proceeding as
they are incurred.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933, as amended, may be available to directors, officers, and controlling
persons of the Holding Company pursuant to the foregoing provisions of its
Bylaws, or otherwise, the Holding Company has been advised that in the opinion
of the Securities and Exchange Commission such indemnification is against public
policy as expressed in the Act.
The Holding Company may purchase insurance against liabilities asserted
against its directors, officers, employees, or agents whether or not it has the
power to indemnify them against such liabilities under the provisions of its
bylaws or pursuant to applicable law. Indemnification insurance for directors,
officers, employees, and agents of the Holding Company has not been purchased
either by such persons or by the Holding Company, but the Holding Company
intends to purchase such indemnification insurance once the reorganization
occurs.
THE SECURITY NATIONAL BANK
==========================
History, Business, and Properties
- ---------------------------------
The Bank was chartered by the Comptroller of the Currency in 1934. The Bank
offers comprehensive banking services to the residential, commercial,
industrial, and agricultural areas that it serves. Services include
agricultural, commercial, real estate and personal loans; checking, savings, and
time deposits; and other customer services, such as safe deposit facilities. The
Bank's loan portfolio, as of December 31, 1998, consisted of approximately 12%
consumer loans, 13% commercial loans, 22% agricultural loans, and 53% real
estate loans.
The general banking business in the State of Wisconsin is characterized by
a high degree of competition. The principal methods of competition among
commercial banks are price, including interest rates paid on deposits, interest
rates charged on borrowings, and fees charged, and service, including
convenience and quality of service rendered to customers. In addition to
competition among commercial banks, banks face significant competition from
non-banking financial institutions, including savings and loan associations,
credit unions, small loan companies, and insurance companies.
There is one other bank, a federal/stock savings bank, with an office
located in Durand. The Bank's competition comes from this institution and others
located near Durand. Insurance companies, mortgage bankers, and brokerage firms
provide additional competition for certain banking services. The Bank also
competes for interest bearing funds with issuers of commercial paper and other
securities, including the United States Government.
13
<PAGE>
There are no pending or threatened legal proceedings known to the Bank
that, in the opinion of the directors and officers of the Bank, may be
materially adverse to the Bank's financial condition, business, or operations.
There are no material pending or threatened legal proceedings known to the Bank
in which any director, executive officer, or affiliate of the Bank (or any
associate of any of them) has a material interest that is adverse to the Bank.
The Bank's main banking office is located at 212 W. Prospect Street,
Durand, Wisconsin 54736-1123, in a facility owned by the Bank and built in 1969.
On April 30, 1999, the Bank's staff included 10 officers and 15 full-time and 3
part-time employees. There are approximately 205 shareholders of the Bank.
Year 2000 Compliance
- --------------------
A critical issue has emerged for the economy overall regarding how existing
application software programs and operating systems can accommodate the date
value for the year 2000. Many existing application software products in the
marketplace were designed only to accommodate a two-digit date position which
represents the year (e.g., "98" is stored on the system and represents the year
1998). As a result, the year 1999 (i.e., "99") could be the maximum date value
these systems will be able to accurately process. The same issue has emerged for
non-information technology systems. These systems typically include embedded
technology such as micro-controllers which must be either repaired or, if this
is not possible, replaced.
Bank management is fully aware of the Year 2000 issue for both information
technology and non-information technology systems and has created a written plan
for the correction of, or contingency plan for, the Year 2000 problem (the
"Plan"). The Board of Directors oversees the Bank's Year 2000 efforts and
directed the senior management to report to the board at least quarterly on the
progress of the Year 2000 Plan. The Plan is divided into five phases as follows:
a. Awareness Phase. All Bank customers have received brochures explaining
the Y2K issue and the potential problems that could result. It clearly details
the process the Bank is taking to ensure that is prepared for the Year 2000 date
change. In addition, the Bank has contacted many of its largest loan and deposit
customers to evaluate their preparations and to assess any additional risk that
may be associated. The Bank believes that the awareness phase is 90 percent
complete.
b. Assessment Phase. The Year 2000 committee has inventoried all equipment
within the Bank and all items by criticality (e.g. how critical the item is to
Bank operations), confidence (e.g. the compliance or non-compliance assessment
of the item), and control (e.g. how much influence the Bank has on the outside
vendor). Based on this risk assessment, the committee has developed a mission
critical list of items deemed necessary for bank operations. The committee has
contacted all outside vendors that provide software that the Bank uses and has
received their Year 2000 plans on their products. The Bank believes that the
assessment phase is 100 percent complete.
c. Renovation Phase. The Bank replaced its main computer system in August
of 1998 in anticipation of the date change. All other critical systems have been
tested and found to be compliant. We do not anticipate any other upgrades
necessary for either hardware or software. The Bank believes that the renovation
phase is 100 percent complete.
d. Validation Phase. The Bank's primary computer system and software was
tested in February of 1999. The proxy testing was conducted and the results
compiled by a nationally known CPA firm, McGladrey & Pullen. The testing was
done on behalf of all banks' using the systems and was designed to support the
requirements of the Federal Financial Institutions Examination Council. Bank
management has reviewed the test results, with no exceptions being found. The
Bank believes that the validation phase is 100 percent complete.
e. Implementation Phase. The Bank believes that the implementation phase is
100 percent complete, and that all of its mission control systems are Year 2000
ready.
14
<PAGE>
Security National Bank Year 2000 budget as follows:
To Date Projected Total
Hardware Replacement $40,000.00 -0- $40,000.00
Hardware Update $5,000.00 -0- $5,000.00
Software Replacement $230,000.00 -0- $230,000.00
Software Upgrade -0- -0- -0-
Education of Problem $10,000.00 $3,000.00 $13,000.00
ATM Upgrade -0- -0- -0-
Expensed/Implementation $26,000.00 $9,000.00 $35,000.00*
Remodeling/Construction -0- -0- -0-
TOTALS $311,000.00 $12,000.00 $323,000.00
*Estimated
Note: Hardware costs capitalized over a 5 year period.
Software costs capitalized over a 3 year period.
Education/ATM Upgrade/Implementation expended in 1998 and 1999.
Bank management does not believe that these expenditures will have a
material impact on the Bank's financial condition.
Bank management believes that the risks posed by the Year 2000 problem are
manageable and correctable. Outside vendors will be able to provide different
software products if the current products the Bank is using will not be Year
2000 compliant. However, the Bank has a contingency plan in place in the event
its computer systems are unable to adequately address the Year 2000 problem.
Management
- ----------
The name, age and position of each of the Directors and executive officers
of the Bank are as follows:
Name Age Position
- ---- --- --------
Richard E. Bates............................ 49 Director/Sr. Vice Pres.
Jerry M. Bauer.............................. 47 Director
Robert Davidian............................. 44 Director
Carole Komro................................ 58 Director
Gerald L. Levenske.......................... 55 Director
T.L. Schiefelbein........................... 67 Director/Chairman
Gerald Sundstrom............................ 58 Director
Gerald V. Weiner............................ 56 Director/President, CEO
Connie Binkowski............................ 61 Senior Vice President
James F. Mayo............................... 47 Vice President Finance/
Operations Cashier
The term of office for all directors is one year. The directors are elected
at the annual meeting of the shareholders of the Bank. All executive officers
are appointed to their respective positions for a one year period by the board
of directors at the annual meeting of the Bank.
15
<PAGE>
Business Background of Directors and Executive Officers
- -------------------------------------------------------
Richard E. Bates (Director/Senior Vice President): Mr. Bates has been
employed at Security National Bank since July, 1974. He is currently a member of
the Board of Director and Senior Vice President/Loans and Credit Administration.
He also serves as Secretary of the Board of Directors Loan Committee. Previous
to this he worked for Wisconsin Finance Corporation, Madison, Wisconsin. He is a
graduate of the University of Wisconsin-Eau Claire with a major in Business
Administration. Mr. Bates attended the University of Wisconsin Graduate School
of Banking and has attended numerous banking schools and seminars. He is active
in community affairs, currently serving as President of the Pepin County
Economic Development Corporation. He is active in the Durand Lions, Commercial
Club and served as a director of Chippewa Valley Hospital and Oakview Care
Center.
Jerry M. Bauer (Director): Jerry M. Bauer has served as a director since
1992. He currently serves as the Chairman of the Loan Committee, a member of the
Employee Relations and Compensation Committee, and as a director of Security
Durand Corporation, a wholly owned subsidiary of the bank. Mr. Bauer has been
President of Bauer Built, Incorporated since 1976. Bauer Built is a distribution
of new and retreaded tires and related products and services throughout the
Midwest, and a distributor of petroleum products in West Central Wisconsin. He
also was elected to serve on the Board of Directors of Marten Transport, LTD of
Mondovi, Wisconsin in January 1997. He is currently on their Compensation and
Audit Committee.
Connie Binkowski (Senior Vice President): Ms. Binkowski has been employed
at Security National Bank since May, 1956. She is currently Senior Vice
President/Retail Banking and Human Resources. She has had experience in many
areas of the bank, including teller, secretarial, deposit and loan functions,
general operations, and employee benefits and administration. Ms. Binkowski has
attended numerous banking seminars and workshops covering areas of bank
regulatory changes, new financial services and bank products. She has been
active in community activities and served as a Board Member of the Chippewa
Valley Technical College from 1986 to 1993.
Robert Davidian (Director): Mr. Davidian has served as a director since
1993. He currently serves as Chairman of the Employee Relations and Compensation
Committee, and as a member of the Audit and Compliance Committee. Mr. Davidian
graduated from the University of Wisconsin-River Falls with a Bachelor of
Science and Arts Degree in 1978, and from the University of Washington, Seattle
with a Master of Fine Arts in 1980. He is the Accounting Manager for Shandwick
International, a public relations organization with sixty-five offices
worldwide.
Carole Komro (Director): Ms. Komro has served as a director since 1993. She
currently serves on the Audit and Compliance Committee, and as Chair of the
Investment and Asset/Liability Committee. Ms. Komro is a life-long resident of
the Durand area and a graduate of Sacred Heart School, Lima. In 1960 she and her
husband, Jack, founded Komro Sales and Service, Inc., an agricultural automation
company where she is still employed. They also operated a dairy and cash crop
farm for 37 years. She has been active in community affairs, serving on the
Pepin County Diary Promotion Committee, the church choir and altar society, and
many other volunteer projects.
Gerald L. Levenske (Director): Mr. Levenske has served on the board since
1991. He currently serves on the Loan Committee, and the Investment and Asset
Liability Committee. Mr. Levenske is Executive Vice President and General
Manager of Nelson Telephone Cooperative, Inc. and its subsidiaries. Nelson
Telephone Cooperative, Inc. is a rural telephone cooperative headquartered in
Durand, Wisconsin. The primary purpose of the Cooperative is to provide
telecommunications services to its members. Levenske has served on numerous
national telephone industry committees and boards. He has been a resident of the
Durand area for 19 years.
16
<PAGE>
James F. Mayo (Vice President Finance/Operations, Cashier): Mr. Mayo has
been employed at Security National Bank since April, 1999. He is currently Vice
President/Finance/Operations and Cashier. He also serves as Secretary to the
Board of Directors, and the Audit and Compliance, and Investment and
Asset/Liability Committees of the board. Previous banking positions include
serving as Executive Vice President at American Bank, and various positions at
Norwest Bank and Community State Bank, all in Eau Claire. Mr. Mayo is a graduate
of the University of Wisconsin-Eau Claire with a degree in Business
Administration. He has attended numerous banking schools and seminars.
T.L. Schiefelbein (Director/Chairman): Mr. Schiefelbein has served as a
director since 1967 and was President and Chief Executive Officer of Security
National Bank from January 1971 to December 1998. He is currently Chairman of
the Board and serves on the Loan Committee, the Investment and Asset/Liability
Committee, and as a director of Security Durand Corporation, a wholly owned
subsidiary of the bank. He graduated from the University of St. Thomas with a
degree in Business and from the Graduate School of Banking at the University of
Wisconsin-Madison in 1967. He has served on a number of committees of the
American Bankers Association and the Wisconsin Bankers Association (WBA) and as
President of the WBA in 1988.
Gerald Sundstrom (Director): Mr. Sundstrom has served as a director since
1991. He currently serves on the Audit and Compliance Committee, the Employee
Relations and Compensation Committee, and as a director of Security Durand
Corporation, a wholly owned subsidiary of the bank. Mr. Sundstrom is a
practicing Certified Public Accountant (CPA). He graduated from the University
of Wisconsin-Eau Claire in 1964. Between 1964 and 1981 he held various
accounting positions in industry and the public accounting profession. He began
his own CPA practice in Durand, Wisconsin in 1981.
Gerald V. Weiner (Director/President, CEO): Mr. Weiner was elected to the
Board of Directors, President and Chief Executive Officer (CEO) in January,
1998. Previous positions include President and CEO of Badgerland FCS, Madison;
President and CEO of Norwest Bank-Eau Claire and Community State Bank in Eau
Claire; and various positions at banks in Mosinee and Wausau, Wisconsin. Mr.
Weiner has served as President of the Eau Claire Area Chamber of commerce and on
the Board of Directors of numerous economic development organizations. He has
also been active in many community and civic activities. Mr. Weiner is a Cum
Laude graduate of the University of Wisconsin-Eau Claire and received the UW-Eau
Claire Alumni Distinguished Service Award in August, 1993.
Executive Compensation
- ----------------------
The following tables outline the annual compensation and estimated annual
benefits payable upon retirement to the Bank's executive officers for services
rendered in their capacity as officers of the Bank. The compensation presented
in the tables represents the aggregate amount paid to all of the listed
executive officers for the year. Gerald V. Weiner had a total annual salary and
bonus which exceeded $100,000 during the last fiscal year.
17
<PAGE>
Summary Compensation Table(1)
<TABLE>
<CAPTION>
Name and Principal Position Year Salary($)(2) Bonus($) Other($)(3)
<S> <C> <C> <C> <C>
Gerald V. Weiner, President 1999(4) $342,869.00 $56,000.00 $23,263.20
Richard E. Bates, Sr. V.P.
Connie Binkowski, Sr. V.P.
Kevin Neuharth, V.P. Oper.
James Mayo, V.P Fin/Oper. Cashier
Gerald V. Weiner, President
Richard E. Bates, Sr. V.P.
Connie Binkowski, Sr. V.P. 1998 $325,500.00 $54,250.00 $27,097.44
Kevin Neuharth, Oper & Cashier
T.L. Schiefelbein, President 1997 $331,500.00 $55,250.00 $24,043.68
Richard E. Bates, Sr. V.P.
Connie Binkowski, Sr. V.P.
Kevin Neuharth, Oper & Cashier
T.L. Schiefelbein, President 1996 $307,800.00 $51,300.00 $23,343.36
Richard E. Bates, Sr. V.P.
Connie Binkowski, Sr. V.P.
Kevin Neuharth, Oper & Cashier
(1) The compensation provided in the table for a given year represents the total aggregate compensation paid to the listed
executive officers as a group for that year.
(2) "Salary" includes salary only.
(3) These amounts represent health insurance premiums paid by the Bank.
(4) Projected total.
</TABLE>
Director Compensation
- ---------------------
Directors are paid $8,400 per year. Certain adjustments may be made for
missed meetings and additional committee meetings attended. Richard E. Bates and
Gerald V. Weiner, as inside directors, are not paid directors fees.
Board Review of Management Compensation
- ---------------------------------------
The entire board of directors reviews and determines the compensation for
the officers of the Bank. The executive officers that are members of the board
of directors and thus participate in the decisions concerning compensation are
Gerald V. Weiner and Richard E. Bates.
Principal Shareholders
- ----------------------
The following table sets forth certain information regarding the beneficial
ownership of the Bank's common stock as of April 2, 1999, by (i) each person who
is known to the Bank to own beneficially more than five (5%) of the Bank's
outstanding stock; (ii) each of the Bank's Directors; (iii) each of the Bank's
executive officers; and (iv) all Directors and executive officers of the Bank as
a group. "Beneficial Ownership" is defined below.
18
<PAGE>
Number of Shares Percentage of Shares
Name(1) Beneficially Owned(2) Beneficially Owned
- ------- --------------------- ---------------------
Richard E. Bates.............. 70 *
Jerry M. Bauer................ 559 4.7%
Robert Davidian............... 156 1.3%
Carole Komro.................. 133 1.1%
Gerald L. Levenske............ 10 *
T.L. Schiefelbein............. 850 7.1%
Gerald Sundstrom.............. 32 *
Gerald V. Weiner.............. 20 *
James F. Mayo ................ --- ---
Connie Binkowski.............. 72 *
Directors and executive
officers as a group........... 1,902 15.9%
* Less than one percent (1%).
