SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the registrant [X]
Filed by a party other than the registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material pursuant to ss. 240.14a-11(c) or ss. 240.14a-12
GFSB Bancorp, Inc.
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(Name of Registrant as Specified in Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of filing fee (Check the appropriate box):
[X] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11. (set forth the amount on which the filing
fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
(1) Amount previously paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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<PAGE>
[GFSB BANCORP, INC. LETTERHEAD]
September 24, 1999
Dear Fellow Stockholder:
On behalf of the board of directors and management of GFSB Bancorp,
Inc. (the "Company"), I cordially invite you to attend the annual meeting of
stockholders to be held at Gallup Federal Savings Bank's Loan Center located at
214 West Aztec Avenue, Gallup, New Mexico, on October 27, 1999, at 10:00 a.m.
(the "Meeting"). The attached Notice of Annual Meeting and Proxy Statement
describe the formal business to be transacted at the Meeting. During the
Meeting, I will also report on the operations of the Company. Directors and
officers of the Company will be present to respond to any questions stockholders
may have.
The matters to be considered by stockholders at the Meeting are
described in the accompanying Notice of Annual Meeting and Proxy Statement. The
board of directors of the Company has determined that the matters to be
considered at the Meeting are in the best interest of the Company and its
stockholders. For the reasons set forth in the Proxy Statement, the board of
directors unanimously recommends a vote "FOR" each matter to be considered.
WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING, PLEASE SIGN AND
DATE THE ENCLOSED PROXY CARD AND RETURN IT IN THE ACCOMPANYING POSTAGE-PAID
RETURN ENVELOPE AS PROMPTLY AS POSSIBLE. This will not prevent you from voting
in person at the Meeting, but will ensure that your vote is counted if you are
unable to attend the Meeting. YOUR VOTE IS VERY IMPORTANT.
Sincerely,
/s/Jerry R. Spurlin
Jerry R. Spurlin
President
GFSB Bancorp, Inc.
<PAGE>
GFSB BANCORP, INC.
221 WEST AZTEC AVENUE
GALLUP, NEW MEXICO 87301
(505) 722-4361
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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON OCTOBER 27, 1999
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NOTICE IS HEREBY GIVEN that the annual meeting of stockholders (the
"Meeting") of GFSB Bancorp, Inc. ("the Company"), will be held at Gallup Federal
Savings Bank's Loan Center located at 214 West Aztec Avenue, Gallup, New Mexico,
on October 27, 1999 at 10:00 a.m. A proxy card and a proxy statement for the
Meeting are enclosed.
The Meeting is for the purpose of considering and acting upon the
following matters:
1. The election of two directors of the Company;
2. The ratification of the GFSB Bancorp, Inc. 1995 Stock Option
Plan;
3. The ratification of the Gallup Federal Savings Bank Management
Stock Bonus Plan and Trust Agreement; and
4. The ratification of the appointment of Neff & Ricci LLP, as
independent auditors of the Company for the fiscal year ending
June 30, 2000.
The transaction of such other matters as may properly come before the
Meeting or any adjournments thereof may also be acted upon. The board of
directors is not aware of any other business to come before the Meeting. Any
action may be taken on the foregoing proposals at the Meeting on the date
specified above or on any date or dates to which, by original or later
adjournment, the Meeting may be adjourned. Stockholders of record at the close
of business on September 15, 1999 are the stockholders entitled to vote at the
Meeting and any adjournments thereof.
EACH STOCKHOLDER, WHETHER OR NOT HE OR SHE PLANS TO ATTEND THE MEETING, IS
REQUESTED TO SIGN, DATE AND RETURN THE ENCLOSED PROXY WITHOUT DELAY IN THE
ENCLOSED POSTAGE-PAID ENVELOPE. ANY PROXY GIVEN BY THE STOCKHOLDER MAY BE
REVOKED BY FILING WITH THE SECRETARY OF THE COMPANY A WRITTEN REVOCATION OR A
DULY EXECUTED PROXY BEARING A LATER DATE. ANY STOCKHOLDER PRESENT AT THE MEETING
MAY REVOKE HIS OR HER PROXY AND VOTE IN PERSON ON EACH MATTER BROUGHT BEFORE THE
MEETING. HOWEVER, IF YOU ARE A STOCKHOLDER WHOSE SHARES ARE NOT REGISTERED IN
YOUR OWN NAME, YOU WILL NEED ADDITIONAL DOCUMENTATION FROM YOUR RECORD HOLDER TO
VOTE IN PERSON AT THE MEETING.
BY ORDER OF THE BOARD OF DIRECTORS
/s/George S. Perce
George S. Perce
Secretary
Gallup, New Mexico
September 24, 1999
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IMPORTANT: THE PROMPT RETURN OF PROXIES WILL SAVE THE COMPANY THE EXPENSE OF
FURTHER REQUESTS FOR PROXIES IN ORDER TO INSURE A QUORUM AT THE MEETING. A
SELF-ADDRESSED ENVELOPE IS ENCLOSED FOR YOUR CONVENIENCE. NO POSTAGE IS REQUIRED
IF MAILED IN THE UNITED STATES.
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<PAGE>
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PROXY STATEMENT
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GFSB BANCORP, INC.
221 WEST AZTEC AVENUE
GALLUP, NEW MEXICO 87301
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ANNUAL MEETING OF STOCKHOLDERS
October 27, 1999
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GENERAL
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This Proxy Statement is furnished in connection with the solicitation
of proxies by the board of directors of GFSB Bancorp, Inc. (the "Company") to be
used at the annual meeting of stockholders of the Company which will be held at
Gallup Federal Savings Bank's Loan Center located at 214 West Aztec Avenue,
Gallup, New Mexico, on October 27, 1999 at 10:00 a.m. local time (the
"Meeting"). The accompanying notice of the Meeting and this Proxy Statement are
being first mailed to stockholders on or about September 24, 1999. The Company
is the sole stockholder of Gallup Federal Savings Bank (the "Bank").
At the Meeting, stockholders will consider and vote upon (i) the
election of two directors, (ii) the ratification of the GFSB Bancorp, Inc. 1995
Stock Option Plan ("1995 Stock Option Plan"), (iii) the ratification of the
Gallup Federal Savings Bank Management Stock Bonus Plan and Trust Agreement
("MSBP"), (iv) the ratification of the appointment of Neff & Ricci LLP, as
independent auditors of the Company for the fiscal year ending June 30, 2000,
and such other matters as may properly come before the meeting of any
adjournments thereof. The board of directors of the Company (the "Board" or the
"Board of Directors") knows of no additional matters that will be presented for
consideration at the Meeting.
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VOTING AND REVOCABILITY OF PROXIES
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Stockholders who execute proxies retain the right to revoke them at any
time. Unless so revoked, the shares represented by such proxies will be voted at
the Meeting and all adjournments thereof. Proxies may be revoked by written
notice to the Secretary of the Company at the address above or by the filing of
a later dated proxy prior to a vote being taken on a particular proposal at the
Meeting. A proxy will not be voted if a stockholder attends the Meeting and
votes in person. Proxies solicited by the Board of Directors will be voted in
accordance with the directions given therein. Where no instructions are
indicated, signed proxies will be voted "FOR" the nominees for directors set
forth below and "FOR" the other listed proposals. The proxy confers
discretionary authority on the persons named therein to vote with respect to the
election of any person as a director where the nominee is unable to serve, or
for good cause will not serve, matters incident to the conduct of the Meeting,
and matters which the Company receives notice after September 10, 1999.
<PAGE>
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VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF
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Stockholders of record as of the close of business on September 15,
1999 (the "Record Date"), are entitled to one vote for each share of common
stock of the Company (the "Common Stock") held on the Record Date. As of the
Record Date, the Company had 981,308 shares of Common Stock issued and
outstanding.
The certificate of incorporation of the Company ("Certificate of
Incorporation") provides that in no event shall any record owner of any
outstanding Common Stock which is beneficially owned, directly or indirectly, by
a person who beneficially owns in excess of 10% of the then outstanding shares
of Common Stock (the "Limit") be entitled or permitted to any vote with respect
to the shares held in excess of the Limit. Beneficial ownership is determined
pursuant to the definition in the Certificate of Incorporation and includes
shares beneficially owned by such person or any of his or her affiliates or
associates (as such terms are defined in the Certificate of Incorporation),
shares which such person or his or her affiliates or associates have the right
to acquire upon the exercise of conversion rights or options and shares as to
which such person and his or her affiliates or associates have or share
investment or voting power, but shall not include shares beneficially owned by
any employee stock ownership plan or similar plan of the issuer or any
subsidiary.
