[Redwood Financial, Inc. Letterhead]
September 12, 1996
Dear Fellow Stockholder:
On behalf of the Board of Directors and management of Redwood Financial,
Inc. (the "Company"), I cordially invite you to attend the Annual Meeting of
Stockholders to be held at the office of the Company and its wholly owned
subsidiary, Redwood Falls Federal Savings and Loan Association, 301 South
Washington Street, Redwood Falls, Minnesota on October 22, 1996 at 10:00 a.m.
The attached Notice of Annual Meeting and Proxy Statement describe the formal
business to be transacted at the Annual Meeting. During the Annual Meeting, I
will report on the operations of the Company. Directors and officers of the
Company, as well as a representative of KPMG Peat Marwick LLP, certified public
accountants, will be present to respond to any questions stockholders may have.
The matters to be considered by stockholders at the Annual 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 Annual 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 Annual Meeting, but will assure that your vote is counted if you
are unable to attend the Annual Meeting. YOUR VOTE IS VERY IMPORTANT.
Sincerely,
/s/Paul W. Pryor
Paul W. Pryor
President
<PAGE>
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REDWOOD FINANCIAL, INC.
301 SOUTH WASHINGTON STREET
REDWOOD FALLS, MINNESOTA 56283-0317
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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To be Held on October 22, 1996
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NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders (the "Meeting")
of Redwood Financial, Inc. (the "Company"), will be held at the office of the
Company and its wholly owned subsidiary, Redwood Falls Federal Savings and Loan
Association, at 301 South Washington Street, Redwood Falls, Minnesota on October
22, 1996 at 10:00 a.m.
The Meeting is for the purpose of considering and acting upon the following
matters:
1. The election of two directors of the Company; and
2. The ratification of the appointment of KPMG Peat Marwick LLP as
independent auditors of the Company for the fiscal year ending June 30,
1997.
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 3, 1996 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 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/Rebecca A. Olson
Rebecca A. Olson
Secretary
Redwood Falls, Minnesota
September 12, 1996
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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
OF
REDWOOD FINANCIAL, INC.
301 SOUTH WASHINGTON STREET
REDWOOD FALLS, MINNESOTA 56283-0317
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ANNUAL MEETING OF STOCKHOLDERS
October 22, 1996
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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 Redwood Financial, Inc. (the "Company") to
be used at the Annual Meeting of Stockholders of the Company which will be held
at the office of the Company and its wholly owned subsidiary, Redwood Falls
Federal Savings and Loan Association (the "Association"), at 301 South
Washington Street, Redwood Falls, Minnesota on October 22, 1996 at 10:00 a.m.
local time (the "Meeting"). The accompanying Notice of Annual Meeting of
Stockholders and this Proxy Statement are being first mailed to stockholders on
or about September 12, 1996. The Company acquired all of the outstanding stock
of the Association issued in connection with the Association's mutual-to-stock
conversion on July 7, 1995 (the "Conversion").
At the Meeting, stockholders will consider and vote upon (i) the
election of two directors and (ii) the ratification of the appointment of KPMG
Peat Marwick LLP as independent auditor of the Company for the fiscal year
ending June 30, 1997. 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. Execution of a proxy, however, confers on the
designated proxy holder discretionary authority to vote the shares represented
by such proxy in accordance with their best judgment on such other business, if
any, that may properly come before the Meeting or any adjournment thereof.
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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, proxies will be voted "FOR" the nominees for directors set forth
below and "FOR" the other listed proposal. The proxy confers discretionary
authority on the persons named therein to vote with respect to the election of
any person as a director where the nominee is unable to serve, or for good cause
will not serve, and matters incident to the conduct of the Meeting.
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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 3, 1996
(the "Record Date"), are entitled to one vote for each share of common stock of
the Company (the "Common Stock") then held. As of the Record Date, the Company
had 1,068,750 shares of Common Stock issued and outstanding.