(1) The address of each Director and executive officer is 212 W. Prospect
Street, Durand, WI 54736-1123.
(2) Based on the number of shares outstanding at April 2, 1999.
"Beneficial ownership" is determined in accordance with Securities and
Exchange Commission ("SEC") Rule 13d-3, which generally provides that an
individual is considered to beneficially own any stock held by his or her
spouse, children or relatives who share the same home as the individual, and
stock over which the individual exercises voting or investment control (as
trustee of a trust or a president of a corporation, for example).
Description of the Stock of the Bank
- ------------------------------------
As of the date hereof, the Bank is authorized to issue 12,000 shares of
common stock, all of one class, of which 12,000 shares are issued and
outstanding. The Bank has approximately 205 shareholders of record. For further
information about the stock, see "COMPARISON OF BANK STOCK WITH HOLDING COMPANY
STOCK."
Transactions with Related Parties
- ---------------------------------
The Bank has had in the ordinary course of business, and will continue to
have in the future, banking transactions such as personal and business loans
with its directors and officers. Such loans are now and will continue to be on
the same terms, including collateral and interest rate, as those prevailing at
the same time for comparable transactions with others of similar credit standing
and do not and will not in the future involve more than normal risks of
collectibility or present other unfavorable features.
At no time during 1996, 1997, 1998, and 1999 did or has the maximum
aggregate direct and indirect extensions of credit to such persons and to such
businesses in which such persons are interested, as a group, exceed ten percent
(10%) of the Bank's capital. From time to time, the Bank has entered into
nonbanking business transactions with entities with which some of its directors
are affiliated. Those transactions have been at arm's length and have been at
competitive prices.
Indemnification of Directors and Officers
- -----------------------------------------
Wisconsin law governing indemnification of the Bank's directors, officers,
and employees is substantially similar to the law governing indemnification of
the Holding Company's directors, officers, and employees. For a brief discussion
of that law, see "SECURITY FINANCIAL SERVICES CORPORATION--Certain Anti-Takeover
and Indemnification Provisions."
19
<PAGE>
Insofar as indemnification for liabilities arising under the Securities Act
of 1933, as amended, may be permitted to directors, officers, and controlling
persons of the Bank pursuant to the foregoing provisions, or otherwise, the Bank
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act.
The Bank's Articles of Association provide that directors and officers will
be indemnified to the fullest extent permitted by law for all reasonable
expenses and against all liability asserted against, incurred by or imposed on
him or her in connection with any action, suit or proceeding, based on his or
her actions as a director or officer (or, while a director or officer, by his or
her service at the Bank's request as a director, officers, partner, trustee,
member of any governing or decision-making committee, employee or agent of
another corporation or foreign corporation, partnership, joint venture, trust or
other enterprise, including service to an employee benefit plan). If the
director or officer is not successful on the merits, he or she will not be
indemnified:
(a) For a breach or failure to perform a duty to the Association if the
breach or failure to perform constitutes (1) a willful failure to deal fairly
with the Association or its stockholders in connection with the matter in which
the director or officer has a material conflict of interest, (2) a violation of
criminal law, unless the director or officer had reasonable cause to believe his
or her conduct was lawful or no reasonable cause to believe his or her conduct
was unlawful, (3) a transaction from which the director or officer derived an
improper personal benefit, or (4) willful misconduct; or
(b) Against expenses, penalties or other payments incurred in an
administrative proceeding instituted by an appropriate bank regulatory agency
which proceeding results in a final order assessing civil money penalties or
requiring affirmative action by the officer or director in the form of payments
to the Association.
Shares of the Stock Owned or Controlled by Management
- -----------------------------------------------------
As of the date hereof, the executive officers and directors of the Bank own
or control, directly or indirectly, 1,902 shares of the stock, or 15.9% of the
total Bank stock outstanding. To the knowledge of the Holding Company no person
above named has any material interest in the transaction proposed by the
reorganization, direct or indirect, other than in their status as shareholders.
Recommendation of the Bank's Board of Directors
- -----------------------------------------------
The Board of Directors of the Bank recommends that all shareholders vote to
approve the reorganization. The decision of the Board of Directors of the Bank
to recommend the reorganization to the shareholders is based on their belief
that the Bank's affiliation with the Holding Company is in the best interest of
the Bank and its shareholders.
Such belief is based on a number of factors, including recent and
historical transactions in the Bank's capital stock, the Board of Directors'
knowledge of the business, operations, properties, assets, earnings and
prospects of the Bank, and the advantages provided by a holding company
corporate organizational structure. The Board of Directors of the Bank did not
attach a relative weight to the factors it considered in reaching its decision,
but considering all factors made the determination to recommend the
reorganization to the shareholders. See "THE REORGANIZATION--Reasons for the
Reorganization."
FINANCIAL INFORMATION
=====================
Financial statements, prepared in accordance with generally accepted
accounting principles and dated December 31, 1998 and June 30, 1999, accompany
this Prospectus.
20
<PAGE>
COMPARISON OF BANK STOCK
WITH HOLDING COMPANY STOCK
==========================
Authorized Shares and Par Value
- -------------------------------
The Bank is authorized to issue 12,000 shares of capital stock, all of one
class, designated as common stock, of which 12,000 shares are issued and
outstanding. The Holding Company is authorized to issue 24,000 shares of capital
stock, all of one class, $100.00 par value, designated as common stock. No
Holding Company stock has been issued. Either the Bank or the Holding Company
could increase the amount of authorized stock at any time by an amendment to its
Articles of Incorporation approved by its shareholders.
The Holding Company will issue 12,000 shares in the reorganization. The
Holding Company has no specific plans at this time regarding the sale or
distribution of any of its 12,000 additional authorized but unissued shares. The
excess 12,000 shares have been authorized at this time to provide the Holding
Company with greater flexibility to expand or diversify its business in the
future. The Holding Company's Articles of Incorporation provide that authorized
but unissued stock of the Holding Company may not be sold or issued by the
Holding Company except on a majority vote of the entire Board of Directors.
However, this requirement does not apply to any shares repurchased by the
Holding Company from existing shareholders, which are known as "treasury
shares."
The shareholders of the Holding Company will be granted preemptive rights
under Wisconsin law to acquire additional shares of Holding Company common stock
that may be issued in the future.. The exercise of preemptive rights will allow
a shareholder to maintain his or her proportionate ownership interest in the
Holding Company. When new common stock is to be issued, a shareholder having
preemptive rights may purchase his or her pro rata share of the offering before
any shares are offered to others. For example, a shareholder who owns 240 shares
of the total 12,000 shares of Holding Company stock that will be outstanding
after the Reorganization owns 2% of the Holding Company's stock. If the Holding
Company should offer additional common stock for sale in the future, such a
shareholder will be entitled to purchase 2% of the amount of common stock being
offered. Any fractional shares produced by the application of preemptive rights
will be rounded up to the next whole share.
There are circumstances under which preemptive rights are not applicable.
Under Wisconsin law, a shareholder of the Holding Company will not have
preemptive rights with respect to the shares enumerated below. However, except
for treasury shares, the Board does not presently intend to issue any shares
where preemptive rights are not applicable.
1. Shares issued as compensation to directors, officers or employees of
the Holding Company or its affiliates. No such shares are anticipated
at this time.
2. Shares issued to satisfy conversion or option rights created to
provide compensation to directors, officers or employees of the
Holding Company or its affiliates. No such shares are anticipated at
this time.
3. Shares authorized in the Holding Company's Articles of Incorporation
that are issued within six months of the effective date of
incorporation. The Holding Company's Board of Directors has no
intention of issuing additional shares of stock within six months of
the effective dated of incorporation.
4. Shares sold for other than money or an obligation to pay money. No
such shares are anticipated at this time.
5. Treasury shares. These are shares of Holding Company stock that were
issued to shareholders but have been subsequently repurchased by the
Holding Company. The Holding Company has no treasury shares at this
time. However, the Board of Directors of the Holding Company generally
intends to purchase Holding Company stock from shareholders as and
21
<PAGE>
when it becomes available from time to time for fair value as
determined by the Board, and any such shares held by the Holding
Company will become treasury shares. This intention is not a
commitment or offer to purchase Holding Company stock.
Voting Rights
- -------------
Each share of Bank stock has one vote on all matters presented to the
shareholders of the Bank. Each act by the shareholders of the Bank requires a
majority vote, except as otherwise provided in the Articles of Association,
Bylaws or by law. The Bank's Articles of Association require a two-thirds
majority in order to amend. The Bank's Bylaws require a majority vote in order
to amend the Bylaws. Bank shareholders are entitled to cumulative voting in the
election of directors.
Each share of the Holding Company stock has one vote on all matters
presented to the shareholders of the Holding Company. Each act by the
shareholders of the Holding Company requires a majority vote, except as
otherwise provided by the Articles of Incorporation or law. The Holding Company
Articles of Incorporation require a 75% affirmative vote of the shares
outstanding in order to amend, alter, or repeal the provisions of the Holding
Company's Article 5. The Holding Company will not have cumulative voting in the
election of directors.
There are some differences in the voting requirements imposed by the
federal banking laws which govern the Bank as compared to the Wisconsin general
corporate laws which govern the Holding Company. For example, under federal
banking law, a shareholder vote of two-thirds of the outstanding Bank stock is
required to approve a Bank merger. Under the Wisconsin Business Corporation Law,
however, a vote of the majority of the outstanding Holding Company stock can
approve a Holding Company merger. Additionally, under the Wisconsin Business
Corporation Law, a vote of the majority of the outstanding Holding Company stock
can amend the Holding Company's Articles, whereas under federal banking law, a
two-thirds vote of shareholders is required to amend the Bank's articles of
association.
All of the directors of the Bank are elected at each annual meeting.
Currently, the shareholders of the Bank elect the Bank's Board of Directors at
the Bank's annual meeting of shareholders held on the 3rd Tuesday in April of
each year or, if that date falls on a legal holiday in the state of Wisconsin,
the next banking day. Bank shareholders exercise direct control over the Bank's
affairs by election of the Bank's directors and by the right to vote on other
Bank matters from time to time. Bank directors may be removed by the affirmative
vote of a two-thirds majority of the outstanding shares entitled to vote for the
election of such director, taken at the Bank's annual meeting or at a special
meeting called for that purpose.
If the proposed reorganization is consummated, the shareholders who receive
Holding Company stock will elect the Holding Company Board of Directors. The
Board of Directors of the Holding Company will consist of between five and ten
directors, with the exact number of directors to be determined from time to time
by resolution adopted by a majority of the directors. The Board will initially
consist of eight members. The Board will be divided into three classes as nearly
equal in number as possible. Each year, the term of office of one class of
directors will expire. This means that of the initial directors, the term of one
class will expire at the first annual meeting of the Holding Company's
shareholders, the term of the second class will expire at the second annual
meeting, and the term of the third class will expire at the third annual
meeting. After the initial terms of one, two and three years, respectively, each
class of directors will serve a three-year term ending in a successive year. The
Holding Company's directors will be elected annually by the shareholders of the
Holding Company.
The officers of the Holding Company will be elected annually by the Holding
Company Board of Directors. The officers of the Holding Company will vote the
shares of Bank stock held by the Holding Company, and therefore will elect the
Bank Board of Directors, acting pursuant to the instructions of the Board of
Directors of the Holding Company.
22
<PAGE>
There is no requirement that the Boards of the Bank and of the Holding
Company be identical. Shareholders of the Holding Company will exercise direct
control over the Holding Company by election of the Holding Company directors
and by other voting rights, and therefore will exercise indirect control over
the Bank. The direct control of the Bank stock will be exercised by the Holding
Company Board of Directors, who are obligated to act in the best interests of
the Holding Company shareholders.
Dividends
- ---------
The Bank has paid cash dividends on its common stock each year since 1946,
and expects to continue to pay dividends in the future. Recent dividends have
been as follows:
Dividend
Year Paid Per Share
--------- ---------
1993 42
1994 50
1995 50
1996 55
1997 60
1998 75
1999 85
It is the intention of the Board of Directors of the Holding Company to pay
cash dividends on its common stock at least annually. Substantially all of the
Holding Company's assets will consist of its investment in the Bank. Immediately
after the reorganization, the availability of funds for dividends to be paid by
the Holding Company will depend primarily upon the receipt of dividends from the
Bank. Dividends of the Holding Company will also be dependent on future
earnings, the financial condition of the Holding Company and its subsidiaries,
and other factors.
Whether the dividends, if any, paid by the Holding Company in the future
will be equal to, less than, or more than the dividends paid by the Bank in the
past cannot be predicted. However, it is unlikely that dividends paid by the
Holding Company in the initial few years of operation would be significantly
larger than the dividends paid by the Bank in prior years, and such dividends
may not be as large. If the Holding Company incurs indebtedness, such as
expenses for the reorganization or a loan to purchase Holding Company stock,
Bank dividends received by the Holding Company will be applied toward that
indebtedness, at least in part, rather than be paid to Holding Company
shareholders as dividends from the Holding Company.
Under applicable national banking law, the Bank is restricted as to the
maximum amount of dividends it may pay on its common stock. A national bank may
not pay dividends except out of undivided profits. Additionally, a national bank
may not pay any dividend until an amount equal to at least 10% of net income for
the preceding two consecutive half years has been transferred to surplus. Such
transfers are required until the surplus fund equals 100% of the bank's common
capital. A bank's ability to pay dividends may also be restricted in the event
that losses in excess of undivided profits have been charged against surplus and
in certain other circumstances. Federal regulators have authority to prohibit a
bank from engaging in any action deemed by them to constitute an unsafe or
unsound practice, including the payment of dividends. In addition to the
foregoing, Wisconsin business corporations such as the Holding Company are
prohibited by Wisconsin law from paying dividends while they are insolvent or if
the payment of dividends would render them unable to pay debts as they come due
in the usual course of business.
Market for the Stock
- --------------------
In General: As of April 2, 1999, the Bank had 205 shareholders of record.
No established public trading market exists for the Bank stock. The stock is
infrequently traded, and the current market for the stock is limited. The Bank
is prohibited by law from holding or purchasing more than 10% of its own shares
except in limited circumstances.
23
<PAGE>
Similarly, there will be no established public trading market for Holding
Company stock. Unlike the Bank, however, the Holding Company will generally be
able to purchase its own shares. In some circumstances, a bank holding company
may not purchase its own shares without giving prior notice to the Federal
Reserve Board. Specifically, if the Holding Company desires to purchase as much
as 10% (in value) of its own stock in any 12-month period, it may be required in
some instances to obtain approval for so doing from the Federal Reserve Board.
Otherwise, the Holding Company is restricted by sound business judgment, its
prior commitments, and the consolidated financial condition of the Holding
Company and its subsidiaries. In no event may a Wisconsin corporation purchase
its own shares when the corporation is insolvent or when such a purchase would
make it insolvent.
Although the Holding Company may generally, in the Board's discretion,
purchase shares of its stock, it is not obligated to do so.
Consent of Holding Company Generally Required to Transfer Shares. Pursuant
to Article 5(b) of the Holding Company's Articles of Incorporation, a
shareholder cannot sell, assign or in any way dispose of or alienate his or her
shares without prior written consent of the Holding Company. Prior written
consent is not required for 1) a transfer between a shareholder and his or her
spouse or children, including stepchildren (or any lineal descent thereof), his
or her parents, and his or her sibling(s); and 2) any pledge or hypothecation of
stock. However, in both cases, the person who receives the transferred stock
will be bound by the restrictions on transfer contained in the Holding Company's
Article 5(b).
If a shareholder decides to transfer any of his or her shares without the
Holding Company's prior written consent, then the shares to be transferred are
subject to the Holding Company's right of first refusal, discussed below.
Right of First Refusal. Pursuant to Article 5(b) of its Articles of
Incorporation, the Holding Company will have a "right of first refusal" to
purchase any shares of its stock at the price and on the terms and conditions
offered to any Holding Company shareholder by a prospective purchaser.
Shareholders should refer to Article 5(b) of the Articles of Incorporation,
attached as Exhibit D. The following description is not a comprehensive
statement of the terms of the Holding Company's right of first refusal.
Summary of the Provision. The right of first refusal will apply to all
sales, assignments, or dispositions of any right, title or interest in or to
Holding Company shares, whether voluntary or by operation of law, except for:
1. any pledge of Holding Company stock, and
2. transactions between a shareholder and: a) his or her spouse or
children, including stepchildren (or any lineal descendant thereof),
b) his or her parent(s); and c) his or her sibling(s).