The presence in person or by proxy of at least a majority of the
outstanding shares of Common Stock entitled to vote (after subtracting any
shares held in excess of the Limit) is necessary to constitute a quorum at the
Meeting. With respect to any matter, any shares for which a broker indicates on
the proxy that it does not have discretionary authority as to such shares to
vote on such matter (the "Broker Non-Votes") will not be considered present for
purposes of determining whether a quorum is present. In the event there are not
sufficient votes for a quorum or to ratify any proposals at the time of the
Meeting, the Meeting may be adjourned in order to permit the further
solicitation of proxies.
As to the election of directors, the proxy being provided by the Board
enables a stockholder to vote for the election of the nominees proposed by the
Board, or to withhold authority to vote for one or more of the nominees being
proposed. Directors are elected by a plurality of the votes of the shares
present in person or represented by proxy at a meeting and entitled to vote in
the election of directors.
As to the ratification of the 1995 Stock Option Plan and the MSBP,
which are submitted as Proposals II and III, respectively, a stockholder may:
(i) vote "FOR" the ratification; (ii) vote "AGAINST" the ratification; or (iii)
"ABSTAIN" with respect to the ratification. With respect to Proposals II and
III, an affirmative vote of a majority of the votes cast at the Meeting, in
person or by proxy, is required to constitute stockholder ratification without
regard to (a) Broker Non-Votes or (b) proxies marked "ABSTAIN" as to such
proposal.
As to the ratification of independent auditors, by checking the
appropriate box, a stockholder may: vote "FOR" the item, (ii) vote "AGAINST" the
item, or (iii) vote to "ABSTAIN" on such item. Under the Company's Certificate
of Incorporation and Bylaws, unless otherwise required by law, all other general
matters shall be determined by a majority of votes cast affirmatively or
negatively without regard to (a) Broker Non-Votes or (b) proxies marked
"ABSTAIN" as to that matter.
Persons and groups owning in excess of 5% of the Common Stock are
required to file certain reports regarding such ownership pursuant to the
Securities Exchange Act of 1934, as amended (the "1934 Act"). The following
table sets forth, as of the Record Date, persons or groups who own more than 5%
of the Common Stock and the ownership of all executive officers and directors of
the Company as a group. Other than as noted below, management knows of no person
or group that owns more than 5% of the outstanding shares of Common Stock at the
Record Date.
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<PAGE>
<TABLE>
<CAPTION>
Percent of Shares of
Amount and Nature of Common Stock
Name and Address of Beneficial Owner Beneficial Ownership Outstanding
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<S> <C> <C>
Gallup Federal Savings Bank Employee Stock Ownership Plan 80,750 8.2%
(the "ESOP")(1)
221 West Aztec Avenue, Gallup, New Mexico
Lance S. Gad(2) 65,701 6.7%
1250 Fence Raw Drive
Fairfield, Connecticut 06430
Charles L. Parker, Jr.(3) 65,122 6.6%
221 West Aztec Avenue
Gallup, New Mexico
Richard C. Kauzlaric(3) 98,120 10.0%
221 West Aztec Avenue
Gallup, New Mexico
George S. Perce(3) 65,121 6.6%
221 West Aztec Avenue
Gallup, New Mexico
All Directors and Executive Officers as a 390,920 38.4%
Group(4) (12 persons)
</TABLE>
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(1) The ESOP purchased such shares for the exclusive benefit of ESOP
participants with funds borrowed from the Company. These shares are held in
a suspense account and are allocated among ESOP participants annually on
the basis of compensation as the ESOP debt is repaid. The ESOP Trustee must
vote all shares allocated to participant accounts under the ESOP as
directed by participants. Unallocated shares and shares for which no timely
voting directors is received will be voted by the ESOP Trustee as directed
by the ESOP Committee. As of the Record Date, 21,520 shares have been
allocated under the ESOP to participant accounts. Based on a Schedule 13G
filed February 24, 1997, the ESOP reported shared voting and dispositive
power with respect to all shares.
(2) Based on a schedule 13G filed on February 10, 1998.
(3) Based, in part, on a Schedule 13G filed February 26, 1998, includes 3,659
shares that may be acquired within 60 days of the Record Date by the
exercise of options.
(4) Excludes 40,035 shares held by the Gallup Federal Savings Bank Management
Stock Bonus Plan (the "Management Stock Bonus Plan" or "MSBP"). Trustees of
the MSBP disclaim beneficial ownership with respect to such shares held in
a fiduciary capacity. Excludes 67,709 shares (80,750 shares minus the
13,041 shares allocated to executive officers) of Common Stock held under
the ESOP for which certain individuals
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<PAGE>
in the group serve as a member of the ESOP Committee or as ESOP Trustee.
Such individuals disclaim beneficial ownership with respect to such shares
held in a fiduciary capacity.
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SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
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The Common Stock of the Company is registered pursuant to Section 12(g)
of the Securities Exchange Act of 1934 ("Exchange Act"). The executive officers
and directors of the Company and beneficial owners of greater than 10% of the
Company's Common Stock ("10% beneficial owners") are required to file reports on
Forms 3, 4, and 5 with the Securities and Exchange Commission ("SEC") disclosing
changes in beneficial ownership of the Common Stock. In August 1999, Mr. Rick
Gallegos, president of the Bank, filed a Form 3 after the transaction was
required to be reported. Except as otherwise noted above, and based solely on
the Company's review of Forms 3, 4, and 5 filed by officers, directors and 10%
beneficial owners of Common Stock, no executive officer, director or 10%
beneficial owners of Common Stock failed to file such ownership reports on a
timely basis during the fiscal year ended June 30, 1999.
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PROPOSAL I - ELECTION OF DIRECTORS
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The Certificate of Incorporation requires that the Board be divided
into three classes, each of which contains approximately one-third of the
members of the Board. The directors are elected by the stockholders of the
Company for staggered three-year terms, or until their successors are elected
and qualified. One class of directors, consisting of James Nechero, Jr. and
Vernon I. Hamilton, has a term of office expiring on the date of the Meeting. A
second class, Michael P. Mataya, Charles L. Parker, Jr. and George S. Perce, has
a term of office expiring at the annual meeting of stockholders to be held in
2000. A third class, consisting of Wallace R. Phillips and Richard C. Kauzlaric,
has a term of office expiring at the annual meeting of stockholders to be held
in 2001. The Board of Directors currently consists of seven members. Two
directors will be elected at the Meeting to serve for three-year terms or until
a successor has been elected and qualified.
James Nechero, Jr. and Vernon I. Hamilton have been nominated by the
Board to serve as directors for three-year terms to expire in 2002. The nominees
are currently members of the Board. It is intended that the persons named in the
proxies solicited by the Board will vote for the election of the named nominees.
If a nominee is unable to serve, the shares represented by all valid proxies
will be voted for the election of such substitute as the Board may recommend or
the size of the Board may be reduced to eliminate the vacancy. At this time, the
Board knows of no reason why either nominee might be unavailable to serve.
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<PAGE>
The following table sets forth the nominees and the directors
continuing in office, their name, age, the year they first became a director of
the Company or the Bank, the expiration date of their current term as a
director, and the number and percentage of the Common Stock beneficially owned.
Each director of the Company is also presently a member of the board of
directors of the Bank. The following table also sets forth the number and
percentage of the Common Stock beneficially owned by the Company's executive
officers as a group.
<TABLE>
<CAPTION>
Shares of
Year First Current Common Stock
Elected or Term to Beneficially Percent
Name and Position(s)(1) Age(2) Appointed(3) Expire Owned of Class
- ----------------------- ------ ------------ ------ ----- --------
<S> <C> <C> <C> <C> <C>
BOARD NOMINEES FOR TERM TO EXPIRE IN 2002
James Nechero, Jr., Director and 65 1976 1999 35,024(4)(6) 3.6%
Assistant Secretary of the Company and
Vice Chairman of the Board of the Bank
Vernon I. Hamilton, Director 69 1990 1999 40,133(4)(6) 4.1%
DIRECTORS CONTINUING IN OFFICE
Michael P. Mataya, Director 49 1994 2000 20,121(4)(6) 2.0%
Charles L. Parker, Jr., Director and 37 1994 2000 65,122(4)(5)(6) 6.6%
Treasurer of the Company
George S. Perce, Director and Secretary 60 1990 2000 65,121(4)(5)(6) 6.6%
of the Company, and Director, Treasurer
and Secretary of the Bank
Wallace R. Phillips, D.D.S., Director 77 1971 2001 26,673(4)(5)(6) 2.7%
and Chairman of the Board of the Company
Richard C. Kauzlaric, Director and 61 1983 2001 98,120(4)(6) 10.0%
Vice-Chairman of the Board of the
Company and Chairman of the Board of
the Bank
CERTAIN EXECUTIVE OFFICERS
Jerry R. Spurlin, President of the 57 25,996(7) 2.6%
Company
Total shares owned by directors and 390,920(8) 38.4%
executive officers (12 persons)
</TABLE>
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(1) Unless otherwise indicated, individual serves in the disclosed position for
both the Company and the Bank.
