<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(Mark One)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1997
------------------------------------------------
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
-------------------- ---------------------------
Commission File Number: 0-20331
--------------------------------------------------------
Midwest Federal Financial Corp.
- -------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Wisconsin 39-1725856
- -------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
1159 Eighth Street, Baraboo, Wisconsin 53913
- -------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(608) 356-7771
- -------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
N/A
- -------------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past
90 days. X YES NO
------- -----------
Registrant became subject to the filing requirements of the Act on July 7,
1992.
As of August 8, 1997 there were 2,069,998 shares, $.01 par value, of the
registrant's common stock issued and 1,627,674 shares or common shares
equivalents are outstanding.
<PAGE> 2
Midwest Federal Financial Corp.
And Subsidiary
Table of Contents
PART I - Financial Information
- ------------------------------
Consolidated Statements of Financial Condition (unaudited) 1
Consolidated Statements of Operations (unaudited) 2
Consolidated Statements of Cash Flows (unaudited) 3
Notes to Consolidated Financial Statements (unaudited) 4
Managements discussion and Analysis of financial
Condition and Results of Operations 11
PART II - Other Information
- ---------------------------
Item 1. Legal Proceedings 13
Item 2. Changes in Securities 13
Item 3. Defaults Upon Senior Securities 13
Item 4. Submission of Matters to Vote
of Securities Holders 13
Item 5. Other Information 13
Item 6. Exhibits and Reports on Form 8-K 13
<PAGE> 3
Midwest Federal Financial Corp. And Subsidiary
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
June 30, 1997 and December 31, 1996
<TABLE>
<CAPTION>
June 30, 1997 Dec. 31, 1996
ASSETS ------------- -------------
<S> <C> <C>
Cash and cash equivalents $ 5,524,230 $ 6,874,107
Other Interest-bearing deposits 100,000 100,000
Securities held to maturity (fair value 1997 $894,732; 1996 $1,093,240) 900,000 1,100,000
Securities available for sale 37,776,409 34,320,832
Loans held for sale 397,400 527,446
Loans, net of allowance for loan losses 1997 $1,619,387; 1996 $1,538,580 152,208,040 144,201,689
Accrued interest receivable 1,963,904 1,512,342
Premises and equipment, net 4,275,370 4,030,183
Other Assets 3,904,570 3,633,424
------------ ------------
$207,049,923 $196,300,023
============ ============
LIABILITIES AND STOCKHOLDERS EQUITY
Liabilities
Deposits:
Non-interest bearing $ 13,588,818 $ 13,204,354
Interest bearing 146,102,481 139,287,113
------------ ------------
159,691,299 152,491,467
Borrowed Funds 26,890,000 24,800,000
Advance payments by borrowers -- escrow accounts 349,119 141,893
Accrued interest payable and other liabilities 1,871,270 1,962,987
------------ ------------
188,801,688 179,396,347
------------ ------------
Commitments, Contingencies and Credit Risk
Stockholder's Equity
Common stock, par value $.01 per share, 9,000,000 shares authorized,
2,069,998 shares issued, outstanding 1,627,674 and 1,620,379 respectively 20,700 20,700
Additional paid-in capital 6,495,310 6,495,310
Retained earnings, substantially restricted 15,673,183 14,507,322
Unrealized gain (loss) on securities available for sale, net (6,500) (94,600)
Loan to ESOP (319,169) (350,142)
Treasury stock, at cost 442,324 and 449,619 shares respectively (3,615,289) (3,674,914)
------------ ------------
18,248,235 16,903,676
------------ ------------
$207,049,923 $196,300,023
============ ============
</TABLE>
See accompanying notes to consolidated financial statements
Page 1
<PAGE> 4
Midwest Federal Financial Corp.
And Subsidiary
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
Quarter Ended Six Months Ended
------------- ----------------
06/30/97 06/30/96 06/30/97 06/30/96
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Interest and dividend income:
Mortgage loans $2,474,964 $2,197,304 $4,846,761 $4,220,597
Other loans 1,020,224 886,327 1,960,387 1,788,451
Investment securities and interest-bearing deposits 333,834 354,625 640,868 731,269
Mortgage-backed securities 275,138 241,444 515,531 443,247
Dividends on stock in Federal Home Loan Bank 24,648 15,000 48,032 29,860
---------- ---------- ---------- ----------
TOTAL INTEREST AND DIVIDEND INCOME 4,128,808 3,694,700 8,011,579 7,213,424
---------- ---------- ---------- ----------
Interest Expense:
Deposits 1,793,760 1,663,183 3,499,768 3,287,604
Borrowed funds 383,013 219,652 730,679 406,171
---------- ---------- ---------- ----------
TOTAL INTEREST EXPENSE 2,176,773 1,882,835 4,230,447 3,693,775
---------- ---------- ---------- ----------
Net interest income 1,952,035 1,811,865 3,781,132 3,519,649
Provision for loan losses 69,000 52,500 138,000 105,000
---------- ---------- ---------- ----------
Net interest income after provision for loan losses 1,883,035 1,759,365 3,643,132 3,414,649
---------- ---------- ---------- ----------
Non-interest income:
Loan fees and service charges 68,590 63,704 139,448 137,089
Deposit account fees and service charges - Net 214,653 205,350 428,026 383,941
Net gain on sale of investment and mortgage-
backed securities 182,815 40,155 332,837 158,934
Net gain on sale of loans 106,108 71,211 181,377 139,013
Other income 140,999 132,095 261,674 258,837
---------- ---------- ---------- ----------
TOTAL NON-INTEREST INCOME 713,165 512,515 1,343,362 1,077,814
---------- ---------- ---------- ----------
Operating Expenses:
Compensation and other employee benefits 787,328 748,437 1,540,350 1,426,990
Occupancy 198,707 193,570 389,324 396,650
Telephone and postage 94,062 87,839 184,643 175,337
Data processing 89,528 90,425 184,679 180,967
Federal deposit insurance premiums 21,633 67,912 43,526 137,694
Other 255,597 176,978 457,526 387,618
---------- ---------- ---------- ----------
TOTAL OPERATING EXPENSES 1,446,855 1,365,161 2,800,048 2,705,256
---------- ---------- ---------- ----------
Income before provision for income taxes 1,149,345 906,719 2,186,446 1,787,207
Provision for income taxes 394,700 323,700 733,500 643,200
---------- ---------- ---------- ----------
NET INCOME $ 754,645 $ 583,019 $1,452,946 $1,144,007
========== ========== ========== ==========
Total earning per share $ .44 $ .33 $ .84 $ .65
========== ========== ========== ==========
</TABLE>
See accompanying notes to consolidated financial statements
Page 2
<PAGE> 5
Midwest Federal Financial Corp.
And Subsidiary
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
------------------------------------
<S> <C> <C>
06/30/97 06/30/96
-------------- -------------
Cash Flows from operating activities:
Net Income $ 1,452,946 $ 1,144,007
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation 186,960 189,774
Amortization 43,606 43,606
Net amortization (accretion) of bond premiums and discounts 175,694 (12,369)
Provision for loan losses 138,000 105,000
Securities (gains) losses (332,837) (158,934)
Gain on sale of loans (181,377) (139,013)
Origination of loans held for sale (9,321,045) (13,161,190)
Proceeds from sale of loans held for sale 9,632,468 13,672,258
Deferred income taxes 0 0
Increase in accrued interest receivable and other assets (817,814) 86,892
Increase in accrued interest payable and other liabilities (60,318) (100,447)
-------------- -------------
Net cash provided by operating activities 916,283 1,669,584
-------------- -------------
Cash flows from investing activities
Net (increase) decrease in other interest-bearing deposits 0 498,999
Purchases of securities held to maturity 0 0
Proceeds from maturities of securities held to maturity 200,000 800,000
Purchases of securities available for sale (16,223,148) (16,370,026)
Proceeds from sales of securities available for sale 12,270,834 10,376,964
Proceeds from maturities of securities available for sale 793,480 3,501,805
Net increase in loans (8,144,351) (11,914,574)
Purchases of premises and equipment (432,147) (254,267)
-------------- -------------
Net cash (used in) investing activities (11,535,332) (13,361,099)
Cash Flows From Financing Activities
Net increase in deposits 7,199,832 8,637,730
Net increase (decrease) in borrowings 2,090,000 1,250,000
Net increase in advance payments by borrowers for escrow 207,226 222,290
Purchase of treasury stock 0 0
Proceeds from exercise of stock options 31,758 14,340
Dividends paid (259,644) (183,775)
-------------- -------------
Net cash provided by financing activities 9,269,172 9,940,585
-------------- -------------
Increase in cash and cash equivalents (1,349,877) (1,750,930)
Cash and cash equivalents:
Beginning 6,874,107 6,479,903
-------------- -------------
Ending $ 5,524,230 $ 4,728,973
============== =============
Supplemental Cash Flow Information
Cash payments for:
Interest $ 3,499,768 $ 3,287,604
Income taxes 652,648 643,200
See Notes to Consolidated Financial Statements
</TABLE>
Page 3
<PAGE> 6
Midwest Federal Financial Corp.
And Subsidiary
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accounting policies of Midwest Federal Financial Corp. and Subsidiary (the
Company) conform to generally accepted accounting principles and prevailing
practices within the thrift industry. A summary of the more significant
accounting policies follows:
PRINCIPLES OF CONSOLIDATION
The accompanying consolidated financial statements include the accounts of
Midwest Federal Financial Corp., its wholly-owned subsidiary, Baraboo Federal
Bank, FSB (the Bank), and the Bank's wholly-owned subsidiary, BF Financial,
Inc. All significant intercompany accounts and transactions have been
eliminated in consolidation. BF Financial, Inc. offers full service brokerage
services and insurance annuity contracts to its customers.
CASH EQUIVALENTS
The Company generally considers all highly liquid debt instruments with
original maturities when purchased of three months or less to be cash
equivalents.
SECURITIES HELD TO MATURITY AND AVAILABLE FOR SALE
Management determines the appropriate classification of debt securities at the
time of purchase. Debt securities are classified as held-to-maturity when the
Company has the positive intent and ability to hold the securities to maturity.
Held to maturity securities are stated at amortized cost.
Debt securities not classified as held to maturity and marketable equity
securities are classified as available for sale. Available for sale securities
are stated at fair value, with the unrealized gains and losses, net of tax,
reported as a separate component of shareholders' equity. Prior to fiscal
1994, investment securities and mortgage-backed and related securities held for
sale were carried at the lower of cost or market value.
The cost of debt securities classified as held to maturity or available for
sale is adjusted for amortization of premiums and accretion of discounts to
maturity, or in the case of mortgage-backed and related securities, over the
estimated life of the security. Such amortization is based on a level-yield
method and is included in interest income from the respective security.
Interest and dividends are included in interest and dividend income from
investments. The cost of securities sold is based on the specific
identification method.
LOANS HELD FOR SALE
Mortgage loans held for sale generally consist of current production of certain
fixed-rate first mortgage loans. Mortgage loans held for sale are carried at
the lower of cost (less principal payments received) or market value.
LOANS RECEIVABLE
Loans receivable are stated as unpaid principal balances, less the allowance
for loan losses and net deferred loan origination fees. Interest income is
recognized using methods which approximate a level yield on principal amounts
outstanding. Accrual of interest is discontinued either when reasonable doubt
exists as to the full, timely collection of interest or principal or when a
loan becomes contractually past due by 90 days or more with respect to interest
or principal. At that time, any accrued but uncollected interest is reversed,
and additional income is recorded only to the extent that payments are received
and the collection of principal is reasonably assured.