The articles of incorporation of the Company ("Articles of
Incorporation") provide that in no event shall any record owner of any
outstanding Common Stock which is beneficially owned, directly or
<PAGE>
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 Articles 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 Articles
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 Company 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 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 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 independent auditors as set forth in Proposal
II, by checking the appropriate box, a stockholder may; (1) vote "FOR" the item,
(ii) vote "AGAINST" the item, or (iii) vote to "ABSTAIN" on such item.
Ratification of Proposal II requires a majority of votes cast at the Meeting.
Unless otherwise required by law, all other 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.
-2-
<PAGE>
<TABLE>
<CAPTION>
Percent of Shares of
Amount and Nature of Common Stock
Name of Beneficial Owner Beneficial Ownership Outstanding
- ------------------------ -------------------- --------------------
Redwood Falls Federal Savings and Loan
Association Employee Stock Ownership Plan Trust
301 South Washington Street, Redwood Falls,
<S> <C> <C>
Minnesota 82,748(1) 7.74%
Laifer Capital Management, Inc.
45 West 45th Street
New York, New York 10036 66,700(2) 6.24%
Wellington Management Company
75 State Street
Boston, Massachusetts 02109 93,800(3) 8.78%
First Financial Fund, Inc.
One Seaport Plaza - 25th Floor
New York, New York 10292 93,800(4) 8.78%
</TABLE>
- ----------------------------------
(1) Held directly for the benefit of employees of the Association.
(2) Based on a Schedule 13G filed with the Securities and Exchange Commission,
dated February 7, 1996.
(3) Based on a Schedule 13G filed with the Securities and Exchange Commission,
dated February 9, 1996.
(4) Based on a Schedule 13G filed with the Securities and Exchange Commission,
dated February 7, 1996.
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SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
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Section 16(a) of the 1934 Act requires the Company's officers and
directors, and persons who own more than ten percent of the Common Stock, to
file reports of ownership and changes in ownership of the Common Stock, on Forms
3, 4 and 5, with the Securities and Exchange Commission ("SEC") and to provide
copies of those Forms 3, 4 and 5 to the Company. The Company is not aware of any
beneficial owner of more than ten percent of its Common Stock.
Based upon a review of the copies of the forms furnished to the Company,
or written representations from certain reporting persons that no Forms 5 were
required, the Company believes that all Section 16(a) filing requirements
applicable to its officers and directors were complied with during the 1996
fiscal year.
-3-
<PAGE>
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I - INFORMATION WITH RESPECT TO NOMINEES FOR DIRECTOR,
DIRECTORS CONTINUING IN OFFICE, AND EXECUTIVE OFFICERS
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Election of Directors
The Articles of Incorporation require that the Board of Directors 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. The Board of Directors currently consists of six 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 P. Tersteeg and J. Scott Nelson have been nominated by the Board
of Directors to serve as directors with three-year terms to expire in 1999.
Messrs. Tersteeg and Nelson currently serve on the Board of Directors as
Chairman and Vice Chairman, respectively. 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 of Directors 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 a nominee might be unavailable to serve.
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 Association, the expiration date of their current term as a director, and
the number and percentage of shares of the Common Stock beneficially owned. Each
director of the Company is also a member of the Board of Directors of the
Association.
<TABLE>
<CAPTION>
Shares of
Year First Current Common Stock
Elected or Term to Beneficially Owned Percent
Name Age(1) Appointed(2) Expire (3)(4) of Class(5)
- ---- ------ ------------ ------- ------------------ -----------
BOARD NOMINEES FOR TERM TO EXPIRE IN 1999
<S> <C> <C> <C> <C> <C>
James P. Tersteeg 50 1980 1996 37,500(6) 3.5%
J. Scott Nelson 40 1987 1996 27,912(6) 2.6%
DIRECTORS CONTINUING IN OFFICE
Paul W. Pryor 65 1966 1997 26,307 2.5%
Blaine C. Farnberg 68 1972 1997 23,922(6) 2.2%
Donald C. Orth 52 1982 1998 7,284 -.-%(7)
Thomas W. Stotesbery 43 1991 1998 7,775(6) -.-%(7)
All Directors and
Executive Officers as
a Group (6 persons) 130,700 12.2%
</TABLE>
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(1) At June 30, 1996.