(2) At June 30, 1999.
(3) Refers to the year the individual first became a director of the Company or
the Bank. All directors of the Bank, except Mr. Spurlin, became directors
of the Company when it was incorporated in March 1995.
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<PAGE>
(4) Includes 3,659 shares of Common Stock that may be acquired within 60 days
of the Record Date pursuant to the exercise of stock options.
(5) Excludes 59,230 unallocated shares of Common Stock held under the ESOP for
which such individual serves as either an ESOP Trustee or as a member of
the ESOP Committee. Beneficial ownership is disclaimed with respect to such
ESOP shares held in a fiduciary capacity.
(6) Excludes 40,035 shares held under the MSBP for which all members of the
board of directors serve as trustee and maintain shared voting and
dispositive power over such shares.
(7) Includes 5,130 shares of Common Stock that may be acquired within 60 days
of the Record Date pursuant to the exercise of stock options.
(8) Includes 36,443 shares of Common Stock that may be acquired within 60 days
of the Record Date pursuant to the exercise of stock options.
Biographical Information on Directors and Executive Officers
Set forth below is certain information with respect to the directors
and executive officers of the Company. All persons have held their present
positions for five years unless otherwise stated.
James Nechero, Jr. serves as Assistant Secretary of the Company and has
served as a Director of the Bank since 1976 and became the Vice-Chairman of the
Board of Directors of the Bank in 1989. Mr. Nechero is the President of Eagle
Energy, Inc., a real estate investment company and is a member of the New Mexico
Amigos.
Vernon I. Hamilton has served as Director of the Bank since 1990. Mr.
Hamilton is President of V.I. Hamilton Construction Co., Inc. Mr. Hamilton is a
member of the United Methodist Church, Elks, BPOE, the Masons, and the Community
Concert Association.
Michael P. Mataya was elected Director of the Bank in August of 1994.
Mr. Mataya is President and Chief Executive Officer of Indian Capital
Distributing Co., a wholesale gasoline marketer. Mr. Mataya is Director of the
New Mexico Petroleum Marketers Association and serves on the Board of Directors
for Los Angeles Crippled Children's Hospital.
Charles L. Parker, Jr. serves as Treasurer of the Company and was
elected Director of the Bank in August of 1994. Mr. Parker is President of
Sanders Trading Corp. and Twin Lakes Trading Corp., and he is an employee of
Thriftway Marketing Corp. Mr. Parker is currently a member of the New Mexico
Amigos.
George S. Perce currently serves as Secretary of the Company and has
served as Director of the Bank since 1990. Mr. Perce is the owner of Perce
Engineering, a professional engineering and surveying company, and Perce Farms
of Deming, a producing pecan grove.
Wallace R. Phillips, D.D.S. is Chairman of the Board of Directors of
the Company and has served as Director of the Bank since 1971. Dr. Phillips is a
retired dentist. He currently serves as Commissioner of the Gallup Municipal
Airport.
Richard C. Kauzlaric has served as Chairman of the Board of Directors
of the Bank since 1989 and as a Director since 1983. He is Vice-Chairman of the
Board of Directors of the Company. Mr. Kauzlaric is President of Bubany
Insurance Agency, Inc. He is President of Western New Mexico Gallup Foundation,
past Regent of Western New Mexico University, Past President of New Mexico
Amigos, and
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<PAGE>
a sustaining member of the Amigos. Mr. Kauzlaric has been instrumental in the
redevelopment of downtown Gallup.
Jerry R. Spurlin has been with the Bank since September of 1990 and
served as President from February 1991 to November 1998. Mr. Spurlin was elected
Director of the Bank in March of 1995. Previously, he was an Executive Vice
President, Senior Vice President and Vice President at a financial institution
in Alamogordo, New Mexico. He has served twice as President of the
Gallup-McKinley County Chamber of Commerce, and is the Chairman of the
Administrative Council for the First United Methodist Church of Gallup. Mr.
Spurlin is Secretary/Treasurer of New Mexico Western University Gallup
Foundation, a former director of the Gallup Downtown Development Group and a
member of the Gallup Rotary Club. He is the Treasurer and a director of the
Navajo Partnership for Housing.
Richard P. Gallegos, age 48, joined the Bank as its President on
November 16, 1998. Previously Mr. Gallegos was a President and Vice President of
a financial institution in Gallup, New Mexico and Albuquerque, New Mexico. He is
Treasurer of the Gallup-McKinley County Chamber of Commerce, a committee member
of the McKinley/Cibola/San Juan Counties Enterprise Loan Fund and a member of
the Gallup Rotary Club. Mr. Gallegos has served on the board of Consumer Credit
Counseling of New Mexico.
Marshall W. Coker, age 42, has been with the Bank since October of 1995
as Chief Administrative Officer. Previously, Mr. Coker was a Vice President and
an Assistant Vice President at a financial institution in Albuquerque, New
Mexico. Prior to Mr. Coker's experience at New Mexico financial institutions, he
worked for the Office of Thrift Supervision as an Examiner and a Corporate
Analyst. While with the Office of Thrift Supervision, Mr. Coker earned the
distinction as a Federal Thrift Regulator. He is a member of the First Baptist
Church of Gallup and the Kiwanis Club of Gallup.
William W. Head, Jr., age 59, joined the Bank as Chief Lending Officer
on November 1, 1995. Prior to that, Mr. Head was a lawyer in private practice
for 30 years, with emphasis the last 20 years in banking, commercial, real
estate and probate law. He has been a member of the Board of Directors and
President of the Inter-Tribal Indian Ceremonial Association. He is a director of
the Housing Authority of the City of Gallup.
Jennifer Hembd, age 53, has been with the Bank since April 1997 as Vice
President/Real Estate Loan Officer. Previously, Ms. Hembd was a senior loan
officer for a New Mexico mortgage company and a senior loan officer and
community outreach officer at a financial institution in Santa Rosa, California.
Meetings and Committees of the Board of Directors
The Board of Directors of the Company conducts its business through
meetings of the Board and through activities of its committees. All committees
act for both the Company and the Bank. During the fiscal year ended June 30,
1999, the board of directors of the Company held four regular meetings and ten
special meetings and the board of directors of the Bank held twelve regular
meetings and eight special meetings. No director attended fewer than 75% of the
aggregate of: (1) the total meetings of the board of directors of the Bank and
the Company and (2) the total number of meetings held by all committees on which
such director served during the fiscal year ended June 30, 1999.
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<PAGE>
The Company's full board of directors acts as a non-standing nominating
committee ("Nominating Committee") and selects the management nominees for
election of directors. In its deliberations, the Nominating Committee considers
each candidate's knowledge of the banking business and involvement in community,
business, and civic affairs. While the Board of Directors will consider nominees
recommended by stockholders, it has not actively solicited recommendations.
Nominations by stockholders must be made in accordance with the Certificate of
Incorporation and must be made in writing to the Secretary of the Company and
must be delivered to, or received at, the executive office of the Company not
less than 60 days prior to the anniversary date of the immediately preceding
annual meeting of stockholders. The notice must state for each nominee and the
nominating stockholder: (i) name, age, business address and residence address,
(ii) principal occupation or employment, (iii) shares of Common Stock owned, and
(iv) other information that would be required for a nominee in the Company's
proxy material. The notice must further state the name, address and ownership of
Common Stock of all stockholders known to support the nominee. During the fiscal
year ended June 30, 1999, the Board meet once as the Nominating Committee.
The Executive Committee of the Bank consists of Messrs Kauzlaric,
Nechero, Perce and Gallegos. The Executive Committee met 13 times during the
fiscal year ended June 30, 1999 and exercises the powers of the Board of
Directors between meetings of the Board of Directors.
The Personnel and Compensation Committee of the Bank, a standing
committee, consists of Messrs Perce, Phillips, Mataya, Hamilton, Nechero,
Kauzlaric and Gallegos. The Personnel and Compensation Committee meets as needed
to review all personnel matters. As a member of the Personnel and Compensation
Committee, Mr. Gallegos does not act on matters related to his compensation. The
Personnel and Compensation Committee met three times during the fiscal year
ended June 30, 1999.
The Audit/Investment Committee of the Bank was comprised of Directors
Parker, Kauzlaric, Nechero and Spurlin. The Audit/Investment Committee met
monthly to select independent auditors, review audit reports, and to review and
approve internal controls for financial reporting. From July 1, 1998 to October
26, 1998, the Audit/Investment Committee met five times. The Audit/Investment
Committee was subsequently split into two separate committees. The recently
formed Audit Committee of the Bank, a standing committee, is comprised of
Directors Perce, Kauzlaric and Mataya. The Audit Committee meets quarterly and
as needed to select independent auditors, review audit reports and to review and
approve internal controls for financial reporting. The Audit Committee met two
times during the fiscal year ended June 30, 1999.