LOAN FEES AND RELATED COSTS
Certain loan origination fees, commitment fees and direct loan origination
costs are being deferred and the net amounts amortized as an adjustment of the
related loan's yield. The Bank is amortizing these amounts into interest
income, using the level yield method, over the contractual life of the related
loan.
Other origination and commitment fees not required to be recognized as a yield
adjustment are included in loan fees and service charges.
Page 4
<PAGE> 7
MIDWEST FEDERAL FINANCIAL CORP.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
FORECLOSED PROPERTIES
Real estate acquired by foreclosure or deed in lieu of foreclosure, is adjusted
to its fair market value upon acquisition and is subsequently carried at the
lower of cost or net realizable value. Costs related to the development and
improvement of property are capitalized; holding costs are charged to expense.
ALLOWANCE FOR LOSSES ON LOANS AND FORECLOSED PROPERTIES
Management periodically reviews loans and foreclosed properties to determine
whether the estimated realizable value of the related asset is less than the
carrying amount. In making such determinations, consideration is given to
estimated sales price, refurbishing costs, and direct holding and selling
costs. When a loss is anticipated, an allowance for the estimated loss is
provided. In addition, general loss allowances are established in excess of
identifiable losses. This allowance is based on the Bank's own loss
experience, that of the financial services industry, and management's ongoing
assessment of the credit risk inherent in the portfolio.
OFFICE PROPERTIES AND EQUIPMENT
Office properties and equipment are recorded at cost. Maintenance and repair
costs are charged to expense as incurred. When property is retired or
otherwise disposed of, the related cost and accumulated depreciation are
removed from the respective accounts and the resulting gain or loss is recorded
in income. The cost of office properties and equipment is being depreciated
principally by accelerated and straight-line methods over the estimated useful
lives of the assets for both financial reporting and tax reporting purposes.
INCOME TAXES
Deferred income taxes have been provided under the liability method. Deferred
tax assets and liabilities are determined based upon the difference between the
financial statement and tax bases of assets and liabilities, as measured by the
enacted tax rates which will be in effect when these differences are expected
to reverse. Deferred tax expense is the result of changes in the deferred tax
asset and liability.
EARNINGS PER SHARE
Earnings per share of common stock for the periods ending June 30, 1997 and
1996 were computed based on consolidated net income and weighted average
outstanding shares. The weighted average outstanding shares for the quarter
ending June 30, 1997 and 1996 were 1,792,262 and 1,719,933 respectively.
Page 5
<PAGE> 8
MIDWEST FEDERAL FINANCIAL CORP.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
ACCOUNTING CHANGES
In February 1997, the Financial Accounting Standards Board Issued Statement No.
128, "Earnings Per Share" (SFAS No. 128). SFAS 128 simplifies the standards
for computing earnings per share and makes the calculation comparable to
international standards. SFAS 128 replaces primary earnings per share with a
presentation of basic earnings per share. It also requires dual presentation
of basic and diluted earnings per share and a reconciliation of basic to
diluted earnings per share.
Basic earnings per share is computed by dividing income available to common
stockholders by the weighted-average number of common shares outstanding for
the period. Diluted earnings per share reflects the potential dilution that
could occur if securities or other contracts to issue common stock were
exercised or converted into common stock or resulted in the issuance of common
stock that then shared in the earnings of the Company.
SFAS 128 is effective for financial statements issued for periods ending after
December 15, 1997, and requires restatement of all prior period earnings per
share data. That is, SFAS 128 will be implemented in the fourth quarter of
1997 and restated back to January 1, 1997. If SFAS 128 had been in effect
during the second quarter of 1997, basic earnings per share would have been
$.46 per share and diluted earnings per share would have been $.44 per share
for the period ended June 30, 1997.
RECLASSIFICATIONS
Certain amounts in these financial statements for prior years have been
reclassified to conform to the June 30, 1997, presentation.
Page 6
<PAGE> 9
MIDWEST FEDERAL FINANCIAL CORP.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2 - DEBT AND EQUITY SECURITIES
Debt and equity securities have been classified in the consolidated statements
of financial condition according to management's intent. The carrying amount
of securities and their approximate fair values are shown below.
<TABLE>
<CAPTION>
Gross Gross Estimated
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
SECURITIES HELD TO MATURITY:
June 30, 1997
U.S. Government and agency securities $ 900,000 $ --- $ 5,268 $ 894,732
============= ========== ========== ===========
December 31, 1996
U.S. Government and agency securities $ 1,100,000 $ 440 $ 7,200 $ 1,093,240
============= ========== ========== ===========
SECURITIES AVAILABLE FOR SALE:
June 30, 1997
U.S. Government and agency securities $ 12,684,439 $ 31,182 $ 132,532 $12,583,089
State and municipal securities 6,735,211 70,538 19,219 6,786,530
Mortgage-backed and related securities 17,525,462 106,351 156,321 17,475,492
Equity securities 841,298 92,675 2,675 931,298
-------------- ---------- ---------- -----------
$ 37,786,410 $ 300,746 $ 310,747 $37,776,409
============= ========== ========== ===========
December 31, 1996
U.S. Government and agency securities $ 11,907,933 $ 30,599 $ 129,628 $11,808,904
State and municipal securities 5,576,226 94,514 6,373 5,664,367
Mortgage-backed securities 15,827,399 46,298 270,410 15,603,287
Equity securities 1,158,874 87,975 2,575 1,244,274
------------- ---------- ---------- -----------
$ 34,470,432 $ 259,386 $ 408,986 $34,320,832
============= ========== ========== ===========
</TABLE>
Page 7
<PAGE> 10
MIDWEST FEDERAL FINANCIAL CORP.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 3 - LOANS RECEIVABLE
- -------------------------
Details of loans receivable
06/30/97 12/31/96
------------ ------------
Commercial real estate $ 39,732,231 $ 35,245,601
Residential real estate 65,998,330 66,615,603
Construction 4,540,451 4,911,600
Consumer installment 19,137,853 16,435,287
Home equity 14,569,865 13,347,187
Commercial 11,941,689 10,643,378
------------ ------------
$155,920,419 $147,198,656
Less:
Undisbursed loan proceeds 2,092,992 1,458,387
Allowance for loan losses 1,619,387 1,538,580
------------ ------------
$152,208,040 $144,201,689
============ ============
Page 8
<PAGE> 11
MIDWEST FEDERAL FINANCIAL CORP.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 4 - DEPOSIT ACCOUNTS
- -------------------------
Deposit accounts are summarized as follows:
<TABLE>
<CAPTION>
06/30/97 12/31/96
---------------------- ----------------------
<S> <C> <C> <C> <C>
Amount Percent Amount Percent
------ ------- ------ -------
Demand Deposit accounts (noninterest-bearing) $ 13,588,818 8.51% $ 13,204,352 8.66%
Negotiable Orders of Withdrawal (NOW) accounts
(2.25% at December 31, 1996 and June 30, 1997) 10,250,826 6.42% 10,775,861 7.07%
Savings Accounts
(2.25% at December 31, 1996 and June 30, 1997) 11,469,689 7.18% 11,255,467 7.38%
Money market accounts
(2.40% to 5.30% at December 31, 1996 and June 30, 1997) 36,085,575 22.60% 30,711,114 20.14%
Certificate Accounts:
Less than 3.00% 0 0 0 0
3.00% to 3.99% 679,837 0.43% 2,398,461 1.57%
4.00% to 4.99% 3,365,838 2.11% 3,474,756 2.28%
5.00% to 5.99% 49,863,347 31.22% 48,399,408 31.74%
6.00% to 6.99% 32,595,305 20.41% 29,819,655 19.55%
7.00% and over 1,792,064 1.12% 2,452,393 1.61%
------------ ------ ------------ ------
Totals $159,691,299 100.00% $152,491,467 100.00%
============ ====== ============ ======
Weighted Average Savings Interest Rate 5.20% 5.10%
==== ====
</TABLE>
Page 9
<PAGE> 12
MIDWEST FEDERAL FINANCIAL CORP.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 5 - RETAINED EARNINGS - SUBSTANTIALLY RESTRICTED
Under the provisions of FIRREA, the Savings Bank is required to meet certain
tangible, core and risk-based capital requirements. Tangible capital generally
consists of stockholders' equity minus certain intangible assets. Core capital
generally consists of stockholders' equity. The risk-based capital
requirements presently address risk related to both recorded assets and
off-balance-sheet commitments and obligations.
The following table summarizes the Savings Bank's capital ratios and the ratios
required by FIRREA and subsequent regulations at June 30, 1997:
<TABLE>
<CAPTION>
Tangible Core Risk-Based
Capital Capital Capital
------------ ----------- ------------
<S> <C> <C> <C>
Savings Bank's regulatory percentage 7.09% 7.09% 10.32%
Required regulatory percentage 1.50% 3.00% 8.00%
----------- ----------- -----------
Excess regulatory percentage 5.59% 4.09% 2.32%
=========== =========== ===========
Savings Bank's regulatory capital $14,549,000 $14,549,000 $16,168,000
Required regulatory capital 3,077,000 6,154,000 12,537,000
----------- ----------- -----------
Excess regulatory capital $11,472,000 $ 8,395,000 $ 3,631,000
=========== =========== ===========
</TABLE>
Page 10
<PAGE> 13
MIDWEST FEDERAL FINANCIAL CORP.
AND SUBSIDIARY
MANAGEMENT'S DISCUSSIONS AND ANALYSIS
OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
FINANCIAL DATA SUMMARY
- ----------------------
TOTAL ASSETS
Total assets have increased by $10.7 million from December 31, 1996, to June
30, 1997, an increase of 5.5%. Deposit growth, and to a lessor extent,
borrowings, have funded increases in earning assets.
LOANS
Net loans receivable have increased by $8.0 million from December 31, 1996, to
June 30, 1997, an increase of 5.5 %. Commercial mortgage loans account for
$4.5 million of this increase and consumer loans account for $2.7 million.
Adjustable rate mortgage loans, commercial and consumer loans are held in the
portfolio of the Bank. Fixed rate mortgage originations continue to be sold to
FHLMC.
CASH AND INVESTMENTS
Mortgage backed securities and investments have increased by $3.3 million, an
increase of 9.2%.
DEPOSITS
Deposit growth from December 31, 1996, to June 30, 1997, was $7.2 million, an
increase of 4.7%. Deposit growth was used to fund the growth in loans and
investments.
BORROWED FUNDS
The borrowed funds of the Bank have increased by $2.1 million. The increase in
borrowed funds has helped fund growth in earning assets.
EQUITY
Equity increased $1.3 million or 8.0%. The increase is primarily due to
increased retained earnings.
OPERATING DATA SUMMARY
- ----------------------
NET INTEREST INCOME
Net interest income for the second quarter of 1997 is up 7.7% over the first
quarter of 1996. The increase in net interest income is due to growth in
assets of 10.3% from one year ago. Year to date net interest income is up 7.4%
due to similar increases in asset growth year to date. Increased market
pressure on deposit rates is the primary cause for the 17 basis point reduction
in net interest margin from one year ago. Second quarter 1997 net interest
margin was 4.17% compared to a record high 4.30% for the second quarter of
1996.
NON-INTEREST INCOME
Non-interest income increased by 39.0% from the quarter ending June 30, 1996,
compared to the quarter ending June 30, 1997, and is up 24.6% year to date.