Transferees in either of the transactions described in (1) or (2) will be
subject to the Holding Company's right of first refusal. The Holding Company is
not obligated to make any purchases of the Holding Company stock, but may do so
at the discretion of its Board of Directors.
If a shareholder wants to dispose of any portion of his or her shares of
Holding Company stock, other than in a transaction of the type described in (1)
or (2) above, without first obtaining the written consent of the Holding
Company, the Holding Company's right of first refusal applies. The right of
first refusal operates as follows:
1. The shareholder that wants to dispose of his or her shares must give
the Holding Company written notice of his or her intent to do so,
stating (i) the identity of the proposed transferee of the shares,
(ii) the number of shares the shareholder proposes to transfer, (iii)
the proposed consideration for the shares and (iv) the other terms and
conditions of the proposed transfer of the shares.
24
<PAGE>
2. The shareholder must give the Holding Company a copy of the written
offer.
3. The Holding Company has a right of first refusal to acquire all, but
not less than all, of the shares to be disposed of for the
consideration and on the other terms and conditions offered by the
proposed transferee. These terms and conditions must be contained in
the written notice given to the Holding Company by the shareholder.
4. The Holding Company must exercise its right to acquire the shares to
be disposed of by giving written notice to the shareholder, indicating
the number of shares it will acquire, within forty-five (45) days
following receipt of the written notice from the shareholder.
5. If the Holding Company does not exercise its acquisition rights within
that time period, the shareholder will be free for forty-five (45)
days to transfer all of the shares to be disposed of to the transferee
identified in the written notice to the Holding Company, at the same
consideration and on the same terms and conditions set forth in the
notice.
6. After giving notice of the intended transfer, the shareholder may not
participate as an officer, director or shareholder of the Holding
Company with respect to the Holding Company's decision on whether or
not to acquire the shares to be disposed of, unless requested by the
other shareholders holding a majority of the Holding Company's
outstanding shares of stock, not including the shares held by the
selling shareholder.
7. As a condition precedent to the effectiveness of any transfer of
Holding Company shares, the transferee must agree in writing to be
bound by all of the terms and conditions of the Holding Company's
right of first refusal.
Each certificate representing shares of Holding Company stock shall bear a
legend in substantially the following form:
"The shares represented by this certificate and any sale,
transfer, or other disposition thereof are restricted under
and subject to the terms and conditions contained in Article 5
of the Corporation's Articles of Incorporation, a copy of
which is on file at the offices of the Corporation."
The provisions of the Holding Company's Articles of Incorporation relating
to this right of first refusal may not be amended, altered or repealed except by
the affirmative vote of the holders of at least 75% of the shares of Holding
Company stock.
Potential Anti-Takeover and Other Effects. The Holding Company's right of
first refusal may reduce the ability of third parties to obtain control of the
Holding Company. In particular, the Holding Company's right to match the price
offered by a prospective buyer might make acquisitions of large blocks of
Holding Company stock by other buyers more difficult. The right of first refusal
might also discourage tender offers, proxy contests, or other attempts to gain
control of the Holding Company through the acquisition of voting stock.
Shareholders who might support the takeover of the Holding Company in a given
situation could only amend, alter or repeal the right-of-first-refusal provision
by obtaining an affirmative vote of 75% of the issued and outstanding shares.
Because of these effects, this provision may render removal of current
management by a new owner less likely. This could be the case whether or not
such removal would be beneficial to shareholders generally. This provision may
also limit shareholder participation in transactions such as tender offers.
25
<PAGE>
Whether the right of first refusal serves as an advantage to management or
to shareholders depends on the particular circumstances. In a hostile tender
offer, for example, members of management and shareholders who support the
present ownership may benefit from the provision, while shareholders that want
to participate in the tender offer or that want to remove management might be
disadvantaged.
Reasons for the Right of First Refusal. The Boards of Directors of the
Holding Company and the Bank believe that giving the Holding Company a right of
first refusal to purchase shares of its stock is in the best interests of the
Holding Company and its shareholders and the Bank. One of the purposes of
forming a holding company for the Bank is to enable the Bank to continue under
local control. The proposed right of first refusal effectuates this purpose by
providing a mechanism for assuring local control of the Holding Company and the
Bank.
The proposal is not the result of Bank management's knowledge of any
specific effort to obtain control of the Bank by means of a merger, tender
offer, solicitation in opposition to management or otherwise. Nevertheless, the
Boards of Directors are concerned that, without this provision and the other
anti-takeover provisions described in this prospectus-proxy statement, local
control of the Bank may not be achieved over the long term.
Value
- -----
As of April 30, 1999, the per share book value of the Bank stock, according
to the Bank's internal financial statements, was $1,553.07.
To the best knowledge of the Bank, there have been 101 different transfers
of Bank stock, involving a total of 3,696 shares of Bank stock, between January
1, 1995, and the date of this prospectus-proxy statement.
The following is a listing of sales of Bank stock known to the Bank since
January 1, 1995.
DATE SHARES PRICE PER SHARE
---- ------ ---------------
6/3/95 6 Unknown
6/3/95 3 $850.00
6/29/95 35 $750.00
7/29/95 3 Unknown
8/16/95 15 Unknown
10/24/95 20 $880.00
3/27/96 10 Unknown
7/26/96 250 Unknown
12/20/96 100 Unknown
12/18/97 2 $1,200.00
12/18/97 5 $1,500.00
12/18/97 10 $1,500.00
3/23/98 100 $1,500.00
6/18/98 10 Unknown
8/22/98 3 Unknown
2/24/99 5 $1,800.00
26
<PAGE>
23 sales were conducted between non-family members, and 8 sales were
conducted between family members. The 70 remaining transfers of Bank stock did
not involve a sale of the stock.
At least initially, the value of one share of Holding Company stock will be
approximately equal to the value of one share of Bank stock because each
shareholder will receive one share of Holding Company stock for each share of
Bank stock. There is no assurance, however, that those values will remain
equivalent, particularly if the Holding Company should acquire another bank or
establish a non-banking subsidiary to conduct a banking-related business. Bank
stock will not reflect the value of any other Holding Company subsidiaries that
may be established in the future.
Other
- -----
Liquidation Rights. The Shareholders of the Bank and the Holding Company
are entitled to share pro rata in the net assets of the organization, after
payment of all liabilities, if the organization is ever liquidated.
Conversion Rights. Neither the Bank stock nor the Holding Company stock is
convertible into any other security.
Call. Neither the Bank stock nor the Holding Company stock is subject to
any call or redemption rights on the part of the organization.
Assessability. All of the Bank and Holding Company stock issued or to be
issued is or will be fully paid and nonassessable, except as provided by law.
The Wisconsin Business Corporation Law imposes a statutory liability on
shareholders of every corporation up to an amount equal to the par value of
their shares, and to the consideration for which their shares without par value
were issued, for all debts owing to employees of the corporation for services
performed for such corporation, but not exceeding six months' service in any one
case.
SUPERVISION AND REGULATION
==========================
General
- -------
Financial institutions and their holding companies are extensively
regulated under federal and state law. Consequently, the growth and earnings
performance of the Holding Company and the Bank can be affected not only by
management decisions and general economic conditions, but also by the statutes
administered by, and the regulations and policies of, various governmental
regulatory authorities including, but not limited to, the Federal Reserve Board,
the Federal Deposit Insurance Corporation ("FDIC"), the OCC, the Internal
Revenue Service, federal and state taxing authorities, and the Securities and
Exchange Commission (the "SEC"). The effect of such statutes, regulations and
policies can be significant, and cannot be predicted with a high degree of
certainty.
Federal and state laws and regulations generally applicable to financial
institutions and their holding companies regulate, among other things, the scope
of business, investments, reserves against deposits, capital levels relative to
operations, the nature and amount of collateral for loans, the establishment of
branches, mergers, consolidations and dividends. The system of supervision and
regulation applicable to the Holding Company and the Bank establishes a
comprehensive framework for their respective operations and is intended
primarily for the protection of the FDIC's deposit insurance funds and the
depositors, rather than the shareholders, of the Bank.
27
<PAGE>
The following references to material statutes and regulations affecting the
Holding Company and the Bank are brief summaries thereof and do not purport to
be complete, and are qualified in their entirely by reference to such statutes
and regulations. Any change in applicable law or regulations may have a material
effect on the business of the Holding Company and the Bank.
Banking Regulation
- ------------------
The Holding Company, if the reorganization is successful, will be a bank
holding company subject to the supervision of the Board of Governors of the
Federal Reserve System under the Bank Holding Company Act of 1956, as amended
(the "Act"). In accordance with Federal Reserve Board policy, the Holding
Company will be expected to act as a source of financial strength to the Bank
and to commit resources to support the Bank in circumstances where the Holding
Company might not do so absent such policy. As a bank holding company, the
Holding Company will be required to file with the Board of Governors annual
reports and such additional information as the Board of Governors may require
pursuant to the Act. The Board of Governors may also make examinations of the
Holding Company and its subsidiary.
The Act requires every bank holding company to obtain the prior approval of
the Board of Governors before it may acquire direct or indirect ownership of
more than five percent (5%) of the voting securities or substantially all of the
assets of any bank. The Act limits the activities by bank holding companies to
managing, controlling, and servicing their subsidiary banks and to engaging in
certain non-banking activities which have been determined by the Board of
Governors to be closely related to banking. Similarly, the Act, with specified
exceptions relating to permissible non-banking activities, forbids holding
companies from acquiring voting control (generally, 25% or more of the voting
power) of any company which is not a bank. Some of the activities that the Board
of Governors has determined by regulation to be closely related to banking are
making or servicing loans, leasing real and personal property where the lease
serves as the functional equivalent of an extension of credit, making
investments in corporations or projects designed primarily to promote community
welfare, acting as an investment or financial advisor, providing data processing
services, and acting as an insurance agent or broker, as those activities are
defined and limited by the regulation.
Subsidiary banks of a bank holding company are subject to certain
restrictions imposed by the Federal Reserve Act on any extensions of credit to
the bank holding company or any of its subsidiaries, on investments in the stock
or other securities thereof, and on the taking of such stock or securities as
collateral for loans to any borrower. Further, under the Act and regulations of
the Board of Governors, a bank holding company and its subsidiaries are
prohibited from engaging in certain tie-in arrangements in connection with any
extension of credit or provision of any property or services. The Board of
Governors possesses cease and desist powers over bank holding companies and
their non-banking subsidiaries if their actions represent an unsafe or unsound
practice or a violation of law.
The Bank is a national bank and is subject to the supervision and
examination of the Comptroller of the Currency. The Bank is a member of the
Federal Deposit Insurance Corporation. Areas subject to regulation by the
authorities include reserves, investments, loans, mergers, issuance of
securities, payment of dividends, establishment of branches, and other aspects
of banking operations.
Capital Requirements for the Holding Company and the Bank
- ---------------------------------------------------------
The Federal Reserve Board and the OCC use capital adequacy guidelines in
their examination and regulation of bank holding companies and banks. If capital
falls below minimum guideline levels, a bank holding company may, among other
things, be denied approval to acquire or establish additional banks or non-bank
businesses.
28
<PAGE>
The Federal Reserve Board and the OCC's capital guidelines establish the
following minimum regulatory capital requirements for bank holding companies and
banks: a risk-based requirement expressed as a percentage of total risk-weighted
assets, and a leverage requirement expressed as a percentage of total assets.
The risk-based requirement consists of a minimum ratio of total capital to a
total risk-weighted assets of 8%, of which at least one-half must be Tier 1
capital (which consists principally of stockholders' equity). The leverage
requirement consists of a minimum ratio of Tier 1 capital to total assets of 3%
for the most highly rated companies, with minimum requirements of 4% to 5% for
all others.
As of March 31, 1999, the Bank's Tier 1 risk-based ratio was approximately
26.73%, its total risk-based capital ratio was approximately 26.73%, and its
leverage ratio was approximately 51.63%.
The risk-based and leverage standards presently used by the Federal Reserve
Board and the OCC are minimum requirements, and higher capital levels will be
required if warranted by the particular circumstances or risk profiles of
individual banking organizations. Further, any banking organization experiencing
or anticipating significant growth would be expected to maintain capital ratios,
including tangible capital positions (i.e., Tier 1 capital less all intangible
assets), well above the minimum levels.
The Federal Reserve Board's regulations provide that the foregoing capital
requirements will generally be applied on a bank- only (rather than a
consolidated) basis in the case of a bank holding company with less than $150
million in total consolidated assets.
Liquidity Requirements for Holding Company and Bank
- ---------------------------------------------------
Generally, under federal banking law, a national bank may purchase and sell
for its own account three different types of investments. A bank may purchase
and sell an unlimited amount of Type 1 securities--that is, obligations of the
United States or general obligations of a state or a political subdivision of a
state--subject only to the exercise of prudent banking judgment. A bank may
purchase for its own account Type II and III securities, when in its prudent
business judgment it believes that the obligator will, among other things, be
able to meet all debt service obligations and that the security is readily
marketable. A bank may not hold Type II and III securities of any one obligator
in a total amount in excess of 10% of the bank's capital and surplus. Type II
securities include general obligations of a state or a political subdivision or
any agency of a state or political subdivision for housing, university or
dormitory purposes.
The OCC does not have any specific requirements as to a bank's liquidity
adequacy. Rather, the OCC reviews a number of different factors to determine
whether a bank's liquidity is adequate. These factors include, among other
things, the bank's capital adequacy (this factor is discussed in more detail
above in the section titled "Capital Requirements for Holding Company and
Bank"), its funds management practices, its core deposits, its volatile deposits
(generally, deposits that are not insured), its liquid assets and whether the
funding meets of the bank. The Bank believes that its present liquidity is
adequate.
The Federal Reserve Board's Regulation Y does not impose specific liquidity
requirements on bank holding companies. However, a key principle underlying the
Federal Reserve Board's supervision of bank holding companies is that such
companies should be operated in a way that promotes the soundness of their
subsidiary banks. In this regard, a principal objective of a bank holding
company's funding strategy should be to support capital investments in
subsidiaries with capital and long-term sources of funds, and maintain
sufficient liquidity and capital strength to provide assurance that any
outstanding debt obligations can be serviced and repaid without adversely
affecting the condition of the affiliated bank. In addition, there are special
rules limiting acquisition of debt in connection with the formation of small
holding companies. The Federal Reserve Board requires that new holding
companies' debt-to-equity ratio decline to 30% within 12 years after acquisition
of a bank and that the holding company will be able to safely meet debt
servicing and other requirements imposed by its creditors. The debt-to-equity
ratio limitations are generally applied to releveraging transactions except in
connection with further bank acquisitions.
29
<PAGE>
FDIC Insurance Premiums
- -----------------------
The Bank will pay deposit insurance premiums to the FDIC in 1999 of
approximately $10,900.00.
Loan Limits to Borrowers
- ------------------------
Generally, under federal banking laws, a national bank may make to any one
borrower total loans and extensions of credit not fully secured by collateral
having a market value at least equal to the loan in an amount not to exceed 15%
of the unimpaired capital and unimpaired surplus of the bank. Generally, the
total loans to any one person fully secured by marketable collateral having a
value at least equal to the outstanding loan may not exceed 10% of the
unimpaired capital and unimpaired surplus of the bank. Bank holding companies
are not subject to specific limitations on loans to one borrower. However, bank
holding company lending activities require the prior approval of the Federal
Reserve Board under Regulation Y.
Regulatory Developments
- -----------------------
On September 23, 1994, the "Riegle Community Development and Regulatory
Improvement Act of 1994" (the "Riegle Act") was signed into law. The provisions
of Title III of the Riegle Act are intended to reduce the paperwork and
regulatory burdens of federally-insured financial institutions and their holding
companies. The Riegle Act also gives the federal banking agencies greater
flexibility with respect to the implementation and enforcement of certain
provisions of the Federal Deposit Insurance Corporation Improvement Act of 1991
("FDICIA"), including the FDICIA provisions regarding safety and soundness
standards, examination frequency and independent audit requirements.
In addition, on September 29, 1994, the "Riegle-Neal Interstate Banking and
Branching Efficiency Act of 1994" (the "Riegle-Neal Act") was signed into law.
Effective September 29, 1995, the Riegle-Neal Act allows bank holding companies
to acquire banks located in any state in the United States without regard to
geographic restrictions or reciprocity requirements imposed by state law, but
subject to certain conditions, including limitations on the aggregate amount of
deposits that may be held by the acquiring holding company and all of its
insured depositor institution affiliates.