(2) Refers to the year the individual first became a director of the Company
or the Association. All directors of the Association during January 1995
became directors of the Company when it was incorporated in January
1995.
-4-
<PAGE>
(3) Includes shares of Common Stock held directly as well as by spouses or
minor children, in trust, and other indirect ownership, over which shares
the individuals effectively exercise sole or shared voting and investment
power, unless otherwise indicated. Excludes shares of Common Stock subject
to options not exercisable as of the Voting Record Date.
(4) Beneficial ownership as of the Record Date.
(5) Percentages are calculated on the basis of the amount of outstanding Common
Stock, excluding Common Stock held by or for the account of the Company or
its subsidiaries, plus Common Stock deemed outstanding pursuant to the
rules under the 1934 Act. The amount of Common Stock that an individual has
a right to acquire (e.g., pursuant to the exercise of options or through
the vesting of restricted stock) within 60 days from the Record Date is
included when calculating that individual's percentage of Common Stock
beneficially owned. There were no options or restricted stock beneficially
owned as of the Record Date.
(6) Excludes 74,468 unallocated shares of Common Stock held under the Employee
Stock Ownership Plan ("ESOP") for which such person serves as a member of
the ESOP Committee or Trustee Committee. Such individual disclaims
beneficial ownership with respect to such shares held in a fiduciary
capacity. See "Director and Executive Officer Compensation - Other Benefits
- Employee Stock Ownership Plan." Excludes 45,000 shares of Common Stock
held under the Management Stock Bonus Plan for which such person serves as
a member of the Management Stock Bonus Plan Committee or as trustee. See
"Director and Executive Officer Compensation - Other Benefits - Management
Stock Bonus Plan."
(7) Less than 1.0%.
Biographical Information
Set forth below is certain information with respect to the directors of the
Company. All directors have held their present positions for five years unless
otherwise stated. Messrs. Pryor and Orth are the executive officers of the
Company.
James P. Tersteeg has been a director of the Association since 1980 and a
director of the Company since its formation in January 1995. Mr. Tersteeg is the
owner of Tersteeg's Inc., a grocery store in Redwood Falls, Minnesota. Mr.
Tersteeg is also a member of the District 637 Foundation, the Lion's Club, and
the Redwood Falls Planning Task Force.
J. Scott Nelson has been a director of the Association since 1987 and a
director of the Company since its formation in January 1995. Dr. Nelson, a
doctor of pharmacy, is a part-owner and chief executive officer of Sward-Kemp
Drug, Inc., a provider of pharmaceutical services in Redwood Falls. Dr. Nelson
is also a member of the Redwood Falls Public Utilities Commission and a director
of Redwood Falls Venture Capital.
Paul W. Pryor has been with the Association as an officer and a director
since 1966 and a director of the Company since its formation in January 1995.
Mr. Pryor became the President and Chief Executive Officer of the Association in
1974. Mr. Pryor is a member of the Redwood City Task Force, a member of the
Minnesota League of Savings and Community Bankers, and a member of America's
Community Bankers.
Blaine C. Farnberg has been a director of the Association since 1972 and a
director of the Company since its formation in January 1995. Mr. Farnberg is
retired from the retail shoe business. He is also Treasurer of the Battle Lake
Food Shelf and a director of Art of the Lakes.
-5-
<PAGE>
Donald C. Orth has been with the Association since 1975 and has been a
director of the Association since 1982 and a director of the Company since its
formation in January 1995. Mr. Orth serves as a Vice President of the Company
and the Association and has been a branch manager since 1975. Mr. Orth is also
an officer of the Olivia Chamber of Commerce, the Kiwanis Club, and the Youth
Baseball League.