Increases in gain on sale of securities are primarily responsible for this
increase.
NON-INTEREST EXPENSE
Non-interest expenses increased by 6.0% for the quarter ending June 30, 1997,
when compared to the quarter ending June 30, 1996, and is up 3.5% year to date.
Increases in personnel costs and other costs associated with asset growth were
offset by a decrease in FDIC insurance premiums.
NET INCOME
Net income for the second quarter of 1997 is 29.4% higher than the second
quarter of 1996 and earnings per share increased from $.33 to $.44, or 33%.
Net income year to date is 27.0% higher than 1996 and year to date earnings per
share increased from $.65 to $.84, or 29.2%.
Page 11
<PAGE> 14
MIDWEST FEDERAL FINANCIAL CORP.
AND SUBSIDIARY
KEY OPERATING RATIOS
(UNAUDITED)
ENDED JUNE 30
<TABLE>
<CAPTION>
Three Month Period
--------------------
1997 1996
---- ----
<S> <C> <C>
Return on assets
(Net income divided by average assets) (1) 1.47% 1.30%
Return on average equity
(net income divided by average equity) (1) 17.02% 13.84%
Average equity to average assets 8.66% 9.41%
Interest rate spread
(difference between average yield on interest earning assets and
average cost of interest bearing liabilities) (1) 3.68% 3.81%
Net interest margin
(net interest income as a percentage of average interest
earning assets) (1) 4.13% 4.30%
Non-interest expense to average assets 2.82% 3.04%
Average interest earning assets to interest bearing deposits 109.80% 110.87%
Allowance for loan losses to total loans at end of period 1.05% 1.03%
Net charge-offs to average outstanding loans during the period .00% .00%
Ratio of non-performing assets to total assets .12% .20%
Risk-based capital (of the Bank) 10.32% 13.14%
- -------------------------------------------------------------------
</TABLE>
(1) Annualized
Page 12
<PAGE> 15
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
- ---------------------------
Not Applicable
Item 2. Changes in Securities
- ------------------------------
Not Applicable
Item 3. Defaults upon Senior Securities
- ----------------------------------------
Not Applicable
Item 4. Submission of Matters to Vote of Securities Holders
- ------------------------------------------------------------
Not Applicable
Item 5. Other information
- --------------------------
Not Applicable
Item 6. Exhibits and Reports on Form 8-K
- -----------------------------------------
(a) Exhibits
10.1 Employment Agreement with Gary E. Wegner
10.2 Employment Agreement with Scott D. Huedepohl
10.3 Midwest Federal Financial Corp. 1997 Nonqualified Stock
Option Plan
(b) During the quarter ended June 30, 1997, the Registrant was not
required to file any Current Reports on Form 8-K, and no reports
on Form 8-K were filed.
Page 13
<PAGE> 16
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
MIDWEST FEDERAL FINANCIAL CORP.
\s\ Gary E. Wegner
- ------------------------------------------------
Gary E. Wegner, President & CEO
\s\ Dean C. Carter
- ------------------------------------------------
Dean C. Carter, Chief Financial Officer
Date: August 12, 1997
<PAGE> 1
EXHIBIT 10.1
EMPLOYMENT AGREEMENT
--------------------
This Employment Agreement (this "Agreement") is entered into as of this
17th day of June, 1997 between Gary E. Wegner ("Executive") and Midwest Federal
Financial Corp., a Wisconsin corporation (the "Company").
WHEREAS, Executive is currently employed by the Company as its President
and Chief Executive Officer; and
WHEREAS, Executive also is currently employed by the Company's
wholly-owned subsidiary, Baraboo Federal Bank, FSB, a federally-chartered
capital stock savings bank (the "Bank"), as its President and Chief Executive
Officer under the employment agreement entered into between Executive, the
Company and the Bank dated as of February 26, 1992, and subsequently amended
(the "Prior Agreement"); and
WHEREAS, Executive and the Company desire to enter into this Agreement
pertaining to the terms of the continued employment of Executive with the
Company and the Bank and the security the Company is providing to Executive
with respect to his employment in lieu of the terms and conditions of the Prior
Agreement;
NOW, THEREFORE, the parties hereto agree as follows:
1. Employment of Executive. The Company hereby employs Executive, and
Executive hereby accepts employment with the Company, upon the terms and
conditions hereinafter set forth, for the term set forth in Section 2 of this
Agreement. Executive is employed by the Company to perform the duties of
President and Chief Executive Officer of the Company and the Bank, and the
Company shall cause the Bank to appoint Executive to such positions. The
services to be performed by the Executive shall include those normally
performed by the President and Chief Executive Officer of similar banking
organizations and as directed by the Board of Directors of the Company which
are not inconsistent with the foregoing. It is the Company's present intention
that the services to be performed by Executive shall be substantially similar
to the services presently being performed by Executive. Executive agrees to
devote his full business time to the rendition of such services, subject to
absences for customary vacations and for temporary illnesses. The Company
agrees that during the term of this Agreement (a) it will not reduce the
Executive's job titles, status or responsibilities without the Executive's
consent, (b) Executive shall not be required, without his express written
consent, to be based anywhere other than within the Baraboo metropolitan area,
except for reasonable business travel in connection with the Company's
business, (c) Executive shall not be assigned duties materially inconsistent
with his position, duties, responsibilities, and status as President and Chief
Executive Officer of the Company and the Bank, (d) it will not change in any
significant way the nature or scope of Executive's authority or his overall
working environment, (e) it will not terminate any incentive compensation plan
or arrangement, so that when considered in the aggregate and
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with any substitute plan or plans, the incentive plan or arrangement in which
Executive is participating fail to provide him with substantially the same level
of benefits, (f) it will not materially reduce the secretarial or other
administrative support of the Executive, (g) it will not materially reduce the
number or seniority of other Company personnel who report to Executive, or
materially reduce the frequency with which, or the nature of the matters with
respect to which, such personnel are to report to Executive, other than as part
of a Company-wide reduction in staff; and (h) it will not reduce or adversely
change the salary, perquisites, benefits, contingent benefits or vacation time
which had theretofore been provided to the Executive. During the term of this
Agreement, Executive also shall serve as a director of the Company (subject to
being elected by shareholders), the Bank or any subsidiaries thereof and shall
receive as compensation therefor directors fees in the same amount paid to other
directors of the Company, the Bank or any subsidiaries thereof, as the case may
be, for similar services (which amount shall be in addition to the compensation
provided for under Section 3 hereof). During the term of this Agreement,
Executive also shall serve as an officer of any subsidiaries of the Company or
the Bank without any additional compensation. Executive also may serve on
boards of directors of charitable organizations and other business corporations
and may request personal time off to attend to civic, charitable and personal
investment activities, provided Executive notifies the Board of Directors of the
Company concerning such service and activities, the Board of Directors does not
disapprove them and such service and activities do not interfere with the
discharge of Executive's management duties.
2. Term of Employment. The term of this Agreement and of Executive's
employment hereunder shall be for an initial period commencing on the date
hereof (the "Commencement Date") and ending on the third anniversary of the
date hereof, unless terminated earlier as provided in Sections 5, 6 and 7
hereof. Beginning on the date one year after the Commencement Date, and each
anniversary of the Commencement Date thereafter but not including the
expiration date of this Agreement (each such date is hereinafter referred to as
an "Anniversary Date"), the Board of Directors of the Company may extend the
term of this Agreement for a period of one year in addition to the
then-remaining term, if any, by giving the Executive written notice of such
extension. Reference herein to the term of this Agreement shall refer to both
the initial term and such extended term.
3. Compensation. The Company agrees to compensate or to cause the Bank to
compensate the Executive for his services hereunder during the term of this
Agreement by payment of a base salary at the annual rate of $117,800 in such
monthly, semi-monthly or other payments as are from time to time applicable to
other executive officers of the Bank. The Executive's salary may be increased
from time to time during the term of this Agreement in the sole discretion of
the Board of Directors of the Company, but Executive's salary shall not be
reduced below the level then in effect. Executive also shall be paid directors
fees as provided in Section 1 hereof. In addition, Executive shall be entitled
to participate in incentive compensation plans or arrangements as may from time
to time be established by the Company or the Bank on a basis consistent with
the treatment of other executive officers of the Company or the Bank (but
recognizing differences in responsibilities among executive officers).
Executive also shall be entitled to receive any other bonus or discretionary
compensation payments as the Board of Directors of the Company may determine
from time to time.
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4. Additional Benefits - Expenses. Executive shall be provided such other
benefits (including but not limited to medical, health, life and other
insurance coverage) and shall be entitled to participate in such retirement
plans of the Company and the Bank, as are generally made available to other
executive officers of the Company or the Bank. During his employment,
Executive also shall be entitled to customary vacations in accordance with
vacation policies and practices of the Company or the Bank prevailing from time
to time, and to reimbursement for reasonable expenses incurred on behalf of the
Company or the Bank in accordance with the then prevailing policies and
practices of the Company. Executive also shall be provided an automobile by
the Company for his business and personal use (but Executive agrees to
reimburse the Company for his personal use of the vehicle at a rate established
by the Company), and the Company shall pay Executive's dues for his membership
in the Baraboo County Club. All payments under this Agreement shall be subject
to all federal, state or local withholdings which may be required.
5. Termination.
(a) Just Cause. The Board of Directors of the Company may terminate the
employment of Executive with the Company and the Bank at any time for "Just
Cause." "Just Cause" shall mean personal dishonesty, incompetence, willful
misconduct or breach of a fiduciary duty involving personal profit in the
performance of his duties under this Agreement, intentional failure to perform
stated duties (provided that such nonperformance has continued for 10 days
after the Company has given written notice of such nonperformance to the
Executive and its intention to terminate Executive's employment because of such
nonperformance), willful violation of any law, rule or regulation (other than a
law, rule or regulation relating to a misdemeanor, traffic violation or similar
offense), final cease-and-desist order or material breach of any provision of
this Agreement. If Executive's employment is terminated for "Just Cause", the
Executive shall be entitled to receive his theretofore unpaid base salary for
the period of employment up to the date of termination, but shall not be
entitled to any compensation or employment benefits pursuant to this Agreement
for any period after the date of termination.
(b) Termination or Suspension of Employment as Required by Law.
Notwithstanding anything in this Agreement to the contrary, the following
provisions shall limit the obligation of the Company to continue employing
Executive, but only to the extent required by the applicable regulations of the
OTS (12 C.F.R. Section 563.39), or similar succeeding regulations:
(i) If the Executive is suspended and/or temporarily prohibited from
participating in the conduct of the Bank's affairs by a notice served under
Section 8(e)(3) or (g)(1) of the Federal Deposit Insurance Act (12 U.S.C.
Section 1818(e)(3) and (g)(1)), the Company's obligations under this Agreement
shall be suspended as of the date of service of notice, unless stayed by
appropriate proceedings. If the charges in the notice are dismissed, the
Company may in its discretion (i) pay Executive all or part of the compensation
withheld while its contract obligations hereunder were suspended and (ii)
reinstate (in whole or in part) any of its obligations which were suspended.
If the Company does not pay Executive all of the compensation withheld while
its contract obligations hereunder were suspended or does not reinstate in
whole its obligations which were suspended, Executive may terminate his
employment hereunder pursuant to Section 5(d) and such termination shall be
considered
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as termination for "Good Reason."
(ii) If the Executive is removed and/or permanently prohibited from
participating in the conduct of the Bank's affairs by an order issued under
Section 8(e)(4) or (g)(1) of the Federal Deposit Insurance Act (12 U.S.C.