Effective June 1, 1997, the Riegle-Neal Act allows banks to establish
interstate branch networks through acquisitions of other banks, subject to
certain conditions, including certain limitations on the aggregate amount of
deposits that may be held by the surviving bank and all of its insured
depository institution affiliates. The establishment of de novo interstate
branches or the acquisition of individual branches of a bank in another state
(rather than the acquisition of an out-of-state bank in its entirety) is allowed
by the Riegle-Neal Act only if specifically authorized by state law. Over time,
the provisions of the Riegle-Neal Act may increase competition in the market
served by the Holding Company and the Bank.
AVAILABLE INFORMATION
=====================
The Holding Company has filed with the Securities and Exchange Commission
("SEC"), Washington, D.C., a Registration Statement (No. 333-_____) on Form S-4
under the Securities Act of 1933, for the registration of Holding Company stock
to be issued in the reorganization. This Prospectus constitutes the Prospectus
that was filed as a part of that registration statement.
30
<PAGE>
The Bank currently is not subject to the requirements of the Securities
Exchange Act of 1934 ("Exchange Act"), and files no reports or proxy statements
with the SEC pursuant thereto. After consummation of the reorganization, the
Holding Company will be subject to the reporting requirements of the Exchange
Act, pursuant to Section 15(d) thereof, but the Holding Company's duty to file
such reports is automatically suspended as to each fiscal year at the beginning
of which the Holding Company's stock is held by fewer than 300 shareholders.
Immediately upon completion of the reorganization, the Holding Company's stock
will be held by no more than 205 shareholders. Accordingly, the Holding Company
will not file, for the foreseeable future, reports or proxy statements with the
SEC. However, the Holding Company will voluntarily provide shareholders with
reports of the same nature, and with the same frequency, as are currently
provided by the Bank to Bank shareholders.
The SEC maintains a Web site, http://www.sec.gov, that contains filings
made electronically with the SEC, including those of the Holding Company.
LEGAL MATTERS
=============
Certain legal matters in connection with the reorganization will be passed
upon for the Holding Company and the Bank by Boardman, Suhr, Curry & Field LLP,
One South Pinckney Street, Fourth Floor, Madison, Wisconsin 53703.
31
<PAGE>
EXHIBIT A
=========
AGREEMENT AND PLAN OF REORGANIZATION
====================================
<PAGE>
AGREEMENT AND PLAN OF REORGANIZATION
====================================
THIS AGREEMENT and Plan of Reorganization ("Agreement") is made as of
____________, 1999, by and between THE SECURITY NATIONAL BANK, a national
banking association ("Bank"), and SECURITY FINANCIAL SERVICES CORPORATION, a
Wisconsin corporation ("Security Financial").
RECITALS
========
The parties consider it advantageous to form a one-bank holding company,
which will be Security Financial, to own all of the outstanding stock of the
Bank. To form the holding company, Security Financial will organize a
wholly-owned subsidiary bank, called New Security National Bank, a national
banking association ("New Bank"). Bank will then merge with and into New Bank,
leaving New Bank as the survivor, and converting the outstanding stock of Bank
into stock of Security Financial, so that the shareholders of Bank will become
the shareholders of Security Financial.
This reorganization is comprised of the organization of New Bank and the
merger of Bank into New Bank, as the surviving entity (the "merger"). Pursuant
to the terms of this Agreement, and a Merger Agreement between Bank and New Bank
(to be executed after New Bank is formed), as of the Effective Date of the
Merger, each of the then issued and outstanding shares of Bank Common Stock
("Bank Common") will be converted into one share of the authorized but
previously unissued common stock of Security Financial ("Security Financial
Common").
NOW, THEREFORE, the parties do adopt this plan of reorganization and agree
as follows:
1. Merger. Subject to compliance with all requirements of law and the
terms and conditions set forth in this Agreement, Bank will be merged
with and into New Bank.
(a) Effective Date; Surviving Bank. The Effective Date of this Merger
(the "Effective Date") shall be the date specified in a Merger
Certification Letter to be issued by the Comptroller of the
Currency (the "Comptroller"). At the Effective Date, Bank shall
be merged with and into New Bank, the separate existence of Bank
shall cease and New Bank, as the surviving corporation (the
"Surviving Bank"), shall succeed to and possess all of the
properties, rights, privileges, immunities, and powers, and shall
be subject to all the liabilities, obligations, restrictions, and
duties, of Bank and New Bank.
1
<PAGE>
(b) Charter Number. With the consent of the Comptroller, the charter
number of the Bank prior to the Effective Date shall be the
charter number of the Surviving Bank.
(c) Articles of Association; Name. From and after the Effective Date
and until thereafter amended as provided by law, the Articles of
Association of the Surviving Bank shall be the Articles of
Association of Bank, as amended or restated, and the name of the
Surviving Bank shall be that of Bank.
(d) Bylaws. From and after the Effective Date and until thereafter
amended as provided by law, the Bylaws of Bank in effect
immediately prior to the Effective Date shall constitute the
Bylaws of the Surviving Bank.
(e) Directors and Officers. From and after the Effective Date and
until their respective successors are elected, the members of the
Board of Directors and the officers of the Surviving Bank shall
consist of those persons who are serving as directors and
officers of the Bank immediately prior to the Effective Date.
(f) Conversion of Stock. As of the Effective Date, by virtue of the
merger and without any action on the part of the shareholders of
Bank, all of the Bank Common outstanding immediately prior to the
Effective Date shall cease to exist and shall be converted into
Security Financial Common, at the rate of one (1) share of
Security Financial Common for each one (1) share of Bank Common.
As of the Effective Date, by virtue of the merger and without any
action on the part of the shareholders of New Bank, all of the
New Bank common stock outstanding immediately prior to the
Effective Date shall cease to exist and shall be converted to
12,000 shares of common stock of the Surviving Bank.
(g) Transmittal Procedure. Bank will close its transfer records on a
date twenty (20) days prior to the Effective Date for a period
through and including the Effective Date. When the Effective Date
is established, the date of closing of transfer records will also
be set, and the shareholders of Bank will be notified of such.
Bank will make every reasonable effort to have its shareholders
of record tender their certificates for Bank Common to the
Exchange Agent at least seven (7) days prior to the Effective
Date. Bank will serve as the Exchange Agent for this transaction.
On the Effective Date, Security Financial shall provide to Bank,
and Bank shall mail or deliver to its shareholders, stock
certificates of Security Financial Common to which those
shareholders are entitled by reason of the merger; provided,
however, that no Security Financial Common certificate shall be
mailed or delivered to a Bank shareholder who is eligible to
exercise dissenter's rights or who has not delivered to the Bank
all certificates of Bank Common owned by such shareholder (or if
a certificate has been lost, an indemnity bond or other agreement
satisfactory to Security Financial).
2
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Until so delivered to the Bank, each outstanding certificate
which prior to the Effective Date represented shares of Bank
Common will be deemed for all purposes to evidence only the right
to receive the ownership of the shares of Security Financial
Common into which such Bank Common has been converted; provided,
however, that until such Bank Common certificates are so
delivered to Bank, no dividend payable on Security Financial
Common at any time after the Effective Date shall be paid to the
holder of such undelivered certificate. Upon the delivery of such
certificate after the Effective Date, Security Financial shall
pay, without interest, any unpaid dividends by reason of the
preceding sentence to the record holder thereof, and Bank shall
deliver the stock certificate for Security Financial Common.
(h) Dissenting Shares of Bank. If any shares of Bank Common are
dissenting shares, Bank shall proceed according to applicable law
to determine and pay the fair value of those dissenting shares.
"Dissenting shares" shall mean each outstanding share of Bank
Common as to which the holder has strictly complied with the
provisions of applicable law in order effectively to withdraw
from Bank and obtain the right to receive the appraised value of
his shares of Bank Common.
As of the Effective Date or the date that the last action is
taken to exercise dissenter's rights, whichever is later,
dissenting shares shall, by virtue of the merger, cease to
represent any ownership interest or ownership rights to the Bank
or Security Financial, and shall be converted into the right to
receive fair value of those shares as provided by law.
(i) Business. From and after the Effective Date, the business of the
Surviving Bank shall be that of a national banking association,
conducted at the offices of Bank where located immediately prior
to the Effective Date.
(j) Assets and Liabilities. From and after the Effective Date, the
Surviving Bank shall be liable for all liabilities of New Bank
and Bank; and all deposits, debts, liabilities, and contracts of
New Bank and Bank, respectively, matured or unmatured, whether
accrued, absolute, contingent or otherwise, and whether or not
reflected or reserved against on balance sheets, books of account
or records of New Bank or Bank, shall be those of the Surviving
Bank and shall not be released or impaired by reason of the
merger; and all rights of creditors and other obligees and all
liens on property of either New Bank or Bank shall be preserved
unimpaired. Further, all rights, franchises and interests of New
3
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Bank and Bank, respectively, in and to every type of property
(real, personal and mixed) and choices in action shall be
transferred to and vested in the Surviving Bank by virtue of such
merger without any deed or other transfer, and the Surviving
Bank, without any order or other action on the part of any court
or otherwise, shall hold and enjoy all rights of property,
franchises and interests, including appointments, designations
and nominations, and all other rights and interests in every
fiduciary capacity, in the same manner and to the same extent as
such rights, franchises and interests were held or enjoyed by New
Bank and Bank, respectively, on the Effective Date.
(k) Tax Consequences. The parties intend and desire that the merger
shall be treated for income tax purposes as a forward triangular
merger under Section 368(a)(1)(A) and Section 368(a)(2)(D) of the
Internal Revenue Code. The parties shall act in all respects
consistently with that intent.
(l) Shareholder Approvals. This Agreement and Plan of Reorganization
will be submitted to the respective shareholders of Bank and New
Bank for ratification and confirmation at shareholder meetings to
be called and held in accordance with the applicable provisions
of law and the respective Articles of Association and Bylaws of
Bank and New Bank. Each shareholder meeting shall be called as
soon as reasonably possible. Bank and New Bank will proceed
expeditiously and cooperate fully in the procurement of any other
consents and approvals and in the taking of any other action, and
the satisfaction of all other requirements prescribed by law or
otherwise, necessary for consummation of the merger. Security
Financial, as sole shareholder of New Bank, shall vote its stock
in New Bank to approve the merger and the transactions set forth
in this Agreement.
(m) Regulatory Approvals. The parties shall prepare and submit for
filing any and all applications, filings, and registrations with,
and notifications to, all federal and state authorities required
for the merger to be consummated as contemplated by this
Agreement. Thereafter, the parties shall pursue all such
applications, filings, registrations, and notifications
diligently and in good faith, and shall file such supplements,
amendments, and additional information in connection therewith as
may be reasonably necessary for the merger to be consummated.
(n) Merger Agreement. Security National shall form New Bank promptly
following execution of this Agreement and shall cause New Bank to
execute the Merger Agreement attached hereto as Exhibit A. Within
three days after execution by New Bank, Bank shall execute the
Merger Agreement.
2. Representations and Warranties by Bank. Bank represents and warrants
to Security Financial that this Agreement has been approved by the
Board of Directors of Bank, and upon approval by the shareholders of
Bank will be fully authorized by all necessary corporation action.
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3. Representations and Warranties by Security Financial. Security
Financial represents and warrants to Bank that the shares of Security
Financial Common to be delivered to Bank shareholders pursuant to this
Agreement will, upon issuance, be duly and validly authorized and
issued and fully paid and nonassessable voting shares, except as
otherwise required by law, and will constitute all of the issued and
outstanding shares of Security Financial as of the Effective Date.
4. Closing. Subject to the satisfaction of all closing conditions
contained herein or their waiver, the closing shall occur on the
Effective Date, which will be within thirty (30) days after the
satisfaction of the last closing condition. The Closing shall take
place at the offices of Bank, or at such other place as Security
Financial and Bank may hereafter agree.
5. Conditions to Obligations of Both Parties.
The obligations of each party to be performed on the Effective Date
shall be subject to the following conditions:
(a) Regulatory Approval. On or before the Effective Date, Bank shall
have received the approval from those regulatory agencies whose
approval of the merger is required and any mandatory waiting
period(s) associated with such approval(s) shall have expired.
(b) No Litigation. At the Effective Date, no litigation or
governmental investigation shall have been commenced or, to the
best knowledge of Security Financial or Bank, threatened or
proposed, which would have a material, adverse effect on the
value of Bank or an adverse effect on the ability of any party to
close this transaction, or which arises out of or concerns the
transactions contemplated by this Agreement.
(c) Closing Not Later Than December 31, 1999. The closing of the
transactions contemplated hereunder shall have occurred on or
before December 31, 1999, unless such date is extended by mutual
written agreement of the parties. It is the expectation of the
parties to close on December 31, 1999.
(d) Shareholder Approval. This Agreement shall have been approved and
adopted by the shareholders of Bank and of New Bank in such
manner as required by law.
5
<PAGE>
(e) Tax Opinion. The parties shall have received a written opinion of
tax counsel that the transactions contemplated by this Agreement
and the Merger Agreement will constitute a tax-free
reorganization under the provisions of Sections 368(a)(1)(A) and
368(a)(2)(D) of the Internal Revenue Code with respect to those
shareholders of Bank who will receive Security Financial Common
in the merger.
(f) Securities Law Compliance. The Security Financial Common stock to
be issued in the merger shall have been registered, qualified or
exempted under all applicable federal and state securities laws,
and there shall have been no stop order issued or threatened by
the SEC or any state that suspends the effectiveness of any such
registration, qualification, or exemption.
6. Conditions to Obligations of Security Financial and New Bank. The
obligations of Security Financial and New Bank to be performed on the
Effective Date shall be subject to the following conditions:
(a) Representations and Warranties True; Covenants and Obligations
Performed. All representations and warranties of Bank shall be
true and correct in all material respects on the Effective Date,
and Bank shall have performed all acts required of it under the
terms of this Agreement.
(b) Dissenting Shares. There shall be not more than ten percent (10%)
of the total outstanding shares of Bank that as of the Effective
Date are eligible to elect dissenter's rights by reason of having
complied with the procedures required by applicable law.
(c) No Material Adverse Change. The assets, business, operations and
prospects of Bank shall not have been materially and adversely
affected by a loss or destruction not fully compensated by
insurance, by any governmental proceeding or action, or by any
other event or occurrence, which in the reasonable judgment of
Security Financial would defeat or frustrate the purposes of the
reorganization or otherwise make the reorganization undesirable.
7. Conditions to Obligations of Bank. The obligations of Bank to be
performed on the Effective Date shall be subject to the following
conditions: All representations and warranties of Security National
shall be true and correct in all material respects on the Effective
Date, and Security Financial and New Bank shall have performed all
acts required of them under the terms of this Agreement.
6
<PAGE>
8. Additional Covenants of the Parties.
(a) Cooperation. The parties will fully cooperate with each other and
their respective counsels and accountants in connection with any
steps to be taken as part of their obligations under this
Agreement, including without limitation, the preparation of
financial statements and the supplying of information in
connection with the preparation of regulatory applications.
(b) Expenses. All costs and expenses and charges incurred by a party
hereto shall be borne by such party, including the fees of their
respective accountants and attorneys; provided, however, that if
the merger is not consummated for any reason, all costs and
expenses incurred by Security Financial and New Bank shall be
paid by Bank.
9. Termination. This Agreement and merger may be terminated and abandoned
upon prompt written notice to the other party before the Effective
Date, notwithstanding authorization and adoption of this Agreement by
the shareholders of one or both of Bank and New Bank:
(a) By mutual consent of Bank and Security Financial through their
Boards of Directors;
(b) By Bank at any time after December 31, 1999, (or such later date
as shall have been agreed to in writing by the parties) if any of
the conditions provided for in Paragraphs 5 or 7 of this
Agreement have not been met and have not been waived in writing
by Bank; or
(c) By Security Financial at any time after December 31, 1999 (or
such later date as shall have been agreed to in writing by the
parties) if any of the conditions provided for in Paragraphs 5 or
6 of this Agreement have not been met and have not been waived in
writing by Security Financial.
10. Miscellaneous.
(a) Assignment. This Agreement and the rights, interests, and
benefits hereunder shall not be assigned, transferred, or pledged
in any way, and shall not be subject to execution, attachment, or
similar process. Any attempt to assign, transfer, pledge, or make
any other disposition of this Agreement or of the rights,
interests, and benefits contrary to the foregoing provision, or
the levy of any attachment or similar process thereupon, shall be
null and void and without effect.
7
<PAGE>
(b) Waiver. No failure or delay of any party in exercising any right
or power given to it under this Agreement shall operate as a
waiver thereof. No waiver of any breach of any provision of this
Agreement shall constitute a waiver of any prior, concurrent, or
subsequent breach. No waiver of any breach or modification of
this Agreement shall be effective unless contained in a writing
executed by both parties.