Director Compensation
Each member of the Board of Directors of the Company receives an annual
retainer of $1,200 plus $100 per regular or special board meeting attended. Each
member of the Board of Directors of the Bank who attends a minimum of ten
regular meetings receives an annual fee of $12,000. The Chairman of the Board of
the Bank receives an additional fee of $6,000. Committee members receive fees of
$100 per meeting attended. Two former directors receive Advisory Director fees
of $250 per month. No Board or Committee fees are paid to Board members who are
also employees. During the fiscal year ended June 30, 1999, the Company paid a
total of $118,200 in director fees.
Prior Stock Awards. On January 5, 1996, the stockholders of the Company
approved the GFSB Bancorp, Inc. 1995 Stock Option Plan ("1995 Stock Option
Plan") and the Gallup Federal Savings Bank
-8-
<PAGE>
Management Stock Bonus Plan ("Management Stock Bonus Plan"). Directors Phillips,
Kauzlaric, Nechero, Hamilton, Mataya, Parker, and Perce, received (as of the
date of stockholder approval) options to purchase 6,099 shares of Common Stock
under the 1995 Stock Option Plan and 2,439 shares of restricted stock under the
Management Stock Bonus Plan. The options granted to these directors were first
exercisable at a rate of 20% the first year from the date of grant and 20%
annually thereafter. Similarly, restricted stock granted to the above named
directors vested 20% the first year from the date of grant and 20% annually
thereafter.
Executive Compensation
Summary Compensation Table. The following table sets forth the cash and
non-cash compensation awarded to or earned by the President of the Company for
the fiscal years provided below. No other executive officer of the Company or
the Bank received cash compensation in excess of $100,000 for the fiscal year.
<TABLE>
<CAPTION>
Long Term Compensation
Annual Compensation Awards
--------------------------------------------- ----------------------------
Securities
Restricted Underlying
Name and Other Annual Stock Options/ All Other
Principal Position Year Salary Bonus Compensation(1) Awards($)(2) SARs(#) Compensation
- ------------------- ------ ------ ----- --------------- ------------ ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Jerry R. Spurlin 1999 $ 75,483 $ 22,500 $ 2,500 $ - -- $ 23,337(3)
President 1998 $ 66,983 $ 12,500 $ 6,000 $ -- -- $ 40,289(4)
1997 $ 66,833 $ 0 $ 6,000 $ -- -- $ 37,302(5)
</TABLE>
- -----------------
(1) Represents annual automobile allowance.
(2) At June 30, 1999, Mr. Spurlin had 1,800 shares of restricted stock in the
aggregate which had a total value of $24,300 (calculated by multiplying the
aggregate number of restricted stock by the Common Stock's closing market
price as of the last day of the fiscal year). Dividends will be paid on the
restricted stock awarded.
(3) Includes $1,642 of health and life insurance and an allocation of 1,607
shares of Common Stock under the Bank's ESOP for fiscal year 1999, valued
at $21,695 (based upon the Common Stock's closing market price of $13.50 on
June 30, 1999).
(4) Includes $1,505 of health and life insurance paid on behalf of Mr. Spurlin,
and an allocation of 2,424 shares of Common Stock under the Bank's ESOP for
fiscal year 1998, valued at $38,784 (based upon the Common Stock's closing
market price of $16.00 on June 30, 1998).
(5) Includes $1,582 of health and life insurance paid on behalf of Mr. Spurlin
and an allocation of 2,820 shares of Common Stock under the Bank's ESOP for
fiscal year 1997, valued at $35,720 (based upon the Common Stock's closing
market price of approx. $12.67 per share on June 30, 1997).
Other Benefits
1995 Stock Option Plan
The 1995 Stock Option Plan became effective on January 5, 1996 and
provides for a term of ten years, after which no awards may be made, unless
earlier terminated by the Board of Directors pursuant to the terms of the 1995
Stock Option Plan. No stock options were awarded to executive officers named in
the Compensation Table during the fiscal year Ended June 30, 1999.
-9-
<PAGE>
<TABLE>
<CAPTION>
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FY-END
OPTION/SAR VALUES
- ------------------------------ -------------- ------------ --------------------------- -----------------------------
Number of Securities
Underlying Unexercised Value of Unexercised
Shares Options/SARs in-the-Money Options/SARs
Acquired on Value at Fiscal Year-End at Fiscal Year-End
Exercise Realized (#) ($)
Name (#) ($) Exercisable/Unexercisable Exercisable/Unexercisable
- ------------------------------ -------------- ------------ --------------------------- -----------------------------
<S> <C> <C> <C> <C>
Jerry R. Spurlin -- -- 5,130 / 3,420 $21,803 / 14,535(1)
</TABLE>
- ---------------
(1) Based upon an exercise price of $9.25 per share versus a closing price of
$13.50 at June 30, 1999.
- --------------------------------------------------------------------------------
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
- --------------------------------------------------------------------------------
The Bank, like many financial institutions has followed a policy of
granting various types of loans to officers, directors, and employees. Such
loans have been made in the ordinary course of business and on substantially the
same terms including collateral, as those prevailing at the time for comparable
transactions with the general public and must not involve more than the normal
risk of collectibility, or present other unfavorable features. In addition,
loans made to a director or executive officer in excess of the greater of
$25,000 or 5% of the Bank's capital and surplus (up to a maximum of $500,000)
must be approved in advance by a majority of the disinterested members of the
Board of Directors. However, as part of the Bank's compensation program, the
Bank sets the interest rate for loans approved for full-time employees, officers
and directors for personal, non-business purposes at a rate which is 1% lower
than the rate for non-employees for the same type of loan, as long as the
resulting interest rate is not lower than the Bank's cost of funds. Such rates
are only effective while such persons are employees, officers, or directors of
the Bank. As of June 30, 1999, the Bank's directors and executive officers had
loans outstanding from the Bank with current balances of $929,966 in the
aggregate or approximately 10.6% of retained earnings.
Except as noted below, no directors or executive officers were engaged
in transactions with the Bank or any subsidiary involving more than $60,000
during the fiscal year ended June 30, 1999. Furthermore, the Bank had no
"interlocking" relationships existing on or after June 30, 1999 in which (1) any
executive officer is a member of the Board of Directors/Trustees of another
entity, one of whose executive officers is a member of the Bank's board of
directors, or where (ii) any executive officer is a member of the compensation
committee of another entity, one of whose executive officers is a member of the
Bank's board of directors.
Set forth below is certain information as of June 30, 1999, relating to
loans given to executive officers and directors who had aggregate outstanding
loan balances with the Bank of $60,000 or greater.
-10-
<PAGE>
<TABLE>
<CAPTION>
Prevailing
Name of Officer of Original Interest Rate at Unpaid
Name of Officer of Type of Loan Date Loan Rate Time of Employee Balance
Director Loan Originated Amount Note Loan Rate 06/30/99
--------- ----- ----------- -------- ----- ----- ----- --------
<S> <C> <C> <C> <C> <C> <C> <C>
James Nechero, Jr. Home Mortgage 09/16/93 $ 50,000 6.75% 6.75% 6.75% 24,926
Nechero Ltd. Co. Equip. Lease/Purch. 01/12/95 $202,649 11.30% 11.30% 11.30% 86,967
Nechero Ltd. Co. Equip. Lease/Purch. 05/01/95 $ 26,886 11.32% 11.32% 11.32% 13,367
James Nechero, Jr. Home Mortgage 03/21/98 $112,000 6.63% 6.63% 5.63% 110,272
Michael P. Mataya 81,541
Revocable Trust Home Mortgage 03/17/95 $125,000 8.00% 8.00% 7.00%
Michael Mataya Airplane 12/19/97 $ 28,500 12.00% 12.00% 11.00% 21,342
Michael P. Mataya Automobile 05/17/99 $ 35,058 12.00% 12.00% 11.00% 35,058
Jerry R. Spurlin Automobile 06/11/99 $ 19,750 8.00% 8.00% 7.00% 19,750
Jerry R. Spurlin Home Mortgage 08/07/98 $129,000 6.63% 6.63% 5.63% 124,159
Jerry R. Spurlin Home Equity LOC 04/23/97 $ 17,000 7.75%(1) 7.75%(1) 8.25%(1) 10,600
Marshall W. Coker Home Mortgage 10/26/98 $121,000 6.38% 6.38% 5.38% 120,038
William W. Head Automobile 03/04/96 $ 19,737 9.00% 9.00% 8.00% 3,993
William W. Head Home Mortgage 01/26/95 $ 95,000 7.00% 7.00% 6.50% 76,573
William W. Head Home Equity LOC 06/25/97 $ 25,000 7.75%(1) 7.75%(1) 8.25%(1) 22,775
Richard P. Gallegos Home Mortgage 01/28/97 $124,000 7.38% 7.38% 7.38% 121,127
</TABLE>
- ---------------
(1) The Bank offers to the public a Hometown Advantage Home Equity Line of
Credit at an initial fixed rate of 7.75% for the first six months. At
the end of six months the rate converts to a variable rate 1.5% over
the Wall Street Journal Prime. Therefore the rate on these two loans
converted to a variable rate 0.5% over the Wall Street Journal Prime
six months after they were opened.