Section 1818(e)(4) or (g)(1)) all obligations of the Company under this
Agreement shall terminate as of the effective date of the order.
(iii) If the Bank is in default (as defined in Section 3(x)(1) of
the Federal Deposit Insurance Act), all obligations to Executive hereunder shall
terminate as of the date of default, but such termination shall not affect any
vested rights of Executive, the Company or the Bank.
(iv) All obligations under this Agreement may be terminated,
except to the extent determined that continuation of the contract is necessary
for the continued operation of the Bank: (i) by the Director of the Office of
Thrift Supervision (the "Director") or his or her designee at the time the
Federal Deposit Insurance Company enters into an agreement to provide assistance
to or on behalf of the Bank under the authority contained in Section 13(c) of
the Federal Deposit Insurance Act and (ii) by the Director, or his or her
designee at the time the Director or such designee approves a supervisory merger
to resolve problems related to operation of the Bank or when the Bank is
determined by the Director to be in an unsafe or unsound condition.
(v) Termination under this Section 5(b) shall not affect other
rights hereunder which are vested at the time of termination.
(c) Voluntary Termination. Executive may terminate his employment
hereunder at any time for any reason upon giving the Company written notice, at
least ninety (90) days prior to termination of employment. Upon such
termination, Executive shall be entitled to receive Executive's theretofore
unpaid base salary for the period of employment up to the date of termination,
but shall not be entitled to any compensation or employment benefits pursuant
to this Agreement for any period after the date of termination.
(d) Good Reason. Executive may terminate his employment hereunder at
any time for "Good Reason." "Good Reason" shall be deemed to exist if
Executive terminates his employment because, without his express written
consent, the Company breaches any of the terms of this Agreement. If Executive
terminates his employment for "Good Reason," Executive shall receive (i) his
base salary under Section 3 hereof through the then remaining term of employment
under Section 2 (calculated as if his employment had not been terminated under
this Section 5(d)), which amount shall be paid in a lump-sum or in equal monthly
installments at the discretion of Executive, (ii) his theretofore unpaid base
salary and pro-rated incentive compensation for the period of employment up to
the date of termination, (iii) medical and other insurance through the then
remaining term of employment under Section 2 (calculated as if his employment
had not been terminated under this Section 5(d)) consistent with the terms and
conditions set forth in Section 4, (iv) any other benefits to which Executive is
entitled by law or the specific terms of the Company's policies in effect at
the time of termination of employment and (v) an amount equal to the product of
the Company's or the Bank's annual aggregate contribution, for the benefit of
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Executive in the year preceding termination, to all qualified retirement plans
in which Executive participated multiplied by three (calculated as if his
employment had not been terminated under this Section 5(d)). The benefit in (v)
under this Section 5(d) shall be in addition to any benefit payable from any
qualified or non-qualified plans or programs maintained by the Company or the
Bank at the time of termination.
(e) Termination without Just Cause. The Company may terminate
Executive's employment without Just Cause, in which case the Executive shall
receive the amounts that would be paid Executive under Section 5(d) if he had
terminated his employment for Good Reason.
(f) Change in Control. (i) If, at any time after the date hereof, a
"Change in Control" (as hereinafter defined) occurs and within twelve (12)
months thereafter Executive's employment is terminated by the Company other
than for Just Cause or Executive terminates his employment for any reason, then
Executive shall be entitled to the benefits provided below.
(A) The Company shall promptly pay to Executive an amount
equal to the product of 2.99 times Executive's "base amount" as defined in
Section 280G(b)(3) of the Code (such "base amount" to be derived from
Executive's compensation paid by the Company and the Bank).
(B) For purposes of all employee benefit plans (including, but
not limited to, health and life insurance and incentive, pension and retirement
plans) of the Company and the Bank, Executive (and his dependents and
beneficiaries, as the case may be) shall be given service credit for all
purposes for, and shall be deemed to be an employee of the Company and the Bank
during, the term of this Agreement set forth in Section 2 (calculated as if
employment had not been terminated under this Section 5(f)), notwithstanding the
fact that he is no longer an employee of the Company or the Bank; provided that,
if the terms of any of such employee benefit plans do not permit such credit or
deemed employee treatment, the Company or the Bank will make payments and
distributions to Executive outside of the plans in amounts substantially
equivalent to the payments and distributions Executive would have received
pursuant to the terms of the plans and attributable to such credit or deemed
employee treatment, had such credit or deemed employee treatment been permitted
pursuant to the terms of the plans.
(ii) (A) Anything in this Agreement to the contrary
notwithstanding, it is the intention of the Company and Executive that no
portion of any payment under this Agreement, or payments to or for the benefit
of Executive under any other agreement or plan, be deemed an "Excess Parachute
Payment" as defined in Section 280G of the Code, or its successors. It is
agreed that the present value of and any payment to or for the benefit of
Executive in the nature of compensation, receipt of which is contingent on the
occurrence of a Change in Control, and to which Section 280G of the Code applies
(in the aggregate "Total Payments") shall not exceed an amount equal to one
dollar less than the maximum amount that the Company may pay without loss of
deduction under Section 280G(a) of the Code. Present value for purposes of this
Agreement shall be calculated in accordance with Section 280G(d)(4) of the
Code. Within sixty days (60) following the earlier of (1) the giving of notice
of termination of employment or (2) the giving of notice by the Company to
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Executive of its belief that there is a payment or benefit due Executive, the
Company, at the Company's expense, shall obtain the opinion of the Company's
public accounting firm (the "Accounting Firm"), which opinion need not be
unqualified, which sets forth: (a) the amount of the Base Period Income of
Executive (as defined in Code Section 280G), (b) the present value of Total
Payments and (c) the amount and present value of any excess parachute payments.
In the event that such opinion determines that there would be an Excess
Parachute Payment, the payment hereunder shall be modified, reduced or
eliminated as specified by Executive in writing delivered to the Company within
thirty (30) days of his receipt of such opinion or, if Executive fails to so
notify the Company, then as the Company shall reasonably determine, so that
under the bases of calculation set forth in such opinion there will be no Excess
Parachute Payment. In the event that the provisions of Sections 280G and 4999
of the Code are repealed without succession, this Section shall be of no further
force or effect.
(B) In the event that the Accounting Firm is serving as
accountant or auditor for the individual, entity or group effecting the Change
in Control, Executive shall appoint another nationally recognized public
accounting firm to make the determinations required hereunder (which accounting
firm shall then be referred to as the Accounting Firm under Section
5(f)(ii)(A)). All fees and expenses of the Accounting Firm shall be borne
solely by the Company. Any determination by the Accounting Firm shall be
binding upon the Company and Executive.
(iii) For purposes of Section 5(f) of this Agreement, a "Change in
Control" shall be deemed to have occurred if:
(A) a third person, including a "group" as defined in Section
13(d)(3) of the Securities Exchange Act of 1934 (as in effect on the date
hereof), becomes the beneficial owner of shares of the Company having 20% or
more of the total number of votes that may be cast for the election of directors
of the Company, including for this purpose any shares beneficially owned by such
third person or group as of the date hereof; or
(B) as the result of, or in connection with, any cash tender
or exchange offer, merger or other business combination, sale of assets or
contested election, or any combination of the foregoing transactions (a
"Transaction"), the persons who were directors of the Company before the
Transaction shall cease to constitute a majority of the Board of Directors of
the Company or any successor to the Company. (In the event of any reorganization
involving the Company in a transaction initiated by the Company in which the
shareholders of the Company immediately prior to such reorganization become the
shareholders of a successor or ultimate parent company of the Company resulting
from such reorganization and the persons who were directors of the Company
immediately prior to such reorganization constitute a majority of the Board of
Directors of such successor or ultimate parent, no "Change in Control" shall be
deemed to have taken place solely by reason of such reorganization,
notwithstanding the fact that the Company may have become the wholly-owned
subsidiary of another company in such reorganization and members of the Board of
Directors of the Company may have become members of the Board of Directors of
such successor company, and thereafter the term "Company" for purposes of this
paragraph shall refer to such successor or ultimate parent company.); or
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(C) a third person, including a "group" as defined in Section
13(d)(3) of the Securities Exchange Act of 1934 (as in effect on the date
hereof), acquires control, as defined in 12 C.F.R. Section 574.4, or any
successor regulation, of the Company which would require the filing of an
application for acquisition of control or notice of change in control in a
manner set forth in 12 C.F.R. Section 574.3, or any successor regulation.
6. Death of Executive. If Executive shall die during the term of this
Agreement, his employment with the Company and this Agreement shall terminate
and the Company shall pay to a beneficiary designated in writing by Executive,
or in the absence of such designation, to Executive's estate, the full amount
of his theretofore unpaid base salary and pro-rated incentive compensation for
the period of employment up to the date of termination, and the Company shall
have no further obligations hereunder. The preceding sentence shall not be
construed to limit any benefit payable in the event of the death of Executive
under any applicable benefit plans or other arrangements.
7. Disability of Executive. If Executive becomes Totally and Permanently
Disabled (as defined below) during the term of this Agreement, the Company may
terminate Executive's employment and this Agreement, except Sections 8 and 9
hereof, by giving Executive written notice of such termination not less than 5
days before the effective date thereof. If Executive's employment and this
Agreement are terminated pursuant to this Section 7, the Company shall pay to
Executive his theretofore unpaid base salary and pro-rated incentive
compensation for the period of employment up to the date of termination, and
the Company shall have no further obligations to Executive under this
Agreement. The preceding sentence shall not be construed to limit any benefit
payable to Executive under any applicable benefit plans or other arrangements.
The Executive is Totally and Permanently Disabled for purposes of this Section
7 if he is disabled or incapacitated to the extent that he is unable to perform
the duties of President and Chief Executive Officer of the Company or the Bank
for more than three (3) consecutive months, and such disability or incapacity
is expected to continue for more than three (3) additional months as certified
by a medical doctor of Executive's own choosing and concurred in by a doctor of
the Company's choosing.
8. Covenant Not to Compete. Executive acknowledges that the Company would
be substantially damaged by an association of Executive with a depository
institution that competes for customers with the Company and the Bank. Without
the consent of the Company, Executive shall not at any time during the term of
this Agreement or Executive's employment, and for a period of three years
thereafter (regardless of the reason for termination), (a) solicit any person
who was a customer of the Company or the Bank or any of their subsidiaries
during the two year period prior to the termination of this Agreement or
Executive's employment hereunder for Executive or any other person, to offer the
same products or render the same services to such customer as were provided or
proposed to be provided by the Company or the Bank or any of their subsidiaries
to such customer as of the time of termination of Executive's employment, (b)
directly or indirectly, on Executive's behalf or in the service or on the behalf
of others, render or be retained to render similar services as described in
Section 1 hereof, whether as an officer, partner, trustee, consultant, or
employee for any depository institution, which has a banking office located
within 25 miles of any office of the Bank or any banking office of the Company
as of the date of Executive's termination of employment, provided, however, that
Executive shall not be
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deemed to have breached this undertaking if his sole relationship with any other
such entity consists of his holding, directly or indirectly, an equity interest
in such entity not greater than three percent (3%) of such entity's outstanding
equity interest, or (c) actively induce or solicit any employees of the Company
or the Bank to leave such employ. For purposes of this Section 8, "person"
shall include any individual, corporation, partnership, trust, firm,
proprietorship, venture or other entity of any nature whatsoever.