(c) Entire Agreement. This Agreement supersedes any other
representations or agreement, whether written or oral, that may
have been made or entered into by Security Financial, Bank, New
Bank or by any officer or officers of such parties relating to
the acquisition of Bank, or its assets or business, by Security
Financial. This Agreement constitutes the entire agreement by the
parties, and there are no agreements or commitments except as set
forth herein.
(d) Amendment. This Agreement may be modified or amended only by a
written agreement executed by duly authorized officers of both
parties.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the date and year first above written.
ATTEST: THE SECURITY NATIONAL BANK
_______________________ By: _____________________________________
ATTEST: SECURITY FINANCIAL SERVICES CORPORATION
_______________________ By: ____________________________________
8
<PAGE>
EXHIBIT A
MERGER AGREEMENT
MERGER AGREEMENT ("Merger Agreement") made as of this ____ day of
_______________, 1999, by and between Security National Bank, a national banking
association ("Bank"), and New Security National Bank, a national banking
association ("New Bank").
WITNESSETH
WHEREAS, Bank and Security Financial Services Corporation ("Security
Financial") have entered into an Agreement and Plan of Reorganization dated as
of _________ __, 1999 ("Agreement"), pursuant to which Bank has agreed to merge
with and into Security Financial's wholly-owned subsidiary, New Bank, in a
forward triangular merger; and
WHEREAS, Bank and New Bank wish to agree on the terms of the merger now
that New Bank has been formed;
NOW, THEREFORE, the parties agree as follows:
1. Incorporation of Plan of Reorganization. The terms and conditions of the
Agreement are incorporated herein by reference in their entirety, and made a
part of this Merger Agreement with the same effect as if New Bank had been a
party to the Agreement.
2. Cooperation. New Bank shall cooperate with Bank to achieve a prompt
consummation of the transactions contemplated in the Agreement, and shall
perform all actions necessary or convenient to be performed by it for that
purpose.
3. Articles of Association. Effective as of the time this merger shall
become effective as specified in the Agreement, the articles of association of
that bank resulting from the merger of Bank and New Bank shall read in their
entirety as stated in the Bank's Articles of Association.
4. Capital Stock. The amount of capital stock of New Bank shall be $50,000,
divided into 500 shares of common stock, each of $100 par value. At the time the
merger shall become effective (and after the temporary capitalization of the
interim bank has been returned to Security Financial), the resulting bank shall
9
<PAGE>
have $____________ in capital, a surplus of $____________, and undivided profits
of $____________, adjusted, however, for earnings and expenses between
_________________, and the effective date of the merger. At the time the merger
shall become effective, the 500 shares of New Bank stock then outstanding shall
be converted into 12,000 shares, each of $100 par value, of the resulting bank.
IN WITNESS WHEREOF, the parties have executed this Merger Agreement by
their proper corporate officers duly authorized to execute this Agreement, as of
the date first above written.
Attest: THE SECURITY NATIONAL BANK
_________________________ By __________________________________
Attest: NEW SECURITY NATIONAL BANK
_________________________ By _________________________________
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<PAGE>
EXHIBIT B
=========
TAX OPINION OF BOARDMAN, SUHR, CURRY & FIELD LLP
================================================
<PAGE>
_____________, 1999
The Board of Directors
Security Financial Services Corporation
212 West Prospect Street
Durand, Wisconsin 54736-1123
The Board of Directors
Security National Bank
212 West Prospect Street
Durand, Wisconsin 54736-1123
Gentlemen:
You have requested that we render an opinion as to the tax consequences to
Security Financial Services Corporation ("Holding Company"), Security National
Bank ("Bank"), New Security National Bank ("New Bank"), and the shareholders
("Shareholders") of the Bank in connection with a corporate reorganization to
form a one-bank holding company, as described in an Agreement and Plan of
Reorganization dated _____________, 1999, between the Holding Company and the
Bank ("Agreement") and in a certain Prospectus/Proxy Statement dated
__________________.
We acknowledge that this opinion is provided for the benefit and
guidance of the Shareholders as well as for the benefit and guidance of the
Holding Company and the Bank.
In making this opinion, we have relied on the Agreement, the
Prospectus/Proxy Statement, and the Merger Agreement (to be executed between the
Bank and the New Bank), and on the truth and completeness of the warranties,
representations, statements, and facts contained in those documents. We have
also relied upon the truth and completeness of the following representations of
the Holding Company and the Bank:
1. The fair market value of the Holding Company stock and other
consideration received by each Bank shareholder will be approximately equal to
the fair market value of the Bank stock surrendered in the exchange.
2. There is no plan or intention by the Bank shareholders who own one
percent (1%) or more of the Bank stock, and to the best of the knowledge of the
management of the Bank, there is no plan or intention on the part of the
remaining Bank shareholders to sell, exchange, or otherwise dispose of a number
of shares of Holding Company stock received in the transaction that would reduce
the Bank shareholders' ownership of Holding Company stock to a number of shares
having a value, as of the date of the transaction, of less than fifty percent
(50%) of the value of all of the formerly outstanding Bank stock as of the same
<PAGE>
Page 2
date. For purposes of the representation, shares of Bank stock exchanged for
cash or other property, surrendered by dissenters, or exchanged for cash in lieu
of fractional shares of Holding Company stock will be treated as outstanding
Bank stock on the date of the transaction. Moreover, shares of Bank stock and
shares of Holding Company stock held by Bank shareholders and otherwise sold,
redeemed or disposed of prior or subsequent to the transaction will be
considered in making this representation.
3. The New Bank, as the surviving corporation, will acquire at least ninety
percent (90%) of the fair market value of the net assets and at least seventy
percent (70%) of the fair market value of the gross assets held by the Bank
immediately prior to the transaction. For purposes of this representation,
amounts paid by the Bank to dissenters, amounts paid by the Bank to shareholders
who receive cash or other property, Bank assets used to pay its reorganization
expenses, and all redemptions and distributions (except for normal dividends)
made by the Bank immediately preceding the transfer will be included as assets
of the Bank immediately prior to the transaction.
4. Prior to the transaction, the Holding Company will be in control of the
New Bank within the meaning of I.R.C. ss. 368(c).
5. Following the transaction, the New Bank will not issue additional shares
of its stock that would result in the Holding Company losing control of the New
Bank within the meaning of I.R.C. ss. 368(c).
6. The Holding Company has no plan or intention to reacquire more than
fifty percent (50%) of its stock issued in the transaction.
7. The Holding Company has no plan or intention to liquidate the New Bank,
to merge the New Bank with and into another bank or corporation, to sell or
otherwise dispose of the stock of the New Bank, or to cause the New Bank to sell
or otherwise dispose of any of the Bank's assets acquired in the transaction,
except for dispositions made in the ordinary course of business or transfers
described in I.R.C. ss. 368(a)(2)(c).
8. The liabilities of the Bank assumed by the New Bank and the liabilities
to which the transferred assets of the Bank are subject, were incurred in the
ordinary course of Bank's business.
9. Following the transaction, the New Bank will continue the historic
business of the Bank or use a significant portion of Bank's business assets in a
business.
10. The Holding Company, Bank, New Bank, and the Bank's shareholders will
pay their respective expenses, if any, incurred in connection with the
transaction.
<PAGE>
Page 3
11. There is no intercorporate indebtedness existing between the Holding
Company and the Bank or between the New Bank and the Bank which was issued,
acquired or will be settled at a discount.
12. No two parties to the transaction are investment companies as defined
in I.R.C. ss. 368(1)(2)(F)(iii) and (iv).
13. The Bank is not under the jurisdiction of a court in a Title 11
(bankruptcy) or similar case.
14. The fair market value of the assets of the Bank transferred to the New
Bank will equal or exceed the sum of the liabilities assumed by the New Bank,
plus the liabilities, if any, to which the transferred assets are subject.
15. No stock of New Bank will be issued in the transaction.
We have not undertaken to verify independently any of the factual matters
upon which we rely in providing this opinion. Moreover, we have assumed that no
changes have occurred or will occur with respect to the documents described
above or the representations set forth in numbers 1 through 15 above.
Based upon and subject to the foregoing, legal counsel is of the opinion
that, for federal and State of Wisconsin income purposes:
(1) The proposed merger will constitute a reorganization within the
meaning of ss. 368(a)(1)(A) by reason of ss. 368(a)(2)(D) of the
Internal Revenue Code of 1986, as amended, and Chapter 71 of the
Wisconsin Statutes. The reorganization will not be disqualified by
reason of the fact that Holding Company common stock is used in the
transaction. (Internal Revenue Code Section 368(a)(2)(D).)
(2) No gain or loss will be recognized to the Bank on the transfer of
substantially all of its assets to the New Bank in exchange for
Holding Company common stock and the assumption by the New Bank of the
liabilities of the Bank.
(3) No gain or loss will be recognized to the Holding Company or the New
Bank upon the receipt by the New Bank of substantially all of the
assets of the Bank in exchange for the Holding Company common stock
and the assumption by the New Bank of the liabilities of the Bank.
(4) The basis of the Bank assets in the hands of the New Bank will be the
same as the basis of those assets in the hands of the Bank immediately
prior to the proposed transaction.
<PAGE>
Page 4
(5) The holding period of the assets of the Bank in the hands of the New
Bank will include the period during which such assets were held by the
Bank.
(6) The basis of the New Bank stock in the hands of the Holding Company
will be increased by an amount equal to the basis of the Bank assets
acquired by the New Bank in the transaction, and will be decreased by
the amount of liabilities of the Bank assumed by the New Bank and the
amount of liabilities to which the acquired assets of the Bank are
subject.
(7) No gain or loss will be recognized by the shareholders on the exchange
of their Bank common stock for Holding Company common stock; provided,
however, that no opinion is expressed with respect to Bank
shareholders who dissent from the transaction and receive cash for
their Bank stock.
(8) The income tax basis of the Holding Company common stock to be
received by the shareholders will be the same as the basis of the Bank
common stock surrendered in exchange.
(9) The holding period of the Holding Company common stock to be received
by the shareholders will include the period during which the Bank
common stock surrendered in exchange was held, provided that the Bank
common stock is held as a capital asset on the date of the exchange.
Our opinion is limited to the specific issues addressed. We express no
opinion and make no representation, and no inference is intended or should be
drawn from any statement in this letter, as to any other issues involving the
transaction.
BOARDMAN, SUHR, CURRY & FIELD LLP
<PAGE>
EXHIBIT C
=========
UNITED STATES CODE SECTIONS
===========================
<PAGE>
National Banks 12 USCS ss. 215a
(b) Dissenting shareholders. If a merger shall be voted for at the called
meetings by the necessary majorities of the shareholders of each association or
State bank participating in the plan of merger, and thereafter the merger shall
be approved by the Comptroller, any shareholder of any association or State bank
to be merged into the receiving association who has voted against such merger at
the meeting of the association or bank of which he is a stockholder, or has
given notice in writing at or prior to such meeting to the presiding officer
that he dissents from the plan of merger, shall be entitled to receive the value
of the shares so held by him when such merger shall be approved by the
Comptroller upon written request made to the receiving association at any time
before thirty days after the date of consummation of the merger, accompanied by
the surrender of his stock certificates.
(c) Valuation of shares. The value of the shares of any dissenting shareholder
shall be ascertained, as of the effective date of the merger, by an appraisal
made by a committee of three persons, composed of (1) one selected by the vote
of the holders of the majority of the stock, the owners of which are entitled to
payment in cash; (2) one selected by the directors of the receiving association;
and (3) one selected by the two so selected. The valuation agreed upon by any
two of the three appraisers shall govern. If the value so fixed shall not be
satisfactory to any dissenting shareholder who has requested payment, that
shareholder may, within five days after being notified of the appraised value of
his shares, appeal to the Comptroller, who shall cause a reappraisal to be made
which shall be final and binding as to the value of the shares of the appellant.
(d) Application to shareholders of merging associations: Appraisal by
Comptroller; expenses of receiving association; sale and resale of shares; State
appraisal and merger law. If, within ninety days from the date of consummation
of the merger, for any reason one or more of the appraisers is not selected as
herein provided, or the appraisers fail to determine the value of such shares,
the Comptroller shall upon written request of any interested party cause an
appraisal to be made which shall be final and binding on all parties. The
expenses of the Comptroller in making the reappraisal or the appraisal, as the
case may be, shall be paid by the receiving association. The value of the shares
ascertained shall be promptly paid to the dissenting shareholders by the
receiving association. The shares of stock of the receiving association which
would have been delivered to such dissenting shareholders had they not requested
payment shall be sold by the receiving association at an advertised public
auction, and the receiving association shall have the right to purchase any of
such shares at such public auction, if it is the highest bidder therefor, for
the purpose of reselling such shares within thirty days thereafter to such
person or persons and at such price not less than par as its board of directors
by resolution may determine. If the shares are sold at public auction at a price
greater than the amount paid to the dissenting shareholders, the excess in such
sale price shall be paid to such dissenting shareholders. The appraisal of such
shares of stock in any State bank shall be determined in the manner prescribed
by the law of the State in such cases, rather than as provided in this section,
if such provision is made in the State law; and no such merger shall be in
contravention of the law of the State under which such bank is incorporated. The
provision of this subsection shall apply only to shareholders of (and stock
owned by them in) a bank or association being merged into the receiving
association.
<PAGE>
EXHIBIT D
=========
ARTICLES OF INCORPORATION OF
SECURITY FINANCIAL SERVICES CORPORATION
=======================================
<PAGE>
ARTICLES OF INCORPORATION
Stock (for profit)
Executed by the undersigned for the purpose of forming a Wisconsin
for-profit corporation under Chapter 180 of the Wisconsin Statutes repealed and
recreated by 1989 Wis. Act 303:
ARTICLE 1. Name of Corporation: Security Financial Services Corporation
ARTICLE 2. The Corporation shall be authorized to issue 24,000 shares. The
par value of each share shall be $100.00.
ARTICLE 3. The street address of the initial registered office is: 212 West
Prospect Street, P.O. Box 210, Durand, Wisconsin 54736.
ARTICLE 4. The name of the initial registered agent at the above registered
office is: Gerald V. Weiner.
ARTICLE 5. Other provisions (OPTIONAL):
ARTICLE 6. Executed on June 24, 1999.
Name and complete address of each incorporator:
John E. Knight
Boardman, Suhr, Curry & Field LLP
One south Pinckney Street, Fourth Floor
P.O. Box 927
Madison, WI 57301
/s/ John E. Knight
(Incorporator Signature)
This document was drafted by John E. Knight.
DFI CORP FILE ID NO. S054335.
Document Stamped Received June 24, 1999, 1:26 p.m., by State of Wisconsin,
Department of Financial Institutions.
Document stamped Filed June 30, 1999, by State of Wisconsin, Department of
Financial Institutions.
<PAGE>
SECURITY FINANCIAL SERVICES CORPORATION
ARTICLES OF INCORPORATION
Article 5. (Continued):
A. Board of Directors. The number of directors shall not be less than five
(5) nor more than ten (10), the exact number of directors to be determined from
time to time by resolution adopted by a majority of the entire Board of
Directors, and such exact number shall be eight (8) until otherwise determined
by resolution adopted by a majority of the entire Board of Directors. As used in
this Article 5 "entire Board of Directors" means the total number of directors
which the Corporation would have if there were no vacancies.
The Board of Directors shall be divided into three (3) classes of nearly
equal in number as may be, with the term of office of one class expiring each
year. At the first annual meeting of the shareholders, directors of the first
class (Class I) shall be elected to hold office for a term expiring at the next
succeeding annual meeting, directors of the second class (Class II) shall be
elected to hold office for a term expiring at the second succeeding annual
meeting and directors of the third class (Class III) shall be elected to hold
office for a term expiring at the third succeeding annual meeting. Subject to
the foregoing, at each annual meeting of shareholders, directors chosen to
succeed those terms then expired shall be elected for a term of office expiring
at the third succeeding annual meeting of shareholders after their election, so
that the term of one class of directors shall expire each year. Any vacancies on
the Board of Directors for any reason and any newly created directorships
resulting from any increase in the number of directors, may be filled by the
Board of Directors, acting by a majority of the directors then in office,
although less than a quorum. Each director shall hold office until the next
election of the class for which such director shall have been elected or
appointed and until his or her successor shall be elected and qualified or until
his or her death, or until he or she shall resign or shall have been removed in
the manner hereinafter provided. No decrease in the number of directors shall
shorten the term of any incumbent director.