- --------------------------------------------------------------------------------
PROPOSAL II - RATIFICATION OF THE 1995 STOCK OPTION PLAN
- --------------------------------------------------------------------------------
General
The Board of Directors adopted the 1995 Stock Option Plan and the
Company's stockholders approved it on January 5, 1996 ("Effective Date").
Pursuant to the 1995 Stock Option Plan, up to 142,313 shares of Common Stock are
reserved for issuance by the Company upon exercise of stock options to be
granted to officers, directors, key employees and other persons from time to
time. The purpose of the 1995 Stock Option Plan is to attract and retain
qualified personnel for positions of substantial responsibility and to provide
additional incentive to certain officers, directors, key employees and other
persons to promote the success of the business of the Company and the Bank.
Pursuant to regulations of the Office of the Thrift Supervision (the
"OTS") applicable to stock benefit plans established or implemented within one
year following the completion of a mutual-to-stock conversion of a federally
chartered savings institution such as the Bank, the 1995 Stock Option Plan
contains certain restrictions and limitations. The 1995 Stock Option Plan
provides that options granted to employees or directors become first exercisable
no more rapidly than ratably over a five-year period (with acceleration upon
death or disability or a Change in Control, as such term is defined in the 1995
Stock Option Plan); provided, however, that such accelerated vesting is not
inconsistent with the regulations of the OTS at the time of such acceleration.
Recent OTS interpretive letters permit awards under stock benefit plans to
accelerate vesting of awards upon a Change in Control; provided that
stockholders ratify such plan provisions by action of stockholders taken more
than one year following the completion of the mutual-to-stock conversion. The
Board of Directors is seeking ratification of the 1995 Stock Option Plan (as
-11-
<PAGE>
previously approved by the stockholders on January 5, 1996) as a means of
complying with the OTS interpretive letters.
Ratification of the 1995 Stock Option Plan does not increase the number
of shares reserved for issuance thereunder, alter the classes of individuals
eligible to participate in the 1995 Stock Option Plan, or otherwise amend or
modify the terms of the 1995 Stock Option Plan. In the event that the 1995 Stock
Option Plan is not ratified by stockholders at the Meeting, the 1995 Stock
Option Plan will nevertheless remain in effect. However, any employee or
director of the Company or the Bank that has their service terminated prior to
the vesting of such stock awards may forfeit such unvested awards to the extent
that may be required under applicable OTS regulations and policies.
The 1995 Option Plan is administered by the Board of Directors or a
committee of not less than three non-employee directors appointed by the
Company's Board of Directors and serving at the pleasure of the Board (the
"Option Committee"). Members of the Option Committee shall be deemed
"Non-Employee Directors" within the meaning of Rule 16b-3 pursuant to the 1934
Act. The Option Committee may select the officers and employees to whom options
are to be granted and the number of options to be granted based upon several
factors including prior and anticipated future job duties and responsibilities,
job performance, the Bank's financial performance and a comparison of awards
given by other institutions. A majority of the members of the Option Committee
shall constitute a quorum and the action of a majority of the members present at
any meeting at which a quorum is present shall be deemed the action of the
Option Committee.
Officers, directors, key employees and other persons who are designated
by the Option Committee will be eligible to receive, at no cost to them, options
under the 1995 Stock Option Plan (the "Optionees"). Each option granted pursuant
to the 1995 Stock Option Plan shall be evidenced by an instrument in such form
as the Option Committee shall from time to time approve. Option shares may be
paid for in cash, shares of Common Stock, or a combination of both. The Company
will receive no monetary consideration for the granting of stock options under
the 1995 Stock Option Plan. Further, the Company will receive no consideration
other than the option exercise price per share for Common Stock issued to
Optionees upon the exercise of those options.
Shares of Common Stock issuable under the 1995 Stock Option Plan may be
from authorized but unissued shares, treasury shares or shares purchased in the
open market. An option which expires, becomes unexercisable, or is forfeited for
any reason prior to its exercise will again be available for issuance under the
1995 Stock Option Plan. No option or any right or interest therein is assignable
or transferable except by will or the laws of descent and distribution. The 1995
Stock Option Plan shall continue in effect for a term of ten years from the
Effective Date.
Stock Options
The Option Committee may grant either Incentive Stock Options or
Non-Incentive Stock Options. In general, if an Optionee ceases to serve as an
employee of the Company for any reason other than disability or death, an
exercisable Incentive Stock Option may continue to be exercisable for three
months but in no event after the expiration date of the option, except as may
otherwise be determined by the Option Committee at the time of the award. In the
event of the disability or death of an Optionee during employment, an
exercisable Incentive Stock Option will continue to be exercisable for one year
and two years, respectively, to the extent exercisable by the Optionee
immediately prior to the Optionee's disability or death but only if, and to the
extent that, the Optionee was entitled to exercise such Incentive Stock Options
on the date of termination of employment. The terms and conditions of
Non-Incentive Stock
-12-
<PAGE>
Options relating to the effect of an Optionee's termination of employment or
service, disability, or death shall be such terms as the Option Committee, in
its sole discretion, shall determine at the time of termination of service,
disability or death, unless specifically determined at the time of grant of such
options.
Currently, the 1995 Stock Option Plan requires that options granted to
employees or directors become first exercisable no more rapidly than ratably
over a five-year period (with acceleration upon death or disability or a Change
in Control, as such terms are defined in the 1995 Stock Option Plan); provided,
however, that such accelerated vesting is not inconsistent with the regulations
of the OTS at the time of such acceleration. Ratification of the 1995 Stock
Option Plan at the Meeting will conform the acceleration of vesting of options
upon a Change in Control with applicable OTS interpretive letters. Such
stockholder ratification will be effective with respect to previously awarded
options and any options that may be granted in the future. Pursuant to the 1995
Stock Option Plan, upon a Change in Control, all options previously granted and
outstanding as of the date of a Change in Control will automatically become
exercisable and non-forfeitable.
No shares of Common Stock shall be issued upon the exercise of an
option until full payment has been received by the Company, and no Optionee
shall have any of the rights of a stockholder of the Company until shares of
Common Stock are issued to such Optionee. Upon the exercise of an option by an
Optionee (or the Optionee's personal representative), the Option Committee, in
its sole and absolute discretion, may make a cash payment to the Optionee, in
whole or in part, in lieu of the delivery of shares of Common Stock. Such cash
payment to be paid in lieu of delivery of Common Stock shall be equal to the
difference between the fair market value of the Common Stock on the date of the
option exercise and the exercise price per share of the option. Any cash payment
shall be in exchange for the cancellation of such option. A cash payment shall
not be made in the event that such transaction would result in liability to the
Optionee and the Company under Section 16(b) of the 1934 Act, and regulations
promulgated thereunder.
The 1995 Stock Option Plan provides that the Board of Directors of the
Company may authorize the Option Committee to direct the execution of an
instrument providing for the modification, extension or renewal of any
outstanding option, provided that no such modification, extension or renewal
shall confer on the Optionee any right or benefit which could not be conferred
on the Optionee by the grant of a new option at such time, and shall not
materially decrease the Optionee's benefits under the option without the
Optionee's consent, except as otherwise provided under the 1995 Stock Option
Plan.
Awards Under the 1995 Stock Option Plan
The Board or the Option Committee shall from time to time determine the
officers, directors, key employees and other persons who shall be granted
options under the Plan, the number of options to be granted to any participant,
and whether options granted to each such Plan participant shall be Incentive
Stock Options and/or Non-Incentive Stock Options. In selecting participants and
in determining the number of shares of Common Stock subject to options to be
granted to each such participant, the Board or the Option Committee may consider
the nature of the services rendered by each such participant, each such
participant's current and potential contribution to the Company and such other
factors as may be deemed relevant. Participants who have been granted an option
may, if otherwise eligible, be granted additional options. In no event shall
shares of Common Stock subject to options granted to non-employee directors in
the aggregate under this 1995 Stock Option Plan exceed more than 30% of the
total number of shares of Common
-13-
<PAGE>
Stock authorized for delivery under this Plan, and no more than 5% of total
shares of Common Stock may be awarded to any individual non-employee director.
In no event shall shares of Common Stock subject to options granted to any
employee exceed more than 25% of the total number of shares of Common Stock
authorized for delivery under the 1995 Stock Option Plan.