9. Confidential Information. Executive acknowledges that he now has, and
hereunder will have, access to important and confidential information regarding
the business and services of the Company, the Bank and their subsidiaries, and
that the disclosure to, or the use of such information by, any business in
competition with the Company, the Bank or their subsidiaries shall result in
substantial and undeterminable harm to the Company, the Bank and its
subsidiaries. In order to protect the Company, the Bank and its subsidiaries
against such harm and from unfair competition, Executive agrees with the
Company that while employed by the Company and at any time thereafter,
Executive will not disclose, communicate or divulge to anyone, or use in any
manner adverse to the Company, the Bank or their subsidiaries any information
concerning customers, methods of business, financial information or other
confidential information of the Company, the Bank, or their subsidiaries,
except for information as is in the public domain or ascertainable through
common sources of public information (otherwise than as a result of any breach
of this covenant by Executive).
10. Limitation on Termination or Disability Pay. Any payments made to
Executive pursuant to this Agreement or otherwise are subject to and
conditioned upon the compliance of such payments with 12 U.S.C. Section
1828(k) and any regulations promulgated thereunder.
11. Legal Fees and Expenses. The Company shall pay all legal fees and
expenses that Executive may incur in connection with his enforcement of the
terms of this Agreement, but only if and after a legal judgment or settlement
has been reached. Executive shall be entitled to receive interest thereon for
the period of any delay in payment from the date such payment was due at the
rate determined by adding two hundred basis points to the six-month Treasury
Bill rate.
12. Inquiries Regarding Proposed Activities. In the event Executive shall
inquire in writing of the Company whether any proposed action on the part of
Executive would be considered by the Company to be prohibited by or in breach
of the terms of this Agreement, the Company shall have 30 days after receipt of
such notice to express in writing to Executive its position with respect
thereof and in the event such writing shall not be given to Executive, such
proposed action, as set forth in the writing of the Company, shall not be
deemed to be a violation of or breach of this Agreement.
13. No Duty of Mitigation. Executive shall not be required to mitigate
the amount of any payment or benefit provided for in this Agreement by seeking
other employment or otherwise, nor shall the amount of any payment or benefit
provided for in this Agreement be reduced by any compensation earned by
Executive as the result of employment by another employer, by retirement
benefits after the date of termination or otherwise.
14. Successors. This Agreement may not be assigned by the Company except
in
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connection with a merger involving the Company or a sale of substantially
all of its assets (subject to the Change in Control provisions of Section
5(f)), and the obligations of the Company provided for in this Agreement shall
be formally assumed by, and be the binding legal obligations of, any successor
to the Company by purchase, merger, consolidation, or otherwise. This
Agreement may not be assigned by Executive during his life, and upon his death
will be binding upon and inure to the benefit of his heirs, legatees and the
legal representatives of his estate.
15. Notice. For the purposes of this Agreement, notices and all other
communications provided for in this Agreement shall be in writing and shall be
deemed to have been duly given when personally delivered or sent by certified
mail, return receipt requested, postage prepaid, addressed to the respective
addresses set forth on the first page of this Agreement (provided that all
notices to the Company shall be directed to the attention of the Board of
Directors of the Company with a copy to the Secretary of the Company), or to
such other address as either party may have furnished to the other in writing
in accordance herewith.
16. Amendments. No amendment or additions to this Agreement shall be
binding unless in writing and signed by all parties, except as herein otherwise
provided.
17. Severability. The provisions of this Agreement shall be deemed
severable and the invalidity or unenforceability of any provision shall not
affect the validity or enforceability of the other provisions hereof. If,
however, any provision of this Agreement is declared invalid or unenforceable
by a court of competent jurisdiction, then the parties hereto shall in good
faith amend this Agreement to include an alternative provision that
accomplishes a similar result.
18. Governing Law. This Agreement shall be governed by the laws of the
United States to the extent applicable and otherwise by the internal laws of
the State of Wisconsin.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the day
and year first above written.
MIDWEST FEDERAL FINANCIAL CORP.
By: \s\George F. McArthur
---------------------------
Its: Chairman
---------------------------
EXECUTIVE
\s\ Gary E. Wegner
-------------------------------
Gary E. Wegner
The Bank hereby acknowledges this Agreement and by its execution of this
Agreement hereby agrees to fulfill its obligations hereunder.
BARABOO FEDERAL BANK, FSB
By: \s\ George F. McArthur
----------------------------
Its: Chairman
---------------------------
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EXHIBIT 10.2
EMPLOYMENT AGREEMENT
--------------------
This Employment Agreement (this "Agreement") is entered into as of this
17th day of June, 1997 between Scott D. Huedepohl ("Executive") and Midwest
Federal Financial Corp., a Wisconsin corporation (the "Company").
WHEREAS, Executive is currently employed by the Company as its Vice
President; and
WHEREAS, Executive also is currently employed by the Company's
wholly-owned subsidiary, Baraboo Federal Bank, FSB, a federally-chartered
capital stock savings bank (the "Bank"), as its Executive Vice President under
the employment agreement entered into between Executive, the Company and the
Bank dated as of December 29, 1995 (the "Prior Agreement"); and
WHEREAS, Executive and the Company desire to enter into this Agreement
pertaining to the terms of the continued employment of Executive with the
Company and the Bank and the security the Company is providing to Executive
with respect to his employment in lieu of the terms and conditions of the Prior
Agreement;
NOW, THEREFORE, the parties hereto agree as follows:
1. Employment of Executive. The Company hereby employs Executive, and
Executive hereby accepts employment with the Company, upon the terms and
conditions hereinafter set forth, for the term set forth in Section 2 of this
Agreement. Executive is employed by the Company to perform the duties of Vice
President of the Company and Executive Vice President of the Bank, and the
Company shall cause the Bank to appoint Executive to such position. The
services to be performed by the Executive shall include those normally
performed by the Vice Presidents of similar banking organizations and as
directed by the Board of Directors of the Company which are not inconsistent
with the foregoing. It is the Company's present intention that the services to
be performed by Executive shall be substantially similar to the services
presently being performed by Executive. Executive agrees to devote his full
business time to the rendition of such services, subject to absences for
customary vacations and for temporary illnesses. The Company agrees that
during the term of this Agreement (a) it will not reduce the Executive's job
titles, status or responsibilities without the Executive's consent, (b)
Executive shall not be required, without his express written consent, to be
based anywhere other than within the Baraboo metropolitan area, except for
reasonable business travel in connection with the Company's business, (c)
Executive shall not be assigned duties materially inconsistent with his
position, duties, responsibilities, and status as Vice President of the Company
and Executive Vice President of the Bank, (d) it will not change in any
significant way the nature or scope of Executive's authority or his overall
working environment, (e) it will not terminate any incentive compensation plan
or arrangement, so that when considered in the
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aggregate and with any substitute plan or plans, the incentive plan or
arrangement in which Executive is participating fail to provide him with
substantially the same level of benefits, (f) it will not materially reduce the
secretarial or other administrative support of the Executive, (g) it will not
materially reduce the number or seniority of other Company personnel who report
to Executive, or materially reduce the frequency with which, or the nature of
the matters with respect to which, such personnel are to report to Executive,
other than as part of a Company-wide reduction in staff; and (h) it will not
reduce or adversely change the salary, perquisites, benefits, contingent
benefits or vacation time which had theretofore been provided to the Executive.
During the term of this Agreement, Executive also shall serve as a director of
the Bank and shall receive as compensation therefor directors fees in the same
amount paid to other directors of the Bank for similar services (which amount
shall be in addition to the compensation provided for under Section 3 hereof).
During the term of this Agreement, Executive also shall serve as an officer of
any subsidiaries of the Company or the Bank without any additional compensation.
Executive also may serve on boards of directors of charitable organizations and
other business corporations and may request personal time off to attend to
civic, charitable and personal investment activities, provided Executive
notifies the Board of Directors of the Company concerning such service and
activities, the Board of Directors does not disapprove them and such service and
activities do not interfere with the discharge of Executive's management duties.
2. Term of Employment. The term of this Agreement and of Executive's
employment hereunder shall be for an initial period commencing on the date
hereof (the "Commencement Date") and ending on the third anniversary of the
date hereof, unless terminated earlier as provided in Sections 5, 6 and 7
hereof. Beginning on the date one year after the Commencement Date, and each
anniversary of the Commencement Date thereafter but not including the
expiration date of this Agreement (each such date is hereinafter referred to as
an "Anniversary Date"), the Board of Directors of the Company may extend the
term of this Agreement for a period of one year in addition to the
then-remaining term, if any, by giving the Executive written notice of such
extension. Reference herein to the term of this Agreement shall refer to both
the initial term and such extended term.
3. Compensation. The Company agrees to compensate or to cause the Bank to
compensate the Executive for his services hereunder during the term of this
Agreement by payment of a base salary at the annual rate of $__________ in such
monthly, semi-monthly or other payments as are from time to time applicable to
other executive officers of the Bank. The Executive's salary may be increased
from time to time during the term of this Agreement in the sole discretion of
the Board of Directors of the Company, but Executive's salary shall not be
reduced below the level then in effect. Executive also shall be paid directors
fees as provided in Section 1 hereof. In addition, Executive shall be entitled
to participate in incentive compensation plans or arrangements as may from time
to time be established by the Company or the Bank on a basis consistent with
the treatment of other executive officers of the Company or the Bank (but
recognizing differences in responsibilities among executive officers).
Executive also shall be entitled to receive any other bonus or discretionary
compensation payments as the Board of Directors of the Company may determine
from time to time.
4. Additional Benefits - Expenses. Executive shall be provided such other
benefits (including but not limited to medical, health, life and other
insurance coverage) and shall be
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entitled to participate in such retirement plans of the Company and the Bank, as
are generally made available to other executive officers of the Company or the
Bank. During his employment, Executive also shall be entitled to customary
vacations in accordance with vacation policies and practices of the Company or
the Bank prevailing from time to time, and to reimbursement for reasonable
expenses incurred on behalf of the Company or the Bank in accordance with the
then prevailing policies and practices of the Company. Executive also shall
be provided an automobile by the Company for his business and personal use (but
Executive agrees to reimburse the Company for his personal use of the vehicle at
a rate established by the Company). All payments under this Agreement shall be
subject to all federal, state or local withholdings which may be required.
5. Termination.
(a) Just Cause. The Board of Directors of the Company may terminate the
employment of Executive with the Company and the Bank at any time for "Just
Cause." "Just Cause" shall mean personal dishonesty, incompetence, willful
misconduct or breach of a fiduciary duty involving personal profit in the
performance of his duties under this Agreement, intentional failure to perform
stated duties (provided that such nonperformance has continued for 10 days
after the Company has given written notice of such nonperformance to the
Executive and its intention to terminate Executive's employment because of such
nonperformance), willful violation of any law, rule or regulation (other than a
law, rule or regulation relating to a misdemeanor, traffic violation or similar
offense), final cease-and-desist order or material breach of any provision of
this Agreement. If Executive's employment is terminated for "Just Cause", the
Executive shall be entitled to receive his theretofore unpaid base salary for
the period of employment up to the date of termination, but shall not be
entitled to any compensation or employment benefits pursuant to this Agreement
for any period after the date of termination.
(b) Termination or Suspension of Employment as Required by Law.
Notwithstanding anything in this Agreement to the contrary, the following
provisions shall limit the obligation of the Company to continue employing
Executive, but only to the extent required by the applicable regulations of the
OTS (12 C.F.R. Section 563.39), or similar succeeding regulations:
(i) If the Executive is suspended and/or temporarily prohibited from
participating in the conduct of the Bank's affairs by a notice served under
Section 8(e)(3) or (g)(1) of the Federal Deposit Insurance Act (12 U.S.C.