The names and addresses of the persons who are to serve as directors until
the first annual meeting of the shareholders or until their successors are
elected and shall qualify are:
Richard E. Bates Gerald L. Levenske
502 East Prospect Street 802 7th Avenue West
Durand, WI 54736 Durand, WI 54736
Jerry M. Bauer T.L. Schiefelbein
1108 Auth Street 1034 Auth Street
Durand, WI 54736 Durand, WI 54736
<PAGE>
Robert Davidian Gerald Sundstrom
2162 Sargent Avenue 403 6th Avenue East
St. Paul, MN 55105 Durand, WI 54736
Carole Komro Gerald V. Weiner
W2328 Highland Drive N5655 Pleasant Ridge
Durand, WI 54736 Durand, WI 54736
B. Transfer Restrictions.
1. Shareholders of the Corporation's capital stock, herein the "Stock," may
not sell, transfer, assign, encumber, pledge, hypothecate, or in any way dispose
of or alienate any of their shares of the Stock, or any right, title or interest
therein, whether voluntarily or by operation of law, or by gift or otherwise, in
this Part B called a "transfer", without the prior written consent of the
Corporation. Provided, however, that the prior written consent of the
Corporation shall not be required as to: (i) any transfer between a shareholder
and his or her spouse or children, including stepchildren, or any lineal
descendant thereof, his or her parent(s) and his or her sibling(s); or (ii) any
pledge or hypothecation of shares of the Stock, provided, that as a condition
precedent to the effectiveness of either of the transfers described in (i) or
(ii) herein, the transferee in any such transfer shall be bound by all of the
terms and conditions of this Article 5B.
2. In the event a shareholder, herein the "Selling Shareholder", desires to
transfer his or her shares of Stock, or any portion of it, called the "Offered
Shares", other than in a transaction of the type described in (i) or (ii) above,
without first obtaining the written consent of the Corporation, the Selling
Shareholder, first, shall give the Corporation written notice of his or her
intent to do so, stating in the notice the identity of the proposed transferee
of the Offered Shares, the number of Offered Shares the Selling Shareholder
proposes to transfer, the proposed consideration for the Offered Shares and the
other terms and conditions of the proposed transfer of the Offered Shares. The
Selling Shareholder shall include with the written notice given to the
Corporation under this paragraph a copy of the written offer to purchase the
Offered Shares. The Corporation shall have a right of first refusal to acquire
all, but not less than all, of the Offered Shares for the consideration and on
the other terms and conditions offered by the proposed transferee and as
contained in the written notice given to the Corporation by the Selling
Shareholder. The Corporation shall exercise its right to acquire the Offered
Shares by giving written notice to the Selling Shareholder, indicating the
number of Offered Shares it will acquire, within forty-five (45) days following
receipt of the written notice of the Selling Shareholder. In the event the
Corporation does not exercise its acquisition rights within the time period as
provided herein with respect to all of the Offered Shares, the Selling
<PAGE>
Shareholder shall be free for a period of forty-five (45) days thereafter to
transfer all of the Offered Shares to the transferee identified in the written
notice to the Corporation, and at the same consideration and on the same terms
and conditions as set forth in such written notice. After giving any notice of
intended transfer of any shares of the Stock pursuant to this Article 5B, the
Selling Shareholder, unless requested by the other shareholders of the
Corporation holding a majority of the Corporation's outstanding shares of
capital stock, not including the shares of the Stock held by the Selling
Shareholder, shall refrain from participating as an officer, director or
shareholder of the Corporation with respect to the Corporation's decision on
whether or not to acquire the Offered Shares and, if so requested to
participate, the Selling Shareholder shall cooperate with the other shareholders
and the Corporation in every reasonable way to effectuate the purpose of this
Article 5B. Except as provided in this Article 5B, the Selling Shareholder shall
be bound by the restrictions and limitations imposed by this Article 5B after
any notice of a desire to transfer is given and whether or not any such transfer
actually occurs. As a condition precedent to the effectiveness of any transfer
of Offered Shares to any person or entity, such transferee shall agree in
writing to be bound by all of the terms and conditions of this Article 5B.
C. Stock Certificates. Each certificate representing shares of the Stock
shall have endorsed thereon a legend in substantially the following form:
The shares represented by this certificate and any sale,
transfer, or other disposition thereof are restricted under
and subject to the terms and conditions contained in Article 5
of the Corporation's Articles of Incorporation, a copy of
which is on file at the offices of the Corporation.
Any attempted or purported sale, transfer, assignment, encumbrance, pledge,
hypothecation or other disposition or alienation of any of the shares of the
Stock by a shareholder in violation of this Article 5 shall be null, void and
ineffectual, and shall not operate to transfer any right, title or interest
whatsoever in or to such shares of the Stock.
D. Authorized But Unissued Stock. Authorized but unissued stock of the
Corporation shall not be sold or issued by the Corporation except upon a
majority vote of the entire Board of Directors of the Corporation. This
requirement shall not be applicable to Treasury shares held by the Corporation.
E. Amendment. The provision of this Article 5, may not be amended, altered
or repealed except by the affirmative vote of holders of at least seventy five
percent (75%) of the shares of the capital stock of the Corporation issued and
outstanding and entitled to vote, at any regular or special meeting of the
shareholders if notice of the proposed amendment, alteration or repeal be
contained in the notice of meeting.
<PAGE>
ARTICLES OF AMENDMENT
Stock (for profit)
A. Name of Corporation: Security Financial Services Corporation
Text of Amendment
RESOLVED, THAT, the articles of incorporation be amended as follows:
RESOLVED that Article 5 of the Articles of Incorporation be amended to
include the following, to immediately follow the heading "Article 5. Other
Provisions (OPTIONAL):"
"The Corporation elects to have preemptive rights. See
additional provisions of Article 5 attached to and made
part of these Articles of Incorporation."
B. Amendment(s) adopted on July 22, 1999
Indicate the method of adoption by checking the appropriate choice below:
( ) In accordance with sec. 180.1002, Wis. Stats. (By the Board of
Directors)
OR
( ) In accordance with sec. 180.1003, Wis. Stats. (By the board of
Directors and Shareholders)
OR
(X) In accordance with sec. 180.1005, Wis. Stats. (By Incorporators or
Board of Directors, before issuance of shares)
C. Executed on behalf of the corporation on: August 3, 1999
/s/ John E. Knight
-----------------------------
John E. Knight
Incorporator
D. This document was drafted by John E. Knight.
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 20. Indemnification of Officers and Directors.
Sections 180.0850 through 180.0859 of the Wisconsin Statutes permit and in
some cases require indemnification of directors, officers, employees, and agents
of a Wisconsin corporation. In general, such indemnification is required unless
the person violates a duty of loyalty or a duty of care as specifically set
forth in the statutes. Section 180.0851, Wis. Stats.
Article 7 of the registrant's bylaws provide for indemnification of
officers and directors under terms and conditions that follow the statutory
language cited above. A complete copy of the bylaws is included in Exhibit 3
hereto.
Item 21. Exhibits and Financial Statement.
Schedules
(a) Exhibits. The following exhibits are submitted:
Exhibit No. Description
----------- -----------
2 Agreement and Plan of Reorganization (set
forth as an exhibit to the Prospectus)
3 Articles of Incorporation (set forth as an
exhibit to the Prospectus) and bylaws of
Security Financial Services Corporation
4 Specimen stock certificate of Security
Financial Services Corporation
5 Opinion of Boardman, Suhr, Curry & Field LLP
8 Tax Opinion of Boardman, Suhr, Curry & Field LLP
(set forth as an exhibit to the Prospectus)
23 Consent of Boardman, Suhr, Curry & Field LLP
(included in opinion)
99 Form of Proxy for shareholders of Security
National Bank
<PAGE>
(b) No financial statement schedules are required to be filed with
regard to Security Financial Services Corporation or Security
National Bank.
Item 22. Undertakings.
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, as amended ("Act");
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most
recent post-effective amendment thereof) which, individually or
together, represent a fundamental change in the information in
the registration statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the
total value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the
estimated maximum offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule 424(b) (ss.
230.424(b) of the Act) if, in the aggregate, the changes in
volume and price represent no more than a 20% change in the
maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective 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 the purpose of determining any liability under the Act, each
such post-effective amendment shall be deemed to be a new registration
statement relating to the securities offered, and the offering of such
securities at that time shall be deemed to be the initial bona fide
offering.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered that remain unsold at the end of
the offering.
(4) To respond to requests for information that is incorporated by
reference into the prospectus pursuant to Items 4, 10(b), 11 or 13 of
this Form, within one business day of receipt of such request, and to
send the incorporated documents by first class mail or other equally
prompt means. This includes information contained in documents filed
subsequent to the effective date of the registration statement through
the date of responding to the request.
<PAGE>
(5) 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.
(6) Insofar as indemnification for liabilities arising under the Act 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 SEC such
indemnification is against public policy as expressed in the Act and
is, therefore, unenforceable. In the event that a claim for
indemnification against liability arising under the Act (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.
SIGNATURES
==========
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Durand, State of
Wisconsin, on the 6th day of August, 1999.
Security Financial Services Corporation
By:
/s/ Gerald V. Weiner
---------------------------------------
Gerald V. Weiner, President
In accordance with the requirements of the Securities Act of 1933, this
Registration Statement was signed by the following persons in the capacities
indicated on the 6th day of August, 1999.
Signature Title(s)
/s/ Jerry M. Bauer Director
- ----------------------------------
Jerry M. Bauer
/s/ T.L. Schiefelbein Director/Chairman
- ----------------------------------
T.L. Schiefelbein
/s/ Richard E. Bates Director/Executive Vice President
- ----------------------------------
Richard E. Bates
/s/ Gerald Sundstrom Director
- ----------------------------------
Gerald Sundstrom
/s/ Gerald L. Levenske Director
- ----------------------------------
Gerald L. Levenske
<PAGE>
/s/ Carole Komro Director
- ----------------------------------
Carole Komro
/s/ Robert Davidian Director
- ----------------------------------
Robert Davidian
/s/ Gerald V. Weiner Director/President
- ----------------------------------
Gerald V. Weiner
<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------
FORM S-4
REGISTRATION STATEMENT
Under
The Securities Act of 1933
----------
Security Financial Services Corporation
(Exact name of registrant as specified in its charter)
E X H I B I T S
<PAGE>
INDEX TO EXHIBITS
=================
Exhibit No. Description
- ----------- -----------
2 Agreement and Plan of Reorganization (set
forth as an exhibit to the Prospectus)
3 Articles of Incorporation (set forth as an
exhibit to the Prospectus) and bylaws of
Security Financial Services Corporation
4 Specimen stock certificate of Security
Financial Services Corporation
5 Opinion of Boardman, Suhr, Curry & Field LLP
8 Tax Opinion of Boardman, Suhr, Curry & Field LLP
(set forth as an exhibit to the Prospectus)
23 Consent of Boardman, Suhr, Curry & Field LLP
(included in opinion)
99 Form of Proxy for shareholders of Security National Bank
EXHIBIT 3(ii)
=============
BYLAWS OF
SECURITY FINANCIAL SERVICES CORPORATION
=======================================
<PAGE>
BYLAWS OF
SECURITY FINANCIAL SERVICES CORPORATION
=======================================
ARTICLE I. OFFICES
The principal office of the Corporation shall be located in Durand, Pepin
County, Wisconsin.
ARTICLE II. SHAREHOLDERS
SECTION l. Annual Meeting. The annual meeting of the Shareholders shall be
held at such place, on such date, and at such time as the Board of Directors
shall each year fix for the purposes of electing Directors and for the
transaction of such other business as may come before the meeting. If the
election of Directors is not held on the day designated for any annual meeting
of the Shareholders, or at any adjournment thereof, the Board of Directors shall
cause the election to be held at a special meeting of the Shareholders as soon
thereafter as may be convenient.
SECTION 2. Special Meetings. Special meetings of the Shareholders, for any
purpose, unless otherwise prescribed by statute, may be called by the President
or the Board of Directors, and shall be called by the President at the request
of Shareholders owning, in the aggregate, not less than ten percent (10%) of all
the outstanding shares of the Corporation entitled to vote at the meeting,
provided that such Shareholders deliver a signed and dated written demand to the
Corporation, describing the purpose(s) for which the meeting is to be held.
SECTION 3. Place of Meeting. The President may designate any place, either
within or without the State of Wisconsin, as the place of meeting for any annual
meeting or for any special meeting called by the Board of Directors. If no
designation is made, or if a special meeting is otherwise called, the place of
meeting shall be the principal office of the Corporation in the State of
Wisconsin. Any meeting may be adjourned to reconvene at any place designated by
vote of a majority of the shares represented at the meeting.
SECTION 4. Notice of Meeting. Written notice stating the place, day and
hour of the meeting, and, in case of a special meeting, the purpose for which
the meeting is called, shall be delivered not less than ten (10) days (unless a
longer period is required by law) nor more than sixty (60) days before the date
of the meeting, either personally or by mail, by or at the direction of the
President or the Secretary, to each Shareholder of record entitled to vote at
the meeting. If mailed, the notice shall be deemed to be delivered when
deposited in the United States mail, addressed to the Shareholder at his or her
address as it appears on the stock record books of the Corporation, postage
prepaid.
1
<PAGE>
SECTION 5. Quorum; Manner of Acting. Except as otherwise provided by law,
the Articles of Incorporation or these Bylaws, a majority of the outstanding
shares of the Corporation entitled to vote, represented in person or by proxy,
shall constitute a quorum at a meeting of Shareholders and a majority of votes
cast at any meeting at which a quorum is present shall be decisive of any
motion, except that each Director shall be elected by a plurality of the votes
cast by the shares entitled to vote. Though less than a quorum 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 original
meeting.
SECTION 6. Closing of Transfer Books or Fixing of Record Date. For the
purpose of determining Shareholders entitled to notice of or to vote at any
meeting of Shareholders or any adjournment thereof, or Shareholders entitled to
receive payment of any dividend, or in order to make a determination of
Shareholders for any other proper purpose, the Board of Directors may provide
that the stock transfer books shall be closed for a stated period but not to
exceed, in any case, sixty (60) days. If the stock transfer books shall be
closed for the purpose of determining Shareholders entitled to notice of or to
vote at a meeting of Shareholders, such books shall be closed for at least ten
(10) days immediately preceding such meeting. In lieu of closing the stock
transfer books, the Board of Directors may fix in advance a date as the record
date for any such determination of Shareholders, such date in any case to be not
more than sixty (60) days and, in case of a meeting of Shareholders, not less
than ten (10) days prior to the date on which the particular action, requiring
such determination of Shareholders, is to be taken. If the stock transfer books
are not closed and no record date is fixed for the determination of Shareholders
entitled to notice of or to vote at a meeting of Shareholders, or Shareholders
entitled to receive payment of a dividend, the close of business on the date
next preceding the date on which notice of the meeting is mailed or the date on
which the resolution of the Board of Directors declaring such dividend is
adopted, as the case may be, shall be the record date for such determination of
Shareholders. When a determination of Shareholders entitled to vote at any
meeting of Shareholders has been made as provided in this section, such
determination shall be applied to any adjournment thereof except where the
determination has been made through the closing of the stock transfer books and
the stated period of closing has expired.
2
<PAGE>
SECTION 7. Proxies. At all meetings of Shareholders, a Shareholder entitled
to vote may vote by proxy appointed in writing by the Shareholder or by his or
her duly authorized attorney in fact. Proxies shall be filed with the Secretary
of the Corporation before or at the time of the meeting. No proxy shall be valid
after eleven (11) months from the date of its execution, unless otherwise
provided in the proxy. A proxy may be revoked at any time before it is voted,
either by written notice filed with the Secretary of the Corporation or the
acting secretary of the meeting, or by oral notice given by the Shareholder to
the presiding officer during the meeting. The Board of Directors shall have the
power and authority to make rules establishing presumptions as to the validity
and sufficiency of proxies. Proxies may be subject to the examination by any
Shareholder at the meeting, and all proxies shall be filed and preserved.
SECTION 8. Voting of Shares. Each outstanding share entitled to vote shall
be entitled to one (l) vote upon each matter submitted to a vote at a meeting of
Shareholders, except to the extent that the voting rights of the shares of any
class or classes are limited or denied by the Articles of Incorporation.
SECTION 9. Voting of Shares by Certain Shareholders. Shares standing in the
name of another corporation may be voted either in person or by proxy, by the
president of such corporation or any other officer appointed by such president.
A proxy executed by any principal officer of such other corporation or assistant
thereto shall be conclusive evidence of the signer's authority to act, in the
absence of express notice to this Corporation, given in writing to the Secretary
of this Corporation, of the designation of some other person by the board of
directors or the bylaws of such other corporation. A Shareholder whose shares
are pledged shall be entitled to vote such shares until the shares have been
transferred into the name of the pledgee, and thereafter the pledgee shall be
entitled to vote the shares so transferred.