The table below presents information related to options previously
awarded by the Company under the 1995 Stock Option Plan. Ratification of the
1995 Stock Option Plan does not impact the number of options previously awarded.
Stockholder ratification of the 1995 Stock Option Plan confirms the provisions
of the 1995 Stock Option Plan previously approved by stockholders of the
Company. In accordance with the 1995 Stock Option Plan, all outstanding options
shall become immediately exercisable in the event of a Change in Control of the
Company or the Bank.
PREVIOUSLY AWARDED BENEFITS
1995 STOCK OPTION PLAN
----------------------
Number of Options
Name and Position Previously Granted(1)(2)
- ----------------- ------------------------
Jerry R. Spurlin, President of the Company 8,550(3)
and Director of the Bank.........................
Rick Gallegos, President of the Bank............. 10,000
James Nechero, Jr. Director (5).................. 6,099
Vernon I. Hamilton, Director (5)................. 6,099
Executive Officer Group (5 persons).............. 39,925(3)
Non-Executive Officer Director Group
(7 persons).................................... 42,693(4)
Non-Executive Officer Employee Group............. 12,000(3)
- -----------------
(1) The exercise price of such options is equal to the fair market value of the
Common Stock on the date of grant.
(2) Options shall vest, on the one year anniversary of the date of grant, 20%
annually during periods of continued service as an employee, director, or
director emeritus. Upon vesting, options shall remain exercisable for ten
years from the date of grant without regard to continued service as an
employee, director, or director emeritus.
(3) Options awarded to officers and employees will be exercisable as follows:
options awarded at the time of stockholder approval are first exercisable
at the rate of 20% on the one year anniversary of the date of grant and 20%
annually thereafter during periods of continued service as an employee,
Director or Director Emeritus. Such awards shall be 100% exercisable in the
event of death, disability, or upon a change in control of the Company or
the Bank. Options awarded to employees shall continue to be exercisable
during continued service as an employee, Director or Director Emeritus.
Options not exercised within three months of termination of service as an
employee shall thereafter be deemed non-incentive stock options.
(4) Options awarded to directors are first exercisable at a rate of 20% one
year after the date of grant and 20% annually thereafter, during such
period of service as a director or director emeritus, and shall remain
exercisable for ten years without regard to continued service as a director
or director emeritus. Upon disability, death, or a change in control of the
Company or the Bank, such awards shall be 100% exercisable.
(5) Nominee for election as director.
-14-
<PAGE>
Effect of Mergers, Change of Control and Other Adjustments
Subject to any required action by the stockholders of the Company,
within the sole discretion of the Option Committee, the aggregate number of
shares of Common Stock for which Options may be granted hereunder or the number
of shares of Common Stock represented by each outstanding Option will be
proportionately adjusted for any increase or decrease in the number of issued
and outstanding shares of Common Stock resulting from a subdivision or
consolidation of shares or the payment of a stock dividend or any other increase
or decrease in the number of shares of Common Stock effected without the receipt
or payment of consideration by the Company. Subject to any required action by
the stockholders of the Company, in the event of any change in control,
recapitalization, merger, consolidation, exchange of shares, spin-off,
reorganization, tender offer, partial or complete liquidation or other
extraordinary corporate action or event, the Option Committee, in its sole
discretion, shall have the power, prior to or subsequent to such action or
events, to (i) appropriately adjust the number of shares of Common Stock subject
to each option, the exercise price per share of such option, and the
consideration to be given or received by the Company upon the exercise of any
outstanding options; (ii) cancel any or all previously granted options, provided
that appropriate consideration is paid to the Optionee in connection therewith;
and/or (iii) make such other adjustments in connection with the 1995 Stock
Option Plan as the Option Committee, in its sole discretion, deems necessary,
desirable, appropriate or advisable. However, no action may be taken by the
Option Committee which would cause Incentive Stock Options granted pursuant to
the 1995 Stock Option Plan to fail to meet the requirements of Section 422 of
the Code without the consent of the Optionee. The 1995 Stock Option Plan
provision to accelerate the exercise of options and the immediate exercisability
of options in the case of a Change in Control of the Company could have an
anti-takeover effect by making it more costly for a potential acquiror to obtain
control of the Company due to the higher number of shares outstanding following
such exercise of options.
The power of the Option Committee to accelerate the exercise of options
and the immediate exercisability of Options in the case of a Change in Control
of the Company could have an anti-takeover effect by making it more costly for a
potential acquiror to obtain control of the Company due to the higher number of
shares outstanding following such exercise of options. The power of the Option
Committee to make adjustments in connection with the 1995 Stock Option Plan,
including adjusting the number of shares subject to options and canceling
options, prior to or after the occurrence of an extraordinary corporate action,
allows the Option Committee to adapt the 1995 Stock Option Plan to operate in
changed circumstances, to adjust the 1995 Stock Option Plan to fit a smaller or
larger company, and to permit the issuance of options to new management
following such extraordinary corporate action. However, this power of the Option
Committee also has an anti-takeover effect, by allowing the Option Committee to
adjust the 1995 Stock Option Plan in a manner to allow the present management of
the Company to exercise more options and hold more shares of the Company's
Common Stock, and to possibly decrease the number of options available to new
management of the Company.
Amendment and Termination of the 1995 Stock Option Plan
The Board of Directors may alter, suspend or discontinue the 1995 Stock
Option Plan, except that no action of the Board shall increase the maximum
number of shares of Common Stock issuable under the 1995 Stock Option Plan,
materially increase the benefits accruing to Optionees under the 1995 Stock
Option Plan or materially modify the requirements for eligibility for
participation in the 1995 Stock Option Plan unless such action of the Board
shall be subject to approval or ratification by the stockholders of the Company.
-15-
<PAGE>
Possible Dilutive Effects of the 1995 Stock Option Plan
The Common Stock to be issued upon the exercise of options awarded
under the 1995 Stock Option Plan may either be authorized but unissued shares of
Common Stock or shares purchased in the open market. Because the stockholders of
the Company do not have preemptive rights, to the extent that the Company funds
the 1995 Stock Option Plan, in whole or in part, with authorized but unissued
shares, the interests of current stockholders will be diluted. If upon the
exercise of all of the options, the Company delivers newly issued shares of
Common Stock (i.e., 138,038 shares of Common Stock), then the dilutive effect to
current stockholders would be approximately 12.3%. Ratification of the 1995
Stock Option Plan does not increase the maximum number of shares issuable under
the 1995 Stock Option Plan as previously approved by stockholders.
Federal Income Tax Consequences
Under present federal tax laws, awards under the 1995 Stock Option Plan
will have the following consequences:
1. The grant of an option will not by itself result in the
recognition of taxable income to an Optionee nor entitle the
Company to a tax deduction at the time of such grant.
2. The exercise of an option which is an "Incentive Stock Option"
within the meaning of Section 422 of the Code generally will not,
by itself, result in the recognition of taxable income to an
Optionee nor entitle the Company to a deduction at the time of
such exercise. However, the difference between the option
exercise price and the fair market value of the Common Stock on
the date of option exercise is an item of tax preference which
may, in certain situations, trigger the alternative minimum tax
for an Optionee. An Optionee will recognize capital gain or loss
upon resale of the shares of Common Stock received pursuant to
the exercise of Incentive Stock Options, provided that such
shares are held for at least one year after transfer of the
shares or two years after the grant of the option, whichever is
later. Generally, if the shares are not held for that period, the
Optionee will recognize ordinary income upon disposition in an
amount equal to the difference between the option exercise price
and the fair market value of the Common Stock on the date of
exercise, or, if less, the sales proceeds of the shares acquired
pursuant to the option.
3. The exercise of a Non-Incentive Stock Option will result in the
recognition of ordinary income by the Optionee on the date of
exercise in an amount equal to the difference between the
exercise price and the fair market value of the Common Stock
acquired pursuant to the option.
4. The Company will be allowed a tax deduction for federal tax
purposes equal to the amount of ordinary income recognized by an
Optionee at the time the Optionee recognizes such ordinary
income.
5. In accordance with Section 162(m) of the Code, the Company's tax
deductions for compensation paid to the most highly paid
executives named in the Company's Proxy Statement may be limited
to no more than $1 million per year, excluding certain
"performance-based" compensation. The Company intends for the
award of options under the 1995 Stock Option Plan to comply with
the requirement for an exception to Section 162(m) of the Code
applicable to stock option plans so that the Company's deduction
for
-16-
<PAGE>
compensation related to the exercise of options would not be
subject to the deduction limitation set forth in Section 162(m)
of the Code.
Accounting Treatment
The Company expects to use the "intrinsic value based method" as
prescribed by APB Opinion 25, accordingly, neither the grant nor the exercise of
an option under the 1995 Stock Option Plan currently requires any charge against
earnings under generally accepted accounting principles. Common Stock issuable
pursuant to outstanding options which are exercisable under the 1995 Stock
Option Plan will be considered outstanding for purposes of calculating earnings
per share on a diluted basis.