Section 1818(e)(3) and (g)(1)), the Company's obligations under this Agreement
shall be suspended as of the date of service of notice, unless stayed by
appropriate proceedings. If the charges in the notice are dismissed, the
Company may in its discretion (i) pay Executive all or part of the compensation
withheld while its contract obligations hereunder were suspended and (ii)
reinstate (in whole or in part) any of its obligations which were suspended.
If the Company does not pay Executive all of the compensation withheld while
its contract obligations hereunder were suspended or does not reinstate in
whole its obligations which were suspended, Executive may terminate his
employment hereunder pursuant to Section 5(d) and such termination shall be
considered as termination for "Good Reason."
(ii) If the Executive is removed and/or permanently prohibited from
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participating in the conduct of the Bank's affairs by an order issued under
Section 8(e)(4) or (g)(1) of the Federal Deposit Insurance Act (12 U.S.C.
Section 1818(e)(4) or (g)(1)) all obligations of the Company under this
Agreement shall terminate as of the effective date of the order.
(iii) If the Bank is in default (as defined in Section 3(x)(1) of the
Federal Deposit Insurance Act), all obligations to Executive hereunder shall
terminate as of the date of default, but such termination shall not affect any
vested rights of Executive, the Company or the Bank.
(iv) All obligations under this Agreement may be terminated, except to the
extent determined that continuation of the contract is necessary for the
continued operation of the Bank: (i) by the Director of the Office of Thrift
Supervision (the "Director") or his or her designee at the time the Federal
Deposit Insurance Company enters into an agreement to provide assistance to or
on behalf of the Bank under the authority contained in Section 13(c) of the
Federal Deposit Insurance Act and (ii) by the Director, or his or her designee
at the time the Director or such designee approves a supervisory merger to
resolve problems related to operation of the Bank or when the Bank is
determined by the Director to be in an unsafe or unsound condition.
(v) Termination under this Section 5(b) shall not affect other rights
hereunder which are vested at the time of termination.
(c) Voluntary Termination. Executive may terminate his employment
hereunder at any time for any reason upon giving the Company written notice, at
least ninety (90) days prior to termination of employment. Upon such
termination, Executive shall be entitled to receive Executive's theretofore
unpaid base salary for the period of employment up to the date of termination,
but shall not be entitled to any compensation or employment benefits pursuant
to this Agreement for any period after the date of termination.
(d) Good Reason. Executive may terminate his employment hereunder at any
time for "Good Reason." "Good Reason" shall be deemed to exist if Executive
terminates his employment because, without his express written consent, the
Company breaches any of the terms of this Agreement. If Executive terminates
his employment for "Good Reason," Executive shall receive (i) his base salary
under Section 3 hereof through the then remaining term of employment under
Section 2 (calculated as if his employment had not been terminated under this
Section 5(d)), which amount shall be paid in a lump-sum or in equal monthly
installments at the discretion of Executive, (ii) his theretofore unpaid base
salary and pro-rated incentive compensation for the period of employment up to
the date of termination, (iii) medical and other insurance through the then
remaining term of employment under Section 2 (calculated as if his employment
had not been terminated under this Section 5(d)) consistent with the terms and
conditions set forth in Section 4, (iv) any other benefits to which Executive
is entitled by law or the specific terms of the Company's policies in effect at
the time of termination of employment and (v) an amount equal to the product of
the Company's or the Bank's annual aggregate contribution, for the benefit of
Executive in the year preceding termination, to all qualified retirement plans
in which Executive participated multiplied by three (calculated as if his
employment had not been terminated under this Section 5(d)). The benefit in
(v) under this Section 5(d) shall be in
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addition to any benefit payable from any qualified or non-qualified plans or
programs maintained by the Company or the Bank at the time of termination.
(e) Termination without Just Cause. The Company may terminate Executive's
employment without Just Cause, in which case the Executive shall receive the
amounts that would be paid Executive under Section 5(d) if he had terminated
his employment for Good Reason.
(f) Change in Control. (i) If, at any time after the date hereof, a
"Change in Control" (as hereinafter defined) occurs and within twelve (12)
months thereafter Executive's employment is terminated by the Company other
than for Just Cause or Executive terminates his employment for any reason, then
Executive shall be entitled to the benefits provided below.
(A) The Company shall promptly pay to Executive an amount
equal to the product of 2.99 times Executive's "base amount" as defined in
Section 280G(b)(3) of the Code (such "base amount" to be derived from
Executive's compensation paid by the Company and the Bank).
(B) For purposes of all employee benefit plans (including, but
not limited to, health and life insurance and incentive, pension and retirement
plans) of the Company and the Bank, Executive (and his dependents and
beneficiaries, as the case may be) shall be given service credit for all
purposes for, and shall be deemed to be an employee of the Company and the Bank
during, the term of this Agreement set forth in Section 2 (calculated as if
employment had not been terminated under this Section 5(f)), notwithstanding the
fact that he is no longer an employee of the Company or the Bank; provided that,
if the terms of any of such employee benefit plans do not permit such credit or
deemed employee treatment, the Company or the Bank will make payments and
distributions to Executive outside of the plans in amounts substantially
equivalent to the payments and distributions Executive would have received
pursuant to the terms of the plans and attributable to such credit or deemed
employee treatment, had such credit or deemed employee treatment been permitted
pursuant to the terms of the plans.
(ii) (A) Anything in this Agreement to the contrary
notwithstanding, it is the intention of the Company and Executive that no
portion of any payment under this Agreement, or payments to or for the benefit
of Executive under any other agreement or plan, be deemed an "Excess Parachute
Payment" as defined in Section 280G of the Code, or its successors. It is
agreed that the present value of and any payment to or for the benefit of
Executive in the nature of compensation, receipt of which is contingent on the
occurrence of a Change in Control, and to which Section 280G of the Code applies
(in the aggregate "Total Payments") shall not exceed an amount equal to one
dollar less than the maximum amount that the Company may pay without loss of
deduction under Section 280G(a) of the Code. Present value for purposes of this
Agreement shall be calculated in accordance with Section 280G(d)(4) of the
Code. Within sixty days (60) following the earlier of (1) the giving of
notice of termination of employment or (2) the giving of notice by the Company
to Executive of its belief that there is a payment or benefit due Executive, the
Company, at the Company's expense, shall obtain the opinion of the Company's
public accounting firm (the "Accounting Firm"), which opinion need not be
unqualified, which sets forth: (a) the amount
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of the Base Period Income of Executive (as defined in Code Section 280G), (b)
the present value of Total Payments and (c) the amount and present value of any
excess parachute payments. In the event that such opinion determines that there
would be an Excess Parachute Payment, the payment hereunder shall be modified,
reduced or eliminated as specified by Executive in writing delivered to the
Company within thirty (30) days of his receipt of such opinion or, if Executive
fails to so notify the Company, then as the Company shall reasonably determine,
so that under the bases of calculation set forth in such opinion there will be
no Excess Parachute Payment. In the event that the provisions of Sections 280G
and 4999 of the Code are repealed without succession, this Section shall be of
no further force or effect.
(B) In the event that the Accounting Firm is serving as
accountant or auditor for the individual, entity or group effecting the Change
in Control, Executive shall appoint another nationally recognized public
accounting firm to make the determinations required hereunder (which accounting
firm shall then be referred to as the Accounting Firm under Section
5(f)(ii)(A)). All fees and expenses of the Accounting Firm shall be borne
solely by the Company. Any determination by the Accounting Firm shall be
binding upon the Company and Executive.
(iii) For purposes of Section 5(f) of this Agreement, a "Change in
Control" shall be deemed to have occurred if:
(A) a third person, including a "group" as defined in Section
13(d)(3) of the Securities Exchange Act of 1934 (as in effect on the date
hereof), becomes the beneficial owner of shares of the Company having 20% or
more of the total number of votes that may be cast for the election of directors
of the Company, including for this purpose any shares beneficially owned by such
third person or group as of the date hereof; or
(B) as the result of, or in connection with, any cash tender
or exchange offer, merger or other business combination, sale of assets or
contested election, or any combination of the foregoing transactions (a
"Transaction"), the persons who were directors of the Company before the
Transaction shall cease to constitute a majority of the Board of Directors of
the Company or any successor to the Company. (In the event of any reorganization
involving the Company in a transaction initiated by the Company in which the
shareholders of the Company immediately prior to such reorganization become the
shareholders of a successor or ultimate parent company of the Company resulting
from such reorganization and the persons who were directors of the Company
immediately prior to such reorganization constitute a majority of the Board of
Directors of such successor or ultimate parent, no "Change in Control" shall be
deemed to have taken place solely by reason of such reorganization,
notwithstanding the fact that the Company may have become the wholly-owned
subsidiary of another company in such reorganization and members of the Board of
Directors of the Company may have become members of the Board of Directors of
such successor company, and thereafter the term "Company" for purposes of this
paragraph shall refer to such successor or ultimate parent company.); or
(C) a third person, including a "group" as defined in Section
13(d)(3) of the Securities Exchange Act of 1934 (as in effect on the date
hereof), acquires control, as
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defined in 12 C.F.R. Section 574.4, or any successor regulation, of the Company
which would require the filing of an application for acquisition of control or
notice of change in control in a manner set forth in 12 C.F.R. Section 574.3,
or any successor regulation.
6. Death of Executive. If Executive shall die during the term of this
Agreement, his employment with the Company and this Agreement shall terminate
and the Company shall pay to a beneficiary designated in writing by Executive,
or in the absence of such designation, to Executive's estate, the full amount
of his theretofore unpaid base salary and pro-rated incentive compensation for
the period of employment up to the date of termination, and the Company shall
have no further obligations hereunder. The preceding sentence shall not be
construed to limit any benefit payable in the event of the death of Executive
under any applicable benefit plans or other arrangements.
7. Disability of Executive. If Executive becomes Totally and Permanently
Disabled (as defined below) during the term of this Agreement, the Company may
terminate Executive's employment and this Agreement, except Sections 8 and 9
hereof, by giving Executive written notice of such termination not less than 5
days before the effective date thereof. If Executive's employment and this
Agreement are terminated pursuant to this Section 7, the Company shall pay to
Executive his theretofore unpaid base salary and pro-rated incentive
compensation for the period of employment up to the date of termination, and
the Company shall have no further obligations to Executive under this
Agreement. The preceding sentence shall not be construed to limit any benefit
payable to Executive under any applicable benefit plans or other arrangements.
The Executive is Totally and Permanently Disabled for purposes of this Section
7 if he is disabled or incapacitated to the extent that he is unable to perform
the duties of Vice President of the Company or Executive Vice President of the
Bank for more than three (3) consecutive months, and such disability or
incapacity is expected to continue for more than three (3) additional months as
certified by a medical doctor of Executive's own choosing and concurred in by a
doctor of the Company's choosing.