Thomas W. Stotesbery has been a director of the Association since 1991 and
a director of the Company since its formation in January 1995. Mr. Stotesbery
has been a Certified Public Accountant for more than 14 years. He is also a
member of the Redwood Falls Public Utilities Commission, secretary of the
Redwood Falls Lions Club, and a member of the St. Catherine Parish Council.
Nominations for Directors
Pursuant to Article X of the Articles of Incorporation, nominations, other
than those made by or at the direction of the Board of Directors, shall be made
pursuant to timely notice in writing to the Secretary of the Company as set
forth in that Article. To be timely, a stockholder's notice shall be delivered
to, or mailed and received at, the principal executive offices of the Company
not less than 60 days prior to the anniversary date of the immediately preceding
annual meeting of stockholders of the Company.
Such stockholder's notice shall set forth (a) as to each person whom the
stockholder proposes to nominate for election or re-election as a director and
as to the stockholder giving the notice (i) the name, age, business address, and
residence address of such person, (ii) the principal occupation or employment of
such person, (iii) the class and number of shares of Common Stock which are
beneficially owned by such person on the date of such stockholder notice, and
(iv) any other information relating to such person that is required to be
disclosed in solicitations of proxies with respect to nominees for election as
directors pursuant to Regulation 14A under the 1934 Act; and (b) as to the
stockholder giving the notice (i) the name and address, as they appear on the
Company's books, of such stockholder and any other stockholders known by such
stockholder to be supporting such nominees and (ii) the class and number of
shares of Common Stock which are beneficially owned by such stockholder on the
date of such stockholder notice and, to the extent known, by any other
stockholders known by such stockholder to be supporting such nominees on the
date of such stockholder notice. At the request of the Board of Directors, any
person nominated by, or at the direction of, the Board for election as a
director at an annual meeting shall furnish to the Secretary of the Company that
information required to be set forth in a stockholder's notice of nomination
which pertains to the nominee.
The Board of Directors may reject any nomination by a stockholder not
timely made in accordance with the requirements of the Articles of
Incorporation. If the presiding officer at the meeting determines that a
nomination was not made in accordance with the terms of the Articles of
Incorporation, the presiding officer shall so declare at the annual meeting, and
the defective nomination shall be disregarded.
Meetings and Committees of the Board of Directors
The Board of Directors conducts its business through its meetings and
through the activities of its committees. During the year ended June 30, 1996,
the Board of Directors held twelve regular meetings and two special meetings. No
director attended fewer than 75% of the total meetings of the Board of Directors
and committees on which such director served during the fiscal year ended June
30, 1996.
-6-
<PAGE>
The Compensation Committee is comprised of directors Tersteeg, Nelson,
Farnberg, and Stotesbery. The committee is responsible for continual review of
the performance of the senior management group consisting of the President/Chief
Executive Officer and the Vice President/Branch Manager. The Compensation
Committee is also responsible for setting the levels of compensation of all
employees. The committee met once in fiscal 1996.
The Audit Committee is comprised of directors Farnberg, Stotesbery, and
Nelson. The audit committee is responsible for overseeing the Company's and the
Association's audit procedures and other related matters. The audit committee
met once during fiscal 1996.
The Company does not have a standing nominating committee.
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DIRECTOR AND EXECUTIVE OFFICER COMPENSATION
- --------------------------------------------------------------------------------
Director Compensation
Each member of the Board of Directors receives a fee of $500 for each
meeting attended. No additional fees are paid for committee meetings. For the
fiscal year ended June 30, 1996, fees paid to all directors totalled $41,000.
Directors also received awards of stock option and restricted stock
under the 1995 Stock Option Plan and the Management Stock Bonus Plan as of the
date of stockholder approval of these plans. See "- Other Benefits - 1995 Stock
Option Plan" and "- Management Stock Bonus Plan."