Stockholder Ratification
Stockholder ratification of the 1995 Stock Option Plan is being sought
in accordance with interpretive letters of the OTS. An affirmative vote of a
majority of the votes cast at the Meeting on the matter, in person or by proxy,
is required to constitute stockholder ratification of the 1995 Stock Option
Plan, submitted as Proposal II.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE
RATIFICATION OF THE 1995 STOCK OPTION PLAN.
- --------------------------------------------------------------------------------
PROPOSAL III - RATIFICATION OF THE MSBP
- --------------------------------------------------------------------------------
General
The Board of Directors of the Company previously adopted the MSBP as a
method of providing directors, officers, and key employees of the Bank with a
proprietary interest in the Company in a manner designed to encourage such
persons to remain in the employment or service of the Bank. As previously
approved by stockholders of the Company on January 5, 1996, the Bank contributed
sufficient funds to the MSBP to purchase Common Stock representing up to 4% of
the aggregate number of shares issued in the Conversion (i.e., 56,925 shares of
Common Stock) in the open market. All of the Common Stock purchased by the MSBP
was purchased at the fair market value of such stock on the date of purchase.
Awards under the MSBP were made in recognition of expected future services to
the Bank by its directors, officers and key employees responsible for
implementation of the policies adopted by the Bank's Board of Directors and as a
means of providing a further retention incentive.
Pursuant to regulations of the Office of the Thrift Supervision (the
"OTS") applicable to stock benefit plans established or implemented within one
year following the completion of a mutual-to-stock conversion of a federally
chartered savings institution such as the Bank, the MSBP contains certain
restrictions and limitations. The MSBP provides that stock awards ("Awards")
granted to employees or directors become vested no more rapidly than ratably
over a five-year period (with acceleration upon death or disability or a Change
in Control, as such term is defined in the MSBP); provided, however, that such
accelerated vesting is not inconsistent with the regulations of the OTS at the
time of such acceleration. Recent OTS interpretive letters permit awards under
stock benefit plans to accelerate vesting of awards upon a Change in Control;
provided that stockholders ratify such plan provisions by action of stockholders
taken more than one year following the completion of the mutual-to-stock
conversion. The Board of Directors is seeking ratification of the MSBP (as
previously approved by the stockholders on January 5, 1996) as a means of
complying with the OTS interpretive letters.
-17-
<PAGE>
Ratification of the MSBP does not increase the number of shares
reserved for issuance thereunder, alter the classes of individuals eligible to
participate in the MSBP, or otherwise amend or modify the terms of the MSBP. In
the event that the MSBP is not ratified by stockholders at the Meeting, the MSBP
will nevertheless remain in effect. However, any employee or director of the
Company or the Bank that has their service terminated prior to the vesting of
such stock awards may forfeit such unvested awards to the extent that may be
required under applicable OTS regulations and policies.
Awards Under the MSBP
Currently, the MSBP requires that Awards granted to employees or
directors become first exercisable no more rapidly than ratably over a five-year
period (with accelerated vesting upon death or disability or a Change in
Control, as such terms are defined in the MSBP); provided, however, that such
accelerated vesting is not inconsistent with the regulations of the OTS at the
time of such acceleration. Ratification of the MSBP at the Meeting will conform
the acceleration of vesting of Awards upon a Change in Control with applicable
OTS interpretive letters. Such stockholder ratification will be effective with
respect to previously granted Awards and any Awards that may be granted in the
future. Pursuant to the MSBP, upon a Change in Control, all Awards previously
granted and outstanding as of the date of a Change in Control will automatically
become exercisable and non-forfeitable.
Benefits under the MSBP ("Plan Share Awards") may be granted at the
sole discretion of a committee comprised of not less than three directors who
are not employees of the Bank or the Company (the "MSBP Committee") appointed by
the Bank's Board of Directors. The MSBP is managed by trustees (the "MSBP
Trustees") who are non-employee directors of the Bank or the Company and who
have the responsibility to invest all funds contributed by the Bank to the trust
created for the MSBP (the "MSBP Trust"). Unless the terms of the MSBP or the
MSBP Committee specifies otherwise, awards under the MSBP will be in the form of
restricted stock payable as the Plan Share Awards shall be earned and
non-forfeitable. Twenty percent (20%) of such awards shall be earned and
non-forfeitable on the one year anniversary of the date of grant of such awards,
and 20% annually thereafter, provided that the recipient of the award remains an
employee, Director or Director Emeritus during such period. A recipient of such
restricted stock will not be entitled to voting rights associated with such
shares prior to the applicable date such shares are earned. Dividends paid on
Plan Share Awards shall be held in arrears and distributed upon the date such
applicable Plan Share Awards are earned. Any shares held by the MSBP Trust which
are not yet earned shall be voted by the MSBP Trustees, as directed by the MSBP
Committee. If a recipient of such restricted stock terminates employment or
service for reasons other than death, disability, or a change in control of the
Company or the Bank, the recipient forfeits all rights to the awards under
restriction. If the recipient's termination of employment or service is caused
by death, disability, or a change in control of the Company or the Bank
(provided that such accelerated vesting is not inconsistent with applicable
regulations of the OTS at the time of such change in control), all restrictions
expire and all shares allocated shall become unrestricted. Awards of restricted
stock to directors shall be immediately non-forfeitable in the event of the
death or disability of such director, or a change in control of the Company or
the Bank and distributed as soon as practicable thereafter. The Board of
Directors can terminate the MSBP at any time, and if it does so, any shares not
allocated will revert to the Company.
Plan Share Awards under the MSBP will be determined by the MSBP
Committee. In no event shall any Employee receive Plan Share Awards in excess of
25% of the aggregate Plan Shares authorized under the Plan. Plan Share Awards
may be granted to newly elected or appointed non-employee Directors of the Bank
subsequent to the effective date (as defined in the MSBP) provided that the Plan
Share Awards made to non-employee directors shall not exceed 30% of total Plan
Share Reserve in the aggregate under the Plan or 5% of the total Plan Share
Reserve to any individual non-employee Director.
-18-
<PAGE>
The aggregate number of Plan Shares available for issuance pursuant to
the Plan Share Awards and the number of shares to which any Plan Share Award
relates shall be proportionately adjusted for any increase or decrease in the
total number of outstanding shares of Common Stock issued subsequent to the
effective date (as defined in the MSBP) of the MSBP resulting from any split,
subdivision or consolidation of the Common Stock or other capital adjustment,
change or exchange of Common Stock, or other increase or decrease in the number
or kind of shares effected without receipt or payment of consideration by the
Company.
The following table presents information related to the previously
granted awards of Common Stock under the MSBP as authorized pursuant to the
terms of the MSBP. Ratification of such MSBP does not change the number of
shares awarded or other terms. Such ratification of the MSBP confirms the
provisions of the MSBP previously approved by the stockholders of the Company.
<TABLE>
<CAPTION>
PRIOR AWARDS UNDER THE MSBP
---------------------------
Number of Shares Previously
---------------------------
Name and Position Previously Granted (1)(2)
- ----------------- -------------------------
<S> <C>
Jerry R. Spurlin, President of the Company and
Director of the Bank .......................................... 4,500
Richard P. Gallegos, President of the Bank .................... 6,000
James Nechero, Jr. Director (4) ............................... 2,439
Vernon I. Hamilton, Director (4) .............................. 2,439
Executive Officer Group (5 persons) ........................... 18,000
Non-Executive Officer Director Group (7 persons) .............. 17,073(3)
</TABLE>
- ------------------
(1) All Plan Share Awards presented herein shall be earned at the rate of 20%
one year from date of grant, and 20% annually thereafter. All awards become
immediately 100% vested upon death, disability, or termination of service
following a change in control (as defined in the MSBP).
(2) Plan Share Awards shall continue to vest during periods of service as an
employee, director, or director emeritus.
(3) Each of 7 non-executive officer directors of the Bank were awarded 2,439
shares as of January 5, 1996.
(4) Nominee for election as a director.
Amendment and Termination of the Plan
The Board may amend or terminate the MSBP at any time. However, no
action of the Board may increase the maximum number of Plan Shares permitted to
be awarded under the MSBP, except for adjustments in the Common Stock of the
Company, materially increase the benefits accruing to Participants under the
MSBP or materially modify the requirements for eligibility for participation in
the MSBP unless such action of the Board shall be subject to ratification by the
stockholders of the Company.
Possible Dilutive Effect of the MSBP
In the event that the MSBP is not ratified at the Meeting, the MSBP
will nevertheless remain in effect. Because shares for awards under the MSBP
have already been purchased in the market, current shareholders will suffer no
ownership dilution. However, in the event the MSBP is ratified and a change in
control of the Company occurs prior to the time that shares that have been
awarded pursuant to the MSBP would otherwise vest, the aggregate purchase price
received by stockholders could be effectively
-19-
<PAGE>
reduced by the value of shares that vest solely because of the change in
control. The Company currently has no plan in place that will result in a change
in control.