SECTION 10. Waiver of Notice by Shareholders. Whenever any notice is
required to be given to any Shareholder of the Corporation under the Articles of
Incorporation, these Bylaws or any provision of law, a waiver of such notice, in
writing, signed at any time (whether before or after the time of meeting) by the
Shareholder entitled to such notice, shall be deemed equivalent to the giving of
such notice. A waiver with respect to any matter of which notice is required
under any provision of Chapter 180, Wisconsin Statutes, shall contain the same
information as would have been required to be included in the notice, except the
time and place of meeting.
3
<PAGE>
ARTICLE III. BOARD OF DIRECTORS
SECTION l. General Powers. The business and affairs of the Corporation
shall be managed by its Board of Directors.
SECTION 2. Number of Directors. The number of Directors of the Corporation
shall be not less than five (5) nor more than ten (10), the exact number of
Directors to be determined from time to time by resolution adopted by a majority
of the entire Board of Directors, and such exact number shall be eight (8) until
otherwise determined by resolution adopted by a majority of the entire Board of
Directors. As used in this Section, "entire Board of Directors" means the total
number of Directors which the Corporation would have if there were no vacancies.
Whenever the authorized number of Directors is increased between annual meetings
of the Shareholders, a majority of the Directors then in office shall then have
the power to elect such new Directors for the balance of a term and until their
successors are elected and qualified. Any decrease in the authorized number of
Directors shall not become effective until the expiration of the term of the
Directors then in office unless, at the time of such decrease, there shall be
vacancies on the Board which were being eliminated by the decrease.
SECTION 3. Election and Term. The Directors shall be elected by the
Shareholders at the regular annual meeting of Shareholders. Each Director shall
hold office until the annual meeting of Shareholders occurring at the end of the
term to which such Director is elected or appointed in accordance with the
Articles of Incorporation of the Corporation and until his or her successor has
been elected or until his or her death, resignation or removal in the manner
provided in this Article. The persons receiving the greatest number of votes
shall be the persons elected.
SECTION 4. Regular Meetings. The Board of Directors may provide, by
resolution, the time and place, either within or without the State of Wisconsin,
for the holding of regular meetings of the Board of Directors without other
notice than such resolution.
SECTION 5. Special Meetings. Special meetings of the Board of Directors may
be called at any time by or at the request of the President, and shall be called
at the request of three or more directors. The person or persons authorized to
call special meetings of the Board of Directors may fix any place, either within
or without the State of Wisconsin, as the place for holding any special meeting
of the Board of Directors called by them.
SECTION 6. Notice. Notice of any special meeting shall be given at least
forty-eight (48) hours in advance of the meeting by written notice delivered
personally or mailed to each Director at his or her business address, or by
telegram. If mailed, the notice shall be deemed to be delivered when deposited
in the United States mail so addressed with postage prepaid. If notice is given
by telegram, it shall be deemed to be delivered when the telegram is delivered
4
<PAGE>
to the telegraph company. Whenever any notice is required to be given to any
Director of the Corporation under the Articles of Incorporation, these Bylaws or
any provision of law, a waiver of such notice, in writing, signed at any time
(whether before or after the time of meeting) by the Director entitled to such
notice, shall be deemed equivalent to the giving of such notice. The attendance
of a Director at a meeting shall constitute a waiver of notice of that meeting,
except where a Director attends a meeting and at the meeting objects 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
regular or special meeting of the Board of Directors need be specified in the
notice or waiver of notice of such meeting.
SECTION 7. Quorum. Except as otherwise provided by law, the Articles of
Incorporation, or these Bylaws, a majority of the number of Directors then in
office shall constitute a quorum for the transaction of business at any meeting
of the Board of Directors, but a majority of the Directors present (though less
than such quorum) may adjourn the meeting from time to time without further
notice.
SECTION 8. Participation in Meetings By Conference Telephone. Members of
the Board of Directors, or of any committee of the Board, may participate in a
meeting of such Board or committee by means of conference telephone or similar
communication equipment by which all persons participating in the meeting can
hear each other and such participation shall constitute presence in person at
such meeting. All participating Directors shall be informed that a meeting is
taking place at which official business may be transacted by conference
telephone or similar communication equipment.
SECTION 9. Manner of Acting. The act of the majority of the Directors then
in office shall be the act of the Board of Directors, unless the act of a
greater number is required by law, the Articles of Incorporation, or these
Bylaws.
SECTION 10. Removal and Resignation. Any Director may be removed, with or
without cause, at any meeting of the Shareholders by the affirmative vote of a
majority of the outstanding shares entitled to vote for the election of such
Director, taken at a special meeting of Shareholders called for that purpose. A
Director may resign at any time by filing his or her written resignation with
the Secretary of Corporation.
SECTION 11. Vacancies. Any vacancy occurring in the Board of Directors,
including a vacancy created by an increase in the number of Directors, may be
filled until the next succeeding annual Shareholders' meeting by the affirmative
vote of a majority of the Directors then in office.
5
<PAGE>
SECTION 12. Compensation. The Board of Directors, irrespective of any
personal interest of any of its members, may establish reasonable compensation
of all Directors for services to the Corporation as Directors, officers or
otherwise, or may delegate such authority to an appropriate committee. The Board
of Directors also shall have authority to provide for, or to delegate authority
to, an appropriate committee to provide for reasonable pensions, disability or
death benefits, and other benefits or payments, to Directors, officers and
employees and to their estates, families, dependents, or beneficiaries on
account of prior services rendered to the Corporation.
SECTION 13. Presumption of Assent. A Director of the Corporation who is
present at a meeting of the Board of Directors or a committee thereof at which
action on any corporate matter is taken shall be presumed to have assented to
the action taken unless the dissent or abstention of the Director shall be
entered in the minutes of the meeting or unless the Director shall file a
written dissent to such action with the person acting as the Secretary of the
meeting before adjournment or shall forward such dissent by certified mail to
the Secretary of the Corporation immediately after the adjournment of the
meeting. Such right to dissent shall not apply to a Director who voted in favor
of such action.
SECTION 14. Committees. The Board of Directors may designate one or more
committees, each committee to consist of three or more Directors elected by the
Board of Directors, which to the extent provided in said resolution shall have
and may exercise, when the Board of Directors is not in session, the powers of
the Board of Directors in the management of the business and affairs of the
Corporation, except action in respect to dividends to Shareholders, election of
the principal officers, action under or pursuant to the Articles of
Incorporation, amendment, alteration or repeal of these Bylaws, or the removal
or filling of vacancies in the Board of Directors or committees created pursuant
to this section. The Board of Directors may elect one or more of its members as
alternate members of any such committee who may take the place of any absent
member or members at any meeting of such committee, upon request by the
President or upon request by the chairman of such meeting. Each such committee
shall fix its own rules governing the conduct of its activities and shall make
such reports to the Board of Directors of its activities as the Board of
Directors may request.
6
<PAGE>
SECTION 15. Informal Action Without Meeting. Any action required or
permitted by the Articles of Incorporation, these Bylaws, or any provision of
law to be taken by the Board of Directors at a meeting or by resolution may be
taken without a meeting if a consent in writing, setting forth the action so
taken, is signed by all of the Directors then in office.
ARTICLE IV. OFFICERS
SECTION l. Number, Election and Term of Office. The principal Officers of
the Corporation shall be a Chairman of the Board, President, one (1) or more
Vice Presidents, a Secretary and a Treasurer, each of whom shall be elected by
the Board of Directors. Such other Officers and Assistant Officers as may be
deemed necessary may be elected or appointed by the Board of Directors. Any two
or more offices may be held by the same person. Each Officer shall hold office
until the next annual meeting of Shareholders and his or her successor shall
have been duly elected or until his or her death or until he or she resigns or
is removed in the manner provided below.
SECTION 2. Removal. Any Officer or agent elected or appointed by the Board
of Directors may be removed by the Board of Directors whenever in its judgment
the best interests of the Corporation will be served thereby. Any such removal
shall be without prejudice to the contract rights, if any, of the person being
removed. Election or appointment shall not of itself create contract rights.
SECTION 3. Vacancies. A vacancy in any principal office because of death,
resignation, removal, disqualification, or otherwise, shall be filled by the
Board of Directors.
SECTION 4. Chairman of the Board. The Chairman of the Board shall preside
at all meetings of the shareholders and the Board of Directors and shall have
such other powers and duties as may from time to time be prescribed by these
Bylaws or by resolution of the Board of Directors.
SECTION 5. President. The President shall be the principal executive
officer of the Corporation and, subject to the control of the Board of
Directors, shall in general supervise and control all of the business and
affairs of the Corporation. The President shall, when present, preside at all
meetings of the Shareholders and of the Board of Directors in the absence of the
Chairman of the Board. The President shall have authority, subject to such rules
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as may be prescribed by the Board of Directors, to appoint such agents and
employees of the Corporation as he shall deem necessary, to prescribe their
powers, duties and compensation, and to delegate authority to them. Such agents
and employees shall hold office at the discretion of the President. The
President shall have authority to sign, execute, and acknowledge, on behalf of
the Corporation, all deeds, mortgages, bonds, stock certificates, contracts,
leases, reports, and all other documents or instruments necessary or proper to
be executed in the course of the Corporation's regular business, or which shall
be authorized by resolution of the Board of Directors. Except as otherwise
provided by law or the Board of Directors, the President may authorize any Vice
President or other Officer or agent of the Corporation to sign, execute, and
acknowledge such documents or instruments in his place and stead. In general,
the President shall perform all duties incident to the office of President and
such other duties as may be prescribed by the Board of Directors from time to
time.
SECTION 6. The Vice President. In the case of the removal of the President
from office, or death or resignation, the powers and duties of the office shall
devolve upon the Vice President, who shall perform all duties of the office
until a meeting of the directors is held and a President is elected. The Board
of Directors shall empower a Vice President to discharge the duties of the
President in the event of absence or disability of the President. In general,
the Vice President shall perform all duties incident to the office of Vice
President and such other duties as may be prescribed by the Board of Directors
and the President from time to time.
SECTION 7. The Secretary. The Secretary shall: (a) keep the minutes of the
Shareholders' and of the Board of Directors' meetings in one or more books
provided for that purpose; (b) see that all notices are duly given in accordance
with the provisions of these Bylaws or as required by law; (c) be custodian of
the corporate records; (d) keep a register of the post office address of each
Shareholder which shall be furnished to the Secretary by such Shareholder; (e)
sign with the President, or Vice President, certificates for shares of the
Corporation, the issuance of which shall have been authorized by resolution of
the Board of Directors; (f) have general charge of the stock transfer books of
the Corporation; and (g) in general, perform all duties incident to the office
of Secretary and have such other duties and exercise such authority as from time
to time may be designated or assigned to the Secretary by the President or by
the Board of Directors.
SECTION 8. The Treasurer. If required by the Board of Directors, the
Treasurer shall give a bond for the faithful discharge of his or her duties in
such sum and with such surety or sureties as the Board of Directors shall
determine. The Treasurer shall: (a) have charge and custody of and be
responsible for all funds and securities of the Corporation; receive and give
receipts for monies due and payable to the Corporation from any source
whatsoever; and deposit all such monies in the name of the Corporation, in such
banks or other depositories as shall be selected in accordance with the
provisions of ARTICLE V of these Bylaws; and (b) in general, perform all of the
duties incident to the office of Treasurer and have such other duties and
exercise such other authority as from time to time may be delegated or assigned
to the Treasurer by the President or by the Board of Directors.
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SECTION 9. Compensation. The compensation of the Officers shall be fixed
from time to time by the Board of Directors and no Officer shall be prevented
from receiving such compensation by reason of the fact that he or she is also a
Director of the Corporation.
ARTICLE V. CONTRACTS, LOANS, CHECKS AND DEPOSITS
SECTION l. Contracts. The Board of Directors may authorize any Officer or
Officers, agent or agents, to enter into any contract or execute and deliver any
instrument in the name of and on behalf of the Corporation, and such
authorization may be general or confined to specific instances.
SECTION 2. Loans. No loans may be contracted on behalf of the Corporation
and no evidences of indebtedness may be issued in its name unless authorized by
or under the authority of a resolution of the Board of Directors. Such
authorization 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 such Officer or Officers, agent or agents
of the Corporation and in such manner as shall from time to time be determined
by or under the authority of a 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 such
banks, trust companies, or other depositories as may be selected by or under the
authority of the Board of Directors.
SECTION 5. Voting of Securities Owned by this Corporation. Subject always
to the specific directions of the Board of Directors, (a) any shares or other
securities issued by any other corporation and owned or controlled by this
Corporation may be voted at any meeting of security holders of such other
corporation by the President of this Corporation if he be present, or, in his
absence, by the Vice President of this Corporation, and (b) whenever, in the
judgment of the President, or in his absence, the Vice President, it is
desirable for this Corporation to execute a proxy or written consent in respect
to any shares or other securities issued by any other corporation and owned by
this Corporation, such proxy or consent shall be executed in the name of this
Corporation by the President or Vice President of this Corporation, without
necessity of any authorization by the Board of Directors, affixation of
corporate seal or countersignature or attestation by another officer. Any person
or persons designated in the manner above stated as the proxy or proxies of this
Corporation shall have full right, power, and authority to vote the shares or
other securities issued by such other corporation and owned by this Corporation
the same as such shares or other securities might be voted by this Corporation.
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ARTICLE VI. CERTIFICATES FOR SHARES AND THEIR TRANSFER
SECTION l. Certificates for Shares. Certificates representing shares of the
Corporation shall be in such form as shall be determined by the Board of
Directors. Each certificate shall be signed by the President and by the
Secretary. All certificates for shares shall be consecutively numbered or
otherwise identified. The name and address of the person to whom the shares
represented thereby are issued, with the number of shares and date of issue,
shall be entered on the stock transfer books of the Corporation. All
certificates surrendered to the Corporation for transfer shall be canceled and
no new certificates shall be issued until the former certificates for a like
number of shares shall have been surrendered and canceled, except that in case
of a lost, destroyed, or mutilated certificate a new one may be issued therefor
upon such terms and indemnity to the Corporation as the Board of Directors may
prescribe.
SECTION 2. Transfer of Shares. Transfer of shares of the Corporation shall
be made only on the stock transfer books of the Corporation by the holder of
record or by his or her legal representative, who shall furnish proper evidence
of authority to transfer, or by the holder's attorney authorized by power of
attorney duly executed and filed with the Secretary of the Corporation, and on
surrender for cancellation of the certificate for such shares. The person in
whose name shares stand on the books of the Corporation shall be deemed by the
Corporation to be the owner thereof for all purposes.
SECTION 3. Restriction Upon Transfer. The face or reverse side of each
certificate representing shares shall bear a conspicuous notation of any
restriction imposed by the Corporation upon the transfer of such shares.
SECTION 4. Lost, Destroyed or Stolen Certificates. Where the owner claims
that his or her certificate for shares has been lost, destroyed or wrongfully
taken, a new certificate shall be issued in place thereof if the owner (a) so
requests before the Corporation has notice that such shares have been acquired
by a bona fide purchaser, (b) files with the Corporation a sufficient indemnity
bond, and (c) satisfies such other reasonable requirements as the Board of
Directors may prescribe.
SECTION 5. Consideration for Shares. The shares of the Corporation may be
issued for such consideration as shall be fixed from time to time by the Board
of Directors. The consideration to be paid for shares may be paid in whole or in
part in money, in other property, tangible or intangible, or in labor or
services actually performed for the Corporation. When payment of the
consideration for which shares are to be issued shall have been received by the
Corporation, such shares shall be deemed to be fully paid and nonassessable by
the Corporation, except as required by law. No certificate shall be issued for
any share until such share is fully paid.
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SECTION 6. Stock Regulations. The Board of Directors shall have the power
and authority to make all such further rules and regulations not inconsistent
with the statutes of the State of Wisconsin as it may deem expedient concerning
the issue, transfer and registration of certificates representing shares of the
Corporation.