Executive Compensation
Summary Compensation Table. The following table sets forth the cash and
non-cash compensation awarded to or earned by the Chief Executive Officer. No
other executive officer had a salary and bonus during the fiscal year ended June
30, 1996 that exceeded $100,000 for services rendered in all capacities to the
Company. All compensation listed below was paid by the Association.
<TABLE>
<CAPTION>
Long Term Compensation
Annual Compensation Awards
-------------------------------------- --------------------------
Securities
Restricted Underlying
Name and Principal Other Annual Stock Options/ All Other
Position Year Salary Bonus Compensation(1) Awards($) SARS(#) Compensation
- -------------------- ---- ------ ----- --------------- --------- ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Paul W. Pryor 1996 $109,440 $9,120 $7,000 110,391(2) 28,125(3) $12,255(4)
President and Chief 1995 $104,232 $8,686 $7,200 -- -- --
Executive Officer 1994 $ 97,416 $8,118 $3,450 -- -- --
</TABLE>
- ------------------
(1) Consists solely of Board of Director's fees. For the fiscal years 1996,
1995, and 1994, there were no (a) perquisites over the lesser of $50,000
or 10% of the named executive officer's total salary and bonuses for the
year; (b) payments of above-market preferential earnings on deferred
compensation; (c) payments of earnings with respect to long term
incentive plans prior to settlement or maturity; (d) tax payment
reimbursements; or (e) preferential discounts on stock.
-7-
<PAGE>
(2) Mr. Pryor has 11,250 shares of restricted stock in the aggregate which
have a total value of $105,469 (calculated by multiplying the aggregate
number of restricted stock by the Common Stock's average bid and ask
price as of the last day of the 1996 fiscal year). Dividends, if any,
are paid on the restricted stock awarded and are accrued until the
restricted stock becomes vested. Awards are earned by participants at a
rate of 20% per year for five years, as long as the participant remains
an employee of the Association. The value of restricted stock granted is
calculated by multiplying (i) the number of restricted stock granted by
(ii) the Common Stock's closing average bid and ask price as of the date
of grant.
(3) Such options by their term shall be first exercisable at the rate of
one-fifth per year beginning on the anniversary date of the date that
the option was granted (January 17, 1996).
(4) Consists of an allocation of 1,307.19 shares of Common Stock under the
ESOP as of June 30, 1996, with a value of $9.375 (average of the bid and
ask price) at June 30, 1996.
Employment Agreement. During 1995, in connection with the Conversion,
the Association entered into an employment agreement with President Paul Pryor.
The agreement is for a term of three years and has a base salary of $109,440.
The agreement is terminable by the Association for just cause. Just cause is
defined in the agreement as termination by reason of personal dishonesty;
incompetence; willful misconduct; breach of a fiduciary duty involving personal
profit; intentional failure to perform stated duties; willful violation of any
law, rule, or regulation (other than traffic violations or similar offenses);
entering into a final cease-and-desist order; or material breach of any
provision of the agreement. If the agreement is terminated for just cause, the
employee only receives his salary up to the date of termination. If the
Association terminates the agreement without just cause, the employee is
entitled to a continuation of salary from the date of termination through the
remaining term of the agreement.
The agreement provides that in the event of involuntary termination of
employment in connection with, or within one year after, any change in control
of the Company or the Association, the employee will be paid a lump sum equal to
2.99 times the employee's average compensation during the prior five year
period. If a lump sum payment had been made as of June 30, 1996, Mr. Pryor would
have received a payment of up to $295,034. That payment would be an expense to
the Association, reducing net earnings and the Association's capital by that
amount. The agreement may be renewed annually if the board of directors
determines that the executive has met its requirements and standards.
Other Benefits
Deferred Compensation. The Association maintains a non-qualified
deferred compensation plan that allows an employee to annually defer up to one
month's salary into an account for the benefit of the employee. Upon attaining
the age of 65, the employee is entitled to the amount in the account payable in
six annual installments. Such six year period may be shortened or lengthened (up
to a total of ten years) by the Association's board of directors.