Federal Income Tax Consequences
Common Stock awarded under the MSBP is generally taxable to the
recipient at the time that such awards become earned and non-forfeitable, based
upon the fair market value of such stock at the time of such vesting.
Alternatively, a recipient may make an election pursuant to Section 83(b) of the
Code within 30 days of the date of the transfer of such Plan Share Award to
elect to include in gross income for the current taxable year the fair market
value of such award. Such election must be filed with the Internal Revenue
Service within 30 days of the date of the transfer of the stock award. The
Company will be allowed a tax deduction for federal tax purposes as a
compensation expense equal to the amount of ordinary income recognized by a
recipient of Plan Share Awards at the time the recipient recognizes taxable
ordinary income. A recipient of a Plan Share Award may elect to have a portion
of such award withheld by the MSBP Trust in order to meet any necessary tax
withholding obligations.
Accounting Treatment
For accounting purposes, the Company will recognize compensation
expense in the amount of the fair market value of the Common Stock subject to
Plan Share Awards at the grant date pro rata over the period of years during
which the awards are earned.
Stockholder Ratification
The Company is submitting the MSBP to stockholders for ratification in
accordance with the interpretive letters of the OTS. An affirmative vote of a
majority of the votes cast at the Meeting on the matter, in person or by proxy,
is required to constitute stockholder ratification of the MSBP, submitted as
Proposal III.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE
RATIFICATION OF THE MSBP.
- --------------------------------------------------------------------------------
PROPOSAL IV -- RATIFICATION OF APPOINTMENT OF AUDITORS
- --------------------------------------------------------------------------------
Neff & Ricci LLP was the Company's independent public accountant for
the fiscal year ended June 30, 1999. The Board of Directors has approved the
selection of Neff & Ricci LLP as its auditors for the fiscal year ending June
30, 2000, subject to ratification by the Company's stockholders. A
representative of Neff & Ricci LLP is expected to be present at the Meeting to
respond to stockholders' questions and will have the opportunity to make a
statement if he or she so desires.
Ratification of the appointment of the auditors requires the approval
of a majority of the votes cast by the stockholders of the Company at the
Meeting. The Board of Directors recommends that stockholders vote "FOR" the
ratification of the appointment of Neff & Ricci LLP as the Company's auditors
for the fiscal year ending June 30, 2000.
-20-
<PAGE>
- --------------------------------------------------------------------------------
STOCKHOLDER PROPOSALS
- --------------------------------------------------------------------------------
In order to be considered for inclusion in the Company's proxy
materials for next year's Annual Meeting of Stockholders, any stockholder
proposal to take action at such meeting must be received at the Company's
executive offices at 221 West Aztec Avenue, Gallup, New Mexico 87301, no later
than May 17, 2000.
In the event the Company receives notice of a stockholder proposal to
take action at next year's annual meeting of stockholders that is not submitted
for inclusion in the Company's proxy material, or is submitted for inclusion but
is properly excluded from the proxy material, the persons named in the proxy
sent by the Company to its stockholders intend to exercise their discretion to
vote on the stockholder proposal in accordance with their best judgment if
notice of the proposal is not received at the Company's main office by August
28, 2000. The Certificate of Incorporation provides that if notice of a
stockholder proposal to take action at next year's annual meeting is not
received at the Company's main office by August 28, 2000, the proposal will not
be eligible for presentation at that meeting.
- --------------------------------------------------------------------------------
MISCELLANEOUS
- --------------------------------------------------------------------------------
A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-KSB, EXCLUDING
EXHIBITS, FOR THE YEAR ENDED JUNE 30, 1999 WILL BE FURNISHED WITHOUT CHARGE TO
STOCKHOLDERS AS OF THE RECORD DATE UPON WRITTEN REQUEST TO THE SECRETARY, GFSB
BANCORP, INC., 221 WEST AZTEC AVENUE, GALLUP, NEW MEXICO 87301.
The Board of Directors is not aware of any business to come before the
Meeting other than those matters described above in this Proxy Statement.
However, if any other matters should properly come before the Meeting, it is
intended that proxies in the accompanying form will be voted in respect thereof
in accordance with the judgment of the persons named in the accompanying proxy.
If the Company did not have notice of a matter on or before September 10, 1999,
it is expected that the persons named in the accompanying proxy will exercise
discretionary authority when voting on that matter.
The cost of soliciting proxies will be borne by the Company. The
Company will reimburse brokerage firms and other custodians, nominees and
fiduciaries for reasonable expenses incurred by them in sending proxy materials
to the beneficial owners of Common Stock. In addition to solicitations by mail,
directors, officers, and regular employees of the Company may solicit proxies
personally or by telegraph or telephone without additional compensation.
BY ORDER OF THE BOARD OF DIRECTORS
/s/George S. Perce
George S. Perce
Secretary
Gallup, New Mexico
September 24, 1999
-21-
<PAGE>
GFSB BANCORP, INC.
- --------------------------------------------------------------------------------
ANNUAL MEETING OF STOCKHOLDERS
October 27, 1999
- --------------------------------------------------------------------------------
The undersigned hereby appoints the Board of Directors of GFSB Bancorp,
Inc. ("Company"), or its designee, and each of them, with full powers of
substitution in each of them, to act as attorneys and proxies for the
undersigned, to vote all shares of Common Stock of the Company which the
undersigned is entitled to vote at the Annual Meeting of Stockholders
("Meeting"), to be held at Gallup Federal Savings Bank's Loan Center located at
214 West Aztec Avenue, Gallup, New Mexico on October 27, 1999, at 10:00 a.m. and
at any and all adjournments thereof, in the following manner:
FOR WITHHELD
--- --------
1. The election as director of all nominees
listed below: [_] [_]
James Nechero, Jr.
Vernon I. Hamilton
INSTRUCTIONS: To withhold your vote for any individual nominee, insert the
nominee's name on the line provided below.
FOR AGAINST ABSTAIN
--- ------- -------
2. The ratification of the GFSB Bancorp, Inc.
1995 Stock Option Plan. [_] [_] [_]
3. The ratification of the Gallup Federal Savings
Bank Management Stock Bonus Plan and
Trust Agreement. [_] [_] [_]
4. The ratification of the appointment of Neff
& Ricci LLP, as independent auditors of
GFSB Bancorp, Inc., for the fiscal
year ending June 30, 2000. [_] [_] [_]
In their discretion, such attorneys and proxies are authorized to vote
upon such other business, if any, as may properly come before the Meeting or any
adjournments thereof.
The Board of Directors recommends a vote "FOR" all of the above listed
propositions.
- --------------------------------------------------------------------------------
THIS PROXY WILL BE VOTED AS DIRECTED, BUT IF NO INSTRUCTIONS ARE SPECIFIED, THIS
PROXY WILL BE VOTED FOR EACH OF THE PROPOSITIONS STATED. IF ANY OTHER BUSINESS
IS PRESENTED AT SUCH MEETING, THIS PROXY WILL BE VOTED BY THOSE NAMED IN THIS
PROXY IN THEIR BEST JUDGMENT. AT THE PRESENT TIME, THE BOARD OF DIRECTORS KNOWS
OF NO OTHER BUSINESS TO BE PRESENTED AT THE MEETING.
- --------------------------------------------------------------------------------
<PAGE>
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
Should the undersigned be present and elect to vote at the Meeting, or
at any adjournments thereof, and after notification to the Secretary of the
Company at the Meeting of the stockholder's decision to terminate this proxy,
the power of said attorneys and proxies shall be deemed terminated and of no
further force and effect. The undersigned may also revoke this proxy by filing a
subsequently dated proxy or by written notification to the Secretary of the
Company of his or her decision to terminate this proxy.
The undersigned hereby revokes any proxy previously given and
acknowledges receipt from the Company prior to the execution of this proxy of a
Notice of Annual Meeting of Stockholders and a proxy statement dated September
24, 1999.
Please check here if you
Dated: , 1999 [_] plan to attend the Meeting.
-----------------------------
- ------------------------------------ ------------------------------------
PRINT NAME OF STOCKHOLDER PRINT NAME OF STOCKHOLDER
- ------------------------------------ ------------------------------------
SIGNATURE OF STOCKHOLDER SIGNATURE OF STOCKHOLDER
Please sign exactly as your name appears on this proxy. When signing as
attorney, executor, administrator, trustee, or guardian, please give your full
title. If shares are held jointly, each holder should sign.
- --------------------------------------------------------------------------------
PLEASE COMPLETE, DATE, SIGN, AND MAIL THIS PROXY PROMPTLY IN THE ENCLOSED
POSTAGE-PREPAID ENVELOPE.
- --------------------------------------------------------------------------------