ARTICLE VII. LIABILITY AND INDEMNIFICATION OF
DIRECTORS, OFFICERS, EMPLOYEES AND AGENTS; INSURANCE
SECTION 1. Liability of Directors. No Director shall be liable to the
Corporation, its Shareholders, or any person asserting rights on behalf of the
Corporation or its Shareholders, for damages, settlements, fees, fines,
penalties, or other monetary liabilities arising from a breach of, or a failure
to perform, any duty resulting solely from his or her status as a Director of
the Corporation (or from his or her status as a director, officer, partner,
trustee, member of any governing or decision-making committee, employee or agent
of another corporation or foreign corporation, partnership, joint venture, trust
or other enterprise, including service to an employee benefit plan, which
capacity the Director is or was serving in at the Corporation's request while a
Director of the Corporation) to the fullest extent not prohibited by law, as the
same exists or may hereafter be amended (but, in the case of any such amendment,
only to the extent such amendment permits the Corporation to further limit or
eliminate the liability of a Director than the law permitted the Corporation to
provide prior to such amendment); provided, however, that this limitation on
liability shall not apply where the breach or failure to perform constitutes (a)
a willful failure to deal fairly with the Corporation or its Shareholders in
connection with a matter in which the Director has a material conflict of
interest; (b) a violation of criminal law, unless the Director had reasonable
cause to believe his or her conduct was lawful or no reasonable cause to believe
his or her conduct was unlawful; (c) a transaction from which the Director
derived an improper personal benefit; or (d) willful misconduct.
SECTION 2. Liability of Officers. No Officer shall be liable to the
Corporation for any loss or damage suffered by it on account of any action taken
or omitted to be taken by him or her as an officer of the Corporation (or as an
officer, director, partner, trustee, member of any governing or decision-making
committee, employee or agent of another corporation or foreign corporation,
partnership, joint venture, trust or other enterprise, including service to an
employee benefit plan, which capacity the Officer is or was serving in at the
Corporation's request while being an Officer of the Corporation) in good faith,
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if such person (a) exercised and used the same degree of care and skill as a
prudent person would have exercised or used under the circumstances in the
conduct of his or her own affairs, or (b) took or omitted to take such action in
reliance upon information, opinions, reports or statements prepared or presented
by: (1) an officer or employee of the Corporation whom the officer believed in
good faith to be reliable and competent in the matters presented, or (2) legal
counsel, public accountants and other persons as to matters the officer believed
in good faith were within the person's professional or expert competence.
SECTION 3. Indemnification of Directors, Officers, Employees and Agents.
(a) Right of Directors and Officers to Indemnification. Any person shall be
indemnified and held harmless to the fullest extent permitted by law, as the
same may exist or may hereafter be amended (but, in the case of any such
amendment, only to the extent such amendment permits the Corporation to provide
broader indemnification rights than the law permitted the Corporation to provide
prior to such amendment), from and against all reasonable expenses (including
fees, costs, charges, disbursements, attorney fees and any other expenses) and
liability (including the obligation to pay a judgment, settlement, penalty,
assessment, forfeiture or fine, including an excise tax assessed with respect to
an employee benefit plan) asserted against, incurred by or imposed on him or her
in connection with any action, suit or proceeding, whether civil, criminal,
administrative or investigative ("proceeding") to which he or she is made or
threatened to be made a party by reason of his or her being or having been a
Director or Officer of the Corporation (or by reason of, while serving as a
Director or Officer of the Corporation, having served at the Corporation's
request as a director, officer, partner, trustee, member of any governing or
decision-making committee, employee or agent of another corporation or foreign
corporation, partnership, joint venture, trust or other enterprise, including
service to an employee benefit plan); provided, however, in situations other
than a successful defense of a proceeding, the Director or Officer shall not be
indemnified where he or she breached or failed to perform a duty to the
Corporation and the breach or failure to perform constitutes (a) a willful
failure to deal fairly with the Corporation or its Shareholders in connection
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with the matter in which the Director or Officer has a material conflict of
interest; (b) a violation of criminal law, unless the Director or Officer had
reasonable cause to believe his or her conduct was lawful or no reasonable cause
to believe his or her conduct was unlawful; (c) a transaction from which the
Director or Officer derived an improper personal benefit; or (d) willful
misconduct. Such rights to indemnification shall include the right to be paid by
the Corpo ration reasonable expenses as incurred in defending such proceed ing;
provided, however, that payment of such expenses as incurred shall be made only
upon such person delivering to the Corporation (a) a written affirmation of his
or her good faith belief that he or she has not breached or failed to perform
his or her duties to the Corporation, and (b) a written undertaking, executed
personally or on his or her behalf, to repay the allowance to the extent it is
ultimately determined that such person is not entitled to indemnification under
this provision. The Corporation may require that the undertaking be secured and
may require payment of reasonable interest on the allowance to the extent that
it is ultimately determined that such person is not entitled to indemnification.
(b) Right of Director or Officer to Bring Suit. If a claim under subsection
(a) is not paid in full by the Corporation within 30 days after a written claim
has been received by the Corporation, the claimant may at any time thereafter
bring suit against the Corporation to recover the unpaid amount of the claim
and, if successful in whole or in part, the claimant shall be entitled to be
paid also the reasonable expense of prosecuting such claim. It shall be a
defense to any such action (other than an action brought to enforce a claim for
expenses incurred in defending any proceeding in advance of its final
disposition where the required undertaking has been tendered to the Corporation)
that the claimant has not met the standards of conduct under this Section which
make it permissible for the Corporation to indemnify the claimant for the amount
claimed, but the burden of proving such defense shall be on the Corporation.
(c) Indemnification For Intervention, Etc. The Corporation shall not,
however, indemnify a Director or Officer under this Section for any liability
incurred in a proceeding otherwise initiated (which shall not be deemed to
include counterclaims or affirmative defenses) or participated in as an
intervenor by the person seeking indemnification unless such initiation of or
participation in the proceeding is authorized, either before or after its
commencement, by the affirmative vote of the majority of the Directors in
Office.
(d) Right of Employees and Agents to Indemnification. The Corporation by
its Board of Directors may on such terms as the Board deems advisable indemnify
and allow reasonable expenses of any employee or agent of the Corporation with
respect to any action taken or failed to be taken in his or her capacity as such
employee or agent.
SECTION 4. Contract Rights; Amendment or Repeal. All rights under this
Article shall be deemed a contract between the Corporation and the Director or
Officer pursuant to which the Corporation and the Director or Officer intend to
be legally bound. Any repeal, amendment or modification of this Article shall be
prospective only as to conduct of a Director or Officer occurring thereafter,
and shall not affect any rights or obligations then existing.
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SECTION 5. Scope of Article. The rights granted by this Article shall not
be deemed exclusive of any other rights to which a Director, Officer, employee
or agent may be entitled under any statute, agreement, vote of Shareholders or
disinterested Directors or otherwise. The indemnification and advancement of
expenses provided by or granted pursuant to this Article shall continue as to a
person who has ceased to be a Director or Officer in respect to matters arising
prior to such time, and shall inure to the benefit of the heirs, executors,
administrators and personal representatives of such a person.
SECTION 6. Insurance. The Corporation may purchase and maintain insurance,
at its expense, to protect itself and any person who is a Director, Officer,
employee or agent of the Corporation or is or was serving at the request of the
Corporation as a director, officer, partner, trustee, member of any governing or
decision-making committee, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, including service to an
employee benefit plan, against any liability asserted against that person or
incurred by that person in any such capacity, or arising out of that person's
status as such, whether or not the Corporation would have the power to indemnify
such person against such expense, liability or loss under this Article.
SECTION 7. Prohibited Indemnification and Insurance. Notwithstanding any
other Section in this Article, the Corporation shall not be required to
indemnify and may not purchase and maintain insurance if such indemnification or
insurance is prohibited under applicable federal law or regulation, but shall
indemnify and may purchase and maintain insurance in accordance with this
Article to the extent such indemnification and insurance is not prohibited under
applicable federal law or regulation.
ARTICLE VIII. TRANSACTIONS WITH
CORPORATION; DISALLOWED EXPENSE
SECTION 1. Transactions with the Corporation. Any contract or other
transaction between the Corporation and one or more of its Directors, or between
the Corporation and any firm of which one or more of its Directors are members
or employees, or in which they are interested, or between the Corporation and
any corporation or association of which one or more of its Directors are
Shareholders, members, directors, officers, or employees, or in which they are
interested, shall be valid for all purposes, notwithstanding the presence of
such Director or Directors at the meeting of the Board of Directors of the
Corporation, which acts upon, or in reference to, such contract or transaction,
and notwithstanding his or their participation in such action, if the fact of
such interest shall be disclosed or known to the Board of Directors and the
Board of Directors shall, nevertheless, authorize, approve and ratify such
contract or transaction by a vote of a majority of the Directors present, such
interested Director or Directors to be counted in determining whether a quorum
is present, but not counted in calculating the majority of such quorum necessary
to carry such vote. This Section shall not be construed to invalidate any
contract or other transaction which would otherwise be valid under the common
and statutory law applicable thereto.
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SECTION 2. Reimbursement of Disallowed Expenses. In the event any payment
(either as compensation, interest, rent, expense reimbursement or otherwise) to
any Officer, Director or Shareholder which is claimed as a deduction by this
Corporation for federal income tax purposes shall subsequently be determined not
to be deductible in whole or in part by this Corporation, the recipient shall
reimburse the Corporation for the amount of the disallowed payment, provided
that this provision shall not apply to any expense where the Board, in its sole
discretion, determines such disallowance (including any concession of such issue
by the Corporation in connection with the settlement of other issues in a
disputed case) is manifestly unfair and contrary to the facts. For purposes of
this provision, any such payment shall be determined not to be deductible when
and only when either (a) the same may have been determined by a court of
competent jurisdiction and either the Corporation shall not have appealed from
such determination or the time for perfecting an appeal shall have expired or
(b) such disallowed deduction shall constitute or be contained in a settlement
with the Internal Revenue Service which settlement may have been authorized by
the Board of Directors.
ARTICLE IX. FISCAL YEAR
The fiscal year of the Corporation shall begin on the 1st day of January
and end on the 31st day of December in each year.
ARTICLE X. DIVIDENDS
The Board of Directors may from time to time declare, and the Corporation
may pay, dividends on its outstanding shares in the manner and upon the terms
and conditions provided by law and its Articles of Incorporation.
ARTICLE XI. SEAL
The Corporation shall not have a corporate seal, and all formal corporate
documents shall carry the designation "No Seal" along with the signature of the
Officers.
ARTICLE XII. AMENDMENT
SECTION 1. By Shareholders. These Bylaws may be altered, amended or
repealed and new Bylaws may be adopted by the Shareholders by affirmative vote
of not less than a majority of the outstanding shares of the Corporation
entitled to vote.
SECTION 2. By Directors. These Bylaws may also be altered, amended or
repealed and new Bylaws may be adopted by the Board of Directors by affirmative
vote of not less than a majority of the directors then in office; but no Bylaw
adopted by the Shareholders shall be amended or repealed by the Board of
Directors if the Bylaw so adopted so provides.
SECTION 3. Implied Amendments. Any action taken or authorized by the
Shareholders which would be inconsistent with the Bylaws then in effect but is
taken or authorized by affirmative vote of not less than the number of shares
required to amend the Bylaws so that the Bylaws would be consistent with such
action shall be given the same effect as though the Bylaws had been temporarily
amended or suspended so far, but only so far, as is necessary to permit the
specific action so taken or authorized.
15
EXHIBIT 4
=========
STOCK CERTIFICATE
=================
<PAGE>
SPECIMEN
STOCK CERTIFICATE
=================
NUMBER: SHARES:
RESTRICTED STOCK
Incorporated under the laws of the State of Wisconsin.
Security Financial Services Corporation
Authorized Common 24,000 Shares $100.00 Par Value
This certifies that ______________________ is the owner of
______________________ (common shares -- $100.00 par value) full paid and
non-assessable transferable on the books of the Corporation in person or by duly
authorized Attorney upon surrender of this Certificate properly endorsed.
IN WITNESS WHEREOF the said Corporation has caused this Certificate to be
signed by its duly authorized officers and sealed with the Seal of the
Corporation this _____ day of ___________ A.D., 19___.
- ---------------------------- ---------------------------------
Secretary President
ON REVERSE:
FOR VALUE RECEIVED, _____ hereby sell, assign and transfer unto
______________________________________________ __________ Shares represented by
the within Certificate, and do hereby irrevocably constitute and appoint
_____________________________ Attorney to transfer the said Shares on the books
of the within named Corporation with full power of substitution in the premises.
Dated ______________________, 19___.
In presence of:
- ---------------------------- ---------------------------------
THE SHARES REPRESENTED BY THIS CERTIFICATE AND ANY SALE,
TRANSFER, OR OTHER DISPOSITION THEREOF ARE RESTRICTED UNDER
AND SUBJECT TO THE TERMS AND CONDITIONS CONTAINED IN ARTICLE 5
OF THE CORPORATION'S ARTICLES OF INCORPORATION, A COPY OF
WHICH IS ON FILE AT THE OFFICES OF THE CORPORATION.
EXHIBIT 5
=========
OPINION OF BOARDMAN, SUHR, CURRY & FIELD LLP
============================================
<PAGE>
SPECIMEN
========
_______________, 1999
Security Financial Services Corporation
212 West Prospect Street
Durand, Wisconsin 54736-1123
Reference is made to the Registration Statement on Form S-4 (the
"Registration Statement") to be filed by Security Financial Services Corporation
(the "Corporation") with the Securities and Exchange Commission (the
"Commission") pursuant to the Securities Act of 1933, as amended (the
"Securities Act"), with respect to shares of Common Stock of the Corporation, no
par value, issuable by the Corporation in connection with a reorganization
("Common Stock"), as described in the Prospectus included in the Registration
Statement.
As counsel to the Corporation for purposes of the reorganization, we are
familiar with the Articles of Incorporation and the Bylaws of the Corporation.
We also have examined, or caused to be examined, such other documents and
instruments and have made, or caused to be made, such further investigation as
we have deemed necessary or appropriate to render this opinion.
Based upon the foregoing, it is our opinion that:
(1) The Corporation is duly incorporated and validly existing as a
corporation under the laws of the State of Wisconsin.
(2) The shares of Common Stock of the Corporation when issued upon
consummation of the reorganization and delivered to the shareholders
of Security National Bank in accordance with the provisions of the
Agreement and Plan of Reorganization dated _______________, 1999, will
be validly issued, fully paid and non-assessable under applicable
Wisconsin law, except for statutory liability under Section
180.0622(2)(b) of the Wisconsin Business Corporation Law.
We hereby consent to the use of this opinion as Exhibit 5 to the
Registration Statement, and we further consent to the use of our name in the
Registration Statement under the captions "Legal Matters" and "Tax
Considerations." In giving this consent, we do not admit that we are in the
category of persons whose consent is required under Section 7 of the Securities
Act or the Rules and Regulations of the Commission issued thereunder.
BOARDMAN, SUHR, CURRY & FIELD LLP
EXHIBIT 99
==========
PROXY
=====
<PAGE>
PROXY
=====
SPECIAL MEETING OF SHAREHOLDERS
===============================
Know all men by these presents that I, the undersigned shareholder in
Security National Bank, do hereby appoint Jerry M. Bauer, T.L. Schiefelbein,
Gerald Sundstrom, Gerald L. Levenske, Carole Komro, Robert Davidian, and each of
them individually, my true and lawful attorney, substitute, and proxy, with
power of substitution, for me and in my name to vote at the Special Meeting of
Shareholders of Security National Bank, to be held on September 22, 1999, or at
any adjournment of that meeting, with all powers I should have if personally
present, hereby revoking all proxies heretofore given. I acknowledge that I have
received a Notice of Special Meeting of Shareholders and a Proxy Statement
relating to the meeting. I hereby direct that the person(s) designated above
vote as follows:
(1) FOR [ ] AGAINST [ ] ABSTAIN [ ]
the following resolution:
RESOLVED, that the formation of a bank holding company for Security
National Bank, pursuant to the terms and conditions of an Agreement and
Plan of Reorganization between Security National Bank and Security
Financial Services Corporation and a Merger Agreement between Security
National Bank and New Security National Bank, whereby (i) Security National
Bank will become a wholly-owned subsidiary of Security Financial Services
Corporation, and (ii) shareholders of Security National Bank will become
shareholders of Security Financial Services Corporation, is hereby
authorized and approved.
(2) In his/her discretion as to any other matters that may properly come before
the meeting or any adjournment thereof.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE REORGANIZATION.
This proxy, when properly signed, will be voted in the manner directed by
the undersigned shareholder. If the manner in which to vote is not supplied, the
undersigned shareholder will be deemed to have designated a vote "FOR" the
formation of the bank holding company.
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS.
PLEASE SIGN, DATE AND RETURN THIS PROXY, USING THE ENCLOSED ENVELOPE.
Please sign exactly as your name appears on your stock certificates. When shares
are held by joint tenants, both should sign. When signing as attorney, executor,
administrator, trustee, or guardian, please give full title as such. If a
corporation, please sign in full corporate name by President or other authorized
officer. If a partnership, please sign in partnership name by authorized person.
Dated: ___________________, 1999.
-----------------------------------
Signature
-----------------------------------
Signature if held jointly, or title