Employee Stock Ownership Plan. The Association has established an
employee stock ownership plan, the ESOP, for the exclusive benefit of
participating employees, which was implemented upon the completion of the
Conversion. The ESOP purchased 82,748 shares for the exclusive benefit of plan
participants with funds borrowed from the Company. These shares are held in a
suspense account and will be allocated among ESOP participants annually on the
basis of compensation as the ESOP debt is repaid. The ESOP Committee or the
Board instructs the ESOP Trustees regarding investment of ESOP plan assets. The
ESOP Trustees must vote all shares allocated to participant accounts under the
ESOP as directed by participants. Unallocated shares and shares for which no
timely voting direction is received will be voted by the ESOP Trustees as
directed by the ESOP Committee. As of the Record Date, 4,140 shares have been
allocated under the ESOP to participant accounts.
-8-
<PAGE>
401(k) Savings Plan. The Association has a tax-qualified defined
contribution savings plan ("401(k) Plan") in place for the benefit of its
employees. The Association does not match contributions made by its employees.
Pension Plan. The Association sponsors a tax-qualified defined benefit
pension plan (the "Pension Plan"). All full-time employees of the Association
are eligible to participate after 1 year of services and attainment of age 21. A
qualifying employee becomes fully vested in the Pension Plan upon completion of
five years of qualifying service. The Pension Plan is intended to comply with
ERISA.
The Pension Plan provides for monthly payments to each participating
employee at normal retirement age (age 65). For service prior to January 1,
1994, the monthly benefits payable under the Pension Plan are equal to 34.5% of
average monthly compensation, plus 13.5% of average monthly compensation in
excess of one-twelfth of covered compensation, reduced for less than 30 years of
credited service. Covered compensation is a 35 year average of social security
taxable wage bases. Benefits for service after December 31, 1993, are based upon
1.15% of Average Monthly Compensation times years of service (to a maximum of 30
years), plus 0.45% of Average Monthly Compensation in excess of one-twelfth of
covered compensation. Covered compensation is a 35 year average of social
security taxable wage bases. The maximum benefit is $7,500 per month. If a
participant elects early retirement (age 55), the participant receives a reduced
monthly benefit. If a participant elects late retirement, the participant
receives an increased monthly benefit. Benefits are paid for the life of the
participant following retirement. The Pension Plan also provides for payments in
the event of death. At June 30, 1996, Mr. Pryor had 30 years of credited service
under the Pension Plan. At June 30, 1996, the monthly benefit payable to Mr.
Pryor at normal retirement age would have been $3,651. Total pension expense for
the years ended June 30, 1996, 1995, and 1994 amounted to $21,770, $31,125, and
$29,647, respectively.
Benefits are payable in the form of various annuity alternatives,
including a joint and survivor option. For the Pension Plan year ended June 30,
1996, the highest permissible annual benefit under the Code is $120,800.
Benefits under the Pension Plan are subject to offset for Social Security
benefits.
1995 Stock Option Plan. The Board of Directors has adopted the Redwood
Financial, Inc. 1995 Stock Option Plan (the "Option Plan"), which was approved
by the Company's stockholders at the special meeting of stockholders on January
17, 1996. Pursuant to the Option Plan, a number of shares equal to 10% of the
Common Stock issued in the Company's initial public offering (i.e., 112,500
shares of Common Stock) were reserved for issuance by the Company upon exercise
of stock options to be granted to officers, directors, and key employees of the
Company (or any present of future parent or subsidiary of the Company), from
time to time under the Option Plan. The purpose of the Option Plan is to provide
additional incentive to certain officers, directors, and key employees by
facilitating their purchase of a stock interest in the Company. The Option Plan
became effective on January 17, 1996 and provides for a term of up to ten years,
after which no awards may be made.