8. Covenant Not to Compete. Executive acknowledges that the Company would
be substantially damaged by an association of Executive with a depository
institution that competes for customers with the Company and the Bank. Without
the consent of the Company, Executive shall not at any time during the term of
this Agreement or Executive's employment, and for a period of three years
thereafter (regardless of the reason for termination), (a) solicit any person
who was a customer of the Company or the Bank or any of their subsidiaries
during the two year period prior to the termination of this Agreement or
Executive's employment hereunder for Executive or any other person, to offer
the same products or render the same services to such customer as were provided
or proposed to be provided by the Company or the Bank or any of their
subsidiaries to such customer as of the time of termination of Executive's
employment, (b) directly or indirectly, on Executive's behalf or in the service
or on the behalf of others, render or be retained to render similar services as
described in Section 1 hereof, whether as an officer, partner, trustee,
consultant, or employee for any depository institution, which has a banking
office located within 25 miles of any office of the Bank or any banking office
of the Company as of the date of Executive's termination of employment,
provided, however, that Executive shall not be deemed to have breached this
undertaking if his sole relationship with any other such entity consists of his
holding, directly or indirectly, an equity interest in such entity not greater
than
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three percent (3%) of such entity's outstanding equity interest, or (c) actively
induce or solicit any employees of the Company or the Bank to leave such
employ. For purposes of this Section 8, "person" shall include any individual,
corporation, partnership, trust, firm, proprietorship, venture or other entity
of any nature whatsoever.
9. Confidential Information. Executive acknowledges that he now has, and
hereunder will have, access to important and confidential information regarding
the business and services of the Company, the Bank and their subsidiaries, and
that the disclosure to, or the use of such information by, any business in
competition with the Company, the Bank or their subsidiaries shall result in
substantial and undeterminable harm to the Company, the Bank and its
subsidiaries. In order to protect the Company, the Bank and its subsidiaries
against such harm and from unfair competition, Executive agrees with the
Company that while employed by the Company and at any time thereafter,
Executive will not disclose, communicate or divulge to anyone, or use in any
manner adverse to the Company, the Bank or their subsidiaries any information
concerning customers, methods of business, financial information or other
confidential information of the Company, the Bank, or their subsidiaries,
except for information as is in the public domain or ascertainable through
common sources of public information (otherwise than as a result of any breach
of this covenant by Executive).
10. Limitation on Termination or Disability Pay. Any payments made to
Executive pursuant to this Agreement or otherwise are subject to and
conditioned upon the compliance of such payments with 12 U.S.C. Section
1828(k) and any regulations promulgated thereunder.
11. Legal Fees and Expenses. The Company shall pay all legal fees and
expenses that Executive may incur in connection with his enforcement of the
terms of this Agreement, but only if and after a legal judgment or settlement
has been reached. Executive shall be entitled to receive interest thereon for
the period of any delay in payment from the date such payment was due at the
rate determined by adding two hundred basis points to the six-month Treasury
Bill rate.
12. Inquiries Regarding Proposed Activities. In the event Executive shall
inquire in writing of the Company whether any proposed action on the part of
Executive would be considered by the Company to be prohibited by or in breach
of the terms of this Agreement, the Company shall have 30 days after receipt of
such notice to express in writing to Executive its position with respect
thereof and in the event such writing shall not be given to Executive, such
proposed action, as set forth in the writing of the Company, shall not be
deemed to be a violation of or breach of this Agreement.
13. No Duty of Mitigation. Executive shall not be required to mitigate
the amount of any payment or benefit provided for in this Agreement by seeking
other employment or otherwise, nor shall the amount of any payment or benefit
provided for in this Agreement be reduced by any compensation earned by
Executive as the result of employment by another employer, by retirement
benefits after the date of termination or otherwise.
14. Successors. This Agreement may not be assigned by the Company except
in connection with a merger involving the Company or a sale of substantially
all of its assets (subject to the Change in Control provisions of Section
5(f)), and the obligations of the
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Company provided for in this Agreement shall be formally assumed by, and be the
binding legal obligations of, any successor to the Company by purchase, merger,
consolidation, or otherwise. This Agreement may not be assigned by Executive
during his life, and upon his death will be binding upon and inure to the
benefit of his heirs, legatees and the legal representatives of his estate.
15. Notice. For the purposes of this Agreement, notices and all other
communications provided for in this Agreement shall be in writing and shall be
deemed to have been duly given when personally delivered or sent by certified
mail, return receipt requested, postage prepaid, addressed to the respective
addresses set forth on the first page of this Agreement (provided that all
notices to the Company shall be directed to the attention of the Board of
Directors of the Company with a copy to the Secretary of the Company), or to
such other address as either party may have furnished to the other in writing
in accordance herewith.
16. Amendments. No amendment or additions to this Agreement shall be
binding unless in writing and signed by all parties, except as herein otherwise
provided.
17. Severability. The provisions of this Agreement shall be deemed
severable and the invalidity or unenforceability of any provision shall not
affect the validity or enforceability of the other provisions hereof. If,
however, any provision of this Agreement is declared invalid or unenforceable
by a court of competent jurisdiction, then the parties hereto shall in good
faith amend this Agreement to include an alternative provision that
accomplishes a similar result.
18. Governing Law. This Agreement shall be governed by the laws of the
United States to the extent applicable and otherwise by the internal laws of
the State of Wisconsin.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and
year first above written.
MIDWEST FEDERAL FINANCIAL CORP.
By: \s\ George F. McArthur
----------------------------
Its: Chairman
EXECUTIVE
\s\ Scott D. Huedepohl
-------------------------------
Scott D. Huedepohl
The Bank hereby acknowledges this Agreement and by its execution of this
Agreement hereby agrees to fulfill its obligations hereunder.
BARABOO FEDERAL BANK, FSB
By: \s\ George F. McArthur
----------------------------
Its: Chairman
---------------------------
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EXHIBIT 10.3
MIDWEST FEDERAL FINANCIAL CORP.
1997 NONQUALIFIED STOCK OPTION PLAN
<PAGE> 2
MIDWEST FEDERAL FINANCIAL CORP.
-------------------------------
1997 NONQUALIFIED STOCK OPTION PLAN
-----------------------------------
Table of Contents
-----------------
Page
----
1. Purpose................................................................ 1
2. Definitions............................................................ 1
3. Shares Available under the Plan........................................ 2
4. Stock Options.......................................................... 2
5. Transferability........................................................ 3
6. Change in Control...................................................... 3
7. Adjustments............................................................ 4
8. Fractional Shares...................................................... 4
9. Withholding Taxes...................................................... 4
10. Effect of Termination of Employment............................... 5
11. Administration of the Plan........................................ 6
12. Amendments and Other Matters...................................... 6
13. Governing Law..................................................... 7
<PAGE> 3
MIDWEST FEDERAL FINANCIAL CORP.
-------------------------------
1997 NONQUALIFIED STOCK OPTION PLAN
-----------------------------------
1. Purpose. The purpose of this Midwest Federal Financial Corp. 1997
Nonqualified Stock Option Plan (the "Plan") is to attract and retain directors,
officers and other key employees of Midwest Federal Financial Corp. (the
"Corporation") and its Subsidiaries and to provide such persons with incentives
and rewards for superior performance. The effective date of this Plan is
January 21, 1997.
2. Definitions. (a) As used in this Plan:
"Board" means the Board of Directors of the Corporation.
"Code" means the Internal Revenue Code of 1986, as amended from time to
time.
"Committee" means a committee of not less than two "Non-Employee
Directors" (as defined in Rule 16b-3(b)(3)(i) under Section 16(b) of the
Exchange Act) appointed by and serving at the pleasure of the Board.
"Common Shares" means (i) shares of the Common Stock, par value $.01 per
share, of the Corporation and (ii) any security into which Common Shares may be
converted by reason of any transaction or event of the type referred to in
Section 7 of this Plan.
"Date of Grant" means the date specified by the Board on which a grant of
Stock Options shall become effective, which shall not be earlier than the date
on which the Board takes action with respect thereto.
"Exchange Act" means the Securities Exchange Act of 1934, as amended from
time to time.
"Market Value per Share" means the fair market value of the Common Shares
as determined by the Board from time to time.
"Nonqualified Option" means a Stock Option that is not intended to qualify
as a tax-qualified option under Section 422 of the Code.
"Optionee" means the person so designated in an Option Agreement.
"Option Agreement" means the written contract evidencing Stock Options
granted under this Plan.
"Option Price" means the purchase price payable upon the exercise of a
Stock Option.
"Participant" means a person who is selected by the Board to receive
benefits under this Plan and (i) is at that time a director or an officer
(including officers who are also directors) or other key employees of the
Corporation or any Subsidiary or (ii) has agreed to commence serving in any such
capacity.
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"Stock Option" means the right to purchase Common Shares from the
Corporation upon the exercise of a Nonqualified Option granted pursuant to
Section 4 of this Plan.
"Subsidiary" means a corporation, partnership, joint venture,
unincorporated association or other entity in which the Corporation has a
direct or indirect ownership or other equity interest.
(b) As used in this Plan, the terms "employed" and "employment" shall be
deemed to refer to service as a nonemployee director, as well as to a
traditional employment relationship, as the case may be.
3. Shares Available under the Plan. (a) Subject to adjustment as
provided in Section 7 of this Plan, the aggregate number of Common Shares
covered by outstanding Stock Options granted under this Plan and issued or
transferred upon the exercise or payment thereof shall not exceed 160,000.
Common Shares issued or transferred under this Plan may be Common Shares of
original issuance or Common Shares held in treasury or a combination thereof.
(b) For the purposes of this Section 3:
(i) Upon payment in cash of the benefit provided by any Stock Option
granted under this Plan, any Common Shares that were covered by that award
shall again be available for issuance or transfer hereunder.
(ii) Common Shares covered by any Stock Option granted under this Plan
shall be deemed to have been issued or transferred, and shall cease to be
available for future issuance or transfer in respect of any Stock Option
granted hereunder, at the earlier of the time when they are actually issued or
transferred or the time when dividends or dividend equivalents are paid
thereon.
4. Stock Options. The Board may from time to time authorize grants to
Participants of Stock Options upon such terms and conditions as the Board may
determine in accordance with the following provisions:
(a) Each grant shall specify the number of Common Shares to which it
pertains.
(b) Each grant shall specify an Option Price per Common Share, which
shall be equal to or greater than the fair market value per share on the
Date of Grant.
(c) Each grant shall specify the form of consideration to be paid in
satisfaction of the Option Price and the manner of payment of such
consideration, which may include (i) cash in the form of currency or check or
other cash equivalent acceptable to the Corporation, (ii) nonforfeitable,
unrestricted Common Shares that are already owned by the optionee and have a
value at the time of exercise that is equal to the Option Price, (iii) any
other legal consideration that the Board may deem appropriate, on such basis
as the Board may determine in accordance with this Plan and (iv) any
combination of the foregoing.
(d) Any grant may provide for deferred payment of the Option Price from
the proceeds of sale through a broker on the date of exercise of some or all
of the Common Shares to which the exercise relates.
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(e) Successive grants may be made to the same Participant regardless of
whether any Stock Options previously granted to the Participant remain
UNEXERCISED.
(f) Each grant may specify a period or periods of continuous employment
of the Optionee by the Corporation or any Subsidiary that are necessary before
the Stock Options or installments thereof shall become exercisable.
(g) On or after the Date of Grant of any Stock Option, the Board may
provide for the payment to the Optionee of dividend equivalents thereon in
cash or Common Shares on a current, deferred or contingent basis, or the Board
may provide that any dividend equivalents shall be credited against the Option
Price.
(h) No Stock Option granted pursuant to this Section 4 may be exercised
more than 10 years from the Date of Grant.