An initial grant of 92,500 stock options under the Option Plan was made
upon the Company's receipt of stockholder approval on January 17, 1996, and the
option exercise price is the closing price of the Common Stock on the date of
stockholder approval. The initial grants of stock options were the only options
granted to officers, directors, and key employees during the fiscal year ended
June 30, 1996. Each of Messrs. Tersteeg, Nelson, Farnberg, and Stotesbery
received options to purchase 5,625 shares of Common Stock. Messrs. Pryor and
Orth received options to purchase 28,125 and 16,875 shares of Common Stock,
respectively. As of the Record Date, no stock options have been exercised
pursuant to the Option Plan and 20,000 options are still available for grant.
-9-
<PAGE>
OPTION/SAR GRANTS IN LAST FISCAL YEAR
(Individual Grants)
<TABLE>
<CAPTION>
Potential Realizable
Percent of Value at Assumed
Number of Total Options/ Annual Rate of Stock
Securities SARs Granted Price Appreciation for
Underlying to Employees Exercise or Option Term
Options/SARs in Fiscal Base Price ----------------------
Name Granted (#) Year ($/Sh) Expiration Date 5%($) 10%($)
- -------------------- -------------- -------------- --------------- ---------------- ----- ------
<S> <C> <C> <C> <C> <C> <C>
Paul W. Pryor 28,125 30.41% $9.8125 January 17, 2006 $173,560 $439,836
</TABLE>
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FY-END
OPTION/SAR VALUES
<TABLE>
<CAPTION>
Number of Securities
Underlying Unexercised Value of Unexercised
Shares Options/SARs at in-the-Money Options/SARs
Acquired on Value Fiscal Year-End (#) at Fiscal Year-End ($)
Name Exercise (#) Realized ($) Exercisable/Unexercisable Exercisable/Unexercisable
- ---------------------- -------------- -------------- ------------------------- --------------------------
<S> <C> <C> <C> <C>
Paul W. Pryor 0 $0 0 / 28,125 $0 / $0
</TABLE>
Management Stock Bonus Plan. The Board of Directors has adopted the
Redwood Falls Federal Savings and Loan Association Management Stock Bonus Plan
(the "Management Stock Bonus Plan" or "MSBP"), which was approved by the
Company's stockholders at the special meeting of stockholders on January 17,
1996. The purpose of the MSBP is to provide directors, officers, and key
employees of the Association with a proprietary interest in the Company in a
manner designed to encourage such persons to remain with the Association.
Officers, directors, and key employees of the Association were awarded a
total of 27,000 shares of restricted stock pursuant to the MSBP on the date
stockholders of the Company approved the MSBP. Each of Messrs. Tersteeg, Nelson,
Farnberg and Stotesbery received 2,250 shares of restricted stock. Messrs. Pryor
and Orth received 11,250 and 6,750 shares of restricted stock, respectively.
- --------------------------------------------------------------------------------
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
- --------------------------------------------------------------------------------
The Association, like many financial institutions, has followed a policy
of granting various types of loans to officers, directors, and employees. The
loans have been made in the ordinary course of business and on substantially the
same terms, including interest rates and collateral, as those prevailing at the
time for comparable transactions with the Association's other customers, and do
not involve more than the normal risk of collectibility, or present other
unfavorable features.
-10-
<PAGE>
- --------------------------------------------------------------------------------
II - RATIFICATION OF INDEPENDENT AUDITOR
- --------------------------------------------------------------------------------
KPMG Peat Marwick LLP was the Company's independent auditor for the
fiscal year ended June 30, 1996. The Board of Directors has approved the
selection of KPMG Peat Marwick LLP as its auditor for the fiscal year ending
June 30, 1997, subject to ratification by the Company's stockholders. If not
ratified, the Board of Directors will reconsider its selection. A representative
of KPMG Peat Marwick 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 auditor 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 KPMG Peat Marwick LLP as the Company's auditor for the
fiscal year ending June 30, 1997.
- --------------------------------------------------------------------------------
OTHER MATTERS
- --------------------------------------------------------------------------------
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.
- --------------------------------------------------------------------------------
MISCELLANEOUS
- --------------------------------------------------------------------------------
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.
The Company's Annual Report to Stockholders for the fiscal year ended
June 30, 1996, including financial statements, will be mailed on September 12,
1996 to all stockholders of record as of the close of business on September
3,1996. Any stockholder who has not received a copy of such Annual Report may
obtain a copy by writing to the Secretary of the Company. Such Annual Report is
not to be treated as a part of the proxy solicitation material or as having been
incorporated herein by reference.
- --------------------------------------------------------------------------------
STOCKHOLDER PROPOSALS
- --------------------------------------------------------------------------------
In order to be eligible 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
301 South Washington Street, P.O. Box 317, Redwood Falls, Minnesota 56283-0317,
no later than May 15, 1997.
-11-
<PAGE>
- --------------------------------------------------------------------------------
FORM 10-KSB
- --------------------------------------------------------------------------------
A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-KSB FOR THE FISCAL YEAR ENDED
JUNE 30, 1996, AS FILED WITH THE SEC, WILL BE FURNISHED WITHOUT CHARGE TO
STOCKHOLDERS AS OF THE RECORD DATE UPON WRITTEN REQUEST TO THE SECRETARY,
REDWOOD FINANCIAL, INC., 301 SOUTH WASHINGTON STREET, P.O.
BOX 317, REDWOOD FALLS, MINNESOTA 56283-0317.
BY ORDER OF THE BOARD OF DIRECTORS
/s/Rebecca A. Olson
Rebecca A. Olson
Secretary
Redwood Falls, Minnesota
September 12, 1996
-12-
<PAGE>
ANNEX A
- --------------------------------------------------------------------------------
REDWOOD FINANCIAL, INC.
301 SOUTH WASHINGTON STREET
REDWOOD FALLS, MINNESOTA 56283-0317
(507) 637-8730
- --------------------------------------------------------------------------------
ANNUAL MEETING OF STOCKHOLDERS
October 22, 1996
- --------------------------------------------------------------------------------
The undersigned hereby appoints the Board of Directors of Redwood
Financial, Inc. (the "Company"), or its designee, with full powers of
substitution, 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 (the "Meeting"), to be held at the office
of the Company and its wholly owned subsidiary, Redwood Falls Federal Savings
and Loan Association, 301 South Washington Street, Redwood Falls, Minnesota on
October 22, 1996 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 P. Tersteeg
J. Scott Nelson
INSTRUCTIONS: To withhold your vote for any individual nominee, insert the
nominee's name on the line provided below.
<TABLE>
<CAPTION>
FOR AGAINST ABSTAIN
--- ------- -------
<S> <C> <C> <C>
2. The ratification of the appointment of KPMG
Peat Marwick LLP as independent auditors of
Redwood Financial, Inc., for the fiscal year ending
June 30, 1997. |_| |_| |_|
</TABLE>
In their discretion, such attorneys and proxies are authorized to vote upon such
other business 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 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 12, 1996.
Please check here if you
Dated: , 1996 |_| 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.
- --------------------------------------------------------------------------------
<PAGE>
ANNEX B
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:
[X]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 Rule 14a-11(c) or Rule 14a-12
Redwood Financial, Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of filing fee (Check the appropriate box):
[X] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(i)(2)
or Item 22(a)(2) of Schedule 14A.
[ ] $500 per each party to the controversy pursuant to Exchange Act Rule
14a- 6(i)(3).
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(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.)
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
(5) Total fee paid:
- --------------------------------------------------------------------------------
[ ] 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:
- --------------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
- --------------------------------------------------------------------------------
(3) Filing Party:
- --------------------------------------------------------------------------------
(4) Date Filed:
- --------------------------------------------------------------------------------