(i) Each Stock Option shall be evidenced by a written agreement (the
"Option Agreement") specifying the Option Price, the terms for payment of the
Option Price, the duration of the Stock Option, and the number of shares of
Common Stock to which the Stock Option pertains. An Option Agreement also may
contain an installment exercise schedule, a noncompetition agreement, a
confidentiality provision, provisions for forfeiture in the event of
termination of the Participant's employment with the Corporation or any of its
subsidiaries, and such other restrictions, conditions and terms, as the
Committee shall determine. Option Agreements need not be identical.
(j) The Committee, in its discretion, shall have the power to accelerate
the dates for exercise of any or all Stock Options, or any part thereof,
granted under the Plan.
5. Transferability. (a) Any grant of a Stock Option under this Plan
may permit the transfer thereof by the Participant upon such terms and
conditions as the Board shall specify.
(b) Any grant made under this Plan may provide that all or any part of the
Common Shares that are to be issued or transferred by the Corporation upon the
exercise of Stock Options shall be subject to further restrictions upon
transfer.
6. Change in Control. (a) Notwithstanding any of the provisions of the
Plan or any Option Agreement, upon a Change in Control of the Corporation (as
defined in Section 6(b)) all outstanding Stock Options shall become fully
exercisable and all restrictions thereon shall terminate in order that Optionees
may fully realize the benefits thereunder. Further, the Committee, as
constituted before such Change in Control, is authorized, and has sole
discretion, as to any Stock Option, either at the time such Option is granted
hereunder or any time thereafter, to take any one or more of the following
actions: (i) provide for the purchase of any such Stock Option, upon the
Optionee's request, for an amount of cash equal to the difference between the
exercise price and the then fair market value of the Common Stock covered
thereby had such Stock Option been currently exercisable; (ii) make such
adjustment to any such Stock Option then outstanding as the Committee deems
appropriate to reflect such Change in Control; and (iii) cause any such Stock
Option then outstanding to be assumed, by the acquiring or surviving
corporation, after such Change in Control.
(b) The term "Change in Control" shall mean the occurrence, at any time
during
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<PAGE> 6
the specified term of a Stock Option granted under this Plan, of any of
the following events:
(i) The Corporation is merged or consolidated or reorganized into or
with another corporation or other legal person (an "Acquiror") and as a result
of such merger, consolidation or reorganization less than 50% of the
outstanding voting securities or other capital interests of the surviving,
resulting or acquiring corporation or other person are owned in the aggregate
by the shareholders of the Corporation, directly or indirectly, immediately
prior to such merger, consolidation or reorganization, other than the Acquiror
or any corporation or other person controlling, controlled by or under common
control with the Acquiror;
(ii) The Corporation sells all or substantially all of its business and/or
assets to an Acquiror, of which less than 50% of the outstanding voting
securities or other capital interests are owned in the aggregate by the
shareholders of the Corporation, directly or indirectly, immediately prior to
such sale, other than the Acquiror or any corporation or other person
controlling, controlled by or under common control with the Acquiror; or
(iii) The election to the Board, without the recommendation or approval of
the incumbent Board, of the lesser of (i) three Directors or (ii) Directors
constituting a majority of the number of Directors of the Corporation then in
office.
7. Adjustments. The Board may make or provide for such adjustments in the
number of Common Shares covered by outstanding Stock Options granted hereunder,
the Option Prices per Common Share applicable to any such Stock Options, and the
kind of shares (including shares of another issuer) covered thereby, as the
Board may in good faith determine to be equitably required in order to prevent
dilution or expansion of the rights of Participants that otherwise would result
from (a) any stock dividend, stock split, combination of shares,
recapitalization or other change in the capital structure of the Corporation or
(b) any merger, consolidation, spin-off, spin-out, split-off, split-up,
reorganization, partial or complete liquidation or other distribution of assets,
issuance of warrants or other rights to purchase securities or any other
corporate transaction or event having an effect similar to any of the
foregoing. In the event of any such transaction or event, the Board may
provide in substitution for any or all outstanding Stock Options under this
Plan such alternative consideration as it may in good faith determine to be
equitable under the circumstances and may require in connection therewith the
surrender of all Stock Options so replaced. Moreover, the Board may on or
after the Date of Grant provide in the Option Agreement that the holder of the
award may elect to receive an equivalent award in respect of securities of the
surviving entity of any merger, consolidation or other transaction or event
having a similar effect, or the Board may provide that the holder will
automatically be entitled to receive such an equivalent award. The Board may
also make or provide for such adjustments in the maximum number of Common
Shares specified in Section 3(a) of this Plan as the Board may in good faith
determine to be appropriate in order to reflect any transaction or event
described in this Section 7.
8. Fractional Shares. The Corporation shall not be required to issue
any fractional Common Shares pursuant to this Plan. The Board may provide for
the elimination of fractions or for the settlement thereof in cash.
9. Withholding Taxes. To the extent that the Corporation is required to
withhold federal, state, local or foreign taxes in connection with any payment
made or
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<PAGE> 7
benefit realized by a Participant or other person under this Plan, and the
amounts available to the Corporation for the withholding are insufficient, it
shall be a condition to the receipt of any such payment or the realization of
any such benefit that the Participant or such other person make arrangements
satisfactory to the Corporation for payment of the balance of any taxes required
to be withheld. At the discretion of the Board, any such arrangements may
include relinquishment of a portion of any such payment or benefit. The
Corporation and any Participant or such other person may also make similar
arrangements with respect to the payment of any taxes with respect to which
withholding is not required.
10. Effect of Termination of Employment. (a) Except as provided in
Sections 6, 10(b), or by the Committee, in its sole discretion, any unvested
Stock Option held by an optionee whose employment with the Corporation and its
subsidiaries or service on the Board is terminated for any reason, shall
terminate on the date of termination of employment or service on the Board.
(b) Notwithstanding any other provision of this Plan to the contrary, in
the event of termination of employment by reason of death, disability, normal
retirement, early retirement with the consent of the Corporation, termination
of employment to enter public service with the consent of the Corporation or
leave of absence approved by the Corporation, or in the event of hardship or
other special circumstances, of a Participant who holds a Stock Option that is
not immediately and fully exercisable, all Stock Options held by such optionee
shall become immediately exercisable. Furthermore, in connection with the
circumstances set forth in this paragraph (b) the Committee may take any action
that it deems to be equitable under the circumstances or in the best interests
of the Corporation, including without limitation waiving or modifying any
limitation or requirement with respect to any award under this Plan. For
purposes of this Section 10(b), "disability" shall mean the inability of an
individual to engage in any substantial gainful activity by reason of any
medically determinable physical or mental impairment which is expected to
result in death or which has lasted or can be expected to last for a continuous
period not less than twelve (12) months. The Committee, in its sole
discretion, shall determine the date of any disability.
(c) Unless exercised, a Participant's vested Stock Options shall terminate
and expire 90 days from the date the Participant's employment terminates for any
reason. Stock Options, including, without limitation, vested Stock Options,
shall terminate if the Participant's employment is terminated for cause. A
Participant's employment shall be deemed terminated for cause if, and only if,
the Participant has: (i) wilfully neglected any material duties of Participant's
employment or has performed such duties in a grossly incompetent manner; (ii)
engaged in wilful misconduct in the performance of his duties as an employee
including, but without limiting the generality of the foregoing,
misappropriation of funds or property of the Corporation or securing or
attempting to secure personally any profit in connection with any transaction
entered into, or proposed to be entered into, by the Corporation; (iii) engaged
in conduct which could result in prejudice to the interests of the Corporation
if he were retained in his position with the Corporation; or (iv) violated the
terms of any non-competition agreement or confidentiality agreement at any time
executed by Participant for the benefit of the Corporation.
(d) Stock Options are granted to a Participant in order to induce the
Participant to become or continue as an employee or director of the
Corporation. Upon the termination of Participant's employment for any reason
or service as a director (including, without limitation, death, disability,
resignation, retirement, or at the election of the Corporation), the
Corporation shall have the option (the "Corporation Option"), exercisable by
written notice
Page 5
<PAGE> 8
to Participant within 180 days after such termination of employment or service
as a director, to purchase all shares of Common Stock owned by a Participant as
a result of his exercise of Stock Options ("Owned Shares") and to terminate all
vested stock options not terminated pursuant to this Section 10. If the
Corporation exercises the Corporation Option, it shall pay Participant on or
before the Settlement Date (as hereinafter defined) an amount equal to : (A) the
product of (i) the sum of all underlying shares covered by vested Stock Options
and all Owned Shares, times (ii) the average closing sales price for a share of
Common Stock as reported on The Nasdaq Stock Market for the period ended twenty
(20) days prior to termination of employment, minus (B) the Option Price of
underlying shares not paid by Participant. On the Settlement Date, Participant
shall deliver to the Corporation any Owned Shares being purchased by the
Corporation pursuant to such exercise concurrently with payment for such Owned
Shares by the Corporation. The "Settlement Date" shall be within thirty (30)
days after the Corporation exercises the Corporation Option.
11. Administration of the Plan. (a) This Plan shall be administered by
the Board, which may delegate any or all of its authority hereunder to the
Committee. To the extent of any such delegation, references in this Plan to the
Board shall be deemed to refer to the Committee, unless the context requires
otherwise. A majority of the Board shall constitute a quorum, and the acts of
the members of the Board who are present at any meeting thereof at which a
quorum is present, or acts unanimously approved by the members of the Board in
writing, shall be the acts of the Board. Subject to the express provisions of
the Plan, the Committee may interpret the Plan, prescribe, amend and rescind
rules and regulations relating to it, determine Stock Option grants and the
terms and provisions of Participants' Option Agreements (which need not be
identical), and make such other determinations as it deems necessary or
advisable for the administration of the Plan.
(b) The interpretation and construction by the Board of any provision of
this Plan or any agreement, notification or document evidencing the grant of
Stock Options and any determination by the Board pursuant to any provision of
this Plan or any such agreement, notification or document, shall be final and
conclusive. No member of the Board shall be liable for any such action taken
or determination made in good faith.
12. Amendment and Other Matters. (a) This Plan may be amended from time
to time by the Board without the approval of the Corporation's shareholders,
unless applicable law or the rules of The Nasdaq Stock Market or stock exchange
on which the Corporation's stock is listed or quoted requires shareholder
approval.
(b) With the concurrence of the affected Participant, the Board may cancel
any agreement evidencing Stock Options granted under this Plan. In the event
of any such cancellation, the Board may authorize the granting of new Stock
Options, which may or may not cover the same number of Common Shares as had
been covered by the canceled Stock Options, at such Option Price, in such manner
and subject to such other terms, conditions and discretion as would have been
permitted under this Plan had the canceled Stock Options not been granted.
(c) The Board may grant under this Plan any Stock Option authorized under
this Plan in exchange for the surrender and cancellation of an award that was
not granted under this Plan, including but not limited to an award that was
granted by the Corporation or a Subsidiary, or by another corporation that is
acquired by the Corporation or a Subsidiary by merger or otherwise, prior to
the adoption of this Plan by the Board, and any such award or combination of
awards so granted under this Plan may or may not cover the same number of
Page 6
<PAGE> 9
Common Shares as had been covered by the canceled award and shall be subject to
such other terms, conditions and discretion as would have been permitted under
this Plan had the canceled award not been granted.
(d) This Plan shall not confer upon any Participant any right with respect
to continuance of employment with the Corporation or any Subsidiary and shall
not interfere in any way with any right that the Corporation or any Subsidiary
would otherwise have to terminate any Participant's employment at any time.
13. Governing Law. The Plan, and all Option Agreements hereunder, shall
be construed in accordance with and governed by the laws of the State of
Wisconsin.
Page 7
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